August 2012 Archives

Verizon Successfully Moves to Sever and Stay Patent Infringement Action Based on "Customer Suit Exception"

August 31, 2012

Plaintiff Micro Enhanced Technology Inc. ("Micro") filed a patent infringement action against Videx, Inc., accusing Videx of infringing six patents. Micro subsequently amended its complaint to add two defendants, Verizon Wireless ("Verizon") and ITC Holdings Corp. ("ITC"), both of whom are customers of Videx. Verizon filed a motion to dismiss and a motion to sever and stay.

As the district court explained, Fed.R.Civ.P. 21 "gives the Court discretion to sever any claim against any party" and that "[c]onsistent with that rule, courts have recognized that when a patentee sues both the manufacturer and its customers, 'litigation against or brought by the manufacturer of infringing goods takes precedence over a suit by the patent owner against customers of the manufacturer.' Speed Spectrum Screening LLC v. Eastman Kodak Co., 657 F.3d 1349, 1357 (Fed. Cir. 2011)." The district court further explained that this doctrine is referred to as the "customer suit exception" and "is based on the recognition that a manufacturer is presumed to have a 'greater interest in defending its actions against charges of patent infringement [than a customer may]; and to guard against the possibility of abuse.' Kahn v. Gen. Motors Corp., 899 F.2d 1078, 1081 (Fed. Cir. 1989); see also Spread Spectrum Screening, LLC v. Eastman Kodak Co., 2010 WL 3516106, at *2-3 (N.D. Sept. 1, 2010) (severing customer defendants and transferring claims against manufacturer under the notion that the customers were 'peripheral' to the infringement allegations)." The district court also noted that district courts have broad discretion to control their dockets by staying proceedings, as long as the stay is not indefinite or otherwise excessive.

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Court Severs Defendants in Multi-Defendant Action But Then Consolidates the Severed Cases

August 29, 2012

Plaintiff Oasis Research, LLC ("Oasis") filed a patent infringement action against twelve defendants alleging infringement of four patents. Generally, the patents claim methods for allowing a home computer user to remotely connect to an online service system for external data and program storage in addition to increased processing capabilities in exchange for a fee. Oasis claimed that the defendants infringed the patents-in-suit by providing online backup and storage services.

Defendants asserted that joinder was not proper because Oasis had joined different defendants with different products. In May 2011, the court entered a report and recommendation denying the defendants' motion to dismiss for misjoinder, severance and transfer. The district court adopted the recommendation. After a petition for a writ of mandamus to the Federal Circuit, the Federal Circuit granted the writ, finding that the district court had applied the wrong test and remanded for the district court to apply the correct test: "Since the district court here applied an incorrect test, the district court's ruling must be set aside, and the issues of severance and joinder considered under the proper standard. We therefore grant the petition to the limited extent that we vacate the district court's order denying the motions to sever and transfer, and direct the district court to reconsider those motions in light of the correct test."

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Apple v. Samsung: Court Denies Samsung's Motion for an Adverse Jury Instruction Because Samsung Waited for "Months and Months" and Only Sought the Instruction During Trial

August 27, 2012

The epic patent battle between Apple and Samsung has proved taxing not only for the lawyers and the parties in the case, but also for the judicial system as well. In a recent decision by the Magistrate Judge handling many of the discovery issues in the case, the court pointed out just how unusual--and difficult--the case has been for the court system and how the case has burdened the court and impacted the court's limited resources.

In the middle of the trial, Samsung filed a motion for an adverse jury instruction against Apple. The Magistrate Judge began the order denying the instruction by pointing out that the parties to any case have an obligation to follow the schedule so that the court is able to control its docket, not just for one case, but all of its cases in an orderly fashion: "Before this case the undersigned thought the proposition unremarkable that courts set schedules and parties follow them. This basic division reflects a division not of power, but responsibility, for in setting schedules courts are responsible not only to the parties in one case but to parties in all cases. And the undeniable fact is that because they allow the court to allocate time and other resources in an orderly fashion, schedules and their deadlines in one case can and do impact those in every other case on a judge's docket."

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Google Attempts to Intervene at the ITC in an Investigation Initiated by Nokia against HTC

August 24, 2012

Google moved to intervene as a respondent in the investigation brought by Nokia against HTC. HTC supported Google's intervention and Nokia opposed it. Google asserted that it should be permitted to intervene as a respondent to defend its products and services and to protect its interest in the investigation. As part of this argument, Google asserted that its intervention would aid in the adjudication of the issues in five of the nine patents because the products or services accused of infringement are proprietary Android applications that are developed by Google and supplied by HTC.

In supporting Google's intervention, HTC asserted that Google is uniquely situated to provide information that is necessary for the efficient resolution of the investigation. In support of this position, HTC pointed out that Nokia's claim charts rely on features of Gmail, Google Calendar and other aspects of the Android operating system. HTC then claimed that Google's intervention would eliminate the need for complicated third party discovery regarding these features of Android.

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Apple v. Samsung: Samsung Moves to Preclude Apple from Commenting on Samsung's Failure to Call Certain Witnesses at Trial

August 22, 2012

As the patent trial between Samsung and Apple continues, Samsung moved to preclude Apple from either eliciting testimony or attorney comment on Samsung's failure to call certain witnesses to testify at trial. In its motion, Samsung asserted that permitting such testimony would be prejudicial and would be inappropriate because the district court limited the parties to a 25-hour trial time limit.

In analyzing Samsung's request, the district court noted that "Samsung has not identified, any case law supporting Samsung's requested blanket prohibition on testimony or attorney comment regarding either party's failure to call particular witnesses." Contrary to Samsung's position, the district court found that "[c]ounsel may comment to the jury on the failure to call a witness or the judge may instruct on the presumption." Food Machinery & Chem. Corp. v. Meader, 294 F.2d 377, 384 (9th Cir. 1961). Furthermore, both parties have been subject to the same time limit and other legal and procedural constraints of which Samsung complains, and both parties are equally free to point out the alleged deficiencies in the opposing party's case, to the extent permitted by law. In fact, during cross-examination of Apple's experts, Samsung asked why Apple's experts had not communicated directly with certain Apple inventors, who are still employed by Apple and available. Thus, the jury could have drawn inferences about these inventors' ability to testify and their absence at trial."

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Apple Files Motion for Protective Order to Stop Deposition in Progress: Court Denies the Motion and Sanctions Apple, Including a Potential Waiver of Attorney-Client Privilege and Adverse Inference Instructions to Remedy the Misconduct in Stopping the Dep

August 20, 2012

The plaintiff filed a patent infringement action against several companies, including Apple, asserting infringement of its 6,502,135 patent (the "'135 patent"). The '135 patent claims systems and methods that create a VPN based on a DNS request. The plaintiff claimed that Apple attempted to patent identical ideas in its own patent application, application no. 10/940,225 (the "'225 application"). During discovery, the plaintiff noticed the deposition of Mr. Christopher Allie, an engineering manager at Apple who worked on Apple's VPN on Demand and who is listed as a named inventor on the '225 application.

During the deposition, Mr. Allie testified that he had no knowledge of the '135 patent and had never seen it before. The witness was then asked to review claim 1 of the patent and, after doing so, plaintiff's counsel asked him if he still thought Apple was the first to come up with the idea of determining whether to establish a VPN based on a domain name request. To that question, Apple's counsel objected--with a speaking objection--stating that the witness should be given an opportunity to review and analyze the patent before answering. The witness then testified that he could not state whether there was overlap between the two patents.

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Administrative Law Judge at ITC Strikes Supplemental Expert Reports Filed without Permission

August 17, 2012

MyKey Technology Inc. initiated an ITC Investigation against several respondents, including Guidance Software, Digital Intelligence, Yec Co., Ltd.. and Cru Acquisitions. The parties served initial reports, rebuttal reports and supplemental reports in the Investigation. The procedural schedule only provided for initial expert reports and rebuttal expert reports. Nonetheless, the parties served supplemental expert reports and did not seek leave of the Administrative Law Judge before doing so.

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Soverain Software v. J.C. Penney: Denying Summary Judgment of Non-Infringement of E-Commerce Patent Based on Divided Infringement Theory

August 16, 2012

Plaintiff Soverain Software alleged infringement of patents relating to e-commerce transactions over the Internet involving the use of a shopping cart and online statements. The claims at issue required a system with a client-side buyer computer that was programmed to receive requests.

Defendants contended that they were entitled to judgment as a matter of law of non-infringement because they did not put the entire claimed system into use, citing Centillion Data Sys., LLC v. Quest Comm. Intl., Inc., 631 F.3d 1279 (Fed. Cir. 2011) (holding that the use of a system for purposes of infringement required a party to "control the system as a whole and obtain a benefit from it" but that "supplying the system software for the customer to use is not the same as 'using' the system"). The patented system in Centillion required that the client-side buyer computer be adapted to perform additional processing using Quest software that the user had to download and install on their computer.

Defendants argued, as did Quest in Centillion, that they did not use the claimed system because they did not use a client-side buyer computer that was programmed to receive requests. The court rejected this divided infringement argument and made a key distinction with Centillion:

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Apple v. Samsung: Apple Moves to Enforce Court Orders Regarding Admissibility of Sony Designs That Samsung Failed to Disclose Timely

August 15, 2012

As the Apple v. Samsung case approached trial, Apple filed a motion to enforce prior court orders regarding the exclusion of certain Sony Designs. The motion filed by Apple presented a key issue for the court: whether documents regarding the influence of the "Sony style" on Apple's design and development of the iPhone would be admissible at trial

This issue arose after the Magistrate Judge excluded portions of Samsung's expert reports directed toward invalidity of Apple's design patents at issue in the case because Samsung had not timely disclosed these theories during discovery. As explained by the district court, "[s]pecifically, Judge Grewal determined that Samsung had not timely amended its answers to contention interrogatories. Therefore, Judge Grewal struck portions of the Sherman Report that argued that Apple's designs were anticipated or obvious in light of prior Sony designs. Specifically, Judge Grewal struck the following: Evidence that Apple produced in-house drawings and mock-ups based on the Sony design style. The Sherman Report referenced "Sony style CAD drawings." "Apple's Sony Style Design Mock-Ups," Sony Ericsson W950," and the "Sony Ericsson K800i" in support of Samsung's contention that the D'677 Patent is invalid and that Apple's design engineers were inspired by Sony." Samsung appealed the ruling of the Magistrate Judge to the district court, and the district court subsequently denied Samsung's motion.

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Multi-District Panel Denies Transfer Where Plaintiff Had History of Licensing and Prior Actions Had Settled Early in Litigation

August 13, 2012

The patent holder, Genetic Technologies Limited ("GT") sought centralization in the District of Colorado or, alternatively, in the Northern District of California of six actions involving the alleged infringement of a patent concerning methods of genetic testing. The six actions were pending in the Northern District of California, the District of Connecticut, the Middle District of North Carolina and three actions in the District of Delaware. All of the responding defendants opposed centralization.

The Panel found that centralization was not appropriate and would not serve the convenience of the parties and witnesses or further the just and efficient conduct of the litigation. Several factors weighed against centralization, particularly the patent holder's litigation history. "Several factors weigh against centralization. The patent's litigation history suggests that most actions that have been filed in the past several years have not required significant judicial attention. GT has filed at least nine actions over the course of the past nine years against at least 24 defendants, and only one case has proceeded to claim construction." In addition, GT's extensive licensing activities also weighed against centralization. "As in In re ArrivalStar, the litigation history of similar cases suggests that the advantages centralization typically affords - i.e., reducing duplicative discovery and motion practice, etc. - may not be relevant to most litigants. Further, GT has a fairly extensive licensing history, reportedly issuing licenses for the technology to over 60 entities."

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Abaxis v. Cephied: Technical Expert Allowed to Testify Even Though He Had No Personal Experience with Technology but Opinions on Commercial Success and Copying Excluded

August 9, 2012

Plaintiff Abaxis, Inc. ("Abaxis") moved to exclude the testimony of Cepheid's technical expert because the expert had no personal experience with the technology at issue and because the expert was offering opinions on commercial success and copying. The district court granted the motion in part and denied the motion in part.

As explained by the district court, "Abaxis does not dispute Dr .William's qualifications as an expert. Rather, Abaxis contends that Dr. Williams has no personal experience with the designing or making of freeze-dried materials and lyophilization, rendering his opinions on these topics inadmissible under Rule 702 due to lack of proper foundation. Mot. 1, 3. According to Abaxis, Dr. William's deposition revealed that he was so inexperienced in these matters that his testimony on such subjects would be unreliable. Id. At 3. Thus, Abaxis argues, any opinions of Dr. Williams that require knowledge of the design or manufacture of freeze-dried materials and lyophilization, including his technical evaluation of lyophilipzation or whether the prior art is enabling, are inadmissible under Daubert. Id."

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Apple v. Samsung: Third-Party Licenses Become Public and IBM's License Data Is No Exception

August 6, 2012

The ongoing patent dispute between Apple and Samsung will have significant consequences for both companies but the impacts do not stop with just those two. During the jury trial, many third parties are likely to have data revealed about their own practices as the court has been reluctant to prohibit the public from viewing many, if not all, aspects of the trial.

IBM will be no exception. IBM filed a temporary restraining order in the Apple/Samsung patent dispute to block its confidential data from becoming public. Triggering the filing of IBM's request for a temporary restraining order was Reuters' attempt to publish the terms of a license agreement between IBM and Samsung. IBM appeared before the court requesting an order barring Reuters from publishing certain terms of the license agreement.

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ITC Denies Summary Determination Motion Where Respondent Filed the Motion Two Hours Past the Filing Deadline

August 1, 2012

The Respondent, Pandigital, Inc. ("Pandigital") in this ITC investigation filed a motion for leave to file its motion for summary determination out of time. The proposed schedule in the matter required the filing of the summary determination motion by July 17, 2012. The deadline for filing documents with the ITC is 5:15 p.m. Eastern Time and Pandigial filed the summary determination motion on July 17th, but at 7:25 p.m. Eastern Time. Accordingly, the motion was considered filed on July 18, 2012, one day late.

Pandigital argued in its motion for leave to file out of time that the document was late because its counsel mistakenly believed that the filing deadline was 11:59 p.m. Eastern Time. As Pandigial's counsel acknowledged, the ITC Handbook on Filing Procedures states:

When the Commission has imposed a deadline on the filing of a document, the Secretary will consider the document timely filed electronically only if the user has "clicked" the "confirm" button on the final confirmation page for electronic submission by 5:15:59 p.m., eastern time, on the day that the document is due to be filed, and received e-mail notification of receipt.
(ITC Handbook on filing Procedures at Section F(1).)

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