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The formal investiture of Magistrate Judge Sherry R. Fallon will take place at the District Court on Friday, October 12, 2012 at 3:00 p.m. There is no need to RSVP. Light refreshments will be available immediately following the ceremony in the courtroom lobby area.

See you there!

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In MyKey Technology Inc. v. CPR Tools Inc., et al., C.A. No. 11-443-RGA (D. Del. Sept. 10, 2012), Judge Richard G. Andrews granted a motion to dismiss filed by defendant Intelligent Computer Solutions, Inc. (“ICS”), on the grounds of lack of personal jurisdiction, and also granted a motion to transfer venue to the District of Maryland filed by plaintiff MyKey Technology, Inc. (“MyKey”).

Judge Andrews granted ICS’s motion to dismiss for lack of personal jurisdiction after permitting jurisdictional discovery to clarify the issue. ICS is not incorporated in Delaware, and MyKey itself conceded that there was “no general jurisdiction over [ICS].” Alternatively, MyKey argued that because ICS had a website that would permit Delawareans to purchase the infringing products, ICS had “offered to sell the infringing products to Delawareans,” and thus specific jurisdiction was present. Judge Andrews, however, relied on AFTG-TG, LLC v. Nuvoton Tech. Corp., No. 2011-1306, 2011-1307, 2012 U.S. App. LEXIS 18030 (Fed. Cir. Aug. 24, 2012), to find that the existence of such a website was insufficient to satisfy the requirements of specific jurisdiction. See Nuvoton Tech. Corp., 2012 U.S. App. LEXIS 18030, at *4 (noting specific jurisdiction requires defendant to “purposefully direct[] activities at the forum’s residents”). Judge Andrews also found that other indicia of specific jurisdiction were lacking, as there was no evidence that the infringing products had ever been sold in or shipped to Delaware. Lacking general and specific jurisdiction, Judge Andrews granted the motion to dismiss, leaving two defendants—CPR Tools, Inc. and Logicube, Inc.—in this patent infringement suit.

In addition to granting the motion to dismiss, Judge Andrews granted MyKey’s motion to transfer venue from the District of Delaware to the District of Maryland pursuant to 28 U.S.C. § 1404(a). Section 1404(a) grants a district court the ability to “transfer any civil action to any other district or division where it might have been brought.” Moreover, the District of Delaware typically conducts a detailed analysis of the private and public interest factors set forth in Jumara v. State Farm Ins. Co., 55 F.3d 873 (3d Cir. 1995) to assess whether efficiency and expense considerations warrant transfer. See Jumara, 55 F.3d at 879; see also Mosaid Technologies, Inc. v. Sony Ericsson Mobile Communications (USA) Inc., C.A. No. 11-598-SLR (D. Del. Aug. 16, 2012) (analyzing a motion to transfer under Jumara factors). Under the § 1404(a)/Jumara framework, the movant has the burden of establishing the propriety of transfer. Jumara, 55 F.3d at 879.

ICS had been the only defendant that was opposed to the transfer. However, as discussed above, Judge Andrews dismissed ICS from the suit, rendering its opposition moot. Because the remaining defendants did not contest the transfer, Judge Andrews found that MyKey had sustained its burden to establish the propriety of the transfer despite “rather sparse” allegations with regard to personal jurisdiction in Maryland. Moreover, in light of the lack of contention, it was unnecessary for Judge Andrews to conduct a detailed Jumara analysis. Judge Andrews determined that transfer was appropriate because it “appear[ed] that this [was] a civil action that could have been brought in the District of Maryland.”
At one point in the order, Judge Andrews noted that with the recent amendment to 28 U.S.C. § 1404(a), a district court can transfer a suit “to any district or division to which all parties have consented.” § 1404(a). However, due to the effective date of the amendment, it did not apply to the instant matter.

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In Cephalon, Inc., et al. v. Impax Labs., Inc., C.A. No. 11-1152-SLR (D. Del.), Judge Robinson recently granted defendant-generic drug manufacturer’s motion to dismiss infringement claims based on patents asserted by plaintiffs that had previously been invalidated in prior ANDA litigation. Id. at 1. In this case, plaintiffs filed suit against defendant alleging infringement of four patents-in-suit arising out of defendant’s ANDA for a generic version of a drug used to treat pain in cancer patients. Id. at 1. In response to the complaint, defendant moved to dismiss claims for infringement based on two of the patents-in-suit on the grounds that the two patents had been addressed by the Court in previous ANDA litigation, and the Court found both patents invalid for lack of enablement. Id. at 1-2. Specifically, in the motion to dismiss, defendant argued that under the doctrine of collateral estoppel there was no reason to litigate any issues involving the two invalidated patents because “validity was actually litigated in the [prior ANDA] litigation, culminating with a final judgment of invalidity against plaintiffs.” Id. at 2. The Court agreed. Id. at 4. Citing the U.S. Supreme Court’s decision in Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundations, 402 U.S. 313 (1971), the Federal Circuit’s decision in Abbott Labs. v. Andrx Pharma, Inc., 473 F.3d 1196, 1203 (Fed. Cir. 2007), and the Third Circuit’s decision in Jean Alexander Cosmetics, Inc. v. L’Oreal USA, Inc., 458 F.3d 244, 249 (3d Cir. 2006), the Court held that “collateral estoppel applies to bar the re-litigation of the invalid . . . patents.” Id. at 4. In addition to granting defendant’s motion to dismiss, the Court denied plaintiffs’ request to stay the instant litigation pending the Federal Circuit’s review of the Court’s decision in the prior ANDA litigation on appeal. Id. at 5. In denying that request, the Court noted that briefing in the appeal had only recently been completed, and that if the request were granted, the Court could not resolve the present dispute within the 30-month ANDA stay deadline. Id. at 5.

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In Elpida Memory, Inc., et al. v. Intellectual Ventures I, LLC, et al., C.A. No. 11-623-SLR (D. Del.), Judge Robinson granted defendants’ motion to dismiss plaintiffs’ declaratory judgment action under the first-filed rule. Id. at 5. On July 11, 2011, defendants originally filed suit for patent infringement against plaintiffs and several other Dynamic Random Access Memory (DRAM) circuit manufacturers and their customers in the Western District of Washington. Id. at 1-2. On July 12, 2012, defendants also filed a complaint with the ITC alleging that certain of plaintiffs’ products infringed the same three patents-in-suit asserted against plaintiffs in the Western District of Washington action. Id. at 2. Two days later, on July 14, 2011, plaintiffs filed the instant declaratory judgment action against defendants in the District of Delaware for noninfringement and invalidity of the same three patents asserted against plaintiffs in the District of Washington and the ITC. Id. at 2. In response, defendants moved to dismiss or, in the alternative, transfer the Delaware declaratory judgment action based upon the first-filed Washington action. Id. at 2. The Court granted defendants’ motion. Id. at 5. In its reasoning, the Court noted that there is no dispute that “the Washington action encompasses all of the patents and parties at issue in this case, and is the first-filed action as between it and the instant case.” Id. at 4. The Court also noted that the “record does not demonstrate, nor does [plaintiff] contend, that any exceptions to the first-filed rule apply” and that to find otherwise would “eviscerate the first-filed rule as it is currently understood.” Id. at 4.

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In Magnetar Technologies Corp., et al. v. Six Flags Theme Park Inc., et al., C.A. No. 07-127-LPS-MPT (D. Del.), Magistrate Judge Thynge recently issued a Memorandum Order granting in part defendants’ motion to compel production of documents, and imposing sanctions against plaintiffs for spoliation of evidence as a result of the destruction of certain other documents. Id. at 37. In the motion, defendants sought to compel the production of documents (that plaintiffs claimed were protected from discovery and inadvertently produced) on the grounds that by producing the documents to defendants, plaintiffs had waived any claims of attorney-client privilege or work product over the documents. Id. at 8. Defendants further argued that the documents were not shielded from discovery by any joint client privilege, and even if the documents were somehow protected, plaintiffs should nonetheless be ordered to produce them under the crime-fraud exception and as a sanction against the plaintiffs for the spoliation of other evidence and documents in this case. Id. at 8-9. Specifically, on the issue of spoliation, defendants alleged that during the course of discovery “more than seven hundred boxes of documents were destroyed” at the behest of two of the plaintiffs. Id. at 3. In opposition to the motion, along with arguing that the documents at issue were inadvertently and unintentionally produced, plaintiffs argued that the attorney-client privilege, work-product doctrine and the joint client privilege applied to protect the documents from discovery, and that none of these applicable privileges or immunities had been waived by any of the defendants. Id. at 10-11. Plaintiffs also disputed defendants’ allegations of spoliation, arguing that to the extent any documents were destroyed, those documents were not destroyed intentionally and at the time were under the control of a third party (and not under the defendants’ control). Id. at 10. In granting the motion to compel in part, Judge Thynge concluded that although the attorney-client privilege may have arguably been waived with respect to perhaps one of the plaintiffs, both the work-product doctrine and the joint client privilege still applied to the contested documents and had not been waived. Id. at 23-25. Judge Thynge noted that the “work product protection is not automatically waived through a client’s (or former client’s) production of documents since that protection is invoked by the attorney.” Id. at 24. Judge Thynge also noted that the existence of an agreement between the plaintiffs to retain “common counsel” and the inclusion of each of the plaintiffs on certain privileged communications indicated that a joint client relationship existed among the plaintiffs, warranting protection under the joint client privilege. Id. at 26. Judge Thynge held that the crime-fraud exception did not apply because there was no evidence that plaintiffs had engaged in a crime or fraud or that defendants’ counsel’s services were utilized in order to plan or perpetrate any such crime or fraud. Id. at 31.

On the issue of spoliation, Judge Thynge found in favor of defendants, holding that plaintiffs had failed to satisfy their preservation obligations and that such failure was a “serious matter worthy of sanction.” Id. at 32, 34. Specifically, the Court found that the “destruction of documents in the [third party] warehouse, which was under the control of [one of the plaintiffs], and occurred after the commencement of litigation” constitutes “spoliation.” Id. at 32. In addition, the Court noted that although the plaintiffs “may not have actively obstructed the discovery of evidence, they neglected their duty to preserve evidence, and should have been aware of [the third party’s] document retention policy for approximately six years before this action was filed.” Id. at 32. As a sanction for plaintiffs’ spoliation, the Court ordered the production of certain documents or portions of documents sought by defendants and the attorney-client privilege “lost” with respect to those documents or portions of documents. Id. at 35-36.

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Chief Judge Gregory M. Sleet recently struck defendant’s unclean hands defense in its Answer as improper under FRCP Rule 15(d) and untimely under Rules 15(a) and 16(b). Sirona Dental Systems, Inc., et al. v. Dental Imaging Technologies Corp., C.A. No. 10-288-GMS (D. Del. Sept. 10, 2012).

The parties had agreed to permit plaintiffs to file a Fourth Amended Complaint nearly nine months after the deadline to amend pleadings. Id. at 1. This Amended Complaint contained no substantive changes; it only added the current defendant and removed others as a result of a series of mergers and an agreement between the parties, and substituted the reissues of two of the patents-in-suit for the original patents. Id. at 2. In response, defendant filed its Answer which raised an affirmative defense of unclean hands for the first time. Id. Plaintiffs moved to strike the defense arguing that it was not a proper response under FRCP Rule 15(a) and, even if “viewed instead as a stand-alone amended pleading” under Rule 16(b), would still fail to meet the requirements of this Rule. Id. at 3.

The Court held that defendant’s Answer was “best understood not as a required response to an amended pleading under Rule 15(a)(3) but as a discretionary response to a supplemental pleading, governed by Rule 15(d).” Id. at 4-5 (internal quotation marks omitted). While responses under Rule 15(a) are permitted as a matter of course, a court has the discretion to permit or disallow responses under 15(d). Id. at 5-6. Here, the Court disallowed the unclean hands defense because “[t]he filing of a supplemental complaint containing purely ministerial changes should not permit an opposing party to raise a novel affirmative defense more than nine months after a scheduling order deadline.” Id. at 7.

Because it concluded that Rule 15(a) was inapplicable, the Court did not apply or interpret Rule 15(a)(3), which governs the timing of a required responsive pleading. Judge Sleet did comment, however, that plaintiffs’ argument that the scope of 15(a)(3) pleadings “should be limited to reflect the breadth of the changes in the initial pleading” had merit because to view otherwise might “throw the door open to entirely new claims and defenses each time a ministerial amendment was made to a pleading.” Id. at 4 & n.3.

Judge Sleet also considered whether defendant’s Answer would satisfy Rule 16(b) which permits a party to amend its pleading after the court ordered deadline, only for good cause and with the Court’s consent. Id. at 8. Although defendant did not obtain leave of court to amend its Answer, defendant argued that it had good cause for delay because (i) plaintiffs provided “inconsistent information with regard to the facts relevant to the unclean hands issue” and (ii) defendant had no obligation to investigate this defense earlier because it assumed plaintiffs would adhere to a relevant license agreement. Id. at 9. Judge Sleet disagreed, noting that it was not until after the scheduling order deadline passed that plaintiffs provided “inconsistent information” and thus defendant could have raised the defense by the deadline. Id. In addition, defendant could not justify its delay when it was “presented with evidence of potential bad deeds” and did not perform a “diligent investigation upon receipt of such evidence.” Id. at 10. To hold otherwise “would open the door to untimely defenses and claims whenever they are based on some form of misbehavior.” Id.

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In a recent memorandum order, Judge Stark granted a defendant’s motion to stay pending reexamination, finding that each relevant factor favored a stay. Smarter Agent, LLC v. MobileRealtyApps.com, LLC, C.A. No. 11-915-LPS (D. Del. Sept. 5, 2012). First, the Court noted that the potential for simplification of issues through the reexamination was substantial, because “[a]ll the claims involved in this lawsuit currently stand rejected in the reexaminations. If this remains the outcome, this litigation will be terminated.” Id. at 3. Next, although the case had been filed almost eleven months earlier, the Court noted that “essentially nothing has happened in this case beyond the briefing of the instant motion to stay.” On the other hand, “[t]he reexaminations have been pending for over two years and are significantly farther along than the litigation.” Id. at 4. Finally, the Court was not persuaded by the plaintiff’s claims of undue prejudice, “particularly in light of Plaintiff’s agreement to stay the two related actions[]” asserting the same patents against other defendants. Id. at 5. In a footnote, the Court explained that it “recognizes that a patentee has no obligation to agree to stay litigation against a particular defendant or all defendants just because it has previously agreed to stay litigation against other defendants. But such a patentee should expect that the stay of one related action will be an important consideration if the Court must later decide whether to stay another related action.” Id. at 7 n.2.

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In a recent memorandum order, Judge Stark granted Amneal Pharmaceuticals’ motion for partial judgment on the pleadings of non-infringement, finding that a non-infringement ruling against Galderma Laboratories in a separate action had collateral estoppel effect. Galderma Laboratories Inc. v. Amneal Pharmaceuticals, LLC, C.A. No. 11-1106-LPS (D. Del. Sept. 7, 2012). In the separate action, the Court found that Mylan Pharmaceuticals’ proposed generic product “containing 40 mg doxycycline administered once daily does not infringe [Galderma’s] patents, because such products do not contain the required ‘sub-antibacterial amounts’ of doxycycline but, rather, significantly inhibit the growth of microorganisms.” Id. at 1-2. Amneal, whose proposed product also contained 40 mg of doxycycline, to be administered once daily, argued that the Court’s non-infringement ruling against Galderma in that separate action had collateral estoppel in the instant case. The Court agreed, explaining “in order to prevail against Amneal on its claim for infringement …, Galderma would have to prevail on the ‘identical’ issue it previously litigated – and lost – in the Mylan action.” Id. at 4. That issue was “whether a product containing 40 mg of doxycycline, administered once daily, infringes [Galderma’s] patents.” Id. In rejecting several arguments by Galderma why collateral estoppel was not appropriate in this case, the Court explained that “the Court’s finding of non-infringement of [Galderma’s] patents in the Mylan Action was in no meaningful sense tied to anything unique about Mylan’s proposed product.” Id. at 7.

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Judge Sue L. Robinson recently granted plaintiff’s motion to dismiss defendant’s invalidity counterclaim but denied plaintiff’s motion to strike the corresponding affirmative defense. Internet Media Corporation v. Hearst Newspapers, LLC, C.A. No. 10-690-SLR (D. Del. Sept. 6, 2012). Defendant pled that the patent-in-suit was invalid “for failing to comply with one or more of the requirements for patentability set forth in Title 35 of the U.S. Code, including, but not limited to, §§ 101, 102, 103 and 112.” Id. at 2. Noting that, since Twombly and Iqbal, it is clear that a “counterclaim must set forth sufficient facts to give rise to a plausible claim for relief[,]” Judge Robinson held that defendant’s counterclaim did not contain “such requisite facts” and granted plaintiff’s motion to dismiss, with leave to amend. Id. at 3-4. However, because an affirmative defense “must merely provide fair notice of the issue involved[,]” Judge Robinson denied plaintiff’s motion as to defendant’s affirmative defense of invalidity. Id. at 5.

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Magistrate Judge Thynge has issued a report and recommendation considering the defendant’s motion to stay pending inter partes reexamination in ImageVision.Net, Inc. v. Internet Payment Exchange, Inc., C.A. No. 12-054-GMS-MPT (D. Del. Sep. 4, 2012). Considering each of the three factors for issuing a stay, Judge Thynge concluded that the motion should be denied.

Judge Thynge first considered whether the timing and status of the litigation and the reexamination weighs against a stay. She noted the defendant’s argument that “the legally relevant inquiry considers not whether discovery has commenced, but rather whether discovery is complete and a trial date set.” She then found that the status of the litigation favored a stay because “[a]lthough initial discovery has begun and a scheduling order issued, ‘this case is still in its infancy, and the record is relatively sparse.’ No trial date has been set and discovery is not scheduled to be completed until July 19, 2013. [Plaintiff] does not demonstrate how the facts of this case weigh against a stay despite the obvious lack of significant discovery activity. As a result, the status of the litigation favors a stay.” Id. at 5-6.

Judge Thynge next considered whether a stay would simplify the issues in question and trial of the case. She pointed out that “[s]hould the PTO grant defendant’s reexamination request, many issues outside the purview of the reexamination would remain to be tried.” Finding that “the scope of the issues to be resolved during litigation substantially exceeds the scope of the issues that can be resolved during the reexamination proceedings,” Judge Thynge determined that this factor disfavored a stay. Id. at 6-8.

Finally, Judge Thynge considered whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-moving party. In this regard, she first noted that “[a]lthough competition between two parties is not dispositive, ‘the relationship between the parties is ‘[o]f particular importance’ because ‘[c]ourts are generally reluctant to stay proceedings where the parties are direct competitors.’” Accordingly, “[t]he element of direct competition strongly favor[ed] denying [the] motion for a stay.” Id. at 8-10. Judge Thynge next found that a stay “would prejudice [the plaintiff] particularly” because the reexamination had only recently been filed and “this litigation would likely be completed far in advance of a decision on the last appeal in the reexamination proceeding.” Therefore, the “prejudice to plaintiff resulting from the status of the reexamination proceedings disfavors granting a stay.” Id. at 10. Because the parties in the case were direct competitors and the reexamination was in its earliest stages, Judge Thynge found that the prejudice factor favored a stay and concluded: “Weighing all considerations, the interests in proceeding with the litigation outweigh any basis for a stay in this action.” Id. at 12.

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