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.
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.
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.
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.
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
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.
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.
In a recent memorandum opinion, Judge Richard G. Andrews granted two defendants’ motions to transfer their cases to the jurisdictions where their manufacturing processes are alleged to infringe. Semcon Tech, LLC v. Intel Corp., C.A. No. 12-531-RGA (D. Del. Jan. 8, 2013); Semcon Tech, LLC v. Texas Instruments Inc., C.A. No. 12-534-RGA (D. Del. Jan. 8, 2013). The plaintiff alleged that both defendants (as well as other defendants in a number of concurrently filed cases) infringe a patent “by using a process to make integrated circuits that involves chemical-mechanical polishing with the use of an Applied Materials Reflexion system.” Id. at 2. The Court found that the balance of the Jumara factors weighed in favor of transferring both cases, in large part because unlike situations where a defendant sells an infringing product nationally, such that “the claims rise wherever the defendant’s products are sold” (including within the District of Delaware), Intel’s and Texas Instruments’ manufacturing processes take place, respectively, in the District of Oregon (among other non-Delaware locations) and the Northern District of Texas. Id. at 5, 10-11. Accordingly, “while it may be true that the products made by the infringing methods are sold everywhere, the actual infringing activities are taking place in [Oregon and Texas] but not in Delaware.” Id. The Court explained that the fact that these two cases did not “arise in” Delaware was a significant factor distinguishing them from the situation in In re Link_A_Media Devices Corp., 662 F.3d 1221 (Fed. Cir. 2011), previously discussed here. The Court also found that the plaintiff’s desire to keep a number of concurrently filed cases involving the same patent in the District of Delaware was a Link_A_Media-distinguishing factor that weighed against transfer, but the overall balance of Jumara factors weighed in favor of transfer. Id. at 7-8.
Judge Richard G. Andrews recently dismissed with prejudice plaintiff’s claims of indirect and willful infringement of four patents, which “concern ‘thermal power and management’ for ‘computer systems,’” with limited exceptions. IpVenture Inc. v. Lenovo Group Ltd., et al., C.A. No. 11-588-RGA, at 1, 5-6 (D. Del. Jan. 8, 2013). The only indirect and willful infringement claims that Judge Andrews found to survive defendants’ motion to dismiss plaintiff’s Second Amended Complaint were claims for induced and willful infringement after November 28, 2011, the date on which plaintiff served its Amended Complaint upon the defendants currently in the action. Id. at 2, 5-6. Judge Andrews noted that “[t]he Second Amended Complaint is 81 pages long, but the allegations, in material respects, are very similar against all defendants.” Id. at 1-2. In light of the similarity, Judge Andrews explained in detail the sufficiency of the indirect and willful infringement claims with regard to only one defendant, Dell. Id. at 2-5.
Judge Andrews dismissed all contributory infringement claims with prejudice. Id. at 4, 5-6. Judge Andrews explained that while the Second Amended Complaint made a “separate allegation of contributory infringement,” it merely “recite[d] the various elements of contributory infringement without providing any factual support to give context (or, perhaps more importantly, plausibility) to the allegations.” Id. at 4.
Judge Andrews, however, found that the claims of induced and willful infringement after November 28, 2011, survived defendants’ motion to dismiss. Id. at 4-6. Plaintiff failed to sufficiently plead that defendants had knowledge that the allegedly induced acts or its own acts constituted infringement of the patents-in-suit prior to service of the Amended Complaint. See id. Regarding induced infringement, Judge Andrews explained that “[t]o the extent the allegations can be read to allege that the defendant knew that the induced acts constituted patent infringement, that knowledge is wholly unsupported by any factual allegation, other than the knowledge that would have been gained from having this lawsuit served upon [defendant].” Id. at 4. Addressing willful infringement, Judge Andrews similarly found that “there is nothing factual to plausibly support the conclusion that [defendant] ‘acted despite an objectively high likelihood that its actions constituted infringement of a valid patent,’ and that [defendant] knew or should have known that its actions constituted infringement of a valid patent.” Id. at 5. However, “service of the complaint meant that [defendant’s] knowledge of the existence of the patent had been forcefully brought to its attention,” and at that point whether defendant willfully infringed became a “factual question.” Id.
Judge Andrews provided the following rationale in support of his decision to dismiss the indirect and willful infringement claims with prejudice: “I previously dismissed these same allegations, based upon much the same arguments, without prejudice. Plaintiff’s Second Amended Complaint nearly doubled in size from the Amended Complaint, but added almost nothing of substance to what was in the Amended Complaint. Thus, this time, the dismissals will be with prejudice, as it is clear that Plaintiff cannot satisfactorily amend its Complaint.” Id. See here for Judge Andrews’s prior order, in which he dismissed the indirect and willful infringement claims without prejudice.
Judge Sue L. Robinson held in a recent post-trial opinion that “Rambus’ spoliation was done in bad faith, that the spoliation prejudiced Micron, and that the appropriate sanction is to declare the patents-in-suit unenforceable against Micron.” Micron Tech., Inc. v. Rambus Inc., C.A. No. 00-792-SLR, at 45-46 (D. Del. Jan. 2, 2013). This case was on remand from the Federal Circuit, which directed Judge Robinson to “reconsider [the] bad faith and prejudice determinations related to Rambus’ spoliation, as well as the appropriate sanction, if any, for Rambus’conduct.” Id. at 21. See here a discussion of the Federal Circuit’s opinion, and here for a discussion of Judge Robinson’s opinion prior to appeal.
Judge Robinson noted that in order to find “bad faith,” the Court must “find that Rambus implemented its document retention policy to disadvantage Micron or other potential defendants.” Id. at 22. Judge Robinson explained that “four categories of facts in this case support a finding of bad faith.” Id. Specifically, these categories were “(1) facts tending to show that Rambus’ document retention policy was adopted as part of a firm litigation plan; (2) facts tending to show that the document retention policy was executed selectively; (3) facts tending to show that Rambus acknowledged the impropriety of the document retention policy; and (4) Rambus’ litigation misconduct.” Id. Judge Robinson delineated the specific facts that fell under each category and concluded that there existed “clear and convincing evidence that Rambus’ spoliation was carried out in bad faith.” Id. at 22-29.
Turning to whether Rambus’ spoliation prejudiced Micron, Judge Robinson noted that “[t]he question of prejudice ‘turns largely’ on whether a spoliating party destroyed evidence in bad faith.” Id. at 29. Because “bad faith [had] been found on Rambus’ part, the burden shift[ed] to Rambus to show lack of prejudice.” Id. at 30. Judge Robinson ultimately held that Rambus did not satisfy its burden, and that “Rambus’ spoliation at least prejudiced Micron’s (1) claims and defenses related to patent misuse and violation of antitrust and unfair competition laws, and (2) defense of inequitable conduct.” Id. Regarding the prejudice to Micron’s inequitable conduct defense, Judge Robinson addressed the prongs of “specific intent” and “materiality” individually. Judge Robinson found that “proving the intent prong of inequitable conduct would undoubtedly be more difficult for Micron given Rambus’ bad faith spoliation,” as “nonpublic documents will be instrumental in showing that the patentee purposely chose not to disclose a known reference to the PTO.” Id. at 36. Similarly, Judge Robinson found that proving the “materiality” prong of inequitable conduct would be more difficult, as Micron was precluded from “possibly obtaining evidence of affirmative acts of egregious conduct, such as perjury, the manufacture of false arguments, or deliberate fraud during prosecution.” Id. at 37. Under Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011) (en banc), such egregious acts support a finding of materiality. Id. at 37. Furthermore, with regard to both specific intent and materiality, Judge Robinson emphasized that “the fact that no record was made of what documents were destroyed [could] be of no avail to Rambus, the bad faith actor.” Id. at 37 (emphasis added).
Next, Judge Robinson addressed the appropriate sanction to “rectify Rambus’ spoliation.” Id. at 37. Judge Robinson relied on the factors set forth in Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76 (3d Cir. 1994), which include “(1) the degree of fault of the spoliating party; (2) the degree of prejudice to the adverse party; and (3) whether there is a less severe punishment that would avoid substantial unfairness to the adverse party while still serving to deter similar spoliation by others in the future.” Id. at 38. First, Judge Robinson noted that the “degree of fault in Rambus’ spoliation cannot be overstated by the court.” Id. at 39. Judge Robinson explained that even though her finding of “bad faith” spoliation was sufficient to find Rambus at fault, that degree of fault was “compound[ed]” by “Rambus’ purposeful, thorough document destruction, which did not occur just once, but several times in 1999 and 2000.” Id. (emphasis added). Second, Judge Robinson reiterated that “several of Micron’s affirmative defenses [had] been prejudiced by Rambus’ bad faith spoliation.” Id. She reasoned that “[w]hile the precise degree of prejudice cannot be known because Rambus did not keep any record of what was destroyed, Rambus should not easily be able to excuse its misconduct by claiming that the vanished documents were of minimal import.” Id. Moreover, “[t]he wide range and sheer amount of materials destroyed, along with Rambus’ bad faith, [made] it almost certain that the misconduct interfered with the rightful resolution of the case.” Id. at 39-40.
Third, Judge Robinson considered sanctions less severe than holding the patents-in-suit unenforceable and found them “inappropriate for the unique circumstance of this case.” Id. at 40-46. In reaching her conclusion, Judge Robinson noted that “Rambus’ destruction of evidence was of the worst type: intentional, widespread, advantage-seeking, and concealed.” Id. at 44 (emphasis added). Judge Robinson explained that “[a]ttorney fees, monetary sanctions, and adverse jury instructions will not restore Micron to the same position in which it would have been absent Rambus’ unlawful spoliation, and an evidentiary sanction would likely result in the same substantive outcome but in a less efficient manner.” Id. at 45. Judge Robinson further explained that “[a]ny lesser sanction would, in effect, reward Rambus for the gamble it took by spoliating and tempt others to do the same.” Id. at 45. Judge Robinson concluded that the appropriate sanction was “to hold the patents-in-suit unenforceable against Micron,” given the “nature and degree of Rambus’ wrongdoing.” Id. at 45-46.