Articles Posted in Sherry R. Fallon, Magistrate Judge

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Magistrate Judge Sherry R. Fallon recently recommended that a defendant’s motion to transfer to the Northern District of California be denied. Wireless Media Innovations, LLC v. Leapfrog Enterprises, Inc., C.A. No. 13-1545-SLR-SRF, Report and Recommendation (D. Del. Mar. 20, 2014). Plaintiff and defendant were both Delaware corporations. Defendant’s documents, employees and anticipated witnesses were in California. All alleged acts of infringement took place in California, as plaintiff alleged that defendant’s practices at its California distribution center, rather than its nationally-sold products, infringe plaintiff’s system and method patents. D.I. 1 ¶¶ 11-12; Report and Recommendation at 2 n.1
The Court concluded that, on balance, the Jumara factors weighed against transfer, even though several of the individual factors weighed in favor of transfer. Specifically, defendant’s forum choice, where the claims arose, and the convenience of witnesses favored transfer. See id. at 4-5, 6-8. As to the convenience of witnesses, defendant argued that many of its non-party witnesses that would be crucial to its non-infringement positions may be beyond the reach of the Court’s legal process. Id. at 7. Defendant provided declarations from third parties in support of its contentions. Plaintiff argued that these parties could be deposed and that testimony admitted at trial, but the Court noted that “deposition testimony is not a complete substitute for live trial testimony.” Id. at 8. Because defendant’s “assertions cannot be discounted as speculation in light of the declarations proffered,” this factor weighed in favor of transfer. Id.

On the other hand, Plaintiff’s choice of forum weighed against transfer, as did the convenience of the parties because defendant was the larger company, had chosen to incorporate in Delaware, and had previously sued and been sued in Delaware. See id. at 4-6. The remaining factors were neutral or only weighed slightly in favor of transfer. See id. at 9-10. The Court explained that “[i]n similar cases involving factors that weigh both for and against transfer, this court has declined to elevate a defendant’s convenience over the choice of a neutral forum selected by both parties as the situs of their incorporation.” Id. at 10.

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In Nexans Inc. et al. v. Belden Inc. et al., C.A. No. 12-1491-SLR-SRF (D. Del. Feb. 19, 2014), Magistrate Judge Sherry R. Fallon issued a report recommending the denial of plaintiffs’ motion to stay pending the PTO’s inter partes review (“IPR”) determination regarding the validity of United States Patent Nos. 6,074,503; 7,135,641; 7,977,575; and 7,663,061. Id. at 1. In the instant action (“the Delaware action”), plaintiffs have requested a declaratory judgment of invalidity and noninfringement of the patents under IPR, and are asserting an additional patent. Id. at 2. Shortly after the Delaware action was originally filed, the defendants initiated an additional, parallel action in the Southern District of Indiana for patent infringement against plaintiffs. Id. at 3. Each of plaintiffs IPR petitions were granted and are anticipated to be completed by May 2014. Id. at 3, 1 n.1.

Judge Fallon explained that “Plaintiffs did not wait for the litigation to move forward or for expenses to accrue before petitioning for IPR,” which weighed slightly in favor of stay. Id. at 5. Further, “[n]o substantive litigation took place while the parties awaited the court’s decision on the motions to dismiss,” and “fact discovery remains open and the trial is scheduled for December 2015.” Id.

Judge Fallon, however, was persuaded by defendants’ argument that plaintiffs may be “attempting to gain an improper tactical advantage by filing first to secure a Delaware forum, opposing litigation in Indiana and then seeking a stay of the litigation altogether in favor of IPRs.” Id. at 5. Further, Judge Fallon found the status of the IPR proceedings to disfavor stay, given the “substantial amount of time before the close of discovery and the short window of time before the PTO issues its decision in the IPRs.” Id. at 6. Judge Fallon similarly explained that while the IPR could simplify the issues for trial, “[r]eceiving a determination from the PTO early in the discovery phase of the pending case weighs against a stay. The parties will have nearly a year remaining to tailor further proceedings based on the outcome of the IPRs, without disruption to the present scheduling order.” Id. at 7. Judge Fallon additionally noted that the IPR proceedings are scheduled to conclude by May 2014, and the fact discovery deadline is not until December 2015, which weighed against stay. Id. at 8. On balance, Judge Fallon concluded that stay was not warranted and denied plaintiffs’ motion.

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In a recent Report and Recommendation, Magistrate Judge Sherry R. Fallon found that plaintiff’s amended complaint, asserting U.S. Patent No. 6,587,441 (“the ‘441 Patent”), should be dismissed for lack of subject matter jurisdiction. Mayfair Wireless LLC v. Celico Partnership et al., 11-772-SLR-SRF (D. Del. Aug. 30, 2013). Defendants argued there existed “three breaks in the chain of title of the ’441 patent” before its alleged assignment to plaintiff. Id. at 6. The named inventors of the ’441 Patent allegedly assigned the patent application to their employer, Gooitech, Inc. (“Gooitech”). Id. at 2. The Hinsdale Bank & Trust Company (“Hinsdale”) eventually “foreclosed on Gooitech’s assets, including the application for the ’441 patent,” and purchased those assets at a UCC sale in Illinois in 2000. Id. at 2-3. Hinsdale purportedly sold its rights in the ’441 patent application to Sierra Strategic Consulting (“Sierra”) pursuant to a bill of sale in 2001. Id. at 3. The bill of sale did not specifically mention the patent application, but referred more generally to “intellectual property rights that Hinsdale acquired from Gooitech.” Id. Sierra assigned its rights to 3P Networks Inc., which “allegedly transferred rights, title and interest in the ‘441 patent application” to Technology Alternatives, Inc. (“Technology Alternatives”). Id. Technology Alternatives, the patentee, eventually became a subsidiary of TechAlt, Inc. (“TechAlt”). Id. at 4. Service by Design, Ltd. (“SBD”) entered into a security agreement with TechAlt, and SBD purchased TechAlt’s assets (including the purported interest in ’441 application) after TechAlt defaulted on its obligations. Id. at 4. After subsequent assignments, the current plaintiff was allegedly assigned the rights to the ’441 Patent. Id. at 4-5.

Magistrate Judge Fallon first addressed whether “any alleged breaks in the chain of title occurring prior to the issuance of the ’441 patent are irrelevant.” Id. at 6 (emphasis added). Magistrate Judge Fallon concluded that “[d]efendants have overcome the presumption” that the patentee, Technology Alternatives, “properly held legal title at the time the patent issued.” Id. at 8. Judge Fallon explained that “four of the six Named Inventors did not have written assignments on file with the PTO indicating their intention to transfer their ownership interests, in contravention of 35 U.S.C. § 261 and 37 C.F.R. § 3.81(a).” Id. Moreover, “[t]he request for issuance of the patent to Technology Alternatives is likewise missing from the PTO’s records.” Id. In light of these findings, Judge Fallon went on to “asses each alleged break in the chain of title, including those occurring prior to the issuance of the ’441 patent.” Id. at 9.

With respect to the bill of sale between Gooitech and Hinsdale, Magistrate Judge Fallon found that “[t]he evidence . . . insufficient to support Mayfair’s contention that Hinsdale properly foreclosed on its interest in Gooitech’s property pursuant to the terms of its security agreement.” Id. at 12. Magistrate Judge Fallon noted that the “unsigned notice of public sale issued by Hinsdale on August 9, 2000 fails to list the collateral to be sold.” Id. Moreover, the “subsequent March 31, 2001 bill of sale between Hinsdale and Sierra . . . does not specify that the ’441 patent application was among those intellectual property rights [noted in the agreement].” Id. at 12-13. Magistrate Judge Fallon thus declined “to assume the rights to the application for the ’441 patent were included in the foreclosure sale,” and thus found a break in the chain of title. Id. at 13-14.

Next, Magistrate Judge Fallon considered the whether there was a break in the chain of title “between 3P Networks and Technology Alternatives because no written assignment regarding the transfer is on file with the PTO.” Id. at 14. Magistrate Judge Fallon found, however, that “the notice of assignment between 3P Networks and Technology Alternatives sufficiently sets forth an intent to transfer ownership rights in the ’441 patent to qualify as an assignment for purposes of 35 U.S.C. § 261.” Id. at 15.

Magistrate Judge Fallon also considered, inter alia, whether the “absence of an assignment from Technology Alternatives to TechAlt” created a break in the chain of title. Id. at 17. While the parties agreed there was no formal assignment, Magistrate Judge Fallon still had to address whether “Technology Alternatives consented to TechAlt’s pledge of the ’441 patent to SBD as collateral in the November 19, 2004 security agreement, whether such consent is valid, and whether an indirect transfer of the ’441 patent to SBD would cure any defect.” Id. at 18. Magistrate Judge Fallon explained that “[e]ven if the court were to assume that state law permits Technology Alternatives to consent to TechAlt’s inclusion of the ’441 patent as security, the Illinois UCC provisions are preempted by § 261 of the Patent Act because Technology Alternatives and TechAlt never executed a written assignment.” Id. at 19. Accordingly, Magistrate Judge Fallon could not “overlook the absence of a written assignment between Technology Alternatives and TechAlt,” and found another break in the chain of title. Id. at 20.

In light of the two breaks in the chain of title, Magistrate Judge Fallon recommended that the court grant defendants’ motion to dismiss for lack of subject matter jurisdiction. Id. at 24.

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In a recent memorandum opinion, Magistrate Judge Sherry R. Fallon denied defendant’s motion to transfer venue to the Northern District of California and denied plaintiff’s motion to strike portions of the declaration of William Pringle, who defendant employs as a compliance associate. Agincourt Gaming, LLC v. Zynga, Inc., C.A. No. 11-720-RGA-SRF (D. Del. Jun. 18, 2013) (publicly-available redacted version issued Jun. 27, 2013 (D.I. 62)). Considering defendant’s motion to transfer, Judge Fallon found plaintiff’s forum preference weighed against transfer, “although not as strongly as it would if [plaintiff] had its principal place of business in Delaware.” Id. at 4. On the other hand, Judge Fallon found that defendant’s forum preference, and “to a lesser extent,” the location of books and records, and “practical considerations” favored transfer. See id. As Judge Fallon explained, defendant’s forum preference had a “legitimate basis,” as it maintains its principal place of business in the Northern District of California where “most of its employees are located.” Id. Further, Judge Fallon found that the location of the books and records weighed slightly in favor of transfer because while defendant did not deny “that it [would] produce all relevant records electronically,” plaintiff did “not dispute that most of the relevant documents are located in the Northern District of California.” Id. at 6. Moreover, with respect to practical considerations that could make the trial easy, expeditious, or inexpensive, Judge Fallon noted that “[plaintiff] does not deny the fact that it will be more expensive and less convenient for [defendant] to litigate in Delaware, and does not contend that it would be substantially more convenient and less expensive for [plaintiff] to litigate in Delaware.” Id. at 7. Finding that the other public and private interest factors did “not add much weight to the balancing and are neutral,” Judge Fallon denied defendant’s motion to transfer. Id. at 4, 8.

With respect to the motion to strike, plaintiff first argued that the court should strike Paragraph 7 of William Pringle’s declaration because “he did not select the five employees slated to testify at trial based on his personal knowledge.” Id. Denying plaintiff’s motion, Judge Fallon explained that “[n]othing in the record suggests that Pringle did not have personal knowledge of the responsibilities of the five listed witnesses, their knowledge of the accused products, whether they would testify at trial, and whether they lived in the San Francisco Bay area.” Id. at 9. Further, as Judge Fallon noted, defendant offered “additional evidence” of which employees would testify and their locations in the form of Pringle’s 30(b)(6) deposition. Id. Second, Judge Fallon denied plaintiff’s motion to strike Paragraph 13, in which Pringle stated that he “’ha[s] been informed’ of matters relating to the content of possible trial testimony.” Id. Plaintiff argued this statement constituted inadmissible hearsay, but Judge Fallon found that Paragraph 13 was merely “intended to show that the previously identified . . . employees” of defendant are capable of testifying with respect to relevant topics. Id. Third, plaintiff moved to strike Paragraph 15 of Pringle’s declaration on the grounds that “Pringle lacked knowledge on which to base his assessment at his deposition regarding how burdensome and expensive it would be to litigate in Delaware.” Id. at 10. Denying plaintiff’s motion, Judge Fallon found that Pringle had “personal knowledge, based on the number of games at issue in the suit, that the production of documents could be substantial and costly.” Id.

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Magistrate Judge Sherry R. Fallon recently recommended the dismissal of a pro se patent infringement complaint filed against the United States, various United States officials, and Kannalife Sciences, Inc. McDowell v. U.S., et al., C.A. No. 12-1302-SLR-SRF (D. Del. May 10, 2013). The pro se plaintiff was the inventor of U.S. Patent No. 7,597,910, “directed to compositions and methods for treating prostate disorders using a mixture of cannabis, shiitake mushrooms, and maitake mushrooms,” but had assigned the patent to SLGM Medical Research Institute. Id. at 1, 5. The inventor argued that he had standing to bring the complaint because he and SLGM Medical Research were “one and the same,” but Magistrate Judge Fallon rejected that argument, explaining that “only the owner of the patent has standing to sue.” Id. at 5. Magistrate Judge Fallon also recommended that the complaint against the United States and its officials be dismissed for lack of subject matter jurisdiction on the basis that 28 U.S.C. § 1498 requires that patent infringement actions against the United States be filed in the United States Court of Federal Claims. Id. at 6.

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Magistrate Judge Sherry R. Fallon recently recommended that the court grant defendant Staples, Inc.’s 12(b)(6) motion to dismiss claims made against it for indirect and willful infringement of U.S. Patent No. 6,216,139. Execware, LLC v. Staples, Inc., C.A. No. 11-836-LPS-SRF (D. Del. Dec. 10, 2012).
Judge Fallon first addressed plaintiff’s indirect infringement claims, which included claims of induced and contributory infringement, and noted that in order to survive a motion to dismiss, a plaintiff must (1) “adequately plead a claim for direct infringement,” and (2) “plead sufficient facts . . . for the Court to infer that the defendants had knowledge of [the plaintiff’s] patents and that their products infringed on those patents.” Id. at 4-5 (quoting Trading Techs. Int’l, Inc. v. BCG Partners, Inc., 2011 WL 43946581, at *3 (N.D. Ill. Sept. 2, 2011) (emphasis in original)). To adequately plead direct infringement, a plaintiff must provide the level of detail required by Form 18 of the Federal Rules of Civil Procedure. Id. at 4. Judge Fallon found that plaintiff failed to provide such detail. Id. at 7. Despite identifying Staples’ customers as the alleged direct infringers, the amended complaint did not “allege that Staples’ customers actually used the accused software, or that Staples caused its customers to directly infringe the ’139 patent.” Id. at 6-7. As a result, Judge Fallon recommended the dismissal of the plaintiff’s direct infringement claim. Id. at 6-8.

Judge Fallon further recommended that if the court did not adopt her recommendation regarding direct infringement, plaintiff’s indirect infringement claim should be “limited from the date of filing of the complaint.” Id. at 8. In reaching her recommendation, Judge Fallon relied on a line of District of Delaware rulings in concluding “that a plaintiff may plead actual knowledge of the patents-in-suit as of the filing of the initial complaint to state a cause of action limited to the defendant’s post-litigation conduct, and a defendant’s decision to continue its conduct despite knowledge gleaned from the complaint is sufficient to establish the intent element required to state a claim for indirect infringement.” Id. at 10 (citing Apeldyn Corp. v. Sony Corp., 852 F. Supp. 2d 568, 573-74 (D. Del. 2012); Walker Digital, LLC v. Facebook, Inc., 852 F. Supp. 2d 559, 565-66 (D. Del. 2012)). Because the plaintiff’s amended complaint alleged that Staples had knowledge of the patent only after the filing of the complaint, Judge Fallon explained that the indirect infringement claims should be limited to activity after the filing date. Id.

Turning to the plaintiff’s wilfull infringement claim, Judge Fallon noted that in order to overcome a motion to dismiss, a plaintiff must plead “facts giving rise to at least a showing of objective recklessness of the infringement risk.” Id. at 11 (quoting St. Clair Intellectual Prop. Consultants, Inc. v. Hewlett-Packard Co., 2012 WL 1134318, at *2-3 (D. Del. Mar. 28, 2012)). Judge Fallon further noted that the “Federal Circuit has held that a patentee cannot recover enhanced damages based solely on the accused infringer’s post-filing conduct when the patentee has not sought a preliminary injunction.” Id. at 12. Because the plaintiff failed to plead that Staples had “pre-suit knowledge of the ‘139 patent,” Judge Fallon recommended that the court dismiss its wilfull infringement claim. Id. at 12-13.

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The formal investiture of Magistrate Judge Sherry R. Fallon will take place at the District Court on Friday, October 12, 2012 at 3:00 p.m. There is no need to RSVP. Light refreshments will be available immediately following the ceremony in the courtroom lobby area.

See you there!

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In Monec Holding AG v. Motorola Mobility, Inc., et al., C.A. No. 11-798-LPS-SRF (D. Del.), Magistrate Judge Fallon recently issued a Report and Recommendation recommending that defendants’ motion to dismiss plaintiff’s claims for indirect infringement and willfulness be granted. Id. at 1. In the case, plaintiff filed suit against multiple defendants alleging willful, direct and indirect infringement of a patent relating to an electronic book technology. Id. at 1-2. Specifically, in its first amended complaint, as bases for its claims of indirect infringement and willfulness, plaintiff alleged that: (1) “Defendants instruct their customers, both retailers and end-users, on infringing uses of the Infringing Products”; (2) “Defendants knew or should have known that the Infringing Products were especially made for use in an infringement of [the patent-in-suit]”; and (3) “there is no substantially noninfringing use of the Infringing Products.” Id. at 2. In support of its allegations that defendants had actual knowledge of the patent-in-suit, plaintiff further alleged that because defendants’ competitors had been engaged in litigation with plaintiff involving the same patent at issue in this case, and because that litigation received substantial press coverage, defendants in this case were aware of and would have likely followed and monitored that litigation. Id. at 1-2.

The Court disagreed, concluding that plaintiff had failed to allege sufficient facts from which the Court could infer that defendants had actual knowledge of the patent-in-suit at the time they committed the allegedly infringing activities. Monec Holding at 8-9. The Court found that plaintiff’s assumption that defendants would have known about the patent-in-suit based on the litigation activities of their competitors was not enough. Id. at 8. The Court also found that the plaintiff failed to sufficiently allege willful blindness or that the defendants somehow purposefully avoided knowledge of the patent-in-suit. Id. at 12. In addition, on the issue of intent, the Court found that plaintiff’s “conclusory averments” contained no factual support to establish the requisite intent and that marketing activities of the defendants, absent more, do not demonstrate that defendants knew such activities were infringing or that defendants had the specific intent to encourage another’s infringement. Id. at 13. Likewise, on the issue of willful infringement, the Court found that plaintiff failed to sufficiently allege how or why defendants would have known that the patent-in-suit applied to their allegedly infringing activities or that defendants acted in “deliberate disregard” of plaintiff’s rights. Id. at 16.

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In Ivoclar Vivadent AG v. 3M Company, C.A. No. 11-1183-GMS-SRF (D. Del. June 22, 2012), defendant filed a motion to transfer the case to the District of Minnesota where defendant first-filed a declaratory judgment action against plaintiff for non-infringement and invalidity of the same patent. Id. at 1-4. Plaintiff, a Liechtenstein company, opposed defendant’s motion arguing that an exception to the first-filed rule applied “because [defendant] preemptively filed its declaratory judgment action in Minnesota with the intent to dictate venue prior to the formal termination of the [Confidential Disclosure Agreement that contained a covenant not to sue].” Id. at 10-11. Judge Fallon disagreed and ultimately recommended transfer rather than dismissal. Judge Fallon analyzed the Jumara factors and found that all but one factor weighed in favor of transfer or was neutral. Id. at 14-27.

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