April 16, 2014

Chief Judge Sleet resolves competing proposals on appropriate post-verdict royalty rates.

Chief Judge Gregory M. Sleet recently issued a memorandum and order resolving a post-trial dispute regarding the appropriate royalty rate to apply to post-verdict infringement. Telcordia Technologies, Inc. v. Cisco Systems, Inc., C.A. No. 04-876-GMS (D. Del. Apr. 14, 2014). The Court previously had found that a permanent injunction was not warranted, and ordered the parties to negotiate the terms of a reasonable royalty rate for post-verdict infringement. Id. at 1. The parties were unable to reach agreement, however, and ultimately submitted competing proposals that amounted to a difference of roughly $8.9 million. Id. at 4.

Chief Judge Sleet noted that royalty rates applied to post-verdict ongoing infringement frequently exceed royalty rates found at trial because of the parties’ changed legal status following a verdict, but that market circumstances also need to be considered in the analysis. Id. at 7. The Court found that the plaintiff was in a stronger bargaining position after prevailing at trial, and on appeal, but was not in a strong enough position to warrant the 3.5% “market rate” the plaintiff proposed with respect to its ‘763 and ‘633 patents (through the expiration of the ‘763 patent, after which the plaintiff proposed a 2% market rate through the expiration of the ‘633 patent). Id. at 8. The defendant proposed an “effective rate” of 0.64% on the two patents. The Court ultimately found that a 1.25% royalty rate on the ‘763 patent, and a 1% royalty rate on the ‘633 patent, were appropriate under the circumstances. Id. at 9.

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April 8, 2014

Chief Judge Sleet Grants Transfer to Northern District of California

OpenTV, a Delaware corporation with a California principal place of business, sued Netflix, also a Delaware corporation with a California principal place of business, for infringement of patents related to technologies for “over-the-top” delivery of movies, television, and other media via the Internet. Netflix filed a motion to transfer to the Northern District of Delaware, which Chief Judge Sleet granted.

Considering the Third Circuit’s Jumara factors, Judge Sleet found that “[a]lthough the plaintiff’s choice of venue is ordinarily entitled to deference, its preference is ‘entitled to less than the paramount consideration’ when it files suit where it is incorporated but not physically located. Here, OpenTV’s preferred forum is Delaware, where it is incorporated, but Open TV’s principal place of business is in Northern California. Therefore, the court will not accord substantial weight to OpenTV’s choice of Delaware.” This factor, therefore, weighed slightly in favor of transfer to California. OpenTV, Inc. v. Netflix, Inc., C.A. No. 12-1733-GMS, Memo. at 3 (D. Del. Mar. 31, 2014) (citations omitted). Additional facts that weighed in favor of transfer included that the accused products were developed in California, the parties could more easily and cost-effectively litigate in California, and relevant witnesses including the inventors and third party witnesses were in California. Id. at 4-8.

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April 7, 2014

Judge Sleet grants motion to transfer to Eastern District of Michigan

In Cruise Control Technologies LLC v. Chrysler Group LLC, et al., 12-1755-GMS (D. Del. Mar. 31, 2014), Chief Judge Gregory M. Sleet granted defendants’ motion to transfer venue to the Eastern District of Michigan in this multi-defendant litigation. Id. at 3-4. Of the thirteen defendant car companies in the instant litigation, all but one filed motions to transfer or statements consenting to such transfer. Id. at 1-2. As Judge Sleet explained, defendants contend that venue is proper in the Eastern District of Michigan because each defendant has its "headquarters and/or research and development facilities . . . located there.” Id. at 6. Plaintiff did not contest this point, and Judge Sleet therefore turned to the Jumara private interest factors. Id.

First, Judge Sleet considered the parties’ choice of forum and found this factor to weigh against transfer. Id. at 6-7. Specifically, Judge Sleet explained that “the court declines to strip the plaintiff’s forum choice of the deference due merely because the plaintiff may have been formed primarily to enforce patent rights.” Id. at 7. Judge Sleet therefore found that “although the Defendants’ choice of the Eastern District appears to be a legitimate venue, [plaintiff’s] forum choice controls.” Id. at 7. Next, Judge Sleet addressed “where the claims arose,” and noted that “the crucial inquiry in determining the deeper roots of infringement claims is where the design and development of the accused products occurred.” Id. at 8-9. Judge Sleet explained that all defendants “are either headquartered in the Eastern District of Michigan and/or operate their research and development facilities there.” Id. at 8. Further, defendants’ “accused products and services were designed and developed in the Eastern District of Michigan” and “no design or development related to the accused products occurred in Delaware.” Id. at 8. Judge Sleet therefore found this factor to weigh strongly in favor transfer. Id. at 9.

Addressing the “convenience of the parties,” Judge Sleet noted “[t]he fact that the Defendants possess vast resources . . . does not mean that the court should follow an approach that would unnecessarily waste these resources.” Id. at 10. Judge Sleet further explained that “while the court does not seek to give short shrift to the inconvenience to [plaintiff] of being compelled to litigate outside the forum it has chosen, the court must ‘account for the absolute costs likely to flow from its transfer decision.’” Id. at 10. Judge Sleet thus found this factor to weigh in favor of transfer, given that all of defendants’ “employees involved in the research and design of the accused products or who otherwise possess knowledge relevant to the instant litigation are located in the Eastern District of Michigan.” Id. at 10-11. Judge Sleet similarly found “the witnesses’ convenience” to weigh in favor of transfer, noting that “unavailability of witnesses in this jurisdiction combined with inconvenience to third party witnesses is sufficient to establish that the witnesses' convenience favors transfer.” Id. at 11.

After noting that the location of books and records was neutral in the Court’s analysis, Judge Sleet considered the Jumara public interest factors. Addressing practical considerations, Judge Sleet explained that “this action has significant connections to” the Eastern District of Michigan. Id. at 12. Further, as Judge Sleet pointed out, “even regarding those Defendants who are incorporated in Delaware, the Eastern District of Michigan still has a stronger interest to this litigation because it is where the claims arose and where the employees and known material witnesses are located.” Id. Judge Sleet additionally noted the fact that “all, except one, of the other Defendants are seeking transfer also weighs in favor of transferring the instant actions to the Eastern District of Michigan.” Id. at 13. Judge Sleet also found the administrative difficulty of the two fora to favor transfer, noting that “Delaware courts’ dockets are far more congested on average than those of courts in the Eastern District of Michigan,” and that “Delaware is one of the busiest patent jurisdictions in the nation.” Id. at 13-14.

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April 7, 2014

Chief Judge Sleet denies motions to transfer to the District of Massachusetts

Chief Judge Gregory M. Sleet has denied motions to transfer to the District of Massachussetts in a number of related patent infringement actions. Videoshare, LLC v. Google Inc, et al., C.A. No. 13-990-GMS; Videoshare, LLC v. Viddler, Inc., C.A. No. 13-991-GMS; Videoshare, LLC v. Vimeo, LLC, C.A. No. 13-992-GMS (D. Del. Apr. 1, 2014).

Plaintiff was a Delaware company with its principal place of business in Massachusetts. Each defendant was also a Delaware company with principal places of business in California, Pennsylvania, and New York. Id. at 2.

Applying the Jumara factors, the Court concluded that “only the defendants’ forum preference counseled transfer, and that factor is eclipsed by [plaintiff’s] forum choice, which was afforded a degree of heightened deference.” Id. at 13. The remaining factors either weighed in favor of transfer or were neutral. Of particular interest in the Jumara analysis was the “unusual scenario” presented as to the convenience of the parties: “the parties' respective headquarters are physically located further from their preferred forum than the opposed forum. As such, the court does not need to deeply analyze the associated logistical and operational costs, or the parties’ ability to bear those costs, because the parties are willing to travel a further distance to litigate in their preferred forum. Stated differently, none of the parties can make a colorable argument that it would be ‘inconvenient’ to litigate closer to home.” Id. at 9. The location of the parties’ books and records was also neutral because the “bulk of relevant evidence was not located in either forum.” Id. at 10. Additionally, while the plaintiff had previously sued one of the defendants in Massachusetts regarding the same claimed technology, that case had been dismissed on procedural grounds. Id. at 6. The Court therefore concluded that the potential efficiency of transferring these cases was only marginal as the Massachusetts court did not gain familiarity with the merits of the underlying patented technology. Id. at 6-7, 11.

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March 25, 2014

Chief Judge Sleet Grants Motion to Transfer Case against Zynga to Northern District of California Based in Part on Subpoena Power over Third Party Witnesses

Plaintiff Segan is a New York limited liability company with a principal place of business in New York. Segan sued Zynga for infringement of its patent related to online games, accusing popular Zynga games such as Cafe World, CityVille, Empires & Allies, FarmVille, FishVille, FrontierVille, Mafia Wars, PetVille, Treasure Isle, YoVille and Zynga Poker. Zynga is a Delaware corporation with a principal place of business in San Francisco. Zynga moved to transfer the case to the Northern District of California. Segan LLC v. Zynga Inc., C.A. No. 11-670-GMS, Memo at 1-2 (D. Del. Mar. 19, 2014).

Third party witnesses ended up playing a large role in the transfer analysis. Segan identified three potential third-party witnesses: the co-inventor and the two prosecuting attorneys. Judge Sleet explained that these individuals did not affect the Court’s transfer analysis because “they are not Segan’s employees, and they are not third-party witnesses that reside within the subpoena power of either the District of Delaware or the Northern District of California.” Id. at 5 n.1. By contrast, Zynga identified several relevant third party witnesses who were not within the District of Delaware’s subpoena power but could be compelled by subpoena to testify in the Northern District of California. Because Zynga’s identified third party witnesses were “important to resolving infringement,” could be compelled to testify in California, and could more conveniently testify in California because they were headquartered there, Judge Sleet found that this factor strongly favored a transfer to the Northern District of California. Id. at 6-7.

Weighing the other factors set forth by the Third Circuit in Jumara v. State Fram Ins. Co., 55 F.3d 873 (3d Cir. 1995), Chief Judge Sleet determined that the interests weighed in favor of transfer. Although both parties chose “traditional and legitimate” venues, Judge Sleet acknowledged that “plaintiffs have historically been accorded the privilege of choosing their preferred venue,” so this factor weighed slightly against transfer. Id. at 3-4. Similarly, the convenience to each party of its chosen venue was given some weight, but was ultimately neutral. Id. at 5-6. Judge Sleet also found that the accused products had a closer connection to California through Zynga’s San Francisco headquarters and that the relevant books and records were located in California. Each of these factors weighed somewhat in favor of transfer. Id. at 4-7. Finally, practical considerations also favored transfer because “none of the parties have a presence in Delaware; the majority of the evidence, witnesses, and nonparty companies are located in the Northern District of California; and transfer would reduce the expense and disruption to Zynga’s and the nonparty companies’ business operations.” Id. at 7-8.

In sum, Judge Sleet determined that the motion to transfer should be granted: “Considering the Jumara factors as a whole, the court believes that Zynga has met its burden of demonstrating that the interests of justice and convenience strongly favor transfer. Notably, only Segan’s forum preference weighs against transfer, and that preference was not afforded maximum deference in this case. On the other hand, several factors counsel transfer: the location where the claim arose; the location of relevant books and records; and practical considerations that might make trial easier and less expensive. Additionally, the convenience of witness factor strongly favors transfer because the Northern District of California can exercise subpoena power over most of the nonparty witnesses, but Delaware cannot. Therefore, the court grants Zynga’s motion to transfer.” Id. at 9.

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March 19, 2014

Judge Sleet grants motion to transfer declaratory judgment action

In Constant Contact Inc. v. Umbanet Inc., C.A. No. 12-1467-GMS (D. Del. Mar. 12, 2014), Chief Judge Gregory M. Sleet granted Umbanet Inc.’s (“Umbanet”) motion to transfer Constant Contact Inc.’s (“Constant Contact”) declaratory judgment action to the District of New Jersey. In September 2012, Umbanet filed an action for patent infringement against one of Constant Contact’s customers, Englewood Wine Merchants (“EWM”) in the District of New Jersey, alleging that EWM infringes U.S. Patent Nos. 7,067,730 and 7,444,374 (collectively, the “patents-in-suit”) via its use of Constant Contact’s e-mail marketing service. Id. at 1. In November 2012, Constant Contact filed an action in the District of Delaware seeking, among other things, a declaratory judgment that the patents-in-suit are invalid and that none of Constant Contact’s customers infringe the patents-in-suit by using Constant Contact’s products. Id. at 1.

First, Judge Sleet determined that the declaratory judgment action could have brought in the District of New Jersey, as “[b]oth Constant Contact's declaratory judgment suit and Umbanet's suit against EWM in New Jersey arise out of the use by EWM in New Jersey of Constant Contact's e-mail marketing products.” Id. at 5. Turning to the Jumara private interest factors, Judge Sleet noted that “Constant Contact's choice of forum is Delaware, where it is incorporated, but Constant Contact's principal place of business is in Massachusetts.” Id. at 6. Accordingly, Judge Sleet did not grant Constant Contact’s choice of forum as much deference “as that normally shown a plaintiff's choice of forum.” Id. Judge Sleet found, on the other hand, that Constant Contact’s choice of New Jersey as a venue was legitimate as “New Jersey is where the use of Constant Contact's products by EWM that gave rise to the instant suit occurred.” Id. Judge Sleet therefore found that the parties’ forum choice “weigh[ed] slightly in favor of transfer.” Id. Considering whether the claim “arose elsewhere,” Judge Sleet explained that “both the declaratory judgment action currently at issue and Umbanet's suit against EWM in New Jersey arise out of EWM's use in New Jersey of Constant Contact's allegedly infringing products.” Id. Accordingly, Judge Sleet found this factor weighed “strongly” in favor of transfer. Id. at 7.

Judge Sleet also found the convenience of the parties weighed in favor of transfer. Id. at 7-8. Specifically, Judge Sleet noted that Constant Contact had its principal place of business in Massachusetts and Umbanet had its principal place of business in New York. Id. at 7. While Constant Contact argued that New York was only a “short train ride” from Delaware, Judge Sleet explained that “New Jersey is a much shorter train ride from New York.” Id. Further, Umbanet was only a “one-employee operation” while Constant Contact had a market capitalization of approximately $473 million. Id. Judge Sleet thus found that Constant Contact can “much more easily bear the cost of leaving Massachusetts to litigate in New Jersey than Umbanet can bear the cost of venturing from New York to litigate in Delaware.” Id. at 7-8. Judge Sleet found the location of books and records, and the convenience of witnesses to be neutral in the Court’s analysis. Id. at 8.

Turning to the public interest factors, Judge Sleet determined that judicial efficiency favored transfer. Id. at 8-9. Specifically, Judge Sleet found that the New Jersey action involves “the same patents, the same technology, the same prior art, and the same accused product.” Id. at 9. Further, as Judge Sleet explained, “full discovery continues and the claim construction process has commenced and is well underway,” and there is therefore “some efficiency to be achieved in allowing that process to continue without the interruption and potential conflict of a parallel proceeding before this court.” Id. Judge Sleet similarly found that New Jersey’s interest in this matter favors transfer. Id. Specifically, “New Jersey has an interest in this matter because the underlying use by EWM of Constant Contact's alleged infringing product occurred in New Jersey and is currently being litigated in New Jersey.” Id. Delaware’s interest in the instant matter, as Judge Sleet explained, was “more tenuous.” Id.

Considering the Jumara factors a whole, Judge Sleet determined that Umbanet met its burden of demonstrating that “the interests of justice and convenience strongly favor stay.” Id. at 10.

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January 21, 2014

Chief Judge Sleet denies defendant's request to file summary judgment on the issue of whether a Certificate of Correction was invalid

Chief Judge Gregory M. Sleet recently considered defendant's letter request to file a summary judgment motion on the issue of whether the Certificate of Correction for the patent-in-suit was invalid because the error it corrected was not minor under 35 U.S.C. § 255. Cubist Pharmaceuticals, Inc. v. Hospira, Inc., C.A. No. 12-367-GMS (D. Del. Jan. 15, 2014). Judge Sleet denied the request because "[w]hile the instant issue is a question of law, the court found in its claim construction order that 'the determination of whether the stereochemistry correction is properly considered a correction of 'minor character' presents questions requiring expert testimony regarding the nature of the error and its correction.'" Id. at 2. Because underlying issues of fact remained as to whether the Certificate of Correction was invalid, Judge Sleet denied defendant's request. Id.

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January 16, 2014

Judge Sleet grants motion to stay pending inter partes review

In a recent order, Chief Judge Gregory M. Sleet granted defendant’s (“Level 3”) motion to stay pending the inter partes review (“IPR”) of U.S. Patent No. 7,724,879. AIP Acquisition LLC v. Level 3 Communications, LLC, C.A. No. 12-617-GMS, Order (D. Del. Jan. 9, 2014). Plaintiff (“AIP”) is also pursuing related actions against at least 5 other defendants (“Cable Defendants”) in the District of Delaware. See C.A. Nos. 12-1688; 12-1689; 12-1690; 12-1691; 12-1692-GMS. At the time of the memorandum order, AIP was asserting against Level 3 U.S. Patents Nos. 6,757,275; 7,486,662; and 7,724,879 (“the ‘879 Patent”). Order at 1 n.1. Further, against all but one Cable Defendant, AIP asserted two additional patents, U.S. Patent Nos. 6,496,579 and 6,078,654. Order at 1 n.2 The Cable Defendants did not join Level 3’s IPR, but did not oppose a stay of their cases or the Level 3 case. Id. at 4 n.3.

Judge Sleet concluded that a stay would “simplify the issues before the court and conserve judicial resources.” Id. at 4. As Judge Sleet explained, in the PTO’s decision granting Level 3’s IPR petition, the PTO found that Level 3 “demonstrate[d] a reasonable likelihood of prevailing on its challenge to patentability of [all claims] of the ’879 patent.” Id. at 5. Judge Sleet thus concluded that granting stay would allow “the court and the parties to avoid wasting resources on a Markman hearing and at trial to address claims that have a ‘reasonable likelihood’ of being amended or canceled.” Id. at 5. Judge Sleet also noted, among other things, that while AIP was asserting against Level 3 two patents other than the ‘879 patent, the parties determined that only the ‘879 patent required claim construction. Id. at 6. Judge Sleet additionally found a stay would simplify the issues for trial because Level 3 would be “estopped from asserting invalidity arguments that were raised or reasonably could have been raised during the IPR proceeding,” and the Cable Defendants, although not parties to the IPR, had stipulated to be estopped from raising certain arguments based on the IPR proceedings. Id. at 5.

Judge Sleet found that the remaining stay factors did not “alter the balancing analysis,” and ultimately concluded that stay would “simplify issues before the court and [would] not unduly prejudice AIP.” Id. at 4, 6. Judge Sleet granted Level 3’s motion to stay and also stayed each of the related Cable Defendant cases.

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January 14, 2014

Judge Sleet sua sponte stays litigation pending the U.S. Supreme Court's decision in Alice Corp. Pty. Ltd. v. CLS Bank Int'l

Chief Judge Gregory M. Sleet recently considered defendant Metlife's motion to dismiss plaintiff's patent infringement action on the basis that plaintiff's patent, U.S. Patent No. 6,684,189, fails to claim patentable subject matter. The Money Suite Company v. Metlife, Inc., C.A. No. 13-1748-GMS (D. Del. Jan. 9, 2014). Metlife alleged that "the '189 patent is directed to an abstract idea -- using a computer to generate a quote for a financial product product-- and is thus non-patentable subject matter." Id. at 3. Judge Sleet noted that the Federal Circuit is divided on the applicability of "[t]he abstract idea judicial exception to patent eligibility under § 101 of the Patent Act" to computer-implemented inventions. Id. The United States Supreme Court recently granted cert in Alice Corp. Pty. Ltd. v. CLS Bank Int'l, the outcome of which may substantially affect the issues implicated by Metlife's motion. As such, Judge Sleet sua sponte stayed this and other related cases pending the Supreme Court's ruling. Id. at 4. The Supreme Court will hear argument in Alice Corp on March 31 (see SCOTUS Blog for coverage).

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January 9, 2014

Chief Judge Sleet excludes evidence of proceedings before European Patent Office

Chief Judge Gregory M. Sleet recently granted a motion in limine seeking to exclude from trial evidence or argument regarding proceedings before, and decisions arising from, the European Patent Office. Edwards Lifesciences LLC, et al. v. Medtronic CoreValve LLC, et al., C.A. No. 12-23 (GMS) (D. Del. Jan. 2, 2014). As Judge Sleet explained, “there is a substantial risk of prejudice to [plaintiffs] given the strong likelihood that the jury would be confused and give undue deference to the foreign decisions and proceedings.” Id. at 1-2. Moreover, the Court found that such foreign proceedings, and decisions arising from them, are “of dubious probative value” that “hardly outweighs the substantial risk of prejudice.” Id. at 2.

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