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Solutran, Inc. v. U.S. Bancorp

United States District Court, D. Minnesota

February 28, 2018

Solutran, Inc., Plaintiff,
v.
U.S. Bancorp and Elavon, Inc., Defendants. U.S. Bancorp and Elavon, Inc., Counter-claimants,
v.
Solutran, Inc., Counter-defendant.

          Robert J. Gilbertson, David J. Wallace-Jackson, and Sybil Dunlop, Greene Espel PLLP, for Plaintiff and Counter-defendant.

          Peter M. Lancaster, Ben D. Kappelman, and Kenneth E. Levitt, Dorsey & Whitney LLP, and J. Thomas Vitt, Jones Day, for Defendants and Counter-claimants.

          MEMORANDUM OPINION AND ORDER

          SUSAN RICHARD NELSON, UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         The Court now addresses Plaintiff's Motion in Limine No. 2 to exclude evidence, testimony, exhibits, and argument related to BankServ [Doc. No. 228]. For the reasons stated below, the Court grants the motion in part and defers ruling in part.

         II. BACKGROUND

         On September 25, 2013, Plaintiff filed a Complaint against Defendants, alleging infringement of its United States Patent No. 8, 311, 945 (“'945 patent”). (Compl. [Doc. No. 1].) Patent ‘945 was issued to Plaintiff on November 13, 2012. (Id., Ex. A [Doc. No. 1-1].) As required by the Pretrial Schedule, Defendants served their invalidity contentions on August 15, 2014. (See Ernstene Aff. [Doc. No. 105] ¶ 2-3.) The case was subsequently stayed while Defendants pursued a Covered Business Method review with the Patent Trial and Appeal Board. (See generally Order dated Sept. 18, 2014 [Doc. No. 50].) After the stay was lifted, Magistrate Judge Thorson issued an amended pretrial scheduling order that allowed Defendants to amend their invalidity contentions by April 15, 2016, provided that they could demonstrate good cause to do so. (Am. Pretrial Scheduling Order [Doc. No. 69], at 4.)

         Defendants moved to amend their invalidity contentions to include, among other things, a system called BankServ. (See Mot. for Leave to Amend Invalidity and Noninfringement Contentions [Doc. No. 98].) Defendants describe BankServ as “an electronic check conversion product offered by BankServ Check Services between 1999 and at least 2002.” (U.S. Bank's Opp'n to Solutran's Mots. in Lim. [Doc. No. 265] (“Defs.' Mem. in Opp'n”), at 11.) The Magistrate Judge denied Defendants' motion, finding that Defendants had not met their burden to show diligence and that allowing amendment would be prejudicial to Plaintiff. (Minute Entry dated Oct. 3, 2016 [Doc. No. 114].) Defendants objected, and this Court affirmed the Magistrate Judge's decision. (See Order dated Dec. 20, 2016 [Doc. No. 151].) Defendants concede that, because of the Magistrate Judge's order, they cannot offer evidence of BankServ's process to support their claims of patent invalidity. (Tr. of Final Pretrial Conference [Doc. No. 284] (“Tr.”), at 43.)

         Defendants seek to admit evidence relating to BankServ for other purposes, however, and Plaintiff has moved to exclude that evidence. (Solutran's Mots. in Lim. [Doc. No. 228], ¶ 2.) Plaintiff has also expressed concern that some of Defendants' exhibits appear to reference other prior art that was not disclosed in Defendants' invalidity contentions, which Defendants plan to use for other purposes at trial.[1] (See Tr., at 35-37.)

         Defendants respond that even though BankServ was excluded for invalidity purposes, it is still relevant and admissible for other purposes at trial, such as to rebut allegations of copying and to counter Plaintiff's damages claims. (Defs.' Mem. in Opp'n, at 10-16.)

         III. DISCUSSION

         Defendants contend that they should be permitted to introduce evidence of the BankServ system for four purposes: (1) to rebut Plaintiff's argument that Defendants' infringement was willful because they copied Plaintiff's patent ‘945; (2) to rebut Plaintiff's argument that Defendants' copying of patent ‘945 shows that the patent is nonobvious; (3) to counter Plaintiff's claim of lost profits by showing that BankServ was an available noninfringing alternative; and (4) in the reasonable royalty analysis, to show that patent ‘945 lacked utility or advantages over old modes or devices.[2] (Defs.' Mem. in Opp'n, at 11-13; Tr., at 45-48.)

         These first two purposes relate to copying. The first is moot, because the Court has granted Defendant U.S. Bank's Motion in Limine to Exclude Argument that Defendants' Infringement was Willful [Doc. No. 235]. (See Order dated Feb. 26, 2018 [Doc. No. 297].) The second purpose is too closely related to Defendants' invalidity claims. If Plaintiff offers evidence of copying to show nonobviousness, it will be to counter Defendants' claim that patent ‘945 is invalid because it is obvious under 35 U.S.C. § 103. Thus, if Defendants use BankServ to rebut that evidence and show that they did not copy Plaintiff's patent, they would essentially be using it to show that patent ‘945 is invalid for obviousness. This purpose undermines the Magistrate Judge's order denying Defendants' motion to amend their invalidity contentions. The Court will not permit Defendants to introduce evidence of the BankServ process or other nondisclosed prior art to rebut accusations of copying.

         Defendants make a stronger argument for admitting evidence related to BankServ to counter Plaintiff's damages claims. Plaintiff seeks to recover lost profits. Under the Panduit standard, this requires Plaintiff to show the lack of an available, noninfringing alternative process that Defendants might have used instead of infringing the patent. See Grain Processing Corp. v. Am. Maize-Products Co., 185 F.3d 1341, 1351 (Fed. Cir. 1999); SmithKline Diagnostics, Inc. v. Helena Labs. Corp., 926 F.3d 1161, 1165 (Fed. Cir. 1991). Defendants claim that BankServ's process was an acceptable alternative to the process that infringed upon Plaintiff's patent ‘945. (Defs.' Mem. in Opp'n, at 13.) ...


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