Antitrust and Patent Misuse

By Memorandum Order entered by The Honorable Leonard P. Stark in GN Netcom, Inc. v. Plantronics, Inc., Civil Action No. 12-1318-LPS (D.Del. September 29, 2017), the Court denied Defendant Plantronics, Inc.’s motion for summary judgment which contended that any foreclosure effect of Defendant’s exclusive dealing arrangement with its distributors was negated by Plaintiff GN Netcom, Inc.’s ability to circumvent the exclusive dealing arrangement by accessing the end-users directly. In other words, Plantronics argued that GN could not show substantial foreclosure of the market for the telephone headsets at issue because GN could make sales calls directly to the contact center and office end-users with delivery effected by any of the hundreds of resellers that GN uses, including some of the Plantronics Only Distributors (“PODs”) themselves. Id. at *5. As support for the proposition, Plantronics referred to GN’s recent, successful history of reaching out to end users in this manner (“solution selling”), which resulted in significant “wins” and growth in market share for GN. Id.

The Court, however, noted that “[t]he core question presented by the motion is whether, taking the evidence in the light most favorable to GN, Plantronics has demonstrated that a reasonable juror could find only that GN had adequate, ‘available,’ ‘viable,’ and/or ‘effective,’ alternative means of distribution, notwithstanding Plantronics’ POD program. The ‘mere existence of other avenues of distribution’ is not enough on its own. Instead, there must be an ‘assessment of [the alternative means’] overall significance to the market,’ and such alternative means must be ‘practical or feasible in the market as it exists and functions.” Id. at *6.

Ultimately, the Court found that Plantronics could not meet the summary judgment standard to show that the only reasonable conclusion to be drawn from the record is that distribution through PODs is an adequately available, viable and/or effective means of distribution for GN. Id. at *8-9. Although the Court noted the record contains substantial evidence from which a jury might reasonably find that GN could adequately compete for business, Plantronics failed to show that was the only conclusion a jury could reasonably reach. Id. at *9. Thus, summary judgment was denied.

A copy of the Memorandum Order is attached.

An interesting and notable take away from this case is that, due to certain discovery spoliation by Plantronics concerning the deletion of emails, the Court had previously imposed monetary and evidentiary sanctions on Plantronics, including a permissive adverse inference instruction to be given at trial and being required to seek leave of Court before filing any motion for summary judgment – given the impact that the spoliation and permissive adverse inference could have on the resolution of any motion for summary judgment. See id. at *2. It leaves one wondering whether this would have been a case appropriate for summary judgment but for the sanctions and adverse inferences against Plantronics due to its spoliation.

By Memorandum Opinion entered by The Honorable Gregory M. Sleet in Jedi Technologies, Inc. v. Spark Networks, Inc. et al., Civil Action No. 16-1055-GMS (D.Del. August 3, 2017), the Court granted defendants’ motion to dismiss plaintiff’s patent infringement action under Federal Rule of Civil Procedure 12(b)(6) after finding that plaintiff’s patents claim ineligible subject matter under 35 U.S.C. § 101. Specifically, the Court found that the asserted claims of the patents-in-suit, U.S. Patent Nos. 7,885,977 (“the ‘977 patent”), 8,417,729 (“the ‘729 patent”), 8,930,406 (“the ‘406 patent”), and 9,432,315 (“the ‘315 patent”), are invalid under § 101 because each claim the abstract concept of matching online chatters based on criteria such as personality or location without providing the kind of meaningful limitations needed to make the subject matter patent-eligible. Id.at *12-13. In other words, the Court found that the patents-in-suit do nothing more than “recite the performance of some business practice known from the pre-Internet world along with the requirement to perform it on the Internet.” Id.at *16.

Ultimately, the Court invalidated pursuant to 35 U.S.C. § 101 claims 1, 2, 4 and 5 of the ‘977 patent, claims 26, 27, 29, 30 and 31 of the ‘729 patent, claims 3, 4, and 6 of the ‘406 patent, and claims 1, 2, 3, 4, 6, 7, 8, and 9 of the ‘315 patent for claiming ineligible subject matter and having no inventive concept. See Order.

Copies of the Court’s Memorandum Opinion and Order are attached.

By Memorandum Opinion entered by The Honorable Gregory M. Sleet in Nespresso USA, Inc. v. Ethical Coffee Company SA, Civil Action Np. 16-194-GMS (D.Del. July 13, 2017), the Court granted the motion to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2) of Counterclaim Defendants Nestle Nespresso SA, Nestle SA (“Nestle”) and Nestec SA (“Nestec). In granting the motion, the Court found that neither Nestle or Nestec are “at home” in Delaware and, thus, cannot be subject to general jurisdiction in Delaware. Id.at *5. With respect to specific juridisction, the Court found that Counterclaim Plaintiff Ethical Coffee Company (“ECC”) failed to make a prima facie showing that Nestle or Nestec would be subject to personal jurisdiction in Delaware under a stream of commerce theory or an agency theory. Id.at *6-9. The Court also disagreed with ECC’s position that Federal Rule of Civil Procedure 4(k)(2) gave the Court personal jurisdiction over Nestle and Nestec explaining that, since minimum contacts had not been established through either stream of commerce or agency approach, personal jurisdiction could not be predicated on Rule 4(k)(2). Id.at *10.

A copy of the Memorandum Opinion is attached.

By Memorandum Opinion entered by The Honorable Leonard P. Stark in Enzo v. Gen-Probe Inc., Civil Action No. 12-104-LPS (consolidated) (D.Del., June 28, 2017), the Court granted the motion of defendants Gen-Probe Incorporated and Hologic, Inc. for summary judgment of invalidity of U.S. Patent No. 6,992,180 (“the ‘180 patent”) on nonenablement grounds. In doing so, the Court found that there was no genuine dispute of fact that the ‘180 patent specification lacks enablement and that a reasonable jury could not find for Enzo. Id.at *14. “Instead, the only conclusion a reasonable jury could reach is that clear and convincing evidence proves the ‘180 patent is invalid for nonenablement.” Id.

The Court explained that, based on the record, a reasonable factfinder could only find: (1) the quantity of experimentation necessary to arrive at embodiments equal to the full scope of the claims is undue; (2) insufficient direction or guidance is presented in the ‘180 patent to allow a person of ordinary skill in the art (“POSA”) to avoid undue experimentation; (3) an insufficient number of working examples are present; (4) the invention arises in a field of art that was highly unpredictable at the time of the invention; (5) the prior art showed that the pertinent field was unpredictable; (6) although the relative skill of those in the art was high, persons of ordinary skill in the art at the time of the invention did not have sufficient knowledge to fill in what was missing from the ’180 patent; (7) the art was highly unpredictable; and (8) the claims in the ‘180 patent are extremely broad. Id.at *16. Accordingly, the Court concluded that the specification of the ‘180 patent did not sufficiently teach those of ordinary skill in the art how to make and use the full scope of the claimed invention without undue experimentation. Thus, summary judgment that the ‘180 patent is invalid for nonenablement was warranted.

A copy of the Memorandum Opinion is attached.

By Memorandum Opinion entered by The Honorable Richard G. Andrews in Insight Equity d/b/a Vision-Ease Lens Worldwide v. Transitions Optical, Inc., Civil Action No. 10-635-RGA (D.Del. May 9, 2017), the Court granted in part and denied in part Plaintiff’s motion to exclude the expert testimony of Defendant’s expert which defined the relevant market for purposes of the antitrust claims.

Defendant’s expert defined the relevant market in the case to include both photochromic and clear lenses and used two econometric tests – cross-price elasticity of demand and co-price movement – to support her market definition. Id. at * 9. Plaintiff’s motion did not challenge the methodological soundness of cross-price elasticity and co-price movement; rather, it challenged the appropriateness of those tests under the facts and circumstances of the case. Id. at *12. In other words, Plaintiff’s motion challenged the “fit” of the expert’s use of cross-price elasticity of demand and co-price movement given the facts and circumstances of this case. Id.

Ultimately, with the exception of not allowing Defendant’s expert to rely on the co-price movement that she attributed to common components of clear and photochromic lenses, the Court rejected Plaintiff’s challenge and permitted Defendant’s expert to testify on co-price movement and cross-price elasticity of demand in giving her expert opinion on the relevant market for purposes of the antitrust claims. Id. at *14-16.

A copy of the Memorandum Opinion is attached.

The general takeaway is that an expert’s testimony must comply with the three requirements set forth in Daubert v. Merrell Dow Pharma., Inc., 509 U.S. 579, 589 (1993): (1) qualification; (2) reliability, and (3) fit. The Court has a gatekeeping role in assessing whether the proffered testimony complies with the Daubert requirements. However, Courts tend to interpret the qualification, reliability and fit requirements of Daubert liberally when evaluating whether to exclude proffered expert testimony.

By Memorandum Opinion entered by The Honorable Leonard P. Stark in Intellectual Ventures I LLC et al. v. Symantec Corp. et al., C.A. No. 13-440-LPS (D.Del. February 13, 2017), the Court granted Defendants’ motion for summary judgment of patent ineligibility upon finding that the claims at issue – claims 25 and 33 of U.S. Patent No. 5,537,533 (“the ‘533 patent”) – (1) are directed to an abstract idea, and (2) fail to include any inventive concept sufficient to elevate them into patent-eligible applications of the abstract idea of backing up data. Id. at *3-11.

In so ruling, the Court agreed with Symantec that the claims at issue simply recite the basic steps of copying data from one location to another several times and sending a confirmation that the data has been received; and this is something humans and institutions have been doing for centuries, even before computers. Id. at *8. The Court also agreed that, although the claims invoke existing computer functionality as a tool to better back up data, the claims do not themselves purport to improve anything about the computer or network itself. Id. at *8-9. For example, unlike Enfish and McRo, the claims do not improve the way computers store information or otherwise function and do not otherwise provide an inventive concept. Id. Therefore, the court agreed with Symantec that the claims lack anything sufficient to transform the abstract idea into patent-eligible subject matter. Id.

A copy of the Memorandum Opinion is attached.

The general take away is that simply citing to generic computer components or functionality when describing an abstract idea, law of nature, or physical phenomena without some new, additional improvement, unique combination or something else that can be considered an inventive concept is not going to transform patent-ineligible subject matter into patent-eligible under 35 U.S.C. §101. Whenever a patent possibly claims an abstract idea, law of nature or physical phenomena, an analysis of the claims under the two-step process set forth in Mayo should be performed.

The United States District Court for the District of Delaware announced that, effective February 3, 2017, the Honorable Sue L. Robinson, transitioned to Senior Judge.  In the announcement, the Court also set forth certain changes to its case assignment practices given Judge Robinson’s transition to a Senior United States District Judge.  In short, Judge Robinson will not be assigned any new criminal cases or new civil cases.  Until the vacancy is filled, all new criminal cases will be assigned to Chief Judge Stark, Judge Sleet and Judge Andrews.  Until the vacancy is filled, all new civil cases will be assigned to Chief Judge Stark, Judge Sleet, Judge Andrews and a new docket referred to as “Vacant Judgeship” or “VAC”.  The cases assigned to VAC will also be referred to one of the Magistrate Judges – Judge Thynge (“MPT”), Judge Burke (“CJB”), and Fallon (“SRF”).

A copy of the Court’s Announcement is attached.

Through Order entered by Chief Judge Leonard P. Stark and pursuant to the authority vested in the Court by Rule 83 of the Federal Rules of Civil Procedure, the United States District Court for the District of Delaware amended its Local Rules of Civil Practice and Procedure. The revised Local Rules become effective on August 1, 2016.

Copies of the Revised Local Rules of Civil Practice and Procedure of the United States District Court for the District of Delaware and the implementing Order are attached.

By Memorandum Opinion entered by The Honorable Leonard P. Stark in GN Netcom, Inc. v. Plantronics, Inc., Civil Action No. 12-1318-LPS (D.Del., July 12, 2016) (redacted), the Court granted in part Plaintiff’s Motion for Sanctions arising from the deletion of emails by a senior executive of Defendant who was responsible for all domestic sales functions and ultimately responsible for the execution and implementation of the Plantronics Only Distributor (“POD”) program and agreements which are the focus of the claims asserted in the antitrust action.  The record contained evidence that, after the filing of the lawsuit and despite Defendant promptly issuing a litigation hold to relevant employees upon receiving Plaintiff’s demand letter, updating the litigation hold after the lawsuit was filed, providing training sessions and sending quarterly reminders to ensure compliance, the senior executive of Defendant deleted certain emails that should have been preserved in the anticipation or conduct of litigation, instructed others in the company to delete certain emails, and Defendant otherwise engaged in spoliation of electronically stored information (“ESI”). Id. at * 1-18.  The Court found that (1) Defendant, due to its senior executive’s deletion of emails and his instructing others to delete certain emails, failed to take reasonable steps to preserve ESI which cannot be restored or replaced; (2) Defendant did so in bad faith with the intent to deprive Plaintiff from using the information contained in the emails; and (3) Plaintiff is prejudiced by the loss of the emails. Id. at *18-26.

The Court next evaluated the appropriate sanctions to impose and decided to impose against Defendant the following: (1) monetary sanctions in the form of the reasonable fees and costs incurred by Plaintiff in connection with the spoliation disputes; (2) punitive sanctions in the amount of $3 million dollars; (3) possible evidentiary sanctions during trial, if requested in the future by Plaintiff and found by the Court to be warranted; and (4) sanction instructions to the jury that it “may” – as opposed to that it “must” – draw an adverse inference that emails destroyed by Defendant would have been favorable to Plaintiff’s case and/or unfavorable to Defendant’s defense. Id. at *26-30.

A copy of the redacted public version of the Opinion is attached.

Of particular note is the fact that, in rendering its ruling in the Opinion, the Court applied Federal Rule of Civil Procedure 37(e) as revised by the December 1, 2015 amendment.

By Memorandum Opinion entered by The Honorable Sue L. Robinson in In Re Class 8 Transmission Indirect Purchaser Antitrust Litigation, Civil Action No. 11-00009-SLR (D.Del., October 21, 2015), the Court denied plaintiffs’ class certification motion, found the case does not present a case or controversy under Article III, and dismissed the case.

By way of background, the suit was filed on behalf of and the proposed plaintiffs class was a number of purchasers of Class 8 trucks from one or more of defendants’ authorized sales agents or dealers.  Defendants in the action were Eaton Corporation (“Eaton”) and a number of Original Equipment Manufacturers (“OEMs”).  Eaton manufactures transmissions for Class 8 trucks and the OEMs manufacture and sell Class 8 trucks.  In order to assemble and sell Class 8 trucks, OEMs purchase component parts, such as transmissions, from suppliers like Eaton.  Id. at 2.

Plaintiffs alleged that Eaton and the OEMs conspired to put Eaton’s main competitor, ZF Meritor, out of business thereby expanding Eaton’s monopoly in the Class 8 truck transmission market and permitting all defendants to share in the profits resulting from the monopoly.  Id. at 3.  Plaintiffs alleged that the conspiracy was achieved by Eaton entering into Long Term Agreements (“LTAs”) in the early 2000s with each of the four OEMs designed to eliminate ZF Meritor’s market share in the Class 8 transmission market.  Plaintiffs ultimately alleged that they had to pay higher prices for transmissions and, in turn, for Class 8 trucks, as a result of defendants’ actions and had “less choice and suffered from a decrease in innovation.”  Id. at 3-4.

In evaluating whether to certify the proposed class of indirect purchaser plaintiffs, the Court noted that a “district court has broad discretion to grant or deny a class certification.”  Id. at 5.  The Court also noted that a party seeking certification bears the burden of establishing that certification is warranted under the circumstances.  In other words, plaintiffs bear the burden of establishing that all four requirements of Federal Rule of Civil Procedure 23(a) are met and that at least one part of Federal Rule of Civil Procedure 23(b) is met.  Id. at 5-6.  The requirements of Federal Rule of Civil Procedure 23(a) are:  (1) numerosity; (2) commonality; (3) typicality; and (4) adequacy.  Id.  The two additional requirements of Federal Rule of Civil Procedure 23(b)(3) are: (1) predominance; and (2) superiority.  Id.

In reaching its decision to deny the class certification motion, the Court found that plaintiffs failed to meet the adequacy requirement under Federal Rule of Civil Procedure 23(a) because plaintiffs failed to demonstrate that the class representatives could adequately represent the class.  Id. at 10-13.  The Court also found that plaintiffs failed to meet the predominance requirement of Federal Rule of Civil Procedure 23(b)(3) because plaintiffs were unable to demonstrate common evidence to show that all or nearly all members of the proposed class suffered antitrust injury as a result of defendants’ alleged conduct.  Id. at 13-15.  The Court did find that plaintiffs met the numerosity, commonality and typicality requirements of Federal Rule of Civil Procedure 23(a).  Id. at 6-10.  The Court did not making any findings concerning the superiority requirement of Federal Rule of Civil Procedure 23(b)(3) given its findings of failure to meet the adequacy and predominance requirements.  Id. at 27.

A copy of the Memorandum Opinion is attached.