Murata Mfg. Co., Ltd. v. Bel Fuse, Inc.

• Decision Date: 14 March 2006
• Docket Number: No. 03 C 2934.,03 C 2934.
• Citation: 422 F.Supp.2d 934
• Parties: MURATA MANUFACTURING CO., LTD., Plaintiff, v. BEL FUSE, INC., et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

422 F.Supp.2d 934

MURATA MANUFACTURING CO., LTD., Plaintiff, v. BEL FUSE, INC., et al., Defendants.

No. 03 C 2934.

United States District Court, N.D. Illinois, Eastern Division.

March 14, 2006.

Patrick Joseph Kelleher, Andrea Maria Augustine, Brian C. Rupp, Michael E. Barry, Peter J. Meyer, Richard Andrew Wulff, Gardner Carton & Douglas LLP, Chicago, IL, for Plaintiff.

Andres N. Madrid, Joshua L. Raskin, Martin G. Raskin, Steinberg & Raskin P.C., New York City, David J. Sheikh, Niro, Scavone, Haller & Niro, Ltd., Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

COLE, United States Magistrate Judge.

I. BACKGROUND

Murata Manufacturing Co., Ltd., moves to compel the defendants to produce documents identifying their non-U.S. sales of modular jacks, which Murata claims infringe its patent. The patent-in-suit, Murata's '641 patent, is directed to a modular jack of the kind used in computers and similar electronic devices. The jack has an integrated noise suppression feature designed to reduce the adverse effects of an extraneous electromagnetic field or signal. Murata alleges that Bel Fuse: (1) is making, using, selling, importing and/or offering for sale infringing modular jacks in the United States in violation of 35 U.S.C. § 271(a); and (2) has induced and continues to induce infringement by others in violation of 35 U.S.C. § 271(b). (Second Amended Complaint, ¶¶ 10, 11). When Murata served document requests on Bel Fuse that sought information regarding Bel Fuse's sales of and profits from its accused modular jacks worldwide, Bel Fuse objected as to non-U.S. sales information, claiming it was irrelevant. Attempts to resolve the discovery dispute as required by Local Rule 37.2 were unsuccessful. This motion followed.

According to Murata, it is entitled to the documents covering non-U.S. sales for two reasons: During the Rule 37.2 conference Bel Fuse made a binding promise to produce the materials, and the information relating to foreign sales is relevant to Murata's claim that Bel Fuse sold infringing jacks to overseas producers, which incorporated them into products that they then sold in the United States. Murata also submits that foreign sales are relevant to damages insofar as they can be employed to arrive at a reasonable royalty rate. Finally, Murata maintains that the foreign sales are relevant to Bel Fuse's defense of obviousness, inasmuch as those figures can potentially demonstrate that the infringing products enjoyed "commercial success."¹

Bel Fuse, of course, denies that it made any binding promises to produce the sales information, and stands by its original objection that the data is irrelevant to obviousness. As for Murata's inducement claim, Bel Fuse contends that it cannot provide support for the discovery sought because Murata cannot prove Bel Fuse is liable for inducement. Finally, Bel Fuse contends that the doctrine of judicial estoppel precludes Murata from arguing that foreign sales information is relevant to its inducement of infringement claim.

A. Murata's Previous Discovery Motion

This is not the first time discovery regarding non-U.S. sales has been an issue in this case. When Murata filed this case on May 1, 2003, it alleged only that Bel Fuse directly infringed the patent-in-suit by "making, using, selling, importing and offering for sale in this judicial district and elsewhere in the United States ... [the accused products]." (Complaint, ¶ 7) (Emphasis added). On November 14, 2003, Murata served its first request for non-U.S. sales information on Bel Fuse Inc. While awaiting Bel Fuse's response, Murata amended its complaint by adding Bel Fuse Inc.'s parent company, Bel Fuse Ltd.—a Hong Kong company having its principal place of business in Kowloon, Hong Kong—as a defendant. The Hong Kong company manufactures accused products in Asia and sells and ships the products to Bel Fuse in the United States, as well as to non-U.S. customers. The Amended Complaint again alleged direct infringement "within this judicial district and elsewhere in the United States of America." (Amended Complaint, ¶ 8). On December 17, 2003, Bel Fuse objected to production of foreign sales information on the grounds that it was not relevant to any issue in the case.

On January 9, 2004, Murata filed its "Second Motion to Compel: Financial Information," ("Second Motion to Compel"), which sought an order requiring Bel Fuse to produce its non-U.S. sales information. Murata argued that those sales were relevant to the issue of nonobviousness because they bore on the patented invention's commercial success and to the calculation of a reasonable royalty. (Second Motion to Compel, at 9-10). Bel Fuse opposed the motion, contending that Murata had to establish actual infringement on the part of Bel Fuse before foreign sales figures could possibly be found relevant to commercial success. (Bel Fuse's Brief in Opposition to Murata's Second Motion to Compel: Financial Information; at 10-12)("Brief in Opposition"). In support of its position, Bel Fuse relied exclusively on the dissent in Truswal Systems Corp. v. Hydro-Air Engineering, Inc., 813 F.2d 1207, 1215 (Fed.Cir.1987).²

On February 13, 2004, Magistrate Judge Brown, at a hearing on Murata's motion, confirmed that Murata sought sales information in connection with Bel Fuse's defense of obviousness:

THE COURT: Because foreign sales as sales are not relevant to damages because the foreign sales would not be recoverable in a United States court. Right?

MURATA'S COUNSEL: The only way they might be relevant on an infringement theory, your Honor, is if they were alleged to have induced infringement by the customer abroad who ultimately imports it into the United States.

* * *

But as of right now what we're talking about is obviousness.

(Hearing Transcript, at 4).

Magistrate Judge Brown went on to indicate that she was not satisfied by Murata's cited authorities in support of its argument that foreign sales information had to be produced because of its relevance to the issue of obviousness. (Hearing Transcript, at 8). Instead, she relied on Speller v. United States, 14 Cl.Ct. 170 (Cl.Ct.1988), which held that the patent-holder must "show some relationship between the claimed invention and the information sought" in order to obtain sales data from a non-party. (Hearing Transcript, at 11 (quoting Speller, 14 Cl.Ct. at 174)).³ Magistrate Judge Brown found that Murata had not discussed what type of showing this might be and she felt there needed to be "a lot more discussion" of the issue and "a lot more factual material" to support Murata's position. In the end, she denied Murata's motion without prejudice. (Hearing Transcript, at 11, 13-14, 18-19).⁴

Murata's next move, which had been telegraphed at the hearing, was to amend the complaint by adding a claim of inducement: "[Bel Fuse has] infringed and continue[s] to infringe the '641 patent under 35 U.S.C. § 271 by inducing others to infringe the '641 patent." (Second Amended Complaint, ¶ 11). Bel Fuse did not oppose the amendment, and the Second Amended Complaint was filed on November 5, 2004. Murata served new discovery requests on Bel Fuse, seeking several categories of documents, including Bel Fuse's non-U.S. sales data. Bel Fuse objected to most of the categories and once again contended that information regarding sales to customers outside the United States was irrelevant.

B. The Local Rule 37.2 Discovery Conference

On May 2, 2005, counsel for Murata and Bel Fuse conferred by telephone, pursuant to Local Rule 37.2, to discuss the latter's objections to Murata's document requests. The Rule mandates that the parties attempt to amicably resolve discovery disputes before applying to the court for relief. The conference was wide ranging. One of the matters discussed was Bel Fuse's objection to producing information about non-U.S. sales. Murata's three counsel claim that when they explained the relevancy of the requested information and the cases in support of their position, Bel Fuse's counsel agreed to withdraw his objection and to produce the requested information within two weeks of the conference. (Murata's Brief in Support of Its Fifth Motion to Compel, Ex. 7-9, Declarations of Patrick J. Kelleher, Peter J. Meyer, and Richard A. Wulff).

On May 9, 2005, Murata's attorney wrote to Bel Fuse's lawyer to "summarize our telephone conference of 2 May, 2005." (Exh. 7(A) at 1). On page two, under the prominent heading, "Sales Outside of the United States," Murata's attorney addressed the topic of foreign sales information.⁵ The letter noted that Bel Fuse's counsel had withdrawn objections to the production of the non-U.S. sales documents, and that he had promised production in two weeks:

As we discussed, sales outside of the United States are relevant to the issue of commercial success. You stated that defendants were withdrawing their relevancy objections to non-U.S. sales information and you expected that defendants would produce responsive documents within the next two weeks.

(Ex. 7(A), at 3).

On May 13, 2005, Bel Fuse's attorney responded with a brief email, stating that while he had originally estimated that he could "provide additional information within 2 weeks ... it will take some additional time." (Id., Ex, 7(B)). Significantly, he did not dispute Murata's clear and unambiguous statement that he had agreed to withdraw Bel Fuse's relevancy objection to non-U.S. sales. By May 24th, there had been no production, and Murata's counsel again wrote to inquire about the situation. (Id., Ex, 7(C)). Bel Fuse's attorney's succinct email stated that "getting the info" was taking more time than estimated due to travel schedules. (Id., Ex, 7(D)). But, he promised, "[I am] doing the best I can." A week later, Murata's attorney again wrote complaining about the non-production and threatening to seek court enforcement of "our agreement," if he did not receive the agreed upon production or a firm commitment to...