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Judge Richard G. Andrews recently denied a defendant’s motion for leave to amend its answer to assert invalidity counterclaims. M2M Solutions LLC v. Sierra Wireless America, Inc., et al., C.A. No. 12-30-RGA (D. Del. May 15, 2014). Judge Andrews acknowledged that leave to amend under Rule 15 should be granted “when justice so requires,” but explained that in this case the defendant also had to comply with the scheduling order entered under Rule 16. Here, the defendant did not move to amend until more than 12 months after the scheduling order’s deadline for amended pleadings. The Court found that the defendant “failed to show that the Court’s Scheduling Order could not ‘reasonably be met despite [] diligence’ on [defendant’s] behalf.” Id. at 2. The motion was therefore denied pursuant to Rule 16.

The Court explained that the defendant asserted mirror image invalidity affirmative defenses in a timely manner, and found no reason why the defendant could not have alleged its invalidity counterclaims at that time. Id. As a result, Rule 16 aside, Judge Andrews explained that denial would also be appropriate under Rule 15, because the defendant unduly delayed filing a motion for leave to amend. Id. at 3.

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Judge Sue L. Robinson recently issued a claim construction decision for three patents relating to real-time online transactions. Pi-Net Int’l Inc. v. JPMorgan Chase & Co., C.A. No. 12-282-SLR (D. Del. May 14, 2014). The following claim terms appearing in one or more of U.S. Patents No. 8,108,492, 5,987,500, and 8,037,158 were considered by the Court:

“real-time:”
“value-added network (VAN) switch.” (found to be indefinite)
“switching.” (found to be indefinite)
“service network.” (found to be indefinite)
“transactional services:”
“web transaction:”
“point-of-service application[s]” and “transactional application[s]”
“web application” and “network application”
“said user application”
“back-end transactional application[s],” and “the selected back-end transactional application:”
“object routing:”
“a routed transactional data structure that is both complete and non-deferred, in addition to being specific to the point-of-service application:”
“keeping a transaction flow captive:”
“value-added network service provider:”
“value-added network system:”
“transaction link:”
The Court also construed several means-plus-function claim terms:

“means for switching to a transactional application in response to a user specification from a network application.”
“means for transmitting a transaction request from said transactional application.”
“means for processing said transaction request.”
“computer system executing the back-end transactional application for processing the transaction request in real-time.”
The Court found each of these mean-plus-function claim terms indefinite because the the specification failed to provide sufficient structure or an algorithm to disclose how the function is performed.

In a separate opinion, and as a result of the Court’s rulings on claim construction, the Court granted the defendants’ motion for summary judgment of invalidity for indefiniteness, and also for lack of enablement, and lack of written description.

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In Sunpower Corporation v. Panelclaw, Inc., C.A. No. 12-1633-GMS (D. Del. May 16, 2014), Chief Judge Gregory M. Sleet granted defendant’s motion to stay pending inter partes review (“IPR”). Finding that plaintiff would not be unduly prejudiced by a stay, Judge Sleet first explained that any delay in defendant’s IPR filing was not due to defendant’s dilatory intent, but rather the result of plaintiff’s “own delay and settlement discussions.” Id. at 1-2. Specifically, Judge Sleet noted that while defendant had requested from plaintiff what claims it intended to assert via e-mail, plaintiff did not disclose that information until more than five months later with the service of its claim charts. Id. at 2. Judge Sleet further noted that defendant had filed its motion to stay two weeks after its IPR petitions. Id. at 3. Judge Sleet also found that the early stage of the IPR did not necessarily “counsel against granting stay, . . . . since any stay would be lifted by August 2014 if [defendant’s] IPR petitions are not granted.” Id. Notably, Judge Sleet found that the parties are not direct competitors. Id.

Judge Sleet found that the IPR process would likely simplify the issues before the Court. Even though the issues presented in the IPR did not completely overlap with those in the litigation, the case could be “much simplified or ended altogether” if claims were canceled. Id. at 4. Judge Sleet also pointed to the fact that if the claims were amended through the IPR, it would be “preferable to know what those amendments are prior to devoting substantial time and effort to claim construction, summary judgment motions, expert reports, and trial.” Id. at 4. Judge Sleet also noted that the Court could still benefit from the PTAB’s expertise in the event the claims survived the IPR, and that the IPR’s estoppel effect could further simplify matters for the Court. Id. at 4.

Judge Sleet found that the early stage of the litigation also favored stay, noting that there is “no case scheduling order, document production has yet to occur, and no trial date has been set.” Id. at 5.

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Following consideration of the parties’ letters and a discovery conference on the issues, Judge Richard G. Andrews ordered that (i) the number of claims plaintiff may assert be limited to eight (8) per patent, and that (ii) defendant submit a proposed order and supporting letter specifying the documents, which are in the possession of a third party, that plaintiff be required to produce. Agincourt Gaming LLC v. Zynga Inc., C.A. No. 11-720-RGA (D. Del. May 14, 2014). The parties’ redacted letters filed on these issues highlight the parties’ disputes. See D.I. 127 (Defendant’s Redacted Opening Letter); D.I. 130 (Plaintiff’s Redacted Responsive Letter).

As to the issue regarding the number of asserted claims, plaintiff had initially asserted fifty-five (55) claims across three patents. (D.I. 127 at 2.) Defendant claimed that plaintiff had represented that it did not intend to present all of those 55 claims to the jury. (D.I. 127 at 2.) Plaintiff agreed that it would consider dropping certain claims depending on the number of claim terms defendant identified for construction. (D.I. 127 at 3; D.I. 130 at 3.) Defendant identified 40 terms for construction, but plaintiff found many of the identified terms were non-technical, and therefore had no “intrinsic basis for specialized definition.” (D.I. 130 at 3.) Plaintiff thereafter requested that defendant pick twenty (20) of the (40) identified terms, and further asserted it would “elect claims to get to 10.” (D.I. 130 at 3.)

At that point, the parties reached an impasse. Defendant requested that the Court order plaintiff to narrow the number of claims to “5 per patent” before the “parties expend resources on claim construction for claims that will be dropped.” (D.I. 127 at 3.) Following the discovery conference, Judge Andrews granted defendant’s request in part, ordering that plaintiff may elect “no more than eight claims from each of the asserted patents.” (D.I. 125). Judge Andrews did note in the Court’s Order, however, that “[u]pon a showing of diligence, and with due consideration for prejudice, Plaintiff may request to alter the election of claims.” Order at 1.

The discovery issue addressed whether plaintiff would be required to produce documents in the possession of a third party, Bally Gaming, Inc. (“Bally”), from whom plaintiff acquired a portion of its multi-patent family. (See D.I. 127 at 1-2; D.I. 130 at 1-2.) On this issue, the parties’ dispute centered around whether plaintiff had “control” over Bally—that is, the legal right to obtain the documents required on demand—based on the Patent Sale Agreement (“PSA”) plaintiff and Bally entered into. (See D.I. 127 at 1-2; D.I. 130 at 1-2.) Defendant asserted that plaintiff’s reliance on a “restrictive definition” of the term “Documents” found in the PSA was improper. (D.I. 127 at 2.) Following the discovery conference, Judge Andrews provided a very specific order:

“The Defendant should submit a proposed order that specifies what the Plaintiff should be ordered to produce. The Defendant should consider the proposed order as an ‘all-or-nothing’ request. If the Court decides it is overbroad, the Court may well deny it in its entirety just for that reason. The Defendant should also submit a separate letter that explains, in as much detail as is necessary, why it wants the information and how it is related to any of the disputed issues in the case.”

Order at 1. Judge Andrews also gave plaintiff and defendant an opportunity to submit responsive and reply letters on the issue, respectively. (D.I. 125.)

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Chief Judge Sleet has granted a stay of litigation pending Inter Partes Review of the patents-in-suit in the U.S. Patent and Trademark Office in a case in which the PTAB has not yet decided whether to grant the IPR petitions. Judge Sleet first concluded that the plaintiff is unlikely to suffer undue prejudice as a result of the stay. The defendants filed their IPR petitions well within the one-year timeframe required by statute and the “timing of the request for stay suggests no dilatory motive” because it was filed less than two weeks after the IPR petitions. It was also persuasive to Judge Sleet that the plaintiff was a non-practicing entity, which “by its own admission, does not compete with the defendants.” Canatelo LLC v. Axis Comms. AB, et al., C.A. No. 13-1227-GMS, Order at 2 n.2 (D. Del. May 14, 2014).

Judge Sleet next concluded that the issues before the court will be simplified should the Patent Trial and Appeal Board grant the defendants inter partes review. In this regard, His Honor considered “statistics [that] indicate that it is very likely the PTAB will grant the IPR petitions.” Ultimately, “Should the PTAB deem the patents-in-suit unpatentable or narrow their scope, the court’s resources will be conserved by expending fewer resources on claim construction or avoiding the claim construction process altogether. Should the claims survive the IPR process, the court will still benefit from the PTAB’s expertise.” Id. at 2 n.3.

Finally, Judge Sleet explained that the case is at a very early stage, thus weighing in favor of a stay: “Staying a case in its early stages advances judicial efficiency and prevents the court and the parties from expending resources on claims that may be rendered invalid. Here, the parties have yet to conduct any discovery and no scheduling order has been entered.” Id. at 2 n.4.

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In Pragmatus AV, LLC v. Yahoo! Inc., C.A. No. 11-902-LPS-CJB (D. Del. May 15, 2014), Magistrate Judge Christopher J. Burke issued a Report and Recommendation relating to the construction of sixteen disputed terms across five patents: U.S. Patent Nos. 5,689,641; 6,237,025; 6,351,762; 5,854,893; 7,185,054; and 5,896,500. The patents in suit “relate to the field of distributed multimedia collaboration. Specifically, the Asserted Patents disclose systems and methods for utilizing hardware, software and communications technologies ‘to produce a multimedia collaboration system that greatly facilitates distributed collaboration, in part by replicating the benefits of face-to-face collaboration.’” Id. at 2.

Judge Burke construed the following terms:

“a first and second set of potential participants”
“active states” / “active teleconference”
“addresses of video display devices”
“call handle”
“conducting”
“controlling communications connections”
“displayed in two sets”
“initiate” /“initiating”
“managing a video conference”
“potential participants”
“quick dial list”
“selecting” /“selected”
“teleconference”
“on hold”/“hold state”
“tracking the audio and video capabilities associated with each workstation”
“video display device”

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In Moneycat Ltd. v. PayPayl Inc., C.A. No. 13-1358-MSG (D. Del. May 15, 2014), Judge Mitchell S. Goldberg, sitting by designation, granted defendant’s motion to transfer to the Northern District of California.

As a threshold matter, Judge Goldberg addressed whether the motion was timely. Plaintiff argued it was not because Judge Goldberg’s “Policies and Procedures encourage the parties to make motions for a transfer prior to the Rule 16 scheduling conference, which occurred in this case over two months prior to [defendant] filing its motion to transfer. Second, [plaintiff] contends that transfer at this point—with the case having proceeded through substantial portions of discovery—would delay resolution of its infringement claims, particularly where [defendant] has refused to agree to continue on the same discovery schedule should the case be transferred.” Id. at 4. Even though “motions to transfer ought to be made as early in the proceedings as practicable” and the Court observed that, in light of the parties’ past litigation history, defendants should have been aware of what products would be accused and thus could have brought the transfer motion earlier, see id. at 5-6, the Court allowed the motion, noting that filing early transfer motions was not a hard and fast rule and that the case was still in its early stages. Id. at 6.

The Court then turned to the Jumara factors. Plaintiff is based in Israel, does not have a U.S. business presence, and has no apparent ties to Delaware. Under these facts, plaintiff’s forum choice was “not entitled to significant deference.” Id. at 7. The Court also observed that “there is reason to believe that [plaintiff] will have to send resources to the West Coast on occasion no matter where this case is tried, because much of the evidence and many of the witnesses in this case are in California,” the principal place of business of defendant. Id. Therefore, the Court “accord[ed] [plaintiff’s] choice of forum less deference than would otherwise be appropriate.” Id. at 8.

Defendant’s forum choice, where the claim arose, the convenience of the parties, the convenience of witnesses, and the location of books and records all weighed in favor of transfer, a key fact being that defendant’s activities regarding the accused services, records, and witnesses were largely in California or likely to be. See id. at 9, 10, 12. However, these factors only slightly favored transfer except for the convenience of the parties and the location of books and records. Id. at 15. As to the convenience of the parties, the Court noted differences in case law regarding the weight to afford the fact that a defendant is a Delaware corporation, which was the case here. Id. at 10-11. The Court followed the “decisions by considering [defendant’s] incorporation as weighing slightly in favor of denying transfer, but . . . decline[d] to give it significant weight. Overall, because neither party has a significant physical connection to Delaware, [the Court found] the convenience of the parties factor to weigh in favor of transfer” Id. at 11.

As to the public interest Jumara factors, all were neutral save practical considerations, which weighed in favor of transfer, the Court again citing the fact that the bulk of witnesses and evidence were in California. Id. at 13.

“Balancing these factors,” the Court concluded that defendant had “met its burden to justify transferring this action to the Northern District of California.” Id. at 15.

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As detailed in our previous post, at this year’s meeting of the IP Section of Federal Bar Association’s Delaware Chapter, Judge Stark gave a presentation on the District’s Patent Study Group, as well as on recent and anticipated changes to his and Judge Robinson’s case management practices. The slides from this presentation have been posted to the District of Delaware’s web site and are posted below.

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Attendees of the May 13th annual meeting of the IP Section of Federal Bar Association’s Delaware Chapter were privileged to hear perspectives from a variety of judges, including Chief Judge Rader and Judge Dyk from the Federal Circuit Court of Appeals, Judge Jordan from the Third Circuit, Chief Judge Davis of the Eastern District of Texas, Magistrate Judge Grewal of the Northern District of California, and Chief Judge Sleet and Judges Robinson, Stark and Andrews of the District of Delaware.

In addition to opening remarks from Chief Judge Rader and Chief Judge Sleet, the event included a district court judicial panel, an appellate judicial panel, and a presentation by Judge Stark, the soon-to-be Chief Judge of the District of Delaware. Judge Stark’s presentation provided a statistical overview of litigation in the District and the Court’s recently implemented Patent Study Group (PSG). The presentation also touched upon current (e.g., Judge Robinson’s new model scheduling order) and anticipated changes (e.g., Judge Stark’s new model scheduling order expected in later 2014) stemming from the results of the PSG.

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In Carrier Corporation v. Goodman Global, Inc. et al., C.A. No. 12-930-SLR (D. Del. May 8, 2014), Judge Sue L. Robinson denied defendants’ motion to stay pending reexamination of U.S. Patent No. 7,243,004. At the time of the Court’s decision, the PTO had rejected all claims and an Action Closing Prosecution was expected to issue. Id. at 2.

As Judge Robinson explained, defendants had reasoned that granting stay would conserve judicial resources “based on two assumptions: (a) the administrative process will likely conclude prior to judgment being entered; and (b) the claims will likely be cancelled and deemed unpatentable.” Id. at 2.

Judge Robinson was not persuaded by either of these assumptions. Judge Robinson first observed that the Federal Circuit in Fresenius USA, Inc. v. Baxter Int’l, Inc., 721 F.3d 1330, 1334 (Fed. Cir. 2013) “confirmed that Congress, in enacting the reexamination statute, 35 U.S.C. § 302, expected reexaminations to take place concurrent with litigation.” Id. at 3. Addressing the first assumption above, Judge Robinson explained that “cancelled claims are deemed unpatentable only if the time for appeal has expired or any appeal proceeding has terminated.” Id. (citing 35 U.S.C. § 307(a); Fresenius, 721 F.3d at 1339). As to the second assumption, Judge Robinson explained that “reexamination does not proceed at all absent the finding of a substantial new question of patentability by an examiner; thus, the second assumption applies to every reexamination proceeding once instituted.” Id.

Judge Robinson ultimately determined that “[w]ithout an end to the administrative process in sight, and with different (but equally significant purposes) being served by litigation, the court declines to stay the litigation unless [plaintiff] fails to pursue its administrative remedies once the Action Closing Prosecution issues.” Id. at 4.

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