Eastern District of Texas Federal Court Practice

Plaintiff's Motion for JMOL on Invalidity Granted in Part; Court Sets Aside Portions of Jury's Invalidity Findings

Realtime Data v. T-Mobile, 6:10cv493 (3/4/13)

Judge: Ron Clark

Holding: Plaintiff's' Motion for Judgment As A Matter of Law as to Invalidity GRANTED IN PART

As I posted previously, last month a Tyler jury found all of the eleven asserted claims across three patents not infringed, and all eleven invalid.  Yesterday Judge Clark ruled on the plaintiff's motions for judgment as a matter of law as to invalidity.  "After careful review of the record," the Court wrote, "and taking into consideration T-Mobile’s burden to prove invalidity by clear and convincing evidence, the court will grant Realtime’s motion for JMOL in part." The Court upheld the jury's verdict that five of the claims were invalid as obvious, but reversed the jury's verdict that the other six were invalid as obvious.

Judge Clark's opinion addresses the applicable law on the burden of proving invalidity at trial, as well as the law on motivation to combine.  On the latter point, in addressing the first asserted patent, Judge Clark held that the defendant's expert presented sufficient evidence to survive JMOL with one exception.  As to that one combination - a reference plus the knowledge of a person of ordinary skill in the art, Judge Clark held that a close reading of the transcript led to the conclusion that this "combination" was in fact simply an attempt to assert the reference as anticipating - and anticipation with respect to that reference was not claimed or submitted to the jury.  "T-Mobile cannot sneak an invalidating reference through the back door when its failure to comply with the rules concerning invalidity contentions and disclosures would bar the front door to that reference," he wrote.  The Court then noted that the issue was not an academic one because this combination was the only reference asserted against the two claims of this patent, thus it reversed the jury's verdict of invalidity as to those claims.

On the second patent, Judge Clark affirmed the jury's verdict of invalidity as to the two asserted claims.

With respect to the third patent, Judge Clark set aside the jury's finding on invalidity as to the four asserted claims as to both asserted combinations, and in the course of doing so, addressed the jury's task in light of the burden of proof:

The jury is not required to go on a scavenger hunt, piecing together T-Mobile’s case from scraps of seemingly unrelated testimony. Dr. Reader testified about a lot of information in a fairly short period of time. No reasonable jury could have found that this offhand mention of Figure 1.4, tethered to nothing more than a general description of the Hoffman reference, is clear and convincing evidence of invalidity as to this claim limitation, especially when Dr. Reader later testified it was only satisfied by the Sebastian reference.

Finally, in a section entitled "Why the court reached a different conclusion with respect to the ‘506 patent claims", the court explained why it reached a different conclusion with respect to the '530 claims when it affirmed the jury's verdict of invalidity on the claims of the '506 patent..

The ‘506 and ‘530 patents have similar claim language, and the court allows the jury verdict to stand on the ‘506 patent and not on the ‘530 patent. Therefore, it is worth reiterating briefly the difference between Dr. Reader’s testimony on the two patents. With respect to the‘506 patent, Dr. Reader specifically cited two pages from Hoffman when discussing the “receiving a data block” limitation, explained what the Hoffman passage said, and stated that the devices mentioned in Hoffman received a data block by “capturing” with these devices. Although he did not specifically say that a data block could be received from an external source, the passages explained from Hoffman can be interpreted as such. Again, the key is that Dr. Reader actually explained what the Hoffman reference meant in the context of the claim limitation, rather than leaving the jury to pull together far-flung testimony (Hoffman/Sebastian combination) or pick through a patent passage not deemed important enough for Dr. Reader to explain (Dye/Aakre combination).

Tyler Jury Renders Defense Verdict on Infringement and Invalidity

This afternoon a Tyler jury in Judge Ron Clark's court (trying a case prepared by Judge Love for Judge Davis) rendered a verdict for defendant T-Mobile in Realtime Data v. T-Mobile.  The jury found the eleven asserted claims not infringed and also found each claim invalid under each of the asserted obviousness grounds (two combinations on nine of the claims, one combination on the remaining two).

Motion to Dismiss for Misjoinder Denied; Case Severed and Consolidated for Pretrial

Swipe Innovations v. Elavon, 9:12cv40 (8/14/12)

Judge: Ron Clark

Holding: Motion to Dismiss for Misjoinder DENIED

Judge Clark denied the motion to dismiss for misjoinder under the AIA (the case was filed in July 2012, long after the statute became effective), but severed the claims against the moving defendant into a new lawsuit, and consolidated that case with the original case for pretrial issues only.

Motion to Dismiss Indirect Infringement Claims Granted

Swipe Innovations v. Elavon, et al., 9:12cv40 (E.D. Tex. 7/31/12)

Judge: Ron Clark

Holding: Motion to Dismiss Indirect Infringement Claims GRANTED

One of the defendants in this case, First Data Corporation, filed a motion to dismiss the plaintiff's indirect infringement claims against it under Twombly/Iqbal.  The plaintiff did not respond (and in fact amended its complaint to delete the allegations of indirect infringement), and while Judge Clark noted that a party failing to respond to a motion is presumed not to oppose it under Local Rule CV-7(d), he nonetheless addressed the issue on its merits.

"Swipe Innovations’s March 7, 2012 Original Complaint includes precisely one sentence regarding indirect infringement as to First Data," Judge Clark noted.  It read “In addition, First Data induced infringement and/or contributed to the infringement of one or more of the claims of the [‘]296 patent by its customers and/or suppliers.” Doc. # 1 at ¶ 21. This sentence was deleted from Swipe Innovations’s July 20, 2012 Amended Complaint. Doc. # 98 at ¶ 21. As the Amended Complaint was filed after First Data’s motion to dismiss, "the court can only conclude that this sentence was deliberately deleted in response to First Data’s motion."  Thus, "[g]iven the standard on a Rule 12(b)(6) motion to dismiss, and the fact that Swipe Innovation’s most recent pleading contains no allegations of indirect infringement whatsoever as to any Defendant, the court grants First Data’s motion. Swipe Innovations’s claims of indirect infringement against First Data, to the extent any such claims are actually being asserted, are dismissed."

 

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."