Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_06-cv-04538/USCOURTS-cand-3_06-cv-04538-9/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 35:271 Patent Infringement

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

MATSUSHITA ELECTRIC INDUSTRIAL

CO., LTD.,

Plaintiff,

 v.

CMC MAGNETICS CORPORATION,

HOTAN CORPORATION, and

KHYPERMEDIA CORPORATION,

Defendants. /

No. C 06-04538 WHA

ORDER DENYING PLAINTIFF’S

MOTION TO BIFURCATE TRIAL

AND FOR PHASED DISCOVERY,

AND VACATING HEARING 

INTRODUCTION

In this patent-infringement action, plaintiff moves to bifurcate trial and proceed with

phased discovery. Plaintiff proposes that defendants’ patent-misuse counterclaim and

affirmative defense based on standard-setting, patent-pooling, and licensing activities should be

severed from trial on the rest of the claims and defenses. Plaintiff also proposes to proceed with

a phased discovery schedule that would allow only limited discovery on defendants’ patentmisuse counterclaims and defenses. Plaintiff has shown that bifurcation may be desirable, but

plaintiff has not shown that it is necessary at this time. Accordingly, plaintiff’s motion to

bifurcate trial is DENIED without prejudice to renewing the motion at the final pretrial

conference. Plaintiff’s motion to proceed with phased discovery is DENIED. 

Case 3:06-cv-04538-WHA Document 95 Filed 01/29/07 Page 1 of 5
United States District Court

For the Northern District of California

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STATEMENT

On July 26, 2006, plaintiff Matsushita Electric Industrial Company, Ltd., filed this

action against defendants CMC Magnetics Corporation, Hotan Corporation, and Khypermedia

Corporation. Matsushita’s complaint alleged that defendants infringed three of its patents. The

first patent, United States Patent No. 4,847,132, was drawn to a protective layer applied to an

optical recording medium. Matsushita’s second patent, United States Patent No. 5,790,487, was

drawn to an optical recording medium and an optical information recording method. The third

patent, United States Patent Reissue No. 37,185, was drawn to the optical pickup head of an

information recording and reproducing apparatus. Each of the three patents was assigned to

Matsushita. The ’132 patent and the ’487 patents were allegedly part of the DVD 6C standard.

In their answer, defendants presented affirmative defenses of inequitable conduct and

patent misuse. They also asserted patent misuse counterclaims alleging Walker Process-type

sham litigation and antitrust-type counterclaims related to patent-pooling, standard-setting, and

licensing activities. Matsushita moved to dismiss the antitrust-type affirmative defenses and

counterclaims. Plaintiff’s motion was denied, but defendants were required to make a more

definite statement of those counterclaims and defenses. Defendants did so in their first

amended answer filed on November 29, 2006. Defendants alleged that Matsushita and the other

owners of patents in the DVD 6C standard colluded to eliminate competing standards in the

field (Amd. Ans. ¶ 52). The patent owners unnecessarily merged two competing DVD

standards (id. at ¶ 50). Pool members could then charge super-competitive prices for licenses

absent a competing standard. Defendants also alleged that Matsushita unlawfully expanded the

scope of its patents through these activities and through its licensing of the DVD 6C standard. 

Now, during the fact-discovery phase, plaintiff moves to bifurcate trial. Matsushita’s

patent-infringement claims and defendants’ invalidity, inequitable conduct, and Walker

Process-type patent misuse defenses and counterclaims would proceed first. A separate trial on

defendants’ patent misuse claims related to standard-setting, patent-pooling, and licensing

would be held later if necessary. Additionally, Matsushita moves to establish a phased

discovery plan. Discovery on defendants’ patent-pooling, standard-setting and licensing

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defenses and counterclaims would be limited to two narrow issues: whether or not the defenses

and claims are barred by laches, and whether or not Matsushita granted licenses on individual

patents. 

ANALYSIS

1. MOTION TO BIFURCATE TRIAL.

Under FRCP 42(b), courts have discretion to bifurcate trial in order to avoid prejudice,

to promote expedition and economy, or to further convenience. “One of the purposes of Rule

42(b) is to permit deferral of costly and possibly unnecessary discovery proceedings pending

resolution of potentially dispositive preliminary issues.” Ellingson Timber Co. v. Great N. Ry.

Co., 424 F.2d 497, 499 (9th Cir. 1970). “It is the interest of efficient judicial administration that

is to be controlling under the rule, rather than the wishes of the parties.” WRIGHT & MILLER,

Federal Practice and Procedure, § 2388 (2d ed. pocket part 2006). “With respect to both

discovery and trial,” the moving party has the “burden of proving that the bifurcation will

promote judicial economy and avoid inconvenience or prejudice to the parties.” 

Spectra-Physics Lasers, Inc. v. Uniphase Corp., 144 F.R.D. 99, 101 (N.D. Cal. 1992).

Matsushita argues that its proposal for bifurcating the antitrust counterclaims would

conserve resources and simplify the proceedings. Specifically, it argues that those claims would

involve different proof and facts. Matsushita also points out that if CMC prevails on its

invalidity or non-infringement arguments, a trial on the rest of the defenses and counterclaims

would be unnecessary. This is true. It is difficult to see, however, how Matsushita’s plan of

bifurcating only the antitrust-type counterclaims and defenses would be preferable to

bifurcating all inequitable conduct and patent-misuse claims and defenses at a later date. 

Matsushita also points out that keeping all these issues in a single trial might confuse the jury. 

It is too early to evaluate this idea. At all events, the risk of jury confusion must be weighed

with the risk of inconvenience to the jury caused by a multiplicity of proceedings. Overlap in

the evidence as between the two claims may militate in favor of one slightly longer trial rather

than two long trials. This is a tough judgment call that will be better informed after all

discovery is taken and the expert reports are disclosed. 

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Matsushita compares this action extensively to the facts of Matsushita Elec. Indus. Co.

v. Cinram Int’l., Inc., 299 F.Supp.2d 370 (D. Del. 2004). In that decision, Matsushita sued

Cinram for infringement of patents in the DVD 6C standard. Cinram asserted counterclaims

alleging that Matsushita and other DVD 6C pool members had cross-licenses with members of

another patent pool, the DVD 3C standard. These agreements, Cinram alleged, foreclosed

competition by raising the royalty rates on both standards. The court bifurcated trial separating

Cinram’s antitrust claims from Matsushita’s patent-infringement claims, and allowed discovery

to go forward on the limited issue of whether Matsushita granted licenses on the individual

patents. Here, defendants present similar allegations regarding licensing practices, but they also

allege the DVD 6C pool foreclosed competition by wiping out competing technology. This is

different sort of anticompetitive conduct that may or may not relate to Matsushita’s licensing

practices because defendants have alleged theories that do not rest on tying. They alleged that

anticompetitive conduct raised the price on all essential patents because there was no competing

standard. Furthermore, defendants are only inquiring into the formation of one standard where

Matsushita was intimately involved in the standard’s creation. Matsushita’s attempt to

shoehorn this action into the Cinram mold does not quite hold up. 

Plaintiff also argues that under the Cinram decision, the issue of whether Matsushita

granted licenses on individual patents will be dispositive. Matsushita again neglects that

defendants are proceeding under antitrust theories other than packaged or tied licenses. 

Because of that, it is not as clear that this will dispose of the counterclaim as it was in Cinram. 

It is also difficult to see how an inquiry into Matsushita’s laches defense would dispose so

quickly of all other issues involved in this action. Both parties would still have to inquire into

the formation of the DVD 6C standard. Both would have to conduct discovery into defendants’

involvement and contact with the DVD forum. The Cinram decision is instructive from a casemanagement standpoint, but it is not binding. 

This case is still at a relatively early stage. Parties have another five months of fact

discovery ahead of them and trial is set for November of this year. Trial bifurcation at this stage

of the proceedings is premature. Indeed, parties admit that they have taken only a few

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depositions to date. Matsushita presents good arguments in favor of bifurcation, but they are

simply not sufficient at this time to bifurcate trial along the lines it proposes. Bifurcation at this

stage would foreclose the possibility of trying the issues at the same time. In the alternative,

some other plan for bifurcating might prove more advantageous later in the proceedings. 

Accordingly, Matsushita’s motion to bifurcate trial is DENIED without prejudice to being

reassessed at the final pretrial conference. 

2. PHASED DISCOVERY.

Additionally, Matsushita asks that the Court restrict discovery on Matsushita’s

counterclaims to two “threshold” issues: (1) whether the DVD 6C pool granted individual

licenses; and (2) whether CMC’s counterclaim is barred by laches. Because this order declines

to bifurcate trial, it will also decline to phase discovery. To do otherwise would foreclose the

option of a single trial later. Accordingly, Matsushita’s motion for phased discovery is DENIED.

CONCLUSION

For all the above-stated reasons, plaintiff’s motion to bifurcate trial is DENIED without 

prejudice to being renewed at the final pretrial conference. Plaintiff’s motion for phased

discovery is DENIED. Seeing that no further argument is necessary, the hearing on this matter is

hereby VACATED.

IT IS SO ORDERED.

Dated: January 29, 2007 WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

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