Federal Circuit Orders: No Receipt, No Returns

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You thought shopping on the day after Thanksgiving was bad? Try forum shopping your way to the Northern District of California from the Eastern District of Texas. Good luck.

This round of Federal Circuit orders shows three lawsuit transfer attempts with mixed results.  Two companies tried to move their cases from the Eastern District of Texas to the Northern District of California. One succeeded. Another company tried, unsuccessfully, to get from Delaware to the Northern District of California. (Personally, I’d vote for California, but then again, I like the Bay area.) It turns out the way to succeed in this group was to get to court first.

Plus, we have a couple of unusual bonus orders on special. Don’t forget to keep your receipt when you read about last week’s orders from the Federal Circuit!

 

Juniper Networks, Inc. v. Altitude Capital Partners, LP, Nos. 2011-1411, -1468 (Fed. Cir. Aug. 17, 2011) (nonprecedential order)

This is a little procedural matter, but there’s a big backstory to it. The short version is that Juniper got sued in the Eastern District of Texas and wanted the case moved to the Northern District of California. It didn’t work out that way.

Altitude and Security Research Holdings (SRH) are two entwined companies organized in Delaware and based in New York. Enhanced Security Research (ESR) is a limited liability company organized in Texas and based in Berkeley, California. ESR’s business is to “monetize” a couple of patents that ESR got from the inventor. ESR sued Juniper in Texas, but that case was transferred to Delaware. (Juniper asked to get the case transferred to California, but it went to Delaware instead.)

Meanwhile, ESR assigned all substantial rights in the patent to SRH. Altitude came up with the funding to sue Juniper in exchange for a share of any damages it got from the lawsuit.

The Delaware judge dismissed the transferred suit because ESR didn’t own all the rights any more, and ESR and SRH then filed a new Delaware lawsuit against Juniper. Juniper, in an attempt to get the case to California, sued Altitude and SRH in the Northern District of California for a declaratory judgment that it does not infringe any valid, enforceable claim of the patents owned by ESR and SRH. (This is a way of saying the patent claims are either invalid, not enforceable because of some type of fraud on the U.S. Patent & Trademark Office, or not infringed.)

I know, this is confusing.

It looks something like this:

Anyway, Juniper’s noninfringement action was dismissed for lack of subject matter jurisdiction (meaning the court doesn’t have the power to deal with the patent lawsuit). There can’t be a case or controversy with Altitude because Altitude has no rights in the patents and can’t sue. (A “case or controversy” is a dispute that’s clear. For example, if I threaten to sue you, that might create a case or controversy between us. But if I just send you a letter saying I have some patents you might like to license, that’s probably not a case or controversy, because it isn’t clear that there’s a dispute yet. If you ignore me, there’s no reason to believe I’ll sue you. You need a case or controversy to get into federal court.) But, the judge did conclude that the court had personal jurisdiction over Altitude, meaning that it had enough of a relationship to California that it wouldn’t be unjust to take it to court there.

Both Juniper and Altitude appealed this decision to the Federal Circuit. This order (we finally got there!) is about Altitude’s request to be identified as the “cross-appellant.” That is, Altitude wanted the court to recognize its appeal. Altitude won, so the only way it can appeal is if it could improve its position or worsen its opponent’s position. Well, Altitude can’t seem to win any better than it did; I mean, the case was dismissed!

So, the court ordered Altitude to explain why it should be allowed to cross-appeal. Who would’ve though such a tiny order would have so much to it?

And in the end, this case heads back to Delaware.

You can read the order here.

 

In re Board of Regents of the University of Texas Systems, No. 2011-m974 (Fed. Cir. Aug. 17, 2011) (Judges Bryson, Linn, and Prost) (nonprecedential order)

Continuing this week’s theme, there’s a bit of forum-wrangling going on here. Two inventors sued Western Digital and Hitachi in the Eastern District of Texas. The inventors made their invention while working at the University of Texas, which (according to the complaint) assigned the relevant patents to them. Western Digital and Hitachi moved to dismiss this case, claiming that the inventors weren’t the real owners of the patent. On the same day, they filed a suit in the Northern District of California against the inventors and the Board of Regents of UT.

Their attempt to move the case didn’t work, because the judge in California transferred the case to the Eastern District of Texas.

OK, the case is back in Texas, so what’s the Board asking for? The Board wanted the case dismissed altogether, because it claims that it had no contacts with California, there is no case or controversy, and the Board has sovereign immunity. It wanted the case done. But the judge transferred the case under 27 U.S.C. § 1406(a), which can be used when a case has been filed in the wrong court. The judge was saying, essentially, “Let the Texas court sort it out.”

So the Board requested a “writ of mandamus” from the Federal Circuit, which is basically an order from the court to a government official that tells him (or her) to do something. In this case, the Board wanted the Federal Circuit to order the judge to dismiss the case instead of transferring it.

No luck, though, because the Federal Circuit did not see the transfer to Texas as improper. The court concluded that the Board can take its issues up with the Eastern District of Texas and appeal from there if appropriate.

You can read the order here.

 

In re Xoft, Inc., No. 2011-m983 (Fed. Cir. Aug. 17, 2011) (Judges Bryson, Linn, and Prost) (nonprecedential order)

In still more forum shopping news, Xoft tried to get its case moved from the District of Delaware to the Northern District of California. Xoft was sued in Delaware for patent infringement by Carl Zeiss Surgical GmBH and Carl Zeiss Meditec, Inc. Xoft asked the court to transfer the case to the Northern District of California.

The district judge denied Xoft’s motion, and Xoft petitioned the Federal Circuit for a writ of mandamus (just like in the Board of Regents case above) to order the judge to transfer the case anyway.

The problem for Xoft is that the Third Circuit (where the District of Delaware is located) gives a lot of preference to the plaintiff’s choice of the court it wants to sue in. Xoft is incorporated in Delaware, and apparently it couldn’t identify any witnesses or evidence that wouldn’t be available in Delaware. Some courts are eager to get rid of patent cases, but Delaware generally isn’t one of them.

The Federal Circuit didn’t see any abuse of discretion in the district court’s refusal to transfer, so it denied Xoft’s petition.

You can read the order here.

 

In re Vertical Computer Systems, Inc., No. 2011-m985 (Fed. Cir. Aug. 17, 2011) (Judges Bryson, Linn, and Prost) (nonprecedential order)

This case shows how important it can be to win the race to the courthouse. Vertical was involved in licensing discussions with Interwoven, Inc. involving a couple of Vertical’s patents. Interwoven sued Vertical in the Northern District of California for a declaratory judgment that it doesn’t infringe any valid, enforceable claim of Vertical’s patents. (This is the same language Juniper used in the Juniper Networks case discussed above.) A month later Vertical sued Interwoven and some other defendants in the Eastern District of Texas for patent infringement.

The Eastern District of Texas transferred the infringement claims against Interwoven to the Northern District of California, while the other defendants stayed in Texas. Vertical moved to have the whole case transferred back to Texas, but the district judge denied the motion, mainly based on the fact that Interwoven filed first.

The Federal Circuit didn’t see any reason to believe that the district court was clearly wrong in what it did. Vertical had at least one corporate director in the Northern District of California, and the case against the other defendants in Texas apparently involved very different products. (This is a disadvantage to filing one suit against many defendants that have different businesses and products.  There can be economies to filing one suit, but you may not get much sympathy from a judge if one defendant manages to break off like this.)

Vertical was in a tough spot once Interwoven beat them to the courthouse. The “first-to-file” rule is that the first case filed is the one that determines the court where the suit will take place. One exception is if the first suit is an “anticipatory filing.” An anticipatory filing is a placeholder lawsuit. When two parties are negotiating, sometimes one side will go ahead and file a lawsuit, even though it doesn’t know yet if a suit is really necessary, just to try and take advantage of the first-to-file rule and get into the court it wants. Then, if negotiations stall, it will serve the complaint from the lawsuit it already filed. As you might imagine, courts don’t like these kinds of games.

But it’s difficult to claim that Interwoven filed suit too early when Vertical sued it just a month later. That sure sounds like there was a real dispute when it filed, which is what’s required to give the district court subject matter jurisdiction (meaning that the subject matter of the case is something the court can hear).

So, unlike Juniper Networks, In re Board of Regents, and In re Xoft, this case is staying in California.

You can read the order here.

 

3D Systems, Inc. v. Envisiontec, Inc., No. 2011-1340 (Fed. Cir. Aug. 17, 2011) (Judges Bryson, Linn, and Prost) (nonprecedential order)

This order is the first outlier of the bunch: it isn’t about an attempt to transfer.

It seems that Envisiontec jumped the gun in filing an appeal, and 3D Systems moved to dismiss. 3D Systems sued Envisiontec for infringement of 12 patents. That’s a lot, and the district made 3D Systems pick a smaller set of patents and claims to sue on. The judge here adopted a case schedule that required 3D systems to pick a few “paradigm” claims and stayed the proceedings for the remaining claims. (For non-lawyers, “staying” part of a lawsuit means that it’s put on hold until something happens, when it will be reactivated and dealt with. The important thing is that this part of the case doesn’t go away permanently; it just kind of hangs out there.) This means that, at least in theory, if 3D Systems lost, it still had some patents left in reserve.

3D Systems won its infringement case and Envisiontec appealed. Well that’s a problem, because you generally don’t have the right to appeal unless the district court enters a final judgment. (There are a few ways you can appeal without a final judgment, but they didn’t apply here.) And there were still those other patents and claims sitting out there.

So, the court agreed with 3D Systems that Envisiontec’s appeal was premature. It will have to wait until it gets a final judgment from the lower court.

You can read the order here.

 

Merial Ltd. v. Cipla Ltd., Nos. 2011-1471, -1472 (Fed. Cir. Aug. 17, 2011) (Judges Lourie, Moore, and Reyna) (nonprecedential order)

This case is one for the dogs.

Merial makes Frontline® and Frontline® Plus, two medications used to prevent fleas and ticks from infesting dogs. (Full disclosure: my dogs use Frontline® Plus and they seem to be flea and tick free.) Merial sued Cipla, an Indian company, in the Middle District of Georgia for infringing its patents by making a generic version of Frontline®. Cipla didn’t respond, and Merial got a default judgment, including an order (called an injunction) preventing Cipla from importing or selling its generic version in the U.S. Merial took Cipla back to court to ask for sanctions for violating that injunction.

According to the district court’s findings, Cipla worked with another company to try to get around the injunction and import Cipla’s product anyway. Merial asked the court to find Cipla in contempt of the injunction. Cipla claimed it didn’t have contact with Georgia and couldn’t be sued there. On that basis, Cipla asked the court to get rid of its earlier ruling that Cipla couldn’t import its product.

The court didn’t buy Cipla’s story, because it sold products all around the U.S. Plus, it had admitted to a court in Illinois that it had enough contact with the U.S. to be sued here.

The court granted Merial’s motion, and ordered that Cipla stop importing its infringing drugs. It also ordered Cipla to deliver its U.S. inventory to Merial to be destroyed.

Cipla asked the Federal Circuit to stop enforcement of the lower court’s order until the appeal was done. To get an order putting the injunction on hold pending appeal, Cipla would have to show that it was likely to win or that the potential for harm is so great as to justify “staying” the injunction. The court didn’t seem too sympathetic, although it did stay the destruction of Cipla’s inventory. It left the rest of the order in place, so Cipla still has to stop selling its generic version of Frontline®.

The result makes sense, because you can’t un-destroy the stuff, even if there isn’t a great chance that Cipla will win on the merits.

You can read the order here.

 

 

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