April 1, 2014

Judge Stark adopts Magistrate Judge’s Burke’s Recommendation to Deny Transfer to N.D. Cal

Judge Leonard P. Stark recently adopted Magistrate Judge Christopher J. Burke’s recommendation from earlier this month, in which Judge Burke recommended denial of a defendant’s motion to transfer to the Northern District of California. MAZ Encryption Technologies LLC v. Hewlett-Packard Company, C.A. No. 13-306-LPS, Report and Recommendation (D. Del. Mar. 6, 2014), adopted, Order (D. Del. Mar. 28, 2014).

Plaintiff was a small Delaware corporation that claimed to have no revenue. Report and Recommendation at 3. It had also brought nine other cases in Delaware; seven involved one or both of same patents-in-suit, and two others involved a related patent. Id. at 2. Defendant was a large Delaware corporation with its principal place of business, and much of its operations, in California. Additionally, the designers of the accused products, while no longer employed with defendant, resided in California. Id. at 4.

As to plaintiff’s forum preference, defendant argued that this factor should be given less or no weight because plaintiff’s “minimal ties to Delaware were manufactured in an apparent attempt to manipulate the venue laws.” Id. at 9 (internal quotation marks omitted). Judge Burke recognized that “the record clearly suggests a connection between Plaintiff’s formation as a Delaware LLC, the assignment of the patents to Plaintiff and the filing of the instant suit in this Court, all of which occurred in relatively short order,” id., and that “[t]here are clearly certain circumstances in which a plaintiff’s connection to a forum and its choice to file suit there evidence an improper motive,” id. at 10. But Judge Burke observed that it may be difficult to differentiate between a formation that is an “appropriate kind of business or litigation decision” and one that is essentially “venue manipulation.” Id. at 11-12. Judge Burke did not have to make this determination here, however, because plaintiff’s forum choice was legitimate for another reason: it brought suit in Delaware to assure personal jurisdiction over defendant, a Delaware corporation. Id. at 12. Therefore, this factor weighed against transfer.

The other factors weighing against transfer were the convenience of the parties and practical considerations. The convenience of the parties only weighed slightly against transfer; while plaintiff’s small size and financial condition, as compared to that of defendant, may have meant that it would suffer greater hardship if forced to litigate in California, Judge Burke gave this minimal weight because there was little detailed information available about plaintiff’s finances, “and the reality [is] that Plaintiff’s members can and have initiated litigation here and in other courts.” Id. at 18. More significantly, the number of pending related cases in Delaware and their level of overlap with the patents-in-suit in this case weighed against transfer. See id. at 23-25.

All other factors weighed in favor of transfer (defendant’s forum preference, where the claim arose, convenience of witnesses, and books and records - although the last two only slightly) or were neutral. Judge Burke explained that “[u]ltimately, with the factors in equipoise, Defendant has not bet its burden to show that the balance of convenience of the parties is strongly in its favor.” Id. at 28. Therefore, Judge Burke recommended that the motion to transfer be denied.

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March 20, 2014

Magistrate Judge Burke recommends denial of indirect and willful infringement claims.

Magistrate Judge Christopher J. Burke recently recommended the dismissal of a plaintiff’s induced infringement and willful infringement claims, with leave to amend. McRO, Inc. v. Rockstar Games, Inc., C.A. No. 12-1513-LPS-CJB; v. Take-Two Interactive Software, Inc., C.A. No. 12-1517-LPS-CJB; v. 2K Games, Inc., C.A. No. 12-1519-LPS-CJB (D. Del. Mar. 17, 2014). With respect to indirect infringement, the Court found that the allegations of direct infringement by unidentified “game developers” was sufficient, but that the allegation that the defendants had knowledge that these game developers were using the patented methods to create the games developed for defendants was insufficient. Judge Burke found that the indirect infringement claim really was “little more than a rephrasing of a portion of the language of Claim 1 of the ‘576 patent and ‘278 patent[.]” “It is really not much different from a bland statement that an entity has taken some unspecified action to practice a ‘method claimed’ in the patents-in-suit. Just as important, the complaints do not really contain any further more specific, concrete factual allegations as to what particular type of actions the developers have actually taken, or what kind of development they have actually engaged in, that are plausibly asserted to amount to the use of the claimed methods.” Id. at 11. As a result, the complaint failed to allege post-suit knowledge of infringing conduct by the game developers that could support an induced infringement claim.

Judge Burke recommended denial of the defendant’s motion to dismiss direct infringement claims, explaining that “Form 18 does not require a plaintiff to list specific accused products, nor to specify what functionality infringed, or any facts that show how [the defendant] performs even one step of a claimed method.” Id. at 7 (internal quotation marks omitted). However, because the allegations “do not plead sufficient specific factual matter about what Defendants or others were actually doing in order to plausibly indicate that, at any point, Defendants were or should have been aware that they were committing patent infringement[,]” Judge Burke recommended denial of the willful infringement claims.

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March 8, 2014

Magistrate Judge Burke recommends dismissal of induced infringement claims.

Magistrate Judge Christopher J. Burke recently recommended the dismissal of a plaintiff’s induced infringement claims. Trans Video Electronics, Ltd. v. Netflix, Inc., C.A. No. 12-1743-LPS (D. Del. Mar. 4, 2014). Judge Burke first found that the plaintiff failed to adequately allege pre-suit knowledge of the asserted patent. Specifically, the plaintiff’s allegation that the defendant “has had knowledge of the ‘936 patent as of July 1, 2011[,]” without factual support, was found to be conclusory and was therefore disregarded in the context of the motion to dismiss. Judge Burke also found that the complaint failed to adequately allege direct infringement by the defendant’s customers. Judge Burke explained that “the Complaint is silent even as to what it is that the customers are alleged to have actually done that is asserted to amount to the ‘use’ of” an infringing method. Instead, the complaint alleged only that the customers “use a method for distributing information to various locations in a digital network,” which simply “parrots [a portion] of the preamble of claim 9 of the ‘936 patent . . . it does not give any hint as to how the customers’ actions are said to relate to the content of the method-at-issue.” Finally, and relatedly, Judge Burke explained that the plaintiff's allegation that the defendant specifically encouraged its customers to infringe through "instructions" on the defendant's website (which were not recited in or attached to the complaint) was insufficient: "[i]n light of the lack of facts pled linking up any 'instructions' with conduct plausibly asserted to amount to direct infringement, the allegations as to this element, then, are insufficient as well."

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February 21, 2014

Magistrate Judge Burke recommends granting, without prejudice, defendant’s motion to dismiss induced infringement claim.

In a recent report and recommendation, Magistrate Judge Christopher J. Burke recommended that a motion to dismiss the plaintiffs’ allegations of induced infringement be granted. Versata Software, Inc., et al. v. Could9 Analytics, Inc., C.A. No. 12-925-LPS (D. Del. Feb. 18, 2014). Judge Stark had previously dismissed, without prejudice, the plaintiffs’ allegations of indirect infringement in an amended complaint, finding that “[a]ll that is alleged with respect to specific intent to induce the end user is really just legal conclusion and conclusory factual assertions, essentially tracking the statute.” Id. at 2. The plaintiffs then amended their claims in the Second Amended Complaint, and the defendant again moved to dismiss, at which point Judge Stark referred the motion to Magistrate Judge Burke.

The defendant argued that the Second Amended Complaint’s induced infringement allegations still failed to “allege facts plausibly showing that the defendant had knowledge that the alleged direct infringer’s acts constituted infringement.” Id. at 4. More specifically, the defendant argued that the plaintiff failed to allege how end users using the accused products were infringing. Id. Judge Burke explained that “while a plaintiff need not provide a detailed, step-by-step description of the alleged infringement in the complaint, this Court has required some identification of how it is that use of the accused product infringes the patent, in order to plausibly assert that the indirect infringer knew that the downstream use of its products constitutes patent infringement.” Id. at 6 (emphasis in original).

The induced infringement allegations at issue were that the defendant “actively induces . . . the infringement of the [patents-in-suit] by customers that use [the defendant’s] Infringing Products,” and that the defendant “sells the infringing products with the intent that its customers use those products in an infringing manner.” Id. at 8. Judge Burke found the allegations deficient, explaining that “[t]hese allegations do not do the job of plausibly asserting Defendant’s knowledge that the end users’ acts constituted infringement of the patents-in-suit, as Plaintiffs have simply identified the accused products and generically alleged that their use somehow infringes the asserted patents.” Id. However, Judge Burke recommended that the allegations be dismissed, without prejudice, to permit the plaintiff to file a third amended complaint. Id. at 8-9.

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February 19, 2014

Judge Burke recommends denial of motions to dismiss direct infringement allegations

Magistrate Judge Christopher J. Burke recently considered motions to dismiss for failure to state a claim filed by defendants in three of eight related cases brought by Custom Media Technologies. Custom Media Technologies LLC v. Charter Communications, Inc., et al., C.A. Nos. 13-1420-LPS-CJB , 13-1425-LPS-CJB, 13-1426-LPS-CJB (D. Del. Feb. 10, 2014). Defendants moved to dismiss Charter's claims of direct infringement, arguing that Claim 1 of the patent-in-suit relates to "'customizing and distributing presentations for user sites[,]' and not to 'DVR technology [accused of infringement], which allows television viewers to watch and record television programming.'" Id. at 4. Although Charter's pleading was only required to meet the minimal requirements of Form 18, defendants argued that the Federal Rules, including Form 18, was not satisified, equating the situation at hand to a "a plaintiff stat[ing] that its patent covered an electric motor and that the defendent infringed because he sells cakes." Id. at 5. Judge Burke disagreed. "Plaintiff has accused a general category of products and services (here, 'DVR devices and DVR service' provided to cable television customers) of infringement. No more specificity . . . is required by Form 18." Id. Moreover, Form 18 only requires a "basic description" of the patentee's invention, "so long as there is a plausible basis to believe that the nature of what the patent covers might be infringed by the accused products." Id. Although Charter's allegations were "admittedly sparse," they were plausible. "[T]he Court cannot say that it is implausible, for example, that Defendants' DVR devices and services work in conjunction with thei cable television services to perform the steps of the method in Claim 1[.]" Id. at 6.

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January 27, 2014

Judge Burke grants motion to stay

In Princeton Digital Image Corporation v. Konami Digital Entertainment Inc., et al., C.A. Nos. 12-1461 & 13-335-LPS-CJB (D. Del. Jan. 15, 2014), Magistrate Judge Christopher J. Burke granted defendants’ motions to stay where one defendant had filed a request for inter partes review (“IPR”) that had yet to be granted by the PTO.

Simplification of issues only weighed slightly in favor of a stay. While a high percentage of the claims were potentially at issue in the IPR, it was also too early in the case to tell how much overlap there would be in issues between the two proceedings. Id. at 5-6. Even if not all claims were cancelled, the IPR could still simplify some issues due to its estoppel effect, although that simplification would only apply to the defendant that filed the IPR petition. Id. at 4-5.

The stage of the litigation “on balance more strongly favor[ed] the moving parties,” id. at 9, where i) discovery was "in its nascent stages,” id. at 9, and ii) substantive proceedings already held (i.e., early Markman, a hearing on a motion to dismiss, and a discovery dispute) actually “served to emphasize how the cases are not close to resolution at all.” Id. at 8 n.6.

As to the potential prejudice to the plaintiff, the Court found that the timing of the motions to stay did not suggest an attempt to gain an inappropriate tactical advantage. Id. at 12. Among other things, the Court was not persuaded by plaintiff’s arguments that, out of “gamesmanship,” the defendant who filed the IPR had concealed its intention to file the IPR when it requested early Markman and a stay of discovery deadlines. Id. at 11. Therefore this sub-factor weighed in favor of a stay. However, while IPR proceedings “promise[] to be a more expeditious process” than inter partes reexamination proceedings, because the PTO had not yet determined whether to grant review, the early status of the IPR proceeding weighed against granting a stay. Id. at 12. As plaintiff was a non-practicing entity, the parties in this case were not direct competitors, and thus this final sub-factor within the prejudice analysis weighed in favor of a stay. Id. at 13. On balance, the prejudice factor weighed in favor of a stay. Id.

Because “[t]he potential for simplifying the issues, the current status of this litigation and the amount of undue prejudice associated with the stay requests all favor a stay, to at least some degree,” the Court granted the motions. Id. at 14.

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December 16, 2013

Magistrate Judge Burke Recommends Transfer of Venue for Video Game Cases

Magistrate Judge Burke recently issued a report and recommendation recommending that four related cases be transferred to the Central District of California. The parties to the cases are involved in computer graphics and video game software, and the patents-in-suit relate to lip-synchronization for animated computer graphics characters used in video games. The defendants in four of thirteen related cases moved to transfer to the Central District of California, and the plaintiff opposed and asked in the alternative for jurisdictional discovery. Both the plaintiff and all four defendants are incorporated in Delaware but have primary places of business in California. Additionally, the plaintiff has sixteen similar cases pending in the Central District of California, all of which were filed shortly after the Delaware actions. McRO, Inc., d/b/a Planet Blue v. Activision Blizzard, Inc., et al., C.A. No. 12-1508-LPS-CJB, Report and Recommendation at 2-5 (D. Del. Dec. 13, 2013).

Judge Burke considered the factors articulated by the Third Circuit in Jumara v. State Farm Ins. Co., 55 F.3d 873 (3d Cir. 1995) and ultimately found that a transfer was warranted. Judge Burke found that only the plaintiff’s choice of forum weighed against transfer. Weighing in favor of transfer to varying degrees were the following factors: the defendants’ forum preference, whether the claim arose elsewhere, convenience of the parties, convenience of the witnesses, location of books and records, and administrative difficulties in getting the case to trial. Neutral factors included: enforceability of judgment, Practical considerations that could make the trial easy, expeditious, or inexpensive, local interests in deciding local controversies at home, and public policy of the fora. Id. at 7-30. Thus, the Court found that “the balance of convenience is strongly in [defendants'] favor” and recommended that the motion to transfer be granted and the request for jurisdictional discovery be denied. Id. at 30-33. Judge Burke recognized that “[t]he issue is not free from doubt, and the Court recognizes the significance of the parties’ choice of Delaware as their State of incorporation and the fact that there are related cases pending here. However, those connections do not sufficiently counterbalance the substantial ties between the Central District and these cases, as is reflected in the number of Jumara factors weighing in favor of transfer.” Id. at 31.

Judge Burke’s Report and Recommendation included an interesting discussion of the plaintiff’s “home turf” as it relates to the plaintiff’s choice of forum factor. Ultimately, Judge Burke determined that the Court “will not and need not resolve this question, as a determination as to whether Delaware is McRo’s ‘home turf,’ in and of itself, has no independent significance regarding the overall Jumara balance of convenience analysis, nor to the analysis as to this first Jumara private interest factor. The cases from this Court originally referencing a plaintiffs ‘home turf’ in the transfer context explained that the burden of proof for a defendant seeking transfer ‘is no less where plaintiff is litigating away from its home turf.’ That is, regardless of whether this District is or is not a plaintiff’s ‘home turf,’ the same overarching standard set out by the Third Circuit for considering a transfer motion applies—the defendant must show that the balance of convenience is strongly in its favor in order to justify a transfer of venue. Nor is reference to a plaintiffs "home turf" in this context meant to suggest that if a plaintiff is (or is not) suing on its ‘home turf,’ then as to the first Jumara private interest factor, a plaintiffs choice of forum should automatically be given any set amount of weight. Instead, such a reference is really nothing more than a short-hand way of noting that, when a court balances the relative convenience of different fora as part of a transfer analysis, the ‘the weaker the connection between the forum and either the plaintiff or the lawsuit, the greater the ability of a defendant to show sufficient inconvenience to warrant transfer.’” Id. at 8 n.8 (citations omitted).

Finally, Judge Burke also noted “a split of authority in the courts as to whether a motion to transfer venue should be treated as a dispositive or non-dispositive motion.” Therefore “[i]n an abundance of caution, the Court [titled its opinion] as a ‘Report and Recommendation.’” Id. at 2 n.2.

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November 22, 2013

Judge Burke Recommends Claim Constructions in Exjade ANDA Case

Magistrate Judge Burke has issued a report and recommendation regarding claim construction in a Hatch-Waxman case involving the drug deferasirox, known by the brand name Exjade. The case involves two patents, one of which claims the chemical compound itself and was not the subject of claim construction disputes, and one of which claims methods of using certain compounds and was the subject of claim construction disputes. Novartis Pharms. Corp., et al. v. Actavis, Inc., et al., C.A. No. 12-366-RGA-CJB, Report and Recommendation at 1-2 (D. Del. Nov. 21, 2013). The terms that Judge Burke construed were:
- “diseases”
- “iron overload”
- “treating”
Id. at 6-23.

Interestingly, the parties also disputed whether certain claims were independent or dependent claims. The defendants argued that claims 8 and 16 expressly referred to claims 3 and 9, respectively, and were thus clearly dependent. The defendants found further support for the dependency of these claims in the prosecution history, including statements during prosecution that “identical claim language to that at issue was language of dependency.” Id. at 23-28. Plaintiffs took the position that claims 8 and 16 were independent, but had “no real answer for how to square [the] prosecution history with their . . . position that the claims are independent.” Id. at 27. Accordingly, Judge Burke also recommended that claims 8 and 16 be construed as dependent claims. Id. at 28.

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September 11, 2013

Judge Burke recommends denying Philips' motion to dismiss plaintiff's induced infringement claims

Judge Christopher J. Burke recently issued a report and recommendation on defendant Philips' motion to dismiss plaintiff Advanced Optical Tracking's ("AOT") induced infringement claims. Advanced Optical Tracking, LLC v. Koninklijke Philips N.V., et al, C.A. No. 12-1292-LPS-CJB (D. Del. Sept. 9, 2013). In deciding the motion, Judge Burke noted that in order to survive a motion to dismiss an induced infringement claim, "a patentee must plead facts 'plausibly showing that [the alleged infringer] specifically intended [a third party] to infringe the patents-in-suit and knew that the [third party's] acts constituted infringement.'" Id. at 4 (quoting In re Bill of Lading Transmission & Processing Sys. Patent Litig., 681 F.3d 1323, 1339 (Fed. Cir. 2012)) (alteration in original). Philips argued that AOT's allegations failed to adequately plead pre-filing knowledge of the patent-in-suit, knowledge of the alleged inducement, or facts to satisify the intent requirement for an induced infringement claim. Id. Judge Burke disagreed.

Contrary to Philips' contentions, AOT' s allegations of pre-suit knowledge are accompanied by basic factual content meant to bolster the claim. Here, the [Complaint] identifies September 19, 2012 notice letters that are asserted to have provided Defendants with knowledge of the inducement claims, and explains how that notification was allegedly sent to Defendants. Additionally, AOT's allegations indicate that these letters not only identified the patent-in-suit and the induced infringement claim, but that they also identified the accused products at issue, the alleged direct infringers (Defendants' suppliers, distributors, and resellers)/ how the alleged direct infringers were alleged to have infringed the patent (i.e., through the manufacture, use, sale and offer for sale of the accused products) and certain exemplary actions by which Defendants were asserted to have acted to induce infringement (i.e., by "entering into, performing, and requiring performance under manufacturing, supply, and distribution agreements" with those suppliers, distributors, and resellers).

Id. at 6.

Regarding intent, Judge Burke found that AOT's allegations, "while not robust," were sufficiently pled. Id. at 8. The Complaint contended that "Defendants, with knowledge that the accused products infringed the patent-in-suit, continued to require performance of contractual agreements entered into with their suppliers, distributors and resellers-agreements mandating that those entities manufacture, supply and distribute the accused products." Id. at 9. Philips argued that the Complaint did not set forth additional facts, such as the content of the agreements or the nature of the relationship between Defendants and the third parties. Id. Judge Burke found, however, that the AOT was not required to "rule out all possible non-infringing eventualities; it need simply assert enough facts to provide Defendants with fair notice of facially plausible claims." Id.

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September 6, 2013

Judge Burke recommends denial of defendant’s renewed motion to transfer

In Pragmatus AV, LLC v. Yahoo! Inc., C.A. No. 11-902-LPS-CJB (D. Del. Aug. 28, 2013), Magistrate Judge Christopher J. Burke recommended denial of defendant’s renewed motion to transfer to the Northern District of California. Judge Burke had previously recommended denial of defendant’s motion to transfer (see here), and Judge Stark had accepted the recommendation (see here). Defendant argued that plaintiff’s recent filing of a separate lawsuit against defendant in the Northern District of California (the “California Action”) altered the Jumara factors such that transfer was merited. The California Action involved different patents within the same family as the patents-in-suit in this case and involved the same accused product. Id. at 16.

The Court first addressed the relevance of In re EMC Corp., 501 F. App’x 973 (Fed. Cir. 2013), where the Federal Circuit held that “motions to transfer venue are to be decided based on the situation which existed when suit was instituted,” but also noted that “a district court may properly consider any judicial economy benefits which would have been apparent at the time the suit was filed.” Id. at 8 (internal citations and quotation marks omitted). While it observed that “the full scope of In re EMC Corp’s impact and meaning as to this question” was unclear, see id. at 9-10, “[u]ltimately, the Court need not further examine the full scope of the rule . . . [because] even if the Court could properly take all of the proffered facts related to the California Action into account for purposes of the Renewed Motion to Transfer, the Court determines that they do not add support to that motion, nor would they alter the outcome of the First Motion to Transfer.” Id. at 10-11.

The Court went on to reject all of defendant’s arguments that the California Action “undercut” the original reasons for keeping the case in Delaware. As to plaintiff’s forum preference, plaintiffs had provided a “plausible” explanation for suing in different districts that was not a bad-faith attempt to forum-shop. See id. at 11-15. The convenience of the parties factor was also unaffected. Id. at 16. Regarding practical considerations, while transfer could minimize duplication, it was also the case that the patents in the California Action were different, “and so efficiencies gained from transferring this case to the Northern District . . . might not be as extensive as Defendant argues.” Id. at 17. The Court added that transferring the case to California “would almost certainly have the effect of delaying the ‘expeditious’ progress of the case regarding the five patents-in-suit here (which is nearing the close of discovery), in order to account for the fact that the California Action is at its inception.” Id. at 18. “In conclusion, because the filing of the California Action does not, in the Court's view, alter the calculus as to any of the cited Jumara factors in favor of transfer, the Court recommends denial of [defendant's] Renewed Motion to Transfer.” Id.

Defendant had moved to enjoin the California Action in the alternative, under the first-filed rule. The Court also recommended denial of this motion, finding that “while there is an overlap in the identity of parties and there may be an overlap of certain legal issues among the two lawsuits, the cases are sufficiently different such that the first-filed rule does not apply,” particularly because there was no overlap of patents between the two actions. Id. at 20.

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