In Pfizer Inc., et al. v. Teva Parenteral Medicines, Inc., et al., C.A. No. 10-37-GMS (D. Del. Nov. 21, 2011), the Court granted the defendants’ motion to amend to add an obvious-type double patenting defense, filed on the last day for amendments to the pleadings under the amended scheduling order. The plaintiffs argued they would be prejudiced by the defendants’ last minute amendment, and that there was no reason for defendant’ to have waited as long as they did to amend. Id. at 3-4. The Court rejected the plaintiffs’ argument, and in a footnote reminded the plaintiffs that they chose not to oppose the defendants’ previous motion to amend the scheduling order to extend the deadline for amended pleadings. Id. at 6 n.13. Although the defendants’ motion to amend came on the last day possible under the amended scheduling order, the plaintiffs’ non-objection to the extension of that deadline undercut their claims of prejudice. “Specifically, while Teva could have sought to amend its Answer to include this defense earlier, it filed this motion within the time allotted by the court—and unopposed by the plaintiffs—for such amendments.” Id.
In Eastman Chemical Co. v. Alphapet Inc., et al., C.A. No. 09-971-LPS-CJB (D. Del. Nov. 18, 2011), the plaintiff offered three arguments in support of its motion for jurisdictional discovery to determine whether the Court could exercise personal jurisdiction over a Thai parent company defendant. Judge Burke first rejected the notion that the Thai parent was bound by a forum selection provision contained in an agreement entered into by one of the parent’s subsidiary co-defendants, explaining that the plaintiff could advance no non-frivolous argument that the Thai parent was bound by that provision because (1) the parent was not a third party beneficiary of the agreement containing the provision, id. at 13-17, and (2) there was no suggestion that the parent received any direct monetary or non-monetary benefit from the agreement containing the provision such that it could be considered “closely related” to the agreement containing the forum-selection clause. Id. at 19-25. Judge Burke next rejected the plaintiff’s argument that discovery should be permitted to show that the Thai parent was subject to general jurisdiction, through an agency theory, based on its subsidiary’s continuous and systematic contacts with Delaware. Although the plaintiff alleged sufficient facts to suggest an agency relationship, the plaintiff “offer[ed] no evidence suggesting that the subsidiaries in question have any . . . significant Delaware contacts.” Id. at 28-30. Finally, the Court considered whether discovery should be permitted to determine whether the Thai parent could be subjected to personal jurisdiction in Delaware based on the stream-of-commerce theory. Judge Burke outlined Delaware’s “unique” stream-of-commerce body of law, explaining that jurisdiction may be found where there is a showing of “(1) an intent to serve the Delaware market; and (2) that this intent results in the introduction of the product [at issue] into the market and that plaintiff’s cause of action arises from injuries caused by that product.” Id. at 33 (quoting Belden Techs., Inc. v. LS Corp., 626 F. Supp. 2d 448, 456 (D. Del. 2009) (alteration in original)). Judge Burke emphasized that under the second prong, the relevant inquiry is not whether the defendants sold their products in Delaware, but rather “whether there are any Delaware sales of Defendants’ . . . products, or of other products that incorporate Defendants’ . . . products (even if those products themselves are not directly sold or marketed in Delaware).” Id. at 34 (emphasis added). Based on that standard, Judge Burke granted-in-part the plaintiff’s motion and permitted limited discovery into whether the Thai parent could be subjected to personal jurisdiction in Delaware based on the stream-of-commerce theory in connection with the “sales and distribution of . . . products in the U.S. and Delaware.” Id. at 38.
Rule 8 and "Fair Notice" under Twombly/Iqbal: Motion to Dismiss Breach of Contract and Trade Secret Misappropriation Claims GRANTED-IN-PART
In Eastman Chemical Co. v. Alphapet Inc., et al., C.A. No. 09-971-LPS-CJB (D. Del. Nov. 10, 2011), Judge Burke granted-in-part the defendants’ motion to dismiss claims for breach of contract and trade secret misappropriation. The plaintiff filed an amended complaint against the defendants for patent infringement, breach of contract and trade secret misappropriation. Id. at 1. Regarding the breach of contract and trade secret misappropriation claims, the plaintiff alleged that, at the direction of the defendants, certain former employees improperly disclosed confidential, proprietary and trade secret information relating to a manufacturing technology owned by the plaintiff and subject to a license agreement. Id. at 2-3. The defendants moved to dismiss these claims pursuant to Fed. R. Civ. P. 12(b)(6). Id. at 1. In their motion, the defendants argued that the plaintiff’s claim for trade secret misappropriation should be dismissed because it failed to satisfy the notice pleading standard of Rule 8. Id. at 6. The defendants further argued that the claim for breach of contract should be dismissed because: (1) not all of the defendants were parties to the alleged license agreement at issue; (2) the plaintiff had failed to sufficiently plead breach of contract; and because (3) the plaintiff had failed to identify any implied contractual provision that might support an implied breach of contract claim. Id. at 18-19. The Court granted-in-part defendants’ motion by dismissing without prejudice the breach of contract claim asserted against one of the defendants and the claim for breach of any implied contractual provisions against all of the defendants. Id. at 2. The Court denied the defendants’ motion in all other respects. Id. at 2. In denying the defendants’ motion with respect to the trade secret misappropriation claim, the Court concluded that the claim was sufficiently pled under the standards of Rule 8 and that the defendants had “been given sufficient factual information to provide adequate notice of the plausible grounds for [p]laintiff’s misappropriation claim under the Twombly/Iqbal standard. Id. at 9. The Court noted that under Rule 8, “even if a complaint is somewhat ‘lacking in specificity,’ that is not a reason to dismiss the complaint, unless that lack of specificity deprives the defendants of fair notice of the claim itself.” Id. at 14 (citation omitted). Regarding the implied breach of contract claim, the Court concluded that the plaintiff “failed to identify any implied contractual term that should be read into the [license agreement at issue], and . . . likewise failed to state a claim for breach of any such implied provision.” Id. at 28-29.
New Orders in Apeldyn: Judge Robinson Grants Summary Judgment, Denies Daubert Motion, and Announces Claim Construction
Judge Robinson recently issued several new orders and opinions in the ongoing dispute over LCD technology between Apeldyn Corp. and defendants, AU Optronics Corp. (AUO) and Chi Mei Optoelectronics Corp. (CMO). Apeldyn Corp. v. AU Optronics Corp., C.A. No. 08-568-SLR (D. Del. Nov. 15, 2011).
In a memorandum opinion (C.A. No. 08-568-SLR, Nov. 15, 2011), the court granted both AUO's and CMO's motions for summary judgment of no inducement of patent infringement. Because the court separately granted CMO's motion for summary judgment of noninfringement, its could not have been found to have induced infringement and was entitled to summary judgment on that issue. Id. at 19. In granting AUO's motion for summary judgment of no inducement, Judge Robinson rejected two arguments for inducement proffered by Apeldyn. First, she rejected a "transitive knowledge" theory of constructive knowledge, whereby licensees would be charged with knowledge of any patent listed on the face of a patent that is in turn listed on the face of the patent that they license. Such a "finding of constructive knowledge based on the listing of a patent on the face of another patent, twice removed," the court concluded, would lack grounding in case law. Id. at 20. "There is simply no indication that constructive notice is meant to embrace the hundreds, if not thousands, of listed patents that would be generated in many cases by such an extrapolation." Id. Second, Judge Robinson rejected Apeldyn's theory of willful blindness to customers' infringement, finding that "[a]t best, Apeldyn has framed AUO as a reckless or negligent defendant - not a willfully deliberate one." Id. AUO's failure to collect patents related to LCD panels issued to other companies or to gather knowledge as to whether any of AUO's patents cite to the patent in dispute fell short of the willful blindness contemplated by the Supreme Court in Global-Tech Appliance, Inc. v. SEB S.A. Id.
In the same opinion, Judge Robinson denied AUO's motions for summary judgment of invalidity and noninfringement, but granted CMO's motion for summary judgment of noninfringement. She found AUO's motions to be unsupported by expert testimony or other evidence. Id. at 12. CMO's motion for summary judgment of noninfringement, by contrast, was well supported by expert testimony and was not contradicted by any evidence supporting Apeldyn's opposition. Id. at 16-17.
Judge Robinson also ruled in a seperate memorandum order (C.A. No. 08-568-SLR, Nov. 15, 2011) on the defendant's motion to exclude Apeldyn's expert witness under Daubert. AUO sought to exclude any testimony regarding the expert's testing of LCD panels or AUO's sales and activities. Judge Robinson, however, refused to exclude either class of testimony. Testimony regarding the expert's tests was proper, in part, because AUO's critique of the method used was rendered irrelevant by the court's claim construction. Because the court did not accept a construction with Apeldyn's additional limitation, she reasoned, the court did not address that limitation, and it remained an issue of fact to be tried. Id. at 5. Furthermore, the court was not impressed by a suggestion by the defendant's witness that another method of testing would be "probably more scientific," and characterized this suggestion as "an insufficient basis to preclude [the witness's] testimony." Id. at 5-6. Judge Robinson also allowed the expert's proffered testimony regarding sales activities and whether they encourage infringement. In forming a proper opinion on nonobviousness, she said, an expert witness may consider marketing and sales activities and may rely on the testimony of other witnesses, to the extent that it is reliable. Id. at 6.
Finally, in another memorandum order (C.A. No. 08-568-SLR, Nov. 15, 2011), Judge Robinson construed disputed claim language by reference to the language of the patent in dispute, her claim constructions often quoting from the patent specifications themselves. She "decline[d] to add the additional language suggested by Apeldyn," saying that the suggested "concept is not discussed in the specification. Moreover, the requirement that polarized light must exist along the same eigen-axis negates any need for further limitation." Id. at 2.
On November 3, 2011 the District of Delaware judges signed an Order Relating to Utilization of Magistrate Judges. Among other things, the Order kicked off a one year Pilot Project “to evaluate Magistrate Judge utilization.” As part of the Pilot Project, the Clerk of the Court will randomly assign cases to Magistrate Judges. These matters will not initially be assigned to a District Judge and the Magistrate Judge will "be responsible for all pretrial management of the case, including determination of all nondispositive motions and scheduling." Within 60 days from assignment of the Magistrate Judge, the parties may consent to Magistrate Judge jurisidiction by filing Form AO85. If they consent, the case will remain assigned to the Magistrate Judge for all purposes, including trial. After 60 days, if the parties do nothing, or if a case dispositive motion is filed within that time, the case will be randomly re-assigned to a District Judge. These cases, however, will be eligible for referral back to a Magistrate Judge for discovery purposes, ADR or for case management through case dispositve motions. There are categories of cases that will not be assigned to a Magistrate Judge as part of this Pilot Project, including patent cases in which one or more “related” case is pending. See Standing Order, section D. As always, parties to a matter not directly assigned to a Magistrate Judge may also consent to Magistrate Judge’s jurisdiction by filing the Consent Form (Form AO85).
The Standing Order also clarified the procedure for objecting to Magistrate Judge Rulings and Recommendations. See Standing Order, section C.
In Advanced Micro Devices, Inc. v. S3 Graphics Co., Ltd., C.A. No. 11-965-LPS (D. Del. Oct. 25, 2011) (public version released Nov. 8, 2011), Judge Stark denied the plaintiffs’ motion for a temporary restraining order and preliminary injunction which sought to enjoin the defendants from continuing to prosecute patent infringement claims in the ITC. The plaintiffs asserted that an injunction was needed because the ownership of the patent-in-suit was disputed, and the resolution of the ITC proceedings could irreparably harm the true owner of the patent. The Court denied the plaintiffs’ motion, finding that although it might have the discretionary authority to enjoin the defendants from continuing to prosecute their claims before the ITC, it would not do so under the circumstances because the ITC action “could hardly be more advanced, and the instant action is less than two weeks old; [and] Plaintiffs were aware of the ITC proceeding for some months before they attempted to intervene in it and waited months longer before asking a district court to halt the ITC proceedings[.]” Id. at 3. Judge Stark did, however, invite the parties to submit a scheduling order that would bifurcate and fast-track the Court’s consideration of case-dispositive motions and/or a trial on the merits of the patent ownership dispute, anticipating a resolution of that issue within approximately six months. Id. at 2.
Special Master Poppiti: Costs and Expenses Shifted to Defendant Where Defendants' Discovery Practices Wasted Time and Resources
In Apeldyn Corp. v. AU Optronics Corp., C.A. No. 08-568-SLR (D. Del. Oct. 27, 2011), Special Master Poppiti recently shifted all "of the Special Master's compensation, costs and expenses" associated with certain discovery disputes to defendants AU Optronics Corp. ("AUO") and Chi Mei Optoelectronics Corp. ("CMO"). Special Master Poppiti previously awarded Apeldyn its costs in connection with these disputes, and "Apeldyn requested that the Special Master 'consider allocating costs for [his] services" in connection with [these disputes] 'to reflect' an 'appropriate apportion[ment] to AUO and CMO[.]" Id. at 1-2. AUO and CMO did not respond to this request. Id. at 2. Special Master Poppiti then asked Apeldyn to submit a two-page letter explaining its position on "'the way in which AUO and CMO wasted the Special Master's time and resources[,]'" and he ordered AUO and CMO to submit letters in response. Id. Although Apeldyn submitted its letter, neither AUO nor CMO responded. Id. Thus, finding that "the Special Master would not have had to expend time and resources on these matters had AUO and CMO not engaged in . . . inappropriate discovery practices[,]" "and placing significant weight on the lack of opposition to Apeldyn's request by either AUO or CMO," Special Master Poppiti apportioned all "of the Special Master's compensation, costs and expenses" associated with these discovery disputes to AUO and CMO. Id. at 3.
Judge Robinson: Defense Expert’s Damages Opinions “wholly speculative and, consequently, not helpful to the trier of fact”
In a recent memorandum order, Judge Robinson ordered the exclusion of certain defense expert testimony in the upcoming, bifurcated damages portion of a patent infringement case. SRI Int’l Inc. v. Internet Security Sys., Inc., C.A. No. 04-1199-SLR (D. Del. October 31, 2011). Judge Robinson first concluded that proffered testimony regarding possible “design arounds” as alternatives to the patented technology was entirely speculative. An expert, she said, “may offer an opinion incorporating proffered facts, [but may not] reiterate the lay testimony and provide a conclusory opinion based on the lay testimony.” Id. at 5. The excluded testimony included:
(1) A speculative opinion on Georgia Pacific factor 13 that was not based on an analysis of the portion of the realizable profit that should be credited to the invention as distinguished from non-patented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer, id.;
(2) A damages opinion that relied on a third party patent without making a substantive comparison of that patent with the patents-in-suit, id. at 5-6;
(3) Conclusory opinions regarding which features of the infringing product are and are not covered by the patents-in-suit that contradicted evidence presented at the liability trial, id. at 6-7; and
(4) An opinion that the inventions in question had little value as they offered only minor, incremental improvements over prior art, id. at 7-8.
With regard to the last of these opinions, Judge Robinson noted in a footnote that the expert report “reads dangerously close to an obviousness opinion.” Id. n.8. As the defendants had already failed on obviousness arguments, Judge Robinson ordered damages witnesses not to “opine that a system/method having all of the patented features was concurrently in use in the prior art.” Id.
In a recent ANDA case Judge Sleet granted defendant Anchen’s motion for judgment on the pleadings of Count V of its counterclaims seeking a declaratory judgment that Plaintiffs’ 083 patent was unenforceable. Bone Care International LLC v. Anchen Pharmaceuticals, Inc., C.A. No. 09-285-GMS (consolidated) (D. Del. Oct. 31, 2011). In support of its motion Anchen argued that “Bone Care’s action of disclaiming and requesting the delisting of the ‘083 Patent from the Orange Book renders this patent unenforceable as a matter of law, as such action statutorily disclaims all patent claims.” Id. at 1. Plaintiffs responded that the court lacked subject matter jurisdiction to decide Anchen’s declaratory judgment counterclaims because Bone Care statutorily disclaimed the patent and because Genzyme covented not to sue Anchen for infringement of the patent. Id. at 2. Judge Sleet determined that under Rule 54(b) judgment on the pleadings was appropriate because Plaintiff’s statutorily disclaimed the patent and provided no defense to this statutory disclaimer, because “Count V is a cognizable/individual counterclaim for discrete relief as to the ‘083 patent”, and because “there is nothing indicating that granting Anchen’s motion will result in a waste of judicial resources or impede judicial efficiency.” Id. at 3.