Chief Judge Lynn Refuses To Maintain Stay of Patent Case Pending Supreme Court’s Oil States Decision

On November 13, 2017, Chief Judge Lynn entered an Order (available here) in Leak Surveys v. Flir Systems. In 2013, Leak filed suit asserting infringement of one patent. Thereafter, the PTAB instituted an IPR as to the patent, and the Court stayed the litigation pending the results of the IPR. In 2015, the PTAB invalidated all of the asserted claims, and, in 2017, the Federal Circuit affirmed the PTAB’s decision. The Supreme Court refused to grant certiorari to review the Federal Circuit’s decision.

Despite presently having no claims to assert (since they had all been invalidated), Leak sought to continue the stay until after the Supreme Court issues its decision in Oil States (wherein the Supreme Court will determine whether IPRs are constitutional). According to Leak, a finding that IPRs are unconstitutional would “void all previous IPR decisions such that they would no longer have any preclusive effect.” Chief Judge Lynn refused to maintain the stay, and instead dismissed the case with prejudice:

Plaintiff overstates the potential effect of Oil States. Even if the Supreme Court holds that IPRs are unconstitutional, it may choose not to apply the new rule retroactively. [FN1: The Supreme Court considers three factors to determine whether a decision announcing a new rule should apply retroactively. See Chevron Oil Co. v. Huson, 404 U.S. 97 (1971). The factors are: (1) whether the holding in question “decid[ed] an issue of first impression whose resolution was not clearly foreshadowed” by earlier cases, (2) “whether retrospective operation will further or retard [the] operation” of the holding in question, and (3) whether retroactive application “could produce substantial inequitable results” in individual cases. Id. at 106-07.] Even if the Supreme Court applies the new rule retroactively, it would seemingly only apply to cases still pending on direct review of the PTAB decision. [FN2: In contrast to civil cases, criminal cases that are final on direct appeal may be subject to collateral review if the new rule is (1) substantive or (2) is a watershed rule that implicates the “fundamental fairness and accuracy of the criminal proceeding.” Whorton v. Bockting, 549 U.S. 406, 407 (2007) (quoting Saffle v. Parks, 494 U.S. 484, 495 (1990)).] See Harper v. Virginia Dep’t of Taxation, 509 U.S. 86, 86 (1993). Accordingly, the outcome of Oil States is unlikely to affect the PTAB’s judgment here, where Plaintiff has exhausted all appeals.

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2018 N.D. Tex. Bench Bar Conference To Take Place On January 12, 2018

The Dallas and Fort Worth Chapters of the Federal Bar Association will host the second annual Bench Bar Conference on Friday, January 12, 2018 (7.0 hours of MCLE credit, with 2.0 hours of ethics credit). Should be a great event. The attached flyer has more details.

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Federal Circuit’s In re Micron Decision—TC Heartland Constituted Change In Law, But District Courts Can Still Deny Untimely Motions To Dismiss For Improper Venue Under Inherent Authority

In the wake of the Supreme Court’s TC Heartland decision (which significantly limited the venues where a plaintiff can file patent-infringement lawsuits), many defendants raised venue challenges for the first time after answering the plaintiff’s complaint. And many courts held that defendants in presently pending cases had waived an improper venue challenge by failing to file a motion to dismiss due to improper venue prior to filing their answers. Those courts held that the venue challenge was “available” to the defendants at the time (despite being squarely foreclosed by then-existing Federal Circuit precedent) such that the failure to challenge venue prior to answering resulted in waiver of the venue challenge under Federal Rule of Civil Procedure 12(h)(1)(A). Rule 12(h)(1)(A) provides for waiver when a defendant omits an available venue defense from an initial motion to dismiss or fails to file the venue challenge prior to answering the complaint.

In In re Micron (available here), the Federal Circuit held that those courts had incorrectly found waiver based on Rule 12:

We conclude that TC Heartland changed the controlling law in the relevant sense: at the time of the initial motion to dismiss, before the Court decided TC Heartland, the venue defense now raised by Micron (and others) based on TC Heartland’s interpretation of the venue statute was not “available,” thus making the waiver rule of Rule 12(g)(2) and (h)(1)(A) inapplicable.

The Court found that the improper venue defense, prior to TC Heartland, was not available because “until the Supreme Court decided TC Heartland . . . it would have been improper, given controlling precedent, for the district court to dismiss or to transfer for lack of venue. . . . Where controlling law precluded the district court, at the time of the motion, from adopting a defense or objection and on that basis granting the motion, it is natural to say, in this context, that the defense or objection was not ‘available’ to the movant.”

But the Federal Circuit nevertheless went on to find that a district court still has authority to find that a patent-infringement defendant has waived its improper venue defense:

But that waiver rule, we also conclude, is not the only basis on which a district court might reject a venue defense for non-merits reasons, such as by determining that the defense was not timely presented. A less bright-line, more discretionary framework applies even when Rule 12(g)(2) and hence Rule 12(h)(1)(A) does not.

Because the district court improperly found waiver under Rule 12, the Federal Circuit reversed and remanding for the district court to consider anew the defendant’s venue challenge. In doing so, the Federal Circuit set forth several considerations for district courts under this “discretionary framework”:

  • “[N]othing in the Federal Rules of Civil Procedure would preclude a district court from applying other standards, such as those requiring timely and adequate preservation, to find a venue objection lost if, for example, it was not made until long after the statutory change took effect.”
  • “Congress has provided express statutory confirmation of judicial authority to consider the timeliness and adequacy of a venue objection: 28 U.S.C. § 1406(b) provides that ‘[n]othing in this chapter shall impair the jurisdiction of a district court of any matter involving a party who does not interpose timely and sufficient objection to the venue.’”
  • “Being a privilege, [venue] may be lost. It may be lost by failure to assert it seasonably, by formal submission in a cause, or by submission through conduct.”
  • “We have not provided a precedential answer to the question whether the timeliness determination may take account of factors other than the sheer time from when the defense becomes available to when it is asserted, including factors such as how near is the trial, which may implicate efficiency or other interests of the judicial system and of other participants in the case. But we have denied mandamus, finding no clear abuse of discretion, in several cases involving venue objections based on TC Heartland that were presented close to trial. We also note a scenario that presents at least an obvious starting point for a claim of forfeiture, whether based on timeliness or consent or distinct grounds: a defendant’s tactical wait-and-see bypassing of an opportunity to declare a desire for a different forum, where the course of proceedings might well have been altered by such a declaration.”

At bottom, In re Micron is of limited import, because it only applies to those cases pending at the time of the TC Heartland decision where defendants did not lodge venue challenges pre-TC Heartland but had venue challenges available to them post-TC Heartland because of TC Heartland’s change in the law. Of course, for those cases filed post-TC Heartland, defendants sued in improper venue now have the venue challenge made available to them by TC Heartland, so those defendants will waive their venue challenge by failing to challenge venue prior to answering.

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Thinking About Suing Your Opponent’s Lawyer In Texas? Think Again — Judge Godbey Tosses Case Against Proskauer Rose Due To Attorney Immunity Doctrine

On November 2, 2017, Judge Godbey entered an Order (available here) in Dorrell v. Proskauer Rose. In the case, plaintiffs were a group of investors who purchased fraudulent certificates of deposit issued by Stanford International Bank Limited (i.e., the Stanford of ponzi-scheme fame). Plaintiffs allege that Proskauer (a law firm), through one of its former partners, “conspired with Stanford to avoid regulation and detection, thereby extending the duration of Stanford’s scheme.” Proskauer moved to dismiss based on the attorney-immunity doctrine.

Judge Godbey agreed with Proskauer and dismissed the case. Judge Godbey summarized the attorney-immunity doctrine as follows:

It is well-settled in Texas that a third party may not generally hold an attorney liable for conduct undertaken in the representation of a client. This general rule is designed to encourage “loyal, faithful, and aggressive representation by attorneys employed as advocates,” which might be compromised if attorneys were subject to suit by third parties. An attorney is thus “given latitude to ‘pursue legal rights that he deems necessary and proper’ precisely to avoid the inevitable conflict that would arise if he were ‘forced constantly to balance his own potential exposure against his client’s best interest.’” The scope of the rule turns “on the type of conduct in which the attorney engages, rather than on whether the conduct was meritorious in the context of the underlying lawsuit.” Hence, if an attorney conclusively establishes that his conduct was within the scope of his legal representation of a client, attorney immunity applies.

However, attorneys “are not protected from liability to non-clients for their actions when they do not qualify as ‘the kind of conduct in which an attorney engages when discharging his duties to his client.’” For example, an attorney who participates in a fraudulent business scheme with a client or assaults opposing counsel during trial is unprotected by attorney immunity, as such acts are “entirely foreign to the duties of an attorney.”

(citations omitted).

Plaintiffs argued that the attorney-immunity doctrine did not apply to the facts of the case, due to three purported exceptions: (i) the “litigation context exception” (i.e., the attorney-immunity doctrine does not apply to conduct that occurs outside of formal litigation); (ii) the “crime exception” (i.e., that the attorney-immunity doctrine does immunize an attorney’s criminal conduct); and (iii) the “Texas Securities Act exception” (i.e., that immunity does not extend to claims brought under the Texas Securities Act). Ultimately, Judge Godbey ruled none these exceptions do not exist under Texas law.

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15 New Patent Cases

Over the last several weeks, there have been 15 new patent cases filed in the Northern District of Texas, including:

  • BookIt v. Bank of America (complaint available here);
  • Canon v. Avigilon (complaint available here);
  • Cellular Communications Equipment v. ZTE et al. (complaint available here);
  • Iron Oak Technologies v. Sharp (complaint available here);
  • Uniloc v. LG Electronics (6 cases) (complaints available here, here, here, here, here, here, and here);
  • MyMail v. Yahoo (complaint available here);
  • Display Technologies v. Yamaha (complaint available here);
  • Jenny Yoo Collection v. Watters Designs (complaint available here); and
  • Complex Memory v. ZTE (complaint available here).
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Magistrate Judge Reno

Congratulations to Lee Ann Reno for her selection as magistrate judge for the Northern District of Texas’ Amarillo division! Magistrate Judge Reno is replacing Magistrate Judge Averitte, who served for the last 30 years as the Amarillo division’s first and only full-time magistrate judge.

Judge Reno’s service began on October 1, 2017. According to a Northern District of Texas News Release (available here):

Lee Ann Reno is a native of West Texas who grew up in Panhandle, Texas. She attended Texas Tech University and in 1990 received her Bachelor of Science in Education, summa cum laude. In 1994, she received her Doctor of Jurisprudence, cum laude, from Texas Tech University School of Law, where she served as a research editor of the Law Review. Upon graduation from law school, Ms. Reno began private practice as an associate attorney at the Amarillo law firm of Sprouse, Mozola, Smith & Rowley, now known as Sprouse Shrader Smith. She has spent all 23 years of her law practice with the Sprouse firm. In January 2000, Ms. Reno became the second female partner in the firm, where her practice included cases in the areas of civil rights/governmental entity defense, personal injury defense, employment law, and commercial litigation.

In 2005, Ms. Reno’s peers elected her to serve as the President of the Texas Young Lawyers Association. Both before and since that time, Ms. Reno has served on numerous state and local bar committees, as well as civic organizations, including President of the Amarillo Area Bar Foundation, President of the Amarillo Area Women’s Bar Association, and President of the Amarillo Area Young Lawyers Association. She is a Sustaining Life Fellow of the Texas Bar Foundation. Ms. Reno was recently elected to be a member of the American Board of Trial Advocates. Ms. Reno has extensive trial and appellate experience, having tried well over 30 cases to verdict and handled numerous appeals in both state and federal courts. Ms. Reno is licensed in all state courts in Texas, and is admitted to practice in all four federal district courts in Texas, the United States Court of Appeals for the Fifth Circuit, and the United States Supreme Court.

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Chief Judge Lynn Denies Transfer Motion in Blackberry v. Avaya

On October 10, 2017, Chief Judge Lynn entered an Order (available here) in Blackberry v. Avaya. After concluding that Avaya fell short of meeting its burden to show that the proposed transferee venue was clearly more convenient than the Northern District of Texas, the Court denied the motion.

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Much Ado About Nothing: Tribal Sovereign Immunity In Inter Partes Reviews

I predict that tribal sovereign immunity will have little, if any, effect on inter partes reviews (IPRs). But if I’m wrong (and I’ve *occasionally* been wrong before), tribal sovereign immunity will lead to the death of IPRs, absent Congressional action. This is because, if my analysis is wrong, and absent abrogation of tribal sovereign immunity by Congress, anyone who can scrape together enough money to buy a Tribe’s sovereign immunity can put an end to an IPR.

Last month, Allergen announced that it would pay a Native American Tribe (Saint Regis Mohawk Tribe) $13.75 million for the Tribe to become the owner of a portfolio of Allergen’s patents—with the patents then being exclusively licensed back to Allergen. (The Tribe is also eligible to receive $15 million in additional annual royalties from Allergen.)

Why would Allergen pay the Tribe to take ownership of Allergen’s patents? So that the patents would hopefully be immune (based on the Tribe’s sovereign immunity) from inter partes review proceedings. Allergen had asserted the patents-at-issue in a lawsuit filed in the Eastern District of Texas against defendants Mylan, Teva, and Akorn in 2015. The defendants then placed the patents into an IPR before the PTAB.

After the announcement of the Allergen-Tribe deal, the Tribe immediately filed a motion to dismiss currently pending IPR proceedings based on Tribal sovereign immunity. (The motion to dismiss is available here). The Tribe argues in the motion that Congress has not unequivocally waived its sovereign immunity, and neither has the Tribe. Further, the Tribe asserts that the IPR cannot proceed without the Tribe (as it claims to be an indispensable party).

It appears as if three prior PTAB decisions involving state universities served as the impetus for the deal and the Tribe’s subsequent motion to dismiss:

  • Covidien LP v. University of Florida Research Foundation Inc., IPR2016-01274 (PTAB, Jan. 25, 2017) (available here): The PTAB determined that the University of Florida, as an arm of the State of Florida, was entitled to a sovereign-immunity defense to the institution of an IPR of the challenged patent. Accordingly, the petition was dismissed. (The University of Florida had filed an action against the petitioner in Florida state court alleging breach of a license contract between the parties. Petitioner then filed three petitions requesting IPRs of the relevant patent.)
  • Neochord, Inc. v. University of Maryland, IPR2016-00208 (PTAB, May 23, 2017) (available here): The PTAB granted the University of Maryland’s motion to dismiss and terminated the IPR. The University had exclusively licensed its patent to Harpoon Medical. Although the petitioner argued that the IPR could proceed solely against Harpoon Medical, the PTAB disagreed: “the University remains a necessary and indispensable party to this proceeding, and we cannot proceed without the University” because the “University has retained rights under the license agreement, and transferred less than ‘substantially all’ rights to Harpoon Medical.”
  • Reactive Surfaces Ltd. v. Toyota Motor Corp., IPR2016-01914 (PTAB, July 13, 2017) (available here): The PTAB found that, due to sovereign immunity, the Regents of the University of Minnesota could not be compelled to join the IPR against their will, but nevertheless held that the proceeding could continue in their absence against co-patent owner Toyota.

With respect to the Allergen-Tribe deal, I believe that what will eventually result in the rejection of the Tribe’s sovereign-immunity defense will be the fact that it must become a party to the district-court litigation proceedings (as it is now the owner of the patents) and will affirmatively assert patent infringement against the defendants in that litigation. Accordingly, I believe that the PTAB and (subsequently) the courts will find that, by becoming a party to federal district court litigation and accusing defendants of infringement, the Tribe has waived its sovereign immunity in the corresponding IPRs.

For example, in Covidien, the panel intimated that a state that owned a patent could waive its sovereign-immunity defense by bringing a “related federal district court patent infringement (or declaratory judgment of validity) case.” In Neochord, the panel stated that “mere participation in judicial proceedings does not create a waiver unless the State has taken affirmative steps to invoke federal jurisdiction, such as filing suit as a plaintiff or seeking removal of a proceeding to federal court.” In support, the panel cited Lapides v. Bd. of Regents of Univ. Sys. Of Ga., 535 U.S. 613 (2002) and Vas-Cath, Inc. v. Curators of University of Missouri, 473 F.3d 1367 (Fed. Cir. 2007). In Lapides, the Supreme Court held that a state waived sovereign immunity by removing a lawsuit from state court to federal court. In Vas-Cath, the Federal Circuit determined that the University of Missouri waived its Eleventh Amendment defense to an interference appeal to federal district court by affirmatively seeking the interference in the first instance.

All of this said, I’m guessing Allergen has some pretty smart attorneys on its payroll, and it wouldn’t shell out over $13 million to purchase sovereign immunity if it didn’t think the Tribe’s sovereign-immunity defense had a very good chance of succeeding. But the deal strikes me as too cute by half—and these types of “schemes” rarely hold up in court. My prediction is that they certainly won’t hold up before the PTAB, where salaries of ALJs are on the line if purchasing tribal sovereign immunity can end an IPR.

If I’m wrong on waiver, I believe Congress will step in with a waiver-of-sovereign-immunity-fix. Or perhaps the Supreme Court, in Oil States, will strike down IPRs altogether. We shall see.

Of note, Judge Bryson of the Federal Circuit, sitting by designation in the Eastern District of Texas, has suggested that private parties cannot purchase tribal sovereign immunity. In Judge Bryson’s opinion concerning the Tribe’s intervention in Allergen’s district-court case (available here), he noted that he had previously directed the parties in the district-court litigation to “file briefs addressing the question whether the Tribe should be added as a co-plaintiff [with Allergen] or whether the assignment transaction should be disregarded as a sham.” In connection with the Court directing Allergen to disclose what consideration it received in exchange for the purported assignment of the patents-in-suit to the Tribe, Allergen “stat[ed] that the consideration for the assignment of the patents to the Tribe was the Tribe’s promise not to waive its sovereign immunity with respect to any IPR or other administrative action in the PTO related to the patents.” Judge Bryson wrote:

[I]t is clear that Allergan’s motivation for the assignment was to attempt to avoid the IPR proceedings that are currently pending in the PTO by invoking the Tribe’s sovereign immunity as a bar to those proceedings. The Court has serious concerns about the legitimacy of the tactic that Allergan and the Tribe have employed. The essence of the matter is this: Allergan purports to have sold the patents to the Tribe, but in reality it has paid the Tribe to allow Allergan to purchase—or perhaps more precisely, to rent—the Tribe’s sovereign immunity in order to defeat the pending IPR proceedings in the PTO. This is not a situation in which the patentee was entitled to sovereign immunity in the first instance. Rather, Allergan, which does not enjoy sovereign immunity, has invoked the benefits of the patent system and has obtained valuable patent protection for its product, Restasis.

But when faced with the possibility that the PTO would determine that those patents should not have been issued, Allergan has sought to prevent the PTO from reconsidering its original issuance decision. What Allergan seeks is the right to continue to enjoy the considerable benefits of the U.S. patent system without accepting the limits that Congress has placed on those benefits through the administrative mechanism for canceling invalid patents.

If that ploy succeeds, any patentee facing IPR proceedings would presumably be able to defeat those proceedings by employing the same artifice. In short, Allergan’s tactic, if successful, could spell the end of the PTO’s IPR program, which was a central component of the America Invents Act of 2011. In its brief, Allergan is conspicuously silent about the broader consequences of the course it has chosen, but it does not suggest that there is anything unusual about its situation that would make Allergan’s tactic “a restricted railroad ticket, good for this day and train only.” Smith v. Allwright, 321 U.S. 649, 669 (1944) (Roberts, J., dissenting).

Although sovereign immunity has been tempered over the years by statute and court decisions, it survives because there are sound reasons that sovereigns should be protected from at least some kinds of lawsuits. But sovereign immunity should not be treated as a monetizable commodity that can be purchased by private entities as part of a scheme to evade their legal responsibilities. It is not an inexhaustible asset that can be sold to any party that might find it convenient to purchase immunity from suit. Because that is in essence is what the agreement between Allergan and the Tribe does, the Court has serious reservations about whether the contract between Allergan and the Tribe should be recognized as valid, rather than being held void as being contrary to public policy. See generally Restatement of the Law (Second) Contracts §§ 178-179, 186.

Judge Bryson compared the Allergan-Tribe deal to sham transactions found in certain tax situations:

The defendants point out that the assignment-and-licensing transaction in this case is similar in some respects to other transactions that have been held ineffective, such as abusive tax shelter transactions, in which courts have looked behind the face of the transactions to determine whether the transactions have economic substance or are simply a method of gaming the tax system to generate benefits that were not intended to be available. See, e.g., Salem Fin., Inc. v. United States, 786 F.3d 932 (Fed. Cir. 2015); Coltec Indus., Inc. v. United States, 454 F.3d 1340 (Fed. Cir. 2006).

Allergan argues that the transactions are legitimate because the Tribe has offered consideration in the form of its agreement not to waive its sovereign immunity before the PTO and in exchange has received much-needed revenue from Allergan. But such circumstances are frequently encountered in sham transactions, such as abusive tax shelters. The straw parties who perform the service of making the transaction appear to have economic substance, when it actually does not, are providing a service, for which they are ordinarily well compensated. Nonetheless, the transaction is disregarded if it is contrary to the policies underlying the relevant laws.

And Judge Bryson found that this was not the first time a tribe had essentially tried to sell its sovereign immunity:

Another roughly analogous example cited by the defendants is People ex rel. Owen v. Miami Nation Enterprises, 386 P.3d 357 (Cal. 2016). In that case, two tribal entities ran payday loan businesses. When the lending entities were sued by the State for improper lending practices, the entities asserted sovereign immunity. The California Supreme Court determined that, despite the formal agreements between the lending entities and the tribes, the tribes had no operational control over the businesses and received only a small percentage of the profits of the businesses. After examining all of the circumstances, the court concluded that the arrangement between the lenders and the Tribes was such that the businesses were not entitled to assert the tribes’ sovereign immunity.

According to Judge Bryson,

The concern of the courts in both of those examples is the same: whether the party invoking a particular legal protection has engaged in a bona fide transaction of the sort for which that legal protection was intended. In both the abusive tax shelter cases and the Owen case, the answer was no. In this case, as indicated, the Court has serious doubts that the transaction in which Allergan has sought to obtain immunity from inter partes review by the PTO in exchange for payments to the Tribe is the kind of transaction to which the Tribe’s sovereign immunity was meant to extend.

In the end, Judge Bryson added the Tribe as a co-plaintiff, “while leaving the question of the validity of the assignment to be decided in the IPR proceedings, where it is directly presented” to ensure that “any judgment in this case will not be subject to challenge based on the omission of a necessary party[.]” (Judge Bryson had invalidated the patents that were subject to the Allergen-Tribe deal.) “Importantly, the Court’s decision to permit joinder of the Tribe does not constitute a ruling on the validity of the assignment of the Restasis patents or the Tribe’s status as a ‘patentee’ for purposes of the Patent Act, 35 U.S.C. § 281. Instead, it is merely a discretionary determination by the trial court that the transferee’s presence would facilitate the conduct of the litigation.”

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Magistrate Judge Stickney Grants Motion For Costs, Finds $350/Hour Attorney-Fee Rate Reasonable

On September 11, 2017, Magistrate Judge Stickney entered an Order (available here) in The Sugar Art v. Confectionary Arts International. In the case, the plaintiff previously brought suit against the defendant in the Western District of Texas, and, in response to the defendant’s motion to dismiss, filed a notice of voluntary dismissal. On the same day that the plaintiff filed a notice of voluntary dismissal, the plaintiff filed an identical complaint in the Northern District of Texas. The defendant again filed a motion to dismiss (or, in the alternative, transfer to Connecticut). Defendant also file a motion for costs, requesting that the plaintiff pay for costs incurred in defending the Western District of Texas suit. Defendant’s fees and expenses from that suit totaled $8,142.37.

Under Rule 41(d),

[if] a plaintiff who previously dismissed an action in any court files an action based on or including the same claim against the same defendant, the court (1) may order the plaintiff to pay all or part of the costs of that previous action; and (2) may stay the proceeding until the plaintiff has complied.

Judge Stickney found that:

The award of costs under Rule 41(d) is at the Court’s discretion. Although a showing of bad faith is not required for the Court to impose costs, a showing of good faith may be a factor in the Court’s decision not to impose costs. Rule 41(d) serves as a deterrent to forum shopping and does not distinguish between voluntary and involuntary dismissals. Thus, this Court retains the authority to award attorneys’ fees as a condition to bringing the new action.

Plaintiff emphasizes that because it filed the Western District Suit based on a good faith belief that Defendant sold its products to distributors in the Western District, the Court should deny Defendant’s Motion for Costs. Plaintiff further contends that it dismissed the Western District Suit in order to ensure proper service. However, when refiling the case in the Northern District, Plaintiff committed the same defect of service as it did in the Western District Suit. Plaintiff does not dispute that the claims brought in the Northern District are the same as those in the Western District Suit. Therefore, the Court may award attorney’s fees incurred by Defendant in the Western District Suit if it deems such award appropriate.

Upon consideration of the parties’ briefs, the evidence produced at the hearing, and the applicable law, the Court finds that Plaintiff’s actions were not taken in bad faith, however, attorney’s fees are still appropriate given the circumstances. Defendant’s attorney asserts that he worked 22.75 hours on the Western District Suit at the rate of $350 an hour. The Court finds this rate is reasonable under the circumstances. Defendants also incurred $179.87 in expenses. Plaintiff did not contest the rate or amount of hours. Therefore, the Court awards Defendants $7,962.50 in attorney’s fees and $179.87 in costs relating to the Western District Suit.

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Judge Kinkeade Refuses To Disqualify Sterne Kessler from Representing Global Tel*Link

On September 18, 2017, Judge Kinkeade entered an Order (available here) in Securus v. Global Tel*Link. Securus had moved to disqualify Sterne Kessler from representing Global Tel. Before January 2017, Global Tel was represented by Kellogg Huber. Two Kellogg attorneys of record then left Kellogg and joined Sterne Kessler. Sterne Kessler and Kellogg presently represent Global Tel.

Securus moved to disqualify Sterne Kessler because it has some attorneys representing Global Tel against Securus in the instant litigation and other attorneys representing Global Tel in prosecuting Global Tel’s patents before the U.S. Patent & Trademark Office. Securus was concerned that GTL’s litigation counsel in this case has access to Securus’ confidential information, and that this confidential information might be transferred from such litigation attorneys to those working on USPTO proceedings and used to Securus’ detriment—e.g., used to draft claims on Securus’ products.

Global Tel, in response, asserted that Sterne Kessler need not be disqualified because neither Sterne Kessler nor the two Kellogg attorneys who left Kellogg to join Sterne Kessler had ever represented Securus, so none of them has any obligation under the ethical rules related to confidential information of a former client (since Securus was never a client in the first place). Global Tel further asserted that the case’s protective order and an ethical wall will be sufficient to prevent unauthorized access and use of Securus’ confidential information.

Judge Kinkeade found:

The Court agrees with GTL’s argument that [the two attorneys] do not technically have any duty to Securus as they would to a former client because they have never represented Securus. But the Court also recognizes the validity of Securus’ concerns regarding the safe-keeping and proper use of Securus’ confidential information obtained by GTL’s litigation counsel. [The two attorneys] have access to Securus’ confidential information through discovery in this matter; information GTL’s attorneys working on its patents and USPTO proceedings would not have. Certainly, the improper use of this information could harm Securus; however, access to an opposing party’s confidential information through litigation discovery is not an unusual situation, especially in patent litigation.

Protections for access and distribution of a party’s confidential information are controlled through the use of protective orders. . . . Th[e] [case’s] Agreed Protective Order places safeguarding restrictions on the dissemination and use of Securus’ confidential information disclosed in this litigation, including: (1) restrictions on who can access the information; (2) restriction requiring that the confidential material be used only in this litigation and in the other cases between these parties that are pending in this district; (3) restriction specifically preventing use of the information in any patent prosecution, reexamination, reissue, or review proceeding concerning any application or issue patent; (4) a patent prosecution bar preventing attorneys who have accessed confidential information from participating in GTL patent prosecution; and (5) a bar preventing attorneys who have accessed confidential information from participating in other patent review proceedings in which GTL would be able to amend claim language.

In addition to the protection already in place through the Agreed Protective Order, Sterne acknowledges that it has a duty to maintain the confidentiality of Securus’ information. Sterne also acknowledges a concern may be raised about its ability to comply with its duty because Sterne has some lawyers working on this GTL litigation and other Sterne lawyers working on other GTL matters. Sterne has already established an ethical wall to separate its litigation section from its prosecution and USPTO sections. The Court agrees with Sterne and GTL that this is a prudent practice that Sterne shall continue to use to protect Securus’ confidential information. The need to create and maintain this wall, however, does not come from an ethical rule that would disqualify Sterne. Sterne’s duty to do this comes from the Miscellaneous Order and Agreed Protective Order issued by this Court.

Accordingly, the Court denied the disqualification request but ordered Sterne Kessler to maintain its ethical wall to prevent unauthorized access to and use of Securus’ confidential information.

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