Northern District of Texas Selects New Magistrate Judge

On July 19, 2016, the Northern District of Texas announced that D. Gordon Bryant, Jr. has been selected as the Northern District’s newest magistrate judge (news release available here). Mr. Bryant has a B.B.A., with honors, from Baylor University and a J.D. from Baylor School of Law. Mr. Bryant’s legal career includes positions as an Assistant United States Attorney for the Northern District of Texas in Amarillo, as well as Senior Litigation Counsel within the U.S. Attorney’s Office. Mr. Bryant begins service on August 1, 2016, and will preside in the Lubbock Division of the Northern District.

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Supreme Court Upholds “Broadest Reasonable Construction” Standard in Inter Partes Reviews

On June 20, 2016, the Supreme Court issued its decision in Cuozzo Speed Technologies, LLC v. Lee (available here). The decision had two notable holdings. First, the Supreme Court held that the Patent Office could properly implement its regulation that, in an inter partes review, a patent claim shall be construed according to “its broadest reasonable construction.” In so holding, the Supreme Court rejected the argument that the Patent Office should, like courts, give claims their “ordinary meaning . . . as understood by a person of skill in the art.” This holding was principally based on Chevron deference.

Second, the Supreme Court held that Section 341(d) of the America Invents Act, which provides that “[t]he determination by the Director [of the Patent Office] whether to institute an inter partes review under this section shall be final and non-appealable” bars “mine-run claim[s]” involving the Patent Office’s decision to institute inter partes review, although it may not bar consideration of, for example, a constitutional question.

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Federal Defend Trade Secrets Act Now In Effect

Effective May 11, 2016, the United States enacted the Defend Trade Secrets Act, which provided, for the first time, a federal cause of action for trade secret misappropriation. Notable provisions of the Act include those:

  • Providing for a private civil cause of action, with a three-year statute of limitations, for the owner of a trade secret that is misappropriated, 18 U.S.C. § 1836(b)(1), (d).
  • Defining “trade secret” to mean “all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if—(A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information[.]” 18 U.S.C. § 1839(3).
  • Criminalizing theft of trade secrets and providing for up to 10 years’ imprisonment and a fine of the greater of $5,000,000 or 3 times the value of the stolen trade secret, 18 U.S.C. § 1832.
  • Providing for an interlocutory appeal from a decision or order of a district court authorizing or directing the disclosure of any trade secret in cases brought under the Act, 18 U.S.C. § 1835(a).
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Make Sure to Follow The Local Rules Or Risk Having Your Motion Denied

I recently came across an interesting Order from Senior Judge Sam Cummings in Medshare Technologies, Inc. v. Commonwealth Capital Corp. (available here). Defendants filed a Motion to Strike, for More Definite Statement, and Motion to Dismiss for Failure to State a Claim. Seven days later, the Court denied the motion because it lacked a certificate of conference and an appendix. This is a good example showing the importance of being familiar with the Court’s Local Rules.

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Supreme Court Unanimously Rejects Federal Circuit’s Enhanced Damages Standard For Patent Infringement

On June 13, 2016, the Supreme Court issued its unanimous opinion in Halo Electronics v. Pulse Electronics (available here). Halo rejected the Federal Circuit’s Seagate test for enhanced damages.

The Patent Act specifies that, in cases of infringement, “the court may increase the damages up to three times the amount found or assessed.” 35 U.S.C. § 284. The Federal Circuit had applied a multi-part test, founded upon In re Seagate Technology, LLC, 497 F. 3d 1360 (Fed. Cir. 2007) (en banc), to determine the circumstances when an award of enhanced damages was appropriate:

[Under the Federal Circuit’s test], a plaintiff seeking enhanced damages must show that the infringement of his patent was “willful.” The Federal Circuit announced a two-part test to establish such willfulness: First, “a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent,” without regard to “[t]he state of mind of the accused infringer.” This objectively defined risk is to be “determined by the record developed in the infringement proceedings.” “Objective recklessness will not be found” at this first step if the accused infringer, during the infringement proceedings, “raise[s] a ‘substantial question’ as to the validity or noninfringement of the patent.” That categorical bar applies even if the defendant was unaware of the arguable defense when he acted.

Second, after establishing objective recklessness, a patentee must show—again by clear and convincing evidence—that the risk of infringement “was either known or so obvious that it should have been known to the accused infringer.” Only when both steps have been satisfied can the district court proceed to consider whether to exercise its discretion to award enhanced damages.

Then, under Federal Circuit law, an award of enhanced damages would be subject to “trifurcated” appellate review:

The first step of Seagate—objective recklessness—is reviewed de novo; the second—subjective knowledge—for substantial evidence; and the ultimate decision—whether to award enhanced damages—for abuse of discretion.

Hardly anything about Seagate survived Halo. Halo found:

  • Enhanced damages “are not to be meted out in a typical infringement case, but are instead designed as a ‘punitive’ or ‘vindictive’ sanction for egregious infringement behavior” which has been described as “willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or—indeed—characteristic of a pirate.”
  • Enhanced damages are “generally reserved for egregious cases of culpable behavior.”
  • Seagate’s test “is unduly rigid, and it impermissibly encumbers the statutory grant of discretion to district courts.” “[I]t can have the effect of insulating some of the worst patent infringers from any liability for enhanced damages.”
  • Objective recklessness need not be found before district courts may award enhanced damages. “In the context of [] deliberate wrongdoing, [] it is not clear why an independent showing of objective recklessness—by clear and convincing evidence, no less—should be a prerequisite to enhanced damages.”
  • “The subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless.”
  • “[C]ulpability is generally measured against the knowledge of the actor at the time of the challenged conduct” not on the strength of the actor’s “attorney’s ingenuity.”
  • Enhanced damages need not follow a finding of egregious misconduct. “[C]ourts should continue to take into account the particular circumstances of each case in deciding whether to award damages, and in what amount.”
  • Enhanced damages “should generally be reserved for egregious cases typified by willful misconduct.”
  • “Bad-faith infringement” is an independent basis for enhancing patent damages, and a showing of objective recklessness is not required.
  • The enhanced damages determination is not governed by a clear and convincing standard of proof—a preponderance of the evidence standard applies.

Finally, Halo rejected the Federal Circuit’s “tripartite” framework for appellate review. Enhanced damages awards should be reviewed for abuse of discretion. Appellate review should be informed by “the considerations . . . identified” by the Supreme Court.

In light of its holdings, Halo is a very favorable decision for patent holders. For example, post-Seagate, many defendants had basically ignored patentees’ assertions of infringement, relying on the fact that, under Seagate, so long as the defendant came up with an “objectively reasonable” defense of either non-infringement or invalidity by the time of trial, enhanced damages could not be awarded. Halo, however, made it clear in no uncertain terms that engaging in this conduct will not preclude an award of enhanced damages. Other notable aspects of Halo are that the Federal Circuit will no longer review enhanced damages awards de novo, and a clear and convincing standard of proof no longer applies to the enhanced damages inquiry.

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New Local Rules To Become Effective September 1, 2016

On June 7, 2016, the Northern District of Texas entered Special Order No. 2-87 (available here), which amends Local Rule 5.4 and adopts Local Rule 7.5.

The amended Local Rule 5.4 provides that “[a] prisoner application, motion, or petition filed under 28 U.S.C. § 2241, § 2254, or § 2255 must be filed in accordance with the current miscellaneous order establishing procedures for such applications, motions, or petitions.”

The new Local Rule 7.5 provides for certain page limits in death penalty habeas cases.

These local rules become effective on September 1, 2016.

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Annual Judicial Appreciation Luncheon (June 23, 2016)

The Federal Bar Association and the Judicial Committee of the Dallas Bar are sponsoring the annual Judiciary Appreciation Luncheon. The Luncheon will be held on Thursday, June 23, 2016, at the Belo Mansion’s Pavilion from noon until 1:30 p.m. The Luncheon has been approved for 1 hour of CLE credit. Preregistration is required by June 16, 2016:

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New Northern District Magistrate Judge Selected

Hal Roberts Ray Jr. will succeed Magistrate Judge Roach as Wichita Falls’ Magistrate Judge. As reported by the Witchita Falls Times Record News:

Ray has law degrees from the University of Texas and the University of London. He clerked for U.S. District Judge Halbert Woodward and has worked for several law offices in Texas, including a stint with Sherrill & Pace in Wichita Falls from 1988 until 1990.

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Judge Lynn To Become New Chief Judge Of The Northern District of Texas

With Chief Judge Solis’ retirement, Judge Barbara M.G. Lynn will become the Northern District of Texas’ Chief Judge, effective May 1, 2016. Congratulations Chief Judge Lynn!

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New Federal Rules

On December 1, 2015, the Federal Rules of Civil Procedure were amended (the amendments are here and a redline showing the changes from the prior version of the Rules is here). Here’s a quick summary of what I believe to be the most important amendments:

Rule 1: Rule 1 has been amended to indicate that the parties, as well as courts, have an obligation to secure the just, speedy, and inexpensive determination of every action and proceeding.

Rule 4: Rule 4 has been amended to indicate that a defendant must generally be served with process within 90 days after the complaint is filed (shortened from 120 days).

Rule 16: The time for the Court to typically issue a scheduling order has been shortened from

the earlier of 120 days after any defendant has been served with the complaint or 90 days after any defendant has appeared

to

the earlier of 90 days after any defendant has been served with the complaint or 60 days after any defendant has appeared.

Further, the Rule has been amended to indicate that the scheduling order may provide for the preservation of electronically stored information and that, before moving for an order relating to discovery, the movant must request a conference with the Court.

Rule 26: In probably one of the most significant changes to the Rules, Rule 26 has been amended to provide that, unless otherwise limited by court order, discovery must be not only relevant to a party’s claim or defense, but also “proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.” The Court must limit discovery if it determines that the proposed discovery is outside the scope of the foregoing.

The Court now has explicit authority to allocate expenses regarding discovery when entering protective orders.

Additionally, the following sentence has been stricken from the rules: “For good cause, the court may order discovery of any matter relevant to the subject matter involved in the action.” The Advisory Committee Notes indicate that this provision “is rarely invoked” and that “[p]roportional discovery relevant to any party’s claim or defense suffices, given a proper understanding of what is relevant to a claim or defense.” The Notes also indicate that the three examples of discovery “relevant to the subject matter” of the case provided by the 2000 Notes—i.e., “other incidents of the same type, or involving the same product”; “information about organizational arrangements or filing systems”; and “information that could be used to impeach a likely witness”—are not foreclosed by the current amendment.

My prediction is that these changes to Rule 26 will increase discovery disputes (e.g., whether the discovery is “proportional to the needs of the case” as opposed to simply relevant), requiring more Court intervention. Perhaps this will not be the case, however, as courts were always free to consider the “proportionality” factor when ruling on a motion to compel or a motion for a protective order.

Rule 26 also now permits “early Rule 34” document requests, which are designed to assist the parties focus discussion during the Rule 26(f) conference. Specifically, “[m]ore than 21 days after the summons and complaint are served on a party, a request under Rule 34 may be delivered: (i) to that party by any other party, and (ii) by that party to any plaintiff or to any other party that has been served.” However, any such discovery request “is considered to have been served at the first Rule 26(f) conference.”

Rule 26’s contemplated discovery plan now requires the parties’ views and proposals on any issues about “preservation” of electronically stored information.

Rule 34: There are two major changes to Rule 34, dealing with document requests. First, the party responding to the document requests must complete its production of documents “no later than the time for inspection specified in the request or another reasonable time specified in the response.” Per the Advisory Committee Notes, when documents must be produced in stages, “the response should specify the beginning and end dates of the production.”

Second, an objection to a document request “must state whether any responsive materials are being withheld on the basis of that objection.” The Advisory Committee Notes indicate that a responding party may include an objection that contains “a statement that the responding party will limit [its] search to documents or electronically stored information created within a given period of time prior to the events in suit, or to specified sources.” If such an objection is made, “the statement of what has been withheld can properly identify as matters ‘withheld’ anything beyond the scope of the search specified in the objection.”

Rule 37: Rule 37 has been rewritten, and now addresses the preservation and loss of electronically stored information:

If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:

(1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or

(2) only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation may: (A) presume that the lost information was unfavorable to the party; (B) instruct the jury that it may or must presume the information was unfavorable to the party; or (C) dismiss the action or enter a default judgment.

Rule 84: Rule 84, previously stating that “[t]he forms in the Appendix suffice under these rules and illustrate the simplicity and brevity that these rules contemplate”, has been abrogated. There are no longer any forms.

Appendix of Forms: Abrogated.

The amendments govern all proceedings commenced on or after December 1, 2015, and all proceedings pending on that date “insofar as just and practicable.”

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