In a non-precedential opinion issued October 18, 2013, the Federal Circuit issued a decision that calls into question the overall utility of forum selection clauses in contractual relationships. In fact, Eli Lilly lost its bid to have its dispute with Genentech and City of Hope heard in the Northern District of California despite a forum selection clause in the governing contract that stated the parties would litigate any dispute in the Northern District of California. See In re Eli Lilly and Co.
Eli Lilly petitioned for a writ of mandamus directing the United States District Court for the Northern District of California to vacate its order transferring this case to the United States District Court for the Central District of California. In its order granting Genentech’s motion to transfer, the district court noted that the trial judge in the Central District of California had presided over four cases involving the same family of patents at issue. The district court further noted that another trial judge in the Northern District of California had recently transferred a case brought by one of Eli Lilly’s business partners that involves the same patent and product to the Central District of California, citing the expertise the trial judge had gained through these prior lawsuits.
Last week, the United States Court of Appeals for the Federal Circuit issued a decision in ncCUBE Corporation v. SeaChange International, dealing with the failure of the district court to find SeaChange in contempt for violating a permanent injunction.
ARRIS (formerly nCUBE) commenced the present litigation on January 8, 2001, alleging the infringement of certain claims of U.S. Patent No. 5,805,804 (“’804 patent”), which discloses and claims a media server capable of transmitting multimedia information over any network configuration in real time to a client that has requested the information. The patented technology allows a user to purchase videos that are then streamed to a device such as a television.
On May 28, 2002, the jury returned a verdict in ARRIS’s favor, finding that SeaChange willfully infringed the asserted claims in the ’804 patent. The Federal Circuit later affirmed the jury verdict and the district court’s subsequent decision to enhance the damages award. Subsequent to the Federal Circuit affirmance, the district court entered a permanent injunction enjoining SeaChange from “making, using, selling, or offering to sell… the SeaChange Interactive Television System… as well as any devices not more than colorably different therefrom that clearly infringe the Adjudicated Claims of the ’804 patent.”
The term “patent troll” conjures up all kinds of images and ideas, but what is a patent troll? The answer is that there is really no universally accepted definition of what a patent troll is. In the most common sense of the term, it is usually reserved for those who acquire patents from inventors or companies, perhaps through bankruptcy, auction or otherwise, and then turn around and sue giants of industry for patent infringement. In this situation, patent trolls are typically extremely well funded, they are not engaging in any commerce, so they do not fear a patent infringement counter-claim because they are not infringing, or doing, anything.
Over time, however, as the debate has matured and many with a patent reform agenda seek to weaken patent rights in hopes of solving their short-term litigation concerns, the term patent troll has morphed to mean any non-practicing entity. Such a definition of patent troll is overly broad, though, because it collects many entities that are simply not doing anything other than pursuing the American dream. These individuals and entities include universities, independent inventors, research & development companies, and federal laboratories. Indeed, such a list of innovators has typically been one that has been celebrated, not reviled.
But there are, of course, bad actors.
In The Charles Machine Works, Inc. v. Vermeer Manufacturing Co. (Fed. Cir., July 26, 2013), the patent in question was U.S. Patent 5,490,569 (the “’569 patent”), which generally relates to a two-pipe drill for boring underground holes in the horizontal direction. An inner pipe rotates the drill bit. An outer pipe, which includes a body and casing, is used for steering. The ’569 patent also discusses a structure called a “deflection shoe” as a steering mechanism. The deflection shoe is included on one side of the casing to create an asymmetry about the casing’s centerline axis. If the casing does not rotate, the deflection shoe causes the drill to deflect away from a straight path. When the casing rotates, however, the drill follows a straight horizontal path.
The Charles Machine Works (“CMW”) sued Vermeer for infringement of the ’569 patent. Asserted apparatus claims 1, 4–8, 10, 12, 18, 20–25, and 27 recite “a deflection shoe mounted on a first side of” either “the body” or “the casing.” Asserted method claims 30–31 recite “the casing having a deflection shoe thereon.”
CMW alleged infringement by two types of Vermeer drills: non-commercial prototypes and commercial products. Both types of drills include a structure called a bent sub, which CMW contends meets the “deflection shoe” and “mounted on” limitations. The prototypes include an additional structure called a wear pad. Vermeer moved for summary judgment of noninfringement, literal or under the doctrine of equivalents, of the asserted claims. The district court granted Vermeer’s motion as to all accused products. CMW appealed to the United States Court of Appeals for the Federal Circuit.
On appeal, CMW argued, among other things, that the court erred by granting summary judgment as to Vermeer’s accused prototypes. Furthermore, CMW argued that Vermeer’s motion for summary judgment covered only the accused commercial products. As a result, CMW asserted that it did not have notice that the district court was considering making a ruling relative to the prototypes, which CMW maintained are structurally different than the commercial products.
On July 18, 2013, Complete Genomics, Inc., which is a wholly-owned subsidiary of BGI-Shenzhen (“BGI”), announced that it entered into a settlement agreement with Illumina, Inc. under which Illumina will dismiss with prejudice both lawsuits it had brought against Complete: Illumina, Inc. and Solexa, Inc. v. Complete Genomics, Inc., Case No. 10-cv-05542 EDL (N.D. Cal.); and Illumina, Inc. and Illumina Cambridge Ltd. v. Complete Genomics, Inc., Case No. 12-cv-01465 BEN BGS (S.D. Cal). The agreement is reciprocal, so Complete will likewise dismiss with prejudice all counterclaims against Illumina.
No payment is being made by either party to the other, which is not particularly unusual. What makes this story interesting is that the parties also announced that no licenses are being granted by either party to the other. Typically, in patent litigation, you will see either a payment going in one direction or some kind of cross-license. Thus, it would seem that the parties simply decided that they would each be better off simply giving up on the case and moving in separate directions.
It is a bit unusual to see both parties walk away empty-handed, but with the cost of patent litigation and the reality that patent litigation stalls forward movement with respect to research and development, perhaps it is not shocking.