Case 2:12-cv-01369-NBF Document 56 Filed 05/04/13 Page 1 of 12
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`UNITED STATES DISTRICT COURT
`FOR THE WESTERN DISTRICT OF PENNSYLVANIA
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`KONINKLIJKE PHILIPS ELECTRONICS N.V.
`and PHILIPS ELECTRONICS NORTH
`AMERICA CORPORATION,
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` Plaintiffs,
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`v.
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`ZOLL LIFECOR CORPORATION,
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` Defendant.
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`C.A. No. 2:12-cv-01369-NBF
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`Judge Nora Barry Fischer
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`Electronically Filed
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`ZOLL’S BRIEF IN SUPPORT OF ITS MOTION FOR SANCTIONS FOR PLAINTIFFS’
`FAILURE TO MEDIATE IN GOOD FAITH
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`ZOLL brings this motion for sanctions because Philips’ actions at the April 17, 2013
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`mediation show a lack of good faith in attempting to settle this and the other litigations between
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`the parties. Philips was represented at the mediation by only two people, neither of whom
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`attended the prior court-ordered mediation in Massachusetts. Philips’ counsel with primary
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`responsibility for handling of the trial of the matter did not attend, even though he was at the
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`prior mediation. The two Philips corporate representatives who attended the Massachusetts
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`mediation—including a senior executive who flew in from the Netherlands—were likewise
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`absent from the mediation. Philips instead sent one member of its outside counsel team who has
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`had little or no visible role in any of the extensive prior negotiations. Philips’ corporate
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`representative was a mid-level patent prosecution and transactional attorney, rather than a
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`member of senior management of any of the Philips entities involved in this action.
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`ZOLL is also a member of a large corporate family, and certainly recognizes the need in
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`mediations such as this for corporate authority to be delegated as appropriate to people with the
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`Philips Exhibit 2017
`Zoll Lifecor v. Philips
`IPR2013-00609
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`appropriate seniority and grasp of the fundamental issues. ZOLL by bringing this motion also
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`does not seek to impugn the capabilities of either of Philips’ representatives at the mediation. But
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`where the stakes are as high as they are here, where the dispute spans four lawsuits in three
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`courts with myriad asserted patents and accused products, and where the negotiations between
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`the parties date back to
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`, continuity is paramount. That is undeniable, and toward that end,
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`ZOLL sent the same core team that has been dealing directly with settlement issues since the
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`outset, over countless in-person meetings, exchange of correspondence, and telephone
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`discussions: its President, its general counsel, its director of IP, and two members of its trial
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`team, including of course its lead counsel.
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`Philips’ failure to seriously and meaningfully engage in mediation was further reflected
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`in the tectonic shifts in its settlement positions. Just three weeks before the mediation,
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`, effectively ensuring that nothing
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`would be accomplished at the mediation
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`At a critical and demanding time, and despite the fact that experts reports in the first
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`Massachusetts action were due the next day, ZOLL devoted enormous time and resources—not
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`to mention the attention of its entire senior in-house and outside legal team—to the April 17th
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`mediation, and to preparing the mediator for that session. It is now apparent that Philips’ true
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`motivation in readily agreeing to mediation at the January 14th hearing on ZOLL’s motion to
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`stay this case, and in the subsequent briefing on that issue, was primarily, if not entirely, driven
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`by a desire to avoid the stay that ZOLL was seeking. Philips’ lack of commitment to the process,
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`and its failure to send any members of its core negotiating team to that mediation, either business
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`or legal, doomed the mediation to failure, and wasted all of ZOLL’s efforts. ZOLL respectfully
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`submits that sanctions are warranted on these facts, including an award of its fees and costs for
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`this wasted effort. However, ZOLL continues to place great stock in the ADR offices of this
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`District, and further requests that Philips be ordered to re-engage in mediation with the requisite
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`level of commitment, at Philips’ expense, and with the stay continuing until such time as that
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`effort concludes.
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`I.
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`Background
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`To make plain that Philips’ conduct at the April 17, 2013 mediation failed to meet the
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`good faith standard required by the rules and the Court, ZOLL sets forth the history of the
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`negotiations and settlement discussions between the parties. Over the course of the various
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`lawsuits, Philips has repeatedly made material, and arbitrary, changes in its settlement demands,
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`and often pursued courses of conduct that seem designed to hinder settlement, rather than to
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`reach a business resolution.
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`A.
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`History of Litigation Between the Parties
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`This Pittsburgh action is one of four pending patent infringement suits between the
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`parties—with two others in the District of Massachusetts and one in the District of Delaware.
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`The same two law firms represent ZOLL and Philips respectively in all four lawsuits. (Docket
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`No. 42, Hearing Tr., p. 35; Docket No. 45, p. 3). Attorneys Michael Jakes and Denise DeFranco
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`have been the primary Philips attorneys in all four cases, while attorneys Kurt Glitzenstein and
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`Adam Kessel have been the primary ZOLL attorneys. All four attorneys have appeared in this
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`case, with Mr. Jakes serving as Philips’ lead counsel, and Mr. Glitzenstein as ZOLL’s.
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`Three of the four lawsuits involve infringement allegations by Philips against ZOLL
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`(with one involving infringement counterclaims by ZOLL against Philips), all relating to
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`defibrillators, while the fourth involves infringement claims by ZOLL against Philips’ subsidiary
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`Respironics, relating to remote monitoring and control of Respironics’ positive airway
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`pressurization devices for problems such as sleep apnea, with sales that dwarf those of the
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`defibrillators at issue in the other three cases.
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`B.
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`The Parties’ Prior Settlement Discussions
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`The next serious settlement discussions took place as part of the first Massachusetts
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`action. The parties participated in a Court-ordered mediation before Magistrate Judge Boal on
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`January 11, 2013. Attorneys Jakes and DeFranco represented Philips, and Edward Blocker (IP &
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`Standards Manager Healthcare) and Stephanie van Wermeskerken (IP & Standards General
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`Manager Healthcare from the Netherlands) were present as Philips’ corporate representatives.
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`Attorneys Glitzenstein and Kessel represented ZOLL, and Jonathan Rennert (President of
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`ZOLL), Aaron Grossman (Vice-President and General Counsel), and Robert Follett (Director of
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`IP) were present as ZOLL’s corporate representatives. Just before that mediation, Philips
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`mediation was unsuccessful. On March 14, 2013,
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`. Not surprisingly, the
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` The terms of that demand encompassed this case.
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`C.
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`The Pittsburgh Litigation and Hearing Before the Court
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`On January 14, 2013, three days after the unsuccessful mediation in Boston, the parties
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`appeared before this Court at a hearing on ZOLL’s motion for a limited stay. At that hearing, the
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`parties discussed the prior attempts at settlement. (Docket No. 42, Hearing Tr., pp. 15–16, 26–
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`29). Those discussions between the Court and counsel for ZOLL turned to this Court’s well-
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`regarded ADR program, in which it uses skilled neutrals to help parties resolve their disputes, at
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`which point Philips’ counsel interjected, stating that “Philips would be agreeable to additional
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`mediation in this court with such a person.” (Id. p. 29). Philips repeated this assertion in its
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`supplemental brief after the hearing. (Docket No. 43, p. 8). ZOLL also indicated that it would be
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`interested in further mediation. (Docket No. 42, p. 29; Docket No. 44, p. 4).
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`After taking the parties’ positions under advisement and considering the additional
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`briefing on ZOLL’s motion for a stay, the Court issued an opinion granting in part and denying
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`in part the motion and ordering the parties to mediation pursuant to Local Rule 16.2. (Docket No.
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`45). The Court ordered mediation based, in part, on the parties’ expressed desire for additional
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`mediation and as an initial alternative to ordering the stay ZOLL requested. (Id., p. 4).
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`In ordering the parties to mediation, the Court noted in its order that it expected the
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`parties to treat the process seriously and engage in good faith efforts to resolve the litigation:
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`Last, given past unsuccessful attempts, the Court advises that it
`expects all parties and counsel to proceed in good faith. See ADR
`Policies and Procedures 2.4. (If a party files a motion with the
`Court alleging matters such as bad faith the assigned US District
`Judge may adjudicate the motion or may elect to request another
`judge to do so.) To the extent any party and/or counsel fails to
`adhere to the Court’s ADR Policies, then and in that event, the
`Court will entertain motions for sanctions.
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`(Id., p. 6).
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`D.
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`The April 17, 2013 Mediation
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`At the Court’s direction, the parties retained Robert Lindefjeld as the mediator and
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`scheduled the mediation to occur in Boston on April 17, 2013. As before, ZOLL was represented
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`by attorneys Glitzenstein and Kessel, and by corporate representatives Jonathan Rennert
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`(President of ZOLL), Aaron Grossman (Vice-President and General Counsel), and Robert Follett
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`(Director of IP).1 All five of ZOLL’s representatives have been involved in the extensive prior
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`negotiations with Philips. ZOLL also spent a substantial amount of time preparing for the
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`mediation, including drafting a twenty-page mediation statement and spending hours in
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`discussions, planning, and review of Philips’ claims.
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`Philips chose a different approach. None of the individuals who attended the January 11,
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`2013, mediation, or who were significantly involved in the long history of negotiations between
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`the parties, attended the April 17th mediation. Instead, Philips only sent attorney Robert Shaffer
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`and corporate representative Brinton Yorks (principal attorney in Philips IP & Standards
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`organization). Mr. Yorks handles patent prosecution and transactional work for Philips and is
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`substantially less senior than either Mr. Blocker or Ms. van Wermeskerken.
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`1 ZOLL has a parent company, Asahi Kasei.
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`2 ZOLL recognizes the confidentiality obligations of ADR Rule 6 regarding the mediation process. At the
`guidance of the Court’s ADR Coordinator, ZOLL has intentionally generalized its discussion of what
`occurred during the mediation in order to maintain the confidentiality of those discussions. ZOLL will
`supplement these details (including providing documents, affidavits, or testimony) as appropriate at the
`Court’s request or during the status hearing on May 7, 2013, should the Court find these details to be
`important in resolving this Motion.
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`II.
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`Law and Procedures Regarding the Court’s ADR Process
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`By both Rule and the Court’s February 6, 2013, Order, parties to a mediation are
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`obligated to proceed in good faith and make reasonable efforts to resolve both the current lawsuit
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`and other issues between the parties. See, e.g., ADR Rule 3.1; Docket No. 45, pp. 5–6.
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`To facilitate the mediation and to maximize the chances of resolving the parties’ dispute,
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`the attorney “who will be primarily responsible for handling of the trial of the matter” must be in
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`attendance, as well as a corporate representative “who has full settlement authority and who is
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`knowledgeable about the facts of the case.” ADR Rule 2.7(A)(1) and (B). “Any party who fails
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`to have physically in attendance the necessary decision maker(s) will be subject to sanctions.”
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`ADR Rule 2.7(A)(3).
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`In lieu of granting the full stay requested by ZOLL, the Court specifically and explicitly
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`required the parties to engage in good faith negotiations or face sanctions. (Docket No. 45, p. 6).
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`III. Argument
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`Despite affirmatively representing both during and after the hearing on ZOLL’s motion
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`for a stay that it wanted to mediate to reach a global settlement of all four lawsuits, that was
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`apparently an effort to avoid this case being stayed in its entirety. Philips did not mediate in good
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`faith, and did not reasonably attempt to resolve the disputes between the parties. Instead, Philips
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`sent individuals with limited if any continuity to the extensive prior settlement discussions, and
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`readily and objectively apparent that Philips had no interest or intent in engaging in a mediation
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`that had any realistic chance of succeeding.
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`In addition to the time and effort ZOLL wasted preparing for this unproductive
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`mediation, Philips’ actions interfered with ZOLL’s defense of the claims pending against it in the
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`lawsuit pending in the District of Massachusetts. Rebuttal expert reports in that case were due on
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`April 18, 2013, the day after the mediation, and the preparation for and participation in the
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`mediation necessarily diverted resources and attention from those reports.
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`ZOLL also sent three of its senior management to the mediation—its president, vice
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`president and general counsel, and director of intellectual property—to be able to have the
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`necessary individuals present to reach a global settlement. All three had been extensively
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`involved in the long history of prior settlement negotiations with Philips.
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`In contrast, Philips sent Mr. Yorks. Mr. Yorks is a patent prosecutor and transactional
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`attorney who primarily works in Philips’ ultrasound business.3 Early on in the parties’ prior
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`settlement negotiations Mr. Yorks was replaced with Mr. Blocker as Philips’ lead negotiator, and
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`Mr. Blocker did attend the prior Massachusetts mediation. Mr. Yorks is also at least two steps
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`below Ms. van Wermeskerken, who also attended the Massachusetts mediation.
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`Mr. Shaffer similarly was not the primary negotiator or counsel for Philips during the
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`prior negotiations, and he did not attend the January 11, 2013, mediation in the Massachusetts
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`action.
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`It appears clear that Philips substantially increased its settlement demand and did not
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`send its senior personnel because it had no intention of engaging in a serious mediation. Philips’
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`3 However, Mr. Yorks does spend some of his time working with Philips’ defibrillator products.
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`failure to engage meaningfully violated both the spirit and letter of the ADR Rules and the
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`Court’s order, and warrants the relief ZOLL seeks on this motion.
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`IV. Conclusion/Relief Requested
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`In light of Philips’ failure to participate in this mediation in good faith, sanctions are
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`appropriate. ZOLL remains optimistic that with the Court’s assistance and appropriate
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`participation from Philips, the parties can at least ascertain what the true gap is between them,
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`and evaluate whether a full resolution of all of the disputes between them is feasible at this time.
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`As a sanction for Philips’ misconduct, ZOLL specifically requests:
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`1.
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`its costs and fees associated with preparing for and attending the mediation,
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`including its share of Mr. Lindefjeld’s fees;
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`2.
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`the Court order the parties to conduct another mediation before Mr. Lindefjeld (at
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`Philips’ cost for everything, including ZOLL’s attorney time at the mediation,
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`travel costs, and share of the mediator’s fee) in the next sixty days in which lead
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`counsel for Philips and senior management from Philips with full settlement
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`authority attend; and
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`3.
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`a continuation of the stay of this litigation pending the outcome of the mediation.
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`ZOLL believes that these remedies would be adequate to sanction Philips for its misconduct and
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`act as deterrent to engaging in further misconduct going forward.
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`Dated: May 4, 2013
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`Respectfully submitted,
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`/s/Henry M. Sneath
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`Henry M. Sneath (Pa. ID No. 40559)
`Robert L. Wagner (Pa. ID No. 308499)
`Joseph R. Carnicella (Pa. ID No. 200294)
`Picadio Sneath Miller & Norton, P.C.
`Four Gateway Center
`444 Liberty Avenue, Suite 1105
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`Pittsburgh, PA 15222
`(412) 288-4000
`(412) 288-2405 (fax)
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`Kurt L. Glitzenstein (pro hac vice)
`Adam J. Kessel (pro hac vice)
`Brian K. Wells (pro hac vice)
`Gauri M. Dhavan (pro hac vice)
`Fish & Richardson P.C.
`One Marina Park Drive
`Boston, MA 02210
`(617) 542-5070
`(617) 542-8906 (fax)
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`CERTIFICATE OF SERVICE
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`I hereby certify that this document filed through the ECF system will be sent
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`electronically to the following registered participants as identified on the Notice of Electronic
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`Filing (NEF) on this 4th day of May, 2013. In addition, an unredacted version of this document
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`was sent by e-mail to the individuals listed below on this date.
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`Dara A. DeCourcy (decourcy@zklaw.com)
`George N. Stewart (stewart@zklaw.com)
`Zimmer Kunz
`600 Grant Street
`3300 USX Tower
`Pittsburgh, PA 15219
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`David K. Mroz (David.Mroz@finnegan.com)
`Michael Jakes (mike.jakes@finnegan.com)
`Robert F. Shaffer (robert.shaffer@finnegan.com)
`Finnegan, Henderson Farabow, Garrett & Dunner, LLP
`901 New York Avenue, NW
`Washington, DC 20001
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`Denise W. DeFranco (denise.defranco@finnegan.com)
`Finnegan, Henderson Farabow, Garrett & Dunner, LLP
`Two Seaport Lane
`Sixth Floor
`Boston, MA 02210-2001
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`/s/Henry M. Sneath
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`Henry M. Sneath, Esquire
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