Court Dismisses for Improper Venue under TC Heartland

In a May 24, 2018 ruling, Judge Nathan S. Roman dismissed the plaintiffs’ patent infringement action for improper venue. The defendant conceded that it had committed acts of alleged infringement in the District, but argued that it was incorporated in Ohio and did not have “a regular and established place of business” in the District as required under the patent venue statute, 28 U.S.C. § 1400(b). So, the defendant argued, venue is improper in this District under the Supreme Court’s TC Heartland ruling.

Judge Roman first rejected the plaintiffs’ contention that the defendant waived the argument, noting it “is evident that prior to TC Heartland, filing a motion for improper venue based on an argument that Defendant was not incorporated in New York, would have been in direct contravention of Federal Circuit law.” As to the merits of the venue issue, in light of the defendant’s concession of alleged infringing acts in the District, and of the indisputable fact that the defendant is incorporated in Ohio, the Court noted that it need only resolve whether the defendant has a “regular and established place of business” in the District. In making that determination, Judge Nathan considered the impact of the defendant’s maintenance of storage units in New York. The Court rejected these units as a basis for jurisdiction, writing: 

First, the storage units identified by Plaintiffs are likely “physical places in the district” prong, insofar as they are “building[s] or []part[s] of a building set apart for any purpose” . . . . Plaintiffs also demonstrated that Defendant pays for these storage units, . . . leading to a conclusion that the storage units are “of the defendant” . . . . Nevertheless, the storage units are not “regular and established places of business”, because Plaintiffs have failed to demonstrate that Defendant “actually engage[s] in business from [either] location.” . . . The question is whether the storage units are “location[s] at which one carries on a business.” . . . They are not. While Defendant’s customer service reps may “typically” retrieve materials from the storage units to visit customers within this District, . . . , no “employee or agent of [Defendant actually] conduct[s] business at” the storage units, whatsoever . . . . Venue is improper.

Court Upholds Sufficiency of Patent Infringement Complaint Under Iqbal

In a March 16, 2016 ruling, Judge Shira A. Scheindlin denied the defendant's motion to dismiss a complaint alleging willful direct, induced and contributory infringement. Applying the Iqbal standard for all three types of infringement, Judge Scheindlin found the allegations of direct infringement adequate, writing:

Allegations that plead that “a specific product [] allegedly infringes [the] patent by virtue of certain specific characteristics” meet the Iqbal plausibility standard. A plaintiff is not required to list which of the claims in the patent have been infringed in its pleading; as the Federal Circuit has recently reiterated, “a plaintiff need not even identify which claims are being infringed.”

With regard to the induced infringement claim, the Court found:

The Complaint also contains details regarding the printed instructional material and website instructions provided by [the defendant] instructing its customers as to how to use the [accused system] in a manner that allegedly directly violates the ‘641 Patent. This level of detail is sufficient to survive a motion to dismiss.

Judge Scheindlin also upheld the pleading of the contributory infringement claim, noting:

As explained above, [the plaintiff] has sufficiently pled direct infringement and that [the defendant} was aware of the ‘641 Patent. [The plaintiff] also alleges that the [accused system] and its various components have no substantial noninfringing use. While [the defendant] argues that [the plaintiff's] general allegation to that effect is insufficiently particular to satisfy Iqbal, “numerous post-Iqbal cases have not required detailed factual allegations in support of a plaintiff’s claim that a defendant’s product lacks substantial noninfringing uses.”

The Court did, however, find the claim for willful infringement to be inadequately pled, ruling:

The facts pled here offer a plausible risk that [the defendant] was infringing the ‘641 Patent by selling the [accused system] — and this is why [the plaintiff's] other claims survive [the defendant's] motion to dismiss. But these allegations do not rise to the much higher level of objectively reckless risk of infringement. Without additional facts to support a conclusion that the risk of infringement was highly likely, [the plaintiff] has failed to meet its burden.

Judge Scheindlin did all the plaintiff to file an amended complaint bolstering the willful infringement facts, if possible.

Court Denies Stay Pending PTAB's Consideration of Petition to Institute IPR

In a March 3, 2016 ruling, Judge Katherine Polk Failla denied the defendant's motion for a stay of the plaintiff's patent infringement claims pending the PTAB's decision on whether to institute an IPR.  The deciding factor in the Court's ruling was the parties' relationship as competitors, leading the Court to conclude that "in spite of Defendants’ contention that Plaintiff is the more powerful entity, Plaintiff nonetheless faces prejudice as the current patent-holder."  Judge Failla concluded by noting that "if the PTO later institutes IPR proceedings, the Court may be in a better position to revisit a potential stay, and Defendants may renew their motion at that time."

Court Finds Lack of Subject Matter Jurisdiction Over Invalidity Claim After Plaintiff Dismissed its Infringement Claim

In a November 10, 2015 ruling, Judge Jed S. Rakoff dismissed the defendant's declaratory judgment counterclaim of invalidity for lack of subject matter jurisdiction when the plaintiff dismissed its infringement claim after an adverse Markman construction.  The plaintiff also offered a covenant not to sue that was effective as to future claims against the defendant unless the adverse claim construction was reversed.  Judge Rakoff found that the covenant not to sue eliminated subject matter jurisdiction over the invalidity counterclaim, writing:

In light of the parties' joint stipulation of non-infringement and plaintiff's covenant not to sue on the [patent-in-suit] barring a change in the law of the case, there is no live controversy between the parties as to infringement and defendants have no immediate interest in the validity of defendants' . . . Patent as long as that remains so. While defendants might gain such an interest if plaintiff both appeals the Court's Markman Order and persuades the Federal Circuit of what it could not persuade this Court, there is no certainty that plaintiff will even take an appeal. Plaintiff has not committed to doing so and defendants themselves recognize that plaintiff very well may choose not to, asserting that plaintiff is posturing in threatening to appeal. . . . A controversy this speculative simply cannot be considered to have the "sufficient immediacy" needed to invoke the Declaratory Judgment Act. As such, this Court does not have jurisdiction to entertain the invalidity claim.

Judge Rakoff also ruled that even if the Court had jurisdiction, the Court would decline in its discretion to exercise it given the lack of any immediate controversy.  Judge Rakoff found that "that it would be imprudent and a potential waste of both the parties' and judicial resources for the Court to proceed to determine the validity of the [patent-in-suit], when plaintiff has categorically dropped its infringement allegations barring a reversal of the Court's construction of the term" at issue.

Court Finds Unjust Enrichment Claim Raises Federal Question Under Patent Act

In an October 29, 2015 ruling,Judge Jesse M. Furman found federal question jurisdiction over the plaintiff's unjust enrichment claim which depended on the defendant's infringement of the plaintiff's patent.  The plaintiff administers a number of patent license pools, and the defendant took a license under one of the pools.  After the defendant stopped paying royalties, the plaintiff sued in state court for breach of contract and unjust enrichment.  The defendant removed to this Court, and the plaintiff moved to remand.  Plaintiff's unjust enrichment theory was that the defendant "'benefited by acting as if it had a patent pool license . . ., i.e., that it was "under the umbrella of the protection of the [relevant] Contract"'" and 'it [did] so at the expense of [the plaintiff] which had nonetheless provided this umbrella of protection but was not adequately compensated for doing so.'"  Judge Furman found that "to prevail on that claim, [the plaintiff] must necessarily prove infringement of one or more of the patent in the patent pool," "[t]hat is, the only way [the plaintiff] can prove that [the defendant] benefited at its expense is by showing that it used (and therefore infringed) a patent in the pool."  The Court noted that that "fact distinguishes [the plaintiff's] claim from breach of contract cases found not to raise federal patent questions because the claims turned on interpretation or application of a term in the contract, and infringement or non-infringement was not the determining factor," and denied the plaintiff's motion to remand.

Court Finds Pre-Suit Product Testing Covered by Work Product Privilege

In an October 22, 2015 ruling, Judge Jed S. Rakoff found that the work product privilege applies "to documents regarding plaintiffs' testing of defendant's accused products" before the plaintiffs filed this patent infringement action.  The defendant argued that the test results comprised mere data that could not be protected as work product.  The Court rejected this argument, finding that "'[b]oth facts and opinions are protected by the work product privilege.'"

Judge Rakoff also ordered the plaintiffs to produce a privilege log despite their argument "that doing so 'would disclose counsel's pre-filing investigation, mental processes, and work-product, and would identify potential non-testifying expert consultants in violation of Rule 26.'"  Judge Rakoff wrote:

Thus, plaintiffs' novel argument is that the privilege log itself would be privileged.  This borders on the frivolous.  Rule 26(b)(5) does not end with the caveat, "if the party feels like it."  It is in no way optional.  Nor does it matter that plaintiffs feel the creation of a privilege loge would be "burdensome and wasteful."

Court Refuses to Preliminarily Enjoin Defendants' Participation in IPR

In a September 16, 2015 ruling, Judge Vernon S. Broderick denied the plaintiffs’ motion for a preliminary injunction to enjoin the defendants from participating in a Patent Office Inter Partes Review proceeding because the participation supposedly violated a forum selection clause in the contract between the plaintiffs and the defendants. In denying the injunction, Judge Broderick ruled that the plaintiffs would not be irreparably harmed by being forced to proceed with the IPR because the cost of the proceeding, although costing in the hundreds of thousands of dollars, was nevertheless not an unquantifiable amount constituting irreparable injury. The Court further ruled that the plaintiffs had failed to show a likelihood of success on the merits because the IPR proceeding did not arise out of or relate to the parties’ contract containing the forum selection clause, and thus was not covered by the forum selection clause. Judge Broderick reasoned that the issues in the IPR – the validity of the patents-in-suit – were unrelated to the parties’ contract, and in fact could have been raised essentially by any third party not at all involved in the contract.

The plaintiffs had also contended that the defendants were equitably estopped from challenging the validity of the patents because the defendants had previously assigned the patents at issue. The Court disposed of this contention by noting that the Patent Trial and Appeal Board “has held that the defense of assignor estoppel does not apply in IPR proceedings” so “if the IPR is initiated, [the plaintiffs] will be unable to raise assignor estoppel unless and until the outcome of the IPR is appealed to the Federal Circuit.”

Court Finds Inventor Acted as Own Lexicographer

In an August 6, 2015 ruling, Judge Richard J. Sullivan found that the inventor of the family of patents-in-suit acted as his own lexicographer by submitting unsolicited “remarks” during the prosecution of one of the later patents in the family (the ‘010 patent). The Court wrote:

There is no dispute that the “remarks” Joao [the inventor] to the USPTO are part of the prosecution history for the ‘010 Patent, and although Defendants question his motives – noting that the constructions contained in the “remarks” simply echoed the constructions proposed in the claim construction brief of an unrelated case – for purposes of claim construction, the “remarks” appear sufficiently clear, deliberate, and precise.

Judge Sullivan then considered whether the “remarks” were pertinent to one of the earlier patents in the same family that had an identical specification, and used “the ‘remarks’ as extrinsic evidence for purposes of construing the terms of” that patent “to the extent those remarks do not directly contradict the plain meaning of those terms and such terms cannot be construed without the aid of extrinsic evidence.”

Court Denies Summary Judgment of Patent Infringement Because of "Battle of the Experts"

In a May 28, 2015 ruling, Judge Jed S. Rakoff denied summary judgment of patent infringement because the parties’ experts had conflicting views on the issue. Judge Rakoff wrote that the plaintiff “has proffered expert testimony that” the accused product contains a particular claim limitation and the defendant “has proffered expert testimony that it does not. Upon careful review, it is clear that the resulting 'battle of experts' involves genuine disputes of material fact precluding judgment as a matter of law. Accordingly, the Court hereby denies both parties' motions for summary judgment.”

Court Denies Priority to a Patent Claim, Thus Invalidating It Based on Prior Art

In a May 8, 2015 ruling, Judge P. Kevin Castel found a patent claim to be invalid over prior art despite the patentee’s claim of earlier priority for the claim at issue. Relying on Federal Circuit precedent, the Court noted where a defendant produces prior art with a date preceding the filing date of the patent at issue, the burden shifts to the patentee to provide evidence and argument at least creating an issue of fact that the claim is supported by the written description of the patent from which it claims priority. If the patentee does so, the burden shifts back to the defendant to show by clear and convincing evidence that the earlier written description does not support the claim. In invalidating the claim at issue, Judge Castel wrote:

Under the Videotek burden-shifting framework described earlier, the defendants met their initial burden of production by identifying prior art—the Flex Binders—which, the parties agree, would invalidate Claim 20 if it cannot claim the benefit of the ’640 Patent’s earlier filing date. It was then incumbent upon Chizmar to produce “evidence and argument” that creates a genuine issue of material fact with respect to whether the disclosures of the ’640 Patent satisfy the written description requirement. This Chizmar has failed to do. Accordingly, Claim 20 of the ’140 Patent is invalid as anticipated by the Flex Binders.

Court Dismisses Patent Infringement Action for Lack of Standing

In an April 28, 2015 ruling, Judge Colleen McMahon found that the plaintiff in a patent infringement action lacked standing because of a defect in the patent’s chain of title. The plaintiff’s title to the patent depended upon a transfer from the plaintiff’s wholly-owned subsidiary to the plaintiff. The Court found that not such transfer had taken place. Judge McMahon wrote that there had not been an express assignment, and that the plaintiff had not acquired the patent automatically upon the plaintiff’s filing of a certificate of dissolution for the subsidiary. According to the Court, the mere filing of the certificate does not cause the transfer, which happens only upon the filing of a plan of dissolution within three years of the filing of the initial certificate.

Court Declines to Dismiss Unclean Hands Defense

In a March 19, 2015 ruling, Judge Thomas P. Griesa declined to strike the defendant’s defense of unclean hands. Although the plaintiff is asserting a patent infringement claim, the unclean hands defense relates to the plaintiff’s alleged inequitable interference with the defendant’s supply agreement with a third party. The Court held that by “seeking an injunction against defendant [on the patent infringement claim], plaintiff comes to the court in equity” so the “defense of unclean hands deserves to be tried on the merits.”

Court Denies Summary Judgment Because of Factual Dispute Between Experts

In a January 14, 2015 ruling, Judge Coleen McMahon denied summary judgment in this patent infringement action because of the parties’ experts’ conflicting testimony. The Court wrote:

In sum, the two sides’ experts differ on two critical points: whether [the prior art] and the [patent-in-suit] disclose the same elements and limitations, and whether one acknowledged difference between them (the plurality of numbers) would have been “obvious” to one skilled in the art. Each side has presented testimony from a purported expert to support its point of view. The experts do not agree. That precludes summary judgment.

In commenting on the experts’ disagreement about the qualifications for a person skilled in the art concerning the patent-in-suit, Judge McMahon wrote:

Two more disparate descriptions of what constitutes a “person having ordinary skill in the art” I cannot imagine. . . . The Court has no idea who is correct, or for that matter how to resolve the issue; this is the first case I can recall in which the parties did not agree on the qualifications of the hypothetical “person having ordinary skill in the art.” . . . If the parties cannot agree on who qualifies as a person skilled in the art, then there is a question of fact to be resolved. This precludes summary judgment as well.

Court Declines to Dismiss Patent Infringement Claim on Grounds of Laches and Equitable Estoppel

In a June 18, 2014 ruling, Judge P. Kevin Castel denied defendant's motion to dismiss this patent infringement action on the grounds of laches and equitable estoppel.  With regard to laches, the defendant argued that some discussions between the parties before the patents-in-suit triggered the period for measuring laches, but Judge Castel ruled that the period ran from the issuance of the patents.  The Court also noted that "[f]acts concerning factors, such as the unreasonableness of the delay or the lack of excuse do not appear" in the amended complaint, precluding dismissal.  Judge Keenan likewise rejected the equitable estoppel defense, finding that "facts necessary to establish the affirmative defense of equitable estoppel do not appear on the face of the" amended complaint.

Court Declines to Compel Answers to Contention Interrogatories Early in Patent Infringement Action

In a May 29, 2014 ruling, Judge Katherine B. Forrest declined to compel the answers to contention interrogatories early in this patent infringement action.  The Court wrote:

There is no special "patent rule" that provides for contention interrogatories at the outset of a case.  There are, however, significant alternative means for the parties to obtain additional particularity regarding allegations:  this Court's Individual Rules provide for the virtually immediate disclosure of plaintiff's infringement contentions, followed by a document production, followed by disclosure of any invalidity contentions, followed (again) by a document production.  And so on.  The Local Patent Rules provide similarly.

Court Dismisses Contributory Patent Infringement Claim, But Declines to Dismiss Induced and Willful Infringement Claims

In a May 12, 2014 ruling, Judge Robert D. Sweet refused to dismiss the plaintiff’s induced patent infringement claim and claim for willful infringement, but did dismiss the contributory infringement claim under Rule 12(b)(6). With regard to the induced infringement, the Court wrote that the fact that the plaintiff and defendant are competitors in producing the goods covered by the patents-in-suit, that the plaintiff marked its goods with the pertinent patents, and that industry trade publications mentioned the existence of the plaintiff’s patents all gave rise to the inference that the defendant knew of the patents or turned a willful blind eye to their existence. Judge Sweet further ruled that that these same facts supported the plaintiff’s claim of willful infringement. The Court, however, dismissed the contributory infringement claim, noting that claims “of indirect infringement [necessary to support a contributory infringement claim] requires the application of Iqbal/Twombly plausibility standard,” and the “Complaint makes a barebones recitation that the [accused device] was ‘especially made or especially adapted’ for an infringing use and that it has ‘no substantial noninfringing uses.’”

Court Dismissed Patent and Trademark Infringement Claims on Exhaustion and First Sale Grounds

In an April 23, 2014 ruling, Judge Paul A. Engelmayer dismissed the plaintiff’s patent infringement claims on the grounds of exhaustion and dismissed the trademark infringement claims because the goods at issue were genuine even if they had been sold in unauthorized markets. With regard to patent exhaustion, there was no dispute that the patented goods had been purchased from the patent owner exhausting the patent protection, although the plaintiff contended that they had been sold in violation of contractual restrictions. Relying on the Supreme Court’s decision in Quanta Computer, Inc. v. LG Elecs., Inc., 553 U.S. 617 (2008), Judge Engelmayer ruled that the patent protection was exhausted despite the contractual breach, writing that “Quanta precludes the argument that any failure by a party to abide by any contractual condition in an agreement involving a patented device will revive an otherwise exhausted patent so as to permit the patentholder to sue for infringement, as opposed to, e.g., breach of contract.”

The Court dismissed the plaintiff’s trademark-related claims on analogous grounds of the “first sale doctrine.” Judge Engelmayer wrote that there can be no trademark infringement if genuine goods are at issue even if those goods are sold in violation of contractual restrictions.

In a follow up May 7, 2014 ruling, Judge Engelmayer declined to exercise supplemental jurisdiction over the remaining state law claims, and dismissed the entire action.

Court Declines to Stay Enforcement of Patent Infringement Judgment Pending Patent Office Reexamination

In an April 11, 2014 ruling, Judge Samuel Conti denied the defendants' motion to stay execution of damages pending reexamination in the Patent Office of the patent-in-suit in this infringement action. Following a jury verdict, including for willful infringement, the Court entered judgment against the defendants for $953,424.66. Shortly before the trial, the defendants filed an request for reexamination, and after the trial and the jury’s verdict, the Patent Examiner issued a non-final office action invalidating the single claim at issue. The defendants then moved for the stay.

Noting that courts have discretion stay proceedings during Patent Office proceedings, Judge Conti found that all three factors that usually inform the stay decision weigh in favor of denying the stay, particularly given the lateness of the request and the advanced state of the lawsuit. Although Judge Conti recognized that there is some risk the judgment could become final and the patent-in-suit would later be invalidated (which does not permit reopening the judgment), he found the concerns premature, and wrote that “the Court would be willing to reconsider its decision to stay” if the Patent Office renders a final decision on validity while the appeal is still pending.

The Court also treated the defendants’ motion in the alternative as a request for a stay pending appeal without the posting of a supersedeas bond. Judge Conti again ruled that the pertinent factors weigh against entry of such a stay, and denied the motion.

Court Denies Summary Judgment of Invalidity Based on Indefiniteness after Having Denied Summary Judgment on Non-Infringement

In an April 7, 2014 ruling, Judge Jed S. Rakoff denied the defendants’ motion to invalidate two claims in the patent-in-suit in the plaintiffs’ infringement action. Judge Rakoff had earlier denied the defendants’ motion for summary judgment of non-infringement. The defendants argued in the current motion that because the Court had construed the pertinent claim terms but had been unable to reach a conclusion as to non-infringement, the claims are indefinite as lacking a “‘discernible boundary.’” Judge Rakoff rejected this argument, writing:

it would be unusual if a claim that can be construed definitely could suddenly become indefinite because an accused product came close to infringing but left the possibility of its noninfringement. A party should not be able to invalidate another’s patent solely by coming close enough to infringing that a Court cannot determine infringement, a question of fact, as a matter of law on a motion for summary judgment.

Court Grants Stay of Patent Infringement Action Pending Covered Business Method Review in the USPTO

In an April 1, 2014 ruling, Judge Katherine B. Forrest stayed a patent infringement action pending the USPTO’s decision on the defendant’s petition for a Covered Business Method review, and the outcome of the review. The Court was “persuaded by the undisputed evidence presented by [the defendant] of the high likelihood that both the Patent Trial and Appeal Board will grant the Covered Business Method review, and that such CBM review will result in the cancellation or amendment of at least one claim of” the patent-in-suit. Judge Forrest noted that it “is not this Court’s typical practice or inclination to grant stays,” but found that the four factors for granting a stay set out in the America Invents Act weigh in favor of a stay in light of the likelihood that the CBM review will result in amendment of the patent and the early stage of the proceeding.