Failure to Implement Pre-Suit Litigation Hold Warrants Spoliation Sanctions and Adverse Jury Instruction

The magistrate judge recommended sanctioning defendant with an adverse jury instruction for spoliation and rejected defendant's argument that it did not have to impose a litigation hold until plaintiffs filed suit. "Defendants’ duty to preserve documents arose [a year and a half before plaintiff filed suit] when Plaintiffs notified Defendants of a potential lawsuit against them should they decide to market their alleged infringing product. . . . Plaintiffs show that one of Defendants’ key senior employees . . . indisputably destroyed email communications due to Defendants’ failure to put in place a litigation hold. . . . [Her] communications are especially probative of the claims at issue in this litigation because her current and past employment with Defendants involved the design, development, and testing of the products accused of infringing on the Patents-In-Suit."

Zest IP Holdings, LLC, et. al. v. Implant Direct MFG, LLC, et. al., 3-10-cv-00541 (CASD November 25, 2013, Order) (Gallo, M.J.)

Fact Issues as to Validity Preclude Willfulness Claim

The court granted defendant's motion in limine to preclude evidence of willfulness at the jury trial. "The court notes that its order denying summary judgment that the [patent-in-suit] is not anticipated and nonobvious held that there are triable 35 U.S.C. §§ 102 and 103 issues. Because a reasonable jury could find that the [patent] could be found invalid on multiple grounds, a finding of willfulness is precluded. It would be unfairly prejudicial to instruct the jury on willfulness where that issue is not properly before the jury."

Guzik Technical Enterprises, Inc. v. Western Digital Corporation et. al., 5-11-cv-03786 (CAND November 22, 2013, Order) (Grewal, M.J.)

10-Month Delay Sinks Motion to Transfer

The court denied defendant's motion to transfer venue of plaintiff's infringement action from the Eastern District of Wisconsin to the Northern District of California because the interests of justice did not favor transfer. "[T]he motion to transfer was filed nearly ten months after the case was filed in this District and six months after the scheduling order was issued. . . . It is unclear whether a transferee court would accommodate that schedule. . . . [T]here is no explanation for why the motion to transfer was not brought earlier. If the other forum were truly so convenient, one would expect much swifter action to transfer the case there. . . . Because both convenience and the interests of justice are required in order to transfer a case under [28 U.S.C. § 1404], the motion will be denied."

Circuit Check, Inc. v. QXQ, Inc., 1-12-cv-01211 (WIED November 20, 2013, Order) (Griesbach, J.)

Motion for Attorneys’ Fees is Premature During Appeal of Claim Construction

The court denied without prejudice defendant's motion for attorneys' fees under 35 U.S.C. § 285 until after plaintiff's appeal of claim construction. "The Court concludes that [defendant's] present motion is premature. [Defendant's] fee request could be affected by the outcome of the pending appeal of the Court’s claim construction, and the Court believes it is prudent to await the decision on appeal before ruling on any fees request. Accordingly, the Court denies the present motion without prejudice to [defendant] to bring the motion, if warranted, after the Federal Circuit Court of Appeals issues its decision on the pending appeal of the Court’s claim construction."

Superior Industries, LLC v. Masaba, Inc., 0-10-cv-00764 (MND November 20, 2013, Order) (Frank, J.)

Patentee May Not Recover Lost Profits of Subsidiary Based on Reduction of Hypothetical Sales Price of Subsidiary

The court granted defendants' motion for summary judgment that plaintiff was not entitled to price erosion damages incurred by its subsidiary because plaintiff did not establish a direct injury. "While [plaintiff's expert] has offered hypotheticals about the potential impact of Defendants' infringement, however, such as the possibility that [plaintiff] would have received a lower price if it had attempted to sell one of its subsidiaries, she has provided no factual basis to support these hypotheticals. . . . [W]ere the Court to find that such hypotheticals are sufficient to establish an independent basis for a parent to recover the lost profits of its subsidiaries it would be creating an exception that would essentially swallow the rule . . . . Every parent of a wholly owned subsidiary . . . could obtain the lost profits of the subsidiary simply by claiming it fully controlled the subsidiary and that dividends could have passed the lost profits upstream had the parent decided dividends should be declared by the subsidiary or that a hypothetical buyer might have paid less for a subsidiary had the parent chosen to sell it. Further, such a holding would also fly in the face of the well-established rule that damages may not be awarded on the basis of harm that is entirely speculative."

Volterra Semiconductor Corporation v. Primarion, Inc., et. al., 3-08-cv-05129 (CAND November 18, 2013, Order) (Spero, M.J.)

Early Rule 11 Motion Denied as Premature, But Subject to Renewal

The court denied defendants' motion for Rule 11 sanctions. "Defendants complain that plaintiff has not provided 'details regarding [its] infringement analysis or underlying claim construction positions. . . .' Defendants then urge the court to conclude, prior to claim construction, that plaintiff's 'purported infringement theory includes no 'code comparison' whatsoever and no 'commands' from the user's device or 'instructions' from the ad server that command the user's device to select an advertisement.'. . . The court is not prepared to engage in a claim construction exercise, construing the claim terms . . . at this stage of the proceedings, with no context provided by discovery or a motion practice. . . . [P]laintiff may well be stretching the meaning of two older patents (clearly directed at television and radio), circa 1998-99, to fit current internet streaming video technology. . . . The court cautions plaintiff that it will entertain a renewed Rule 11 motion, if merited, after discovery and a full claim construction record."

HBAC MatchMaker Media Inc. v. CBS Interactive Inc., 1-13-cv-00428 (DED November 18, 2013, Order) (Robinson, J.)

Third-Party IPR Warrants Stay, With Scope of Estoppel for “Redundant” Grounds to be Decided

The court granted defendant's motion to stay pending inter partes review initiated by a nonparty, but agreed to hold a separate hearing regarding potential estoppel effects. "[Defendant] asks that the estoppel extend only to those grounds actually raised in the inter partes review, not those that reasonably could have been raised. The Court notes that some of the grounds asserted by [the nonparty] in its petition for inter partes review of the [patent-in-suit] were disallowed because they were 'redundant in light of the grounds on the basis of which an inter partes review is being instituted.' The Court requires additional argument before deciding the extent to which [defendant] will be estopped. . . . [Defendant] should be prepared to discuss any invalidity grounds it would assert that were not asserted by [the nonparty] and that would not be redundant of those actually raised."

e-Watch, Inc. v. Avigilon Corporation, 4-13-cv-00347 (TXSD November 15, 2013, Order) (Atlas, J.)

“Conditional Action” is Unpatentable Abstract Idea

The court granted defendant's motion to dismiss plaintiff's infringement action because plaintiff's method patent for triggering machine events claimed unpatentable subject matter. "The patent describes . . . a method for superimposing prespecified locational, environmental, and contextual controls on user interactions . . . . [T]he Court agrees with the Defendant that the abstract idea at the heart of the claim is the very concept of a conditional action. . . . A conditional action is a basic tool on which a multitude of disciplines rely upon for innovation. As the Defendant points out, '[the concept] informs disciplines ranging from medicine ("Treat a patient with medicine X when he presents with symptom Y.") . . . , economics ("Increase price when customer demand is greater than supply.")[,] to law ("My performance of the contract is excused if you materially breach it.").' The fundamental role that the concept of conditional actions play in numerous disciplines is sufficient to warrant it protection as an abstract idea, because its patenting would 'impede innovation[,] more than it would tend to promote it.' Furthermore, a conditional action is more abstract then other ideas that Federal Circuit and the Supreme Court have previously held to be unpatentable. . . . The Patentee attempts to limit claim 1 of the patent by confining it to a computer environment in which there must be present at least one stationary computer and one mobile computer along with the presence of two human users. . . . [W]hile, the Patentee has divided the world of computers into two halves, stationary and mobile, and required a computer from each half, this limitation does little more than require two general-purpose computers, an act that does nothing to transform a nonpatentable abstract idea into a patentable invention."

UbiComm LLC v. Zappos IP Inc., 1-13-cv-01029 (DED November 13, 2013, Order) (Andrews, J.)

Consideration of Noninfringing Alternatives Does Not Constitute Inappropriate Rate Cap

The court denied plaintiff's motion in limine to preclude the testimony of defendant's damages expert because he capped the range of potential royalty rates. "[Plaintiff] asserts that [defendant's expert's] calculations . . . impermissibly 'establish[] a cap' on the range of potential reasonable royalty rates in the hypothetical negotiation by concluding that [defendant] would not pay a royalty rate higher than the cost associated with forgoing use of the infringing products and instead using available, noninfringing alternatives. . . . [The expert's] proposed testimony does not stem from the mistaken belief that infringement damages must be capped at the cost of using a noninfringing alternative. Instead, he examines the economic circumstances of this particular case, notes the availability of acceptable noninfringing alternatives to [defendant], and concludes that no other factors would compel [defendant] to accept a higher royalty rate during the hypothetical negotiations. Such analysis does not, as [plaintiff] contends, misapply the law on damages."

Kimberly-Clark Worldwide Inc. v. First Quality Products Inc., et. al., 1-09-cv-01685 (PAMD November 13, 2013, Order) (Caldwell, J.)

Does the Exclusion of Expert Testimony Preclude Plaintiff's Damages Claim?

Yes. The court granted defendants' motion to preclude plaintiff from seeking lost profits for three of its patents after the court struck the related opinions of its damages expert. "[Plaintiff] claims that it can prove its entitlement to lost profits through a vague combination of other evidence concerning the number of [defendants'] infringing sales. . . . [A]lthough [plaintiff] contends that it previously disclosed a general theory of lost profits damages that does not rely on either expert testimony or the Panduit factors, [plaintiff] did no such thing. . . . To admit a brand new damages theory on the literal eve of trial would be grossly prejudicial to [defendant], which has never had the opportunity to take discovery on or prepare to rebut any lost profits theory other than the one presented in [plaintiff's expert's] Report. . . . Furthermore, there is a high risk that introducing this new theory, the contours of which remain murky even to the Court, will confuse the issues, mislead the jury, and waste time. . . . Nor does [plaintiff] offer any proposals by which to ensure that leaving the jury to its own devices to calculate a lost profits award will not result in a damages award that is wildly speculative or based on factors that have no place in a lost profits calculation."

Apple Inc. v. Samsung Electronics Co. Ltd., et. al., 5-11-cv-01846 (CAND November 12, 2013, Order) (Koh, J.)

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No. Following the court's decision to exclude plaintiff's damages expert, the court granted plaintiff's request to call defendant's damages expert during plaintiff's case-in-chief. "[Defendant] has cited no authority to support the proposition that there is a per se rule precluding a party from relying on the testimony of an adverse party’s expert in its case-in-chief. . . . [T]he Court finds that it is appropriate to permit [plaintiff] to call [defendant's expert] in its case-in-chief. . . . [Defendant] contends that it will be 'prevent[ed] . . . from controlling the presentation of its own case' and that there is a risk that '[its expert's] testimony will be taken out of context and misunderstood by the jury.' This argument is unpersuasive. If Plaintiff’s counsel poses improper questions, [defendant] may object. And, to the extent that [defendant] is concerned about responses to proper questions, the result is not materially different than if Plaintiff were to cross-examine [defendant's expert] were he presented first as a defense witness. . . . However . . . [defendant's expert] appropriately assumed infringement in carrying out his damages analysis, and it would be improper for [plaintiff] to use that assumption to bolster its infringement case."

NetAirus Technologies, LLC v. Apple Inc., 2-10-cv-03257 (CACD November 11, 2013, Order) (Kronstadt, J.)

In Limine Objection to “Patent Quality Inventor Study” Sustained

The court sustained defendant's objection to a “Patent Quality Inventor Study” submitted by plaintiff which ranked the inventor of the patents-in-suit "as the 'top rated inventor' in the 'wireless' invention category. [Plaintiff] argues that this exhibit is properly offered as a secondary consideration of nonobviousness – specifically, praise by others. The Court notes that the study does not pertain specifically to any of the patents-in-suit, much less the asserted claims. The Court finds that the probative value of the study is minimal, as it lacks the requisite nexus to the claims at issue in this case. . . . Similarly, the potential for unfair prejudice is high. The Court also determines that the study does not fall within the exception set forth in Federal Rule of Evidence 803(17), and that it is primarily offered for its truth, and is therefore hearsay.

Personalized Media Communications, L.L.C. v. Zynga, Inc., 2-12-cv-00068 (TXED November 8, 2013, Order) (Payne, M.J.)

No Attorneys’ Fee Award for Reexamination

The court denied defendant's motion for attorneys' fees under 35 U.S.C. § 285 for fees incurred during reexamination. "[Defendant] initiated the reexamination and obtained a stay of the litigation until the examiner’s final rejection of the claims. At that time, it successfully requested that the stay be lifted before all appeals from the reexamination were exhausted. The Court then construed the claims and granted [defendant's] motion for summary judgment of non-infringement and invalidity. As a result, this is not a case in which the reexamination 'virtually replaced the district court litigation.' [Defendant] is, therefore, not entitled to the . . . fees attributable solely or primarily to the reexamination."

Kim Laube & Company, Inc., et. al. v. Wahl Clipper Corporation, et. al., 2-09-cv-00914 (CACD November 6, 2013, Order) (Kronstadt, J.)

No Lost Profits For Violation of Protective Order

The court denied defendants' motion for contempt for plaintiff's violation of a protective order, and denied defendant's request for lost profits resulting from such violation, but instead granted an award of attorneys' fees under Rule 37. "[Plaintiff's] violation of the Protective Order, while not contempt, is still sanctionable under Federal Rule of Civil Procedure 37 . . . . The defendants argue that the Court should order [plaintiff] to reimburse the defendants $573,149 for lost profits from sales to four distributors that were allegedly 'destroyed' as a result of [plaintiff's] letters. . . . The only evidence proffered by the defendants is [defendant's CFO's] bald assertion; there are no declarations or communications from the distributors reflecting that the letters from [plaintiff] had any impact on the distributors, much less that the letters caused them to cancel the purchase orders. [The CFO's] unsupported assertion is an insufficient evidentiary basis for the monetary remedies the defendants seek."

LifeScan Scotland, Ltd. v. Shasta Technologies, LLC et. al., 3-11-cv-04494 (CAND November 6, 2013, Order) (Orrick, J.)

Ownership Dispute Undermines Common Interest Privilege

The court granted in part defendant's motion to compel the production of documents withheld as privileged. "Plaintiffs maintain that communications between [an individual plaintiff and his brother] pertaining to litigation strategy or advice of counsel fall squarely within the Common Interest Doctrine and are privileged. Plaintiffs predicate this assertion on their argument that [the individual plaintiff and his brother] have a common interest in the prosecution of the infringement of the patent at issue. . . . [I]t appears that [the individual plaintiff and his brother] are adverse to each other. They are currently engaged in litigation in [another action] over ownership of [a] closely allied . . . patent which embraces claims similar to those in the immediate case. Direct communications between [the individual plaintiff and his brother] pertaining to rights and title to the [patents in both actions] or litigation strategy in the case presently before this Court would also be subject to disclosure. [Plaintiffs] are obviously not engaged in a joint strategy for the prosecution of this case. They are clearly at loggerheads and simply do not share a common interest."

Porto Technology, Co., Ltd. et. al. v. Cellco Partnership d/b/a Verizon Wireless et. al., 3-13-cv-00265 (VAED November 5, 2013, Order) (Hudson, J.)

No Privilege for “Litigation Funding Agreement”

The court granted defendants' motion to compel the production of a litigation funding agreement and rejected plaintiff's claim that the agreement was privileged. "[Plaintiff] maintains that ownership of the [patent-in-suit] and who is funding the instant litigation are not relevant issues in the case, and that turning over the litigation funding agreement would not lead to the discovery of relevant evidence. [Plaintiff] also believes that the litigation agreement is privileged material. . . . This Court finds that the litigation funding agreement is relevant and is not privileged, and [plaintiff] is ordered to produce it. . . ."

Cobra International v. BCNY International, et. al., 0-05-cv-61225 (FLSD November 4, 2013, Order) (Matthewman, M.J.)

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No Privilege for Communications with “Astrologist”

The court granted in part plaintiff's motion to compel discovery regarding defendant's consulting astrologist and rejected defendant's claim of privilege. "[D]efendant cites no authority for the proposition that astrology constitutes a religion or belief system to which a privilege could attach. . . . [Defendant's founder's] consultations with [an astrologer] about the astrological wisdom of using certain attorneys, or about taking litigation or business actions on certain dates, is not the type of communication to which a religious privilege would attach. . . . Defendant offers no evidence that [the astrologer] was 'hired,' or the scope of any purported 'consulting' arrangement. And, if there really was some consulting arrangement for the purposes of this litigation, defendant fails to explain why it allowed the emails to be produced and [its founder] to be questioned about this communications with [the astrologer]."

Trading Technologies International, Inc. v. CQG, et. al., 1-05-cv-04811 (ILND November 4, 2013, Order) (Schenkier, J.)

“Hourly Rates, Total Hours, and Total Fees” May Not Be Submitted Under Seal

The court denied without prejudice defendant's motion to file under seal declarations in support of its motion for attorneys' fees. "The Court is unable to hold that good cause exists on the submitted papers. The Application provides only a perfunctory assertion that [the exhibits] contain 'proprietary business information for both [defendant] and [its counsel] and reflect the relationship and communication between attorneys and client.' [Defendant] does not discuss in any detail why the invoices and summary chart should not be revealed to the public, nor why any danger cannot be mitigated by redacting confidential information or privileged communications. District courts in this circuit have refused to seal documents relating to the hourly rates, total hours, and total fees paid to attorneys. . . . The Court notes that it has granted [a co-defendant’s] Application to File Under Seal . . . [That] Application sought only to seal detailed records of attorneys’ actions in the matter, while leaving public summaries showing hourly rates and total hours. [The co-defendant] convincingly argued that good cause exists to protect the detailed information because review of those records may provide insight into how [the co-defendant] pursues patent litigation. [Movant] may wish to proceed in the same manner.

SmartMetric Inc. v. MasterCard International Incorporated, et. al., 2-11-cv-07126 (CACD November 1, 2013, Order) (Fitzgerald, J.)

Licensing Practices Not Protected from Discovery by Attorney-Client Privilege

The court granted in part plaintiff's motion to compel the production of licensing documents defendant withheld as privileged. "Plaintiff requests 'All Documents Relating To [defendant’s] corporate licensing policy or procedures.” “Defendant claims its licensing practices are developed by attorneys and are therefore protected by attorney-client privilege. Plaintiff’s RFP is overbroad insofar as it relates to defendant’s generic licensing practices not specifically related to plaintiff’s location technology. However, the attorney-client privilege doctrine only protects 'confidential communications between lawyer and client made to facilitate legal services for the client.' It is questionable whether licensing practices are developed to facilitate legal services. Defendant shall produce documents that reflect its licensing practices or procedures relative to location technology."

Skyhook Wireless, Inc. v. Google, Inc., 1-10-cv-11571 (MAD October 31, 2013, Order) (Zobel, J.)

Discovery of cffDNA Not Patentable

The court granted plaintiff's motion for summary judgment that defendant's pre-natal testing patent contained ineligible subject matter and rejected defendant's argument that the patent claimed the use of DNA and not the DNA itself. "[Defendant] argues that the claims are patentable because although cffDNA is not patentable, the use of cffDNA is patent eligible. The Court disagrees. The Supreme Court has never stated that any use of a natural phenomenon is patentable. . . . It is only an innovative or inventive use of a natural phenomenon that is afforded patent protection. . . . [B]ased on the undisputed facts before the Court, the only inventive part of the patent is that the conventional techniques of DNA detection known at the time of the invention are applied to paternally inherited cffDNA as opposed to other types of DNA. Thus, the only inventive concept contained in the patent is the discovery of cffDNA, which is not patentable."

Ariosa Diagnostics, Inc. v. Sequenom, Inc., 3-11-cv-06391 (CAND October 30, 2013, Order) (Illston, J.)