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International Business Machines Corp. v. The Priceline Group Inc.

United States District Court, D. Delaware

February 13, 2017

INTERNATIONAL BUSINESS MACHINES CORPORATION, Plaintiff,
v.
THE PRICELINE GROUP INC., KAYAK SOFTWARE CORPORATION, OPENTABLE, INC., and PRICELINE.COM LLC, Defendants.

          MEMORANDUM ORDER

          CHRISTOPHER J. BURKE UNITED STATES MAGISTRATE JUDGE.

         WHEREAS, the Court has considered the parties' letter submissions, (D.I. 271, 272, 275, 276, 283, 284, 288), relating to: (1) Defendants The Priceline Group Inc., priceline.com LLC, Kayak Software Corporation and OpenTable Inc.'s (collectively, "Defendants") pending discovery-related motion, (D.I. 267); and (2) certain disputes raised in Plaintiff International Business Machines Corporation's ("IBM") pending discovery-related motion, (D.I. 267), [1] as well as the parties' arguments made during the December 14, 2016 hearing with the Court, (D.I. 294 (hereinafter, "Tr."));

         NOW, THEREFORE, IT IS HEREBY ORDERED that:

         1. With regard to Defendants' request that the Court enter an order that: (1) compels IBM to search for and produce documents from 2004 pertaining to offers to sell a working embodiment of United States Patent No. 7, 631, 346 (the '"346 patent"); (2) grants leave to allow Defendants to take additional depositions of the IBM personnel involved with the Orange S.A. ("Orange") project; (3) grants leave for third party discovery, including of Orange; and (4) grants leave to supplement Defendants' expert report to add and support the defenses that this discovery elicits, (D.I. 272 at 2; see also D.I. 283 at 2 (requesting that the Court "compel IBM to respond to Defendants' discovery requests [regarding the conception, reduction to practice, and prior offers for sale of the invention of the '346 patent], including production of customer offers, agreements, and communications, and grant leave to take discovery from other sources if IBM claims that it no longer has same")), the Court GRANTS-IN-PART Defendants' request, as set out below.

         2. As to the issue of prior offers for sale of the invention of the '346 patent, documents produced in the case demonstrate that certain versions of a product relating to the invention of the '346 patent were released to customers, including Orange, in 2004. (See, e.g., D.I. 272 at 2; D.I. 283 at 1; D.I. 284 at 2) However, though Defendant priceline.com LLC propounded an interrogatory requesting that IBM "[d]escribe in detail all discussions, disclosures, transactions, or other communications that occurred before the filing date of any Patent-in-Suit concerning any proposed or actual sale or offer to sell (regardless of whether for commercial or experimental purposes). . . of any products, systems, or services whose use was or may have been covered by any claim of the Patents-in-Suit[, ]" (D.I. 283, ex. 4 at 6), [2] IBM's responses were silent as to the '346 patent, (id., ex. 6 at 5-6, 10). Furthermore, while Defendants propounded Requests for Production of Documents seeking documents relating to this topic, (id, ex. 5 at 9, 11 (Request Nos. 22, 23, 24, 36)), they assert that "IBM has not produced a single document evidencing when the first offer was made or when it was accepted" with respect to an embodiment of the invention described in the '346 patent, (D.I. 272 at 2; see also D.I. 283 at 1). Defendant priceline.com LLC is entitled to a supplemental interrogatory response that addresses the '346 patent, and Defendants are entitled to any responsive documents pertaining to offers to sell an embodiment of the invention in the '346 patent. Accordingly, the Court ORDERS that by no later than January 27, 2017, IBM shall provide supplemental responses to these discovery requests, including the production of any responsive documents relating to customer offers, agreements, and communications that regard offers for sale of the invention of the '346 patent. Furthermore, Defendants may thereafter serve supplemental expert reports limited to "add[ing] and supporting] the defenses that this discovery elicits." (D.I. 272 at 2)[3]

         3. As to the issue of conception and reduction to practice of the invention of the '346 patent, on May 31, 2016, IBM produced an interrogatory response in which it stated that "the inventions of the '346 Patent were conceived no later than April of 2004 and reduced to practice no later than April 1, 2005." (D.I. 284, ex. 40 at 88-89 (emphasis added)) IBM further explained in the response that, inter alia, the "inventors' conception is documented in at least design documents related to the Tivoli Federated Identity Manager ('TFIM') product[, ]" that the inventors' efforts in reducing the inventions of the patent to practice led to the launch of the TFIM product, and that the team working on the development of TFIM "created PRPQ versions of the TFIM product to test its functionality, including one PRPQ version on or near July 2004 and a second PRPQ version on or near December 2004." (Id. at 89) The response then further cited to numerous documents, (id. at 89-91) "which explained that PRPQ releases were distributed to third-parties to solicit feedback[, ]" including to Orange, (D.I. 284 at 2).[4] The Court agrees with IBM that its response gave Defendants the "ability to investigate" issues relating to conception and reduction to practice, (Tr. at 25-26), which Defendants indeed explored at the October 7, 2016 deposition of the '346 patent's lead inventor, Heather Hinton, (see, e.g., D.I. 272, ex. 3 at 115-19; D.I. 284 at 3 (citing to various sections of Ms. Hinton's deposition transcript)).

         4. Defendants' primary complaint with respect to this issue is that on November 22, 2016 (almost one month after the October 25, 2016 fact discovery deadline in this case), IBM filed a Response in an ongoing inter partes review ("IPR") proceeding regarding the '346 patent, in which IBM further refined its position with respect to reduction to practice of the invention of the '346 patent. In that Response, IBM stated that certain claims of the '346 patent "were actually reduced to practice no later than July 2004" at which time "a pre-release version of TFIM . . . included the functionality of the challenged claims-including code for runtime account creation as claimed in the '346 patent." (D.I. 283, ex. 3 at 3 (emphasis added)) Defendants assert that this referenced source code was "first produced [by IBM] at the close of fact discovery" and "[t]his specific and new information never made it into IBM's interrogatory responses pertaining to when, how, and by whom the disclosed subject matter was allegedly conceived and reduced to practice." (Id. at 1 (emphasis in original)) This latest November 22, 2016 IPR disclosure did further crystallize IBM's position as to reduction to practice. But it is not clear how the disclosure justifies Defendants' requested relief with regard to this topic (such as Defendants' request for leave to allow Defendants to take additional depositions of IBM personnel involved with the Orange project and leave for third party discovery of Orange). This is because IBM's prior responses had similarly made clear that IBM had created (including in July 2004) prerelease versions of TFIM relating to the invention of the '346 patent, which IBM provided to Orange (among others). For this reason, Defendants' requests in this regard are DENIED.[5]

         5. Defendants make some additional broad requests with respect to the issues of conception, reduction to practice, and prior offers for sale of the invention of the '346 patent. These include Defendants' request for leave to take discovery from other sources if IBM claims that it no longer has documents relating to offers for sale, or their request that the trial be postponed if the additional discovery processes granted to them cannot be completed prior to the filing of dispositive motions. (D.I. 272 at 2; D.I. 283 at 2) These requests are either premature or not warranted at this time. Should Defendants feel there is a basis to renew these requests following their having obtained the above-permitted discovery, they may do so at that time.

         6. With regard to Defendants' request with respect to United States Patent No. 5, 961, 601 (the '"601 patent"), for leave to assert four new invalidity theories that they did not reference in their preliminary election of prior art, (D.I. 272 at 2-3), the Court GRANTS-IN-PART that request. The Court agrees with Plaintiffs that this is a request to modify the Scheduling Order pursuant to Federal Rule of Civil Procedure 16(b), (see D.I. 275 at 3), for which Defendants must make a showing of good cause.[6] See Paoli v. Stetser, Civil Action No. 12-66-GMS-CJB, 2013 WL 2154393, at *2 (D. Del. May 16, 2013); Venetec Int'l, Inc. v. Nexus Med, LLC, 541 F.Supp.2d 612, 618 (D. Del. 2008). Whether Rule 16(b)'s good cause requirement is met depends on the diligence of the party seeking modification, rather than on prejudice to the non-moving party. Paoli, 2013 WL 2154393, at *2; Venetec Int'l, Inc., 541 F.Supp.2d at 618.

         7. Defendants focused their argument in their briefs almost exclusively on one of their new invalidity theories: their request to narrow a previously-asserted obviousness theory based on the prior art reference "HTML and CGI Unleashed" ("Unleashed") and another reference ("Danish"), to an anticipatory theory based on Unleashed alone. (D.I. 276 at 2) Defendants argue that good cause exists for this modification because IBM's Preliminary Infringement Contentions did not focus on certain limitations (the "identifying" limitation and the "recursively embedding" limitation) of the claims of the '601 patent, and that only as the case progressed were Defendants able to piece together IBM's infringement theory as to these claim limitations (based on IBM's discovery requests, IBM's claim construction positions, and IBM's discovery responses). (D.I. 283 at 2; Tr. at 39-41) This led to Defendants' decision to elevate Unleashed to an anticipatory reference, one that Defendants claim "mirror[s] IBM's apparent theory." (D.I. 283 at 2; see also Tr. at 39-41) In other words, Defendants suggest that if IBM's Preliminary Infringement Contentions had been clearer as to the infringement position IBM was taking with respect to these limitations, then Defendants would have been able to earlier assert an invalidity theory based on "Unleashed" alone.

         8. The Court agrees that Defendants have established good cause to be permitted to press a theory of anticipation based solely on the Unleashed reference. In doing so, the Court agrees with Defendants that Plaintiffs initial contentions were vague as to how the above-referenced limitations were met by the Accused Instrumentalities, (D.I. 283, ex. 10 at 8-11), and were only meaningfully fleshed out later during the Markman process, (see, e.g., D.I. 199 at 135-40), and thereafter. In turn, the Court can understand why Defendants, though diligent, would not have earlier been in a position to identify this particular prior art theory as potentially sufficient to render the relevant claims invalid. (D.I. 283 at 2)

         9. Furthermore, although prejudice is not a factor explicitly considered in the "good cause" analysis, it is still worth noting that the Court's decision here should not prejudice IBM.[7] For one, it is not as if Defendants seek to modify their election of prior art to add Unleashed as an entirely newly-disclosed reference-rather, the reference has been known to IBM for some time. On June 8, 2016, for example, Defendants disclosed Unleashed in their Preliminary Election of Asserted Prior Art, (D.I. 271, ex. 3 at 26), and on July 29, 2016, Defendants served their Third Supplemental Preliminary Invalidity Contentions in which they provided an anticipatory mapping of Unleashed, (D.I. 283, ex. 14).[8] On September 27, 2016, Defendants notified IBM that they wished to promote Unleashed to an anticipatory reference (providing a corresponding chart), (D.I. 272, ex. 6), and on October 25, 2016, IBM supplemented its interrogatory answers, in order to detail its view as to why Unleashed does not, inter alia, anticipate the '601 patent, (D.I. 276, ex. 1 at 152-54). Moreover, the only specific example of prejudice that IBM points to is that Defendants are now relying on Unleashed's source code as a central part of their theory, and "IBM can no longer take discovery as to how that source code functioned at the time of the invention or whether it was in fact available back in 1996." (D.I. 275 at 3) But Defendants' production in July 2016 directed IBM to pages of the Unleashed textbook that "disclose [] specific CGI program code to run on a server and perform functions[.]" (D.I. 283, ex. 14 at 7; see also Id. at 10-11, 13) And so it is not clear on this record why, prior to the October 25, 2016 discovery deadline, IBM was unable to take any discovery with respect to at least those portions of the source code referenced in the textbook. Nor is it clear why IBM waited until six weeks after it was served with the Unleashed anticipatory theory to object, (D.I. 272 at 3; D.I. 276 at 2); had it done so earlier, perhaps there could have been room to adjust the schedule to allow for whatever discovery it needed with respect to this portion of the source code.

         10. There is one aspect of Defendants' anticipatory theory with respect to Unleashed, however, that may be problematic. IBM asserts that "Defendants produced a source code that allegedly was related to the 'Unleashed' reference on November 15, 2016, weeks after the close of discovery" and that "Defendants' expert is relying heavily on that untimely produced source code." (D.I. 271 at 3); see also Fed. R. Civ. P. 16(f)(1)(C). The parties dispute whether the content of this disclosure merely reflects "an electronic reproduction of what is printed on the cited pages" of the Unleashed reference, as Defendants contend, (D.I. 276 at 3; see also Tr. at 43-44), or whether "the source code Defendants produced contains more than the text in the previously produced text book[, ]" as IBM argues, (IBM's Discovery Dispute Hearing Slides at 2; Tr. at 49, 55; see also D.I. 284 at 3). If what was produced amounts solely to the former, then Defendants may rely on it at trial; if what was produced (or some portion of it) amounts to the latter, then even Defendants are not suggesting that they should be permitted to later rely on it. The Court does not have enough information on this record to assess which party is right. Accordingly, by no later than January 20, 2017, the parties shall provide a joint letter of no more than four (4) single-spaced pages, in which: (1) IBM shall set out its view as to what content, if any, contained on the late-produced Unleashed source code CD goes beyond what is printed in the textbook; and (2) Defendants shall set out their response to the contrary. And aside from the narrow issue of whether Defendants' modified prior art theory may include reference to certain source code content on this CD, the Court GRANTS Defendants' request to modify their election of prior art with respect to the '601 patent to rely on Unleashed as an anticipatory reference, but DENIES the request as to the other three theories at issue.[9] Defendants should, by no later than January 20, 2017, serve on Plaintiff a revised final election of prior art that identifies no more than seven prior art theories for this patent and that, with the exception of the permitted inclusion of the Unleashed anticipation theory, lists only theories earlier disclosed in their preliminary election of prior art.[10]

         11. With regard to Defendants' request for a court order compelling IBM to produce a comprehensive privilege log, (D.I. 272 at 3-4), and with regard to IBM's request for a court order compelling Defendants to produce a privilege log of documents that were withheld or redacted on grounds of privilege relating to any analysis performed by or for Defendant priceline.com LLC concerning infringement, validity, or enforceability of the patents-in-suit, (D.I. 271 at 1-2), the Court declines to decide the matter at this time. Instead, in light of the parties' willingness to further discuss whether they could reach agreement on the exchange of privilege logs on targeted subject matters, (Tr. at 64-65, 70-71; D.I. 283 at 2-3), the Court ORDERS that by no later than January 20, 2017, the parties shall: (1) further meet and confer to see if they can resolve the issue, if they have not already done so; and (2) submit a ...


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