EDTX & NDTX Monthly Wrap-Up — March 2018

This post is another entry in our monthly survey of substantive orders in the Eastern and Northern Districts of Texas. This month, there were several decisions in two areas of interest: (1) awards of attorneys' fees, and (2) where venue is proper and convenient.

Awards of Attorneys' Fees

Attorneys' Fees: Denied

Phoenix Licensing, LLC et al v. Consumer Cellular, Inc., No. 2:16-cv-00152 (E.D. Tex. Mar. 12, 2018) (M.J. Payne)

LPL Licensing sued twelve Defendant groups on ten patents relating to generating customized marketing communications. The Defendants were from diverse industries and included "wireless communication providers, a pharmacy chain, insurance companies, banks, and a hospitality company." Following successful § 101 motions to dismiss, Defendant loanDepot moved for the Court to find the case exceptional and award fees under § 285.

The Court first considered loanDepot's argument that LPL Licensing litigated the case in an unreasonable matter. In support of its motion, loanDepot alleged that LPL's widespread filing of nearly identical complaints against diverse defendants is evidence of a strategy to extract nuisance value settlements. The Court admitted that while such conduct "justifies further inquiry," it is not sufficient to find bad faith. loanDepot also pointed to LPL's rapidly decreasing settlement offers, from an initial offer of $938,000, then to a $100,000 offer, and finally to an offer for a covenant not to sue on any of LPL's patents before the District Judge adopted the recommendation to grant the § 101 motions. The Court did not find this persuasive, observing that the initial $938,000 offer as well as other six and seven-figure offers to other Defendants were too large to be considered nuisance values.

loanDepot also claimed that LPL should have known the patents were invalid, and so there was no reasonable basis for asserting them. The Court disagreed here as well, first observing that "many of the cases on which the Court relied in granting the defendants' motion to dismiss were decided after Plaintiffs filed their lawsuits." Because Plaintiffs filed their lawsuits in early 2016, they did not have the benefit of the Alice jurisprudence, which "did not begin to fully develop until late 2015." In addition, the patents had previously prevailed against multiple challenges to their validity and were "successfully monetized for an extensive period." Finally, the Court was swayed by the fact that the inventor owned LPL and had experience in the industry in which he practiced the claimed inventions. Thus, the Court was satisfied that this was not a case "where the plaintiff acquired the patents on the cheap and then incurred minimal litigation costs and fees while hoping for a quick and easy settlement." Because LPL did not litigate the case in an unreasonable manner and had a reasonable basis for asserting the patents, Judge Payne denied loanDepot's motion for fees.

Where Venue is Proper and Convenient

Motion for Summary Judgment of Improper Venue: Recommended Grant

Snyders Heart Valve LLC v. St. Jude Medical S.C., Inc. et al., No. 4:16-cv-00812 (E.D. Tex. Mar. 7, 2018) (M.J. Priest Johnson)

Patentee Snyders Heart Valve sued St. Jude Medical, alleging infringement by St. Jude's transcathetic aortic valve system. St. Jude initially filed motions to dismiss for improper venue both before and after TC Heartland. The Court denied the motions, citing factual issues that could not be decided on a motion to dismiss.

St. Jude then brought a motion for summary judgment of improper venue and argued that any sales of the valve system in the district would be subject to the safe harbor provision of 35 U.S.C. § 271(e)(1). Section 271(e)(1) protects acts that would otherwise constitute patent infringement if they are conducted "solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products."

St. Jude presented evidence that showed the accused sales were done for the purposes of obtaining FDA approval. The Court found that "Plaintiff [had] not alleged any facts showing activities in this District other than those statutorily exempted from infringement by § 271(e)(1)." Judge Priest Johnson therefore recommended granting defendants' motion for summary judgment of improper venue.

Motion to Dismiss for Improper Venue: Recommended Denial

Keranos, LLC v. Silicon Storage Technology, Inc., et al., No. 2:13-cv-00017 (E.D. Tex. Mar. 1, 2018) (M.J. Payne)

Judge Payne recommended denying Defendants' motion to dismiss for improper venue, finding that Defendants had waived their objection by waiting nine months after TC Heartland to file it. The Court first addressed Plaintiffs' unpersuasive arguments, noting that Defendants did not waive their venue objection before TC Heartland by either failing to object in a responsive pleading, or by litigating the case and seeking affirmative relief from the Court. Because the objection was not an available right or privilege at the time, the Court found that Defendants could not have waived it before TC Heartland.

However, the Court determined that Defendants' delay in filing the motion after TC Heartland did constitute a waiver. Defendants argued that they waited (1) to "avoid expending unnecessary resources preparing and filing pleadings and other papers that are not pertinent to the issue on remand and that can be filed at a later date" and (2) because the case was stayed. The Court disagreed, stating that only the deadlines to answer certain counterclaims and respond to a motion to dismiss were stayed, and so recommended denying the motion to dismiss.

Motion to Transfer Venue for Convenience: Granted

Blue Spike, LLC v. Juniper Networks, Inc. No. 6:17-cv-00016 (E.D. Tex. Mar. 8, 2018) (M.J. Mitchell)

Juniper Networks moved to transfer venue to the Northern District of California for convenience under 28 U.S.C. § 1404(a). After satisfying the threshold inquiry of whether the suit could have been filed in the proposed transferee district, the Court weighed several factors to determine whether the transfer should be granted.

Relative Ease of Access of Proof

Movant bore the burden of identifying "sources of proof with enough specificity that a court can determine whether transfer will increase the convenience of the parties." To satisfy this, Juniper Networks asserted that the majority of its witnesses and documents were in the Northern District of California. In addition, Juniper Networks noted that the Court had already transferred seven cases against this plaintiff to the same district due to Juniper Network's ties.

For its part, Plaintiff argued that all of its evidence is in the Eastern District of Texas, but the Court gave this no weight because "the Federal Circuit requires courts in patent infringement cases to assume that the bulk of all relevant evidence comes from the accused infringer." Finally, the fact that electronic discovery mitigates any venue inconvenience is irrelevant because "the Court must consider the actual location of documents and physical evidence." Therefore, the Court found this factor to weigh in favor of transfer.

Cost of Attendance for Willing Witnesses

"This factor is generally the most important factor in a transfer analysis." The Court considered the convenience of both non-party and party witnesses, but noted that more weight is given to the convenience of the former.

Juniper Networks claimed that witnesses of its third-party suppliers would likely be located in the Northern District of California, but because Juniper Networks failed to affirmatively state that these witnesses had relevant and material information, the Court discounted their convenience.

As for party witnesses, Juniper Networks claimed that 15 of 20 employees with relevant technical information work in the Northern District of California. The Court balanced this against Plaintiff's showing that its CEO and co-inventor of the asserted patents has difficulty traveling due to a medical condition, but found that the convenience of Juniper Network's witnesses outweighed that of Plaintiff's CEO. The remaining factors were neutral, so Magistrate Judge Mitchell granted the Motion to Transfer Venue.