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Magistrate Judge Schneider of the District of New Jersey, sitting by designation, recently issued an order granting in part and denying in part plaintiff’s application for the production of documents related to defendant’s licensing agreements. Sciele Pharma, Inc., et al. v. Lupin, Ltd., et al., C.A. No. 09-37-RBK-JS (D. Del. Jan. 28, 2013) (redacted version). The patents-in-suit in this infringement action relate to the treatment of diabetes. Id. at 8. Plaintiff requested five categories of “‘settlement and licensing documents’” for the purpose of assessing royalty damages; the details of one of these categories were redacted from the order. Id. at 1-2.

The focus of the Court’s analysis was on whether the patents in the requested agreements were “comparable” to the patents-in-suit, a relevant factor in examining a reasonable royalty calculation. Id. at 2-3. The Court first concluded that differences between the patents involved in the redacted category and the patents-in-suit did not affect whether these agreements were discoverable, but instead “[went] to their weight and admissibility;” because discovery is “a broader standard than admissibility,” the Court ordered production of these agreements. Id. at 6-7. The Court also granted plaintiff’s request as to agreements concerning biguanides, which is “in the class of compounds that includes metformin, the active ingredient” in plaintiff’s patented drug. Id. at 7-8. Plaintiff had sufficiently demonstrated comparability because the scope of discovery, “including determining whether a requested agreement is comparable, is interpreted broadly.” Id. at 8.

The Court denied plaintiff’s requests for agreements “concerning the treatment of diabetes” and “[o]ther extended release pharmaceutical characteristics” because they were “overbroad” and plaintiff had not shown that they were comparable. Id. at 8-9. But “a combination of [these two] requests [was] sufficiently comparable to be discoverable. [Defendant] will be Ordered to produce licensing agreements for other drugs for the treatment of diabetes that also have extended release pharmaceutical characteristics.” Id. at 9.

Having determined that defendant should produce some license agreements, the Court then analyzed whether it must also produce “communications concerning or associated with these agreements including negotiations, forecasts and analysis,” noting that such documents are generally “less probative and more prejudicial than the licenses themselves.” Id. at 9-10 (internal quotation marks omitted). The Court ordered production of such documents related to the redacted category based on its “similar[ity] to the issues in this case,” but denied the request as to all other categories, noting that their “minimal relevancy is outweighed by the cost, burden, prejudice and distraction the documents will generate.” Id. at 10-11.

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Judge Leonard Stark recently considered several motions in limine in advance of an upcoming jury trial on patent infringement and bench trial on inequitable conduct. See Enova Tech. Corp. v. Initio Corp., C.A. No. 10-04-LPS, Order at 1-3 (D. Del. Jan. 31, 2013). Judge Stark first considered plaintiff’s motion to exclude evidence or argument regarding “foreign patent proceedings, disputes, prosecution, or enforcement involving [plaintiff’s] foreign patent rights.” He granted the motion with respect to the upcoming jury trial, finding that the evidence was irrelevant and prohibited by Rule 403, but denied the motion with respect to the bench trial on inequitable conduct. Id. at 1.

Judge Stark also denied the following motions:
– Plaintiff’s motion to exclude defendants’ expert testimony regarding “the value of [plaintiff’s] patented technology and the value and availability of non-infringing alternatives,” which he found to be an untimely Daubert motion to exclude relevant evidence. Id. at 1-2.
– Plaintiff’s motion to exclude evidence of licenses that were allegedly incomparable to a hypothetical license of the patents-in-suit. Id. at 2.
– Defendant’s motion to exclude any mention of a settlement between plaintiff and another defendant under Rules 408 and 403. Id.

Judge Stark granted the following motions:
– Plaintiff’s motion to “exclude testimony and argument inconsistent with the Court’s claim construction,” which all parties agreed should not be permitted. Id.
– Defendant’s motion to exclude evidence of pre-suit knowledge of the patents-in-suit, where such evidence was inadmissible hearsay and properly excludable under Rule 403. Id.
– Defendant’s motion to exclude evidence of lost sales or price erosion, where plaintiff was not seeking damages under either theory, and so long as defendant did not “open the door to such evidence.” Id. at 2-3.

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Judge Richard Andrews recently considered a motion for leave to file an amended and supplemental answer and counterclaim that would set out various invalidity, inequitable conduct, and other defenses and claims that the defendant wanted to add after obtaining discovery from the plaintiff. See Inventio AG v. Thyssenkrupp Elevator Ams. Corp., C.A. No. 08-874-RGA, Order at 1-2 (D. Del. Jan. 29, 2013). Judge Andrews granted the motion with respect to invalidity defenses that were previously pleaded with less specificity and failure to mark and best mode claims that could be raised without prejudice to further proceedings. With respect to inequitable conduct, however, Judge Andrews found the question to be somewhat more complicated and allowed some claims but denied others. Id.

Judge Andrews focused on the specificity with which a claim was alleged in the proposed amended and supplemental complaint. He found that inequitable conduct claims related to prior art “are the sort that are easily made, recycling the obviousness defenses as inequitable conduct defenses.” Id. at 2. Accordingly, he found that the defendant had not met its burden by claims such as accusations that the inventor “cited prior art to the PTO but did not separately cite the prior art contained within the cited prior art.” Id. Similarly, Judge Andrews denied one best mode claim because it did not make specific allegations but allowed another best mode claim that made “very specific allegations of what the inventor knew about the best mode . . . intent to deceive, materiality, and a reason why the inventor wanted to deceive the PTO.” Id.

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Chief Judge Gregory M. Sleet recently granted a motion to stay pending reexamination in a case involving a patent entitled “Fuel Composition for a Diesel Engine.” Neste Oil Oyj v. Dynamic Fuels, LLC, et al., C.A. No. 12-662-GMS (D. Del. Jan. 31, 2013). The Court’s balancing of the relevant factors was swayed by several considerations. First, the Court found unconvincing the plaintiff’s argument that, because the defendants are direct competitors, a stay of potentially several years would be unduly prejudicial because plaintiffs could lose market share and goodwill. The Court explained that the plaintiff offered no evidence that the defendants are in fact direct competitors in the relevant market, and that lack of evidence was consistent with the plaintiff’s decision not to move for preliminary injunctive relief. Id. at 5-6. Second, the PTO already had rejected all claims of a related patent on reexamination, and the PTO’s first office action relating to the patent-in-suit adopted the same grounds for rejection of all claims of the patent-in-suit. Id. at 9. The Court found that this weighed in favor of the conclusion that the reexamination of the patent-in-suit ultimately would simplify the issues in this case. Id. at 9-10. Finally, the case was in its earliest stages, and a scheduling order had yet to be entered. Id. at 10.

More specifically, the Court explained that where the parties are direct competitors, “there is a reasonable chance that delay in adjudicating the alleged infringement will have outsized consequences to the party asserting infringement has occurred, including the potential for loss of market share and an erosion of goodwill.” Id. at 4 (quoting SenoRx, Inc. v. Hologic, Inc., No. 12-173-LPS-CJB (D. Del. Jan. 11, 2013)) (previously discussed here). The Court found unconvincing, though, the plaintiff’s argument that the defendants are its direct competitors, and that it would therefore be unduly prejudiced by a stay, in part because the plaintiff chose not to move for a preliminary injunction when it filed suit. Id. at 5. The Court explained, “the defendants have correctly noted that the only proof of direct competition . . . offered by [plaintiff] is wholly unsupported attorney argument.” Id. (internal quotations omitted). That, combined with the facts that the plaintiff did not seek a preliminary injunction and the relevant market was comprised of a large number of firms, weighed in favor of a finding that the plaintiff would not be unduly prejudiced by a stay. Id. at 5-6.

The Court next explained that a stay pending reexamination likely would result in issue simplification because the PTO already rejected all claims of a related patent which shared the same specification as the patent-in-suit, and “the reasoning underlying the PTO’s cancellation” of the related patent “will also apply to the [patent-in-suit].” Id. at 9. This result, the Court explained, was made more likely by the PTO’s first office action, which “adopt[ed] . . . all four . . . proposed grounds for rejection and . . . reject[ed] . . . all twenty patent claims.” Id. As the Court explained, “the likelihood of claim cancellation . . . is at least distantly signaled by a preliminary PTO action.” Id. at 9 n.4.

Finally, the Court explained that two “undue prejudice” arguments frequently made by plaintiffs opposing stays pending reexamination were insignificant in the Court’s analysis in this case. Id. at 6 n.3. The Court was not significantly moved by concerns about “stale evidence, faded memories, unavailable witnesses, and lost documents” because the plaintiff provided the Court with no information about how a stay would actually threaten the availability of particular evidence or witnesses. Id. at 6. The Court also rejected the plaintiff’s argument that reexamination “represents an inadequate forum for [an] invalidity dispute.” Id.

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Special Master Collins J. Seitz, Jr., recently issued a report that made recommendations with respect to whether defendants should be permitted to use information from the litigation at hand in an ex parte reexamination of plaintiff’s two asserted patents that defendants intend to initiate. Inventio AG v. ThyssenKrupp Elevator Ams. Corp. et al., C.A. No. 08-874-RGA (D. Del. Jan. 22, 2013). In the litigation, the Court entered a protective order, which permitted the parties to designate certain information as “Confidential” and other information as “Highly Confidential.” Id. at 2-4. In light of the intended reexamination, defendants filed a motion requesting that the Court “(1) declassify some or all of the information as non-confidential; or (2) modify the Protective Order so that some or all of the information can be submitted to the USPTO under seal in accordance with the procedures of Section 724.02 of the Manual for Patent Examining Procedure (‘MPEP’).” Id. at 2. Pursuant to this motion, the Court addressed 31 disputed categories of information, 30 of which were excerpts from “deposition transcripts of [plaintiff’s] 30(b)(6) witnesses,” and one which was a page that plaintiff argued came “from the prosecution file in the Singapore patent office.” Id.

Special Master Seitz recommended granting defendants’ motion to reclassify as non-confidential 24 of the categories of disputed information. Id. at 15. Despite plaintiff’s designation of this information as “Highly Confidential,” Special Master Seitz found that this information did not fall under any specific category of information permitted to be designated as “Highly Confidential” or “Confidential” pursuant to the Protective Order. Id. at 15. For example, in his analysis, Special Master Seitz frequently found that information from the deposition excerpts did not fall under the categories of “non-public technical information of [plaintiff],” “[n]on-public research,” or “non-public information about [plaintiff’s] ‘internal studies, . . . testing and evaluations.’” See id. at 8-15. Moreover, none of the information fell under the “catch-all category” in Paragraph xviii, as plaintiff failed to demonstrate “with any specificity how it would be harmed by the disclosure of [the] information.” Id. at 15.

Special Master Seitz found that the 7 remaining categories of information were appropriately designated as “Highly Confidential,” but he was nevertheless required to address defendants’ alternative request to modify the protective order to use the protected information in the anticipated reexamination. See id. at 8-15. To determine whether to grant the modification, Special Master Seitz considered whether “good cause still exist[ed] for the order,” which in this instance required him to consider the “relevancy of [the disputed] information to the proposed ex parte reexamination.” See id. at 15-16. Special Master Seitz noted that if information submitted under seal is found “material to patentability” during the reexamination, it will be made available to the public. See id. at 5 (citing MPEP § 724.04(c)(D)). It was further explained that an ex parte reexamination is comprised of two distinct phases—the request phase and the substantive review phase. A third party may submit “admissions” of the patent owner during both the request and substantive review phases. See id. at 22 (citing MPEP § 2258(I)(F); 37 C.F.R. § 1.104(c)). Moreover, under the provisions of the newly-enacted AIA, a third party may also submit “statements” during the substantive review phase. See id. at 22 (citing 35 U.S.C. §§ 301, 302).

However, for a third party to submit an “admission,” it must found “in the [patent] file or in a court record.” Id. at 22. Similarly, to qualify as a “statement,” the information must at least “be filed by the patent owner in a proceeding before a Federal court or the [USPTO],” and the patent owner must have “[taken] a position on the scope of any claim of the patent.” Id. at 17 (citing 37 C.F.R. § 1.501(a)(2)). Special Master Seitz reasoned that the information at issue was not “in a court record” because it was not “filed with the court,” and thus the information would likely not qualify as an “admission.” Id. at 22. Similarly, the information at issue was not filed with the Court or USPTO, and the patent owner did not take a position regarding claim scope. Thus, the information would also likely not qualify as a “statement.” Id. Special Master Seitz therefore concluded that “the information at issue would likely not be considered by the USPTO if [defendants] submitted it as part of a request for an ex parte reexamination,” and thus defendants’ “stated need to submit [the] information to the USPTO should be given little weight.” Id. at 24. Moreover, “[e]ven in the unlikely event that this information is deemed material by the USPTO, the importance of this information to the reexamination . . . [would] not outweigh the harm to [plaintiff] caused by public disclosure.” Id. at 26. Special Master Seitz thus recommended that “good cause” still existed for the protective order with regard to the 7 remaining categories of disputed information. See id. at 25-26.

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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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