July/August 2019
IP Litigator
Few people enjoy receiving a complaint—especially the legal kind. Defendants accused in patent cases may struggle to decide the next move. While there are many options, taking three actions early in a case can help defendants gain control and move toward resolution. These actions include moving to transfer or dismiss the case if venue is improper; obtaining an early claim construction decision on a dispositive claim term; and seeking a stay after filing a post-grant proceeding. This article touches briefly on each of these possibilities and their potential benefits.
Venue matters. Venue dictates whether you will rocket toward trial in 15 months in the Eastern District of Virginia or saunter toward trial in three years in New York or New Jersey.2 Venue also dictates the jury pool, the local rules governing discovery and procedural issues, and the availability of evidence. Defendants that find themselves litigating in the wrong venue should consider the benefits of a motion to transfer or motion to dismiss based on venue.3
In 2017, the Supreme Court narrowed the pool of venues available for patent litigation.4 The patent venue statute provides a “civil action for patent infringement may be brought in the judicial district where [1] the defendant resides, or [2] where the defendant has committed acts of infringement and has a regular and established place of business.”5 The Supreme Court clarified that, for purposes of the patent venue statute, a domestic (US-based) defendant “resides” only in its state of incorporation.6 This helped resolve the meaning of “reside.” This language, however, does not mean that venue is proper in every district in a multi-district state—e.g., California or Texas—even if the defendant is incorporated in one of those states. Rather, for states “having multiple judicial districts, a corporate [domestic] defendant shall be considered to ‘reside’ only in the single judicial district within that state where it maintains a principle place of business, or, failing that [showing], the judicial district in which its registered office is located.”7 Defendants can thus challenge venue not only with respect to their state of incorporation, but also with respect to specific districts within multidistrict states.
When the “regular and established place of business” prong of the patent venue statute applies, three factors are considered: (1) there must be a physical place in the district; (2) it must be a regular and established place of business; and (3) it must be the place of the defendant.8 As to the second factor, “regular” means “steady, uniform, and methodical” and “established” means “settled certainly, or fixed permanently.”9 In application, courts have reasoned a part-time home office was not a “regular and established place of business” because the employee worked there part time and could sell his home at any time.10 As to the third factor, the Federal Circuit explained that the place of the defendant must be “established and ratified.”11 Courts have declined to find the place of business of a distributor sufficient to establish venue for a supplier,12 or to find the place of business of a related corporate entity enough to establish venue for a defendant.13
Other considerations may be important too. For example, district courts retain discretion in a venue challenge to dismiss a case or transfer it to the jurisdiction having proper venue.14 Also, district courts may grant early discovery on the venue question,15 which could increase the cost of filing this motion. There, however, is also the possibility that the court will stay a proceeding until after the venue question has been resolved, which might offer the parties the opportunity to negotiate and seek amicable resolution early on.16
Judge Giles S. Rich famously stated, “the name of the game is the claim.”17 And rightly so. “It is the claims that define the metes and bounds of the patentee’s invention.”18 A claim construction that positions a defendant’s allegedly infringing activity outside of the claimed metes and bounds can mean an early victory. In appropriate cases, a defendant should consider the benefits of seeking early claim construction.
While not universally available, many district courts permit early claim construction.19 As the Federal Circuit has explained, the “district court has broad powers of case management.”20 This includes the discretion to assess any claim construction issues early in the case, even before additional discovery.21 Whether a court is willing to do so may depend on a variety of factors, including whether construing the term would be case dispositive; whether a construction is clear based on the intrinsic record; the technology; the likelihood of settlement; and whether the record is developed enough to allow for informed decisionmaking.22 Defendants should consider highlighting these features in any motion to the court.
Because seeking early claim construction can be beneficial if a winning construction could dispose of the case, defendants may wish to consider early claim construction to guide the proceeding and usher the parties toward early settlement, in appropriate situations.23
A third option defendants may wish to consider is seeking a stay with the district court after initiating a postgrant proceeding at the USPTO. Generally, three factors are relevant to the stay determination, including: (1) if a stay would unduly prejudice or present a clear tactical disadvantage to the nonmoving party; (2) if a stay would simplify the issues in question and trial of the case; and (3) whether discovery is complete and a trial date set.24 The Federal Circuit has noted that this discretionary determination may include other factors as well, such as the burden of litigation on the court and parties.25
The timing of this motion can be an important consideration for defendants. Any request for a stay filed before the IPR has been instituted risks being denied, or at least being denied with the option to renew after institution.26 After institution, the likelihood of a stay award increases, even at later stages of the litigation.27 For example, in Ethicon LLC v. Intuitive Surgical, the district court stayed the litigation when six of the seven asserted patents were subject to review by the USPTO, despite that the case was only a few months away from trial, fact discovery had closed, expert discovery was almost over, and the court had already issued its claim construction ruling.28 The court noted that the “potential for simplification [was] quite substantial,” and outweighed other concerns.29
Even if the defendant does not file an IPR petition, it can nevertheless seek a stay if other third-parties have filed petitions challenging the litigated patent(s). It should be noted, however, that some courts condition a stay in these situations on the defendant agreeing to be estopped from presenting similar argument and art during the litigation.30
While litigation can be daunting, taking early action can help defendants move the dispute toward resolution. Up-front investment in the right motions can pay dividends and reduce overall cost by placing a case in the proper venue, removing issues, or even resolving the case entirely.
Endnotes
1 “The Fastest Docket for the 8th Straight Year,” Law360 (May 6, 2016) (available at https://www.lexology.com/library/detail.aspx?g=6048d405-7021-4779-948f-43ae0d2ac421).
2 This discussion applies to domestic (US-based) defendants. Foreign defendants may be subject to jurisdiction in every district in the US, and may not have this same avenue of attack available. See, e.g., In re HTC Corp., 889 F.3d
1349, 1356–61 (Fed. Cir. 2018).
3 See TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514, 1516–21 (2017).
4 35 U.S.C. § 1400(b).
5 TC Heartland, 137 S. Ct. at 1516–21.
6 In re ZTE (USA) Inc., 890 F.3d 1008, 1014–16 (Fed. Cir. 2018).
7 In re Cray Inc., 871 F.3d 1355, 1360 (Fed. Cir. 2017).
8 Id. at 1362–63.
9 See, e.g., Lemoin v. Mossberg Corp., Case No. 18-cv-60902-ALTONAGA/Seltzer, 2018 WL 4905644, at *2–5 (S.D. Fla. Sept. 26, 2018).
10 In re Cray, 871 F.3d at 1363.
11 EMED Techs. Corp. v. Repro-Med Sys., Inc., Case No. 2:17-cv-728-WCBRSP, 2018 WL 2544564 (E.D. Tex. June 4, 2018); see also, e.g., AGIS Software Dev., LLC v. ZTE Corp., Civ. Action No. 2:17-cv-00517-JRG, 2018 WL
4854023, at *2–4 (E.D. Tex. Sept. 28, 2018).
12 Xodus Med., Inc. v. Allen Medical Sys., Inc., No. 2:17-cv-00581, 2018 WL 2338763 (W.D. Pa. May 22, 2018); see also, e.g., Interactive Toybox, LLC v. Walt Disney Co., 1:17-cv-1137-RP, 2018 WL 5284625, at *3–4 (W.D. Tex.
Oct. 24, 2018).
13 28 U.S.C. § 1406(a) (“district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought.”); see, e.g., EMED, 2018 WL 2544564 (E.D. Tex. June 4, 2018) (transferring case avoids prejudice because case was pending for seven months and parties had filed preliminary injunction briefs); Bd. of Regents, Univ. of Tex. Sys. v. Medtronic PLC, No. A-17-CV-0942-LY, 2018 WL 2343788, at *4 (W.D. Tex. May 17, 2018), vacated in other part on reconsideration, 2018 WL 4179080, at *2 (W.D. Tex. Jul. 19, 2018) (dismissing case
as to one defendant because of improper venue); JPW Indus., Inc. v. Olympia Tools Int’l, Inc., No. 3:16-cv-03153, 2017 WL 4512501, at *2–4 (M.D. Tenn. Oct. 10, 2017).
14 Compare Xodus, 2018 WL 2338763, at *1–3 (granting limited jurisdictional discovery in connection with transfer motion); Uniloc USA, Inc. v. Apple Inc., __ F. Supp. 3d __, 2017 WL 3382806 (E.D. Tex. 2017); Addition & Detoxification Inst., LLC v. Rapid Drug Detox Center, No. 11-C-7992, 2012 WL 4850188, at *1–2 (N.D. Ill. Oct. 11, 2012); Mass Eng’g, Inc. v. 9X Media, Inc., Civ. Action No. 2-09-CV-358-TJW, 2010 WL 2991018 (E.D. Tex. July 28, 2010), with Eclipse IP, LLC v. ECCO USA, Inc., Civil Action NO. 5:12-cv-160, 2013 WL 5838675, at *3 (N.D. W. Va. Oct. 30, 2013) (denying motion for discovery relating to venue); McRo, Inc. v. Activision Blizzard, Inc., Civ.
Action Nos. 12-1508-LPS-CJB, 12-1511-LPS-CJB, 12-1512-LPS-CJB, 12-1518-LPS-CJB, 2013 WL 6571618, at *14 (D. Del. Dec. 13, 2013), report and recommendation adopted, 2013 WL 6869866 (D. Del. Dec. 30, 2013).
15 See In re Google Inc., __ F. App’x __, 2015 WL 5294800, at *1–2 (Fed. Cir. 2015); B.E. Tech. LLC v. Sony Comp. Entertainment Am., LLC, Nos. 2:12-cv-02826-JPM-tmp, 2:12-cv-02827-JPM-tmp, 2:12-cv-02828-JPM-tmp, 2013 WL 524893 at *1 (W.D. Tenn. Feb. 11, 2013).
16 Giles S. Rich, The Extent of the Protection and Interpretation of Claims-American Perspectives, 21 Int’l Rev. Indus. Prop. & Copyright L., 497, 499 (1990).
17 Thorner v. Sony Computer Entm’t Am. LLC, 669 F.3d 1362, 1367 (Fed. Cir. 2012).
18 See, e.g., Vivid Techs. Inc. v. Am. Science & Eng’g, Inc., 200 F.3d 795, 803-04 (Fed. Cir. 1999) (affirming stay of discovery pending resolution of early claim construction dispute); Technology Innovations Assoc. v. Google, Inc., C.A. No. 13-0355-LPS, 2014 WL 3896121 (D. Del. 2014); Tyco Healthcare Retail Servs. AG v. Kimberly-Clark Corp., Civ. Action No. 06-3762, 2007 WL 2155571 (E.D. Pa. July 24, 2007) (finding early claim construction would further the “salutary goals of speed and economy”); see also, e.g., IPVX Patent Holdings, Inc. v. Voxernet LLC, Case No. 5:13-cv-01708 HRL, 2014 WL 3074296, at *3 n.2 (N.D. Cal. July 3, 2014) (rejecting plaintiff argument that claim construction is “too early,” noting that the evidence IPVX would need to defeat summary judgment is evidence “IPVX should have secured very early in this case, if not before filing its complaint”); Famosa, Corp. v. Gaiam, Inc., No. 11 Civ. 5703(KBF), 2012 WL 573999, at *3 (S.D.N.Y. Feb. 22, 2012) (noting “[s]ummary judgment is entirely appropriate at an early stage in a case where, as here, the issues are cut and dry”); Magarl, L.L.C. v. Crane Co., No. 1:03-cv-
01255-JDT-TW, 2004 WL 2750252, at *14–15 (S.D. Ind. Sept. 29, 2004).
19 See, e.g., Vivid Techs., 200 F.3d at 803-04.
20 See, e.g., id.; Technology Innovations, 2014 WL 3896121.
21 See, e.g., Iris Connex, LLC v. Dell, Inc., No. 2:15-CV-1915-JRG, 2017 WL 365634, at *5 (E.D. Tex. Jan. 25, 2017) (“early claim construction on a limited set of disputed terms followed by entry of summary judgment is appropriate if a superficial understanding of the accused products makes it clear that a single limitation is obviously absent from the accused products and that full blown discovery could not lead a reasonable jury to any other conclusion”); Scripps Research Inst. v. Illumina, Inc., No. 16-CV-661 JLS (BGS), 2017 WL 1361623, at *4 (S.D. Cal. Apr. 14, 2017); Technology Innovations, 2014 WL 3896121; Tyco Healthcare, 2007 WL 2155571.
22 E.g., Technology Innovations, 2014 WL 3896121, at *1 (“By order dated June 9, 2014, the Court agreed with Google that its proposed early, limited claim construction process would likely facilitate the just, speedy, and inexpensive determination of this action, even if the Court’s construction did not prove to be case dispositive.”).
23 Murata Mach. USA v. Daifuku Co., 830 F.3d 1357, 1361–62 (Fed. Cir. 2016); see also, e.g., Nokia Corp. v. Apple Inc., No. C.A. 09-791, 2011 WL 2160904, at *1 (D. Del. June 2, 1011).
24 Murata, 830 F.3d at 1361–62; NFC Tech. LLC v. HTC Am., Inc., No. 2:13-cv-1058, 2015 WL 1069111, at *5 (E.D. Tex. Mar. 11, 2005) (“whether a stay will reduce the burden of litigation on the parties and the court [] is a consideration that courts often take[] into account in determining whether to grant a stay pending inter partes review”); accord Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1426–27 (Fed. Cir. 1988) (noting in the reexamination context that the authorizing statute need not expressly grant district courts with discretion to stay pending reexamination because “such power already resides with the Court”).
25 See, e.g., Sierra Pacific Indus. v. Kolbe & Kolbe Millwork Co., Inc., 18-cv-853-wmc, 2019 WL 1924836, at *2–3 (W.D. Wis. April 30, 2019); Invensas Corp. v. Samsung Elecs. Co., Civ. Action No. 17-1363-MN-SRF, at *3–6 (D. Del. Oct. 2, 2018); Lincoln Elec. Co. v. Soluciones, No. 1:15-cv-1575, 2016 WL 6909072, at *2 (N.D. Oh. June 17, 2016). But see Uniloc USA Inc. v. LG Elecs. U.S.A. Inc., Case No. 18-cv-06737-JST, 18-cv-06739-JST, 18-cv- 06740-JST, 2019 WL 1905161, at *2–7 (N.D. Cal. Apr. 29, 2019) (issuing stay pending seven IPR petitions that were filed, but not yet granted, finding that the “high upside mitigates to some extent the risk that the PTO will deny review”); Neuro Cardia Techs., LLC v. LivaNova, Inc., Civ. Action No. H-18-1517, 2018 WL 4901035, at *4–5 (S.D. Tex. Oct. 9, 2018); Neste Oil OYJ v. Dynamic Fuels, LLC, Civ. Action No. 12-1744-GMS, 2013 WL 3353984 (D.
Del. July 2, 2013).
26 E.g., Ethicon LLC v. Intuitive Surgical, Inc., Case No. 17-871-LPS, 2019 WL 1276029, at *2–3 (D. Del. Mar. 20, 2019); Logantree LP v. Garmin Int’l, Inc., Case No. 17-1217-EFM-KGS, at *2 (D. Kan. Feb. 12, 2019); SRC Labs, LLC v. Microsoft Corp., Case No. C18-0321JLR, 2018 WL 6065635, at *3 (W.D. Wash. Nov. 11, 2018).
27 Ethicon, 2019 WL 1276029, at *2–3.
29 Id.
30 See, e.g., Lighting Science Grp. v. Shenzhen Jiawei Photovoltaic Lighting Co., Case No. 16-cv-03886-BLF, 2017 WL 2633131, at *3–6 (N.D. Cal. June 19, 2017) (conditioning award of stay on the defendant agreeing to be bound by estoppel provisions as if party to IPR); Evolutionary Intelligence v. Millennial Media, Case No. 5:13-cv-04206-EJD, at *4–6 (N.D. Cal. June 11, 2014); accord Neste, 2013 WL 3353984. But see Intellectual Ventures II LLC v. Huntington Bancshares Inc., No. 2:13-cv-00785, 2014 WL 2589420, at *2–5 (S.D. Oh. June 10, 2014) (finding it unfair to hold a defendant to estoppel provisions when it did not participate in the IPR).
Reprinted with permission from the IP Litigator, published by Wolters Kluwer. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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