Texas Patent Litigation Monthly Wrap-Up: March 2023

March's Texas Patent Litigation Monthly Wrap-Up covers decisions addressing post-verdict JMOL, the point at which cases become exceptional, and the standard for amending invalidity contentions, among other issues.

Judge Albright Issues Comprehensive Order Addressing Renewed JMOL, Undisclosed Sales, Supplemental Damages, and Enhanced Damages

Judge Albright recently issued a comprehensive order addressing post-verdict judgment as a matter of law, as well as damages related to undisclosed sales, supplemental damages, and enhanced damages. In Jiaxing, the plaintiff won a jury verdict of $13.8 million. Jiaxing Super Lighting Electric Appliance Co. Ltd. et al. v. CH Lighting Technology Co. Ltd. et al., No. 6:20-cv-00018, Dkt. 323 at 2 (W.D. Tex. Mar. 17, 2023). After the verdict, and after the court had granted in part the plaintiff’s motion for enhancement of damages but denied its motion for exceptional case, attorney fees, and a permanent injunction, the plaintiff moved for supplemental damages, ongoing royalty, and enhancement of post-verdict damages. The defendants, in turn, renewed their JMOL motion on invalidity, non-infringement, and willfulness, and requested a new trial. Id. at 3-4. The plaintiffs argued that the renewed JMOL should be limited only to those issues raised in the original JMOL. Id. at 5. The court’s order addressed each of the issues raised by the parties.

Turning first to invalidity, the court found that there was substantial evidence to support the jury’s verdict on each invalidity ground raised in the renewed JMOL that had previously been presented in the defendants’ original JMOL. Id. at 7-14. The court faulted the defendants for presenting certain arguments for the first time in their JMOL motion, and found other arguments waived because the defendants did not present them in their original JMOL. Id. at 7, 10, 14. In particular, the court noted that the “[d]efendants failed to present a credible case of their own on [a disputed claim] element.” Id. at 9. The court also found that the defendants failed to demonstrate that the prior art comprised certain required claim elements, such as a “detection result latching circuit.” Id. at 13.

Turning next to infringement and willfulness, the court found that the jury’s verdict was supported by substantial evidence. Id. at 15-18. For infringement, the court found that a reasonable jury could have found that the accused devices do not lack a “pulse generator.” Id. at 16. On the issue of willfulness, the court found that a reasonable jury could find that the defendants’ witnesses were not credible, among other reasons. Id. at 18. The court further found that although the defendants’ failure to redesign was not evidence of maliciousness or bad faith, and found that the defendants did not copy, such findings were not sufficient to warrant a grant of JMOL. Id. at 18, 19.

The court then addressed defendants’ request for a new trial. Id. at 19-35. The court found none of the arguments offered by the defendants to be persuasive. Id. In particular, the court found that it had properly granted JMOL to the plaintiff on certain invalidity grounds, and, therefore, those grounds were not a proper basis for a new trial. Id. at 20. The court further found the expert testimony relied upon by the defendants as to invalidity to be conclusory, and accordingly, insufficient to warrant a new trial. Id. at 21-23. The court found against the defendants on numerous other issues related to invalidity. Id. at 23-24, 34. Further, on the issue of damages, the court found that the defendants had waived certain arguments, and also found the defendants’ cited cases to be inapposite. Id. at 25-30. Finally, the court found that alleged inflammatory statements from an email did not warrant a new trial because the court did not believe that it swayed the jury’s verdict. Id. at 33.

Next, the court addressed the plaintiff’s request for damages for undisclosed pretrial sales and supplemental damages. Id. at 39-42. The defendants argued against damages for the undisclosed pretrial sales, claiming the plaintiff had waived those damages by not presenting them to the jury or asking the court to include such relief in prior motions, despite having the pertinent information for months preceding trial. Id. The plaintiff’s position was that the parties’ pre-trial agreement regarding the issues to try at trial preserved its right to seek relief on the issue of undisclosed pretrial sales and that its post-trial motion was timely as to the relief being sought. Id. The court agreed with the plaintiff, finding the factual situation similar to numerous other cases in which damages for sales unaccounted for at trial were allowed. Id. at 41. The court also found for the plaintiff on the issue of supplemental damages for similar reasons. Id. at 42. The court further awarded pre- and post-judgment interest for both the undisclosed pretrial sales and the supplemental damages. Id. at 42-44.

The court then addressed the plaintiff’s request for an ongoing royalty. The court found the defendants’ argument against an ongoing royalty unpersuasive. The defendants argued that the plaintiff failed to address changes in the negotiating positions between the parties (essentially requiring the plaintiff to present an updated Georgia-Pacific analysis). Id. at 45. But the plaintiff pointed out, and the court agreed, that the changes favored an increased royalty rate, and no authority supported the defendants’ position. Id. The court specifically noted that the plaintiff’s expert explained that the defendants’ only evidence to the contrary (falling LED prices) was a result of the defendants’ infringement. Id. at 45.

Finally, the court tackled the plaintiff’s request for enhanced damages for continued infringement. Id. at 46. Here, the court granted the plaintiff’s motion in part. Id. Specifically, the court analyzed the Read factors and determined that, in light of the fact that the jury had already determined that the infringement was willful, several of the factors now “weigh even more heavily” in favor enhancement. Id. at 47. For example, the court found that the defendants could no longer maintain a good faith belief that they do not infringe. Id. Accordingly, the court agreed to enhance damages by the same factor as it had done for past infringement. Id. at 48. The court, however, denied the plaintiff’s request to enhance ongoing royalties. Id.

Eastern District Details When a Case Becomes Exceptional

In Traxcell, the Eastern District of Texas issued a ruling on when a case becomes exceptional. Traxcell Techs., LLC v. Nokia Solutions and Networks US LLC et al, Case No. 2:17-CV-44-RWS-RSP, Dkt. 459 at 1 (“Exceptional Case Order”). Traxcell sued multiple corporations for patent infringement over the same patents. Among the many defendants were Nokia and AT&T. See id.; Traxcell Techs., LLC v. AT&T, Inc., Case No. 2:17-CV-00718. The Nokia and AT&T cases were filed separately and proceeded on separate schedules, but both were in the same Eastern District court. Id. Relevant proceedings were held before Magistrate Judge Roy Payne, with reports and recommendations presented to the District Court. Id. at 2. Claim construction reports and recommendations were adopted by the court prior to the instant ruling.

In the Nokia case, the magistrate judge issued a claim construction order on January 7, 2019, construing the terms “computer” and “location” against Traxcell. Exceptional Case Order at 1-2. The magistrate judge also found that another asserted claim was indefinite. Id. Based on this, Traxcell’s infringement claims against Nokia were implausible. See id. at 2. On February 6, 2019, Nokia’s counsel sent Traxcell’s counsel a Rule 11 letter notifying Traxcell of the futility of its infringement claims. Id. Nokia moved for summary judgement of non-infringement and the court granted the requested relief on December 11, 2019. Id. at 2.

Just over two months after the Nokia claim construction order, on April 15, 2023, the court issued another claim construction order adopting the Nokia claim constructions in the AT&T case. Traxcell Techs., LLC, Case No. 2:17-CV-00718, Dkt. No. 171. In its claim construction briefing against AT&T, Traxcell addressed the Nokia claim construction order, arguing against it. Exceptional Case Order at 2. The magistrate judge and the court rejected those arguments. Id. at 4.

On July 16, 2019, Traxcell filed a motion for leave to file objections to the magistrate judge’s claim construction order. Id. at 2. The magistrate judge denied the motion as being untimely on August 13, 2022. Id. Nokia then moved for attorney’s fees. Id. at 1. Nokia took the position that exceptional case status should have started on January 8, 2019, immediately after the magistrate judge issued his claim construction order. Id. at 2. The magistrate judge disagreed, finding that exceptional case status began on August 13, when the magistrate judge denied Traxcell’s motion for leave. Id. at 1.

The District Court agreed with the magistrate judge that the case became exceptional on August 13, 2019. Id. The district court referenced Traxcell’s claim construction arguments in its case against AT&T in reaching this decision. The court found that Traxcell’s arguments in the AT&T case were a reasonable but unsuccessful “attempt to sway the Court into construing the claims differently.” Id. at 4. The District Court found the situation to be “unique” because of the fact that there was pending claim construction on the same disputed terms in another case before the same court. Id. Additionally, Traxcell argued in the AT&T claim construction briefing that the Nokia claim construction ruling was erroneous. Under the “totality of the circumstances,” the District Court found that Traxcell’s decision to maintain the litigation did not become unreasonable until after the magistrate judge denied Traxcell’s motion for leave. Id. (citing Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554 (2014)).

Northern District Sets the Standard for Amending Invalidity Contentions

In Nabors, the Northern District of Texas analyzed when amending invalidity contentions is appropriate. Nabors Drilling Techs. U.S. v. Helmerich & Payne Int'l Drilling Co., Case No. 3:20-cv-03126-M, Dkt. 224 at 1 (N.D. Tex. Mar. 27, 2023). Nabors sued Helmerich & Payne for infringement of seven patents. Id. The defendant counter-sued for infringement of four patents, all assigned to Motive Drilling Technologies. Id. at 1, n. 1. On May 26, 2022, the court issued a claim construction order as to the Nabors patents, and then issued another claim construction order on August 17, 2022 as to the Motive patents. Id. at 2. In pertinent part, the court found the term “optimized path” in one of the asserted Motive patents to be indefinite. Id. On August 26, 2022, Nabors moved to amend its invalidity contentions as to the Motive patents to allege invalidity of asserted claims that comprised the term “optimal path.” Id. 

The court begins its analysis with the relevant local rules. Id. at 2-3. The court noted that preliminary invalidity contentions are due within 45 days from the date infringement contentions are served as per LPR 3-3. Id. at 2. Under LPR 3-6, the court noted that final invalidity contentions may be served within 50 days of a claim construction ruling if either the party claiming patent infringement serves final infringement contentions or if the party opposing infringement believes in good faith that the claim construction ruling requires amendment. Id. Other than these two exceptions, the court found that a party may amend its invalidity contentions only upon a showing of “good cause.” Id. at 2-3. The court noted that good cause “may include newly discovered instrumentalities, newly discovered bases for claiming infringement, or newly discovered prior art references,” and that a party asserting such good cause must provide a statement attesting to the same. Id. at 3. The court then listed the four factors generally considered by courts when using their discretion to grant an untimely motion to amend under the “good cause” standard. Id. (citing Mobile Telecomms., Techs., LLC v. Blackberry Corp., 3:12-CV-1652-M, 2015 WL 12698061, at *1 (N.D. Tex. May 19, 2015) (Lynn, J.)).

The court then addressed Nabors request to amend. The court noted that Nabors appears to seek amendment based on either LPR 3-6(b) or LPR 3-7(b). Id. at 4. Turning first to LPR 3-6(b), the court found that amendment was strictly limited to within 50 days of a claim construction order. Id. Because that deadline had passed, the court found that amendment under LPR 3-6(b) was unavailable to Nabors. Id. Turning next to LPR 3-7(b), the court found that the circumstances did not meet the “good cause” standard. Specifically, the court noted the types of events that would justify amendment (i.e., “newly discovered instrumentalities, newly discovered bases for claiming infringement, or newly discovered prior art references”) were not present in the instant case. Id.

The court next turned to the four-factor test and found that three of the factors weighed against a finding of “good cause,” while one was neutral. Id. at 5. As to the first factor, diligence, the court found that Nabors provided no explanation as to why it waited for over three months after the court issued its claim construction ruling, nor was the court convinced that Nabors could not have included the allegations of indefiniteness in its preliminary infringement contentions. Id. As to the third and fourth factors, potential prejudice and availability of a continuance, the court found that, just because the term “optimized path” was found to be invalid, that did not mean the term “optimal path” was invalid. Id. at 6. Such a determination would require claim construction and would frustrate the purpose of the local rules. Accordingly, the court found that the third and fourth factors weighed against amendment. Id. The court also found that the “importance of the amendment” factor was neutral because if it were critical, Nabors would have included it earlier. Id. at 6-7.

Accordingly, the court denied Nabors’ request to amend its invalidity contentions. Id. at 7.