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In Endeavor Meshtech, Inc. v. Aclara Technologies LLC, C.A. No. 13-1618-GMS (D. Del. Feb. 25, 2015), Judge Gregory M. Sleet granted defendant’s (“Aclara”) motion to transfer to the Eastern District of Missouri. Judge Sleet found that Aclara satisfied its burden of showing that the relevant Jumara factors strongly support transfer. Only plaintiff’s (“Endeavor”) forum preference weighed against transfer, and, as the Judge Sleet explained, that preference did not warrant maximum deference in this case because of Endeavor’s minimal connection to the District of Delaware. See id. at 3-5. The remaining factors weighed strongly in favor of transfer or, at least, are neutral. For example, Judge Sleet found the factor of “whether the claims arose elsewhere” to slightly favor transfer, given that Aclara markets the accused products from its Missouri headquarters. See id. at 6. Additionally, even though Aclara’s operations were split between Missouri and Texas, Judge Sleet nevertheless found the “convenience of the parties” factor to favor transfer, noting that “the Eastern District of Missouri is certainly more convenient for Aclara.” Judge Sleet explained that it is “unwise and unfair ‘to subject all parties to an inconvenient forum when a forum exists that would significantly reduce the burden of at least one of the parties.’” Id. at 7-8 (emphasis added). Judge Sleet also found the “location of books and records factor” to weigh slightly in favor of transfer, even though some evidence may derive from Aclara’s Texas facility. See id. at 8-9. On balance, in the interests of convenience and justice, Judge Sleet found that transfer was warranted.

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In Immersion Corporation v. HTC Corporation, et al., C.A. No. 12-259-RGA (D. Del. Feb. 24, 2015), Judge Richard G. Andrews granted-in-part defendants’ Daubert motion to exclude plaintiff’s damages expert, excluding the testimony regarding lost profits but allowing testimony regarding a reasonable royalty.

As to reasonable royalty, the expert chiefly relied on a prior settlement agreement between plaintiff and another party that covered the same patents-in-suit for accused devices with the same operating system; the settling party and current defendants also had “comparable market shares.”  Id. at 4.  Defendants argued that the expert’s calculation was flawed as it rested “on the premise that the patents-in-suit are the most valuable in the [settlement] portfolio,” and also that the expert had “cherry-picked” this particular license agreement as having the highest royalty rate among several other licenses.  Id. at 4.  But the Court concluded that reliance on this particularl agreement was reasonable, and Defendants’ criticisms went to weight rather than admissibility.  Id. at 5-6.

As to lost profits, Defendants moved to exclude, as speculative and failing to show demand for the patented product, this expert’s theory that was “based on a license agreement that the parties negotiated for several years, but ultimately did not enter into.  The agreement would have licensed the patents-in-suit, as well as [software of Plaintiff not covered by the patents] . . . [the expert] reasoned that ‘but for’ Defendants’ infringement, Defendants would have entered into the agreement they had been negotiating. He therefore calculated lost profits by applying that rate to [Defendants’] sales.”  Id. at 6 (citations omitted). The Court concluded that this theory was “based on a faulty legal premise” and thus excluded it.  The expert had not attempted to show any functional relationship between the patented products and this software, such that Plaintiff would be entitled to recover from lost sales of unpatented components sold with a patented product.  Id. at 8-9.

Furthermore, the lost profits testimony was “inconsistent with the premise of the lost profits analysis.”  Id. at 9. While the traditional lost profits framework is “based on an analysis where the hypothetical world is one in which the infringing sales did not occur” and, “[s]ince the sales did not occur, the infringement had been ‘factored out,'” the expert’s theory assumed Defendants had licensed the patents.  Plaintiff’s counsel admitted that there was no case accepting this theory, although the Court observed there was also no case rejecting it either.  Id. at 9 & n.7.  The Court ultimately concluded that this theory “[went] too far,” as it would allow a patentee to seek damages representing “the right to exploit,” rather than simply the recognized “right to exclude.” Id. at 9-10 (citing hypothetical where whatever profits Defendants would have made from the licensed software, as well as the profits of other parties licensing the patents in light of Defendants’ own use of them, would be recoverable).

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Magistrate Judge Sherry R. Fallon recently issued a Report and Recommendation, recommending that the Court deny plaintiff’s motion to dismiss defendant’s state law counterclaims.  GPNE Corp v. Fleetmatics USA, LLC, C.A. No. 13-2049-SLR-SRF (D. Del. Feb. 20, 2015).  Plaintiff argued first that defendant’s state law tort claims are preempted by federal law because defendant could not show that plaintiff’s claims of infringement were “objectively baseless.”  Id. at 5.  Defendant responded that “federal law does not preempt its state law tort claims because it has alleged sufficient facts to show that GPNE sent . . . infringement letters in bad faith.”  Id.  Judge Fallon agreed with defendant, noting that at the pleadings stage it does not need to prove its allegations of bad faith are true, only that they are adequately pled.  Id. at 8-12.  Judge Fallon also found that defendant adequately pled its counterclaims of tortious interference, violation of the Delaware Uniform Deceptive Trade Practices Act, and common law unfair competition.   Id. at 12-17.

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Applying the U.S. Supreme Court’s decision in Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014), Judge Robinson granted-in-part and denied-in-part defendant Motorola’s summary judgment motion regarding whether Intellectual Ventures’ patents claim inventive subject matter.  Intellectual Ventures I, LLC, et al. v. Motorola Mobility LLC, C.A. No. 11-908-SLR (D. Del. Feb. 24, 2015).  Judge Robinson noted that under current case law “it is clear that computer-based programming constitutes patentable subject matter so long as the basic requirements of § 101 are met[.]”  Id. at 10 (internal quotation omitted).  But, the application of the law to “this area of technology ha[s] been a moving target[.]”  Id. Quoting the Federal Circuit’s recent DDR Holdings decision, Judge Robinson noted that to overcome “Internet-centric” challenges to patent eligibility, the claims must do more than:

recite a commonplace business method aimed at processing business information, applying a known business process to the particular technological environment of the Internet, or creating or altering contractual relations using generic computer functions and conventional network operations, such as the claims in Alice, Ultramercial, buySAFE, Accenture, and Bancorp.

Id.at 10-11 (quoting DDR Holdings, LLC v. Hotels.Com, L.P., 773 F.3d 1245, 1259 (Fed. Cir. 2014).  Applying this analytical framework, Judge Robinson found that the asserted claims of Intellectual Ventures’ U.S. Patent No. 6,557,054, titled “Method and System for Distributing Updates by Presenting Directory of Software Available for User Installation That Is Not Already Installed on User Station,” invalid under § 101.  Judge Robinson found, however, that the asserted claims of U.S. Patent No. 7,409,450,  titled “Transmission Control Protocol/Internet Protocol (TCP/IP) Packet-Centric Wireless Point to Multi-Point (PTMP) Transmission System Architecture,” were drawn to patentable subject matter.  Id. at 13-22.

The claims at issue were:

‘054 Patent

181. A computer implemented method for distributing software updates from a remote computer system to a user station, the method comprising:

presenting, at the user station, as a function of an identification of software already installed on the user station, a directory of software updates available for installation on the user station and not already installed on the user station;

sending to the remote computer system over a communications network a selection of software updates for distribution to the user station, wherein the selection of software updates is selected at the user station as a function of the directory; and

receiving from the remote computer system over the communications network software updates indicated by the selection.

 ‘450 Patent

1 . A method comprising:

coupling one or more subscriber customer premise equipment (CPE) stations with a base station over a shared wireless bandwidth using a packet-centric protocol; and allocating said wireless bandwidth and system resources based on contents of packets to be communicated over said wireless bandwidth, wherein the contents of each packet include a packet header and wherein the allocating is responsive to at least one field in the packet header.

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A recent special master decision from the District of Delaware provides guidance on two common discovery topics: the assertion of privilege and adequate preparation of a Rule 30(b)(6) witness. Special Master Terrell first explained that the “common legal interest” privilege was not applicable because the defendant did not adequately identify another party with which it shared a common interest merely by identifying an “unnamed possible joint venture.” Merck Sharp & Dohme Corp. v. Xellia Pharmaceuticals ApS, et al., C.A. No. 14-199-RGA, Special Master Or. at 4 (D. Del. Feb. 20, 2015). The Special Master also found that communications with foreign attorneys were not privileged and should be produced because “the law in this Court does not recognize the attorney client privilege protection for a foreign attorney, unless there is the involvement of a United States attorney, where the subject generally concerns a United States patent. [The defendant] willingly introduced this patent challenge in the U.S. by filing its ‘Paragraph IV certification’ concerning the ‘300 patent at issue in this lawsuit. Thus, the ‘touch base’ test [identified in some case law] is applicable.” Id. at 4-5.

The plaintiff also complained that the defendant’s 30(b)(6) witness was not adequately prepared for three noticed deposition topics: the decision to file a Paragraph IV certification, attempts to design-around the patent-in-suit, and analysis and investigation of the patent-in-suit. The Special Master concluded that the witness “was properly prepared and gave sufficient testimony in response to the Deposition Notice. . . . Some of the topics in the Deposition Notice overlap and it appears [the witness] gave extensive testimony relevant to the ‘300 patent. With respect to [the decision to file a Paragraph IV certification], testimony need not be given as to the specific legal advice in connection with the filing of the Paragraph IV certification. As to the factual basis for this filing, [the witness] testified about that under other Topics. [Furthermore,] it is not surprising that there would be some documents, particularly aged documents, as to which [the witness] would have no knowledge. On balance, I am satisfied that [the witness] was the appropriate witness for the Deposition Notice, made reasonable efforts to prepare, and gave testimony where she had relevant knowledge.” Id. at 6-7.

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In a recent order, Judge Richard G. Andrews denied a motion seeking permission to use confidential discovery information obtained in the district court litigation before the PTAB in an inter partes review proceeding.  Callwave Commc’ns LLC v. AT&T Mobility LLC, et al., C.A. Nos. 12-1701-RGA, 12-1702-RGA, 12-1703-RGA (D. Del. Feb. 19, 2015).  As Judge Andrews explained, “my view is that discovery before the PTAB is an issue for the PTAB.  Any confidentiality issues, if discovery is permitted, can be resolved at the same time by the PTAB.”

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Judge Andrews recently addressed two interesting legal questions on summary judgment motions related to invalidity and limitation of damages. The first related to the requirement of 35 U.S.C. § 120 that a patent application be “if filed before the patenting . . . on the first application” in order to have the priority date of that previously-filed application. Because a foreign patent application with an identical specification had been filed more than a year before three patents-in-suit, if the patents-in-suit were not treated as continuations of another application with the benefit of an earlier priority date, they would be anticipated by the foreign application. Immersion Corp. v. HTC Corp., et al., C.A. No. 12-259-RGA, Memo. Op. at 5-8 (D. Del. Feb. 11, 2015). The parent of the patents-in-suit was issued on August 6, 2002, and the patents-in-suit were all filed on the same day. Thus, the question was whether the patents-in-suit could have been “filed before the patenting” of the parent, which, the defendants argued, automatically issued at 12:00:01 a.m. on August 6, 2002. Id.

The plaintiff argued that the PTO has “long given continuation applications the priority date of a prior application if the continuation is filed on the same day that the prior application issues as a patent” and that the PTO has expressed this position in the MPEP. Accordingly, the plaintiff argued that the Court should give Chevron deference to the PTO as a matter of administrative law. Judge Andrews, however, found that the PTO’s view was not entitled to Chevron deference because the relevant statute is not “silent or ambiguous” Rather, “35 U.S.C. § 120 . . . expressly states that the application must be filed ‘before’ the parent application issues.” Id. Further, although the plaintiff pointed to one district court that had adopted the PTO’s interpretation, the Federal Circuit has expressly “left open the question of ‘whether filing a continuation on the day
the parent issues results in applications that are co-pending as required by the statute.’” Id. (citing Encyclopaedia Britannica, Inc. v. Alpine Electronics of Am., Inc., 609 F.3d 1345, 1352 (Fed. Cir. 2010)). Because the plaintiff had the burden of proving entitlement to an earlier priority date and did not present evidence of when on August 6, 2002 the applications were filed, it did not establish an earlier priority date and Judge Andrews granted the defendants’ motion for summary judgment of anticipation of the three patents-in-suit. Id.

Secondly, Judge Andrews addressed a cutoff on damages at the point of a patent’s reissuance. “If a patent is reissued, damages are available for the period between the original issuance and the issuance of the reexamined claims only if the original claims and reexamined claims are ‘identical’ . . . [or] ‘without substantive change.’” Id. at 14-16. In this case, the patentee added the phrase “concurrently running” to the claim at issue, which the defendants argued was a substantive change and the plaintiff argued was merely a clarification that did not affect claim scope. Judge Andrews found that this was a substantive change to claim scope because although “the specification is a relevant consideration, Plaintiffs argument that having multiple programs is inherent in the claim because it is disclosed in the specification is contrary to the ‘well-established principle that a court may not import limitations from the written description into the claims.’ . . . Moreover, though not dispositive, it is highly persuasive that the patent examiner allowed the amended claim only after ‘concurrently running’ was added because the prior art made ‘no reference to any other programs that are running concurrently and how the determination is made between the plurality of concurrently running programs . . . .’” Id.

Chief Judge Stark recently addressed a similar issue involving damages for a reissued patent, finding that damages must be cut off at the filing of a complaint because the patentee had failed to mark embodying products or otherwise provide notice of its patent during the period of patent reissuance.

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In Alltech Associates Inc. v. Teledyne Instruments Inc., C.A. No. 13-425-RGA (D. Del. Feb. 12, 2015), Judge Richard G. Andrews  denied plaintiff’s unopposed motion to vacate certain of the Court’s claim construction rulings in the case. Having reached a settlement agreement with defendant, plaintiff argued that the Court’s constructions it disagreed with “should be vacated because settlement precludes review of the constructions,” and expressed concerns about the constructions “having a collateral estoppel effect” in subsequent cases. Id. at 1. The Court denied the request. It observed that while “[s]ettlement of any civil litgation is usually a good outcome,” refusing to vacate an order may encourage settlement early on if parties had to “carefully assess whether settlement was in their best interest before a claim construction hearing.” Id. (emphasis added). The Court further explained that “[a]ssuming that the standard that applies is whether there are exceptional circumstances justifying vacating the claim construction order . . . that standard has not been met. . . . [The Court could not] judge how important vacating the claim construction is to the settlement” based on the motion.  Id.

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In Intel Corporation v. Future Link Systems, LLC, 14-377-LPS (D. Del. Feb. 12, 2015), Magistrate Judge Christopher J. Burke addressed Future Link’s motion which sought to dismiss Intel’s declaratory judgment complaint related to nine patents on various grounds. In particular, Future Link alleged “(1) that the Complaint should be dismissed for lack of subject matter jurisdiction, pursuant to Federal Rule of Civil Procedure 12(b)(1), as Intel does not have standing to bring the declaratory judgment claims at issue; (2) that Intel’s claims regarding direct and indirect non-infringement should be dismissed for failure to state a claim, pursuant to Federal Rule of Civil Procedure 12(b)(6); (3) that Intel’s claims regarding a license defense and the doctrine of patent exhaustion also fail to state a claim pursuant to Rule 12(b)(6); and (4) that the Court should exercise its inherent authority under the Declaratory Judgment Act to dismiss the suit.” Id. at 6.

Judge Burke recommended granting Future Link’s motion, in part. Specifically, Judge Burke recommended that the court dismiss Counts 1-14 and 17-20 of the Complaint.  Judge Burke further recommended that the motion be denied as to Count 16, and granted in part with respect to Count 15.  In particular, with respect to Count 15, Judge Burke recommended that the motion to dismiss be granted with respect to indirect infringement of all claims of the ’0576 patent and direct infringement of claims 17-19, and denied with respect to direct infringement of claims 1-16 and 20-21. The dismissal of these claims was recommended to be without prejudice.  Id. at 29-30.

As Judge Burke explained, “Intel’s first theory as to why subject matter jurisdiction exists relates to the infringement allegations Future Link made against Intel’s customers Dell, HP and Promise” in various letters. See id. at 2-5, 8.  As to direct infringement of certain claims of one patent at issue, the ’0576 Patent, Judge Burke found subject matter jurisdiction to exist.  Judge Burke explained that “since it is reasonable to infer that Future Link has accused Dell, HP, and Promise of infringement based solely on the use and sale of Intel components, there is necessarily an implied accusation that Intel itself has also directly infringed the 18 arrangement claims. This is because Intel, in both making these components and selling them to its three customers, would have been performing its own independent acts of infringement (assuming that these components are, in fact, infringing).” Id. at 15. On the other hand, Judge Burke found Intel’s allegations as to direct infringement of the other eight patents at issue insufficient to support subject matter jurisdiction. Judge Burke explained that “[h]ere, at most these allegations indicate that (1) Intel’s customers have been accused of infringement, and (2) Intel produces at least some (unspecified number of) ‘components’ that are the subject of these accusations. But unlike in Arris or DataTern, here there are: (1) no allegations that Future Link had ever directly accused Intel of infringement of these eight patents; (2) no allegations that Future Link ever communicated with Intel regarding Intel’s role in Dell, HP or Promise’s asserted acts of infringement; and (3) again, no allegations that Future Link specifically listed Intel’s own products by name when discussing its customers’ alleged infringement of the patents.” Id. at 20. Judge Burke also found that the complaint did not provide sufficient allegations to establish subject matter jurisdiction with respect to induced or contributory infringement.  Id. at 17-18, 23-24.

Judge Burke then turned to Intel’s second theory of subject matter jurisdiction, which was based on Intel’s alleged indemnity obligations to its customers.  Judge Burke found this theory insufficient to support subject matter jurisdiction, as it was “not clear enough from the Complaint (and the Dell, HP and Promise Letters) that Future Link was actually putting Intel components at issue.” As Judge Burke explained, Intel did not cite any authority that “courts have found subject matter jurisdiction to exist when it was unclear from the Complaint that a patent holder’s allegations against the customer in fact related to the sale or use of the supplier’s equipment in the first place.” Id. at 25.

Lastly, Judge Burke recommended denying Future Link’s motion to dismiss for failure to state a claim of non-infringement.  As to the claims at issue, Judge Burke noted that “[a]lthough Intel’s allegations in Count 15 are sparse as to the products at issue, the remainder of its Complaint provides needed context.” Id. at 28.

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Judge Gregory M. Sleet recently granted a motion by Intel to transfer a case to the District of Oregon.  Memory Integrity, LLC v. Intel Corp., C.A. No. 13-1804-GMS (D. Del. Feb. 13, 2015).  In addressing the Third Circuit’s Jumara factors, Judge Sleet discounted the weight of Memory Integrity’s choice to file suit in Delaware, its “home” forum, agreeing with Intel (itself a Delaware corporation) that because Memory Integrity is a “non-practicing entity with no facilities, operations, employees, or presence in Delaware[,]” it “cannot reap the full benefits of heightened deference” to its chosen forum.  Id. at 4.  On the other hand, Judge Sleet found Intel’s preferred forum, the District of Oregon, to make sense given that the company has a large design and development facility in Oregon, along with 37,000 employees.  Id. at 5.  Although the parties disputed whether the accused products in the case were developed in Oregon or Israel, Judge Sleet noted that it was undisputed that they were not developed in Delaware, id. at 7, nor were there any identified witnesses or records located in Delaware, id. at 8-9.  On balance, Judge Sleet found that the Jumara factors tipped in favor of transferring the case.

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