ACQIS v. IBM, 6:09cv148 (E.D. Tex. 1/20/11)
Judge: Leonard Davis
Holding: Motions for Leave to Amend Invaldity Contentions GRANTED in part and DENIED in part.
Motion for leave to amend contentions, both infringement and invalidity are creatures peculiar to patent local rules that don't permit such amendment absent good cause. But they apply familiar standards, i.e. the "good cause" requirement of FRCP 16 for amendment of stuff after the deadline for the stuff has passed. (The older I get the fewer nouns I really need - or at least can remember).
In this case, the defendant wanted to add two additional pieces of prior art, both of which were products developed by the defendants or their acquired companies. (Ed note: I argued these motions on behalf of ACQIS at the hearing). This similarity, plus the fact that the motions shared factual similarities - filed at the same time, in the same litigation and asserting many of the same facts as justification makes this opinion by Judge Davis of particular interest because he found that the facts that were not similar - which he identifies in the ruling - justified denying one but granting the other. The Court ruled from the bench at the pretrial hearing in this case, and followed up with this written opinion.
The opinion contains one other section of note, and that is Judge Davis' rejection - citing liberally to prior opinions by Judge Ron Clark of Beaumont, who has written extensively on this area - of the argument as to one of the motions that good cause wasn't required because this was really an amendment that could be made of right under P.R. 3-6(a)(2)(B) as a result of the Court's claims construction. As the standards for when such amendment is permitted are not well known, this section is worth reproducing in full:
This argument also lacks merit. IBM should have prepared for the possibility that the Court would not adopt its proposed limitation. A party cannot argue that merely because its proposed claim construction is not adopted by the Court, it is surprised and must prepare new invalidity contentions. Convolve, Inc. v. Compaq Computer Corp., 2006 WL 2527773 (S.D.N.Y. August 31, 2006) (holding that parties who have notice of the opposing party’s claim construction but do not prepare for the possibility that the court may adopt it can be held accountable); Finisar Corp., 424 F. Supp. 2d at 901 (granting motion to strike amended invalidity contentions); Nike, Inc. v. Adidas Am., Inc., 479 F. Supp. 2d 664, 667 (E.D. Tex. 2007) (Clark, J.) (granting motion to strike amended infringement contentions even though the court adopted neither party’s proffered claim constructions); Mass Engineered Design, Inc. v. Ergotron, Inc., 250 F.R.D. 284, 286 (E.D. Tex. 2008) (Davis, J.). Accepting such an argument would encourage parties to file narrow proposed constructions and hide important prior art until later in the case. Finisar Corp., 424 F. Supp. 2d at 901. For these reasons, the exception articulated by Patent Rule 3-6(a)(2)(B) is narrowly drawn to circumstances where the Court’s construction reasonably surprises a party. Accordingly, IBM is not entitled to amend as a right.
This case is set for jury selection the beginning of February in Tyler before Judge Davis.
Americans For Fair Patent Use, LLC v. The Orvis Company, Inc., 2:10cv00439 (E.D. Tex. 1/19/11)
Judge: David Folsom
Holding: Motion to Transfer Venue GRANTED
I have to admit, I'm a bit partial to Orvis - I like their luggage. And the plaintiff is going to need it after this ruling by Judge Folsom sending the case to Vermont. Following on Judge Ward's recent opinion denying a motion to transfer in a false marking case but providing a detailed recitation of the standards is this order from Judge Folsom last week transferring a case against Orvis brought by the Americans For Fair Patent Use, LLC (AFPU).
Judge Folsom started by noting that Orvis had withdrawn its motion to dismiss claiming that no false marking occurred and that the complaint didn't meet minimum pleading standards, accordingly it was denied without prejudice.
The venue analysis is of course a familiar one, and growing so even in false marking cases. Judge Folsom noted that "given the nature of the false patent marking statute, the majority of relevant sources of proof in the above-captioned case are likely to be in Orvis’ custody in Vermont". With respect to witnesses, again, this case is illustrative of most cases I have seen, as indicated by Judge Folsom's analysis:
Neither party has stated that any potential witness in this case is located or works in the Eastern District of Texas. Orvis’ potential witnesses all appear to be located in Vermont, while AFPU’s corporate representative is located in Austin, Texas. Thus, under the 100 mile rule, Vermont would be more convenient for Orvis’ witnesses, while the Eastern District of Texas would be more convenient for AFPU’s corporate representative. As discussed above, given the nature of the false patent marking statute, the majority of relevant sources of proof and witnesses will likely be presented by Orvis. AFPU even states that Orvis “may ultimately present more witnesses at trial than AFPU.” Dkt. No. 12 at 7. Therefore, it would appear that more witnesses are located in Vermont than in Austin and the District of Vermont would be more convenient overall. Thus, the Court finds this factor weighs in favor of transfer.
Judge Folsom ended up concluding that "[g]iven the specific facts and circumstances of this matter, the location of sources of proof, witnesses’ cost of attendance, and the local interest factors weigh in favor of transfer, and the remaining factors are neutral. On balance, Orvis has clearly demonstrated that the District of Vermont would be a more convenient venue than the Eastern District of Texas." AFPU raised one additional argument, though, and that was that as a private attorney general, it ought not to have to bear the burden of prosecuting its case in a remote forum. Judge Folsom rejected this argument, noting that the cases cited in support dealt with situations where the district courts both had experience with the patents-in-suit and therefore the interests of judicial economy counseled against transfer. There were no such benefits in this case.
By my count, that makes nine rulings on venue motions in the Eastern District of Texas, with eight being granted and one denied.
Had a nice surprise on the front page of this morning's Marshall News Messenger, which ran a cover story on last night's artists reception at our new offices at the Hub. The article by reporter Terri Richardson says far better than I have ever been able to what we have been trying to do over the past year. "A work of artistry and history combined," she wrote, "the Hub Shoe Store was open for business in shoes once again Monday night during a gallery reception for 'The Shoe Show' featuring seven Marshall artists. The show is part of an ongoing series of rotating paintings for the halls of the store as attorney Michael C. Smith and partners have dedicated the wall space of the restored retail outlet to historic displays as well as new renderings."
“This is a revolving art show,” she quotes artist Carol Pace as saying. “We call it ‘Art at Work’ and we’ve been doing this for two years, furnishing art to his office, and he features us on his blog to lawyers across the nation.” (yes, readers, that's you - waiting for me to quit posting on artwork, and explain the latest venue opinion in false marking cases by Judge Folsom.)
"Conference rooms boasted new art work alongside video display screens that played a slide show of photos from demolition inside the buildings and the restoration efforts," the article continues. "Artists enjoyed one [conference room], which featured unique Sam B. Hall Federal Courthouse art from when the building was first a post office."
It was a particular pleasure to have former owners Louis and Audrey Kariel attend the reception, representing the family that ran the Hub from 1897 to 2001. Thankfully things look a lot better than when we took this picture together when renovations started in the fall of 2009. One of my favorite moments of the evening was catching Louis reading the display on his dad, Louis Sr., who bought the store from his uncle Mose Weisman in 1924, and worked with Louis Jr. in it from 1947 until shortly before he passed away in 1991. Audrey told me last night that in all the years father and son worked together, she never heard a cross word. (Between them, she meant - when UT lost a ballgame there were cross words aplenty, I'm sure).
Anyway, it was a very nice event, and we were very happy to be able to recognize and honor the artists that have made this such a special place to work. Incidentally, one of the pieces of "shoe" art, Not Forgotten by Mieko Hathaway, is on its way to our firm's Sherman office, where it fits in with the cowboy boot motif my partner Clyde Siebman deems appropriate (if you've seen our firm's website at www.siebman.com you'll know what I mean).
Due to the odd pretrial conference and jury selection we are just a bit late getting invitations out, but I wanted to announce that the attorneys and staff of Siebman, Burg, Phillips & Smith LLP are hosting a gallery reception at our new offices in Marshall honoring and recognizing the local artists who prepared The Shoe Show, which is a collection of original artwork prepared specially for exhibition in our new offices - for more details on the artwork, see my prior post here. The actual "shoe" show consist of eight pieces displayed together, but we have another eleven pieces by local artists on display, as well as five in the firm's permanent collection, including the new one on the Marshall federal courthouse, details of which are here. The reception is Monday evening January 24th from 5-7 pm. Everything (except our five) are available for sale the artists tell me. (Except for what I can't stop myself from buying between now and then).
We will still be having an open house and ribbon cutting in the near future, but we wanted to have a special event for the local artists who have contributed so much to our office's appearance.
Judge: T. John Ward
Holding: Motion to Transfer Venue DENIED
For any other opinion this heading might be hyperbole, but this opinion merits a few waves of the proverbial lighter (or cell phone). As I've posted recently, every venue ruling to date that I'm aware of (two from Marshall and five from Tyler) summarily granted motions to transfer. Two others were argued in Marshall in December, including this one, and Judge Ward just issued his ruling denying the motion, making it the first venue motion denied within the district.
But the opinion is noteworthy for going through the background of the cause of action and venue law in patent cases in some detail before turning to the facts of the case. I commend the analysis to you, since it's a very useful summary of the law to crib from. (The Court even surfs over to Gray on Claims for one footnote - this is good stuff, Maynard, as we used to say in the music department at ETSU back when it was ETSU and I was in music. But I digress).
One issue to be addressed at the outset was the defendant's argument that the plaintiff's choice of forum should be accorded less than the usual deference in a false marking case. Perplexed, Judge Ward pointed out that there is no deference to the plaintiff's choice any longer - it isn't even a factor in the venue analysis. The question was whether the burden of proof in false marking cases should be the same as that set forth in the Fifth Circuit's In re Volkswagen case, or whether it should be lessened. After detailing the policy rationale underlying the false marking statute, as well as the history of the false marking statute, and the fact that given that the usual factors already favor defendants so that any contrary decision would likely ensure that all false marking cases would be heard in the defendant's home forum, Judge Ward declined to depart from the rule set forth in In re Volkswagen. In doing so, the Court was also not persuaded that the plaintiff's status as a recently-formed "marking troll" affected the analysis.
The label of a “marking troll” obviously draws its name from the “patent troll” label often ascribed to entities created solely to buy patents and then license them or bring patent infringement suits. But these entities own a legitimate property right—the patent—that they are seeking to enforce. The Court is not aware of any rules that apply differently to them. Likewise, a holding company formed to prosecute marking cases has a legitimate claim and the rules should not apply any different to them. Indeed, in the Forest Group decision, one party argued that the Federal Circuit‟s interpretation could give rise to a “new cottage industry” of such entities, but the Federal Circuit responded that “[t]his, however, is what the clear language of the statute allows.”
(Internal citation looked at, thought about, then omitted).
Judge Ward then went on to the transfer analysis, where he noted that most of the proof in false marking cases is not located with the plaintiff, but instead with the defendant or third parties. Interestingly, in this case the products at issue were not made by the defendant Target, but rather by third parties, Kimberly-Clark and Bemis. Now, guess where these third parties make the accused products? In Paris, Texas and Longview, Texas, both within the Eastern District and within absolute subpoena power of Marshall court. In fact the packaging itself is made only about twenty miles away from Marshall at Bemis' facility in Longview, and while KC makes the products in Paris, its headquarters are in Irving, Texas, which is far closer to Marshall than Wisconsin, to where transfer is sought. (And let me tell you, it is a long and miserable collection of flights to get from Texas to Wisconsin, as I discovered when I spoke at a Door County, Wisconsin bar event three years ago' Love the people - love the dairy products - hate the flights). Of course the evidence regarding the alleged intent to deceive is in Wisconsin, but this case presented substantial local connections with respect to the marking and manufacture of the accused products.
He also rejected the argument that the plaintiff's incorporation in Texas gave no "local interest" under In re Microsoft and In re Zimmer because plaintiff was allegedly a "front for counsel" created in anticipation of litigation, noting that the persons who formed the Texas company were in Texas before forming the company, with the counsel having been here for many years prior to that (I would note that I tried a horse-kicking case against one of their counsel at least ten years ago in state court - a Texas connection that we both likely regret), and noting that it was incorporating to manipulate venue that the Federal Circuit held was not permissible, not incorporating in anticipation of litigation, which Bon Tools expressly held was. Therefore he gave it some weight - but after considering the other Texas interests noted above and the Wisconsin interest, called this factor even.
In the end, Judge Ward wrote that "[i]n balancing the Gilbert convenience factors in this case, the Court observes that two factors slightly weigh in favor of transfer and one factor slightly weighs against transfer. Therefore, Target has not met its burden in showing the Eastern District of Wisconsin is 'clearly more convenient' than the Eastern District of Texas."
Once again, to echo what Judge Ward said about the way this analysis will apparently usually come out in false marking cases given the nature of the cause of action (and as if the prior seven rulings granting motions didn't already suggest this) in this case where the marking and the product were both made within absolute subpoena range of the courthouse in Marshall, the balance still very slightly (net one factor slightly favoring) weighed in favor of transfer. But that was not sufficient to meet Volkswagen's "clearly more convenient" standard, which the Volkswagen court says (referencing the plaintiff's choice of forum, which it roughly equates to the burden of proof) "places a significant burden on the movant to show good cause for the transfer."
Overall a very engaging read - I highly recommend it. But then again, I think Box. v. Ameritrust, 810 F. Supp. 776 (E.D. Tex.1992) (Hall, J.) was a potboiler due to its nuanced analysis of the effect of President Jefferson's political issues in the Louisana Territory on contemporary venue law.
State Bar of Texas members will begin voting on proposed changes to the Texas disciplinary rules on Tuesday, January 18. I couldn't pass up this chance to share this excerpt from an interview with Thomas H. Watkins (not in the picture to the left), who served as chair of the Supreme Court of Texas Task Force on the Texas Disciplinary Rules of Professional Conduct. If you're not from Texas you might find it amusing. If you're from Texas uoi won't notice anything unusual about the language at all.
Q: How did you become an authority on the Texas disciplinary rules?
A: The Supreme Court of Texas called and asked if I would chair the Task Force on the Texas Disciplinary Rules of Professional Conduct. I puffed up like a toad. I was so proud. It wasn’t until seven years later that I realized this is what a Republican Supreme Court does to punish a Democrat.
Just read this interesting post on the Gametime IP blog about Eastern District trial success stats from the recent Price Waterhouse Coopers study. It has some useful metrics on the plaintiff's win rate at trial, noting that the win rate from 1995 forward was at 83% in 2006, but declined to 72% the next year (2007 - the annus horribilis for plaintiffs that's I have posted on previously) then to 67% two years later. That's not the per-year number - that's the cumulative number even including the 2001-2006 string of plaintiff wins, so the cumulative win rate dropped sixteen points in three years, and according to the post the overall win rate has remained steady the last three years at about 55%. That's ballpark what I had calculated, but since I'm not so good with math, it was nice to have an accounting outfit confirm it.
The Eastern District of Texas is probably the only environment in which references to pork these days have nothing to do with Congress.
Most Eastern District watchers are by now familiar with Judge Everingham's recent order granting a new trial in Commil v. Cisco, 2:07cv341-CE as a result of the "I bet not pork" and "the most important trial in history ... in the Bible" references by the defendant's local counsel. This evening Cisco filed a motion for reconsideration of that order (docket #362), arguing that the reconsideration was inappropriate because the conduct was an isolated event, citing the Fifth Circuit's recent opinion in U.S. v. Morin, No. 09-40702, _____ F.3d _____ (5th Cir. Dec. 10, 2010), that there was no evidence that the conduct prejudiced Commil (noting that the jury found for Commil on direct infringement and awarded damages), and that a retrial on induced infringement would be futile in any event. In the alternative, Cisco asks that the Court clarify its ruling to address how the first trial will be referred to or used in the second trial.
A response to the motion would normally be due in seventeen days, then the motion is ripe for ruling, although the parties are permitted to file a reply and a surreply brief, but Cisco filed separately a motion to expedite in light of the April retrial, asking that a response be filed by January 19, and a hearing be held by January 24, if the Court's schedule permits.
I spent the day in Tyler enjoying the federal courts' hospitality while attending a lengthy series of scheduling conferences in false marking cases in U. S. District Judge Michael Schneider's court. One nice thing about having 40% of the nation's false marking cases filed locally is that you can see a lot of the same kinds of cases at the same time - sixteen last month in Marshall and seven today in Tyler. The rulings were, not surprisingly, generally similar to last month's before Judges Ward and Everiham in Marshall as well. Motions to dismiss asserting standing defects and their associated motions to stay were generally either withdrawn in light in the Federal Circuit's rulings, or denied, while motions to transfer were uniformly granted.
The morning presented four cases, three of which had motions to transfer. All three motions to transfer were granted, and in the one remaining case the Court denied the motion to dismiss asserting that the pleadings as to intent to deceive were insufficient - again, same as the judges in Marshall - and accepted the parties' proposed scheduling order.
The afternoon's three cases proceeded similarly - the two cases where defendants filed motions to transfer were granted, and in the third Judge Schneider denied the motions to dismiss attacking standing and the adequacy of the intent to deceive allegations and adopted the parties' proposed scheduling order, although he looked askance at the parties' initial proposal that the case would take 24 hours to try.
In toto, the five cases in which defendants sought transfer were transferred and the other two were set for trial. The initial motions to dismiss were uniformly denied, with one case preserving for later review the defendant's challenge to the constitutionality of the statute.