MEMORANDUM & ORDER
Re: Defendant’s Motion to Amend Invalidity Contentions; Plaintiffs Motion to Strike Final Invalidity Contentions; and Plaintiffs Motion to Modify the Protective Order
Plaintiff CBS Interactive, Inc., f/k/a CNET Networks, Inc., (“CBSI”) filed this patent infringement action against Etilize, Inc. (“Etilize”), alleging infringement of two patents involving methods and systems for compiling product information to create online purchasing and cataloguing systems of goods and services. Now before the court is Eti-lize’s motion to amend its invalidity contentions, to include two items of prior art, and CBSI’s motions to strike the final invalidity contentions and to modify the protective order. Having considered the parties’ arguments and for the reasons stated below, the court enters the following memorandum and order.
BACKGROUND
I. Litigation History
Plaintiff CBSI is a worldwide media company and defendant Etilize is a company that markets and sells electronic product catalogs. Because the parties’ background, the technology at issue and the procedural history of the case have been reviewed in prior orders issued by this court, only a brief summary of the relevant facts is needed here. Further details can be found in prior summary judgment orders, e.g., CNET Networks, Inc. v. Etilize, Inc.,
On August 31, 2006, plaintiff filed a complaint alleging infringement of United States Patent No. 6,714,933 (“the '933 patent”) and its continuation-in-part, United States Patent No. 7,082,426 (“the '426 patent”) (together, “the patents-in-suit”). The patents-in-suit generally relate to methods and processes of compiling information about consumer products into catalogued databases for online merchants. On February 7, 2007, Etilize filed its original answer and counterclaims. On March 3, 2008 the court issued a Claim Construction Memorandum and Order. See CNET Networks, Inc. v. Etilize, Inc.,
On June 9, 2008, Etilize moved for summary judgment that its accused products do not infringe the '933 and '426 patents, either literally or under the doctrine of equivalents. That motion was denied in the court’s Second Summary Judgment Order. On July 31, 2008, Etilize moved for summary judgment for invalidity of all asserted claims of the '933 and '426 patents. At the same time, Etilize
In its motion to amend its answers and counterclaims, Etilize sought to add an affirmative defense for inequitable conduct and new counterclaims for Walker Process fraud due to a failure to provide material information regarding Smartshop’s technology to the United States Patent and Trademark Office (“USPTO”) during prosecution of the patents-in-suit. As is being argued in the instant motion to amend its invalidity contentions, Etilize then argued that Smartshop developed a process acknowledged by the inventors of the patents-in-suit to be “very similar” to the processes claimed in the '933 and '426 patents. In its Third Summary Judgment Order, the court denied Etilize’s motion to amend its answer and counterclaims and held that Etilize had failed to demonstrate, inter alia, that the Smartshop technology was materially relevant to the patents-in-suit.
Expert discovery closed on September 25, 2008. Trial is scheduled for February 2009.
II. Etilize’s Motion to Amend Invalidity Contentions
Etilize now seeks to amend its invalidity contentions to include two alleged recently discovered prior art items — Smartshop and WebSphinx. Etilize asserts that it discovered during the depositions of Walsh and Mus-grove depositions, both former Smartshop employees, that Smartshop was using a semiautomatic process to aggregate product data with crawlers for a comparison shopping website called Smartshop.com prior to the filing date of the patents-in-suit. See Khaliq Dec. Ex. 5 (Walsh Deposition), 59:2-65:18; 108:15-24; 109:16-22
Etilize asserts that it discovered the Web-Sphinx technology shortly before it filed its June 9, 2008 motion to summary judgment of non-infringement. See Khaliq Dec. ¶ 7. Web-Sphinx is open-source software that performs crawler and extractor functions and that has allegedly been in the public domain since 1998. See Khaliq Dec. Exh. 6. Etilize argues that the relevance of WebSphinx was not analyzed by Etilize until plaintiff served a July 21, 2008 infringement expert report which accused software tools aQuire and Xtract of infringing the patents-in-suit. Eti-lize argues that because plaintiffs infringement contentions now read on common crawler/extractor technologies “that are ubiquitous in the prior art,” Etilize should therefore be permitted to assert other common crawlers and extractors as a basis for invalidity of the patents-in-suit.
CBSI opposes the motion and argues that Etilize’s failure to conduct timely discovery precludes a finding of good cause to amend its invalidity contentions. CBSI alleges that Etilize has long been on notice of Smartshop, based on multiple references to Smartshop and its relation to plaintiff in the publicly available prosecution file history of the patents-in-suit and in the issued '933 patent specification. See Carter Dec., ¶ 3, Exh. A (copy of inventors’ assignment to American Freeway Inc., d/b/a Smartshop.com from file history); ¶ 4, Exh. B (copy of asset purchase agreement between CNET and Smartshop from file history); ¶ 5 (production of assignment and purchase agreement to Etilize in
CBSI alleges that Etilize has likewise long-been aware of WebSphinx, based on the testimony of Etilize’s expert witness Dr. Mir-anker. Id. ¶ 9, Exh. E. (Miranker Deposition), 212:25-213:6. CBSI disputes Etilize’s contention that it was not aware that aQuire and Xtract were a main focus of this action prior to July 2008. CBSI points to the fact discovery it propounded on Etilize regarding the functionality of aQuire and Xtract. Id. ¶¶ 7 & 10, Exhs. C & F (notice of deposition and request for production of documents). CBSI also points to Etilize’s motion for summary judgment of noninfringement, which rested on the workings of its aQuire and Xtract tools. See Def.’s Motion, Docket No. 90. CBSI asserts that Etilize cannot meet its burden to show good cause when it failed to conduct basic timely discovery into its validity claims and waited until after the close of both fact and expert discovery to seek leave to amend its invalidity contentions to include the Smartshop and WebSphinx references as alleged prior art. CBSI argues that it will be prejudiced if Etilize is granted leave to amend and expert discovery would need to be reopened.
III. CBSI’s Motion to Strike Etilize’s Final Invalidity Contentions
Etilize filed its final invalidity contentions on May 27, 2008 (following a statutory holiday on May 26, 2008) asserting the Liaison Content Exchange and Liaison Express software products and related systems, as well as any installations of same (together, the “Liaison software products”), as prior art under 35 U.S.C. sections 102 and 103.
CBSI asserts that Etilize improperly served its final invalidity contentions without seeking leave of court and without complying with the Patent Local Rules.
Etilize opposes CBSI’s motion and argues that its final invalidity contentions were properly served pursuant to the court’s April 30, 2008 Modified Schedule Order and that this court has already ruled that Etilize may rely on the Liaison software products at trial. Additionally, Etilize asserts that its final invalidity contentions satisfied Patent Local Rule 3-7 because Etilize had good cause to amend its contentions to include the Liaison software products that it had presented as part and parcel of its invalidity arguments throughout the action in various motions before the court. Specifically, Etilize cites its preliminary invalidity contentions, served on June 14, 2007, which asserted the Liaison Content Exchange 3.0 User’s Guide and the Liaison Express 2.0 User’s Guide as prior art under 35 U.S.C. sections 102(a)-(b) and 103, and Etilize’s motion for summary judgment of invalidity based on the Liaison User Guide references. See Khaliq Dec. ISO Opp’n,
IV. CBSI’s Motion to Modify the Protective Order
In order to protect their respective intellectual property, the parties entered into a protective order on October 16, 2007. See Stipulated Protective Order, Docket No. 59. This protective order restricts disclosure of “Highly Confidential — Attorneys’ Eyes Only” information or items only to parties’ outside counsel, one house counsel and any necessary experts, court personnel and professional vendors. Id. at § 7.3. The protective order restricts disclosure and use of “Attorneys’ Eyes OnlySource Code” information or items only to parties’ outside counsel and any necessary experts and court personnel. Id. at § 7.5. The protective order also restricts the use of protected material disclosed or produced in this case by another party or a non-party “only for litigating or attempting to settle this litigation.” Id. at § 7.1.
CBSI contends that Etilize has acquired, disclosed and misused CBSI’s confidential information. Specifically, CBSI contends that Etilize’s highest level management has acted in concert with a former CNET customer to engage in efforts to misappropriate plaintiffs confidential information and that Etilize and Etilize Pakistan continue to possess and use such information. CBSI requests a modification of section 7.1 of the protective order to allow CBSI to use the information produced by Etilize in discovery to collaterally pursue claims for trade secret misappropriation in a different forum against Etilize and other parties.
Etilize argues that no good cause exists to modify the protective order and that CBSI is engaging in an improper attempt to pre-litigate a hypothetical collateral case in order to unfairly prejudice Etilize before this court. Etilize contends that nothing in the existing protective order impedes plaintiff from pursuing its alleged claims for trade secret misappropriation. Specifically, Etilize argues that CBSI fails to show good cause because there is no collateral litigation pending and therefore the potential relevance of the protected materials cannot be deduced. Etilize further argues that CBSI proposes a wholesale modification of the protective order that could result in a collateral litigant obtaining highly confidential documents that may not be relevant to a proceeding for trade secret violations. Etilize concludes that CBSI should be precluded from modifying the protective order to use any discovery on trade secret claims until it has filed a complaint for trade secret misappropriation that identifies the trade secret at issue with the necessary particularity as required by California law.
LEGAL STANDARD
I. Amendment to Contentions
The Northern District of California has adopted a comprehensive set of Patent Local Rules governing patent litigation. In general, the Patent Local Rules exist to further the goal of full and timely discovery and provide all parties with adequate notice and information with which to litigate their cases. See Fresenius Medical Care Holdings, Inc. v. Baxter Intern., Inc.,
Under original Patent Local Rule 3-7, a party may amend or modify its final invalidity contentions upon a showing of good cause and by order of the Court. Patent Local
The “good cause” requirement disallows infringement contentions from becoming moving targets throughout the lawsuit. Integrated Circuit Sys., Inc. v. Realtek,
The patent local rules were adopted by this district in order to give claim charts more ‘bite.’ The rules are designed to require parties to crystallize their theories of the case early in the litigation and to adhere to those theories once they have been disclosed. Rule 16-9(c) advances this purpose by making it difficult subsequently to revise claim charts through eleventh hour ‘discovery’ of facts. Unlike the liberal policy for amending pleadings, the philosophy behind amending claim charts is decidedly conservative, and designed to prevent the ‘shifting sands’ approach to claim construction [and] ensure that litigants put all their cards on the table up front.
Id. (quoting Atmel Corp. v. Info. Storage Devices, Inc.,
To effectuate purposes of both transparency and efficiency, the application of the rule turns on: (1) Plaintiffs ability to learn of the additional devices prior to the final infringement contentions date; and (2) prejudice to the parties. This inquiry first considers whether plaintiff was diligent in amending its contentions and then considers prejudice to the non-moving party. 02 Micro,
Additionally, under Patent Local Rule 3-4, with the invalidity contentions, the party opposing a claim of patent infringement must “produce or make available for inspection and copying” the following:
(a) Source code, specifications, schematics, flow charts, artwork, formulas, or other documentation sufficient to show the operation of any aspects or elements of an Accused Instrumentality identified by the patent claimant in its Patent L.R. 3-l(c) chart; and
(b) A copy of each item of prior art identified pursuant to Patent L.R. 3-3(a) which does not appear in the file history of the patent(s) at issue. To the extent any such item is not in English, an English translation of the portion(s) relied upon must be produced.
Patent L.R. 3-4.
II. Modification of Protective Orders
Generally, protective orders prevent a party from disseminating only that information obtained through use of the discovery process. Seattle Times Co. v. Rhine-hart,
DISCUSSION
I. Motion to Amend Invalidity Contentions
On several levels, Etilize’s posture in its motion for leave to amend its invalidity con
Second, the court cannot fathom how Eti-lize could suggest that it only became aware of the fact that plaintiff was broadly accusing aQuire and Xtraet of infringing the patents-in-suit upon the filing of plaintiffs July 21, 2008 infringement expert report. Plaintiff has asserted from the outset of the litigation that aQuire and Xtraet were implicated in this lawsuit. See, e.g., Hameed Dee., Docket No. 37 (filed September 7, 2007); see also, Carter Dec. ¶¶ 7 & 10, Exhs. C & F (notice of deposition and request for production of documents). Indeed, the court noticed this basic fact in several of its prior orders. For example, in the court’s background facts of its Second Summary Judgment Order, the first sentence in the section entitled “The Accused Product” states: “The accused product, SpeX, is created by Etilize through the use of a pair of software tools called aQuire and Xtraet.” CNET Networks, Inc. v. Eti-lize, Inc.,
In any event, the court turns to a brisk analysis of the standard by which Etilize may amend its final invalidity contentions. The Patent Local Rules make clear that Etilize may not amend its contentions unless it shows good cause. See Patent L.R. 3-7. The Federal Circuit has interpreted the “good cause” requirement of Patent Local Rule 3-7 to mandate that parties in patent cases must “proceed with diligence in amending [their infringement and invalidity contentions] when new information comes to light in the course of discovery.” 02 Micro,
Etilize’s arguments concerning notice do not save its sinking ship and Etilize’s reliance on case law holding that notice alone can permit an untimely amendment fail to help Etilize here. Etilize’s tortured argument that its prior allegations of fraud served to put CBSI on notice of Etilize’s intent to add such art to its invalidity contentions is preposterous. Notice of a future invalidity contention cannot be based on a motion that introduces alleged prior art references for the first time after the close of fact discovery. Moreover, Etilize lost its fraud motion because it failed to demonstrate, inter alia, that the Smartshop technology was materially relevant to the patents-in-suit. The Patent Local Rules were designed to prevent the parties from shuffling or re-framing their theories in reaction to adverse substantive rulings. See LG Electronics Inc. v. Q-Lity Computer Inc.,
With regard to WebSphinx, Etilize’s argument that CBSI’s infringement contentions now read on common crawler/extractor technologies “that are ubiquitous in the prior art” and that Etilize should therefore be permitted to assert other common crawlers and
The Patent Local Rules disfavor untimely discoveries that leave the opposing party with little time to conduct discovery on a new theory. See 02 Micro,
In an effort to clarify the issues for trial, the court finds it necessary to, once again, counsel Etilize on its improper reliance on CBSI’s infringement case rather than the court’s claim construction ruling to advance its invalidity contentions. Etilize relies on Bristol-Myers Squibb Co. v. Ben Venue Labs. Inc.,
As the court stated in its last order, a theory of invalidity based solely on infringement contentions that were not adopted by the court’s claim construction order is not recognized in the law. Etilize is instructed to read the court’s section on “Additional Considerations” in its Third Summary Judgment Order. The court is aware that Etilize filed its initial motion papers seeking leave to amend its invalidity contentions prior to the issuance of that order. However, Etilize filed its reply to CBSI’s opposition on November 3, 2008, well after the Third Summary Judgment Order was issued. Etilize would have done well to have read that section of the order with the same detail with which it read the portion concerning Etilize’s ability to assert Liaison art at trial.
Accordingly, Etilize’s motion to amend its final invalidity contentions is DENIED.
II. Motion to Strike Invalidity Contentions
For this motion, the court finds that Eti-lize’s right to amend its preliminary invalidity contentions and present its final invalidity contentions outweighs the countervailing duty to avoid prejudicing CBSI through improper alterations. The court agrees with Etilize that its final invalidity contentions were timely served pursuant to the court’s April 30, 2008 Modified Schedule Order. However, this court-ordered extension did not in any way obviate or override Etilize’s
It is not the court’s role to sift through the attorney arguments and filed exhibits with a fine-toothed comb to determine when Etilize came into possession of the Liaison software products and what Etilize did or did not serve to CBSI and on what dates. The facts make plain that Etilize has failed to comply with the Patent Local Rules on numerous occasions. Etilize can hardly dispute this point, and indeed concedes as much in its arguments to the court not to avoid the merits on the basis of “technicalities” and to put substance over form. Suffice to say, the court does not condone Etilize’s untimely and unprofessional behavior, and remains perplexed as to why Etilize only delivered to CBSI the Liaison software products well after close of discovery. Certainly, it was not CBSI’s burden to subpoena the Liaison software, as the court has already stated. See Third Summary Judgment Order, at 1275 (“[c]ontrary to Etilize’s allegation, it is not CNET’s burden to subpoena the Liaison products for inspection. It is Etilize’s burden to disclose the actual embodiments and software products for consideration on summary judgment.”). Rather, it was CBSI’s proper right to obtain from Etilize access to copies of each asserted prior art item, along with the source code, specifications and other documentation sufficient to show the operation of the asserted prior art, as required by Patent Local Rules. See, e.g., Patent L.R. 3-4.
Under Patent Local Rule 3-4, the party opposing a claim of patent infringement must “produce or make available for inspection and copying” such cited documents and things. In its motion, CBSI focuses its arguments on Etilize’s dilatory production. The facts as presented are not clear as to whether and when Etilize alternatively made available for inspection and copying the Liaison software. See, e.g., Carter Declaration in support of Pi’s Supplemental Brief, Exh. D (November 6, 2008 e-mail from Khaliq to Michael referring to inspection copies Etilize made available and which CBSI never opted to inspect). However, the court digresses in this point because, as was the case on summary judgment, the court finds that Etilize’s failure to timely produce or make available the asserted prior art ultimately hurts no one but itself. The court does not disregard CBSI’s alleged prejudice to its discovery concerning Etilize’s invalidity defenses, but instead places a pragmatic focus on Etilize’s burden with regard to its own fact discovery on invalidity. After all, CBSI as patentee has no duty to come forward with evidence of validity until after the challenger has established a prima facie case of invalidity. See Stratoflex, Inc. v. Aeroquip Corp.,
Although Etilize is correct that the court previously held that Etilize could reply on the Liaison software at trial, the court also held that there is a dearth of evidence to determine whether the Liaison software is actually enabled. And, because Etilize previously conceded that the Liaison software is needed to carry out any of the previously asserted Liaison User Guide’s “teachings,” Etilize’s burden of establishing invalidity based on anticipation by a clear and convincing standard with regard to any of the Liaison references will be predicated on many of the same facts, or lack thereof. As such, the court finds there is little to be gained from striking Etilize’s final invalidity contentions while the underlying Liaison User Guide references remain at play in this case. Whether those contentions will bear out in successful proofs of invalidity is another matter.
Accordingly, CBSI’s motion to strike Eti-lize’s final invalidity contentions is DENIED.
III. Motion to Modify the Protective Order
Rule 26(c) of the Federal Rules of Civil Procedure governs protective orders. In the Ninth Circuit, issues concerning the scope of protective orders for confidential information entails a balancing test of the conflicting interests between the protection of Rule 26(c) and the broad mandate of the admissibility of information in discovery conferred by Rule 26(b)(1) of the Federal Rules of Civil Procedure. See, e.g., Brown Bag
In this case, CBSI is seeking a broadening of the protective order provision regarding access to and the use of protected material to allow it to use such material in another forum. Specifically, CBSI asserts that it needs to be able to use the information produced by Etilize in discovery to pursue claims for trade secret misappropriation in state court against Etilize and others. In its moving papers, CBSI requests the following modification to section 7.1 of the protective order (the underlined language): “A Receiving Party may use Protected Material that is disclosed or produced by another Party or by a non-party in connection with this case only for litigating or attempting to settle this, or any actual or potential collateral, litigation.”
CBSI bears the burden to make a showing of good cause to modify the protective order. In its moving papers, CBSI contends that Etilize schemed to obtain and use plaintiffs proprietary information to build a similar competing product with the objective of stealing plaintiffs customers. CBSI further alleges the existence of an internal Etilize program to gather information by false pretenses to learn about plaintiffs product content offerings and related pricing. CBSI asserts that Etilize has acted in concert with plaintiffs former customers to acquire and provide confidential information to Etilize Pakistan engineers. CBSI argues that significant prejudice will result if it is not allowed to use the information produced by Etilize to prevent further misuse and disclosure of CBSI’s confidential information that Etilize and Etilize Pakistan continue to use and misuse to this day.
Setting attorney argument aside, the discovery documents CBSI cites in support of these contentions do not provide unequivocal evidence of illegal activity in the form of false pretenses. To the contrary, the court finds that some of the documents demonstrate nothing more than standard competitive activity in the form of market intelligence gathering. However, some of the discovery documents do present a rather questionable use of proprietary information that the court finds satisfies the good cause standard of Rule 26(c) to justify CBSI’s motion to use such discovery material to protect itself from harm. Because the relevant documents are under seal, neither CBSI as moving party nor the court need enumerate or specifically describe the discovery materials that contain such information. See United States v. Corbitt,
A good cause analysis under Federal Rule of Civil Procedure 26(c) entails a balancing of the needs for discovery against the need for confidentiality. The typical analysis considers whether sufficient cause exists to protect such information from being disclosed to the public. In this case, the disclosure being sought is not as broad as full public disclosure; CBSI seeks a specific modification of one clause of the protective order to permit it to use discovery information from this litigation for the purposes of initiating collateral litigation. All other clauses and provisions of the protective order will stand, including the disclosure restrictions of highly confidential materials to attorneys’ eyes only. Etilize is wrong that such a modification would necessarily allow documents to be released wholesale and to a collateral litigant. That is simply not the ease. Whether a collateral litigant would ultimately obtain access to the discovery materials is not something this court can even determine. See, e.g., Foltz v. State Farm Mut. Auto. Ins. Co.,
In the Ninth Circuit, there is a strong policy “favor[ing] access to discovery materials to meet the needs of parties engaged in collateral litigation.” See, e.g., Foltz,
Ninth Circuit precedent also looks to the needs of parties engaged in pending litigation and, in particular, the reliance interests on the protective order of the party opposing its modification. Beckman,
Normally, the court must also weigh the countervailing reliance interest of the party opposing modification against the likelihood that the collateral action is sufficiently related to the instant action, such that a significant amount of duplicative discovery may be avoided by granting the modification request. See Foltz,
Accordingly, CBSI’s motion to modify the protective order is GRANTED. The court reiterates that only a modification of limited nature is authorized, however. See infra, Conclusion. At oral argument, the court encouraged the parties to draft an amended modification and present it as a stipulation to the court. After meeting and conferring, the parties stipulated to a modification that the court approved for filing as an addendum. That modification in no manner condones CBSI’s use of information gained through discovery in this case other than such use as is necessary in order for CBSI to prepare and file its collateral litigation. This holding has no application to information gained by CBSI separate and apart from the discovery processes in this litigation.
For the foregoing reasons, the court HEREBY ORDERS that:
(1) Etilize’s motion for leave to amend its invalidity contentions under Patent Local Rule 3-7 is DENIED.
(2) CBSI’s motion to strike Etilize’s final invalidity contentions is also DENIED.
(3) CBSI’s motion to modify the protective order is GRANTED. The protective order entered by this court on October 16, 2007 will be modified by the stipulation the parties presented to the court at the December 4, 2008 oral argument. The parties will file the stipulation as an addendum to the protective order.
IT IS SO ORDERED.
Notes
. To the extent that these facts were in sealed documents, the court finds they are not worthy of sealing.
. The district's current Patent Local Rules do not apply here since they are effective only for cases filed on and after March 1, 2008. The original Patent Local Rules, effective December 1, 2000, apply to the instant action and all references herein are to the original rules.