n 3Shape A/S v. Carestream Dental, LLC, No. 1:22-cv-01829-WMR (N.D. Ga. Jan. 2, 2024), Judge Ray, II adopted a series of Reports and Recommendations ("R&R") in a patent infringement case, including denying Plaintiff 3Shape's motion to sever counterclaims, denying Defendants Dental Imaging Technologies Corp. and DEXIS's (collectively, "DITC") motion to enforce and for sanctions, and granting in part 3Shape's motion to supplement invalidity contentions.
Motion to Sever
3Shape moved to sever two of DITC's counterclaims, which alleged infringement of DITC's patents. In adopting the R&R to deny 3Shape's motion to sever, the court found that judicial economy weighs strongly in favor of not severing the claims because: the claims involve the same parties and similar technologies, it would spare the discovery already produced in the case, and there are mechanisms in place to protect against any potential jury confusion. The court further found that "[t]he continuation of the status quo of the case and any remaining delay from the Counterclaims are insufficient to merit a finding of prejudice" against 3Shape.
Motion to Enforce and for Sanctions
DITC moved to enforce the court's prior motion to compel and award sanctions. The court had previously found 3Shape's response to an interrogatory on damages theories insufficient because it failed to identify the damages theory. In response to the order, 3Shape served two additional responses, which the court found were sufficient because they "identified the damages theories and provided Bates-number documents that supported their damages theory with a breakdown of what the documents demonstrate." Because 3Shape's responses were sufficient, the court denied DITC's motion.
Motion to Supplement Invalidity Contentions
3Shape moved to compel DITC to supplement their invalidity contentions. The court found that DITC's use of catch-all language, which referenced identical exhibits for each asserted patent, was insufficient, because the supplemental invalidity contentions failed to identify why the combinations were obvious. Accordingly, the court granted the motion to supplement as related to obviousness theories.
In Jetaire Aerospace, LLC, v. Aersale, Inc.,No. 1:20-cv-25144-DPG (S.D. Fla. Jan. 8, 2024),Chief Magistrate Judge Torres granted in limited part Defendant Aersale, Inc.'s motion to excludePlaintiff Jetaire Aerospace, LLC's infringement expert testimony in a patent infringement case. The court further denied Aersale's motion to exclude Jetaire's damages expert testimony.
In the aviation industry, the Federal Aviation Administration (FAA) requires passenger and cargo aircraft to be fitted with fuel tank ignition mitigation solutions to minimize the risk of an explosion. Jetaire developed foam-based ignition mitigation kits that, basically, fill an aircraft fuel tank with specialized foam to help prevent a spark from causing an explosion. In seeking to acquire an FAA certificate to use its system in an aircraft, Jetaire entered into an agreement with Aersale to use Aersale's Boeing 737s for development and testing purposes. After Jetaire declined to develop a system for Aersale's use, Aersale developed and marketed its foam product, directly competing with Jetaire.
Aersale moved to strike expert testimony from Jetaire's patent infringement expert, William Ashworth, and from its damages expert, Justin Blok.
Concerning Ashworth's testimony, the court agreed that part of his testimony improperly reached legal conclusions. Ashworth had stated that Jetaire's alleged offers for sale could not be invalidating offers for sale under the on-sale bar. The court found that whether a product was on sale for the purposes of the on-sale bar is a question of law to be analyzed under the law of contracts as defined by the Uniform Commercial Code (UCC). Since Ashworth's experience does not include UCC or other commercial law expertise, the court found that Ashworth would not meet the Daubert qualification requirement and struck that limited portion of his testimony. The court, however, left open any purely factual point underlying the on-sale bar analysis that may relate to Ashworth's engineering or industry-related expertise, such as the ready-for-patenting element of the on-sale bar defense.
Concerning Blok's testimony, the court rejected Aersale's arguments that Blok's lost profits and reasonable royalty theories were inherently unreliable and unhelpful or contradictory to Federal Circuit law.
Under Blok's lost profit theory, Jetaire (the patentee) and its related company that sells the patented products are treated as the same entity for purposes of determining lost profits. The court found that with every sale of the patented product, any lawful use under the FAA requires a licensing fee from Jetaire for its FAA certifications. Therefore, the court found a genuine dispute of material fact as to whether Jetaire's license satisfies the Poly-America1 requirement that the patentee must sell "some item" and whether Jetaire can also obtain lost profits from the sale of the patented products.
Under Blok's reasonable royalty theory, a 100% technical apportionment factor was applied to arrive at a hypothetical royalty rate. The court found that, under Daubert, Blok is qualified to render this damages opinion and had a reliable basis to do so based on Ashworth's report. Therefore, the court denied Aersale's motion to strike Blok's testimony.
In Natera, Inc. v. NeoGenomics Labs., Inc., No. 1:23-cv-00629-CCE-JLW (M.D.N.C. Jan. 10, 2024), Chief Judge Eagles granted-in-part Defendant NeoGenomics Laboratories, Inc.'s request for Plaintiff Natera, Inc. to post a bond. The court also clarified the scope of its preliminary injunction, previously entered against NeoGenomics on December 27, 2023, as reported here.
As a preliminary matter, the court had to decide whether it retained jurisdiction to modify its preliminary injunction. Prior to the instant order, NeoGenomics filed a notice of appeal to contest the court's preliminary injunction order. Consequently, Natera argued the court did not retain jurisdiction to modify its order. While the court agreed that generally, district courts are stripped of jurisdiction when an appeal has been filed, Federal Rule of Civil Procedure 62(d) provides that district courts retain jurisdiction to modify their orders "on terms for bond or other terms that secure the opposing party's rights." Thus, the court found it had jurisdiction to modify the preliminary injunction and to determine and impose a bond.
Next, the court addressed NeoGenomics' request that the court set the bond for $400 million. NeoGenomics argued its valuation came from its inability to collect a return on investment in its allegedly infringing molecular residual disease ("MRD") liquid assay product, RaDaR, as well as the decrease in its stock price after the court's entry of the preliminary injunction order. While the court agreed that posting a bond was appropriate, it disagreed as to the dollar amount. Specifically, measuring the "gravity of the potential harm" for a wrongful injunction against such measures for damages like lost profits, lost market share, and costs for relaunching a product, the court found that changes in a company's stock price and estimated return on investment were relevant but not particularly helpful in determining a proper bond amount. Indeed, the court opined that NeoGenomics would likely see its stock price rebound should the court lift the injunction. Accordingly, the court set out to determine a reasonable bond.
Given that neither party presented further argument as to the specific bond amount, the court reviewed the full evidence of record and based its holding largely on a market research firm's analysis of NeoGenomics's forecasted revenues for MRD products pre- and post- issuance of the injunction. After the injunction issued, NeoGenomics's forecasted total revenues for the MRD products dropped from $8.5 million to $1.7 million in 2024 and from $17.2 million to $3.4 million in 2025. Taken together, the court ordered Natera must post a $10 million bond, commensurate with the estimated costs of the injunction.
Finally, the court clarified the scope of its preliminary injunction with respect to two instances of NeoGenomics's conduct. First, NeoGenomics had entered three contracts—signed but not yet under performance—at the time the injunction issued. NeoGenomics requested that the "clinical trials in process" exemption from the injunction apply to these three contracts. The court agreed with NeoGenomics, finding that enjoining such agreements would "delay potentially meaningful scientific research." Second, NeoGenomics asked that a certain set of blood samples, taken prior to the injunction but received after issuance of the injunction, be allowed to test with the RaDaR product. Given the relatively small amount (less than 100 samples), Natera did not oppose, and the court clarified that the samples may be tested with NeoGenomics's RaDaR product.
In Taser International, Inc. v. Phazzer Electronics, Inc., No. 6:16-cv-00366-PGB-LHP (M.D. Fla. Jan. 10, 17, and 23, 2024), Judge Paul G. Byron granted several motions for sanctions and denied another in a long-running case between Plaintiff Taser International, Inc. (now known as Axon Enterprise, Inc.) and Defendant Phazzer Electronics. In 2016, Taser filed suit against Phazzer Electronics asserting claims of patent and trademark infringement, false advertising, and unfair competition. Ultimately, a default judgment was entered against Phazzer Electronics. Since then, in Taser's post-judgment collection efforts, Taser impleaded third parties, including Steven Abboud (Phazzer Electronics' alleged principal), Phazzer Global, LLC and Phazzer IP, LLC, into the case. The post-judgment litigation spawned discovery and several motions to compel.
Taser moved for sanctions against: 1) Phazzer IP and its corporate representative, Diana Robinson; 2) Mr. Abboud; and 3) Joelle Bordeaux, counsel for Phazzer Global and Mr. Abboud.
The court granted Taser's motion for sanctions against Phazzer IP and Ms. Robinson, finding that they had "engaged in an intentional pattern of obfuscation and delay that has plagued this litigation" and was "nothing short of outrageous." Specifically, the court faulted Phazzer IP and Ms. Robinson for: Ms. Robinson being unprepared for a deposition when she was designated as the corporate representative; falsely identifying the owner of Phazzer IP in federal tax returns; making a series of bad-faith bankruptcy filings designed to delay post-judgment collection efforts by Taser and making false assertions during those proceedings; and committing intentional spoliation. The court issued default judgment in Taser's favor on its fraudulent transfer claim and awarded Taser its attorney's fees and costs.
The court also granted Taser's motion for sanctions against Mr. Abboud, finding that he had engaged in discovery obfuscation and delay tactics. Specifically, the court faulted Mr. Abboud for falsely denying having possession of responsive documents despite having responsive documents in his personal email account, falsely denying that the email account in question was indeed his personal email account, and attempting to distance himself from holding an ownership interest in Phazzer Global despite having such an interest. The court described Mr. Abboud as having "no respect for the rule governing these proceedings," issued default judgment in Taser's favor on its alter ego claim, and awarded Taser its attorney's fees and costs.
Taser also sought sanctions against Ms. Bordeaux, the attorney for Phazzer Global and Mr. Abboud. The court denied Taser's motion, finding that none of Ms. Bordeaux's actions rose to the "high bar" of "bad faith, vexatious, and unreasonable conduct."
In Rugged Cross Hunting Blinds, LLC, v. Good Sportsman's Marketing, LLC, No. 8:23-cv-2289-WFJ-NHA (M.D. Fla. Jan. 22, 2024), Judge Jung granted Defendants Hadley Development, LLC and Tru-View, LLC's motion to dismiss or sever and transfer as well as Defendant Good Sportsman's Marketing, LLC's ("GSM") motion to dismiss or sever and transfer. The court dismissed Plaintiff Rugged Cross Hunting Blinds, LLC's, ("RCHB") patent infringement claims against Hadley and Tru-View without prejudice for lack of venue and transferred the remainder of the case to the Southern District of Texas based on the first-filed rule.
In its complaint, RCHB, a Florida company with its principal place of business in Tampa, Florida, alleged that Defendants have directly or indirectly infringed RCHB's U.S. Patent No. 11,399,535 ("'535 Patent"), which "generally discloses a partially transmissive mesh material that prevents game from seeing inside a hunting blind structure while allowing hunters to see outside the same." Hadley and Tru-View, both Kansas companies with their principal places of business in Wichita, Kansas, develop and manufacture outdoor recreational products and share common ownership. GSM, a Texas company with its principal place of business in Irving, Texas, is one of Hadley and Tru-View's customers. Importantly, after receiving multiple notice letters from RCHB, GSM filed a declaratory judgment action against RCHB in the Southern District of Texas, seeking a declaratory judgment that the '535 Patent was invalid and not infringed. GSM also brought a claim of tortious interference against RCHB for allegedly "interfering with GSM's contracts and relationships with various retailers."
Hadley and Tru-View's Motion to Dismiss or Sever and Transfer
Under TC Heartland,2 venue in patent infringement cases is determined by 28 U.S.C. § 1400(b), which provides 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." Recognizing that Hadley and True-View neither reside nor have a "regular and established place of business" in Florida, RCHB argued that Hadley and True-View waived objections to venue based on previously executed NDAs between the parties, which contained forum selection clauses. The court rejected this argument, finding "the subject NDAs are not licensing agreements and RCHB's claims do not directly or indirectly arise from them." Accordingly, and in view of the first-filed rule (discussed below), the court severed and dismissed RCHB's claims against Hadley and Tru-View without prejudice for lack of venue.
GSM's Motion to Dismiss or Sever and Transfer
The first-filed rule provides that, when parties have instituted competing or parallel litigation in separate courts, there is a strong presumption that favors the forum of the first-filed suit. When determining whether to transfer pursuant to the first-filed rule, the court considers three factors: the chronology of the two actions, the similarity of the parties, and the similarity of the issues. Reviewing the factors, the court found that all weighed in favor of transfer: RCHB filed the Florida lawsuit after GSM filed the Texas lawsuit; the parties were identical (now that Hadley and Tru-View have been dismissed); and the issues in the Florida suit were inherently related to the issues presented in the first-filed Texas suit. Further, the court rejected RCHB's argument that the Texas lawsuit was purely anticipatory in nature, finding instead that the Texas lawsuit was likely the result of RCHB's alleged interference with GSM's business relationships. Thus, the court transferred the remainder of this case to the Southern District of Texas.
Footnotes
1. Poly-America, L.P. v. GSE Lining Tech., Inc., 383 F.3d 1303, 1311 (Fed. Cir. 2004)
2. TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 581 U.S. 258, 270 (2017).
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