February 15, 2010

Federal Circuit: Questionable Personal Jurisdiction Warrants Transfer

Among the many considerations that courts face when deciding whether to transfer an action, especially in an era of ever-expanding dockets, judicial economy can sometimes tip the balance. In a recent order, the Federal Circuit upheld a D. Del. decision that sent the underlying ANDA case to another district. Of the several reasons cited, the Court approved the district court's rationale for avoiding a potentially unnecessary round of discovery:

"In this case, the Delaware District Court ruled that 'substantial, unresolved questions remain with regard to whether this District has personal jurisdiction over Defendant Apotex . . . ' and stated that it would not exercise jurisdiction over Apotex without jurisdictional discovery. Under these circumstances, we cannot say that the Delaware District Court clearly abused its discretion in ruling that judicial economy and the interest of justice weighed strongly in favor of transfer."

In re Pfizer Inc., Misc. Docket No. 915 (D. Del. Feb. 2, 2010) (Horbaly, Clerk, for the Court).

February 11, 2010

NJ District Court Reverses Opinion that Contradicted DE Opinion

Last month, we posted about New Jersey Magistrate Judge Bongiovanni's decision to disqualify a lawyer for a conflict of interest under Rule of Professional Conduct 1.7, in Wyeth and Cordis Corp. v. Abbott Laboratories, et al., C.A. No. 08-230-JAP (D.N.J. Dec. 1, 2009). Magistrate Judge Bongiovanni's holding contradicted a District of Delaware case - both cases had identical facts, but Magistrate Judge Bongiovanni held the firm disqualified, while Judge Robinson had held that, although the firm's conduct violated Rule 1.7, the facts of the case did not warrant disqualification.

This week, New Jersey District Judge Pisano reversed Magistrate Judge Bongiovanni's decision, and held that the attorney was not disqualified, after a discussion of the facts of the case that roughly mirrored Judge Robinson's opinion. According to Judge Pisano, violations of Rule 1.7 do not result in mandatory disqualifiction under Third Circuit and New Jersey law. Wyeth and Cordis Corp. v. Abbott Laboratories, et al., C.A. No. 08-230-JAP, at *15 (D.N.J. Feb. 8, 2010). Judge Pisano stated that this rule is particularly appropriate because "[m]odern litigation . . . often involves multinational companies and multinational law firms among whom conflicts occasionally arise due to the broad reach of their respective businesses," and because of the degree of prejudice that results to a party when its chosen counsel is disqualified. Id. at 9-10.


February 6, 2010

Magistrate Judge Thynge: Opinion on Inline JMOL motion

Magistrate Judge Thynge recently issued an opinion in Inline Connection Corporation v. Earthlink, C.A. No. 02-272-MPT (D. Del. Feb. 5, 2010). The opinion addressed several issues (see full opinion below); one interesting issue involved the law regarding a "practicing the prior art" defense.

In this case, the jury found that the patent was both invalid and not infringed. Id. at 11. The patentee sought to rescue their patent via a motion for judgment as a matter of law (JMOL) that the patent was not invalid, because the defendant's expert had failed to "identify each claim element, state the witnesses' interpretation of the claim element, and explain in detail how each claim element is disclosed in the prior art reference," as required by Koito Mfg. Co., Ltd. v. Turn-Key-Tech, LLC, 381 F.3d 1142, 1152 (Fed. Cir. 2004). Id. at 21. The Court agreed.

Defendant Earthlink then tried to put on a "'practicing the prior art' defense," arguing that "its [product] is “materially identical” [to the prior art] and, thus, 'if [its product] were found to infringe, then the patent claims that are at issue would have to be invalid,'" but the Court disagreed. The Court pointed out that "[t]he Federal Circuit [has] stated that 'this court has made clear that there is no ‘practicing the prior art’ defense to literal infringement," Koito at 1153, and that all of the other cases cited by Earthlink for its "practicing the prior art" defense involved situations where the accused product was the prior art - i.e., it was invented or on sale before the priority date. Thus, the Court granted the JMOL motion.

This shows that you should not rely on a pure "practicing the prior art" defense, despite its apparent logic (after all, how can a patentee have patented something that existed in the prior art?), unless your actual product is the prior art.

Inline Connection Corporation v. Earthlink, C.A. No. 02-272-MPT (D. Del. Feb. 5, 2010)

February 4, 2010

Eduardo C. Robreno: Always Read the Footnotes

Sometimes, the footnotes tell the whole story. In this case, that expression is literally true: district judge Eduardo C. Robreno's recitation of the facts and his analysis are contained within one extraordinary footnote. That analysis, moreover, is significant.

In its decision released Tuesday, the Court delineated the scope of pleading, on information and belief, the "deceptive intent" element of the inequitable-conduct defense. In short, the answer is no:

"Even assuming that the Court adopts a liberal interpretation of the inference of intent to deceive, Defendants present no specific facts showing Plaintiff . . . actually possessed any knowledge with respect to the commercial availability of the Components. Absent some particularized showing regarding this knowledge, the Amended Answer does not satisfy the Rule 9(b) pleading requirement in light of [Federal Circuit precedent]."

Inventio AG v. Thyssenkrupp Elevator Americas Corp., C.A. No. 08-874-ER (D. Del. Feb. 2, 2010) (Robreno, J., sitting by designation).

February 4, 2010

Judge Farnan: Motion to Transfer Denied in ANDA Case

In Pfizer, Inc. v. Sandoz, Inc., C.A. No. 09-742-JJF (D. Del. Jan. 20, 2010), Judge Farnan explained a recent trend among Delaware ANDA plaintiffs: when jurisdiction in Delaware is not a sure thing, ANDA plaintiffs will bring suit in Delaware, and then immediately bring a second suit in another "safe" forum where jurisdiction is assured. Id. at 12. Plaintiffs feel that they must do this because, under the Hatch-Waxman Act, they have only a 45-day window in which to bring suit once they receive notice of an ANDA filing, and the statute is silent on what happens if the suit that they bring within the window is dismissed for lack of jurisdiction. Id. To be avoid that potential problem, plaintiffs have been hedging their bets by bringing two suits. Id.

In this particular case Pfizer, a Delaware corporation with its principal place of business in New York, brought an ANDA suit against Sandoz, Inc., a Colorado corporation with its principal place of business in New Jersey, but also with its primary manufacturing plant located in Colorado. Id. at 3. Pfizer first brought suit in Delaware, and then a day later brought suit in Colorado. Id. Sandoz filed answers and counterclaims for declaratory judgment in both jurisdictions, and brought the present motion to transfer to Colorado. Pfizer responded with a motion in Delaware to enjoin the declaratory judgment action in Colorado. Id.

Luckily for Pfizer, Judge Farnan seemed to understand their concerns as ANDA plaintiffs. After describing the parties' ordinary arguments for and against Pfizer's choice of forum, id. at 4-5, Judge Farnan explained the need, as other courts have noted, for plaintiffs to bring ANDA cases in a "safe" forum in addition to their preferred forum because of the statute's lack of clarity. In light of that need, and because the other factors were each neutral, Judge Farnan held that Pfizer's choice of forum takes precedence, and denied Sandoz's motion to transfer. Id. at 6-16. Judge Farnan reserved decision on Pfizer's motion to enjoin the declaratory judgment action in Colorado, however, pending the Colorado court's resolution of similar motions to transfer. Id. at 16.

Pfizer, Inc. v. Sandoz, Inc., C.A. No. 09-742-JJF (D. Del. Jan. 20, 2010)

February 3, 2010

New opinion from Delaware Court of Chancery on Trade Secret Misappropriation

In a recent case before Vice Chancellor Parsons of the Delaware Court of Chancery, Plaintiff Great American brought claims against Defendant Cherrydale for, among other things, misappropriation of trade secrets. Great American Opportunities, Inc. v. Cherrydale Fundraising, LLC et al., C.A. No. 3718-VCP (Del. Ch. Jan. 29, 2010). The action stemmed from events that occurred around the acquisition of Kathryn Beich, Inc. (“KB”) by Great American. The trade secrets in question involved a list of sales representatives and their contact information; a list of KB sales representatives ranked by volume of sales; order status reports, which listed contact information and the status of KB orders; and other confidential proprietary reports, customer contact and purchasing information. Id. at 11-14. Cherrydale argued that this information did not constitute trade secrets and were not misappropriated because the “information was used solely by independent contractors whose acts cannot be attributed to Cherrydale.” Id. at 45.

Under the Delaware Uniform Trade Secrets Act, the plaintiff must prove: (1) “that a trade secret exists, i.e., the statutory elements—commercial utility arising from secrecy and reasonable steps to maintain secrecy—have been shown;” (2) “that the plaintiff communicated the trade secret;” (3) “that such communication was made pursuant to an express or implied understanding that the secrecy of the matter would be respected;” and “(4) that the trade secret has been used or disclosed improperly to the plaintiff’s detriment.” Id. at 46-47. After weighing the evidence presented at trial, Vice Chancellor Parsons determined that the information at issue were protected trade secrets. Id. at 48-67. However, because Great American failed to prove the amount of actual damages it was entitled to, Vice Chancellor Parsons awarded Great American compensatory damages only for Cherrydale’s unjust enrichment caused by the misappropriation. Id. at 68-78. Cherrydale’s actions were, however, found to be willful and malicious leading Vice Chancellor Parson’s to double the compensatory damages award. Id. at 82.

Great American Opportunities, Inc. v. Cherrydale Fundraising, LLC et al., C.A. No. 3718-VCP (Del. Ch. Jan. 29, 2010)

February 3, 2010

Judge Joseph J. Farnan, Jr.: Expert Testimony Allowed Under Liberal Third Circuit Standard

Following the Third Circuit's "liberal" approach to the admission of expert testimony, the Court found that the defendant's trade secret expert was qualified to testify regarding the electrochemistry field. Roche Diagnostics Operations, Inc. v. LifeScan Inc., C.A. No. 07-753-JJF, Memo. Order (D. Del. Jan. 29, 2010). Specifically, the Court held that the proffered expert's "education, academic endeavors, and publications demonstrate a substantial level of expertise." Id. at 2. Plaintiff argued that the expert had no prior experience or skills in the technical area at issue and therefore was unqualified to testify as to defendant's trade secret misappropriation counterclaims. Id. at 1.

In the same case, a jury recently found for plaintiffs on defendant's breach of contract and unfair competition counterclaims. See verdict sheet here.

Roche Diagnostics Operations, Inc. v. LifeScan Inc., C.A. No. 07-753-JJF, Memo. Order (D. Del. Jan. 29, 2010).

January 31, 2010

Judge Joseph J. Farnan, Jr.: Addressing Motions to Amend

Judge Farnan recently addressed motions to amend in two related cases.

In WebXchange Inc. v. Dell, Inc. and WebXchange Inc. v. FedEx Corporation, the defendants sought to amend their answers (after the amendment deadline) to "add flesh" to their inequitable conduct affirmative defenses and counterclaims. C.A. No. 08-132-JJF, Memo. Op. (D. Del. Jan. 20, 2010); C.A. No. 08-133-JJF, Memo. Op. (D. Del. Jan. 20, 2010). The court granted defendants' motions to amend finding that the amendments could not have been made prior to the pleading deadline, "despite [their] diligence." Id. at 5. Furthermore, the court found that the amendments were not futile because factual determinations regarding the the extent of the inventor's knowledge of certain documents and whether they were intentionally withheld from the PTO are "not appropriate at this stage of the litigation." Id. at 9. The amendments also do not prejudice plaintiff because the amendments relate to two earlier theories alleged by defendants in their earlier amended answers, no Markman hearing has been held, no trial date has been set and the close of expert and fact discovery are set off the Markman order. Id. at 9.

WebXChange Inc. v. Dell, Inc., C.A. No. 08-132-JJF, Memo. Op. (D. Del. Jan. 20, 2010).

WebXChange Inc. v. FedEx Corporation, C.A. No. 08-133-JJF, Memo. Op. (D. Del. Jan. 20, 2010).

January 29, 2010

Judge Robinson: Interpretation of In Re Seagate

In Cordis Corporation v. Boston Scientific Corporation, C.A. No. 03-27-SLR (D. Del. Jan. 28, 2010), Judge Robinson had an opportunity to lay out her views on In re Seagate Techonology, LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc). In Re Seagate held that "to establish willful infringement, a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. . . . If this threshold objective standard is satisfied, the patentee must also demonstrate that this objectively-defined risk (determined by the record developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer." Id. at 2, quoting Seagate.

Judge Robinson expressed her view that this holding allows consideration only of pre-litigation evidence, excluding things like prior court decisions:

It cannot be emphasized enough that the litigation process is a complicated one, comprising multiple steps and moved forward by multiple decisions, ranging from resolving a discovery dispute to a case-dispositive motion. Consequently, I am very uncomfortable with characterizing administrative and court decisions as "objective evidence" for presentation to a jury. As recognized by counsel, a jury is going to give such evidence great weight, even when the procedural and substantive bases for most such decisions will not be apparent to the jury. This strikes me either as the kind of evidence better suited for review by a court' or as eliciting the kind of hindsight review that is so strenuously discouraged in other aspects of patent law. See KSR Intern. Co, v. Teleflex Inc., 550 U.S. 398, 421 (2007). Therefore, consistent with the reasoning of the Seagate decision as a whole (and its emphasis on prelitigation conduct), generally only evidence regarding the prelitigation landscape of the dispute will be admitted.
Id. at 3-4. Further, even pre-litigation evidence remains subject to the Rule 403 standard. Id. at 5. Based on those rules, Judge Robinson excluded various evidence from the damages portion of the case, including a prior preliminary judgment decision, the outcome of other prior litigation, and statements issued during re-examination proceedings. Id. at 4-5.

Cordis Corporation v. Boston Scientific Corporation, C.A. No. 03-27-SLR (D. Del. Jan. 28, 2010)

January 29, 2010

Sue L. Robinson: ANDA Filer Succeeds in Prosecution Laches Defense

District judge Sue L. Robinson this week issued a rare win to a party asserting a laches defense. According to the Court, eleven patent applications and ten abandonements, among others, adequately demonstrated the patent-in-suit's unenforceability:

"Taken in the totality, this case involves eleven patent applications, ten abandonements, and no substantive prosecution for a decade. CRCT's primary justification for delay, that neither Examiner Ford nor Examiner Richter would have allowed the applications at issue absent human data, is not objectively reasonable in view of the fact that CRCT never attempted to traverse the rejections (thereby either validating its position or obtaining allowance of its claims). CRCT's delay, therefore, cannot 'be explained by reference to [ ] legitimate considerations and/or expectations.' . . . CRCT introduced no contemporaneous evidence substantiating its position or establishing that CRCT sought to develop the technology prior to the Schering license. CRCT only engaged the PTO once it had a profit motive to do so."

With these delays, the ANDA filer established the abuse of the patent system necessary to a successful prosecution-laches defense.

Cancer Research Technology v. Barr Labs. Inc., C.A. No. 07-457-SLR (D. Del. Jan. 26, 2010) (Op. Part II).