Indirect Competition Supports Finding of Irreparable Harm for Permanent Injunction

Following a jury trial, the court granted both plaintiffs' motion for a permanent injunction; both plaintiffs were irreparably harmed even though one did not practice the patent-in-suit. "[One plaintiff] directly competes with [defendant] for the same customers in the OEM market. . . . [A second plaintiff's] sales are bound at the hip to [the first plaintiff's] sales, such that when [the first's] sales to OEMs lag, [the second] feels the pain. Thus, even though [the second plaintiff] does not practice the [patent], its tire repair kits directly compete with [defendant's] infringing repair kits. The only significant dispute here is whether the patentee [the second plaintiff] can be irreparably harmed by infringing sales even though it competes with [defendant] through an intermediary ([the first plaintiff]). . . . [I]ndirect competition generally can support a finding of irreparable harm. Here, it is clear that [the second plaintiff] and [defendant] compete for the same market – even if indirectly. . . . [F]ewer sales for [the first plaintiff] mean fewer sales for [the second]. [The second plaintiff] thus has lost market share to [defendant], favoring a finding of irreparable injury."

Accessories Marketing, Inc. v. Tek Corporation, 5-11-cv-00774 (CAND March 7, 2014, Order) (Grewal, M.J.)

“Gross Misrepresentation” of Non-Infringing Alternative and Continued Willful Infringement Warrant Enhanced Ongoing Royalty Rate

The court granted in part plaintiff's motion for an ongoing royalty on defendant's accused secure video products and awarded an ongoing royalty at approximately double the verdict's implied royalty rate. "While [defendant] has taken steps to mitigate its infringement, [it] grossly misrepresented its ability to implement a non-infringing alternative to the jury. The huge disparity between [defendant's] position at trial and [its] position post-judgment also warrants increasing the implied royalty rate. In light of the changed circumstances, the reasonable royalty rate should be increased by 25%. . . . [Defendant's] ongoing willful infringement must also be considered. . . . While [defendant] contends it is not a willful infringer because it has a good faith belief that the patents-in-suit are invalid and that it does not infringe, the jury’s verdict and this Court’s judgment do not support [defendant's] belief. . . .While [it] has taken steps to implement non-infringing alternatives, [defendant] has not ceased all infringement. Considering four factors favor enhancing the implied royalty rate, the ongoing royalty rate is increased 50% to 0.98%."

VirnetX Inc. v. Apple Inc., 6-13-cv-00211 (TXED March 6, 2014, Order) (Davis, J.)

Four Year Stay Pending Reexam No Impediment to Further Stay Pending IPR

The court granted defendant's motion to stay pending inter partes review. Although the case was eight years old and had been stayed four years pending reexamination, the early stage of the case, potential simplification of issues, and lack of undue prejudice weighed in favor of a stay. "To date, no claim construction hearing or trial date has been set. Moreover, the parties have not engaged in any significant discovery. While the Court appreciates that this case has been pending for several years, this fact alone does not negate the reality that a trial of this matter could be in distant view. As such, the Court finds that this case is still in early stages of litigation and well-positioned for a stay. . . . Now that the PTO has instituted review on all claims of the [patent-in-suit], simplification of the issues is more likely. . . . The gravamen of [plaintiff's] opposition is that this case was previously stayed for four years pending the ex parte reexamination. Any further delay, [plaintiff] argues, is inappropriate. The Court disagrees."

IP Co., LLC v. Tropos Networks, Inc., 1-06-cv-00585 (GAND March 5, 2014, Order) (Cooper, J.)

Plaintiff’s Merger With Defense Counsel’s Former Client Warrants Disqualification

The court granted plaintiff's motion to disqualify defense counsel who had served as lead patent counsel for a company that merged with plaintiff. "[F]or purposes of Rule 3-310(E), [plaintiff] is [defense counsel's] former client. By virtue of [the] merger with [plaintiff], [plaintiff] is now the holder of the attorney-client privilege relating to [defense counsel's] representation of [the company that merged with plaintiff]. . . . [Defense counsel's] extensive and long-term representation of [that company] unquestionably created an attorney-client relationship between them. [The] subsequent merger with [plaintiff] did not extinguish that relationship. [Defense counsel's] argument to the contrary 'exalts substance over form,' and is contrary to purposes of the attorney-client relationship."

Sunbeam Products, Inc. v. Oliso Inc., 3-13-cv-03577 (CAND March 4, 2014, Order) (Illston, J.)

IPR Motion to Amend Addressing Prior Art “Individually” Insufficient Show Patentability of Substitute Claims

In a final written decision, the Board denied the patent owner's motion to amend claims on the grounds that the motion failed to demonstrate the patentability of the substitute claims over the prior art. "[The expert's] testimony . . . is limited to anticipation issues, and fails to demonstrate sufficiently that the substitute claims are nonobvious. . . . Although [he] concludes that the substitute claims would not have been obvious to one of ordinary skill in the art, [his] analysis merely discusses how each cited prior art reference individually does not disclose the features added in the substitute claim. Such a patentability analysis is insufficient to demonstrate nonobviousness, because an analysis of whether the subject matter of a claim would have been obvious 'need not seek out precise teachings direct to the specific subject matter of the challenged claim, for a court can take account of the inferences and creative steps that a person of ordinary skill in the art would employ.'"

Petition for Inter Partes Review by Research In Motion Corporation, IPR2013-00016 (PTAB February 25, 2014, Order) (Chang, APJ)

Stay Pending IPR Conditioned on Non-Petitioner’s Agreement to “Weaker” Estoppel

The court conditionally granted a non-petitioner defendant's motion to stay pending inter partes review contingent upon defendants' agreement to be subject to "weaker" statutory estoppel due to the defendant's non-involvement with the IPR proceedings. "[B]ecause [defendant] is not one of the IPR petitioners, [it] would not be precluded under 35 U.S.C. § 315(e)(2) from reasserting invalidity contentions rejected by the PTO. . . . If [defendant] and IPR petitioners communicate on strategy, [defendant] should be bound by the full statutory estoppel provision. If, however, [defendant] has no input on the IPR strategy, it should not be precluded from raising arguments that could have been raised in the IPR proceedings. At the hearing, [defendant] represented to the court that it did not assist the IPR petitioners with any prior art search, that it took no part in drafting the IPR petitions, and that it is not in communication with the IPR petitioners concerning the IPR. . . . [R]equiring [defendant] to submit to a weaker estoppel foreclosing it from relitigating claims made and finally determined in the IPR proceedings is necessary to effect the PTO’s interest in protecting the integrity of PTO proceedings and in preventing parties from having a 'second bite at the apple.' The court thus conditions the stay on [defendant's] agreement to be estopped only from asserting any invalidity contention that was actually raised and finally adjudicated in the IPR proceedings."

Evolutionary Intelligence, LLC v. Sprint Nextel Corporation et al, 5-13-cv-04513 (CAND February 28, 2014, Order) (Whyte, J.)

No Stay Pending Interlocutory Appeal of Denied Stay Pending CBM Review

The court denied defendants' motion to stay pending an interlocutory appeal of the court's earlier decision to deny a motion to stay pending CBM review. "Defendants have failed to cite, and this Court is unaware of, any authority holding that attending a Markman hearing in the middle of a co-pending reexamination proceeding constitutes 'irreparable injury.'. . . To the extent any further statements of Plaintiff’s [during CBM review] or amendments to claims may affect the Court’s claim construction, such is fully remediable with supplemental claim constructions. . . . This Court is mindful that the Federal Circuit, in reviewing whether or not this case should be stayed, is tasked with ensuring that AIA § 18(b) is 'consistently applied across cases and across the various district courts.'. . . However, the Federal Circuit’s decision-making does not depend on whether the proceedings below are stayed pending appeal. Defendants have failed to demonstrate how this Court’s denial of a stay pending interlocutory appeal would impede, in any way, the Federal Circuit’s interest in the consistent application of AIA § 18(b) across the nation’s district courts."

VirtualAgility, Inc. v. Salesforce.com, Inc. et al, 2-13-cv-00011 (TXED February 27, 2014, Order) (Gilstrap, J.)