Antitrust and Patent Misuse

By Memorandum Opinion entered by The Honorable Leonard P. Stark in American Axle & Mfg., Inc. v. Neapco Holdings LLC et al., Civil Action No. 15-1168-LPS (D.Del. February 27, 2018), the Court granted Defendants’ Motion for Summary Judgment of Invalidity of U.S. Patent No. 7,774,911 (“the ‘911 patent”) after finding that it was directed to patent ineligible subject matter under 35 U.S.C. §101.

The ‘911 patent relates generally to shaft assemblies for transmitting rotary power in a driveline and more specifically to a method for attenuating driveline vibrations transmitted through a shaft assembly. Id. at *1-2. Many of the prior art liners attenuated the shell mode vibrations but did not also attenuate bending or torsion mode vibrations. Id. at *2. “The ‘911 patent purports to provide ‘an improved method for damping various types of vibrations in a hollow shaft,’ which facilitates the damping of shell mode vibration as well as bending mode vibration and/or torsion mode vibration.” Id.

In applying the two-part framework of the Alice test to the ’911 patent, the Court agreed with Defendants that (1) the claimed methods are simply the application of laws of nature, Hooke’s law, with the result of friction damping; and (2) the claims do not contain an inventive concept. Id. at *9-16. Thus, the Court found that the asserted claims of the ‘911 patent are not patent-eligible under 35 U.S.C. §101. Id. at *15.

A copy of the Memorandum Opinion is attached.

The takeaway is that drafters of patents for processes claiming patent ineligible subject matter – laws of nature, physical phenomena, and abstract ideas – should be mindful that their patent claims contain some additional features or inventive concept that provide practical assurances that the process is more than a drafting effort designed to monopolize the law of nature itself. Parties sued for infringement of patents that arguably involve laws of nature, physical phenomena and/or abstract ideas should carefully evaluate those patents to determine whether they meet the Alice test.

The United States District Court for the District of Delaware has announced new procedures for assignment of cases to Senior Judge Gregory M. Sleet in light of Judge Sleet’s retirement from the bench during the fall of 2018 and two current District Judge vacancies on the Court. With respect to new civil cases, for the time being, Senior Judge Sleet will continue to draw a share of new civil cases equal to that of the Court’s active District Judges. The Court has begun the process of reassigning a portion of the civil cases currently on Judge Sleet’s docket – primarily those scheduled for trial in 2018. With respect to criminal cases, Judge Sleet will no longer be assigned new criminal matters beginning sometime in the spring of 2018. At and after that time, all new criminal cases will be assigned to the Court’s active District Judges.

In the announcement, the Court clarified that the procedures for the assignment of cases to the Vacant Judgeship docket (“VAC”) remain unchanged and no new visiting judges have been added to the list since the September 2017 announcement.

A copy of the Announcement is attached.

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.