Liqwd, Inc. et al v. L'Oreal USA, Inc. et al

RESPONSE TO OBJECTIONS

D. Del.January 16, 2019

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE LIQWD, INC. and OLAPLEX LLC, Plaintiffs, v. L’ORÉAL USA, INC., L’ORÉAL USA PRODUCTS, INC., L’ORÉAL USA S/D, INC., and REDKEN 5TH AVENUE NYC, LLC, Defendants. ) ) ) ) ) ) ) ) ) ) ) C.A. No. 17-14-JFB-SRF DEFENDANTS’ RESPONSE TO PLAINTIFFS’ OBJECTIONS TO MAGISTRATE JUDGE’S DISCOVERY ORDER Of Counsel: Dennis S. Ellis Katherine F. Murray Paul Hastings LLP 515 South Flower Street, 25th Floor Los Angeles, CA, 90071 (213) 683-6000 Naveen Modi Joseph E. Palys Daniel Zeilberger Paul Hastings LLP 875 15th Street, N.W. Washington, D.C., 20005 (202) 551-1990 Scott F. Peachman Paul Hastings LLP 200 Park Avenue New York, NY 10166 212-318-6000 Dated: January 16, 2019 Frederick L. Cottrell, III (#2555) Jeffrey L. Moyer (#3309) Katharine L. Mowery (#5629) Richards, Layton & Finger, P.A. One Rodney Square 920 N. King Street Wilmington, Delaware 19801 (302) 651-7700 cottrell@rlf.com moyer@rlf.com mowery@rlf.com Attorneys for Defendants Case 1:17-cv-00014-JFB-SRF Document 613 Filed 01/16/19 Page 1 of 12 PageID #: 33422 i TABLE OF CONTENTS Page TABLE OF AUTHORITIES .......................................................................................................... ii I. Introduction and Summary of Argument ............................................................................ 1 II. Procedural History .............................................................................................................. 2 III. Standard of Review ............................................................................................................. 3 IV. Argument ............................................................................................................................ 4 A. WesternGeco Does Not Support Olaplex ............................................................... 4 B. Olaplex Neglects to Address Controlling Precedent That Is Fatal to Its Argument That the Holding in WesternGeco Should Be Expanded ........................................ 5 V. Conclusion .......................................................................................................................... 8 Case 1:17-cv-00014-JFB-SRF Document 613 Filed 01/16/19 Page 2 of 12 PageID #: 33423 ii TABLE OF AUTHORITIES Page(s) Cases Cardiac Pacemakers, Inc. v. St. Jude Medical, Inc., 576 F.3d 1348 (Fed. Cir. 2009) (en banc)..........................................................................1, 4, 5 Degussa v. Materia Inc., No. 09-CV-636 NLH-JS, 2011 WL 3707067 (D. Del. Aug. 24, 2011) .....................................3 Enplas Display Device Corp. v. Seoul Semiconductor Co., Ltd., 909 F.3d 398 (Fed. Cir. 2018)................................................................................................2, 7 Limelight Networks, Inc. v. Akamai Technologies, Inc., 572 U.S. 915 (2014) ...........................................................................................................2, 6, 7 Power Integrations, Inc. v. Fairchild Semiconductor International, Inc., No. 04-1371-LPS, 2018 WL 4804685 (D. Del. Oct. 4, 2018) ...................................................5 United States v. U.S. Gypsum Co., 333 U.S. 364 (1948) ...................................................................................................................3 WesternGeco LLC v. ION Geophysical Corp., 138 S. Ct. 2129 (2018) ..................................................................................................... passim Statutes 35 U.S.C. § 271(a) ................................................................................................................. passim 35 U.S.C. § 271(b) ................................................................................................................. passim 35 U.S.C. § 271(f) .................................................................................................................. passim 35 U.S.C. § 284 ........................................................................................................................1, 4, 5 Case 1:17-cv-00014-JFB-SRF Document 613 Filed 01/16/19 Page 3 of 12 PageID #: 33424 1 I. INTRODUCTION AND SUMMARY OF ARGUMENT Magistrate Judge Fallon’s December 12, 2018 order (“Discovery Order”) correctly denied Plaintiffs Liqwd, Inc. and Olaplex LLC’s (collectively, “Olaplex”) motion to compel Defendants L’Oréal USA, Inc., L’Oréal USA Products, Inc., L’Oréal USA S/D, Inc., and Redken 5th Avenue NYC, LLC (collectively, “L’Oréal USA”) to produce worldwide sales data when L’Oréal USA has already produced voluminous sales data for the relevant country—the United States. In suggesting otherwise, Olaplex misstates black letter patent law and fails to provide any reason why this Court should depart from controlling precedent from the Federal Circuit and the Supreme Court. Olaplex’s motion stems from a recent decision, WesternGeco LLC v. ION Geophysical Corp., 138 S. Ct. 2129 (2018), where the Supreme Court held that “in a case involving infringement under [35 U.S.C.] § 271(f)(2),” where “the act of exporting components from the United States” is at issue, lost-profit damages associated with the foreign sale of those exported components “were a [proper] domestic application of [35 U.S.C.] § 284.” WesternGeco, 138 S. Ct. 2129, 2138 (2018). Section 271(f), however, is unavailable to Olaplex because the patents- at-issue only include method claims. See Cardiac Pacemakers, Inc. v. St. Jude Med., Inc., 576 F.3d 1348, 1365 (Fed. Cir. 2009) (en banc) (“[T]he language of Section 271(f), its legislative history, and the provision’s place in the overall statutory scheme all support the conclusion that Section 271(f) does not apply to method patents.”) (emphasis added). Indeed, Olaplex now tacitly concedes it cannot claim relief under Section 271(f), but suggests it is entitled to foreign sales data because it is pursuing direct infringement under Section 271(a) and induced infringement under Section 271(b). The fatal flaw in Olaplex’s argument, however, is that infringement of a method claim under Sections 271(a) and (b) must be tied to performance of the claimed method in the United Case 1:17-cv-00014-JFB-SRF Document 613 Filed 01/16/19 Page 4 of 12 PageID #: 33425 2 States. Even if the general principles of WesternGeco could be extended to apply in some instances to these sections of the patent statute, as Olaplex suggests, Olaplex utterly fails to provide a reason for doing so here. Instead, Olaplex misstates the law in an attempt to convince the Court to grant relief. Specifically, Olaplex asserts (in an improper new argument that was not presented to Magistrate Judge Fallon) that it is entitled to foreign sales information because “[t]he manufacture of a product in the United States, which is then shipped abroad with instructions for infringing use, triggers Section 271(b) liability.” (D.I. 593 at 6.) This is flat wrong. The Supreme Court has held that “a defendant may not be liable for inducing infringement of a patent under 35 U.S.C. § 271(b) when no one has directly infringed the patent under § 271(a) or any other statutory provision,” Limelight Networks, Inc. v. Akamai Techs., Inc., 572 U.S. 915, 917 (2014) (emphasis added), and Section 271(a) expressly requires the purported infringing use to occur “within the United States,” 35 U.S.C. § 271(a). Indeed, removing any possible doubt, the Federal Circuit recently reaffirmed (after the WesternGeco decision issued) that “liability for induced infringement under § 271(b)” requires a “patentee [to] prove[] the defendant possessed the requisite knowledge and specific intent to induce direct infringement in the United States.” Enplas Display Device Corp. v. Seoul Semiconductor Co., Ltd., 909 F.3d 398, 408 (Fed. Cir. 2018) (emphasis added). L’Oréal USA respectfully submits that Olaplex’s objections filed January 2, 2019 (D.I. 593) are without merit and should be overruled. II. PROCEDURAL HISTORY When Olaplex sought relief from Magistrate Judge Fallon, it argued that WesternGeco “[held] that worldwide patent damages for infringement . . . relating to supplying components from the U.S. to be combined outside the U.S. in a manner that would be infringing in the U.S., may be awarded.” (D.I. 527 at 3.) Thus, Olaplex mapped its purported relief to Section 271(f), Case 1:17-cv-00014-JFB-SRF Document 613 Filed 01/16/19 Page 5 of 12 PageID #: 33426 3 which is the provision that was at issue in WesternGeco and is the only provision of Section 271 that speaks to supplying components from the United States to be combined outside the United States. L’Oréal USA responded by pointing out that (1) Olaplex had neglected to inform the Court of controlling precedent prohibiting relief under Section 271(f) for method claims (like those at issue here), and (2) Olaplex had in any event not articulated any legitimate grounds for seeking worldwide manufacturing and sales information. (D.I. 530 at 1-2.) At the hearing, Olaplex shifted gears and pressed the theory—in direct contrast to Section 271(a)’s express language that requires infringement to occur “within the United States” (as Olaplex now concedes)—that there can be “direct infringement abroad.” (D.I. 593-2 at 63:8-11.) Olaplex did not provide any argument remotely connecting any purported infringement of its method claims in the United States to foreign sales. Olaplex now shifts gears again and attempts to legitimize its request for foreign sales data through the theory that “[t]he manufacture of a product in the United States, which is then shipped abroad with instructions for infringing use, triggers Section 271(b) liability.” (D.I. 593 at 6.) This argument was not presented to Magistrate Judge Fallon, and is in any event unfounded and contrary to well-settled law. III. STANDARD OF REVIEW “A district court judge will only reverse a magistrate judge’s opinion on pretrial matters if it is clearly erroneous or contrary to law.” Degussa v. Materia Inc., No. 09-CV-636 NLH-JS, 2011 WL 3707067, at *2 (D. Del. Aug. 24, 2011) (internal quotation marks omitted). Olaplex argues that “[t]he Discovery Order should be set aside as clearly erroneous.” (D.I. 593 at 5.) “A finding is ‘clearly erroneous’ when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.” United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948). Case 1:17-cv-00014-JFB-SRF Document 613 Filed 01/16/19 Page 6 of 12 PageID #: 33427 4 IV. ARGUMENT The Discovery Order correctly rejected Olaplex’s improper request for worldwide sales data relating to purported infringement of the method claims in the asserted patents. Olaplex has not presented any theory on which it is entitled to relief, and its efforts to say otherwise run in direct conflict with controlling Supreme Court and Federal Circuit precedent. A. WesternGeco Does Not Support Olaplex In WesternGeco, the Supreme Court recognized that “[t]o determine the focus of § 284 [the damages section of the patent statute] in a given case, we must look to the type of infringement that occurred.” WesternGeco, 138 S. Ct. at 2134. Thus, the Court “turn[ed] to § 271(f)(2), which was the basis for WesternGeco’s infringement claim and the lost-profits damages that it received.” Id. The Court explained that while “[t]he general infringement provision, § 271(a), covers most infringements that occur ‘within the United States,’” “[t]he subsection at issue in [WesternGeco], § 271(f), expands the definition of infringement to include supplying from the United States a patented invention’s components.” WesternGeco, 138 S. Ct. at 2134. The Court thus found that, while “Section 271(f)(2) focuses on domestic conduct,” it can be tied to lost-profit damages associated with foreign sales since the provision requires components being “combined outside of the United States.” Id. at 2137-38. Section 271(f), however, is not available to Olaplex. This is because the patents-in-suit include only method claims. The claims of U.S. Patent No. 9,498,419 are directed to a “method for bleaching hair” (D.I. 126, Ex. A at col. 25, l. 42 – col. 26, l. 53), and the claims of U.S. Patent No. 9,668,954 are likewise directed to a “method for bleaching hair” (D.I. 126, Ex. B at col. 25, l. 58 – col. 27, l. 30). The Federal Circuit, sitting en banc, has held that “the language of Section 271(f), its legislative history, and the provision’s place in the overall statutory scheme all support the conclusion that Section 271(f) does not apply to method patents.” See Cardiac Pacemakers, Case 1:17-cv-00014-JFB-SRF Document 613 Filed 01/16/19 Page 7 of 12 PageID #: 33428 5 Inc. v. St. Jude Med., Inc., 576 F.3d 1348, 1365 (Fed. Cir. 2009) (en banc) (emphasis added). WesternGeco did not overturn Cardiac Pacemakers (nor does Olaplex allege that it did), and thus Cardiac Pacemakers is binding precedent that precludes relief for Olaplex under Section 271(f). B. Olaplex Neglects to Address Controlling Precedent That Is Fatal to Its Argument That the Holding in WesternGeco Should Be Expanded Olaplex apparently recognizes that it cannot obtain relief under Section 271(f), but argues that Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., No. 04-1371-LPS, 2018 WL 4804685 (D. Del. Oct. 4, 2018) expanded WesternGeco to hold “that worldwide damages are available under any subsection of Section 271.” (D.I. 593 at 5 (emphasis removed).) Olaplex misunderstands the import of Power Integrations, which found only that “[t]he Supreme Court’s analysis of the patent damages statute, § 284, has equal applicability to the direct infringement allegations pending [in Power Integrations], as governed by § 271(a), as it did to the supplying a component infringement claims at issue in [WesternGeco], which were governed by § 271(f)(2).” Power Integrations, 2018 WL 4804685, at *1. In other words, Power Integrations found that in circumstances where direct infringement can be tied to and causes foreign harm, relief for that harm may be available. However, regardless of whether Power Integrations was rightly decided,1 its conclusion is not relevant here since, as Magistrate Judge Fallon recognized, Olaplex failed to articulate any legitimate connection between any purported infringement and any foreign harm. 1 The Order in Power Integrations was cautiously certified for interlocutory appeal. Power Integrations, 2018 WL 4804685, at *2 (D. Del. Oct. 4, 2018) (“Rather than try this case based on this Court’s conclusion on implicit overruling – and risking, if wrong, two additional trials instead of just one more – it would materially advance the conclusion of this litigation to ask the Federal Circuit to tell us if, in light of [WesternGeco], the trial should be limited to U.S. damages or should, instead, consider worldwide damages.”). Case 1:17-cv-00014-JFB-SRF Document 613 Filed 01/16/19 Page 8 of 12 PageID #: 33429 6 At the hearing, Olaplex suggested that it was entitled to foreign sales information because there can be “direct infringement abroad.” (D.I. 593-2 at 63:8-11.) Olaplex’s argument, however, ran in direct conflict with the language of Section 271(a), which only speaks to direct infringement “within the United States.” 35 U.S.C. § 271(a). Indeed, Olaplex now concedes this requirement of Section 271(a). (D.I. 593 at 6 (recognizing the “requirement that the infringement occur ‘within the United States’ . . . in Section 271(a)”).) Olaplex’s latest theory that it is entitled to foreign sales information rests on the idea that, even though Section 271(a) of the patent statute includes “a requirement that the infringement occur ‘within the United States,’” (D.I. 593 at 6), “[t]he manufacture of a product in the United States, which is then shipped abroad with instructions for infringing use, triggers Section 271(b) liability” (D.I. 593 at 6). The problem with Olaplex’s argument is that it has already been rejected by the Supreme Court. Specifically, in Limelight, the Supreme Court dealt with “the question [of] whether a defendant may be liable for inducing infringement of a patent under 35 U.S.C. § 271(b) when no one has directly infringed the patent under § 271(a) or any other statutory provision.” Limelight, 572 U.S. at 917. If answered in the positive, then Olaplex’s theory that—despite Section 271(a)’s express requirement for infringing use to occur “within the United States”—Section 271(b) encompasses inducement of infringement outside the United States may have made sense. However, the Supreme Court soundly rejected that argument, explaining that “[t]he statutory text and structure and our prior case law require that we answer this question in the negative.” Id. Indeed, Olaplex appears to confuse Section 271(b) with Section 271(f). As the Supreme Court further explained in Limelight: Section 271(f)(1) reinforces our reading of § 271(b). That subsection imposes liability on a party who “supplies or causes to Case 1:17-cv-00014-JFB-SRF Document 613 Filed 01/16/19 Page 9 of 12 PageID #: 33430 7 be supplied in or from the United States all or a substantial portion of the components of a patented invention ... in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States” (emphasis added). As this provision illustrates, when Congress wishes to impose liability for inducing activity that does not itself constitute direct infringement, it knows precisely how to do so. The courts should not create liability for inducement of non-infringing conduct where Congress has elected not to extend that concept. Id. at 922-23. In other words, the Supreme Court explained that Section 271(b) differs from Section 271(f) in that Section 271(b) does require underlying direct infringement that occurs within the United States. Id.; see also Enplas Display Device Corp., 909 F.3d at 408 (holding that “liability for induced infringement under § 271(b)” requires a “patentee [to] prove[] the defendant possessed the requisite knowledge and specific intent to induce direct infringement in the United States”) (emphasis added). Olaplex suggests that Magistrate Judge Fallon erred in taking into account that the patents-in-suit are method patents. (D.I. 593 at 5.) But it is Olaplex that “fundamentally misunderstands what it means to infringe a method patent.” Limelight, 572 U.S. at 921. “A method patent claims a number of steps [and under the Supreme] Court’s case law, the patent is not infringed unless all the steps are carried out.” Id. By way of example, consider two hairdressers, one in a salon in Delaware and one overseas in a salon in Switzerland. If the Delaware-based hairdresser performed all of the claimed steps of the patents, the hairdresser could potentially be found liable for direct infringement. And if some other person induced that Delaware-based hairdresser to perform all of those steps, they could potentially be found liable for induced infringement. On the other hand, if the Switzerland-based hairdresser performed all of the steps of the patents, the hairdresser could not be liable for any direct infringement under governing law since those steps would not have been performed in the United States. And if Case 1:17-cv-00014-JFB-SRF Document 613 Filed 01/16/19 Page 10 of 12 PageID #: 33431 8 some other person induced that Switzerland-based hair dresser to perform all of those steps, they too could not be liable for induced infringement under governing law. Thus, in the context of this case, there is simply no reason why foreign sales information should be considered. And Olaplex provides none, other than its erroneous belief (as explained above) that, while the Switzerland-based hairdresser would not be liable for direct infringement under Section 271(a), a person who induces the Switzerland-based hair dresser to act would be liable for induced infringement under Section 271(b). V. CONCLUSION Olaplex provides no legitimate reason for the Court to compel L’Oréal USA to produce worldwide sales data that bear no relationship to any of Olaplex’s claims. As such, for the reasons provided above, L’Oréal USA respectfully submits that Olaplex’s objections to the Discovery Order should be overruled. Case 1:17-cv-00014-JFB-SRF Document 613 Filed 01/16/19 Page 11 of 12 PageID #: 33432 9 Of Counsel: Dennis S. Ellis Katherine F. Murray Paul Hastings LLP 515 South Flower Street, 25th Floor Los Angeles, CA, 90071 (213) 683-6000 Naveen Modi Joseph E. Palys Daniel Zeilberger Paul Hastings LLP 875 15th Street, N.W. Washington, D.C., 20005 (202) 551-1990 Scott F. Peachman Paul Hastings LLP 200 Park Avenue New York, NY 10166 212-318-6000 Dated: January 16, 2019 /s/ Katharine L. Mowery Frederick L. Cottrell, III (#2555) Jeffrey L. Moyer (#3309) Katharine L. Mowery (#5629) Richards, Layton & Finger, P.A. One Rodney Square 920 N. King Street Wilmington, Delaware 19801 (302) 651-7700 cottrell@rlf.com moyer@rlf.com mowery@rlf.com Attorneys for Defendants Case 1:17-cv-00014-JFB-SRF Document 613 Filed 01/16/19 Page 12 of 12 PageID #: 33433