Motion to Dismiss Granted Where Patent Infringement Complaint Alleged Joint Infringement But Failed to Allege Direction and Control

April 16, 2014

Plaintiff Nu Flow Technologies (2000) Inc. ("Nu Flow) filed a patent infringement action against Defendant A.O. Reed & Company ("A.O. Reed") and ten Doe defendants based on two patents U.S. Patent No. 7,849,883 B2 (the '883 patent) and U.S. Patent No. 6,691,741 132 (the '741 patent). The '883 patent, entitled "Liner Assembly for Pipeline Repair and Methods of Installing Same," claims a liner assembly used to repair a pipeline. The '741 patent, entitled "Installation Assemblies for Pipeline Liners, Pipeline Liners and Methods for Installing the Same," claims an installation assembly and a method for installing a liner in a pipeline.

A.O. Reed moved to dismiss the complaint, arguing that the Complaint should be dismissed because Nu Flow's allegations of joint infringement fail to meet the pleading standard of Twombly and Iqbal. Joint infringement exists only "if one party exercises control or direction over the entire process such that every step is attributable to the controlling party, i.e., the mastermind." Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1329 (Fed. Cir. 2008) (internal quotation marks omitted).

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Declaratory Judgment Action Dismissed for Lack of Personal Jurisdiction Where Contacts in Jurisdiction Occurred Before, and Were Unrelated to, Patent-in-Suit

April 14, 2014

Digital Ally, Inc. ("Digital Ally") filed a declaratory judgment action pertaining to patent infringement against Utility Associates, Inc. ("Utility"). Utility filed a motion to dismiss for lack of subject matter and personal jurisdiction.

Digital Ally is a Nevada corporation with its principal place of business in Kansas. It sells advanced digital video systems to consumers, including law enforcement agencies, across the country. Utility, which is a competitor of Digital Ally, is incorporated in Delaware and has its principal place of business in Georgia. Utility has no offices in Kansas and none of its employees or sales agents reside in Kansas. Utility is not registered to do business in Kansas, but it does sell some products to a few customers in Kansas.

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Misstatements on Application for In Forma Pauperis Status Results in Dismissal of Patent Infringement Action with Prejudice

April 9, 2014

Plaintiff filed a patent infringement action and also filed an application to proceed in pro per and In Forma Pauperis. The defendants file a motion to dismiss the action based on false statements in the application.

As the district court explained, "[t]he Application requires the applicant to detail all sources of income he has received within the last twelve months and to declare under penalty of perjury that all of the information provided is true. The Declaration further notes that the applicant understands that a false statement may result in a dismissal of the claims."

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Carnegie Mellon v. Marvell: District Court Enhances Damages to $1.5 Billion

April 7, 2014

After a jury returned a verdict against Marvell for patent infringement, Carnegie Mellon ("CMU") filed several motions, including for prejudgment interest, for supplemental damages, for enhanced damages, for an ongoing, increased royalty rate triple what the jury found, and for a permanent injunction.

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Stay Pending Resolution of Covered Business Method Review Denied Where Case Was Narrow and Trial Date Was Already Set

April 2, 2014

Plaintiff SecureBuy, LLC ("SecureBuy") filed a Motion to Stay Proceedings pending resolution of a Covered Business Methods ("CBM") review at the Patent Trial and Appeals Board ("PTAB"). When the motion was stayed, the PTAB had not yet granted review of the CBM petition.

Before ruling on the stay request, the district court had previously heard argument on defendant's motion for preliminary injunction or in the alternative for expedited discovery and an expedited trial. The district court denied the preliminary injunction but granted Defendant's request to expedite the case and scheduled trial for August of 2014. When it opposed the preliminary injunction and expedited trial, SecureBuy made similar arguments as it raised in its motion to say pending the CBM review, which the district court considered when ruling on the previous motion.

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Quantum World v. Dell: After Receiving Numerous Daubert Motions, District Court Lays Down Strict Time Limits for Trial and Rules That Daubert Motion Hearing Time Will Count Against Time Limits for Party That Brings and Loses a Daubert Challenge

March 31, 2014

In this patent infringement case, the district court received a number of motions to strike portions of expert reports and to exclude the testimony of certain experts. As stated by the district court, it received the following: "Defendants' Motion to Strike Portions of the Expert Report and Exclude the Testimony of Richard Belgard Regarding Infringement by Systematically Reseeding Pseudorandom Number Generators" [#247 filed January 27, 2014]; plaintiffs "Motion to Exclude Testimony of Dell Expert Witness Dr. Markus Jakobsson" [#252 filed January 31, 2014]; the "Defendants' Motion to Strike Portions of the Expert Report and Exclude the Testimony of Dr. Stephen Melvin Regarding Statistical Confidence Levels" [#254 filed February 3, 2014]; "Defendant Dell Inc.' s Sealed Motion to Exclude the Proposed Expert Testimony of Robert Mills" [#258 filed February 5, 2014]; and plaintiffs "Sealed Motion to Exclude the Proposed Expert Testimony of Stephen Magee" [#266 filed February 13, 2014].

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Potter Voice v. Microsoft: Microsoft's Request to Exclude Expert Declaration for Claim Construction Denied Where Microsoft's Arguments Went to Weight and Credibility, Not to Admissibility

March 26, 2014

In this patent infringement action, Potter Voice submitted an expert declaration of David Klausner for the purpose of claim construction. Microsoft moved to exclude the declaration under Fed.R.Evid. 702.

The district court explained the background of the patent as follows: In 1998, United States patent number 5,729,659 (the '659 patent) was issued to Jerry L. Potter. Plaintiff, Potter voice Technologies LLC, now owns the '659 patent. The '659 patent describes a method and apparatus for controlling a digital computer using oral input. The patent infringement claims alleged in Potter's complaint are based on four distinct software products: (1) BlackBerry Voice Commands; (2) Google Voice Search; (3) Google Voice Actions; and (4) Windows Speech Commands. Potter alleges that the defendants infringe the '659 patent when these software products are used on mobile phones.

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GPNE v. Apple: Court Precludes Retention of Experts Where Expert Had Consulted for Apple's Competitors

March 24, 2014

Plaintiff GPNE Corporation ("GPNE") filed a patent infringement action against Apple. As part of its case, GPNE wanted to retain two experts, Ghobad Heidari and Kamran Etemad, and Apple objected for two reasons. First, as explained by the court, Apple argued that if Heidari and Etemad are given access to Apple's confidential information (as would be required for them to act as experts), Apple would suffer extreme prejudice in the marketplace as both Heidari and Etemad are active in patenting mobile technology. Second, Apple argued that the patent prosecution bar within the protective order prohibited Heidari and Etemad from being granted access to its proprietary information, as both men have patent applications now pending before the Patent and Trademark Office.

After citing some recent decisions from the Northern District of California on experts, the court considered the risk to Apple if Heidari were granted access to its confidential information. "Heidari presents precisely the same risks as the expert in Symantec. He is an active consultant in the field at issue. In the very recent past, he has worked for several of Apple's competitors, and there has been no representation or agreement that he will not do so again in the very near future. Apple points out several ways in which the information to which he would be exposed as an expert in this case could influence his work as a consultant on patent licensing, reverse engineering, and portfolio management, even if he were to make his best efforts to cabin the information off in his mind, and the court finds these concerns persuasive. Furthermore, despite the concerns raised by Apple, GPNE has not identified any unique qualifications or knowledge that make Heidari better suited than any other expert to serve."

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Inter Partes Review Terminated Where PTAB Found That Challenged Claims Were Indefinite

March 19, 2014

Petitioner, BlackBerry Corporation and BlackBerry Limited ("Blackberry"), filed a petition on October 30, 2012, for an inter partes review ("IPR") of claims 1-12 of US Patent No. 6,871,048 ("the ‟048 patent"). On March 18, 2013, the Board instituted trial on claims 1-12 of the ‟048 patent based on all grounds of unpatentability alleged in the petition.

After institution of trial, Patent Owner, MobileMedia Ideas LLC ("MobileMedia"), filed a patent owner response, Blackberry filed a reply, and an oral hearing was held on October 18, 2013. On December 16, 2013, the parties filed a joint motion to terminate the IPR proceeding, which the PTAB only granted in part, terminating the proceeding with respect to Blackberry, but not with respect to MobileMedia.

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Federal Circuit Rules that Conduct Before Patent-Issuance Can Provide 'Case or Controversy' for Declaratory Relief

March 17, 2014

Accused infringers have long relied on the Declaratory Judgment Act ("the Act") to bring actions against patent owners to clear any cloud over their accused business activities. To that end, the Act has served as a powerful tool. Accused infringers do not even have to wait to be named as a defendant in an infringement lawsuit before bringing their own cause of action, as a plaintiff, for declaratory relief that the patent-at-issue is invalid, unenforceable, or not infringed. The Act, however, requires that the party seeking declaratory relief establish that a "case or controversy" exist from the moment it files its action. Although many courts, including the Supreme Court, have provided guidance as to where to draw the line above which a sufficient case or controversy exits, that line is still a murky one. What actions must a patent owner take--and when must it take those actions--to trigger the requisite case or controversy allowing an accused infringer to file its action first?

Well, the Federal Circuit recently added further guidance on the issue. In Danisco US, Inc., v. Novozymes A/S, a unanimous panel of the Federal Circuit reversed a district court and held that the patent holder's conduct prior to the issuance of the patent can form a sufficient case or controversy for declaratory relief.

The relationship between the parties in the case provides important background. The declaratory judgment plaintiff, Danisco, and defendant, Novozymes, compete to develop and supply Rapid Starch Liquefaction ("RSL") products. Since about 2001, Novozymes had sued Danisco for patent infringement numerous times. In one of those suits, Novozymes amended a pending patent application to claim one of Danisco's new products, then sued Danisco on the same day the patent issued.

In 2011, the PTO issued to Danisco a patent that claimed an enzyme that is the active ingredient in Danisco's RSL products. Shortly after the issuance of Danisco's patent, Novozymes again amended one of its then-pending patent applications to claim what it believed to be the same active ingredient claimed in the Danisco patent and used in Danisco's products. Because Novozymes's patent application allegedly had an earlier priority date, Novozymes requested that the PTO initiate an interference in order to rule that Novozymes was the party entitled to a patent claim covering the subject matter. The PTO examiner, however, rejected Novozymes's request on the grounds that, under his claim interpretation, Danisco's issued claim did not meet some of the limitations of Novozymes's amended claims and, therefore, no interferences was necessary or proper. In response, Novozymes disagreed and filed a request for continued examination, challenging the examiner's conclusions regarding Danisco's "interfering [] patent." For his part, the examiner rejected the request. Later, although under no regulatory obligation to do so, Novozymes submitted public comments to the PTO to, in its words, "clarify [for] the record," its belief that the parties' respective claims covered the same subject matter. Novozymes further commented that it refused to "acquiesce" to or otherwise be "estopped" by what it deemed to be the examiner's erroneous and "overly narrow" view of the amended claim in Novozymes's patent application.

On the same day the Novozymes application issued as a patent, Danisco filed declaratory judgment actions in federal district court that its products, including the active ingredient, did not infringe the Novozymes patent and that the Novozymes patent was invalid. Danisco also asserted that, to the extent the parties' respective patent claims covered the same subject matter, Danisco's patent had priority. Novozymes moved to dismiss Danisco's action for lack of the case or controversy required to bring a declaratory judgment action.

The District Court for the Northern District of California granted the motion to dismiss. Although the district court acknowledged that, based on past behavior, the Novozymes patent presented a substantial risk to Danisco, it nevertheless found that a case or controversy did not exist as of the day Danisco filed its action for declaratory relief. Significantly, the district court stated that "there is no precedent for finding jurisdiction based on such pre-patent issuance events alone . . .." The district court further found that Danisco was missing an "affirmative act of enforcement" or "implied enforcement threat" by Novozymes because "pre-issuance conduct" could not satisfy that requirement.

The Federal Circuit disagreed. It ruled that there is no bright-line requirement as to whether Novozymes had affirmatively or impliedly accused Danisco of infringing its issued patent. To the contrary, the Supreme Court has never held that a declaratory judgment defendant must be preparing to file a suit before a case or controversy exits. Rather, the Court has required only that the "dispute be 'definite and concrete, touching the legal relations of parties having adverse legal interests'; and that it be 'real and substantial' and 'admi[t] of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.'"

The proper question, instead, is whether, under the totality of the circumstances, Danisco has demonstrated a "substantial risk" that the harm will occur. That question, the Federal Circuit held, must be answered in the affirmative in light of the relevant history between the parties. Specifically, Novozymes had a history of suing Danisco for infringement of its patents. In some of those cases, the Novozymes patents included claims that were amended (in the application stage) to specifically cover Danisco products. Here, Novozymes amended a claim in an application with the intention of specifically covering the active ingredient in Danisco's products and also triggering an interference with issued Danisco patent claims. And when Novozymes's actions were met with rejection by the PTO, Novozymes made clear that it would not "acquiesce" to, or be "estopped" by, the PTO's conclusions.

At bottom, the Federal Circuit held, Novozymes's actions put Danisco in the position of either abandoning its RSL products or running the risk of again being sued for infringement by Novozymes. That is "precisely the type of situation that the Declaratory Judgment Act was intended to remedy." Thus, the district court erred by dismissing the action because "the totality of the circumstances shows that Novozymes's posturing put Danisco in a position of either pursuing arguably illegal behavior, i.e., infringement, or abandoning that which it claims a right to do, i.e., make and sell the RSL products that are the embodiments of [its] patent. . .."

Patent owners and their respective infringement targets should continue to monitor developments in the nuanced caselaw regarding declaratory judgment jurisdiction. For now, the Danisco decision provides helpful insight into the delicate balance of pre-litigation activity with the sole effect of making patent rights known, on the one hand, and activity has the effect of creating the requisite case or controversy for declaratory relief, on the other hand.

VirnetX v. Apple: Court Grants Enhanced Ongoing Royalty Based on Disparity Between Position at Trial and Position Post-Judgment on Non-Infringing Alternatives

March 17, 2014

On August 11, 2010, VirnetX filed suit alleging that Apple and several other defendants infringed several U.S. Patents, which generally describe a method for transparently creating a virtual private network ("VPN") between a client computer and a target computer or disclosing a secure domain name service. The accused products were Apple's VPN On Demand and FaceTime. The jury returned a verdict in favor of VirnetX, finding that the patens were not invalid and that Apple infringed the asserted claims. To compensate VirnetX for Apple's infringement, the jury awarded VirnetX $368,160,000 in damages.

After the jury trial, VirnetX filed a motion for an ongoing royalty against Apple, requesting that the royalty rate be enhanced from .52% to 1.52%. VirnetX argued the royalty rate should be trebled because of changed circumstances in light of the Georgia-Pacific factors and Apple's now willful infringement and because the bargaining positions of the parties would have dramatically shifted in favor of VirnetX. VirnetX also relied on Apple's continuing infringement post-trial, and its inability to easily implement the non-infringing alternatives discussed at trial.

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Expert Permitted to Rely on Consultant Who Conducted "Survey" Even Though Consultant Was Not a "Survey" Expert

March 12, 2014

Zurn Industries, Inc. ("Zurn") moved to exclude Sloan Valve Company's ("Sloan") consultant witness and other testimony based on the consultant's investigation. The patent-at-issue, U.S. Patent No. 7,607,635, entitled "Flush Valve Handle Assembly Providing Dual Mode Operation" (the "'635 Patent"), pertains "to flush valves for use with plumbing fixtures such as toilets, and more specifically to improvements in the bushing of the actuating handle assembly that will provide for user-selectable, dual mode operation of the flush valve." As explained by the district court, the improvement is a mechanism that allows a user to select one of two flush volumes based on the direction of actuation of the handle: a full flush volume to evacuate solid waste from the bowl or a reduced flush volume to remove liquid waste.

The district court explained that Sloan hired Leone Flosi of Quest Consultants Int'l Ltd. ("Quest") to perform an investigation of bathrooms containing either Sloan or Zurn manual dual flush valves and handles at Sloan's damage expert, Mr. Bero's, direction. Specifically, Sloan hired Mr. Flosi and Quest to "assist in estimating the ratio of collateral product sales relative to manual dual-flush flushometer valves." Mr. Bero used this data to project and calculate the profits that Sloan allegedly lost on collateral sales of unpatented products.

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Sonic Industry v. iRobot: Court Sua Sponte Strikes iRobot's Affirmative Defenses for Failure to Comply with Federal Rules of Civil Procedure

March 10, 2014

Sonic Industry ("Sonic") filed a patent infringement action against iRobot Corporation ("iRobot"). iRobot filed an Answer and Affirmative Defenses to the patent infringement complaint. The district court issued a memorandum order sua sponte because of some "problematic aspects of that responsive pleading."

The district court noted that iRobot had regularly "coupled its invocation of the disclaimer made available under appropriate circumstances by Fed. R. Civ. P. ("Rule") 8(b)(5) with the language 'and, therefore, denies those allegations.'" The district court found that these answers were problematic. "But it is of course oxymoronic for a party to assert (presumably in good faith) that it lacks even enough information to form a belief as to the truth of an allegation, then proceed to deny it. Because such a denial is at odds with the pleader's obligations under Rule 11(b), the quoted language is stricken from each of those paragraphs of the Answer."

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Infringement Expert Excluded Where Expert Did Nothing More Than Parrot Claim Language in Infringement Analysis

March 5, 2014

Plantronics, Inc. ("Plantronics") filed a patent infringement action against ALIPH, Inc. ("ALIPH"). After expert reports were submitted, ALIPH moved to exclude the expert report of Plantronics' infringement expert.

At the heart of the action is the fit of ear buds in a human ear. However, the district court found that Plantronics' expert had done very little infringement analysis in this regard. As the district court explained, "plaintiff's infringement expert, Professor Katz, did nothing more than try defedants' products on various (unidentified) ear molds and state that defendants' products infringed based on conclusory ipse dixit recitations of claim limitations with no explanation or analysis."

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Emblaze v. Apple: Court Declines to Stay the Case Pending the United States Supreme Court's Decision in Akamai v. Limelight Networks

March 3, 2014

In this patent infringement action between Emblaze and Apple, Apple filed a motion to stay the case pending the recent grant of certiorari in Akamai v. Limelight Networks. In Akamai, a divided en banc Federal Circuit panel held that Akamai did not have to prove that any Limelight customer directly infringed its patent and that Limelight's inducement alone is sufficient to prove infringement. In motion to stay, Apple argued that a reversal of the Federal Circuit's decision could effectively end Emblaze's case because Emblaze has no proof that any Apple customer directly infringes the method claims at issue.

Emblaze opposed the motion arguing that much of the case would not be subject to Akamai because 10 of the claims in suit are apparatus claims, which Akamai does not address. Emblaze further explained that because Emblaze's damages theory is not dependent on the number of claims Apple infringes, a reversal in Akamai would substantially change the case.

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