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Sid Leach (#019519) Monica A. Limón-Wynn (#019174) SNELL & WILMER L.L.P. One Arizona Center 400 E. Van Buren Street Phoenix, AZ 85004-2202 Telephone: (602) 382-6372 Facsimile: (602) 382-6070 [email protected] [email protected] Attorneys for Plaintiff Hypercom Corporation IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Hypercom Corporation, Plaintiff, vs. Omron Corporation, Defendant. Plaintiff Hypercom Corporation ("Hypercom") moves in limine for an Order precluding Omron Corporation ("Omron") from using, referencing or presenting at trial the testimony, opinions, report, or video of James Dunlop. The testimony, reports and opinions of Omron's expert James Dunlop are not relevant and not reliable. Mr. Dunlop's testimony, report, opinion, and video have nothing to do with nor are they based upon facts known by either Verve or Omron when Verve filed the malicious lawsuits against Hypercom, or at any time during the pendency of the lawsuits. Instead, Mr. Dunlop has based his opinion upon after-the-fact information obtained for himself. Additionally, Omron failed to disclose Dunlop in this case until well after the deadline by which all expert witnesses should have been disclosed. In the alternative, Hypercom moves the Court to conduct a Daubert hearing to determine whether Omron's experts should be precluded from testifying at trial. This Motion is supported by the following memorandum of points and authorities. No. CV 04-0400-PHX-PGR HYPERCOM CORPORATION'S MOTION IN LIMINE RE JAMES DUNLOP; OR IN THE ALTERNATIVE, REQUEST FOR DAUBERT HEARING
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MEMORANDUM OF POINTS AND AUTHORITIES I. VERVE HAS BEEN FOUND LIABLE FOR BRINGING LAWSUITS ALLEGING PATENT INFRINGEMENT AGAINST HYPERCOM WITHOUT FIRST CONDUCTING AN ADEQUATE PRE-FILING INVESTIGATION Hypercom brought this action seeking to hold Omron liable for damages that Hypercom suffered due to Verve LLC's filing of multiple patent infringement lawsuits, and instigating an investigation before the International Trade Commission, against Hypercom without probable cause. In its Complaint, Hypercom alleges that Omron should be held liable for these damages because: (1) Omron is liable as a co-conspirator for Verve's actions in bringing and maintaining malicious lawsuits (and the ITC investigation) against Hypercom; (2) Omron aided and abetted Verve in the torts of malicious prosecution and abuse of process, and aided and abetted Raymond Galasso's unreasonable and vexatious multiplication of the proceedings against Hypercom, and (3) Omron is liable as an instigator of the malicious lawsuits and the malicious ITC investigation against Hypercom. In Verve LLC v. Hypercom Corp., No. CV-05-0365-PHX-FJM, 2006 U.S. Dist. LEXIS 58398 (D. Ariz. Aug 16, 2006), Verve was found liable for the torts of malicious prosecution and abuse of process, and Raymond Galasso was found liable for unreasonably and vexatiously multiplying the proceedings against Hypercom within the meaning of 28 U.S.C. § 1927 (hereinafter "the Verve Case"). In the Verve Case, the Court concluded that Hypercom had established "malice" through Counterdefendants' conduct of "wholly insufficient pre-filing investigation," continuing to pursue claims in various jurisdictions after it had been established that Verve lacked standing to maintain them; and representing that Verve was a proper patent owner while knowing that Omron held substantial rights in the patents, and "the tactic of filing multiple lawsuits in multiple jurisdictions without a reasonable explanation for doing so." Verve LLC v. Hypercom Corp., at *14.
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On October 26, 2006, after a four-day trial, a unanimous jury awarded compensatory damages and punitive damages against Verve, Verve's principals, and Verve's lawyers, and in favor of Hypercom. On January 9, 2007, Final Judgment was entered in the Verve Case against Verve, LLC, Raymond Galasso, Kevin Imes, and the Simon, Galasso & Frantz law firm, jointly and severally. II. THE TESTIMONY OF JAMES DUNLOP IS NOT RELEVANT BECAUSE IT IS BASED SOLELY ON HIS AFTER-THE-FACT INVESTIGATION A copy of the report submitted by James Dunlop is attached as Exhibit 1. Dunlop's patent analysis report includes a video allegedly made in about June 2006 of a Hypercom terminal in a PetCo store, and his analysis is limited to the observations made in the June 2006 time frame. Although Omron attempts to characterize Dunlop's analysis as fact testimony, one look at his report would seem to demonstrate otherwise. Exhibit 1. He includes claim charts expressing his opinion concerning certain patent claims and information that he allegedly uncovered in an after-the-fact investigation. The Hypercom ICE 6000 terminal that is depicted in the Dunlop video was connected to an electronic cash register, which would have been connected in turn to a POS application server. Hypercom did not make the electronic cash register or the POS application server. Hypercom did not supply the software that was running on the system in use at the PetCo store. The functionality of the Hypercom terminal would have depended on the software running on the electronic cash register, the software running on the POS application server, and/or the software running on the Hypercom terminal, none of which was provided by Hypercom. All of these facts are discussed in more detail in Hypercom's motion in limine to exclude Omron's expert Brad Gulko (Doc. #168), and that discussion and the supporting exhibits are incorporated herein by reference. The receipts included in Mr. Dunlop's expert report are dated June 8, 2006, indicating that his observation of a Hypercom terminal occurred in June 2006, and the video accompanying his report was made in June 2006.
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In a malicious prosecution case, the issue of lack of probable cause must be analyzed based on the facts known at the time the underlying lawsuits were filed. Bradshaw v. State Farm Mut. Auto. Ins. Co., 157 Ariz. 411, 417-418, 758 P.2d 1313, 1319-20 (1988) (the "relevant questions are whether, at the time it filed the wrongful death action, State Farm believed a jury might find its case meritorious and whether that belief was reasonable") (emphasis in original). Liability for malicious prosecution may also be based upon the continuation of a proceeding beyond the point that a reasonably prudent man would have continued to prosecute the asserted claim. Thus, the relevant state of mind that is at issue in this case must be based upon what Omron (and Verve) knew at the time the proceedings were instituted, and while the claims against Hypercom continued to be asserted. "The test generally applied is whether, upon the appearances presented ... a reasonably prudent man would have instituted or continued the proceeding." Slade v. City of Phoenix, 112 Ariz. 298, 301, 541 P.2d 550, 553 (1975); see also McClinton v. Rice, 76 Ariz. 358, 367, 265 P.2d 425, 431 (1953) (Court refers to "institution or continuation of an action without probable cause" as an element of malicious prosecution). To the extent that liability is based upon a continuation of the malicious proceedings, the analysis would have to be based upon facts known to Omron while the proceedings were still pending. The challenged expert testimony and video at issue in this motion is irrelevant to this case, because it involves information that was not known to Omron (or Verve) during the time that any of the malicious proceedings against Hypercom were pending. Hydranautics v. FilmTec Corp., 204 F.3d 880, 886 (9th Cir. 2000) ("[T]he lack of probable cause question must be answered based upon the facts actually known to FilmTec at the time it prosecuted its patent application and infringement case, and not on the facts it actually presented."). Information obtained subsequent to the filing of the lawsuits is irrelevant to the question of whether there was probable cause at the time the malicious complaints were filed. Id.; Hite v. Triton Energy Ltd., No. 99-56975, 2002 U.S. App. LEXIS 7518, 35 Fed.
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Appx. 434, 437 (9th Cir. April 23, 2002) ("[A]11 events subsequent to the filing of the allegedly malicious lawsuit ... are irrelevant to the question of probable cause.") (unpublished); Gill v. Kostroff, 82 F. Supp.2d 1354, 1364 (M.D. Fla. 2000) ("A determination of whether probable cause exists is based on the facts known by the defendant in the malicious prosecution action at the time the underlying action was initiated, not some later point in time."); Martin Centers v. Dollar Markets, 99 Cal. App.2d 534, 543, 222 P.2d 136 (Cal. App. 2d Dist. 1950) ("The knowledge of facts which may justify the alleged malicious prosecution is that which is possessed at the time of its occurrence; not that which is subsequently acquired."). Omron and its co-conspirator Verve were required to investigate the basis for the patent infringement claims against Hypercom before the lawsuits were filed, not after. View Engineering, Inc. v. Robotic Vision Systems, Inc., 208 F.3d 981, 986 (Fed. Cir. 2000) ("In bringing a claim of infringement, the patent holder, if challenged, must be prepared to demonstrate to both the court and the alleged infringer exactly why it believed before filing the claim that it had a reasonable chance of proving infringement.") (emphasis added). It is improper to file malicious lawsuits first and then try to investigate whether there was any evidentiary support for the malicious claims later. Burnette v. Godshall, 828 F. Supp. 1439, 1448 (N.D. Cal. 1993) ("Plaintiffs attorney chose to `file first and investigate later,' which is unacceptable."), aff'd, 72 F.3d 766 (9th Cir. 1995); Garr v. United States Healthcare, Inc., 22 F.3d 1274, 1279 (3d Cir. 1994) (if a reasonable inquiry has not been conducted, attorney will not be shielded from sanctions by "the stroke of luck that the document happened to be justified"). Omron's experts cannot rely on information about Hypercom's terminals obtained as a result of after-the-fact investigations performed by them long after the malicious lawsuits were filed. When initiating the original cause of action, the defendant in a malicious prosecution action could only rely on information that was obtained by the time the action was initiated, as opposed to information later gained through discovery, indepth inquiry, and communications.
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Gill v. Kostroff, 82 F.Supp.2d 1354, 1364 (M.D. Fla. 2000) (emphasis added). III. DUNLOP'S "PATENT ANALYSIS REPORT," HIS "MOVIE" AND HIS TESTIMONY SHOULD BE EXCLUDED As a threshold matter, James Dunlop should not be allowed to testify at trial because Omron disclosed him after the deadline to disclose expert witnesses had passed. As a result, Hypercom did not get an opportunity to take Dunlop's deposition. On the day that discovery closed (which was well after the deadline for disclosing expert witnesses had passed), Omron disclosed James Dunlop in a Supplemental Disclosure Statement dated June 15, 2006. Omron referred to Mr. Dunlop as a "fact witness," yet submitted Mr. Dunlop's curriculum vitae along with a written report prepared by Mr. Dunlop (presumably for a fee) entitled, "Patent Analysis Report." Exhibit 1. Cloaking Mr.
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Dunlop as a fact witness rather than as an expert witness is a transparent attempt to circumvent the deadlines in the scheduling order. Omron's untimely disclosure of Dunlop is sufficient justification to preclude Dunlop's testimony, opinions and report. A. Dunlop's Opinions Are Based on His Own After-The-Fact Investigation Rather Than What Facts Omron or Verve Knew at the Time of Filing
Snell & Wilmer L.L.P.
Even if Dunlop had been timely disclosed, his testimony is not relevant. For the same reasons discussed above with respect to Brad Gulko's expert testimony, Dunlop's testimony too fails to meet the relevancy test under Daubert. B. Dunlop's Testimony and Report Violate Rules 702 and 703 of the Federal Rules of Evidence
Omron may attempt to use of Dunlop's "Patent Analysis Report" to support a conclusion that Hypercom infringed upon U.S. Patent No. 5,012,077. Not only is such a report irrelevant in this malicious prosecution action, the report violates the requirements of Fed.R.Evid. 702 and 703. If the data underlying the expert's opinion is unreliable, or a reasonable expert in the field would not base an opinion on it, the opinion resting on that data must be excluded. Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 595 (1993) ("Rule 703 provides that expert opinions based on otherwise inadmissible hearsay are to be admitted only if the facts or data are `of a type reasonably relied upon by experts
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in the particular field in forming opinions or inferences upon the subject.'") (emphasis added); In re TMI Litigation, 193 F.3d 613, 697 (3d Cir. 1999); In re Paoli Railroad Yard PCB Litigation, 35 F.3d 717, 748 (3d Cir. 1994), cert. denied, 513 U.S. 1190 (1995). Even if Omron had timely disclosed Dunlop as one of its expert witnesses, and even if Dunlop's report addressed a relevant issue, Omron would still bear the burden of showing that the data underlying Dunlop's "Patent Analysis Report" is the type of data reasonably relied upon by experts. University of Rhode Island v. A.W. Chesterton Co., 2 F.3d 1200, 1218 (1st Cir. 1993) ("Rules 703 and 705 do not afford automatic entitlements to proponents of expert testimony. Rule 703 requires the trial court to give `careful consideration' to any inadmissible facts upon which the expert will rely, in order to determine whether reliance is `reasonable.'"); Slaughter v. Southern Talc Co., 919 F.2d 304, 306-07 (5th Cir. 1990) ("Federal Rule of Evidence 703 requires courts to examine the reliability of an expert's sources to determine whether they satisfy the threshold established by the rule."). Dunlop merely claims to have "observed" the terminal "automatically discriminating" between one type of card and another, when such conclusion is not based on any analysis as to any programming that might have enabled the terminal to discriminate automatically. That is hardly the type of analysis "reasonably relied" upon by an expert. Moreover, it would require an expert to be able to offer an opinion that the Hypercom terminal, as opposed to other devices operating as part of the PetCo system, actually performed the discrimination between a credit card and a debit card and was responsible for the functionality allegedly observed by Mr. Dunlop. Permitting a witness to offer such an opinion unsupported by a sufficient factual foundation significantly increases the risk of misleading the jury. United States v. Dukagjini, 326 F.3d 45, 58 (2d Cir. 2002) ("When an expert is no longer applying his extensive experience and a reliable methodology, Daubert teaches that the testimony should be excluded.)
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IV.
OMRON'S EXPERT WITNESS JAMES DUNLOP SHOULD NOT BE PERMITTED TO TESTIFY AT TRIAL In the Ninth Circuit, "[t]he general test regarding the admissibility of expert
testimony is whether the jury can receive `appreciable help' from such testimony." United States v. Gwaltney, 790 F.2d 1378, 1381 (9th Cir. 1986), cert denied, 479 U.S. 1104 (1987). Because unreliable and unfairly prejudicial expert witness testimony is not helpful to the trier of fact, the trial court should exclude such evidence. Jinro America Inc. v. Secure Investments, Inc., 266 F.3d 993, 1004 (9th Cir. 2001). In Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 589 (1993) ("Daubert I"), the Supreme Court imposed a special gatekeeping obligation upon a trial judge to make a preliminary assessment of the admissibility of expert scientific testimony. Specifically, the Court held that, "the trial judge must ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable." Id. at 589. In making a preliminary assessment, the trial court engages in a two-part inquiry. First, the court must determine whether the expert's testimony reflects "scientific knowledge," that is, "whether their findings are `derived by scientific method,' and whether their work product amounts to `good science.'" Daubert v. Merrell Dow Pharmaceuticals, Inc., 43 F.3d 1311, 1315 (9th Cir.) ("Daubert II"), cert. denied, 516 U.S. 869 (1995). Second, the court must determine whether the proffered expert testimony is relevant, "i.e., that it logically advances a material aspect of the proposing party's case." Id. V. THE "PROBATIVE VALUE," IF ANY, OF THE TESTIMONY OF JAMES DUNLOP IS SUBSTANTIALLY OUTWEIGHED BY THE DANGER OF CONFUSION OF THE ISSUES AND MISLEADING THE JURY Additionally, the expert testimony of Dunlop should be excluded under Rule 403 of the Federal Rules of Evidence. The Ninth Circuit has noted that expert evidence can be both powerful and quite misleading because of the difficulty in evaluating it. Because of this risk, a trial judge in weighing possible prejudice against probative force under Rule 403 exercises more control over experts than lay witnesses. Jinro America Inc. v. Secure Investments, Inc., 266 F.3d 993, 1005 (9th Cir. 2001). In the Jinro case, the Ninth
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Circuit reversed the district court for failing to exclude expert testimony under Rule 403. 266 F.3d at 1005 ("[W]e conclude that the district court abused its discretion in admitting Pelham's testimony for two reasons: it was not reliable and, in any event, it was unduly prejudicial and should have been excluded under Rule 403."). Id., quoting from Daubert I, 509 U.S. at 595. It would be prejudicial and unfair to allow Mr. Dunlop to testify that about information that neither Verve nor Omron ever considered prior to bringing their malicious lawsuits, and which neither of them had while the proceedings against Hypercom were pending. Permitting a witness labeled as an "expert" to offer such an opinion unsupported by a sufficient factual foundation that Omron or Verve even had knowledge of such information will mislead the jury and confuse the issues. United States v. Dukagjini, 326 F.3d 45, 58 (2d Cir. 2002) ("[E]ven if [expert] testimony is admissible under Rule 702, it still must pass muster under Rule 403: Its probative value must not be substantially outweighed by unfair prejudice."), cert. denied, 124 S. Ct. 2832 (2004). Given the realities of litigation, the opinion of a witness impressed by the court with the label of "expert" may carry a great deal of weight with a lay jury, particularly in [complex] matters . . . . Permitting such a witness to offer an opinion unsupported by a sufficient factual foundation would significantly increase the risk of misleading the jury and confusing the issues, the very dangers against which Rule 403 defends. Elcock v. Kmart Corporation, 233 F.3d 734, 756 (3d Cir. 2000). VI. CONCLUSION For the foregoing reasons, Hypercom moves in limine for an Order precluding Omron from using, referencing or presenting at trial the opinions, testimony, report, or video of James Dunlop. In the alternative, Hypercom requests the Court conduct a Daubert to determine whether James Dunlop should be precluded from testifying at trial.
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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000
RESPECTFULLY SUBMITTED this 13th day of April, 2007. SNELL & WILMER L.L.P.
By s/ Sid Leach Sid Leach Monica A. Limón-Wynn One Arizona Center 400 E. Van Buren Street Phoenix, AZ 85004-2202 Attorneys for Plaintiff Hypercom Corporation
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STATEMENT OF MOVING COUNSEL The undersigned certifies that after personal consultation and sincere efforts to do so, counsel for Hypercom and counsel for Omron have been unable to satisfactorily resolve the matters presented in this motion. s/ Sid Leach
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CERTIFICATE OF SERVICE I hereby certify that on April 13, 2007, I electronically transmitted HYPERCOM CORPORATION'S MOTION IN LIMINE RE JAMES DUNLOP; OR IN THE ALTERNATIVE, REQUEST FOR DAUBERT HEARING to the Clerk's Office using the ECF System for filing and transmittal of a Notice of Electronic Filing to the following ECF registrants: David P. Irmscher John K. Henning, IV BAKER & DANIELS 300 N. Meridian Street, Suite 2700 Indianapolis, IN 46204 Phone: 317-237-1317 Fax: 317-237-1000 [email protected] [email protected] Attorneys for Defendant Omron Corporation Paul Moore Ray K. Harris FENNEMORE CRAIG, P.C. 3003 N. Central Avenue, Suite 2600 Phoenix, AZ 85012-2913 Phone: 602-916-5414 Fax: 602-916-5614 [email protected] [email protected] Attorneys for Defendant Omron Corporation s/ Sid Leach A. Colin Wexler Matthew A.C. Zapf GOLDBERG KOHN BELL BLACK ROSENBLOOM & MORITZ, LTD. 55 E. Monroe Street, Ste. 3300 Chicago, IL 60603 Ph. 312-201-4000 Fax: 312-332-2196 [email protected] [email protected] Attorneys for Defendant Omron Corporation H. Michael Clyde Todd R. Kerr PERKINS COIE BROWN & BAIN P.A. 2901 N. Central Ave., Ste. 2000 Phoenix, AZ 85012-2788 Ph.: 602-351-8000 Fax: 602-648-7000 [email protected] [email protected] Attorneys for Defendant Omron Corporation
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