IP Litigation and the Rocket Docket


Rocket Docket IP Litigation

Covering IP litigation in the Eastern District of Virginia's Rocket Docket.

  • Eastern District of VA
  • Judge Payne

"Authorization" and "Access" in the Computer Fraud and Abuse Act

March 15, 2010 | Posted by M. Bruce Harper

Berkeley HeartLab, Inc. (BHL) has filed suit in the Eastern District of Virginia against Health Diagnostic Laboratory, Inc. (HDL) and several former BHL employees for theft of trade secrets, breach of contract, and several other causes of action.  The breach of contract claims refer to a Proprietary Information and Invention Agreement between BHL and the former employees, who allegedly left BHL en masse to work for Richmond based HDL.  The Complaint also includes a claim under the Computer Fraud and Abuse Act, 18 USC 1030 (CFAA). 

 

The CFAA protects against unauthorized access or hacking into to certain computers or information.  For example, the knowing access of a computer without authorization (or exceeding authorized access) for obtaining certain types of information and willfully providing it to someone who is not authorized to receive it is a crime.  Much of the buzz over the CFAA has been with the sensational criminal case United States v. Drew, over cyber-bullying. 

 

However, the CFAA also provides a civil claim for some types of prohibited conduct:

 

 (g) Any person who suffers damage or loss by reason of a violation of this section may maintain a civil action against the violator to obtain compensatory damages and injunctive relief or other equitable relief. A civil action for a violation of this section may be brought only if the conduct involves 1 of the factors set forth in clause (i), (ii), (iii), (iv), or (v) of subsection (a)(5)(B). Damages for a violation involving only conduct described in subsection (a)(5)(B)(i) are limited to economic damages. No action may be brought under this subsection unless such action is begun within 2 years of the date of the act complained of or the date of the discovery of the damage. No action may be brought under this subsection for the negligent design or manufacture of computer hardware, computer software, or firmware.

18 U.S.C. § 1030(g).  Some employers have brought CFAA civil claims against employees that have misappropriated information; the CFAA offers a federal remedy that does not involve the burden of proving that the information stolen was a trade secret. 

 

For example, the BHL Complaint characterizes BHL computers as “protected computers” used in interstate commerce (citing 18 U.S.C. § 1030(e)(2)(B)), and that the former employees “accessed BHL’s computers without authorization and, as a result of such access, made unauthorized copies of computer data.”  Complaint, ¶ 174.   The Complaint spells out a number of factors that BHL might use to argue that it defined and controlled authorized access for

its employees, such as using “key-coded access,” “password protecting patient and sales information,” and controlling sensitive information.  Complaint, ¶¶ 23 - 27.

 

A brewing conflict in civil CFAA litigation dwells specifically on the meaning of the statutory words: “authorization” and “access.”  There is a split between the seventh and ninth circuits on proving these terms.  A background of the cases defining the split may be found at the blog for the Journal of Intellectual Property Law & Practice.  Without repeating the background provided there, in short, the Seventh Circuit reasons that authorization for access to an employer’s computer terminates at the time an employee breaches the duty of loyalty to the employer.  The Ninth Circuit requires a more specific showing of how the employer defined authorized access for the employee, including its safeguards for sensitive information. 

 

BHL’s suit now brings the question to Virginia, and may reveal if the Eastern District of Virginia will choose to follow one of the existing standards, or decide to go its own way.  

 


  • Eastern District of VA
  • Patent Litigation

EDVA "Rocket Docket" In The Top Ten For Patent Filings of 2009

March 15, 2010 | Posted by Andrea Warmbier

The Eastern District of Virginia “Rocket Docket” remains in the top ten for patent infringement filings in the United States in 2009, as reported by LegalMetric, a data analysis company.  The top ten districts for 2009 were:

 

1. Central District of California

2. Eastern District of Texas

3. District of Delaware

4. Northern District of California

5. District of New Jersey

6. Northern District of Illinois

7. Southern District of New York

8. Southern District of California

9. District of Massachusetts

10. Eastern District of Virginia


  • Eastern District of VA
  • Copyright Litigation
  • Judge Lee
  • Judge Anderson
  • Judge Jackson
  • Judge Miller
  • Judge Hudson

Record Companies Pursue Restaurant Owners for Public Song Performances

March 5, 2010 | Posted by Amy Marino

Record companies pursue restaurant owners for failing to get ASCAP licenses for the public performance of several songs in three recent cases filed in the Eastern District of Virginia.  See The Twin Towers Co. v. Knuckleheads, Inc., No. 2:10cv 50 (E.D. Va. 2010); WB Music Corp. v. Blcj, Inc., No. 1:10cv104 (E.D. Va 2010); 6 Deep Pub’ng v. Tropical Soul, Inc., No. 3:10cv062 (E.D. Va 2010).

Public performance is one of the bundle of rights protected under the Copyright Act, 17 U.S.C. § 101 et seq.  Music publishers and songwriters have protected this right through affiliation with performing rights organizations, such as ASCAP, BMI and SESAC, which in turn license the performance right for a statutory royalty to restaurants, movie or television producers, or other business that desire to perform the music.  Through ASCAP, for example, businesses can obtain the right to perform millions of songs created or owned by more than 500,000 songwriters, composers, lyricists and publishers.

Failure to get the licenses to perform can result in statutory damages under the Copyright Act, of between $750 - $30,000 for each work infringed, as well as costs and attorneys fees spent in enforcing the right.  Restaurant owners in cases brought by the music companies over the last few years in the Eastern District of Virginia have felt that burden, largely through settlement or default judgment.  In the most recent cases, the record companies allege that each of the restaurant owners has allowed the unauthorized public performance of three to six different songs within the last couple of years.  If the highest statutory amount is ordered by the court with respect to six songs, this could result in up to $180,000 in damages.

Businesses need permission to play music even if they are only playing CDs, records, or tapes.  On the other hand, businesses do not need permission for radio and television transmissions if the performance is through TV or radio transmission, as long as the  establishment uses a limited number of speakers or TVs, the reception is not further transmitted (for example, from one room to another), and there is no admission charge.

To find out more information about obtaining the proper licenses, businesses can go to http://www.ascap.com/licensing/licensingfaq.html.

 


  • Fourth Circuit
  • Judge Trenga

Judge Trenga's Perspective on the Preliminary Injunctive standards following Winter v. NRDC

February 28, 2010 | Posted by Kathleen J.L. Holmes

Judge Anthony J. Trenga shared his perspectives on the Preliminary Injunction standards following the Fourth Circuit’s adoption of Winter v. NRDC, 129 S.Ct. 365 (2008) in Real Truth about Obama, Inc. v. FEC, 575 F.3d 342 (4th Cir. 2009) in a "View from the Bench" CLE hosted by the Northern Virginia Chapter of the Federal Bar Association. The need to clearly establish the likelihood of success on the merits was paramount. The former "flexible interplay" of (a) irreparable harm; (b) balance of the equities; (c) likelihood of success on the merits; and (d) public interest has been replaced with the requirement that an independent demonstration by the moving party as to each factor must be demonstrated. Despite the routine practice of supporting motions for preliminary injunction with affidavits or verified complaints, Judge Trenga noted that one holdover from the Blackwelder case was that testimony could still be permitted to assist a "perplexed judge." Recent opinions reflect a greater scrutiny of the injunction factors. In FBR Capital Markets & Co. v. Short, 2009 U.S. Dist LEXIS 94558 (E.D.Va Oct. 9, 2009) (J. O’Grady), plaintiff’s motion for a preliminary injunction in a theft of trade secrets case was denied upon a determination that although plaintiff showed a risk of loss, it had not demonstrated any actual loss of customers; further, any demonstrated loss of income could be compensated, undermining the "irreparable harm" factor. In a franchisee/franchisor dispute with covenants not to compete and trademark claims, the court again denied injunctive relief upon determining that inconsistencies in the facts precluded a finding that the plaintiff was likely to succeed on the merits. Allegra Network LLC v. Reeder, 2009 U.S. Dist LEXIS 103688 (E.D.Va. Nov. 4 2009) (J. O’Grady). In a building construction matter, plaintiff’s motion for an injunction was denied upon defendants’ demonstration that not only could plaintiff not establish any of the necessary factors, he had waited for a year to bring the matter to court. Glassman v. Arlington County, Va et al, 1:09cv01249 (Jan.22, 2010).


  • Eastern District of VA
  • Patent Litigation
  • Judge Spencer
  • Humanscale v. CompX

EDVA Jury finds Humanscale Infringes CompX's '054 and '767 Patents, but ITC Simultaneously Issues Determination that CompX Infringes Humanscale's '097 Patent

February 27, 2010 | Posted by William R. Poynter

On Thursday, February 25, the jury returned its verdict in Humanscale v. CompX, on CompX's claims for infringement of its '054 and '767 patents relating to keyboard trays.  The results:

  • All asserted claims of both patents infringed
  • All asserted claims of both patents not invalid
  • Humanscale's laches defense rejected
  • Reasonable royalty damages up to the date the counterclaims were filed:  $17,220,000
  • Reasonable royalty damages from then until December 31, 2009:  $2,152,200
  • Reasonable royalty percentage going forward:  6%

The Court had previously granted Humanscale's motion for a directed verdict on willfulness, so these damages will likely not be enhanced.  See CompX's press release on the jury verdict here

The Court had also previously stayed Humanscale's claims for infringement of its '097 patent, pending an ITC determination regarding the same allegations.  On Tuesday, Judge Paul Luckern at the ITC issued a final determination that CompX had infringed two claims of Humanscale's '097 patent (although he also determined that one of those claims was obvious), and stated that he would recommend a limited exclusion order barring entry of CompX's keyboard trays and a cease and desist order against CompX.

See our previous posts on these cases here

 


  • Eastern District of VA
  • Patent Litigation
  • Federal Circuit
  • Monec v. Apple
  • Judge Brinkema

Judgment in Monec v. Apple Vacated

February 23, 2010 | Posted by William R. Poynter

On Friday, February 19, the Eastern District of Virginia vacated its earlier order granting judgment in favor of Apple, and dismissed the case, pursuant to the parties' joint stipulated order.  The order finally resolves the case between the parties, including Monec's pending appeal to the Federal Circuit.  In its memorandum supporting the request for vacatur, Monec explained that the parties resolved the case using the Federal Circuit's mediation process.  Monec contended that the parties' resolution rendered the Court's judgment moot, and that there were open questions as to whether Monec had a full and fair opportunity to litigate its claims, and whether the Court applied proper procedural standards in issuing judgment in favor of Apple so early in the case, before any discovery or claim construction process.  See our previous posts on the case here


  • Patent Litigation

Are We Ready for Virtual Patent Marking?

February 22, 2010 | Posted by Thomas F. Bergert

Patent infringers must have notice of a patent before they can be liable for patent infringement damages.  Notice can come in many forms, including by lawsuit, cease-and-desist letters, or proper patent marking. 35 U.S.C. Section 287(a) permits recovery of damages based on the constructive notice provided by proper patent marking, even where no actual or direct notice to the alleged infringer has been given.

OceanTomo LLC, the Chicago-based company that brokers deals for IP portfolios and hosts live patent auctions, has recently launched a web site dedicated to virtual patent marking.  See www.patentmarking.com.  Its purpose is to provide free public information linking products and services to their associated patents.  According to the website, information can be posted in three forms: (1) from the actual product manufacturers or service providers themselves; (2) from observations of registered users; and (3) from validated information provided by Ocean Tomo and/or a trusted affiliate organization.

OceanTomo espouses virtual marking as a way to avoid the hassles associated with actual product marking, while also helping to prevent false marking charges.  If patent reform measures were to pass that included a provision permitting virtual marking, OceanTomo states, product manufacturers could replace the specific number on the product itself with a pointer to a website that has the patent information for that product.

Will this be the wave of the future for patent marking?  Tough to say.  Within the field of patent law, patent marking is a fairly black-and-white principle in a sea of gray.  Your product is either properly marked or it isn't.  While one can see the benefits to OceanTomo as an information aggregator (are we still saying "eyeballs" in 2010?) and service provider (minimum annual subscription is apparently $5,000), the benefits to the potential patent enforcer may be less apparent.  If OceanTomo is calling for a switch from marking your product with a patent number to marking it with a website pointer, then doesn't the product still need to be marked somehow?  Not sure where that hassle is eliminated, although I suspect it could make things easier when a product is covered by many patents and the product owner has an electronic means to update the patent list.  Still, what if the site goes down for a couple of hours?  Will an alleged infringer have infringement windows of opportunity as a result?  Until the kinks are worked out and any legislation is fully developed, it may be tough to get virtual marking permitted under Section 287.

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  • Patent Litigation
  • Federal Circuit

Federal Circuit Rejects Expert’s Reasonable Royalty Rate Calculations in ResQNet v. Lansa

February 22, 2010 | Posted by Neil Magnuson and Greg Stephens

In ResQNet.com, Inc. v. Lansa, Inc., decided February 5th, the Federal Circuit affirmed a district court finding of patent infringement, but reversed and remanded as to damages, holding in a per curiam opinion that plaintiff ResQNet’s expert had improperly relied on extraneous past license evidence in calculating a royalty rate.  Building on its September, 2009 decision in Lucent Technologies, Inc. v. Gateway, Inc., the court in ResQNet reaffirmed that “[a]ny evidence unrelated to the claimed invention does not support compensation for infringement but punishes beyond the reach of the statute.”

One approach to determining a “reasonable royalty” for patent infringement, introduced in Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970), is to estimate the rate a hypothetical license would have featured had the parties willingly negotiated prior to the infringement.  In calculating such a rate, a party may rely on any substantial evidence, including royalty rates paid in connection with other, actual licenses for the use of the infringed patent or any other sufficiently similar patents.

Such past license evidence, however, must be “sufficiently comparable to the hypothetical license” at issue.  In Lucent, the Federal Circuit had held that four of the eight license agreements used to calculate a royalty rate “differ[ed] substantially from the hypothetical negotiation” and therefore failed to adequately support the damages calculation.  The court ruled similarly in ResQNet, holding that five of the seven licenses relied on by ResQNet’s expert not only granted rights in the patent, but also included “services such as training, maintenance, marketing, and upgrades” that were “unrelated” to the claimed invention.

The ResQNet court suggested that these “inapposite” licenses were purposefully included in the expert’s calculations to inflate the royalty rate, and that no actual link existed between them and the patented technology.

In dissent, Judge Newman suggested that the ResQNet majority’s opinion misapplied its own precedent, claiming that Lucent does not call for disqualification of all past license evidence that does not wholly relate to the claimed technology.  Rather, if it is at least fractionally relevant, such evidence should be included in rate calculations, though valued proportionally.

Dennis Crouch (Patently-O) and Peter Zura (The 271 Patent Blog) have also blogged about the ResQNet decision.

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  • Eastern District of VA
  • Patent Litigation
  • Judge Spencer
  • Humanscale v. CompX

Humanscale v. CompX Jury Trial

February 21, 2010 | Posted by William R. Poynter

 

On Friday, February 19, Humanscale and CompX completed the first week of a jury trial in the Richmond Division of the EDVA, before Judge Spencer.  See our previous post on the case here.  At issue are CompX's claims of infringement of the '054 and '767 patents, and Humanscale's counterclaims of noninfringement and invalidity.  CompX rested on the third day, and the Court denied all of the Humanscale's motions for judgment as a matter of law, save one.  The Court granted Humanscale's motion on willfulness.  Humanscale started presenting evidence on Friday, and the trial resumes on Monday, February 22. 

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  • Eastern District of VA
  • Trademark Litigation
  • Judge Lee
  • Judge Anderson

Google Adwords Lawsuit set to go to trial in the EDVA

February 19, 2010 | Posted by Patrick R. Hanes

The trademark infringement lawsuit filed by the Virginia-based language learning software company Rosetta Stone against Google is now scheduled to go to trial on May 3, 2010, before a jury in Alexandria, Virginia.  Google's previous motion to dismiss the lawsuit was denied.  This lawsuit is one of several trademark infringement lawsuits filed against Google in federal courts since Google reportedly adopted a new policy allowing advertisers to use trademark terms in their ad text, but it is the only such action pending in the EDVA. Because of the jurisdiction’s well-known speedy docket, it is likely that this case will be the first of the new Adword cases to reach judgment.

Google’s current policy is posted here.

Eric Goldman has a post discussing the cases against Google here on his Technology & Marketing Law Blog.

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  • Eastern District of VA
  • Patent Prosecution
  • Federal Circuit

Appeals from the BPAI in Ex Parte Reexams

February 17, 2010 | Posted by William R. Poynter

Dennis Crouch has an interesting post from yesterday at PatentlyO on conflicting statutory provisions providing for appeals of rejections by the BPAI in ex parte reexamination proceedings, namely whether the patentee can appeal to the District of DC, or whether the Federal Circuit has exclusive jurisdiction over such appeals.   Addressing this issue in Sigram Schindler v. Kappos, 2009 WL 4981473 (E.D. Va. Dec. 18, 2009), the Eastern District of Virginia agreed with the PTO's interpretation (found in 37 C.F.R. § 1.303 and in MPEP § 2279) that section 141 controls, and that appeals lie only at the Federal Circuit. 

The Reexamination Center also has a good discussion of this issue here

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  • Patent Prosecution
  • Federal Circuit

Wyeth Decision Sparks USPTO Procedure to Request Recalculation of Patent Term

February 15, 2010 | Posted by Andrea Warmbier

In the wake of the Federal Circuit’s decision in Wyeth v. Kappos, the USPTO recently announced an interim procedure for patentees to request patent term adjustment recalculations.  In Wyeth, the Federal Circuit affirmed Wyeth and Elan Pharma International Ltd.’s request to extend patent term adjustments under 35 U.S.C. 154(b), due to the USPTO’s delay in prosecuting their patent applications.   Commissioner for Patents Robert Stoll stated that “the USPTO is working to modify its computer program to comply with the Federal Circuit’s decision as soon as possible. Until then, this interim procedure will enable patentees to request a recalculation quickly and at no charge.”   The USPTO expects that the software modification needed to comply with the Wyeth decision will be completed by March 2, 2010.  In the interim, the USPTO is providing patentees with the ability to request a recalculation of their patent term adjustment without a fee or petition as is normally required pending completion of necessary modifications to the USPTO’s computer program.

 

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  • Eastern District of VA
  • Patent Litigation

EDVA Rocket Docket Remains Fastest District for Patent Cases in Pricewaterhouse Coopers 2009 Patent Litigation Study

February 14, 2010 | Posted by William R. Poynter

 

In recent years, PwC has analyzed trends in patent litigation and issued a report focusing on a particular "hot topic" in the arena.  For 2009, that topic was Non-Practicing Entities, and their effect on patent litigation.  The 2009 report draws a number of interesting conclusions about NPEs, including the statistic that since 2002, NPEs have consistently won larger damage awards that operating companies.  Not surprisingly, the Eastern District of Virginia was identified as the fastest docket in the country with an average time-to-trial in patent cases of .88 years.  The study also concludes that the Rocket Docket is a pro-patentee jurisdiction, largely because of its speedy docket, higher success rates for patentees (ranked third with a success rate of 48.6% for patentholders), and larger median damage awards.  

The 271 blog has a discussion of the report here, as does the Prior Art blog here.  

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  • Patent Prosecution
  • Federal Circuit
  • Supreme Court

Bilski Resources

February 12, 2010 | Posted by William R. Poynter

Everyone is anxiously awaiting the Supreme Court's decision in In re Bilski, but until then, AwakenIP has collected here an extremely comprehensive collection of resources on the Bilski case.  It has everything from commentary, to blog posts, to transcripts and briefs, including amicus briefs at the Federal Circuit.  Definitely a website to visit for anyone interested in the Bilski case.

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  • Eastern District of VA
  • Patent Litigation
  • Federal Circuit
  • Juniper v. Graphon
  • Judge Lee

What a Difference a Day Makes: Juniper v. GraphOn

February 11, 2010 | Posted by William R. Poynter

On November 24, the Court dismissed Juniper's claims of infringement, and GraphOn's counterclaims, with prejudice, based on a covenant not to sue that Juniper had given to GraphOn, which the Court concluded eliminated the existence of a case or controversy under Article III of the Constitution.  Fifteen days later, GraphOn filed its motion for attorney fees.  Unfortunately for GraphOn, the motion was a day late; under Rule 54(d)(2)(B)(i), motions for attorney fees are due within fourteen days of the entry of judgment.  The Court denied the motion, finding that GraphOn's excuse that it miscalculated the due date was insufficient to constitute excusable neglect under Rule 6.  GraphOn has appealed both the dismissal and the denial of its motion for fees to the Federal Circuit.  GraphOn's brief is due March 8. 

PATracer also has a discussion of this case here.  See our previous discussion of this case here

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  • Eastern District of VA
  • Patent Litigation
  • Judge Spencer
  • Humanscale v. CompX

Humanscale v. CompX International Headed to a Jury

February 8, 2010 | Posted by William R. Poynter

On February 13, 2009, Humanscale sued CompX International and CompX Waterloo in the EDVA for infringement of US Patent No. 5,292,097.   Humanscale designs and manufactures keyboard support products, such as the keyboard tray in the '097 patent.  In response, Defendants filed the usual counterclaims for invalidity, noninfringement, and unenforceability, and also asserted infringement by Humanscale of US Patent Nos. 5,037,054 and 5,257,767. Early in the case, the Court stayed the claims on the '097 patent, based on a concurrent ITC investigation, and let the claims on the '054 and '767 patents go forward.  Almost exactly a year later, it looks like parties are headed to trial by jury before Judge Spencer in Richmond.  On February 5, 2010, the Court heard oral argument on Humanscale's motion for summary judgment of invalidity and laches (the only summary judgment motion that appears to have been filed), and denied it from the bench.  According to the current scheduling order, the parties are scheduled to begin trial on February 16.   

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  • Eastern District of VA
  • Patent Litigation
  • Monec v. Apple
  • Judge Friedman

Motions for Judgment on the Pleadings in Patent Cases

February 7, 2010 | Posted by William R. Poynter

Patent cases are notoriously expensive to litigate.  As a result, more and more parties are turning to Rule 12(c) in an attempt to narrow down issues in the case, or to dismiss the case entirely.  In Monec v. Apple (which this blog has previously covered here), the Eastern District of Virginia dismissed the case in its entirety, finding that the plaintiff could not recover based on the claims of the patent as written.   And more recently in the Norfolk Division, defendant Walden University filed a Rule 12(c) motion asserting that certain claims of the patent at issue in its case against Digital-Vending Services International are indefinite, in part because they claim both an apparatus and a method.  In addition to arguing that Walden's motion is premature, because the claims have not yet been construed, DVSI has opposed Walden's motion on its merits.  The Court has neither set a date for the hearing nor ruled on the motion. 

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    VSB Intellectual Property Writing Competition 2010

    February 1, 2010 | Posted by William R. Poynter

    The IP Section of the Virginia State Bar has announced its 2010 writing competition, for articles relating to intellectual property law, or the practice of intellectual property law.  According to the VSB's website, the contest is open to students at Virginia law schools, or Virginia residents attending law school outside the Commonwealth of Virginia.  The prize is $4,000 and publication of the article on the VSB IP Section website.  Articles are due by May 29, 2010.  More details can be found here.

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    • Eastern District of VA
    • Patent Litigation
    • Judge Hudson

    PRE Holding v. Monaghan - Dismissed Without Prejudice After Reexamination Granted

    February 1, 2010 | Posted by Andrea Warmbier

    PRE Holding, Inc. v. Monaghan Medical Corporation was dismissed without prejudice pursuant to a Stipulated Order entered on January 27, 2010, in the Richmond Division of the Eastern District of Virginia.  The lawsuit had been pending in the EDVA since July 21, 2009, when PRE Holding asserted that the Defendants infringed U.S. Patent No. 7,562,656, which is directed toward an aerosol medication inhalation system to aid in the delivery of aerosolized medicaments to patients.  Monaghan subsequently requested an Inter Partes Reexamination of the ’656 patent, and the USPTO granted the request on January 20, 2010, and entered a First Office Action rejecting all of the asserted claims as unpatentable. 

     

    Defendant Trudell Medical International agreed to be bound by the USPTO’s disposition of the Reexamination Proceeding to the same extent that Monaghan is bound.  Defendants also agree to discontinue selling the accused products in the United States before the presently scheduled trial date of July 12, 2010.

     

    The Court also ordered that the six year statute of limitations for obtaining damages in the case was tolled from the date the suit was filed through the date on which a final ruling is entered in the Reexamination Proceeding, and that damages would not be limited during that tolling period.


    • Trademark Litigation
    • Fourth Circuit
    • Judge Jones
    • Judge Agee
    • Judge King

    Consumer Affairs Website Escapes Immunity In The Fourth Circuit Because Claims Did Not Show It Encouraged Illegal Content

    January 5, 2010 | Posted by Amy Marino

    In Nemet Chevrolet v. Consumeraffairs.com, Inc., No. 08-2097 (4th Cir. 2009), the Fourth Circuit majority, Judges King and Agee, recently upheld the district court’s Rule 12(b)(6) dismissal of Nemet's defamation claims against Consumeraffairs.com, based on website posts relating to Nemet’s automobile services. The majority found defendant immune as an information service provider under section 230 of the Communications Decency Act (“CDA”). Nemet argued that its claims were sufficient to withstand the motion to dismiss and that Consumeraffairs.com was not entitled to immunity because it was an “information content provider” under section 230(f)(3).

    Section 230 of the CDA prohibits a “provider or user of an interactive computer service” from being held responsible “as the publisher or speaker of any information provided by another information content provider.” 47 U.S.C. § 230(c)(1).  However, the scope of the immunity depends on whether a person’s actions also make it an “information content provider” or “responsible … for the creation or development of information provided through the Internet,” in which case the person is not entitled to immunity.  Id. at § 230(f)(3).

    Nemet first argued that its general allegations that defendant participated in the preparation of the posts: (1) through the structure and design of its website, or (2) by soliciting its customers’ complaints, steering them into specific categories designed to attract consumer class action lawyers, contacting customers to ask questions about their complaints, and helping them draft or revise their complaints, were sufficient to show that Consumeraffairs.com was responsible, in part, for the creation or development of the information in the posts. Nemet’s argument was based on Fair Housing Council v. Roommates.com, LLC, 521 F.3d 1157 (9th Cir. 2008), in which the Ninth Circuit held a website operator liable as an information content provider for the discriminatory postings created by third parties because it had designed the website to develop unlawful content as a condition precedent of use.

    However, the Fourth Circuit disagreed with Nemet, finding Roommates.com distinguishable because the website there required users to input illegal content, whereas Nemet merely alleged that Consumeraffairs.com structured its website and business operations to develop purely lawful information related to class-action lawsuits. Also, because Nemet failed to make any cognizable argument as to how a website operater who contacted a user “developed” or “created” the website content, the court found the allegations both threadbare and conclusory.

    Nemet also argued that Consumeraffairs.com had fabricated eight of the posts because it could not confirm that the posts were created by a Nemet customer, based on the date, model of car, and first name. However, the majority found that the sole basis for these claims was that Nemet could not find the customer in its records based on the information in the post. Thus, viewed in their best light, Nemet’s allegations allowed inference of no more than “the mere possibility” that defendant was responsible for the creation of the posts, and it was entitled to immunity under the CDA.

    Judge Jones concurred with respect to the insufficiency of the allegations based on the website structure and design, but dissented with regard to the eight fabricated posts, because Nemet had alleged that each of those posts gave the name and hometown of the putative customer as well as the make and model of the vehicle sold by Nemet.  Thus, Judge Jones believed Nemet’s allegations, along with other factual allegations concerning Consumeraffairs.com’s derogatory statements about Nemet in connection with the posts, were sufficient to create a reasonable inference that Consumeraffairs.com wrote the eight posts to attract additional complaints, and should withstand the motion to dismiss.

    Click here for this Fourth Circuit opinion.

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    • Eastern District of VA
    • Patent Litigation
    • Judge Brinkema
    • Judge Morgan
    • Judge Spencer
    • Judge Payne

    Inter-Division Transfer in the Rocket Docket

    December 3, 2009 | Posted by William R. Poynter

    On May 19, ePlus, Inc. filed suit in the Rocket Docket against a number of defendants for infringement of patents covering aspects of electronic sourcing and procurement systems.  ePlus, Inc. v. Lawson Software, Inc., Civ. Action No. 2:09-cv-00232 (E.D. Va.).  No stranger to the Rocket Docket, ePlus has attempted to enforce these patents twice before in this Court.  In a case filed in 2004, ePlus received a favorable jury verdict against Ariba in the Alexandria Division before Judge Brinkema, and subsequently, in a case against SAP where the same 79 claims asserted against Lawson were at issue, ePlus was left with a hung jury in the Richmond Division before Judge Spencer.  Both cases settled after the jury returned.  In this case, as with the other two, ePlus filed its complaint in the Alexandria Division, but as with the case against SAP, this case against Lawson was transferred to the Norfolk Division pursuant to the Court's patent rotation procedure.  In Norfolk, the Defendants made a joint motion to transfer the case to Judge Spencer in Richmond, and the Court obliged.

    Analyzing the traditional factors under 28 U.S.C. section 1404(a), the Court concluded that the "interests of justice" factor was dispositive in this case.  While giving short shrift to the Defendants' concerns over inconsistent results, the Court was persuaded that the judicial economy concern under this factor should carry the day, relying heavily on the Court's decision in Mullins v. Equifax Info. Servs., LLC., 2006 WL 1214024 (E.D. Va. 2006).  Specifically, because Judge Spencer was already familiar with the patents, had already construed the claims of many of them (despite the fact that his claim construction order was withdrawn at the parties' request after they settled the SAP case), and had presided over a multi-week jury trial on these patents, he was so much more familiar with them so as to enable him to preside over this case at much less cost, in terms of judicial resources.

    Since receiving the case, Judge Spencer has reassigned the case to Judge Payne in the Richmond Division, and consistent with the Rocket Docket's typical speed, the case has been set for a jury trial to begin on June 14, 2010.

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