Masimo Corp.. v. Philips Electronics North Am. Corp..

• Decision Date: 06 October 2010
• Docket Number: Civil Action No. 09–80–LPS–MPT.
• Citation: 742 F.Supp.2d 492
• Parties: MASIMO CORPORATION, Plaintiff,v.PHILIPS ELECTRONICS NORTH AMERICA CORPORATION and Philips Medizin Systeme Böblingen GMBH, Defendants.Philips Electronics North America Corporation, Counterclaim–Plaintiff,v.Masimo Corporation, Counterclaim–Defendant.
• Court: U.S. District Court — District of Delaware

742 F.Supp.2d 492

MASIMO CORPORATION, Plaintiff,

v.PHILIPS ELECTRONICS NORTH AMERICA CORPORATION and Philips Medizin Systeme Böblingen GMBH, Defendants.Philips Electronics North America Corporation, Counterclaim–Plaintiff,

v.Masimo Corporation, Counterclaim–Defendant.

Civil Action No. 09–80–LPS–MPT.

United States District Court, D. Delaware.

Oct. 6, 2010.

Jack B. Blumenfeld, Jeremy Alexander Tigan, Julia Heaney, Morris, Nichols, Arsht & Tunnell, Wilmington, DE, Deborah Croyle, Douglas G. Muehlhauser, Irfan A. Lateef, Jon Gurka, Joseph S. Cianfrani, Joseph R. Re, M. Lawrence Popofsky, Michelle E. Armond, Perry D. Oldham, Robert A. Rosenfeld, Scott A. Westrich, Pro Hac Vice, for Plaintiff/Counterclaim–Defendant.Richard L. Horwitz, David Ellis Moore, Potter Anderson & Corroon, LLP, Wilmington, DE, Ann Marie Phillips, Brian Rosenthal, Clayton Scott Hataway, Clinton H. Brannon, Pro Hac Vice, for Defendants/Counterclaim–Plaintiff.

MEMORANDUM ORDER

MARY PAT THYNGE, United States Magistrate Judge.I. INTRODUCTION

Plaintiff Masimo Corporation (“Masimo”) and defendants Philips Electronics North American Corporation and Philips Medizin Systeme Böblingen GMBH (collectively, “Philips”) manufacture competing products in pulse oximetry. Pulse oximetry allows for non-invasive measurement of the oxygen levels in a medical patient's hemoglobin.

Generally, pulse oximetry operates via a sensor placed over a thin section of a patient's body, such as the fingertip or earlobe of an adult, or the foot of an infant. The sensor emits red and infrared light through a cross-section of the patient's tissue and measures the amount of light absorbed. Using various algorithms, a monitor then processes the signal and calculates the patient's oxygenation level. Pulse oximetry systems are standard equipment in many clinical settings, either as stand-alone devices, or more commonly, as components of integrated multi-parameter patient monitors which track pulse, temperature, and other physiological vital signs.

II. BACKGROUND

On February 3, 2009, Masimo filed a complaint against Philips alleging infringement of a number of Masimo's pulse oximetry-related patents. Masimo filed an amended complaint on May 12, 2009. In the amended complaint, Masimo alleges that Philips' production, use, and sale of pulse oximeters incorporating Philips' “Fourier Artifact Suppression Technology” as well as Philips' IntelliVue line of patient monitors infringe 14 of Masimo's patents. Regarding eight of these patents, Masimo alleges that Philips' infringement is willful, deliberate, and intentional because Philips has had notice of the patents and the alleged infringement. Masimo requests monetary damages and seeks to enjoin Philips from further production, use, or sale of infringing products.

Philips answered the complaint on June 15, 2009. In their answer, both Philips North America and Philips Medizin deny all allegations of infringement citing 12 defenses including, among others, invalidity of Masimo's patents, prosecution history estoppel, laches, unclean hands, patent misuse, and implied license. Philips North America concurrently filed counterclaims against Masimo. According to Philips North America, Masimo has infringed 10 of Philips' patents through the production, use, and sale of various Masimo monitors, boards, sensors, and oximeters using patented Philips technology. Regarding six of these patents, since Masimo has had notice of the patents and the infringement, Philips North America alleges that Masimo's infringement is willful, deliberate, and intentional. Philips North America requests monetary damages and, for 8 patents, seeks injunctive relief to prevent Masimo from further production, use, or sale of infringing products.

Philips North America's counterclaims also include seven antitrust claims focusing on Masimo's purported anticompetitive restrictions in its licensing agreements; its allegedly improper exclusion of competition in the sensor and patient cable markets; an anticompetitive settlement agreement stemming from a 2006 infringement suit with licensee Nellcor; and claims of exclusionary pricing and bundling practices designed to lock hospitals into Masimo pulse oximetry products. Masimo filed its answer to Philips North America's counterclaims on July 9, 2009, asserting its own counterclaims and defenses. On August 3, 2009, Philips filed its answer to Masimo's counterclaims.

On August 7, 2009, Masimo filed a motion to bifurcate and stay discovery on Philips North America's antitrust counterclaims, which this court granted on March 11, 2010. In its decision, this court found that bifurcation would assist in juror comprehension and increase efficiency without substantial prejudice to either party. This court also stayed discovery concerning Philips North America's antitrust counterclaims, finding that a stay would conserve economy because a trial on Masimo's patent claims could potentially eliminate or simplify Philips North America's antitrust counterclaims. A motion for reconsideration filed by Philips was denied on April 19, 2010, 2010 WL 1544423, and Judge Farnan denied Philips' objections to this court's order on July 15, 2010, 2010 WL 2836379.

On July 30, 2010, Philips filed a motion to bifurcate and stay discovery on patent damages and a brief in support thereof. In its motion, Philips requests bifurcation of the parties' patent damages claims, trial to be scheduled on patent damages to follow trial on the antitrust and patent misuse claims, and a stay of the remaining damages-related discovery until antitrust discovery proceeds. Masimo filed an answering brief on August 27, 2010, to which Philips filed a reply on September 8, 2010. This is the court's decision on Philips' July 30, 2010 motion.¹

III. DISCUSSIONA. MOTION TO BIFURCATE

Rule 42(b) of the Federal Rules of Civil Procedure allows the court broad discretion to “order a separate trial of one or more separate issues, claims, crossclaims, counterclaims, or thirdparty claims” where separation is convenient, will avoid prejudice, expedite a resolution, or economize resources.² “In the context of patent cases, ‘[e]xperienced judges use bifurcation and trifurcation both to simplify the issues in patent cases and to maintain manageability of the volume and complexity of the evidence presented to the jury.’ ” ³ Bifurcation of patent and antitrust claims is not mandatory, but is common.⁴ “Motions to separate the issues of liability and damages are to be granted by the court on a case-by-case basis only when the separation will result in judicial economy and will not unduly prejudice any party.” ⁵

1. Promotion of Economy and Preservation of Time and Resources

Generally, a separate trial on damages issues is seldom required, “but in a patent infringement suit, considerations exist which suggest that efficient judicial administration would be served by separate trial on the issues of liability and damages.” ⁶ A trial on the question of infringement damages is “often difficult and expensive, while being easily severed from the trial of the questions of validity and infringement of the patent.” ⁷ Other courts have found that a finding on the question of liability may obviate the necessity for a damages inquiry or encourage a settlement.⁸ Further, separation of damages from liability allows the parties to obtain final resolution of the liability issue on appeal without reaching the often time-consuming and difficult damages question.⁹ The factors used to determine severability include, but are not limited to: “a) a need for voluminous documents to resolve damages issues; b) complex infringement issues; c) multiple patents, infringing products, claim ( sic ), counterclaims, or parties; or d) the probability that the defendant would prevail on the infringement issue, thereby eliminating the need to address the issue of damages.” ¹⁰

In the instant case, Philips argues that bifurcation and a stay on patent damages will promote judicial economy and preserve the parties' time and resources because a determination of non-infringement or patent invalidity will render a damages phase unnecessary and damages discovery superfluous. At a minimum, Philips contends that a liability trial will narrow the patents, claims, and accused products at issue, which will reduce the quantity and extent of damages discovery. Further, Philips argues that even if a jury were to find infringement liability on a valid patent, a finding of antitrust liability or patent misuse could preclude any recovery regarding the infringement claims.

Masimo asserts that Philips' proposal would waste resources because Philips has not made a showing regarding the likelihood of their defense. Masimo also cites an increase in costs, in the event of further bifurcation, due to the need to educate a second jury regarding the facts and issues of the patent controversy. Masimo further claims that bifurcation and a stay on damages discovery would result in a duplication of effort due to the close relationship between damages and infringement discovery.

Philips is correct that this is a large and complex case with multiple patents, claims, and counterclaims where a finding of non-infringement or patent invalidity in the liability phase would obviate the necessity for a damages trial and render any damage exclusive discovery a waste. However, Philips has not demonstrated that the probability that its defense will prevail at trial is any higher than the probably that Masimo's claims will.¹¹

Additionally, Masimo has alleged, without rebuttal, that certain aspects of its liability case will require educating the jury on specific damages issues, and that certain aspects of its damages case will require educating the jury on liability issues. Specifically, Masimo reasons that further bifurcation would force the parties to, among other duplicative activities, educate a second jury about the patented technology to allow the jurors...