January 15, 2013

Magistrate Judge Burke denies defendant’s motion to stay pending inter partes reexamination

Magistrate Judge Burke recently considered defendant’s motion to stay plaintiff’s patent infringement litigation pending the USPTO’s reexamination of the patents-in-suit. SenoRX, Inc. v. Hologic, Inc., C.A. No. 12-173-LPS-CJB (D. Del. Jan. 11, 2013). The patents-in-suit relate to “balloon brachytherapy device[s],” which are used in the treatment of breast cancer. Id. at 1-2. Defendant filed requests for reexamination following the entry of the Court’s scheduling order and while discovery progressed in the case. See id. at 2-3. Defendant then filed a motion to stay pending resolution of the reexamination proceedings. Id. at 3. In weighing the relevant factors to determine whether a stay was appropriate, the Court concluded that “the prejudice factor decidedly weigh[ed] against a stay.” Id. at 19.

“With nearly all of the asserted claims currently subject to a non-final rejection and before the PTO,” the potential for simplification of issues favored a stay, “though not strongly so” because of the “lack of complete (though not insignificant) overlap of the issues to be addressed in the PTO and in the District Court.” Id. at 7, 8. The current status of the litigation also favored a stay but that was “tempered” by the fact that “the case was not in its infancy” when defendant filed its motion. Id. at 11-12.

As to prejudice, while the timing of defendant’s motion weighed in favor of a stay, “there [was] the real prospect of at least a multi-year, lengthy delay” until the reexamination proceedings were complete. Id. at 15. The relationship between the parties also weighed against a stay. Because the parties “are the only two companies who participate in the balloon brachytherapy market” and “this ‘hard-fought’ competition has also spawned additional litigation” in another court, “it is very clear that the level of competition between the parties is acute.” Id. at 16-17. The Court’s conclusion was not affected by the fact that plaintiff did not seek a preliminary injunction “with the fact of direct competition not in any serious dispute.” Id. at 17.

Overall, while “the issue [was] a close one, with good arguments to be made for either outcome sought by the parties,” the potential for prejudice to plaintiff “[struck] the Court as more compelling, immediate and certain when compared to the potential for efficiency gains or simplification of the issues that might result from reexamination.” Id. at 20.

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January 14, 2013

Judge Robinson Enjoins ANDA Defendant from Launching Generic Product

Judge Sue Robinson has issued an order enjoining ANDA defendant Tolmar, Inc. from launching its generic product at the expiration of the 30-month stay. See Leo Pharma A/S v. Tolmar, Inc., C.A. No. 10-269-SLR, Order (D. Del. Jan. 9, 2013). Having been advised that the stay provided by the Hatch-Waxman act expires on January 14, 2013, Judge Robinson enjoined Tolmar from launching its generic product until January 18, 2013 or until the court issues its opinion, whichever is sooner.

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January 14, 2013

Judge Andrews grants two defendants' motions to transfer to jurisdictions where infringing manufacturing processes take place.

In a recent memorandum opinion, Judge Richard G. Andrews granted two defendants’ motions to transfer their cases to the jurisdictions where their manufacturing processes are alleged to infringe. Semcon Tech, LLC v. Intel Corp., C.A. No. 12-531-RGA (D. Del. Jan. 8, 2013); Semcon Tech, LLC v. Texas Instruments Inc., C.A. No. 12-534-RGA (D. Del. Jan. 8, 2013). The plaintiff alleged that both defendants (as well as other defendants in a number of concurrently filed cases) infringe a patent “by using a process to make integrated circuits that involves chemical-mechanical polishing with the use of an Applied Materials Reflexion system.” Id. at 2. The Court found that the balance of the Jumara factors weighed in favor of transferring both cases, in large part because unlike situations where a defendant sells an infringing product nationally, such that “the claims rise wherever the defendant’s products are sold” (including within the District of Delaware), Intel’s and Texas Instruments' manufacturing processes take place, respectively, in the District of Oregon (among other non-Delaware locations) and the Northern District of Texas. Id. at 5, 10-11. Accordingly, “while it may be true that the products made by the infringing methods are sold everywhere, the actual infringing activities are taking place in [Oregon and Texas] but not in Delaware.” Id. The Court explained that the fact that these two cases did not "arise in" Delaware was a significant factor distinguishing them from the situation in In re Link_A_Media Devices Corp., 662 F.3d 1221 (Fed. Cir. 2011), previously discussed here. The Court also found that the plaintiff’s desire to keep a number of concurrently filed cases involving the same patent in the District of Delaware was a Link_A_Media-distinguishing factor that weighed against transfer, but the overall balance of Jumara factors weighed in favor of transfer. Id. at 7-8.

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January 13, 2013

Judge Andrews dismisses plaintiff’s indirect and willful infringement claims in part, with prejudice

Judge Richard G. Andrews recently dismissed with prejudice plaintiff’s claims of indirect and willful infringement of four patents, which “concern ‘thermal power and management’ for ‘computer systems,’” with limited exceptions. IpVenture Inc. v. Lenovo Group Ltd., et al., C.A. No. 11-588-RGA, at 1, 5-6 (D. Del. Jan. 8, 2013). The only indirect and willful infringement claims that Judge Andrews found to survive defendants’ motion to dismiss plaintiff’s Second Amended Complaint were claims for induced and willful infringement after November 28, 2011, the date on which plaintiff served its Amended Complaint upon the defendants currently in the action. Id. at 2, 5-6. Judge Andrews noted that “[t]he Second Amended Complaint is 81 pages long, but the allegations, in material respects, are very similar against all defendants.” Id. at 1-2. In light of the similarity, Judge Andrews explained in detail the sufficiency of the indirect and willful infringement claims with regard to only one defendant, Dell. Id. at 2-5.

Judge Andrews dismissed all contributory infringement claims with prejudice. Id. at 4, 5-6. Judge Andrews explained that while the Second Amended Complaint made a “separate allegation of contributory infringement,” it merely “recite[d] the various elements of contributory infringement without providing any factual support to give context (or, perhaps more importantly, plausibility) to the allegations.” Id. at 4.

Judge Andrews, however, found that the claims of induced and willful infringement after November 28, 2011, survived defendants’ motion to dismiss. Id. at 4-6. Plaintiff failed to sufficiently plead that defendants had knowledge that the allegedly induced acts or its own acts constituted infringement of the patents-in-suit prior to service of the Amended Complaint. See id. Regarding induced infringement, Judge Andrews explained that “[t]o the extent the allegations can be read to allege that the defendant knew that the induced acts constituted patent infringement, that knowledge is wholly unsupported by any factual allegation, other than the knowledge that would have been gained from having this lawsuit served upon [defendant].” Id. at 4. Addressing willful infringement, Judge Andrews similarly found that “there is nothing factual to plausibly support the conclusion that [defendant] ‘acted despite an objectively high likelihood that its actions constituted infringement of a valid patent,’ and that [defendant] knew or should have known that its actions constituted infringement of a valid patent.” Id. at 5. However, “service of the complaint meant that [defendant’s] knowledge of the existence of the patent had been forcefully brought to its attention,” and at that point whether defendant willfully infringed became a “factual question.” Id.

Judge Andrews provided the following rationale in support of his decision to dismiss the indirect and willful infringement claims with prejudice: “I previously dismissed these same allegations, based upon much the same arguments, without prejudice. Plaintiff’s Second Amended Complaint nearly doubled in size from the Amended Complaint, but added almost nothing of substance to what was in the Amended Complaint. Thus, this time, the dismissals will be with prejudice, as it is clear that Plaintiff cannot satisfactorily amend its Complaint.” Id. See here for Judge Andrews’s prior order, in which he dismissed the indirect and willful infringement claims without prejudice.

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January 13, 2013

Judge Robinson finds twelve patents unenforceable in light of unlawful spoliation in Micron Tech., Inc. v. Rambus Inc.

Judge Sue L. Robinson held in a recent post-trial opinion that “Rambus’ spoliation was done in bad faith, that the spoliation prejudiced Micron, and that the appropriate sanction is to declare the patents-in-suit unenforceable against Micron.” Micron Tech., Inc. v. Rambus Inc., C.A. No. 00-792-SLR, at 45-46 (D. Del. Jan. 2, 2013). This case was on remand from the Federal Circuit, which directed Judge Robinson to “reconsider [the] bad faith and prejudice determinations related to Rambus’ spoliation, as well as the appropriate sanction, if any, for Rambus’conduct.” Id. at 21. See here a discussion of the Federal Circuit’s opinion, and here for a discussion of Judge Robinson’s opinion prior to appeal.

Judge Robinson noted that in order to find “bad faith,” the Court must “find that Rambus implemented its document retention policy to disadvantage Micron or other potential defendants.” Id. at 22. Judge Robinson explained that “four categories of facts in this case support a finding of bad faith.” Id. Specifically, these categories were “(1) facts tending to show that Rambus’ document retention policy was adopted as part of a firm litigation plan; (2) facts tending to show that the document retention policy was executed selectively; (3) facts tending to show that Rambus acknowledged the impropriety of the document retention policy; and (4) Rambus’ litigation misconduct.” Id. Judge Robinson delineated the specific facts that fell under each category and concluded that there existed “clear and convincing evidence that Rambus’ spoliation was carried out in bad faith.” Id. at 22-29.

Turning to whether Rambus’ spoliation prejudiced Micron, Judge Robinson noted that “[t]he question of prejudice ‘turns largely’ on whether a spoliating party destroyed evidence in bad faith.” Id. at 29. Because “bad faith [had] been found on Rambus’ part, the burden shift[ed] to Rambus to show lack of prejudice.” Id. at 30. Judge Robinson ultimately held that Rambus did not satisfy its burden, and that “Rambus’ spoliation at least prejudiced Micron’s (1) claims and defenses related to patent misuse and violation of antitrust and unfair competition laws, and (2) defense of inequitable conduct.” Id. Regarding the prejudice to Micron’s inequitable conduct defense, Judge Robinson addressed the prongs of “specific intent” and “materiality” individually. Judge Robinson found that “proving the intent prong of inequitable conduct would undoubtedly be more difficult for Micron given Rambus’ bad faith spoliation,” as “nonpublic documents will be instrumental in showing that the patentee purposely chose not to disclose a known reference to the PTO.” Id. at 36. Similarly, Judge Robinson found that proving the “materiality” prong of inequitable conduct would be more difficult, as Micron was precluded from “possibly obtaining evidence of affirmative acts of egregious conduct, such as perjury, the manufacture of false arguments, or deliberate fraud during prosecution.” Id. at 37. Under Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011) (en banc), such egregious acts support a finding of materiality. Id. at 37. Furthermore, with regard to both specific intent and materiality, Judge Robinson emphasized that “the fact that no record was made of what documents were destroyed [could] be of no avail to Rambus, the bad faith actor.” Id. at 37 (emphasis added).

Next, Judge Robinson addressed the appropriate sanction to “rectify Rambus’ spoliation.” Id. at 37. Judge Robinson relied on the factors set forth in Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76 (3d Cir. 1994), which include “(1) the degree of fault of the spoliating party; (2) the degree of prejudice to the adverse party; and (3) whether there is a less severe punishment that would avoid substantial unfairness to the adverse party while still serving to deter similar spoliation by others in the future.” Id. at 38. First, Judge Robinson noted that the “degree of fault in Rambus’ spoliation cannot be overstated by the court.” Id. at 39. Judge Robinson explained that even though her finding of “bad faith” spoliation was sufficient to find Rambus at fault, that degree of fault was “compound[ed]” by “Rambus’ purposeful, thorough document destruction, which did not occur just once, but several times in 1999 and 2000.” Id. (emphasis added). Second, Judge Robinson reiterated that “several of Micron’s affirmative defenses [had] been prejudiced by Rambus’ bad faith spoliation.” Id. She reasoned that “[w]hile the precise degree of prejudice cannot be known because Rambus did not keep any record of what was destroyed, Rambus should not easily be able to excuse its misconduct by claiming that the vanished documents were of minimal import.” Id. Moreover, “[t]he wide range and sheer amount of materials destroyed, along with Rambus’ bad faith, [made] it almost certain that the misconduct interfered with the rightful resolution of the case.” Id. at 39-40.

Third, Judge Robinson considered sanctions less severe than holding the patents-in-suit unenforceable and found them “inappropriate for the unique circumstance of this case.” Id. at 40-46. In reaching her conclusion, Judge Robinson noted that “Rambus’ destruction of evidence was of the worst type: intentional, widespread, advantage-seeking, and concealed.” Id. at 44 (emphasis added). Judge Robinson explained that “[a]ttorney fees, monetary sanctions, and adverse jury instructions will not restore Micron to the same position in which it would have been absent Rambus’ unlawful spoliation, and an evidentiary sanction would likely result in the same substantive outcome but in a less efficient manner.” Id. at 45. Judge Robinson further explained that “[a]ny lesser sanction would, in effect, reward Rambus for the gamble it took by spoliating and tempt others to do the same.” Id. at 45. Judge Robinson concluded that the appropriate sanction was “to hold the patents-in-suit unenforceable against Micron,” given the “nature and degree of Rambus’ wrongdoing.” Id. at 45-46.

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January 13, 2013

Judge Sleet grants defendants’ motion to transfer to Northern District of California

Chief Judge Gregory M. Sleet recently granted defendants’ joint motion to transfer venue to the Northern District of California in this patent infringement action. Linex Technologies, Inc. v. Hewlett-Packard Company, et al., C.A. No. 11-400-GMS (D. Del. Jan. 7, 2013). Plaintiff was a Delaware corporation “with small offices in Florida, New Jersey, Massachusetts, and Texas.” Id. at 2. One defendant was a California corporation, the remaining four were Delaware corporations, and all five had their principal places of business in the Northern District of California. Id.

Plaintiff’s forum preference was entitled “to at least somewhat heightened deference” because it had filed the action in its state of incorporation, which was “part of its home turf.” Id. at 5 (internal quotation marks omitted). However, the forum preference received “something less than . . . paramount consideration” because the plaintiff had filed its action in a district in which it was not physically located. Id. at 5 (citing, inter alia, In re Link_A_Media Devices Corp., 662 F.3d 1221, 1223 (Fed. Cir. 2011)).

All other Jumara factors weighed in favor of transfer or were neutral. The physical location of the defendants and relevant evidence in California influenced the Court’s analysis of several factors. The Court acknowledged that key witnesses and books and records were in or near the Northern District of California in its conclusion that these two factors weighed in favor of transfer, albeit only “slightly” for books and records. Id. at 9-11. The “practical considerations” within Jumara’s public interest factors weighed in favor of transfer “[f]or largely the same reasons that the court found the [books and records and convenience of witnesses] factors to weigh in favor of transfer.” Id. at 12.

As to the convenience of the parties, while “not all defendants have chosen to incorporate in Delaware, and the court is cognizant of In re Link_A_Media's general warning to avoid weighing a defendant’s state of incorporation too heavily in the transfer analysis,” here “the decisions of [four defendants] to incorporate in Delaware do suggest that the inconvenience of litigating here is somewhat less than the court would ordinarily presume it to be. As such, the court [found] that this factor [was] neutral.” Id. at 8-9.

On the other hand, these “same underlying facts [i.e., the physical location of the defendants in California] in its assessment of [the] ‘practical considerations’ factor” favored transfer: “[a]s a matter of form, the fact that [all but one of the defendants were] incorporated in Delaware did affect the private interest, party convenience analysis. The public interest factor at issue here, however, calls for the court to examine practical considerations rather than ones of form, and there is little reason to believe a California-based firm actually reduces its costs of litigating in this district merely by incorporating in Delaware. Put simply, the concern that prevented the court from concluding that the ‘convenience of the parties’ factor favored transfer is inapplicable here, and the court believes that the parties’ aggregate litigation costs will be reduced by litigating in California.” Id. at 12.

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January 7, 2013

Judge Andrews reserves final decision on defendant’s Daubert motion to exclude plaintiff’s damages expert until live testimony hearing before trial

Judge Richard G. Andrews recently issued a memorandum opinion addressing defendant’s motion to exclude the live testimony of plaintiff’s expert, whom plaintiff offered to opine on the damages related to defendant’s alleged infringement of U.S. Patent No. 5,859,547 (“the ‘547 patent”), entitled “Dynamic Logic Circuit.” AVM Technologies, LLC v. Intel Corporation, C.A. No. 10-610-RGA, slip. op. (D. Del. Jan. 4, 2013). Judge Andrews concluded that “[w]hile I am thus of the opinion that [plaintiff’s expert’s] testimony about damages should be entirely excluded, I also believe that my final decision on the matter would be better informed if I heard live testimony, subject to cross-examination, from [plaintiff’s expert], before the beginning of trial.” Id. at 7.

Judge Andrews first addressed defendant’s argument that plaintiff’s expert’s opinion was unreliable because his “calculation of a reasonable royalty rate violates the entire market value rule because he made no effort to apportion the percentage of [defendant’s] accused revenues that is attributable to the ‘547 patent.” Id. at 3. Judge Andrews noted that “the general rule is that royalties will be based on the ‘smallest salable patent practicing unit.’” Id. at 4 (quoting LaserDynamics v. Quanta Comp., Inc., 694 F.3d 51, 67 (Fed. Cir. 2012)) (internal quotation marks omitted). However, under the “entire market value rule” exception, “[t]he patentee may rely on the entire market value of the accused product if the patentee demonstrates that the patented feature creates the ‘basis for customer demand’ or ‘substantially create[s] the value of the component parts.’” Id. at 4 (quoting Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1318 (Fed. Cir. 2011)) (internal quotation marks omitted). Consistent with its expert’s position, plaintiff argued that royalties should be based on the sales of microprocessors because those were the “smallest saleable patent-practicing unit.” See id. at 5. Judge Andrews found, however, that “[t]he use of a saleable unit that is greater than the patented feature is going to introduce Uniloc error.” Id. Judge Andrews further explained, “I gather that dynamic logic circuit(s) may be an important part of a microprocessor. It is completely unclear to me how many other important parts there are, although my sense is that there are many.” Id. at 6 (emphasis added). Thus, “[a]ssuming for the sake of argument that dynamic logic circuits are the single most important part of [defendant’s] microprocessors, it is still a long haul to conclude that they ‘drive demand’ for the entire microprocessor.” Id. Judge Andrews ultimately concluded that plaintiff’s expert’s report “provides little, if any, basis for allowing his testimony” regarding a reasonable royalty rate. Id.

Judge Andrews then addressed defendant’s argument that plaintiff’s expert’s use of four license agreements to estimate damages was unreliable. Judge Andrews noted that plaintiff must “show that the prior licenses are truly comparable to the license that the parties would have negotiated for the asserted patent before introducing this evidence to the jury.” Id. Judge Andrews found that the use of these licenses was unreliable in certain respects. For instance, this is a “single patent case,” but “three of the four license agreements” relied on gave plaintiff “a license to entire patent portfolios that included dozens of patents.” Id. at 7. Further, plaintiff’s expert’s report “does not indicate that he performed any analysis to compare the benefits and value of the technology covered by this agreement, and he conceded as much at his deposition.” Id.

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January 7, 2013

Judge Andrews strikes ten summary judgment briefs, invites defendant to file one combined summary judgment brief with 40 page limit.

Judge Richard G. Andrews recently issued an order, sua sponte, striking 10 of 11 summary judgment briefs filed by a defendant, finding that the anticipated volume of the briefing related to summary judgment motions was excessive. The lone brief that was not struck was unopposed. XpertUniverse Inc. v. Cisco Systems Inc., C.A. No. 09-157-RGA (D. Del. Jan. 2, 2013). Judge Andrews estimated that the Court would need to review and consider 600 or more pages of briefing in connection with the 11 summary judgment briefs, 3 Daubert motions, and one motion for “terminating sanctions”, and noted that this volume of briefing would not be accepted by any other District Court judge. Judge Andrews explained, “Chief Judge Sleet does not allow summary judgment briefing absent an approval process. Judge Robinson would allow a maximum of 200 pages total of briefing in connection with these motions. Judge Stark would allow a maximum of 100 pages of total briefing.” Id. at 1-2. Finding that the volume of briefing in the instant case would be excessive if permitted to go forward, Judge Andrews struck 10 of the summary judgment briefs, as well as answering briefs that had been filed, adding “[t]he Defendant may choose to pursue such of these ten motions as it wishes, but must submit only one brief of no more than 40 pages . . . Plaintiff may respond with a no more than 40 page brief . . . and Defendant may reply with a no more than 20 page brief . . . .” Id. at 2.

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January 3, 2013

Judge Stark construes claims of patents relating to data encryption and decryption technology

Judge Leonard P. Stark recently construed six of seven disputed claim terms of U.S. Patent Nos. 7,136,995 and 7,900,057, entitled “Cryptographic Device” and “Cryptographic Serial ATA Apparatus and Method,” respectively. Enova Technology Corporation v. Initio Corporation, et al., C.A. No. 10-04-LPS (D. Del. Dec. 28, 2012). The following terms were construed:

-“encrypted” (and variations, including “encryption,” “encrypt,” “encrypting”)
-“passed through”
-“a data stream interceptor that distinguishes between command/control and data signal transfers”
-“transparently”
-“host”
-“said SATA protocol stack is operatively coupled to a USB (Universal Serial Bus) interface via a SATA-to-USB protocol translator”

The Court concluded that “cryptographic Serial ATA (SATA) apparatus” was not a claim limitation because it appeared in the preamble of claim 1 and did not "breath life" into dependent claims 13-15, as argued by Defendants. Id. at 9. Therefore, no construction was required. Id.

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December 27, 2012

Jury finds all asserted claims invalid, no infringement by any defendant.

After an eleven day trial before Chief Judge Gregory M. Sleet, a jury recently returned a defense verdict in litigation involving computer security products. Finjan, Inc. v. Symantec Corp., et al., C.A. No. 10-593 (GMS) (D. Del. Dec. 20, 2012). The jury found that none of the three defendants literally infringed the patents asserted against them, and that every asserted claim of those patents was invalid in any event as both anticipated and obvious.

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