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Articles

Northern District of California Rule Changes 2008

February 29, 2008

Articles

Northern District of California Rule Changes 2008

February 29, 2008

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The revisions to the Patent Local Rules for the Northern District of California (“Patent Local Rules”) apply to cases filed on or after March 1, 2008. The revisions include two major conceptual changes. First, litigants must identify in their joint claim construction the 10 most significant claim terms in dispute. See Patent Local Rule 4-1(b) (2008). As part of this identification, litigants must identify “terms for which construction may be case or claim dispositive.” Id. Courts retain discretion to adjust this provision to suit the circumstances of a particular case. See Patent Local Rule 1-3.

Second, the Patent Local Rules eliminate the term “preliminary” from the infringement contentions and invalidity contentions. See Patent Local Rules 3-1 and 3-3. The Patent Local Rules thus contemplate that litigants will provide well-formulated contentions near the outset of litigation. Underscoring this expectation, the Patent Local Rules eliminate a former provision that allowed amendments of contentions without leave of court when warranted by a court’s claim construction ruling. See former Patent Local Rule 3-6 (2000).

The revised Patent Local Rules now require a “timely showing of good cause” for all amendments to contentions. See Patent Local Rule 3-6. The Patent Local Rules provide examples of circumstances that may support a finding of “good cause,” the first of which reflects the circumstances under which litigants could amend as of right under the old rules. The circumstances that may support “good cause” are “(a) a claim construction by the Court different from that proposed by the party seeking amendment; (b) recent discovery of material, or prior art despite earlier diligent search; and (c) recent discovery of nonpublic information about the Accused Instrumentality which was not discovered, despite diligent efforts, before the service of the Infringement Contentions.” Id.

The removal of “preliminary” from the Patent Local Rules is in line with the Eastern District of Texas, which removed “preliminary” contentions from its Patent Rules in October 2006. See General Order 06-15, Appendix M at Rules 3-1 through 3-6 (October 27, 2006). However, under the Eastern District of Texas Patent Rules, an amendment is still permitted without leave of court within 30 days of a court’s claim construction ruling, provided that the litigant has a good faith basis for believing that the court’s ruling so requires. Id. In addition, under the rules and practice of at least some Judges in the Eastern District, plaintiffs are relieved from the obligation to provide detailed contentions with respect to “source code” elements in a patent claim until after they have received a production of the relevant source code by the defendants.

The new Patent Local Rules include several other changes. The initial case management conference should include discussion of how the parties intend to educate the court on the technology at issue. See Patent Local Rule 2-1. The patentee must disclose its theories of direct and indirect infringement with its infringement contentions. See Patent Local Rule 3-1. For theories of indirect infringement, the patentee must identify the underlying direct infringement and describe the acts of the alleged indirect infringer that contribute to or are inducing that direct infringement. See Patent Local Rule 3-1(d). The patentee must disclose “public use” information related to asserted patents, in addition to the “prior sale” information required under the old rules. See Patent Local Rule 3-2(a). The patentee must also disclose all documents evidencing ownership of the asserted patents. See Patent Local Rule 3-2(d).

Invalidity contentions must include disclosure of obviousness contentions, including an identification of any combinations of prior art showing obviousness. See Patent Local Rule 3-3(b). Where alleged obviousness is by combination, the Patent Local Rules have removed the requirement in the old rules for disclosure of “the motivation to combine” the prior art. See former Patent Local Rule 3-3(b). This change comports with the holding of the Supreme Court in KSR International Co. v. Teleflex Inc. that a motivation to combine need not necessarily be shown to prove obviousness. 127 S. Ct. 1727 (2007).

Litigants must also disclose, no later than 50 days after the court’s claim construction ruling, all advice of counsel information on which they plan to rely as part of a patent-related claim or defense. See Patent Local Rule 3-7. Finally, the Patent Local Rules now explicitly recite that failure to make a good faith effort to meet and confer “may expose counsel to sanctions, including under 28 U.S.C. § 1927,” which provides sanctions to compensate for costs and fees incurred due to unreasonable and vexatious conduct. See Patent Local Rule 4-7.

In our view, litigants in new Northern District of California cases will feel the most impact from these changes in the early stages of the case. In the past, a plaintiff could usually count on being able to file amended infringement contentions without leave of Court – at least based on information learned from the defendant’s required document production or because of the outcome of the Markman hearing. Similarly, a defendant could usually count on being able to add new prior art to its invalidity contentions without leave of Court either in response to amended infringement contentions or because of the outcome of the Markman hearing. In both cases, the plaintiff and defendant would typically file amended contentions more than a year into the litigation.

Under the new rules, neither the plaintiff nor defendant can count on being able to refine and update their infringement and invalidity theories late into the case. While many desired amendments may qualify for the “good cause” requirement, the lack of certainty will necessarily require a change in strategy. Many plaintiffs will need to consider significantly greater pre-suit due diligence – far beyond the requirements of Rule 11 – in order to prepare more fully refined infringement contentions at the beginning of the case. Indeed, this change in the rules may prove a boon for third-party vendors in the business of conducting extensive (and expensive) reverse engineering analyses as plaintiffs make this a more routine part of their pre-suit preparation. For defendants, there will be increased pressure to “scour the earth” for prior art in the first 90 days of the litigation. Defendants can no longer assume that they will be able to add hard-to-find prior art later in the case, thus increasing the pressure to conduct expensive international searches right from the outset of the litigation. Defendants in certain technologies will also be pressured to fully track down long-retired and difficult-to-document prior art products and services – a process that often requires a team of searchers to contact dozens or potentially hundreds of potential leads. To put it simply, the new rules will require plaintiffs to invest more time and energy in a case before filing suit, while defendants will bear a similar burden during the first four to six months of litigation.

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