Case 1:11-cv-03855-AT Document 405 Filed 03/29/16 Page 1 of 13
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF GEORGIA
`ATLANTA DIVISION
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`CANON, INC.,
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`Plaintiff,
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`v.
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`COLOR IMAGING, INC. and
`GENERAL PLASTIC INDUSTRIAL
`CO., LTD,
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`Defendants.
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`ORDER
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`CIVIL ACTION NO.
`1:11-CV-3855-AT
`
`This matter is before the Court on the Special Master’s Reports and
`
`Recommendations (“R&R”s) [Docs. 370, 371] on Plaintiff’s and Defendants’
`
`Motions for Summary Judgment. Plaintiff moved for summary judgment for a
`
`declaration of the validity of its patent, U.S. Patent No. 7,646,012 (the “’012
`
`Patent”). (Doc. 320.) For ease of reference, the Special Master’s R&R on
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`Plaintiff’s motion will be referred to as the “Validity R&R.” Defendants moved for
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`summary judgment on multiple defenses to infringement, including the doctrines
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`of exhaustion, implied license, and repair; Canon’s lack of proof of direct or
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`indirect infringement liability; insufficient notice under 35 U.S.C. § 287(a); and a
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`separate damages issue. (Doc. 322.) The R&R on Defendants’ motion will be
`
`referred to as the “Defenses R&R.”
`
`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF GEORGIA
`ATLANTA DIVISION
`
`
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`CANON, INC.,
`
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`Plaintiff,
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`v.
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`COLOR IMAGING, INC. and
`GENERAL PLASTIC INDUSTRIAL
`CO., LTD,
`
`
`Defendants.
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`ORDER
`
`CIVIL ACTION NO.
`1:11-CV-3855-AT
`
`This matter is before the Court on the Special Master’s Reports and
`
`Recommendations (“R&R”s) [Docs. 370, 371] on Plaintiff’s and Defendants’
`
`Motions for Summary Judgment. Plaintiff moved for summary judgment for a
`
`declaration of the validity of its patent, U.S. Patent No. 7,646,012 (the “’012
`
`Patent”). (Doc. 320.) For ease of reference, the Special Master’s R&R on
`
`Plaintiff’s motion will be referred to as the “Validity R&R.” Defendants moved for
`
`summary judgment on multiple defenses to infringement, including the doctrines
`
`of exhaustion, implied license, and repair; Canon’s lack of proof of direct or
`
`indirect infringement liability; insufficient notice under 35 U.S.C. § 287(a); and a
`
`separate damages issue. (Doc. 322.) The R&R on Defendants’ motion will be
`
`referred to as the “Defenses R&R.”
`
`
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`Case 1:11-cv-03855-AT Document 405 Filed 03/29/16 Page 2 of 13
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`Following submission of the two R&Rs (241 pages in total), the parties
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`extensively briefed and re-briefed the issues presented therein. (Docs. 375-78,
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`383, 384, 386-91.) The Court received over 500 pages of post-R&R briefing, not
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`including exhibits. On February 10, 2016, the Court heard two hours of oral
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`argument. (Doc. 395.) The parties then submitted letter briefs on a few issues
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`that were raised at oral argument, (Docs. 397, 398), and again on issues raised in
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`those letter briefs. (Docs. 403, 404.)
`
`I.
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`LEGAL STANDARD
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`Generally, “[t]he court must decide de novo all objections to findings of fact
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`made or recommended by a master.” Fed. R. Civ. P. 53(f)(3). The Court must
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`also decide de novo all objections to conclusions of law made or recommended by
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`a master. Fed. R. Civ. P. 53(f)(4). And “[u]nless the appointing order establishes
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`a different standard of review, the court may set aside a [special] master’s ruling
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`on a procedural matter only for an abuse of discretion.” Fed. R. Civ. P. 53(f)(5).
`
`II. DISCUSSION
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`Initially, the parties appeared to take issue with many parts of the Special
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`Master’s R&Rs. However, after briefing and oral argument, the issues were
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`narrowed significantly. For example, the Defendants no longer argue that
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`Canon’s notice of infringement under 35 U.S.C. § 287(a) was insufficient because
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`it was given as to a limited subset of the allegedly infringing bottles. And the
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`parties agreed at oral argument to address the requested exclusion of evidence of
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`Canon’s intent (to prohibit customers from using non-Canon toner) at the motion
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`
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`2
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`Case 1:11-cv-03855-AT Document 405 Filed 03/29/16 Page 3 of 13
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`in limine stage or at trial. Thus, the Court will only address with specificity below
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`those issues on which a dispute remains.
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`The Court has read and heard the parties’ arguments on the issues before it
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`and before the Special Master. The Court has undertaken a thorough, de novo
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`review of the record in this case and the law as it pertains to the parties’
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`objections to the legal analysis and recommendations made by the Special
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`Master.
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`A. Validity R&R
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`Plaintiff moved to adopt the Validity R&R with one objection, and
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`Defendants raised a number of objections. Specifically, Plaintiff objected to the
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`Special Master’s assertion that the combination construction, i.e., that the patent
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`incorporates both the cartridge and the driving member inside the copier, “has a
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`direct impact on the prior art to be considered as part of the § 103 obviousness
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`analysis.” (Doc. 370 at 19.)1 Plaintiff points out that the Special Master “does not
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`explain how his conclusion of nonobviousness would be any different if claim 24
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`were construed as being directed to a toner supply container alone” – as opposed
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`to the combination of the supply container and the parts of the invention located
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`in the copier. (Doc. 375-1 at 43.)
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`While Plaintiff
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`labels this disagreement with the Validity R&R’s
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`consistency an ‘objection,’ the Special Master’s comment was merely part of the
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`
`1 All references to page numbers within docket entries refer to the blue docket page number in
`the header of each page and not the page number on the submission itself, which are generally
`at the bottom of each page.
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`
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`3
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`
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`Case 1:11-cv-03855-AT Document 405 Filed 03/29/16 Page 4 of 13
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`initial portion of the Special Master’s analysis and was not an explicit
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`recommendation. There is nothing wrong with the general statement that a
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`patent construction has a direct impact on the prior art considered as part of the
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`nonobviousness analysis. Whether a particular construction in fact affects a
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`particular prior art analysis is a different question. Here, the Special Master’s
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`analysis ultimately indicated that he considered some inventions that appear to
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`apply only to the inventive aspects that reside within the toner supply container
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`alone, and none of the inventions that he considered were sufficient to support
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`invalidation. Plaintiff’s Objection is therefore a moot point and the Objection
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`[Doc. 375-1 at 44] is OVERRULED.
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`Defendants objections are as follows: (1) the R&R misunderstands the
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`problem facing the inventors at the time of the invention; (2) The Validity R&R’s
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`determination of analogous prior art was improperly narrow and should not have
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`excluded the Hilton ’966 and Sundberg ’990 patents; (3) Defendants’ basis for
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`combining references is well-founded; (4) The prior art combinations disclose the
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`displacing force receiving portion limitation of Claim 24, and the fact that it is in
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`a different place on the invention is not material to the analysis; (5) the Yoshiki
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`’079 patent does not teach away from the invention. The Special Master’s R&R
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`addresses these specific issues and, after a thorough review of the record and the
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`caselaw, the Court can find no reason to stray from the Special Master’s
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`recommendations as to (2)-(5) of the above. Those Objections [Doc. 378] are
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`OVERRULED.
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`4
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`Case 1:11-cv-03855-AT Document 405 Filed 03/29/16 Page 5 of 13
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`Defendants are correct, though, that at least a clarification is warranted as
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`to issue (1) above: how the R&R addresses the problem facing the inventors at the
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`time of the invention. The Court agrees with Defendants that the Validity R&R
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`improperly precluded Defendants from using the disclosures in certain sections
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`of the ’012 Patent application, e.g., those in the “FIELD OF INVENTION AND
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`RELATED ART” section, to assist a person of reasonable skill in the art (“POSA”)
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`in looking to certain prior art to solve a particular issue. (See Doc. 347 at 19
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`(asserting that some prior art was “known to ‘result[] in complications’ or require
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`additional ‘complicated’ structures.”) (citing ’012 patent 2:25-28, 2:31-32, 2:39-
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`44, 2:43-45). The Special Master cites no authority for this proposition, and
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`some cases indicate that relying on disclosures in the prior art section of the
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`patent application at issue may not be improper in all circumstances. See Sci.
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`Plastic Products, Inc. v. Biotage AB, 766 F.3d 1355, 1361 (Fed. Cir. 2014) cert.
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`denied, 135 S. Ct. 2380 (2015) (affirming Patent Trial and Appeal Board decision
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`holding the “known problem of leakage in threaded connections of plastic LPLC
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`cartridges under pressure identified in the [patents] provides a reason for one of
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`ordinary skill in the art to have turned to King or Strassheimer to improve the
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`sealing arrangement set forth in Yamada.”). Canon is correct that Judge Moore
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`lodged a vigorous dissent against this use of the patent. See id. at 1362-63
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`(Moore, J., dissenting) (“This statement, in the patents, is not a recognition of a
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`known prior art problem that would have motivated one of skill in the art to want
`
`to modify the Yamada design. It was a problem identified, not in the prior art,
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`5
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`Case 1:11-cv-03855-AT Document 405 Filed 03/29/16 Page 6 of 13
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`but by these inventors.”). But alas, Judge Moore was dissenting, and none of the
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`cases Canon cites in opposition to the majority in Scientific Plastic obviously
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`condemns such use of the patent at issue’s prior art section. Thus, the Court
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`DOES NOT ADOPT the portion of the Validity R&R that states “Defendants
`
`improperly use the patent disclosures to assist the POSA.” (Doc. 370 at 94.) On
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`that issue, Defendants’ Objections [Doc. 378] are SUSTAINED.
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`Defendants’ victory, though, is Pyrrhic. As the Special Master goes on to
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`explain, even if Defendants were able to rely on the disclosures in the patent at
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`issue, those disclosures would still be insufficient to support a finding that a
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`POSA would have looked to the non-analogous ‘snap-fit’ teachings found in the
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`Hilton ’966 and Sundberg ’990 patents. That portion of the Special Master’s
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`reasoning is ADOPTED here. (See Doc. 370 at 94-95.)
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`Thus, the Validity R&R [Doc. 370] is ADOPTED with the exception
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`described above. As that exception does not impinge upon the Special Master’s
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`overall recommendation, Canon’s Motion for Summary Judgment as to the
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`validity of U.S. Patent No. 7,646,012 [Doc. 320] is GRANTED.
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`B. Defenses R&R
`
`The Court also adopts the Defenses R&R with the following clarifications
`
`and exceptions. If an issue is not mentioned below, it is ADOPTED.2
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`2 The Court notes that the year “2020” in the block quote on page 77 of Doc. 371 should read
`“2010.”
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`6
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`Case 1:11-cv-03855-AT Document 405 Filed 03/29/16 Page 7 of 13
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`1. Exhaustion
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`On the exhaustion defense, summary judgment in favor of Defendants is
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`DENIED. The Court rejects, for the reasons stated in the Defenses R&R,
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`Canon’s position that the copier must embody “all inventive aspects” of the
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`invention in order to trigger exhaustion. In addition, as stated in the R&R, the
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`jury must decide the reasonableness3 of the Katun bottle as a non-infringing
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`alternative. The Defenses R&R is NOT ADOPTED, though, as to the exclusion
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`of evidence of Canon’s intent to prohibit customers from using non-Canon toner.
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`As noted above, the parties have agreed to address exclusion of this evidence
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`through a pretrial motion in limine or at trial. Absent the Court granting a
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`motion in limine or excluding such evidence at trial, it is up to the jury to
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`determine whether Canon intended to prohibit customers from using non-Canon
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`toner.
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`Another evidentiary issue relevant to the exhaustion analysis concerns a
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`first sale of certain models of copiers in the United States. In response to
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`Defendants’ motion for summary judgment on this issue, Canon argued not only
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`that summary judgment should be denied, but in some places appeared to argue
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`that summary judgment might be more appropriately entered in its favor
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`pursuant to Rule 56(f) of the Federal Rules of Civil Procedure. (See Doc. 345 at
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`3 The Court also ADOPTS the Special Master’s recommendation that “a reasonable non-
`infringing use” in this context “is one that is not unusual, far-fetched, illusory, impractical,
`occasional, aberrant, or experimental.”
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`7
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`Case 1:11-cv-03855-AT Document 405 Filed 03/29/16 Page 8 of 13
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`7.) Canon did not, though, affirmatively move for summary judgment on the
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`exhaustion defense based on lack of evidence of a first sale in the United States.
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`Although a district court has the authority under Rule 56(f) to grant
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`summary judgment (1) in favor of a nonmoving party; (2) on grounds not raised
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`by a party in its summary judgment motion, or (3) sua sponte after “identifying
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`for the parties material facts that may not be genuinely in dispute,” the district
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`court must first provide the parties with “notice and a reasonable time to
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`respond.” See Fed. R. Civ. P. 56(f); Massey v. Cong. Life Ins. Co., 116 F.3d 1414,
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`1417 (11th Cir. 1997). The notice requirement “is not an unimportant technicality,
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`but a vital procedural safeguard” subject to strict enforcement. See Massey, 116
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`F.3d at 1417. Notice to a movant that summary judgment may be entered against
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`it must sufficiently alert the movant to the potential for summary judgment to be
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`granted against it so it has the “opportunity to formulate and prepare its best
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`opposition to an impending assault upon the continued viability of its defense [or
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`claim].” Georgia State Conference of NAACP v. Fayette Cty. Bd. of Comm’rs, 775
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`F.3d 1336, 1344 (11th Cir. 2015) (quotation, citation, and punctuation omitted).
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`It also must provide the party with sufficient time to respond. See Cox Nuclear
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`Pharmacy, Inc. v. CTI, Inc., 478 F.3d 1303, 1312-13 (11th Cir. 2007) (holding 30
`
`days’ notice was sufficient because it was “far more than the ten days required
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`under Rule 56(c).”). Finally, the evidentiary record regarding the claims or
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`defenses must be fully developed to support a grant of summary judgment under
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`8
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`Case 1:11-cv-03855-AT Document 405 Filed 03/29/16 Page 9 of 13
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`Rule 56(f). See id. at 1313 (discussing Artistic Entm’t, Inc. v. City of Warner
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`Robins, 331 F.3d 1196, 1201-02 (11th Cir. 2003) (per curiam)).
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`Here, despite multiple rounds of briefing discrete issues, it is not clear: (1)
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`that movant Defendants have been put on sufficient notice, by the Court or by
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`Plaintiff, that summary judgment may be entered against them; or (2) that
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`movant Defendants were given sufficient time to “marshal their strongest
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`evidence and legal arguments in opposition to summary judgment.” Massey, 116
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`F.3d at 1417-18. The issues were generally briefed over time, but Canon did not
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`squarely present the issues to the Court or Defendants in an affirmative motion
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`for summary judgment. Accordingly, the Court will not grant summary judgment
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`in favor of non-movant Canon based on lack of evidence of U.S. sales of the
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`relevant copiers.
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`Instead, the Court simply ADOPTS the Special Master’s recommendation
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`that summary judgment in favor of Defendants be DENIED based in part on the
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`lack of this evidence. (Doc. 371 at 76-77.)
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`The Court notes that Defendants have offered various sources of
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`evidentiary support for a first U.S. sale as to third-party end users throughout
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`summary judgment briefing and even through the latest letter briefs submitted to
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`the Court. Defendants have become moving targets on this point, relying, at
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`different times, on 78 contracts, 10 invoices, and a misleading excerpt from a
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`stipulation. Defendants now seek to “utilize subpoenas to obtain information” for
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`use at trial. (Doc. 397 at 3.)
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`9
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`Case 1:11-cv-03855-AT Document 405 Filed 03/29/16 Page 10 of 13
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`The Federal Rules of Civil Procedure “are designed to narrow and clarify
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`the issues and to give the parties mutual knowledge of all relevant facts, thereby
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`preventing surprise.” Shelak v. White Motor Co., 581 F.2d 1155, 1159 (5th Cir.
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`1978) (citing Hickman v. Taylor, 329 U.S. 495 (1947)).4 Defendants must
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`identify the evidence on which they intend to rely with some clarity in the parties’
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`proposed consolidated pretrial order so that Plaintiff can file any motion in
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`limine to which it is entitled. Defendants are hereby on notice that if they pursue
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`defenses at trial based on obviously insufficient evidence, the Court may deem it
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`frivolous litigation and potentially subject Defendants to costs and fees.
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`2. Implied license, repair, and damages defenses
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`Summary judgment is DENIED on the implied license defense. The
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`parties – and the Court – agree that the Special Master erred in recommending
`
`that the reasonableness of the non-infringing alternative is not part of the
`
`implied license test. Indeed it is. See Glass Equipment Development, Inc. v.
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`Besten, Inc., 174 F.3d 1337, 1342 (Fed. Cir. 1999) (describing the importance of
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`reasonableness in the implied license test based on the Federal Circuit’s prior
`
`decision in Bandag, Inc. v. Al Bolser’s Tire Stores, Inc., 750 F.2d 903, 924 (Fed.
`
`Cir. 1984)). That specific recommendation within the Defenses R&R is NOT
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`ADOPTED.
`
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`4 In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the Eleventh
`Circuit adopted as binding precedent all of the decisions of the former Fifth Circuit rendered
`prior to the close of business on September 30, 1981.
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`10
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`Case 1:11-cv-03855-AT Document 405 Filed 03/29/16 Page 11 of 13
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`Even so, the reasonableness of the Katun bottle, which the Special Master
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`correctly explained was an issue for the jury where it was discussed in the
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`exhaustion analysis, precludes summary judgment on implied license as well.
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`And because summary judgment is denied as to both the exhaustion and implied
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`license defenses, summary judgment must also be DENIED on the repair
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`defense for the reasons stated in the R&R. That portion of the R&R is
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`ADOPTED.
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`Summary judgment is also DENIED on Defendants’ argument that
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`damages against Defendant General Plastic Industrial Co., LTD (“GPI”) should be
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`limited due to insufficient notice to a third party (namely, Densigraphix) under
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`35 U.S.C. § 287(a). The Court ADOPTS the Special Master’s detailed reasoning
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`as to why notice of infringement given to Densigraphix by Canon’s prior
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`complaint for infringement was sufficient to satisfy the requirements of § 287(a).
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`None of the cases cited by Defendants anywhere in the briefing or at oral
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`argument requires a different result. Defendants’ Objections [Doc. 377] in this
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`regard are OVERRULED. Because notice was sufficient, a jury must now
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`decide whether Canon can recover damages for GPI’s sales of Part A accused
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`products.
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`For the reasons stated by the Special Master, summary judgment is also
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`DENIED on: (1) the defense that Canon does not have sufficient evidence of
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`Defendant GPI’s direct infringement (Doc. 371 at 107-08); and (2) the defense
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`that Canon should not be able to recover damages for the entire market value of
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`11
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`Case 1:11-cv-03855-AT Document 405 Filed 03/29/16 Page 12 of 13
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`the toner cartridge. (Id. at 148-49.) Summary judgment is also GRANTED in
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`favor of Canon on the defense that Canon has no proof of infringement by third-
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`party end users that would lead to Defendants’ indirect infringement liability.
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`(Id. at 101-02.) As explained by the Special Master, the parties’ stipulation as to
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`third-party use eliminated this defense, and Defendants cannot now either: (1) go
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`back and say they no longer stipulate; or (2) argue that Canon needs actual
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`evidence. (Id.) Neither party objected to the recommendation of these two
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`denials and one grant of summary judgment, so all three recommendations are
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`hereby ADOPTED and the defense that Canon has no proof of third-party end
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`user direct infringement is DISMISSED.
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`III. CONCLUSION
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`For the foregoing reasons and in the foregoing ways, the Special Master’s
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`Validity R&R [Doc. 370] and Defenses R&R [Doc. 371] are both ADOPTED IN
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`PART and DENIED IN PART. This decision also disposes of both summary
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`judgment motions [Docs. 320, 322] and all related motions [Docs. 375, 376, 377,
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`378].
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`Now that the issues in this case have been somewhat narrowed, the Court
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`believes mediation may be productive. This matter is therefore REFERRED to
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`private mediation. The parties are DIRECTED to engage a private mediator and
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`to split the mediator’s costs evenly. Mediation SHALL conclude no later than
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`May 6, 2016. During this period, this case is removed from the Court’s active
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`docket. The parties are DIRECTED to file a status report within 5 days of the
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`12
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`Case 1:11-cv-03855-AT Document 405 Filed 03/29/16 Page 13 of 13
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`conclusion of the mediation indicating whether this matter is resolved. The Clerk
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`is DIRECTED to submit the parties’ status report to the undersigned as soon as
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`the report is filed, at which point the case will be restored to the active docket.
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`The pretrial order SHALL be due within 30 days of the filing of the mediation
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`status report.
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`In the meantime, the parties are DIRECTED to file, by April 8, 2016, a
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`joint statement listing all of the issues that remain to be tried in this case.
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`IT IS SO ORDERED this 28th day of March, 2016.
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`_____________________________
`Amy Totenberg
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`United States District Judge
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`13
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