1081 (Fed. Cir. 1989) (citation omitted). The exception only applies, however, when the second-
filed action would dispose of all claims in the first action. See Kahn v. General Motors Corp., 889
F.2d 1078, 1081-82 (Fed. Cir. 1989).

The Defendants assert that the rationale underlying the customer suit exception supports their
motion to stay this action against the Customer Defendants. The Defendants claim that Marimba
is the “true defendant” in this case, the resolution of Beck’s claims against Marimba will resolve all
claims against the Customer Defendants, and Beck can obtain full relief from Marimba in the event
that Beck prevails on its patent claims. Moreover, the Defendants argue, unlike in the customer suit
context, Beck will not be deprived of litigating this case in its chosen forum. The Defendants also
claim that judicial economy warrants the separation and stay because the inclusion of the Customer
Defendants in the case results in unnecessarily duplicative discovery requests; the case is likely to
settle; and the validity of Beck’s patents are in question.

The rationale behind the customer suit exception, however, does not assist the Defendants
here. The exception applies in patent cases where the movant has first shown that failing to separate
would be inconvenient or prejudicial, i.e., the manufacturer defendants are faced with defending two
lawsuits simultaneously in two different jurisdictions, or the manufacturers cannot join the customer
litigation. See, e.g., Whelen, 741 F. Supp. at 715; Tri-Tronics Co., Inc. v. MacGregor & Co., Inc.,
No. 90 C 0630, 1990 WL 114738, at *3-4 (N.D. IIL. July 25, 1990). When all parties are joined in
one simultaneous action, the same problems are not presented, and the rationale underlying the
customer suit exception does not apply. See Naxon Telesign Corp. v. GTE Info. Sys., Inc., 89 F.R.D.
333, 338-39 (N.D. Ill. 1980).

Even if the Court agrees that the Customers Defendants are not necessary to resolve the


to order a separation, a court must determine (1) whether separation would prevent prejudice to a
party or promote judicial economy; (2) whether separation would unfairly prejudice the non-movant;
and (3) whether ordering separate trials would violate the Seventh Amendment.? Houseman, 171
F.3d at 1121, The movant has the burden of proving that separation will serve judicial economy and
will not result in prejudice. Real, 195 F.R.D. at 620.

The Defendants argue that the customers are not necessary to the litigation or to any potential
recovery by Beck, and that requiring the Customer Defendants to be involved in the case does not
promote judicial economy. In support of their argument, the Defendants analogize this case to those
applying the “customer suit” exception to the first to file rule. See, e.g., Whelen Techs., Inc. v. Mill
Specialties, Inc., 741 F. Supp. 715, 715 (N.D. IIL. 1990). In certain patent cases, courts apply the
customer suit exception to the general rule that the first suit filed is given priority. Kahn v. General
Motors Corp., 889 F.2d 1078, 1081 (Fed. Cir. 1989). Under this exception, a suit filed against a
manufacturer’s customer or reseller may be stayed in favor of a later-filed action involving the
manufacturer of the allegedly infringing goods. Id.; see also Codex Corp. y. Milgo Elec. Corp., 553
F.2d 735, 738 (1st Cir. 1977) (recognizing a “rebuttable presumption” that a declaratory judgment
action brought in the manufacturer’s home forum “should take precedence over a mere customer
action in a jurisdiction in which the manufacturer could not be sued”).

The rationale behind the customer suit exception is that the manufacturer is presumed to have
a “greater interest in defending its actions against charges of patent infringement,” and therefore “the

manufacturer is the true defendant” in a patent case. Kahn y. General Motors Corp., 889 F.2d 1078,

*The relevant clause states: “[TJhe right of trial by jury shall be preserved, and no fact
tried by a jury, shall be otherwise reexamined in any Court of the United States, than according to
the rules of the common law.” U.S. Const. amend. VII.

3


litigation, and that Beck can get full relief from Marimba alone, that is not enough to grant to motion.
See Tri-Tronics, 1990 WL 114738, at *3-4. The issue is not whether the Customer Defendants can
be separated; the issue is whether, “in furtherance of convenience or to avoid prejudice,” those
defendants should be separated. This case does not involve particularly complex issues or a
multitude of defendants. See, e.g., Real, 195 F.R.D. at 622; Refac Int'l, Lid. v. IBM, 790 F.2d 79,
80 (Fed. Cir. 1986). Moreover, given that the same attorneys represent all four defendants, and that
the customers will be subject to third-party discovery requests even if separated, it is difficult for the
Court to conclude that a separate trial will promote judicial economy and convenience. Finally, the
Defendants’ claims that the case is likely to settle or that the Defendants will prevail are not relevant,
since neither outcome is certain.

Because the Defendants have failed to meet their burden of proving that separating the case
against the Customer Defendants would prevent prejudice or promote judicial economy, it is
unnecessary to discuss the other two factors described in Houseman, whether Beck would be unfairly
prejudiced by a separation or whether a separation would violate the Seventh Amendment.

CONCLUSION

The Defendants’ Motion Pursuant to F.R.C.P. 42(b) to Separate and Stay Action Against

Defendants the Bear Sterns Companies, Inc., Bear, Stearns & Co., Inc., and Verizon

Communications, Inc. is denied.


Minute Order Form (06/97)

United States District Court, Northern District of [linois

Name of Assigned Judge Ronald A. Guzman Sitting Judge if Other Nan R. Nolan
or Magistrate Judge _ than Assigned Judge .
CASE NUMBER 01 C5207 DATE 11/19/2001
CASE Beck Systems, Inc. vs. Marimba, Inc., et al.
TITLE
[In the following box (a) indicate the party filing the motion, ¢.g,, plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

MOTION: of the motion being presented |

DOCKET ENTRY:

qd) Oo Filed motion of { use listing in “Motion” box above.}

Qg oa Brief in support of motion due

3B) Oo Answer brief to motion due, . Reply to answer brief due, :

4 oO Ruling/Hearing on___ set for__—at__

6) O Status hearing[held/continued to] [set for/re-set for] on _setfor_ at

© Oo Pretrial conference[held/continued to] (set for/te-set for] on setfor____at.

(7) o Trial{set for/re-set forlon at

(3) #30 {BenchJury trial} [Hearing] hetd’continued to at

0) Oo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

QFRCP4(m) General Rule 21 OO FRCP4I(a)(1) OO FRCP41(a)(2).

7) | [Other docket entry] | Enter Memorandum Opinion and Order: Defendants’ Motion Pursuant to
F.R.C.P. 42(b) to Separate [34-1] and Stay [34-2] Action Against Defendants the Bear Stearns
Companies, Inc., Bear, Stearns & Co., Inc., and Verizon Communications, Inc. is denied. Status hearing
set for November 28, 2001 is reset to November 29, 2001 at 10:00 a.m.

dl) ff [For further detail see order attached to the original minute order.]

No notices required, advised in open court Document
S fC Number
No notices required. sumbef of noticgs.
SY | Notices maited by judze’s stat ~
Notiticd counsel by telephone. YON Ae el
Docketing to mail notices. ey /
Mail AO 450 form. ddcketidy deputy initiats
V_ | Copy to judge/magiswaeindee— a)
souttoom 7" bade de date eave
Ag deputy’s
initials
Date/time received in
central Clerk’s Office cvaing deputy initia



ENTER:

Yee Q Mate

Nan R. Nolan
United States Magistrate Judge

Lor 14, 200 |

Dated:


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION oul
BECK SYSTEMS, INC., )
)
Plaintiff, ) Case No. 01 C 5207
)
v. ) Judge Ronald A. Guzman
)
MARIMBA, INC., VERIZON ) Magistrate Judge Nan R. Nolan
COMMUNICATIONS, INC., THE BEAR )
STEARNS COMPANIES, INC., BEAR, )
STEARNS & CO., INC., )
)
Defendants. y

MEMORANDUM OPINION AND ORDER

This patent infringement action is before the Court on Defendants’ Motion Pursuant to
F.R.C.P. 42(b) to Separate and Stay Action Against Defendants the Bear Stearns Companies, Inc.,
Bear, Stearns & Co., Inc., and Verizon Communications, Inc. In their motion, the Defendants! claim
that separating three defendants from the case will enhance judicial economy and the convenience
of the parties, and that the Plaintiff, Beck Systems, Inc. (“Beck”), will not be prejudiced by a
separation and stay order. Beck argues that a separation is not warranted, and that it would result
in inefficient litigation and prejudice to Beck.

For the reasons explained below, Defendants’ Motion Pursuant to F.R.C.P. 42(b) to Separate
and Stay Action Against Defendants the Bear Stearns Companies, Inc., Bear, Stearns & Co., Inc.,

and Verizon Communications, Inc. is DENIED.

‘All four defendants join on the motion.


BACKGROUND

Beck’s Amended Complaint alleges infringement of two ofits patents relating to technology
that facilitates the management of networked computers. Specifically, Beck alleges that defendant
Marimba, Inc. (“Marimba”), manufactures and markets certain software products that contain Beck’s
patented technology. The Amended Complaint claims that Marimba (1) directly infringes Beck’s
patents by manufacturing, using, selling, and/or offering for sale the allegedly infringing products;
(2) induces others to infringe; and (3) contributes to the infringement of others. The other three
defendants, the Bear Stearns Companies, Inc., Bear, Stearns & Co., Inc., and Verizon
Communications, Inc. (collectively the “Customer Defendants”) are customers of Marimba who use
the allegedly infringing software. The Amended Complaint claims that the Customer Defendants
(1) directly infringe Beck’s patent by practicing the inventions claimed; (2) induce others to infringe;
and/or (3) contribute to the infringement of others. Beck seeks a judgment that its patents are valid,
enforceable, and infringed by the Defendants; a preliminary and permanent injunction; and damages.

The Defendants now seek to separate and stay the action as to the Customer Defendants, and
to allow the case to proceed against only Marimba, the manufacturing defendant.

DISCUSSION

This Court has the discretion, under Rule 42(b), to order separate trials “in furtherance of
convenience or to avoid prejudice, or when separate trials will be conducive to expedition and
economy.” Fed. R. Civ, P. 42(b); see Houseman y. United States Aviation Underwriters, 171 F.3d
1117, 1121 (7th Cir. 1999), A separation is an exception, not the rule, and “{cJourts should not order
separate trials unless such a disposition is clearly necessary.” Real v. Bunn-O-Matic Corp., 195

F.R.D. 618, 620 (N.D. Ill. 2000) (citation and internal quotation omitted). In considering whether