Appeals from the United States District Court for the Central District of California in Case No. 07-CV-0883, Judge Virginia A. Phillips.
The opinion of the court was delivered by: Lourie, Circuit Judge.
Before NEWMAN, LOURIE, and BRYSON, Circuit Judges.
Opinion for the court filed by Circuit Judge LOURIE.
Dissenting opinion filed by Circuit Judge NEWMAN.
Tokai Corp., Scripto-Tokai, Inc., and Calico Brands, Inc., (collectively, "Tokai") appeal from the decision of the United States District Court for the Central District of California granting a motion for summary judgment of invalidity for obviousness of U.S. Patents 5,697,775 (the "'775 patent"); 5,897,308 (the "'308 patent"); and 6,093,017 (the "'017 patent"). Tokai Corp. v. Easton Enters. Inc., No. 5:07-cv-00883 (C.D. Cal. Oct. 27, 2009) ("SJ Order"). Easton Enterprises, Inc. (d.b.a. Easton Sales) and Fun Line Industries, Inc. (collectively, "Easton") cross-appeal from the court's claim construction order, Tokai Corp. v. Easton Enters. Inc., No. EDCV 07-883-VAP, 2009 WL 1582924 (C.D. Cal. June 2, 2009), and the court's order granting Tokai's motion to strike Easton's supplemental invalidity contentions, Tokai Corp. v. Easton Enters. Inc., EDCV 07-00883-VAP, 2009 WL 2047845 (C.D. Cal. July 8, 2009). Because the district court correctly granted summary judgment of invalidity, we affirm. As a result, we need not decide Easton's cross-appeal.
Tokai owns the asserted patents, which relate to safety utility lighters having extended lighting rods (useful for lighting barbecue grills, for example). The asserted patents share a priority date of August 15, 1995.*fn1 The claims of the asserted patents are directed to utility lighters with automatic child-safety mechanisms for preventing accidental ignition. Tokai competes with Easton in the market for safety utility lighters. Tokai asserts that it has sold more than 100 million safety utility lighters in the United States under one or more of its asserted patents. SJ Order, slip op. at 37. Tokai also contends that Easton has sold more than nine million such lighters.
In July 2007, Tokai sued Easton in the District Court for the Central District of California for infringing the asserted patents. Easton counterclaimed for invalidity. At issue are claim 1 of the '775 patent; claims 1, 10, and 13 of the '308 patent; and claims 1, 3, and 4 of the '017 patent.
The parties agree that the asserted claims substantially overlap. Each of the asserted independent claims describes a "lighting rod" (i.e., a utility lighter) having a particular "safety device." The differences among the asserted claims arise primarily in the safety-device portion of the claim. Claim 1 of the '775 patent exemplifies the asserted claims:
1. A safety device in a lighting rod, which lighting rod is provided with a rod-like top end portion and a main body, the rod-like top end portion being provided with a jetting nozzle for jetting out a gas, the main body being provided with:
ii) a valve mechanism for opening and closing a path, through which the gas is supplied from the gas tank to the jetting nozzle,
iii) a piezo-electric unit for generating a discharge voltage for lighting the gas, and
iv) an operation member, which is capable of sliding, which has an operating section, and which drives the valve mechanism and the piezoelectric unit in order to carry out a lighting operation, the operating section of the operating member being exposed to the exterior of the main body, the safety device comprising:
a) a locking member having an engagement section, which interferes with a portion of the operation member and thereby locks the lighting operation of the operation member, said locking member being capable of moving in a direction, that intersects with the direction along which the operation member moves, and
b) an urging member, which urges said locking member to a locking direction, said locking member being movable to a lock releasing position against the urging force of said urging member, wherein, with the locking member in the lock releasing position, the lighting operation is carried out by operating the operating section of the operation member, and said locking member automatically returns to the state of the locking as the operation member returns to its original position.
'775 patent col.24 l.59--col.25 l.28 (emphases added). As illustrated by the relevant portions of figures 8A and 8B of the '775 patent, the claimed utility lighter has a trigger ("operation member" 120) and a safety device, which comprises a "locking member" (125) and a spring ("urging member" 26). To operate the lighter, the user depresses the locking member against the force of the spring and pulls the trigger. When the user releases the locking member, the spring automatically returns the locking member to its initial position, where the trigger is blocked from inadvertent actuation.
In June 2009, the district court issued a claim construction order, after which Easton stipulated that its accused utility lighters infringe all but one of the asserted claims as construed by the court.*fn2 SJ Order, slip op. at 3.
In September 2009, Tokai moved for summary judgment on Easton's counterclaim of invalidity for obviousness, and Easton filed a cross-motion for summary judgment for obviousness of the asserted patents over four prior art references. In opposition to Easton's motion, Tokai submitted expert declarations from Dr. Jones (the "Jones declaration") and Mr. Sung (the "Sung declaration"). Easton objected to the declarations, and the district court sustained Easton's objection. SJ Order, slip op. at 6--7. The district court noted that Tokai failed to submit written reports from Jones and Sung during expert discovery and that, as a result, Easton was denied an opportunity to depose these witnesses on the subject matter of their expert declarations. The court thus declined to consider either declaration in resolving the parties' summary judgment motions.
On the issue of invalidity, the district court determined that there existed no genuine issue of material fact as to the obviousness of the asserted claims over the four prior art references asserted by Easton: U.S. Patents 5,326,256 ("Shike"); 5,199,865 ("Liang"); 5,090,893 ("Flo-riot"); and 4,832,596 ("Morris"). In doing so, the court applied the four-factor analysis for obviousness under 35 U.S.C. § 103, as set forth in Graham v. John Deere Co., 383 U.S. 1, 17--18 (1966). First, the court found no genuine issue of material fact regarding the scope and content of the asserted prior art references. SJ Order, slip op. at 18--22. Secondly, the court found no material dispute regarding the differences between the prior art and the claimed invention. Id. at 23--33. The court found that, with the exception of a single aspect of claims 10 and 13 of the '308 patent (discussed further infra), each element of the asserted claims was disclosed in the asserted prior art. Id. at 23. Third, with regard to the level of skill in the art, the district court noted that the parties disagreed sharply. The court determined, however, that the dispute was immaterial, as the court's conclusion on obviousness was the same under either party's asserted level of skill. Id. at 36. Finally, the court evaluated Tokai's alleged objective indicia of nonobviousness. Tokai asserted that its commercial success supported patentability, but the court found no nexus between the sales data and the merits of the invention beyond what was available in the prior art. Id. at 38--39. The court also found unpersuasive Tokai's asserted evidence that Easton copied the claimed inventions. Id. at 40. Based on its analysis of the Graham factors, the district court concluded that the asserted claims would have been obvious to one of ordinary skill in the art as of the priority date of the asserted patents and entered final judgment on October 23, 2009.
Tokai timely appealed from the district court's exclusion of its expert declarations and from the district court's grant of summary judgment of invalidity of the asserted claims. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
A. The District Court Did Not Abuse Its Discretion by
Excluding the Expert Evidence
We review a district court's decision to exclude evidence under the law of the regional circuit. Del. Valley Floral Grp., Inc. v. Shaw Rose Nets, LLC, 597 F.3d 1374, 1379 (Fed. Cir. 2010). The Ninth Circuit, the pertinent regional circuit in this case, reviews a district court's decision to exclude evidence on summary judgment for abuse of discretion. Wong v. Regents of Univ. of Cal., 410 F.3d 1052, 1060 (9th Cir. 2005).
Tokai argues that the district court abused its discretion by excluding the Jones and Sung declarations. With regard to the Sung declaration, Tokai argues that the court failed to find that Sung was exempt from the written report requirement of Federal Rule of Civil Procedure 26(a)(2)(B). Specifically, Tokai asserts on appeal that Rule 26(a)(2)(B) permits Sung, as an employee of Tokai, to offer an expert declaration without an accompanying written report. Tokai further argues that its failure to submit written expert reports for both Jones and Sung should be excused under Rule 37(c)(1), because Tokai was justified in not providing written reports to rebut Easton's expert testimony.
In response, Easton argues that the district court did not abuse its discretion by excluding the Jones and Sung declarations for failure to comply with the written report requirement of Rule 26(a)(2)(B). With respect to the Sung declaration, Easton argues that its exclusion was not an abuse of discretion, because there is no evidence in the record that Sung was an employee of Tokai. Easton also argues that the district court properly excluded the declarations under Rule 37(c)(1) because Tokai was not justified in failing to submit the written reports and because Easton was prejudiced by its inability to depose Jones and Sung on the subject matter of their declarations. Finally, Easton argues that the two declarations are wholly conclusory, and therefore their exclusion, even if an abuse of discretion, was harmless.
Under Rule 26(a)(2)(B), the disclosure of expert testimony must be accompanied by a written report prepared and signed by the expert witness "if the witness is one retained or specially employed to provide expert testimony in the case or one whose duties as the party's employee regularly involve giving expert testimony." Thus, Rule 26(a)(2)(B) contemplates an employee-expert exception to the written report requirement for "individuals who are employed by a party and whose duties do not regularly involve giving expert testimony." Torres v. City of Los Angeles, 548 F.3d 1197, 1214 (9th Cir. 2008).
Rule 37(c)(1) "gives teeth" to the written report requirement of Rule 26(a)(2)(B) by forbidding a party's use of improperly disclosed information at a trial, at a hearing, or on a motion, unless the party's failure to disclose is substantially justified or harmless. Yeti By Molly Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir. 2001). In reviewing the district court's decision to exclude the declarations, we are mindful to give "particularly wide latitude to the district court's discretion to issue sanctions under Rule 37(c)(1)." Id. ("Courts have upheld the use of the sanction even when a litigant's entire cause of action or defense has been precluded.").
With respect to Rule 26(a)(2)(B), Tokai failed to introduce evidence indicating that Sung qualified for the employee-expert exception. Tokai alleges that during the summary judgment hearing it informed the district court of Sung's status as a Tokai employee. The record indicates otherwise. Tokai's counsel stated only that Sung "has personal knowledge of the patents-in-suit because he has dealt with them," and that he "was not obligated to provide an expert report because he was one of ordinary skill in the art." J.A. 2255--56. These statements fail to assert, let alone prove, that Sung was a Tokai employee entitled to exemption from the written report requirement of Rule 26(a)(2)(B). Moreover, even if Sung were a Tokai employee, Tokai failed to introduce evidence indicating that his duties did not "regularly involve giving expert testimony." Rule 26(a)(2)(B). Thus, the district court did not abuse its discretion by declining to exempt Sung from the written report requirement of Rule 26(a)(2)(B).
Regarding Rule 37(c)(1), we agree with the district court that Tokai's failure to adhere to the requirements of Rule 26(a)(2)(B) was neither harmless nor substantially justified. Tokai does not argue that it lacked the time or ability to prepare and submit the required written reports. Before the close of expert discovery, Tokai acknowledged that it was "fully prepared . . . to confront the challenges to its patents presented by Easton's Preliminary Invalidity Contentions," which included all four asserted prior art references. Pl.'s Reply to Def.'s Opp. to Mot. to Strike Def.'s Supplemental Invalidity Contentions and to Exclude Prior Art References Thereto at 11, Tokai Corp. v. Easton Enters., Inc., No. 5:07-cv-00883 (C.D. Cal. June 29, 2009), Doc. No. 64. Yet Tokai made a tactical decision not to submit written reports from its experts. J.A. 2255--56. Tokai contends that there was no reason to submit the written reports, because the invalidity portions of Easton's expert report were "effectively gutted" by the court's exclusion of particular prior art references on which Easton's expert relied. Appellants' Opening Br. at 22. This assertion has no merit, however, as Easton relied on its expert report at summary judgment only to establish the appropriate level of skill in the art. SJ Order, slip op. at 6--7.
The written report requirement of Rule 26(a)(2)(A) provided reason enough for Tokai to submit the written reports, given that Tokai proffers no justification apart from its own subjective beliefs. We have previously cautioned litigants of the "pitfalls of playing fast and loose with rules of discovery":
Conclusory expert reports, eleventh hour disclosures, and attempts to proffer expert testimony without compliance with Rule 26 violate both the rules and principles of discovery, and the obligations lawyers have to the court. Exclusion and forfeiture are appropriate consequences to avoid repeated occurrences of such manipulation of the litigation process.
n.4 (Fed. Cir. 2008). In addition, Tokai's failure to submit the required written reports prejudiced Easton by preventing Easton from deposing Jones and Sung on the subject matter of their expert testimony. We thus hold that the district court did not ...