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In a recent Order, Chief Judge Gregory M. Sleet denied plaintiff’s motion to lift a stay pending reexamination that the Court had granted in September 2012. Walker Digital, LLC v. Canon U.S.A., Inc., et al., C.A. No. 11-326-GMS, at 1 (D. Del. Jan. 28, 2013). Since the Court had granted the stay, the USPTO had completed its reexamination and had rejected twenty-seven out of the twenty-nine original claims of the patent-in-suit. Id. at 1, 2 n.1. Two weeks later it granted a second request for reexamination of the two remaining claims. Id. at 1. The Court examined the traditional factors in determining whether a stay was appropriate “with an eye toward any . . . changed circumstances since it ordered the initial stay.” Id. at 2 n.1. It concluded that “[c]ircumstances have not changed so drastically as to have altered the court’s earlier disposition.” Id. at 1 n.2.

Only undue prejudice was of “increased concern” to the Court. Id. at 2 n.1. The Court concluded that factors relating to the second reexamination “will subject [plaintiff] to some added measure of prejudice.” Id. at 3 n.1. “The PTO’s second reexamination was made necessary, at least in part, by [defendant’s] failure to include certain prior art in its initial reexamination request. The court, however, has recognized the difficulty a party faces in compiling an exhaustive catalogue of prior art and balancing its duty to file a prompt reexamination request with its desire to submit all relevant prior art to the PTO . . . Here, [defendant’s] piecemeal reexamination efforts certainly raise the specter of unjust delay, but, at this time, the court will not infer that the defendants sought an inappropriate tactical advantage – the delay might just as easily represent the sort of innocent failure that one would expect to result from the balancing discussed above.” Id. at 3 n.1. Additionally, “[t]he status of the reexamination proceeding also [gave] the court pause in considering the prejudice factor” because “it [was] reasonable to presume that the [second reexamination] might last into 2015.” Id.

However, these increased concerns about prejudice “remain[ed] outweighed within the larger stay analysis. Should new developments arise, another motion to lift the stay may be warranted, but the court must deny [plaintiff’s] present motion.” Id. at 4 n.1.

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Judge Richard G. Andrews recently denied plaintiff’s motion for leave to file a second amended complaint that would add two additional defendants, one of which was an Indian corporation with a principal place of business in India. Howard Foundation Holdings Ltd. v. Int’l Vitamin Corp., C.A. No. 12-35-RGA (D. Del. Jan. 28, 2013). Although the motion was timely, Judge Andrews noted that the claim construction process had already begun and a claim cosntruction hearing was scheduled for April. Granting the motion would “necessitate a lengthy postponement in the case[,]” and Plaintiff can separately sue the two proposed defendants.

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Magistrate Judge Mary Pat Thynge recently granted a defendant’s motion seeking early claim reduction, and a plaintiff’s corresponding motion to limit the number of prior art references relied upon by the defendant. Masimo Corp. v. Philips Electronics N. Am. Corp., C.A. No. 09-080 (D. Del. Jan. 23, 2013). As the Court explained, “more than 39 claim terms are proposed for construction: 95 claims are asserted by [the plaintiff] on seven patents, averaging more than 12 claims per patent, making this litigation unwieldy.” Id. at 8.

The plaintiff proposed that in order to narrow the issues to be tried to the jury, it would be appropriate to limit the number of claims to be construed, and then following the Markman decision for the parties to meet and confer and agree upon a reduction of the claims asserted and prior art references relied upon. Following summary judgment decisions, under the plaintiff’s proposal, the parties would again meet and confer to further reduce the claims asserted and prior art references relied upon. Id. at 7. The Court rejected this proposal based on a review of the parties’ history in earlier litigation: “depending on the parties’ discretion to reduce the claims at issue until sometime after summary judgment is decided is at best doubtful, and will not simplify the matter. The fairer and more effective approach is to limit both the number of claim terms to be construed and the number of asserted claims.” Id. at 8.

The Court found that “early claim reduction is warranted before claim construction briefing and summary judgment motions are filed. In light of the analysis herein, including the breakdown between the number of presently asserted independent and dependent claims, the related subject matter of the patents, the genealogy of the asserted patents and the relationship among them, the previous claim construction decisions, and the filed summary judgment motions, [the plaintiff] is ordered to identify thirty (30) claims that are representative of the claims presently at issue from any or all of its asserted patents.” Id. at 12. In addition, the Court ordered the parties to limit the claims to be construed to “no more than twenty … taking into account terms that would be unfamiliar or confusing to the jury or unclear or ambiguous in the context of the claim.” Id. at 13. The Court added that following the reduction in reduction of claims and terms to be construed, the defendant must “identify no more than 40 prior art references, and shall provide its invalidity contentions with charts … for each prior art reference.” Id. at 15. The Court explained that these ordered limitations were within the Court’s discretion, and were consistent with the Federal Circuit’s decisions in In re Katz Interactive Call Processing Patent Litigation, 639 F.3d 1303 (Fed. Cir. 2011) and Stamps.com Inc. v. Endica, Inc., 437 Fed. Appx. 897 (Fed. Cir. 2011), because additional claims could be added at a later date upon a showing of good cause such that the limitations were not immutable. Id. at 8, 11, 15.

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Chief Judge Gregory M. Sleet recently considered whether it was appropriate to dismiss a first-filed declaratory judgment action or transfer the action to the Southern District of Texas where a later-filed patent infringement suit was pending. Woodbolt Distribution, LLC d/b/a Woodbolt Int’l v. Natural Alternatives Int’l, Inc., C.A. No. 11-1266-GMS (D. Del. Jan. 23, 2013). Judge Sleet noted that while it is in the Court’s discretion to dismiss declaratory judgment actions, dismissal should not conflict with the “first-filed” rule – i.e., dismissal cannot be based soled on the existence of a parallel patent infringement suit later-filed in another district. Id. at 3. Here, Judge Sleet determined that dismissal was warranted because Texas was a more convenient forum for all parties and for potential witnesses. Also, the Texas action was progressing more quickly and could continue to proceed “free from the specter of inconsistent judgments.” Id. at 7. Judge Sleet determined that dismissing this action did not conflict with the “first-filed” rule because, although the rule was applicable, there was evidence that the declaratory judgment action appeared to be “‘anticipatory’ and thus present[ed] a common exception to the application of the [first-filed rule].” Id. at 8.

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Chief Judge Gregory M. Sleet recently rejected an argument that a defendant’s invalidity counterclaim should be dismissed (and an invalidity defense stricken) based on the doctrine of assignor estoppel. EMC Corp., et al. v. Zerto, Inc., C.A. No. 12-956-GMS (D. Del. Jan. 14, 2013). As the Court explained, assignor estoppel is “an equitable doctrine that prevents one who has assigned the rights to a patent (or patent application) from later contending that what was assigned is a nullity. The estoppel also operates to bar other parties in privity with the assignor, such as a corporation founded by the assignor.” Id. at n.1 (quoting Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220, 1224 (Fed. Cir. 1988) (internal citation omitted)).

In this case, the plaintiffs argued that the defendant’s invalidity counterclaim should be dismissed because the two named inventors of the patents-in-suit (who now are affiliated with the defendant) had assigned away their rights in the patents. More specifically, the plaintiffs argued that the inventors “now hold controlling positions in the defendant corporation or its parent company . . .” and that, as a result, it would be inequitable to allow them to partipate in invalidating the patents. Id. The Court agreed with the defendant, though, that the motion was premature. Id.

The Court explained that the question whether assignor estoppel may be applied depends on a balancing of the equities—and “the court’s ‘primary consideration . . . is the measure of unfairness and injustice that would be suffered by the assignee if the assignor were allowed to raise defenses of patent invalidity.’” Id. (quoting Diamond Scientific, 848 F.2d at 1225). Among the factual issues the Court determined needed further development in this case were whether the assignors received consideration for the transfer of their rights in the patents, the extent of their role in the patent application process, and their relationship with the defendant company. The Court found that although it was undisputed that the inventors founded the defendant’s parent company, it was not clear “how much corporate control they presently exercise over either entity. Likewise, the level and structure of their compensation is unknown at this time.” Id. The Court therefore found the plaintiff’s motion premature, but left open the door to the plaintiff raising an assignor estoppel argument at a later date on a more fully developed record.

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As we previously reported, Magistrate Judge Burke issued a report and recommendation in October, recommending denial of a motion to transfer venue filed by patent-infringement defendant Yahoo! Yahoo! filed objections to that report, and Judge Stark has now considered the objections. Yahoo! argued that Judge Burke’s report applied the wrong analysis with respect to the “location of witnesses” and “practical considerations” Jumara factors and had improperly balanced all of the Jumara factors. Judge Stark, however, found none of Yahoo!’s arguments persuasive, and he overruled the objections, adopted Judge Burke’s report, and denied the motion to transfer. Pragmatus AV, LLC v. Yahoo! Inc., C.A. No. 11-902-LPS-CJB, Memo. Order at 1-3 (D. Del. Jan. 16, 2013).

The Court overruled all of Yahoo!’s objections, despite giving the motion to transfer de novo review. As Judge Stark noted, a motion to transfer is “non-dispositive and subject to a ‘clearly erroneous’ or ‘contrary to law’ standard of review.” Id. at 1-2 (citing In re Heckman Corp. Securities Litig., 2011 WL 1219230, at *1 (D. Del. Mar. 31, 2011)). Nevertheless, “[c]ourts are split as to the standard of review that should be applied to review of objections relating to a motion to transfer venue.” Id. at 1 n.1. Given this split of authority, the fact that neither party had addressed the standard of review, and Judge Stark’s “determination that the Report should be adopted even under the most stringent (de novo) standard of review” the Court applied de novo review. Id.

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Judge Richard G. Andrews recently considered defendant’s request to compel plaintiff to supplement its response to defendant’s interrogatory that asked for information about the allegations in plaintiff’s complaint about plaintiff’s pre-filing testing of the accused product. Waters Technologies Corp. v. Aurora SFC Systems Inc., C.A. No. 11-708-RGA (D. Del. Jan. 14, 2013). Plaintiff’s complaint alleged that “[o]n or about April 4, 2011, Waters acquired a sample Aurora SFC Fusion A5 product, conducted testing and analysis on the device, and determined that use of the product and/or the product itself meets all of the limitations of one or more claims in each ofthe ‘767 and ‘609 Patents.” Id. at 1. In response to defendant’s interrogatory, plainitff identified the date of the testing and identified a person with knowledge of the testing, but refused to provide further information claiming attorney-client privilege. Id. at 2. Defendant argued that plaintiff waived attorney-client privilege because plaintiff “pled its testing and asserted it had evidentiary support, about which [defendant] is entitled to take discovery.” Id. Plaintiff argued that “there can be no waiver for complying with Rule 11’s requirement of a good faith pre-suit investigation and other pleading requirements.” Id. While Judge Andrews noted that plaintiff “should not have allege[d] facts in its Complaint unless the facts are something it intends to prove[,]” the allegations were “essentially” a statement that Plaintiff complied with Rule 11. Id. at 3. Therefore, the Court denied defendant’s request and found that plaintiff had not waived attorney-client privilege. Id.

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Judge Gregory M. Sleet recently granted Oracle’s Motion to Intervene and Stay Advanced Dynamic Interfaces, LLC’s litigation against Aderas Inc., et al. pending the disposition of Oracle’s declaratory judgment action against Advanced Dynamic Interfaces. Advanced Dynamic Interfaces, LLC v. Aderas Inc., C.A. No. 12-963-GMS (D. Del. Jan. 11, 2013). Judge Sleet found that Oracle filed its declaratory judgment action after learning of this litigation and received “requests for indemnification from its customers that ADI named as defendants.” Id. at 2 fn.1. Because the Court had yet to initiate a scheduling conference and discovery had yet to begin, Judge Sleet determined that Oracle’s motion was timely. The Court determined that because Oracle is the “designer, developer, and licensor” of the accused products, and Oracle’s interests could not be adequately represented by the existing parties, Oracle demonstrated that intervention was appropriate. Id. And, because the case was in its infancy, staying this case pending Oracle’s declaratory judgment action was appropriate. Id. at fn.2

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Magistrate Judge Burke recently considered defendant’s motion to stay plaintiff’s patent infringement litigation pending the USPTO’s reexamination of the patents-in-suit. SenoRX, Inc. v. Hologic, Inc., C.A. No. 12-173-LPS-CJB (D. Del. Jan. 11, 2013). The patents-in-suit relate to “balloon brachytherapy device[s],” which are used in the treatment of breast cancer. Id. at 1-2. Defendant filed requests for reexamination following the entry of the Court’s scheduling order and while discovery progressed in the case. See id. at 2-3. Defendant then filed a motion to stay pending resolution of the reexamination proceedings. Id. at 3. In weighing the relevant factors to determine whether a stay was appropriate, the Court concluded that “the prejudice factor decidedly weigh[ed] against a stay.” Id. at 19.

“With nearly all of the asserted claims currently subject to a non-final rejection and before the PTO,” the potential for simplification of issues favored a stay, “though not strongly so” because of the “lack of complete (though not insignificant) overlap of the issues to be addressed in the PTO and in the District Court.” Id. at 7, 8. The current status of the litigation also favored a stay but that was “tempered” by the fact that “the case was not in its infancy” when defendant filed its motion. Id. at 11-12.

As to prejudice, while the timing of defendant’s motion weighed in favor of a stay, “there [was] the real prospect of at least a multi-year, lengthy delay” until the reexamination proceedings were complete. Id. at 15. The relationship between the parties also weighed against a stay. Because the parties “are the only two companies who participate in the balloon brachytherapy market” and “this ‘hard-fought’ competition has also spawned additional litigation” in another court, “it is very clear that the level of competition between the parties is acute.” Id. at 16-17. The Court’s conclusion was not affected by the fact that plaintiff did not seek a preliminary injunction “with the fact of direct competition not in any serious dispute.” Id. at 17.

Overall, while “the issue [was] a close one, with good arguments to be made for either outcome sought by the parties,” the potential for prejudice to plaintiff “[struck] the Court as more compelling, immediate and certain when compared to the potential for efficiency gains or simplification of the issues that might result from reexamination.” Id. at 20.

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Judge Sue Robinson has issued an order enjoining ANDA defendant Tolmar, Inc. from launching its generic product at the expiration of the 30-month stay. See Leo Pharma A/S v. Tolmar, Inc., C.A. No. 10-269-SLR, Order (D. Del. Jan. 9, 2013). Having been advised that the stay provided by the Hatch-Waxman act expires on January 14, 2013, Judge Robinson enjoined Tolmar from launching its generic product until January 18, 2013 or until the court issues its opinion, whichever is sooner.

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