Delaware IP Law Blog

It is well-established that plaintiff's choice of forum will be a strong consideration in deciding a motion to transfer. Judge Sleet in denying the defendants' motion to transfer in the case Acuity Brands, Inc. v. Cooper Industries, Inc., again stressed the importance of plaintiff's choice of forum -- particularly where both parties are Delaware corporations and inconvenience is the only argument for transfer. C.A. No. 07-444-GMS, Memorandum (D. Del. July 31, 2008).

Defendants argued that their only tie to Delaware was the fact that they were incorporated here and that the case law provides for transfer where that is the only link to the forum. Id. at 3. The Court found the cases relied on by defendants distinguishable, however, since in those cases there was also simultaneous litigation proceeding in the transfer district, and there is no such parallel litigation here. Id. at 4.

In a continuing trend in D. Del. transfer opinions, the Jumara factors related to location of witnesses and documents are becoming less important to the analysis. The Court has held that party-witnesses such as employees "are presumed willing to testify at trial" and therefore are not part of the analysis. Id. at 5. And even in the case of third-party witnesses, "a flight to Delaware is not an onerous task warranting transfer." Id. Finally, in this age of electronic discovery, the location of documents becomes almost irrelevant. Id.

For a copy of the opinion see here.

In the past month, two juries have come back from deliberations with verdicts in favor of the plaintiff patent-holder. On June 13, 2008, in the Elan Pharmaceuticals Inc. v. Abraxis Bioscience Inc. case, the jury found that Abraxis's Abraxane breast cancer drug infringed two of Elan's patents and that these patents were valid and enforceable. The jury did not find willful infringement. Elan was awarded $55,230,000 in damages based on a 6% reasonable royalty rate for an approximately 3 1/2 year period.

See a copy of the verdict form here.

On July 1, 2008, in the Linear Technology Corporation v. Monolithic Power Systems, Inc. case, the jury again came back with a verdict for the plaintiff. In this case involving semiconductor technology, the jury found that the defendant infringed the plaintiff's patent and that the patent was valid. The parties had previously stipulated to nominal damages in the event that the jury found infringement.

See a copy of the verdict form here.

The question that arises is whether these verdicts are further examples that the District of Delaware is a "plaintiff/patent holder-friendly" forum or whether there is no clear trend in verdicts in this district. Keep watching for a future post analyzing the trend in jury verdicts in this district...

As patent litigation grows more complex, splitting jury trials into separate liability and damages phases has become increasingly commonplace. As grounds for bifurcating proceedings, courts often cite the need to avoid jury confusion and the interests of promoting judicial economy. But, as a recent decision by Chief Judge Gregory M. Sleet demonstrates, the bifurcation inquiry remains a fact-specific exercise, and is far from automatic.

On the topic of judicial economy, the Court noted that the damages phase of trial would consume “perhaps one day of a ten-day trial.” Balanced against the “time and judicial resources required to hold two separate trials,” the Court held that carving out the short damages presentation would lead to “duplicative” proceedings.

The Court also rejected the jury confusion point: “Through reasoned and considered presentation, the attorneys for each side may clarify and compartmentalize issues for the jury.” Indeed, the Court implied that parties’ should give juries more credit: “[T]his court regularly tries complex cases before juries and has found juries well able to keep separate issues separate, particularly with the aid of considered and cogent presentations by counsel.”

The message to litigators? Bifurcation is not always warranted. And, more importantly, keep it short and sweet.

Deutscher Tennis Bund v. ATP Tour Inc., C.A. No. 07-178-GMS (D. Del. June 23, 2008) (Sleet, C.J.).

As the pace of invention (and litigation) has increased over the past several decades, so has the pressure for companies to design around their competitors’ patents. The freedom to develop non-infringing alternatives to protected products fosters both competition and innovation, two crucial aspects of the modern patent system. But what happens when two companies settle an infringement suit, only to have the alleged infringer immediately come to market with a different product utilizing the same technology?

According to District of Delaware Chief Judge Gregory M. Sleet, it is for the jury to decide whether the design around breached the parties’ settlement agreement. In the underlying litigation, defendant agreed to forego selling the disputed voltage regulator or “any other” products incorporating plaintiff’s circuitry. After defendant began marketing its design around, plaintiff brought an action seeking to enforce the settlement agreement.

On summary judgment, the Court declined the invitation to draw the boundaries of the design around, noting that competing expert opinions precluded an early disposition:

Although a close question, the court’s conclusion is supported by the parties’ experts’ opinions, which – not surprisingly – are diametrically opposed. . . . Thus, there appears to be a classic battle of the experts on the issue of whether the [design around] contains the ZX circuitry . . . . (slip op. at 11)

This factual issue, in turn, prevented the Court from determining whether plaintiff could enforce the settlement agreement against the disputed product. Practitioners take note: As a first litigation step, the jury must decide the composition of the design around.

Linear Tech. Corp. v. Monolithic Power Sys. Inc., C.A. No. 06-476-GMS (D. Del. May 23, 2008) (Sleet, C.J.).

Civil contempt. Not an issue that comes up frequently in patent litigation, but something the District of Delaware has shown it will take very seriously. The Court in Fisher-Price, Inc. v. Safety 1st, Inc., found that even inadvertent or insignificant sales of an infringing product will not excuse a violation of a court-ordered injunctive order. C.A. No. 01-051-GMS, Memorandum, at 5-6 (D. Del. May 5, 2008). Furthermore, when an injunctive order requires a party to "make every reasonable effort possible" to retrieve infringing products from retail shelves, the Court found that hiring another company to retrieve the products did constitute "reasonable effort", however, inconsistent behavior with different retailers and delayed retrieval efforts will not constitute "reasonable effort". Id. at 6-7.

See a copy of the opinion here.

This morning's edition of IP Law360 (subscription) features an informative article on judges' pet peeves in patent litigation. Featured in the piece are two D. Del. judges: Chief Judge Sleet and Judge Farnan.

Of note are the judges' comments on summary judgment motions and the use of experts. On the issue of summary judgment, Chief Judge Sleet noted that:

Generally in these cases, both parties have experts who are ready, willing, and able to come to court and dispute the facts. It can be a significant waste of time and money to bring a summary judgment motion.

Judge Farnan agreed: "The problem is, if I'm a lawyer for a generic and I'm attacking a patent and I think it is obvious because of a combination of two prior pharmaceutical products, there's almost always going to be a dispute of facts."

On the topic of experts, Judge Farnan cautioned litigants against expert overkill:

I pretty much let [litigants] try the case they want, but I talk to them in the pretrial conference about the value [experts] offer. I have to write an opinion, and they want that opinion yesterday. So I tell them, 'the more you put into that trial record, the more I have to consider and address.'

Patent litigation is an aggressive, competitive field of law. The judges' comments today add valuable perspective - that of the decision maker - to how best to champion the causes of our clients.

One avenue to obtaining personal jurisdiction over a non-resident defendant is to assert the familiar "stream of commerce" theory of long-arm jurisdiction: the foreign party purposefully shipped the accused product through established distribution channels, thereby causing injury in the forum. But does the jurisdictional calculus change when the defendant is a patent holding company, operating solely through its subsidiaries? According to District of Delaware Chief Judge Gregory M. Sleet, it does not.

In a recent decision, the Court rejected the claim that a Danish holding company with no connections to Delaware can escape litigation in this district. By collaborating with its subsidiaries on the design, production, and distribution of the accused product, the holding company can properly be said to have directed its activities to the state.

"[The holding company] acted in consort with its subsidiaries to place the accused products in the stream of commerce; it knew that the accused products foreseeably would be sold in the United States and Delaware; and [its] conduct and connections with the forum state were such that it should reasonably have anticipated being brought to court here."

Notably, the Court accepted, as evidence of foreseeability, a subsidiary's website listing of a Delaware vendor selling the accused products. For purposes of personal jurisdiction, at least, a holding company now cannot hide behind the activities of its subordinate entities.

Energy Transportation Group, Inc. v. William Demant Holding A/S, C.A. No. 05-422-GMS (D. Del. Jan. 4, 2008) (Sleet, C.J.).

After the Federal Circuit released its Seagate decision, Patently-O asked a fair question: "What role, if any, is there for the thick, formal opinions explaining in detail why a particular patent is invalid, unenforceable, and/or not infringed?"

A recent decision by District of Delaware Chief Judge Gregory M. Sleet goes a long way in answering that question in this district. In its January 4th order, the Court stated that while Seagate "does effect a change in the standard for willfulness . . . it does not inform the totality of circumstances analysis for the objective recklessness standard . . . ." Therefore, "nothing in Seagate forbids a jury to consider whether a defendant obtained advice of counsel as part of the totality of the circumstances in determining willfulness."

As a result, the Court allowed the evidence of defendants' failure to obtain advice of counsel.

Energy Transportation Group Inc. v. William Demant Holding A/S, C.A. No. 05-422-GMS (D. Del. Jan. 4, 2008) (Sleet, C.J.).

One day before the Eastern District of Virginia grappled with the PTO's rulemaking authority under 35 U.S.C. § 120, Chief Judge Gregory M. Sleet issued another decision addressing the contours of later-filed applications. In its October 30th decision on invalidity, the Court rejected the assertion that one of several patents in suit could not claim the priority date of a 1988 parent application.

The underlying invention — a food product comprising a mixture of microorganism-based lipids and food material — disclosed a limitation that, according to the Court, matched the written description of the parent application. That the claim in issue and the specification did not mirror one another, however, is not dispositive for purposes of determining priority:

"[T]he court notes that whether a disclosure is limited or broad is of no moment in a written description analysis [under Section 120], as the only requirement of section 112 is for an applicant to provide a description that 'reasonably conveys' to one skilled in the art that the inventor was in possession of what is claimed as of the filing date sought."

While the fate of the PTO's campaign against unlimited filings remains unsettled, the Court here reminded us that the substance behind the later-filed application is secure.

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Martek Biocsciences Corp. v. Nutrinova Inc., C.A. No. 03-896-GMS (D. Del. Oct. 30, 2007) (Sleet, J.)

Following Federal Circuit precedent, Chief Judge G. Sleet recently found that non-merits based dismissal of a patent claim in one action does not preclude the plaintiff from bringing that same claim in a subsequent infringement action. Abbott Diabetes Care, Inc. v. Dexcom, Inc., C.A. No. 06-514-GMS (D. Del. Sept. 30, 2007). Abbott previously filed an amended complaint in an earlier action between the same parties looking to add three more patents to that lawsuit. Dexcom filed, and the Court granted, a motion to strike this amended complaint for failure to comply with the requirements of Fed. R. Civ. P. 15(d). Abbott then brought a new action alleging infringement of those three patents and Dexcom again moved to strike. The Court found that because its earlier decision did not reach the merits of those patent claims each of those patent claims now raises a distinct cause of action and therefore is not duplicative of the complaint in the earlier action. Id. at 6. The Court did, however, consolidate this new case with the earlier filed litigation as the technologies at issue in each case are similar, the same device is accused of infringement in both cases and Abbott admitted in papers filed in the earlier litigation that any new case would likely be consolidated with the prior litigation. Finally, the Court agreed to stay the case pending reexamination of all patents-in-suit (including the ones in the prior litigation) where the Rule 16 scheduling conference had not yet occurred, no scheduling order was in place and no discovery had begun. The stay would further simplify issues for trial. Id. at 8-9.

Of particular note regarding the local rules… Both parties filed additional letters after complete briefing on the pending motions. The Court disregarded these letters in making its ruling as failing to comply with D. Del. LR 7.1.2(b) which only allows the filing of additional papers where there is a need to cite subsequent authorities. Id. at 2 n.1.

The so-called "first-filed rule" of jurisdiction provides that, subject to a variety of exceptions, the first court to receive a cause of action should resolve the litigation to the exclusion of the second. According to a recent decision by Chief Judge Gregory M. Sleet, a necessary adjunct to this principle is that the second court need not delve into matters that are peculiarly within the first tribunal's purview.

In the Every Penny Counts litigation, which IPLaw360 (subscription) has treated elsewhere, the Delaware court found that uncertainty surrounding the availability of personal jurisidiction in the initial Florida court cannot constitute a reason for filing a parallel action in Delaware. Instead, the resolution of that question rests solely with the Florida court.

The Court continued: "With the institution of a separate action in this court, [plaintiff] essentially asks this court to substitute its judgment for that of the first-filed Florida court on the scope of the Florida court's jurisdiction." As a result, the Court transferred the second-filed action to Florida.

Bank of America, N.A. v. S.I.P. Assets LLC & Every Penny Counts Inc., C.A. No. 07-159-GMS (D. Del. Sept. 11, 2007) (Sleet, C.J.).

Illinois Tool Works Inc. v. Frito-Lay N.A., Inc., C.A. No. 06-54 GMS (D. Del. July 9, 2007).

Illinois Tool Works (ITW) appealed the decision of the Board of Patent Appeals and Interferences to the Delaware district court pursuant to 35 U.S.C. § 146. The interference was between the Jurgoven patent (assigned to Frito-Lay), an application submitted by Jurgoven, and an application by Ramsey (assigned to ITW). The subject matter of the patent/applications and the two counts of the interference was a zippered flexible food product package that is pinch-grip openable, and the method of opening and closing the package. The Board found in favor of Frito-Lay, awarding it priority of invention because ITW had derived its invention from the Jurgoven patent. The Board declined to rule on the patentability of the Jurgoven patent "because ITW did not file a timely preliminary motion on the issue." Op. at 3.

The issue before the Court was whether the Court should consider the patentability of the Jurgoven patent even though the issue was not raised at the proper time before the Board. ITW did not raise the patentability issue in the early phases of the interference, instead waiting until its briefing before the Board to raise the issue. Frito-Lay argued that this amounted to a waiver of the patentability issue by ITW such that the patentability issue was not properly before the Court. The Court disagreed. The Court held that although ITW did not raise the patentability issue through the proper procedural vehicle before the Board (a preliminary motion), "the record clearly demonstrates that ITW raised the issue with the Board during the judgment motion phase of the interference and insisted that it be resolved during the interference." Op. at 5. Thus, the Court ruled that the patentability issue is properly before the Court, but only as to the prior art argued before the Board – ITW may not raise new patentability arguments at this time. Op. at 8.

Talecris Biotherapeutics, Inc. v. Baxter Int'l Inc., C.A. No. 05-349 GMS (D. Del. June 18, 2007).

Talecris sued Baxter for patent infringement, and Baxter counterclaimed for a declaratory judgment of noninfringement and invalidity. In this opinion, Judge Sleet denied Baxter's motion for summary judgment that the patent at issue is invalid for indefiniteness and granted (sua sponte) summary judgment that the patent is not indefinite.

Baxter asserted that three separate claim terms were indefinite: 1) "acceptable level suitable for intravenous administration," 2) "increased level of anticomplement activity," and 3) "then incubating the solution of step a"/"the increased anticomplement activity of the solution." Op. at 4. However, most of the opinion focused on the first claim term, which included the phrase "acceptable level." With regard to this first claim term, the court held that "the record reflects that the phrase has meaning to those of ordinary skill in the art, albeit the determination of that meaning may depend on a number of variables, and the ultimate determination of acceptability may be temporally distant from the time in which the inventive steps of the claim are performed." Op. at 8. Baxter's arguments as to the other claim terms were dismissed by the court as a rehashing of claim construction arguments. Op. at 9.

Despite Talecris' arguments in its briefs that disputes of material fact existed so as to preclude summary judgment, the Court found no genuine issues of material fact existed. Thus, even though Talecris did not cross-move for summary judgment in its favor on the issue of indefiniteness, the Court, sua sponte, granted summary judgment in its favor, removing the indefiniteness issue from the trial to come.

The Judicial Panel on Multidistrict Litigation (MDL) has ordered fifteen related patent cases consolidated and transferred to the District of Delaware. Judge Gregory M. Sleet, who had presided over several of the pending cases, will now hear the consolidated action, which involves nine patents related to high-speed internet and "related" services. See Docket, 07-md-1848-GMS (filed June 21, 2007).

By ordering the transfer and consolidation, the MDL rejected the assertion that unique questions of fact predominate over any commonalities: "Transfer under [28 U.S.C] Section 1407 does not require a complete identity or even a majority of common factual or legal issues as a prerequisite to transfer." Indeed, the MDL expressly commented on the benefits of trying the cases in Delaware: "[W]e are assigning this litigation to a seasoned jurist in a readily accessible district with the capacity to handle this litigation."

Read the order here: In re Rembrandt Technologies LP Patent Litigation, No. 1848 (J.P.M.L. June 18, 2007) (Hodges, J.).

Does an attorney have any duties to disclose or for that matter not take a case where they previously represented the parent corporation of an adverse party in prior unrelated litigation?

The District of Delaware recently had on opportunity to opine as to whether such conduct violates Rule 1.9 of the Model Rules of Professional Conduct. In Talecris Biotherapeutics, Inc. v. Baxter International, Inc., C.A. No. 05-349-GMS, Memorandum (D. Del. June 14, 2007), the plaintiff moved to disqualify defendant and counterclaim plaintiff's counsel. This particular attorney had previously represented a parent company of the counterclaim defendant in a previous action fourteen years ago that surrounded infringement claims of a non-asserted patent and product. Id. at 2. The patent that was litigated in the prior litigation, however, has been asserted as prior art rendering the plaintiff's patent invalid. The attorney was only a third-year associate at the time and was a member of a four person trial team. Id.

The Court found that the motion should be denied as the attorney's conduct did not violate Rule 1.9. Rule 1.9 prevents a lawyer from "taking a position adverse to a former client in the same or related matter unless the former client consents after consultation." Id. at 3. The Court considered three factors in determining whether the matters were "substantially related" and therefore the representation would be in violation of Rule 1.9: "(1) the nature and scope of the prior representation; (2) the nature and scope of the current representation; and, (3) during the prior representation, the possibility that the client disclosed confidences to his attorney which could be relevant to the current action and detrimental to the former client in the course of the current litigation." Id. at 4.

The particular attorney in this case, was only a third-year associate during the prior representation and only interacted with the former client during the early stages of discovery in litigation that occurred 15 years ago and lasted only 6 months. Id. at 5. The Court admitted, that the fact that the defendants are now asserting the patent that was at issue in the prior litigation as prior art to the patent at issue in the current litigation does raise some overlap. Id. However, it also noted that this patent appears to have been disclosed during the prosecution of the patent at issue and appears on the face of that patent. Therefore, the Court found it not reasonable to infer that the defendant's current reliance on this prior art patent was as a result of confidential information the attorney received during that prior litigation.

The motion was thus denied as the "substantive relationship between the two litigations is tenuous." Id. at 7.

In a footnote, the Court stated that "the prudent course of action would have been" for the attorney to have provided notice to her client of the potential conflict and request a waiver as soon as identifying them as a potentially adverse party. Id. at 7 n.3.

Therefore, when in doubt, disclose and get a waiver so as to protect yourself from being in violation of the Model Rules.

Merck & Co. v. Apotex, Inc., C.A. No. 06-230 (GMS) (D. Del. May 21, 2007).

Judge Sleet granted Merck's motion to dismiss this case for lack of subject matter jurisdiction after Merck comprehensively covenanted not to sue Apotex over its generic version of Fosamax, despite the alleged jurisdictional "gaming" of the Hatch-Waxman Act's "triggering events" by Merck. This opinion addresses an important issue in ANDA litigation, so I will break down this opinion in more detail than usual.

Facts

Merck owns nine Orange Book patents for Fosamax. Apotex filed an ANDA seeking to make a generic version of Fosamax, certifying to the FDA that Merck's patents were invalid, unenforceable, and/or not infringed by its generic. Apotex informed Merck of its ANDA, and Merck filed suit under the Hatch-Waxman Act for infringement in April 2006. Apotex counterclaimed for a declaratory judgment of invalidity and noninfringement. In August 2006, Merck granted Apotex a comprehensive covenant not to sue and then moved to dismiss the case for lack of subject matter jurisdiction.

The Heart of the Problem - Gamesmanship

Essentially, the brand-name drug companies have found a loophole in the interaction between the Hatch-Waxman Act and the federal courts that delays generic manufacturers' entry into the marketplace. The Hatch-Waxman Act provides that a patentee may sue an ANDA applicant that submits an application with a paragraph IV certification (that the brand name drug's patent(s) is invalid/unenforceable/not infringed) for infringement. If the brand name manufacturer files suit within 45 days of receiving notice of the application, then a 30-month stay of the generic application's approval is invoked. The 30-month stay can only be lifted by an earlier decision in a patent infringement case or by Court order to shorten or lengthen the stay. The loophole goes like this: 1) generic files application, 2) brand name files suit for infringement within 45 days, invoking the 30-month stay, 3) the brand name covenants not to sue the generic, depriving the district court of jurisdiction, and 4) the infringement case is dismissed, but the 30-month stay remains because no "triggering event" has occurred. The advantage to the brand name manufacturer is a potentially longer period of exclusivity than if the district court had found in favor of the generic manufacturer on the merits.

Judge Sleet notes quite strongly that the practical realities of this system unnecessarily strain the court system. Op. at 10, fn. 4.

The Court's Hands Are Tied

The Court analyzed the continued existence of an actual case or controversy under the Federal Circuit's recent decision in Teva v. Novartis, which announced the end of the "reasonable apprehension of suit" test, ushering in a broader "actual controversy" inquiry dictated by the Supreme Court's MedImmune decision. The Court found that "Apotex's advancement of this case against Merck [after Merck's covenant not to sue] becomes merely a means to an end, where the desired "end" is a triggering event but the means to that end, the litigation itself, is not sanctioned under the current legal framework." Op. at 8. Thus, the Court held that Merck's covenant not to sue deprived it of jurisdiction over Apotex's declaratory judgment counterclaims under Super Sack and dismissed the suit.

Antitrust Implications?

Apotex argued to the Court that "Merck's actions of filing suit, covenanting not to sue, and moving to dismiss for lack of jurisdiction, are an unlawfully anticompetitive and monopolistic scheme to delay entry by Apotex and other generic filers into the market…." Op. at 13. Ultimately, the Court found that while Apotex may suffer a business disadvantage from Merck's use of the Hatch-Waxman scheme, this disadvantage is not actionable as an antitrust violation because it is sanctioned and contemplated by the Hatch-Waxman Act. Op. at 18. As such, the Court denied Apotex's motion to amend its complaint to add antitrust claims as futile.

Conclusion

Just when everyone thought that Teva v. Novartis would make it easier for generic manufacturers to maintain suits against patentees, the brand name manufacturers come up with a new tactic. Looking forward, it will be interesting to see how the FDA and Congress deal with this loophole. Considering the amount of money on the line, I'm sure the Federal Circuit will also get a chance to opine on this case.

Yesterday, in the District of Delaware a jury found in favor of plaintiff, Telcordia Tech. Inc. and against defendant, CISCO Systems, Inc. More details as they become available…

Update: Read the jury verdict form here

On Tuesday, Delaware district judge Gregory M. Sleet issued a one-page order granting a voluntary dismissal in the Merck-Apotex ANDA litigation. After Apotex filed an ANDA application, Merck brought an infringement action. Apotex responded with a declaratory-judgment counterclaim. Merck then decided it no longer wanted to pursue the action and granted Apotex a covenant not to sue.

Thereafter, Merck filed a motion to voluntarily dismiss, claiming that the covenant removed the Court's subject matter jurisdiction concerning both the infringement claim and counterclaim. As reported by IPLaw360 (subscription), Defendant Apotex opposed Merck's motion, contending that dismissal of the case would remove a "triggering event" under the Hatch-Waxman Act and therefore would delay Apotex's entry into the market. The Court, which said it would issue a full decision at a later date, apparently rejected this argument and sided with Merck on jurisdictional grounds.

It will be interesting to see how the Court analyzes the jurisdictional argument in the upcoming opinion, especially in light of Apotex's contention that Merck is allegedly manipulating the Hatch-Waxman process. Stay tuned.

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