December 3, 2013

Judge Stark grants leave to amend and offers guidance on sufficiency of plaintiff's claims

In Gammino v. American Telephone and Telegraph Company, et al., C.A. No. 12-666-LPS (D. Del. Nov. 22, 2013), Judge Leonard P. Stark granted plaintiff’s motion for leave to file an amended complaint. Having granted this motion, the Court also denied as moot motions to dismiss direct and/or willful infringement claims contained in the original complaint. However, the Court still “offer[ed] . . . guidance as to the adequacy of the pleadings contained in the Amended Complaint.” Id. at 6.

One defendant opposed plaintiff’s motion for leave to amend, arguing that amendment was futile because the requested claims were barred by claim preclusion. Plaintiff’s proposed amendment added additional defendants and allegations related to direct and willful infringement. Id. at 2. Defendant argued that because plaintiff had previously dismissed indirect infringement claims against all defendants with prejudice, and “because Plaintiff's claim for direct infringement is asserted against the same defendant on the same alleged facts, the adjudication on the merits of the claim for indirect infringement must also bar Plaintiff's claim for direct infringement." Id. at 3-4. The Court disagreed because the dismissal of the indirect claims occurred in the instant action and had not resulted in a final judgment; for res judicata to apply, “an adjudication on the merits must have occurred in a previous proceeding and resulted in a final judgment.” Id. at 4. Furthermore, the dismissed causes of action arose under a different section of the patent laws than the direct claims. Id.

Because the Court granted plaintiff’s motion for leave to amend, its Amended Complaint was now the operative complaint. Therefore, the Court denied as moot other defendants’ motions to dismiss direct and/or willful infringement claims contained in the original complaint. Id. at 6. But, “in light of the length of time that this action has already been pending, and in hopes that yet another round of motions to dismiss may be avoided,” the Court “offer[ed] . . . guidance as to the adequacy of the pleadings contained in the Amended Complaint.” Id. at 6. The Court examined plaintiff’s allegations and observed that its direct and willful infringement allegations appeared to be adequate under the applicable standards. Id. at 7-8.

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December 3, 2013

Judge Andrews grants motion to disqualify counsel

In Enzo Life Sciences, Inc. v. Adipogen Corporation, C.A. No. 11-88-RGA (D. Del. Nov. 20, 2013), Judge Richard G. Andrews granted defendants’ motion to disqualify plaintiff’s counsel. An attorney that had previously worked on the case for defendants was now a named partner of plaintiff’s new counsel. Id. at 3.

It was clear that the named partner was disqualified; the Court considered whether the conflicted attorney’s firm had complied with ABA Model Rule of Professional Conduct 1.10(a)(2), which outlines what steps a firm can take to avoid a conflict being imputed to it. The Court concluded that the firm had not established an effective screen and had not shown that no part of the fee for this action would be apportioned to the conflicted attorney. Id. at 6.

As to the adequacy of the screen, several factors weighed in favor of disqualification. The Court cited the conflicted attorney’s past involvement in the defendants’ representation, which included drafting confidential mediation statements and signing various discovery documents. Id. at 7-8. While this attorney did not have a “pivotal role” in the case while working for defendants, and while he “may now have a ‘limited recollection’ of this case, at the time he was working on the case he surely was aware of the defense strategies.” Id. at 8. Furthermore, he had been an attorney of record for defendants and now his name appeared on firm correspondence, which created “a constant appearance of a continuing imputed conflict.” Id. Finally, the small size of this firm detracted from the efficacy of a screen. Id. at 9.

While the firm had implemented a screen in a timely fashion, the screen also lacked “key aspects.” Id. First, while it prohibited firm members from talking about the case with the conflicted attorney, it lacked a “prohibition regarding discussing the matter in the presence of [this attorney], or in locations from which [he] could still hear the conversations.” Id. This was a particularly important issue for a small firm. Second, the screen had no enforcement mechanism as it provided “no warning to employees as to what would occur if the screen were not followed.” Id.

As to the fee issue, “no evidence was provided to the Court to assess whether [plaintiff’s counsel’s firm] has sufficient funds, considering the firm's small size, to satisfy the firm's partner share agreement without any of the funds from this case being used to pay [the conflicted attorney’s] share. While the court is mindful that [the attorney’s] partnership share would not fluctuate based upon the success of their client, because of the nature of a small firm it is likely that his actual pay would be affected.” Id. at 11.

Finally, the Court concluded that a balancing of the equities favored disqualification, emphasizing that the “strong interest in preserving the integrity of the judicial system” was particularly strong here, where the potential for use of confidential information would be in the same matter. “This court must protect against even the appearance of impropriety.” Id. at 12-13.

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December 2, 2013

Judge Andrews grants motion to preclude assertion of willful infringement

In a recent memorandum order, Judge Richard G. Andrews granted defendants’ motion to preclude plaintiff’s assertion of willful infringement. Inventio AG v. Thyssenkrupp Elevator Americas Corp., C.A. No. 08-874-RGA (D. Del. Nov. 20, 2013). First, Judge Andrews found that the complaint did not contain any factual assertions related to willfulness, noting that “[t]he words ‘wilfull,’ ‘willfully,’ ‘objectively unreasonable,’ ‘knowledge of the patent,’ or any similar construct, do not appear in the Complaint.” Id. at 1. While plaintiff argued that its request for a “declaration that this is an exceptional case pursuant to 35 U.S.C. § 285” put defendants on notice of its willfulness claim, Judge Andrews found that a “demand for relief is not a factual assertion.” Id. Second, Judge Andrews found that plaintiff should not be permitted to amend its complaint to assert wilfull infringement, noting that the deadline to amend the pleading was “nearly a year ago,” and that plaintiff had not shown the diligence required by the good cause standard under Fed. R. Civ. P. 16. Id. at 1-2.

Third, Judge Andrews found that plaintiff “proffered no evidence from which pre-filing willful infringement could be found.” Id. at 2. Specifically, Judge Andrews found that the “hazy testimony” plaintiff cited was insufficient to establish that defendants had pre-suit knowledge of the asserted patents. Id. at 3. Further, while plaintiff argued that defendants saw that “Schindler’s elevator repair operations,” were marked with five patents, Judge Andrews explained, among other things, that none of those patents were asserted in the instant litigation, and that it did not appear that defendants copied any patented aspects of the marked Schindler product. Id. at 3 & n.3.

Fourth, Judge Andrews found that plaintiff failed to set forth a sufficient to basis to pursue a post-filing willfulness claim. Id. at 3. Plaintiff argued that a post-filing claim was justified because “it did not know Defendants were engaged in any post-filing infringement until receiving discovery.” Id. at 4. Judge Andrews found, however, that such argument made “no sense,” in part because plaintiff’s complaint indicated there was post-filing infringement. Id. Moreover, as Judge Andrews explained, “[i]t seems hard to believe that Plaintiff, having learned that its competitor was infringing its patents by renovation projects that would take some period of time to complete, did not know (without the need for discovery) that the infringement was, as it alleged, continuing.” Id. at 5

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November 29, 2013

Judge Robinson decides various summary judgment motions, motions to exclude experts and provides guidance as to the Court's preferences for citations to the record

Judge Sue L. Robinson recently considered various motions for summary judgment, motions to strike and exclude testimony, and issued claim constructions of the terms of the patents-in-suit (Patent Nos. 6,874,049, 6,708,259, and 6,647,450). Cradle IP, LLC v. Texas Instruments, Inc., C.A. No. 11-1254 (D. Del. Nov. 20, 2013).

Before analyzing the eight motions before the Court, Judge Robinson noted that to determine summary judgment the court must confirm "the parties have cited evidence in support of their arguments"; and that "the evidence demonstrates the proposition for which it is cited." Id. at 11-12. In that respect, Judge Robinson noted that the "the parties could not have been less helpful to the court." The specific issues with the parties' record cites included:

[T]he parties (and their experts) cited to documents by their Bates-stamp numbers, with no indicia of their location in the record. Even when the parties were kind enough to locate the document in question by an exhibit number, it was often difficult to discern which of the volumes containing identical exhibit numbers was actually referenced. To add insult to injury, the parties organized the appendices so that the exhibits were not necessarily included in numerical order because, e.g., one exhibit had to be sealed. In sum, it was a rare occurrence that a brief cited evidence by an exhibit number that was clearly identified by the appendix in which it resided.

Id. at 12.

Turning to the motions to strike and exclude expert testimony, Judge Robinson granted Texas Instrument's motion striking "new theories" from Cradle IP's expert's declarations. Id. at 13. "As far as the court can tell, the declaration is longer than his two expert reports combined, and primarily cites to itself as authority." Id. Judge Robinson also granted Texas Instrument's motion to strike that related to a third party declaration not vetted in discovery. Id. Judge Robinson denied the remaining motions to strike that related to supplemental expert reports. Id. at 14. "[T]he court has neither the time nor the resources - nor even the record - to recreate the parties' tortuous litigation strategies insofar as determining whether plaintiff had cause to file a supplemental report in the first instance and whether it ventured into new theories which demanded a response by defendant in the second instance." Id. Judge Robinson also denied Texas Instrument's motion to exclude Cradle IP's expert on secondary considerations, finding that Texas Instrument's complaints went to the weight of the evidence. Id. Judge Robinson did, however, grant Cradle IP's motion to strike an expert declaration because it contained disclosures that had not been vetted through discovery. Id.

Turning to the summary judgment motions, Judge Robinson granted-in-part Texas Instrument's motions for summary judgment of non-infringement and denied its motion for summary judgment of invalidity. Regarding the '049 patent, Judge Robinson granted Texas Instrument's motion that "that Cradle has not shown that Tl has made, used, sold, or offered to sell the 'entire patented invention' or that any of its customers have employed the 'entire patented invention in the required configuration set forth in the apparatus claims.'" Id. at 22-23. Judge Robinson found that there was "no evidence to show that Tl or its customers used the apparatus in combined mode. To the contrary, the only evidence provided shows that the software needed for the apparatus to operate in combined mode was not even developed." Id. at 24. Judge Robinson also granted Texas Instrument's motion as to the method claim 6, that Cradle IP "failed to provide evidence to show that either TI or its customers have actually performed 'all of the steps of the claimed method.'" Id. at 25. Regarding the '259 patent, Judge Robinson granted Texas Instrument's motion that Cradle IP provided no evidence of direct infringement of the method claims, finding that "at best" Cradle IP has shown that the products are capable of operating in an infringing manner, rather than evidence of use. Id. at 31. Regarding the '450 patent, Judge Robinson granted Texas Instrument's motion. The Court found that "Cradle fail[ed] to identify evidence to support a finding of a genuine issue of material fact, instead pointing only to a conclusory opinion, unsupported by evidence, in [its expert's] declaration." Id. at 40.

Judge Robinson also construed the following claim terms of the patents-in-suit:

"A system bus that allows only one bus transaction in any one clock cycle"
"Any processor requesting access to the shared resource"
"The shared resource is available/unavailable for access"
"The shared resource has just been made available for
access"
"cell"
"Idle Memory Transfer Controller"
"Command FIFO"
"Split transaction global bus"
"Acknowledgment of command receipt"
"Releasing the split transaction global bus"

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November 27, 2013

Judge Andrews denies all post-trial motions except with respect to interest

Judge Richard G. Andrews recently ruled on several post-trial motions in XpertUniverse, Inc. v. Cisco Systems, Inc., C.A. No. 09-157-RGA (D. Del. Nov. 20, 2013). The Court first denied the defendant’s motion for judgment as a matter of law on infringement, finding that the defendant failed to show that there was insufficient evidence from which the jury could find infringement and support its damages award. The Court also found that the evidence at trial supported the jury’s finding of no invalidity based on the on-sale bar. Next, the Court denied the defendant’s motion for an order that the patents were unenforceable due to inequitable conduct, explaining that the defendant failed to show clear and convincing evidence to support a finding that the plaintiff specifically intended to defraud the PTO.

The Court next addressed the plaintiff's post-trial motions to alter or amend the judgment, for supplemental damages and an accounting of sales of a new product version, for pre- and post-judgment interest under 35 U.S.C. § 284 and 28 U.S.C. § 1961, and for a permanent injunction or, alternatively, ongoing royalties. Judge Andrews explained that “[a] party seeking to include a new product version in post-verdict relief must prove that the new version is not more than colorably different from the product found to infringe, and that the newly accused product actually infringes.” Id. at 24. The Court found that the new version appeared to be more than colorably different than the accused product, and decided that rather than conducting an evidentiary hearing on whether the new version infringed, it would deny the motion without prejudice to the plaintiff’s filing a new patent infringement suit with respect to the new version . Id. at 25. The Court then granted the motion for pre- judgment interest at the prime rate, compounded quarterly, and post-judgment interest pursuant to 28 U.S.C. § 1961.

The Court denied the plaintiff’s motion for a permanent injunction, finding that the plaintiff failed to show a likelihood of irreparable harm, because the harm alleged had already occurred, and was not prospective harm that could be prevented by an injunction. Id. at 28-29. Further, the plaintiff failed to show that money damages would not compensate it for the alleged harm, or that the balance of harms or public interest favored granting a permanent injunction. Id. at 30-31. With respect to the plaintiff’s alternative request for ongoing royalties, the Court explained that one of the accused products was no longer being sold, and only a new version of the other, which was not shown to infringe, was being sold. The Court therefore denied the request for ongoing royalties. Id. at 31-32. Finally, the Court found no basis to award attorneys’ fees under 35 U.S.C. § 285. Id. at 32-33.

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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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November 22, 2013

Judge Andrews Again Requires Reduction of Large Number of Claim Terms for Construction at Markman Hearing

In three separate civil actions filed together and involving a number of defendants, the parties had been scheduled to have a joint Markman hearing on December 5, 2013. Because the parties had “submitted a brief with about twenty-seven (27) disputed terms” however Judge Andrews has ordered that the “Court will hear no more than ten disputed terms at the Markman hearing.” Interdigital Comms. Inc., et al. v. Huawei Techs. Co. Ltd., et al., C.A. No. 13-8-RGA, Order at 2 (D. Del. Nov. 19, 2013). Judge Andrews’ order requires the Defendants to choose eight terms and the Plaintiffs to choose two terms, and requires the parties to submit a letter with the ten terms they decide upon. Id.

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November 21, 2013

Judge Thynge recommends partial dismissal of plaintiff’s amended complaint

Magistrate Judge Mary Pat Thynge recently recommended that defendant First Midwest Bancorp’s (“FMBI”) motion to dismiss be granted in part. Strikeforce Technologies, Inc. v. Phonefactor, Inc., et al., C.A. No. 13-490-RGA-MPT, Report and Recommendation (D. Del. Nov. 13, 2013), amended, Report and Recommendation (Amended) (D. Del. Nov. 14, 2013) (minor corrections to original) (“Amended Report”).

Plaintiff argued that FMBI’s subsidiary, First Midwest Bank, infringed its patent and that FMBI was liable under both alter ego and agency theories. Amended Report at 3. The Court concluded that plaintiff had not sufficiently alleged facts to establish an alter ego theory of liability, but that it had alleged enough facts to support “pure agency liability.” Id. at 7.

As to alter ego, the Court explained that the

allegations regarding the relationship between FMBI and First Midwest Bank establish that the two entities are commingled. FMBI and First Midwest Bank have a nearly identical board of officers and directors; the majority of FMBI’s assets are attributable to First Midwest Bank; both corporations employ the same governance polices [sic] and procedures; both corporations operate from the same location in Illinois. While these allegations meet the first element [of alter ego liability], StrikeForce has not alleged any facts suggesting fraud or injustice in FMBI’s use of the corporate form [i.e., the required second element to establish alter ego liability].

Id. at 8. Plaintiff argued that fraud was not required to be pled under the alter ego theory and that the theory was “muddled, and the cases outside the realm of patent infringement cannot be applied wholesale.” Id. at 9. The Court recognized that, under Third Circuit law, a plaintiff need not prove actual fraud and may allege facts “suggest[ing] fraud or injustice,” but here, plaintiff did not address any factors that suggested “fraud or other similar injustice in the structure of FMBI and First Midwest Bank. Contrary to [plaintiff’s] first argument, fraud or some other similar injustice is a required element for finding alter ego liability.” Id. at 9-10. Plaintiff also “suggest[ed] that if allowed to conduct discovery, it would provide this court all the factors necessary to conduct a meaningful alter ago analysis,” but the Court found that the argument “undermin[ed] the purpose of the well-pled complaint requirement.” Id. at 10.

As to the agency theory, the Court concluded that plaintiff’s allegations “reasonably support the inference that FMBI directed First Midwest Bank’s act of infringement,” citing similar facts quoted above relating to the entities’ relationship to conclude that the allegations “suggest a close connection in the operations of the two companies, making it reasonable to infer FMBI authorized or directed” activities related to plaintiff’s infringement allegations. Id. at 11. The Court also explained that plaintiff need not allege facts supporting fraud or injustice under a “pure agency” theory; it would be required to do so under an “agency akin to an alter ego theory.” Id. at 12.

FMBI also argued that plaintiff did not allege “enough plausible facts to suggest that discovery would uncover sufficient evidence to support either alter ego or agency liability. FMBI urges the court dismiss the claims against it because having a regulated wholly-owned subsidiary should not subject a parent corporation to discovery expenses based on mere allegations of a typical corporate structure.” Id. at 13. While recognizing “the burden of litigation,” the Court concluded that plaintiff’s agency claim was plausible under Rule 12(b)(6) and should not be dismissed. Id. at 13-14.

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November 21, 2013

Judge Andrews construes claim terms related to wireless communication technology

Judge Richard G. Andrews recently construed nine claim terms across two patents, U.S. Patent Nos. 8,094,010 and 7,583,197. Plaintiff is asserting these patents in five actions in the District of Delaware, and Judge Andrews’s construction applied to each of these actions. M2M Solutions LLC v. Sierra Wireless America, Inc., C.A. Nos. 12-30, 12-31, 12-32, 12-33, 12-34-RGA (D. Del. Nov. 12, 2013). Judge Andrews construed the following disputed claim terms:

- “permitted caller”
- “coded number”
- “a programmable interface”
- “processing module”
- “monitoring device”
- “wireless communications circuit for communicating through an antenna”
- “monitored technical device”
- “at least one wired or wirelessly attached monitoring device”
- “a wireless communications circuit having an antenna”

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November 20, 2013

Judge Robinson denies early Rule 11 motion, but cautions plaintiff that the court will entertain renewed motion after claim construction

Judge Sue. L. Robinson recently considered an early Rule 11 motion filed by several defendants in HBAC Matchmaker Media, Inc. v. CBS Interactive Inc., et al., C.A. Nos. 13-428, 13-430, 13-433, 13-434, 13-435, 13-437, 13-438 (D. Del. Nov. 18, 2013). Prior to filing the motion, defendants wrote plaintiff requesting that it withdraw its claims because the complaints accused websites, whereas the patents-in-suit were directed to "targeted advertising in the context of television and radio." Id. at 2. At the Rule 16 scheduling conference, Judge Robinson asked the plaintiff to provide the court for in camera review the materials it relied upon in performing its pre-filing investigation. Id. Plaintiff submitted emails prior to the filing date evidencing that plaintiff reviewed press articles on the use of targeting advertising at issue in the claims. Id. at 4. Plaintiff also submitted emails discussing the patents and alleged infringement, claim charts which were the subject of pre-suit emails, and evidence that plaintiff used tools to analyze network traffic between a viewer’s computer and defendants' servers. Id.

Defendants argued that plaintiff's "conclusory" assertions that it had a reasonable basis for finding infringement were insufficient because "plaintiff's purported infringement theory include[d] no code comparison whatsoever" and plaintiff provided no "details regarding [its] infringement analysis or underlying claim construction positions regarding the code comparison and instructions/commands limitations." Id. at 3-4.

Judge Robinson denied defendants' motion, declining to "engage in a claim construction exercise" at this early point in the case. Id. at 4. But, Judge Robinson noted that "plaintiff may well be stretching the meaning of two older patents (clearly directed at television and radio)," and cautioned the plaintiff that it would entertain a renewed Rule 11 motion and/or an attorneys' fees motion under 35 U.S.C. § 285 after discovery and claim construction is completed. Id. at 5. Judge Robinson also stated that the court might permit early claim construction of "dispositive limitations" after the parties exchange "fundamental documents." Id.

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