By Order dated October 30, 2009 (PDF), Magistrate Judge Leonard P. Stark issued his recommendations on Defendant Swisslog’s Motion to Dismiss Due to Lack of Entire Patent Ownership, the parties’ claim construction contentions with respect to the claims in dispute, several motions for summary judgment filed by the parties, and certain evidentiary motions.

Plaintiff, McKesson Automation, Inc. (“Plaintiff” or “McKesson”), and Defendant, Swisslog Holdings AG (“Defendant” or “Swisslog”), are in the business of manufacturing and selling automated pharmaceutical retrieval and distribution systems to hospitals.  In this patent infringement action, McKesson asserts that Swisslog’s PillPick System infringes two of McKesson’s patents, U.S. Patent No. 5,468,110 (“the ‘110 patent”) and U.S. Patent No. 5,593,267 (“the ‘267 patent”). The ‘110 and ‘267 patents disclose a system for filling prescriptions and restocking medicines in a pharmacy. 

Judge Stark Recommends that Swisslog’s Motion to Dismiss Be Denied

Swisslog moved to dismiss based on its contentions that McKesson failed to establish that it holds all rights, title and interest in the ‘110 and ‘267 patents.  Essentially, Swisslog’s motion asked the Court to reconsider the conclusion previously reached by Magistrate Judge Stark in his Report and Recommendations of August 29, 2008 that a 1990 transaction between Automated Healtchare, Inc. (McKesson’s predecessor-in-interest and, hereinafter, “AHI”) and several investors did not constitute an assignment of patent rights to the investors but, instead, only gave the investors a security interest in AHI’s patent rights.  Swisslog had filed objections to Judge Stark’s August 2008 Report and Recommendations and Judge Robinson did not adopt Judge Stark’s recommendation to deny Swisslog’s previous motion to dismiss on the merits.  Rather, Judge Robinson denied Swisslog’s previous motion to dismiss without prejudice to Swisslog to renew it later.

Upon consideration of Swisslog’s renewed motion to dismiss, Judge Stark found that nothing had occurred that changed his view that AHI gave the investors a security interest in AHI’s patent rights as opposed to assigning its patent rights to the investors.  Specifically, Judge Stark noted that all of the reasons on which he relied to find in his prior Report and Recommendations that “a security interest was created, and that security interest was automatically extinguished when AHI repaid the loans were unaffected by the subsequent history in the record.”  Accordingly, Judge Stark again recommended that Swisslog’s Motion to Dismiss be denied.

Judge Stark’s Rulings on the Evidentiary Motions

Both parties filed motions to preclude certain testimony of their opponent’s expert(s).    Specifically, Swisslog moved to preclude McKesson’s experts from providing testimony regarding infringement by equivalents or the materiality of prior art.  For the sake of brevity, I will only discuss Swisslog’s motion to preclude McKesson’s expert from testifying about infringement by equivalents in this summary.

With respect to attempting to preclude McKesson’s expert’s testimony on infringement by equivalents, Swisslog contended that the doctrine of equivalents analysis by McKesson’s expert in his expert report was inadequate under Federal Rule of Civil Procedure 26(a) and Federal Rule of Evidence 702 in that it provided no equivalency analysis for certain claims and contains only recitations of the legal test for infringement by equivalents and conclusory statements of infringement with respect to the remaining claims.  McKesson countered asserting that its expert’s analysis follows established legal principles and, for every claim limitation for which the expert concludes the doctrine of equivalents is applicable, he describes the function, way and result of Swisslog’s accused system for purposes of comparison to the relevant claim limitation.  Moreover, McKesson asserted that Swisslog’s complaints improperly focused on the weight of the evidence provided by McKesson’s expert’s analysis rather than the relevant inquiries under Federal Rule of Evidence 702, Daubert and Federal Rule of Civil Procedure 26(a)(2)(B), which focus instead on notice, reliability and utility.

After reviewing McKesson’s expert’s report and the parties’ contentions regarding it, the Court denied Swisslog’s motion to preclude McKesson’s expert’s testimony on infringement by equivalents.  In denying the motion, the Court found that (1) the experience and methodology of McKesson’s expert was sufficient under Daubert, (2) McKesson met its burden of showing qualifications, reliability, and fit with respect to its expert’s opinion, (3) Swisslog’s contentions largely related to the weight that McKesson’s expert’s testimony may be given by the factfinder, rather than the admissibility of that expert’s testimony, and (4) there was no showing of bad faith or incurable prejudice.

Significantly, the Court emphasized that, in conducting the required analysis under Federal Rule of Evidence 702 and Daubert, “it is not proper to attempt to assess the correctness of the expert’s opinion.”  The Court also noted that each of the criticisms raised by Swisslog could be adequately explored during cross-examination of the experts at trial.