Magistrate Judge Toliver Sanctions Defendant $7,500 And Precludes Testimony For Failure To Appear For Deposition

On August 8, 2017, Magistrate Judge Toliver issued an Order (available here) in National Urban League v. Urban League of Greater Dallas & North Central Texas. The Order is worth a read as a reminder of some of the bad things that can happen if a party fails to attend its noticed deposition.

In the case, in December 2016, plaintiff noticed the Chairman of defendant’s Board of Directors for a deposition to take place on January 26, 2017, and a Rule 30(b)(6) deposition of defendant to take place on January 27. On January 23, defense counsel asked whether the Chairman’s deposition could be moved to January 27 or later so that the deponent could attend a funeral scheduled for January 25 in Atlanta. After plaintiff declined (but offered to push back the start time of the deposition to accommodate travel back to Dallas from the funeral—an offer defendant refused), defendant moved on January 25 (after defense counsel arrived in Dallas from New York) for a protective order as to the Chairman’s deposition and to quash the Rule 30(b)(6) deposition.

On January 26 (i.e., the next day), Judge Boyle summarily denied the motion, ordered the depositions to proceed as scheduled, and warned defendants that failure to appear would result in sanctions including contempt of court. Neither the Chairman nor a corporate designee appeared for deposition. Instead, on January 27, defendant sought reconsideration of Judge Boyle’s order, which Judge Boyle denied. Plaintiff was thus forced to file its motion for summary judgment without the benefit of the Chairman’s and the defendant’s testimony.

Plaintiff then filed a motion for sanctions, which Judge Toliver granted. Judge Toliver found defendant’s actions willful, and that they did not stem from an inability to comply with the notices and the Court’s explicit order that the deponents appear as directed. Judge Toliver ordered as follows:

  • Defendant was precluded from offering the testimony of the Chairman in any form and on any subject.
  • Defendant was precluded from offering testimony in any form of any witness on the topics listed in plaintiff’s Rule 30(b)(6) deposition notice.
  • Defendant was ordered to pay plaintiff $7,500.50, consisting of attorney’s fees and costs incurred in connection with preparing for the depositions, waiting for the witnesses to arrive, hiring a court reporter, and airfare/hotel expenses.
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Supreme Court Allows Trademark Registration Of “Derogatory” Terms

On June 19, 2017, the Supreme Court issued its decision in Matal v. Tam (available here). In Tam, a band applied for a federal trademark registration of the band’s name, “The Slants.”

“Slants” is a derogatory term for persons of Asian descent, and members of the band are Asian-Americans. But the band members believe that by taking that slur as the name of their group, they will help to “reclaim” the term and drain its denigrating force.

The Patent and Trademark Office denied the application due to federal law’s prohibition of the registration of trademarks that may “disparage . . . or bring . . . into contemp[t] or disrepute” any “persons, living or dead.” 15 U.S.C. § 1052(a).

The Supreme Court held that the First Amendment barred enforcement of § 1052(a), because “speech may not be banned on the ground that it expresses ideas that offend.” The Court rejected the argument that registered trademarks are government speech (and, accordingly, could be regulated for content).

The decision not only cleared the way for the band’s trademark registration but, of perhaps greater interest (at least to football fans), will also allow the Washington Redskins to have their trademark.

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Supreme Court’s Biosimilar Decision in Sandoz v. Amgen

On June 12, 2017, the Supreme Court issued its decision in Sandoz v. Amgen (available here). The Court interpreted 42 U. S. C. § 262(l), enacted as part of the Biologics Price Competition Act of 2009 (BPCIA). The BPCIA governs biosimilars—biologic products that are highly similar to other biologic products already approved by the Food and Drug Administration (FDA). The Court summarized the relevant governing procedure as follows:

Under §262(l), an applicant that seeks FDA approval of a biosimilar must provide its application materials and manufacturing information to the manufacturer of the corresponding biologic within 20 days of the date the FDA notifies the applicant that it has accepted the application for review. The applicant then must give notice to the manufacturer at least 180 days before marketing the biosimilar commercially.

The Supreme Court resolved two questions. First, the Court found that an injunction is not available under federal law to enforce the requirement that an applicant provide its application and manufacturing information to the manufacturer of the biologic, but remanded for consideration of whether an injunction is available under state law.

Second, the Court found that the applicant may provide notice to the manufacturer before obtaining a license from the FDA for its biosimilar. In other words, the applicant need not only provide notice after obtaining the license.

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Will Martin Shkreli’s Letter “Hoping to See Four Children Homeless” Send Him to Prison?

Long ago, someone told me to assume everything you write will end up on the front page of the New York Times, and someone else (likely my mother) told me, “if you don’t have anything nice to say, don’t say anything at all.” These lessons were on my mind when reading an article about Martin Shkreli (of let-me-acquire-a-life-saving-drug-currently-selling-for-$13-per-pill-and-jack-up-the-price-of-it-to-$750-per-pill fame) on Tuesday’s front page of the New York Times. The article begins:

Tim Pierotti, who once ran a consumer hedge fund for Martin Shkreli, said he had already lost faith in his boss by the end of 2012.

Then a letter from Mr. Shkreli came to his home, addressed to his wife.

“Your husband has stolen $1.6 million from me,” it read.

“Your pathetic excuse of a husband,” the letter added, “needs to get a real job that does not depend on fraud to succeed.”

“I hope to see you and your four children homeless,” the letter said. “I will do whatever I can to assure this. Your husband’s arrogance is infuriating, and making an enemy out of me is a mistake.”

The letter was entered into evidence Tuesday as Mr. Pierotti testified in Mr. Shkreli’s trial in Federal District Court in Brooklyn.

The trial referred to in the article is the currently pending trial where Shkreli stands accused of committing securities fraud. After nearly fifteen years of practicing law, I don’t know much about securities, and I have no idea whether Shkreli is guilty of fraud.

But here’s what I do know: In many cases, jurors don’t have the slightest understanding of the relevant factual issues – these cases may include complicated patent-infringement lawsuits, antitrust lawsuits, and, yes, securities-fraud lawsuits. But they do understand very well whether they like a party (or a witness) and it’s my belief that jurors often decide which party they like first and then look for any way to find in that party’s favor (or against the party they like the least). Given this, likeability is of primary importance in any jury trial (judges, of course, are human beings too, so being likeable in front of a judge is also a good thing).

Which takes me back to the Shkreli letter. In general, people like wives—and they really like children. Why send a letter saying you hope to see a wife and her four children homeless? Sending the letter likely made Shkreli feel good. But is that temporary feeling worth spending years of your life in prison (or, in a civil lawsuit, worth millions of dollars in damages)? Not in my book. So even if Pierotti “stole $1.6 million from” Shrkeli, the letter shouldn’t have been sent, as it violates the two principles discussed above—(i) assume everything you write will end up on the front page of the New York Times (and, in this case, to boot, admitted into evidence in your criminal trial), and (ii) if you don’t have anything nice to say, say nothing at all.

Assume Shkreli was right that Pierotti had, in fact, stolen $1.6 million from Shkreli, what should Shkreli have done? Here are two better things I can think of: (i) file a civil lawsuit against him, and (ii) report him to state or federal law enforcement. What do you think would make Pierotti feel worse – receiving a silly letter telling him that you hoped his wife and children become homeless and that “making an enemy out of me is a mistake” or knowing that he was a defendant in a civil lawsuit and that state and federal officials were investigating him? (Based on the full Shkreli letter, it seems as if Shkreli did file a lawsuit and report Pierotti to the authorities—so Shkreli should’ve left well enough alone.)

In the practice of law, as in life, it’s often tempting to send puerile correspondence—especially e-mail—when someone upsets you. Trying to make someone else feel bad may make you feel good for a couple of minutes. But, if you do, inevitably it’s you that will end up looking like the bad guy. And your reputation—whether in court before a judge, in the practice of law amongst fellow members of the bar, your industry, or life in general—is important and priceless. So the next time you think about sending that over-the-top e-mail or letter, stop and let things cool down. Then draft a response that you’d be happy to see on the front page of the New York Times. And, as a general rule, if you don’t have anything nice to say, don’t say anything at all.

If you ignores these principles, your correspondence could very well come back to haunt you. We’ll see whether it does in Shkreli’s case.

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Don’t Know Who To Sue? Magistrate Judge Toliver Lays Out The Procedure For Obtaining Discovery To Find Out

On July 12, 2017, Magistrate Judge Toliver issued an Order in Mary Kay v. Ayon (available here) detailing how to obtain discovery to determine a defendant’s identity. In the case, Mary Kay (the plaintiff) filed a motion for leave to conduct discovery prior to the Rule 26(f) conference. Mary Kay accused certain unnamed “Doe” defendants of “illegally selling products bearing the Mary Key registered trademarks through three Internet storefronts on (Amazon), each of which ships the infringing products from Rowlett, Texas.” Mary Kay asserted that two third parties—Amazon and Mail Plus—would likely have information regarding the “Doe” defendants’ identities. Mary Kay accordingly sought leave to serve subpoenas on Amazon and Mail Plus to determine defendants’ true identities.

Judge Toliver noted that, in general, a party may not seek discovery prior to the Rule 26(f) conference, unless “good cause” exists for such discovery. “Good cause” may exist where the plaintiff, absent early discovery, cannot identify and serve a defendant.

In such an instance, the court considers whether the moving party: (1) identifies the missing party “with sufficient specificity such that the Court can determine that defendant is a real person or entity who could be sued in federal court”; (2) identifies all previous efforts to locate the unknown defendant; and (3) establishes that its suit could withstand a motion to dismiss. In other instances, courts have considered (1) whether the plaintiff makes a prima facie showing of harm; (2) the specificity of the discovery request; (3) the absence of alternative means to obtain the subpoenaed information; (4) the necessity of the subpoenaed information to advance the claim; and (5) the user’s expectation of privacy.

Judge Toliver determined that Mary Kay had shown good cause for early discovery. Mary Kay identified the Doe defendants with as much clarity as possible, detailed its effort to locate and identify the Doe defendants, and established that its suit could withstand a motion to dismiss. Lastly, Amazon and Mail Plus appeared to be the only entities from which Mary Kay could obtain information regarding the identities of the Doe defendants. As such, Judge Toliver allowed Mary Kay to serve subpoenas on Amazon and Mail Plus for documents and other information to enable Mary Kay to determine the names, addresses, and contact information of the relevant individuals.

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Stuck in Dodge? Can You Challenge Venue In Patent Cases Under TC Heartland If You Previously Failed to Contest Venue?

As I previously noted, the Supreme Court’s recent TC Heartland decision dramatically curtailed where patent holders can sue defendants for infringement. Prior to TC Heartland, under the Federal Circuit’s decisions (dating back to 1990 in VE Holding), patent owners could essentially sue defendants in every venue in which defendants sold the accused products. TC Heartland upended decades of Federal Circuit jurisprudence, and found that US based patent-infringement defendants could only be sued (i) in their state of incorporation, or (ii) where they have committed acts of infringement and have a regular and established place of business.

A recent article by Thompson & Knight attorneys Justin Cohen and Natalie Cooley, Was TC Heartland An ‘Intervening Change In Law’ (available for download here), raises the question of what happens to the hundreds or thousands of pending lawsuits that were filed pre-TC Heartland in venues that would, post-TC Heartland, be improper. Can defendants now raise improper venue as a defense if they failed to raise it pre-TC Heartland? Or are they stuck in the current venue?

Perhaps not surprisingly, as in much of law, the courts are divided. Some have found that the defendant has not waived its improper-venue defense, while others find that improper venue is a defense that was waived by the failure of the defendant to assert it.

Take Chief Judge Lynn’s recent decision (available here) in iLife Technologies v. Nintendo. ILife filed suit against Nintendo in late 2013. Nintendo answered in early 2014 and admitted that venue was proper in the Northern District of Texas. Nintendo sought discretionary transfer under Section 1404, which the Court denied.

On May 22, 2017, the Supreme Court decided TC Heartland. Nintendo then moved to dismiss the case contending that, in light of TC Heartland, venue was improper in the Northern District of Texas. Jury selection was set for August 2017.

Chief Judge Lynn noted that, in 1957, the Supreme Court (in Fourco) interpreted § 1400 (the patent venue statute) to take precedence over § 1391 (the general venue statute), and that, under § 1400, a corporation only resided in its state of incorporation. The Supreme Court stated in Fourco, “We hold that 28 U.S.C. § 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. § 1391(c).”

In 1988, Congress amended § 1391(c) to read, “For purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced.” In 1990, the Federal Circuit (in VE Holding) found that the 1988 amendment “redefined” the meaning of the term “resides” in § 1400(b) and, accordingly, Fourco was no longer controlling on the meaning of “resides.” Accordingly, since 1990, the test for venue was “whether the defendant was subject to personal jurisdiction in the district of suit at the time the action was commenced.” (The Federal Circuit reaffirmed the validity of VE Holding in 2016). In practice, this meant that a patent-infringement defendant, for nearly the last thirty years, could be sued anywhere it sold the accused products.

The Supreme Court, in TC Heartland, reversed the Federal Circuit’s nearly three decades’ worth of jurisprudence, finding that Congress did not intend to alter the meaning of § 1400 when it amended § 1391. As such, post-TC Heartland, venue in patent cases is only proper where (i) the defendant corporation is incorporated, or (ii) the defendant has committed acts of infringement and has a regular and established place of business.

In ILife, Nintendo did not operate an office in Texas or employ anyone in Texas, so it moved to dismiss the case for improper venue under TC Heartland. ILife, on the other hand, argued that Nintendo waived its venue defense because it had not previously filed a Rule 12 motion and admitted venue was proper in its answer. Nintendo responded by arguing that, prior to TC Heartland, the defense of improper venue was not available due to the Federal Circuit’s VE Holding decision. Nintendo cited cases recognizing that a change in controlling law—or an “intervening change in law”—allows parties to assert previously unraised grounds.

Chief Judge Lynn rejected Nintendo’s argument, finding that TC Heartland did not qualify as an intervening change in law. According to Chief Judge Lynn, only the Supreme Court may overrule one of its precedents and, until that occurred, Fourco was the law (notwithstanding the Federal Circuit’s VE Holding decision). “The intervening twenty-seven years may have created reliance on VE Holding by litigants, including Nintendo, but that does not change the harsh reality that a party could have ultimately succeeded in convincing the Supreme Court to reaffirm Fourco, just as the petitioner in TC Heartland did.” (citations and quotations omitted). Because TC Heartland did not constitute an intervening change in law, Nintendo could not now assert its improper-venue defense.

As Thompson & Knight attorneys Cohen and Cooley note in their article, Chief Judge Lynn’s waiver finding in ILife appears to fall within the majority view of district courts considering the issue (and, arguably, the Federal Circuit, which recently rejected a mandamus petition seeking to allow an improper-venue defense post-TC Heartland), although at least one court (in the Western District of Washington) found that defendants did not waive the defense of improper venue by omitting it from their initial pleading and motions because they “could not reasonably have anticipated this sea change” in the law. According to Cohen and Cooley, “Arguably, [] defendants should be able to revive their venue challenges (or make them in the first instance), under the rationale that TC Heartland constituted an intervening change in law.” The authors note that, if litigants have waived their venue defense by not raising the defense in light of controlling adverse circuit precedent, “litigants will be required to file motions challenging controlling proposition[s] of [relevant] Circuit law to avoid risking waiver in the event of a later reversal by a higher court.” (quotations omitted). “This requirement will place lawyers in the precarious position of risking Rule 11 violations or waiving litigants’ rights in the event of unprophesied changes to controlling law.”

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New N.D. Tex. Patent Cases

Here are three more post-TC Heartland N.D. Tex. patent cases:

  1. Axcess International v. Transcore (complaint available here);
  2. D’Alise v. Straumann (complaint available here) (note: my firm is Dallas counsel for the plaintiff); and
  3. Galderma v. Perrigo (complaint available here).
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Judge Kinkeade Article From Carrollton Leader

The Carrollton Leader has written a great article about Judge Kinkeade. The article discuses Judge Kinkeade growing up the son of a Baptist preacher, becoming an attorney by age 22 (after considering becoming an actor), representing the Dallas Cowboys and the “Rat Pack,” his over three decades’ worth of experience serving as a judge, presiding over a recent case involving Facebook (where Mark Zuckerberg testified in court for the first time), and the Kinkeade Campus of Canine Companions for Independence in Irving.

The article is well worth a read, and highlights a number of reasons why the N.D. Tex. is lucky to have Judge Kinkeade as a judge.

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Chief Judge Lynn Transfers Patent Case To Michigan

On May 21, 2017, Chief Judge Lynn entered an Order (available here) in Camatic v. Irwin transferring the case from Dallas to Michigan. In Camatic, two Camatic entities accuse Irwin of infringing one of Camatic’s patents (note: my firm represents Irwin). One Camatic plaintiff is an Australian company with its principal place of business in Australia. The second Camatic plaintiff is a Georgia corporation with its principal place of business in Farmer’s Branch (within the Northern District of Texas).

Irwin, a Michigan company headquartered in Grand Rapids, Michigan, sought transfer to the Western District of Michigan. Chief Judge Lynn ultimately found that Irwin demonstrated that the sources of proof, compulsory process, cost of attendance, and local interest factors weighed in favor of transfer, and no transfer factor weighed against transfer. Accordingly, the Court transferred the case to Michigan.

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New Patent Cases

The following are the new patent-infringement lawsuits filed over the last couple of weeks in the Northern District of Texas:

  • BMC Software v. Cherwell Software (Complaint available here)
  • Honeywell International v. MEK Chemical Corp. (asserting infringement of U.S. Patent No. 6,514,928) (Complaint available here)
  • Honeywell International v. MEK Chemical Corp. (asserting infringement of U.S. Patent No. 5,902,912) (Complaint available here)
  • Seven Networks v. ZTE (Complaint available here)
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