EDTX & NDTX Monthly Wrap-Up — June 2018

This post is our latest review of noteworthy case developments in the Eastern and Northern Districts of Texas for the month of June 2018. Two subjects stand out this month from the Eastern District: (1) venue and (2) expert report/damages.

Endo Pharmaceuticals Inc. v. Lupin Atlantis Holdings SA, 2:17-cv-00558 (May 30, 2018, E.D. Tex.)

The sole defendant in the case was a Swedish corporation, which filed a motion to transfer for improper venue. Judge Gilstrap denied the motion, reasoning that "[w]hile it was previously unclear whether § 1400(b) was controlling for foreign defendants involved in patent infringement suits, the Federal Circuit recently reaffirmed the 'long-established rule that suits against aliens are wholly outside the operation of all the federal venue laws, general and special.' Thus, a foreign defendant may be sued in any judicial district under 28 U.S.C. § 1391(c)(3)." (Id. at 3)

However, the court granted defendant’s alternative motion to transfer venue because the ease of access to proof, availability of compulsory process, and witness convenience favored transfer. (Id. at 8).

EMED Technologies Corporation v. Repro-Med Systems, Inc. d/b/a RMS Medical Products, 2:17-cv-00728 (Jun. 4, 2018, E.D. Tex.)

The court granted defendant’s motion to transfer for improper venue because defendant did not have a regular and established place of business in the district through its "necessary" distributor. Judge Bryson reasoned that "[t]here is abundant case law from other district courts holding that a distributor's place of business cannot establish venue for its supplier [and] business necessity is insufficient to impute [a distributor's] place of business to [defendant]." (Id. at 4).

Further, the court transferred plaintiff’s infringement action rather than grant defendant’s motion to dismiss without prejudice for improper venue. Among other reasons, the court noted that the "case has been pending [for 7 months], and [plaintiff] may be prejudiced by having to re-file and relinquish seven months of potential damages." (Id. at 4)

Kaist IP US LLC v. Samsung Electronics Co., Ltd. et al, 2:16-cv-01314 (May 31, 2018, E.D. Tex.)

Plaintiff had filed a motion to strike portions of the rebuttal report of defendants' damages expert. Judge Payne denied most of the motion:

• The court held that an expert's reliance on a cost evaluation chart created by an engineer did not constitute improper reliance on undisclosed expert testimony, reasoning that "[the witness who created the chart] is not a testifying expert whose opinions must be disclosed pursuant to Fed. R. Civ. P. 26, and there is no showing that his chart was prepared significantly earlier than its disclosure." (Id. at 2)
• The court held that portions of the report related to the expert's theory capping the value of a patent-in-suit based on prior licensing negotiations was not unreliable, reasoning that "although Plaintiff may disagree with [the expert’s] ultimate conclusion and reasoning," the expert had considered the relevant data in his analysis. (Id. at 3)
• The court allowed portions of the report regarding two patents that were previously disclosed in defendants' invalidity contentions but not disclosed as noninfringing alternatives in defendants’ damages interrogatory responses, reasoning that "[t]here is no showing that this opinion is derived from anyone other than the testifying experts. . . . [U]ntil [defendants’ damages expert] had an opportunity to consider the various patents, talk with [defendants’ technical expert], and formulate his position, Defendants had no obligation to identify the patents as part of their damages defense, which they ultimately did with service of [their damages expert’s] report." (Id. at 5)
• The court noted that "the smallest salable patent practicing unit principle states that a damages model cannot reliably apportion from a royalty base without that base being the smallest salable patent-practicing unit," but clarified that this principle "is not a rigid rule, but rather an evidentiary tool intended to avoid jury confusion." The court held that there were no such concerns in this case because the defendant "doesn't derive a per-unit royalty by applying a royalty rate to the price of the devices," rather "it concludes the sales prices of [its] devices increase by an amount tied to the benefits stemming from the accused processors." (Id. at 5-6)