Posted On: January 30, 2007

Expert's Failure to Consider Claimed Invention Not a Matter of "Semantics"

In a follow-up opinion in the Inline-AOL Litigation, Magistrate Judge Thynge has held that an expert's enablement analysis that concerns only the accused infringing product must be excluded as unreliable. AOL's invalidity expert analyzed the accused ADSL system (an end-to-end digital transmission network), rather than the claimed invention, which encompasses a larger transmission system. Responding to Inline's motion to exclude, AOL argued that the expert applied an appropriate methodology to its enablement inquiry, since the narrower ADSL system fell within the full scope of the broader claims in issue.

The Court rejected this assertion, noting that rather than being an argument of "semantics," as AOL countered, Inline properly identified the expert's faulty analysis:

"At no time did [the expert] evaluate whether the patents would enable one of skill in the art to make or use the claimed invention without undue experimentation." (slip op. at 9) (emphasis in original)

By failing to consider the claimed invention, the expert's opinion on enablement was unreliable as a matter of law and therefore inadmissible.

<%media(20070130-Inline - Enablement.pdf|Inline Connection Corp. v. AOL Time Warner Inc., C.A. No. 02-272-MPT (D. Del. Jan. 29, 2007) (Thynge, M.J.).)%>

Posted On: January 30, 2007

New Procedure for Markman Briefing in Judge Sleet Cases

Over the past day, Judge Sleet has been issuing orders in all his cases requiring that the parties submit a joint appendix in conjunction with their Markman briefing that contains all intrinsic and extrinsic evidence relied on by the parties to support their respective constructions. The appendix is due at the time the parties file their answering briefs. A sample table of contents as found on Judge Sleet's website can be found <%media(20070130-Sleet Sample_Joint_Appendix.pdf|here)%>.

Posted On: January 27, 2007

How Much is Enough? - A Well-Pled Counterclaim

How specific must the allegations be in a counterclaim for inequitable conduct or affirmative defense of patent misuse to withstand a motion to strike? That was the issue recently before Judge Robinson in the <%media(20070127-Medpointe 2.pdf|Medpointe, Inc. v. Apotex Inc.)%> matter. C.A. 06-164, Memorandum Order (D. Del. Jan. 26, 2007) (Robinson, J.). It is well-established that inequitable conduct and patent misuse must be pled with particularity. The Court held that in order to be so pled, the allegation must "' specify the time, place and content of any alleged misrepresentations made to the PTO or otherwise 'give the defendant [d] notice of the precise misconduct alleged."" Id. (internal citations omitted). Because the defendants identified the misrepresentation and "the basis for asserting knowledge on the part of the applicants� there is nothing vague about 'time, place or content' vis a vis [the inequitable conduct allegation]" and therefore the Court denied the motion to strike.

Posted On: January 27, 2007

A Vacation to Europe… Deposition Testimony of Foreign Inventor

Where the inventor of the patent-in-suit is a German citizen, former employee of the plaintiff's predecessor and assigned all rights in the invention to his former employee, can he be subject to an "American-style" deposition? As with all things legal, it depends. Or so Judge Robinson recently held in the <%media(20070127-Medpointe 1.pdf|Medpointe Healthcare, Inc. v. Apotex Inc. )%> case. C.A. 06-164, Memorandum Order (D. Del. Jan. 26, 2007) (Robinson, J.).

The defendants in this case were seeking the deposition of a named inventor on the patent-in-suit and German citizen. The inventor was a former employee of an early predecessor company of the plaintiff. Crucial to the Court's decision was the language in the assignment of the inventor's rights to his former employee. The assignment required the inventor to: "�testify in any legal proceedings�" and "�do everything necessary to aid [his former employer] their successors and assigns, to obtain and enforce proper protection for said invention in the United States�" Id. at 2. (Note: the inventor had agreed to be deposed under the Hague Convention.) The Court held that this assignment only required the inventor to "testify in any legal proceedings" only on behalf of his former employer and "only generally obligates" him to "do everything necessary or desirable to aid" the former employer's successors and assigns (such as the plaintiff here). Id. If the assignment had required him to testify in any legal proceeding on behalf of his former employer or their successors or assigns the outcome likely would have been different. The type of broad language at issue here will not require a non-party to participate in an American-style deposition, and therefore the inventor must be deposed under German law via the Hague Convention process.

Also see Chief Judge Robinson's opinion on the issue of patent misuse <%media(4/20070516-Apotex.pdf|here)%>.

Posted On: January 27, 2007

Reasonable Royalty Figure Excludes Real Negotiations When Conducted For Settlement Purposes

When calculating reasonable-royalty damages, the "hypothetical license negotiation" assumes prominence in the factfinder's decisionmaking process. But what happens when a party to an infringement action seeks to introduce evidence of real negotiations to prove a reasonable royalty? According to Magistrate Judge Thynge, when those failed talks are part of settlement discussions, the numbers are inadmissible.

The Court reaffirmed the vitality of FRE 408 in patent cases by holding that the policy of encouraging "freely negotiated" settlements outweighs the obvious probative value that licensing negotiations have on a damages calculation:

"[D]efendants' argument for admission as providing a 'reality check' is directly contrary to FRE 408[,] which bars evidence when it is offered to prove the validity, invalidity or amount of a disputed claim."

According to the Court, the only significance of the data was its "effect to validate [the party's] assessment of the amount in dispute" - exactly what FRE 408 prohibits.

Interestingly, the Court implied that a potential exception exists: where an expert incorporates the underlying settlement data into his or her damages analysis, the rule may no longer apply.

<%media(20070127-Inline.pdf|Inline Connection Corp. v. AOL Time Warner Inc., C.A. No. 02-272-MPT (D. Del. Jan. 23, 2007) (Thynge, M.J.).)%>

Posted On: January 24, 2007

Two Statements of Note…

Two statements of note in a recent decision by Judge Jordan (<%media(20070124-Rocep - 05-141[1].pdf|Rocep Lusol Holdings Ltd. v. Permatex, Inc.)%>, C.A. No. 05-141 (D. Del. Jan. 19, 2007) (Jordan, J.):

- An inventor's testimony regarding the meaning of a piece of prior art will be given little or no consideration (as with claim construction) since the testimony is often self-serving. Id. at 12 n.5.

- Disclosing an element of a claim as an alternative embodiment in a piece of prior art rather than as the primary embodiment of the claim will not make a reference non-anticipating. Id. at 12 n.6.

The Court went on to grant the defendants' motion for summary judgment that the patent was invalid based on a PCT application filed by the inventor of the patent-in-suit.

Posted On: January 23, 2007

New District of Delaware Filings

1/16: Purdue Pharma L.P., The P.F. Laboratories, Inc. and Purdue Pharmaceuticals L.P. v. KV Pharmaceutical Company and Actavis Totowa LLC (patent infringement)

1/17: MPEG LA, L.L.C. v. ODS Optical Disc Service, Inc. (f/k/a ODS Business Services, Inc.); and ODS Business Services, Ltd. (declaratory judgment; Lanham Act)

1/18: Nesscap Co., Ltd. and Nesscap, Inc. v. Maxwell Technologies, Inc. (patent infringement)

1/19: Syngenta Biotechnology, Inc., Garwood Seed Co., Golden Seed Co., L.L.C., and Thorp Seed. Co. v. DeKalb Genetics Corp. and Monsanto Co. (declaratory judgment; patent non-infringement)

Posted On: January 17, 2007

Magistrate Judge Thynge Refuses To Limit Damages at Summary Judgment Stage

<%media(20070117-Inline 01-16-2007.pdf|Inline Connection Corp. v. AOL Time Warner Inc., C.A. No. 02-272-MPT (D. Del. Jan. 16, 2007).)%>
Magistrate Judge Thynge granted in part and denied in part defendants' motions for partial summary judgment regarding damages and motions in limine regarding the scope of plaintiff's expert testimony on damages.


The Court denied the motion in limine to exclude expert damages calculations based in part on non-infringing product because excluding this testimony would involve the evaluation and determination of facts underlying the expert report, which the Court found improper at the summary judgment stage. Conversely, the Court excluded expert testimony that included AOL�s �Bring Your Own Access� service offering as part of the damages calculation due to the irrelevance of such testimony.

As to plaintiffs� motion for summary judgment to limit damages to infringing products only (and to exclude non-infringing sales from the analysis), the Court found it inappropriate to restrict the damages analysis at this stage. Op. at 17. Thus, the Court refused to substitute its judgment for that of the jury and denied to the motion. Under Georgia Pacific, said the Court, "calculating a reasonable royalty is not merely a function of the number of infringing systems, other elements [presumably convoyed sales of noninfringing product given the context] contribute to and influence the analysis." Id.

Posted On: January 16, 2007

New District of Delaware Filings

1/12/07: Teva Pharmaceutical Indus. Ltd. and Teva Pharmaceuticals USA, Inc. v. Torrent Pharmaceuticals Ltd. and Torrent Pharma Inc. (patent infringement - declaratory judgment)
1/10/07: Keurig, Incorporated v. Kraft Foods Global, Inc., Tassimo Corporation, and Kraft Foods, Inc. (patent infringement)

Posted On: January 12, 2007

Magistrate Judge Reaffirms Duty to Mark Licensed Product

Last December, Magistrate Judge Mary Pat Thynge issued a decision on a patentee's continuing obligation to mark its licensed product. On a motion for reconsideration, the magistrate judge today issued a follow-up opinion reaffirming that duty:

"Inline [the patentee] made no attempt to mark, in that it never required its licensee . . . to mark tangible articles of the system. It is the burden of the patentee to show that either actual or constructive notice occurred and that it complied with the statutory requirements."

The Court also rejected Inline's assertions that the Court mistakenly concluded that the duty to mark runs to system, as opposed to only method, claims:

"Inline does not cite any affirmative case law which suggests that a patentee may avail itself of the benefits provided by [Section] 287(a), yet does not have a duty to mark merely because its patent contains a system, and not a 'method.' "

Beyond the marking considerations, this case is another example of the high bar set in this district for motions for reconsideration.

<%media(20070112-Inline.pdf|Inline Connection Corp. v. AOL Time Warner Inc., C.A. No. 02-272-MPT (D. Del. Jan. 12, 2007) (Thynge, M.J.).)%>

Posted On: January 12, 2007

In-House Employees and Access to Attorneys' Eyes Only Information

The analysis of whether in-house an employee should be granted full access to information labeled "attorneys' eyes only" focuses on two things: the employee's position in the company and the risks and safeguards of inadvertent disclosure. R.R. Donnelly & Sons, Co. v. Quark, Inc., C.A. No. 06-032, 2007 U.S. Dist. LEXIS 424 (D. Del. Jan. 4, 2007) (Farnan, J.).

In this case, plaintiff wanted its Chief Patent Counsel and President of Corporate Strategic Initiatives to have access to all discovery related information for case management purposes such as advising the client and managing outside counsel. The Court found that because the role of Chief Patent Counsel does not report directly to any business people involved in competitive decision-making and only deals with legal decision-making relating to the company's patent portfolio, that he will be allowed access to "attorneys' eyes only information." On the other hand, the Court did not find that the President of Corporate Strategic Initiatives should have full access because his role in the company is to be directly involved in the competitive decision-making of the company and he interacts directly with the business people. Therefore, inadvertent disclosure with his role is much more likely than with the Chief Patent Counsel.

In a separate discussion, Judge Farnan addressed the scope of the prosecution bar covered by the Protective Order and because the plaintiff offered to amend the protective order to limit access to confidential and attorneys' eyes only information to outside litigation counsel that have entered an appearance in this action there was no reason to broaden the scope of the prosecution bar to prevent their outside counsel firm from prosecuting any patents involving any aspect of the technology at issue.

Posted On: January 11, 2007

First Post-eBay Injunction Decision Issues in Delaware

In the first post-eBay injunction decision in the District of Delaware, Chief Judge Sue L. Robinson denied, without prejudice to renew, a plaintiff's application for permanent injunctive relief.

In the underlying action between loan-application companies IMX Inc. and LendingTree LLC, plaintiff IMX prevailed before a jury on its infringement claim. But considering the company's request for equitable relief, Chief Judge Robinson refused, in light of the Supreme Court's intervening decision in eBay v. MercExchange, to rule without the benefit of a full record:

"The Court declines to effectively impose a ten-year compulsory license on defendant absent more information, for example, the effects of defendant's infringement on plaintiff's business and of a potential permanent injunction on the public and the marketplace." (slip op. at 47)

According to the Court, IMX should have supplemented its injunction arguments to account for the eBay decision, which came down after submission of the initial round of briefing. As a result, IMX failed to offer the types of evidence the Court sought:

"Plaintiff . . . put forward no evidence of irreparable harm resulting from defendant's infringement, for example, market or financial data, to support its sweeping statements." (slip op. at 43)

Ultimately, the question whether eBay will hamper the frequency in which permanent injunctions have previously been issued must wait for another day: in its Order, the Court granted IMX leave to renew once any appeal on the liability phase is resolved.

<%media(20070111-IMX - Injunction.pdf|IMX v. LendingTree, C.A. No. 03-1067-SLR (D. Del. Jan. 10, 2007) (Robinson, C.J.).)%>

Also yesterday, the Court issued its decision on <%media(20070111-IMX - Inequitable Conduct.pdf|inequitable conduct)%>.

Posted On: January 11, 2007

Judge Robinson Denies Transfer in Dispute Involving "Spinners"

<%media(20070111-Rimmax.pdf|Rimmax Wheels LLC v. RC Components, Inc., C.A. No. 06-029-SLR (D. Del. Jan. 10, 2007).)%>
Judge Robinson refused to transfer this contract dispute from Delaware to the defendant's home state of Kentucky. Despite the location of defendant's witnesses in Kentucky, the Court found the action had a substantial connection to Delaware and refused to disturb the plaintiff's choice of forum. Connections to Delaware included: 1) the plaintiff is a Delaware corporation based in Delaware, 2) the contract at issue has a Delaware choice of law clause, and 3) the defendant sells its products through Delaware dealers. The Court also noted the stage of the proceedings in the opinion-discovery is close to completion and defendant has filed a motion for summary judgment.

For those that don't know, "spinners," according to Wikipedia, are "wheel covers which spin independently of the wheel itself when the brakes are applied." Spinners (also referred to as "ride spinners" or "Sprewells") create the illusion that the wheel is rotating when it is not. The popularity of spinners was initially due to their use in hip-hop music videos, but they have now crossed over into mainstream popularity. The image below was taken from Wikipedia and demonstrates the use of spinners in the music video for the Three 6 Mafia song "Ridin' Spinners." While the spinners at issue in this case are for motorcycles, they are available for virtually any wheeled vehicle.
<%image(20070111-180px-Threesixspinnaz.gif|180|136|)%>

Posted On: January 10, 2007

A Proposed Effect of Medimmune v. Genentech on Licensee's Risk Analysis

What will be the effect of the Supreme Court's decision in <%media(20070110-Medimmune.pdf|Medimmune v. Genentech)%>? I propose that Medimmune will lead to more lawsuits by licensees due to decreased risk on the licensee, but only under certain economic conditions-when the license fee savings from litigating the invalidity and/or noninfringement issues is greater than the attorneys' fees the licensee must expend to litigate the suit. To explain this proposition, let us examine a licensee's options before and after Medimmune.

Before:

The licensee has only two choices: 1) continue paying the license fee or 2) repudiate the license agreement by stopping payment and then sue. If the licensee decides to sue, the licensee must take a significant risk�if they lose, they may end up paying more in damages (including treble damages and attorneys� fees) than they would have paid under the license, or they may be enjoined from practicing the invention (although the chances of an injunction are not what they used to be). If the licensee wins, however, they most likely will have forfeited their attorneys� fees in litigating the suit, but can practice (and have been practicing) the invention free of charge.

After:

The licensee now has three possible courses of action: 1) continue paying the license fee, 2) repudiate the license agreement by stopping payment and then sue, or 3) continue making license payments, but proceed with a declaratory judgment suit for invalidity and noninfringement.
Choices 1 and 2 are analytically the same as before Medimmune. Choice 3, however, is new and different. The following equation sets forth the main economic risks in play, other than the risk of losing the invalidity or noninfringement suit (presumably a low risk or the licensee should keep paying the royalties under the license), when deciding how to proceed:

Choice 1: (remaining patent term in years)(yearly license fee) + (other competitive considerations)

Choice 2: (damages, including treble damages)(chance of losing) + (monetary and competitive cost of an injunction)(chance of an injunction) +(your attorneys� fees)(percentage chance of NOT recovering your attorneys� fees) + (other side�s attorney�s fees)(percentage chance of other side recovering their fees) + (your costs and other side�s costs)(chance you are NOT the prevailing party)

Choice 3: (your attorneys� fees)(percentage chance of NOT recovering your attorneys� fees) + (other side�s attorney�s fees)(percentage chance of other side recovering their fees) + (your costs and other side�s costs)(chance you are NOT the prevailing party) + (average time to verdict)(yearly license fee) [Note that the Medimmune Court expressed �no opinion on whether a nonrepudiating licensee is similarly relieved of its contract obligation during a successful challenge to a patent�s validity.� Thus, it is possible that a licensee could recover the royalties paid during litigation]

Under Choice 3, the licensee may keep paying the license fee, but sue as well. In most situations, the licensee�s largest risk when suing will be losing its attorneys� fees. If the licensee wins, then it can practice the invention free of charge. If the licensee loses, it simply keeps paying the contractually agreed upon license payments, thus limiting the licensee�s potential exposure. To come out on top in this scenario, the licensee generally must 1) successfully prevail on either the invalidity or noninfringement issues and 2) realize a license fee savings in excess of its attorneys� fees (unless the licensee is fortunate enough to recover its attorneys� fees). Thus, it only makes economic sense for the licensee to continue paying the license fee and sue the patentee if the license fee is relatively large. That is, the license fee savings from prevailing in court must be sufficiently large so as to justify the uncertainty associated with attempting to invalidate a patent or prove noninfringement.

Notice what risks are NOT associated with Choice 3, but would be associated with repudiating a license and suing or being sued (the only method available prior to Medimmune, other than taking a license). In a declaratory judgment suit brought while continuing to pay royalties, the licensee has no risk of damages (treble or otherwise) and no risk of an injunction. While the Supreme Court has recently reduced the likelihood of obtaining an injunction, an injunction is still possible in most cases. Notice, however, that Choice 3 includes the added expense of paying the license fee during litigation. Thus, Medimmune has created a new way to attack the questions of whether to take a license and whether to continue under a license, and this new choice eliminates the risk of damages and an injunction that licensees previously had when forced to repudiate a license before suing. A licensee�s decision on whether to continue under a license or bring suit against the patentee, however, in general, will be guided by the amount of the license fee payments in comparison to the potential attorneys� fees.

For example, take the situation where a licensee has entered into a license that pays the patentee an average of $3 million a year and make the following assumptions: the time to decision is 2 years, the attorneys� fees to litigate the case are $4 million, and the patent term has 10 years remaining. Under Choice 2 above (pre-Medimmune), the licensee would only need to pay the $4 million in attorneys� fees up front and would save $30 million in license fees if it prevails, which would result in a total savings of $26 million ($30 million minus $4 million). Under Choice 3 above (post-Medimmune), the licensee would need to pay $4 million in attorneys� fees and $6 million in license fees during litigation and would save only $24 million in license fees if it prevails, which would result in a total savings of $14 million ($24 million minus $10 million). Thus, Choice 2 would provide a greater savings to the licensee in this scenario, but that greater savings comes with greater risk�the licensee could lose the case and end up paying damages and/or subject to a permanent injunction.

I make many assumptions in this analysis that may or may not be true in a majority of situations. I welcome anyone�s comments on the validity of this analysis, or any other ideas.

Posted On: January 9, 2007

Supplemental Expert Report Allowed Three Months After Close of Expert Discovery

<%media(20070109-Inline v. AOL (Thynge).pdf|Inline Connection Corp. v. AOL Time Warner, Inc., C.A. No. 02-272-MPT (D. Del. Jan. 8, 2007).)%>

In this discovery ruling, U.S. Magistrate Judge Thynge denied in part Inline's motion to exclude a supplemental expert report as untimely and prejudicial. The supplemental expert report was served three months after the close of expert discovery, more than three and a half months before trial, and nearly three months before the proposed final pretrial order was due. Based on this timing, the Court refused to exclude the report. The Court, however, limited the defendant's ability to use certain declarations in the report and permitted Inline to take depositions of the expert and a third party concerning new prior art listed in the supplemental report.

Posted On: January 8, 2007

Federal Circuit Refuses to Hear D. Del. Appeal

In a tersely worded order, the Federal Circuit has declined to entertain an interlocutory appeal from a decision of then-Delaware district judge Kent A. Jordan.

The case began when pharmaceutical giant Amgen Inc. filed suit against Ariad Pharmaceuticals Inc., seeking a declaratory judgment of noninfringement and invalidity. Faced with a motion to dismiss for lack of subject matter jurisdiction, the district court denied the motion, but certified the case for appeal.

Notwithstanding the district court's certification, the Federal Circuit summarily denied the application for permission to appeal. Although styled "nonprecedential," the appellate court's order raises the question whether it is willing to resolve apprehension-of-suit issues when a district court has, by denying a 12(b)(1) motion, retained control over the case.

<%media(20070108-amgen-ariad.pdf|Amgen Inc. v. ARIAD Pharma. Inc., Misc. No. 839 (Fed. Cir. Dec. 29, 2006).)%>

Posted On: January 4, 2007

Chief Judge Robinson Institutes Streamlined Discovery Dispute Procedure

Chief Judge Sue L. Robinson today announced a new discovery dispute procedure. The Court's form patent scheduling order now includes a provision for designating two in-person discovery status conferences in advance. With these fixed dates in place, the Court will no longer allow the parties to file, without express consent by the Court, any motions to compel or motions for protective order. More pressing disputes that arise during depositions or that involve the scope of a protective order, however, may still be resolved via telephone conference with the Court.