IP UPDATE

Purposeful Direction in a Forum Activates the Long Arm of the Law

By Jiaxiao Zhang on Jul 28, 2022
Posted In Copyrights

The US Court of Appeals for the Ninth Circuit again vacated the US District Court for the Central District of California’s dismissal of a case for lack of personal jurisdiction, applying Fed. R. Civ. Proc. 4(k)(2) and concluding that the copyright infringement claims involving a foreign defendant were properly litigated in the United States. Lang Van, Inc. v. VNG Corporation, Case No. 19-56452 (9th Cir. Jul. 21, 2022) (Bybee, Bennett, JJ.; Bataillon, Distr. J., sitting by designation).

Lang Van, Inc. (LVI) is a California corporation that produces and distributes Vietnamese music and entertainment and owns copyrights to more than 12,600 songs and original programs. LVI sued VNG Corporation, a Vietnamese company that makes copyrighted music available for download worldwide through its Zing MP3 website and mobile applications. LVI served discovery requests on VNG, but instead of supplying substantive information or documents, VNG moved to dismiss for lack of personal jurisdiction. The district court granted the motion, and LVI appealed to the Ninth Circuit, which vacated and remanded the case to the district court with instructions that LVI be permitted to undertake jurisdictional discovery.

On remand, LVI took third-party discovery and argued that the evidence showed that VNG intentionally chose to release its applications in the United States; consented to jurisdiction, choice of law and venue in California; and allowed hundreds of thousands of iOS downloads and tens of thousands of Android downloads.

VNG filed a renewed motion to dismiss LVI’s (now amended) complaint, arguing a lack of personal jurisdiction, forum non conveniens (that there is another, more appropriate, forum) and failure to state a claim. The district court granted VNG’s motion after finding that there was no specific personal jurisdiction over VNG in California under the Ninth Circuit’s specific personal jurisdiction test. The district court did not address the second and third arguments (forum non conveniens and failure to state a claim) and did not address the issue of long-arm jurisdiction over VNG under Rule 4(k)(2). Again, LVI appealed.

The Ninth Circuit assessed jurisdiction under Rule 4(k)(2), which provides for jurisdiction over foreign defendants that have ample contacts within the United States as a whole, but whose contacts are so scattered among states that no single state would have jurisdiction. The test requires proof that (1) the claim at issue arises from federal law and (2) the defendant is not subject to any state’s courts of general jurisdiction, such that (3) invoking jurisdiction upholds due process, with the burden shifting to the defendant to show that application of jurisdiction under the third prong would be unreasonable.

The Ninth Circuit found that the first prong was met because the case involved claims of copyright infringement under federal law, and that the second prong was met because VNG asserted that it was not subject to the personal jurisdiction of any state court of general jurisdiction in the United States.

As for the third prong, the Ninth Circuit explained that when jurisdiction is challenged, the plaintiff must show (1) purposeful activities or transactions [...]

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New WDTX Order Shakes Up Initial Judge Assignments

By Ryan C. Clark on Jul 28, 2022
Posted In Patents

A recent order from Chief Judge Garcia of the US District Court for the Western District of Texas (WDTX) changes how judges are initially assigned to cases filed in its Waco Division. As of July 25, 2022, patent cases filed in the Waco Division shall be randomly assigned to one of 12 judges. The list includes at least one judge from each of the district’s seven divisions. The order states that the new practice is due to “consideration of the volume of new patent cases assigned to the Waco Division, and in an effort to equitably distribute those cases.”

It’s no secret that the Waco Division has been a magnet for patent lawsuits in the last four years. The only judge in Waco—Judge Alan D. Albright—has presided over more than 2,500 patent cases since September 2018. Those 2,500 patent cases account for about 17% of all patent cases filed nationally in district courts in that timeframe. Plaintiffs’ preference to file in Waco is due in part to Judge Albright’s knowledge of patent cases, his interest in patent cases and his promulgation of local patent rules aiming for a predictable and quick path to trial.

Although Waco cases may now initially be assigned to other judges, whether they choose to keep the assignments remains to be seen. The recent order contains a footnote stating that its previous order for assigning judges “remains in full force and effect.” That previous order allows judges to reassign any case “by mutual consent.” (See Item XVIII(a).) Thus, judges may self-select out of these cases. A large criminal docket is one example of why a judge might self-select out of a patent case.

Even if another judge is assigned and decides to keep a Waco patent case, it remains to be seen whether they will adopt Judge Albright’s local patent rules. Judge Albright has put extensive efforts into the local rules, including procedures related to discovery disputes, pre-Markman discovery, Markman hearings, infringement and invalidity contentions, US Patent & Trademark Office inter partes review effects and more. His cases have averaged about eight months to a Markman hearing and about 24 months to trial. Other judges may decide to make use of that framework to save time and effort or to avoid inconsistencies within the division.

Stay tuned for updates as this new assignment practice unfolds and more patent cases are assigned.

Breach of Confidentiality Claim Survives Motion to Dismiss under Anti-SLAPP Law

By Tessa Kroll on Jul 28, 2022
Posted In Trade Secrets

The Court of Appeals of Texas (Fourth District) upheld a trial court’s order denying a motion to dismiss a breach of confidentiality agreement claim pursuant to the Texas Citizens Participation Act (TCPA), which is designed to protect people from strategic lawsuits against public participation (SLAPP). Harper v. Crédito Real Bus. Cap., Case No. 21-0212 (Tex. App. July 20, 2022) (Martinez, Chapa, Watkins, JJ.)

Crédito Real Business Capital (CRBC) leases equipment and provides financing services to companies in the construction industry. CRBC provides its services through two limited liability companies: CR-FED and CR-FED Leasing. Earl Harper previously worked for CRBC as executive vice president and was required to sign a confidentiality agreement with CR-FED stipulating that he would not share its confidential information with third parties.

CRBC advanced money and leased equipment to Ontrack Site Services, a site grading contractor and customer with whom Harper worked. As part of his employment, Harper was provided with confidential information regarding CRBC’s plans and projections for its relationship with Ontrack, including CRBC’s willingness to extend additional financing or leasing services to the contractor. Harper allegedly used this information to help Ontrack negotiate better lease rates and financing terms to CRBC’s detriment. CRBC terminated Harper’s employment. Harper subsequently joined a new company and advised Ontrack to obtain financing from that company instead of CRBC.

CRBC sued Harper for breach of fiduciary duty and breach of contract for misappropriating CRBC’s trade secrets and breaching the confidentiality agreement. Harper filed a motion to dismiss the breach of contract claim pursuant to the TCPA, under which a party can file a motion to dismiss a lawsuit if it “is based on or is in response to a party’s exercise of the right of free speech, right to petition, or right of association.” The trial court denied the motion. Harper appealed, contending the following:

CRBC’s breach of contract claim related to Harper’s exercise of free speech.
CRBC did not establish a prima facie case of its breach of contract claim.
The trial court improperly considered CRBC’s amended petition.

A motion to dismiss pursuant to the TCPA is evaluated under a three-step burden shifting framework:

The movant must first demonstrate that the legal action is based on the movant’s exercise of the right to free speech, the right to petition or the right to association.
The nonmovant must then establish a prima facie case of its claim.
If the nonmovant satisfies its burden, the action must still be dismissed if the movant establishes grounds on which it is entitled to judgment as a matter of law.

The Texas Court of Appeals first addressed whether the trial court was permitted to consider CRBC’s amended petition when it ruled on the motion to dismiss. CRBC’s amended petition merely clarified that “CRBC” was the assumed name for both CR-FED and CR-FED Leasing, rather than just CR-FED. Because the amended petition was filed well before the hearing date and did not include any element of surprise, the Court concluded that [...]

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Court to Counsel: Be Frivolous at Your Own Risk

By Cecilia Choy, Ph.D. on Jul 28, 2022
Posted In Patents

The US Court of Appeals for the Federal Circuit may “award just damages and single or double costs to the appellee” under the Federal Rule of Appellate Procedure 38 if an appeal is frivolous as filed or as argued. In a non-precedential decision, the Court granted-in-part and denied-in-part a party’s motion for sanctions and request to hold the opposing party’s counsel jointly and severally liable. Pop Top Corp. v. Rakuten Kobo Inc., Case No. 21-2174 (Fed. Cir. July 14, 2022) (Moore, C.J.; Newman, Stoll, JJ.) (per curiam). (Newman, J., dissenting). The Court granted attorneys’ fees and double costs, although it lowered the requested amount for attorneys’ fees.

Pop Top owns a patent describing methods and systems related to enabling highlighter functionality on web pages. The patent’s claim requires an “internet document [that] includes code for invoking a highlighting service to operate with the internet document.” Pop Top alleged that Kobo’s e-books on an app infringed as they are “highlightable” and “include code.” Kobo explained that all highlighting-related code was in the app, not the e-books, an assertion supported by a declaration from its chief technology officer. The district court granted summary judgment of noninfringement.

Pop Top appealed, arguing that the district court erred by not resolving the parties’ alleged claim construction dispute regarding the limitation “code for invoking,” and by deciding that Pop Top’s citation of the Kobo declaration and the infringement contentions (for the first time on appeal) was insufficient evidence of infringement to survive summary judgment.

An appeal is frivolous as filed if “the judgment by the tribunal below was so plainly correct and the legal authority contrary to appellant’s position was so clear that there really is no appealable issue.” The Federal Circuit decided that the appeal was frivolous as filed, explaining that there was no reasonable basis to appeal the summary judgment. The district court had determined that Pop Top offered “no evidence whatsoever” that the e-books included “code for invoking a highlighting service” but relied solely on the Kobo declaration, which stated that the app, not the e-books, contained the highlighting functionality.

An appeal is frivolous as argued if “the appellant engages in misconduct in arguing the appeal.” The Federal Circuit decided that Pop Top’s appeal was frivolous as argued because it “blatantly misconstrue[d] Kobo’s position” when arguing disputed scope for “code for invoking.” Kobo explained that there was no dispute; even under Pop Top’s construction, there was no infringement because the e-books do not contain code invoking the highlighting service. Pop Top further compounded its misconduct in arguing that it presented sufficient evidence to survive summary judgment, failing to explain how any cited evidence, such as the Kobo declaration, showed that Kobo’s e-books contain code related to highlighting.

The Federal Circuit explained that it may hold that counsel be jointly and severally liable for a sanctions award if “an appeal is frivolous due to the nature of the advocacy in support of it.” Because Pop Top’s appeal was frivolous “entirely because of the baseless [...]

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Standard Techniques Applied in Standard Way to Observe Natural Phenomena? Not Patent Eligible

By Jiaxiao Zhang on Jul 28, 2022
Posted In Patents

In what may be another blow to diagnostic patents, the US Court of Appeals for the Federal Circuit affirmed the patent ineligibility of claims that it held to be directed to detecting natural phenomena by conventional techniques. CareDx, Inc. v. Natera, Inc., Case No. 2022-1027 (Fed. Cir. July 18, 2022) (Lourie, Bryson, Hughes, JJ.)

CareDx is the exclusive licensee of three Stanford University patents directed to diagnosing or predicting organ transplant status by using methods to detect a donor’s cell-free DNA (cfDNA). When an organ transplant is rejected, the recipient’s body destroys the donor cells, releasing cfDNA from the donated organ’s dying cells into the blood. Detecting the naturally increased levels of donor cfDNA (due to the deteriorating organ condition) can be used to diagnose the likelihood of an organ transplant rejection.

The representative claims were summarized as having four steps for detecting a donor’s cfDNA in a transplant recipient:

“Obtaining” or “providing” a “sample” from the recipient that contains cfDNA
“Genotyping” the transplant donor and/or recipient to develop “polymorphism” or “SNP” “profiles”
“Sequencing” the cfDNA from the sample using “multiplex” or “high-throughput” sequencing, or performing “digital PCR”
“Determining” or “quantifying” the amount of donor cfDNA.

CareDx filed two lawsuits, one alleging that Natera’s kidney transplant rejection test infringed the patents, and another alleging that Eurofins Viracor’s various organ transplant rejection tests infringed one of the patents. Natera and Eurofins moved to dismiss the complaints for failing to state a claim because of a lack of patent-eligible subject matter under 35 U.S.C. § 101. The magistrate judge who reviewed the motions recommended that they be denied, finding that the claims were a “purportedly new, unconventional combination of steps” to detect natural phenomena. Although the recommendation was vacated with regard to Natera because the complaint was amended, the district court adopted the magistrate’s recommendation as to Eurofins with modified reasoning that the patent “specifications raise doubts about the patents’ validity” by suggesting that the steps were neither new nor unconventional. Still, the district court was wary of ruling prematurely and denied the motion so that the parties could conduct discovery to develop the record on what was considered conventional in the art.

Following expert discovery relating to § 101 eligibility, Natera and Eurofins moved for summary judgment on patent ineligibility. The district court denied summary judgment, citing a factual dispute as to the conventionality of the techniques for performing the claimed methods. Natera and Eurofins moved for certification of interlocutory appeals of the district court’s denial. After conferring with the parties, the district court agreed to reconsider its decision in view of case law raised in the certification motion. After reconsideration, the district court granted the summary judgment motions of ineligibility, finding that the asserted claims were directed to the detection of natural phenomena—specifically, the presence of donor cfDNA in a transplant recipient and the correlation between donor cfDNA and transplant rejection—and concluding that based on the specification’s many admissions, the claims recited only conventional techniques.

CareDx appealed, arguing [...]

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