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United States District Court, S.D. New York

June 18, 2004.


The opinion of the court was delivered by: HENRY PITMAN, Magistrate Judge


I. Introduction

Defendants in this patent infringement action move for a separate trial on the issue of willfulness and to defer discovery concerning willfulness until the conclusion of the trial of liability issues. For the reasons set forth below, defendants' motion is denied in all respects.

  II. Facts

  Plaintiff Novartis AG is the owner of United States Patent No. 5,733,569 ("the '569 Patent") which describes and claims, among other things, liquid pharmaceutical compositions for the nasal administration of calcitonin, a hormone known to participate in calcium and phosphorus metabolism. The '569 Patent claims compositions that contain benzalkonium chloride to enhance bioavailability as well as an application device and method for administering the compositions.

  Novartis AG is also the owner of United States Patent No. 5,759,565 ("the '565 Patent") which claims liquid pharmaceutical compositions for the nasal administration of calcitonin which contain benzalkonium chloride.

  In or about September 2002, defendants filed an abbreviated new drug application with the United States Food and Drug Administration for approval of the commercial manufacture, use and sale of a salmon calcitonin nasal spray. As required by 21 U.S.C. § 355 (j)(2) (vii), defendants submitted with their application an opinion letter from the firm of Caesar, Rivise, Berstein, Cohen & Pokotilow, Ltd., ("Caesar, Rivise") opining that the '569 and '565 Patents were invalid on the grounds of obviousness and prosecution laches. If plaintiffs' patents are valid and defendants' products are within the scope of the patents' claims, defendants' abbreviated new drug application constitutes an act of infringement. 35 U.S.C. § 271 (e)(2).

  Plaintiffs commenced the pending infringement action in November 2002. Plaintiffs allege that defendants have willfully infringed the '569 and '565 Patents and seek an injunction, damages and other relief. In the course of discovery, defendants have admitted that the subject of their abbreviated new drug application is within the scope of the claims of the '569 and '565 Patents (Defendants Supplemental Responses to Plaintiffs' First Set of Requests for Admission, dated November 7, 2003, Nos. 20-22; Defendants' Responses to Plaintiffs' Second Set of Requests for Admissions, dated December 1, 2003, Nos. 60-67). Thus, the principal issues at trial will be the validity of the '569 and '565 Patents and, if the patents are valid, whether defendants' infringement was willful.

  In October 2003, defendants advised plaintiffs that they would rely on an advice-of-counsel defense to plaintiffs' claim of willful infringement and produced 75 pages of documents that had previously been withheld on the ground of privilege. Because plaintiffs believe that the documents produced by defendants are incomplete, and in order to explore further the advice-of-counsel defense, plaintiffs seek additional documents and deposition testimony from Caesar, Rivise and to depose defendants' principals concerning the advice of counsel. Defendants oppose this discovery, claiming that trying validity and willfulness together will lead to confusion, delay and unfairly prejudice defendants by forcing a premature waiver of the attorney-client privilege.

  III. Analysis

  The factors to be considered in resolving a motion for separate trials were succinctly and cogently summarized by the Honorable Laura Taylor Swain, United States District Judge, in Dallas v. Goldberg, 143 F. Supp.2d 312, 315 (S.D.N.Y. 2001):

Under Rule 42(b) of the Federal Rules of Civil Procedure the Court, in its discretion, can bifurcate the trial of an action for "convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy." Fed.R.Civ.P. 42(b). The decision to bifurcate a trial rests within the sound discretion of the trial court. See Simpson v. Pittsburgh Corning Corp., 901 F.2d 277, 283 (2d Cir. 1990); Agron v. Trustees of Columbia Univ., No. 88 Civ. 6294, 1997 WL 399667 at *1 (S.D.N.Y. July 15, 1997). Although bifurcation of trials is not unusual and may under appropriate circumstances be the preferred method, bifurcation remains the exception rather than the rule. See Lewis v. Triborough Bridge, No. 97 CIV. 0607, 2000 WL 423517 at *2 (S.D.N.Y. Apr. 19, 2000); Agron, 1997 WL 399667 at *1; Kerman v. City of New York, No. 96 Civ. 7865, 1997 WL 666261 at *5 (S.D.N.Y. Oct. 24, 1997).
The application of Rule 42(b) does not lend itself to a bright-line test but, rather, requires case-by-case analysis. See Monaghan v. SZS 33 Associates, 827 F. Supp. 233, 245 (S.D.N.Y. 1993). Factors that courts consider in determining whether bifurcation is appropriate include: (1) whether the issues are significantly different from one another; (2) whether the issues are to be tried before a jury or to the court; (3) whether the posture of discovery on the issues favors a single trial or bifurcation; (4) whether the documentary and testimonial evidence on the issues overlap; and (5) whether the party opposing bifurcation will be prejudiced if it is granted. See Lewis, 2000 WL 423517 at *2; Reading Indus., Inc. v. Kennecott Copper Corp., 61 F.R.D. 662, 664 (S.D.N.Y. 1974). The party seeking bifurcation bears the burden of establishing that bifurcation is warranted. See Lewis, 2000 WL 423517 at *2.
See also Kos Pharm., Inc. v. Barr Labs., Inc., 218 F.R.D. 387, 390-91 (S.D.N.Y. 2003).

  Application of relevant factors to this case leads to the conclusion that separate trials are not appropriate here. A. Overlap of Issues

  Although defendants state that there is no overlap between the issues of willfulness and validity, their argument does not withstand analysis.

  "In order to find willful infringement, [a] district court `[is] required to find by clear and convincing evidence in view of the totality of the circumstances that [the infringer] acted in disregard of the [patentee's] patent and lacked a reasonable basis for believing it had a right to do what it did.'" WMS Gaming, Inc. v. International Game Tech., 184 F.3d 1339, 1354 (Fed. Cir. 1999), quoting Amsted Indus., Inc. v. Buckeye Steel Castings Co., 24 F.3d 178, 181 (Fed. Cir. 1994). Accord Golight, Inc. v. Wal-Mart Stores, Inc., 355 F.3d 1327, 1339 (Fed. Cir. 2004); Crystal Semiconcductor Corp. v. TriTech Microelectronics Int'l, Inc., 246 F.3d 1336, 1346 (Fed. Cir. 2001). Although "[i]t is well settled that an important factor in determining whether willful infringement has been shown is whether or not the infringer obtained the opinion of counsel," Comark Communications, Inc. v. Harris Corp., 156 F.3d 1182, 1191 (Fed. Cir. 1998), the mere fact that an infringer has received the advice of counsel is not the end of the analysis. Amsted Indus. Inc. v. Buckeye Steel Castings Co., supra, 24 F.3d at 182; Kori Corp. v. Wilco Marsh Buggies & Draglines, Inc., 761 F.2d 649, 656-57 (Fed. Cir. 1985). The fact finder must still assess the reasonableness of an accused infringer's reliance on the advice of counsel. Stryker Corp. v. Davol Inc., 234 F.3d 1252, 1259 (Fed. Cir. 2000); Graco, Inc. v. Binks Mfg. Co., 60 F.3d 785, 793 (Fed. Cir. 1995).

  Evaluation of the reasonableness of an infringer's reliance can involve the subject matter of the patent. Home Elevators, Inc. v. Millar Elevator Serv. Co., 933 F. Supp. 1090, 1092 (N.D. Ga. 1996); THK America, Inc. v. NSK Co., 151 F.R.D. 625, 629-30 (N.D. Ill. 1993). For example, the infringer's failure to disclose all material information, or the "best information," to counsel can vitiate the advice-of-counsel defense. Comark Communications, Inc. v. Harris Corp., supra, 156 F.3d at 1191. Resolving what information is material or constitutes the "best information" necessarily implicates the subject matter of the patent because it is impossible to determine what information is material or constitutes the "best information" without understanding the subject matter of the patent. See generally Amsted Indus. Inc. v. Buckeye Steel Castings Co., supra, 24 F.3d at 183 (affirming jury's rejection of advice-of-counsel defense where there was evidence that counsel did not fully understand the invention).

  Similarly, where obviousness or anticipation are argued, as they are here, an opinion's failure to relate the prior art to the specific claims or claim elements or to explain how the prior art anticipates the claims or renders them obvious may defeat an advice-of-counsel defense. As the Court of Appeals for the Federal Circuit explained in affirming a finding of willfulness notwithstanding counsel's opinion that the patent in suit was invalid:

  Substantial evidence supports the district court's conclusion that a reasonable jury could have concluded that the opinion letters were not adequate to defeat a finding of willfulness. Kiley, the CellPro representative who procured the opinion letters from Bloomberg, was highly sophisticated in matters of patent law and in the involved technology. Kiley had worked as a patent examiner and later was a partner at the law firm of Lyon & Lyon, where he handled patent prosecution and patent litigation. See Hopkins II, 978 F. Supp. at 187. It is therefore reasonable to conclude that Kiley should have been on notice concerning the opinions' obvious shortcomings and accordingly of the impropriety of CellPro's course of action. See, e. g., Underwater Devices, Inc. v. Morrison-Knudsen Co., 717 F.2d 1380, 1390, 219 USPQ 569, 576 (Fed. Cir. 1983). The opinions did not attempt to link the disclosures of the prior art references relied upon to establish anticipation or obviousness with the limitations of the claims of the patents. For example, and as the district court recognized, none of the allegedly anticipatory references cited in the '680 opinion letter even refers to a cell suspension. See Hopkins II, 978 F. Supp. at 194. The '204 opinion letter concluded that CellPro did not infringe claims 2, 3, 5, and 6 of the '204 patent, but conspicuously omitted any reference to claims 1 and 4, the claims asserted by Hopkins in this action. . . . Such shortcomings should have been especially troublesome to a knowledgeable practitioner like Kiley, especially considering that the opinions did not express an opinion concerning infringement of the broadest claims. . . . Under the circumstances, we cannot say that a reasonable jury could not have concluded that the opinion letters were ineffective to instill in CellPro, through Kiley, reasonable confidence that its activities did not infringe valid patents. Johns Hopkins Univ. v. Cellpro, Inc., 152 F.3d 1342, 1364 (Fed. Cir. 1998).

  Finally, defendants' second invalidity argument — prosecution laches — will require analysis of the prosecution histories of the '569 and '565 Patents. See generally Symbol Tech., Inc. v. Lemelson Med., Educ. & Research Found., L.P., 277 F.3d 1361, 1364-65 (Fed. Cir. 2002). The same prosecution histories will need to be examined to determine the reasonableness of defendants' reliance on counsel's opinion concerning prosecution laches.

  I am not suggesting that the vitality of an advice-of-counsel defense turns on the correctness of counsel's advice; it clearly does not. Johns Hopkins Univ. v. Cellpro, Inc., supra, 152 F.3d at 1364 ("Our case law makes clear that legal opinions that conclude (even if ultimately incorrectly) that an infringer would not be liable for infringement may insulate an infringer from a charge of willful infringement if such opinions are competent (and followed)."). Nevertheless, whether the opinion, and the defendants' reliance on the opinion, falls with the arc of reasonableness frequently cannot be determined without resort to the underlying technology.

  Since defendants have not met their burden of demonstrating the separability of the technology from the issue of reasonableness, the first Rule 42(b) factor weighs against separate trials. B. Mode of Trial

  This action is to be tried to the Court without a jury. Since the case will be tried without a jury, there is no chance that the fact finder will be confused by trying liability and willfulness in a single action.

  C. Does the Posture of Discovery Favor a Single Trial or Bifurcation

  Fact discovery in this matter closed on December 9, 2003. However, claim construction proceedings are still pending and no trial date has been set. In light of the need to complete claim construction proceedings before the merits of the case can be resolved, granting a modest extension of fact discovery to permit plaintiff to complete discovery concerning willfulness will not delay the ultimate resolution of this matter.

  D. Evidentiary Overlap

  As discussed at pages 5-8, there is a substantial overlap of evidence concerning willfulness and liability.

  E. Prejudice

  Denial of defendants' motion for separate trials will not result in prejudice to defendants. Granting the motion would, however, result in prejudice to plaintiffs.

  Although the Court of Appeals for the Federal Circuit has cautioned that "[a]n accused infringer . . . should not, without the trial court's careful consideration, be forced to choose between waiving the [attorney-client] privilege in order to protect itself from a willfulness finding, . . . and maintaining the privilege, in which case it may risk being found to be a willful infringer . . .," Ouantum Corp. v. Tandon Corp., 940 F.2d 642, 643-44 (Fed. Cir. 1991), none of the concerns cited by the Federal Circuit are present here.

  First, defendants have already chosen to rely on an advice-of-counsel defense. The substance of counsel's opinion has already been voluntarily disclosed to plaintiffs; the only remaining issue is whether discovery concerning the issue should be completed now.

  Second, assuming that counsel's opinion was honestly formed, permitting the completion of discovery concerning the advice of counsel, will not prejudice defendants on any liability issue. I have reviewed the documents defendants have already produced concerning the advice-of-counsel defense, and these documents demonstrate that counsel concluded that the '569 and '565 Patents were invalid for substantially the same reasons defendants are asserting in this action. Since counsel's analysis appears to be entirely consistent with defendants' position in this litigation, it is difficult to understand how disclosure could prejudice defendants on the merits.

  Finally, defendants contend that denial of their motion for separate trials may prejudice them because it may result in the disqualification of Caesar, Rivise. There are several responses to this argument. First, plaintiffs have committed not to seek the disqualification of counsel. Second, even if the Court were to determine sua sponte that Caesar, Rivise should be disqualified, defendants are represented by both Caesar, Rivise and the firm of Amster, Rothstein & Ebenstein. The Amster firm specializes intellectual property work and has taken the "laboring oar" in all of defendants' court appearances before me. There is every reason to believe that the Amster firm would continue to provide excellent representation for defendants should it become necessary to disqualify Caesar, Rivise. Finally, to the extent that any hardship to defendants would result from the possible disqualification of Caesar, Rivise, that hardship will be the result of defendants' unilateral choice to retain Caesar, Rivise as counsel in this infringement action. The possibility that Caesar, Rivise would be a witness and might have to be disqualified was foreseeable from the outset of these proceedings. Having unilaterally created the situation in which disqualification was a possibility, it is only fair that defendants unilaterally bear the consequences. See Real v. Bunn-O-Matic Corp., 195 F.R.D. 618, 626 (N.D. Ill. 2000).

  Granting defendants' motion, on the other hand, will result in prejudice to plaintiffs. Plaintiffs will be prejudiced because the proceedings will be multiplied into two trials instead of one, and the final resolution of this matter will be further delayed. IV. Conclusion

  For all the foregoing reasons, defendants' motion for a separate trial on the issue of willfulness is denied in all respects. Since defendants' application to stay discovery on the issue of willfulness is entirely derivative of its motion for a separate trial, their motion to stay discovery on willfulness is also denied. Plaintiffs shall complete all discovery on the issue of willfulness within sixty (60) days of the date of this Order.


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