Judge Sue Robinson has partially granted and partially denied a patent infringement defendant’s motion to dismiss claims of indirect and willful infringement. Consistent with her previous holding in Walker Digital, Judge Robinson found that plaintiff’s claims of both induced and contributory infringement based on notice of the patents-in-suit as of the filing date were facially plausible. Accordingly, she denied the motion to dismiss with respect to these claims of indirect infringement. With respect to willful infringement, however, Judge Robinson explained that the lack of pre-suit knowledge of the patents-in-suit was fatal to claims of willful infringement. Therefore, consistent with her past decisions, Judge Robinson granted the defendant’s motion to dismiss with respect to claims of willful infringement. See Netgear Inc. v. Ruckus Wireless Inc., C.A. No. 10-999-SLR, Memo Order at 1-3 (D. Del. Mar. 14, 2013).
Judge Sue L. Robinson recently stayed, in the interest of judicial economy, its decision on the motion to amend judgment filed by defendant, pending the Federal Circuit’s decision in Robert Bosch LLC v. Pylon Manufacturing (see discussion here). Asahi Glass Co., Ltd., v. Guardian Indus. Corp., C.A. No. 09-515-SLR (D. Del. Mar. 11, 2013). “The Federal Circuit is currently considering, en banc, its jurisdiction over appeals from patent infringement liability determinations when a trial on damages has not yet occurred and when willfulness issues remain outstanding.” Id. A stay was appropriate because the Federal Circuit’s decision would have a “direct impact” on the appealability of this case. Id.
Chief Judge Gregory M. Sleet issued a memorandum order this week granting a plaintiff’s motion for leave to amend its complaint, which the Court previously dismissed without prejudice. Endo Pharmaceuticals Inc. v. Mylan Technologies Inc., et al., C.A. No. 11-220-GMS (D. Del. Mar. 11, 2013). The first claim of the plaintiff’s original complaint alleged that the defendant failed to comply with the notice requirements of the Hatch-Waxman Act, because the plaintiff (which was the recipient of the defendant’s Paragraph IV Notice) was not actually the owner of the patent at issue at the time notice was provided. Id. at 1. The second claim in the original complaint alleged that in the event the Court were to “determine now or at a future date that [the defendant] has complied with its obligations under the Hatch-Waxman Act . . . [the defendant] has infringed the ’510 Patent by submitting an ANDA . . . containing a Paragraph IV certification with respect to that patent”. Id. at 2. The Court dismissed the complaint, finding that because the plaintiff acknowledged that it was not the owner of the ’510 patent, it lacked standing to bring its first claim. Id. In turn, the Court was unable to reach the second claim because, “as pled, [it] was conditioned on a determination of” the first claim. Id.
Shortly after the dismissal, the plaintiff moved to amend its complaint to restate its second claim to correct a “technical defect in pleading.” Id. The defendant countered that the “technical defect” was not an “inadvertent error,” but instead was an intentional “strategy to extend the statutory 30 month stay . . . instead of bringing a claim for infringement.” Id. at 4 (quoting D.I. 21 at 1, 3). The defendant argued further that the plaintiff had ample time to amend its complaint in response to the motion to dismiss but chose not to do so until the complaint was dismissed. In the defendant’s view, the plaintiff’s failure to promptly amend its complaint was “the result of undue delay and dilatory conduct.” Id. (quoting D.I. 21 at 3).
The Court disagreed with the defendant. Because the plaintiff had a good faith basis to believe that its original complaint would not be dismissed, and because the plaintiff filed its motion for leave to amend within fourteen days of the complaint’s dismissal, the Court was “unable to discern any dilatory motive and concludes that the delay was not so excessive as to be unreasonable.” Id. at 5-6. The Court also rejected the defendant’s argument that it would be unduly prejudiced if an amended complaint were permitted to be filed, explaining that the defendant “was clearly put on notice of [the plaintiff’s] infringement claim” by the original complaint, “and the amendment does not substantially change the underlying theory of the case.” Id. at 6.
The Court also rejected the defendant’s argument that the plaintiff’s amended infringement claim should not relate back to the date of the original complaint (which was filed within 45 days of the Paragraph IV Notice). The Court explained that although the original infringement claim was defective, there was no dispute that it was “brought” within 45 days of the Paragraph IV Notice, which was all that the statute required to trigger a 30 month stay. Id. at 9. The Court further found that its dismissal of the complaint had not terminated the 30 month stay once it was triggered, because “if Congress had wished the thirty month stay to be extinguished upon a dismissal without prejudice, it would have said as much.” Id. at 10.
In a series of recent decisions in XpertUniverse, Inc. v. Cisco Systems, Inc., C.A. No. 09-157-RGA (D. Del.) (“XpertUniverse”), Judge Richard G. Andrews considered defendant’s Daubert motions related to two of plaintiff’s experts and its motions for partial summary judgment.
As to the admissibility of plaintiff’s expert’s testimony, the Court assessed the “trilogy of restrictions on expert testimony: qualification, reliability and fit.” XpertUniverse (D. Del. Mar. 7, 2013), at 1 (internal citation omitted). The expert’s qualification was not contested. Id. As to fit, while defendant’s “witnesses are going to testify that some of the materials [the expert would rely on] describe features that did not make it into the actual accused . . . products,” to the Court, “[i]t certainly seem[ed] to be theoretically possible for an expert to determine product features based on documentation. Whether Dr. Nourbakhsh,” plaintiff’s expert, “worked from the right materials, what those materials show, and what features are in the products are more factual questions for the jury than Daubert issues for the Court.” Id. at 3. As to reliability, the Court examined whether the expert could “testify about what ‘functionalities’ customers use in the absence of any direct knowledge.” Id. at 2. Plaintiff primarily asserted induced and/or contributory infringement and it was crucial to establish whether, and how, defendant’s customers utilized “optional functionalities” in order to show direct infringement. Id. at 3. The Court concluded that the evidence on which the expert relied to conclude that customers used such features was “exceedingly thin,” and the expert’s conclusion was also “beyond his expertise and knowledge, and therefore in the realm of speculation.” Id. at 4, 5. Therefore the Court excluded the expert’s conclusion “about direct infringement by [defendant’s] customers.” Id. at 5. Finally, also related to reliability, the Court concluded that the expert’s opinions with regard to secondary considerations of non-obviousness based on commercial success, failure of others, copying, praise, and industry acceptance went “beyond his computer science and call center expertise” and were inadmissible. Id. at 6. On the other hand, the expert was “clearly qualified to offer an opinion” on long-felt need and this testimony was admissible. Id.
Because the Court concluded that this expert may not opine as to customers’ direct infringement and may only opine on long-felt need as to secondary considerations of non-obviousness, it also granted in part defendant’s motion for partial summary judgment as to indirect infringement by some of its products. XpertUniverse (D. Del. Mar. 8, 2013). Plaintiff’s “only basis for demonstrating indirect infringement is Dr. Nourbakhsh’s opinion that [defendant’s customers] will use the methodology recited by the [asserted] method claims,” and this testimony was unreliable. Id. at 17 (internal citations and quotation marks omitted). Defendants had also moved for summary judgment on plaintiff’s non-patent claims based on rescission, fraud, breach of contract, misappropriation of trade secrets, and trademark infringement, and the Court granted these motions in part. Id. at 23-24.
Finally, the Court considered the admissibility of the testimony of plaintiff’s damages expert, Mr. Bratic. XpertUniverse (D. Del. Mar. 11, 2013). It noted that “Bratic’s opinions necessarily evolved after the Court’s [decision on the motions for partial summary judgment],” therefore it “address[ed] Bratic’s opinions as it understands them based on Bratic’s testimony on March 8, 2013.” Id. at 2. As to the patent infringement claims, the expert “opin[ed] that based on a hypothetical negotiation between [plaintiff and defendant] as of the earliest patent infringement, [defendant] would have paid [plaintiff] a lump sum of $32.4 million in exchange for a license to the two patents in suit. Bratic opine[d] that [defendant] would have paid [plaintiff] 50% of the $65 million he believes” a third party invested to develop a product that “Bratic opine[d] is a proxy for [plaintiff’s] technology.” Id. at 4.
“The primary basis for decision is the opinion’s faulty basis for recommending a lump sum” as opposed to a running royalty based on ongoing sales or usage. Id. at 5. The Court noted that “the parties at the hypothetical negotiation would be aware that [plaintiff] never sold a single product and [defendant’s] sales have totaled less than $1 million. Bratic’s numerous methodological flaws are thrown into sharp relief by his conclusion: $32 million in a lump sum royalty on $937,000 in sales of accused products simply makes no sense.” Id. at 6. Addressing the specifics of these flaws, the Court first noted that the “only explanation” for the lump sum payment was “the vision selling strategy implemented by [defendant] and the significant convoyed sales generated from the sale of Accused Products. Bratic’s sole basis for quantifying this [strategy] and convoyed sales” was testimony that the Court had “determined lack[ed] foundation.” Id. (internal citations and quotation marks omitted). Second, the expert “also [did] not provide any logical link between these grounds” and his quantification of the lump sum. Id. Therefore, the expert’s “opinion that the parties would have realized that the appropriate royalty structure for rights to the patents in suit would have been a lump sum royalty is not based on sufficient data or information.” Additionally, the expert’s $65 million estimation of the amount the third party invested in the relevant product was also “based on insufficient information.” Id. As a result, the Court concluded that this expert could not “opine . . . that a hypothetical negotiation between the parties would have concluded in a lump sum of $32.5 million.” Id. at 10.
Judge Sue Robinson has ordered a patent infringement defendant to reimburse plaintiff’s attorney fees of $23,658 in connection with plaintiff having to respond to defendant’s post-trial briefing on inequitable conduct. See Asahi Glass Co. v. Guardian Indus. Corp., C.A. No. 09-515-SLR, Memorandum Order at 1 (D. Del. Mar. 11, 2013). Judge Robinson previously found that defendant’s theories of inequitable conduct “were either devoid of merit or procedurally barred” and ordered defendant to pay plaintiffs’ reasonable costs in preparing and filing their responsive brief on inequitable conduct. The parties were, however, unable to agree on the amount of plaintiffs’ fees for which defendant was responsible. Id. at 1-2.
Judge Robinson found that a “detailed and reliable reconstruction of time spent” was acceptable to support the request for 20 hours of partner attorney time on the responsive brief. She also found that because only 30.2 hours of associate time were evidenced by client invoices and there was no similar reconstruction of time, only 30.2 hours were allowable as costs, not the 40 requested by plaintiffs. Id. at 4-7. Finally, Judge Robinson found that both the amount of time spent on the brief and the hourly rates charged were reasonable in light of the length of the briefing in question, the importance and high stakes of the issue being briefed, and the prevailing market rates for intellectual property attorneys. Id. at 7-8. Because the defendant demonstrated no sufficient justification for reducing the award, Judge Robinson granted the requested partner, associate, and paralegal fees.
In a recent memorandum opinion, Chief Judge Gregory M. Sleet transferred a case to the Northern District of California, although the plaintiffs could not clearly have filed suit in that district in the first place. ChriMar Systems, Inc., et al. v. Cisco Systems, Inc., et al., C.A. No. 11-1050-GMS (D. Del. Mar. 6, 2013). The Court noted that 28 U.S.C. § 1404(a) provides that an action can be transferred to “any other district or division where it might have been brought[,]” id. at 5, as “measured from the time the action was commenced . . . .” Id. at 6 n.3. In this case, the plaintiffs were Michigan and Texas entities, and one of the original defendants was a Delaware corporation headquartered in New Jersey, which could not clearly have been sued by the plaintiffs in the Northern District of California. Id. at 6 n.3. That Delaware/New Jersey defendant settled with the plaintiffs and was dismissed from the case before the motion to transfer was filed. Id. at 2. As the Court explained, “an exception to the general timing rule . . . exists and ‘the action may . . . be transferred if the defendants as to whom venue in the transferee district would have been improper have settled or been dismissed from the action when the transfer motion is made.’” Id. at 6 n.3 (quoting 17 James Wm. Moore et al., Moore’s Federal Practice § 111.12[b] (3d ed. 2012)). Because all three remaining defendants maintained their principal places of business within the Northern District of California, the Court found that transfer to that district would be permissible under § 1404(a). Id. at 6.
The Court next considered whether transfer to the Northern District of California would be appropriate based on the Third Circuit’s Jumara factors. The Court noted that the plaintiffs’ choice of forum in Delaware was entitled to “increased weight . . . but less than the ‘substantial’ or ‘paramount’ weight to which it would be entitled had [they] filed suit in [their] home forum.” Id. at 8. However, the Court found that the rest of the Jumara factors were neutral or weighed in favor of transfer, most notably because: (a) the remaining defendants maintained principal places of business in the Northern District of California, id. at 9; (b) the plaintiffs “will be forced to bear travel costs no matter the court’s decision, but proceeding in California will likely spare the defendants significant expense[,]” id. at 10; and (c) the defendant provided information about third party witnesses who would not be subject to a trial subpoena issued by the District of Delaware. Id. at 11. The Court explained, “[w]hile the first factor – the plaintiffs’ forum preference – pulls against transfer and is given increased weight here [because two of the remaining defendants were Delaware corporations], all the remaining Jumara considerations recommend transfer or have no effect on the court’s analysis.” Id. at 14.
Chief Judge Gregory M. Sleet recently granted plaintiff’s motion for leave to file a first amended complaint, which seeks a “declaratory judgment that eight of . . . defendants’ patents are invalid.” Comba Telecom, Inc. v. Andrew L.L.C. et al., C.A. No. 12-311-GMS, at 1 (D. Del. Mar. 7, 2013). In its motion, plaintiff requested that it be granted leave to include in its amended complaint “additional facts to strength[en] its declaratory judgment jurisdiction claim, such as addressing the preparatory steps it has taken to introduce products in the United States and the defendants’ statements and suits against it in other jurisdictions.” Id. at 1-2. Finding that defendants would not be prejudiced by the amendments nor would the amendments be futile, Judge Sleet granted plaintiff’s motion for leave. Id. at 3.
First, Judge Sleet found that plaintiff’s proposed amendments would not prejudice defendants because the litigation is in its early stages, and defendants would therefore have an opportunity to file motions or to conduct discovery on the issues raised in the amended complaint. Id. at 2-3 n.5. Judge Sleet further noted that plaintiff’s proposed amendments “do not contradict its prior pleadings,” and that defendants may challenge plaintiff’s allegations. Id. at 3 n.5. Turning to futility, Judge Sleet noted that “futility of amendment occurs when the complaint, as amended, does not state a claim upon which relief can be granted, as judged by the Rule 12(b) standard.” Id. In the declaratory judgment context, as Judge Sleet explained, a plaintiff may “demonstrate satisfaction” of the “case or controversy” requirement by showing that “there has been meaningful preparatory conduct that could lead to potentially infringing activity,” and by showing that the “claim is real and has an element of immediacy.” Id. n.5. Judge Sleet found that the proposed amendments included allegations related to “preparatory conduct,” specifically, that plaintiff had “the capacity to produce inventory to sell in the United States,” and was actively “participating in trade shows and soliciting Request for Proposals.” Id. n.5. The proposed amendments also addressed the “real” nature of the claim, as they included the identification of “defendants’ suits against [plaintiff] in China and Brazil as well as the defendants’ June 16, 2011 press release stating that they will protect their patent rights.” Id. n.5. Judge Sleet concluded that “taking the factual allegations in the proposed amended complaint as true, [plaintiff’s] Amended Complaint is not decidedly futile.” Id. n.5.
In view of granting plaintiff’s motion, Judge Sleet denied defendants’ motion to dismiss for lack of jurisdiction as moot. Id. at 3. However, in a subsequent order, Judge Sleet found that “factual issues exist regarding the alleged controversy between the parties” and granted defendants’ motion to authorize jurisdictional discovery. Comba Telecom, Inc. v. Andrew L.L.C. et al., C.A. No. 12-311-GMS, at 1 nn.1-2 (D. Del. Mar. 11, 2013). Judge Sleet denied, however, the expansive scope of jurisdictional discovery defendants requested, which included “two depositions, fifteen interrogatories, and twenty-two requests for production.” Id. n.1. The permissible scope of jurisdictional discovery would be determined at the scheduling teleconference. Id.
Judge Richard G. Andrews recently granted defendant’s motion to disqualify plaintiff’s lead counsel because “[the lead counsel] was serving as [defendant’s] opinion counsel at the time [plaintiff] filed” its patent infringement suit against defendant, and “thus creat[ed] an impermissible concurrent conflict of interest.” Parallel Iron, LLC v. Adobe Systems Incorporated, C.A. No. 12-874-RGA, at 1, 7 (D. Del. Mar. 4, 2013). The lead counsel had provided opinion letters with infringement analyses to defendant in three previous engagements, with the findings of its final opinion letters presented during a conference call between the lead counsel and defendant in February 2012. Id. at 1-3. The provision that guided Judge Andrews’s analysis was Model Rule 1.7(a), which states that “‘a lawyer shall not represent a client if the representation involves a concurrent conflict of interest’ absent client consent.” Id. at 4.
Judge Andrews concluded that it was reasonable for defendant to believe that an active attorney-client relationship existed between the lead counsel and defendant at the time the lead counsel filed the instant suit, five months after the conference call in February 2012. Id. at 3, 5. Plaintiff argued that the attorney-client relationship was terminated because at the end of the conference call the partner from the lead counsel handling the matter “asked whether anything further was needed from [the lead counsel],” and defendant responded in the negative. Id. at 7. Judge Andrews disagreed, noting that “[s]uch a customary gesture to conclude a conversation is not sufficient to terminate [defendant’s] expectations.” Id. As Judge Andrews explained, “the six year history between [defendant] and [the lead counsel] was sufficient to instill in [defendant] reasonable belief that it would not be sued by [the lead counsel], at least absent some sort of prior notice that [the lead counsel] would no longer be available to serve as [defendant’s] opinion counsel.” Id. at 5. Further, Judge Andrews noted that the lead counsel was aware of the active nature of the litigation for which it provided its final opinions and should have expected that defendant would want updates in view of any developments that would bear on its infringement analyses. See id. Judge Andrews emphasized that “[i]t is the law firm’s responsibility to ensure there are no questions regarding the status of its current client relationships.” Id.
While disqualifying the lead counsel from the litigation at hand, Judge Andrews did not find it necessary to create an “ethical wall” between the lead counsel and co-counsel, because “[t]he complete bar of communications between [the lead counsel] and co-counsel would seriously hamper [the lead counsel’s] ability to litigate on behalf of [plaintiff]” in other ongoing actions. Id. at 8. To this end, Judge Andrews found it significant that there was “no reason to believe that [the lead counsel] operated in bad faith when it sued [defendant].” Id. at 7.
Judge Richard G. Andrews recently issued a claim construction opinion construing plaintiff Inventio AG’s patents-in-suit, U.S. Patent No. 6,892,861 and U.S. Patent No. 6,935,465, relating to “elevator modernizing technology.” Inventio AG v. ThyssenKrupp Elevator Americas Corp., C.A. No. 08-874-RGA (D. Del. Mar. 6, 2013). This case is on remand from the Federal Circuit after the Federal Circuit reversed the Court’s previous claim construction opinion finding the claims indefinite. Id. at 1. Judge Andrews construed the terms “computing unit” and “modernizing device.”
In ImageVision.Net, Inc. v. Internet Payment Exchange, Inc., C.A. No. 12-054-GMS-MPT (D. Del. Feb. 25, 2013), Magistrate Judge Thynge issued a report recommending denial of defendant’s renewed motion to stay pending inter partes reexamination. Defendant had previously moved for a stay pending reexamination and in September 2012 Judge Thynge had recommended denial of that motion, discussed here. Chief Judge Sleet adopted that part of the recommendation. Id. at 2. At the time of this first motion to stay, the PTO had not granted the request for reexamination, but it did in December 2012 and “preliminarily rejected” all of the claims of the patent-in-suit. Id. at 2, 10. Defendant then renewed its motion to stay pending the reexamination. Id. Judge Thynge again recommended denial of defendant’s motion. Id. at 16.
Because the case was filed after the America Invents Act (“AIA”) was enacted, Judge Thynge first observed that “no mandatory stay [is] required under the AIA for grants of inter partes reexaminations, and the traditional three-part test to determine whether a stay is appropriate still applies. Nevertheless, the present analysis must address new events that have occurred since the original denial of defendant’s motion to stay, specifically the grant of the inter partes reexamination, and the effect of the new AIA standard on the application of the factors regarding a stay. ” Id. at 6-7. The AIA altered the standard for the grant of inter partes reexamination from requiring “the Director to find a substantial new question of patentability affecting any claim” to requiring a determination that there is “a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” Id. at 4 (internal citations and quotation marks omitted).
Turning to the three-part test, Judge Thynge first concluded that the status of the litigation did not favor a stay. Id. at 9. While the case was in its early phases, “the parties here [were] well into discovery, and significant deadlines [were] scheduled in the coming months.” Id. at 8-9. Additionally, the reexamination proceedings were at an early stage. Id. at 9. These factors all weighed against granting a stay. Id. As to simplification of issues, Judge Thynge concluded that “simplification weigh[ed] more strongly in favor of a stay” than when defendant filed its first motion. Id. at 10. “Moreover, reexamination was granted under the new heightened standard of the AIA, which means defendant is reasonably likely to prevail on invalidity. . . . Reexamination [would therefore] serve to simplify certain issues regarding validity. Further, because of the new standard, and since all claims of the [patent-in-suit] are found invalid on anticipation and obviousness, it may be more likely amendments to the claims of the patent will occur as a result of reexamination.” Id. at 10-11.
Finally, Judge Thynge concluded that plaintiff would be unduly prejudiced if a stay was granted, which was the “most substantial and important issue.” Id. at 11. Regarding the impact of the stage of the reexamination proceedings on the prejudice analysis, defendant argued that “the PTO is statutorily mandated to handle inter partes reexamination proceedings expeditiously and with special dispatch.” Id. at 14 (internal citations and quotation marks omitted). But Judge Thynge observed that “[i]n light of the recent passage of the AIA, it is unclear how such requirements will affect the time frame of the reexamination process.” Id. Therefore, as the reexamination process was in its early stages, this factor did not favor a stay. Id. As in the previous recommendation, Judge Thynge observed that the plaintiff and defendant were direct competitors and that this “weigh[ed] heavily against granting a stay.” Id. at 15-16.