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Paice LLC v. Hyundai Motor Co.

United States District Court, D. Maryland, Northern Division

October 29, 2014

PAICE LLC, et al., Plaintiffs,
v.
HYUNDAI MOTOR COMPANY, et al., Defendants.

MEMORANDUM OPINION

WILLIAM D. QUARLES, Jr., District Judge.

Paice LLC ("Paice") and The Abell Foundation, Inc. ("Abell") (collectively, the "Plaintiffs") sued Hyundai Motor Company, Hyundai Motor America (together, "Hyundai"), and others[1] (collectively, the "Defendants") for patent infringement. Pending are non-party Toyota Motor Corp.'s ("Toyota") motion for reconsideration of Magistrate Judge Susan K. Gauvey's decision allowing Abell to discover a Toyota/Paice settlement agreement, and the Defendants' motions for leave to file second, third, and fourth invalidity contentions. For the following reasons, Toyota's motion will be denied, and the Defendants' motions will be granted in part and denied in part.

I. Background[2]

A. The Parties

Paice is a Delaware limited liability company with a place of business in Bonita Springs, Florida. 2d Am. Compl. ¶ 1. Since Paice was established in 1992 by Doctor Alex J. Severinsky, the company has developed "innovative hybrid electric technology" to promote fuel efficiency, lower emissions, and "superior driving performance." Id. According to Paice, its hybrid patents are "well known" in the automotive industry. Id. ¶ 30.[3] Abell, a Maryland corporation, is a nonprofit charitable organization whose objectives include increasing energy efficiency and producing alternative energy. Id. ¶ 2. In 1998, Abell was introduced to Paice and has become an equity owner of the company. Id. Hyundai Motor Company and Kia Motors Corporation are Korean companies. Id. ¶¶ 3-4. Hyundai Motor America is a California subsidiary of Hyundai Motor Company, id. ¶ 5; Kia Motors America, Inc. is a California subsidiary of Kia Motors Corporation, id. ¶ 6. Hyundai and Kia are "related companies and share information and technology. Id. ¶ 34.

B. The Patents in Suit

Paice and Abell are co-owners of U.S. Patent Nos. 6, 209, 672 (the "672 patent");[4] 7, 104, 347 (the "347 patent");[5] 7, 237, 634 (the "634 patent");[6] 7, 559, 388 (the "388 patent");[7] and 8, 214, 097 (the "097 patent").[8] 2d Am. Compl. ¶¶ 11-16. The 347, 634, 388, and 097 patents issued from continuation-inpart applications relating to the 672 patent. Id. ¶ 16. The 672 patent is entitled "Hybrid Vehicle" and protects a "hybrid electric vehicle that is fully competitive with presently conventional vehicles in performance, operating convenience, and cost, while achieving substantially improved fuel economy and reduced pollutant emissions." 672 patent, Col. 1, 11.13-18.[9]

C. Procedural History

On February 16, 2012, the Plaintiffs sued the Defendants for directly, indirectly, and willfully infringing the 634, 347, and 388 patents, in violation of 35 U.S.C. § 271. ECF No. 1. On May 22, 2012, the Defendants moved to dismiss. ECF No. 14. On June 8, 2012, the Plaintiffs opposed the motion and moved for leave to file an amended complaint. ECF No. 24. On June 13, 2012, the Court denied the Defendants' motion to dismiss as moot and deemed the proposed amended complaint filed as of June 13, 2012. ECF No. 26. Also on June 13, 2012, the Plaintiffs filed the first amended complaint. ECF No. 27.[10] On June 27, 2012, the Defendants moved to dismiss for failure to state a claim. ECF No. 29. On July 16, 2012, the Plaintiffs opposed the motion. ECF No. 30. On July 30, 2012, the Defendants replied. ECF No. 31. On March 27, 2013, the Court denied the Defendants' motion to dismiss. ECF Nos. 32, 33.

On April 10, 2013, the Defendants answered the amended complaint and asserted counterclaims for declaratory judgment of the invalidity and non-infringement of the patents. ECF No. 34 at 15-19. On May 6, 2013, the Plaintiffs answered the Defendants' counterclaims. ECF No. 38. On May 20, 2013, the Court entered a scheduling order pursuant to Local Rule 103.9. ECF No. 49. On May 28, 2013, the Court modified the scheduling order to limit the number of proposed terms for construction to 15, and to limit the number of asserted claims to 30 within 15 days of the claim construction ruling. ECF No. 50.

On June 7, 2013, the Plaintiffs moved for leave to file a second amended complaint adding the 097 patent to the case. ECF No. 52.[11] On June 13, 2013, the Court entered a scheduling order superseding the May 20, 2013 order. ECF No. 53. The new scheduling order required any motion to amend the pleadings to be filed within 60 days of the order. Id. at 1 ¶ 8. On June 24, 2013, the Defendants opposed the motion for leave to amend. ECF No. 56. On July 5, 2013, the parties submitted a joint discovery plan. ECF No. 58. On July 12, 2013, the Plaintiffs replied. ECF No. 62.

On August 13, 2013, the Defendants served the Plaintiffs with their invalidity contentions. See ECF No. 429-1 at 2. On November 5, 2013, the Defendants moved for leave to serve first amended invalidity contentions. ECF No. 74. On November 6, 2013, the case was referred to Magistrate Judge Susan K. Gauvey for discovery. ECF No. 76. On December 17, 2013, the Court granted leave to file a second amended complaint. ECF Nos. 92-93. On January 3, 2014, the Plaintiffs answered the amended complaint and counterclaimed. ECF No. 97.

On January 14, 2014, the Court held a claim construction hearing. ECF No. 106. On May 30, 2014, the Defendants moved for leave to serve second amended invalidity contentions. ECF No. 256. On June 16, 2014, the Plaintiffs opposed that motion. ECF No. 309. On July 3, 2014, the Defendants replied. ECF No. 353. On July 24, 2014, the Court issued its claim construction findings[12] and denied the Defendants' motion to file first invalidity contentions. ECF Nos. 399-400.

On August 19, 2014, the Defendants moved for leave to serve third amended invalidity contentions. ECF No. 429. On September 15, 2014, the Plaintiffs opposed the motion for leave to serve third amended invalidity contentions. ECF No. 448. On September 22, 2014, the Defendants replied. ECF No. 452. On September 22, 2014, the Defendants moved for leave to serve fourth amended invalidity contentions. ECF No. 454. On October 9, 2014, the Plaintiffs opposed the motion. ECF No. 463. On October 27, 2014, the Defendants replied. ECF No. 472.

II. Toyota's Motion for Reconsideration

A. The Discovery Dispute

In July 2010, non-party Toyota and Paice entered into a settlement agreement in which Toyota received a license for Paice's patents[13] in exchange for a royalty. See ECF No. 186 at 7. The settlement agreement included a confidentiality provision (Section 5.9) which states:

a) The terms of this Agreement are confidential and shall not be disclosed unless required by law.
b) Notwithstanding any provision to the contrary, a Party may disclose the Agreement:
1. In connection with an order of a court or other government body or as otherwise required by or in compliance with law, litigation discovery, or regulations; provided that the disclosing Party provides the other Party with reasonable notice to permit the other Party an opportunity to intervene and oppose disclosure, if available;
2. In confidence to the Party's attorneys, accountants, banks and financial sources; or
3. In confidence, in connection with the potential or actual sale of all or substantially all of the business assets to which this Agreement relates, so long as, in each case, the entity to which disclosure is made is bound to confidentiality on terms commensurate with those set forth herein.

ECF Nos. 177 at 3; 186 at 8.

On January 22, 2014, in this suit, the Defendants moved to compel the Plaintiffs to produce materials from the Paice-Toyota litigation. ECF No. 108. Paice informed Toyota that it would produce the settlement agreement under Section 5.9(b)(1) of the confidentiality clause. ECF No. 188 at 7. On January 28, 2014, Toyota moved to intervene. ECF No. 111. On April 3, 2014, Toyota and the Defendants reached a resolution which included the Defendants withdrawing their motion to compel. ECF Nos. 167, 171. Paice informed Toyota that it still intended to produce the settlement agreement. ECF No. 177, Ex. A. On April 9, 2014, Toyota moved for a protective order. ECF No. 177. On May 13, 2014, Judge Gauvey held a hearing on the protective order. ECF No. 217. On May 30, 2014, the Plaintiffs moved to compel Toyota to produce the settlement agreement. ECF No. 251. On July 7, 2014, Judge Gauvey issued a memorandum opinion and order. ECF No. 355.

Judge Gauvey held that Paice could not use the settlement agreement in the current litigation because of the confidentiality provision.[14] ECF No. 355 at 9-11. However, Judge Gauvey found that Abell was not bound by the settlement agreement because Abell purchased its interest in the patents after the Paice-Toyota settlement negotiations, and Abell was not a successor, assign, or beneficiary[15] under Delaware law.[16] Id. at 25-31. Although Judge Gauvey expressed doubt about the admissibility of the settlement agreement, [17] she determined that under the broad scope of discovery, Abell was entitled to production of the settlement agreement. Id. at 3.

On July 18, 2014, Toyota moved for reconsideration of whether Abell was bound by the confidentiality provision. ECF No. 390. On August 7, 2014, Abell opposed the motion for reconsideration. ECF No. ...


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