Featured Expert Contributor – Intellectual Property (Patents)
Jeffri A. Kaminski, Venable LLP, with Briana Rizzo,* Venable LLP
*Editor’s Note: With this post we welcome the participation in The WLF Legal Pulse of Featured Expert Contributor on patent litigation and policy issues, Jeffri Kaminski.
The Delaware District Court, historically known as a venue friendly to patent holders, appears ready to fight back against the litigation strategies of Patent Assertion Entities (PAEs), or “patent trolls.” While the court has traditionally disfavored imposing fees and sanctions on unsuccessful Plaintiffs , several recent cases signal a major shift in the judicial perspective on what District Court Judge Richard G. Andrews calls “misleading and prejudicial” tactics.  Most notably, Parallel Iron LLC v. NetApp Inc. and Summit Data Systems, LLC v. EMC Corporation et al solidify a growing trend in the Delaware Circuit of both judicial discontent with PAE litigation tactics and a willingness to sanction such behavior.
A trend on the rise
The U.S. Supreme Court released its groundbreaking Octane Fitness, LLC v. Icon Health & Fitness, Inc. decision on April 29, 2014, lowering the standard of 35 U.S.C. § 285 “exceptional” behavior and enabling prevailing parties to obtain attorneys’ fees for behavior that merely “stands out from others with respect to the substantive strength of a party’s litigating position […] or the unreasonable manner in which the case was litigated.” While several cases immediately following Octane Fitness retained a traditional refusal to award fees, on September 12, 2014, Judge Andrews released three pro-defendant opinions on the matter, the most significant being Parallel Iron LLC v. NetApp Inc. Continue reading
Tomorrow morning from 10:00 a.m. to 11:00 a.m., Washington Legal Foundation will be broadcasting a live Web Seminar program entitled Aguinda v. Chevron: The Remarkable Rise and Fall of a Stage-Managed Litigation & PR Crusade. You can register for free viewing by clicking on the program title.
Our speakers will be Paul M. Barrett, Assistant Managing Editor of Bloomberg BusinessWeek and author of the just-released book Law of the Jungle; and Eric G. Lasker, a partner with the Hollingsworth LLP law firm.
Even though the litigation accusing Chevron of environmental harm in Ecuador has been going on for over two decades, the case itself, and Chevron’s counter-litigation alleging the plaintiffs’ lawyers committed fraud, remain unresolved. The U.S. Court of Appeals for the Second Circuit will soon hear the plaintiffs’ lawyers’ appeal of Federal District Court Judge Lewis Kaplan’s RICO ruling. And just yesterday, the U.S. Court of Appeals for the Fourth Circuit affirmed a lower court’s order that two lawyers affiliated with lead plaintiffs’ lawyer Steven Donziger provide documents and computer drives Chevron sought in support of its RICO charges. Paul Barrett’s coverage of that Fourth Circuit ruling can be read here.
“This settlement is so unfair, it cannot be fixed.”
That statement marked the beginning of the end of a federal district court judge’s opinion, as well as the class-action settlement to which the opinion referred. U.S. District Court for the Northern District of California Judge William Alsup’s May 29 opinion in Daniels v. Aéropostale West, Inc. provides a tutorial on how not to win judicial approval of a class-action settlement.
Ms. Daniels alleged that she and other employees of the trendy apparel retailer Aéropostale were denied non-discretionary bonus pay (i.e., overtime) in violation of the federal Fair Labor Standards Act (FLSA). Judge Alsup conditionally certified the class in April 2013. Daniels provided notice to all employees in the class, and 594 opted into the suit. The parties filed a motion on April 24, 2014 seeking preliminary approval of a proposed settlement.
For reasons we will elaborate, Judge Alsup refused to grant approval. On June 12, the court entered an order decertifying Daniels, dismissing the claims, and extending the statute of limitations for 30 days so dismissed plaintiffs could pursue individual suits if they wish. The order noted that the parties agreed to the decertification, and that Aéropostale would make payment to any class member “who did not receive full payment for the overtime adjustment on any non-discretionary bonus earned during the collective action period.” The plaintiff’s lawyers agreed to provide notice of the action’s decertification at their own expense.
Lessons. In just 12 pages, Daniels offers litigants and their lawyers at least five lessons on how to undo your own class-action settlement.
Lesson #1: Be unresponsive to the court’s requests
In just the second paragraph of the opinion, Judge Alsup took the unusual step of noting the name and affiliation of all counsel of record in the case. This was not done to recognize their brilliant advocacy. As the rest of the opinion reveals, the lawyers, among other things, failed to provide the court with expert damage reports as required by federal procedural rules. After the parties filed their proposed settlement, the court had to ask twice for more information or corrections to the document. When pressed by Judge Alsup, Daniels’s lawyer could not state how much the plaintiff would ask the jury to reward. In addition, “Plaintiff’s counsel also failed to provide any specific information about overtime hours worked and non-discretionary bonuses paid.” Continue reading
New Hampshire likes to be first. It boasts America’s first modern state-run lottery, the first ski school, and even the world’s first paintball game. And Dixville Notch, NH residents enter the first votes in each presidential election.
Thanks to a recent $236 million verdict in a state-sponsored lawsuit, New Hampshire may be gunning for first in the hearts and minds of America’s plaintiffs’ bar too—a distinction, Washington Legal Foundation’s General Counsel Mark Chenoweth argues in a June 11 New Hampshire Union Leader op-ed, that the state should not proudly embrace.
New Hampshire hired private, contingent-fee attorneys to sue oil companies for groundwater contamination. As Mark explains:
They alleged that leaking underground storage tanks contaminated local groundwater with the chemical MTBE. But rather than sue gas stations that owned the leaking tanks (and violated EPA rules), the state’s hired guns went after deep-pocketed oil companies (that were following EPA rules). The lawyers calculated that they could win a large payday, regardless of those companies’ actual responsibility, by putting deep pockets and pollution claims in front of a jury.
In compliance with a statutory mandate, EPA allowed the addition of MTBE to gasoline to improve air quality. Congress anticipated that leaks might occur, so it created a fund states could tap for clean-up. New Hampshire did not seek money from the fund, perhaps, the Union Leader op-ed notes, because the state would have to use those funds for groundwater clean-up. Not wanting to be limited, the state filed suit instead, even though it could not show physical harm to any person or destruction of any property.
New Hampshire now could have a $236 million slush fund courtesy of a jackpot justice verdict, and as Mark writes, “Attorney General Joseph Foster has staunchly opposed placing the money in a state-managed trust devoted to testing and clean-up.”
New Hampshire’s “success” has inspired neighboring Vermont to jump on the MTBE lawsuit bandwagon. Dallas law firm Baron & Budd and New York firm Weitz & Luxenberg will be joining up with New Hampshire’s local counsel, the Pawa Law Group, to represent Vermont and its litigious attorney-general, William Sorrell.
Last week was quite a successful one in Washington for the plaintiffs’ bar. First, as WLF’s Rich Samp detailed in a May 22 Legal Pulse post, the Solicitor General of the U.S. opposed federal preemption of state failure-to-warn suits against medical device companies. Then, the following day, the Senate Judiciary Committee shelved legislation meant to curb abusive litigation and related activities by “patent-assertion entities” (PAEs), a.k.a. patent trolls.
But attorneys who represent PAEs, and the private businesses that may benefit from PAE activity, should temper their enthusiasm. The concept of “patent reform” will persist during Congress’s timeout. Various Executive Branch entities are working to shine a light on patent troll misbehavior, and the federal judiciary is gradually becoming less tolerant of patent litigation abuse. Consider the following examples of such non-legislative activity.
Federal Agencies. While the White House made the biggest splash on patent litigation last June with a Task Force on High-Tech Patent Issues report, far more impactful work regarding PAEs is being done at the Federal Trade Commission (FTC). For the past year, FTC has been conducting a formal “6(b)” study of PAEs. In a May 19 Federal Register notice, the Commission noted that it would be sending information requests to 25 PAEs as well as 15 wireless communication industry manufacturers and patent holding companies. Continue reading
The U.S. Court of Appeals for the Fourth Circuit issued a decision on April 16 in a case called Company Doe v. Public Citizen that signals hope for asbestos defendants who are seeking to combat fraudulent claims in North Carolina. Those claims were brought in connection with a bankruptcy proceeding styled as In re: Garlock Sealing Technologies, LLC et al. (“Garlock”). How could an anonymous CPSC case from Maryland affect a gasket company’s asbestos bankruptcy from North Carolina? In a word: transparency. Both cases involve the ability of third parties to gain access to documents enmeshed in public litigation.
In issuing its ruling in Company Doe, the Fourth Circuit surely had no inkling that its words might cheer long-suffering asbestos defendants. However, that court’s insistence on transparency and public access to the judicial process bodes well for an asbestos case in which similar issues have been percolating. When the district court (and perhaps eventually the Fourth Circuit) hears motions from asbestos defendants and others about divulging sealed documents from the Garlock asbestos bankruptcy docket, the recent decision in Company Doe will surely loom large. There is no guaranty as to where the Fourth Circuit ultimately will come down on the sealing issues in Garlock. But it does appear that a new day is dawning, and—if the Court of Appeals acts consistently with its stated policy favoring public access in Company Doe—it just might prove to be the Day of Reckoning for fraudulent asbestos plaintiffs and their trial lawyer accomplices.
Company Doe Takes Two Steps Forward in District Court
Company Doe v. Public Citizen, No. 12-2209 (“Company Doe”), started when the U.S. Consumer Product Safety Commission received a “report of harm” and sought to post it on its new government-run product safety database website. [Full disclosure: I worked as legal counsel to CPSC Commissioner Anne Northup from 2009 through 2010, but left before this report of harm was received.] The report alleged that a company’s product was related to the death of an infant, but the company strongly objected that the report of harm was not accurate. When the company could not obtain satisfaction through direct negotiations with the Commission, it was forced to file suit against the CPSC in federal district court in Maryland (where the CPSC is located) to enjoin the Commission from posting the erroneous report of harm. Continue reading
Patent plaintiffs, especially those resembling “patent trolls,” routinely sue in plaintiff-friendly forums, such as the Eastern District of Texas, or in other forums thousands of miles away from a defendant’s home base. Plaintiffs use the attendant inconveniences as leverage when pursuing quick settlements. Such venue manipulation is an item of significant concern to repeat player defendants of patent lawsuits.
Congress considered and rejected venue reforms as part of the America Invents Act of 2011, which may be one reason such provisions are not included in current reform efforts on Capitol Hill. Another reason may be that over the last five years, the U.S. Court of Appeals for the Federal Circuit has built up a robust jurisprudence which gives defendants a fair chance at having lawsuits transferred to a more convenient forum. Our 2010 Legal Pulse post The Federal Circuit Messes with (the Eastern District of) Texas Yet Again examined a series of Federal Circuit rulings which together have provided predictable standards for judging venue transfer requests under 28 U.S.C. § 1404(a).
However, two Federal Circuit decisions issued on the same day—February 27—by the same panel of judges now threaten the prevailing clarity on patent litigation transfer of venue. In both cases, Judges Prost and Reyna affirmed the lower courts’ denial of defendants’ motions to transfer with Judge Newman twice dissenting. In re Apple Inc. originated in the Eastern District of Texas, while In re Barnes & Noble, Inc. was filed in the Western District of Tennessee. The plaintiff in In re Apple is a Luxembourg company with one employee which has a Plano, Texas subsidiary whose six employees manage the company’s patent portfolio. The plaintiff in In re Barnes & Noble registered to do business in Tennessee just before filing this suit (as well as 19 other identical suits in the same court) and is a one-employee company with a home office. Continue reading