Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_03-cv-01431/USCOURTS-cand-4_03-cv-01431-23/pdf.json

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

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1 [PROPOSED] ORDER DENYING BAXTER'S MOTION

IN LIMINE NO. 4 PRECLUDING EVID. AND ARG. RE

PATIENT DEATHS AND PRODUCT RECALLSS

Case No. C 03-01431 SBA (EDL)

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Juanita R. Brooks, SBN 75934, brooks@fr.com

Todd G. Miller, SBN 163200, miller@fr.com

Fish & Richardson P.C. 

12390 El Camino Real 

San Diego, CA 92130 

Telephone: (858) 678-5070 

Facsimile: (858) 678-5099 

Mathias W. Samuel, pro hac vice, samuel@fr.com

Thomas S. McClenahan, SBN 203204, mcclenahan@fr.com

Fish & Richardson P.C. 

60 South Sixth Street, Suite 3300 

Minneapolis, MN 55402 

Telephone: (612) 335-5070 

Facsimile: (612) 288-9696 

Limin Zheng, SBN 226875, zheng@fr.com

S. Kameron Parvin, SBN 232349, parvin@fr.com 

Fish & Richardson P.C. 

500 Arguello Street, Suite 500 

Redwood City, CA 94053 

Telephone: (650) 839-5070 

Facsimile: (650) 839-5071 

Attorneys for Plaintiffs/Counterclaim Defendants 

Fresenius Medical Care Holdings, Inc. and Fresenius USA, Inc. 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

OAKLAND DIVISION 

FRESENIUS MEDICAL CARE HOLDINGS, 

INC., a New York corporation; and FRESENIUS 

USA, INC., a Massachusetts corporation, 

 Plaintiffs and Counterdefendants,

v. 

BAXTER INTERNATIONAL, INC., a 

Delaware corporation; and BAXTER 

HEALTHCARE CORPORATION, a 

Delaware corporation, 

 Defendants and Counterclaimants.

Case No. C 03-01431 SBA (EDL) 

ORDER DENYING BAXTER'S MOTION 

IN LIMINE NO. 4 PRECLUDING 

EVIDENCE AND ARGUMENT 

REGARDING PATENT DEATHS AND 

PRODUCT RECALLS 

 

Case 4:03-cv-01431-PJH Document 737 Filed 06/12/06 Page 1 of 7
2 [PROPOSED] ORDER DENYING BAXTER'S MOTION

IN LIMINE NO. 4 PRECLUDING EVID. AND ARG. RE

PATIENT DEATHS AND PRODUCT RECALLSS

Case No. C 03-01431 SBA (EDL)

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This matter comes before the Court on Baxter’s Motion in Limine No. 4 to preclude 

evidence and argument regarding patient deaths and product recalls. Having considered the 

submissions and arguments of the parties, and the applicable facts and law, the Court hereby 

DENIES Baxter’s Motion. 

The “patient death and product recall” evidence Baxter seeks to preclude includes 

numerous recalls of both hemodialysis machines, including System 1000, and disposables and 

other components, including dialyzers and bloodlines.1 This evidence is relevant to both the 

calculation of a reasonable royalty and the validity of the patents-in-suit, especially in view of 

Baxter’s heavy reliance on Fresenius’s commercial success in the market. 

With respect to evidence of machine recalls, Baxter offers no argument as to why this 

evidence should be precluded. Fresenius contends that this evidence is highly relevant to the 

calculation of a reasonable royalty under the Georgia Pacific framework. The Court agrees. 

First, commercial success of the product allegedly made under the patented technology is 

one of the important factors to be considered in determining a reasonable royalty. Georgia-Pacific 

Corp. v. U.S. Plywood Co., 318 F. Supp. 1116, 1120 (D.C.N.Y. 1970) (“8. The established 

profitability of the product made under the patent; its commercial success; and its current 

popularity.”). In this case, Baxter argues that Fresenius’s commercial success with its 

hemodialysis products was due to the incorporation of a touch screen in the 2008K machines and 

therefore would lead to a higher royalty rate in the hypothetical negotiation. Fresenius counters 

that evidence of Baxter’s repeated recalls demonstrates otherwise. Fresenius argues that the 

multiple recalls have severely affected Baxter’s reputation in the marketplace and has contributed 

significantly to Fresenius’s commercial success with its hemodialysis products, including the 

2008K machines. Evidence of machine recalls tends to show that Fresenius’s success in selling its 

2008K machines was due to factors such as perceived differential in hemodialysis product quality 

between Baxter and Fresenius, rather than the patented technology. 

 

1

 While Baxter phrased the evidence at issue as evidence regarding “patient deaths and product 

recalls,” the patient death evidence is tangential to the recall evidence. 

Case 4:03-cv-01431-PJH Document 737 Filed 06/12/06 Page 2 of 7
3 [PROPOSED] ORDER DENYING BAXTER'S MOTION

IN LIMINE NO. 4 PRECLUDING EVID. AND ARG. RE

PATIENT DEATHS AND PRODUCT RECALLSS

Case No. C 03-01431 SBA (EDL)

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Second, a key part of the reasonable royalty determination under Georgia Pacific is 

whether the accused infringer had acceptable non-infringing alternatives available to it at the time 

of the hypothetical negotiation. Id. at 1120 (“9. The utility and advantages of the patent property 

over the old modes or devices, if any, that had been used for working out similar results.”). In this 

case, Fresenius contends that its 2008H hemodialysis machine — which did not use a touch screen 

— was such an alternative, and that had Althin or Baxter demanded an excessive royalty, 

Fresenius would have continued selling the 2008H machine. Baxter argues, however, that the 

2008H machine was not an acceptable alternative because it lacked a touch screen. To rebut this 

argument, Fresenius contends that if Fresenius could not sell the 2008K machines, customers 

facing the choice between the safe, reliable 2008H machines and the less than reliable 

Althin/Baxter machines would have chosen the 2008H machines, notwithstanding its lack of a 

touch screen. To determine whether the 2008H machine is an acceptable non-infringing 

alternative as Fresenius claims, the jury needs to be presented with a complete and accurate view 

of the marketplace. Evidence of recalls of Baxter’s hemodialysis products forms part of the 

market reality that should be considered by the jury.2

Third, evidence of product recalls is relevant to the terms of the hypothetical license. Id. at 

1120 (“7. The duration of the patent and the term of the license.”). License agreements have 

historically included provisions for adjusting royalty rates. Quality control problems of a 

competitor-licensor is likely to lead the licensee to re-negotiate for a lower royalty rate over the 

term of the hypothetical license. 

 

2

 Relatedly, Baxter bases its over $80 million royalty damages claim on the theory that if 

Fresenius could not add a touch screen to its machines, it would suffer severe market contraction 

and lost sales; and to avoid this loss of sales, Fresenius would have paid a very high royalty. 

Baxter’s theory assumes that without a touch screen product, Fresenius would lose sales to 

Althin/Baxter’s products with a touch screen. Fresenius argues, however, even without a touch 

screen product, it would not have suffered any meaningful market contraction because customers 

would have preferred the proven reliability of Fresenius’s machines — even without a touch 

screen — to the Althin/Baxter products. Again, to resolve the dispute, the jury needs to be 

presented with a full and accurate view of the marketplace. 

Case 4:03-cv-01431-PJH Document 737 Filed 06/12/06 Page 3 of 7
4 [PROPOSED] ORDER DENYING BAXTER'S MOTION

IN LIMINE NO. 4 PRECLUDING EVID. AND ARG. RE

PATIENT DEATHS AND PRODUCT RECALLSS

Case No. C 03-01431 SBA (EDL)

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Fourth, evidence of product recalls is also relevant to the determination of the commercial 

relationship between Fresenius and Althin, Baxter’s predecessor, or Baxter, which is another 

factor to be considered in calculating a reasonable royalty. Id. at 1120 (“5. The commercial 

relationship between the licensor and licensee, such as, whether they are competitors in the same 

territory in the same line of business; or whether they are inventor and promoter.”). The quality 

problems Baxter faced were largely inherited from its predecessor Althin. Evidence of recalls 

tends to show that customers view Fresenius’s machines as superior than Althin’s or Baxter’s 

machines. In such a case, the degree to which Althin’s or Baxter’s and Fresenius’ machines (and 

disposables) compete is reduced, which in turn would tend to reduce the royalty rate in the 

hypothetical negotiation. 

Moreover, Baxter has relied heavily on Fresenius’s commercial success as “secondary 

considerations” evidence in countering Fresenius’s invalidity contention based on obviousness. 

“For objective evidence to be accorded substantial weight, its proponent must establish a nexus 

between the evidence and the merits of the claimed invention.” In re GPAC, Inc., 57 F.3d 1573, 

1580 (Fed. Cir. 1995). Evidence of recalls is relevant to a determination of whether there is the 

requisite nexus between Fresenius’s commercial success and the patented technology. In the 

hemodialysis market, sales for products are primarily driven by factors such as vendors’ 

reputations for quality, service, machine reliability. [Kelleher Decl. (Dkt. No. 447), Ex. 1, at 

¶¶ 19, 137-138, 141-142 & n.84.] Evidence of product recalls tends to show that Fresenius’s 

commercial success in the market was due to its reputation in product quality and reliability, rather 

than the patented technology, which in turn will support a finding that there is a lack of the 

requisite nexus between Baxter’s alleged secondary considerations evidence and the merits of the 

claimed invention. 

With respect to the evidence of recalls of dialyzers and bloodlines, Baxter argues that such 

evidence should be excluded because these products are “not even at issue.” However, it is 

Baxter, not Fresenius, who has chosen to make these products an issue. Baxter’s damages claim is 

based in part on Fresenius’s sales of unpatented “disposables, spare parts, and service,” including 

Case 4:03-cv-01431-PJH Document 737 Filed 06/12/06 Page 4 of 7
5 [PROPOSED] ORDER DENYING BAXTER'S MOTION

IN LIMINE NO. 4 PRECLUDING EVID. AND ARG. RE

PATIENT DEATHS AND PRODUCT RECALLSS

Case No. C 03-01431 SBA (EDL)

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dialyzers, under the theory that Fresenius was able to sell these products as “convoyed” products 

along with the accused machines. Fresenius contends that customers purchased its dialyzers 

because of their superior quality, not because the customers may also have purchased a 2008K 

machine at some point in time. Evidence of recalls of Althin/Baxter’s disposables and other 

hemodialysis components tends to show that customers were seeking out Fresenius’s products 

based on the fact that they were superior to the competition, not because Fresenius introduced a 

machine with a touch screen, and thus is relevant to the calculation of damages. 

“All relevant evidence is admissible, except as otherwise provided by the Constitution of 

the United States, by Act of Congress, by these rules, or by other rules prescribed by the Supreme 

Court pursuant to statutory authority.” Fed. R. Evid. 402. Baxter invokes Federal Rule of 

Evidence 403 as a reason to exclude this evidence, claiming that the evidence will be prejudicial to 

Baxter and confusing to the jury. The Court, however, finds that Federal Rule of Evidence 403 

does not warrant the preclusion of the evidence. 

With respect to the evidence of machine recalls, Baxter does not, and cannot make any 

argument as to why the relevant evidence should nonetheless be excluded. Baxter bases its 

prejudice claim largely on the allegedly “inflammatory” patient death evidence. This argument 

does not apply to evidence of machine recalls because none of the machine recalls involved 

patient deaths. 

With respect to the evidence of recalls of dialyzers and bloodlines, the probative value of 

the evidence substantially outweighs any marginal prejudice to Baxter or supposed danger of jury 

confusion. 

Baxter’s reliance on products liability cases is misplaced. In the cases relied on by Baxter, 

before reaching the conclusion that the probative value of the recall evidence was substantially 

outweighed by the Rule 403 dangers, the courts first found that the recalls arising out of unrelated 

defects had no relevance to the products liability claims at issue. Olson v. Ford Motor Company, 

410 F. Supp. 2d 869, 873-74 (D.N.D. 2006); Verzwyvelt v. St. Paul Fire & Marine Insurance 

Company, 175 F. Supp. 2d 881, 888 (W.D. La. 2001). To the contrary, in the present case, as 

Case 4:03-cv-01431-PJH Document 737 Filed 06/12/06 Page 5 of 7
6 [PROPOSED] ORDER DENYING BAXTER'S MOTION

IN LIMINE NO. 4 PRECLUDING EVID. AND ARG. RE

PATIENT DEATHS AND PRODUCT RECALLSS

Case No. C 03-01431 SBA (EDL)

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discussed above, evidence of repeated recalls of Baxter’s products are highly relevant to both the 

validity of the patents-in-suit and the computation of a reasonable royalty should Fresenius be 

found to have infringed any valid and enforceable claim of the patents-in-suit. 

Moreover, the likelihood of unfair prejudice and jury confusion existed in Olson and 

Verzwyvelt is absent in this case. In products liability cases, because of the likelihood for spillover 

between recalls and inference of fault, there is a real danger that unfair prejudice and jury 

confusion will arise if the plaintiff is permitted to parade before the jury evidence of a product 

recall of a different product. See Verzwyvelt, 175 F. Supp. 2d at 888-89. However, in this patent 

case, such danger does not exist. Even if there is any likelihood for spillover between recalls and 

inference of fault, Baxter’s liability is not at issue and thus will not be prejudiced. In addition, 

prejudice is unlikely to arise in this case because both Baxter and Fresenius are commercial 

entities. Posttape Associates v. Eastman Kodak Co., 537 F.2d 751, 758 (3d Cir. 1976) (“It is 

doubtful that there would be any prejudice because the parties were both commercial entities[.]”). 

As noted by the court in United States v. Bainbridge Management, L.P., Case Nos. 01 CR 

469-1, 01 CR 469-6, 2002 WL 31006135, at *1 (N.D. Ill. Sept. 5, 2002), a case relied on by 

Baxter, evidence is excluded on a motion in limine “only if the evidence is clearly inadmissible for 

any purpose.”3

 “In weighing the probative value of evidence against the dangers and 

considerations enumerated in Rule 403, the general rule is that the balance should be struck in 

favor of admission.” United States v. Dennis, 625 F.2d 782, 797 (8th Cir.1980); see also United 

States v. Dodds, 347 F.3d 893, 897 (11th Cir. 2003) (noting that Rule 403 is “an extraordinary 

remedy which the district court should invoke sparingly, and [t]he balance . . . should be struck in 

 

3

 Bainbridge is also distinguishable from the present case in that the evidence excluded in 

Bainbridge had no probative value. In Bainbridge, the defendants were indicted with mail and 

wire fraud, health care fraud, and racketeering charges. The crux of the indictment involved a 

kickback and bribery scheme. Physicians allegedly used unnecessary medical procedures to 

generate fees and obtain funds from Medicare, Medicaid, and private insurers. In excluding the 

evidence of the death of two patients, allegedly the results of two such unnecessary procedures, 

the court found that the evidence was not probative of either the necessity of the medical 

procedures performed or the elements of wire and mail fraud, racketeering, or health care fraud. 

Bainbridge, 2002 WL 31006135, at *2. 

Case 4:03-cv-01431-PJH Document 737 Filed 06/12/06 Page 6 of 7
7 [PROPOSED] ORDER DENYING BAXTER'S MOTION

IN LIMINE NO. 4 PRECLUDING EVID. AND ARG. RE

PATIENT DEATHS AND PRODUCT RECALLSS

Case No. C 03-01431 SBA (EDL)

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favor of admissibility”). Even in the context of products liability actions, where recall evidence is 

relevant to a central issue in a case, admission is warranted. See, e.g., Snodgrass v. Ford Motor 

Co., Case No. Civ 96-1814(JBS), 2002 WL 485688, at *3-*6 (D.N.J. March 28, 2002) (denying 

motion to preclude evidence of safety recall even though it was conceded that the evidence was 

prejudicial to Ford because the evidence was relevant to issues central to the case). 

In this case, evidence relating to the quality and reliability of Baxter’s hemodialysis 

products is highly relevant to both the calculation of a reasonable royalty and Baxter’s contention 

of secondary considerations. The prejudice to Baxter, if any, would be nominal, and in any event 

would not be “unfair.” See Snodgrass, 2002 WL 485688, at *5 (noting that exclusion under Rule 

403 requires that the prejudice be unfair). Introduction of the recall evidence “does not portend a 

foregone conclusion in [Fresenius’s] favor, nor does it suggest decision in [Fresenius’s] favor due 

to an emotionally-charged issue, such as gender-based derogatory comments in a sex 

discrimination case.” Id. Moreover, jury confusion is unlikely given that Baxter is not being sued 

for products liability of products unrelated to the recalls here. Any residual confusion can be 

cured by clear limiting instructions of the purposes for which the evidence may be considered. 

See id. at *6. Therefore, Rule 403 does not warrant preclusion of the relevant recall evidence in 

this case. 

For the foregoing reasons, the Court hereby DENIES Baxter’s Motion in Limine No. 4. 

IT IS SO ORDERED. 

Dated: 6-12-06 __________________________________________ 

 HON. SAUNDRA BROWN ARMSTRONG 

 UNITED STATES DISTRICT JUDGE 

 

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