Judge Smith Severs Patent Claims Against Multiple Defendants

Posted on January 23, 2012 by Dabney Carr

While the AIA bars the joinder of patent infringement claims against multiple defendants (discussed here), there are still a few pre-AIA suits alleging that multiple defendants independently infringed the same patents. Judge Smith recently became the latest Eastern District of Virginia judge to dismiss such a suit for improper joinder. Automated Tracking Solutions, LLC v. Awarepoint Corp., et al., Case No. 2:11CV424 (E.D.Va. Jan. 13, 2012), found here.

Automated Tracking accused five separate defendants of infringing four different patents. According to the defendants, the Complaint asserted different patent claims against each defendant’s product, and so there was no commonality at all between the claims. In response, Automated Tracking asserted only that joinder of all claims into one suit created significant efficiencies and that there was no evidence of prejudice from proceeding jointly.

Unfortunately for Automated Tracking, Rule 20 does not allow joinder based solely on efficiency and lack of prejudice. As Judge Smith pointed out, claims against separate defendants must also arise out of the same transaction, occurrence or series of transactions and occurrences. Judge Smith also rejected Automated Tracking’s claims of judicial economy, holding that the “type of joinder in the case at bar represents judicial ineconomy and serves no purpose but to thwart the rules of proper procedure for filing separate lawsuits.” 

Judge Smith dismissed all but Awarepoint, the first named defendant. As of this date, Automated Tracking has re-filed suit against three of the dismissed defendants, and those cases have been assigned to separate judges in Alexandria and Norfolk. It will be interesting to see whether and to what extent the district judges handling these cases attempt to coordinate claim construction, discovery and other pre-trial matters.

Automated Tracking also provides an interesting contrast to Judge Cacheris’ recent decision in Coach, Inc. v. 1941 coachoutletstores.com to allow joinder of claims under the ACPA against 356 unrelated alleged cybersquatters. It is difficult to articulate a distinction between the two decisions other than that practical considerations support allowing a plaintiff  to join claims against multiple accused cybersquatters, but those same considerations do not apply to other types of litigation, including patent litigation.

Tags: , ,

Standing Granted in Trustee-Beneficiary Relationship, Says Judge Smith

Posted on August 25, 2011 by Matthew Osborne

Standing can be a tricky issue in situations where affiliated corporate entities assign and cross-license patents amongst themselves. In Pfizer, Inc., v. Teva Pharmaceuticals USA, Inc., Case No. 2:10cv128, 2011 U.S. Dist. LEXIS 90021 (E.D.Va. Aug. 12, 2011), Judge Smith weighed-in on two interesting scenarios: trustee-beneficiary patent ownership and exclusive licenses with owner-retained rights.

Standing, Generally

Before delving into the facts of Pfizer’s multiplicity of corporate entities and transfers of patent rights therebetween, Judge Smith broadly covered the categories of plaintiffs that have standing in suits of patent infringement, along with their respective remedies, as set out by the CAFC:

·         Plaintiffs which can sue in their name alone, including patent owners, assignees, and exclusive licensees with “all substantial rights in the patent;”

·         Plaintiffs which can sue in tandem with the patent owner, including exclusive licensees not holding “all substantial rights;” and

·         Plaintiffs which can sue in equity, including parties with equitable ownership of a patent

 

Trustee-Beneficiary Relationship

In a rather interesting contractual maneuver, dubbed the “Patent Filing Agreement,” Pfizer, Ltd. developed technology to be pursued before the USPTO under the control of affiliate Pfizer, Inc. The arrangement assigned all Pfizer, Ltd. invention rights to Pfizer, Inc., to be held “in trust” for beneficiary, Pfizer, Ltd.  The ability to grant licenses in issued patents was retained by Pfizer, Ltd.

Judge Smith held both Pfizer, Ltd. and Pfizer, Inc. to have standing as plaintiffs in the suit. Regarding Pfizer, Inc., the Court found the Patent Filing Agreement to clearly rest ownership of US patents in the hands of Pfizer, Inc. and, accordingly, the ability to stand as sole plaintiff in litigation. Regarding Pfizer, Ltd., the Court found the beneficiary relationship to the patent-in-suit, coupled with the right to grant licenses and enforce the patent, to independently give the beneficiary the ability of sole plaintiff standing in litigation. Judge Smith further noted that a beneficiary would, at the very least, be able to hold standing in tandem with the patent owner or in equity.

 

Exclusive Licensee (with Retained Rights)

The Court then turned to the complicated case of subsidiary Pfizer Ireland Pharmaceuticals Unlimited Liability Co. (“Pfizer Ireland”), also a party to the litigation. Pfizer Ireland had received an exclusive license to the patent-in-suit though a series of conveyances too complex to list here. With the chain of custody blessed by the Court, Judge Smith turned to the terms of the exclusive license, to determine whether it met the burden required for co-plaintiff standing. In its examination of the license, the Court considered:

·         Whether the licensee has exclusive rights in a territory,

·         Whether the licensor has retained the right to grant further licenses,

·         Whether the licensee has the right to sue for infringement, and

·         Whether the licensor retains rights to develop and market the invention.

After analysis, Pfizer Ireland was deemed a bare licensee for the purposes of standing. The Court pointed to Pfizer, Ltd.’s retained “Right of Conversion,” which allowed Pfizer, Ltd. to revoke exclusivity at a later date, and Pfizer Ireland’s lack of a primary right of enforcement in cutting against a truly exclusive license.

Based on this analysis, Judge Smith removed Pfizer Ireland from the suit, while keeping both Pfizer, Inc. and Pfizer, Ltd. as co-plaintiffs.
Tags: , , , ,

Proving Invalidity Based on Prior Invention Under 35 U.S.C. 102(g)(2)

Posted on August 10, 2011 by Dabney Carr

Successful patent invalidity challenges asserting prior invention under § 102(g)(2) are rare, which makes Judge Smith’s recent award of summary judgment on that basis even more noteworthy. In her latest opinion in The Fox Group, Inc. v. Cree, Inc., Case No. 2:10CV314, 2011 U.S. Dist. LEXIS 87231 (E.D.Va. Aug. 8, 2011), found here, Judge Smith sets out a helpful roadmap for an accused infringer pursuing a § 102(g)(2) invalidity claim.

Proof of the Defense

Under §102(g)(2), a patent is invalid if the invention has been made by another inventor who had not abandoned suppressed or concealed it. 

The Court noted two ways to prove prior invention: (1) by reducing the invention to practice first or (2) by being the first to conceive the invention and then exercising reasonable diligence in reducing it to practice.

Cree asserted prior invention by reduction to practice, which requires:

  • construction of an embodiment that met all the limitations of a patent’s claims; and
  • a determination that the invention would work for its intended purpose

Once actual reduction to practice is established, the burden shifts to the patentee to show that the prior inventor abandoned, suppressed or concealed the invention.

Reduction to Practice

Fox challenged whether Cree met the second prong of the reduction to practice test – “contemporaneous recognition and appreciation of the invention” – because Cree did not appreciate that its invention met the specific requirements of the patent’s claims. 

On the contrary, Judge Smith held:

  • A prior inventor is not required to show that he recognized the invention in the same terms as those in the patent’s claims.
  • The invention is not the language of the claims but the subject matter thereby defined.
  • Cree need only appreciate the novelty of its invention through (1) evidence of its subjective belief about its invention; and (2) objective evidence that corroborated that subjective belief.

Abandonment, Suppression or Concealment

Fox claimed that Cree’s delay in publicizing its invention constituted abandonment, suppression or concealment.

First, Fox argued that Cree did not publish any document which disclosed every element of the patent claims. Judge Smith quickly dismissed this claim because it was based on the requirements to prove anticipation under § 102(b) not prior invention under § 102(g)(2)

Second, Fox argued that Cree delayed nine years before it used its invention in a commercial product. Judge Smith rejected the position that a prior inventor must commercialize its product. Cree’s contemporaneous disclosure of the invention through a presentation and a paper at an international conference met any requirement of public disclosure. 

Based on the findings of actual reduction to practice and absence of evidence of abandonment, suppression or concealment, Judge Smith entered judgment of invalidity and dismissed Cree’s claim for a declaration of non-infringement as moot.
Tags: , ,

Adiscov Redux: Judge Smith Denies Motion to Dismiss Re-Filed Complaint

Posted on April 29, 2011 by Dabney Carr

As we blogged here, Judge Smith’s dismissal of the Complaint in Adiscov, L.L.C. v. Autonomy Corp., Case No. 2:10cv218, 2011 U.S. Dist. LEXIS 11551 (E.D.Va. Jan. 27, 2011), based on Twombly/Iqbal, went a step beyond similar decisions by holding that a patentee must set forth how the accused products infringe the patent at issue.  That decision has caused some among the EDVA patent bar to question how much detail a Complaint must contain to satisfy Fed. R. Civ. P. 8.

Adiscov clearly got the message. Its re-filed Complaint specified the accused products and included a detailed claim chart laying out the basis of its claims. Earlier this week, on a renewed motion to dismiss, Judge Smith held that “Adiscov has cured the fatal deficiencies which caused the court to dismiss its complaint in the first case.” Adiscov, L.L.C. v. Autonomy Corp., 2:11Cv201 (E.D.Va. April 26, 2011) (“Adiscov II”), which can be found here.

Specifically, Adiscov’s complaint met the pleading requirements of Rule 8 because it:

  • “specifically identified the Autonomy’s products that it claims to infringe”
  • “names the elements of Claim 1 of the ‘760 patent which are specifically infringed”
  • states “in general how such products infringe the ‘760 patent.”

Judge Smith brushed aside Autonomy’s arguments that Adiscov’s allegations were overinclusive and conclusory, implying that Rule 8 only requires that a patentee set forth some theory of infringement. Beyond determining whether that theory is plausible, the District Court will not delve any further.

Adiscov II clarifies that Twombly/Iqbal and Rule 8 set a low bar to plead patent infringement that a patentee should be easily able to meet. In sum, a Complaint for patent infringement need only:

  1. assert that the plaintiff owns the patent
  2. identify the defendants
  3. assert that the defendant infringed the patent
  4. identify the accused products
  5. state in general how the accused products infringe
  6. identify the parts of patent law that are implicated.

As a result, dismissals under Twombly/Iqybal will be rare and short-lived, as any competent patent lawyer should be able to meet any grounds for dismissal in a re-filed Complaint.

Tags: , , ,

Judge Smith Dismisses Patent Suit Based on Twombley/Iqbal

Posted on February 9, 2011 by Dabney Carr

On January 27, Judge Rebecca Beach Smith dismissed a patent infringement action on the grounds that the Complaint failed to meet the pleading requirements in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009). Adiscov, LLC v. Autonomy Corp., Case No. 2:10CV218 (E.D.Va. Jan. 27, 2011) (Smith, J.). The decision can be found here.

Adiscov LLC brought suit against three defendants alleging infringement of its patent covering methods for conducting electronic discovery on computer systems.  Adiscov’s allegation of infringement was brief and simple: it alleged that each defendant manufactured, used and sold products and services including “legal discovery software and services . . . acting or capable of acting in the manner described and claimed in the ‘760 patent.” Adiscov did not identify any specific infringing product or class of products nor did the Complaint identify how the defendants’ products infringe its patent.

Judge Smith’s opinion concisely summarizes Twombly’s and Iqbal’s two basic requirements of sufficient factual allegations and plausibility of those allegations:

  • First, while detailed factual allegations are not required, a Complaint “requires more than labels and conclusions.” “An unadorned, the-defendant-unlawfully-harmed-me accusation” is not enough.
  • Second, a Complaint must contain sufficient factual matter, accepted as true, to state a plausible claim for relief. The Court must be able to draw the reasonable inference that a defendant is liable for the misconduct alleged, i.e., more than a “sheer possibility that a defendant has acted unlawfully.”

Regional Circuit law, not Federal Circuit law, applies to a motion to dismiss under Rule 8.  Adiscov is the second E.D. Va. case addressing Twombly in the patent context. We blogged here about the first case, Judge Payne’s 2007 decision in Taltwell, LLC v. Zonet Corp.,  2007 U.S. Dist. LEXIS 93465 (E.D.Va. Dec. 20, 2007). 

 

As in Taltwell, Judge Smith looked to the Federal Circuit’s decision in McZeal v. Sprint Nextel Corp., 501 F.3d 1354 (Fed. Cir. 2007). In McZeal, the Federal Circuit held that a complaint must include:

  • an assertion that the plaintiff owns the patent at issue;
  • the names of the defendants;
  • an assertion that the defendant infringed the patent;
  • a general description of the means by which the patent was infringed;
  • the specific parts of the patent law that are implicated.

As other cases, including Taltwell  have found, Judge Smith held that merely reciting “legal discovery software and services” as the accused products did not describe a category or specific products and services as Rule 8 required. 

 

Judge Smith went on to rule that Adiscov’s allegations failed the plausibility requirement because they failed to describe how the products at issue infringed the patent. That holding goes a step beyond Taltwell and other cases by implying that a patentee must not only identify the accused products, it must also set forth how the claims of the patent at issue apply to the accused products. Without such allegations, Judge Smith holds, all that “the court is left with is ‘a sheer possibility’ that one of [defendants’] numerous products or services infringe the ‘760 patent in one way or another.”

 

Judge Smith dismissed Adiscov's complaint without prejudice. Adiscov quickly re-filed its suit on February 2, and the new Complaint can be found here. Interestingly, Adiscov’s re-filed Compalint has been assigned to Judge Lee in the Alexandria Division even though Adiscov listed the Norfolk case before Judge Smith as a related case. Adiscov’s re-filed Complaint identifies specific accused products and, in response to Judge Smith’s ruling on the plausibility of its allegations, also includes representative claim charts in the Complaint itself.
Tags: , , ,