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Upcoming Webinar: COVID-19 and the Case for Force Majeure in California

Join us as two California business trial lawyers present “COVID-19 and the Case for Force Majeure in California”

The webinar will take place on Wednesday, May 27 at 10:00 AM – 11:00 AM Pacific Time. Register now.

Businesses throughout California are suffering the crippling economic consequences triggered by the COVID-19 pandemic. Looking for relief, many have been stymied by force majeure (so-called “Act of God”) clauses. Our speakers will discuss how to determine if you have a legitimate claim, and explore critical questions about force majeure in California, including:

  • What is a force majeure?
  • What constitutes force majeure in California?
  • How to determine when to assert force majeure?
  • Does force majeure trigger business interruption insurance?
  • What are the practical considerations for addressing force majeure in the
    COVID-19 Pandemic?

Our speakers include:

  • Stan Gibson, Partner, Jeffer Mangels Butler & Mitchell LLP

Stan is an experienced business trial lawyer and is the Chair of JMBM’s Patent Litigation Group. Among his numerous successes is the $570M breach of contract and patent infringement verdict for his client in Medtronic v. Michelson, which is listed in the National Law Journal’s Hall of Fame, a list of the 100 highest grossing verdicts since 2003.

 

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District Court Determines No Personal Jurisdiction Exists Under Rules (4)(k)(1) and (4)(k)(2) of the Federal Rules of Civil Procedure Where Plaintiff Could Show Only a Single Infringing Unit Was Sold in the State and Defendant’s Website and Other Activities Were Not Directed at Residents of the State

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Stan Gibson and Julia Consoli-Tiensvold

In Miller Industries Towing Equipment Inc., v. NRC Industries, Plaintiff Miller Industries Towing Equipment Inc. (“Plaintiff” or “Miller”) alleged infringement of a patent by NRC Industries (“Defendant” or “NRC”). The patents in question involve towing recovery vehicles designs and uses. Defendant moved to dismiss under Federal Rule of Civil Procedure (“FRCP”) 12(b)(2), alleging that the Court lacked personal jurisdiction over NRC. Defendant also moved to dismiss the claims under FRCP 12(b)(6), but this was ultimately determined to be moot in light of the Court’s determination.

Plaintiff argued that the district court could exercise personal jurisdiction over NRC as it has exercised sufficient “minimum contacts” with the state of Tennessee under Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945), because NRC advertises in two magazines that have Tennessee subscribers, posts training videos to nationally accessible third-party websites (such as YouTube), maintains a website accessible by Tennessee residents, participates in trade shows where NRC markets its infringing products to Tennessee residents, and because NRC has sold the infringing product to at least one Tennessee resident.

The legal standard for determining whether a court may exercise personal jurisdiction over a defendant is based on FRCP 4(k)(1) and 4(k)(2). Touchcom, Inc. v. Bereskin & Parr, 574 F.3d 1403, 1410 (Fed. Cir. 2009). Continue reading

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

A Three Part Series

By Stan Gibson

Part 3 – Practical Guidance: Force Majeure and the COVID-19 Pandemic

 

See Part 1 – What Constitutes a Force Majeure

See Part 2 – Asserting Force Majeure

See Part 3 – Practical Guidance

Practical Guidance for Addressing Force Majeure in the COVID-19 Pandemic

Parties on both sides of a contract must weigh their options when faced with a force majeure event and should take steps to ensure that they have a clear understanding as to their obligations, the claims being made by the other contracting party, and what steps they can take to mitigate their losses and/or protect their rights.

There are a number of steps a party can and should take to limit any potential liability in the midst of the current COVD-19 Pandemic.

Review the Terms of Your Contract

First, review the specific terms of your contract. Parties may contract around certain risks that might otherwise be viewed as a force majeure event. You will need to know what your obligations are under the contract and whether you, or the other contracting party, will still be expected to perform even in the face of these unprecedented circumstances. For example, a contract may include specific provisions that a strike or national emergency does not relieve a party of its obligations under the contract.

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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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