EDTX & NDTX Monthly Wrap-Up: July 2020

This post summarizes some of the significant developments in the Eastern District of Texas and the Northern District of Texas for the month of July 2020. COVID-19 continues to have a major impact on legal proceedings, but recent rulings in the Eastern District of Texas provide clarity and guidance as to how the court will handle cases during the pandemic. In Dallas, Judge Godbey issued a claim construction ruling relevant to "Nonce" words.

A. Litigation in the time of COVID-19.

In a trio of rulings, the Eastern District of Texas demonstrated its commitment to moving litigation forward, but at the same time taking reasonable measures to protect court personnel, litigants, and jurors.

1. Valyrian IP v. SpectrumVoIP Inc.: Alternate service allowed due to process serving difficulties.

Valyrian commenced an action against SpectrumVoIP on March 31, 2020. Valyrian IP v. SpectrumVoIP Inc., Case No.: 4:20-cv-00264-ALM, Dkt. No. 1. However, by July of 2020, Valyrian had not yet served SpectrumVoIP. Valyrian filed a motion for alternate service, stating that its process server had made several attempts to perfect service at the address of the defendant's registered agent designated for service of process. Dkt. No. 5. Valyrian represented that, "despite diligent efforts," service was unsuccessful. Id.

Valyrian proposed to effectuate service by posting a true and correct copy of the filed Summons and Complaint on the "front door or at such other door as appears to be the main entrance" of the defendant. Id. at 2. Valyrian also stated that it would mail a true and correct copy of the filed Summons and Complaint simultaneously by U.S.P.S. first-class and certified return receipt. Id. Finally, Valyrian requested that the Court grant it a thirty-day extension to complete service. Id.

Judge Mazzant accepted Valyrian's proposal. Id. In doing so, the Court recognized the difficulties faced by plaintiffs in effectuating service during the coronavirus pandemic. Rather than deny the motion and simply extend the time to effectuate service, the Court decided to grant Valyrian's request for alternate service.

2. VirnetX Inc. v. Apple, Inc.: Virtual conferences not prejudicial

Apple and VirnetX are scheduled to begin trial in August. Apple moved the Court to conduct the pretrial hearing via videoconference for all parties. VirnetX Inc. v. Apple, Inc., Civil Action No. 6:12-cv-855, Dkt. No. 886. Apple devoted much of its briefing on the issue of COVID-19 in the Eastern District of Texas. Id. at 3. For example, Apple presented the following graph to depict the rise of COVID-19 in the Eastern District of Texas:

Id. Apple further noted that COVID-19 was more contagious than previously thought and that domestic travel was risky, an important consideration considering that most of Apple's trial counsel was outside of the state of Texas. Id. at 4-5.

VirnetX opposed Apple's motion. VirentX proposed, instead, to move the pretrial conference to right before the trial. Dkt. No. 901. VirnetX also stated that it would not object if some of Apple's counsel attended the pretrial counsel in person, while others attending the conference remotely. Id. Apple countered that neither proposed solution was acceptable. Dkt. No. 886 at 8. Apple stated that VirnetX's first proposal would be prejudicial to Apple's trial preparations, as it would leave no time to incorporate any pre-trial rulings. Id. With respect to having VirnetX attend in person, while Apple attends mostly virtually, Apple stated that it would put the parties on substantially unequal footing. Id. Furthermore, Apple argued that VirnetX could not explain why Apple's proposal, a virtual pretrial conference for all parties, was prejudicial to VirnetX. Id. at 7.

The Court agreed with Apple. It also noted that the Court had, over the last several months, "presided over numerous proceedings, both remote and in person, including a week-long trial beginning June 22 that involved a jury panel of 60 citizens." Dkt. No. 903. It then granted Apple's request to set the pretrial hearing via videoconference.

3. Optis Wireless Technology, et al. v. Apple Inc.: Public Health Critical, but Court has taken Appropriate Precautions

Apple moved the Court to extend the trial date from August 3, 2020, to October 5, 2020. Optis Wireless Technology, LLC, et al. v. Apple Inc., Civil Action No: 2:19-CV-00066-JRG, Dkt. No. 341. Apple argued that an August 3, 2020 jury trial would jeopardize the health and safety of the trial participants and the local community. Dkt. No. 341 at 3. In its motion, Apple presents arguments similar to the ones that it presented in the VirnetX case: that the number of COVID-19 cases is rising throughout the United States, Texas, and the Eastern District. Id. Additionally, Apple cited to recommendations from the Centers for Disease Control and Prevention ("CDC"), Texas Governor Greg Abbott, and Dr. Robert Haley, Professor of Internal Medicine at UT Southwestern Medical Center, to minimize in person contact. Id. at 1.

Optis, for its part, did not dismiss the dangers of COVID-19, but rather argued that proposed appropriate safety measures are adequate to address the danger. Dkt. No. 352 at 8—10. Optis further argued that Apple's motion is merely an effort to delay trial, especially considering Apple knew of the danger presented by COVID-19 for months prior to filing its motion. See Dkt. Nos. 158, 159. Optis also noted that there is no evidence that the situation will improve. Dkt. No. 352 at 8—10. Optis further noted the precautions it has been taking to minimize the risk of COVID-19: safety training regarding COVID-19 prevention; hiring an industrial hygienist to provide properly distanced work areas in Marshall and appropriate personal protective equipment; temperature monitoring; and daily health self-screenings. Id. at 1.

The Court denied Apple's motion. Dkt. No. 387 at 2. In doing so, the Court took the opportunity to highlight the measures it has taken to keep the public safe: abiding by the recommendations of the CDC; providing instructions and appropriate reassurances to the venire panel via a letter; e-mailing counsel for the parties precise instructions in advance of the pretrial hearing; precluding entrance to the Courthouse to those necessary including limiting the number of persons seated at counsel tables to three persons per table during voir dire and during trial; directing trial counsel and the jury—once the trial begins to wear face shields which will allow for a full view of the lawyers' and jurors' faces and expressions while providing substantial protection from projection of breath droplets; and daily sanitization of Courthouse facilities. Id. at 3-6.

The Court also addressed another Apple concern the risk to witnesses who must travel to the Eastern District. Id. at 6-7. The Court noted that in person testimony is preferred, but found that "[r]eal time live video testimony from these witnesses presented via monitors in the courtroom will enable the jury to make instantaneous deductions about each such witness and his testimony." Id. at 6. While not ideal, the Court found this to be the best solution during the pandemic.  Id. The Court also found that even if it granted a continuance, there was no guarantee that it would be short, as the situation may not change. Id. at 7.

B. Hyosung TNS, Inc. v. Diebold Nixdorf, In: A mixed claim construction analysis.

In Hyosung TNS. Inc., Judge Godbey addressed the construction of a "nonce" word after the Federal Circuit had held the term indefinite in a corresponding ITC case. Hyosung TNS, Inc. v. Diebold Nixdorf, Inc., Civil Action No. 3:16-CV-0364-N, Dkt. 102 at 1. In his ruling, Judge Godbey specifically addressed the "obvious" question as to why the district court would revisit the term when it had already been addressed by the Federal Circuit. Id. at 7. Judge Godbey noted that the Federal Circuit, in addressing the ITC appeal, may not have had the benefit of the factual record that could be developed at the district court. Id. at 7. Thus, the district may reach a different conclusion or propose a different construction based on the evidence presented before it. Id. However, non-factual issues should be deferred to the Federal Circuit's prior analysis, resulting in a mixed claim construction analysis. See id. at 10.

The technology at issue related to ATMs. Id. at 1. In particular, depositing checks or sums of money in bulk. Id. at 2. The asserted '235 patent described an "escrow" area, wherein a bundle of checks could be held until a customer completed the entire transaction (of depositing the checks). Id. at 2. If the customer canceled the transaction before the deposit was complete, the bundle of checks would be returned to the customer. Id. The escrow area in which the checks would be held was termed a "cheque standby unit." Id.

Judge Godbey began his analysis with a review of legal standards, particularly those related to construing means-plus-function claims. Id. at 3. As a general rule, Judge Godbey noted the importance of the intrinsic record, and the use of extrinsic evidence only if the intrinsic evidence does not unambiguously describe the scope of the patented invention. Id. at 3-4. Judge Godbey then turned to means-plus-function claims, focusing in on three recent Federal Circuit cases. Id. at 4. The first, Williamson v. Citrix, removed the "strong" presumption that terms with the word "means" should construed as means-plus-function, while terms without the word "means" should not be considered as such. Id. at 4-6. The next case, Zerolick v. Apple, was notable in that the Federal Circuit overturned a district court finding that "program" and "user interface code" were nonce words. Id. at 5. Instead, the Federal Circuit held that the district court had not made pertinent findings of fact that the terms were truly nonce words.

Judge Godbey then analyzed Diebold Nixdorf, Inc. v. Int'l Trade Comm'n in detail, since it involved the same patent and the same terms. Id. at 6; Diebold Nixdorf, Inc. v. Int'l Trade Comm'n, 899 F.3d 1291 (Fed.Cir. 2018). In Diebold, the Federal Circuit reversed an ITC ruling and held that the term "cheque standby unit" was indefinite. Id.  The Federal Circuit reached this conclusion even though Diebold relied only on the intrinsic evidence to argue for indefiniteness, while Hyosung relied on expert testimony. Id.  at 6-7. The Court held that the term did not have a reasonably well understood meaning in the art, and that the term was described simply in terms of its function. Id.  at 7.  The Court also held that the specification did not provide adequate disclosure of any structure to perform the function. Id.  Thus, the term was indefinite.

The Federal Circuit's decision did not end the inquiry for the district court. Judge Godbey noted that although the term was held to be indefinite, the district court must interpret the claims after deciding factual issues, since the factual issues might change the construction. Id.  at 7. In this case, Judge Godbey had access to expert testimony which the Federal Circuit had not been able to consider. Id.  at 8.

Having set the stage, Judge Godbey then turned to the disputed term: cheque standby unit. The determination as to whether the term denoted sufficient structure to a person of skill in the art ("POSITA") came down to a battle of the experts. This implies that the intrinsic evidence did not unambiguously establish whether the cheque standby unit is definite or not, since Judge Godbey noted earlier in the Order that the extrinsic evidence should only be considered if the intrinsic evidence did not provide the answer.

The Court found the defendant's expert more persuasive. Id.  at 9. The Court noted that both experts were well qualified and knowledgeable. Id.  at 8. However, the Court found flaws with the approach of plaintiff's expert, particularly the fact that the expert did not establish that the disputed term indicates structure to a POSITA. Id.  at 9. The Court stated that the standard is not whether a POSITA "could" program a computer to perform the recited function, but rather whether a POSITA would understand the term to denote structure. Id.  at 9-10.

Once Judge Godbey had addressed the factual issue, and determined that the facts presented did not change the Federal Circuit's determination that the term was a nonce term, he deferred to the Federal Circuit's means-plus-function analysis. Since the Federal Circuit found there to be no structure in the specification to perform the underlying function, Judge Godbey found the patent was invalid for indefiniteness under 35 U.S.C. § 112, para. 2. Id.

Author: Noel Chakkalakal