Fredericton, New Brunswick, June 10, 2021
PRESENT: Madam Justice McDonald
BETWEEN:
PAID SEARCH ENGINE TOOLS, LLC
Plaintiff/ Defendant by Counterclaim
and
GOOGLE CANADA CORPORATION, GOOGLE LLC AND ALPHABET INC.
Defendants/ Plaintiffs by Counterclaim
ORDER AND REASONS
[1] This is a motion by the Defendants, Google Canada Corporation, Google LLC, and Alphabet Inc (Google), seeking leave to file and rely upon the reply expert reports of Dr. David C. Parkes dated May 6, 2021 (Third Parkes Report), and Dr. Steven Tadelis dated May 7, 2021 (Second Tadelis Report). Google argues that the reply reports were necessitated by new evidence contained in the Plaintiff’s, Paid Search Engine Tools, LLC (PSET), responding expert reports on construction. Google argues that it is entitled to respond to new evidence and that fairness requires that it be permitted to file the reply reports.
Background
[2] The underlying proceeding is a patent infringement action by PSET against Google. PSET alleges that portions of Google’s Google Ads, previously known as AdWords, and AdSense for Search, infringe various claims of its Canadian Patent No. 2,415,167 (the “167 Patent”), entitled “Paid Search Engine Bid Management”. Google counterclaims alleging that the 167 Patent is invalid on numerous grounds. This action is not bifurcated.
[3] This matter has been case managed and, in her January 13, 2021 Order, Prothonotary Aylen set out the following schedule for the delivery of expert reports:
- The timetable for the delivery of expert reports is as follows:
a. Expert reports in chief (Plaintiff on construction and infringement, and monetary remedies; Defendants on construction and validity) shall be served by January 29, 2021.
b. Responding expert reports (Plaintiff on construction and validity; Defendants on construction and infringement (including non-infringing alternatives/baselines), and monetary remedies (including deductions and apportionment of costs)) shall be served by March 31, 2021.
c. Reply expert reports of the Plaintiff, as of right, on the issues of non-infringing alternatives/baselines and deduction and apportionment of costs shall be served by May 7, 2021;
d. All other proposed reply expert reports shall be served by May 7, 2021.
[4] On March 26th, 2021, on the consent of the parties, Prothonotary Aylen extended the deadline for service of the responding expert reports to April 7, 2021.
[5] The parties have filed the following reports:
PSET
- Dr. Haruvy’s report in-chief re monetary remedies, Jan 29, 2021 (First Haruvy Report)
- Ms. Stricchiola’s report in-chief re construction and infringement, Jan 29, 2021 (First Stricchiola Report)
- Dr. Haruvy’s responding report re validity, Apr 7, 2021 (Second Haruvy Report)
- Ms. Stricchiola’s responding report re construction and validity, Apr 7, 2021 (Second Stricchiola Report)
- Dr. Haruvy’s reply report, May 7, 2021
- Ms. Stricchiola’s reply report, May 7, 2021.
- Dr. Parkes’s report in-chief re construction and validity, Jan 29, 2021 (First Parkes Report)
- Dr. Parkes’s responding report re construction and infringement, Apr 7, 2021 (Second Parkes Report)
- Dr. Tadelis’s report in-chief re monetary remedies, Apr 7, 2021 (First Tadelis Report).
[6] On this Motion Google seeks leave to file and rely upon the following reports:
- Dr. Parkes’s reply report re construction and infringement, May 7, 2021
- Dr. Tadelis’s reply report re monetary remedies, May 7, 2021.
[7] Google argues that the Second Haruvy Report and the Second Stricchiola Report, both served on April 7, 2020, contain new evidence. As these reports were served on the same day as Google’s responding reports, Google has not had an opportunity to respond to this new evidence.
[8] The claim that the Second Haruvy Report contains “new evidence” seems to arise from the fact that Dr. Haruvy’s first report only addressed the issue of monetary remedy. The first Stricchiola report provided opinion on construction and infringement of the 167 Patent. Both Dr. Haruvy’s and Ms. Stricchiola’s second reports responded to Dr. Parkes’s first report on construction and validity of the 167 Patent. Dr. Haruvy was therefore providing a response to Dr. Parkes’s evidence on validity without having previously provided his opinion on construction.
[9] In opining on the validity of the 167 Patent, Dr. Haruvy makes necessary assertions about the claim date for each of the asserted claims and the scope of the patent. He also gives his opinion on the identity of the skilled person. However, he uses the skilled person description of Dr. Parkes for his analysis.
[10] Google provided PSET with the proposed Reply reports on May 7, 2021 and this Motion was filed on May 27, 2021 and heard on June 8, 2021.
[11] The trial is scheduled to commence on June 14, 2021.
Issues
[12] The issues are:
Are the Third Parkes Report and Second Tadelis Report proper reply evidence?
Should the Court exercise its discretion to allow the reports?
Analysis
General Principles
[13] Generally, the approach with respect to reply evidence is outlined by Justice Stratas in Amgen Canada Inc v Apotex Inc, 2016 FCA 121 as follows at para 12:
At trial, it is a well-known rule of evidence that a plaintiff cannot split its case by adducing evidence on reply that is merely confirmatory of the case in-chief: Allcock, Laight & Westwood Ltd. v. Patten (1966), 1966 Can LII 282 (ON CA), [1967] 1 O.R. 18. Instead, reply evidence must relate to issues raised in the defence’s case that were not raised in the plaintiff’s case in-chief: Halford v. Seed Hawk Inc., 2003 FCT 141 at paras. 14-15. Further, there is good reason to restrict the admission of evidence on reply. As Wigmore argued, allowing a wide range of evidence could be unfair to the respondent who had supposed the case in chief would be the entire case to meet. It could also create an unending alternation of successive fragments of the case coming forward: John Henry Wigmore, Evidence in Trials at Common Law, revised by James H. Chadbourn (Toronto: Little, Brown and Co, 1976) v. 6 at p. 672.
[14] The principles governing the admission of reply evidence were addressed by the Associate Chief Justice in Merck Sharp & Dohme Corp v Wyeth LLC, 2020 FC 1087. Quoting from Janssen Inc v Teva Canada Limited, 2019 FC 1309 at para 16, citing Halford v Seed Hawk Inc, 2003 FCT 141 at para 15, Justice Gagné notes, at para 9, the following four principles:
1. Evidence which is simply confirmatory of evidence already before the court is not to be allowed.
2. Evidence which is directed to a matter raised for the first time in cross examination and which ought to have been part of the plaintiff's case in chief is not to be allowed. Any other new matter relevant to a matter in issue, and not simply for the purpose of contradicting a defence witness, may be allowed.
Evidence which is simply a rebuttal of evidence led as part of the defence case and which could have been led in chief is not to be admitted.
Evidence which is excluded because it should have been led as part of the plaintiff's case in chief will be examined to determine if it should be admitted in the exercise of trial judge's discretion.
[15] In Janssen, Justice Manson states, “Mere disagreement with statements made by another witness is not proper subject matter for reply evidence. Disagreements between experts can be addressed by cross-examination.” In Bauer Hockey Ltd v Sport Maska Inc, 2020 FC 212 at para 16, Justice Zinn also relies on the Halford principles and adds that parties should not bring a motion for leave to file reply expert reports “simply to emphasize perceived shortcomings in the other party’s expert evidence. Those shortcomings may be explored during cross-examination or highlighted in argument.”
[16] Additionally, the following four factors noted in Merck Sharp at para 10, and Merck-Frosst v Canada (Health), 2009 FC 914 at para 10, should be considered in deciding whether to allow reply evidence:
whether the further evidence serves the interests of justice;
whether the further evidence assists the Court in making its determination on the merits;
whether granting the motion will cause substantial or serious prejudice to the other side; and
whether the reply evidence was available and/or could not be anticipated as being relevant at an earlier date.
- Are the Third Parkes Report and Second Tadelis Report proper reply evidence?
[17] As mentioned above, Google seeks to adduce this reply evidence because it argues that PSET’s second reports contained new evidence on the following issues:
the identity of the skilled person;
the claim date;
whether the Vickrey-Clarke-Groves (VCG) auction format is a non-infringing alternative; and
new claims construction generally.
Skilled Person
[18] Google argues that the Second Haruvy Report provides an opinion on the identity of the skilled person and this necessitates reply evidence from its expert, Dr. Parkes. PSET argues that Dr. Haruvy’s evidence on the skilled person was in response to Dr. Parkes’ and could not have been presented in his report in-chief.
[19] The Second Haruvy Report at paragraph 4 discusses “who would be the likely target reader of the 167 Patent and about their understanding, back in 2002, of what these claims would mean and how to apply these concepts.” He disagrees with Dr. Parkes that the skilled person would require a university degree in computer science (para 100) and that the skilled person would require any specific knowledge or experience in market design, including for online markets, obtained through a university degree in economics or a related field (para 68). He also states that the intended audience of the 167 Patent is people with practical needs in managing paid search engine advertising, not an auction theorist (para 70). However, he then conducts the remainder of his analysis as to the validity of the 167 Patent based on the skilled person as described by Dr. Parkes (para 102).
[20] Google argues that without leave to adduce the reply reports, it will be deprived of the opportunity to respond to Dr. Haruvy’s description of the skilled person. With respect to the skilled person, I have summarized the following five points from paragraphs 10–17 of the Third Parkes Report which are replies to Dr. Haruvy on the following:
- Difference in instructions from counsel between the skilled person as one “who can ‘appreciate the nature and description of the invention’” and one who can “put the invention into practice using only the disclosure in the patent”;
- That the skilled Person does not need any knowledge of computer programming;
- That the skilled Person would be “a manager or executive”;
- That the “the consequences of this patent are public facing” and that that requires that the Skilled Person would have “a relatively senior position”; and
- That the Skilled Person would not require knowledge of auctions if we are to consider claims 28 and above.
[21] The instructions from counsel referred to by Dr. Haruvy in 1 above, are the same as those described in paragraph 48 of the First Stricchiola Report. Therefore, Google has already had an opportunity to respond to this point. In addition, expert evidence is not necessary to point out a difference in legal principles utilized by the experts. As stated in Bauer, this could be done by counsel in argument or examination.
[22] Dr. Parkes admits that 2 and 5 above are already addressed in his first and second reports. As noted in Janssen and Halford, “Evidence which is simply confirmatory of evidence already before the court is not to be allowed”.
[23] The only potentially “new” evidence on the description of the skilled person in the Third Parkes Report concerns whether it would be necessary for the skilled person to be in a relatively senior position, 4 above, or manager or executive, 3 above. Dr. Parkes states that he disagrees with Dr. Haruvy on this point because there is nothing in the 167 Patent to suggest this, and because:
a “manager or executive” as described by Dr. Haruvy is disassociated with the primary audience described in the 167 Patent, namely, a developer of a bidding tool to interface with paid search engines. For example, developers of tools such as ClickPatrol, ManageBid, Did-It, and the inventors’ own KBO tool.
[24] Dr. Parkes also disagrees with Dr. Haruvy on these points because there is nothing in the 167 Patent to support the assertion that a patent with public-facing consequences would require that the skilled person hold a relatively senior position. That a senior position is not required was not mentioned in Dr. Parkes’s first and second reports.
[25] Although this is the first time Dr. Parkes has expressed this opinion, at its core this is a disagreement with Dr. Haruvy’s reasoning which can be addressed in cross-examination or in argument.
[26] A disagreement among experts on the issue of the “skilled person” is not grounds to permit reply evidence.
Claim Date
[27] Google argues that Ms. Stricchiola and Dr. Haruvy discuss, for the first time in their second reports, the claim dates relevant to the asserted claims and that these dates conflict with the pleadings. By contrast, PSET argues that the claim date was not addressed prior to their second reports because the claim date is only relevant to validity and not relevant to construction or infringement issues.
[28] PSET’s Further Amended Statement of Claim at paragraph 9 states that the claim date of each of the Asserted Claims is July 5, 2000.
[29] Paragraph 12 of the Second Haruvy Report states that claims 1–27 are entitled to a claim date of July 5, 2000 (priority application date) and the remaining claims are entitled to a claim date of July 5, 2001 (Canada filing date). While the claim date is not referenced in the First Haruvy Report, he notes at paragraph 23 of his Second Report, that he has been asked to respond to the validity evidence presented in Dr. Parkes’s report in-chief, which includes the claim date. Ms. Stricchiola also did not reference the claim date in her first report. At paragraph 7 of her second report, her opinion is the same as Dr. Haruvy’s.
[30] Paragraph 19(i) of the First Parkes Report states “None of the Asserted Claims are supported by the priority application to the 167 Patent, and therefore the claim date of the 167 Patent ought to be July 5, 2001”. The report contains a full discussion of the evidence on which Dr. Parkes relies in determining that each asserted claim was not disclosed in the US patent application, and therefore not eligible for the earlier priority claim date (paras 154–184).
[31] Even if PSET’s experts’ opinions appear to conflict with the claim date in PSET’s pleadings, the First Parkes Report fully sets out the evidence in support of his opinion that the later claim date applies to all claims. The fact that PSET’s experts later agreed with him on the claim date for some of the claims does not necessitate an opportunity for reply.
[32] The Third Parkes Report adds nothing new, stating only that he agrees with PSET’s experts regarding claims 28 and above (para 66).
[33] On the issue of the claim date, the Third Parkes Report is merely confirmatory of an opinion already expressed. Therefore, according to Janssen and Halford,it is not the proper subject matter for reply evidence.
VCG Auctions as a Non-Infringing Alterative
[34] This issue relates to both of the proposed Reply reports.
[35] Google argues that reply evidence on VCG is necessary because Dr. Haruvy’s and Ms. Stricchiola’s opinions on whether VCG auctions would infringe diverge. It argues that Dr. Haruvy’s construction, for the first time in his second report, establishes that VCG auctions would not infringe while Ms. Stricchiola’s position on this shifted over time, with the construction in her first report leaving it unclear as to whether VCG auctions would infringe, while in her second report she concludes that they would infringe.
[36] Google argues that, based on the claims construction presented in Ms. Stricchiola’s report in-chief, Dr. Parkes was not able to come to a clear conclusion in his responding report on whether a VCG auction would infringe the 167 Patent or would be a non-infringing alternative. As a result, Dr. Tadelis was not able to accurately calculate the amount of Google’s profits that came from the use of allegedly infringing technologies. Google, therefore, argues that the lateness of Dr. Haruvy’s opinion, the change in Ms. Stricchiola’s, and the fact that they do not agree means that the Court would benefit from reply by both of its experts.
[37] PSET argues that the burden of proof on whether VCG auctions would infringe is on Goggle, and it is not dependant on the evidence of PSET’s experts.
The Third Parkes Report
[38] Paragraph 97 of the Third Parkes Report concerning VCG auctions, states:
[A]ccording to Dr. Haruvy a VCG auction was part of the common general knowledge, it “extends” the 1960s Vickrey auction, and the Skilled Person “would understand that the method in the patent is not an extension of Vickrey auction”. Thus, according to Dr. Haruvy, the Skilled Person would understand that the method in the 167 Patent is not a VCG auction, and thus a VCG auction would not infringe under Dr. Haruvy’s claim construction.
[39] This is not a “new” opinion on the issue of VCG auctions nor does it provide evidence to assist the Court in understanding the claimed divergent opinions of PSET’s experts. It merely makes an inference from Dr. Haruvy’s statements on VCG auctions.
[40] Paragraph 86 of the Second Haruvy Report states his opinion that VCG is an extension of Vickrey auctions and that “the method in the patent is not an extension of Vickrey auction” (para 327). Accordingly, Dr. Parkes’ opinion on this issue is not necessary as the same point can be made in cross-examination or argument.
[41] There are no grounds to admit the Third Parkes Report because of its evidence concerning VCG auctions.
The Second Tadelis Report
[42] According to Google, the Second Tadelis Report, which provides an economic opinion on VCG, is necessary because of the changed position taken by PSET’s experts on whether VCG is a non-infringing alternative. Google argues that while a VCG auction format was known as a potential alternative, it was not relevant as an actual non-infringing alternative/baseline until PSET presented expert evidence on construction that confirmed it did not infringe.
[43] I note that at paragraph 135 of the First Tadelis Report, VCG is listed as a non-infringing alternative. The features, advantages, and disadvantages of VCG along with other non-fringing alternatives are discussed and the report concludes, at paragraph 202, that there is “no compelling evidence that Google’s revenues and profits from Search Ads would have been measurably different had a non-infringing option been in place as of 2017”.
[44] The Second Tadelis Report confirms at paragraph 7 that the same conclusion “applies equally to the case in which a VCG auction is among the non-infringing options”.
[45] Google was aware that VCG was a potential non-infringing alternative before the submission of Dr. Tadelis’s first report and it is addressed in that report. Neither Google nor Dr. Tadelis has provided any explanation as to why all evidence relevant to VCG as a non-infringing alternative could not have been led in Dr. Tadelis’s evidence in-chief in the first report.
[46] PSET has not conceded that the VCG auction format does not infringe and one of its experts maintains that it does infringe. Even if PSET’s experts take differing positions on the VCG issue, Google has failed to establish why it was unable to provide full evidence of VCG when it was known to be a potential non-infringing alternative.
[47] In my view, the VCG issue has been on the table throughout this litigation and Google should have anticipated it as being relevant and led its evidence at an earlier date.
[48] I conclude that the VCG auction evidence in the Second Tadelis Report is not proper subject matter for reply evidence as this issue cannot be said to be unanticipated.
New Claims Construction
[49] Google submits that the Third Parkes Report is necessary to respond generally to Dr. Haruvy’s new claims construction evidence that is inconsistent with Ms. Stricchiola’s evidence and was improperly omitted from his report in-chief. On the contrary, PSET argues that Dr. Haruvy’s evidence is responding to the First Parkes Report and that there is no inconsistency between Dr. Haruvy’s and Ms. Stricchiola’s evidence.
[50] Prothonotary Aylen’s Order clearly permits PSET’s experts to submit evidence on construction in their second reports. The Second Haruvy Report responds to the construction and validity evidence in the First Parkes Report. Any perceived inconsistencies between this evidence and that provided by Ms. Stricchiola should be dealt with through examination and argument.
[51] Google has not established that there is any ground related to Dr. Haruvy’s “new” construction on which the Third Parkes Report should be admitted.
2. Should the Court exercise its discretion?
[52] Google argues that even if the Court determines that the expert reports it seeks to introduce are not Reply evidence, the Court retains discretion to admit the evidence (Bristol-Myers Squibb Canada Co v Apotex Inc, 2019 FC 1379 at para 12). Google’s position is that there is no prejudice to PSET and no delay will result as the reports are from existing experts who are scheduled to appear at trial. Google also submits that the reports will be of assistance to the Court.
[53] PSET claims that it will be prejudiced if new evidence and arguments are allowed at this stage, less than one week before the trial, as it would deprive PSET of the opportunity to respond on key issues, such as non-infringing alternatives. There is no time for sur-reply reports and because of the limited time for each expert to testify at trial, PSET may not be able to respond effectively at trial.
[54] In determining if the Court should exercise its discretion, I have concluded that the proposed reply reports do not contain “new” evidence and therefore do not assist the Court in its task of making a determination on the merits. I am also of the view that the subject matter addressed in the reply reports has already been offered in earlier reports, or could have been anticipated at an earlier date. In the circumstances, I agree that PSET would suffer prejudice if the reports were allowed at this late stage in the proceedings.
[55] For the reasons above, Google’s motion to file reply evidence is dismissed with costs payable to PSET.
ORDER IN T-40-18
THIS COURT ORDERS that:
Google’s motion to file reply evidence is dismissed.
PSET is awarded its costs in the middle of Column III of Tariff B.
"Ann Marie McDonald"
Judge
FEDERAL COURT
SOLICITORS OF RECORD
DOCKET:
T-40-18
STYLE OF CAUSE:
PAID SEARCH ENGINE TOOLS, LLC v GOOGLE CANADA CORPORATION, GOOGLE LLC AND ALPHABET INC.
PLACE OF HEARING:
HEARD VIA VIDEOCONFERENCE
DATE OF HEARING:
JUNE 8, 2021
ORDER AND reasons:
MCdonald J.
DATED:
june 10, 2021
APPEARANCES:
Marcus Klee Devin Doyle Jonathan Stainsby
For The PLAINTIFF
Michael Crichton Marc Richard
For The DEFENDANTS
SOLICITORS OF RECORD:
AITKEN KLEE LLP Ottawa, Ontario
For The PLAINTIFF
Gowling WLG (Canada) LLP Ottawa, Ontario
For The DEFENDANTS