U.S. Court of Appeals for the Federal Circuit, Philip Morris v. ITC, Docket No. 2022-1227

Customs

 

Import

 

Section 337 of the Tariff Act of 1930, 19 U.S.C. § 1337

 

Duty to Consult Under Section 337

 

Forfeiture

 

Public Interest

 

Domestic Industry Requirement

 

Patent Infringement

 

Cease and Desist Order

 

Limited Exclusion Order

 

 

 

 

Appeal from the United States International Trade Commission in Investigation No. 337-TA-1199.

 

 

RAI Strategic Holdings, Inc., R.J. Reynolds Vapor Company, and R.J. Reynolds Tobacco Company (collectively “Reynolds”) filed a complaint at the International Trade Commission alleging that respondents Philip Morris Products S.A., Philip Morris USA, Inc., and Altria Client Services LLC (collectively “Philip Morris”) violated Section 337 of the Tariff Act of 1930, 19 U.S.C. § 1337, through the importation and sale of tobacco products that infringed certain claims of U.S. Patent Nos. 9,901,123 and 9,930,915. After conducting a Section 337 investigation, the Commission barred Philip Morris and its affiliates from importing products infringing the asserted patents. Philip Morris appeals, contending that the Commission failed to “consult with, and seek advice and information from” the Department of Health and Human Services (HHS) as required by Section 337. In addition, Philip Morris challenges the Commission’s determinations on public interest, domestic industry, patent validity, and infringement. For the reasons set forth below, we affirm the Commission’s decision in full.

 

 

(…) In response to Reynolds’ complaint, the Commission instituted an investigation and ordered the presiding administrative law judge (ALJ) to “provide the Commission with findings of fact and a recommended determination on the issue” of public interest. J.A. 3432–33 (85 Fed. Reg. 29,482–83 (May 15, 2020)).

 

 

The ALJ issued a final initial determination (FID) concluding that: (1) Reynolds had shown that Philip Morris infringed the asserted claims, and that Philip Morris had not shown the asserted claims to be invalid, id. at *58; (2) Reynolds had established the existence of a domestic industry with respect to both of the asserted patents, id.; and (3) “the public interest evidence of record did not weigh against entry of a remedy,” id. at *73. The ALJ also recommended that the Commission issue a limited exclusion order, id. at *74, but not cease and desist orders, id. at *76. Philip Morris petitioned the full Commission for review of the FID.

 

 

It is undisputed that Reynolds satisfied the technical prong of the domestic industry requirement with respect to the asserted patents. (Fn. 1).

 

 

The Commission decided to review the FID in part. In the Matter of Certain Tobacco Heating Articles & Components Thereof, Inv. No. 337-TA-1199, Commission Opinion, 2021 WL 4947427 (Oct. 19, 2021) (Commission Op.). Among other things, it affirmed the ALJ’s determination of nonobviousness of the asserted claims of the ’123 patent and the ALJ’s determination that Reynolds satisfied the domestic industry requirement. The Commission concluded that Philip Morris had violated Section 337 and issued cease and desist orders directed to Altria Client Services LLC and Philip Morris USA, Inc., and issued a limited exclusion order banning the importation of infringing products by Philip Morris and its affiliates. Philip Morris appeals. We have jurisdiction under 28 U.S.C. § 1295(a)(6).

 

 

Our court reviews the Commission’s decisions under the standards of the Administrative Procedure Act (APA). 19 U.S.C. § 1337(c); 5 U.S.C. § 706(2). We review the Commission’s legal determinations, including statutory interpretation, de novo and its factual findings for substantial evidence. Spansion, Inc. v. Int’l Trade Comm’n, 629 F.3d 1331, 1343–44 (Fed. Cir. 2010).

 

 

We begin with Philip Morris’s argument that the Commission erred by failing to meet its statutory duty as set forth in Section 337. That statutory duty requires that: During the course of each investigation under this section, the Commission shall consult with, and seek advice and information from, the Department of Health and Human Services, the Department of Justice, the Federal Trade Commission, and such other departments and agencies as it considers appropriate. 19 U.S.C. § 1337(b)(2).

 

 

Because Philip Morris forfeited this argument, and because in any event the Commission satisfied its duty to “consult with” HHS, we conclude that the Commission committed no error.

 

 

(…) Even in the absence of forfeiture, we conclude that, in this case, the Commission satisfied its duty to “consult with” HHS and the FDA. When the Commission instituted the investigation in May 2020, it published a Notice of Investigation in the Federal Register, J.A. 3432–33, and individually served letters enclosing the Notice of Investigation to representatives of the Department of Justice, the U.S. Bureau of Customs and Border Protection, the Federal Trade Commission, and HHS. J.A. 43501.

 

 

Public Interest:

 

§ 1337(d)(1) provides that if the Commission determines “that there is violation of this section, it shall direct that the articles concerned. . . be excluded. . . unless, after considering public interest, it finds that such articles should not be excluded” (emphasis added). In deciding this issue, the Commission must consider the effect of the remedy on four statutory public interest factors: (1) public health and welfare, (2) competitive conditions in the U.S. economy, (3) the production of like articles in the United States, and (4) U.S. consumers. 19 U.S.C. § 1337(d)(1), (f)(1).

 

 

 

Domestic industry requirement:

 

The domestic industry requirement of Section 337, 19 U.S.C. § 1337(a)(2) and (a)(3), includes an economic prong, which “requires that there be an industry in the United States,” and a technical prong, which “requires that the industry relate to articles protected by the patent,” both of which must be met. InterDigital Commc’ns, LLC v. Int’l Trade Comm’n, 707 F.3d 1295, 1298 (Fed. Cir. 2013).

 

 

(…) Obviousness of the ’123 Patent Claims (…).

 

 

(…) Infringement of the ’915 Patent.

 

 

 

 

(U.S. Court of Appeals for the Federal Circuit, March 31, 2023, Philip Morris v. ITC, Docket No. 2022-1227)

 

U.S. Court of Appeals for the Federal Circuit, University of Massachusetts v. L’Oréal S.A., Docket No. 2021-1969

Jurisdictional Discovery

 

Personal Jurisdiction (Foreign Corporation)

 

Technology Licensed by Foreign Corporation to the U.S. Corp. Could Suffice to Allow Jurisdictional Discovery. R & D Abroad Could Suffice as Well

 

Patent-Infringement Claims

 

L’Oréal

 

 

 

 

Appeal from the United States District Court for the District of Delaware in No. 1:17-cv-00868-CFC-SRF.

 

 

(…) UMass also challenges the district court’s personal-jurisdiction determinations. See Personal Jurisdiction Report and Recommendation at 17–26; Personal Jurisdiction Order at 1–4. Because we find that at the very least jurisdictional discovery was appropriate, we vacate and remand to the district court, without reaching the question of whether UMass made a sufficient prima facie showing that L’Oréal S.A. was subject to personal jurisdiction based on the complaint and evidence submitted at the time of the Rule 12(b)(2) motion. See Autogenomics, Inc. v. Oxford Gene Technology Ltd., 566 F.3d 1012, 1016–17 (Fed. Cir. 2009). Personal-jurisdiction analysis for patent-infringement claims is governed by Federal Circuit law. See Synthes (U.S.A.) v. G.M. Do Reis Jr. Ind. Com. de Equip. Medico, 563 F.3d 1285, 1293 (Fed. Cir. 2009); Electronics for Imaging, Inc. v. Coyle, 340 F.3d 1344, 1348 (Fed. Cir. 2003). A denial of jurisdictional discovery, however, is reviewed for abuse of discretion, applying the law of the regional circuit. Autogenomics, 566 F.3d at 1021–22. In the Third Circuit,“ if the plaintiff presents factual allegations that suggest with reasonable particularity the possible existence of the requisite contacts . . . , the plaintiff’s right to conduct jurisdictional discovery should be sustained.”  Eurofins Pharma US Holdings v. BioAlliance Pharma SA, 623 F.3d 147, 157 (3d Cir. 2010) (cleaned up and emphasis added); see also Compagnie Des Bauxites de Guinee v. L’Union Atlantique S.A. d’Assurances, 723 F.2d 357, 362 (3d Cir. 1983) (“A plaintiff who is a total stranger to a corporation should not be required, unless he has been undiligent, to try such an issue on affidavits without the benefit of full discovery.” (citation omitted)). In other words, jurisdictional discovery should be allowed unless plaintiff is attempting to “undertake a fishing expedition based only upon bare allegations” or a claim is “clearly frivolous.” Eurofins, 623 F.3d at 157; Toys “R” Us, Inc. v. Step Two, S.A., 318 F.3d 446, 456 (3d Cir. 2003) (citation omitted). Here, the district court abused its discretion in not allowing jurisdictional discovery on the record before it. In front of the magistrate judge, UMass made more than clearly frivolous, bare allegations that L’Oréal S.A. was subject to personal jurisdiction, either because L’Oréal S.A. introduced the accused products into the stream of commerce or because L’Oréal USA operated as L’Oréal S.A.’s agent in certain potentially relevant respects. See Plaintiffs’ Memorandum of Law in Opposition to Defendant L’Oréal S.A.’s Motion to Dismiss at 1–17, University of Massachusetts v. L’Oreal S.A., No. 1:17-cv-00868 (D. Del. Dec. 8, 2017), ECF No. 27. For example, as potentially relevant to both theories, UMass put forward evidence buttressing the possibility that L’Oréal S.A. researched and developed the addition of adenosine to skin-care products, J.A. 263–69; J.A. 1070; J.A. 1073–77, and L’Oréal S.A.’s own submitted declaration indicated that L’Oréal S.A. may have licensed that technology to L’Oréal USA, J.A. 553–54 (Rabinowitz Decl. ¶ 6) (“From time to time, L’Oréal S.A. and L’Oréal USA engage in the sale of goods or services between the two companies.”). For its part, L’Oréal S.A. did not specifically deny allegations that it developed and licensed the relevant technology to L’Oréal USA, stating only that “L’Oréal S.A. does not directly develop, sell, market, or advertise to consumers in Delaware any of the products at issue in this action,” without making it clear what it meant by “directly develop.” J.A. 553–54 (Rabinowitz Decl. ¶ 6).

 

 

Because this evidence raises the possibility that discovery might have uncovered the requisite contacts under our precedent, see, e.g., Nuance Communications, Inc. v. Abbyy Software House, 626 F.3d 1222, 1233–34 (Fed. Cir. 2010); Celgard, LLC v. SK Innovation Co., 792 F.3d 1373, 1379–82 (Fed. Cir. 2015), we vacate the jurisdictional determinations. UMass is entitled to jurisdictional discovery before any jurisdictional determination, if one remains necessary, is made.

 

 

 

 

 

(U.S. Court of Appeals for the Federal Circuit, June 13, 2022, University of Massachusetts v. L’Oréal S.A., Docket No. 2021-1969)

 

U.S. Court of Appeals for the Federal Circuit, Broadcom Corp. v. International Trade Commission, Docket No. 20-2008

Import

 

Customs

 

Patent Infringement

 

19 U.S.C.  § 1337  

Existence of a Domestic Industry Requirement (Consists of an “Economic Prong” and a “Technical Prong.”)

 

 

 

Appeal  from  the  United  States  International  Trade  Commission in Investigation No. 337-TA-1119.

 

 

 

Broadcom Corporation (“Broadcom”) filed a complaint at the International Trade Commission (“the Commission”) alleging a violation of 19 U.S.C. § 1337  (“Section  337”) based on the importation of products by Renesas Electronics Corporation (“Renesas”) and other companies that are asserted to infringe U.S.  Patents 7,437,583  (the “’583  patent”) and 7,512,752 (the “’752 patent”). In a final initial determination, the administrative law judge (“the ALJ”) held that  Broadcom failed to demonstrate a violation of Section 337 with respect to the ’583 patent because it failed to satisfy the technical prong of the domestic industry requirement and because there was no infringement of claim 25. (For the ’752 patent, the ALJ held that claim 5 would have been unpatentable as obvious over certain prior art). The parties then filed petitions seeking Commission review, and the Commission affirmed the relevant portions of the    final initial determination. Certain Infotainment  Sys., Components Thereof, and  Auto.  Containing the Same, Inv. No. 337-TA-1119 (May 28, 2020) (Final) (“Decision I”).

 

 

(…) Holding that there was no Section 337 violation because Broadcom failed to show the existence of a domestic industry (…).

 

At the Commission, Broadcom alleged a violation of Section 337 based on the importation of products by Renesas and other companies that it asserts infringe claims 17 and 18 and 25 and 26. Each of the accused infringers was a respondent in the Commission investigation and most have intervened in support of the Commission in this appeal.

 

In the final initial determination, the ALJ held that Broadcom failed to demonstrate that its system-on-a-chip (“SoC”) satisfied the technical prong of the domestic industry requirement in Section 337 because the SoC did not include a “clock tree driver,” which is a limitation of the asserted claims. J.A. 46. The ALJ also held that Broadcom failed to demonstrate infringement of claims 25 and 26 because it “could not identify any specific source code in the accused product where the claimed sequence of events ‘actually happened.’” J.A. 96. The Commission affirmed both holdings.

 

The Commission determined that there was no Section 337 violation because Broadcom failed to satisfy the technical prong of the domestic industry requirement. On appeal, Broadcom asserts error in the Commission’s findings of fact. Reviewing these findings for substantial evidence, we affirm the Commission’s decision.

 

To establish a violation of Section 337 a complainant must show both infringement and that an industry “relating to the articles protected by the patent . . . exists or is in the process of being established” in the United States. 19 U.S.C. § 1337(a)(2), (3). Under Commission precedent, the domestic industry requirement consists of an “economic prong” and a “technical prong.” See, e.g., Alloc, Inc. v. ITC, 342 F.3d 1361, 1375 (Fed. Cir. 2003). To meet the technical prong, the complainant must establish that it practices at least one claim of the asserted patent. This requires a complainant to identify “actual ‘articles protected by the patent.’” Microsoft Corp. v. ITC, 731 F.3d 1354, 1361–62 (Fed. Cir. 2013) (citing 19 U.S.C. § 1337(a)(2)–(a)(3)). To meet the economic prong, the complainant must demonstrate that its investment in the protected article is “significant” or “substantial.” 19 U.S.C. §1337(a)(3). The economic prong is not at issue in this appeal.

 

The ALJ determined that Broadcom identified only its SoC as a domestic industry article. However, the ALJ found, and Broadcom did not dispute, that the SoC did not contain the “clock tree driver” that is required by claim 25; it found that the driver must be stored on an external memory, separate from the SoC. But Broadcom instead argued that it satisfies the technical prong of the domestic industry requirement because it collaborates with its customers to integrate its SoC with external memory to enable retrieval and execution of the “clock tree driver” firmware. However, the ALJ faulted Broadcom for failing to identify any specific external memory that contained the “clock tree driver,” and noted that an actual article protected by the patent is needed to meet the industry requirement.

 

The Commission similarly found that Broadcom failed to identify any specific integration of the purported domestic industry SoC and the “clock tree driver” firmware, or a specific location where the firmware was stored. The Commission reasoned that without identifying an actual integration of the SoC and “clock tree driver,” Broadcom posited only a hypothetical device that did not meet claim 25’s limitations and therefore did not satisfy the technical prong of the domestic industry requirement. The Commission added that Broadcom’s new argument, i.e., that it manufactured and tested a “system” that included an SoC and firmware that contained the clock tree driver, was waived because Broadcom did not raise this theory in the ALJ proceedings.

 

We agree with the Commission that Broadcom failed to satisfy the technical requirement. We have previously found that, in order to meet the technical requirement of Section 337, a complainant must “show that there is a domestic industry product that actually practices” at least one claim of the asserted patent. Microsoft, 731 F.3d at 1361. In Microsoft, the patentee Microsoft supplied a mobile operating system to its customers. Id. at 1358, 1361. Microsoft’s asserted patent dealt with server-client communications, in which the client application was run on a mobile phone manufactured by Microsoft’s customers. Id. at 1360–61. Microsoft failed to show, however, that any such client applications were actually implemented on any third-party mobile device. Id. We therefore found that Microsoft did not satisfy the domestic industry requirement.

 

Broadcom suffers from substantially the same failure of proof here. As in Microsoft, Broadcom failed to identify any specific integration of the domestic industry SoC and the “clock tree driver” firmware, or a specific location where the firmware was stored. Broadcom does not challenge this finding, and instead introduces new theories that the Commission properly deemed waived. Because Broadcom failed to identify an actual article that practices claim 25, the Commission’s finding that Broadcom failed to satisfy the domestic industry requirement of Section 337 was supported by substantial evidence.

 

In light of our affirmance of the Commission’s finding of no domestic industry, the portion of the Commission’s decision addressing infringement of claim 25 is moot. We thus do not address Broadcom’s appeal from that portion of the Commission’s decision.

 

 

 

 

(U.S. Court of Appeals for the Federal Circuit, March 8, 2022, Broadcom Corp. v. International Trade Commission, Docket No. 20-2008)

 

U.S. Court of Appeals for the Federal Circuit, WI-LAN INC. v. SHARP ELECTRONICS CORPORATION, Docket No. 2020-1041

 

Patent Infringement

Evidence

Discovery

Source Code Printout

Expert as a Substitute for a Fact Witness?

 

Wi-LAN Inc. appeals two related judgments of the United States District Court for the District of Delaware, on summary judgment in one instance and by stipulation in the other, holding that Sharp Electronics Corporation and Vizio, Inc. did not infringe the asserted claims of U.S. Patent No. 6,359,654 (“the ’654 patent”) and U.S. Patent No. 6,490,250 (“the ’250 patent”). We affirm.

 

(…) Here, the district court concluded that the source code printout could not be admitted under Rule 703 because it was not authenticated and, as a result, Wi-LAN was attempting to use Rule 703 as a “‘backdoor’ to allow the admission into evidence of otherwise inadmissible declarations and other materials simply because they might assist the jury’s evaluation of an expert’s opinions.” J.A. 31. We agree. Wi-LAN attempts to do exactly what is impermissible under Rule 703 by using its expert as a substitute for a fact witness to circumvent the rules of evidence to admit otherwise inadmissible evidence.

 

Wi-LAN argues that experts typically rely on material, like source code, in reaching opinions about infringement. That is obviously correct. But Wi-LAN has not made a showing that source code experts reasonably rely on unauthenticated source code printouts.

 

In light of these admissibility issues, Wi-LAN’s fallback position is that the district court should have granted it additional time to obtain an admissible version of the source code. We disagree. Wi-LAN had ample time to obtain the source code and to find custodial witnesses to authenticate the source code over the course of discovery but failed to do so.

 

Wi-LAN had been on notice since early 2016 that it was going to need the system-on-chip source code from third parties to prove its direct infringement case. Throughout the litigation, Wi-LAN repeatedly requested extensions of time to obtain the source code from the third-party manufacturers. Ultimately, however, Wi-LAN only procured a single printout version of the source code with declarations after suing the third-party manufacturers.

 

Wi-LAN, as the district court found, “had ample time and opportunities over years of litigation to obtain evidence of infringement from the system-on-chip manufacturers” but failed to do so. J.A. 32. Given this record, the district court did not abuse its discretion in denying Wi-LAN an additional opportunity to obtain an admissible form of the source code.

 

Secondary Sources: Charles Alan Wright, Arthur R. Miller & Victor J. Gold, Federal Practice and Procedure § 6274 (2d ed. 2020).

 

 

(U.S. Court of Appeals for the Federal Circuit, April 6, 2021, WI-LAN INC. v. SHARP ELECTRONICS CORPORATION, Docket No. 2020-1041)

 

 

 

U.S. Court of Appeals for the Federal Circuit, Communications Test Design, Inc. v. Contec, LLC, Docket No. 2019-1672

Declaratory Judgment Action (v. Complaint for Patent Infringement)

Declaratory Judgment Act

First-to-File Rule

Anticipatory filing was made in bad faith during active licensing discussions

Equitable considerations warranted departure from the first-to-file rule

Federal Comity

Forum Non Conveniens

Communications Test Design, Inc. (“CTDI”) filed suit in the United States District Court for the Eastern District of Pennsylvania, seeking declaratory judgment that its test systems do not infringe two of Contec, LLC’s patents (“the Pennsylvania action”). Six days later, Contec sued CTDI for patent infringement in the United States District Court for the Northern District of New York (“the New York action”). Contec moved to dismiss the Pennsylvania action, arguing that CTDI’s anticipatory filing was made in bad faith during active licensing discussions. The district court granted the motion, exercising its discretion to decline jurisdiction over CTDI’s declaratory judgment action. Commc’ns Test Design, Inc. v. Contec LLC, 367 F. Supp. 3d 350, 360 (E.D. Pa. 2019). In doing so, the court found that equitable considerations warranted departure from the first-to-file rule. CTDI appeals the district court’s dismissal of the Pennsylvania action. Because we conclude that the district court did not abuse the broad discretion accorded to it—both under the Declaratory Judgment Act, 28 U.S.C. § 2201(a) and pursuant to the first-to-file rule—we affirm.

(…) In September 2017, Contec sent a letter to CTDI to determine whether CTDI’s test systems infringed any claims of the asserted patents. Over the course of the following year, the parties exchanged numerous emails and letters. In June 2018, counsel for both parties met in person, and CTDI disclosed certain information about its test systems pursuant to a confidentiality agreement.

In September 2018, Contec’s counsel sent a letter to CTDI stating that “the parties’ extrajudicial process for obtaining information about CTDI’s systems, without the full discovery obligations that would be imposed during litigation, has proved unsatisfactory.” Counsel explained that Contec had a good faith basis to believe that CTDI infringes at least one claim of the asserted patents. The letter asked CTDI to indicate, by September 19, 2018, whether it was willing to “discuss potential terms for a patent license agreement.” Contec warned that, if it did not receive such confirmation, it would sue for patent infringement. Contec attached to its letter a draft of its proposed complaint.

On September 19—Contec’s stated deadline—Jerry Parsons, CTDI’s Chairman and chief executive officer (CEO), spoke on the phone with Hari Pillai, Contec’s CEO, about a possible license for Contec’s patents. During that conversation, Pillai proposed initial terms, and the executives agreed to talk again on September 24, when Parsons would make a counterproposal. After their discussion, Pillai emailed Parsons, confirming the follow-up call and indicating that he looked forward to the counterproposal.

Later that same day, CTDI’s counsel sent an email to Contec’s counsel, confirming that “CTDI will consider potential terms as requested in your most recent letter.” Counsel reiterated that, “despite our firm position on non- infringement and without admission, in an attempt to avoid an impasse, we remain willing to consider reasonable licensing terms and so, we encourage a continued conversation between the executives.”

On September 21—two days after accepting Contec’s request to discuss licensing terms—CTDI filed a declaratory judgment action in Pennsylvania. Later that afternoon, Parsons sent an email to Pillai, confirming that CTDI would put a licensing proposal together and accepting Pillai’s suggested time for their follow-up call on September 24. Parsons made no mention of the fact that CTDI had filed its declaratory judgment complaint.

On September 24—the day the CEOs were scheduled to talk—CTDI’s counsel emailed Contec’s counsel a copy of the declaratory judgment complaint. Counsel stated that official service would be held for a period of time to allow further discussion between the executives.

CTDI ultimately served its declaratory judgment complaint on October 15, 2018.

On September 27, 2018, Contec filed its complaint for patent infringement in the Northern District of New York.

On February 15, 2019, the district court granted Contec’s motion and dismissed CTDI’s complaint. At the outset, the court noted that “neither party disputes that an actual controversy exists here.” Commc’ns Test Design, 367 F. Supp. 3d at 355. Both the Pennsylvania and New York actions involve the same parties, the same patents, the same allegedly infringing products, and the same issue: whether CTDI’s test systems infringe Contec’s patents. The court recognized that, between CTDI’s first-filed declaratory judgment action and Contec’s subsequently filed patent infringement action, CTDI’s first-filed action is preferred “unless considerations of judicial and litigant economy, and the just and effective disposition of disputes, require otherwise.” Id. at 356 (quoting Genentech, Inc. v. Eli Lilly & Co., 998 F.2d 931, 937 (Fed. Cir. 1993), abrogated on other grounds by Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995)).

Recognizing that the anticipatory nature of CTDI’s suit is “merely one factor in the analysis” under the first-to-file rule, the district court explained that “interference with ongoing negotiations constitutes another ‘sound reason that would make it unjust’ to exercise jurisdiction over the declaratory judgment action.” The court also considered the convenience of the parties and availability of witnesses and determined that, “on balance the Northern District of New York is a more convenient forum to resolve the dispute between the parties.” Given these considerations, the district court dismissed the Pennsylvania action in favor of Contec’s later- filed infringement action.

(…) The district court dismissed CTDI’s declaratory judgment action so that Contec’s patent infringement action— filed six days later—could proceed in New York. In these circumstances, where the issue is whether a suit for declaration of patent rights should yield to a later-filed infringement suit, the trial court’s discretion is guided by the first- to-file rule, “whereby the forum of the first-filed case is favored.” Genentech, 998 F.2d at 937. “The ‘first-to-file’ rule is a doctrine of federal comity, intended to avoid conflicting decisions and promote judicial efficiency, that generally favors pursuing only the first-filed action when multiple lawsuits involving the same claims are filed in different jurisdictions.” Merial Ltd. v. Cipla Ltd., 681 F.3d 1283, 1299 (Fed. Cir. 2012) (citing Genentech, 998 F.2d at 937– 38). The filing date of an action derives from the filing of the complaint. Id. (citing Fed. R. Civ. P. 3). Under the first-to-file rule, a district court may choose to stay, transfer, or dismiss a later-filed duplicative action. Id.

(…) Here, the district court carefully considered the record of the parties’ dispute, up to and including the competing filings, and concluded that several factors warranted departure from the first-to-file rule. Specifically, the court found that: (1) CTDI filed its declaratory judgment complaint in anticipation of Contec’s patent infringement complaint; (2) CTDI’s suit interfered with ongoing negotiations between the parties and did not serve the objectives of the Declaratory Judgment Act; and (3) on balance, the Northern District of New York is a more convenient forum. As explained below, we find no abuse of discretion in the district court’s analysis.

(…) As to Contec, the district court considered that: (1) its corporate headquarters are in New York; (2) it has no witnesses, physical facilities or place of business in Pennsylvania; (3) Contec’s employee files for its current and former employees, its email server and its record databases are maintained in its New York facility; (4) three of the six inventors of the patents at issue are current residents of New York; and (5) five of the inventors, “who would serve as key witnesses,” are beyond the subpoena power of the district court. On balance, the court found that these factors favored Contec’s later-filed New York action.

(…) We find no error in the district court’s balancing of the convenience factors, which is committed to the court’s sound discretion. These factors, coupled with the district court’s findings that CTDI’s complaint interfered with ongoing negotiations and was filed in anticipation of Contec’s infringement suit, support the district court’s decision to depart from the first-to-file rule and dismiss CTDI’s complaint.

(U.S. Court of Appeals for the Federal Circuit, March 13, 2020, Communications Test Design, Inc. v. Contec, LLC, Docket No. 2019-1672, Circuit Judge O’Malley)

U.S. Court of Appeals for the Federal Circuit, In Re: Google LLC, Docket No. 19-126

Venue

Jurisdiction

Patent Infringement

Place of Business:

-       Real Property Ownership

-       Leasehold Interest

-       Possession

-       Control

-       Local Caches for Data

-       Internet Service Providers (ISPs)’ Datacenter

-       Rack Space Occupied by the GGC Servers

-       Physical Presence of an Employee or Other Agent of the Defendant

-       Agency Relationship

-       Right of Interim Control

-       Maintaining Equipment

-       Production, Storage, Transport, and Exchange of Goods or Services

Writ of Mandamus

Writ – All Writs Act

Contract Drafting

On Petition for Writ of Mandamus to the United States District Court for the Eastern District of Texas in Nos. 2:18-cv-00462-JRG, 2:18-cv-00463-JRG

Google LLC (“Google”) petitions for a writ of mandamus ordering the United States District Court for the Eastern District of Texas to dismiss the case for lack of venue. See Super Interconnect Techs. LLC v. Google LLC, No. 2:18- CV-00463-JRG, 2019 U.S. Dist. LEXIS 132005 (E.D. Tex. Aug. 7, 2019). We hold that mandamus is warranted and order that the case either be dismissed or transferred.

Super Interconnect Technologies LLC (“SIT”) sued Google for patent infringement in the Eastern District of Texas. Under the patent venue statute, 28 U.S.C. § 1400(b), “any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” SIT filed its suit after the Supreme Court’s decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514, 1517 (2017), which held that “a domestic corporation ‘resides’ only in its State of incorporation for purposes of the patent venue statute,” and this court’s decision in In re Cray, Inc., 871 F.3d 1355, 1360 (Fed. Cir. 2017), which held that a “regular and established place of business” under the patent venue statute must be: (1) “a physical place in the district”; (2) “regular and established”; and (3) “the place of the defendant.”

(…) SIT’s allegation of venue was based on the presence of several Google Global Cache (“GGC”) servers, which function as local caches for Google’s data.

The GGC servers are not hosted within datacenters owned by Google. Instead, Google contracts with internet service providers (ISPs) within the district to host Google’s GGC servers within the ISP’s datacenter. When a user requests Google’s content, the ISP attempts to route the user’s request to a GGC server within its own network (within the district) before routing the request to Google’s central data storage servers (outside the district). The GGC servers cache only a small portion of content that is popular with nearby users but can serve that content at lower latency—which translates to shorter wait times— than Google’s central server infrastructure. This performance benefit is in part due to the physical proximity of the GGC servers to the ISP’s users. This arrangement allows Google to save on bandwidth costs and improve user experience on its various platforms.

At the time of the complaint, Google had entered into contracts with two ISPs to host GGC servers owned by Google in the Eastern District of Texas: Cable One Inc. (“Cable One”) and Suddenlink Communications (“Suddenlink”). The contracts provided that the ISPs would host Google’s GGC servers in their data centers. Specifically, the GGC servers are installed in the ISP’s server racks, which are cabinets that accept standard server components. Each contract states that the ISP must provide “rack space, power, network interfaces, and IP addresses,” for the GGC servers, and provide “network access between the GGC servers and the ISP’s network subscribers.” Supplemental Record, Dkt. 31, Ex. A, at 1; id., Ex. B, at 1. The contracts permit the ISPs to select the rack space for the GGC servers, but they tightly restrict the ISPs’ ability to relocate the servers without Google’s permission once a location is selected. Id., Ex. A, at 2; id., Ex. B at 2. The contracts also strictly limit any unauthorized access to the space used by Google’s servers. Id., Ex. A, at 6–7; id., Ex. B, at 5. The contracts state that the ISPs are required to provide “installation services,” i.e., installing the GGC servers in the server racks. Id., Ex. A, at 1; id., Ex. B at 1. While the contracts forbid the ISPs to “access, use, or dispose of” the GGC servers without Google’s permission, id., Ex. A, at 2; id., Ex. B at 2, they also require the ISPs to provide “remote assistance services,” which “involve basic maintenance activities” performed on the GGC servers by the ISP’s onsite technician, if requested by Google, id., Ex. A, at 1, 6; id., Ex. B, at 1, 5. It is undisputed that no Google employee performed installation of, performed maintenance on, or physically accessed any of the GGC servers hosted by Cable One or Suddenlink.

Google moved to dismiss the complaint for improper venue under 28 U.S.C. § 1406(a) and Federal Rule of Civil Procedure 12(b)(3). The district court denied Google’s motion (…) found that the GGC servers qualified as Google’s “regular and established place of business”.

Google now petitions for a writ for mandamus directing the district court to dismiss the case for lack of venue under § 1400(b). Acushnet and 17 other companies filed an amicus brief in support of Google’s petition. This court heard oral argument on December 13, 2019.

This court “may issue all writs necessary or appropriate in aid of its jurisdiction and agreeable to the usages and principles of law” under the All Writs Act. 28 U.S.C. § 1651(a). The Supreme Court has held that three conditions must be met before a writ may issue: (1) the petitioner “must have no other adequate means to attain . . . relief,” (2) the petitioner must show that the right to mandamus is “clear and indisputable,” and (3) the court must be “satisfied that the writ is appropriate under the circumstances.” Cheney v. U.S. Dist. Court for D.C., 542 U.S. 367, 380 (2004) (first alteration in original).

(…) This court has not addressed this fundamental and recurring issue of patent law. We thus conclude that mandamus is an available remedy.

Under Cray, there are three general requirements to establishing that the defendant has a regular and established place of business: “(1) there must be a physical place in the district; (2) it must be a regular and established place of business; and (3) it must be the place of the defendant.” 871 F.3d at 1360.

The first question is whether the rack space occupied by the GGC servers constitutes a “place” under § 1400(b) as interpreted in Cray. As the court in Cray emphasized, “the first requirement [under § 1400(b)] is that there ‘must be a physical place in the district.’” 871 F.3d at 1362. A “place” merely needs to be a “physical, geographical location in the district from which the business of the defendant is carried out.” Id.

Google’s petition suggests that a court’s inquiry into whether the defendant has a physical “place of business” should focus on whether the defendant has real property ownership or a leasehold interest in real property. We hold that a “place” need not have such attributes. In Cray, we rejected the notion that a “virtual space” or “electronic communications from one person to another” could constitute a regular and established place of business. 871 F.3d at 1362. Here, the GGC servers are physically located in the district in a fixed, geographic location. Indeed, Cray itself recognized that a “place of business” is not restricted to real property that the defendant must “own or lease,” and that the statute could be satisfied by any physical place that the defendant could “possess or control.” Id. at 1363 (discussing the third Cray factor). (…) see also In re Cordis Corp., 769 F.2d 733, 735, 737 (Fed. Cir. 1985) (suggesting that defendant’s employees’ homes, which were used to store the defendant’s “literature, documents and products,” could constitute a “regular and established place of business”).

(…) We agree, however, with Google’s alternative argument that under the second Cray factor, a “place of business” generally requires an employee or agent of the defendant to be conducting business at that place. This is apparent from the service statute for patent cases, now codified at 28 U.S.C. § 1694.

We conclude that a “regular and established place of business” requires the regular, physical presence of an employee or other agent of the defendant conducting the defendant’s business at the alleged “place of business.”

The question then is whether Google had an employee or agent with a regular, physical presence at its “place of business” and whether that employee or agent was conducting Google’s business. The record is clear that there is no Google employee conducting business in the Eastern District of Texas. However, there is nonetheless the question of whether the ISPs are acting as Google’s agent.

An agency relationship is a “fiduciary relationship that arises when one person (a ‘principal’) manifests assent to another person (an ‘agent’) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents to act.” Restatement (Third) of Agency § 1.01. The essential elements of agency are (1) the principal’s “right to direct or control” the agent’s actions, (2) “the manifestation of consent by the principal to the agent that the agent shall act on his behalf,” and (3) the “consent by the agent to act.” Meyer v. Holley, 537 U.S. 280, 286 (2003).

Google contracted with two ISPs, Cable One and Suddenlink, to host its GGC servers. The contracts stated that, for each ISP, Google would provide the ISP with GGC server equipment, which the ISP would install and host in server racks within its datacenter. The contracts contemplated that the ISP would perform three functions.

First, the ISP provides the GGC servers with network access, i.e., a connection to the ISP’s customers, as well as the public Internet. The ISP provides Google with a service, and Google has no right of interim control over the ISP’s provision of network access beyond requiring that the ISP maintain network access to the GGC servers and allow the GGC servers to use certain ports for inbound and outbound network traffic. In this respect, the ISPs are not agents of Google. See Restatement (Third) of Agency § 1.01 cmt. f(1) (“The power to give interim instructions distinguishes principals in agency relationships from those who contract to receive services provided by persons who are not agents.”).

Second, the ISP performs installation of the GGC servers. The contracts with the ISPs stated that the ISP was responsible for the installation of the GGC servers, including “coordination with logistics and shipping personnel; inventory of equipment received; unpacking equipment; assembling equipment based on information and instructions provided by Google; . . . connecting equipment to power strip(s) and Ethernet cable(s); and powering up equipment & executing installation scripts configuring IP address information.” Supplemental Record, Ex. A at 6; id., Ex. B at 5. Although these provisions may be suggestive of an agency relationship, we do not consider the ISPs performing these installation functions to be conducting Google’s business within the meaning of the statute. The installation activity does not constitute the conduct of a “regular and established” business, since it is a one-time event for each server.

Third, the contracts provide that “Google may from time to time request that the ISP perform certain services” involving “basic maintenance activities” with respect to the GGC servers. Id., Ex. A at 6; id., Ex. B at 5. The contracts provided examples of these activities:

Physical switching of a toggle switch; power cycling equipment . . . ; remote visual observations and/or verbal reports to Google on its specific collocation [sic] cabinet(s) for environment status, display lights, or terminal display information; labeling and dress-up of cabling within cabinet; tightening screws, cable ties, or securing cabling to mechanical connections, plugs; replacing existing plug-in only hardware such as circuit cards with spares or upgrades.

Id., Ex. A at 6; id., Ex. B at 5. The ISP’s conduct as to these activities is permitted “only with specific and direct step-by-step instructions from Google.” Id., Ex. A at 6; id., Ex. B at 5. The ISP is also prohibited from “accessing, using, or disposing of the GGC servers, in whole or in part” without Google’s prior written consent. Id., Ex. A at 2; see also Ex. B at 2.

Although the maintenance provision, like the provision on installation, may be suggestive of an agency relationship, SIT has not established that the ISPs performing the specified maintenance functions are conducting Google’s business within the meaning of the statute. The better reading of the statute is that the maintenance activities cannot, standing alone, be considered the conduct of Google’s business.

Maintaining equipment is meaningfully different from—as only ancillary to—the actual producing, storing, and furnishing to customers of what the business offers. In 1897, Congress focused on the latter sorts of activities as the conduct of business. See 29 Cong. Rec. 1900 (1897) (statement of Rep. Lacey) (discussing venue in the context of agents performing traditional business functions, such as manufacturing, sales, or direct customer services); id. at 1902 (discussing similarities to a law conferring “jurisdiction” to sue agents of an insurance company). There is no suggestion in the legislative history that maintenance functions that existed at the time, such as the maintenance of railways or telegraph lines, constituted “conducting the defendant’s business” within the meaning of the statute. See id. at 1900–02.

(…) Clear intent of Congress in enacting the statute to restrict venue to where the defendant resides or is conducting business at a regular and established place of business, with agents there regularly conducting that business, lead us to our conclusion. The venue statute should be read to exclude agents’ activities, such as maintenance, that are merely connected to, but do not themselves constitute, the defendant’s conduct of business in the sense of production, storage, transport, and exchange of goods or services.

We conclude that the Eastern District of Texas was not a proper venue because Google lacked a “regular and established place of business” within the district since it has no employee or agent regularly conducting its business at its alleged “place of business” within the district.

To be clear, we do not hold today that a “regular and established place of business” will always require the regular presence of a human agent, that is, whether a machine could be an “agent.” Such a theory would require recognition that service could be made on a machine pursuant to 28 U.S.C. § 1694. Nor do we decide what might be inferred in this respect from Congress’ amendment to the venue statute in the AIA concerning automated teller machines. See AIA § 18(c).

(U.S. Court of Appeals for the Federal Circuit, February 13, 2020, In Re: Google LLC, Docket No. 19-126, Circuit Judge Dyk)