No. 04 € 5312 Page 5

Allen Group, Ing,, 1989 WL 205782, *7 (N.D.Cal.1989) (submitted the inequitable conduct
question to the jury). We uncovered several similar procedural decisions in our research. See
Medtronic Xomed, Inc, v. Gyrus ENT LLC, 440 F.Supp.2d 1333, 1336 (M.D.Fla.2006) (“a
separate bench trial of this single issue either before or after the jury trial would not be the

most efficient use of judicial resources, and could require re-calling witnesses who will or had

testified at the jury trial”); 3M Innovative Properties Co. v. Dupont Dow Elastomers LLC, 361
F.Supp.2d 958, 981 (D.Minn.2005); Mag Instrument, Inc, v. J. Baxter Brinkmann Int'l. Corp.,

123 F.R.D, 543 (N.D.Tex.1988) (evidence of public use defense was too intertwined with
inequitable conduct defense evidence to allow for separate trials).
Many district courts have, on the other hand, opted for bifurcation of the issue of

inequitable conduct, See Medpoint: care Inc. v. Hi-Tech Pharmacal Co.. » 2007 WL

188285, *6 (D.N.J,2007); DaimlerChrysler AG v. Feuling Advanced Technologies, Inc., 276
F.Supp.2d 1054, 1056 (S.D.Cal.2003); Applera Corp. v. Micromass UK Ltd., 204 F.Supp.2d 724,
729 (D.Del.2002); art Brass . Co,, Inc. v. T; ‘orce Tips, Inc., 867 F.Supp. 782, 787-88
(N.D.Ind.1994); Golden Valley Microwave Foods, Inc. v. Weaver Popcorn Co., Inc., 837 F.Supp.
1444, 1447 (N.D.Ind.1992); Nintendo of a Inc. v. avox Co., 707 F.Supp. 717, 720
(S.D.N.Y.1989), TT relies heavily on THK America, Inc. v. NSK, Ltd., 1996 WL 33398071
(N.D.I1.1996) to argue its point. In THK, Judge Norgle recommended that evidence and
arguments on the issue of inequitable conduct should be heard each day as they arise, after the
jury has been dismissed for the day. In making his recommendation, Judge Norgle considered
that inequitable conduct is an issue for the court’s determination, that patent cases are
inherently complicated and confusing for a jury, and that evidence of inequitable conduct,

essentially fraud, may very well prejudice the patentee in its case to the jury.



No. 04 C 5312 Page 4

99 F.3d at 1114, Unlike defendants, we do not read that passage to endorse any particular
means of dealing with the process of trying inequitable conduct. In fact, quite the opposite,
we read Hebert to reaffirm the district court's discretion and allow the lower court to bifurcate
the issues as it sees fit.

Both parties have submitted district court case law supporting their positions, eSpeed
points to Fri edical_C: dings, Inc. ‘ter Int'l, Inc., 2006 WL 1646108
(N.D.Cal.2006), which relies on Hebert to deny defendant’s motion for bifurcation in
preference of presenting the issues to the jury for an advisory opinion. In Frenius, the district
court was swayed by plaintiff's assertions that denying bifurcation would promote judicial
economy because (1) it would eliminate disputes as to whether certain evidence should be
heard by the jury; (2) the advice of the jury would be beneficial to the court in deciding
inequitable conduct; and (3) substantial overlap of the evidence pertinent to inequitable
conduct and invalidity weighed in favor of one trial. Frenius can be distinguished, however,
because defendant’s assertion of prejudice was severely undermined since the alleged fraud
pertained to a non-party, not to plaintiff. Such is not the case here.

Defendants cite to similar decisions by district court judges that submitted the issue of
inequitable conduct to a jury for an advisory opinion. See Cargill, Inc. vy, Sears Petroleum &
Transport Corp., 388 F.Supp.2d 37, 62 (N.D.N.Y.2005) (jury, in an advisory capacity,
addressed the threshold inequitable conduct questions of materiality and intent to deceive);
Echometer Co, y, Lufkin Industries, Inc., 2004 WL 575954, *1-2 (N.D.Tex.2004) (district court
gave “substantial weight” to the jury’s advisory verdict on inequitable conduct); Transclean

Corp. v. Bridgewood Services, Inc., 101 F.Supp.2d 788, 792 (D.Minn.2000) (limiting the jury’s
advisory fact-finding by specific interrogatories and jury instructions); Modine Mfg, Co. v.



No, 04 C 5312 Page 6

It is the patent, not the patentee, on trial before the jury. See THK,1996 WL 33398071,
at *1, Here, the primary issue is one of validity. And while eSpeed’s argument that its prior
public use argument is too intertwined with its inequitable conduct defense to separate the two
may have some merit, we disagree that it leads only to one result, We think a better option is
the one proposed by THK, to the extent that testimony, evidence and argument is relevant only
to fraud it should be heard outside of the jury’s presence. The Federal Circuit does not
foreclose such a structure, and in fact, Hebert reaffirms our discretion to organize a patent law
trial to best serve fairness and judicial economy. 99 F.3d at 1114. The parties in this case have
been gathering evidence and preparing arguments for three years, Experts have been hired
and joint defense agreements have been established, The trial is currently scheduled for three
weeks. We therefore reject eSpeed’s suggestion of asking the jury to consider and advise on
additional issues outside the scope of its duty.

CONCLUSION
For the reasons stated herein, we grant in part TT’s motion for bifurcation of inequitable
conduct. To the extent possible, evidence and arguments related to inequitable conduct will be

heard during the period of the trial, after the jury has been dismissed for the day.

JAMES B. MORAN

Sehor Judge, U. S. District Court
— Gus, 20. 2007.



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

EASTERN DIVISION

TRADING TECHNOLOGIES )
INTERNATIONAL, INC., )
)

Plaintiff, )

)

vs. ) No. 04 C 5312

)

eSPEED, INC., eSPEED INTERNATIONAL, )
LTD, and ECCO WARE, LTD., )
)

Defendants. )

MEMORANDUM OPINION AND ORDER

Plaintiff Trading Technologies International, Inc. (“TT”) brought this suit against
defendants eSpeed, Inc., eSpeed International, Ltd., Ecco LLC, and EccoWare, Ltd.
(collectively “eSpeed”), alleging infringement of U. S. Patent Nos. 6,766,304 (‘304) and
6,882,132 (132). Both patents, similar in scope and language, relate to computer software used
for electronic trading in the futures market. Defendants assert that the patents-in-suit are
unenforceable by reason of inequitable conduct. TT now seeks to bifurcate the allegations of
inequitable conduct from the upcoming trial. For the reasons stated herein, we grant in part
TT’s motion to bifurcate.

Federal Rule of Civil Procedure 42(b) authorizes us to bifurcate a trial “in furtherance
of convenience or to avoid prejudice, or when separate trials will be conducive to expedition
and economy.” As q matter of discretion of this court, we may bifurcate a trial provided that
such a ruling “1) serves the interests of judicial economy or is done to prevent prejudice to a

party; 2) does not unfairly prejudice the non-moving party; and 3) does not violate the Seventh



No. 04 C 5312 Page 2

Amendment.” Kyocka v. City of Chicago, 203 F.3d 507, 516 (7 Cir.2000). Bifurcation in
patent cases, as in all cases, is the exception, not the rule, Real v. Bunn-Q-Matic Corp., 195
F.R.D. 618, 620 (N.D.11,2000). As the party moving for bifurcation, TT bears the burden of
demonstrating that concerns of judicial economy and prejudice weigh in favor of bifurcation.
Id., at 620,

One applying for a patent has a duty to prosecute his patent in the United Stated Patent
and Trademark Office (“PTO”), with candor, good faith, and honesty. Honeywell Int’l Inc.
y. Universal Avionics Systems Corp., 488 F.3d 982, 999 (Fed.Cir.2007), See also 37 C.E.R. §
1.56. “A breach of this duty — including affirmative misrepresentations of material facts,
failure to disclose material information, or submission of false material information — coupled
with an intent to deceive, constitutes inequitable conduct.” Honeywell Int’l, 488 F.3d at 999,
See also McKesson Information Solutions, Inc, v. Bridge Medical, Inc., 487 F.3d 897, 913
(Fed.Cir.2007) (“A patent may be rendered unenforceable for inequitable conduct if an
applicant, with intent to mislead or deceive the examiner, fails to disclose material information
or submits materially false information to the PTO during prosecution”) (internal citations
omitted), Assertion of inequitable conduct is derived from the equitable doctrine of unclean

hands, and therefore, does not give rise to the right to trial by jury. See Gardco

Manufacturing, Inc, v. Herst Lighting Co., 820 F.2d 1209, 1212 (Fed.Cir.1987). See also
Paragon Podiatry Lab., Inc. v. KLM Labs., Inc, 984 F.2d 1182, 1190 (Fed.Cir.1993) (the

defense of inequitable conduct “being entirely equitable in nature, is not an issue for a jury to

decide”).!

"The Federal Circuit has determined that bifurcation of inequitable conduct, even if tried first, does
not violate any rights guaranteed by the Seventh Amendment. See Gardcg, 820 F.2d 1209.



No. 04 € 5312 Page 3

Plaintiff argues that because inequitable conduct is an equitable question to be decided
by the court, and introduction of evidence of fraud on the part of the patentee may very well
influence the jury on issues of validity, bifurcation is particularly appropriate. Thus, plaintiff
asks us to bifurcate the trial and hold a separate bench trial on the issue of inequitable conduct
following conclusion of the jury trial. In the alternative, plaintiff requests us to set a trial
schedule where the court hears testimony regarding inequitable conduct on selected days after
the jury has been dismissed. eSpeed rejects both suggestions, arguing that the evidence of TT’s
inequitable conduct should be presented to the jury for an advisory verdict under Rule 39(c).’

The Federal Circuit has clearly stated that under Rule 42(b) we have broad discretion
to separate issues and claims for trial, and may therefore “order a trial on unenforceability

separate from an infringement trial that may involve an invalidity defense.” Gardco, 802 F.2d

at 1212. Such is exactly what TT requests here. eSpeed relies on Hebert v. Lisle Corp,, 99 F.3d
1109 (Fed.Cir.1996), to assert that the Federal Circuit has endorsed the process of trying
inequitable conduct whereby the district court allows the issue to be presented to the jury for
an advisory verdict. The Hebert court stated:

There are a variety of ways in which the district court may choose to handle the
issue of inequitable conduct during a jury trial, as the Federal Circuit has
recognized. Some courts have reserved the entire issue of inequitable conduct
unto themselves; some have submitted special interrogatories to the jury on the
facts of materiality and intent; and some have instructed the jury to find and
weigh the facts of materiality and intent and decide the ultimate question of
inequitable conduct, as in the case at bar... Absent a clear showing of prejudice,
or failure to achieve a fair trial, the district court’s choice of procedure will not
be disturbed.

*Federal Rule of Civil Procedure 39(c) reads: “In all actions not triable of right by a jury the court
upon motion or of its own initiative may try any issue with an advisory jury or, except in actions against the
United States when 2 statute of the United States provides for trial without a jury, the court, with the consent
of both parties, may order a trial with a jury whose verdict has the same effect as if trial by jury had been a
matter of right.”