`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
`
`C.A. No. 17-868-CFC-SRF
`
`PUBLIC REDACTED VERSION
`
`)))))))))
`
`UNIVERSITY OF MASSACHUSETTS and
`CARMEL LABORATORIES LLC,
`
`v.
`
`L’ORÉAL USA, INC.,
`
`Plaintiffs,
`
`Defendant.
`
`DEFENDANT’S AUGUST 12, 2020 LETTER TO THE HONORABLE SHERRY R.
`FALLON IN RESPONSE TO PLAINTIFFS’ AUGUST 11, 2020
`DISCOVERY DISPUTE LETTER
`
`Frederick L. Cottrell, III (#2555)
`Katharine L. Mowery (#5629)
`Richards, Layton & Finger, P.A.
`One Rodney Square
`920 N. King Street
`Wilmington, Delaware 19801
`(302) 651-7700
`cottrell@rlf.com
`mowery@rlf.com
`
`Attorneys for Defendant L’Oréal USA, Inc.
`
`Of Counsel:
`
`Eric W. Dittman
`Isaac S. Ashkenazi
`Nicholas A. Tymoczko
`Karthik R. Kasaraneni
`Paul Hastings LLP
`200 Park Avenue
`New York, NY 10166
`(212) 318-6000
`
`Naveen Modi
`Joseph E. Palys
`Paul Hastings LLP
`875 15th Street, N.W.
`Washington, D.C. 20005
`(202) 551-1990
`
`Dennis S. Ellis
`Katherine F. Murray
`Serli Polatoglu
`Browne George Ross LLP
`2121 Avenue of the Stars, Suite 2800
`Los Angeles, California 90067
`(310) 274-7100
`
`Dated: August 12, 2020
`
`
`
`Case 1:17-cv-00868-CFC-SRF Document 251 Filed 08/19/20 Page 2 of 6 PageID #: 9926
`
`Dear Judge Fallon,
`
`1.
`
`Plaintiffs’ Request Is Untimely
`This Court said it best at the prior discovery conference: “Discovery is done.” (Ex. A at
`39:5.) Plaintiffs’ request to reopen fact discovery should be denied on this basis alone.
`Plaintiffs’ excuse that they allegedly learned about foreign sales only in June 2020 is belied by
`the record, and does not support their attempt to expand their claimed $1.9 billion royalty base.
`In September 2019, L’Oréal USA objected
`to Plaintiffs’
`instruction
`in
`their
`Interrogatories that L’Oréal USA identify foreign sales, explaining that “[w]ith respect to method
`patents, actionable patent infringement cannot occur outside the United States.” (Ex. B at 3.)
`This was done out of an abundance of caution, as Plaintiffs’ specific interrogatories were limited
`to products sold in the United States. Interrogatory No. 3, which formed the basis of Plaintiffs’
`accused products list, asked L’Oréal USA to “[i]dentify every product You have ever sold in the
`United States that contains adenosine as an ingredient.” Interrogatory No. 6 similarly asked
`L’Oréal USA to “[d]escribe in detail when and the reason(s) why You determined to use
`adenosine as an ingredient in any product You have sold in the United States.” (Ex. B.) And
`Interrogatory No. 8, the only Interrogatory seeking financial data, asked for sales relating to the
`products “identified in response to Interrogatory No. 3.” (Id.) While Plaintiffs have challenged
`many of L’Oréal USA’s objections throughout this case, they never challenged the objection to
`producing foreign sales, which L’Oréal USA reasserted on November 27, 2019, April 20, 2020,
`and May 8, 2020. (Exs. C-E.)
`In October 2019, relying on L’Oréal USA’s response to Interrogatory No. 3, Plaintiffs
`served their infringement contentions identifying the accused products. On December 3, 2019,
`in response to Interrogatory No. 6, L’Oréal USA explained that it included adenosine in its
`products to
` (Ex. F at 72-73.) Given L’Oréal USA’s response,
`Plaintiffs’ contention that they only learned about foreign sales in June 2020 is not credible.1
`Against this backdrop, in December 2019, L’Oréal USA began producing sales data for the
`accused products. These documents, on their face, identified the data as U.S. sales data. (See,
`e.g., Ex. G (“SkinCeuticals Domestic USA”; “Luxury Products USA”).) But even assuming
`Plaintiffs overlooked all of this, their own statements during discussions of L’Oréal USA’s sales
`data confirm that this case was limited to U.S. sales:
`January 15, 2020, Plaintiffs: “You suggested that [sales] data for some products may be
`missing . . . . Please identify these products, and identify which L’Oréal entity, if any,
`does sell those products in the United States.” (Ex. H.)
`January 27, 2020, L’Oréal USA: “L’Oréal USA has provided the financial data for
`products sold by L’Oréal USA in the United States that it has been able to identify from
`Plaintiffs’ lists . . . .” (Ex. I.)
`
`(cid:120)
`
`(cid:120)
`
`1 A comment made in 2017 that L’Oréal USA is “active” in the U.S. could not have thrown off
`Plaintiffs’ “scent” of foreign sales, as U.S. activity does not preclude foreign activity. (D.I. 242
`at 2, n.1.) In 2019, L’Oréal USA objected to producing foreign sales, and Plaintiffs’ document
`requests were consistent with this objection (i.e., they did not seek foreign sales). (Id., Ex. D at
`Nos. 38, 39, 48.) Plaintiffs’ infringement contentions also do not state that they were accusing
`foreign products. It was Plaintiffs’ burden to be “as specific as possible” when identifying the
`accused products. (D.I. 46 ¶ 3(b).) See Magnadyne Corp. v. Best Buy Co., 2010 WL 11520525,
`at *2 (C.D. Cal. Feb. 22, 2010) (it is plaintiff’s responsibility to identify the accused products).
`1
`
`
`
`Case 1:17-cv-00868-CFC-SRF Document 251 Filed 08/19/20 Page 3 of 6 PageID #: 9927
`
`
`
`(cid:120)
`
`(cid:120)
`
`January 30, 2020, Plaintiffs: “You have still not explained why financial data for several
`divisions is not available before 2013. Please do so. You also said that you would
`identify products that had no US sales before 2019.” (Ex. J.)
`January 31, 2020, L’Oréal USA: “However, we are looking again to confirm whether this
`product was ever sold in the U.S. . . . . For the products listed in your email . . . assuming
`these products were sold in the United States, L’Oréal USA is looking to see if it can
`obtain the data from other sources.” (Ex. K.)
`Plaintiffs knew by January 2020 that this case focused only on products sold in the U.S.
`Plaintiffs also knew by February 2020, when L’Oréal USA produced its testing documents, that
`some products were tested in the U.S., while others were tested abroad. (See, e.g., D.I. 105, Ex.
`F, Ex. G at 2.)2 But even accepting their excuse, Plaintiffs still delayed. On June 15, 2020,
`L’Oréal USA noted that the parties had not met and conferred on the foreign sales issue (D.I. 207
`at 1, n.1), but Plaintiffs waited until June 24, 2020 to request a call. (D.I. 242, Ex. F.) On that
`call, Plaintiffs agreed to provide support for their new demand, but then reneged. During a
`follow-up call on July 8, 2020, the parties agreed they had reached an impasse. Plaintiffs then
`waited three weeks, until July 28, to request a discovery conference. With expert reports already
`served and less than one month to file dispositive motions, there is no time to re-open fact
`discovery. As with Plaintiffs’ previous belated requests for documents, if Plaintiffs wanted
`foreign sales data, “the time to do th[is] was months ago, not now[.]” (Ex. A at 37:5-11.)
`2.
`Plaintiffs’ Requested Discovery is Improper, Irrelevant, and Burdensome
`Even if Plaintiffs’ request was timely, foreign sales are neither relevant nor proportional
`to the needs of the case. Plaintiffs assert method claims and seek only a reasonable royalty. To
`infringe method claims, all steps must be performed in the U.S. Meyer Intellectual Prop. Ltd. v.
`Bodum, Inc., 690 F.3d 1354, 1371 (Fed. Cir. 2012) (“direct infringement of a method claim
`requires that each of the claimed steps are performed within the United States”). Thus, the sale
`of products for use outside the U.S. cannot constitute infringement. See Power Integrations, Inc.
`v. Fairchild Semiconductor Int’l, Inc., 711 F.3d 1348, 1371 (Fed. Cir. 2013) (“Power
`Integrations I”) (A claimant is not entitled to compensation for “defendant’s foreign exploitation
`of a patented invention, which is not infringement at all.”). Plaintiffs do not dispute this, but
`instead assert a new theory: that under § 271(a), they can capture foreign sales of products
`“used” (i.e., tested) in the U.S. prior to their export.3
`Plaintiffs seek such extremely broad foreign sales discovery, yet their expert identified
`U.S. human efficacy tests—none of which are tied to foreign sales—for only a fraction of the
`accused products. (See Ex. M.)4 Even if Plaintiffs could identify U.S. tests for every product,
`
`2 Plaintiffs’ citation to Dr. Galdi’s testimony (D.I. 242 at 2 (289:18-290:1)) is also misleading, as
`Dr. Galdi did not testify that products sold abroad are based on human efficacy tests performed
`in the U.S. Dr. Galdi explained that L’Oréal USA performs many tests on its products prior to
`human tests, including stability, microbiology, and safety testing. (Ex. L at 91:11-93:13.)
`3 Plaintiffs suggest that they can also recover foreign sales based on U.S. manufacturing.
`Contrary to Plaintiffs’ assertion, L’Oréal USA confirmed that the manufacturing process does
`not involve topical application (i.e., use) (D.I. 242, Ex. R); thus, there can be no infringement
`based on manufacturing activities.
`4 Even as to those products, many were tested both in and outside the U.S. (See, e.g., Ex. N.)
`2
`
`
`
`
`
`Case 1:17-cv-00868-CFC-SRF Document 251 Filed 08/19/20 Page 4 of 6 PageID #: 9928
`
`
`
`such alleged use would not entitle them to foreign sales. This is because “[m]ethod claims are
`only infringed when the claimed process is performed, not by the sale of an apparatus that is
`capable of infringing use.” Ormco Corp. v. Align Tech., Inc., 463 F.3d 1299, 1311 (Fed. Cir.
`2006). Plaintiffs are entitled to a reasonable royalty only as to infringing performances of the
`claimed methods, which do not include foreign sales. Just last month, the Federal Circuit
`confirmed that damages for method claims must be tied to the alleged use. In Packet
`Intelligence LLC v. NetScout Sys., Inc., 2020 WL 3966973 (Fed. Cir. July 14, 2020), the court
`explained that, even if the plaintiff could prove that the defendant’s “own use of the patented
`method drove sales for [its] products, that fact would only justify instances of internal use being
`counted as part of the royalty base.” Id. at *11 (emphasis added).5 Under Plaintiffs’ theory,
`which conflates use with sale, there would be no distinction between direct and indirect
`infringement of a method claim, as indirect infringement already allows a patentee to capture
`sales without the defendant’s use.
`Courts have denied timely requests for foreign sales in reasonable royalty cases. See,
`e.g., Kajeet, Inc. v. Qustodio, LLC, 2019 WL 8060078, at *13 (C.D. Cal. Oct. 22, 2019)
`(“[I]nformation regarding defendant’s foreign sales is not relevant to the hypothetical negotiation
`of the reasonable royalty amount because defendant would not be liable for foreign sales that do
`not violate U.S. patent laws.”); Univ. of Florida Res. Found., Inc. v. Motorola Mobility LLC,
`2013 WL 12043502, at *2-3 (S.D. Fla. Dec. 23, 2013) (limiting discovery to domestic sales).
`See also France Telecom S.A. v. Marvell Semiconductor Inc., 39 F. Supp. 3d 1080, 1098-101
`(N.D. Cal. 2014) (noting the lack of authority “for the proposition that a hypothetical negotiation
`can or should include foreign sales that would not otherwise be actionable.”).6 Plaintiffs already
`have the documents they need to calculate damages under § 271(a).
`
`Plaintiffs’ reliance on WesternGeco LLC v. ION Geophysical Corp., 138 S. Ct. 2129
`(2018) and Power Integrations I is misplaced and confirms that foreign sales are not relevant.
`There, the Courts considered whether foreign sales could be captured under a lost profits theory.
`Here, Plaintiffs seek a reasonable royalty, so there are no foreign damages to claim. This
`distinction is important. As explained in Plastronics Socket Partners, Ltd. v. Dong Weon
`Hwang, 2019 WL 4392525, at *4-5 (E.D. Tex. 2019), cited by Plaintiffs, while a plaintiff’s
`foreign damages may be compensable, foreign sales are not: “Indeed, setting aside questions of
`extraterritoriality, under the plain language of the statute, a patent owner cannot recover for
`purely foreign sales under § 271(a) because purely foreign sales are not acts of ‘infringement’
`under § 271(a).” Likewise, in MLC Intellectual Prop., LLC v. Micron Tech., Inc., 2019 WL
`2437073 (N.D. Cal. June 11, 2019), the court rejected plaintiff’s argument that Judge Stark’s
`decision in Power Integrations I following WesternGeco allowed recovery of worldwide
`damages under § 271(a). The court stated: “under Power Integrations I and the cases cited
`
`5 See also Mirror Worlds, LLC v. Apple, Inc., 784 F. Supp. 2d 703, 714-25 (E.D. Tex. 2011)
`(“sales cannot be used to determine damages for [ ] direct infringement of the method claims”);
`Joy Techs., Inc. v. Flakt, Inc., 6 F.3d 770, 773 (Fed. Cir. 1993) (“[M]ethod claims are not
`directly infringed by the mere sale of an apparatus capable of performing the claimed process.”).
`6 See also Enpat, Inc. v. Microsoft Corp., 6 F. Supp. 2d 537, 539-40 (E.D. Va. 1998) (noting that
`none of the Georgia-Pacific factors “support a conclusion that Microsoft would pay for the right
`to engage in foreign sales it already has a legal right to make. Accordingly, . . . Microsoft’s
`foreign sales may not be taken into account in any determination of a reasonable royalty.”).
`3
`
`
`
`
`
`Case 1:17-cv-00868-CFC-SRF Document 251 Filed 08/19/20 Page 5 of 6 PageID #: 9929
`
`
`
`therein, [Plaintiff] may not seek damages based on . . . wholly foreign sales. The Court also
`finds it significant that the Supreme Court denied certiorari in Power Integrations I. . . .Whether
`Judge Stark is correct that WesternGeco II implicitly overruled Power Integrations I remains to
`be seen, but at this time controlling law holds that [Plaintiff] may not seek damages under §
`271(a) based on . . .wholly foreign sales.” Id. at *2-3.7
`
`Even if relevant, it would be unduly burdensome, if even possible, to produce foreign
`sales for products containing the same formulas. Contrary to Plaintiffs’ representation, formulas
`for L’Oréal products vary depending on where they are sold. (Decl. of Cindy Cheung ¶ 4; Ex. L
`at 391:14-23 (“it’s a case by case” as to whether products share formulas).) To identify a
`product sold abroad with the same formula as an accused product, L’Oréal USA would need to
`request and review the packaging for every skincare product sold by every L’Oréal entity around
`the world. (See Cheung Decl. ¶¶ 3-6.)8 This alone would take more than 100 hours, assuming
`every country responds. (Id. ¶ 6.) Financial data is also not tracked by formula numbers, so
`once the products are identified, then the material codes would need to be obtained from the
`marketing departments in each country. (Id. ¶¶ 3, 7.) L’Oréal USA cannot even estimate how
`long this would take. L’Oréal USA also does not have access to sales made by any other
`L’Oréal entity—i.e., sales to foreign, non-affiliated buyers.9
`Plaintiffs’ request to re-open fact depositions should also be denied. Plaintiffs have taken
`15 fact depositions covering over 50 topics. On June 12, 2020, after written discovery closed
`and the parties had reached agreement on the scope of the deposition topics, Plaintiffs served a
`new deposition notice with nine more topics, setting the deposition for June 19, 2020—less than
`the ten days required by Local Rule 30.1. L’Oréal USA objected to this deposition notice. (Ex.
`O.) As noted above, Plaintiffs are not entitled to foreign sales. Some topics are not even limited
`to the accused products (No. 62), while others focus on manufacturing (No. 54), which cannot
`form the basis of infringement. (D.I. 242, Ex. Q.) Even if these topics were relevant, L’Oréal
`USA does not have data on sales made by other L’Oréal entities. As for testing, as Plaintiffs
`concede, they already deposed L’Oréal USA on product testing. (D.I. 242 at 1.) To the extent
`Plaintiffs now seek testimony linking a U.S. test to a foreign sale, as noted above, L’Oréal USA
`does not have this information, which resides with each brand within each country. (See Cheung
`Decl. ¶ 9.) Plaintiffs’ untimely, irrelevant, and burdensome request should be denied.
`
`7 Similarly, in Abbott Cardiovascular Sys., Inc. v. Edwards Lifesciences Corp., 2019 WL
`2521305 (D. Del. June 6, 2019), Judge Noreika refused to expand WesternGeco to claims
`brought under § 271(a): “This Court does not understand WesternGeco to stand for the
`proposition that a patentee in the United States may obtain damages (or injunctive relief) based
`on harm in another country independent of the theory of infringement liability at issue – i.e., §
`271(a) versus § 271(f).” Id. at *18. The Court further noted that “§ 271(f) would be superfluous
`if extraterritorial activities could give rise to liability under § 271(a), or more accurately under §§
`271(b) and (c), which are the domestic counterparts to §§ 271(f)(1) and (2).” Id. at *18, n.18.
`8 As to whether a foreign product contains a “similar” formula, L’Oréal USA does not know how
`it would even go about obtaining this information.
`9 In addition, the Supreme Court has left open the question of whether “other doctrines, such as
`proximate cause, could limit or preclude damages in particular cases.” WesternGeco, 138 S. Ct.
`at 2139, n.3. Here, evidence of whether or not a U.S. test actually drove any foreign sale is not
`maintained by L’Oréal USA. (Cheung Decl. ¶ 9.)
`4
`
`
`
`
`
`Case 1:17-cv-00868-CFC-SRF Document 251 Filed 08/19/20 Page 6 of 6 PageID #: 9930
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Respectfully,
`
`/s/ Frederick L. Cottrell, III
`
`Frederick L. Cottrell, III (#2555)
`
`cc: Counsel of Record (via ECF & E-Mail)
`Attachments
`
`
`
`5
`
`