July 11, 2013

Judge Andrews grants motions to intervene and sever, denies motions to stay

In a recent memorandum order, Judge Richard G. Andrews granted Adobe Systems, Inc.’s (“Adobe”) motion to intervene in two actions pending in the District of Delaware, C.A. Nos. 11-812-RGA and 12-1440-RGA. Select Retrieval LLC v. Amerimark Direct LLC, et al., C.A. No. 11-812-RGA (D. Del. Jul. 3, 2013). Judge Andrews also granted defendants’ motions to sever in C.A. No. 11-812, but denied defendants’ motions to stay in both actions.

Judge Andrews explained that while plaintiff has not sued Adobe, it has sued at least five of its customers in the District of Delaware. Id. at 2. Moreover, “there is litigation on the same patent between the Plaintiff and other Adobe clients” at least in the Southern District of California, Oregon, Illinois, and Maine. Id. Judge Andrews additionally noted that Adobe had filed a declaratory judgment against plaintiff in the Southern District of California, but there has recently been little activity in that action. Id. at 1-2.

Considering Adobe’s motion to intervene, Judge Andrews was guided by Fed. R. Civ. P. 24(a). First, Judge Andrews considered “the extent to which Adobe’s technology was at issue” and “whether Adobe has . . . a duty to defend and indemnify its clients” to determine whether Adobe had a “significant protectable interest.” Id. at 2-3. Judge Andrews noted that plaintiff “did not dispute that Adobe had a duty to defend and indemnify its five clients.” Id. Moreover, Judge Andrews noted that “[t]he fact that Adobe has acknowledged its duty to defend and indemnify is a fairly strong indicator that its technology is indeed at issue in these cases.” Id. at 3. Judge Andrews further explained that “the fact that these five Adobe clients (as well as at least four more Adobe clients in the four related cases) all are alleged to infringe the patent suggests that Adobe’s technology may be the common link that provides a basis to believe each of the nine or more companies infringes the patent.” Id. Judge Andrews thus found it unnecessary “to delve into the technology here to conclude that Adobe does have a significant protectable interest.” Id. Finding the remainder of the Rule 24(a) factors to weigh in Abode’s favor, Judge Andrews granted Adobe’s motion to intervene. Id.

With respect to the motion to stay the litigation, defendants argued for application of the “customer suit exception.” Judge Andrews first distinguished the instant matter from Pragmatus Telecom, LLC v. Advanced Store Co., Inc., C.A. No. 12-88-RGA (D.Del. Jul. 10, 2012) (discussed previously here), where defendants had also argued in favor of the customer suit exception. Id. at 3-4. Judge Andrews noted that in this case, the “manufacturer declaratory judgment is in another district” (weighing in favor of applying the exception). Id. at 4. On the other hand, in this action, “customer defendants have not agreed to be bound by the results.” Id. Moreover, Judge Andrews found that “given the lack of activity in the declaratory judgment action, I cannot think that [granting stay] presents a particularly fair (to the Plaintiff) alternative to the pending litigation.” Id. On balance, Judge Andrews found there were “too many loose ends,” and denied defendants’ motions to stay the litigation. Id.

Judge Andrews had no “hesitation in concluding that the four Adobe customers [in C.A. 11-812] are not properly joined to cases involving other defendants using technology obtained elsewhere.” Id. at 3. Judge Andrews thus granted defendants’ motions to sever, but the cases against them were consolidated with those of the other defendants for all purposes other than trial. Id. at 4.

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July 11, 2013

Judge Sleet claim construction order

Chief Judge Gregory M. Sleet recently construed the claim terms of U.S. Patent Nos. 5,780,676 and 5,962,731 relating to plaintiff's Targretin® drug indicated for the treatment of cutaneous T-cell lymphoma. Eisai, Inc. v. Banner Parmacaps Inc., et al., C.A. No. 11-901-GMS (D. Del. July 2, 2013). The Court construed the following terms:

"co-transfection assay"
"useful to treat skin cancer"

In construing the terms, the Court rejected defendants' proposed construction for "co-transfection assay" that was defined through reference to an article published in Science magazine. Id. at. n.1 After the Markman hearing, the defendants submitted a supplemental letter brief proposing a new construction that excluded reference to to the article. Id. The Court agreed with plaintiff that the supplemental brief was untimely, but did not reach the decision on whether it should consider the brief regardless:

The court agrees that the timing of the defendants' proposed construction comes late in the claim construction process and, without the court granting leave for further briefing, limits the plaintiff's opportunity to fully respond to the merits of the new proposed construction. However, because the court agrees with the plaintiff's proposed construction of this term, it does not need to reach a decision on whether the defendants' second proposed construction should be considered.

Id.

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July 10, 2013

Judge Sleet grants motion to stay pending inter partes review

Chief Judge Gregory M. Sleet recently granted defendants’ motion to stay litigation pending inter partes review of U.S. Patent No. 8,212,094, entitled “Process for the Manufacture of Diesel Range Hydocarbons.” Neste Oil Oyj v. Dynamic Fuels, LLC, et al., C.A. No. 12-744-GMS (D. Del. July 2, 2013).

The Court concluded that the relevant factors governing the grant of a stay, “when taken together, favor granting the defendants’ motion.” Id. at 3. As to the “sub-factors” governing the undue prejudice factor, defendants’ “prompt filing” of its petition and its motion to stay favored granting a stay, but the early stage of the review proceedings increased the risk of prejudice. Id. at 4. The parties were competitors, but “there is some dispute as to the practical scope of the market in which they operate,” with plaintiff arguing that the parties were the only competitors in the market and defendants arguing that the market was broader. Id. at 5-6. The Court, “largely unpersuaded by [plaintiff’s] arguments regarding the practical size of the market,” concluded that the parties were “merely indirect competitors in the large, subsidy-driven market for biomass-based diesel.” Id. at 6 & n.3. Additionally, plaintiff had not sought a preliminary injunction. All of these sub-factors combined favored the grant of a stay because the risk of prejudice to the plaintiff was low. Id. at 7.

The Court also concluded that the potential for simplification of issues favored a stay, see id. at 7-9, and the status of the case “strongly” favored a stay as the case was “in its infancy.” Id. at 9.

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July 9, 2013

Judge Andrews Lifts Stay Pending Reexamination

Judge Richard Andrews has lifted a stay pending reexamination of patents-in-suit in several pending cases filed by Pragmatus Telecom LLC. Judge Andrews noted that two of three patents-in-suit are now free of reexam and the third had survived significant steps of reexam. Essentially, “reexamination proceedings are over, unless [the defendants’ supplier] appeals the inter partes decision on [the third patent.]” Accordingly, Judge Andrews found, “the basis for granting a stay pending re-examination is eroding away” and there “is nothing of significance to be gained by keeping the stay in place.” Judge Andrews also denied the plaintiff’s request to strike the defendants’ response, which “appears to go out of its way to impugn the Plaintiff’s behavior and to label it a ‘troll.’” While this language “should have been avoided,” Judge Andrews denied by request to strike because he does not “generally believe in redacting or rewriting history.” Pragmatus Telecom LLC v. Alcatel-Lucent USA, Inc. et al., C.A. No. 12-1534-RGA, Order at 1-2 (D. Del. July 3, 2013).

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July 9, 2013

Judge Robinson grants parent company's motion to dismiss infringement claims

In a recent memorandum opinion, Judge Sue L. Robinson granted a parent company's motion to dismiss infringement claims made against it based on the alleged conduct of its subsidiaries. Gevo, Inc. v. Butamax(TM) Advanced Biofuels LLC, et al., Civ. No. 12-1724-SLR (D. Del. July 8, 2013). As the Court explained in granting the motion, the plaintiff’s only factually supported allegations were that (1) the parent had two subsidiaries; (2) one of those subsidiaries was involved in a joint venture with another defendant; and (3) one of the defendants disclosed an infringing recombinant yeast strain. Id. at 5. “The remainder of [the plaintiff’s] allegations are conclusory statements.” Id.

More specifically, the Court explained that the complaint provided no underlying facts supporting the conclusory allegation that the parent controlled its subsidiaries’ infringing conduct, therefore “the court is not obligated to accept as true the proposition that [the parent] controls the activities of the subsidiary defendants or the activities of any business ventures owned by the subsidiaries.” Id. at 6. The Court noted that although “[i]t could be argued . . . that [the plaintiff] is not privy to such facts without discovery . . . indicia of control [such] as overlapping boards or officers or consolidated financial statements generally are within the public domain and should have been related if available.” Id. at 6 n.1. The Court also found insufficient the plaintiff’s allegation, made on information and belief, that the parent had actual notice of the defendant’s patent applications so as to support allegations of infringement of plaintiff’s provisional patent rights. The Court explained that this “actual notice” allegation was “not buttressed by any specific facts and is even further diluted by the use of “and/or” in the paragraph.” Id. at 7. For the same reasons, the Court found that the plaintiff did not adequately allege joint infringement or indirect infringement against the parent. Id. at 9-10.

The Court also granted the parent's motion to dismiss the plaintiff’s contributory infringement claim, explaining that the plaintiff did not plead that the parent "sold, offered to sell, or imported a component of the infringing product into the United States. Nor has [the plaintiff] offered facts that would support such a claim.” Id. at 10-11 (footnotes omitted). Finally, the Court granted the parent's motion to dismiss the plaintiff’s willful infringement claim, explaining that “the only circumstance identified by plaintiff to substantiate its willfulness claims . . . is the litigation itself[.]” Id. at 12.

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July 9, 2013

Judge Stark denies motion to stay pending post-grant review

Judge Leonard P. Stark recently denied a defendant’s motion to stay pending post-grant review under the AIA’s Transitional Program for Covered Business Method Patents (“CBM Review”). Benefit Funding Systems LLC, et al. v. Advance America, et al., C.A. No. 12-801-LPS (D. Del. June 28, 2013). The Court explained that its denial was discretionary, and made without prejudice to the defendant’s right to seek a stay in the event the PTAB should ultimately grant the petition for CBM Review. Weighing the factors in Section 18(b) of the AIA, the Court found that (i) a stay would probably simplify issues for trial but likely would not eliminate the need for a trial altogether; (ii) although in its early stages, the Court and parties had invested significant resources in the litigation already whereas CBM Review had not yet been granted; (iii) a stay would prejudice the plaintiff, including by making the plaintiff’s licensing efforts more difficult; and (iv) a stay would not substantially reduce the burden of litigation on the parties and the Court. Id. at 3-4. Judge Stark also ordered that the defendant provide substantive responses to discovery requests, explaining that “Defendant’s effort to essentially grant itself a stay by resisting discovery due only to its pending motion for a stay is improper.” Id. at 1. Finally, the Court granted the plaintiff's motion for leave to amend its complaint to assert claims against one of the defendant's vendors, through which the defendant offered its allegedly infringing services. The Court explained that the defendant did "not have possession, custody, or control of core technical documents for [the vendor], and has been unable to persuade [the vendor] to produce such documents voluntarily." Id. at 2.

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July 8, 2013

Judge Fallon denies defendant’s motion to transfer venue, denies plaintiff’s motion to strike

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

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

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July 8, 2013

Judge Robinson considers motions to strike and exclude evidence

In Invista North America S.A.R.L., et al. v. M&G USA Corporation, et al., C.A. No. 11-1007-SLR-CJB (D. Del. June 25, 2013), Judge Sue L. Robinson considered three motions related to the parties’ discovery.

Plaintiffs moved to strike portions of defendants’ expert’s reply report and this expert’s references to and reliance upon certain experimental data. Plaintiffs argued that parts of the report were untimely because they addressed topics beyond secondary considerations, but the Court concluded that “although not labeled as such, [the sections] at issue were submitted in response to arguments in [plaintiffs’ expert’s] rebuttal report that [defendants’ expert’s] report was incomplete for failing to specifically cite support for his opinions. Thus, viewed as a supplement, those . . . pages were timely filed and appropriately clarified [defendants’ expert’s] opening report. They included only subject matter that was originally disclosed in the opening report and presented no new or changed opinions.” Id. at 5. Even if there had been some prejudice, it was “curable” by plaintiffs, and this reply report was “of high importance to [defendants].” Id. Therefore, the Court denied the motion with respect to this argument. As to the experimental data on which this expert relied, the Court similarly found that “the extreme sanction of” exclusion was not warranted, but noted that defendants could not withhold data from these experiments even if their expert only relied on selected portions of the data. See id. at 6-7. Defendants were ordered to produce such data. The Court did grant plaintiff’s motion to the extent that this expert’s declaration contained “previously undisclosed theories of invalidity,” and the Court listed the relevant parts of the opinion to be struck. Id. at 7-8.

Defendants moved to exclude plaintiffs’ expert’s testimony regarding infringement and secondary considerations of non-obviousness. Regarding the infringement opinion, defendants argued that the testimony was not reliable because the expert did not perform any testing. The Court denied this motion, explaining that “[t]esting is not required to support an infringement opinion” and concluding that the expert’s analysis was reliable. Id. at 9. Regarding the secondary considerations opinion, the Court concluded that the expert, a polymer chemist with over 30 years of experience in the polymer industry, was qualified under “the liberal standard for ‘specialized knowledge’” under Rule 702. Id. at 10. As a result, defendants’ motion was denied.

Finally, plaintiffs moved to strike defendant’s summary declaration and supplemental interrogatory response regarding defendants’ core documents, arguing that they were untimely and “set forth a new non-infringement defense that [defendants’] core technical documents do not reflect the composition of the [accused products].” Id. at 10. This non-infringement defense had been raised for the first time in summary judgment briefing. Although defendants argued that certain of its discovery responses and depositions had put plaintiffs on notice of this issue, the Court found that this defense was “new and untimely” as it “alter[ed] the entire infringement and non-infringement landscape that was developed and vetted during fact and expert discovery. . . . [Defendants were] aware of [plaintiffs’] infringement theories and even confirmed to the court that its own non-infringement theories were premised on its proposed claim construction, not the sufficiency of the core technical documents. At best, [defendants] stood by silently as [plaintiffs] relied on the core technical documents . . . . At worst, [defendants] purposefully disregarded the scheduling order and engaged in trial by ambush with its eleventh-hour defense. Either way, to allow [defendants’] belated new non-infringement theory would substantially prejudice [plaintiffs]” and would be “almost impossible” to cure at this stage of the case. Id. at 12. As a result, the Court granted plaintiffs’ motion to strike the supplemental declaration and interrogatory responses underlying this new defense. Id. at 13.

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July 8, 2013

Judge Sleet grants motion to lift stay and grants motion for leave to file sur-reply

In Fifth Market, Inc. v. CME Group, Inc., et al., C.A. No. 08-520-GMS (D. Del. June 19, 2013), Chief Judge Gregory M. Sleet considered motions related to a stay the Court had issued in May 2011 following defendants’ filing of a request for ex parte reexamination of one patent (“the ‘419 Patent”) and the filing of a draft request for inter partes reexamination of a different patent (“the ‘387 Patent"). Id. at 1-2.

The PTO issued a reexamination certificate for the '419 Patent in February 2013 and granted inter partes reexamination of the '387 Patent in September 2012. The Court explained that “[t]hese developments principally affect the court's assessment of the undue prejudice factor, as [plaintiff] complains of the defendants’ 'excessive delay' in seeking reexamination of the '387 Patent and the resulting delay of this litigation.” Id. at 3 n.1. The timing of defendants’ inter partes reexamination request and its intent to file a request for post-grant review of the ‘419 Patent as a covered business method patent “indicate that they have adopted a strategy of raising piecemeal PTO challenges to [plaintiff’s] patents,” which was “impermissibly tactical.” Id. (internal quotation marks omitted). The status of the reexamination and the fact that the defendants had not yet filed their request for post-grant review also “concern[ed] the court” in terms of potential delay. Id. Finally, “[w]hile the final ‘relationship between the parties’ sub-factor [of the undue prejudice analysis] remains both unchanged and untroubling given [plaintiff’s] status as a non-practicing entity, the defendants’ timing and the status of the '387 reexamination-as well as the planned '419 CBM review-suggest that the broader undue prejudice factor now favors lifting the stay. The defendants appear to have sought an inappropriate tactical advantage, and denial of this motion would expose [plaintiff's] suit to the various evidentiary risks associated with prolonged stays.” Id. (internal citations omitted). As a result, the Court granted the plaintiff’s motion to lift the stay.

In the context of plaintiff’s motion to lift the stay, defendants had moved to strike plaintiff’s reply brief or, in the alternative, for leave to file a sur-reply, which they had filed along with this motion. The Court agreed with defendants that the plaintiff had violated Local Rule 7.1.3(c)(2) when it had “include[ed] [in its reply] a discussion of the stay factors entirely ignored in its opening brief.” Id. at 4 n.2. But the Court “exercise[d] its discretion and grant[ed] the defendants' alternative motion to file a surreply rather than strike [plaintiff’s] reply brief. While [the] opening brief was deficient, the defendants have acknowledged that the three traditional ‘stay factors’ are well known, and they were able to address them in their own answering brief. Moreover, any prejudice that might have resulted from [plaintiff’s] improper reply is remedied by the court's consideration of the defendants’ sur-reply.” Id. (internal citations omitted).

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July 8, 2013

Judge Sleet denies motion for reconsideration of order to produce documents under crime-fraud exception

In Shelbyzyme, LLC v. Genzyme Corporation, C.A. No. 09-768-GMS, Chief Judge Gregory M. Sleet had previously granted in part defendant’s request for the production of plaintiff’s privileged documents under the crime fraud exception, as detailed here. Here the Court considered plaintiff’s motion for reconsideration, and denied it. Slip op. at 1 (D. Del. June 25, 2013).

Plaintiff argued that “the court erred in drawing the inference that patent applicant knew of the abandonment [of a relevant application] by December 1999 and thus was mistaken in its subsequent finding on the ‘intent to deceive’ prong” of fraud. Id. at 3. Plaintiff argued that the Court’s finding was “predicated upon a misreading of” an email from a licensee to the related patent family to defendant, in which the licensee had explained that the application in question would become abandoned if the applicant did not pay a base issue fee. Id. at 5 n.3 (quoting the email in full). The plaintiff “now claims that [the prosecuting attorney and patent counsel] was the source of the information that the issue fee had not been paid.” Id. at 6. However, “the court continues to believe that the most reasonable interpretation of [this] email is that [the applicant] was the source of [the licensee’s] knowledge that the issue fee had not been paid and that [the licensee] conveyed that knowledge to [defendant]. A close examination of the message supports this view,” and, quoting passages from the email, the Court mapped out how the prosecuting attorney’s statement that the fee had not been paid was “conditional” and indicated that he was “unaware as to whether [the applicant] actually had paid the fee.” Id. The Court also noted that “the alternative interpretations presented in [plaintiff’s] Motion for Reconsideration suffer from serious flaws.” Id. at 7.

Plaintiff also “reference[d] a June 2, 2013 declaration [of the prosecuting attorney] in support of its position that [the attorney] was the source of [the licensee’s] knowledge that the issue fee had not been paid.” Id. at 9. The Court disregarded this declaration, explaining that “a motion for reconsideration should not be used ‘as a means to argue new facts or issues that inexcusably were not presented to the court in the matter previously decided.’ Here, [plaintiff] failed to present an equivalent to this . . . declaration in support of its initial [letter brief], making consideration of the above-quoted statement improper.” Id. at 10 (quoting Brambles USA v. Blocker, 735 F. Supp. 1239, 1240 (D. Del. 1990)). “The remaining evidence offered by [plaintiff] to challenge the court’s reading of the [email],” including testimony from various parties regarding this email and the source of information as to whether the issue fee had been paid, “[was] unpersuasive,” as it “[told] the court little about the actual source of [the] information.” Id.

Finally, plaintiff “[took] issue with the court's characterization of a declaration attached to the Petition for Revival, which the court referenced in its discussion of the ‘reliance’ element” of fraud. Id. at 3. “While the court recognizes that its prior characterization of the [this declaration] may have oversimplified matters, conflating [the declarant’s] own knowledge with that of the applicants, it does not believe that any error resulted in its conclusion as to the reliance issue” because its prior characterization was “not required to reach [its] conclusion” that the PTO had reasonably relied on the alleged misrepresentations in the Petition for Revival. Id. at 13.

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