Free Response to Motion - District Court of Arizona - Arizona

Matthew A. C. Zapf (pro hac vice) Colin Wexler (pro hac vice) Chad A. Blumenfield (pro hac vice) GOLDBERG KOHN 55 East Monroe Street, Suite 3300 Chicago, IL 60603-5792 Telephone: 312.201.3914 Facsimile: 312.863.7414 [email protected] [email protected] [email protected] David P. Irmscher (15026-02) John K. Henning (25203-49) BAKER & DANIELS LLP 111 East Wayne Street, Suite 800 Fort Wayne, IN 46802 Telephone: 260-424-8000 Facsimile: 260-460-1700 [email protected] [email protected] H. Michael Clyde (009647) PERKINS COIE BROWN & BAIN P.A. 2901 North Central Avenue, Suite 2000 Phoenix, AZ 85012-2788 Telephone: 602.351.8000 Facsimile: 602.648.7000 [email protected] Attorneys for the defendant, Omron Corporation UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Hypercom Corporation, Plaintiff, vs. Omron Corporation, Defendants. ) ) ) ) ) ) ) ) ) CAUSE NO. CV04-0400 PHX PGR DEFENDANT OMRON CORPORATION'S RESPONSE TO HYPERCOM CORPORATION'S MOTION IN LIMINE TO EXCLUDE CLAIM-CONSTRUCTION ORDER IN NORTHERN DISTRICT OF CALIFORNIA CASE NO. C 04-02795

Case 2:04-cv-00400-PGR

Document 192

Filed 04/27/2007

Page 1 of 10

Contrary to Hypercom's argument, the Claim-Construction Order is relevant for three reasons. First, the Claim-Construction Order rebuts Hypercom Corporation's repeated assertions of fact that Omron Corporation knew the lawsuits filed by Verve, L.L.C., were baseless because Omron knew Hypercom did not sell "electronic cash registers." Hypercom fails to cite a single piece of evidence supporting this alleged fact, see infra, and instead conclusively states that Hypercom's products do not infringe the patents because "point-of-sale terminals" cannot be defined as "electronic cash registers." However, the Northern District of California has held, after full briefing on the issue, that the term "electronic cash registers," a key term in two of the patents at issue in this case, is "explicitly defined to include 'terminals for point of sale systems.'" The ClaimConstruction Order, therefore, is highly relevant to demonstrating Omron's lack of knowledge. Second, the Claim-Construction Order is relevant on the issue of punitive damages. The merits of an underlying infringement claim, including the reasonableness of a proposed definition for a patent claim term, is clearly relevant to whether Omron's conduct was "aggravated and outrageous." The Claim-Construction Order demonstrates that an "electronic cash register" reasonably can be defined to include a point-of-sale terminal, and this reasonableness defeats any claim for punitive damages. Finally, Omron should be permitted to use the Claim-Construction Order to impeach Hypercom's expert witness, Laurence Pretty, who intends to offer opinion testimony that Hypercom does not make "electronic cash registers." This opinion is based on Mr. Pretty's and Hypercom's definition of the term "electronic cash registers."

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However, the Northern District of California disagreed with that definition, holding that the definition for an "electronic cash register" "may include a point-of-sale terminal." Hypercom's Motion implies that Omron will seek to use the Claim-ConstructionOrder for collateral estoppel purposes, but Omron does not intend to seek collateral estoppel against Hypercom on this point. This analysis is therefore irrelevant. Omron plans to use the Claim-Construction Order to rebut Hypercom's argument that no reasonable person could have construed the term "electronic cash registers" to include "point-of-sale terminals." A. The Claim-Construction Order Is Relevant To Rebutting Hypercom's Repeated Assertion That Omron Knew Hypercom Does Not Make Cash Registers This case centers on the allegation that Omron and Verve conspired to file baseless patent infringement claims against Hypercom. However, to succeed on any claim against Omron, Hypercom must prove that Omron knew that the lawsuits filed by Verve were baseless. In an attempt to show that Omron knew Hypercom did not infringe the assigned patents, Hypercom repeatedly asserts that: (1) the patents assigned to Verve are limited to "cash registers;" and (2) Omron knew Hypercom does not make "cash registers." This assertion appears throughout Hypercom's filings: The Michigan Action was commenced against Hypercom without probable cause. Omron admits that the patent asserted against Hypercom in the Michigan Action "covers technology for an electronic cash register and payment system." Doc. # 74, Statement of Facts in Support of Omron Corporation's Motion for Summary Judgment ¶12 ("Omron Statement of Facts"). Omron knew that Hypercom does not sell electronic cash registers when Omron approved Hypercom as a target to be sued in the Michigan Action. Docket No. 85, Hypercom Corporation's Statement Of Facts In Opposition To Omron's Motion For Summary Judgment, filed December 23, 2005, ¶ 92 (emphasis in original). -3Case 2:04-cv-00400-PGR Document 192 Filed 04/27/2007 Page 3 of 10

The complaint filed in the Michigan [Court] alleged that Hypercom's T7 terminal infringed Omron's U.S. Patent No. 4,678,895. Exhibit 33. Omron knew that Omron's U.S. Patent No. 4,678,895 "covers technology for an electronic cash register and payment system," Doc. #74, Omron Statement of Facts ¶12, and Omron knew that Hypercom does not have any electronic cash register products. Id. at ¶ 93 (emphasis in original). The complaint filed in the Texas Action alleged that Hypercom's ICE 6000 terminal infringed Omron's U.S. Patent No. 4,562,341. Exhibit 36. Omron knew that Omron's U.S. Patent No. 4,562,341 "covers technology for an electronic cash register," Doc. #74, Omron Statement of Facts ¶20, and Omron knew that Hypercom does not have any electronic cash register products. Id. at ¶ 102 (emphasis in original). Omron's U.S. Patent No. 4,562,341 is limited to an electronic cash register. Exhibit 49; Doc. #74, Omron Statement of Facts ¶20. Hypercom's accused ICE 6000 terminal is not an electronic cash register, and clearly cannot infringe Omron's U.S. Patent No. 4,562,341. Exhibit 59. Id. at ¶ 103 (emphasis in original). Of course, Hypercom has failed to cite any evidence in support of these "facts." At the same time that these statements were made, however, Hypercom knew that a federal court had rejected precisely the definition of "electronic cash registers" offered by Hypercom. In another lawsuit filed in federal court in the Northern District of California, Verifone, Inc. v. Verve, LLC, et al., No. C04-02795 WHA (N.D. Cal.), Verve claimed that point-of-sale terminals manufactured by Verifone, Inc., infringed two of the same patents involved in this case, U.S. Patent Nos. 4,562,341 ("the '341 Patent") and 4,678,895 ("the '895 Patent"). The Northern District of California held a Markman hearing1 and, after receiving from Verve and Verifone a technology tutorial and full briefing on proposed

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constructions for the claim terms in the two patents, issued the Claim-Construction Order at issue. See Claim-Construction Order, entered June 10, 2005, attached as Exhibit 1 to Hypercom's Motion. In its Claim-Construction Order, the court ruled that the patents assigned by Omron to Verve apply to POS terminals like the ones manufactured by Hypercom. Id. In its Claim-Construction Order for the Omron-assigned '341 and '895 Patents, the court specifically found that: Electronic cash registers are explicitly defined to include "terminals for point of sale systems." Id. at p. 4, lines 19-21. This order holds that "electronic cash register" means "an electronic device capable of both calculating a sum to be paid and automatically conducting credit inquiries using data stored on a customer's cards." This definition may include a point-of-sale terminal. Id. at p. 4, lines 11-14. The '341 patent further describes the electronic cash register portion of the invention disclosed in the '895 patent. Again, electronic cash registers are defined to explicitly include "a terminal for a point-of-sales system" ('341 Patent at col. 1:49). Id. at p. 5, lines 1-3. As argued at the hearing, an electronic cash register could have . . . additional functionality ­ for example, if the electronic cash register was combined with a payment-making terminal in a single device ­ but the asserted claims do not require an electronic cash register to process payments. In other words, the '341 patent deals exclusively with the preapproval of a customer based on the results of a credit inquiry, rather than the ultimate payment of the sum owed. Id. at p. 5, lines 18-23 (emphasis in italics in original; emphasis in underline added). Hypercom argues that the Claim-Construction Order "is properly precluded under Rules 401 and 402 because it offers nothing concerning Omron's state of mind at the time

1

During a Markman hearing, the parties will present arguments regarding their proposed construction of claim terms in the patent. Following this hearing, the court will issue a Claim-Construction Order, which defines the claim terms. Markman v. Westview Instruments, 517 U.S. 370, 374 (1996).

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when the lawsuits were commenced against Hypercom." Hypercom's Motion at 2. Hypercom further argues that the Claim-Construction Order is not relevant because it was entered after the lawsuits filed by Verve concerning the '341 and '895 Patents were dismissed. Id. Neither argument has any merit, however, because they ignore the fact that Hypercom has made the definition of an "electronic cash register" a central part of its claims against Omron. The jury should be permitted to hear that another Court has considered the definition for the term "electronic cash register," rejected Hypercom's proffered argument, and held that the definition of "electronic cash registers" reasonably includes "point-of-sale terminals." The Claim-Construction Order that Hypercom seeks to exclude demonstrates that Hypercom has no evidentiary basis for asserting that Omron "knew" Hypercom's terminals do not infringe the assigned patents because they are not "cash registers." Hypercom's argument implies that Omron will introduce evidence that it relied on the Claim-Construction-Order to guide its decision-making process. Not so. The ClaimConstruction Order will be used to rebut Hypercom's argument that no reasonable person could have construed the term "electronic cash registers" to include "point-of-sale terminals." The fact that a court came to the precise conclusion that Hypercom assails as unreasonable is highly relevant to Omron's defense: how can Hypercom argue that "Omron knew that Hypercom does not have any electronic cash register products" when Hypercom does have electronic cash register products? The timing of the court's determination is immaterial to its relevance.

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B.

The Claim-Construction Order Is Relevant To Omron's Defense Against Punitive Damages As explained above, Hypercom claims Omron knew Hypercom does not make

"electronic cash registers," an argument that rests solely on Hypercom's proffered definition for "electronic cash registers." The Claim-Construction Order, however, demonstrates that an "electronic cash register" reasonably can be defined to include a point-of-sale terminal. Insofar as Hypercom seeks to recover punitive damages, the merits of the underlying infringement claim are clearly relevant, especially where Hypercom makes the merits of that claim an element of its case-in-chief. To support an award of punitive damages, "there must be evidence of an 'evil mind' and aggravated and outrageous conduct." Linthicum v. Nationwide Ins. Co., 150 Ariz. 326, 330, 723 P.2d 675, 679 (1986). Where another federal court has held that the definition of "electronic cash registers" includes point-of-sale terminals, regardless of who manufactures those terminals, that holding is relevant where another party claims that same definition is unreasonable and justifies a punitive damages award. Indeed, the reasonableness of the position that a point-of-sale terminal is an "electronic cash register" demonstrates that Omron's state of mind and conduct cannot qualify as "aggravated and outrageous conduct." The Claim-Construction Order, therefore, is directly relevant to Omron's defense against punitive damages. C. The Court Should Not Preclude The Claim-Construction Order On Collateral Estoppel Grounds Omron is not seeking to use the Claim-Construction Order for collateral estoppel purposes. Omron must be permitted to introduce the Claim-Construction Order to

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demonstrate that construing the claim "electronic cash register" to include point-of-sale terminals is not unreasonable, and therefore Hypercom cannot prove on that basis that Omron "knew" Hypercom did not manufacture "electronic cash registers." Hypercom's collateral estoppel analysis, which takes up much of its Motion, is irrelevant. D. Omron Should Be Permitted To Impeach Hypercom's Expert Witness With The Claim-Construction Order Hypercom intends to use an expert witness, Laurence Pretty, to testify that the term "electronic cash register," which is one of the key terms in the '341 and '895 Patents, cannot be defined to include a point-of-sale terminal. Were this case before the Court on a patent infringement claim, the Court would be required to conduct a Markman hearing. Mr. Pretty's testimony about his construction of the term "electronic cash register" would be inadmissible because the court, and not any witnesses, construes the terms of the patents. Markman v. Westview Instruments, 517 U.S. 370, 374 (1996). For the same reasons here, Mr. Pretty's opinions regarding the definition of an "electronic cash register" should be inadmissible. However, to the extent that the Court intends to allow Mr. Pretty to offer expert testimony on the proper construction of the claim term "electronic cash register," Omron should be permitted to use the Claim-Construction Order to impeach him. As discussed above, the Northern District of California concluded that the term "electronic cash register," as used in the '341 and '895 Patents, could be construed to include point-of-sale terminals. See supra. And this definition is not specific to any particular products or particular manufacturer of point-of-sale terminals. Therefore, the jury should be permitted to hear this evidence during Omron's cross-examination of Mr. Pretty.

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E.

Conclusion Hypercom has no evidence whatsoever that Omron "knew" the lawsuits filed by

Verve were baseless. Thus, Hypercom resorts to arguing that Omron must have known because no reasonable person could construe patents regarding "electronic cash registers" to cover point-of-sale terminals. A federal district court has concluded otherwise, and Omron should be permitted to defend the claims filed by Hypercom by relying on the Claim-Construction Order defining the term "electronic cash register" to include "pointof-sale terminals." RESPECTFULLY SUBMITTED on April 27, 2007.

By: /s/ Matthew A.C. Zapf Matthew A.C. Zapf Colin Wexler Chad A. Blumenfield GOLDBERG KOHN 55 East Monroe Street Suite 3300 Chicago, IL 60603-5792 David P. Irmscher (15026-02) John K. Henning (25203-49) BAKER & DANIELS LLP 111 East Wayne Street Suite 800 Fort Wayne, IN 46802 H. Michael Clyde (009647) PERKINS COIE BROWN & BAIN P.A. 2901 North Central Avenue Suite 2000 Phoenix, AZ 85012-2788 Attorneys for Defendant Omron Corporation

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CERTIFICATE OF SERVICE I hereby certify that on April 27, 2007, I electronically transmitted the attached documents to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Andrew Foster Halaby Ray Kendall Harris John Kenyon Henning, IV David P. Irmscher Sid Leach Monica Anne Limon-Wynn Paul Moore A. Colin Wexler Matthew A.C. Zapf [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

I hereby certify that on April 30, 2007, I caused the attached document to be served by hand delivery on Judge Paul G. Rosenblatt, United States District Court of Arizona, 401 West Washington Street, Phoenix, Arizona 85003-2118.

/s/ Lisa M. Sandoval

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