Texas Patent Litigation Monthly Wrap-Up: April 2023

Four subjects stood out in patent litigation in Texas in April 2023: (1) applicability of the customer-suit exception to the first-to-file rule; (2) the level of ties a reasonable royalty methodology must have to the facts of the case; (3) inter partes review estoppel regarding invalidity grounds in District Court litigation; and (4) effect of failure to seek preliminary injunction in ascertaining the undue prejudice factor for staying litigation.

Dali Wireless, Inc. v. AT&T Corp. et al, 2-22-cv-00012 (Apr. 8, 2023, E.D. Tex.) (Payne, M.J.)

The court denied the defendants’ motion to stay proceedings as to the customer defendant based on the customer-suit exception. Magistrate Judge Payne explained:

[The customer defendant] is more than a mere reseller. Four of the six causes of action accuse the customer [defendant] . . . of directly infringing method claims while accusing the manufacturer [defendants] . . . of indirectly infringing the method claims. . . . In sum, neither the customer-suit exception nor severance under Rule 21 supports staying the cases as to [the customer defendant].

Id. at 5.

The court further denied the defendants’ motion to stay proceedings as to the customer defendant under the traditional stay factors. Magistrate Judge Payne reasoned that:

[T]he stay would limit [the plaintiff’s] ability to pursue its direct infringement claims against [the customer defendant]. Additionally, Defendants themselves acknowledge that discovery as to [the customer defendant] becomes more convoluted upon granting the stay. . . . Staying claims against customers generally increases efficiency and judicial economy, but this is a circumstance with a common customer accused of direct infringement and two manufacturer suppliers accused of indirect infringement. . . . In isolation, [the customer’s] agreement to be bound weighs in favor of a stay. Nevertheless, resolving the infringement and damages issues as to [the manufacturers defendants] will not necessarily resolve all the issues as to [the customer defendant].

Id. at 6.

Estech Systems IP, LLC v. Carvana LLC, 2-21-cv-00482 (Apr. 13, 2023 E.D. Tex.) (Payne, M.J.)

Magistrate Judge Payne denied the defendant’s motion to strike the testimony of the plaintiff’s damages expert witness and found that the expert’s survey was sufficiently reliable. The court disagreed with the defendant “that reasonable royalty estimation methodology must be exactly tied to the facts of the case,” and held that “the methodology need only be sufficiently tied to the facts of the case.” Id. at 5 (emphasis in the original). The court found that “[Plaintiff’s expert] has sufficiently tied the features of the Asserted Patents to the features analyzed in his study. There may be questions regarding the correctness of [the expert’s] methodology and the results from his conjoint study, but assessments as to credibility and correctness are for the factfinder, not the Court.” Id.

Hafeman v. LG Electronics, Inc. et al, 6-21-cv-00696 (Apr. 14, 2023, W.D. Tex.) (Albright, J.)

Judge Albright found that “[a]lthough [Defendant] uses two system references . . . for its invalidity argument [in District Court litigation] that it could not raise before the PTAB, estoppel still applies when the allegedly new references have ‘materially identical’ disclosures as the IPR art.” Id. at 1. The court further explained that “[s]ince the related IPRs here are relying on [the plaintiff’s] patents, and [the plaintiff] has admitted that the [system prior art] practice her patents, there is ‘no substantive difference’ between these alleged references.” Id. Judge Albright noted that “[The defendant] does not rebut [the plaintiff’s] argument that the system art and the IPR references are materially identical because of [the defendant’s] admissions. Nor does [the defendant] deny the overlap between the issues before the PTAB and this Court, arguing that this Court should reach the ‘same conclusion’ that the PTAB made.” Id.

Impinj, Inc. v. NXP USA, Inc. f/k/a NXP Semiconductors USA, Inc., 6-21-cv-00530 (Apr. 20, 2023, W.D. Tex.) (Albright, J.)

Judge Albright denied the plaintiff’s motion to stay litigation pending ex parte reexamination, partly because undue prejudice to the plaintiff disfavored a stay. The court found that “[a]s competitors, [the defendant] faces a nearly inherent prejudice in granting a stay because the longer other prominent players in the market continue to benefit from [the defendant’s] inventions without attribution, the more customers and recognition [the defendant] will lose . . . [which will cause] a permanent loss of market share and goodwill.” Id. at 4 (internal quotations omitted).

Judge Albright disagreed with the plaintiff that “because [the defendant] did not seek a preliminary injunction, [the defendant] will not suffer undue prejudice,” and held that “the mere fact that [the defendant] did not seek a preliminary injunction does not foreclose the possibility, and even probability, of undue prejudice in the event of a delay.” Id. at 4. Judge Albright noted that “[s]taying proceedings until the PTO completes reexamination, which takes 25.7 months on average, may significantly delay any relief [the defendant] may be entitled to as the PTO is not projected to complete reexamination until [8.5 months from now].” Id.