Eastern District of Texas Federal Court Practice

Motion to Transfer Granted as to California Defendants - Denied as to New Texas Defendants

Balthaser Online, Inc. v. Network Solutions LLC et al., 2:08cv00430 (E.D. Tex. 2009)

Judge: David Folsom

Holding: Motion to Transfer Venue GRANTED in part.

One of the interesting things about the recent venue cases out of the Federal Circuit (TS Tech, Telular, VW IV and Genentech) is seeing how they affect cases that were in the pipeline when the law changed.  In this case, the California plaintiff had sued a raft of defendants, most from California.  Then after TS Tech indicated that cases should be transferred where all the defendants are clustered in (or near) the proposed transferee forum, the plaintiff added several tee-ninecy defendants in the Eastern District of Texas.  (yes, that's a word around here, and it's the best one to describe the defendants because in this case, size really does matter.  Wonder if there's a West headnote for that?). 

What makes makes this case notable, in addition to the fact that it allows readers to see whether the additional defendants added in this case change the outcome, is that it occurred after a full hearing on the motion, so readers can, as Judge Folsom did, review the transcript and cite to statements by the parties in support of their arguments in response to the court's questions.  Thus there was no question why the new defendants were added - just what the effect would be.

Judge Folsom's order first copncludes that transfer is required as to the original defendants, noting that the plaintiff and most of the defendants were located the ND Cal, and what non-ND defendants there were were insufficient to show that continuing the case in Texas was the way he should go.  But Judge Folsom agreed that a transfer to California would be extremely inconvenient for the small Texas defendants the plaintiff had added.  Two had appeared pro se only, one had not appeared, and one opposed the transfer for convenience reasons.  Judge Folsom concluded that the issues as between the California and the Texas defendants were different enough that they need not be litigated together, thus the motion was denied as to the newly added Texas defendants.

Patent verdict

A Marshall jury in Judge Folsom's court just returned a verdict in the Retractable Technologies v. Becton Dickinson case, 2:07-CV-250.  Patent infringed, not invalid, and damages of $5 million.

Ring Plus "Cycle" Ends With Finding of Unenforceability

Ring Plus, Inc. v. Cingular Wireless LLC, --- F.Supp.2d ----, 2009 WL 2184541(E.D.Tex. Jul 17, 2009) (NO. 5:08-CV-42-DF)
Judge: Folsom
Holding: Patent unenforceable due to inequitable conduct.
Yep, she's singing. 
Judge Folsom conducted a hearing on the defendant's claims that the plaintiff's patent was unenforceable due to inequitable conduct, and concluded that "[h]aving weighed both materiality and intent, the Court finds that Defendants have shown by clear and convincing evidence that the applicants for the '608 Patent made material misrepresentations coupled with an intent to deceive the USPTO.  Further, Plaintiff has not made a sufficient showing of equitable considerations to outweigh
the findings of materiality and intent. The Court thus finds that the '608 Patent is unenforceable due to inequitable conduct."
On the bright side for the plaintiff, defendants sought to have the case declared exceptional and have attorneys fees awarded, but Judge Folsom declined to go that far.  "Plaintiff's conduct has been less than exemplary," he conceded, but concluded that  "[o]n balance, Plaintiff's conduct has not been sufficiently egregious to justify an award of attorney's fees."  He did note that as a result of the Plaintiff's prior sins he had previously reduced Plaintiff's time limit for its trial presentation from seven and a half hours to five hours but reserved for consideration whether to impose any additional sanctions. 
As best I can recall, that's four holdings of patents as unenforceable (at least three followings verdicts of infringement) in the last eight months or so.

"I Have Good Cause, But It's A Secret" - Motion for Leave to Amend PICs Denied

Hill v. Abercrombie & Fitch, 2:07cv234 (Ed. Tex. April 17, 2009)
Judge: David Folsom
Holding: Motion for Leave to Amend PICs Denied
Plaintiff sought leave to amend its infringement contentions to add a website operated by Microsoft, which has intervened in this case.  (Plaintiff had previously accused some Microsoft products, but not its websites).  Judge Folsom detailed the general standards for infringement contentions and for when such contentions can be amended pursuant to P.R. 3-6 by the plaintiff showing "good cause" for the amendment. 
"On the facts of this case," Judge Folsom wrote, "the Court finds diligence and undue prejudice are the dispositive factors. Hill claims he was diligent because he sought leave to amend his infringement contentions shortly after Microsoft deployed the new website. The Court disagrees.  Although Hill was not tardy in filing this Motion, Hill, through his proposed amendment, seeks to assert an entirely new theory of infringement against Microsoft, without showing why this theory was unavailable to Hill prior to the amendment deadline in the scheduling order. Hill claims that he has diligently analyzed all of Microsoft’s websites but had no reason to believe any of them infringed until now. When asked to explain why this theory—direct infringement by a Microsoft website—was not available to Hill based on the websites Hill previously analyzed, Hill claimed the information was work-product and need not be disclosed.  Thus, Hill attempts to use the work-product doctrine as a shield to
protect itself from disclosing its previous analysis while, at the same time, using it as a sword to justify diligence." (Emphasis mine).
We can just stop reading right there, don't you think?

Order on Motion in Limine in I/O v. Sercel

Input/Output, Inc. et al v. Sercel, Inc., (5-06-cv-00236) (July 22, 2009)
Judge: David Folsom
Holding: Motions in Limine Granted in Part
Orders on motions in limine are always difficult for lawyers not in the case to fully comprehend (and sometimes even lawyers in the case) for several reasons.  First, the order frequently refers to the motions by number and not issue, since the lawyers in the case know well what the numbers refer to.  Second, it's often impossible to fully understand the ruling unless you were at the hearing and heard what the parties told the court the issue really was, and what the court said.  And third, the procedural context of an in limine ruling is crucial, and often the lawyers simply don't take into account the difference between an order excluding or admitting evidence and an in limine ruling, which the judges well understand is a tentative ruling which simply requires counsel to approach the bench before going into an area.  Generally speaking (the Fifth Circuit caselaw is not completely consistent on this point) a ruling on a motion in limine doesn't preserve error or obviate the need to actually offer the evidence at trial, or object to the evidence.  (You might want to check your O'Connor's on this point, because it contains a unseful analysis what a limine ruling does and doesn't do).
A few of these issues came to mind this morning when I was reading Judge Folsom's order on defendant Sercel's motion in limine in this case.  Download 1771 - Ion limine order While it's a good example of how much the casual reader of such an order can't tell from the order in isolation, there are a few interesting points even to an uninformed reader like myself.
First, with respect to Sercel's motion no. 1 seeking in broad terms to limit damages, Judge Folsom first had to break the motion into threee subparts because it had three separate bases.  But all three shared the same basic flaw, he held, which was that they should have been brought as a motion to strike or as a Daubert motion within the required time frame.  Parts also asked the Court to weight the sufficiency of the evidence of lost profits.  All of which pointed to a common problem with motions in limine, which is their use as either a rearguing of a summary judgment or Daubert motion, or, as in the latter case, a premature motion for judgment as a matter of law.  (In this order, #3 was in fact simply a rearguing of a previously filed motion to strike).  If an issue or evidence shouldn't go to the jury, the tool is, as Judge Folsom observed, a motion to strike, or a Daubert motion, or perhaps a motion for summary judgment or to exclude.  Motions in limine are late in the game, and a poor substitute for a substantive motion.  As I've told people for years, file a motion to exclude the objectionable evidence - not a motion in limine.
It bears repeating that an order in limine does not exclude evidence - it simply requires a party to approach the bench before going into something because of the risk of incurable prejudice if it gets out there.  A good example is, well, suggesting to the jury that the plaintiff incorporated where it did to avoid paying taxes.  That would be a good motion in limine subject, I would think, because of the risk of prejudice - but if the plaintiff got cute and started claiming what a great corporate citizen they are the defendant might ask to approach and argue that the plaintiff has opened the door.  But an in limine ruling protects the parties from messing up the fact finder until the Court has decided that something really ought to be introduced.  I've had motions in limine granted against me with the clear understanding that the Court was not indicating he was likely to exclude the evidence at trial - he just wanted to retain control over the issue and wait until he saw the evidence at trial to make sure that the issue ought to come in - had he not granted that, an issue might have gotten before the jury before the Court had a full picture of whether it was proper for it to.  A good example is the common, common ruling that motions in limine are granted essentially in toto for voir dire unless someone really screams that they need to voir dire on a specific subject - but without prejudice to the Court's more substantive ruling on them following voir dire for the evidentiary part of the trial.
Back to the order. 
One issue that is case specific is a ruling permitting the plaintiff to introduce evidence that the defendant's opwn scientists were surprised at how similar the plaintiff's patent was to a Sercel patent, which they believe is non-obvious, in response to Sercel's assertion that the patent is obvious.  (Unless of course Sercel drops the obviousness defense).  Other rulings are not permitting the plaintiff to suggest that failure to obtain an opinion of counsel should result in an adverse inference, and excluding any reference to injunctions.  There are numerous other rulings made, but as they either adopt agreements by the parties are refer only to numbers, as I said, it's not possible to tell what they refer to without studying the underlying motions.
But as I said, a useful order to understand, at least in part, the use and misuse of motions in limine. 

Clawback Effective; Privilege Not Waived

Datatreasury v. Wells Fargo, et al, No. 2:06cv00072 (June 8, 2009)
Judge: David Folsom
Holding: Motion to Determine Privilege and Waiver DENIED
Plaintiff asked the court to hold that one of the defendant's documents was not privileged, or if it were, the privilege had been waived.  Judge Folsom denied the motion holding that it contained legal analysis, and the Wells Fargo had not waived the protection, i.e. its "clawback" was effective.

Motions to Sever to Set Up Motions to Transfer Denied

Sipco, LLC v. Amazon.com, Inc. et al, No. 2:08cv00359) (June 3, 2009)
Judge: David Folsom
Holding: Motions to Sever DENIED
This is a patent infringement case brought against twelve defendants.  At issue in this motion were two defendants' motions to have the plaintiff's claims against them severed so that they could file motions to be transferred to their home forums, unencumbered by the requirement that they show that the proposed transferee forums were "clearly more convenient" for all of the parties and witnesses.  Judge Folsom denied the motions, writing that:

Recently, the Federal Circuit refused to order transfer of a case where transfer would have resulted in multiple lawsuits involving the same issues. In re Volkswagen of Am., Inc., 2009 WL -2- 1425475, at *2 (Fed. Cir. May 22, 2009). In so doing, the Federal Circuit stated that “the existence of multiple suits involving the same issues is a paramount consideration when determining whether a transfer is in the interest of justice.” Id. (emphasis added). Moreover, “a situation in which two cases involving precisely the same issues are simultaneously pending in different District Courts leads to the wastefulness of time, energy, and money that § 1404(a) was designed to prevent.” Id.

In this case, the Court noted that defendants could not argue that transfer of this case is appropriate for all parties because both the Plaintiff and multiple Defendants have offices in the state of Texas. Instead, the moving defendants sought to "create simultaneous proceedings on the same patents and related products in three district courts."   Judge Folsom concluded that doing so "would be unnecessarily wasteful of the court system’s time, energy, and money" and accordingly denied the motions.

Contempt! Court Grants TiVo's Motion Against Echostar

No, not that Contempt, (although both will steam up your DVR something awful). 

Chief Judge Folsom today granted TiVo's motion asking to have Echostar declared in contempt of his permanent injunction.  He set a briefing schedule for any motions for sanctions and set a hearing on the issue of sanctions for July 28, 2009, with each side given thirty minutes.

The opinion is 35 pages long, and begins with a lengthy recitation of contempt law as it applies to patent cases, specifically the KSM Fastening case, .  It then discusses what happened factually in this case as far as Echostar's modifications to its software (the alleged "design around"), whether the modifications rendered the software more than colorably different, whether it continues to infringe, and what to do about TiVo's alleged facial violation of the court's order.

One of the Court's findings is that while it found that even as modified the software still infringed, it would have held Echostar in contempt anyway because it never complied with the injunction's requirement that DVR functionality be disabled after that injunction took effect following the Federal Circuit's affirmance of the case (notably Echostar never appealed the injunction).  The injunction required that DVR functionality be disabled, not that infringing DVR fnctionality be disabled.  (Echostar had claimed that since it had downloaded a software update that eliminated the infringing nature of the functionality, it was not in violation).  "Instead of requesting review of this Court’s order by itself or another court, EchoStar merely ignored this Court’s order because it subjectively believed it to be improper or overly broad. This cannot be allowed," the Court wrote.  "A party may not unilaterally decide whether it will or will not comply with a court order."

"The harm caused to TiVo by EchoStar’s contempt is substantial," the Court concluded.  "EchoStar has gained millions of customers since this Court’s injunction issued, customers that are now potentially unreachable by TiVo. See Dkt. No. 773 at 10. As this Court has noted in the past, “loss of market share and of customer base as a result of infringement cause severe injury,” and “every day of Defendant’s infringement affects Plaintiff’s business.” Id. at 10-11. Although EchoStar requests that this Court stay its injunction further, this Court declines to do so. EchoStar has escaped this Court’s injunction for over two years and further delay will be manifestly unjust to TiVo and cause TiVo substantial harm."

But nary a reference to Brigitte Bardot.  Sigh.

Judgment entered (again) in Paice v. Toyota - ongoing royalty set at 1/4-1/2%

In December 2005 a Marshall jury found for plaintiff Paice in its case against Toyota and awarded approximately $4 million (I was there for closing arguments and recall the plaintiff asking for around $32 million, for what that's worth).  In 2006 Judge Folsom issued orders on requests for injunctions in two trials where plaintiffs had prevailed, granting the injunction in one case (TiVo v. Echostar) but denying it in the other, this case.  In 2007 the Federal Circuit ruled on the appeal in this case.  The court affimed the jury's finding of infringement under equivalents and its decision not to find literal infringement.  It was also okay with the decision not to grant an injunction and with the idea of  an ongoing royalty (which it wouldn't call a compulsory license). 
What it was not okay with and remanded for a redetermination was the district court's setting the royalty at the $25 per engine found by the jury, noting in passing that the plaintiff does not get a jury to determine the ongoing rate.  The reason for the remand was because the court "was unable to determine whether the district court abused its discretion" with respect to calculating the royalty because the district court didn't provide any basis for that number beyond the jury's verdict.  It wasn't saying $25 an engine was wrong - but there must be some (unidentified) analysis backing it up and an explicit opportunity for the parties to negotiate out a royalty rate before the court sets one.  
On Friday, two years and eight months after initially entering judgment, Judge Folsom again entered a final judgment, this time for $4,269,950.00 plus pre and postjudgment interest, plus an ongoing royalty for the remaining life of the ’970 Patent, as a percentage of wholesale vehicle price, of 0.48% for each Toyota Prius II, 0.32% for each Toyota Highlander, and 0.26% for each Lexus RX400H sold after the entry of the Court’s original Final Judgment—August 16, 2006.  For the period of time between the jury’s verdict and final judgment, the Court found the applicable royalty was still $25 per infringing vehicle sale - which looks to me to be a a fraction of the new royalty.

The Dog Ate My Summons (well, sort of)

Sipco, LLC v. Amazon.com, Inc. et al, (2-08-cv-00359)(Feb. 10, 2009)
Judge: David Folsom
Holding: Motion to Set Aside Default/Dismissal GRANTED
The defendant had a default taken against it and sought to set it aside on the basis that water damage in its office made the summons and complaint unreadable.  Judge Folsom agreed that the defendant had shown good cause under FRCP 60 to set aside the default.  He held that the defendant's failure to answer was justifiable, but even if it were not, "the first two factors—lack of prejudice and the existence of meritorious defenses— weigh heavily in favor of setting aside the default judgment."