Chief Judge Leonard P. Stark recently denied a motion to stay pending inter partes review filed by Netflix. Copy Protection LLC v. Netflix, Inc., C.A. No. 14-365-LPS (D. Del. June 17, 2015). As the Court explained, the PTAB had not yet instituted the inter partes review, and was not required by statute to make a decision on whether or not to do so until October 2015. Further, based on the statutory timeline, a final decision from the PTAB would be expected around the same time as trial in this case—October 2016. Therefore, the Court found that the balance of factors weighed against staying the case at this time, but explained that Netflix could renew its motion if and when inter partes review is instituted by the PTAB.
In adidas AG and adidas America, Inc. v. Under Armour, Inc. and MapMyFitness, Inc., C.A. No. 14-130-GMS (D. Del. June 15, 2015), Judge Gregory M. Sleet dismissed co-plaintiff adidas America, which had been added as a plaintiff in a first amended complaint, for lack of standing.
Adidas AG is a German company and the “undisputed legal owner of each of the asserted patents in this suit,” while addidas America, its American subsidiary, was alleged to be an exclusive licensee of the asserted patents within the United States. The Court summarized a “complex series of contracts between adidas AG and its various subsidiaries” through which Plaintiffs claimed they had standing to sue. See id. at 2-3.
Defendants offered both facial and factual challenges to adidas America’s standing. Id. at 4. The Court rejected Defendants’ facial challenge based on allegedly contradictory assertions in the amended complaint: first, that adidas AG owned “all right, title, and interest in and to” the patents (emphasis in original), and second that adidas America was the exclusive licensee in the United States. The Court agreed with Plaintiffs that “alleging that adidas AG owns all ‘right, title, and interest’ in the patents does not make it impossible for adidas America to have an exclusive license to use some of those rights. Under the ‘more generous standard of review associated with’ a facial attack, the Plaintiffs’ amended complaint” was sufficient. Id. at 6 (emphasis in original).
However, the Court then concluded that Plaintiffs had not made a showing that the patents-in-suit were actually the subject of the contractual agreements between the different entities. See id. at 6-8. The patents that were the subject of the agreements were not identified by number, instead by their commercial embodiments. Id. at 6. Instead, Plaintiffs simply made the unsupported (and disputed) assertion that the asserted patents were tied to an embodiment Plaintiffs claimed in briefing was their competitor product to the accused products. Id. This was insufficient to carry Plaintiffs’ burden that subject matter jurisdiction existed. Id. at 7.
Notwithstanding this lack of proof, the Court concluded that one agreement “definitively” resolved that adidas America lacked standing. This agreement “explicitly terminated the effectiveness of the previous [agreements],” and appointed two entities, one of them being adidas America, as the exclusive distributors for Plaintiffs’ products in the U.S. Id. at 8. Therefore, adidas America did not hold the exclusive right to sell the products. As a result, this co-plaintiff lacked standing to sue, even with the patent owner joined, because it lacked any exclusionary rights to the patents-in-suit.
The Court also denied Plaintiffs’ motion to apply German and Dutch law to the interpretation of the contracts at issue, finding that, “in light of its more narrow ruling,” it was unnecessary to address the parties’ additional arguments “concerning the proper interpretation” of the agreements at issue, “which likely would have required the application of foreign law.” Id. at 9 n.4.
Judge Sue L. Robinson recently denied plaintiff Quest Integrity USA, LLC’s (“Quest”) motions for preliminary injunction against defendants Clean Harbors Industrial Services, Inc. and Cokebusters USA Inc. (collectively, the “Defendants”). Quest Integrity USA, LLC v. Clean Harbors Industrial Services, Inc., C.A. Nos. 14-1482, 14-1483-SLR (D. Del. June 12, 2015). The patent-in-suit, U.S. Patent No. 7,542,874 (the “’874 patent”) was directed to a system for inspecting furnace tubes of petroleum refineries. Id. at 2-7.
Addressing the motions, Judge Robinson first considered Quest’s likelihood of success on the merits, and found that Quest had made a prima facie showing of infringement by both Defendants. Id. at 9-11. Turning to the issue of validity, however, Judge Robinson explained that “[v]alidity challenges during preliminary injunction proceedings can be successful, that is, they may raise substantial questions of invalidity, on evidence that would not suffice to support a judgment of invalidity at trial.” Id. at 8. Judge Robinson found that a “substantial question of invalidity” was raised based on a prior art reference (a final report prepared by Quest for Orion Norco Refining explaining its process), and thus Quest could not demonstrate a likelihood of success on the merits. Id. at 11-16. In reaching this determination, Judge Robinson explained that “[t]he court is required to construe the patent consistently for purposes of its infringement and invalidity analyses,” and that the “broad scope of the ‘874 patent . . . encompasses the Norco Report.” Id. at 13-14.
Judge Robinson then went on to find that “[e]ven if Quest had demonstrated a likelihood of success on the merits, . . . Quest has not carried its burden to clearly establish irreparable harm.” Id. at 16. Specifically, Judge Robinson explained that “Quest has not even attempted to analyze the relative importance of patented versus non-patented features and has tacitly conceded that several of [its] initially raised factors cannot be demonstrated.” Id. at 17-18. Further, Judge Robinson was not persuaded that Quest had “demonstrated that defendants pose a threat of irreparable harm if allowed to compete, given the size of the market, the large number of refineries, and the fact that the parties have been competing for years.” Id. at 18.
In a recent memorandum, Judge Sue L. Robinson denied without prejudice the defendants’ motions to dismiss for failure to state a claim in nine related cases. Network Congestion Solutions, LLC v. AT&T Inc., et al., Civ. Nos. 14-894-SLR, 14-895-SLR, 14-896-SLR, 14-897-SLR, 14-898-SLR, 14-899-SLR, 14-901-SLR, 14-902-SLR, 14-903-SLR, and 14-904-SLR (D. Del. June 4, 2015). The complaints asserted infringement of a method claim by “accused ‘network congestion management practices’ . . . used by defendants internally to provide better service to their customers.” Id. at 4. Judge Robinson explained, “[a] rational query is whether there is any way for a patent holder, such as plaintiff, to present—in a complaint—the kind of factual detail defendants suggest is required under the Iqbal/Twombly standard. Drawing on my judicial experience and common sense, I would say ‘no.’” Id. Judge Robinson added, “if the practices identified by plaintiff operate through defendants’ proprietary software, then it is reasonable to conclude that the notice requirements have been met, based on the quantity and quality of publicly available information. To follow defendants’ reasoning would deny an entire class of patent holders the opportunity to even get before a court to test a strength of their intellectual property rights through discovery, let alone to enforce such rights. Id. at 4-5. The Court noted that the plaintiff provided more information about its allegations in its opposition to the motion to dismiss, and denied the motions to dismiss without prejudice to renew if the plaintiff failed to amend its complaints to incorporate that additional information.
Judge Gregory M. Sleet recently granted defendants’ motion to stay litigation filed by IMS Health Incorporated pending the PTAB’s resolution of the covered business method patent review. IMS Health Incorporated v. Symphony Health Solutions Corporation, C.A. No. 13-2071-GMS (D. Del. May 29, 2015). Defendants filed petitions to institute a covered business method (“CBM”) review of the patents in suit. At the time of Defendants’ motion to stay, the Patent Trial and Appeal Board (“PTAB”) instituted review of one patent and the remaining petition was under consideration. Judge Sleet stayed the litigation as to the first petition and temporarily stayed the litigation pending the PTAB’s decision regarding institution of CBM review of the remaining patents in suit.
In StrikeForce Technologies, Inc. v. PhoneFactor, Inc., C.A. No. 13-490-RGA-MPT (D. Del. May 26, 2015), Magistrate Judge Mary P. Thynge recommended denying plaintiff’s (“StrikeForce”) motion to amend its complaint to add allegations of infringement against Microsoft Corporation (“Microsoft”) pursuant to Fed. R. Civ. P. 15(a). StrikeForce acknowledged that “it was aware Microsoft acquired [defendant] PhoneFactor as its wholly-owned subsidiary in October 2012,” but argued that “it was only shortly before filing its motion to amend its complaint and join Microsoft that it became apparent PhoneFactor is not operating as an independent entity, purportedly necessitating the filing of that motion.” Id. at 3.
In reaching the recommendation to deny StrikeForce’s motion, Judge Thynge first concluded that StrikeForce’s “delay in seeking to join Microsoft was undue and its explanation for that delay insufficient to support granting its motion.” Id. at 10. Judge Thynge observed that “[d]espite StrikeForce giving Microsoft actual notice of the ‘599 patent, its belief that Microsoft was one of its ‘largest infringers,’ and Microsoft’s public announcement of its ‘phone based two factor authentication,’ StrikeForce did not name Microsoft as a defendant.” Id. at 7. Judge Thynge also noted that “StrikeForce waited almost twenty-two months after its CEO commented that Microsoft was ‘one of our largest infringers’ and almost nineteen months after filing its initial complaint, and after the Markman hearing was held, to seek to sue Microsoft for infringement in this case.”
In recommending denial of the motion, Judge Thynge also found that “StrikeForce’s ability to separately bring suit against Microsoft, as well as the disruption and delay of the schedule in the instant suit at this stage of the proceeding by the addition of Microsoft, would prejudice PhoneFactor and disrupt the orderly continuation of this case under the current scheduling order.” Id. at 12. Judge Thynge found it notable that StrikeForce “filed its motion to amend after the claim construction hearing had taken place.” Id.
Judge Robinson recently faced the question of the application of two pre-litigation agreements between Boston Scientific, Medtronic, and their predecessors to the awarding of attorneys’ fees at the end of the litigation. The specific agreements at issue included a provision requiring reimbursement of the prevailing party’s attorneys’ fees if infringement litigation arose between the parties. This provision applied to the instant litigation because the later agreement modified the earlier agreement in order to substitute successors in interest but did not eliminate the attorneys’ fee provision of the earlier agreement. Medtronic, Inc. v. Boston Scientific Corp., C.A. No. 07-823-SLR, Memo. at 7-8 (D. Del. May 27, 2015). Furthermore, although one of the defendants was not a signatory to the agreement at issue, Judge Robinson concluded that the defendant was bound by that agreement because it had enjoyed the benefits of the agreement and had engaged in a course of conduct that showed it adopted the agreement. Id. at 8-9.
Judge Robinson also determined that the declaratory judgment plaintiff, Medtronic, was not time-barred from moving for attorneys’ fees under the agreements. The agreement at issue required only a determination of the prevailing party for its “loser pays” provision to apply. Accordingly, there were no issues of fact to present to a jury and Medtronic had not waived its entitlement to attorneys’ fees by failing to offer proof at trial or present the claim in the pretrial order. Judge Robinson therefore concluded that the request for attorneys’ fees post-trial was timely. Id. at 4-6.
Chief Magistrate Judge Thynge recently issued a report and recommendation addressing a patent infringement defendant’s motion to dismiss for failure to state a claim of joint infringement and recommending that the motion be granted. Two-Way Media Ltd. v. Verizon Commc’ns Inc., et al., C.A. No. 14-1212-RGA-MPT, Report and Recommendation at 1-2 (D. Del. May 18, 2015).
Judge Thynge first found that the allegations of the complaint, “viewed in the light most favorable to plaintiff, are sufficient to support the inference that defendants and the third parties carry out all steps claimed in the patents-in-suit.” Id. at 9-10. Although the defendant objected to a phrase in the allegations as “insufficiently precise” and unrelated to the claims of the patents-in-suit, Judge Thynge found that the allegation related to a specific claim of a patent-in-suit and suggested that any ambiguity should be the subject of claim construction rather than a motion to dismiss. Id.
With respect to defendant’s direction and control over the third parties, however, Judge Thynge found that the complaint did not adequately state a claim of joint infringement. “This court is required to take plaintiff’s factual allegations as true, but plaintiff cannot plausibly allege the third parties were contractually obligated to perform all of the steps enumerated in plaintiff’s patents because the terms of the contracts between defendants and the third parties are unknown to plaintiff. . . . Even if Fed. R. Civ. P. 12(b)(6) allowed this court to look outside the record at the extrinsic materials submitted by plaintiff in its response to the motion to dismiss, it would find the third parties were independent businesses providing statistical services to multiple clients using what appears to be proprietary metrics. Thus, it is merely possible—rather than plausible—that defendants control and direct the third parties.” Id. at 13-14.
Magistrate Judge Christopher J. Burke recently considered the impact of a final judgment in a parallel Nevada action on several motions for summary judgment. Spectrum Pharmaceuticals, Inc., et al. v. InnoPharma, Inc., et al., C.A. No. 12-260-RGA-CJB (D. Del. May 22, 2015). Judge Burke ultimately recommended that the defendants’ invalidity motion be granted on collateral estoppel grounds, and the defendants’ non-infringement motion be granted on collateral estoppel grounds with respect to the asserted claims that were the subject of the Nevada judgment. Judge Burke recommended that the plaintiffs’ validity motion be denied as moot, and that the defendant’s non-infringement motion with respect to the asserted claims that were not at issue in the Nevada action also be denied as moot based on a representation by plaintiffs’ counsel that those claims were no longer being asserted.
In Masimo Corporation v. Philips Electronic North America Corporation, et al., C.A. No. 09-80-LPS (D. Del. May 18, 2015), Chief Judge Leonard P. Stark concluded, after a ten-day bench trial, that Defendants had not proven inequitable conduct by Plaintiff. Defendants had alleged that three of Plaintiffs’ attorneys had committed inequitable conduct during a reexamination of one of the patents-in-suit when they did not inform the PTO that Magistrate Judge Thynge, and the Court when it adopted the Magistrate’s Report and Recommendation (“SJ Order”), had rejected constructions on which Plaintiff had relied to overcome the PTO’s rejections.
The Court determined that Defendants had not proven that Plaintiff’s attorneys had “made a deliberate decision to withhold” the SJ Order from the PTO. Id. at 15 (internal quotation marks omitted). Instead, the Court concluded that “these attorneys had set up a system of disclosure aimed at providing the PTO with all relevant district court orders by filing [invention disclosure statements] in [the relevant reexamination] [.]” Id. The Court concluded that “the ‘single most reasonable inference’” as to why this particular order had not been disclosed to the PTO was that “this was the result of timing and circumstances of the reexamination process rather than any deceitful intent of [the attorneys].” Id. at 16. The attorneys had developed a system in which the prosecution attorneys, who could not view information in the litigation subject to the protective order, would still be kept apprised of developments, and the policy was that “anything even remotely relevant to the merits of the case should be submitted.” Id. at 15 (internal quotation marks omitted).
The Court also found that Defendants had not proven that the SJ Order was a “known material reference in the view of [these attorneys], at a time when any of them believed they could have submitted the SJ Order as part of the [relevant reexamination].” Id. at 21. The Court explained that “the record supports a strong inference that [Plaintiffs’] attorneys would have disclosed the SJ Order if they had understood its purported implications during the ten-day window between the SJ Order and the [Notice of Intent to Issue Reexamination Certificate] [(“NIRC”)] . . . and did not do so after that period only because they believed the [reexamination] was closed and, therefore, they were not permitted to do so. . . . Even if [the attorneys] were technically wrong about what post-NIRC disclosures were permissible under the MPEP (a dispute the Court need not resolve), what is decisive here is that they believed no such disclosures were possible.” Id. at 23.
Furthermore, the Court concluded that Defendants did not prove that the attorneys made a misrepresentation to the PTO by “failing to correct a statement [Plaintiff] made to the PTO in a response to an office action, a statement that in [Defendants’] view became false the moment Judge Thynge issued her R&R.” Id. at 23. The Court concluded these “statements” were, in fact, arguments regarding claim construction, and thus no misrepresentation had been made. Id. at 24-25.