Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_04-cv-00400/USCOURTS-azd-2_04-cv-00400-10/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 28:2201 Declaratory Judgment

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1Although Defendant Omron requests that this Court grant oral argument regarding its

Second Motion for Summary Judgment, the Court concludes that oral argument is unnecessary as

it would not sufficiently assist the Court in rendering its opinion.

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Hypercom Corporation, 

Plaintiff, 

vs.

Omron Corporation, 

Defendant. 

)

)

)

)

)

)

)

)

)

)

)

)

 No. CV 04-0400-PHX-PGR

 

 ORDER

Currently pending before the Court is Defendant Omron Corporation's ("Omron")

Second Motion for Summary Judgment (Doc. 136), and Plaintiff Hypercom Corporation's

("Hypercom") Motion to Strike Inadmissible Evidence and to Preclude Testimony of James

Dunlop (Doc. 146). The Court now rules on the motions.1

I. FACTUAL AND PROCEDURAL BACKGROUND 

Hypercom's causes of action in its Second Amended Complaint are based on the

alleged concerted action between Omron and Verve L.L.C. ("Verve") to assert patent

infringement claims against Hypercom (and other companies), without a good faith basis or

probable cause to do so, in order to extort large cash settlements. According to Hypercom,

Omron and Verve engaged in a harassment campaign against Hypercom and others by

Case 2:04-cv-00400-PGR Document 152 Filed 02/22/07 Page 1 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2Omron is a Japanese company that develops, markets and manufactures electronic and

sensory devices in the United States. Omron's patented technology includes electronic relays,

switches, timers and sensory devices, certain medical equipment, and onboard equipment for

automobiles. Verve is a patent holding company, and does not make or sell any products.

- 2 -

instituting costly, inconvenient, and groundless patent infringement suits for the sole purpose

of acquiring cash settlements from the alleged infringers.2

 Verve, allegedly with Omron's

assistance, filed lawsuits against Hypercom for patent infringement in Michigan, Texas,

California and with the International Trade Commission. The patents at issue in the

aforementioned lawsuits are U.S. Patent Nos. 4,678,895 ("the '895 Patent), 4,562,341 (the

'341 Patent), and 5,012,077 ("the '077 Patent). Hypercom's claims against Omron include

three counts: (1) civil conspiracy for abuse of process and malicious prosecution; (2)

malicious prosecution; and (3) aiding and abetting abuse of process and malicious

prosecution.

II. LEGAL STANDARD AND ANALYSIS

The standard for summary judgment is set forth in Rule 56(c) of the Federal Rules of

Civil Procedure. Under this rule, summary judgment is properly granted when, after viewing

the evidence in the light most favorable to the non-moving party, no genuine issues of

material fact remain for trial. Fed. R. Civ. P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-

23 (1986); Eisenberg v. Ins. Co. of N. Am., 815 F.2d 1285, 1288-89 (9th Cir. 1987).

The moving party bears the burden of demonstrating that it is entitled to summary

judgment. Mur-ray Mgmt. Corp. v. Founders Title Co., 819 P.2d 1003, 1005 (Ariz. Ct. App.

1991). If the moving party makes a prima facie case showing that no genuine issue of

material fact exists, the burden shifts to the opposing party to produce sufficient competent

evidence to show that a triable issue of fact does remain. Ancell v. United Station Assocs.,

Inc., 803 P.2d 450, 452 (Ariz. Ct. App. 1990). The Court must regard as true the non-moving

party's evidence, if it is supported by affidavits or other evidentiary material. Celotex, 477

U.S. at 324. However, the non-moving party may not merely rest on its pleadings, it must

produce some significant probative evidence tending to contradict the moving party's

Case 2:04-cv-00400-PGR Document 152 Filed 02/22/07 Page 2 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 3 -

allegations and thereby creating a material question of fact. Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 256-57(1986)(holding that the plaintiff must present affirmative evidence

in order to defeat a properly supported motion for summary judgment); First Nat'l Bank of

Ariz. v. Cities Serv. Co., 391 U.S. 253, 289 (1968).

A. Motion to Strike

As a preliminary matter, the Court will address Hypercom's Motion to Strike

Inadmissible Evidence and to Preclude Testimony of James Dunlop (Doc. 146). Pursuant

to Fed. R. Civ. P. 16 and 56, and Fed. R. of Evid. 403, 702 and 703, Hypercom moves the

Court to enter an order precluding Omron from (1) using the testimony of James Dunlop, (2)

using Mr. Dunlop's patent analysis report submitted as Exhibit 9 to Omron's Second Motion

for Summary Judgment, and (3) using Mr. Dunlop's movie. Hypercom argues that the

aforementioned evidence should be precluded because all are inadmissible under the

applicable rules. 

It is well settled that only admissible evidence may be considered by a trial court in

ruling on a motion for summary judgment. Beyene v. Coleman Sec. Services, 854 F.2d

1179, 1181 (9th Cir. 1988). For purposes of opposing a motion for summary judgment, the

Court's position is that it is sufficient for the parties to object to the evidence presented by

the moving party in their opposition briefs. A motion to strike is unnecessary at this point

in the litigation. The Court reminds the parties that issues regarding the admissibility of

evidence at trial are properly raised in a motion in limine. The parties are to refer to

Paragraph 7 of the governing Scheduling Order (Doc. 146) which states as follows: "Motions

in limine shall be filed no later than the date of the filing of the Joint Pretrial Statement.

Responses to motions in limine are due ten business days after service. No replies are

permitted. The hearing on the motions in limine, if one is permitted by the Court, will take

place at the time of the Pretrial Conference. No motion in limine shall be filed unless a

statement of moving counsel is attached thereto certifying that after personal consultation and

sincere efforts to do so, counsel have been unable to satisfactorily resolve the matter."

Case 2:04-cv-00400-PGR Document 152 Filed 02/22/07 Page 3 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3Raymond Galasso is the head of the intellectual property practice at the lawfirm of Simon,

Galasso & Frantz P.L.C., and the founder and 50% owner of Verve. Kevin Imes owns the remaining

50% of Verve and is a patent agent, registered to practice before the U.S. Patent and Trademark

Office. 

- 4 -

Therefore, Hypercom's Motion to Strike Inadmissible Evidence and to Preclude Testimony

of James Dunlop (Doc. 146) is DENIED without prejudice. 

B. Civil Conspiracy

Hypercom relies on a conspiracy theory to support its state law claims against Omron.

Under Arizona law, there is no civil action for conspiracy; however, "there is an action for

damages caused by acts committed pursuant to a conspiracy." Estate of Hernandez v. Flavio,

et al., 930 P.2d 1309, 1313 (Ariz. 1997). "For a civil conspiracy to occur two or more people

must agree to accomplish a lawful objective with unlawful means, causing damages." Wells

Fargo Bank v. Arizona Laborers, Teamsters, & Cement Masons Local No. 395 Pension Trust

Fund, 38 P.3d 12, 36 (Ariz.. 2002). In sum, "liability for civil conspiracy requires that two

or more individuals agree and thereupon accomplish an 'underlying tort which the alleged

conspirators agreed to commit.'" Id. In this case, Hypercom maintains that Omron was an

instigator for purposes of malicious prosecution, that Omron aided and abetted Verve's

commission of the torts of malicious prosecution and abuse of process, and that Omron aided

and abetted Raymond Galasso's3

 unreasonable and vexatious multiplication of proceedings

against Hypercom. Hypercom names malicious prosecution and aiding and abetting Verve's

commissions of malicious prosecution and abuses of process as the torts underlying the civil

conspiracy.

The Defendant relies on the deposition testimony of its designated representative,

executive director Tetsuyuki Nakano, to support its contention that Hypercom's civil

conspiracy claim must fail. Omron maintains that Nakano's testimony affirms the following:

(1) Omron did not participate in Verve's evaluation of potential infringement of the Omronassigned patents; (2) in accordance with its contractual right, Omron only affirmed that

Hypercom did not qualify as a business partner; and (3) Omron has not been involved, nor

Case 2:04-cv-00400-PGR Document 152 Filed 02/22/07 Page 4 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 5 -

does it intend to become involved, in Verve's prosecution of any claim against Hypercom,

including the administrative proceedings before the International Trade Commission ("ITC

Action"). Omron points to the following portions of Verve's principals', Raymond Galasso

and/ or Kevin Imes, deposition testimony to support its motion: (1) testimony that Verve,

rather than Omron, evaluated the Omron-assigned patents for potential infringement claims;

(2) testimony that Verve did not coordinate any aspect of the infringement lawsuits with

Omron; and (3) testimony that Verve did not routinely inform Omron of its progress in

prosecuting those suits. However, these facts remain disputed. 

Despite Omron's claims to the contrary, the record before the Court reveals that there

are genuine issues of material fact left for trial as to whether Omron engaged in a civil

conspiracy with Verve. First, pursuant to a written agreement, Omron assigned its patent

rights to Verve and was entitled to receive a substantial percentage of the revenue resulting

from the litigation. Second, Omron was aware of and consented to Verve's plan to sue

Hypercom. Third, Omron employees and attorneys provided substantial assistance to Verve

in preparation for the ITC proceeding, including traveling to Japan to prepare a potential

witness, and contacting a Japanese attorney to provide assistance to Verve. Fourth, Omron

insisted that Verve be the named party in the infringement lawsuits so that Omron would

have "zero risk." Simply put, the aforementioned evidence is sufficient to create a question

of material fact as to whether Omron and Verve conspired to commit tortious acts at

Hypercom's expense.

C. Underlying State Law Claims

1. Aiding and Abetting

In its Second Amended Complaint, Hypercom claims that Omron aided and abetted

both abuses of process and malicious prosecutions by Verve. In Arizona, "a person who aids

and abets a tortfeasor is himself liable for the resulting harm to a third person." Wells Fargo

Bank, 38 P.2d at 23. A claim of aiding and abetting tortious conduct is made where (1) the

primary tortfeasor commits a tort that causes injury to the plaintiff, (2) the defendant has at

least a general awareness of the primary tortfeasor's tortious conduct; and (3) the defendant

Case 2:04-cv-00400-PGR Document 152 Filed 02/22/07 Page 5 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4Omron contends that Hypercom has conceded to patent infringement because it failed to

sufficiently dispute the infringement alleged by Omron in its opposition brief and controverting

statement of facts. The Court finds Omron's contention without merit. A review of the record

before the Court reflects Hypercom's consistent denial of any patent infringement. 

- 6 -

substantially assists or encourages the primary tortfeasor in the achievement of the tort. Id.

at 23-26.

Omron moves for judgment to be entered in its favor regarding Hypercom's aiding and

abetting claim by arguing that Hypercom is unable to identify any evidence of intent and

cannot show that Omron substantially assisted with the commission of any tort. The Court,

however, finds that Omron's request for summary judgment on Hypercom's aiding and

abetting claim must be denied as genuine issues of material fact remain for trial. There is

evidence in this case that would allow a reasonable person to conclude that Omron knew that

Verve's patent infringement suits were baseless and then facilitated Verve's alleged wrongful

conduct.4

2. Malicious Prosecution 

Under Arizona law, a malicious prosecution claim exists where a defendant "(1)

instituted a civil action which was (2) motivated by malice, (3) begun without probable

cause, (4) terminated in the Plaintiff's favor and damaged the plaintiff." Bradshaw v. State

Farm Mut. Auto Ins., 758 P.2d 1313, 1319 (Ariz. 1988). Furthermore, in this state a

defendant may be held liable for malicious prosecution as an instigator of the wrongful civil

actions, even if the defendant was not a party to the civil actions that gave rise to the

malicious prosecution claim Id. Omron argues that it is entitled to summary judgment on

Hypercom's malicious prosecution claim because there is no evidence that Omron instigated

any civil proceeding against Hypercom. This Court disagrees. Genuine issues of material

fact remain regarding Plaintiff's malicious prosecution claim. 

D. Noerr-Pennington Immunity

Omron argues that it is entitled to judgment as a matter of law on Hypercom's state

law claims since Verve, and thus Omron, is entitled to immunity for maintaining civil suits

Case 2:04-cv-00400-PGR Document 152 Filed 02/22/07 Page 6 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 7 -

pursuant to the Noerr-Pennington Doctrine. The Court finds this argument without merit.

In the Ninth Circuit, a malicious prosecution claim may proceed as long as the Plaintiff can

demonstrate that the prior action was initiated without probable cause. Hydranautics v.

Filmtec Corp., 204 F.3d 880, 886 (9th Cir. 2000). Furthermore, the "objectively baseless"

standard as used in Noerr-Pennington immunity is equated with "lack of probable cause" as

a required element of a malicious prosecution claim. Id. Generally, the probable cause

element of malicious prosecution is conclusively established where the defendant in the

underlying action achieved a favorable result at the trial court, even if the trial court decision

is later reversed on appeal. Id. It is undisputed that the patent infringement suit filed by

Verve against Hypercom in the District of Arizona was concluded to be objectively baseless

by the Honorable Frederick J. Martone. See Verve L.L.C. v. Hypercom Corp., 2006 WL

2390505. As such, Noerr-Pennington immunity does not apply, and the Court rejects

Omron's arguments to the contrary. 

E. Preemption Based on Federal Patent Law

Omron contends that Hypercom's state law claims are preempted by federal law.

Specifically, Omron argues that Hypercom's state law claims based on bad faith misconduct

in the ITC proceeding are eliminated on preemption principles. To support its position,

Omron cites to the Federal Circuit case, Abbott Laboratories v. Brennan, 952 F.2d 1346

(Fed. Cir. 1992). Omron argues that the Abbott Laboratories case stands for the proposition

that federal patent law preempts common law torts which consist of nothing more than

misconduct in administrative patent proceedings. This Court, however, will apply the law

of the Ninth Circuit which is in direct opposition. According to this circuit, federal law does

not preempt Hypercom's state law claims. In U.S. Aluminum Corp. v. Alumax, Inc., 831

F.2d 878, 881 (9th Cir. 1987), the Ninth Circuit Court of Appeals recognized that although

conflict is possible between state malicious prosecution laws and federal patent laws, the

policies underlying each are not inherently antithetical. Patents do not create an exemption

from state malicious prosecution laws." See also Hydronnautics v. FilmTec Corp., 204 F.3d

880, 886 (9th Cir. 2000) (approving state law malicious prosecution claim arising from patent

Case 2:04-cv-00400-PGR Document 152 Filed 02/22/07 Page 7 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 8 -

infringement action). Accordingly, the Court concludes that Hypercom's state law claims are

not preempted by federal law; therefore, summary judgment in Omron's favor based on

preemption principles is denied. 

Therefore,

IT IS ORDERED that Omron's Second Motion for Summary Judgment (Doc. 136)

is DENIED, and Hypercom's Motion to Strike Inadmissible Evidence and to Preclude

Testimony of James Dunlop (Doc. 146) is DENIED without prejudice.

Due to the resolution of the dispositive motion, IT IS FURTHER ORDERED that

the parties file a Joint Pretrial Statement with the Court on or before March 22, 2007. The

parties are to refer to the Order Setting Scheduling Conference (Doc. 2) for the required Joint

Pretrial Statement format. The Pretrial Conference is scheduled for Monday, April 2, 2007

at 3:30 p.m. in Courtroom 601 before the Honorable Paul G. Rosenblatt. 

DATED this 22nd day of February, 2007.

Case 2:04-cv-00400-PGR Document 152 Filed 02/22/07 Page 8 of 8