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In re Papst Licensing GMBH & Co. KG Litigation

August 8, 2008

IN RE PAPST LICENSING GMBH & CO. KG LITIGATION
THIS DOCUMENT RELATES TO:
CASIO
v.
PAPST, NO. 06-CV-1751



MEMORANDUM OPINION RE: SEVENTH ORDER REGARDING CASIO/PAPST DISCOVERY -- CASIO'S MOTION TO DISMISS

Papst Licensing GMBH & Co. ("Papst") alleges that digital cameras sold by Casio America Inc., its predecessor Casio Inc., and Casio Computer Co., Ltd. (collectively "Casio") in the United States infringe two patents owned by Papst, U.S. Patent Nos. 6,470,399 and 6,895,449 (the "Patents-In-Suit"). Casio denies the allegations. The parties are engaged in pre-trial discovery as part of a set of cases joined for multidistrict litigation ("MDL") during discovery. There has been substantial discovery litigation between these parties, and the Court has imposed sanctions against Papst due to discovery abuses. Now, due to additional alleged discovery abuse, Casio seeks the ultimate sanction - dismissal of Papst's claims against Casio and entry of default judgment in favor of Casio. Casio argues that Papst's Fourth Supplemental Answers and Papst's most recent production of documents are too little too late. Casio's complaints are not without justification, but the Court concludes that its request for dismissal and default is too much too soon.

The Court will deny Casio's motion to dismiss or for default. Even so, because of the continuing discovery abuses revealed by the record, the Court will order Welsh & Katz Ltd. to pay the costs to Casio of bringing this motion, including reasonable attorney fees, and will deem the conception date for the Patents-In-Suit to be no earlier than October 1, 1996.

I. FACTS

A. Prior Discovery Abuse by Papst

Casio's current request for sanctions must be considered in context. As the Court has previously explained:

Casio USA sells digital cameras in the United States. Papst is a German company that produces no products; it acquires patents on products or methods allegedly invented by others and then searches the world for patents it might challenge for infringement. At one of the first status conferences of the MDL, when the Court queried whether this was old-fashioned "claim-jumping," counsel for Papst readily agreed that it had been called worse. Of course, this is a perfectly lawful and respectable business. But it underscores that the business of Papst is litigation, not invention or production. Litigation is the business model whereby Papst, when successful, achieves royalty payments from others. As is clear from this record, the threat of litigation alone often achieves royalty payments. Papst is not represented by counsel from Germany who may be unfamiliar with the federal rules. Its U.S. counsel are from Chicago and regularly represent Papst in patent litigation across the country. These counsel are highly experienced in U.S. patent law and in district court litigation.

See Second Mem. Op. Regarding Casio/Papst Discovery filed May 6, 2008 [Dkt. # 82] ("Second. Op.") at 6.

This Court sanctioned Papst for its discovery abuses by the following opinions and orders: (1) First Order Regarding Casio/Papst Discovery filed April 24, 2008 [Dkt. # 77] ("First Order"); (2) Second Op. and Order Regarding Casio/Papst Discovery filed May 6, 2008 [Dkt. # 83]; and (3) Third Order Regarding Casio/Papst Discovery filed May 19, 2008 [Dkt. # 102] ("Third Order"). Pursuant to these three Orders, the Court agreed with Magistrate Judge Deborah Robinson and required Papst to divulge all information requested by Casio without objection based on any privilege. Further, the Court struck Papst's "outrageously overbroad" discovery requests of Casio, and precluded Papst from advancing additional formal written discovery on Casio because written discovery had long since been closed by the prior presiding judge. Third Order at 5.

Papst's waiver of privilege arose from a May 31, 2007 order of the Magistrate Judge requiring Papst to respond to the initial discovery propounded by Casio America Inc., formerly known as Casio, Inc., ("Casio USA") - without objections - due to Papst's failure to comply with the district court's order requiring Papst to respond to Casio USA's initial discovery requests.*fn1 Papst objected to the Magistrate Judge's May 31, 2007 order, claiming disingenuously that it did not understand the district court's order "to proceed" with discovery. See Second Op. at 7. This Court denied Papst's objections, finding:

Papst's failure to respond to Casio USA's discovery requests, as directly ordered, was entirely unjustified and inexcusable and smacks of bad faith. How difficult is it to understand a district court order that discovery is "to proceed"? Were there any doubt, Papst might have inquired. It did nothing.

Id. at 8. Thus, on May 6, 2008, this Court again ordered Papst to respond to Casio USA's discovery requests without privilege objections. Then, on June 9, 2008, the Court clarified the Papst waiver of privilege as follows:

(1) Papst may not limit its production of otherwise privileged documents to documents related "solely to Casio's products," and Papst must respond to Casio's discovery requests without objection based on attorney-client privilege, consulting expert privilege, or attorney work product as to any document or communication that came into being on or before May 6, 2008. This requirement extends to all Casio discovery requests, not just its initial discovery.

(2) Papst has not waived its privileges as to the other Camera Manufacturers.

Fifth Mem. Order Regarding Casio/Papst Discovery filed June 9, 2008 [Dkt. # 124] ("Fifth Order") at 1; see also Fifth Mem. Op. Regarding Casio/Papst Discovery filed June 9, 2008 ("Fifth Op.") [Dkt. # 123].

B. Alleged Current Discovery Abuses

In apparent satisfaction of the Magistrate Judge's May 31, 2007, order requiring complete responses to Casio USA's discovery requests, Papst served its First Supplemental Interrogatory Responses on Casio on June 11, 2007. Because Papst's answers were woefully inadequate and incomplete, Casio filed a motion to compel. See Civ. No. 06-1751, Motion to Compel [Dkt. # 47], refiled in MDL, MC No. 07-493 [Dkt. # 47]. On April 24, 2008,*fn2 this Court granted the motion to compel, ordering Papst to respond to Interrogatory Nos. 1, 3, 4, 5, and 6 as follows:

k. Papst shall supplement its response to Casio's Interrogatory 1. Although Papst provided a response regarding six specific Casio models that Papst alleges infringe the patents-in-suit and Papst indicated that Casio infringes at least claim 1 for each patent, Papst's response was insufficient because Papst did not identify all infringing products and all claims that are alleged to be infringed. Further, instead of indicating what each claim means, Papst merely stated "the claim element reads on . . . ." Papst shall set forth its contentions regarding how Papst alleges that each element of each claim should be interpreted, as specifically requested in Interrogatory 1.

l. Papst must respond to Casio's Interrogatory No. 3 (regarding secondary considerations evidencing non-obviousness).

m. Papst must respond to Casio's Interrogatory No. 4 (regarding persons with whom Papst discussed a license) and may not limit its response to those documents in existence "up until the complaint was filed." Papst may redact financial terms. Papst's positions with regard to the meaning and scope of the patents-in-suit are relevant.

n. Papst must respond to Casio's Interrogatory No. 5, requesting that Papst "state the art area and level of ordinary skill in the art pertaining to the patents-in-suit and state in detail all bases for each such contention." Papst has access to the patents, the prosecution histories, the closest prior art, and the inventor.

o. Papst must respond to Casio's Interrogatory No. 6, requesting a detailed description of the conception and reduction to practice of the alleged invention. Papst has access to the inventor.

First Order ¶ 6k - o.*fn3

In response to the April 24, 2008 Order, Papst served its Second Supplemental Interrogatory Answers on May 9, 2008. See Casio Mem. in Supp. of its Mot. to Dismiss ("Casio Mem."), Ex. D Second Supp. Interrogatory Answers ("Second Supplemental Answers"). Papst supplemented these answers on May 28, 2008, by serving its Fourth Supplemental Answers. See Casio Mem., Ex. V Papst's Fourth Supp. Interrogatory Answers.

In sum, the relevant timeline is as follows:

May 31, 2007 -- Magistrate Judge ordered Papst to respond to Casio's ...


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