Eastern District of Texas Federal Court Practice

Personal Audio Gets Win Over Apple

Remember the "bit" in the original Tron that yipped "yes, yes, yes, yes!" or "no, no, no, no!" at Jeff Bridges' character (it even has a wiki entry here).   This jury verdict form reminds me of that because the jury form has 24 "yes" answers on page 2, 24 more on the next page, then 14 "no's", 21 "no's", 16 more, and finally three more. Appropriately, the damages number was a single digit (well, not counting the "million" part) although not a binary one.

Friday a jury in Judge Ron Clark's court in the Lufkin case Personal Audio v. Apple, 9:09cv111 awarded the plaintiff $8 million after finding that all eight product groups infringed the three asserted claims literally (and four claims by doctrine of equivalents).  The jury found that the numerous (and separately submitted) references alleged to anticipate or render the claims obvious did not do so, at least not be clear and convincing evidence.  I do not know what the plaintiff was asking for at trial, but I have seen a report of $84 million earlier in the litigation - I'll update this post when I hear something more concrete.

Things Not To Do Three Weeks Before Trial #1: Don't Produce New Documents

Personal Audio, LLC v. Apple, Inc., et. al., 9:09cv111 (E.D. Tex. 6/16/11)

Judge: Ron Clark

Holding: Motion for Discovery Sanctions GRANTED

Today's theme seems to be things not to do three weeks before trial. 

Three weeks before the second trial setting in this case, defendant Apple produced to plaintiff Personal Audio approximately 418 documents totaling more than 6,300 pages.  Personal Audio moved for sanctions in light of the late document production, and the court held an expedited hearing on the motion. For the reasons stated in this order and on the record at the hearing, Judge Clark concluded, the late production was not substantially justified or harmless, and granted Personal Audio’s motion for sanctions.  He also imposed a monetary sanction in the amount of $10,000 "in order to deter future similar conduct both by Apple and by other litigants" and assessed other procedural sanctions as noted below.

The majority of the newly-produced documents came from a nine-year-old disk that Apple said the relevant witnesses didn't remember and which wasn't discovered until one of the witnesses moved offices recently.  "A reasonable inquiry should have revealed these items long ago," Judge Clark concluded.  "Despite the fact that Mr. Robbin appears to be an important Apple witness who was involved in the early design of the iPod, Apple only perused Mr. Robbin’s email.  Apparently, Apple never inquired whether he had any non-electronic documents or items that might be relevant to this case."

The thing that is worth noting about this opinion is Judge Clark's inclusion of several paragraphs in the order of what he told the parties about the importance of the court's mandatory disclosures back at the scheduling conference in this case. It's a familiar speech to practitioners in Judge Clark's court (we refer to it as the "Judge Clark's dad speech" but we all know what it means), and he requires a corporate representative to be present at that conference to hear it.  (Phone is fine although he noted that Apple had a representative there live in this case).  In this case, Judge Clark said the following:

While many of you and probably Apple have been involved in many cases in the Eastern District, this is a district of open disclosure and full disclosure, more so, as near as I can tell, than most districts in the country; and it’s something that’s been going on before we had very many patent cases here.
The reason this is important is—and it was my experience in dealing with clients when I was an attorney—is many times clients don’t believe it because they’re used to trying things in other places. And, so, the local counsel or trial counsel tells them what needs to be done and they don’t believe it and then they’re surprised at trial when witnesses aren’t allowed to testify on their behalf, experts are struck, evidence doesn’t come in because it wasn’t timely disclosed or there were attempts made to hold things back.
And I’ve also had some unfortunate circumstances where the engineers who really knew what was going on failed to tell the attorneys because they’re engineers and they’re out there trying to make a profit and build products and, like my dad who was an engineer, did not like talking to attorneys. And, so, it’s very important that corporate representatives make real sure that these key engineers take the time to speak with counsel early on because a month before trial is too late.
And I’ve seen cases lost on the mere fact of an engineer who just had too many things to do but a month before trial or when everybody was getting ready says, “Oh, what about this?” He comes up with a bunch of documents and a bunch of reasons. That’s not coming in.
But, of course, outside counsel has no real control over the people like the corporate representatives do. So, please make them understand this is real. These are the rules they’re operating under, and the information up-front is what counsel need.

(Emphasis mine).  Note Judge Clark's repeated emphasis on "a month before trial"? It's almost like he understands how these cases are prepared, and was trying to warn practitioners that that dog won't hunt around here.

Judge Clark also emphasized that "[t]his is not the first time that important evidence has untimely emerged in this case" noting that a prior late disclosure of a "very important piece of potentially invalidating prior art" resulted in a continuance of the case's first trial setting.   (Readers might recall that I posted a few months back where Judge Davis encountered a similar situation and decided to exclude one piece of late-disclosed prior art but allow the other in the Acqis v. IBM case).  "The court finds that Apple has engaged in a pattern of failing to meet its obligations to search its records and files and question those employees known to have information that Apple may use to support its claims or defenses, and to disclose such information in accordance with the Federal Rules of Civil Procedure and the orders of this court."

In addition to the $10,000 fine, the Court also entered the following sanctions:

(1) Personal Audio may depose Stan Ng in Houston, Texas on Friday, June 17, 2011.  Apple shall make Anthony Fadell and Jeff Robbin available for deposition in the evening two days prior to the day on which each is expected to testify at trial. The total time allotted for each of these depositions is two (2) hours;
(2) All of the newly-produced documents and MP3 players are admissible for Personal Audio’s use at trial;
(3) Apple may not use or introduce the newly-produced documents and MP3 players as evidence at trial. Apple’s experts shall not rely on or discuss any of the newly-produced documents or MP3 players. Apple may, however, cross-examine Personal Audio’s witnesses about any document or MP3 player introduced by Personal Audio;
(4) When asking questions about one of, or a group of, the newly-produced documents or MP3 players, Personal Audio may tell the jury that the item or items were produced less than a month before trial. Personal Audio may utilize this sanction only twice.

Prejudgment Interest for ... Lawyers Who Don't See The Issue Often Enough

Affinity Labs of Texas, LLC v. BMW North America, LLC et al, 9:08-cv-00164 (3/28/11)

Judge: Ron Clark

Holding: Motion for Prejudgment Interest GRANTED

Prejudgment interest is one of those annoying issues (not unlike court costs and postjudgment interest) that even in a practice where you see the far side of a jury trial fairly often, it's sometimes still not quite often enough to remember the law from case to case.  Here to help out is Judge Ron Clark of Beaumont who puts all the law you need to know about the subject into a useful opinion, and provides a reasoned analysis of the rate and compounding period he believed were correct for this case.

In Affinity Labs, the jury found both patents infringed and assesed approximately $13 million, most ($10.15 million) against Volkswagen.  Plaintiff sought prejudgment interest, and Judge Clark granted the motion, assessing interest at the prime rate, compunded quarterly.  Judge Clark considered the T-bill rate as too low, the state rate (or the infringer's borrowing rate) as too high, but the prime rate, compounded quarterly (as opposed to annually), to be just right.

Plaintiff's Verdict in Lufkin Patent Case

Last Thursday a Lufkin jury in Judge Ron Clark's court renturned a verdict in the Affinity Labs case against Hyundai, Volkswagen & Kia, 9:08cv164.  The sixteen page jury verdict started with findings of direct, induced and contributory infringement on five claims of two patents against Hyundai (specifically the 2010 Hyundai Sonata), then the same findings as to three claims of one patent against Kia (for the 2010 Kia Optima), and the same findings on the original five claims against four Volkswagen products.

On invalidity, the jury found that the defendants had not shown by clear and convincing evidence that the three challenged claims were invalid as anticipated, or the five challenged claims were invalid as obvious under the three combinations asserted, or for failure to meet the written description requirement.

On damages, the jury found $2,430,065 against Hyundai, $406,472 against Kia, and $10,149,993 against Volkswagen.

Trading Technologies International v. eSpeed - Judge Clark concurrence

Trading Technologies Intern., Inc. v. eSpeed, Inc., --- F.3d ----, 2010 WL 653271 (C.A.Fed., 2010)

Judge: Ron Clark (E.D. Tex., sitting by designation)

Holding: District court affirmed  

A long-standing tradition in at least some federal courts is the invitation of district judges to sit on appellate panels "be designation."  Judge Hall did it with the Fifth Circuit in New Orleans when I clerked for him, and while he never much liked traveling once he was on the bench, speaking for his law clerks, we loved it - especially when the travel was to New Orleans.  It was a great experience seeing how appellate courts work, and as Kay Lynn and I discovered, you physically cannot eat your way through the per diem they gave us - and we certainly tried.

The Federal Circuit has extended the invitation to most if not all of the Eastern District's district judges who handle large patent dockets, and several have authored opinions for their panel.  But my favorite recently is Judge Ron Clark of Beaumont's concurrence on this affirmance by the panel (consisting of he, now-Chief Judge Rader, and Judge Louire), which provides a useful insight from a district court's perspective on the practical effect of the way the Federal Circuit reviews claims construction rulings.  I reproduce it essentially in full for readers' edification.

I write separately to respectfully suggest that the current de novo standard of review for claim construction may result in the unintended consequences of discouraging settlement, encouraging appeals, and, in some cases, multiplying the proceedings.  Determination of the meaning that would have been attributed to a claim term by one of ordinary skill in a sophisticated field of art on the date of filing often requires examination of extrinsic evidence-a determination of crucial facts underlying the dispute, as outlined by Judge Rader in the majority opinion. On some occasions, a determination will be made based, in part, on the weight to be given to conflicting extrinsic evidence or even to an evaluation of an expert's credibility.
The standard of review that will be applied by a higher court sets one of the important benchmarks against which competent counsel evaluates decisions regarding settlement and appeal. . . .
The de novo review standard has at least two practical results, neither of which furthers the goal of the “just, speedy, and inexpensive determination of every action and proceeding.”  Fed.R.Civ.P. 1. First, rejection of settlement is encouraged, and a decision to appeal is almost compelled, where counsel believes the client's position is valid, even if debatable, depending on the view taken of extrinsic evidence. It is a natural reaction upon receiving an unfavorable claim construction from a trial court to conclude that one's own view of complicated facts will be better understood by the judges of the Federal Circuit, who generally have more experience with patent cases, and who, by their own authoritative rule, review the claim construction without regard to any determination the lower court has made.
A patentee has the opportunity to write clearly enough so that the meaning of the claims can be determined from the specification. What public policy is advanced by a rule requiring the determination of underlying facts by more than one court, especially when the likely result is that another group of citizens will be required to “volunteer” for lengthy jury duty on remand?
A second, although less common, consequence of the de novo review standard is the opportunity it offers to the party that presents a case with an eye toward appeal rather than the verdict. Skilled counsel who believes a client may not be well received by a jury is tempted to build error into the record by asking for construction of additional terms, and/or presenting only a skeleton argument at the claim construction stage. This is risky, but it would be unusual for this Court to consider a point waived if a particular claim construction had been requested of the trial court and some argument made, but the clearest explanation was presented on appeal.
An appellate court normally does not consider an unpreserved point of error, but a more sharply focused argument regarding points presented on appeal, from among those that are technically preserved, is actually the goal of the appellate specialist. This tactic would be less inviting if claim construction was officially accorded some measure of deference, even if it was applied only in those cases in which resort to extrinsic evidence was necessary.

Federal Circuit Denies Mandamus of Venue Ruling in Personal Audio v. Apple

In Personal Audio v. Apple, 9:09cv011 (February 11, 2010) Judge Clark denied the defendant’s motion to transfer, and yesterday, the Federal Circuit affirmed that decision.  The facts of the decision are important to understand the significance of the Federal Circuit's ruling.

    Personal Audio is a Texas company with an office in the Eastern District of Texas where it keeps many of its original documents.  Transfer was requested to Massachusetts, but none of the defendants had their principal places of business there.  Two of the defendants’ offices are in New York, but another two defendants have principal places of business which are closer to Lufkin, Texas.  Judge Clark concluded that many witnesses, documents and evidence would have to travel a significant distance to trial regardless of which forum and held that, at most, defendants could show that there may be some non-party interest in the District of Massachusetts which he held did not meet the defendants’ burden of showing that Massachusetts is clearly more convenient than the Eastern District of Texas.

    A major issue in this case was that Personal Audio, LLC became a legal valid entity upon its incorporation, which was shortly before filing of the suit.  Judge Clark wrote that “[t]he court has found neither statute that states, nor case that holds, that there is a mandatory waiting period in which a plaintiff cannot file suit in a judicial district after incorporating in that district.”  Judge Clark also noted that while the plaintiff’s only office, located in Beaumont, contained the originals of many of its corporate documents, including most of those relating to prosecution and assignment of the patents in suit, the original assignment history of the patents, and the remaining documents from the prior plaintiff’s predecessor company, neither the plaintiff nor any defendant has any contact with, or documents in, the proposed transferee venue of Massachusetts.

    Judge Clark also pointed out that, “it is common, for example, for a business to incorporate in the State of Delaware in order to take advantage of that state’s corporate tax laws and its courts experience in corporate matters.  The court has not found any case holding that such a “strategic” incorporation should be held against a corporation when analyzing venue or jurisdiction.” 

    On mandamus review, the Federal Circuit, in a brief order, held that "the status of Personal Audio, LLC, as a Texas corporation is not entitled to significant weight, inasmuch as the company’s presence in Texas appears to be both recent and ephemeral—its office is apparently the office of its Texas litigation counsel, and it appears not to have any employees in Texas. Nonetheless," it continued, "the petitioners have not made a compelling showing that Massachusetts is a more convenient forum, particularly in light of the fact that none of the defendants is headquartered there. . . . In sum, the petitioners have failed to satisfy the demanding standard required to justify the issuance of a writ of mandamus."

Hearing Components verdict affirmed - JMOL as to one product and judgment that additional claims indefinite set aside

Well, apparently no one was happy with the resolution of this case.  Hearing Componenets v. Shure was tried in January of 2009 before Judge Ron Clark in Lufkin and resulted in a jury verdict of $4.622 million, which Judge Clark reduced to $1,392,364 when he granted a partial motion for judgment as a matter of law (he had previously held two claims to be invalid as indefinite).
Yesterday in Hearing Components, Inc. v. Shure, Inc., No. 09-1364, the Federal Circuit passed on the plaintiff's claims that Judge Clark erred in entering judgment of that two asserted claims of patent #1 were invalid as being indefinite, as well as in granting judgment as a matter of law of noninfringement of four other claims in patents #2 and #3 by Shure Inc.’s earphones employing a straight nozzle. Defendant was similarly unhappy that Judge Clark denied its motion for JMOL of noninfringement of the same four claims in patents #2 and #3 by Shure’s earphones employing a barbed nozzle (which bothers me just thinking about), its denial of JMOL of invalidity, and its determination of no laches for those patents.  You can guess the result, right?  "We affirm in part, reverse in part, and remand."

Specifically, the Federal Circuit concluded that the first two claim terms were not invalid as indefinite, and remanded for further proceedings, so there's a win for the plaintiff.  It also held that there was substantial evidence that both products infringed, so it affirmed Judge Clark's denial of the JMOL claiming that one didn't infringe, and reversed his granting of the JMOL claiming that the other didn't.  That's two more wins for the plaintiff.  Next up was validity and laches, and the Fed Circuit affirmed Judge Clark's denial of the JMOL on obviousness and his finding that laches did not apply. 

The final score is 5-0 for the plaintiff, 0-5 for the defendant, and 3-2 for Judge Clark.  Since the trial that occurred with respect to the claims from patents #2 and #3 resolved the issues of infringement and damages as to the two accused products on those patents (the damages for the JMOL'ed product are already determined so they can be reinstated - this is a good example of having all the issues resolved by the jury and "in the box" so that a reversal doesn't require a retrial) as best I can tell, only the two claims from patent #1 would have to be tried now.  Since they pertain to a different product (a wax guard used with certain earphones) and patent the trial may not have overlapped that much with the first trial.  I am told that expert disclosures were complete when Judge Clark found the claims indefinite so potentially all that remains is to prepare a schedule for a pretrial order and trial on those two claims and one product.

For a thorough analysis of the legal issues raised by the appeal, see Dennis Crouch's post at Patently-O.

Case Found "Exceptional" After Summary Judgment of Noninfringement; Fees & Costs Awarded From Markman Ruling Forward

Sorkin v. Universal Building Products, 1:08cv133 (E.D. Tex., Jan. 25, 2010)
Judge: Ron Clark

Holding: Motion for Enhanced Damages/Attorneys' Fees GRANTED

Defendant received a summary judgment of noninfringement following Judge Clark's Markman ruling, and now sought to have the case declared "exceptional" under 35 USC section 285 and fees of $300,738.94 for its defense of the action awarded, plus costs.  Judge Clark granted the motion, finding that following the Markman ruling the plaintiff's literal infringement claims (no doctrine of equivalents claims were asserted) were objectively baseless and pursued in subjective bad faith.  He therefore awarded fees and expenses, but only from that point forward ($63,533.50 in fees and $4,103.79 in costs).

Of interest to those with a thing for procedural issues is the Court's explanation of the difference between exceptional status and a Rule 11 basis for a fee award, as well as its discussion of what costs were and were not recoverable, with some being under 28 USC 1920, and some under 35 USC 285 (an important additional source for costs that are not recoverable under 1920).  Kudos to the defendant for a particularly well-documented submission on copy costs, by the way - anybody can win a patent case but rarely can a law firm adequately support a request for copy costs.  Judge Clark wrote that "[defendant] submitted a detailed list to the court of the costs of individual copies, what documents each charge corresponds to, and the appropriate invoices. All relate to documents copied and produced to [plaintiff], courtesy copies provided to the court, and color photographs used in [defendant's] claim construction and summary judgment filings."  The court awarded costs under Section 285 for photocopies, postage, Westlaw research, and PACER research. "The court finds that these costs, all of which are for research and office expenses, are reasonably included in 'those sums that the prevailing party incurs in the preparation for and performance of legal services related to the suit.'"

Summary Judgment of Invalidity (Obviousness) Granted; Motion for Leave to Amend to Assert Walker Process Claims Denied

The Ohio Willow Wood Company v. Thermo-Ply, Inc., (9-07-cv-00274) (Nov. 20, 2009)
Judge: Ron Clark
Holding: Defendant's Motion for Summary Judgment GRANTED; Defendant's Motion to Amend PICs DENIED
On Friday Judge Clark granted summary judgment ending this case.  It has an interesting procedural history.  After plaintiff OWW filed suit against TP, another company intervened, claiming ownership rights in the patent.  Judge Clark held a hearing on the inventorship and invalidity issues raised to the defendant and stayed the case pending resolution of these issues.  The defendant then filed a motion seeking to assert Walker Process claims (Sherman Act violations which allege fraud before the PTO).  Judge Clark denied the motion, concluding that TP could have met the deadline in the scheduling order for asserting such a claim.
More interesting (not that anyone could ask for more from the first order, of course) is another order, also from Friday, in which Judge Clark granted TP's motion for summary judgment that all asserted claims were invalid as obvious (SJ on anticipation was sought, but not granted).

Motion to Tranfer Venue to Minnesota Denied

Deep Nines, Inc. v. McAfee, Inc., 2009 WL 3784372(E.D.Tex. Nov 10, 2009) (NO. CIV.A.9:09CV89)
Judge: Ron Clark
Holding: Motion to Transfer Venue DENIED
"It is clear that where there is no connection with Texas or the Eastern District of Texas, venue is improper here," Judge Clark opens this opinion, citing In re Genentech, 566 F.3d 1338 (Fed.Cir.2009). That was not the situation in this case, he concluded, since there were significant contacts with Texas generally, and the Eastern District specifically. One of the Defendants has an office in the Eastern District, and several potential witnesses are located in the district. In addition, a number of witnesses have also been identified in Dallas (which seasoned venue practitioners know is immediately adjacent to the Eastern District). In addition, Judge Clark had previously adjudicated a dispute between two of the parties in this case, including a claim construction hearing and a trial, involving infringement of one of the patents-in-suit. Also, Deep Nines's claims involve, to some extent, the settlement agreement entered into by Deep Nines and McAfee at the conclusion of the earlier case, and the agreement provides that it shall be governed by Texas law. "Under these facts," Judge Clark wrote, "Secure has not met its burden to demonstrate that transfer to the District of Minnesota is 'clearly more convenient.'”