4:12-cv-11758-GAD-MKM Doc # 355 Filed 08/12/14 Pg 1 of 11 Pg ID 31813
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`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF MICHIGAN
`SOUTHERN DIVISION
`
`Civil Action No.12-cv-11758
`HON. GERSHWIN A. DRAIN
`
`EVERLIGHT ELECTRONICS CO., LTD.,
`and EMCORE CORPORATION,
`
`Plaintiffs/Counter-Defendants,
`
`v.
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`NICHIA CORPORATION, and
`NICHIA AMERICA CORPORATION,
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`Defendants/Counter-Plaintiffs,
`
`v.
`
`EVERLIGHT AMERICAS, INC.,
`
`Defendant.
`____________________________________/
`
`ORDER DENYING NICHIA’S MOTION FOR LEAVE TO AMEND THEIR ANSWER
`TO ADD A DEFENSE OF UNCLEAN HANDS [#265], DENYING EVERLIGHT’S
`MOTION TO STRIKE FOURTH SUPPLEMENTAL EXPERT REPORT OF JOHN C.
`JAROSZ [#268] AND DENYING EVERLIGHT’S MOTION TO STRIKE NICHIA’S
`INFRINGEMENT THEORIES REGARDING THE DOCTRINE OF EQUIVALENTS
`AND CLAIMS 5-8 [#272]
`
`I.
`
`INTRODUCTION
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`The is a patent action. Presently before the Court are the following motions: (1) Nichia
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`Corporation’s and Nichia America Corporation’s (collectively “Nichia”) Motion for Leave to
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`Amend their Answer to Add a Defense for Unclean Hands, filed on April 17, 2014, (2) Everlight
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`Electronics, Co., Ltd.’s (“Everlight”) Motion to Strike the Fourth Supplemental Expert Report of
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`John C. Jarosz, filed on April 30, 2014, and (3) Everlight’s Motion to Strike Nichia’s Infringement
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`Theories Regarding the Doctrine of Equivalents and Claims 5-8 of ‘925 Patent, filed on May 9,
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`2014. These matters are fully briefed and a hearing was held on July 8, 2014. For the reasons that
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`follow, the Court will deny all three motions presently before it.
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`II.
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`LAW & ANALYSIS
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`A.
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`Nichia’s Motion for Leave to Amend
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`In the present motion, Nichia seeks leave to add a defense of unclean hands to Everlight’s
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`claims for a declaratory judgment of invalidity and unenforceablity of the ‘925 and ‘960 patents, or
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`for Counts II, III, V, and VII of Everlight’s Second Amended Complaint. Nichia argues that it has
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`been diligent during these proceedings in pursuing an unclean hands defense, as well as maintains
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`that Everlight will not suffer prejudice if Nichia is allowed to add the defense of unclean hands.
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`Conversely, Everlight asserts that Nichia’s eleventh hour attempt to add an unclean hands defense
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`is procedurally and substantively flawed. Specifically, Everlight suggests that Nichia could have
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`moved to add this defense earlier and Everlight will be severely prejudiced if Nichia’s motion is
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`granted because discovery is now closed.
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`At the heart of the instant dispute is Everlight’s witness, Hans-Dieter Wustlich, a German
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`citizen and former General Manager of Wustlich Mikro-Electronik GmbH, a company focused on
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`the development of LEDs. Wustlich claims that he created a single-chip white LED in 1995, which
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`Everlight relies on to support its contention that Nichia’s patents-in-suit are invalid based on prior
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`art. According to Nichia, at least one of the documents supplied by Everlight to support Wustlich’s
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`claims–an OSRAM datasheet for the L175 phosphor1–was fabricated by Wustlich. Nichia argues
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`that a former OSRAM employee, Robert Otto, has provided a sworn statement that the datasheet
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`Wustlich claims to have received in February of 1995 was not created by OSRAM until 1996. As
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`1 This is the phosphor Wustlich claims he used to create his white LED.
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`such, Wustlich could not have created his white LED prior to Nichia’s invention.
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`A scheduling order establishing a deadline for amendments to pleadings may be modified
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`upon a showing of good cause and upon leave of the district court judge. Inge v. Rock Fin. Corp.,
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`281 F.3d 613, 625 (6th Cir. 2002) (citing Fed. R. Civ. P. 16(b)). “The primary measure of Rule 16's
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`‘good cause’ standard is the moving party’s diligence in attempting to meet the case management
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`order’s requirements.” Id. “Another relevant consideration is possible prejudice to the party
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`opposing the modification.” Id.
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`If good cause is demonstrated, leave to amend should be freely given pursuant to Rule 15(a).
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`Leary v. Daeschner, 349 F.3d 888, 909 (6th Cir. 2003). Rule 15 “reinforce[s] the principle that
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`cases should be tried on their merits rather than the technicalities of pleadings.” Moore v. Paducah,
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`790 F.2d 557, 559 (6th Cir. 1986). The United States Court of Appeals for the Sixth Circuit has
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`identified various factors that this Court must consider when determining whether to grant leave to
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`amend:
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`Undue delay in filing, lack of notice to the opposing party, bad faith by the moving
`party, repeated failure to cure deficiencies by previous amendments, undue prejudice
`to the opposing party, and futility of amendment are all factors which may affect the
`decision. Delay by itself is not sufficient reason to deny a motion to amend. Notice
`and substantial prejudice to the opposing party are critical factors in determining
`whether an amendment should be granted.
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`Brooks v. Celeste, 39 F.3d 125, 129 (6th Cir. 1994) (citing Head v. Jellico Housing Auth., 870 F.2d
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`1117, 1123 (6th Cir. 1989)).
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`The original deadline for amendment of pleadings was February 20, 2013. While it is true
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`that this Court has previously found Everlight has been less than cooperative during the discovery
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`phase of this action, the Court cannot conclude that Nichia’s failure to bring the instant motion
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`earlier is solely attributable to Everlight. Even if Nichia could not add its unclean hands defense
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`prior to the deadline for amendments to pleadings, it could have and should have moved to add its
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`defense earlier than April of 2014, months after the close of discovery. Discovery related to
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`Wustlich was produced by Everlight in November of 2013. Additionally, Nichia points to no new
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`knowledge from the February 2014 deposition of Everlight’s Rule 30(b)(6) witness that supports
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`its contention that it had recently learned of the purported fabrication.
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`Moreover, Everlight’s assertion that it will be severely prejudiced if Nichia is permitted to
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`add an unclean hands defense at this late stage in the proceedings is persuasive. Everlight is
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`foreclosed from taking discovery from the manufacturer of the L175 phosphor, nor will it be able
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`to obtain corroborating testimony from third-party witnesses that support Wustlich’s assertion that
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`he produced a single chip white LED in 1995.
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`As such, based on the foregoing considerations, the Court denies Nichia’s Motion for Leave
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`to Add an Unclean Hands Defense.
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`B.
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`Everlight’s Motion to Strike the Fourth Supplemental Expert Report of John
`C. Jarosz
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`Here, Everlight argues that the Court should strike the Fourth Supplemental Expert Report
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`of Nichia’s expert, John C. Jarosz, as untimely. On December 21, 2013 and March 7, 2014, Nichia
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`submitted its initial expert report. The parties exchanged rebuttal reports on March 28, 2014.
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`Everlight’s expert, Christopher Bakewell, opined in his rebuttal report that Nichia failed to meet
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`its burden to show that it was entitled to lost profits damages and could not show that it would suffer
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`irreparable harm absent an injunction. Two days before Mr. Jarosz’s deposition, Nichia served a
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`Fourth Supplemental Expert Report, which included new analyses and opinions relating to market
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`segmentation, pricing evaluations and irreparable harm. At Jarosz’s April 23, 2014 deposition, he
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`admitted that he had all the requisite information available to provide the analyses and opinions
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`found in his Fourth Supplemental Expert Report.
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`Expert disclosures under Rule 26(a)(2)(B) must be made “at the times and in the sequence
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`that the court orders.” Fed. R. Civ. P. 26(a)(2)(D). When a party fails to disclose expert opinions
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`in accordance with the Court’s deadlines, the Court has the authority to prohibit that party from
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`“supporting or opposing designated claims or defenses, or from introducing designated matters in
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`evidence.” Fed. R. Civ. P. 37(b)(2)(A)(ii).
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`Nichia argues that Everlight did not disclose its intent to argue that it does not compete for
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`U.S. customers for the sale of white light LEDs and that the white LED market is further segmented
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`into low power, mid power, and high power market segments until Everlight submitted its March
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`28, 2014 Rebuttal Report. Nichia asserts that the Bakewell Rebuttal Report relies on new
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`information from Everlight, including a spreadsheet that had not been previously produced,
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`concerning the components used by Everlight in manufacturing white LEDs, as well as included
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`information concerning the power levels for Everlight’s Accused Products, information which was
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`repeatedly sought in discovery. Instead of moving to strike the Bakewell Rebuttal report, Nichia
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`decided to respond to Everlight’s “ambush” by requesting a supplement from Jarosz, which
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`ultimately consisted of 9 and ½ pages and only addressed the new theories set forth in the rebuttal
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`report. Moreover, the Jarosz Fourth Supplemental Expert Report was provided prior to the
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`depositions of both experts.
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`Nichia maintains that the Fourth Supplemental Expert Report complies with Federal Rule
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`of Civil Procedure 26(e)(2) because Jarosz had a duty to supplement in order to properly respond
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`to the new theories raised in the Bakewell Rebuttal Report. See Seton Co. v. Lear Corp., No. 02-
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`71118, 2005 U.S. Dist. LEXIS 8963, *8-9 (E.D. Mich. 2005) (report found proper because the
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`expert corrected lost profits estimate based on information not available at time of initial report,
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`noting no prejudice because opposing party could depose the expert).
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`Nichia further argues that even if the Court were to find that the supplemental report was not
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`permitted under Rule 26(e)(2), the Court cannot strike it as it was substantially justified and
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`harmless under Rule 37(c)(1). Nichia maintains that the Fourth Supplemental Report was
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`substantially justified based on the new theories and new information presented in the Bakewell
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`Rebuttal Report. Moreover, the supplement was harmless because Everlight had an opportunity to
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`depose Jarosz after its production and will have had notice of the opinions set forth in the
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`supplement roughly five months prior to the trial in this matter.
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`Conversely, Everlight maintains that Jarosz’s opinions are not based on new information.
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`Everlight maintains that because all the underlying information was produced prior to the date of
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`Jarosz’s March 7, 2014 report, he could have performed the same analysis performed for his Fourth
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`Supplemental Report.
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`The Court finds Nichia’s argument to be persuasive and declines to strike the Jarosz Fourth
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`Supplemental Report because the Bakewell Rebuttal Report contained new theories which relied on
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`new information. Therefore, it was appropriate for Nichia to supplement its expert report to address
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`this information. Moreover, the supplement was harmless, Everlight had an opportunity to depose
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`Jarosz and question him about his opinions in the Fourth Supplemental Report.
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`As such, Everlight’s Motion to Strike the Jarosz Fourth Supplemental Expert Report is
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`denied.
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`C.
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`Everlight’s Motion to Strike Nichia’s Infringement Theories Regarding the
`Doctrine of Equivalents and Claims 5-8 of ‘925 Patent
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`Here, Everlight moves to strike Nichia’s infringement contentions, specifically: (1)
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`Everlight’s TAG-based phosphors are equivalent to the yttrium-aluminum-garnet-YAG based
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`phosphors claimed in the ‘925 Patent and (2) Everlight’s LEDs with two YAG phosphors infringe
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`claims 5-8 of the ‘925 Patent.
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`This Court’s case management order required Nichia to serve its Disclosure of Preliminarily
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`Asserted Claims and Preliminary Infringement Contentions on November 5, 2012. Nichia’s
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`November 5, 2012 Disclosure of Preliminary Asserted Claims and Preliminary Infringement
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`Contentions stated in relevant part:
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`Everlight has infringed and continues to infringe at least claims 1, 2, 3, 9, and 23 of
`the ‘925 Patent [] literally and/or under the doctrine of equivalents. On information
`and belief, however, Nichia expects that discovery will confirm Everlight’s
`infringement of other claims of the ‘925 Patent. . . . Nichia expressly reserves the
`right to supplement and/or amend the Asserted Claims of the ‘925 Patent based on
`discovery and any further information, expert opinions, and/or claim construction
`rulings obtained during the course of litigation.
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`See Dkt. 272, Ex. B at 4.
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`In October of 2012, Everlight served interrogatories on Nichia requesting that Everlight:
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`Identify each Asserted Nichia Claim and Each Accused Everlight Product, and
`separately for each Asserted Nichia Claim . . . state completely every factual and
`legal basis for your contention that each such Accused Everlight Product infringes
`each such Asserted Nichia Claim including . . . whether such alleged infringement
`is literal or by equivalents . . . [.]
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`See Dkt. No. 272, Ex. A at 8. Nichia responded with various objections and referred Everlight to
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`its November 5, 2012 Preliminary Disclosures. Nichia stated that discovery was ongoing and
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`expressly reserved the right to correct, amend or supplement its response. Id., Ex. C at 7-8.
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`Fact discovery was originally scheduled to close on November 15, 2013. On December 22,
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`2013, Nichia served the Opening Expert Report of E. Fred Schubert, Ph.D. and for the first time
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`asserted infringement under the doctrine of equivalents theory based on Everlight’s use of TAG-
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`based phosphors. Specifically, Nichia maintains that TAG-based phosphors are “insubstantially
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`different” than YAG-based phosphors such that “a garnet fluorescent material containing terbium
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`and aluminum is a substantial equivalent of a garnet fluorescent material containing yttrium and
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`aluminum in the context of the ‘925 Patent.” Id., Ex. D at 78, 89-92. The Schubert report also
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`asserts that Everlight infringes claims 5-8 of the ‘925 Patent.
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`The district court has authority under the Federal Rules of Civil Procedure to impose
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`sanctions for failure to obey a scheduling order. See Fed. R. Civ. P. 16(f)(1); Fed. R. Civ. P.
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`37(b)(2)(A)(ii)-(vii). “Under Rule 16, district courts have ‘broad discretion to enforce their
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`scheduling orders’ and have ‘wide latitude to impose sanctions to comply with their scheduling
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`orders. The district court has discretion to impose whatever sanction it feels appropriate, under the
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`circumstances.’” Magna Donnelly Corp. v. 3M Co., No. 07-cv-10688, 2012 U.S. Dist. LEXIS
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`34234, *12-13 (E.D. Mich. Feb. 24, 2012) (quoting Estes v. King’s Daughters Med. Ctr., 59 F.
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`App’x 749, 752 (6th Cir. 2003)).
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`Rule 26 states that “[a] party . . . who has responded to an interrogatory . . . must supplement
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`or correct its disclosure or response . . . in a timely manner if the party learns that in some material
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`respect the disclosure or response is incomplete or incorrect, and if the additional or corrective
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`information has not otherwise been made known to the other parties during the discovery process
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`or in writing.” Fed. R. Civ. P. 26(e). Moreover, a party is precluded from relying on evidence or
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`information at trial unless the failure to comply with Rule 26 was substantially justified or is
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`harmless. See Fed. R. Civ. P. 37(c)(1); see also R.C. Olmstead, Inc. v. CU Interface, LLC, 606 F.3d
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`262, 271 (6th Cir. 2010). The burden is on the potentially sanctioned party to prove the failure was
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`harmless. Id.
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`Everlight relies on Hochstein v. Microsoft Corp., No. 04-cv-73071, 2009 U.S. Dist. LEXIS
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`72223 (E.D. Mich. Aug. 17, 2009), and Realtime Data, LLC v. Morgan Stanley, No. 2013-1092,
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`2014 U.S. App. LEXIS 1512 (Fed. Cir. Jan. 27, 2014). Everlight argues that Nichia’s failure to
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`provide infringement contentions on the doctrine of equivalents theory for TAG-based LEDs and
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`for claims 5-8 was neither substantially justified nor harmless.
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`Specifically, Everlight argues that Nichia cannot justify its late assertion of its TAG-based
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`infringement contention because Nichia has known about Everlight’s use of TAG-based products
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`for almost ten years. In 2004, Nichia sued Everlight’s Japanese distributor for patent infringement
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`and conducted tests on Everlight’s products which confirmed Everlight’s use of TAG-based
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`phosphors in the models at issue in that litigation. Moreover, in July of 2013, Nichia received
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`discovery in this matter confirming that Everlight sold TAG-based LEDs. Everlight also produced
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`samples of its TAG-based products in the fall of 2013. Moreover, Nichia’s statement during email
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`correspondence to Everlight that “claims 5, 6, 7, and 8 of the ‘925 Patent may also potentially be
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`asserted in this case” is insufficient to put Everlight on notice that discovery relative to claims 5-8
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`needed to be taken. By October of 2013, Nichia had generated test reports for several Everlight
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`products it now accuses of infringing claims 5-8, yet Nichia did not supplement its infringement
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`contentions nor its interrogatory responses.
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`Additionally, Everlight asserts that Nichia’s failure to disclose its doctrine of equivalents
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`theory deprived Everlight of the opportunity to gather discovery relating to TAG-based phosphors
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`characteristics and uses and how they might differ from the YAG phosphors of the ‘925 Patent.
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`Everlight also lost its opportunity to take fact discovery relative to claims 5-8 of the ‘925 Patent.
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`Nichia responds that Everlight’s motion is a “thinly disguised attempt to profit from its own
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`discovery misconduct and avoid defending its infringing products on their merits.” Dkt. No. 295
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`at 1. The Court tends to agree with Nichia. During a good portion of the fact discovery period in
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`this matter, Everlight represented to Nichia and this Court that it did not have documents concerning
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`phosphor information, chemical composition information, and sales information. This information
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`was needed so that Nichia could perform testing and analysis. Everlight’s delays during discovery
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`resulted in Nichia filing five discovery related motions and the Court’s issuance of its December 20,
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`2013 Order granting Nichia’s various discovery motions, extending the discovery period and
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`imposing severe sanctions upon Everlight. This Court found in relevant part:
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`Here, there is no dispute that the Accused Product samples are not only relevant,
`but central to resolving the issue of infringement of Nichia’s patents-in-suit.
`Everlight’s claim that it “has either provided samples or has agreed to provide
`samples of all relevant LEDS to the extent that Everlight can reasonably provide
`samples” is difficult for Nichia, as well as the Court to believe when there are so
`many outstanding questions concerning Everlight’s production of its LED
`samples.
`Everlight’s complaints that Nichia has provided inaccurate model numbers
`or requested samples for products that have not been sold during the relevant time
`period1 are disingenuous due to Everlight’s sloppy production of its samples and
`documents associated with its products. Due to this, it has understandably been
`impossible for Nichia to ascertain the true number of Accused Products at issue
`herein.
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`*
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`*
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`*
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`The Court finds unpersuasive Everlight’s argument that Nichia has not
`been diligent with respect to its discovery requests in this matter. Nichia has
`attempted to obtain crucial phosphor composition and sales information and
`complete production of Everlight’s Accused Product samples for months, yet
`Everlight’s production is still incomplete. Further, Everlight has not shown that it
`would be prejudiced if the Court permits Nichia to conduct additional, limited
`discovery. Accordingly, the Court grants Nichia’s Motion to Compel Specific
`Discovery after the fact discovery cutoff. Nichia’s limited fact discovery shall be
`completed no later than February 1, 2014.
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`Dkt. No. 241 at 3-4,7. As such, the Court sees little reason to accept Everlight’s contention that
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`Nichia could have supplemented its infringement contentions and interrogatory responses prior to
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`serving the Schubert report. Additionally, the Court does not find the ten-year old Japanese action
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`and related products testing to be relevant to the instant proceedings, as such Nichia cannot be
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`faulted for its failure to rely on this information. Thus, Nichia’s supplementation of its contentions
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`at the very beginning of the expert discovery period and during the supplemental discovery period
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`was substantially justified. See Perez, et. al. v. First Am. Title Ins. Co., 810 F. Supp.2d 986, 989 (D.
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`Ariz. 2011); see also Avendt, et al. v. Covidien, Inc., No. 11-15538, 2013 U.S. Dist. LEXIS 174401,
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`*6 (E.D. Mich. Dec. 10, 2013).
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`Everlight’s instant motion appears particularly disingenuous considering it was put on notice
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`of the TAG-based doctrine of equivalents and claims 5-8 infringement contentions in December of
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`2013, during the supplemental discovery period ordered by this Court, yet it failed to bring this
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`motion until May 9, 2014. Everlight should have at the very least moved to conduct the discovery
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`it now argues it was prevented from taking with respect to Nichia’s infringement contentions.
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`Therefore, Everlight’s Motion to Strike Nichia’s Infringement Theories is also denied.
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`III.
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`CONCLUSION
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`For the foregoing reasons, Nichia’s Motion for Leave to Amend Answer to Add Unclean
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`Hands Defense [#265] is DENIED. Everlight’s Motion to Strike the Fourth Supplemental Expert
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`Report of John C. Jarosz [#268] is DENIED. Everlight’s Motion to Strike Nichia’s Infringement
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`Theories Regarding the Doctrine of Equivalents and Claims 5-8 of the ‘925 Patent [#272] is
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`DENIED.
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`SO ORDERED.
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`Dated: August 12, 2014
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`/s/Gershwin A Drain
`GERSHWIN A. DRAIN
`United States District Judge
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