VLSI Technology LLC v. Intel Corporation CAFC
- Filed: 04/11/2019
- Case Updated Daily
- Latest Docket Entry: 05/07/2021
April 23, 2021
The second West Texas trial between VLSI Technology LLC and Intel has ended in a verdict of noninfringement for the chipmaker, capping off a closely watched proceeding before District Judge Alan D. Albright in which the plaintiff—a Fortress Investment Group LLC subsidiary—had sought damages totaling over $3B. That April 21 verdict comes just under two months after a second jury reached the opposite conclusion for another set of patents in a second case between the same parties, finding infringement and awarding $2B in damages.
Judge Albright Moves Second VLSI Case Back to Waco as Federal Circuit Prompts New Approach to Transfer TimingApril 2, 2021
Weeks after a Western District of Texas jury returned a $2.2B verdict for Fortress Investment Group LLC subsidiary VLSI Technology LLC against Intel, District Judge Alan D. Albright has transferred a second case between those two parties (6:19-cv-00255) from Austin back to his home division of Waco. Judge Albright’s March 28 decision to transfer that second case on convenience grounds closely mirrors his rationale for doing so in the first action as well and came after the Federal Circuit rejected his attempt to move that earlier trial but not the entire proceeding. Meanwhile, another disagreement with the Federal Circuit appears to have prompted Judge Albright to reassess the timing of his transfer decisions: after the appellate court issued a series of rulings faulting him for delaying transfer rulings despite proceeding with claim construction, he has now announced that he will rule on interdistrict transfer motions before holding a Markman hearing.
COVID-19 Triggers a Series of VLSI Transfers
As noted above, Judge Albright’s decision to transfer the -255 case was directly informed by the outcome of a series of skirmishes over venue in the lawsuit that recently went to trial. In August 2019, Judge Albright denied Intel’s motion to transfer the latter case to Delaware in August 2019 on convenience grounds. That October, he then granted Intel’s request to transfer the case from Waco—where he presides—to the Western District’s Austin Division, also for convenience (1:19-cv-00977). Judge Albright remained the presiding judge despite the transfer to Austin, with trial initially set for October 2020 and then pushed back to November. However, the Austin courthouse was subsequently closed due to ongoing public health concerns as the year came to a close in the midst of the COVID-19 pandemic’s winter wave, forcing Judge Albright to shift gears in order to hold the trial in person. In late November, he ruled over Intel’s objection that he would conduct the trial in Waco if the Austin courthouse could not reopen by the scheduled January trial date—asserting that he had the authority to do so based in part on the court’s inherent power to manage its docket.
The Federal Circuit disagreed, holding the following month that Judge Albright moved the trial without proper authority and that doing so would require a complete convenience analysis to determine whether the entire case could be transferred to Waco. On December 30, Judge Albright granted plaintiff VLSI’s emergency motion for such a transfer, finding this time that several factors previously weighing for or against transfer to Austin were now neutral due to the present circumstances of the case. Moreover, he concluded that some previously neutral factors now weighed in favor of transfer, in particular the “practical problems” and “court congestion” public-interest factors. The Federal Circuit subsequently affirmed that transfer order, and after another set of delays the case went to trial starting on February 22—culminating in the aforementioned infringement verdict on March 2.
Judge Albright incorporated his December 30 transfer ruling by reference into his March 28 order in the -255 case, holding that the same transfer factors “apply equally strongly in favor of transferring” that lawsuit back to Waco as well. He also noted that “[s]ince the Court made those findings, the COVID-19 infection rate in Waco has improved materially, while the Austin courthouse closure has been extended and the Austin courthouse remains closed indefinitely for trials”. Judge Albright further cited the “significant time and resources” invested by the court and the parties “in developing and implementing COVID-19 safety protocols at the Waco courthouse” as among the “facts and circumstances” weighing toward transfer.
With that decision, the -255 case appears likely to head to trial as scheduled starting on April 12. A third VLSI case against Intel (6:19-cv-00256), moreover, has been scheduled for trial on June 7, and Judge Albright has opted to wait until closer to that trial date before determining whether to transfer that action back to Waco as well: “The Court will address re-transferring the final case (-256) as the trial date approaches and the Austin Courthouse has an opportunity to reopen”. Both cases have been consolidated with a third, lead action (1:19-cv-00977).
The lawsuits discussed above are part of a third round of cases filed in the dispute between VLSI and Intel, which began with a complaint brought by the NPE in October 2017 in the Northern District of California. A pair of Delaware lawsuits then followed in June 2018 and March 2019, the second of which VLSI voluntarily dismissed in April 2019 after District Judge Colm Connolly dismissed some of VLSI’s infringement claims in the first Delaware case. That same day, the NPE then refiled the second case with two more asserted patents in the Western District of Texas’s Waco Division—the lawsuit that went to trial in February. VLSI also filed two cases in that same venue, including the one just transferred (-255). Meanwhile, public records indicate that VLSI has also sued Intel in at least two Chinese venues, the Intellectual Property Courts in Shanghai and Shenzhen.
Judge Albright Agrees to Address Transfer Requests Earlier Following Pressure from Federal Circuit
More broadly, the past year has seen a growing rift develop between the Federal Circuit and Judge Albright on the issue of convenience transfers—a form of relief that he has rarely granted since taking the bench in 2018. This divide has encompassed both Judge Albright’s substantive handling of such transfer motions, and increasingly, his tendency to let those motions sit undecided for months while proceeding with other issues. The latter trend finally came to a boil last month, following a series of rulings in which the Federal Circuit highlighted with increasing firmness Judge Albright’s prior tendency to let transfer motions sit undecided for months—as many as eight in some cases.
In particular, the Federal Circuit first cautioned Judge Albright on timing its November 2020 In re: Apple opinion—a divided ruling focused more directly on Judge Albright’s application and weighing of the public and private interest factors but also involving a six-month delay in deciding a motion a transfer. The appellate court took notice of that delay, stating that “[a]lthough district courts have discretion as to how to handle their dockets, once a party files a transfer motion, disposing of that motion should unquestionably take top priority”. The court contrasted that precedent with what actually happened, noting that “[i]nstead, the district court barreled ahead on the merits in significant respects”. (See here for more on the In re: Apple decision.)
The Federal Circuit more firmly and directly addressed the topic of delay head-on in its February 2021 In re: Hynix decision. In that litigation, defendant SK hynix sought the appellate court’s intervention in January after its motion to transfer litigation filed by Netlist to California sat fully briefed for eight months, during which time Judge Albright moved forward with claim construction. The appellate court found in its February 1 order partly granting Hynix’s mandamus petition “that the district court’s handling of the transfer motion up until this point in the case has amounted to egregious delay and blatant disregard for precedent. Yet another similar circumstance presented itself in a third case, between Precis Group LLC and TracFone Wireless, prompting the Federal Circuit to step in once again—this time, staying the case until Judge Albright ruled on transfer, which he did just a few days later. (More on the resulting In re: TracFone Wireless decision can be found here.)
The TracFone ruling appears to have prompted Judge Albright to formally change his approach with respect to timing. On March 23, he issued a new standing order establishing that he will address interdistrict transfer motions prior to the claim construction hearing: “When there is a pending inter-district transfer, the Court will either promptly enter an order resolving the pending motion(s) prior to the Markman hearing or it will postpone the Markman hearing until it has had the opportunity to do so. The Court will not conduct a Markman hearing until it has resolved the pending motion to transfer.” The order also establishes that parties may not file a motion for interdistrict transfer within eight weeks of a scheduled Markman hearing except when granted leave by the court. Notably, the order also puts the onus on parties, rather than the court, to remind it about currently pending transfer motions ripe for decisions—requiring that such movants file “a status report with respect to whether the motion(s) has been fully briefed and ready for resolution no later than six weeks prior to the date of the Markman hearing”.
For more on the Federal Circuit’s recent rulings on convenience transfers, see “Courts Cannot Delay Transfer Rulings, Repeats Federal Circuit—Prompting Another West Texas Denial” (March 2021).
The new standing order could have a ripple effect across other cases with languishing transfer motions and related motions to stay, some of which are detailed in this recent RPX article. Indeed, some cases with pending transfer requests have already been impacted—for instance, one case filed last July by Koss against Apple, in which the defendant’s transfer motion was filed in December along with a related motion to stay the case. On March 22, the company filed a mandamus petition (2021-135) asking the Federal Circuit to force Judge Albright to act on its motions, but in the wake of Judge Albright’s new standing order—issued the following day—the company filed a status report advising the court that its motions were ready for resolution, as required under the standing order. Judge Albright has not yet issued a ruling as of the date of this report. Meanwhile, Koss filed its response to Apple’s mandamus petition on March 30, arguing that the petition is now moot in light of Judge Albright’s standing order.
Further details on the Koss-Apple dispute can be found here: “Koss and Apple Joust over the Proper Use of Confidential Pre-Suit Communications (December 2020).
Five Finjan Patents Invalidated as Indefinite Despite “Convenient” Testimony from Plaintiff’s ExpertMarch 26, 2021
Finjan Holdings, Inc. has seen a new setback in its Southern District of California lawsuit against ESET (3:17-cv-00183), roughly a year after the first wave of the COVID-19 pandemic ended a trial in the case three days in. On March 23, District Judge Cathy Ann Bencivengo invalidated five of the six anti-malware patents-in-suit, ruling that “convenient” yet unsupported testimony from the plaintiff’s expert on the meaning of the term “downloadable” failed to overcome the defendant’s argument that the patents’ claims are indefinite. That ruling follows another notable decision against Finjan in January, when Northern District of California Judge William Alsup largely granted Juniper Networks’s request for attorney fees due to the NPE’s litigation conduct in a case that he deemed a “fiasco”.
Finjan, which was acquired by Fortress Investment Group LLC in July 2020, sued ESET in January 2017, accusing the company of infringing six patents (6,154,844; 6,804,780; 7,975,305; 8,079,086; 9,189,621; 9,219,755) through the provision of various cybersecurity products. Five of those six patents (all but the ‘305 patent) include the contested term “Downloadables”—the capitalization of which “signal[ed that] it is a specifically defined term”, as later observed by Judge Bencivengo. Significantly, the term also appears in other Finjan patents, though as Judge Bencivengo further noted in her March 23 order, courts have defined it at varying levels of specificity. For instance, one court construed the term as used in the related 6,092,194 patent as “an executable application program which is downloaded from a source computer and run on a destination computer”. However, Judge Bencivengo faulted subsequent courts for incorporating that definition by reference for other patents without accounting for narrowing language in those patents—including one ruling that incorporated the aforementioned “broader” language from the ‘194 patent for another (6,480,962), even though the latter explicitly requires that the “executable application program” be “small”. Judge Bencivengo’s November 2017 construction of that term, in contrast, inserted that qualifier—defining “Downloadables” as “a small executable or interpretable application program which is downloaded from a source computer and run on a destination computer” (emphasis added).
The inclusion of the term “small” would ultimately trigger the just-resolved dispute over indefiniteness. In April 2019, ESET moved for summary judgment of invalidity on that basis, arguing that a person with ordinary skill in the art as of January 27, 1997, the filing date of the related 6,167,520 patent, would not have known “what would constitute ‘small’ with respect to ‘executable programs from a source computer that run on the destination computer’”. The company cited alleged inconsistencies in Finjan’s expert testimony on the subject, arguing that the NPE had failed to provide objective boundaries for the upper limit of “small”—boundaries that were not reflected in the intrinsic record, asserted ESET. Finjan, for its part, pointed to example programs in the patent disclosure that would allegedly provide adequate notice to such a person of skill. Concluding that the record at that point was “conflicted” on this issue, the court denied ESET’s motion in November 2019 without prejudice to refile.
The parties then revisited the definition of “small” when the case went to trial in March 2020, with Finjan’s expert Eric Cole testifying that “an application would be understood to be small if it ‘did not require installation’ and opined that ‘small’ depends not on size but on the function”. Under his definition, a “small executable is an application that does not require installation[,] is ‘self-contained’[,] and is ‘just running automatically’[, . . .] which is ‘typical if you go to any website nowadays,’ whereas an executable that is not small ‘requires installation’ and has ‘a lot of shared libraries and [DLLs] and other programs’ in order to run”. On the trial’s fourth day, however, Judge Bencivengo declared a mistrial in light of the pandemic with the agreement of counsel—though, crucially, after Cole finished his testimony.
Based on that testimony, the court subsequently permitted ESET to renew its summary judgment motion, with the defendant arguing in August 2020 that Cole’s testimony failed to fix any of the defects it had identified—leaving “Downloadables . . . hopelessly indefinite”. Indeed, the company noted that “size does not matter when determining what constitutes ‘small’ because a two terabyte Downloadable would meet his ‘construction’ of the term ‘small’” (emphasis in original).
Judge Bencivengo agreed with ESET in her March 23 order granting the defendant’s motion, faulting Finjan for “present[ing] an explanation how a skilled artisan would interpret ‘small’ that was neither disclosed in his previous declaration to the Court . . . or anchored to the specification or prosecution history”. She underscored that the NPE “never offered evidence of a reasonable range for the size of a small executable or interpretable application program as understood by a skilled artisan in 1997 based on examples provided in the patent specification”, as it would have needed to do in order to overcome ESET’s indefiniteness argument. “It may be convenient to support Finjan’s infringement contentions against ESET’s accused devices, but Finjan’s new explanation does [not] provide clear notice of what constitutes a ‘small executable or interpretable application program’”, held Judge Bencivengo. While Finjan suggested that Cole would replace his completed testimony at a subsequent trial, Judge Bencivengo countered that he would not get a second bite at the apple, ruling that “a subsequent trial is not an opportunity for Dr. Cole to change his opinions or supplement them with support he did not provide on the record at the first trial”.
That same day, the court set a status conference for the following week, advising the parties that they “shall be prepared to discuss a path forward for this case and whether they prefer to stay the case while Finjan appeals the Courts invalidity order”. No such appeal has yet been docketed as of the publication date of this article.
As noted above, this ruling is not the first time that Finjan’s litigation has hit a speedbump this year. On January 9, Judge Alsup ruled that much of the NPE’s case against Juniper had been “exceptional” under Octane, due in part to Finjan’s attempt to switch out its infringement theory on the eve of trial—a misstep that led Judge Alsup to throw out its entire damages case. That decision has set the stage for an award of attorney fees against Finjan for its litigation conduct, which Judge Alsup repeatedly decried as having “wasted a great deal of everyone’s time and energy”. A special master has since been appointed to recommend the appropriate fee award in a report due May 20, with objections due on June 10.
Further details on Judge Alsup’s attorney fee decision in that case can be found here: “Judge Alsup Tees Up Fee Award Against Finjan, Calling Case Against Juniper a ‘Fiasco’” (January 2021).
Judge Alsup also recently dealt Finjan another blow in that case with respect to confidentiality, following the NPE’s attempt to “seal references to its patent valuation and licensing activity” that he had included in a December 2018 Daubert order—an attempt that Judge Alsup rebuffed, and that the Federal Circuit also rejected. On February 10, Judge Alsup once again denied Finjan’s request to withhold that information, holding that the NPE had “offer[ed] no compelling interest that outweighs the public’s own compelling interest in disclosure” (emphasis in original)—citing his own prior ruling against another Fortress NPE, Uniloc 2017 LLC, on a similar sealing dispute.
For more on Judge Alsup’s ruling against Uniloc 2017, and for details on a related battle over its standing to sue in litigation against Apple and other defendants, see “Uniloc Ordered to Unseal Licensing Info as Ruling on Standing Triggers New Dismissals” (December 2020).
March 5, 2021
On March 2, a Western District of Texas jury returned an infringement verdict in litigation between Fortress Investment Group LLC subsidiary VLSI Technology LLC and Intel (6:21-cv-00057). The jury found that Intel infringed two semiconductor patents through the provision of certain processors, awarding a combined $2.2B in damages but also determining that the company’s infringement had not been willful. The in-person trial had previously been delayed several times as a result of COVID-19, with District Judge Alan D. Albright opting to move the trial to another division in order to work around a pandemic-related courthouse closure—a decision that resulted in two trips to the Federal Circuit.
January 25, 2021
The Federal Circuit has refused to order District Judge Alan D. Albright to vacate the recent retransfer, following a full convenience analysis, of a case brought by VLSI Technology LLC against Intel—from Austin, where courthouses remain closed in light of the COVID-19 pandemic, to Waco, where Judge Albright presides and where a scheduled February trial could theoretically still proceed (6:21-cv-00057). “Taking into account the relevant traditional transfer factors”, wrote the appeals court, Judge Albright concluded that “‘unanticipated post-transfer events frustrated the original purpose for transfer’ of the case from Waco to Austin originally”, and, “[w]hile we may have evaluated these factors and the parties’ arguments differently, we are unable to say that the district court’s conclusion amounts to a clear abuse of discretion”.
January 17, 2021
Finjan, Inc. has just seen another setback in its Northern District of California litigation against Juniper Networks (3:17-cv-05659). On January 9, District Judge William Alsup ruled that much of the NPE’s case against Juniper had been “exceptional” under Octane, due in part to Finjan’s attempt to switch out its infringement theory on the eve of trial—a misstep that led Judge Alsup to throw out its entire damages case. That decision sets the stage for an award of attorney fees against Finjan for its litigation conduct, which Judge Alsup repeatedly decried as having “wasted a great deal of everyone’s time and energy”.
Finjan, which was acquired by Fortress Investment Group LLC last July, filed its lawsuit against Juniper in September 2017 (3:17-cv-05659). The NPE’s complaint accused the company of infringing eight patents—with two later dropped, and another added—through the provision of various antivirus, cloud, and sandboxing products and technologies, including Juniper’s SRX Gateways, Sky ATP, and/or Junos Space Security Director. The following February, Judge Alsup ordered the parties to engage in a “shootout”, a narrowing procedure that he first introduced in early 2017 as a way, in his opinion, to more efficiently get to the merits of a patent case. In a shootout, the plaintiff is required to choose a single patent claim for which it thinks it has the strongest arguments and then to move for summary judgment of infringement and validity as to that sole claim. The defendant, in turn, must pick a “weakest claim” and move for summary judgment of noninfringement and invalidity. If successful, the plaintiff would possibly be awarded a preliminary injunction; and if unsuccessful, the court might “impose a sanctions award on them sua sponte for bringing such a ridiculous claim”.
Two such shootouts occurred over the course of the litigation, and the manner in which Finjan pursued certain key aspects of its case throughout both of those stages led him to conclude in his January 2021 order that the case had been “exceptional”.
The first of the two shootouts were partially resolved in Juniper’s favor in August 2018, when Judge Alsup granted the defendant’s shootout motion as to noninfringement—holding that the company’s SRX Gateway and Sky ATP products do not infringe claim 1 of Finjan’s 6,804,780 patent under the construction of the phrase “performing a hashing function”. Later that month, Judge Alsup then issued an order addressing Finjan’s motion, in which the NPE sought a judgment of infringement and validity as to claim 10 of the 8,677,494 patent. While Judge Alsup partially granted the motion as to infringement for certain claim limitations, he struggled with the application of the parties’ agreed-upon definition of “database” to the identified structures before him, deferring any further, clarifying construction of the term “until the jury is instructed so that the Court will have the benefit of the trial record before construing the term”. He scheduled a trial as to Juniper’s infringement under that construction in December 2018, leading to a verdict of noninfringement as to claim 10 of the ‘494 patent later that month. That verdict, and the case’s other judgments in Juniper’s favor, were later summarily affirmed by the Federal Circuit, before which Finjan had already stipulated to the dismissal with prejudice of its other claims.
Finjan’s pursuit of a flawed damages case both immediately before and during the December 2018 trial led to several rebukes from the court—and Judge Alsup would later describe that conduct, in his January 2021 exceptionality order, as a “fiasco [that] wasted a great deal of everyone’s time and energy”. Key among the underlying missteps was the NPE’s belated attempt to revamp its infringement case: as subsequently recounted by Judge Alsup, “[a]fter discovering its infringement theory covered only a minute portion of Juniper’s revenue base, on the eve of [trial] Finjan flip flopped and came up with a new infringement theory, one which would capture more of Juniper’s products and inflate the target revenue base”. In particular, as previously reported by RPX, Finjan had sought to establish a $7.2M royalty base through the testimony of its damages expert, but Juniper argued that this opinion overreached, in that it counted SRX devices for which the Sky ATP addon had not been installed (as required for infringement). Rather, the company argued, the maximum royalty base—including revenue from the paid version of Sky ATP (a freemium product) and from SRX devices with Sky ATP installed—was just $1.8M. Judge Alsup apparently agreed and excluded the entire damages theory: “Finjan tried to sneak this theory in with its expert-damages report, but we caught it, and the Daubert order excluded that trick”.
Finjan then tried to present a “facts-only damages case” to the jury—an attempt, Judge Alsup underscored, that “utterly failed”. For example, a Finjan executive testified as to what the NPE would have asked from Juniper during negotiations, but Judge Alsup struck that “prejudicial testimony” as “patently irrelevant to the question of the hypothetical royalty that two reasonable parties might have agreed to” (as later summarized; emphasis in original). He then gave Finjan a “stern rebuke” and provided the jury with a limiting instruction. “More broadly”, continued Judge Alsup, “Finjan made no effort at trial to allocate the target revenue base between allegedly infringing product functions and noninfringing functions”, while its facts-only damages case “artificially attempt[ed] to inflate revenue to which it would be entitled” just as its expert had sought to do on the eve of trial. For those reasons, Judge Alsup ultimately struck Finjan’s entire damages case as “woefully inadequate”.
Between its insufficient damages case, and the fact that no injunction was available for the expired ‘494 patent, Judge Alsup lamented in his exceptionality order that the “whole song and dance came to nothing, even before the jury later rejected the merits of the infringement claim”. As a result, he concluded that “[t]he entire assertion of the ‘494 patent thus stood out as exceptional”.
Judge Alsup further faulted Finjan for its litigation conduct during the second shootout, during which Juniper sought and won summary judgment of noninfringement and invalidity of claim 9 of the ‘780 patent, the same patent that it had successfully targeted in the first round. Here, Judge Alsup found that Finjan should have dropped the patent from the case after Juniper’s initial victory, since claim 9 shared the claim limitation that formed the basis for the court’s ruling as to claim 1. Yet the NPE did not; indeed, Judge Alsup noted, Finjan not only kept that claim “in the running” for round two, it “even expanded the scope of accused products”—only to fail to oppose Juniper’s second shootout motion as to the majority of those products. “Just as both parties have a joint duty to frame dispositive issues with good judgment”, explained Judge Alsup, “each party has an individual duty to continually reevaluate the viability of its claims. Finjan shirked its end of both of those duties and again wasted everyone’s time and energy in instigating this motion aspect”. Between those errors and several others related to the second shootout, Judge Alsup found that “Finjan’s assertion of the ‘780 patent stands out as exceptional as well”.
That said, Judge Alsup also declined to find that Finjan’s conduct had been exceptional across the board. For instance, he held that the NPE was within its rights not to accept “claim constructions regarding the ‘154 patent from other tribunals”, countering that the plaintiff “had every right to distinguish and even argue against earlier nonbinding claim constructions by the Patent Trial and Appeal Board and unpublished Federal Circuit memoranda” (emphasis in original). Under the circumstances, Judge Alsup ruled that a fee award in this case should be “limited narrowly to time spent defending against the specific patents tainted by that misconduct”.
Having so ruled, Judge Alsup concluded by reiterating his exceptionality finding as to Finjan’s litigation of the ‘494 and ‘780 patents but declining to award fees just yet. Rather, he ordered Juniper to resubmit its billing records in order to limit them to fees incurred for time spent on those two patents. In a separate order issued that same day, Judge Alsup then proposed the appointment of a special master to oversee the remainder of the fee dispute.
Judge Alsup’s January rulings are the latest of several setbacks suffered by Finjan since the start of last year. In March, the NPE’s Southern District of California case against ESET (3:17-cv-00183) made its way to trial, only to see District Judge Cathy Ann Bencivengo declare a mistrial on the fifth day, with the agreement of counsel, in light of COVID-19. Also delayed was its Northern District of California trial against Cisco (5:17-cv-00072), which in mid-December District Judge Beth Labson Freeman pushed from January 11 to June 4. While that order does not specifically cite the pandemic as the reason, the court had already thrice continued the case as a result of COVID-19. After reportedly stating in April that she was “fairly confident” the trial could be held on its originally scheduled date in June 2020, Judge Freeman continued the trial the following month—moving it to October 19 to allow the court to clear its backlog of criminal cases. Judge Freeman then delayed the case again to November 2 after Cisco raised additional public health concerns, and postponed the case one more time on October 26 to the just-vacated date of January 11.
Also impacted by COVID-19 has been a lawsuit filed against Intel by another Fortress subsidiary, VLSI Technology LLC, in the Western District of Texas (1:19-cv-00977)—where presiding District Judge Alan D. Albright has taken more of a wait-and-see approach to jury trials during the pandemic. Late last year, he moved a trial scheduled in that case from Austin, where the courthouse remains closed, to Waco, in an attempt to proceed with a scheduled January trial. However, the Federal Circuit ruled on December 23 that Judge Albright moved the trial without proper authority and that doing so would require a complete convenience analysis to determine whether the entire case could be transferred to Waco. On December 31, Judge Albright granted plaintiff VLSI’s emergency motion for such a transfer, also announcing that he would push the trial back to mid-February to give Intel time to appeal.
As that appeal proceeds, another issue being litigated is the impact of Fortress’s acquisition of Finjan on the VLSI campaign. Late last year, Intel disclosed that it holds a license to Finjan’s portfolio under a 2012 license agreement that grants to it rights to patents held by Finjan and its “affiliates”. On January 11, Intel filed suit against Fortress in the Delaware Court of Chancery, reportedly seeking a judgment that that Finjan license now also covers all patents held by Fortress and its affiliates, including VLSI, because when Fortress acquired Finjan, they all became “affiliated” under the terms of the agreement.
See here for more on other recent developments in the VLSI campaign.
In New Delaware Chancery Court Suit, Intel Argues It Is Now Licensed to All Fortress-Controlled PatentsJanuary 17, 2021
Intel has filed suit in Delaware’s Court of Chancery against Fortress Investment Group LLC, arguing that a 2012 license agreement with Finjan Holdings, Inc. precludes any “affiliate” of Finjan from suing Intel for patent infringement. When Fortress acquired Finjan this past summer, argues Intel, every Fortress-held entity became an “affiliate” under the prior agreement, including Fortress’s VLSI Technology LLC, which has been in litigation against Intel for years. Intel reportedly seeks a declaratory judgment that the 2012 agreement covers all patents that Fortress owns, either directly or through controlled subsidiaries, and pleads claims for breach of contract and tortious interference.
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Judge Albright Delays Patent Trial After Federal Circuit Rejects Rationale for Switching Courthouses Due to PandemicDecember 30, 2020
The COVID-19 pandemic has led most of the nation’s top patent venues to push scheduled jury trials back due to public health risks, with the notable exception of Texas. While District Judge Rodney Gilstrap of the state’s Eastern District recently halted jury trials after resuming them in August, District Judge Alan D. Albright of the Western District has not done so—even moving a scheduled trial from Austin, where the courthouse remains closed, to Waco, in an attempt to proceed with a scheduled January trial between VLSI Technology LLC and Intel. However, the Federal Circuit ruled on December 23 that Judge Albright moved the trial without proper authority and that doing so would require a complete convenience analysis to determine whether the entire case could be transferred to Waco. On December 31, Judge Albright granted plaintiff VLSI’s emergency motion for such a transfer, also announcing that he would push the trial back to mid-February to give Intel time to appeal.
VLSI, an affiliate of Fortress Investment Group LLC, began its litigation against Intel with an October 2017 lawsuit filed in the Northern District of California, followed by a pair of lawsuits filed in Delaware in June 2018 and March 2019. However, in April 2019, after District Judge Colm Connolly dismissed some of VLSI’s infringement claims in the first Delaware action, VLSI voluntarily dismissed the second Delaware suit. That same day, the NPE then refiled the case with two more asserted patents in the Western District of Texas’s Waco Division—the lawsuit in which the trial was just delayed—along with two other complaints in that same venue.
While Judge Albright subsequently denied Intel’s motion to transfer the present case to Delaware in August 2019 on convenience grounds, that October he granted Intel’s request to transfer the case from Waco—where he presides—to the Western District’s Austin Division, also for convenience (1:19-cv-00977). In granting the latter motion, Judge Albright cited Intel’s “substantial presence in Austin” as among the facts tipping the “sources of proof”, “cost of attendance”, and local interest factors in favor of transfer, with only the “compulsory process” factor weighing slightly against. Judge Albright remained the presiding judge despite the transfer to Austin, with trial initially set for October 2020 and then pushed back to November.
As has so often been the case over the past year, though, COVID-19 forced the court to shift gears. In April 2020, a month after a national emergency was declared, District Judges Lee Yeakel and Robert Pitman closed the Austin courthouse, and it has been shuttered ever since in light of ongoing public health concerns due to the novel coronavirus. As October came to a close, Judge Albright then pushed the trial back to January 11. Nonetheless, with all signs pointing to a further-prolonged closure of the Austin courthouse, Judge Albright then ruled on November 20, over Intel’s objection, that if the Austin courthouse could not reopen by the scheduled January trial date, he would conduct the trial in Waco.
Judge Albright grounded the power to do so in two places. First, he cited Federal Rule of Civil Procedure 77(b), which provides that “[e]very trial on the merits must be conducted in open court and, so far as convenient, in a regular courtroom” but also establishes that “no hearing—other than one ex parte—may be conducted outside the district unless all of the affected parties consent”. As to the latter limitation, Judge Albright argued that “[c]ourts in the Fifth Circuit have uniformly interpreted Rule 77(b) as giving a district court the discretion to hold the trial at any division within the district, even without the parties’ consent”. Second, he asserted that moving the trial was an appropriate use of the court’s inherent power to manage its docket, asserting that further delaying the trial was impractical—highlighting the need to proactively manage the “backlog of trials” created by the pandemic, as well as the notion that trials should not be delayed because each US patent has an expiration date. (Note, however, that the oldest patent at issue in this case appears to expire in 2027.)
Intel challenged that holding in a December 2 mandamus petition that the Federal Circuit granted on December 23 (2021-0105). After ruling that mandamus was an appropriate way to seek review here, noting that it was “difficult to see how Intel could obtain meaningful review of the decision otherwise”, the appeals court proceeded to rule in Intel’s favor on the merits. In particular, the Federal Circuit held that moving the trial ran counter to the applicable statutes, explaining in part that Congress established in 28 USC Section 124(d)(1) that “[c]ourt for the Austin Division shall be held in Austin”. This clumsy articulation means, according to the appeals court, that “Intel generally has a ‘statutory right’ to have this case tried in the division in which the action lies” (citation omitted).
As a result, the Federal Circuit rejected both of the arguments that Judge Albright cited. He could not move the trial based on his inherent power because “our plain reading of the above-noted statutes simply leaves no room to invoke such authority here”, the appeals court explained. Judge Albright could not rely upon Rule 77(b) either. Even if that rule allowed a district judge “to decide where to initially assign a case within a district, it does not follow that Rule 77(b) also allows a district court to later sidestep the transfer rules set forth in § 1404 generally”—a proposition not supported by any appellate caselaw that the Federal Circuit was “aware of”. The court also found VLSI’s additional statutory arguments unavailing. The NPE cited Section 1404(b), which allows a proceeding to be moved to another division, but the court ruled that it did not apply because it required the consent of all parties—and Intel had not consented. Nor did Section 1404(a), governing convenience transfers, apply here, as the Federal Circuit noted that it was not relied upon by Judge Albright and held that it can only be used to transfer an entire case, not a trial.
The Federal Circuit thus granted Intel’s mandamus petition, deciding that Judge Albright had abused his discretion. However, the court explained that it was not ruling that Judge Albright lacked the authority to move the trial. Rather, it clarified that he “must effectuate such result under appropriate statutory authority, such as moving the entire action to the Waco Division after concluding, based on the traditional factors bearing on a § 1404(a) analysis, that ‘unanticipated post-transfer events frustrated the original purpose for transfer’ of the case from Waco to Austin originally”. That same day, VLSI filed an emergency motion to transfer the case on that basis.
On December 30, Judge Albright granted the motion to transfer the case in its entirety, explaining his reasoning in an order issued the next day. He held that the case meets the Fifth Circuit’s general criteria for granting a transfer in that it 1) could have been properly brought in the Waco Division and 2) would be in the interests of justice or convenience of the parties (citing that court’s 2013 In re: Radmax decision). Moreover, Judge Albright asserted that under Fifth Circuit law, a district court “retains discretion to retransfer an action back to the original district where it was filed when unanticipatable post-transfer events frustrate the original purpose for transfer”, as that court held in its 1983 In re: Cragar Industries decision. Under Cragar, he explained, there 1) must be an “unanticipatable post-transfer event” that 2) “frustrates the original purpose for transfer”, and 3) “retransfer should be granted under the most impelling and unusual circumstances”.
The closure of the Austin courthouse easily satisfies the first and third requirement, Judge Albright found, as both the court and parties agree that a courthouse closure due to COVID-19 was an unanticipated post-transfer event. As for the second factor, he revisited his Section 1404(a) convenience factor analysis, finding this time that several factors weighing for or against transfer to Austin were now neutral. Specifically, Judge Albright had previously found that the private-interest “relative ease of access to sources of proof” factor weight toward transfer due to the likelihood that it would be easier to locate Intel documents in Austin than Waco, but discovery was now complete. Additionally, the court previously found the private “compulsory process” factor weighed against transfer because some non-party witnesses were based in Dallas (which is in the Northern District), but now found it to be neutral because neither party now plans to call any fact witnesses from that area. Furthermore, while the court originally found the private “cost of attendance” factor “strongly” weighed against transfer, this was now neutral because “hotel costs are cheaper in Waco, witnesses may testify via videoconference” per the agreement of the parties and the court, “Austin witnesses’ costs will be minimal, and VLSI has offered to cover costs of attendance”.
Conversely, the court also found some previously neutral factors now weighed in favor of transfer. In particular, the “all other practical problems” public-interest factor now weighed toward transfer due to the closure of the Austin courthouse and because the Waco courthouse remains open. Also, the court originally found the public-interest “administrative difficulties flowing from court congestion” factor to be neutral, but here found it to weigh in favor of transfer, noting that the court’s packed trial schedule would require moving another trial and further observing that the delay would be far longer than a “garden variety” delay ordinarily associated with transfer. Moreover, Judge Albright noted that the Federal Circuit had previously faulted him for placing too much weight on this factor and pointedly stated that he was not doing so here: “This Court takes note of the Federal Circuit’s guidance and does not attribute dispositive or undue weight to this factor but accords it weight equivalent to that given to other factors.”
After reaching the same conclusions as his original analysis for the remaining public-interest factors—finding the “localized interest” factor to weigh against transfer, and the remaining public factors neutral—Judge Albright held that retransfer back to Waco was appropriate under both Cragar and Section 1404(a).
In addition to moving the case back to Waco, Judge Albright also delayed the trial until February 15 to give Intel sufficient time to challenge the ruling before the Federal Circuit, reportedly remarking at the motion hearing that the appeals court’s guidance would be helpful given the unprecedented circumstances. “These are non-normal issues we’re dealing with,” he purportedly explained, as it would be “good for the circuit to tell me whether I’m properly applying” the convenience transfer factors.
Judge Albright’s nods to the Federal Circuit’s guidance is particularly significant given a recent series of rulings in which that court has rejected his handling of other convenience transfers. These include a July decision in which the Federal Circuit ruled that Judge Albright improperly weighed the applicable factors in a decision that denied an Adobe motion seeking a convenience transfer to the Northern District of California. More recently, a divided Federal Circuit granted a mandamus petition from Apple, ruling in November that Judge Albright erred in concluding that a variety of the applicable factors weighed against transferring another Fortress case—this one brought by its subsidiary Uniloc 2017 LLC—to that same venue. However, Circuit Judge Kimberly A. Moore dissented, arguing that the majority’s analysis exceeded the permissible bounds of mandamus review and improperly disturbed the district court’s factual findings and conclusions.
For more on that decision, see “Divided Federal Circuit Reverses Another Convenience Transfer Denial by Judge Albright” (November 2020). Details on how other top patent venues have handled jury trials can also be found here.
December 18, 2020
As the COVID-19 pandemic forces California into a second lockdown, courts in two of the state’s federal districts have pushed back scheduled patent trials. On December 14, District Judge James V. Selna of the Central District of California vacated a jury trial previously scheduled for April in litigation between TCL and Ericsson over a standard essential patent (SEP) licensing dispute. Two days later, District Judge Beth Labson Freeman postponed a Northern District of California trial from January to June in litigation filed by NPE Finjan Holdings, Inc. against Cisco following a series of prior continuances entered due to the pandemic. These delays come as other top patent venues contend with the impact of the novel coronavirus: while Chief District Judge Rodney Gilstrap of the Eastern District of Texas recently halted all jury trials before him after an outbreak in a nearby division, District Judge Alan D. Albright of the Western District of Texas has indicated that he may still continue to hold trials.
The Central District of California Delays a Notable SEP Trial
The nation’s most popular patent venues have varied widely in their approach to jury trials during the pandemic, as noted in RPX’s prior coverage, with some districts giving judges the discretion over whether to hold trials in light of local conditions. However, the Central District of California—which includes the state’s four hardest-hit counties, Los Angeles, San Bernardino, Riverside, and Orange—has never greenlit the resumption of jury trials, which have remained suspended with no room for discretion since the court imposed its first COVID-19 restrictions in March. The district has since established a three-stage reopening plan, under which jury trials are not to be resumed until the third stage, based on 14-day infection trends; such trials remain suspended until further notice. Additionally, on December 9—shortly after the state imposed a regional stay-at-home order based on dwindling ICU capacity—Chief District Judge Philip S. Gutierrez activated the district’s Continuity of Operations plan, closing all courthouses to the public except for certain criminal matters and leaving civil trials suspended.
On December 14, Judge Selna cited the pandemic in a two-page order that vacated the April 6 trial date scheduled in TCL v. Ericsson. That decision came at the joint request of the parties, which in a December 2 status joint report cited the “current trajectory of various metrics related to COVID-19, the fact that Orange County moved into the Purple Tier on November 17, 2020, and the Court’s prior comments about the logistical issues associated with conducting a civil trial and summoning a jury panel (e.g., that Orange County be well-established in the Orange Tier prior to summoning a jury, which in turn requires 49 days of lead time)”. (The cited tiers are part of California’s COVID-19 mitigation plan, with purple representing the highest COVID-19 risk level based on a county’s new infection rates.)
That newly delayed trial in the TCL v. Ericsson litigation will be the second time that the SEP issues at play come before the district court, following a notable trip back from the Federal Circuit. Judge Selna had previously issued a bench trial order establishing that certain licensing offers made by Ericsson to TCL had purportedly not been fair, reasonable, and non-discriminatory (FRAND), further setting the terms of a FRAND license—just the fourth US ruling in which a court has determined a FRAND rate for a SEP portfolio. Significantly, the court also denied Ericsson’s request for a jury trial on the claims decided. However, in December 2019, the Federal Circuit overturned that decision, ruling that the lower court had deprived Ericsson of its constitutional right to a jury trial by deciding a key license term from the bench.
In setting a new trial as a result of that opinion, Judge Selna indicated to the parties in April 2020 that under the Federal Circuit’s ruling, the “key error” was failing to “afford a jury trial on the release payment” (the license term previously decided from the bench) because that payment is best characterized as “patent damages”—i.e., damages for past patent infringement. Such a determination is both “intertwined” with the determination that Ericsson’s offers to TCL were not FRAND and “inextricably tied” to the determination of a forward royalty rate. As a result, Judge Selna held, the entire prior judgment must fall and a jury must be seated.
More recently, in August, the Federal Circuit further established that the question of whether a patent is essential to a standard should also be determined by a jury—upholding an infringement ruling for a subsidiary of IP Bridge, Inc. against TCL.
For more on the appeal ruling in TCL v. Ericsson, see “California FRAND Ruling Deprived Ericsson of Right to Jury Trial, Holds Federal Circuit” (December 2019).
Finjan’s Trial Against Cisco Gets Delayed Following Spring Setback in Another Case
Meanwhile, the Northern District of California’s penultimate coronavirus order, dated September 16, cleared the way for civil and criminal jury trials, to be conducted “in accordance with the logistical considerations necessitated by the Court’s safety protocols”, following prior suspensions of all such trials. However, as a result of state and local shelter-in-place orders, the court subsequently updated its website to state that “the court will suspend all in-person, in-court proceedings at all Northern District of California courthouses. This suspension will remain in effect through January 10, 2021, with a planned resumption of some limited proceedings, if possible, on January 11, 2021”.
The trial continuance that Judge Freeman entered in the Finjan v. Cisco litigation pushes back a trial previously set to begin on January 11 to June 4. While the order does not specifically cite COVID-19 as the reason, the court had already thrice delayed the case as a result of the pandemic. After reportedly stating in April that she was “fairly confident” the trial could be held on its originally scheduled date in June 2020, Judge Freeman continued the trial the following month—moving it to October 19 to allow the court to clear its backlog of criminal cases. Judge Freeman then delayed the case again to November 2 after Cisco raised additional public health concerns, and postponed the case one more time on October 26 to the just-vacated date of January 11. This Finjan lawsuit was the second to see a trial undercut by COVID-19: the NPE’s Southern District of California case against ESET (3:17-cv-00183) made its way to trial in March, but District Judge Cathy Ann Bencivengo declared a mistrial on the fifth day, with the agreement of counsel, in light of the pandemic.
Texas Judges Have Begun to Diverge on Jury Trials
Worsening COVID-19 infection rates have also led formerly bullish courts to walk back earlier efforts to proceed with patent trials. Among the most notable examples is Judge Rodney Gilstrap of the Eastern District of Texas, who resumed jury trials this past August, holding the nation’s first patent jury trial since the start of the pandemic—resulting in one notable verdict—after coronavirus infection rates in and around his district began to drop. However, as the pandemic’s second wave began to worsen, a trial in a breach of contract case in a nearby division under District Judge Amos L. Mazzant III ended in a mistrial after a COVID-19 outbreak struck the participants—with 15 people, including multiple jurors, members of the plaintiff’s and the defendant’s legal team, and court staff, getting infected. In light of that outbreak and rising case numbers nearby, Judge Gilstrap took the significant step of halting all jury trials before him. Judge Gilstrap stated that he was doing so “reluctantly” but asserted that he had no alternative—arguing that the face-to-face aspect of in-person trials is essential for due process. Judge Mazzant, for his part, has since cancelled a retrial previously scheduled for January 25 in the aforementioned breach of contract case, providing no reason for doing so.
In contrast to Judge Gilstrap, District Judge Alan D. Albright of the Western District of Texas appears to be moving forward with his next trial—at least, for now. In late November, in litigation filed by Fortress Investment Group LLC subsidiary VLSI Technology LLC (1:19-cv-00977), defendant Intel asked to push back a trial scheduled for January 11 to March, observing that “[c]ase and death numbers in McLennan County and in Texas now mirror or are approaching those from July 2020, when the Waco Division was closed to jury trials” and further warning that “those numbers are only expected to continue to rise after the holidays”. A hearing was held on Intel’s requested continuance on December 15; while the minutes for that hearing are unavailable, Judge Albright’s calendar still lists the trial as scheduled on January 11—suggesting that Judge Albright did not grant the motion (or at least, has not yet decided it). That hearing comes shortly after Judge Albright, speaking at a recent IP conference, reportedly expressed confidence about his court’s ability to safely conduct IP trials, following what he described as a positive experience conducting a patent trial this past October.
For details on that October trial, see “Roku Wins Noninfringement Verdict in Judge Albright’s First Patent Trial” (October 2020).