Free Reply to Response to Motion - District Court of Arizona - Arizona

1 2 3 4 5 6 7 8 9 10 11

David P. Irmscher (Indiana State Bar No. 15026-02) John K. Henning (Indiana State Bar No. 25203-49) Baker & Daniels LLP 111 East Wayne Street, Suite 800 Fort Wayne, IN 46802 Telephone: 260-424-8000 Facsimile: 260-460-1700 Ray Harris (Arizona State Bar No. 007408) Paul Moore (Arizona State Bar No. 019912) Fennemore Craig 3003 North Central Avenue, Suite 2600 Phoenix, AZ 85012-2913 Telephone: 602-916-5000 Facsimile: 602-916-5999 Attorneys for the defendant, Omron Corporation UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Hypercom Corporation, CAUSE NO. CV04-0400 PHX PGR OMRON CORPORATION' REPLY IN S SUPPORT OF OPPOSED MOTION FOR LIMITED EXTENSION OF DISCOVERY DEADLINE TO CONDUCT NON-EXPERT DEPOSITIONS (FIRST REQUEST)

12

Plaintiff,
13

vs.
14

Omron Corporation,
15

Defendant
16 17 18 19 20 21 22 23 24 25 26
FENNEMORE CRAIG, P.C.
P HOENIX

Hypercom Corporation' Opposition To Omron' Motion For Extension Of s s Discovery Deadline ("Opposition") and its recent discovery conduct fail to recognize that opposing parties are required to collaborate in good faith during discovery to avoid disputes and allow each side an opportunity to gather information that addresses the merits of their respective claims and defenses. The Honorable Frederick J. Martone of this Court recently explained the good faith obligation to Hypercom and its counsel in Hypercom v. Verve, LLC, et al., Civ. 05-0365-PHX-FJM, another case involving Hypercom, Verve L.L.C. ("Verve"), and the same claims at issue in this lawsuit: And as best I can tell, this series of documents causes me to believe that this case is not being processed properly in the sense of having lawyers working together in a collaborative sort of way to cooperate and get the case
PHX/RHARRIS/1814883.1/12623.001

Case 2:04-cv-00400-PGR

Document 133

Filed 07/14/2006

Page 1 of 11

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
FENNEMORE CRAIG, P.C.
P HOENIX

processed in a timely way without accusations against each other and so that the merits of the case, the merits of the remaining claims, can be resolved. . . . [And clients] don' get to make decisions about the lawyers' independent t professional obligations to work closely with opposing counsel to avoid needless satellite quarrels. See Reporter' Transcript Of Proceedings Motion To Stay Proceedings, attached as s Exhibit 1 to this Reply, at 11-12. Hypercom' counsel in this case were present for this s hearing. However, Omron Corporation' Motion For Limited Extension Of Discovery s Deadline To Conduct Non-Expert Depositions (First Request) ("Motion"), Hypercom' s Opposition, and this reply demonstrate that Hypercom has not taken Judge Martone' s admonition to heart. Rather than collaborate with Omron to schedule basic fact discovery, Hypercom has used the Court' Scheduling Order as both a sword and shield to prevent s Omron from deposing the Hypercom Witnesses.1 The Court should not permit Hypercom and its counsel to engage in such conduct. A. OMRON' REQUEST 37 DAYS BEFORE THE CLOSE OF DISCOVERY S FOR DATES TO DEPOSE THE HYPERCOM WITNESSES IS NOT ELEVENTH HOUR DISCOVERY Hypercom' argument that Omron has not shown good cause for being unable to s depose Hypercom' witnesses lacks any evidentiary support and is without merit. s Hypercom first argues that "[t]here is a complete failure in the motion papers to show any diligence by Omron during the seven months that Omron had available to take discovery in this case," and that Omron should have taken the depositions earlier in discovery. Opposition at 2-3. This argument is both disingenuous and false. As demonstrated in the Motion, Omron (1) first identified the Hypercom Witnesses and requested dates for their depositions on May 8, 2006, 37 days before the close of discovery, (2) followed up three times in the next two weeks for mutually convenient dates, and (3) provided 5 different days before the discovery deadline that Omron was available for the depositions. See
1

Omron seeks to depose George Wallner, Chris Alexander, William Dowlin, Jonatan Schmidt, and a Rule 30(b)(6) witness of Hypercom, described as the "the Hypercom Witnesses" in Omron' Motion. s
PHX/RHARRIS/1814883.1/12623.001

Case 2:04-cv-00400-PGR

Document 133 2 Filed 07/14/2006

Page 2 of 11

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
FENNEMORE CRAIG, P.C.
P HOENIX

Motion at 2-4. This is more than enough to show due diligence, and under no reasonable interpretation of the Court' Scheduling Order, the cases cited by Hypercom in the s Opposition, or the Federal Rules of Civil Procedure can a request to depose Hypercom' s fact witnesses more than a month before the discovery deadline be called "11th hour discovery." Opposition at 2-3. Hypercom' arguments further ignore the facts that (a) a fully dispositive summary s judgment brief was pending, and (b) Omron diligently pursued other discovery prior to notifying Hypercom that it wanted to depose the Hypercom Witnesses. Omron did not notice these depositions earlier in discovery because Omron had a pending motion for summary judgment before the Court that was potentially dispositive on all issues. When Omron did not receive a ruling on the summary judgment motion by March 2006, Omron began conducting discovery in earnest. Omron subsequently served written discovery on Hypercom, disclosed expert reports under Rule 26(a)(2)(B) of the Federal Rules of Civil Procedure, and participated in three expert witness and two fact witness depositions (Herb Kerner and Bryan Farney).2 Hypercom further argues that "none of Omron' attorneys cared to make s themselves available to take the depositions prior to the June 15, 2006 deadline even assuming that Omron had been provided with dates for those witnesses during that period." Opposition at 4. This is simply false. Omron advised Hypercom on May 8, 2006, that both David Irmscher and John Henning were available on May 30-31, June 1, and June 13-15, 2006, for deposing the Hypercom Witnesses. See Exhibit C to Motion. By the time Omron' counsel realized that Hypercom would not voluntarily produce the s witnesses and Omron unilaterally noticed the depositions (May 24, 2006), Omron' s

Notably, Hypercom noticed Mr. Kerner and Mr. Farney' depositions, and Omron and Hypercom collaborated to s schedule mutually convenient dates for both. This would suggest that Hypercom picked and chose its spots for collaboration, as the only disputed depositions are those for which Hypercom refused to provide any dates.
PHX/RHARRIS/1814883.1/12623.001

2

Case 2:04-cv-00400-PGR

Document 133 3 Filed 07/14/2006

Page 3 of 11

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
FENNEMORE CRAIG, P.C.
P HOENIX

counsel was no longer available on the five pre-discovery deadline dates they originally proposed. See Motion at 4-5. Since Omron and Hypercom had cooperated to schedule expert witness depositions after the expert discovery deadline, Omron anticipated continued cooperation to allow Omron to pursue the discovery it had timely requested. Hypercom had other plans, though. Hypercom' next argument is similarly disingenuous. Hypercom posits that if s Omron really wanted to depose the Hypercom Witnesses, Omron would have used one of the many attorneys at Baker & Daniels LLP or Omron' local counsel, Fennemore Craig. s Opposition at 2-3. However, Omron' counsel were not aware that they needed to find s another attorney to depose the Hypercom Witnesses until June 9, 2006, just 4 business days before the discovery deadline. Prior to that day, Hypercom offered no objections to the depositions and even offered to file a stipulation with the Court to permit Omron to depose the Hypercom Witnesses after discovery ended. See Exhibit K to Motion. Contrary to Hypercom' argument, Omron did not "flout" the Court' discovery s s deadlines, "cavalierly disregard" this Court' Scheduling Order, or fail to "take this s Court' Scheduling Order seriously." See Opposition at 4-5. Rather, Omron sought to s collaborate with Hypercom to schedule depositions of Hypercom' fact witnesses, and s Hypercom refused. Such bad faith discovery conduct shows it is Hypercom who failed to take the Scheduling Order seriously. B. HYPERCOM' CLAIMS THAT OMRON REFUSED TO ALLOW S HYPERCOM TO TAKE ANY DISCOVERY AFTER THE DISCOVERY DEADLINE ARE FALSE Hypercom next argues that "Omron refused to allow Hypercom to take any discovery after the June 15, 2006 deadline," and therefore "Hypercom took a similar position with respect to the discovery sought." Not only would such tit-for-tat rationale be objectionable, but the argument is patently false and disingenuous for two reasons: (1) Omron sought repeatedly to coordinate with Hypercom on discovery that Hypercom
PHX/RHARRIS/1814883.1/12623.001

Case 2:04-cv-00400-PGR

Document 133 4 Filed 07/14/2006

Page 4 of 11

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
FENNEMORE CRAIG, P.C.
P HOENIX

wanted; and (2) Omron never objected to all discovery after the discovery cutoff. Hypercom is correct that Omron objected to written discovery served by Hypercom as untimely. See Exhibit 5 to Opposition. Omron' objection, however, was proper and s based on the Court' Scheduling Order, which provides that "[d]iscovery which cannot be s timely responded to prior to the discovery deadline will be met with disfavor, and could result in denial of an extension, exclusion of evidence, or the imposition of other sanctions." Omron notified Hypercom of this objection on May 24, 2006, one week after Hypercom served the written discovery. Importantly, Hypercom never communicated any disagreement with Omron' objection. Hypercom cannot be heard to complain now that s Omron' valid objections, based on this Court' discovery instructions, to untimely s s written discovery justify Hypercom' complete refusal to allow Omron to depose the s Hypercom Witnesses. However, contrary to repeated statements by Hypercom, Omron never objected to any other discovery requested by Hypercom, to take place before or after the discovery deadline, in the weeks before discovery ended. Hypercom unilaterally subpoenaed Mr. Walton and Mr. Anderson for depositions on May 10 and 17, 2006. 3 After Omron informed Hypercom that it was not available on those days, Omron made every effort to collaborate with Hypercom to find dates that all parties were available for Walton' and s Anderson' depositions. Omron even recommended several days after the discovery s deadline for these depositions. See, e.g., Exhibit C to Motion. But Omron never objected once to any depositions that Hypercom wanted to take after the discovery deadline.4
3

The most basic courtesy and good faith in discovery requires the parties to confer prior to noticing depositions, unless the opposing party refuses to provide dates for the deposition.
4

Furthermore, Hypercom provides no evidence that it ever communicated with Mr. Anderson or Mr. Walton for dates they were available to be deposed. Omron anticipates that Hypercom will take the position at the hearing scheduled for July 18, 2006, that even though Hypercom failed to preserve its request for the depositions of Mr. Anderson, Mr. Walton, or any other depositions, Hypercom is entitled to these depositions if the Court grants Omron permission to depose the Hypercom Witnesses. Omron objects to any such request because it would reward Hypercom for failing to participate in discovery in good faith.
PHX/RHARRIS/1814883.1/12623.001

Case 2:04-cv-00400-PGR

Document 133 5 Filed 07/14/2006

Page 5 of 11

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
FENNEMORE CRAIG, P.C.
P HOENIX

C.

HYPERCOM CANNOT COMPLAIN OF SELF-INFLICTED PREJUDICE Hypercom audaciously complains that allowing Omron to take discovery after the

discovery deadline would prejudice Hypercom because it would interfere with Hypercom' ability to prepare a dispositive motion and increase Hypercom' litigation s s expenses. Hypercom cannot complain about prejudice, however, created solely by

Hypercom' refusal to permit discovery that Omron diligently sought more than a month s before the discovery deadline and more than two months before the Court' original s dispositive motion deadline. Hypercom is responsible for creating this situation. Despite multiple requests, Hypercom refused to provide a single date that its witnesses were available for a deposition. When Hypercom' refusal forced Omron to notice the depositions after the s discovery deadline, Hypercom' counsel approached Omron about filing a stipulation to s allow the depositions to proceed (pending the Court' approval): s Other than the expert witness depositions for which we have court approval, the deposition notices you served call for taking depositions after the discovery cut-off of June 15th. We would like to also depose Bryan Farney, Thomas Anderson, and an Omron 30(b)(6). Perhaps we can agree on a discovery cutoff extension to accommodate what the parties would like to finish without jeopardizing the dispositive motion deadline. Would you be willing to file a stipulation to this effect? See Exhibit K to Omron' Motion, E-mail from M. Limon-Wynn dated June 5, 2006. s Omron was willing to file such a stipulation, but Hypercom' counsel rescinded this s proposal on Friday, June 9, 2006, and informed Omron' counsel for the first time that s Hypercom would object to any further discovery after the discovery deadline. Hypercom should not be permitted to use bait-and-switch tactics to avoid discovery, and then cry foul when Hypercom' own conduct results in delays of Court-imposed deadlines. s Moreover, Hypercom' litigation expenses would be the same as if Hypercom had s voluntarily produced its witnesses before discovery ended. The only increased litigation expenses result from Hypercom' refusal to engage in discovery, which forced Omron to s
PHX/RHARRIS/1814883.1/12623.001

Case 2:04-cv-00400-PGR

Document 133 6 Filed 07/14/2006

Page 6 of 11

1 2 3 4 5

move the Court for an order requiring Hypercom to fulfill its discovery obligations and fly to Arizona to appear in person at a discovery conference scheduled by the Court. D. HYPERCOM HAD SUFFICIENT NOTICE OF OMRON' REQUEST FOR S A RULE 30(B)(6) WITNESS Hypercom admits that it received notice of the topics to be covered during a Rule 30(b)(6) deposition three weeks before the discovery cutoff and within a week of

6

Hypercom' May 18, 2006, request for information on the topics so Hypercom could s
7

identify the appropriate witnesses. See Opposition at 8. But Hypercom still criticizes
8

Omron for noticing the Rule 30(b)(6) deposition "based on Omron' counsel availability" s
9

and "two weeks after the close of discovery."
10

Id.

Hypercom' arguments are s

disingenuous and without merit for three reasons.
11 12

First, Hypercom' counsel never s

provided a single date that they were available for a possible Rule 30(b)(6) deposition, despite repeated requests. Regardless of witness availability, notice of the Rule 30(b)(6)
13

topics was not required for Hypercom' counsel to check their calendars and communicate s
14

their potential availability. Second, Hypercom agreed to work with Omron to schedule
15

the Rule 30(b)(6) depositions after the discovery deadline, only to switch positions four
16

business days before the close of discovery. See Exhibit K to Omron' Motion. Third, s
17

Omron noticed the Rule 30(b)(6) deposition after the discovery deadline (a) based on
18

Hypercom' willingness to stipulate to extensions of Court deadlines to schedule the s
19

expert witnesses, and (b) to give Hypercom sufficient time to find the proper Rule
20

30(b)(6) witness(es). Hypercom' efforts at collaboration, however, seem limited to the s
21 22
5

discovery that Hypercom sought.5
Hypercom "notes" that "Omron has already taken a Rule 30(b)(6) deposition of Hypercom in this action," which covered subjects "identical to the matters identified in the Rule 30(b)(6) notice dated May 24, 2006." Opposition at 8-9. If this is an objection, it is improper because (a) the requested Rule 30(b)(6) deposition is not limited to the issue of whether the Court had personal jurisdiction, as was the first Rule 30(b)(6) deposition (b) the first Rule 30(b)(6) deponent, Douglas Reich of Hypercom, was unable to provide any evidence that Omron and Verve conspired to file frivolous patent infringement lawsuits, and Omron is entitled to know whether Hypercom has any evidence after several months of discovery; and (c) the Federal Rules of Civil Procedure impose no limits on the number of Rule 30(b)(6) depositions that a party may notice.

23 24 25 26
FENNEMORE CRAIG, P.C.
P HOENIX

PHX/RHARRIS/1814883.1/12623.001

Case 2:04-cv-00400-PGR

Document 133 7 Filed 07/14/2006

Page 7 of 11

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
FENNEMORE CRAIG, P.C.
P HOENIX

E.

THE RULE 30(B)(6) DEPOSITION IS DIRECTLY RELEVANT TO OMRON' DEFENSE UNDER THE NOERR-PENNINGTON DOCTRINE S Hypercom' last argument is that Omron failed to demonstrate the relevance of the s

Rule 30(b)(6) deposition of a Hypercom representative with "knowledge of technical issues relating to Hypercom' products accused of infringement." Opposition at 9. In s addition to waiving any objections to the depositions for the reasons already stated, Hypercom' argument lacks merit because the depositions are relevant to Omron' s s defense under the Noerr-Pennington doctrine. Hypercom claims that Omron conspired with Verve to file baseless patent infringement lawsuits. See generally Second Amended Complaint. However, Omron and Verve are entitled to immunity against state law claims for maintaining civil suits under the Noerr-Pennington doctrine, which insulates parties who bring civil litigation from liability so long as the litigation is not a "sham." Prof. Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60-61 (1993). Litigation is a "sham" only if both objectively and subjectively baseless. As the Supreme Court has clarified: First, a lawsuit must be objectively baseless so that no reasonable litigant could reasonably expect success on the merits. If an objective litigant could conclude that a lawsuit is reasonably calculated to obtain a favorable outcome, the suit is immunized under Noerr . . . . Only if challenged litigation is objectively meritless may a court examine the litigant' s subjective motivation. Prof. Real Estate Investors, 508 U.S. at 60-61 (emphasis added). Therefore, "as long as the underlying lawsuit is not objectively baseless, the plaintiff cannot be held liable for bringing the suit even if the plaintiff' motives were malicious." American Continental v. s Lexicon, 845 F. Supp. 1377, 1384 (D. Ariz. 1993) (citing Prof. Real Estate Investors, 508 U.S. at 62). A lawsuit is objectively baseless only if it lacks probable cause. "The existence of probable cause to institute legal proceedings precludes a finding that a . . . defendant has
PHX/RHARRIS/1814883.1/12623.001

Case 2:04-cv-00400-PGR

Document 133 8 Filed 07/14/2006

Page 8 of 11

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
FENNEMORE CRAIG, P.C.
P HOENIX

engaged in sham litigation," and is an "absolute defense" to allegations of "sham litigation." Prof. Real Estate Investors, 508 U.S. at 62-63. Probable cause is defined as "as the mere ` reasonabl[e] belie[f] that there is a chance that [a] claim may be held valid upon adjudication.'" Amarel v. Connell, 102 F.3d 1494, 1518-19 (9th Cir. 1996) (quoting Prof. Real Estate Investors, 508 U.S. at 62-63) (emphasis added). To prove that Verve lacked probable cause for filing its infringement lawsuits, Hypercom must "adduce[] evidence to ` disprove the challenged lawsuits' legal viability.'" Id. (quoting Professional Real Estate Investors, 508 U.S. at 61). Otherwise, when probable cause exists for filing a lawsuit, "the Noerr-Pennington doctrine bars all types of state law claims challenging that suit," including abuse of process and malicious prosecution claims. American Continental, 845 F. Supp. at 1385 (citing Oregon Nat. Resources Couns. v. Mohla, 944 F.2d 531, 53234 (9th Cir. 1991)). Omron' expert witnesses have already provided an infringement analysis s demonstrating that Verve' claims of patent infringement against Hypercom are not s merely colorable, but correct, and that the patent infringement claims had merit when filed. This is sufficient to establish probable cause for the infringement claims. The Rule 30(b)(6) deposition on technical issues sought by Omron is relevant to discovering additional information to support the already-filed patent infringement claims against Hypercom. Moreover, the Rule 30(b)(6) technical issues are relevant based on newly discovered facts. The patents involved in the patent infringement lawsuits filed by Verve against Hypercom cover Point Of Sale ("POS") terminals, e.g, the credit and debit card processing machine sitting next to a cash register in a store. One of the patents at issue is U.S. Patent No. 5,012,077 ("the ` 077 Patent"), which covers a credit and debit card processing terminal that is capable of automatically discriminating between a credit and debit card, after the card is swiped, without any additional input from the cashier or the
PHX/RHARRIS/1814883.1/12623.001

Case 2:04-cv-00400-PGR

Document 133 9 Filed 07/14/2006

Page 9 of 11

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
FENNEMORE CRAIG, P.C.
P HOENIX

card owner. See Main Report Of Laurence H. Pretty, Hypercom' Expert on Patent s Litigation Procedure.6 Hypercom' expert opines that Hypercom' POS terminals do not s s infringe the ` 077 Patent because "[n]either the T7 or the ICE 6000 terminal is able to discriminate automatically between credit cards and debit cards." Id. As it turns out, Mr. Pretty is wrong. Omron has direct evidence that rebuts Mr. Pretty' opinions and demonstrates that s Hypercom' ICE 6000 terminal is capable of automatically discriminating between credit s cards and debit cards. This evidence is summarized in the Patent Analysis Report of James Dunlop, an engineer with TAEUS Engineering Intellectual Property. See Patent Analysis Report, attached as Exhibit 2 to Reply. Mr. Dunlop' report summarizes his s observations of a Hypercom ICE6000 terminal at PetCo, a pet supplies retail store in Colorado: Evaluation of the Hypercom ICE6000 showed that no identification had to be given to the cashier or machine to identify the use of a debit or credit card. The displays shown on the Hypercom ICE 6000 prompted the consumer to either enter their PIN or signature depending on the card used. Id. at 3. This evidence proves that Hypercom' ICE6000 terminal infringes the ` s 077 Patent, which would prove that Verve' infringement claims are not baseless. At the very s least, the Rule 30(b)(6) deposition is relevant to evaluate the infringing features of the Hypercom products, corroborate Omron' evidence of infringement, and allow Omron to s further evaluate the credibility and reliability of Mr. Pretty' expert opinions. Omron, s therefore, is entitled to the Rule 30(b)(6) deposition. F. CONCLUSION This discovery dispute arises only because Hypercom has refused to recognize its "independent professional obligations to work closely with opposing counsel to avoid
6

Omron does not attach a copy of the Pretty Report to this Reply because Omron does not want to inundate the Court with paper. Omron will have a copy of the Pretty Report at the July 18, 2006, hearing.
PHX/RHARRIS/1814883.1/12623.001

Case 2:04-cv-00400-PGR

Document 133 10Filed 07/14/2006

Page 10 of 11

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
FENNEMORE CRAIG, P.C.
P HOENIX

needless satellite quarrels." Despite multiple requests for mutually convenient dates for depositions, Hypercom refused to provide even one date. When Omron noticed the depositions, Hypercom agreed to file a stipulation with the Court for permission to proceed with the depositions after the discovery deadline, only to switch positions with four business days remaining in discovery and object to the depositions. Such discovery conduct should not be tolerated. This Court should enter an order extending the discovery deadline and the dispositive motions deadline to allow Omron to depose the Hypercom Witnesses. DATED this 14th day of July, 2006. FENNEMORE CRAIG, P.C. By: s/Ray K. Harris Ray Harris Paul Moore BAKER & DANIELS LLC David P. Irmscher John K. Henning Attorneys for Defendant Omron Corporation CERTIFICATE OF SERVICE I hereby certify that on July 14, 2006, I electronically transmitted the attached documents to the Clerk' Office using the CM/ECF System for filing and transmittal of a s Notice of Electronic Filing to the following CM/ECF registrants: Sid Leach Andrew F. Halaby Monica A. Limon-Wynn SNELL & WILMER L.L.P. One Arizona Center 400 East Van Buren Phoenix, AZ 85004-2202 _s/Melody Tolliver_________________
PHX/RHARRIS/1814883.1/12623.001

Case 2:04-cv-00400-PGR

Document 133 11Filed 07/14/2006

Page 11 of 11