United States: Minnesota Patent Litigation Wrap-Up – May 2019

This post continues our monthly summary of patent litigation in the District of Minnesota, including short summaries of various substantive orders issued in pending cases.

Cardiovascular Systems, Inc. v. Cardio Flow, Inc., 18-cv-01253 (SRN/KMM) (D. Minn. May 2, 2019)

Judge Nelson affirmed Magistrate Judge Menendez's non-dispositive protective order related to a patent prosecution bar. Defendant Cardio Flow had moved for a protective order asking for Plaintiff Cardiovascular Systems, Inc.'s ("CSI") patent prosecution counsel, Mr. Jeffrey Stone, to be subject to a patent prosecution bar. Magistrate Judge Menendez held that under the patent prosecution bar, Mr. Stone could either be privy to confidential patent discovery in the litigation, or he could continue to prosecute analogous patent matters for CSI. CSI objected to Magistrate Judge Menendez's order.

Judge Nelson first discussed her review of the objection to the non-dispositive order. Judge Nelson pointed out that CSI's objection was "essentially a word-for-word copy of the brief that Judge Menendez considered, and ultimately rejected." Additionally, CSI did "not even acknowledge the 'extremely deferential' standard of review that [the district court] applies to appeals of magistrate judge orders on non-dispositive motions." With that background, Judge Nelson affirmed Magistrate Judge Menendez's analysis of CSI's arguments.

Regarding CSI's first main argument, Judge Nelson agreed that Cardio Flow showed that a prosecution bar was necessary. Cardio Flow met its burden by identifying specific types of nonpublic technical devices and documents belonging to Cardio Flow that CSI would have access to when prosecuting its own patents. Next, Judge Nelson found that the risk of competitive use outweighed any potential prejudice to CSI. Judge Nelson agreed that Mr. Stone would not be "out of a job," and could continue "prosecuting CSI's patent applications and pursuing other patent-related matters on CSI's behalf," just "without having access to Cardio Flow's confidential information." Judge Nelson also noted that CSI could engage an outside patent advisor for analyzing the confidential information. Finally, Judge Nelson held that the protective order's mechanism for resolving confidentiality disputes dampened concerns that the prosecution bar was overbroad.

ecoNugenics, Inc. v. Bioenergy Life Science, Inc., 19-cv-00351 (JNE/DTS) (D. Minn. May 7, 2019)

In response to the Court's sua sponte Order to Show Cause, Magistrate Judge Schultz held that counsel for Plaintiff ecoNugenics was not in contempt of court for filing serial actions of claims that had previously been dismissed, but the Court awarded approximately $85,000 in attorneys' fees to be paid by ecoNugenics.

ecoNugenics first filed a complaint for patent infringement against three defendants in 2017. The only defendant that was served filed a motion to dismiss, which the Court granted. ecoNugenics then filed a separate action alleging infringement by the same three defendants. In this second action, ecoNugenics deleted the factual allegations that led to the dismissal in the first action, and replaced them with factual allegations that directly contradicted the first complaint. ecoNugenics then attempted to file an amended complaint, which the Court denied "as futile and in bad faith." ecoNugenics then filed a letter requesting permission to file a motion to reconsider the order of dismissal, but two hours later, filed a voluntary dismissal. ecoNugenics then filed a third action making the same allegations against the same defendants as the second action.

After the filing of the third action, Magistrate Judge Schultz sua sponte issued an order to show cause that ecoNugenics counsel was not in contempt and held a hearing on the subject. In his resulting Order, Magistrate Judge Schultz first analyzed whether a finding of contempt was appropriate under Rule 41(a)(1)(A). He stated that a "proper Rule 41(a)(1)(A) voluntary dismissal vitiates and annuls all prior proceedings and orders in the case and terminates jurisdiction over it for the reason that that case has become moot." He continued to analyze whether Rule 41(a)(1)(A) would allow for a finding of contempt under a literal reading of the rule or under the spirit and intent of the rule. Magistrate Judge Schultz declined to find counsel for ecoNugenics in contempt based on the unresolved Rule 41(a)(1)(A) precedent in the Eighth Circuit.

However, Magistrate Judge Schultz granted attorneys' fees based on Rule 41(d), which provides for costs of a previously dismissed action. Magistrate Judge Schultz noted that the ability to award costs includes attorneys' fees, and such fees were appropriate in this case based on "ecoNugenics' attempt to file a new action in 2018, its futile motion to amend its complaint, its decision, to voluntarily dismiss the 2017 action, and then file an already discredited complaint have required Defendant to expend considerable time and effort on numerous motions." Magistrate Judge Schultz found the amount of fees reasonable and awarded approximately $85,000.

Grupo Petrotemex, S.A. De C.V. and DAK Americas LLC v. Polymetrix AG, 16-cv-2401 (SRN/HB) (D. Minn. May 24, 2019)¹

Magistrate Judge Bowbeer granted in part and denied in part Plaintiff Grupo Petrotemex, S.A. De C.V. and DAK Americas LLC's ("GPT/DAK") Renewed Motion to Compel. Magistrate Judge Bowbeer ordered Defendant Polymetrix to promptly produce all relevant documents within the scope of permissible discovery, finding that Polymetrix inappropriately argued that it could withhold the documents under Swiss Law.

In analyzing Swiss law, Magistrate Judge Bowbeer held that Polymetrix only partially met its burden to block the production of documents under Swiss law Article 162, which prohibits production of documents that would breach contractual and legal obligations to maintain secrecy of a third-party's information. In particular, Polymetrix did not show that it had any express or implied confidentiality obligations currently in effect and applicable to the specific documents requested. The Magistrate Judge, however, found that Article 162 applied to technical, engineering, and manufacturing drawings and specifications for the accused process because of an existing implied obligation of confidentiality. Polymetrix therefore did not need to produce those documents.

Next, Magistrate Judge Bowbeer found that Swiss law Article 273 did not prevent disclosure. Article 273 prevents disclosure when the "master of the secret" is a "Swiss resident, a Swiss legal entity, or the secret falls within the ambit of Swiss sovereignty rules." Here, Polymetrix failed to make any showing of such secrets.

Finally, Magistrate Judge Bowbeer performed a balancing test to determine whether to defer to the Swiss blocking statue and require GPT/DAK to proceed under the Hague Convention. The Magistrate Judge addressed five factors to find the Swiss law inapplicable. Magistrate Judge Bowbeer found the final factor to be determinative. Because noncompliance with the discovery requests would undermine the United States' interests, she ordered production. Magistrate Judge Bowbeer found that in this case, Polymetrix made no specific showing of Switzerland's interest in the blocking statute.

Footnote

[1] This summary completed by Fish and Richardson Twin Cities Summer Associate Chloe Margulis.

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