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Case 3:06-cv-07336-PJH

Document 88

Jonathan E. Rich (SBN 187386)

PROSKAUER ROSE LLP 2049 Century Park East, Suite 3200

Los Angeles, CA 90067-3206 Telephone: (310) 557-2900

Facsimile: (310) 557-2193

Steven M. Bauer (Admitted Pro Hac Vice) Colin G. Cabral (Admitted Pro Hac Vice) PROSKAUER ROSE LLP One International Place

Boston, MA 02110 Tel. (617) 526-9600

Filed 08/27/2007

Page 1 of 19

Attorneys for ENDECA TECHNOLOGIES, INC. and WAL-MART STORES, INC.*

*Additional Counsel Listed on Signature Block

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO DIVISION

SPEEDTRACK, INC.

Plaintiff,

v.

WAL-MART STORES, INC.

Defendant.

ENDECA TECHNOLOGIES, INC.

Intervenor,

v.

SPEEDTRACK, INC.

Defendant in Intervention.

Case Nos. C 06-7336 PJH

NOTICE OF MOTION AND MOTION TO BIFURCATE LIABILITY AND DAMAGES ISSUES AND PROCEED WITH A JURY- WAIVED LIABILITY TRIAL

Before: Hon. Phyllis J. Hamilton

DATE: October 3, 2007 TIME: 9:00 a.m. ACTION FILED: November 29, 2006

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Case 3:06-cv-07336-PJH

Document 88

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PLEASE TAKE NOTICE that on October 3, 2007 at 9:00 a.m., or as soon thereafter as

this matter may be heard, Intervenor Endeca Technologies, Inc. and Defendant Wal-Mart Stores,

Inc. will move this Court: 1) pursuant Fed. R. Civ. P. 42(b), to bifurcate the parties for the

purposes of discovery and trial and proceed with Intervenor Endeca’s jury-waived liability trial;

or, alternatively, 2) pursuant to Fed. R. Civ. P. 26, to bifurcate damages and stay damages-related

discovery pending resolution of the liability issues. In the event that the court does not stay

damages discovery, Wal-Mart hereby requests, pursuant to Fed. R. Civ. P. 26, a protective order

precluding discovery of its sales information prior to the filing of the complaint in this suit.

This motion is supported by the points and authorities cited herein, the Declaration of

Jonathan E. Rich and the exhibits attached thereto, all pleadings and papers on file in this action,

and on such matters as may be presented to the Court at the time of the hearing.

DATED: August 27, 2007

PROSKAUER ROSE LLP Steven M. Bauer (admitted pro hac vice) Colin G. Cabral (admitted pro hac vice) Jonathan E. Rich

By:

/s/ Jonathan E. Rich

Jonathan E. Rich

Attorneys for Defendants ENDECA TECHNOLOGIES, INC. and WAL-MART STORES, INC

FARELLA BRAUN &MARTEL LLP Roderick M. Thompson Andrew Leibnitz Stephanie P. Skaff Cory M. Mason

Attorneys for Defendant, WAL-MART STORES, INC.

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Case 3:06-cv-07336-PJH

Document 88

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TABLE OF CONTENTS

I. INTRODUCTION

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II. STATEMENT OF FACTS

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A. The Dispute Between Endeca And

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B. SpeedTrack’s Failure To Mark Products Sold Under The ‘360 Patent

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III. ARGUMENT

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A. This Court Should Bifurcate Liability And Damages Issues Because

Bifurcation Will Not Inconvenience Or Unduly Prejudice Any Party And Will Promote Judicial

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1. This Court Can Easily Bifurcate Issues Specific To Wal-Mart Because SpeedTrack Is Not Seeking Damages From Endeca,

Thereby Entitling Endeca To A Jury-Waived Liability

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2. Alternatively, Due To The Unique Facts Of This Case, This Court Can Easily Bifurcate Liability and Damages Issues For Trial and

Discovery

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B. Because SpeedTrack Has Not Marked Products With The ‘360 Patent

Number, SpeedTrack Is Not Entitled To Any Pre-Filing Damages And Wal- Mart Should Not Be Required To Produce Damages-Related Discovery

Prior To The Filing Date Of This Suit

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IV. CONCLUSION

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Case 3:06-cv-07336-PJH

Document 88

Filed 08/27/2007

TABLE OF AUTHORITIES

Cases

Amer. Med. Sys. V. Medical Eng’g Corp.,

6 F.3d 1523 (Fed. Cir. 1993)

Avia Group Int’l, Inc. v. Nike, Inc.,

Page 4 of 19

7, 13, 14, 15

1991 U.S. Dist. LEXIS 20492 (D. Or. September 17, 1991)

 

11,

12

Ellingson Timber Co. v. Great Northern Railway Co.,

 

424

F.2d 497 (9th Cir. 1970)

10

Gardco Mfg., Inc. v. Herst Lighting,

 

820

F.2d 1209 (Fed. Cir. 1987)

10

Giro Sport Design, Inc. v. Pro-Tec, Inc.,

 

1989

U.S. Dist. LEXIS 9423 (N.D. Cal. March 17, 1989)

11,

13, 14

Halliburton Services v. Smith Int’l Inc.,

 

317

F. Supp. 2d 719 (E.D. Tex. 2004)

16

Hatsudoki Kabushiki Kaisha et al. v. Bombardier Inc., et al.,

 

2001

U.S. Dist. LEXIS 10738 (C.D. Cal. May 4, 2001)

12

Hirst v. Gertzen,

 

676

F.2d 1252 (9th Cir. 1982)

10

Landmark Graphics Corp. et al. v. Seismic Micro Technology, Inc.,

 

2006

U.S. Dist. LEXIS 77664 (S.D. Tx. October 25, 2006)

11

Mag Instrument, Inc. v. J. Baxter Brinkmann Int’l Corp.,

 

123

F.R.D. 543 (N.D. Tx. 1988)

11

Maxwell v. J. Baker, Inc.,

 

86 F.3d 1098 (Fed. Cir. 1996)

 

15

Medpointe Healthcare Inc. v. Hi-Tech Pharmacal Co., Inc.,

 

2007

U.S. Dist. LEXIS 4652 (D.N.J. January 22, 2007)

11,

12

Merck & Co., Inc. v. MediPlan Health Consulting, Inc.,

 

434

F. Supp. 2d 257 (S.D.N.Y. 2006)

16

Mosel Vitelic Corp. v. Micron Tech., Inc.,

 

2000

WL 1728351 (D. Del. 2000)

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Case 3:06-cv-07336-PJH

Document 88

Motorola, Inc. v. United States,

Filed 08/27/2007

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729

F.2d 765 (Fed. Cir. 1984)

15

Nike, Inc. v. Wal-Mart Stores, Inc.,

 

138

F.3d 1437 (Fed. Cir. 1998)

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Philips Elecs North Am. Corp. v. Contec Corp.,

 

312

F. Supp. 2d 649 (D. Del. 2004)

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Smith v. Alyeska Pipeline Service Co.,

 

538

F. Supp. 977 (D. Del. 1982)

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Swofford v. B&W, Inc.,

 

34 F.R.D. 15 (S.D. Tx. 1963), aff’d, 366 F.2d 402 (5th Cir. 1964), cert. denied, 379 U.S. 962 (1965)

13,

14

Swofford v. B&W, Inc.,

 

366

F.2d 402 (5th Cir. 1964), cert. denied, 379 U.S. 962 (1965)

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Tegal Corp. v. Tokyo Electron America, Inc.,

 

257

F.3d 1331 (Fed. Cir. 2001)

6,

12

Statutes

35 U.S.C. § 287

 

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Case 3:06-cv-07336-PJH

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MEMORANDUM OF POINTS AND AUTHORITIES Pursuant to Civil Local Rule 7-4 and Federal Rules of Civil Procedure 26 and 42,

Intervenor Endeca Technologies, Inc. (“Endeca”) and Defendant Wal-Mart Stores, Inc. (“Wal-

Mart”) respectively submit this Memorandum of Points and Authorities in support of their Motion

To Bifurcate Liability And Damages Issues And Proceed With A Jury-Waived Liability Trial.

I. INTRODUCTION

This is an action for patent infringement. Plaintiff SpeedTrack, Inc. (“SpeedTrack”) filed

suit against Wal-Mart on November 29, 2006, alleging that Wal-Mart infringes U.S. Patent No.

5,544,360 (“the ‘360 Patent”) by providing certain search features on its retail website

(www.Walmart.com). Because Endeca developed and supplied the technology at issue, and in

view of dozens of letters sent by SpeedTrack to other Endeca customers, Endeca intervened in this

case, seeking a declaration from this Court that Endeca’s technology does not infringe the ‘360

Patent and that the patent is invalid.

SpeedTrack answered Endeca’s complaint in intervention on May 25, 2007, by asserting

that it was not seeking damages from Endeca but would only seek damages from Endeca’s

customers. The liability issues pending between Endeca and SpeedTrack are purely equitable

equitable in nature, and, therefore, Endeca is entitled to a jury-waived trial on the liability issues.

See Tegal Corp. v. Tokyo Electron America, Inc., 257 F.3d 1331, 1339-41 (Fed. Cir. 2001)

(affirming district court’s decision to conduct a bench trial because defendant had no right to a

jury trial where the only remedy sought by plaintiff was equitable in nature).

On July 11, 2007, more than seven months after filing this action, SpeedTrack filed a

second complaint against six more of Endeca’s customers. SpeedTrack, Inc. v. Office Depot, Inc.,

et al., C 07-3602 PJH (“the Office Depot case”). The timing of this second suit was no accident

SpeedTrack filed the complaint soon after an unsuccessful mediation. SpeedTrack’s counsel

wrote to Endeca’s counsel to send along the new complaint and noted that the purpose of the

second suit was to persuade Endeca to enter into a global settlement with SpeedTrack: “We hope

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that Endeca will view this new lawsuit as an opportunity to revisit the need to get creative and

serious about a global settlement with SpeedTrack.” (July 11, 2007 letter from R. Dorman to S.

Bauer, attached as Exh. A). 1 The defendants in the Office Depot case are filing a concurrent

motion to stay proceedings pending resolution of the liability issues between Endeca and

SpeedTrack in this case. 2

Endeca and Wal-Mart hereby move, first, for bifurcation of the parties for purposes of

discovery and trial, and second, in the alternative, for bifurcation of the issues of liability and

damages for trial and discovery. Because Endeca is entitled to a bench trial on the liability issues

in this case, and because damages discovery from Wal-Mart and Endeca’s other six customers can

easily be bifurcated and stayed pending resolution of the liability issues between SpeedTrack and

Endeca (regardless of whether the liability trial proceeds before the bench or a jury), either method

of bifurcation will save the Court and the parties needless effort without any delay in the

resolution of these proceedings.

Bifurcation makes practical sense in light of the unique facts of this case. The liability and

damages issues are distinct and will not overlap. Wal-Mart is merely an Endeca customer and,

therefore, has little, if any, information relevant to the technical liability issues. Similarly, Endeca

should have little evidence relevant to the damages issues, since SpeedTrack is not seeking any

damages from Endeca.

In this particular case, bifurcation will promote judicial economy and efficiency without

unduly prejudicing either party. A bench trial on the liability issues between SpeedTrack and

Endeca would provide flexibility to the Court in terms of scheduling and fit more easily into the

Court’s calendar. Moreover, because SpeedTrack’s damages allegations relate to very large

1 All exhibits cited herein are attached to the Declaration of Jonathan E. Rich, Esq., dated August 27, 2007, submitted herewith.

2 Endeca and Wal-Mart respectfully request that the Court calendar this motion for the same

date as the hearing on the Motion to Stay Proceedings in the related action, SpeedTrack , Inc. v. Office Depot, Inc.; CDW Corporation; Newegg.com; Circuit City Stores, Inc.; PC Connection,

Inc.; CompUSA Inc., No. C 07-3602 PJH (also pending before this Court).

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Case 3:06-cv-07336-PJH

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commercial web-sites and their use of a relatively small functionality, the damages issues in this

case are disproportionately complex when compared to the liability portion of the case

particularly because SpeedTrack has made clear that it seeks damages based on the extent of Wal-

Mart’s use of the accused technology and the actual value of that technology to Wal-Mart.

SpeedTrack’s damages allegations will require extensive discovery and expert testimony related to

the calculation of a reasonable royalty. Bifurcation of liability and damages issues will only serve

to expedite discovery and preserve the parties’ resources, as well as the resources of this Court.

Finally, by this motion, in the event that the Court does not bifurcate liability and damages,

Wal-Mart separately requests a protective order to prevent SpeedTrack from seeking discovery

related to pre-filing damages. SpeedTrack and its predecessors sold unmarked products under the

‘360 Patent until the filing date of this suit. These sales preclude SpeedTrack from obtaining

damages incurred prior to the time that Wal-Mart received actual notice of the ‘360 Patent (i.e.,

the date SpeedTrack filed its complaint). See Amer. Med. Sys. v. Medical Eng’g Corp., 6 F.3d

1523, 1538 (Fed. Cir. 1993) (holding that full compliance with the marking statute was not

achieved until the patentee “consistently marked substantially all” of the patented products, and

was no longer distributing unmarked products). As the Court will no doubt recognize, discovery

into Wal-Mart’s on-line sales will be extensive, costly, and time-consuming. Because SpeedTrack

has no need for sales figures relating to Wal-Mart’s pre-filing activities, a protective order

precluding discovery related to pre-filing damages is appropriate.

II. STATEMENT OF FACTS

A. The Dispute Between Endeca And SpeedTrack.

Endeca is a Massachusetts-based, venture-capital-backed company that provides enterprise

information access solutions to a wide range of customers, including a number of online retail

clients. Endeca’s customized solutions are built on the patented Endeca Information Access

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Platform, which, among other things, enables online retailers to optimize the search, navigation,

and merchandizing capabilities of their websites.

SpeedTrack’s complaint against Wal-Mart alleges that Wal-Mart directly infringes the

‘360 Patent by providing Endeca’s search functionality on its www.Walmart.com website.

(SpeedTrack’s Complaint for Patent Infringement, Permanent Injunction and Damages, dated

November 29, 2006, ¶ 10-11, attached as Exh. B). Endeca developed the accused technology and

provided it to Wal-Mart pursuant to a license agreement. After SpeedTrack filed suit against Wal-

Mart and sent dozens of letters to other Endeca customers threatening litigation, Endeca filed a

declaratory judgment action against SpeedTrack, seeking a declaration from this Court that

Endeca’s technology does not infringe the ‘360 Patent and that the patent is invalid. (Endeca

Technology, Inc.’s Complaint In Intervention, dated April 13, 2007, attached as Exh. C).

In SpeedTrack’s counterclaim, filed in response to Endeca’s complaint in intervention, it

waived any claim to damages against Endeca: “SpeedTrack will not be seeking monetary damages

against Endeca, but will seek monetary damages from the direct infringers.” (SpeedTrack, Inc.’s

Answer to Endeca Technologies, Inc.’s Complaint In Intervention And Counterclaim, dated May

25, 2007, ¶ 10, attached as Exh. D).

On July 11, 2007, SpeedTrack filed a second complaint against six more of Endeca’s

customers Office Depot, Inc., CDW Corporation, Newegg.com, Circuit City Stores, Inc., PC

Connection, Inc., and CompUSA, Inc. (SpeedTrack’s Complaint For Patent Infringement,

Permanent Injunction, And Damages, dated July 11, 2007, attached as Exh. E). As in the Wal-

Mart case, SpeedTrack’s allegations focus on Endeca’s Information Access Platform, technology

developed and supplied by Endeca for use on Defendants’ retail websites. (See id. at ¶¶ 13, 22,

31, 40, 49, and 58).

B. SpeedTrack’s Failure To Mark Products Sold Under The ‘360 Patent.

SpeedTrack and its predecessors Jerzy Lewak, Paragon Concepts, and Nisus Software,

Inc. sold unmarked products under the ‘360 Patent for years, including File Clerk, Mailkeeper

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and Nisus Compact (which contained File Clerk). (See, e.g., “Mailkeeper aids info

housekeeping,” MacWEEK, April 3, 1995, attached as Exh. F). A public statement issued by

Jerzy Lewak, a named inventor on the ‘360 Patent and former CEO of Nisus Software, Inc.,

promoted Nisus’s “Guided Information Access” (“GIA”) technology and identified Mailkeeper as

“one product that uses [GIA].” (Email from CEO Jerry Lewak, dated October 13, 2000, at 2,

attached as Exh. G). A screenshot taken from the Nisus website reveals that, as of April 1998,

Nisus considered the GIA technology to be covered by the ‘360 Patent: “GIA stands for Guided

Information Access

5,544,360, foreign patents pending) by Nisus Software Inc.” (“Frequently Asked Questions About

GIA,” last modified April 2, 1998, attached as Exh. H). Indeed, Figure 5 of the ‘360 Patent is a

screenshot of the File Clerk engine included in the Nisus Compact software, which the patent

describes as “an example of a file manager display in accordance with the present invention.”

(U.S. Patent No. 5,544,360, 8:31-32, attached as Exh. I). On information and belief, none of these

products bore SpeedTrack’s patent number.

The technology was developed and patented (US Patent number:

III.

ARGUMENT

A. This Court Should Bifurcate Liability And Damages Issues Because Bifurcation Will Not Inconvenience Or Unduly Prejudice Any Party And Will

Promote Judicial Economy.

Federal Rule of Civil Procedure 42(b) provides that the court, in furtherance of

convenience or to avoid prejudice, or when separate trials will be conducive to expedition and

or of any separate issue.” Fed. R. Civ. P.

42(b). The decision to bifurcate is committed to the sound discretion of the trial court. Hirst v.

Gertzen, 676 F.2d 1252, 1261 (9th Cir. 1982); Gardco Mfg., Inc. v. Herst Lighting, 820 F.2d 1209,

1212 (Fed. Cir. 1987) (“Under Rule 42(b), a district court has broad discretion in separating issues

and claims for trial as part of its wide discretion in trial management.”). Courts also have power to

limit discovery as to the segregated issues. Ellingson Timber Co. v. Great Northern Railway Co.,

424 F.2d 497, 499 (9th Cir. 1970). It is not uncommon for courts to bifurcate issues of liability

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economy, may order a separate trial of any claim

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and damages before substantial discovery has occurred and to stay discovery of damages. Avia

Group Int’l, Inc. v. Nike, Inc., 1991 U.S. Dist. LEXIS 20492, at *6-7 (D. Or. September 17, 1991).

Courts frequently bifurcate liability and damages in patent cases. See Mag Instrument, Inc.

v. J. Baxter Brinkmann Int’l Corp., 123 F.R.D. 543, 545 (N.D. Tx. 1988); Medpointe Healthcare

Inc. v. Hi-Tech Pharmacal Co., Inc., 2007 U.S. Dist. LEXIS 4652, at *13 (D.N.J. January 22,

2007) (“In patent cases, bifurcation of liability and damages is not uncommon, especially when the

damages issues are complicated and extensive evidence would be necessary.”). Indeed, damages

in patent cases often present legal and factual issues that are not relevant to the determination of

liability. Landmark Graphics Corp. et al. v. Seismic Micro Technology, Inc., 2006 U.S. Dist.

LEXIS 77664, at *3 (S.D. Tx. October 25, 2006). Courts have considered several factors in

determining whether bifurcation is appropriate in patent cases, including: 1) convenience; 2)

prejudice; and 3) expediency and judicial economy. See Giro Sport Design, Inc. v. Pro-Tec, Inc.,

1989 U.S. Dist. LEXIS 9423, at *4-9 (N.D. Cal. March 17, 1989).

Endeca and Wal-Mart offer two proposals to simplify the issues before this Court and

promote an expeditious and efficient resolution of this dispute:

1) Because SpeedTrack does not seek damages from Endeca, and because Endeca’s

declaratory judgment action will resolve the liability issues in this case in their entirety, the Court

can bifurcate Endeca and Wal-Mart and try the liability issues at a bench trial scheduled at the

Court’s convenience; or, alternatively,

2) Now that SpeedTrack has sued seven Endeca customers (seven of the largest internet

retailers in the United States), this Court can bifurcate the damages and liability portions of the

case.

1. The Court Can Easily Bifurcate Issues Specific To Wal-Mart Because

SpeedTrack Is Not Seeking Damages From Endeca, Thereby Entitling Endeca To A Jury-Waived Liability Trial.

Endeca’s request that the liability issues be tried to the bench is based on an indisputable

statement of law: SpeedTrack has no right to a jury trial on the liability issues between

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1

SpeedTrack and Endeca because it waived its claim for damages against Endeca and seeks only

2

injunctive relief. See Tegal Corp., 257 F.3d at 1339-41 (affirming district court’s decision to

3

conduct a bench trial because defendant had no right to a jury trial where the only remedy sought

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by plaintiff was equitable in nature); Avia Group, 1991 U.S. Dist. LEXIS 20492 at *7-8 (holding

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there is no right to a jury trial on the issue of enhancement of damages and awarding of attorneys’

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fees); Swofford v. B&W, Inc., 366 F.2d 402, 411-14 (5th Cir. 1964), cert. denied, 379 U.S. 962

7

(1965) (same).

8

Due to the unique facts of this case where the patent owner has expressly waived any

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claim of damages against the manufacturer but has filed suit against seven customers alleging that

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their use of the manufacturer’s technology subjects them to a measure of damages the liability

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and damages issues are so distinct that bifurcation will not present any risk of inconvenience to the

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parties or this Court. See Yamaha Hatsudoki Kabushiki Kaisha et al. v. Bombardier Inc., et al.,

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2001 U.S. Dist. LEXIS 10738, at *9 (C.D. Cal. May 4, 2001) (“[T]he liability and damage issues

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are not so interwoven that one cannot be determined independently of the other. Bifurcation,

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while perhaps not routine, is nonetheless common in patent litigation.”); Avia Group, 1991 U.S.

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Dist. LEXIS 20492, at *5 (“[T]he liability issues will require proof of the specifics of the

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invention, the validity of the patent, and the structure and operation of the allegedly infringing

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product. The damages issue is substantially different and will require proof of sales, costing

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factors, profit levels and offsetting costs.”); Medpointe, 2007 U.S. Dist. LEXIS 4652, at *14

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(“Unlike the technological information necessary to prove liability and the related defense of

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obviousness, financial and economic evidence will be used to prove and defend the issue of

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damages.”).

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The primary advantage of bifurcation of the parties in this case is that a bench trial on the

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liability issues would allow the parties to work toward a speedy and focused resolution on the

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merits. Notably, Endeca is not using bifurcation as a tool for delay. Rather, Endeca seeks to

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expedite the proceedings. A bench trial can be scheduled with more flexibility, will not require

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the court to hold two or more weeks free for a jury, and can allow for a quicker presentation of the

evidence. Indeed, a bench trial might even permit the Court to use of a special master to make

findings of fact. More interestingly, a bench trial would allow the Court to combine Markman and

summary judgment proceedings with a bench trial. To the extent that SpeedTrack claims

“questions of fact” preclude summary judgment, the court will be able to make findings of fact to

resolve those questions.

For this case, a bench trial will allow the case to be tried sooner, at less cost to the parties,

and with less time imposed on the judicial system.

2. Alternatively, Due To The Unique Facts Of This Case, This Court Can Easily Bifurcate Liability and Damages Issues For Trial and Discovery.

Alternatively, this case is a perfect candidate for bifurcation of damages and liability

issues. See Giro Sport, 1989 U.S. Dist. LEXIS 9423 at *5 (granting motion to bifurcate trial and

discovery as to the issues of liability and damages, noting, “It is unlikely that bifurcation will

duplicate either discovery or trial.”). Bifurcation in this case will not require duplicate discovery

and will not prejudice either party. If the liability issues are resolved in favor of Endeca and Wal-

Mart, a trial on damages will not be necessary. On the other hand, a resolution in favor of

SpeedTrack will facilitate settlement without an expensive and time-consuming trial on damages.

See Smith v. Alyeska Pipeline Service Co., 538 F. Supp. 977, 984 (D. Del. 1982) (granting motion

to bifurcate liability and damages, finding that bifurcation would not duly prejudice either party);

Swofford v. B&W, Inc., 34 F.R.D. 15, 20 (S.D. Tx. 1963), aff’d, 366 F.2d 402 (5th Cir. 1964), cert.

denied, 379 U.S. 962 (1965) (“A preliminary finding on the question of liability may well make

unnecessary the damages inquiry, and thus result in substantial saving of time of the Court and

counsel and the reduction of expense to the parties. Moreover, separate trial of the issue of

liability may present counsel the opportunity to obtain final settlement of that issue or appeal

without having reached the often time-consuming and difficult damages question.”).

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Bifurcation of liability and damages issues will also promote judicial economy.

SpeedTrack claims that the proper measure of damages turns on the use of the accused technology

by some of the largest internet retailers in the United States. For this reason, the damages issues in

this case will be complex and will require extensive discovery from Endeca’s customers.

Bifurcation will expedite discovery and preserve the parties’ resources, as well as those of this

Court. See Giro Sport, 1989 U.S. Dist. LEXIS 9423 at *8-9 (“It will be difficult enough to

establish liability in this case without the addition of information relating to the damages issue,

and the time and money spend on assessing damages may not be necessary if no liability is found

or if an injunction would be equitable.”); Swofford, 34 F.R.D. at 19-20 (“In the normal case,

separate trial of issues is seldom required, but in a patent infringement suit considerations exist

which suggest that efficient judicial administration would be served by separate trials on the issues

of liability and damages. The trial of the damages question in such a suit is often difficult and

expensive, while being easily severed from the trial of the questions of validity and infringement

of the patent.”).

For the reasons stated above, this Court should exercise its discretion to bifurcate both trial

and discovery as to the issues of liability and damages.

B. Because SpeedTrack Has Not Marked Products With The ‘360 Patent

Number, SpeedTrack Is Not Entitled To Any Pre-Filing Damages And Wal- Mart Should Not Be Required To Produce Damages-Related Discovery Prior

To The Filing Date Of This Suit.

Finally, should this Court decide not to bifurcate damages and liability, Wal-Mart seeks a

protective order to prevent SpeedTrack from seeking discovery related to pre-filing damages.

Section 287 of the Patent Act protects individuals against unwarranted liabilities where a

patentee fails to provide adequate notice to potential infringers. Amer. Med. Sys. v. Medical Eng’g

Corp., 6 F.3d 1523, 1538 (Fed. Cir. 1993) (“The purpose of the constructive notice provision is ‘to

give patentees the proper incentive to mark their products and thus place the world on notice of the

existence of the patent.’”). Specifically, 35 U.S.C. § 287(a) effectively requires patentees to

provide notice to potential infringers by placing the patent number on any products sold under the

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patent, or where appropriate, on the products’ packaging. 35 U.S.C. § 287. A patentee’s failure to

mark “substantially all” of its patented products in a “substantially consistent and continuous

manner” precludes recovery of any damages prior to the date that the alleged infringer received

actual notice of the patent.

avail itself of the constructive notice provisions of section 287, it bears the burden of proving that

its marking was substantially consistent and continuous. See, e.g., Nike, Inc. v. Wal-Mart Stores,

Inc., 138 F.3d 1437, 1446 (Fed. Cir. 1998); Maxwell v. J. Baker, Inc., 86 F.3d 1098, 1111 (Fed.

Cir. 1996) (“As the patentee, [plaintiff] had the burden of pleading and proving at trial that she

complied with the statutory requirements”); Motorola, Inc. v. United States, 729 F.2d 765, 770

(Fed. Cir. 1984) (same).

SpeedTrack cannot establish that the products sold under the ‘360 Patent were marked in

Id.; Amer. Med. Sys., 6 F.3d at 1537. Where a patentee intends to

a substantially consistent and continuous manner. 3 SpeedTrack and its predecessors Jerzy

Lewak, Paragon Concepts, and Nisus Software, Inc. have sold and marketed unmarked products

for many years under the ‘360 Patent, including File Clerk, Mailkeeper and Nisus Compact (which

contained File Clerk). Notably, SpeedTrack does not contend that these products were marked

with the ‘360 Patent number. (See Letter from A. Block to P. Steadman, dated April 10, 2007,

attached as Exh. J). Rather, SpeedTrack’s only defenses are legal ones – SpeedTrack argues 1)

that the marking provisions of Section 287 do not apply because SpeedTrack has only asserted

method claims against Wal-Mart in this case; and 2) that File Clerk, Mailkeeper and Nisus

Compact are not covered by the claims the ‘360 Patent.

merit.

Both of these arguments are without

3 SpeedTrack allegedly has recently marked some products with the ‘360 Patent number, but upon information and belief, it has made only one sale within the United States. At the time of this sale, both unmarked Nisus products, Compact and Mailkeeper, were available for purchase or free

download. Because SpeedTrack cannot establish that “substantially all” of the products embodying the patent were marked, SpeedTrack is not entitled to pre-filing damages. See Amer.

Med. Sys., 6 F.3d at 1537 (“The world cannot be ‘put on notice’ if the patentee marks certain products, but continues to ship unmarked products.”).

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First, SpeedTrack cannot avoid the marking requirements of Section 287 by asserting only

the method claims of the ‘360 Patent. The Federal Circuit has explicitly stated:

Where the patent contains both apparatus and method claims… to the

extent that there is a tangible item to mark by which notice of the asserted method claims can be given, a party is obliged to do so if it intends to avail itself of the constructive notice provisions of section

287(a).

Amer. Med. Sys., 6 F.3d at 1538-39. According to the Federal Circuit, SpeedTrack cannot

circumvent the marking requirements of Section 287 by asserting only method claims. 4 Almost

every court applying American Medical Systems has so held. See, e.g., Merck & Co., Inc. v.

MediPlan Health Consulting, Inc., 434 F. Supp. 2d 257, 261-262 (S.D.N.Y. 2006) (rejecting

plaintiff’s claim that when “a patent contains both method and product claims, compliance with

the statute is not required if only the method claims of the patent are asserted” and finding that

“marking is required where the patent contains both method and product claims”); Mosel Vitelic

Corp. v. Micron Tech., Inc., 2000 WL 1728351, *2 (D. Del. 2000) (holding that where a patent

contains both method and product claims, the notice provisions of § 287 are applicable, despite

the fact that the patentee may be asserting only the method claims; “the only time that [§ 287]

[does] not come into play is when the patent is directed to only a method or a process”); see also

Halliburton Services v. Smith Int’l Inc., 317 F. Supp. 2d 719, 725 (E.D. Tex. 2004) (same); Philips

Elecs North Am. Corp. v. Contec Corp., 312 F. Supp. 2d 649, 651-652 (D. Del. 2004) (same).

Second, SpeedTrack has no basis to contend that the File Clerk, Mailkeeper and Nisus

Compact products sold by its predecessors were not covered by the ‘360 Patent. SpeedTrack’s

4 The single case cited by SpeedTrack in support of its position, Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075, 1076 (Fed. Cir. 1983), does not save SpeedTrack. In Hanson, the patent was described as containing only method or process claims. Id. at 1083 (“In affirming the district court’s finding of infringement in this case, the court of appeals stated in the first

sentence of its opinion that ‘the patent alleged to be infringed is [for] a process for making snow

for winter sports.’”). Moreover, the Federal Circuit explicitly limited its decision to the particular facts of that case. Id. (“Our decision is a narrow one. We hold only that on the record in this

case, the findings of the magistrate are not clearly erroneous.”).

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position contradicts public statements made by SpeedTrack’s predecessors, and the specification

2

of the ‘360 Patent. For example, a public statement issued by Jerzy Lewak, a named inventor on

3

the ‘360 Patent and former CEO of Nisus Software, Inc., promoted the “Guided Information

4

Access” (“GIA”) technology developed by Nisus and identified Mailkeeper as “one product that

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uses [GIA technology].” (Exh. G, Lewak email, at 2). A screenshot taken from the Nisus website

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reveals that, as of April 1998, Nisus considered the GIA technology to be covered by the ‘360

7

Patent: “GIA stands for Guided Information Access

The technology was developed and

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patented (US Patent number: 5,544,360, foreign patents pending) by Nisus Software Inc.” (Exh.

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H, “Frequently Asked Questions About GIA,at 1). In addition, the specification of the ‘360

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Patent includes screenshots from the same Nisus software that SpeedTrack now contends is not

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covered by the patent. In fact, Figure 5 represents a screenshot of the File Clerk engine included

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in the Nisus Compact software, which the ‘360 Patent describes as “an example of a file manager

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display in accordance with the present invention.” (Exh. I, ‘360 Patent, 8:31-32).

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SpeedTrack cannot demonstrate that its predecessors marked the File Clerk, Mailkeeper,

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and Compact products with the ‘360 Patent number in a substantially consistent and continuous

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manner. Therefore, SpeedTrack is not entitled to recover any pre-filing damages and should not

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be allowed to burden Wal-Mart by seeking damages-related discovery prior to the filing date in

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IV. CONCLUSION

For the foregoing reasons, Wal-Mart and Endeca respectfully request that this Court

bifurcate the parties for the purposes of discovery and trial and proceed with Endeca’s jury-waived

liability trial, or, in the alternative, bifurcate damages and stay damages-related discovery pending

resolution of the liability issues. In the event that the Court does not stay damages discovery,

Wal-Mart respectfully requests a protective order to prevent SpeedTrack from seeking discovery

related to pre-filing damages.

DATED: August 27, 2007

PROSKAUER ROSE LLP Steven M. Bauer (admitted pro hac vice) Colin G. Cabral (admitted pro hac vice) Jonathan E. Rich

By:

/s/ Jonathan E. Rich

Jonathan E. Rich

Attorneys for Defendants ENDECA TECHNOLOGIES, INC. and WAL-MART STORES, INC

FARELLA BRAUN &MARTEL LLP Roderick M. Thompson Andrew Leibnitz Stephanie P. Skaff Cory M. Mason

Attorneys for Defendant, WAL-MART STORES, INC.

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PROOF OF SERVICE

STATE OF CALIFORNIA, COUNTY OF LOS ANGELES I declare that: I am employed in the county of Los Angeles, California. I am over the age of eighteen years and not a party to the within cause; my business address is 2049 Century Park East, Suite 3200, Los Angeles, California 90067-3206. On August 27, 2007, I served the forgoing document, described as WAL-MART STORES, INC. AND ENDECA TECHNOLOGIES, INC.’S NOTICE OF MOTION AND MOTION TO BIFURCATE LIABILITY AND DAMAGES ISSUES AND PROCEED WITH A JURY-WAIVED LIABILITY TRIAL on the interested parties in this action by transmitting via United States District Court for the Northern District of California Electronic Case Filing Program the document(s) listed above by uploading the electronic files for each of the above-listed documents on this date.

Executed on August 27, 2007 at Los Angeles, CA.

/s/

Jonathan E. Rich

Jonathan E. Rich

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