In an IPR Proceeding With Several Listed Petitioners, The Petitioners Must Speak With A Single Voice

August 27, 2014

In IPR2014-00954, the Patent Trial and Appeals Board ("PTAB") (A.P.J.s Petravick, Deshpande, and Clements) issued a decision regarding the proper identification of lead and backup counsel listed in the powers of attorneys in cases involving multiple parties constituting a single Petitioner. The Board explained:

According to 37 C.F.R. § 42.2, "Petitioner" means "the party filing a petition requesting that a trial be instituted." In circumstances not involving a motion for joinder or consolidation of separate proceedings, for each "petition" there is but a single party filing the petition, no matter how many companies are listed as petitioner or petitioners and how many companies are identified as real parties-in-interest. Thus, before the Board, the separate companies constitute and stand in the shoes of a single "Petitioner." Because the eleven companies constitute, collectively, a single party, they must speak with a single voice, both in writing and oral representation.
The Board then went on to address the fact that while the petition properly identified lead and backup counsel, the powers of attorney filed by the various real parties in interest were not consistent with that identification. In one instance, one party excluded certain identified lead and backup counsel while certain other powers of attorney filed by the other real parties in interest excluded other certain identified backup counsel. As a result the Board ordered the Petitioner to file updated powers of attorney consistent with the designation of lead and backup counsel set forth in the Petition.

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This decision addresses a procedural issue regarding inter partes review before the PTAB, but one that could have important implications. Companies agreeing to jointly file a petition for inter partes review must be mindful that, except in cases involving joinder or consolidation of separate proceedings, the Board will not allow each company listed as Petitioner or a real party in interest to be separately heard. Instead, the Board requires that the "Petitioner" speak with "a single voice" regardless of the number of real parties in interest. Thus, companies considering forming or joining a group to file an IPR should consider that one consequence of filing a petition as one of several real parties in interest is that they will not have the opportunity to be separately heard. 505 Games, Inc. et al. v. Babbage Holdings, Inc., Case IPR2014-00954 (Clements) (August 22, 2014), Paper 17.

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. The authors represent inventors, patent owners and technology companies in patent licensing and litigation in U.S. District Courts and in the United States Patent and Trademark Office, including numerous IPRs currently pending before the PTAB. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Greg Cordrey at 949.623.7236 or GCordrey@jmbm.com.

Court Denies Summary Judgment Motion as Premature Prior to Markman Hearing

August 27, 2014

Pipeline Technologies Inc. ("Pipeline") filed a patent infringement action against Telog Instruments Inc. ("Telog"). Telog filed a motion for summary judgment, seeking summary judgment on the ground that the disputed claims of U.S. Patent 7,219,553 ('553 patent) are invalid for indefiniteness under 35 U.S.C. § 112(b).

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UGG: Default Judgment and Treble Damages Entered Against Defendant Where Defendant Failed to Participate in Discovery

August 26, 2014

Plaintiff Deckers Outdoor Corporation ("Plaintiff") alleged that Defendants Superstar International, Inc. and Sai Liu ("Defendants") produce, advertise, and sell products that infringe Plaintiff's design patents for UGG boots. The district court previously ruled that default judgment was appropriate, considering both the procedural requirements of Federal Rule of Civil Procedure 55(b) and the factors laid out in Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). In the previous order, the district court left open what relief Plaintiff could recover.

The district court then addressed whether the Plaintiff should be entitled to treble damages. As explained by the district court, "[u]nder 35 U.S.C. § 284 ("Section 284"), when a Court finds that a patent has been infringed, 'the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.' One way damages may be measured under Section 284 is by the patentee's lost profits. Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009). The burden of proving damages is on the patentee. Id."

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District Court Grants Motion to Reconsider Summary Judgment Motion after Supreme Court's Decision in Limelight v. Akamai

August 20, 2014

In this patent infringement action, FedEx moved for reconsideration after the district court had denied its motion for summary judgment regarding the plaintiff's claim for inducing patent infringement. FedEx moved for reconsideration based on the Supreme Court's recent decision in Limelight Networks, Inc. v. Akamai Technologies, Inc., 134 S. Ct. 2111 (2014).

The district court first analyzed whether the motion to reconsider was procedurally proper. "Under Local Rule 7-18, a motion for reconsideration may be made on the following grounds only:

(a) a material difference in fact or law from that presented to the Court before such decision that in the exercise of reasonable diligence could not have been known to the party moving for reconsideration at the time of such decision, or (b) the emergence of new material facts or a change of law occurring after the time of such decision, or (c) a manifest showing of a failure to consider material facts presented to the Court before such decision. No motion for reconsideration shall in any manner repeat any oral or written argument made in support of or in opposition to the original motion."

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Motion to Stay Pending Inter Partes Review Denied Where Plaintiff Had Prevailed in Previous Inter Partes Review

August 18, 2014

In this patent infringement case, Plaintiff, CTP Innovations, LLC ("CTP") sued V.G. Reed and Sons, Inc. ("Reed") to stop Reed's alleged infringement of two United States patents, which pertain to systems and methods of providing publishing and printing services by a communication network involving computer to plate technology.

Reed moved for a stay of the action pending a determination of an inter partes review ("IPR") before the Patent Trial and Appeal Board (the "PTAB"). In the motion, Reed asserted "that the stay is appropriate because the PTAB's resolution of invalidity issues regarding the two patents will simplify the instant action and no party will be prejudiced by the stay.

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Court Excludes Plaintiff's Experts Where Experts Failed to Comply with Rule 26 Disclosures

August 13, 2014

In this patent infringement action, the defendants, Hangzhou Langhong Technology Co., Ltd. and Langhong Technology USA Inc., moved to exclude the testimony of plaintiff's experts on infringement and damages. The district court had previously issued a scheduling order setting March 26, 2014 as the deadline for the parties to designate their experts and to make the disclosures required by Rule 26(a)(2) of the Federal Rules of Civil Pocedure.

As explained by the district court, Rule 26(a)(2) requires that the expert's report must contain, inter alia, a complete statement of all opinions the witness will express and the basis and reasons for them. Fed. R. Civ. P. 26(a)(2)(B)(i). The district court then found that "[t]he report prepared by Rogers provides virtually none of the information required by Rule 26(a)(2)(B)(i). Plaintiff's response to the motion asserts as an excuse for noncompliance lack of sufficient discovery before Rogers prepared his report for him to have the information he would need to comply with the requirements of Rule 26(a)(2)(B). After a thorough review of the material provided by the parties, the court is not persuaded that plaintiff's excuse for noncompliance with the scheduling order as to Rogers has merit. Plaintiff had ample time before Rogers prepared and submitted his report for the collection of whatever information it needed for Rogers to provide the information in his report required by Rule 26(a)(2)(B)(i)."

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Motion to Stay Enforcement of Judgment Denied Where Defendant Was Found to be a Willful Infringer and Offered Inadequate Security

August 11, 2014

On May 16, 2014, the district court entered Judgment on a jury verdict in favor of Plaintiff Global Traffic Technologies, LLC ("GTT") in the amount of $5,052,118, enhanced damages in the amount of $2,526,059, and prejudgment interest in the amount of $923,965, plus $1,384.14 for each day after October 31, 2013. Defendants Morgan and KME requested that the district court stay execution of judgment and waive the supersedeas bond requirement. Defendant STC requested that the district court stay execution of judgment with an authorized bond of $100,000, together with pending patent applications in the field of traffic signal preemption.

As the district court explained, "[a]n appellant may obtain a stay of execution of judgment pending appeal when an appellant posts a supersedeas bond, "in the full amount of the judgment plus interests, costs, and damages for delay." Fed.R.Civ. P. 62(d); Corporate Comm'n of the Mille Lacs Band of Ojibwe Indians v. Money Ctrs. of Am., Inc., No. 12-1015, 2013 U.S. Dist. LEXIS 176796, at *2 (D. Minn. Dec. 17, 2013) (citing New Access Commc'ns LLC v. Qwest Corp., 378 F. Supp. 2d 1135, 1138 (D. Minn. 2005) (Tunheim, J.)). The Court maintains the discretion, however, to waive the bond requirement and stay enforcement of the judgment without a bond."

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Revenue-Driven Licensing Activities Fail to Satisfy Domestic Industry Requirement for ITC Action

August 7, 2014

The ALJ terminated the ITC investigation upon granting respondent's motion for summary judgment for lack of domestic industry, finding that the complainant's (a licensing entity) patent-related activities were solely revenue-driven rather than production driven. Optical Disc Drives, Components Thereof, and Products Containing the Same, 337-TA-897 (ITC July 30, 2014, Order) (Lord, ALJ). This distinction was key to the ALJ's ruling.
To satisfy the so-called "economic prong" of the domestic industry requirement under 19 U.S.C. § 1337(a)(3), a complainant must show that an industry in the United States exists with respect to the articles protected by the asserted patent in the form of:

(A) significant investment in plant and equipment;
(B) significant employment of labor or capital; or
(C) substantial investment in its exploitation, including engineering, research and development, or licensing.

The legal question at issue was "whether a licensing entity whose patent-related activities are purely revenue driven can choose to prove the existence of a domestic industry under subsections (A) and (B) of section 337(a)(3), avoiding the requirements of subsection (C)." The ALJ answered in the negative, holding that it would be contrary to the statute and case law to allow a purely revenue-driven licensing entity to avoid the requirements of subsections (A) and (B), by asserting a domestic industry under subsection (C).

The ALJ explained the well-established law that where licenses are directed to development or production using patented technology, a licensor can establish a domestic industry by showing the significant expenditures of its licensees under subsections (A) and (B). Citing Certain Variable Speed Wind Turbines and Components Thereof, Inv. No. 337-TA-376, Remand Comm'n Op., 1998 WL 35465896 (Feb. 2, 1998). However, in the absence of production-driven licensing, the case law under subsection (C) requires evidence of a revenue-driven licensing entity's own patent-related activities and expenditures. See, e.g., Certain Multimedia Display & Navigation Devices and Systems, Components Thereof & Prods. Containing the Same ("Certain Multimedia Display"), Inv. No. 337-TA-694, Corrected Comm'n Op. (Aug. 8, 2011).

The ALJ identified two lines of case authority that applied to complainant's establishment of the economic prong of domestic industry: Schaper Manufacturing Co. v. Int'l Trade Comm'n, 717 F.2d 1368 (Fed. Cir. 1983) and Certain Multimedia Display. The Schaper line of cases find domestic industry under subsections (A) and (B) where licensees engage in domestic activities under licenses that relate to development or production of patented articles, whereas Certain Multimedia Display construed subsection (C) to require an entity whose only relationship to the patent is revenue driven to prove substantial qualifying expenditures of its own to establish a domestic industry. See, e.g., Certain Multimedia Display, Corrected Comm'n Op. at 25 (finding no domestic industry based, in part, on the lack of "industry-creating, production-driven licensing activity that Congress meant to encourage").

On summary judgment, the ALJ found no issue of genuine fact relating to complainant Optical Devices' failure to satisfy this economic prong of domestic industry. In its complaint, Optical Devices relied exclusively on its agreements with various licensees, namely Sony Corporation, Sharp Corporation, and Sharp Electronics Corporation, to establish a domestic industry. The ALJ found that these licenses were not directed at "the development or production of patented goods," but rather, were focused on efforts to monetize patents by demanding that companies already manufacturing products enter into license agreements with Optical Devices. Such monetization activities have been classified by the ITC as "revenue-driven." Citing Certain Multimedia Display, Corrected Comm'n Op. at 25 n.20.

Having failed to present evidence of production-driven licensing activities pursuant to Schaper (i.e., production generated by its licensees by virtue of the licensing), the ALJ found that Optical Devices also failed to prove any expenditures of its own relating to the asserted patents pursuant to Certain Multimedia Display.

Accordingly, the ALJ held that the Investigation could not proceed.

District Court Denies Preliminary Injunction Where Plaintiffs Could Not Show Irreparable Harm Because Defendant Is Large and Well Established Company

August 6, 2014

Plaintiff Hill-Rom Company, Inc. ("Hill-Rom") filed a motion for a preliminary injunction against General Electric Company ("GE"). The district court began its discussion by noting that "[t]he Federal Circuit has said that preliminary injunctions are a "drastic and extraordinary remedy" that should not routinely be used. Nat'l Steel Car. Ltd. v. Canadian Pac. Rv., Ltd., 357 F.3d 1319, 1324 (Fed. Cir. 2004). There are four factors to consider when determining whether to grant a preliminary injunction in a patent infringement case: 1) likelihood of success on the merits; 2) irreparable harm; 3) the balance of hardships; and 4) the public interest. Celsis In Vitro. Inc. v. CellzDirect. Inc., 664 F.3d 922, 926 (Fed. Cir. 2012)."

The district court then focused on the irreparable harm factor. "The most salient of the factors in the present case is the second, concerning irreparable harm. The Court FINDS that the Plaintiffs have not made a sufficient showing that., without a preliminary injunction, they will suffer irreparable harm. General Electric Company ("GE") is a very large and well established corporation; any harm that Hill-Rom may suffer from GE manufacturing and selling its AgileTrac Hand Hygiene System ("AgileTrac'') can be quantified and the Plaintiffs will be able to be made whole. There is no question that the Plaintiffs will be able to collect on a judgment, should they win one.

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Motion to Set Aside Default Where Defendant Waited Too Long to Obtain New Counsel

August 4, 2014

Plaintiff Fleet Engineers, Inc. ("Fleet") develops, manufactures, and sells after-market products for the trucking industry. Defendant Tarun Surti, the president of Mudguard Technologies, LLC ("Mudguard"), owns a mud flap patent on which this lawsuit is focused. Fleet filed a complaint which asserted three claims: (1) a request for a declaratory judgment of non-infringement, (2) a request for a declaratory judgment of patent invalidity, and (3) tortious interference with a business relationship. Defendants answered the complaint and filed three counterclaims: (1) patent infringement, (2) breach of contract, and (3) misappropriation of trade secrets.

After the Court held a claim construction hearing, counsel for the defendants requested leave to withdraw from the lawsuit. On September 24, 2013, the Court granted the motion and ordered the defendants to retain new counsel within 30 days. Defendants requested an extension until December 20. On October 25, 2013, this Court gave Defendants an additional 28 days to find new counsel, extending the deadline to November 25, 2013. On November 22, Defendants again requested additional time to hire counsel, which the district court granted but warned Defendants that if counsel did not enter an appearance by December 20, default would enter against Mudguard.

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Court Denies Monetary Sanctions Based on Overdesignation of Documents As Confidential-Outside Counsel Eyes Only But Orders Defendants to Re-Designate Documents and Pay Cost for Redesignating Documents in the Plaintiff's Document Management System

July 31, 2014

In this patent infringement action brought by plaintiff Trustees of Boston University ("BU") , BU alleged that defendants infringed U.S. Patent No. 5,686,738 (the "'738 Patent"), which pertains to light emitting diodes ("LEDs"). BU moved for sanctions against Defendants and their counsel for overdesignating documents as "Confidential-Outside Counsel Eyes Only."

After BU served document requests for emails, Defendants ran search terms that produced over 3.5 million pages of emails. The Defendants then designated every document of that production as Outside Counsel Only, but the Defendants did not review each document to determine whether it in fact contained confidential information. As explained by the district court, "[b]ecause there was not enough time to review each document and meet [the 30-day] deadline, Defendants reviewed the documents quickly and determined that the emails generally met the requirement of the Global Protective Order, and marked them "CONFIDENTIAL-OUTSIDE COUNSEL EYES ONLY."'

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Court Stays Discovery Request for Pre-Litigation Filing Investigation as Premature until Case Concludes

July 29, 2014

The amended complaint filed by Gene Neal and Kennieth Neal alleged claims for patent infringement and violations of California state law for unfair competition and false advertising. The Defendants, pursuant to Rule 26(d), Federal Rules of Civil Procedure sought "an Order regarding the handling of discovery concerning Plaintiffs' pre-filing investigation of Defendants' products which Plaintiffs allege the asserted patents (see, e.g., Doc. No. 34 ¶ 17). The parties were unable to reach an agreement concerning the handling of discovery concerning Plaintiffs' pre-filing investigation after numerous meet and confers and exchange of correspondence. Instead of rushing to the Court to file a motion to compel, Defendants' proposal strikes the right balance between discovery of this relevant information and avoidance of unnecessary litigation costs and therefore Defendants believe that the Court should enter " an appropriate order.

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Supreme Court's Decision on Indefiniteness Constitutes Basis to Reconsider Prior Claim Construction Order But Does Not Result in Change of the Claim Construction

July 23, 2014

In this patent infringement action, Defendant Lighthouse Photonics Corporation's ("Lighthouse") moved to reconsider the Court's Claim Construction Order. Lighthouse argued three reasons for reconsideration: "first, Newport withheld discovery regarding its relevant prior art patents; second, a recent Supreme Court decision constitutes an intervening change in the law; and third, the Court adopted a construction that had not been advanced by either party until the reply briefing."

The district court, turning to the first basis for the motion to reconsider, stated: "There has been no shortage of sniping and finger-pointing in this case, and the briefing on this Motion is no exception. The parties vigorously dispute whether Newport withheld discovery regarding its prior art patents: No. 4,756,003 ("'003 Patent") and No. 5,410,559 ("'559 Patent"). The Court finds no need to wade into the quagmire over who withheld what, because it exercises its "inherent jurisdiction to modify, alter, or revoke" interlocutory decisions. See Martin, 226 F.3d at 1048-49. Specifically, the Court finds that the presentation of two related patents, which were allegedly withheld by Newport, constitutes good cause to reconsider the May 7, 2014 claim construction order."

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Motion to Stay Pending CBM Review Granted Where Non-Practicing Entity Did Not Seek Preliminary Injunction

July 21, 2014

Boku, Inc. ("Boku") filed a CBM petition with the PTAB seeking review of the patentability of Plaintiff's U.S. Patent No. 7,273,168 (the "'168 patent"). The petition challenged all claims of the '168 patent on grounds that they are indefinite, or anticipated by or rendered obvious by one or more of four prior art references not considered by the Patent Office during prosecution of the patent -in-suit.

Boku moved to stay the litigation pending the CBM review based on Section 18(b) of the America Invents Act ("AIA"). As explained by the district court, this statute requires the court to weigh four factors when determining whether to stay litigation pending CBM review, including (1) whether a stay, or denial thereof, will simplify issues and streamline the trial, (2) whether discovery is complete and whether a trial date has been set, (3) whether a stay, or denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party, and (4) whether a stay, or denial thereof, will reduce the burden of litigation on the parties and the court.

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Image Processing Patent Held To Be An Abstract Idea Under Alice Corp.

July 18, 2014

Digitech Image Technologies ("Digitech") asserted U.S. Patent No. 6,128,415, directed to the generation and use of device profiles for digital image processing system against numerous defendants, including Xerox and Fujifilm Corporation. Digitech appealed the district court's finding on summary judgment that the asserted claims were invalid under 35 U.S.C. §101. Specifically, Digitech argued that the district court erred in finding (1) that the device profile claims are directed to a collection of data that lacks tangible or physical properties and (2) that the asserted method claims encompass an abstract idea not tied to a specific machine or apparatus. The Federal Circuit affirmed the decision of the district court.

The '415 patent was aimed at reducing distortion of an image's color and spatial properties caused by imaging devices (e.g. digital cameras, TVs, printers) due to the fact that such devices differ in the range of colors and spatial information that they utilize. According to the court, independent claims 1 and 26 described a device profile as "a collection of information; specifically, a description of a device dependent transformation of spatial and color information":

1. A device profile for describing properties of a device in a digital image reproduction system to capture, transform or render an image, said device profile comprising: first data for describing a device de-pendent transformation of color information content of the image to a device independent color space; and second data for describing a device de-pendent transformation of spatial in-formation content of the image in said device independent color space.

26. A device profile for describing properties of a device in a digital image reproduction system to capture, transform or render an image, said device profile comprising data for describing a device dependent transformation of spatial information content of the image to a device independent color space, wherein through use of spatial stimuli and device response for said device, said data is represented by spatial characteristic functions.

Digitech argued that the claimed "device profile" was patent eligible subject matter under section 101 because it was a tangible object that was an "integral part of the design and calibration of a processor device within a digital image processing system." In particular, Digitech argued that the device profile is "hardware or software within a digital image processing system" and exists as a tag file appended to a digital image. The court disagreed, finding that Digitech's position was unsupported by the claim language, which did not describe the device profile as a tag or any other embodiment of hardware or software ("[T]he claims encompass all embodiments of the information contained in the device profile, regardless of the physical process through which this information is obtained or the physical medium in which it is stored."). Thus, the claimed device profile was viewed as a collection of information or data in an "ethereal, non-physical form" that was ineligible subject matter under section 101.

Similarly, the patent's method claim for generating a device profile was found to be ineligible subject matter because it was directed at an abstract process of organizing information through mathematical correlations (i.e. combining two data sets into a single data set, the device profile) that was not tied to a specific structure or machine and "did not require input from a physical device." The court noted the established principle that claims falling within one of the four subject matter categories (e.g. process) may nevertheless be ineligible if they encompass laws of nature, physical phenomena, or abstract ideas and the Supreme Court's recent affirmation that fundamental concepts by themselves, are ineligible abstract ideas. Citing Diamond v. Chakrabarty, 447 U.S. at 309 and Alice Corp. v. CLS Bank Int'l, 573 U.S. ___, No. 13-298, slip op. While Alice recognized that a claim may be eligible if it includes additional inventive features beyond just the abstract idea, recitation of an abstract idea does not become patent eligible "merely by adding the words 'apply it'." Bancorp Servs., LLC v. Sun Life Assurance Co. of Can., 687 F.3d 1266, 1276 (Fed. Cir. 2012).

The court's reasoning suggests that the patent could have been in compliance with section 101 had its claims been expressly tied to an image processor and its use of the "device profile" to capture, transform or render the digital image. Instead, the claims only recited the manipulation of existing data (i.e., measured chromatic stimuli, spatial stimuli, and device response characteristic functions) into a new form (device profile). The claims' reference to a "digital image reproduction system" in the preamble was found to be insufficient for imparting such limitations. Citing Bicon, Inc. v. Strau-mann Co., 441 F.3d 945, 952 (Fed. Cir. 2006) (holding that the preamble does not limit claim scope if it "merely states the purpose or intended use of an invention.") The claims were simply too broad and lacked the requisite tangible/ physical limitations to go beyond abstract mathematical algorithms.