Magistrate Judge Burke recently denied a defendant’s request to stay a patent infringement case against it pending resolution of its motions to dismiss the case and motion to transfer to the Northern District of California. As Judge Burke explained, “all that has occurred pursuant to the Scheduling Order in the case is that the parties have made some basic initial disclosures,” and “the Court expects to resolve Defendant’s motion to transfer in the near future . . . well before Defendant is required to provide more substantive contentions, and so the Court does not find Defendant’s simplification-related arguments persuasive.” Papst Licensing GMBH & Co. KG v. Lattice Semiconductor Corp., C.A. No. 14-1375-LPS-CJB, Memo. Or. at 1-2 (D. Del. Aug. 3, 2015). Additionally, Judge Burke found that denying the motion to stay would not significantly prejudice any party and would allow the case to proceed on the same schedule as two related cases, each of which also had a similar motion to transfer. Id. The denial was, however, with leave to renew because the Court intended to “address the stay issue again with the parties” once Judge Burke had resolved the motions to transfer. Id. at 2-3.
Judge Gregory M. Sleet recently denied defendant Zonoff Inc.’s motion to dismiss plaintiff Icontrol Networks, Inc.’s motion to dismiss for failure to state a claim. Zonoff Inc. v. Icontrol Networks, Inc., C.A. No. 14-1199-GMS (D. Del. July 31, 2015). Zonoff moved to exclude Icontrol’s claims for failure to adequately plead indirect infringement and joint infringement, and for damages. Judge Sleet found Icontrol’s allegations of induced infringement sufficient as Icontrol alleged “facts supporting a plausible inference that Zonoff had knowledge of the patents-in-suit”; and “that Zonoff took various actions supporting the plausible inference that it intended its customers to infringe the patents-in-suit.” Id. at 2 n.1. Judge Sleet noted that a plaintiff is not required to “‘prove its case at the pleading stage.'” Id. (quoting In re Bill of Lading Transmission & Processing Sys. Patent Litig., 681 F.3d 1293, 1340 (Fed. Cir. 2012) (summary of opinion by Dennis Crouch available at Patently-O). Regarding contributory infringement, Judge Sleet found that Icontrol adequately pled that Zonoff’s accused products had no substantial non-infringing uses because it pled that “Zonoff’s software must infringe no matter how it is used . . . . ” Id. Judge Sleet also rejected Zonoff’s argument that Icontrol was obligated to plead joint infringement because “the claims at issue are not so clear that the court is able to make such a determination [that the method claims implicate joint infringement] without more information.” Id. Finally, Judge Sleet rejected Zonoff’s argument that Icontrol’s claims for damages should be dismissed because Icontrol did not allege that its products complied with the marking statute, 35 U.S.C. § 287. Id. Judge Sleet noted that Zonoff had actual notice of infringement at least as of the filing of the complaint and that the “notice requirements imposed by § 287 do not apply to all patented inventions,” such as patents directed to a process or method. Id.
Magistrate Judge Christopher J. Burke recently considered defendant Plaid Technologies Inc.’s motion to stay this action pending the Court’s resolution of defendant’s motion to dismiss all claims of the seven asserted patents-in-suit as patent-ineligible under 35 U.S.C. § 101. Yodlee, Inc. v. Plaid Technologies Inc., C.A. No. 14-1445-LPS-CJB (D. Del. Jul. 20, 2015). In denying defendant’s motion, Judge Burke noted that if the motion to dismiss is denied, little efficiency would have been gained. Id. at 4-5. Moreover, due to the large number of patents and claims at issue (7 and 162, respectively), “it is reasonable to infer that . . . there is a greater likelihood that a portion of the case will survive the motion to dismiss.” Id. at 5. Ultimately, Judge Burke noted that this “simplification of the issues” factor was neutral. Regarding stage of the litigation factor, Judge Burke noted that although some discovery had progressed, the early stage of the litigation favored a stay. Id. at 7. Finally, regarding undue prejudice, Judge Burke found this factor favored a stay noting that the parties are competitors and that there was evidence that competition from defendant had “financially harmed” plaintiff in the past and likely would in the future. Id. at 13.
Ultimately, Judge Burke decided a stay was not warranted:
On balance, the possibility of simplification of the issues is neutral, the status of the litigation weighs squarely in favor of a stay, and the prospect of undue prejudice weighs squarely against a stay. While reasonable minds could disagree as to the right outcome, the Court is ultimately persuaded that the prospect for harm to Plaintiff were a stay granted is the most compelling factor here. Therefore, the motion to stay is DENIED.
Id. at 15.
UPDATE: On January 27, 2017, Chief Judge Stark issued a memorandum order addressing objections to Judge Burke’s stay decisions. Judge Stark largely affirmed Judge Burke’s decisions, but denied as moot as to one patent-in-suit that had been dismissed on § 101 grounds and granted a stay as to two other patents-in-suit for which the PTAB had instituted CBM review in the time between Judge Burke’s decision and Judge Stark’s decision.
This case was stayed pending a reexamination at the PTO and, although the stay was lifted in 2013, there had been “no activity since October 2013, while the parties continue[d] with inter partes review and covered-business-method review proceedings.” In March 2015, however, the plaintiff filed a “motion to reopen discovery to gather information concerning the prior art status of a particular reference.” Judge Sleet recently denied that motion. Fifth Market, Inc. v. CME Group, Inc., et al., C.A. No. 08-520-GMS, Or. at 1 (D. Del. July 31, 2015).
Judge Sleet explained his view of the request: “Understandably, the parties have been postponing the litigation of this case while the USPTO reviews the patents-in-suit and after appeals are exhausted. Thus, in the court’s view, this case is effectively, if not formally, stayed. And despite showing no interest in reviving its case in district court, the plaintiff now requests that the court order discovery to aid its efforts before the USPTO. The court declines to do so. . . . In short, [the motion] is improper for a number of reasons . . . . The court will not reopen discovery in this matter unless agreed upon by both parties or better justification is provided.” Id. at 2 n.1. Although the plaintiff claimed it needed the discovery into the alleged prior art for purposes of the IPR and this suit, Judge Sleet found that “plaintiff has made no challenge to the [reference] in this matter, to this court. . . . And the defendants are correct to note that the Protective Order between the parties forecloses the use of discovery materials ‘for any purpose other than prosecuting or defending claims in this action.’” Id. Furthermore, Judge Sleet found that there were procedures for the plaintiff to obtain this discovery in the PTO and that, if those procedures would not allow such discovery, the Court would not “undermine the procedures in place by offering an avenue to circumvent the rules.” Id.
In a recent Report and Recommendation, Magistrate Judge Christopher J. Burke recommended that the court grant defendants’ motion for summary judgment regarding damages. Lambda Optical Solutions, LLC v. Alcatel-Lucent USA Inc., C.A. No. 10-487-RGA-CJB (D. Del. Jul. 29, 2015). First, defendants (collectively, “Alcatel”) argued that “Lambda cannot recover pre-suit damages from the date when LOS [, the assignee of the asserted patent,] stopped selling unmarked patented products (February 28, 2007) until the date it gave Alcatel notice of the patent by filing suit in this case (June 4, 2010).” Id. at 5. Considering Alcatel’s argument, Judge Burke was required to address a fairly unsettled question: “whether a patentee that sells unmarked product, but later ceases such sales, becomes a non-producing patentee that may obtain damages under Section 287(a) once sales of the unmarked product cease.” Id. at 7. Judge Burke found that it did not, and therefore recommended that “Lambda is not entitled to damages for the time between when LOS stopped selling unmarked products and the date when Lambda filed suit.” Id. at 13. Judge Burke reasoned this outcome was consistent with the actual language of Section 287(a), and comported with the policies underlying Section 287. See id. at 7-13. For example, Judge Burke noted that “if a patentee-plaintiff were able to return to the more favorable status of a nonproducing patentee simply by halting production of unmarked product, this would not encourage patentees in the first instance ‘to give notice to the public that the article is patented,’ nor would it ‘aid the public to identify whether an article is patented[.]’” Id. at 11. Alcatel also argued that Lambda was not entitled to damages based upon sales of Alcatel’s 1675 LambdaUnite product. Id. at 13. Judge Burke agreed with Alcatel and recommended granting summary judgment in its favor on this issue, finding that the product failed to “selectively provide optical coupling,” as required by the independent claims at issue. Id. at 14.
Judge Gregory M. Sleet recently severed and stayed infringement claims against several banks relating to alleged infringement of mobile banking technology patents pending the resolution of claims against the manufacturer of the banks’ mobile banking applications. Rothschild Mobile Imaging Innovations, LLC v. Mitek Systems, Inc., C.A. No. 14-617-GMS (D. Del. July 31, 2015). As Judge Sleet explained, “the infringement claims against the Bank defendants are peripheral to the claims of infringement against Mitek because the Banks appear to have only been customers of Mitek’s alleged infringing technology.” Id. at 5. The Court added, “[a]djudication of the claims against Mitek will dispose of the claims against the Bank defendants as users of the products [and] [t]he presence of the Bank defendants as parties neither adds nor detracts from [plaintiff’s] patent infringement claim against Mitek.” Id. at 6. The Court found that the balance of factors favored staying the case pending the resolution of the claims against Mitek, and did not favor transferring the case to the Southern District of California, Mitek’s home forum.
In Greatbatch Ltd. v. AVX Corporation, et al., C.A. No. 13-723-LPS (D. Del. July 28, 2015), Chief Judge Leonard P. Stark ordered a mechanism for reduction of asserted claims and prior art before trial. Plaintiff would shortly elect no more than 15 claims, with no per-patent limit. Here the Court adopted Defendants’ proposal over Plaintiff’s proposal for 24 claims. 10 days thereafter, Defendants would narrow prior art references to 20 maximum, with no per-patent limit, as well as identify a maximum of 60 prior art combinations (defined as a combination of two or more references per claim). The parties would not be allowed to modify their elections, as requested by Plaintiff, “solely on the basis of any decisions by the [PTAB] related to any inter partes review . . . petitions involving the asserted claims.” Id. at 2-3.
Further, the Court ordered the parties to adhere to the summary judgment briefing limits in the schedule, which allowed for 40 pages total per party.
In Magnetar Technologies Corp., et al. v. Six Flags Theme Parks Inc., et al., C.A. No. 07-127-LPS-MPT (D. Del. July 21, 2015), Chief Magistrate Judge Mary Pat Thynge recommended granting-in-part Defendants’ motion for attorneys’ fees under section 285, but recommended denial of the motion for fees against Plaintiffs’ counsel under 28 U.S.C. § 1927.
The Court concluded that Plaintiffs’ litigation conduct was objectively unreasonable, making the case exceptional, in particular as to the asserted ‘125 patent that was ultimately found invalid by Chief Judge Stark in July 2014. While the Court rejected a number of Defendants’ arguments regarding the frivolousness of Plaintiffs’ claims, improper motivation for the suit, and objectively unreasonable conduct, see id. at 11-18, the Court agreed that Plaintiffs’ arguments on inventorship for the ‘125 patent were objectively unreasonable — namely, that it was so obvious that an individual not named on the patent was an inventor that the argument he was not was unreasonable. See id. at 18-21. The Court also concluded that Plaintiffs’ reliance on its expert was objectively unreasonable because they “knew or should have known their expert’s opinion fell well short of the Daubert standard.” Id. at 21. The Court had granted Defendants’ Daubert motion due to the expert’s unreliable methodology, “strongly criticiz[ing] his entire infringement analysis” and had cited “a laundry list of unanswered questions” in the report. Id. at 22. The Court’s “criticism demonstrates that [the expert’s] report so lacked any reliable methodology under the Daubert analysis and [Rule 702] that it should have been apparent to plaintiffs.” Id.
Having found the case exceptional based on inventorship issues and Plaintiffs’ reliance on its expert, the Court then narrowed the attorney fees available to Defendants to “reasonable attorneys’ and costs regarding the ‘125 patent related to incorrect inventorship since July 29, 2011 [when key inventor depositions occurred] and [Plaintiffs’] expert report when issued.” Id. at 26. Because Defendants’ current fee request was insufficiently detailed for the Court to determine whether, for example, the rates were reasonable, the Court ordered Defendants to address these issues in any subsequent modification. See id. at 26-27.
The Court then recommended denial of Defendants’ request for fees against Plaintiffs’ counsel under 28 U.S.C. § 1927. The current counsel assumed representation after Plaintiffs’ prior counsel had withdrawn in 2008. Id. at 5. The Court found no direct evidence that the new counsel knew the ‘125 patent was invalid due to incorrect inventorship, and rejected Defendants’ arguments as to unreasonable litigation conduct based. See id. at 28-30. Furthermore, the Court rejected the argument that maintaining the suit on the ‘125 patent after Defendants’ counsel sent two letters regarding the weaknesses of the claims rendered counsel liable, where Plaintiffs’ counsel had “promptly” responded to the letters, explained “in detail” why it disagreed with Defendants’ argument, and “expressed a willingness to continue a good faith dialogue.” Id. at 30.
Update: On September 30, 2015, having considered Plaintiffs’ objections to the Report and Recommendation and Defendants’ subsequent response, Chief Judge Stark returned the issue of attorney fees to Magistrate Judge Thynge for additional findings. See Magnetar Technologies Corp., et al. v. Six Flags Theme Parks Inc., et al., C.A. No. 07-127-LPS-MPT (D. Del. Sept. 30, 2015). In a footnote, the Court also highlighted the need to comply with the Court’s rules regarding page limits for responses to Report and Recommendation objections (10 pages) and the requirement to file redacted public versions of sealed filings. Id. at n.1.
Judge Sleet has issued an interesting order regarding the changing landscape of motions to dismiss for lack of personal jurisdiction in patent cases. At issue was whether each defendant satisfied the Delaware long-arm statute by demonstrating an “intent to serve the Delaware market” or “purposefully direct[ing] activities at residents of the forum.” Blackbird Tech LLC v. Sakka’s Stores, Inc., et al., C.A. No. 14-1256-GMS, Or. at 1-2 (D. Del. July 21, 2015). Judge Sleet explained the relevant precedent: “Previously, Delaware courts indicated that ‘[a] non-resident firm’s intent to serve the United States market is sufficient to establish an intent to serve the Delaware market, unless there is evidence that the firm intended to exclude from its marketing and distribution efforts some portion of the country that includes Delaware.’” Id. at 2 (citing Graphics Props. Holdings, Inc. v. ASUS Computer Int’l, No. 13-864-LPS, 2014 WL 4949589, at *3 (D. Del. Sept. 29, 2014). His Honor continued: “The court is not convinced this statement remains good law in the due process context” in light of various recent cases, including the Supreme Court’s proclamation that a plaintiff must prove purposeful availment by showing “‘regular flow or regular course of sales’ in the forum state or ‘something more’ such as special state-related design, advertising, advice, marketing, or anything else.” Id. at 2-3 (quoting J. McIntyre Mach., Ltd. v. Nicastro, 131 S. Ct. 2780, 2792 (2011)).
The plaintiff also requested jurisdictional discovery. Although Judge Sleet found that there had not been a showing of intent to serve the Delaware market or purposeful availment of Delaware’s laws, the plaintiff’s request for jurisdictional discovery was not “clearly frivolous” in light of the defendants’ acknowledgement “that their accused products have been shipped to Delaware customers.” Id. at 3-4. Accordingly, Judge Sleet allowed the jurisdictional discovery and held the motions to dismiss in abeyance.
Magistrate Judge Burke recently issued a report and recommendation that recommended denying several patent infringement defendants’ motions to dismiss for lack of patentable subject matter under § 101. Judge Burke first found that claim construction was not necessary in this case to perform the § 101 analysis. Execware, LLC v. BJ’s Wholesale Club, Inc., et al., C.A. No. 14-223-LPS, Report and Recommendation at 8-9 (D. Del. July 15, 2015). His Honor then rejected arguments that § 101 challenges are not amenable to Rule 12 motions. Id. at 10-13.
Judge Burke then compared the exemplary claim 1 of the patent-in-suit to several recent Federal Circuit cases addressing § 101 and found that the claims were not directed to an abstract idea: “[C]laim 1 references a specific ‘claimed solution’ (the use of a query dialog box that has particular features) to an identified problem . . . . [T]his proffered solution is one ‘rooted in computer technology in order to overcome a problem specifically arising in the realm of computer[s.]’” Id. at 19-27 (quoting DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1257 (Fed. Cir. 2014)).
Finally, Judge Burke also went on to find that the patent-in-suit did not lack an inventive concept, although “[h]aving determined that claim 1 is not directed to an abstract idea under varying formulations of step one of the Alice test, the Court could end its analysis.” Id. at 29. His Honor concluded that “the presence of the query dialog box limitation in [the] patent amounts to the inclusion of an inventive concept, as it is a meaningful limitation on the underlying idea of ‘displaying, classifying, and organizing unspecified information (referred to as text data objects) in an unspecified transaction.’” Id. at 30-31. Judge Burke also rejected arguments to the contrary by defendants, including that “the process could be performed, in at least an analogous fashion, by two people using pen and paper.” “[A]lthough it may be technically correct to say that humans could use a pen and paper to perform a sorting process that is similar in some ways to the process called for by claim 1, it is hard to assert that this would ‘produce the actual effect of the invention.’. . . Moreover, Defendants have not cited any case where the Supreme Court or the Federal Circuit have held that a claim is patent ineligible based solely on the fact that an analogous method could be performed using pen and paper.” Id. at 32-35.