Effective September 1, 2017, Senior Judge Milton Shadur will retire from the N.D. Illinois bench. Judge Shadur was appointed by President Carter and has served as a federal judge on the Northern District bench for 37 years. Chief Judge Castillo referred to Judge Shadur as a “legend” for his “dedication, . . . remarkable work ethic and his love of the law.” The fact that Judge Shadur retained a full civil docket even after taking senior status, is emblematic of his unwavering work ethic. From my own experience, Judge Shadur was an excellent trial judge. He controlled his courtroom, cared for the jury and had an encyclopedic knowledge of the Federal Rules and case law across many, many substantive legal areas. Judge Shadur’s absence from the bench will be felt for a long time in the Northern District, but he has more than earned his retirement.
Solo Cup Operating Corp. v. Lollicup USA, Inc., No. 16 C 8041, Slip Op. (N.D. Ill. May 17, 2017) (Lefkow, J.).
Judge Lefkow granted plaintiff Solo Cup’s Fed. R. Civ. P. 12(b)(6) motion to dismiss several of defendant Lollicup’s counterclaims in this trademark dispute involving Solo Cup’s product configuration mark or trade dress for its “Traveler” coffee-cup lid.
Fradulent Procurement Counterclaims & Affirmative Defenses
Lollicup alleged that Solo Cup fraudulently procured its Traveler registration, despite having disclosed its relevant patents during examination, by making inconsistent statements about the functionality of the elements to the relevant patent examiner and the relevant trademark examiner. But because the trademark examiner had the prosecution history of the patents and, therefore, was in a position to examine Solo Cup’s statements and choose whether or not to agree with them, there was not a reasonable inference of fraudulent intent.
False Advertising Counterclaim
Lollicup could not make a claim for false advertising based upon Solo Cup’s use of a registration symbol – ® – because Solo Cup’s mark was registered. The fact that Lollicup is challenging the registration does not change that, unless and until the mark was canceled or abandoned.
Unconstitutionality & Preemption
There is no per se prohibition against features disclosed in an expired patent being given trademark protection. In fact, the guarantee against using trademark registration to extend the life of a patent monopoly is the functionality doctrine.
Bodum USA, Inc. v. A Top New Casting, Inc., No. 16 C 2916, Slip Op. (N.D. Ill. May 10, 2017) (Kennelly, J.).
Judge Kennelly denied defendant A Top’s motion for summary judgment based upon plaintiff Bodum’s alleged “naked” license to its Chambord french press coffeemaker trade dress.*
Bodum testified that after licensing its Chambord trade dress rights, it performed an initial inspection of the licensee’s facilities and products. Thereafter, it relied upon licensee’s obligation to maintain the initial quality, as well as yearly product inspections at a trade show by Bodum’s outside counsel. Absent proof of a decline in quality, that evidence was enough to avoid summary judgment.
* In the interest of full disclosure, while I was not involved in this case, I have litigated against Bodum numerous times on issues surrounding french presses, as well as issues surrounding Bodum’s Chambord trade dress.
First Classics, Inc. v. Jack Lake Prods., Inc., No. 17 C 1996, Slip Op. (N.D. Ill. Jun. 1, 2017) (Cole, Mag. J.).
Judge Cole granted plaintiff’s motion to cancel the parties’ agreed settlement conference, but denied plaintiff’s motion for monetary sanctions without prejudice to refile its motion with more detail.
Because defendant refused to attend the settlement conference, although he originally agreed to it, the Court would not require the parties to attend. So, the Court cancelled the conference. The Court, however, was clear that defendant wasted the Court’s and plaintiff’s time and resources.
Despite defendant’s decision to unilaterally cancel the conference without a valid reason, the Court could not award sanctions for two reasons:
- Citing the Court’s own article, the Court reasoned that the Seventh Circuit did not allow magistrate judges to award monetary sanctions. So, absent case citations to the contrary, which plaintiff did not provide, the Court could not award monetary sanctions against defendant; and
- Plaintiff’s motion failed to lay out its specific monetary harm related to defendant canceling the settlement conference.
WorldLogic Corp. v. Chicago Logic, Inc., No. 16 C 11713, Slip Op. (N.D. Ill. Jun. 5, 2017) (Feinerman, J.).
Judge Feinerman construed a key claim term from each patent in suit as part of a mini-Markman proceeding in this patent dispute regarding predictive text technology.
Of particular note, the Court held as follows:
- The Court construed “based on the selected completion candidate” as “using the selected completion candidate as the basis for further searching.” This was the parties’ agreed construction and, while the Court was not required to follow it, the Court did so in this instance because the construction followed the “widely accepted meaning of commonly understood words.”
- The Court construed “providing representations of further keyboard events to the second process, but not to the first process, for processing” as “user keyboard input signals are received and processed by the second process (such as, for example, the virtual keyboard application) but not the first process (such as, for example, the word processing or other application receiving the text input).” As a matter of the English language, representations can be given in a non-visual manner. For example, lawyers verbally represent things to the Court regularly. The Court, therefore, declined to limit the construction to visual representations.
Midwest Innovative Prods., LLC v. Kinamor, Inc., No. 16 C 11005, Slip Op. (N.D. Ill. May 31, 2017) (Shah, J.).
Judge Shah denied defendants’ (collectively “Kinamor”) Fed. R. Civ. P. 12(b)(6) motion to dismiss plaintiff Midwest Innovative Products’ (“MIP”) patent claims in this case involving electrical cord connection coverings.
Kinamor argued that it could not infringe MIP’s patent because a second compression portion of its accused covering had one groove, not the required two grooves. MIP acknowledged that the claims facially required the second compression portion have two grooves, but argued that it was a typographical error that the Court could correct because the error was facially evident and not subject to “reasonable debate.” The Court, however, held that the issue should be decided as part of claim construction. And while the parties agreed that the Court could construe the relevant claim terms as part of the motion, construction was inappropriate at the early stage of the proceedings. In particular, the parties needed to weigh in on the ordinary skill in the art before the Court could rule.
The Court also denied Kinamor’s motion as to invalidity because Rule 12 motions were not the proper vehicle for deciding invalidity.
On June 1, 2017, the Northern District implemented a Mandatory Initial Discovery Pilot (MIDP) Project. The MIDP is going to have a big impact on trademark, copyright and Defense of Trade Secrets Act (DTSA) cases. It will not impact patent cases because they are exempted from the MIDP because the Local Patent Rules already require upfront discovery in patent cases. Fortunately, we can extrapolate from patent cases to help understand the impact of the MIDP on other IP cases.
The cases exempted from the MIDP are:
- Cases exempted by Fed. R. Civ. P. 26(a)(1)(B), which include cases reviewing an administrative record, forfeiture cases arising from federal statutes, heavens petitions, pro se cases, certain actions brought by the United States, proceedings ancillary to another court proceeding and actions to enforce arbitration awards;
- Private Securities Litigation Reform Act cases;
- Cases governed by the Local Patent Rules; and
- Multi-District Litigation cases.
Discovery is: a) required before any other discovery may be requested in the case; b) is a continuing obligation; and c) is not limited to discovery that may be used in the party’s affirmative case or defenses, nor is it limited by the knowledge known at the outset of a case — an investigation must be undertaken to gather the information.
Additionally, the requests — seen here in the Standing Order — require written responses, as well as document production. The requests include:
- Names and contact information of those likely to have discoverable information of any party’s claims or defenses, including a “fair description” of the nature of the information the person is likely to have;
- Names and contact information of all people who a party “believes have given written or recorded statements relevant to any party’s claims or defenses.” Unless privilege is asserted, you must provide copies of the statements if you have them and if not, the names and contact information of those who you believe have custody of them;
- List the documents, things, and electronically stored information (ESI), whether or not in your possession, that may be relevant to any party’s claims or defenses. As with statements and recordings, you must produce those documents or things you have or identify who you believe may have them;
- State the facts and legal theories relevant to each of your claims or defenses;
- A computation of each categories of damages you claim, along with documents or other evidentiary proof or a description of the document and proof;
- Insurance or other agreements that may impact the case, along with the agreements or a description of them; and
- Any part receiving a list required in requests 3, 5 or 6 above, may seek further responses to them if they are believed to be deficient.
The parties must meet and confer as to how to produce documents and ESI. To the extent they disagree, they must present the issues to the Court in a single, joint motion or in a conference call, whichever the Court directs. Absent a Court order to the contrary, a party must produce ESI within forty days after serving its MIDP responses. And unless the parties agree or the Court orders otherwise, ESI should be produced as the receiving party specifies. To the extent that the receiving party does not specify, the producing party may produce in “any reasonably usable form” such that the receiving party will have the same ability to access the data as the producing party.
The MIDP’s Impact
Initial production is a double-edged sword. On the plus side, it saves a considerable amount of written discovery practice and, therefore, will save money over a case’s full life cycle. That has been my experience in the Eastern District of Texas where the Local Rules require early production of most documents without discovery requests or responses. Additionally, what we have seen from the initial production and then initial contentions requirements in the LPR is that getting detailed information on your opponent’s case and having to put your own positions in writing to your opponent sharpens the focus of both sides of a case. Seeing the relative strength and weaknesses of your opponent’s positions and your own helps to identify the real issues in a case early on. Assuming that the Northern District treats the MIDP production and responses as preliminary in the sense that a party’s understanding of facts and, in limited cases, identification of facts can change over the course of discovery, understanding the case in more detail is a significant benefit to both sides and results in quicker resolutions in many cases.
The MIDP will also reduce frustration of defendants that receive bare-bones complaints and cannot tell precisely what they are accused of doing. This is particularly true in Defense of Trade Secrets Act cases where the defendant is now guaranteed an upfront statement of the allegedly stolen trade secrets making it much easier to investigate and defend your case.
The downsides of course, include the upfront cost, both economic and in time of the corporate employees that must gather all of the documents in a rush at the outset of a case. If you view the case as a nuisance and want to drive resolution quickly with as little cost as possible, the MIDP will interfere. Although it will even out and save most parties money over a more typical case that goes to summary judgement or to trial.
The other significant downside is the defendant’s frustration in being sued and immediately being forced to dig into its files and produce business-sensitive, confidential documents to a competitor. That often feels offensive to defendants.
Finally, the MIDP puts a premium on working out discovery issues, ESI protocols and protective orders in the first weeks after a complaint is filed, often before everyone fully understands or as they are just understanding what their potential discovery sources may look like.
Overall, for more substantive cases, our patent litigation experience suggests that the MIDP will lead to faster, more rational and less expensive (at least in legal fees and costs) resolutions of many cases.
I have made it a practice not to immediately blog about big Supreme Court cases. While there is a rush to be the first to publish, I have found that there is a significant difference in the value between immediate analysis and analysis after people take a breath and think about the implications of the case. So, having thought about the TC Heartland LLC v. Kraft Foods Group Brands LLC decision and its implications, my colleagues and I wanted to provide our thoughts on the impact of TC Heartland.
Broadly, of course, TC Heartland does not change a patentholder’s ability to sue or the scope of any patents; so, its impact is different from the recent Supreme Court’s Alice or Lexmark decisions. TC Heartland only limits where some defendants can be sued. It is an important result for regional companies or national companies with a limited or regional physical footprint. It is also significant for the Eastern District of Texas, the District of Delaware, and the other top five patent courts — including the Northern District of Illinois.
The TC Heartland Decision
The patent venue statute, 28 U.S.C. 1400(b) (the statute), states that “[a]ny civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” In its ruling in TC Heartland, the U.S. Supreme Court clarified that, in relation to the statute, “residence” refers only to the state of incorporation. This is in contrast to how district courts and the U.S. Court of Appeals for the Federal Circuit had interpreted the statute for the past 20-plus years, where venue was proper anywhere the district court could exercise personal jurisdiction over a defendant.
Who is Impacted by the Venue Changes?
1. E.D. Texas, N.D. Illinois & the Other Top Five Patent Districts
While the TC Heartland case did not originate in East Texas, the decision will have serious implications there because it is patent holders’ favorite venue. For instance, in 2016, plaintiffs filed 1,679 patent complaints in the U.S. District Court for the Eastern District of Texas (E.D. Texas). The District of Delaware was second with 458 filings. The difference was even more stark in 2015: 2,549 patent cases filed in E.D. Texas and 544 patent cases filed in Delaware, which was again the second-busiest district.1 Although many defendants are incorporated in Delaware, many of the East Texas defendants had few ties to the district.
The number of filings in E.D. Texas will fall significantly. Unified Patents predicts that they will fall by almost 70%. In the first weeks since the decision came down, we are already seeing a sizable shift in filings away from E.D. Texas. Many of the cases are going to Delaware, but there are also a significant number spreading across the country, especially in the other top five or six patent districts — Central and North California, the Northern District of Illinois and New Jersey. In the Northern District of Illinois alone, the first three weeks after TC Heartland saw twenty-one new cases, as opposed to seven new filings in the three weeks before the decision.
2. Regional Companies
Domestic companies now have to be sued where they are incorporated or where they committed allegedly infringing acts and have a permanent and continuous presence. Companies with regional physical footprints will see a change in their patent litigation profile. Some NPEs may not bother suing them because of the hassle of filing against multiple companies in district courts across the country. And to the extent they are sued, the suits will have to be filed where they are incorporated or where they have a permanent and continuous presence. That is a significant benefit in terms of cost, convenience and the potential home court advantage.
While patent holders who prefer to file in E.D. Texas appear to be the big losers in TC Heartland, it is likely that the winners are 1) the District of Delaware, where many companies are incorporated; 2) the Northern District of California, the home of many technology giants and startups; and 3) corporations without nationwide facilities or presence that will no longer be forced into patent litigation in far-flung states. Regardless, patent holders will need to address venue much differently in complaints going forward, with a focus on either the defendant’s state of incorporation or the defendant’s established place of business.
3. National Companies
Companies with national footprints will see far less change, particularly if they have physical locations in East Texas. And it is important to remember that Plano, just east of Dallas, is on the western border of East Texas domain. These companies can likely be sued anywhere, just like they could have been before TC Heartland. There are, however, open questions. For example, if a company is sued for a website technology that has no direct connection to East Texas, is venue proper in East Texas? The early 1990s case law has not answered internet questions because the issues did not exist.
4. Foreign Entities
Foreign entities can likely still be sued anywhere in the country where a court has personal jurisdiction. So, little may have changed for foreign entities.
5. Multi-District Litigation
With patent holders being required to sue defendants in districts across the country, we expect to see a significant uptick in MDL panel requests. Importantly, this could be how patent holders force litigation back to East Texas. If the patent holder files suits against a number of targets, including several in East Texas and then seeks MDL designation asking for the cases to be consolidated in East Texas for discovery, that could drive some of the cases back to Texas. Of course, if many of the cases end up in MDLs, it will significantly reduce the impact of TC Heartland.
6. International Trade Commission (ITC)
Another way to consolidate multiple cases, and get a swift result is to file an ITC action. ITC claimants can sue multiple, unrelated parties in a single ITC action, they are fast and the cases all sit in Washington, DC. The downside to the ITC is that it awards only injunctions — no damages — and it will only exclude product from entering the US. But patent holders are still free to settle on broader terms, including payment terms. And the patent holder can also file and stay district court litigations as a placeholder to seek money damages after the patent holder wins its ITC action. As with potential MDL’s, ITC actions could significantly limit the impact of TC Heartland.
* * *
So is TC Heartland the sea change that it has been made out to be? Despite what you may have read immediately after the decision, there is no absolute answer to that. As with the outcome of so many Supreme Court decisions, it really depends and it will take time to tell. First, it depends upon your particular company. For local or regional entities, there should be at least a temporary and maybe a long-term change. Those entities will have to be sued at home. By way of example, for Chicago-based companies without a national footprint, that likely means being sued in Chicago or wherever the company is incorporated. For companies with a nationwide footprint, or a presence in East Texas, little may change. And if patent holders are successful in getting cases joined in multi-district litigations and sent to East Texas or Delaware or tried in the ITC on a regular basis, not much have changed for anyone.
The likely outcome is somewhere in between. Large campaigns will likely often be joined in multi-district litigation, but we expect them to be placed in districts across the country, not just East Texas and Delaware.
Snap-On Inc. v. Robert Bosch LLC, No. 09 C 6914, Slip Op. (N.D. Ill. Apr. 28, 2016) (Shah, J.).
Judge Shah denied defendants’ (collectively “Bosch”) 35 USC § 285 motion for attorney’s fees in this patent dispute involving tool patents.
As a threshold matter, Bosch was the prevailing party, as required by § 285. While plaintiff Snap-On’s voluntary dismissal of its patent claims was not enough to make Bosch the prevailing party, Snap-On’s provision of a covenant not to sue made Bosch the prevailing party.
While Bosch was the prevailing party, it did not prove that the case was an exceptional one warranting a fees award. Of particular note, the Court held as follows:
- Bosch’s pre-suit investigation did not make the case exceptional. Attorneys need not necessarily have technical backgrounds to perform a pre-suit analysis in a patent case. It was enough, in this case, that Bosch’s counsel had experience litigating patent suits. Furthermore, Bosch’s reliance upon a Bosch engineer’s analysis conducted over several days was not unreasonable.
- The substantive strength of Bosch’s claim could not be considered because they were ruled upon. Bosch’s voluntary dismissal did not lead to a presumption that each of its infringement and validity allegations were wrong.
- Snap-On’s inequitable conduct claim was not sufficiently developed to support an exceptional case finding.
- Bosch’s tactics that prolonged resolution of the case was another reason that the case could not be found exceptional.
- Snap-On continuing to litigate despite Bosch’s relatively low sales did not make the case exceptional.
- The Court also noted that it was free to consider both parties’ conduct in performing its exceptional case analysis.
Torrent Pharma. Ltd. V. Daiichi Sankyo, Inc., No. 16 C 2988, 3956 & 4876, Slip Op. (N.D. Ill. Jul. 25, 2016) (Pallmeyer, J.).
Judge Pallmeyer granted declaratory judgment defendants’ Fed. R. Civ. P. 12(b) motion to dismiss for lack of personal jurisdiction in this ANDA patent litigation involving Benicar®, a drug for treating hypertension.
As an initial matter, defendants (collectively “Daiichi”) did not waive its personal jurisdiction challenge by consenting to jurisdiction in a prior suit in the Northern District of Illinois involving the same drug, but a different plaintiff. Daiichi would have waived jurisdictional challenges if it had brought suit in the Northern District of Illinois.
Plaintiff Torrent’s specific jurisdiction allegations were not sufficiently focused upon Illinois. By securing a patent and listing it in the Orange Book, Daiichi was not specifically targeting Illinois so as to create personal jurisdiction. The Court also noted that internationally domiciled US patentees were not immune from suit so long as they did not enforce their patents because the patent long-arm statute – 35 U.S.C. § 293 – creates personal jurisdiction over every foreign patentee in the Eastern District of Virginia.