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After the jury concluded that LG Electronics had willfully infringed a patent held by Mondis Technology and awarded $45 million in damages, the district court let stand the willful infringement determination but vacated the damage award of $45 million.  The district court concluded that the damage award was based on an invalid theory because it was not properly apportioned under relevant Federal Circuit law.  LG Electronics then asserted that Mondis had waived the right to a damage award based on its reliance of an invalid damage theory under  Promega Corp. v. Life Techs. Corp., 875 F.3d 651, 666 (Fed. Cir. 2017).

In Promega, the Federal Circuit held:

But, as explained above, a patent owner may waive its right to a damages award when it deliberately abandons valid theories of recovery in a singular pursuit of an ultimately invalid damages theory. When a plaintiff deliberately takes a risk by relying at trial exclusively on a damages theory that ultimately proves unsuccessful, and, when challenged, does not dispute that it failed to present an alternative case for damages, a district court does not abuse its discretion by declining to give that plaintiff multiple chances to correct deficiencies in its arguments or the record.

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Force Majeure in California: Does the COVID-19 Pandemic Qualify?

A Three Part Series

By Stan Gibson

Part 2 – Asserting Force Majeure

 

See Part 1 – What Constitutes a Force Majeure

See Part 2 – Asserting Force Majeure

See Part 3 – Practical Guidance

When to Assert Force Majeure

As discussed in Part I, the party claiming inability to perform must be able to show that its performance is impossible or unreasonably difficult due to unforeseeable circumstances beyond its control. Typically, a claim of force majeure is made as an affirmative defense to a claim for breach of contract.

Where a force majeure event is claimed the party faced with the claim has two options. The party may “treat the repudiation as an anticipatory breach and immediately seek damages for breach of contract, thereby terminating the contractual relationship between the parties, or [they] can treat the repudiation as an empty threat, wait until time for performance arrives, and exercise [their] remedies for actual breach if a breach does in fact occur at such time.”[1] Although California law “authorizes the injured party to immediately seek damages” it does “not require the injured party to seek damages or lose the right to treat the repudiation as an anticipatory breach.”[2] If, however, a party “continues to accept the [repudiating party’s] performance, [it] may be deemed to have waived the breach.”[3]

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In this patent infringement action, Plaintiff intended to use a damage expert to support a “lost profits” measure of damages and/or a “reasonable royalty” measure of damages. Defendant moved to exclude the lost profits analysis because the damage expert ignored the testimony of Plaintiff’s corporate designee that contradicted his ultimate conclusion.

In the motion to exclude, as explained by the district court, Defendant argued that the damage expert “ignores” testimony from Plaintiff’s corporate designee (Patrick Cox) that purportedly contradicts his ultimate conclusion that, but for Defendant’s infringement, Plaintiff would have realized the sales that Defendant obtained; and (b) Mr. Holzen “lacks information sufficient to reliably determine [Plaintiff]’s profit per call, because that information is based on negotiated customer agreements, which vary by customer.”

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Force Majeure in California: Does the COVID-19 Pandemic Qualify?

A Three Part Series

By Stan Gibson

Part 1 – What Constitutes a Force Majeure

See Part 1 – What Constitutes a Force Majeure

See Part 2 – Asserting Force Majeure

See Part 3 – Practical Guidance

Introduction

The ongoing COVID-19 Pandemic is disrupting day-to-day operations, supply and delivery chains and general contractual obligations around the world and throughout California. Many companies and individuals are facing unprecedented situations and demands. In the midst of all this you may be wondering what effect, if any, the COVID-19 Pandemic will have on your, and other parties’, contractual obligations. You may have heard people throwing around the term “force majeure” as a reason for excusing performance or terminating a contract. But what does that term mean? And how does it work in California? The purpose of this series of articles is to answer these questions and more.

Although these are unprecedented times, the disruption caused by the COVID-19 Pandemic alone, may not be sufficient to excuse performance under a contract. Before making or responding to any claims of impossibility of performance due to the current situation you should carefully review the terms of your contract. Bear in mind that you, or another party, will not be excused from performance simply because performance is more difficult or expensive than anticipated. If faced with a claim of inability to perform by another party, you should ask yourself whether you are willing and able to continue performing your own contractual obligations before asserting that they are in breach. A party suing for breach of contract must be able to show that it was capable of holding up its end of the contract.

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District Court Permits Ex Parte Communication with Former Employee and Co-Inventor of Plaintiff But Orders Defendants to Turn Over Certain Email Communications

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Stan Gibson and Julia Consoli-Tiensvold

In ICM Controls Corp. v. Honeywell International, Inc., Plaintiffs ICM Control Corp. (“Plaintiffs” or “ICM”) filed a letter motion objecting to ex parte communications between counsel for Defendants Honeywell International, Inc. (“Defendants”) and a former employee and co-inventor of Plaintiffs, due to the possibility that the former co-inventor may have disclosed privileged or confidential information obtained as a result of his employment.

The former employee, Andrew Nguyen, was the co-inventor on the patent at issue in this case alongside Andrew Kadah, the current President of ICM. Mr. Kadah, during Mr. Nguyen’s employment, would have regular communications with co-inventors, including Mr. Nguyen, for the purpose of providing information to legal counsel in order to receive legal advice. Mr. Nguyen left his employment at ICM in 1997, prior to ICM applying for the patent at issue.

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In this patent infringement action, Defendants moved to amend their invalidity contentions and justified the amendment based, in part, on the replacement of its technical expert.

Defendants asserted that its “replacement technical expert (engaged in December 2019 following the passing of prior expert Thomas Gafford) completed an independent review of the current contentions in January 2020 and concluded that, in light of the Court’s rulings on claim construction and ICM’s amended infringement contentions, these additional references would support his explanation why ICM’s doctrine of equivalents theory sweeps in the prior art.”  Defendants also argued that plaintiffs will not be prejudiced by these amendments because the three additional references are “modest” and “originate from the same technical field as those previously charted references;” and because “there [are] still several months before ICM’s June 1, 2020 deadline to respond, giving its technical expert ample time to consider them.”

The court disagreed with this argument, reasoning that “[t]he fact that defendants’ replacement expert found additional prior art and publications that he deemed relevant to the validity of the `645 patent provided no justification for why the defendants or their prior expert did not marshal the same evidence from at least 25 years ago in a more timely fashion.2 The defendants may not exploit the need to replace a deceased expert as an excuse to belatedly make significant changes to their invalidity theories. See, e.g., Apple v. Samsung Elecs. Co., No. C 11-1846, 2012 U.S. Dist. LEXIS 190470, at *61-65 (N.D. Cal. June 27, 2012) (striking numerous expert opinions of invalidity based on theories not previously disclosed in the defendant’s invalidity contentions); Chemfree Corp. v. J. Walter, Inc., 2008 U.S. Dist. LEXIS 93376, at *13-16 (N.D. Ga. Aug. 26, 2008) (denying leave to amend invalidity contentions to incorporate input from a technical expert where the original invalidity contentions were prepared without expert consultation).”

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As many district courts around the country close doors on physical appearances, some district courts are ordering that civil hearings proceed either telephonically or by video. Although such an approach is common in many state courts, it is much more unusual for telephonic or video appearances to occur in district courts. As a result of COVID-19 and the length of time that may be required for continued social distancing, district courts have recognized that telephonic and video appearances will become necessary for many cases.

We should therefore expect more standing orders, similar to the one just issued in the Western District of Texas by Judge Albright. As a result of this order, there will now be specific procedures for hearings that will not require physical appearances. Hearings will continued to take place in the following manner:

All hearings for civil cases on the Waco division’s docket will continue as scheduled, but will occur telephonically. The Court will provide the dial-in information’ either via e-mail or within an order. Because there may be several hearings back-to-back, attorneys should wait until their case is called before speaking. Parties are encouraged to dial-in at least 10 minutes before the scheduled start time.

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In this patent infringement action, the parties jointly moved the court to enter an order, pursuant to Federal Rule of Evidence 502(d), to allow the parties to claw back the production of not just attorney-client information, but also proprietary and confidential information.  To support the request, the parties explained that the complex nature of the action would require the parties to disclose a large volume of electronically stored information (“ESI”) that would contain proprietary source code, software and computer systems.

The parties claimed that entry of the proposed non-waiver order was needed due to the plaintiff’s filing of and intent to file additional similar lawsuits and “to promote efficiency in discovery to prevent exhaustive, expensive privilege review efforts, to make the parties’ nonwaiver agreement binding on third parties, and to otherwise provide the parties with the maximum protection available under the law.”

After quoting Fed.R.Evid. Rule 502(d), the court noted that it had discretion to enter the order and also noted that federal courts routinely enter such orders with respect to privileged information that allows privileged information to be clawed back by the producing party.  The court then found that the provision with respect to clawing back privileged documents was acceptable, but the extension to proprietary and confidential documents was not:  “The Court finds the foregoing provisions acceptable with one exception. Rule 502 applies to the “disclosure of a communication or information covered by the attorney-client privilege or work-product protection.” Id. In the second paragraph of the proposed order, the parties attempt to extend Rule 502’s protection to information and materials beyond that narrow scope – specifically, to proprietary and confidential documents or materials. (See Doc. 56-1, ¶ 2 (emphasis added)). To the extent the parties are seeking to the expand the protection afforded by Rule 502, that request will be denied and the proposed order modified.”

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The district court appointed a special master to resolve the amount of attorney’s fees to which Defendants, including Cisco, were entitled.  As the special master noted, the fees claimed by Cisco were paid under an alternative flat monthly fee arrangement with its counsel, which in recent years, have increased as law firms have begun offering alternatives to the traditional hourly billing model.

In analyzing the fee request, the special master explained that “[t]here are advantages to such models, but also risks in circumstances like this where the scope and reasonableness of fees are subject to judicial review. This report concludes that such alternative fee arrangements, whether flat fee or otherwise, may be compensable under Section 285, but that prevailing parties must be required to satisfy appropriate reasonableness standards to ensure fairness and to protect against potential abuse.”

To evaluate whether it would be appropriate to include such arrangements in determining a fee award, the special master noted that “prudential and reasonableness concerns arise when assessing the quantum of these fees to be awarded in a fee-shifting environment. For example, flat-rate billing structures could compensate counsel at an unreasonable rate, much like a large contingency fee, which Cisco acknowledges would not be recoverable in at least an extreme case. Flat-fee arrangements also potentially sweep in fees unrelated to the fee-shifting at issue, such as the exceptional conduct here. And opportunity for mischief exists, such as in cases involving manifestly unequal resources, or where counsel enjoys multiple lines of engagement with the same client that might allow mixing and matching among different matters and the shifting of fees as part of an unwritten understanding between attorney and client.”

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