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Whitewater West Industries, LTD. v. Pacific Surf Designs, Inc.

United States District Court, S.D. California

September 13, 2019

WHITEWATER WEST INDUSTRIES, LTD., a Canadian corporation, Plaintiff,
PACIFIC SURF DESIGNS, INC., a Delaware corporation, and FLOW SERVICES, INC., a Delaware corporation, Defendants.



         Before the Court is Plaintiffs Motion to Strike or Exclude the Report and Testimony of James T. Carmichael filed by Plaintiff Whitewater West Industries, Ltd. ("Plaintiff or "Whitewater"), Defendants' Second Motion for Summary Judgment, and Plaintiffs First Motion for Summary Judgment. The Motions are fully briefed. The Court finds the motions suitable for determination on the papers without oral argument, pursuant to Civil Local Rule 7.1.d.1


         Plaintiff brings this action against Defendant Pacific Surf Designs, Inc. ("PSD") and Flow Services, Inc. ("FSI") (collectively "Defendants") for direct infringement of Plaintiffs U.S. Patent No. 6, 491, 589 (the "'589 Patent") issued on December 10, 2002. Pursuant to 35 U.S.C. § 282, the '589 Patent is presumed to be valid. (Doc. No. 1 ¶ 11.) The '589 Patent is entitled "Mobile Water Ride Having Sluice Slide-Over Cover" and relates "to a simulated wave water ride attraction having one or more flexible nozzle/sluice covers for ensuring the safety of riders and lowering the risk of injury or interference with ride operation. Id. ¶ 12.

         On January 31, 2014, Surf Park and FlowRider Surf Ltd. ("FlowRider") entered into an Intellectual Property License Agreement conveying to FlowRider all substantial rights to the '589 Patent, including the right to bring actions for infringement of the '589 Patent. All of FlowRider's rights to the '589 Patent were transferred to Whitewater pursuant to a January 31, 2014, Intellectual Property Sublicense Agreement, and a February 1, 2016 amalgamation, in which FlowRider and Whitewater amalgamated as one company in the name of Whitewater. By operation of Canadian law, on the date of the amalgamation, all of FlowRider's assets became the property of Whitewater. Accordingly, Plaintiff Whitewater has independent standing to sue for infringement of the '589 Patent. Id. ¶ 14.

         Plaintiff alleges the '589 Patent includes 57 total claims, of which at least claims 1, 3, 13, 15-17, 24-27, 29-38, 41-43, 50, and 54-55 (the "Asserted Claims") are infringed by Defendants. Despite such awareness, Defendants willfully, deliberately, and intentionally continued to engage in their infringing activities of the Asserted Claims.


         I. Plaintiffs' Motion to Strike or Exclude James T. Carmichael's Expert Report and Testimony.

         Plaintiffs move to strike or exclude the expert report and deposition testimony of James T. Carmichael ("Carmichael") as improperly providing legal opinions on ultimate issues of law. (Doc. No. 197 at 4.)

         In ruling on a motion to strike, the Court "must view the pleading under attack in the light most favorable to the pleader." Id. Importantly, a court should not grant a motion to "Strike "unless it is clear that the matter to be stricken could have no possible bearing on the subject matter of the litigation." Colaprico v. Sun Microsystems, Inc., 758 F.Supp. 1335, 1339 (N.D. Cal. 1991). Accordingly, if there is any doubt as to whether the allegations may raise an issue of fact or law, the motion should be denied. See In re, Inc. Sec. Litig., 114 F.Supp.2d 955, 965 (CD. Cal. 2000).

         The trial judge must act as the gatekeeper for expert testimony by carefully applying Federal Rule of Evidence 702 to ensure specialized evidence is "not only relevant but reliable." Daubert v. Merrell Dow Pharms. Inc., 509 U.S. 579, 589 & n.7 (1993)("Daubert 7"). The Court's obligation "to scrutinize carefully the reasoning and methodology underlying [expert] affidavits" applies even on summary judgment. Houle v. Jubilee Fisheries, Inc., No. CO4-2346JLR, 2006 WL 27204, at *5 (W.D. Wash. Jan. 5, 2006) (quoting Daubert I, 509 U.S. at 501). An expert witness may testify

If (a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based upon sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the witness has reliably applied the principles and methods reliably to the facts of the case.

Fed. R. Evid. 702. The proponent of the evidence bears the burden of proving the expert's testimony satisfies Rule 702. Cooper v. Brown, 510 F.3d 870, 880 (9th Cir. 2007).

         The Court has broad discretion in exercising its gatekeeping function, United States v. Hankey, 203 F.3d 1160, 1168 (9th Cir. 2000), which applies to both scientific and non-scientific testimony. Kumho Tire Co. Ltd. v. Carmichael, 526 U.S. 137, 147 (1999) (applying Daubert to all expert testimony, not just scientific testimony); Hangarter v. Provident Life and Accident Ins. Co., 373 F.3d 998, 1017 (9th Cir. 2004). Under Rule 702, the Court must assure itself of two things: that "any and all scientific testimony or evidence admitted is not only relevant but reliable." Daubert I, 509 U.S. at 589.

         Where, as here, experts are retained to offer non-scientific testimony, the reliability inquiry will "depend[ ] heavily on the knowledge and experience of the expert, rather than the methodology or theory behind it." Hangarter v. Provident Life and Accident Ins. Co., 373 F.3d 998, 1017 (9th Cir. 2004) (quoting Hankey, 203 F.3d at 1169). It is generally said that "[d]isputes as to the strength of [an expert's] credentials, faults in his use of [a particular] methodology, or lack of textual authority for his opinion, go to the weight, not the admissibility of his testimony." Kennedy v. Collagen Corp., 161 F.3d 1226, at 1231 (9th Cir. 1998) (quoting McCullock v. KB. Fuller Co., 61 F.3d 1038, 1044 (2d Cir. 1995)).

         The second prong, relevance, focuses on whether the expert testimony "fits" the facts of the trial. That is, the testimony must be "relevant to the task at hand" in that it "logically advances a material aspect of the proposing party's case." Daubert v. Merrell Dow Pharms. Inc., 43 F.3d 1311, 1316 (9th Cir. 1995) ("Daubert IF). At the bottom, the dispositive question for the relevance prong is whether the proposed testimony "will assist the trier of fact to understand the evidence or to determine a fact in issue." Daubert I, 509 U.S. at 591; Elsayed Mukhtar v. Cal. State. Univ., Hayward, 299 F.3d 1053, 1063 n.7 (9th Cir. 2002), amended by 319 F.3d 1073 (9th Cir. 2003) ("Encompassed in the determination of whether expert testimony is relevant is whether it is helpful to the jury, which is the 'central concern' of Rule 702.")

         To the extent that an expert purports to offer a legal opinion on an ultimate issue, such testimony must be excluded because "offering legal conclusion testimony invades the province of the trial judge." Nationwide v. Kass Info. Sys., Inc., 523 F.3d 1051, 1059 (9th Cir. 2008); Mukhtar, 299 F.3d at 1066 n.10 ("[A]n expert witness cannot give an opinion as to her legal conclusion, i.e., an opinion on an ultimate issue of law."). In breach of contract cases, the expert may not be allowed to opine on the meaning and import of disputed terms. See PMI Mortg. Ins. Co. v. Am. Int'l Speciality Lines Ins. Co., 291 Fed.Appx. 40, 41 (9th Cir. 2008) (unpublished) ("The expert testimony proffered by AISLIC went to the interpretation of the underlying settlement agreement, a contract, an ultimate question of law upon which the opinion of an expert may not be given."). To permit any such testimony would be to commit error, as it is well-known that matters of law are generally "inappropriate subjects for expert testimony." Aguilar v. Int'l Longshoremen's Union Local No. 10, 966 F.2d 443, 447 (9th Cir. 1992).

         As a corollary of this principle, expert conclusions which do not inform the jury about the facts but which "merely function like jury instructions," are impermissible.[1]Lee v. First Nat'l Ins. Co., No. CV09060264MMMCWX, 2010 WL 11549637, at * 10 n.8O (CD. Cal. Dec. 22, 2010) (quoting Charles A. Wright et al, FED. PRAC. & PROC. EVID. § 6265.2 (2d ed.)); accord Nationwide, 523 F.3d at 1060.

         In this case, Defendants seek to elicit testimony from Dr. James T. Carmichael ("Carmichael"), their expert in PTO practice and procedure, on (1) the duty of candor owed to the PTO and the Office's expectation of how patent applicants and petitioners comply with that duty; (2) the kind of information that the PTO considers material when deciding either whether an invention is patentable or whether a petition should be granted; and (3) the PTO's expectations against the inventor's, Plaintiff's and Plaintiff's counsel's action in this case. Id.[2] According to Defendants, Carmichael is well-qualified as an expert in PTO practice and procedure, having served for nearly a decade supervising PTO enforcement proceedings and then as Examiner-In-Chief, to explain "whether misrepresentations made to, or omissions withheld from the Patent Office are material and whether particular facts are indicative of an intent to deceive the Patent Office is admissible." (Doc. No. 215 at 1.)

         Plaintiff does not question or challenge Carmichael's qualifications as an expert.[3](Doc. No. 242 at 2.) It does however set forth three primary reasons why Carmichael's report and testimony are inadmissible and should be stricken entirely.[4] First, Plaintiff argues that Carmichael's report and testimony are designated for no other purpose than to provide improper legal conclusions. (See Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 973 (9th Cir. 2010) (internal quotation marks and citations omitted)) (Doc. No. 197 at 2.) Second, Plaintiff contends that Carmichael improperly speculates what the PTO would have done if it had been in possession of the additional information alleged in this suit. See Id. And third, Carmichael improperly opines on the credibility and intent of Whitewater, its counsel, and third-party Thomas Lochtefeld. (Doc. No. 197 at 2.)

         A. Improper Legal Conclusions

         Plaintiff contends Defendants assert the '589 Patent is unenforceable due to inequitable conduct before the PTO. Specifically, Defendants allege Plaintiff failed to disclose prior art to the PTO, as well as conduct engaged in by Whitewater's attorney, Erikson Squier, and Mr. Lochtefeld, as to activities related to the expiration and reinstatement of the '589 Patent. Defendants intend to illustrate this through Carmichael's expert report and deposition testimony. Id. Plaintiff argues that a number of Mr. Carmichael's opinions asserted in his Expert Report are impermissible legal conclusions.[5]Since "an expert witness cannot give an opinion as to his legal conclusion, i.e., an opinion on an ultimate issue of law," Plaintiff argues that Defendants should be prohibited from using Carmichael's report to do so now. U.S. v. Scholl, 166 F.3d 964, 973 (9th Cir. 1999) (excluding expert testimony offering a legal conclusion.) Id. at 4.

         Defendants do not dispute that an expert witness cannot give an opinion as to his legal conclusion. However, "expert testimony concerning whether misrepresentations made to or omissions withheld from, the Patent Office are material and whether particular facts are indicative of an intent to deceive the Patent Office are admissible, (Doc. No. 215 at 1.) Specifically, Defendants argue that Carmichael's report and testimony will undoubtedly aid the Court and jury with evaluating whether Plaintiffs actions were reasonable and benign or intended to deceive the PTO and effectively did so. Id. Moreover, Defendants assert that Carmichael steered clear of offering 'legal' and "individuals' state of minds opinions, and instead focused on accepted areas such as the PTO's standard for materiality and the duty of candor it imposes on practitioners, applicants, and petitioners. Id. at 4.

         The Court concludes that most of Plaintiff s criticisms go to the weight that a jury should give Carmichael's opinions, rather than their admissibility. As such, these arguments are improper bases to exclude Mr. Carmichael's expert opinion. Furthermore, this Court will not exclude testimony that is relevant to issues that will be put before the jury, even if the testimony is also relevant to issues that will be decided solely by the Court. Unless the testimony has no relevance to the jury, it should be permitted.

         Having reviewed Carmichael's expert report and deposition testimony, the Court concludes that his opinions pass muster under the reliability and relevance requirements of Daubert and Rule 702. Furthermore, the Court notes that Plaintiff offers an expert of its own, Nicholas Godici, to opine on the same issues. Therefore, Plaintiffs request to exclude Carmichael's report and testimony entirely is DENIED. Plaintiff may challenge Carmichael's expert opinions regarding inequitable opinion on cross-examination.

         B. Improper Speculation on what PTO's Actions would have been

         Next, Plaintiff argues that Carmichael's report and deposition testimony should be stricken or excluded because Mr. Carmichael "improperly opines on what he believes a PTO examiner would have done in a specific situation had he or she had additional information Carmichael had been provided" at the time of review and decision. (Doc. No. 197 at 7.)

         Plaintiff contends that Carmichael's report and testimony constitute "retroactive mind-reading of the thoughts of patent examiners." Barry v. Medtronic, Inc., No, 1:14-cv-104, 2016 U.S. Dist. LEXIS 104118, *6-7 (E.D. Tex, July 19, 2016). For example, "the '589 Patent would not have issued as it did if the PTO had been aware of those prior installations and systems", and "if Mr. Squier had disclosed [information he allegedly withheld] the PTO would not have revived the patent and would have viewed the certification as unmistakably false".[6] Id. at 7-8. Furthermore, Plaintiff asserts that "Carmichael has twice had" his expert report or testimony "excluded for attempting to offer exactly this sort of improper testimony." Id.

         Defendants contend that Plaintiff is blatantly mischaracterizing Carmichael's opinions and that he most assuredly does not attempt to read the minds of any patent examiners as part of his expert services or opinions. (Doc. No. 215 at 7.) Rather, Carmichael's report and testimony will assist the Court and the trier of fact in determining whether "from the perspective of a reasonable PTO examiner - the omitted information rises to the level of but-for materiality." Id. Moreover, "Carmichael's opinion is not speculative but based upon his deep understanding of, and long experience with, PTO practice and procedure." Id. at 7-8.

         The Court agrees with Plaintiff. While district courts have consistently recognized that experts may opine on the materiality of a patent applicant's misrepresentations, omissions, and intent before the PTO, that does not entitle them to speculate about the outcome "if the examiner had different information." Doing so is nothing more than "irrelevant speculation." See Applied Materials, Inc. v. Advanced Semiconductor Materials Am., Inc., No. C 92-20643 RMW, 1995 U.S. Dist LEXIS 22335, at *8 (N.D. Cal. Apr. 25, 1995). In a similar circumstance, a district court in the Northern District excluded the testimony of a patent attorney-expert who was also "a former supervising patent examiner and former member of the Patent Office Board of Patent Appeals and Interferences" from providing his expert opinion "as to what the prior art teaches," "the 'materiality' of prior art," or what "the [PTO] examiner would have done if [the expert] had been the examiner, or if the examiner had different information." 1995 WL 261407, at *2 (N.D, Cal. Apr, 25, 1995). In doing so, the court noted that the defendant's expert was not a technical expert, and lacked skill in the pertinent art. See Id. at *2-3. The court found that testimony as to what the examiner "would have done" under different circumstances was "irrelevant speculation" that would impermissibly "advise [the] jury as to applicable principles of law." See Id. at *3; accord Icon-IP Pty Ltd. v. Specialized Bicycle Components, Inc., 87 F.Supp.3d 928, 947 (N.D. Cal. 2015) (prohibiting the defendant's expert, who had spent over thirty-four years working at the PTO, from speculating "about what the PTO would have done had specific prior art references been brought to the examiner's attention").

         Here, Plaintiff argues Carmichael's report and testimony is not helpful to the Court or trier of fact to determine what a patent examiner would have done had it been provided with additional information Carmichael was exposed to because Carmichael states what he believes the PTO examiner would have done based off his experience as a former patent examiner. (See Doc. No. 242 at 3-5.) In essence, Carmichael is placing the proverbial cart before the horse by describing for the fact-finder how they should find in this circumstance rather than allowing them to make the determination based on the facts. In this case, despite Carmichael's prior experience, his testimony oversteps his bounds of authority. Though Carmichael could theoretically opine on PTO policy and procedure, Defendants do not seek to present testimony on that issue. See, e.g., Sundance, 550 F.3d at 1361 n, 2 & n.5 (allowing the defendant's patent attorney-expert "testify as to patent office procedure generally") (citing Bausch & Lomb, Inc. v. Alcon Laboratories, Inc., 79 F.Supp.2d 252, 254-55 (W.D.N.Y. 2000)). Similarly, Carmichael's testimony as to "reasonable practice" by patent examiners would not help the jury to assess a fact in issue: instead, it would require him to give impermissible legal opinions. See Argus Chem. Corp. v. Fibre Glass-Ever coat Co., 759 F.2d 10, 13 (Fed. Cir. 1985) ("The question of the appropriate standard for determining inequitable conduct in procuring a patent is one of law.) Therefore, the Court GRANTS Plaintiffs motion and excludes Carmichael's report and testimony regarding the hypothetical behavior of the PTO.

         C. Opinions Regarding Intent or Credibility

         Finally, Plaintiff argues that Carmichael's report and testimony regarding intent or credibility should be struck/excluded because it is inadmissible. Plaintiff alleges that throughout Carmichael's report and testimony, he refers to specific, purposeful "facts for the sole purpose of attacking the credibility of, or to attempt to imply what the intent, of Whitewater, its counsel, or Lochtefeld was."[7] (Doc. No. 197 at 9.) Certain other comments by Carmichael are mere speculative inferences regarding the knowledge, intent, or practices of Whitewater's counsel in a given situation.[8] Id. at 10. "Such statements are impermissible as they go directly to the province of the fact-finder." Allen Organ Co. v. Kimball Int'l, Inc., 839 F.2d 1556, 1567 (Fed. Cir. 1998) ("Intent is a factual determination particularly within the province of the trier of fact."). Id.

         In response, Defendants argue that Carmichael's expert report and testimony provide a helpful context which will help the Court and trier of fact to analyze the facts of this case. Specifically, Carmichael will describe the PTO's procedures for reinstating a patent that has expired due to unintentional delay/lapse of maintenance fees. Additionally, he will describe the procedures for withdrawing and/or correcting incorrect submissions to the PTO. (Doc. No. 215 at 8.) Finally, Defendants contend Carmichael will identify specific facts in the record which are suggestive of intent. Id. Comparing Plaintiffs actions with the suggestions identified by Carmichael will likely help the jury determine whether Plaintiff intended to deceive the PTO during the reinstatement application process. Id.

         Patent regulations impose a duty of candor to the PTO on each named inventor, attorney and/or agent who prepares/prosecutes a patent application, as well as every person who is substantively involved in the preparation and/or prosecution of the application and whoever is associated with the inventor or assignee. 37 C.F.R, § 1.56. Accordingly, nondisclosure of information to the PTO can support a finding of inequitable conduct which in turn can render an entire patent unenforceable. See Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1287, 1288 (Fed. Cir. 2011) (en banc).

         In cases of omission, direct evidence of a deliberate intent to deceive is rare and thus, indirect and circumstantial evidence may be considered. Id. Nonetheless, the evidence "must be sufficient to require a finding of deceitful intent in the light of all the circumstances," Id. (internal quotation marks omitted). The court may not infer intent solely from materiality. And, "[p]roving that the applicant knew of a reference, should have known of its materiality, and decided not to submit it to the PTO does not prove specific intent to deceive." Id.

         Importantly, "to meet the clear and convincing evidence standard, the specific intent to deceive must be the single most reasonable inference able to be drawn from the evidence." Id. (internal quotation marks omitted). Thus, "when there are multiple reasonable inferences that may be drawn, intent to deceive cannot be found." Id. at 1290-91.

         Here, both materiality and intent are fact-driven, and it is the Defendant's burden to prove the existence of these threshold elements. At this juncture, Defendants have not done so. Carmichael's conclusory report and testimony do not present clear and convincing evidence that the withheld information or alleged misstatements were material to the prosecution of the '589 Patent, nor that the applicants intentionally omitted reference to it. In addition, given the conflicting evidence between Carmichael's and Defendants' expert contentions, the Court cannot conclude there are no triable issues of material fact regarding Plaintiffs failure to disclose the prior art or pay the renewal fees for the '589 Patent.

         Next, Carmichael's report suggests the Plaintiff and/or one of its agents could reasonably have considered the prior art to be immaterial and therefore deemed disclosing it inconsequential to the patent reapplication process. Furthermore, despite stating in his expert report the Plaintiff likely overlooked paying the maintenance fees on the '589 Patent, Carmichael now contends that the evidence is clear that Plaintiff could not have overlooked the maintenance fee renewal considering that Mr. Squier "disclosed that Carmichael was not in a position to not know that the renewal was due, coupled by the fact that no reasonable investigation had been conducted to support his claim of an unintentional delay in paying the patents maintenance fees by Plaintiff." (Doc. No. 242 at 4.) This is especially important considering that under current PTO procedure, the reviewing agent would likely not have revived the patent and would have viewed the certification as unmistakably false. Id.

         Finally, Defendants' evidence reflecting prior disclosure of the '589 Patent information elsewhere in regards to other patents held by Plaintiff, cuts both ways. The other disclosures appear to indicate the applicants were aware of the undisclosed prior art, and the applicants chose not to disclose. Thus, on the one hand, it is reasonable to assume the applicants chose not to disclose the prior art because they deemed it unnecessary and were unaware of the need to pay the renewal fees for the '589 Patent. On the other hand, the applicants' misrepresentations to the PTO could demonstrate that they chose not to disclose the prior art or pay the renewal fees because they wanted to investigate first the validity of Defendants' claims before expending the funds necessary to renew the '589 Patent. Thus, there is conflicting evidence regarding what the examiner actually considered. Therefore, the Court GRANTS Plaintiffs motion to exclude CarmichaeFs report and testimony as to intent and credibility.

         II. Summary Judgement Motions

         Both parties have now filed summary judgment motions. Defendant's motion raises four issues (1) Inequitable Conduct; (2) Intervening Rights for sales made while '589 Patent was expired; (3) Infringement Under 35 U.S.C. § 271; and (4) Permanent Injunction. (See Doc. No. 191.) Plaintiffs motion raises three issues (1) Infringement of the '589 Patent; (2) Validity of the '589 Patent; and (3) Inequitable Conduct. (See Doc. No. 200.)

         This Court's September 27, 2018 Order denying Defendants First Motion for Summary Judgment provides an overview of the '589 Patent and the other allegedly infringing products, so the Court does not repeat it here.

         Summary judgment is appropriate if there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving party bears the initial responsibility of informing the court of the basis of its motion, and identifying those portions of '"the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting former Fed.R.Civ.P. 56(c)).

         Once the moving party meets its initial burden of demonstrating the absence of a genuine issue of material fact, the burden then shifts to the nonmoving party to present "specific facts" showing a "genuine issue for trial." Fed. Trade Comm 'n v. Stefanchik, 559 F.3d 924, 927-28 (9th Cir. 2009) (internal quotation marks omitted). The nonmoving party must go beyond the pleadings and designate facts showing an issue for trial. Bias v. Moynihan, 508 F.3d 1212, 1218 (9th Cir. 2007) (citing Celotex, 477 U.S. at 324).

         The substantive law governing a claim determines whether a fact is material. Suever v. Connell, 579 F.3d 1047, 1056 (9th Cir. 2009). The court draws inferences from the facts in the light most favorable to the nonmoving party. Earl v. Nielsen Media Research, Inc., 658 F.3d 1108, 1112 (9th Cir. 2011).

         If the factual context makes the nonmoving party's claim as to the existence of a material issue of fact implausible, that party must come forward with more persuasive evidence to support his claim than would otherwise be necessary. Mats ...

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