Smart Wearable Technologies Inc. v. Microsoft Corporation

Brief / Memorandum in Opposition re MOTION to Dismiss for improper venue MOTION to Transfer Case to Northern District of California .

W.D. Va.July 5, 2017

IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF VIRGINIA CHARLOTTESVILLE DIVISION SMART WEARABLE TECHNOLOGIES INC., Plaintiff, v. MICROSOFT CORPORATION, Defendant. § § § § § § § § § Case No. 3:16-CV-00047-GEC JURY TRIAL DEMANDED PLAINTIFF’S OPPOSITION TO DEFENDANT MICROSOFT CORP.’S MOTION TO DISMISS FOR IMPROPER VENUE Case 3:16-cv-00047-GEC Document 48 Filed 07/05/17 Page 1 of 13 Pageid#: 579 ii TABLE OF CONTENTS TABLE OF AUTHORITIES .......................................................................................... iii I. INTRODUCTION ............................................................................................... 1 II. LEGAL STANDARD .......................................................................................... 2 III. ARGUMENT ...................................................................................................... 3 A. Microsoft’s Motion is Barred Under the Requirement for Consolidation of Motions Filed Pursuant to F.R.C.P. 12 ................................................. 3 B. Improper Venue Defense was “Available To” Microsoft at the Time of Microsoft’s Filing of Microsoft’s Motion to Dismiss Pursuant to Rule 12(b)(6) ............................................................................................ 4 IV. CONCLUSION ................................................................................................... 7 CERTIFICATE OF SERVICE ........................................................................................ 9 Case 3:16-cv-00047-GEC Document 48 Filed 07/05/17 Page 2 of 13 Pageid#: 580 iii TABLE OF AUTHORITIES Cases: Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558 (Fed. Cir. 1994) .............................................................................. 4 Cobalt Boats, LLC v. Sea Ray Boats, Inc., Civil Action No. 2:15-CV-00021, 2017 U.S. Dist. LEXIS 90728 (E.D. Va. June 7, 2017) ................................................................................ 2, 5, 6 Concession Consultants, Inc. v. Mirisch, 355 F.2d 369 (2d Cir. 1966) ................................................................................. 2 Dubin v. United States, 380 F.2d 813 (5th Cir. 1967) ................................................................................. 2 Elbit Sys. Land v. Hughes Network Sys., LLC, No. 2:15-CV-00037-RWS-RSP, 2017 U.S. Dist. LEXIS 94495 (E.D. Tex. June 20, 2017) .................................................................................... 5 Fourco v. Transmirra, 353 U.S. 222 (1957) ..................................................................................... 5, 6, 7 Holland v. Big River Minerals Corp., 181 F.3d 597 (4th Cir. 1999) ................................................................................. 4 iLife Technologies, Inc. v. Nintendo of America, Inc., No. 3:13-CV-04987 (N.D. Tex. June 27, 2017) .................................................... 5 Leroy v. Great W. United Corp., 443 U.S. 173 (1979) ............................................................................................. 2 Longwall-Assocs. v. Wolfgang Preinfalk GmbH, Case No. 1:00CV00086, 2001 U.S. Dist. LEXIS 8113 (W.D. Va. June 12, 2001) .................................................................................... 2 Manley v. Engram, 755 F.2d 1463 (11th Cir. 1985) ............................................................................. 2 Midwest Indus. V. Karavan Trailers, Inc., 175 F.3d 1356 (Fed. Cir. 1999) ............................................................................ 4 Stonite Products Co. v. Melvin Lloyd Co., Case 3:16-cv-00047-GEC Document 48 Filed 07/05/17 Page 3 of 13 Pageid#: 581 iv 315 U.S. 561 (1942) ......................................................................................... 5, 6 TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S. Ct. 1514, No. 16-341, 2017 WL 2216934 (May 22, 2017) …………… 1, 2, 5, 6, 7 VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990) ............................................................................ 6 Westech Aerosol Corp. v. 3M Co., 2017 U.S. Dist. LEXIS 95768 .............................................................................. 7 Young Again Prods. v. Acord, 459 F. App’x 294 (4th Cir. 2011) .......................................................................... 2 Other F.R.C.P. 7........................................................................................................................ 4 F.R.C.P. 12 .......................................................................................................1, 2, 3, 4, 6 28 U.S.C. § 1391 ............................................................................................................. 5 28 U.S.C. § 1400 .................................................................................................... 1, 5, 6 28 U.S.C. § 1406 ............................................................................................................. 2 Case 3:16-cv-00047-GEC Document 48 Filed 07/05/17 Page 4 of 13 Pageid#: 582 1 Plaintiff Smart Wearable Technologies, Inc. (“Plaintiff” or “SWT”) hereby provides this response to Defendant Microsoft Corp.’s (“Microsoft”) Motion to Dismiss for Improper Venue. For at least the reasons provided herein, Defendant’s Motion should be denied. I. INTRODUCTION SWT filed its Complaint nearly a year ago on July 13, 2016 alleging direct, induced, and contributory infringement of U.S. Patent No. 6,997,8821 (“the ‘882 Patent”) by Microsoft. Dkt. No. 1. About two months later, in lieu of filing its Answer, Microsoft filed a motion under Rule 12 of the Federal Rules of Civil Procedure, a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) which was denied after a hearing and supplemental briefing. Dkt. No. 13, 37. Microsoft filed its Answer on February 14, 2017, generally denying SWT’s allegations relating to venue and asserted Improper Venue as a defense, stating that “Smart Wearables is barred from pursuing its claims in the Western District of Virginia because the venue is improper, and the Complaint, and each purported claim contained therein, should be dismissed under Rule 12(b)(3) of the Federal Rules of Civil Procedure or, in the alternative, transferred to the proper venue.” Dkt. No. 40 at 7. Microsoft has also served its Invalidity Contentions and has participated in discovery via submission of Microsoft’s discovery requests on SWT on May 1, 2017. Only now, after waiving its right to do so and after having availed itself of the jurisdiction of this Court, does Microsoft move for dismissal for improper venue pursuant to Rule 12(b)(3). This conduct is explicitly disallowed under Rule 12. Microsoft incorrectly states that TC 1 The ‘882 patent relates to systems and methods of monitoring a subject (e.g., a person) using acquired six degree- of-freedom (“6-DOF”) data regarding the subject as well as acquired physiological data of the subject. More specifically, the ‘882 Patent discloses deriving 6-DOF data descriptive of the movement of a subject which is synchronized and displayed with physiological data, such as the heart rate of the subject, for example. Microsoft designs, manufactures and sells fitness tracking products, including at least the Band products (“the Accused Products”), that incorporate the technology of the ‘882 patent. Case 3:16-cv-00047-GEC Document 48 Filed 07/05/17 Page 5 of 13 Pageid#: 583 2 Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S. Ct. 1514, No. 16-341, 2017 WL 2216934 (May 22, 2017) has changed the law of venue such that the now asserted improper venue defense has just become “available to” Microsoft. Because Microsoft has waived its right to challenge venue by not including the defense in its prior Rule 12 motion and because this defense has been “available to” Microsoft, just as it was to the Plaintiff’s in TC Heartland, Rule 12 mandates that Microsoft’s motion be denied. II. LEGAL STANDARD Venue is a personal privilege of the defendant that may be waived. Young Again Prods. v. Acord, 459 F. App'x 294, 306 (4th Cir. 2011) (citing Leroy v. Great W. United Corp., 443 U.S. 173, 180 (1979). Rule 12(h) provides that a defense of improper venue is waived if not timely raised. Longwall-Assocs. v. Wolfgang Preinfalk GmbH, Case No. 1:00CV00086, 2001 U.S. Dist. LEXIS 8113, at *4, 7-8 (W.D. Va. June 12, 2001). Improper venue must be raised in a motion made before or concurrent with a defendant’s responsive pleading, otherwise the defense is waived under Rule 12. Cobalt Boats, LLC v. Sea Ray Boats, Inc., Civil Action No. 2:15-CV-00021, 2017 U.S. Dist. LEXIS 90728, *5 (E.D. Va. June 7, 2017) (discussing effect of Fed. R. Civ. P. 12(b), (h)(1)). Once the improper venue defense is waived, any defect in venue is cured, and the benefits of a 28 U.S.C. § 1406(a) transfer for lack of venue are no longer available. Manley v. Engram, 755 F.2d 1463, 1468 (11th Cir. 1985) (citing Dubin v. United States, 380 F.2d 813, 815 (5th Cir. 1967); Concession Consultants, Inc. v. Mirisch, 355 F.2d 369 (2d Cir. 1966)). III. ARGUMENT Microsoft is precluded from filing its present motion by Rule 12 because Microsoft has filed a previous Rule 12 motion that did not assert the defense of improper venue, a defense Case 3:16-cv-00047-GEC Document 48 Filed 07/05/17 Page 6 of 13 Pageid#: 584 3 available to Microsoft at all times during the present suit. This Court, therefore, should dismiss Microsoft’s Motion. A. Microsoft’s Motion is Barred Under the Requirement for Consolidation of Motions Filed Pursuant to F.R.C.P. 12. As noted above, Microsoft has previously filed in this case a motion to dismiss pursuant to Rule 12(b)(6) as well as its Answer. See Dkt. Nos. 13, 40. Microsoft’s 12(b)(6) motion was filed prior to the present Microsoft Motion and, importantly, did not assert the Rule 12(b)(3) defense of improper venue. Instead, Microsoft asserted only that SWT’s Complaint be dismissed for failure to state a claim. See Dkt. No. 13. Application of Rule 12’s mandate that motions filed under that rule be consolidated, discussed in detail below, preclude Microsoft from even filing its present motion to now allege improper venue. Federal Rule of Civil Procedure 12, in relevant part, states: (b) Every defense to a claim for relief in any pleading must be asserted in the responsive pleading if one is required. But a party may assert the following defenses by motion: … (3) improper venue; … (6) failure to state a claim upon which relief can be granted; … (g) Joining Motions. … (2) Except as provided in Rule 12(h)(2) or (3), a party that makes a motion under this rule must not make another motion under this rule raising a defense or objection that was available to the party but omitted from its earlier motion. (h) Waiving and Preserving Certain Defenses. (1) A party waives any defense listed in Rule 12(b)(2)-(5) by: (A) omitting it from a motion in the circumstances described in Rule 12(g)(2); or … Case 3:16-cv-00047-GEC Document 48 Filed 07/05/17 Page 7 of 13 Pageid#: 585 4 (2) Failure to state a claim upon which relief can be granted, to join a person required by Rule 19(b), or to state a legal defense to a claim may be raised: (A) in any pleading allowed or ordered under Rule 7(a); (B) by a motion under Rule 12(c); or (C) at trial. (3) If the court determines at any time that it lacks subject- matter jurisdiction, the court must dismiss the action. USCS Fed Rules Civ. Proc. R. 12 (emphasis added). Application of Rule 12(g)(2) and 12(h)(1)(A) in the present instance bars the filing of Microsoft’s Motion, altogether, and without any need for consideration of the arguments made therein. Improper venue is one of the defenses subject to waiver under Rule 12(g)(2) and is not excepted from waiver by Rule 12(h)(2) or 12(h)(3). By its plain language, therefore, Rule 12’s mandate of the consolidation of filings renders Microsoft’s Motion and the improper venue defense raised therein moot. B. Improper Venue Defense was “Available To” Microsoft at the Time of Microsoft’s Filing of Microsoft’s 12(b)(6) Motion. The law of the circuit in which a district court lies is applied in patent cases for procedural issues. Midwest Indus. v. Karavan Trailers, Inc., 175 F.3d 1356, 1359 (Fed. Cir. 1999). The Fourth Circuit recognizes a general exception to waiver “when there has been an intervening change in the law recognizing an issue that was not previously available.” Holland v. Big River Minerals Corp., 181 F.3d 597, 605-06 (4th Cir. 1999). This exception is applicable to the present matter because it is procedural in nature rather than an application of patent-specific law, therefore Fourth Circuit law applies. Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1564 (Fed. Cir. 1994). Although this exception exists, it is not applicable here because there has been no intervening change in the law of venue. Case 3:16-cv-00047-GEC Document 48 Filed 07/05/17 Page 8 of 13 Pageid#: 586 5 Microsoft contends that the improper venue defense raised in its present motion was not “available to” Microsoft until the recent Supreme Court decision in TC Heartland. Dkt. No. 47 at 8. Microsoft makes this assertion in an attempt to fit within the intervening law exception and avoid preclusion of consideration of its present motion, but this assertion has no merit. It is both at odds with the explicit language of TC Heartland and, further, has been specifically rejected by three district courts considering the issue since the TC Heartland decision, including an Eastern District of Virginia court. See Cobalt Boats, 2017 U.S. Dist. LEXIS 90728 at *8 (“TC Heartland does not qualify for the intervening law exception to waiver because it merely affirms the viability of Fourco” which “has continued to be binding law since it was decided in 1957, and thus, it has been available to every defendant since 1957”); Elbit Sys. Land v. Hughes Network Sys., LLC, No. 2:15-CV-00037-RWS-RSP, 2017 U.S. Dist. LEXIS 94495, at *59-60 (E.D. Tex. June 20, 2017); iLife Technologies, Inc. v Nintendo of America, Inc. No. 3:13-CV-04987 (N.D. Tex. June 27, 2017)2. In Fourco, the Supreme Court interpreted the patent venue statute, 28 U.S.C. § 1400, following its enactment and in light of amendment to the general venue statute, 28 U.S.C. § 1391, in 1948. iLife, at 3 (discussing Fourco v. Transmirra, 353 U.S. 222 (1957)). The Supreme Court held that for purposes of the patent venue statute, a corporation “resides” only in its state of incorporation. Id. This holding was in agreement with a prior Supreme Court decision addressing substantially the same issue with regard to the predecessors to the patent and general venue statutes which held that the patent venue statute was “the exclusive provision controlling venue in patent infringement proceedings” that “limited a prior, broader venue.” Id. (citing Stonite Products Co. 2 True and correct copies of these decisions are provided herewith as Exhibits A-C, respectively, to the Decl. of Richard A. Wojcio, Jr. Case 3:16-cv-00047-GEC Document 48 Filed 07/05/17 Page 9 of 13 Pageid#: 587 6 v. Melvin Lloyd Co., 315 U.S. 561, 566 (1942). The Supreme Court has been consistent in its interpretation of the meaning of the patent venue statutes since Stonite. In TC Heartland, the defendant challenged venue citing inconsistencies in the law and citing Fourco. The issue made it up to the Supreme Court which held that “a domestic corporation ‘resides’ only in its state of incorporation for purposes of the patent venue statute.” TC Heartland LLC, 2017 WL 2216934 at *5. The rationale for this holding was application of the Supreme Court’s interpretation of the patent venue statute, 28 U.S.C. § 1400(b) from Fourco, in which “residence” for corporations was held to refer only to the state of incorporation. Id. The Supreme Court noted that “Congress had not amended § 1400(b) since Fourco” and that it remained good law. Id. at *5-6. In Cobalt Boats, the Court held the improper venue defense waived by both defendants, despite one having raised it in its answer, because it was not timely and sufficiently raised during the course of litigation and because the Supreme Court’s decision in TC Heartland did not constitute a change in the law. Cobalt Boats, 2017 U.S. Dist. LEXIS 90728 at *8. In reaching this conclusion, the Court rejected the argument that a challenge to venue was untenable and therefore unavailable in light of the Federal Circuit’s holding in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990); the same argument made by Microsoft. Id. The Court reasoned that TC Heartland merely applied the prior Supreme Court case law from Fourco which had remained undisturbed since 1957 either by the Supreme Court or by amendment to the patent venue statute, regardless of the Federal Circuit’s holding in VE Holding. Id. The holding in Cobalt Boats has since been cited to favorably by district courts in both the Eastern and Northern Districts of Texas considering the intervening law issue. Case 3:16-cv-00047-GEC Document 48 Filed 07/05/17 Page 10 of 13 Pageid#: 588 7 A single district court case stands apart in finding that TC Heartland did effect a change in the law, opening the door for applicability of the intervening law exception. See Westech Aerosol Corp. v. 3M Co., 2017 U.S. Dist. LEXIS 95768. Importantly, and apart from the facts of the present case, the Westech case was still at the pleadings stage when the defendant sought to add the defense of improper venue to its then-pending 12(b)(6) motion to dismiss which had not yet been responded to by plaintiff. Id. at *2. The Court in Westech merely permitted the defendant to amend its still pending motion to add improper venue as grounds for dismissal, reasoning that doing so would not result in any undue delay or prejudice given the early stage of the case. Id. This stands in contrast to all other cases considering this issue and is distinguished from this case in that the present litigation is substantially farther along than the pleadings stage. Here, there can be no argument that Microsoft’s opportunity to raise improper venue in a Rule 12 motion has passed. In light of the weight of the emerging case law on this issue, it is clear that the recent decision in TC Heartland did not effect a change in the law implicating the intervening law exception. As such, the defense of improper venue was available to Microsoft at all times in this case just as it has been to all defendants since Fourco was decided 60 years ago, case law that Microsoft has been aware of since before the filing of its Answer, which mentions the then-pending TC Heartland case, and has been waived by Microsoft through its choosing not to timely raise the issue. IV. CONCLUSION For the foregoing reasons, Plaintiff respectfully requests that the Court refuse to consider and deny Defendant’s Motion in its entirety. Case 3:16-cv-00047-GEC Document 48 Filed 07/05/17 Page 11 of 13 Pageid#: 589 8 Dated: July 5, 2017 /s/ Mark D. Obenshain Mark D. Obenshain (VSB # 27476) Justin M. Wolcott (VSB # 83367) OBENSHAIN LAW GROUP 420 Neff Avenue, Suite 130 Harrisonburg, VA 22801 Telephone: (540) 208-0727 Facsimile: (540) 266-3568 Email: mdo@obenshainlaw.com Email: jmw@obenshainlaw.com Counsel for Plaintiff Smart Wearable Technologies Inc. Of Counsel: Michael T. Cooke (Admitted Pro Hac Vice) Corby R. Vowell (Admitted Pro Hac Vice) Richard A. Wojcio Jr. (Admitted Pro Hac Vice) FRIEDMAN, SUDER & COOKE Tindall Square Warehouse No. 1 604 East 4th Street, Suite 200 Fort Worth, TX 76102 Telephone: (817) 334-0400 Facsimile: (817) 334-0401 Email: mtc@fsclaw.com Email: vowell@fsclaw.com Email: wojcio@fsclaw.com Case 3:16-cv-00047-GEC Document 48 Filed 07/05/17 Page 12 of 13 Pageid#: 590 9 CERTIFICATE OF SERVICE I hereby certify that on the 5th day of July, 2017, I electronically filed the foregoing document with the clerk of the court for the U.S. District Court for the Western District of Virginia, using the electronic case filing system of the court. The electronic case filing system sent a “Notice of Electronic Filing” to the attorneys of record who have consented in writing to accept this Notice as service of this document by electronic means. /s/ Mark D. Obenshain Case 3:16-cv-00047-GEC Document 48 Filed 07/05/17 Page 13 of 13 Pageid#: 591 Page 1 of 2 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF VIRGINIA CHARLOTTESVILLE DIVISION SMART WEARABLE TECHNOLOGIES INC., Plaintiff, v. MICROSOFT CORPORATION, Defendant. § § § § § § § § § Case No. 3:16-CV-00047-GEC JURY TRIAL DEMANDED DECLARATION OF RICHARD A. WOJCIO, JR. I, Richard A. Wojcio, Jr., hereby declare as follows: 1. I am an attorney with the law firm of Friedman, Suder & Cooke, and counsel for Plaintiff Smart Wearable Technologies, Inc in the above referenced matter. 2. I am competent to testify as to the matters stated herein and base this declaration on my personal knowledge and my review of the pleadings of this case. 3. I make this declaration in support of Plaintiff’s Opposition to Defendant Microsoft Corp.’s Motion to Dismiss for Improper Venue. 4. Attached as Exhibit A is a true and correct copy of Cobalt Boats, LLC v. Sea Ray Boats, Inc., Civil Action No. 2:15-CV-00021, 2017 U.S. Dist. LEXIS 90728 (E.D. Va. June 7, 2017). 5. Attached as Exhibit B is a true and correct copy of Elbit Sys. Land v. Hughes Network Sys., LLC, No. 2:15-CV-00037-RWS-RSP, 2017 U.S. Dist. LEXIS 94495 (E.D. Tex. June 20, 2017). 6. Attached as Exhibit C is a true and correct copy of iLife Technologies, Inc. v Nintendo of America, Inc., No. 3:13-CV-04987 (N.D. Tex. June 27, 2017). I declare under penalty of perjury that the foregoing is true and correct. Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 1 of 71 Pageid#: 592 Page 2 of 2 Dated: July 5, 2017 /s/ Richard A. Wojcio, Jr. Richard A. Wojcio, Jr. Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 2 of 71 Pageid#: 593 EXHIBIT A Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 3 of 71 Pageid#: 594 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Norfolk Division FILED -Aw - 7 2017 court COBALT BOATS, LLC, Plaintiff, V. Civil Action No. 2:15cv21 SEA RAY BOATS, INC. & BRUNSWICK CORP., Defendants. OPINION & ORDER This matter is before the Court on Defendants Sea Ray Boats, Inc.'s ("Sea Ray's") and Brunswick Corporation's ("Brunswick's"), (collectively, "Defendants'") Motion to Transfer Venue in View of TC Heartland f"Motion"1. Doc. 280. As set forth herein, the Court FINDS that Defendants waived venue and DENIES the Motion. I. BACKGROUND A, Procedural History Plaintiff filed its Complaint on January 23, 2015. Doc. 1. Plaintiff filed its Amended Complaint on February 23, 2015. Doc. 9. Defendants answered the Amended Complaint on March 12, 2015. Doc. 15. In the Answer, Defendant Brunswick stated that it "does not contest [that] venue is proper within this judicial district, but [it] denies that this district is the most convenient forum for Cobalt's action." Id at 4. Defendant Sea Ray stated that it "contests that venue is proper within this judicial district." Id On March 12, 2015, Defendants filed a joint Motion to Transfer Venue Pursuant to 28 U.S.C. § 1404(A) ("Motion to Transfer"). Doc. 17. The Court DENIED the Motionto Transfer on April 16,2015. Doc. 33. Case 2:15-cv-00021-HCM-LRL Document 298 Filed 06/07/17 Page 1 of 9 PageID# 15201 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 4 of 71 Pageid#: 595 On April 16, 2015, Defendants filed a petition for inter partes review ("IPR") with the U.S. Patent and Trademark Office ("USPTO") challenging every claim of the '880 Patent. Doc. 35 at 1. On October 16, 2015, the USPTO instituted IPR of the '880 patent. ^ Doc. 50, Ex. 1 at 30. The Court granted the Defendants' Motion to Stay, Docs. 39, 50, in an Order dated November 16,2015. Doc. 63. On October 6,2016, Plaintiff notified this Court of the final written decision of the Patent Trial and Appeal Board ("PTAB") issued on September 28, 2016. Doc. 72. The PTAB found that claims 1, 3, and 6, of the '880 patent are not patentable. Id.; see al^ Doc. 72, Ex. 1 at 43. Since the Court stayed this action "pending resolution of the IPR petition," Doc 63 at 8, the written decision of PTAB terminated the stay. Defendants sought another stay pending further appeals of the PTAB decision. Doc. 78, whichthe CourtDENIED, Doc. 161. On December 14, 2016, the Courtconducted a Markman Hearing. Doc. 109. The Court issued its Markman Order on December 21, 2016. Doc. 110. On Motion of the Plaintiff on February 3,2017, Doc. 124,the Courtalso corrected the Markman Order, Doc. 162. Defendants filed a Motion for Summary Judgment on January 25, 2017. Doc. 115. On April 3, 2017, Defendants filed a Motion for Leave to file a second Motion for Summary Judgment ("Motion for Leave"). Doc. 163. The Court DENIED the Motion for Summary Judgment on April 11, 2017. Doc. 169. The Court DENIED the Motion for Leave on May 3, 2017. Doc. 184. Plaintiff filed a Motion for Summary Judgment on April 28, 2017. Doc. 181. Defendants responded on May 12, 2017. Doc. 206. Plaintiff replied on May 16, 2017. Doc. 211. Case 2:15-cv-00021-HCM-LRL Document 298 Filed 06/07/17 Page 2 of 9 PageID# 15202 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 5 of 71 Pageid#: 596 The Parties filed Motions in Limine on May 11, 2017. Docs. 185, 187, 189, 191, 193, 202. The Parties responded to each other on May 18, 2017, Docs. 212-32, and replied in support of their own motions on May 22, 2017, see Docs. 250-69. The Court addressed the Motions in Limine at the Final Pretrial Conference ("FPTC") on May 25, 2017, and issued an Order on these Motions on June 5,2017. Doc. 285. At that FPTC, Defendants indicated that they wanted to challenge venue. The Court ORDERED expedited briefing on the issue. Doc. 277. Trial is set for June 12,2017. Doc. 81. 11. LEGAL STANDARD A. Venue Venue is a waivable personal privilege of defendants. See Lerov v. Great W. United Corp.. 443 U.S. 173, 180(1979). In patent infringement actions, venue is proper "in thejudicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business." 28 U.S.C. § 1400(b) (2017) ("§ 1400(b)"). Defendants must raise improper venue either in a motion made before responsive pleading or as part of the responsive pleading, or they waive that defense. Fed. R. Civ. P. 12(b), 12(h)(1). In addition, nothing in thestatutory venue provisions "shall impair thejurisdiction of a district court of any matter involving a party who does not interpose timely and sufficient objection to the venue." 28 U.S.C. § 1406(b) (2017). B. Intervening Law Exception The Fourth Circuit recognizes a general exception to waiver "when there has been an intervening change in the law recognizing an issue that was not previously available." Holland V. Big River Minerals Corp.. 181 F.3d 597, 605-06 (4th Cir. 1999). Although this is a patent case, Fourth Circuit law applies to procedural issues that are not unique to patent law. ^ Case 2:15-cv-00021-HCM-LRL Document 298 Filed 06/07/17 Page 3 of 9 PageID# 15203 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 6 of 71 Pageid#: 597 Beverly Hills Fan Co. v. Royal Sovereign Corp.. 21 F.3d 1558, 1564 (Fed. Cir. 1994). Nevertheless, the Federal Circuit also recognizes this intervening law exception, and it applies under either circuit's precedent. See, e.g.. Minton v. Nat'l Ass'n of Sec. Dealers. Inc.. 336 F.3d 1373, 1377(Fed. Cir. 2003) (citations omitted). C. TC Heartland On May 22, 2017, the Supreme Court held that "a domestic corporation 'resides' only in its State of incorporation for purposes of the patent venue statute." TC Heartland LLC v. Kraft Foods Grp. Brands LLC. No. 16-341, 2017 WL 2216934, at *3 (U.S. May 22, 2017). In reaching that holding, the Supreme Court did not directly interpret § 1400(b). Id at *7. The Supreme Court noted that its 1957 decision in Fourco Glass Co. v. Transmirra Products Corp.. 353 U.S. 222, 226 (1957), "definitively and unambiguously held that the word 'reside[nce]' in § 1400(b) has a particular meaning as applied to domestic corporations: It refers only to theState of incorporation." Id It further observed thatneither party sought reconsideration of Fourco and that Congress had not amended § 1400(b) since Fourco. Id Thus, the only issue it addressed was whether amendments to28 U.S.C. § 1391 ("§ 1391") changed the meaning of § 1400(b). Id Although the Supreme Court had never overruled Fourco. it considered the case's validity because the Federal Circuit held that Fourco was no longer good law. S^ VE Holding Corp. V. Johnson Gas Appliance Co.. 917 F,2d 1574, 1579 (Fed. Cir. 1990). Specifically, the Federal Circuit found that amendments to § 1391 changed the meaning of § 1400(b) and that Fourco was no longer good lawbecause it relied on a prior version of § 1391. Id at 1579-83. The Supreme Court held that Fourco is still good law. TC Heartland. 2017 WL 2216934, at *7. The Supreme Court found that "[t]he current version of § 1391 does not contain any indication that Congress intended to alter the meaning of § 1400(b) as interpreted inFourco." Id Case 2:15-cv-00021-HCM-LRL Document 298 Filed 06/07/17 Page 4 of 9 PageID# 15204 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 7 of 71 Pageid#: 598 It further considered Congress's 2011 amendments to § 1391 and found that there was no indication "that Congress in 2011 ratified the Federal Circuit's decision in VE Holding." Id. Thus, the Court applied the holdingin Fourcoto the case at hand. Id at *8. III. ANALYSIS A. Brunswick Waived Its Venue Challenge There is no dispute that Defendant Brunswick did not contest venue priorto this Motion, and the only question presented is whether the Supreme Court's decision in TC Heartland qualifies for the intervening law exception to waiver. ^ Doc. 281 at 7-8; Doc. 282 at 4-7. Defendants want this Court to find that VE Holding was controlling law prior to the Supreme Court's decision inTC Heartland. Doc. 283 at 2-3. They observe that VE Holding has dictated patent venue for twenty-seven (27) years and that the Supreme Court denied certiorari on that very case as well as many subsequent challenges. Id at 3. They argue that requiring them to raise challenges contrary to Federal Circuit precedent is an unreasonable standard for the preservation of defenses. Id at 4. They insist that such a heightened standard for avoiding waiver would be new. Id at 4-5. Plaintiff raises two challenges to Defendants' arguments regarding waiver. Doc. 282 at 5-6. First, it observes that Defendants' case law addressing intervening venue law is distinguishable because it involved a direct amendment to the applicable venue statute and a party that preserved the venue defense in itsanswer. Id at 5 (addressing Eneel v. CBS. Inc.. 886 F. Supp. 728, 730 (C.D. Cal 1995)). Second, it argues that the conflict between Fourco and VE Holding was a defense that was available to Defendants justaseasily as it was to the plaintiff in TC Heartland, who initially raisedthe argument beforePlaintifffiled this case. Id at 5-6. Case 2:15-cv-00021-HCM-LRL Document 298 Filed 06/07/17 Page 5 of 9 PageID# 15205 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 8 of 71 Pageid#: 599 Neither Party cites any case that addresses how to apply the intervening law exception when a circuit court finds that Supreme Court precedent is no longer good law. Defendants reasonably argue that VE Holding challenges were untenable, as the passage of substantial time gave credibility to the Federal Circuit's conclusion that Fourco was no longer good law. ^ Doc. 283 at 2-4. Despite that rational perspective, they errwhen they insist that repeated denials of certiorari on VE Holding and similar cases compel their position. ^ id at 3-4 (making that argument). "As [the Supreme Court] has often stated, the 'denial of a writ of certiorari imports no expression of opinion upon the merits of the case.'" Teaaue v. Lane. 489 US. 288, 296 (1989) (quoting United States v. Carver. 260 U.S. 482,490 (1923)). The twenty-seven (27) year viability of VE Holding is certainly surprising in light of the Supreme Court's view on Fourco. but the circuit courts are only empowered to express the law of their circuit "[i]n the absence ofa controlling decision by the Supreme Court " ^ Hvatt v. Heckler. 807 F.2d 376, 379 (4th Cir. 1986). The Supreme Court has never overruled Fourco. and the Federal Circuit cannot overrule binding Supreme Court precedent. See Thurston Motor Lines. Inc. v. Jordan K. Rand. Ltd.. 460 U.S. 533, 535 (1983) ("Needless to say, only this Court may overrule one of its precedents."). Based on the Supreme Court's holding in TC Heartland. Fourco has continued to be binding law since it was decided in 1957, and thus, ithas been available to every defendant since 1957. Accordingly, the Court FINDS that TC Heartland does not qualify for the intervening law exception to waiver because it merely affirms the viability of Fourco. Defendant Brunswick's assumption that Fourco was no longer good law was reasonable but vwong, and it cannot be excused fi-om its waiver bysaying there was a change in the law.' ' Because the Supreme Court did not change the law, retroactivity is also not at issue, and the Court does not address Defendant's arguments regarding retroactivity. Case 2:15-cv-00021-HCM-LRL Document 298 Filed 06/07/17 Page 6 of 9 PageID# 15206 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 9 of 71 Pageid#: 600 B. Sea Ray Waived Its Venue Challenge Defendant Sea Ray argues that it has not waived its right to challenge venue because it raised that defense in its answer. Doc. 281 at 7. Plaintiff responds that Defendant Sea Ray waived its challenge by failing "to interpose timely and sufficient objection to venue." Doc. 282 at 7 (citing 28 U.S.C. § 1406(b) (2017)). It notes that Defendant Sea Ray made no efforts to raise its venue defense during the course of over two years of litigation since the Answer. Id at 7-8. Defendants essentially concede the issue in reply, stating that"anyarguments directed only to SeaRay should have no bearing on theoutcome of this motion because SeaRay is not the real target of the lawsuit." Doc. 283 at 10. Defendants seek to stay together in the same forum. See id Thus, the Court FINDS that Defendant Sea Ray waived its right to challenge venue by failing to timely andsufficiently object. TheCourt further FINDS thatDefendant SeaRay is not entitled to apply the intervening law exceptionfor the same reasons that Defendant Brunswick is not entitled to apply that exception. Thus, by failing to cite Fourco to challenge venue at the proper time, Defendant Sea Ray also waived that defense. C. Second Provision of the Venue Statute Plaintiff offers an alternative argument for venue under thesecond provision of thepatent venue statute, which states that venue is proper "where the defendant has committed acts of infringement and has a regular and established place of business." § 1400(b). Plaintiff raises two grounds to support venue under this provision: (1) that the presence of Defendants' dealers in this district qualifies as a "regular and established place of business"; and (2) that Defendant Brunswick's warehouse in this district, maintained by a different subsidiary than Sea Ray, qualifies as a "regular and established place of business" despite potentially being unrelated to infringement. Doc. 282 at 9-12. Case 2:15-cv-00021-HCM-LRL Document 298 Filed 06/07/17 Page 7 of 9 PageID# 15207 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 10 of 71 Pageid#: 601 Plaintiffs first basis for venue cannot be resolved on the briefs. Under that argument, the Court would need a factual hearing to determine if Defendants' dealers are independent dealers. See Doc. 283 at 8 (where Defendants argue that their dealers in this District are independent). The presence of salespeople in a district, even without a physical office, may suffice for patent venue. See In re Cordis Corp.. 769 F.2d 733, 735-37 (Fed. Cir. 1985). The presence of independent dealers in a district does not qualifyas a "regular and established place of business." See Holub Indus.. Inc. v. Wvche. 290 F.2d 852, 853-56 (4th Cir. 1961). Thus, the independence ofDefendants' dealers would affect whether venue is proper. Plaintiffs second basis for venue also cannot be resolved on the briefs. Under that argument, the Court would need a factual hearing on the relationship between Defendant Brunswick and its related entity that owns and operates a warehouse in this District. The Fourth Circuit has found the level of control relevant in determining whether one corporation has a regular and established place of business where a related entity operates. See Manville Rniler Co. V. Columbia Boiler Co. of Pottstown. 269 F.2d 600, 606 (4th Cir. 1959). The Fifth Circuit has held that a corporation has a regular and established place of business where one of its divisions operates, even if that division is not part of the infringing activity. Sm Gaddis v. Calgon Corp.. 449 F.2d 1318, 1320 (5th Cir. 1971). This Court would need to examine whether the related entity in this case operates independently, operates as a division of Brunswick, or operates at some level of control between those options. In addition, if the Court read § 1400(b) as requiring a regularand established placeof business related to the acts of infringement, then it would also need to examine whether the warehouse has any relationship to Defendant's Brunswick's alleged acts of infringement. Thus, multiple factual inquiries would be required to resolve whether venue is proper on this ground. 8 Case 2:15-cv-00021-HCM-LRL Document 298 Filed 06/07/17 Page 8 of 9 PageID# 15208 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 11 of 71 Pageid#: 602 However, the Court need not reach the issue of whether venue is proper under the second provision of § 1400(b) because that issue is not necessary to the Court's decision based on its finding of waiver. In addition, any postponement to conduct such factual hearings would be contrary to the "just, speedy, and inexpensive determination" that this court must seek, especially when such hearings arenot necessary to the resolution of this Motion. Fed. R. Civ. P. 1. Thus, the Court DENIES any postponement ofthe trial to conduct further proceedings regarding venue anddoes notrule on Plaintiffs alternative venue argument. IV. CONCLUSION The Court FINDS that Defendants waived venue and DENIES the Motion, Doc. 280. Trial will begin on June 12,2017 as scheduled. The Clerk is REQUESTED to senda copyof this Orderto all counsel of record. It is so ORDERED. M Henry Coke Morgan, Jr. Senior United States District Jucfe. Norfolk, Virginia June y.2017 9 HENRY COKE MORGAN, JR. SENIOR UNITED STATES DISTRICT'JUDGE Case 2:15-cv-00021-HCM-LRL Document 298 Filed 06/07/17 Page 9 of 9 PageID# 15209 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 12 of 71 Pageid#: 603 EXHIBIT B Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 13 of 71 Pageid#: 604 1 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS MARSHALL DIVISION ELBIT SYSTEMS LAND AND C4I LTD., ELBIT SYSTEMS OF AMERICA, LLC, Plaintiffs, v. HUGHES NETWORK SYSTEMS, LLC, BLUETIDE COMMUNICATIONS, INC., COUNTRY HOME INVESTMENTS, INC., Defendants. § § § § § § § § § § § § Case No. 2:15-CV-00037-RWS-RSP MEMORANDUM OPINION AND ORDER AND REPORT AND RECOMMENDATION Before the Court are the following motions: (1) Plaintiffs’ Motion to Strike Expert Opinions Regarding Stricken Prior Art References And Undisclosed Invalidity Theories (Dkt. 275) (“Elbit’s Motion to Strike Invalidity Opinions”). (2) Defendant Hughes Network Systems, LLC’s Motion to Strike Elbit’s ’874 Patent Infringement Contentions (Dkt. 276) (“Hughes’ Motion to Strike Infringement Contentions”). (3) Defendant Hughes’s Motion to Exclude Elbit’s New Priority Date Contentions for the ’073 Patent (Dkt. 277) (“Hughes’ Priority Date Motion”). (4) Defendants’ Motion for Summary Judgment of Noninfringement of the Switching Means of United States Patent No. 6,240,073 (Dkt. 291) (“Defendants’ ‘Switching Means’ Motion”). (5) Defendants Motion for Summary Judgment of Non-Infringement of Claim 28 of the ’073 Patent for Lack of a “Means For Generating A Request” (Dkt. 292) (“Defendants’ ‘Means for Generating Request’ Motion”). (6) Defendants’ Motion for Partial Summary Judgment of Non-Infringement for Hughes’ GMR-1 Products (Dkt. 293) (“Defendants’ GMR-1 Products Motion”). (7) Defendants’ Motion for Partial Summary Judgment of No Damages With Respect to the ’874 Patent (Dkt. 294) (“Defendants’ Damages Motion”) Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 1 of 45 PageID #: 23869 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 14 of 71 Pageid#: 605 2 (8) Defendant Hughes Network Systems, LLC’s Motion for Summary Judgment of No Copying of U.S. Patent No. 6, 240,073 (Dkt. 295) (“Hughes’ Copying Motion”) (9) Defendant Hughes Network Systems, LLC’s Motion for Summary Judgment of No Willfulness (Dkt. 296) (“Hughes’ Willfulness Motion”). (10) Defendant Hughes Network Systems, LLC’s Motion for Summary Judgment of No Pre- Suit Damages Based on Plaintiffs’ Failure to Comply with 35 U.S.C. § 287 (Dkt. 297) (“Hughes’ Marking Motion”). (11) Defendant Hughes Network Systems, LLC’s Motion for Partial Summary Judgment of Non-Infringement of Claims 2-5, 7-9, 11, and 12 of U.S. Patent No. 7,245,874 (Dkt. 298) (“Motion for Summary Judgment of Noninfringement of the ’874 Patent”). (12) Plaintiffs’ Motion to Exclude the Testimony of Dr. Stephen B. Wicker (Dkt. 312) (“Elbit’s Infringement Expert Motion”). (13) Defendant Hughes Network Systems, LLC’s Motion to Exclude Expert Testimony of Stephen G. Kunin (Dkt. 313) (“Hughes’ Motion to Exclude Patent Office Expert Testimony”) (14) Defendants’ Daubert Motion to Exclude the Opinions Offered by Christopher Martinez (Dkt. 314) (“Defendants’ Motion to Exclude Damages Expert Testimony”). (15) Plaintiffs’ Motion to Strike Defendants’ Experts Opinions Regarding Previously- Undisclosed Non-Infringing Alternatives (Dkt. 315) (“Plaintiffs’ Motion to Strike Non- Infringing Alternatives” (16) Hughes’ Motion to Strike Portions of Elbit’s Expert Reports that Rely on Previously- Unidentified Infringement Theories (Dkt. 316) (“Hughes’ Motion to Strike Infringement Opinions”). (17) Plaintiffs’ Motion to Exclude Certain Opinions of Defendants’ Damages Expert, Mr. W. Christopher Bakewell (Dkt. 319) (“Elbit’s Motion to Exclude Damages Expert Testimony”). (18) Defendants Hughes Network Systems, LLC And BlueTide Communications, Inc.’s Motion to Transfer Under 28 U.S.C. § 1406 (Dkt. 372) (“Defendants’ Motion to Transfer”). (19) Defendants Hughes Network Systems, LLC And BlueTide Communications, Inc.’s Motion to Stay Proceedings Pending Resolution of Proper Venue (Dkt. 373) (“Defendants’ Motion to Stay”). The Court resolves the nondispositive motions and provides recommendations for the pending motions for summary judgment as follows. See Fed. R. Civ. P. 72. Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 2 of 45 PageID #: 23870 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 15 of 71 Pageid#: 606 3 TABLE OF CONTENTS BACKGROUND ............................................................................................................................ 4 DISCUSSION ................................................................................................................................. 4 A. Defendants’ Motions for Summary Judgment ................................................................. 4 1. Motions for Summary Judgment of Noninfringement of the ’073 Patent .................... 5 2. Defendants’ Damages Motion (Dkt. 294) .................................................................... 8 3. Hughes’ Copying Motion (Dkt. 295) ........................................................................... 9 4. Hughes’ Willfulness Motion (Dkt. 296) ..................................................................... 10 5. Hughes’ Marking Motion (Dkt. 297) ......................................................................... 12 6. Motion for Summary Judgment of Noninfringement of the ’874 Patent (Dkt. 298) .. 14 B. Motions to Strike or Exclude Contentions or Opinions ................................................. 15 1. Elbit’s Motion to Strike Invalidity Opinions (Dkt. 275) ............................................ 15 2. Hughes’ Motion to Strike Infringement Contentions (Dkt. 276) ............................... 17 3. Hughes’ Priority Date Motion (Dkt. 277) .................................................................. 18 4. Plaintiffs’ Motion to Strike Non-Infringing Alternatives (Dkt. 315) ......................... 20 5. Hughes’ Motion to Strike Infringement Opinions (Dkt. 316) .................................... 23 C. Daubert Motions ............................................................................................................ 27 1. Elbit’s Infringement Expert Motion (Dkt. 312).......................................................... 27 2. Hughes’ Motion to Exclude Patent Office Expert Testimony (Dkt. 313) .................. 29 3. Defendants’ Motion to Exclude Damages Expert Testimony (Dkt. 314) .................. 31 4. Elbit's Motion to Exclude Damages Expert Testimony (Dkt. 319) ............................ 34 D. Defendants’ Motions to Transfer and Stay (Dkts. 372 and 373) ................................... 36 1. Relevant Procedural Background ............................................................................... 37 2. Waiver of Venue Defense ........................................................................................... 38 3. Defendants’ Pending Motion to Transfer under § 1404 (Dkt. 130) ........................... 41 CONCLUSION ............................................................................................................................. 44 Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 3 of 45 PageID #: 23871 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 16 of 71 Pageid#: 607 4 BACKGROUND This is a patent infringement case brought by Elbit Systems Land and C4I Ltd and Elbit Systems of America LLC (collectively, “Elbit”). Elbit accuses Hughes Networks Systems, LLC (“Hughes”), BlueTide Communications, Inc. (“BlueTide”), and Country Home Investments, Inc. (“Country Home”) of infringing U.S. Patent Nos. 6,240,073 (“the ’073 patent”) and 7,245,874 (“the ’874 patent”), both of which relate generally to satellite communication systems. DISCUSSION A. Defendants’ Motions for Summary Judgment Defendants move for summary judgment on various claims and issues underlying Elbit’s infringement and damages contentions. Summary judgment must be granted when there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). “A genuine issue of material fact exists ‘if the evidence is such that a reasonable jury could return a verdict for the non-moving party.’” Crawford v. Formosa Plastics Corp., La., 234 F.3d 899, 902 (5th Cir. 2000) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). The court must consider evidence in the record in the light most favorable to the non-moving party and draw all reasonable inferences in favor of that party. Thorson v. Epps, 701 F.3d 444, 445 (5th Cir. 2012). The moving party must identify the portions of the record that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once a party has made that showing, the non-moving party bears the burden of establishing otherwise. Geiserman v. MacDonald, 893 F.2d 787, 793 (5th Cir. 1990) (citing Celotex, 477 U.S. at 323). The non-moving party cannot “rest upon mere allegations or denials” in the pleadings, but “must set forth specific facts showing there is a genuine issue for trial.” Liberty Lobby, 477 U.S. at 248. Thus, summary judgment “is appropriate if the non-movant ‘fails Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 4 of 45 PageID #: 23872 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 17 of 71 Pageid#: 608 5 to make a showing sufficient to establish the existence of an element essential to that party’s case.’” Bluebonnet Hotel Ventures, LLC v. Wells Fargo Bank, N.A., 754 F.3d 272, 276 (5th Cir. 2014) (quoting Celotex, 477 U.S. at 322). 1. Motions for Summary Judgment of Noninfringement of the ’073 Patent a) Defendants’ “Switching Means” Motion (Dkt. 291) The asserted ’073 patent claims recite a “switching means . . . for switching transmission between said first communication means and said second communication means in accordance with predefined criteria.” See, e.g., ’073 patent at 22:66-23:2. The Court construed the switching means limitation as a means-plus-function term governed by 35 U.S.C. § 112, ¶ 6. Dkt. 208, at 30. The Court defined the corresponding structure as “modem 160 or PC 150 including driver layer 158 performing the algorithms disclosed in the ’073 Patent at 10:30-11:40 or Figure 8, and equivalents thereof.” Id. Hughes contends that “[i]n the ’073 Patent, the modem 160 and the PC 150 are part of the terminal and not part of the hub.” See Dkt. 291 at 4 (citing ’073 Patent, Fig. 7). According to Hughes, Elbit has failed to identify “switching means” structure at or within the terminal, but rather only identifies structure at the hub, and thus summary judgment of noninfringement should be granted Id. at 9. Elbit’s expert, Bruce Elbert, opines to the contrary. Mr. Elbert explains that the accused terminals begin transmitting in random access mode, and when a terminal receives user data, the terminal compares the size of the data to the amount of space in the Aloha transmission. See Dkt. 318-2 ¶¶ 301-19. Based on that comparison, Mr. Elbert opines that the terminal decides whether to switch to an allocated channel, depending on whether the user data fit within the Aloha transmission. Id. The terminal then allegedly waits for the hub to acknowledge that a specific channel has been assigned. Id. This algorithm, according to Mr. Elbert, is consistent with the one Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 5 of 45 PageID #: 23873 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 18 of 71 Pageid#: 609 6 disclosed in the ’073 patent at 10:30-11:40. See Dkt. 318 at 8. Mr. Elbert’s testimony attributes the decision to switch transmission to the terminal, and thus this testimony “at least raises a genuine issue of material fact” concerning infringement. See Vasudevan Software, Inc. v. MicroStrategy, Inc., 782 F.3d 671, 683 (Fed. Cir. 2015). Hughes argues Elbit is estopped from making such arguments because of statements Elbit made during inter partes review. This argument is are not persuasive. Mr. Elbert’s testimony appears consistent with representations Elbit made to the Patent Office concerning where the decision to switch occurs. The Court therefore RECOMMENDS Defendants’ “Switching Means” Motion be denied. b) Defendants’ “Means for Generating Request” Motion (Dkt. 292) Claim 28 of the ’073 patent recites a “means for generating a request.” This means-plus- function limitation corresponds to algorithms described in the specification. One algorithm requires that the generated request include a requested date. See Dkt. 292 at 1. The other alternative algorithm requires the request to be based on an evaluation of a port number. See id. Hughes argues the accused terminals do not generate a request including a requested data rate or port number. See id. Thus, according to Hughes, summary judgment of noninfringement of claim 28 should be granted. Elbit’s expert testimony, however, raises a material factual dispute. Mr. Elbert explains how the accused products satisfy the “means for generating a request” limitation, and Mr. Elbert includes an analysis of how the accused structures are equivalent to the structure corresponding to the claim limitation. See Dkt. 318-2 ¶¶ 451-54, 458-61. Infringement under the doctrine of equivalents is a “highly factual inquiry.” Jeneric/Pentron, Inc. v. Dillon Co., Inc., 205 F.3d 1377, 1384 (Fed. Cir. 2000). Mr. Elbert’s testimony suggesting that the “means for generating” limitation Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 6 of 45 PageID #: 23874 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 19 of 71 Pageid#: 610 7 is met under the function-way-results or substantial similarity tests precludes the grant of summary judgment. See Vasudevan Software, 782 F.3d at 683 (Fed. Cir. 2015). The Court therefore RECOMMENDS Defendants’ “Means for Generating Request” Motion be denied. c) Defendants’ GMR-1 Products Motion (Dkt. 293) Defendants explain that Elbit originally accused Hughes’ products that comply with the GMR-1 standard of infringing the ’073 patent. Dkt. 293 at 1. Elbit did not, however, include opinions concerning these infringement theories in its expert report, and Elbit acknowledges that it will not pursue such theories at trial. Id. As a result, Defendants contend they are entitled to summary judgment of noninfringement as to the GMR-1 products. Id. The Court disagrees. Elbit voluntarily dropped the GMR-1 products before expert discovery-an action that is similar to amending a complaint or voluntarily dismissing claims without prejudice. See Sandisk Corp v. Kingston Tech. Co., 695 F. 3d 1348, 1353 (treating a plaintiff’s withdrawal of asserted claims “as being akin to either a [Fed. R. Civ. P.] 15 amendment to the complaint, or a Rule 41(a) voluntary dismissal of claims without prejudice”) (citations omitted). Defendants highlight that Elbit refuses to enter into a stipulation dismissing the GMR-1 products from the case, but Defendants do not cite authority suggesting Elbit has an obligation to do so. See Alcon Research Ltd. v. Barr Labs., Inc., 745 F.3d 1180, 1193 (Fed. Cir. 2014) (“[W]e have not previously held that a formal motion or stipulation was required to remove claims from a case and we decline to do so here. On the contrary, we recently decided that a patentee’s announcement that it was no longer pursuing certain claims, coupled with its ceasing to litigate them, was sufficient to remove those claims from the case even without such formalities.”). The Court therefore RECOMMENDS Defendants’ GMR-1 Products Motion be denied. Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 7 of 45 PageID #: 23875 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 20 of 71 Pageid#: 611 8 2. Defendants’ Damages Motion (Dkt. 294) Hughes contends that it is entitled to summary judgment of no damages arising from the alleged infringement of the ’874 patent because Elbit’s damages expert, Mr. Christopher Martinez, “offers no opinion on damages for the ’874 Patent.” Dkt. 294 at 1. According to Hughes, there is no other evidence in the record on which Elbit may rely, and thus summary judgment of no damages is appropriate. Id. Hughes’ own damages expert’s report, however, is part of the summary judgment record, and the report includes Mr. Christopher Bakewell’s opinion that the appropriate royalty for the “alleged infringement of the patents-in-suit is a lump-sum of no greater than $3.5 million, which can be allocated as $2.5 million for the ’073 patent and $1 million for the ’874 patent.” Dkt. 319- 1 ¶ 559. Hughes argues this report is not competent summary judgment evidence because it is hearsay, but Hughes’ argument appears to conflict with Fifth Circuit law finding an opponent’s expert’s statement admissible under Rule 801(d)(2)(c). See, e.g., Collins v. Wayne Corp., 621 F.2d 777, 782 (5th Cir. 1980) (statement by expert nonhearsay because expert “was performing the function that [the party opponent] had employed him to perform.”). The Court need not reach the hearsay issue, however, because there is other summary judgment evidence suggesting that a zero royalty is not the only reasonable royalty for the ’874 patent. Mr. Bakewell opines that products accused of infringing the ’874 patent “are a subset of those that are accused of infringing the ’073 patent.” See Dkt. 319-1, ¶ 325. Mr. Martinez opines that the parties would have had a single hypothetical negotiation for both asserted patents, and Mr. Martinez’s testimony can be regarded as proffering a non-zero royalty opinion for the ’874 patent; otherwise, there would have been no need to opine that a “joint” hypothetical negotiation for both asserted patents would have occurred. See Dkt. 321 at 4. Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 8 of 45 PageID #: 23876 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 21 of 71 Pageid#: 612 9 “At summary judgment, as is the case here, a judge may only award a zero royalty for infringement if there is no genuine issue of material fact that zero is the only reasonable royalty.” Apple Inc. v. Motorola, Inc., 757 F.3d 1286, 1328 (Fed. Cir. 2014). The contrary authority cited by Hughes-Unicom Monitoring, LLC v. Cencom, Inc., No. CIV.A. 06-1166 MLC, 2013 WL 1704300, at *6 (D.N.J. Apr. 19, 2013)-was decided before Apple. Indeed, Unicom relies on the summary judgment decision vacated by the panel in Apple, i.e., Apple, Inc. v. Motorola Inc., 869 F.Supp.2d 901 (N.D.Ill.2012) (Posner, J., sitting by designation). In sum, because the summary judgment evidence does not suggest that zero is the only reasonable royalty for the ’874 patent, the Court RECOMMENDS Defendants’ Damages Motion be denied. 3. Hughes’ Copying Motion (Dkt. 295) Hughes seeks summary judgment that Hughes did not copy the invention claimed in the ’073 patent, which, according to Hughes, should preclude Elbit from relying on copying as objective evidence of nonobviousness. See Dkt. 295. Hughes contends Elbit has not shown copying of “a specific product,” id. at 5, because Shiron (Elbit’s predecessor) “did not have a product practicing the ’073 Patent until 2003, two years after Hughes began selling the allegedly infringing [product],” Dkt. 324 at 1. To establish copying, a patent owner may present evidence that an accused infringer replicated the patentee’s product rather than independently develop its own product. See Wyers v. Master Lock Co., 616 F.3d 1231, 1246 (Fed. Cir. 2010). The patent owner need not establish that the accused infringer copied a specific physical product embodied by an issued patent-copying a written formula or prototype is sufficient, for example. Advanced Display Systems, Inc. v. Kent State University, 212 F.3d 1272, 1276 (Fed. Cir. 2000). Indeed, an accused infringer’s efforts to Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 9 of 45 PageID #: 23877 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 22 of 71 Pageid#: 613 10 replicate a claimed invention from the disclosure in a patent or patent application may be sufficient. DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 567 F.3d 1314, 1328-29 (Fed. Cir. 2009). Consistent with this standard, Elbit presents evidence of a presentation (albeit before the ’073 patent issued) in which Shiron showed Hughes a confidential proposal for a “high-speed return link via satellite” product, similar to the written formula in Advanced Display Systems. See 212 F.3d at 127; Dkt. 322 at 19. Elbit also presents evidence that Hughes was generally familiar with Shiron and Elbit’s products and, on one occasion in 2014, compared Hughes’ products with Elbit’s products as part of an effort to secure a contract. See Dkt. 295-8 at 14. Hughes and Elbit are competitors, which gives credence to this evidence. See WBIP, LLC v. Kohler Co., 829 F.3d 1317, 1336 (Fed. Cir. 2016) (“The fact that a competitor copied technology suggests it would not have been obvious.”). Hughes contends that Elbit fails to show a nexus between the alleged copying and the patented invention, but Elbit provides reasonably-supported expert testimony on the matter, thus reducing the dispute to a factual one for the jury to resolve. See Dkt. 322; WBIP, 829 F.3d at 1336 (“Copying is a question of fact and, as with any question of fact, the fact-finder (here, the jury) was entitled to credit WBIP’s evidence over Kohler’s.”). The Court therefore RECOMMENDS Hughes’ Copying Motion be denied. 4. Hughes’ Willfulness Motion (Dkt. 296) Hughes seeks summary judgment of no willfulness because Elbit “cannot point to evidence that is sufficient, as a matter of law, to show that Hughes willfully infringed” the asserted patents. Dkt. 296 at 1. In response to Hughes’ motion, Elbit highlights evidence supporting its contention that Hughes knew the asserted patents were valid and infringed. For example, Elbit points to evidence that its predecessor, Shiron, presented an embodiment of the ’073 patent to Hughes’ senior executives in 1997, that Hughes had knowledge of the asserted patents through Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 10 of 45 PageID #: 23878 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 23 of 71 Pageid#: 614 11 correspondence between Hughes’ in-house counsel and Shiron’s agent, and that Hughes’ in-house counsel and senior engineers possessed claim charts detailing how Hughes’ products are encompassed by the asserted patent claims. See, e.g., Dkt. 322 at 2-3, 6-9. There is sufficient evidence to create a fact dispute as to Hughes’ state of mind before beginning the allegedly infringing conduct. Determining willfulness is a fact-based endeavor. Hughes argues that it had good faith reasons to believe that the patent did not encompass the accused system and that the patent was invalid. See Dkt. 296. Indeed, Hughes’ summary judgment motions of noninfringement provide support for the contention that it was at least not clear that the asserted patents were both valid and infringed. The Supreme Court has explained, however, that the issue of willfulness turns not on the objective reasonableness of a defendant’s conduct, but on the defendant’s subjective beliefs. Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923, 1933 (2016) (“The subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless.”). A jury might conclude from Hughes’ objective evidence that Hughes did not subjectively believe it was infringing a valid patent. See WesternGeco L.L.C. v. Ion Geophysical Corp., 837 F.3d 1358, 1363 (Fed. Cir. 2016) (even after Halo, the objective reasonableness of the accused infringer’s positions can still be relevant to § 284). But Hughes has not offered other summary judgment evidence regarding its executives’ subjective beliefs. Given the state of the evidence, the Court cannot conclude that it would be unreasonable for a jury to find Hughes knew the asserted patents were valid and infringed. The Court therefore RECOMMENDS Hughes’ Willfulness Motion be denied. The Court is nevertheless mindful of the Supreme Court’s clarification that case law has channeled courts’ discretion in granting enhanced damages under § 284-limiting the award of Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 11 of 45 PageID #: 23879 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 24 of 71 Pageid#: 615 12 such damages “to egregious cases of misconduct beyond typical infringement.” Halo, 136 S. Ct. at 1935. The Court will be in a better position after receiving the evidence at trial to determine whether Elbit has demonstrated the level of willfulness necessary to warrant enhanced damages if Elbit prevails. 5. Hughes’ Marking Motion (Dkt. 297) Hughes moves for summary judgment of no pre-suit damages under the ’073 patent because Elbit allegedly failed to comply with the notice requirements of the marking statute, 35 U.S.C. § 287(a). According to Hughes, because Elbit failed to comply with the statute, damages may only accrue from January 21, 2015, the date Elbit filed suit. “The patent marking statute limits recoverable damages where a patentee fails to mark her patented products.” Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 711 F.3d 1348, 1378 (Fed. Cir. 2013) cert. denied, 134 S. Ct. 900 (2014). “Where a patentee does not appropriately mark her products, she may not recover damages for infringement occurring before notice to the infringer.” Id. The statute provides two ways to provide notice: a patentee can (1) provide actual notice; or (2) provide constructive notice “by affixing . . . the word ‘patent‘ or the abbreviation ‘pat.’, together with the number of the patent” on patented articles sold by the patentee or its licensees. 35 U.S.C. § 287. “[A] party that does not mark a patented article is not entitled to damages for infringement prior to actual notice.” Crown Packaging Tech., Inc. v. Rexam Beverage Can Co., 559 F.3d 1308, 1316 (Fed. Cir. 2009). “For purposes of section 287(a), [actual] notice must be of ‘the infringement,’ not merely notice of the patent’s existence or ownership. Actual notice requires the affirmative communication of a specific charge of infringement by a specific accused product or device.” Amsted Indus. Inc. v. Buckeye Steel Castings Co., 24 F.3d 178, 187 (Fed. Cir. 1994) (quoting Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 12 of 45 PageID #: 23880 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 25 of 71 Pageid#: 616 13 § 287(a)). “It is irrelevant . . . whether the defendant knew of the patent or knew of his own infringement. The correct approach to determining notice under section 287 must focus on the action of the patentee, not the knowledge or understanding of the infringer.” Id. Elbit identifies sufficient summary judgment evidence to create a fact dispute concerning whether Hughes had actual notice of the ’073 patent and the charge of infringement. A juror could conclude that iLeverage’s former CEO, Uzi Aloush, provided actual notice sufficient to satisfy the marking statute. Mr. Aloush testified that iLeverage “had the right to act as the exclusive worldwide agent to commercialize” the ’073 patent. See Dkt. 322-11 at 35:24-36:8. Mr. Aloush explained that during talks with Hughes about a license to the ’073 patent, he told Hughes that it infringed the patent. See id. at 139:2-140:9. Hughes corroborates that such talks took place through an interrogatory response stating that “[i]n 2008, Hughes was approached by iLeverage regarding Shiron’s patents, including U.S. Patent Nos. 6,240,073 or 7,245,874. At that time, Hughes communicated with iLeverage regarding U.S. Patent Nos. 6,240,073 or 7,245,874.” Dkt. 322-25 at 24. Hughes’ argument in response to this evidence is that § 287 is an affirmative step that must be taken by the patentee, and that the iLeverage talks do not qualify because iLeverage “did not have authority from Shiron to accuse Hughes of infringement.” Dkt. 324 at 8. To support this argument, Hughes cites the following testimony from Mr. Aloush’s deposition: Q: You did not have any authority from Shiron to make any accusation of patent infringement; is that correct? A: We were brokers. We were not lawyers. It was not a cease and desist letter. It was just an offer for sale. Dkt. 297-8 at 156:14-157:17. This testimony, however, does not suggest that iLeverage could not have provided actual notice of the patent and the charge of infringement, as Shiron’s agent, in a manner sufficient to comply with the marking statute. Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 13 of 45 PageID #: 23881 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 26 of 71 Pageid#: 617 14 If Hughes is arguing that iLeverage would not have been considered an effective patentee when it offered to sell the system allegedly covered by the ’073 patent, Hughes’ argument is not clear. “[I]f the patentee transfers all substantial rights under the patent, it amounts to an assignment and the assignee may be deemed the effective patentee under 35 U.S.C. § 281 for purposes of holding constitutional standing to sue another for patent infringement in its own name.” See, e.g., Sicom Sys., Ltd. v. Agilent Techs., Inc., 427 F.3d 971, 976 (Fed. Cir. 2005). It follows that if an effective patentee provides actual notice of the patent and the charge of infringement, the marking statute could have been satisfied. Mr. Aloush described iLeverage as Shiron’s “exclusive agent,” and Hughes has not met its summary judgment burden of establishing that iLeverage could not have been an effective patentee. A material fact issue as to the scope and extent of iLeverage’s agency relationship exists. If iLeverage was effectively the patentee for purposes of standing, a reasonable juror could conclude that iLeverage provided actual notice of the ’073 patent and the charge of infringement. The Court therefore RECOMMENDS Hughes’ Marking Motion be denied. 6. Motion for Summary Judgment of Noninfringement of the ’874 Patent (Dkt. 298) Hughes moves for partial summary judgment of noninfringement of claims 2-5, 7-9, 11, and 12 of the ’874 patent. Hughes explains that each of these claims depends from a claim requiring “conversion between two protocols,” namely “E1” and “TCP/IP.” Dkt. 298 at 1. According to Hughes, “[t]he third party devices provided by Hughes do not convert to or use TCP/IP for cellular backhaul under any circumstances.” Id. “Instead, they use a different protocol known as UDP.” Id. Thus, according to Hughes, “Elbit has no evidence of infringement of the dependent claims of the ’874 patent.” Id. The Court does not agree. Both Elbit’s and Hughes’ technical experts agree that “TCP/IP refers to a suite of protocols that may be used to interconnect network devices on the Internet.” Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 14 of 45 PageID #: 23882 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 27 of 71 Pageid#: 618 15 See Dkt. 321 at 5-6 (citing expert reports). On the basis of the summary judgment record, a reasonable juror could therefore conclude that UDP is a member of the TCP/IP family, and that if the accused products convert to the UDP protocol, they are encompassed by claims 2-5, 7-9, 11, and 12 of the ’874 patent. To the extent Hughes’ motion for summary judgment is based on an untimely claim construction position regarding the meaning of “TCP/IP,” as that term is used in the asserted claims, Hughes waived these arguments by not raising them earlier. See, e.g., Cent. Admixture Pharmacy Servs., Inc. v. Advanced Cardiac Sols., P.C., 482 F.3d 1347, 1356 (Fed. Cir. 2007) (“The district court found that [defendants] waived any argument with respect to this term by failing to raise it during the claim construction phase. We agree.”); Fenner Inv., Ltd. v. Microsoft Corp., 632 F. Supp. 2d 627, 638 (E.D. Tex. 2009) (“Because this argument is contrary to the claim construction order and was not raised prior to or even following the claim construction hearing it is waived.”), aff’d sub nom. Fenner Investments, Ltd. v. Microsoft Corp., 369 F. App’x 132 (Fed. Cir. 2010). The Court therefore RECOMMENDS Hughes’ Motion for Summary Judgment of Noninfringement of the ’874 Patent be denied. B. Motions to Strike or Exclude Contentions or Opinions 1. Elbit’s Motion to Strike Invalidity Opinions (Dkt. 275) Elbit asks the Court to strike the following two portions of Dr. Stephen Wicker’s expert report: (1) prior art references previously struck by the Court because Hughes failed to disclose the references through invalidity contentions, namely U.S. Patent No. 5,978,386 (“Hämäläinen”) and U.S. Patent No. 7,050,456 (“Sprague”); and (2) a prior art product known as “LANAdvantage” that Hughes allegedly failed to disclose through contentions. See Dkt. 275 at 1. Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 15 of 45 PageID #: 23883 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 28 of 71 Pageid#: 619 16 With respect to the first portion of Dr. Wicker’s report, Hughes argues there is no dispute, while Elbit contends otherwise. Hughes states it agreed, “it would not seek to present the Hämäläinen and Sprague references without first obtaining leave of Court” and that “that Elbit was not required to present an expert rebuttal for those references unless the Court grants Hughes leave to assert them.” Dkt. 286 at 1. Hughes therefore suggests that “there was no dispute on this issue at the time Elbit filed its motion to strike, nor is there any dispute now.” Id. Elbit’s reply brief nonetheless explains that Hughes’ position on the Hämäläinen and Sprague references is not as clear as Hughes would have the Court believe. Dkt. 290 at 1-2. The Court previously struck the Hämäläinen and Sprague references from Hughes’ invalidity contentions because Hughes failed to timely disclose them or offer an adequate explanation for the delay. See Dkt. 242 at 1; Dkt. 249 (Hearing Transcript). Though it is unclear whether a dispute about these references exists, Dr. Wicker opines that claim 1 of the ’874 patent is obvious in view of a combination of references including Hämäläinen or Sprague. See Dkt. 275- 2 at 1292, 1323. To clear the record and resolve any dispute that exists or that may arise, the Court GRANTS Elbit’s motion as to the Hämäläinen and Sprague references and STRIKES portions of Dr. Wicker’s report that rely on these references to demonstrate obviousness, specifically paragraphs 1,118-1,264. See Dkt. 275-2. As for the second disputed portion of Dr. Wicker’s report, Elbit argues Dr. Wicker introduces a new invalidity theory relying on an undisclosed add-on to Hughes’ Personal Earth Station (“PES”) system prior art-the LANAdvantage feature-which allegedly provided Internet-related functionality to the PES. Dkt. 275 at 6. While the phrase “LANAdvantage” may not have appeared in Hughes’ invalidity contentions, Hughes disclosed that the PES included Transmission Control Protocol/Internet Protocol (TCP/IP) functionality, and Hughes cited the Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 16 of 45 PageID #: 23884 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 29 of 71 Pageid#: 620 17 corresponding source code. See Dkt. 286 at 1. Elbit demands granularity not required by the local patent rules. Because Hughes adequately disclosed PES’s underlying functionality, the Court DENIES Elbit’s motion as to the LANAdvantage feature. 2. Hughes’ Motion to Strike Infringement Contentions (Dkt. 276) Hughes moves to strike Elbit’s infringement contentions regarding the ’874 patent for failure to comply with Local Patent Rule 3-1. Dkt. 276 at 1. Hughes contends Elbit “invoked P.R. 3-1(g) for seven claim elements in the asserted claims” yet failed to comply with P.R. 3-1(g)’s requirement that source code corresponding to the claim element be identified 30 days after the opposing party produces the relevant code. Id.; Local Pat. R. 3-1(g) (included in Discovery Order, Dkt. 55 at 2-3). Elbit argues it fully complied with Local Patent Rule 3-1’s requirements by timely serving infringement contentions with an element-by-element analysis and supporting documents, and Elbit merely reserved the right to supplement these contentions for software limitations after it received relevant source code. Local Patent 3-1(g) has a clear purpose. The Rule affords a party alleging infringement an opportunity to delay compliance with Patent Rule 3-1’s requirements for claim elements that may be satisfied by source code that has not yet been produced. After production of the source code, the party claiming infringement must update its infringement contentions by identifying the portions of the code that satisfy relevant claim elements within 30 days. The Rule does not, however, bind a party that refers to a claim element as a “software limitation” to later identify corresponding source code. The Rule merely gives the party a delayed option of doing so. If a party discloses how a “software limitation” is met without reference to source code, and the party’s disclosure otherwise meets Local Patent Rule 3-1’s requirements, there may be no need to later update infringement contentions with references to source code. Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 17 of 45 PageID #: 23885 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 30 of 71 Pageid#: 621 18 Elbit charted certain software limitations by identifying documents allegedly establishing the existence of the limitations in the accused system-without reference to third-party source code. See Dkt. 276-2. Elbit’s contentions also included the following statement: Pursuant to the Court’s Discovery Order (Dkt. 55) and P.R. 3-1(g), Plaintiffs state on information and belief that further evidence for this limitation resides in the source code for the Accused Instrumentalities. Plaintiffs reserve the right to supplement after production of the source code for the Accused Instrumentalities. See, e.g., id. at 7. Although Elbit reserved the right to supplement its contentions with later- produced source code, it had no obligation to do so simply because it identified claim elements as “software limitations” or because it believed at the time that further evidence for those limitations would exist in third-party source code. Because Elbit did not violate Rule 3-1(g), Hughes’ motion to strike is DENIED. 3. Hughes’ Priority Date Motion (Dkt. 277) Hughes moves to exclude Elbit’s contention that asserted claims of the ’073 patent are entitled to a priority date earlier than the patent’s November 14, 1997 filing date. Dkt. No. 277 at 1. There have been prior disputes surrounding the ’073 patent’s priority date and Hughes’ interrogatory question concerning priority. See Dkt. 277 at 2-4. Suffice it to say that until January 2017, Elbit disclosed to Hughes and represented to the Court that the ’073 patent’s priority date is November 14, 1997-the filing date. Id. Elbit’s position changed on January 9, 2017, shortly before the close of fact discovery, when Elbit disclosed to Hughes that the ’073 patent is entitled to a priority date nine months earlier than the filing date-February 11, 1997-based on an earlier conception and reduction to practice. See Dkt. 277-2 at 9-11. Elbit argues its change in position was justified. See Dkt. 288. According to Elbit, it changed its priority contention shortly after Hughes disclosed a new prior art system based on documents dated less than one year before the ’073 patent’s filing date. See id. at 1; 35 U.S.C. Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 18 of 45 PageID #: 23886 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 31 of 71 Pageid#: 622 19 § 102(a). Elbit also argues its new position was not untimely under Rule 26(e)(1) because it was disclosed within the fact discovery period. See Dkt. 288 at 1. Hughes’ interrogatory understandably sought to commit Elbit to a priority date. The Local Patent Rules encourage a party claiming infringement to identify the priority date for asserted claims early in a case. See Local Patent Rule 3-1(e). In many instances, a party claiming infringement will possess facts supporting priority before bringing the lawsuit. Even when discovery reveals an unforeseen earlier priority date, there is rarely a justifiable excuse for shifting a priority date contention near the end of fact discovery. Elbit’s change in priority date was untimely under Rule 26(e)(1) because it is undisputed that Elbit possessed the underlying facts at least by September 2016. Yet Elbit did not update its interrogatory response until January 2017, nine days before fact discovery closed. Accordingly, the question is whether Elbit’s untimely disclosure is harmless. See CQ, Inc. v. TXU Min. Co., L.P., 565 F.3d 268, 280 (5th Cir. 2009) (considering “(1) [the party’s] explanation for its failure to disclose the evidence, (2) the importance of the evidence, (3) the potential prejudice to [the opposing party] in allowing the evidence, and (4) the availability of a continuance”). Elbit does not adequately explain the delay. While Hughes may have supplemented an invalidity contention based on prior art documents dated less than one year before the ’073 patent’s filing date, Elbit had an incentive to trace the ’073 patent’s priority date to as far back as possible in light of other asserted prior art references allegedly made public in 1997. See Dkt. 277 at 8 n.2. Elbit has known about such references since January 2015. While Elbit’s attempt to antedate a prior art defense is undoubtedly important, the prejudice to Hughes is significant. Hughes justifiably developed invalidity positions under the assumption that the ’073 patent is entitled to a priority date no earlier than its filing date. Finally, any continuance would delay trial, which is Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 19 of 45 PageID #: 23887 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 32 of 71 Pageid#: 623 20 about a month away. See S&W Enters., L.L.C. v. SouthTrust Bank of Ala., N.A., 315 F.3d 533, 537 (5th Cir. 2003) (affirming district court’s refusal to grant continuance when it would “unnecessarily delay the trial”). Elbit has therefore failed to show its discovery violation is harmless. See Fed. R. Civ. P. 37(c)(1) (If a party fails to provide information as required by Rule 26(e), “the party is not allowed to use that information . . . to supply evidence . . . at a trial, unless the failure was substantially justified or is harmless.”). Hughes’ Priority Date Motion is GRANTED. Elbit may not present evidence or argue that the ’073 patent is entitled to a priority date earlier than its filing date, i.e., November 14, 1997. Additionally, Elbit is precluded from presenting evidence or argument that the inventors listed on the ’073 patent reduced the invention to practice earlier than November 14, 1997. 4. Plaintiffs’ Motion to Strike Non-Infringing Alternatives (Dkt. 315) Elbit asks the Court to prevent Dr. Wicker and Mr. Bakewell from offering opinions on alleged noninfringing alternatives provided by iDirect, Iridium and Gilat. See Dkt. 315. According to Elbit, Dr. Wicker disclosed Defendants’ reliance on these noninfringing alternatives for the first time in his March 6, 2017 rebuttal report. Id. at 3. Mr. Bakewell in turn cites to Dr. Wicker’s noninfringing alternatives analysis in his report. Id. Defendants do not dispute that the iDirect, Iridium and Gilat products were not disclosed during discovery. Rather, Defendants rely on a loophole in the Federal Rules governing responses to interrogatories. See Dkt. 329 at 2. Elbit served Hughes (and only Hughes) with one interrogatory related to non-infringing alternatives, and Hughes “respond[ed] to that interrogatory with the information available to Hughes.” Id. at 2. The iDirect, Iridium and Gilat products, however, are only sold by other Defendants, most notably BlueTide. Id. at 1. Hughes therefore contends information concerning these products was not available to Hughes, and because the other Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 20 of 45 PageID #: 23888 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 33 of 71 Pageid#: 624 21 Defendants were not served with the non-infringing alternatives interrogatory, Defendants were not obligated to disclose the iDirect, Iridium and Gilat products. Id. at 1-2. The record nevertheless suggests that Hughes had knowledge of at least Gilat’s “SkyEdge” product and the iDirect product. See Dkt. 353-1, 353-2. Deposition testimony reveals that BlueTide had little if any technical expertise necessary to understand whether the products it sells do or do not infringe the asserted claims. See Dkt. 353-3 at 263:3-18. Defendants’ experts only state that they relied on other experts and one of Hughes’ executives, and there is no mention of these experts’ reliance on BlueTide documents or witnesses for any of the three products. See Dkt. 353 at 2-3. Defendants therefore had an obligation to disclose the allegedly non-infringing iDirect, Iridium and Gilat products, and they failed to do so. The question is whether the violation is harmless. See Fed. R. Civ. P. 37(c)(1) (If a party fails to provide information as required by Rule 26(e), “the party is not allowed to use that information . . . to supply evidence . . . at a trial, unless the failure was substantially justified or is harmless.”); see also CQ, 565 F.3d at 280 (considering “(1) [the party’s] explanation for its failure to disclose the evidence, (2) the importance of the evidence, (3) the potential prejudice to [the opposing party] in allowing the evidence, and (4) the availability of a continuance”). Defendants’ explanation for their failure to disclose the evidence is simply that Elbit did not ask each Defendant to answer the interrogatory about noninfringing alternatives. That explanation is not credible because the record suggests Hughes should be charged with knowledge of the iDirect, Iridium and Gilat products. “The rules governing discovery in federal court are designed to ‘accomplish full disclosure of the facts, eliminate surprise, and promote settlement.’” Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 21 of 45 PageID #: 23889 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 34 of 71 Pageid#: 625 22 Moore v. Ford Motor Co., 755 F.3d 802, 808 (5th Cir. 2014) (quoting S. Ry. Co. v. Lanham, 403 F.2d 119, 127 (5th Cir. 1968)). The importance of the opinions concerning the allegedly noninfringing iDirect, Iridium and Gilat products is minimal. Dr. Wicker provides little detail as to how these products meet the noninfringing alternative standard. Rather, Dr. Wicker explains that “Elbit has not accused the [products] of infringement and Mr. Elbert has not provided an opinion as to the infringement of the [products].” See Dkt. 315-3 ¶¶ 67-71. Such a conclusion is insufficient to establish a noninfringing alternative. Droplets, Inc. v. Overstock.com, Inc., Case 2:11-cv-00401-JRG-RSP, Dkt. 347 at 3 (Jan. 9, 2015 E.D. Tex.) (expert “should be precluded from making the assertion that [products] are non-infringing alternatives simply because [the plaintiff] has not accused them of infringement.”). The possibility that Defendants could establish the iDirect, Iridium and Gilat products as noninfringing alternatives is therefore remote. See Allergan, Inc. v. Teva Pharm. USA, Inc., No. 2:15-CV-1455-WCB, 2017 WL 1512334, at *5 (E.D. Tex. Apr. 27, 2017) (Bryson, J., sitting by designation) (“In determining the importance of the amendment, the Court must make a pragmatic judgment as to the likelihood that the newly asserted defense will succeed.”). The potential prejudice to Elbit is significant because Defendants’ experts, if limited to their reports at trial, would simply present their conclusions that the iDirect, Iridium and Gilat products are noninfringing alternatives, largely because the products have not been accused of infringement. Elbit has not had a chance to test the underlying merits of these conclusions through discovery. Finally, any continuance would delay trial, which is about a month away. See S&W Enters., L.L.C. v. SouthTrust Bank of Ala., N.A., 315 F.3d 533, 537 (5th Cir. 2003) (affirming district court’s refusal to grant continuance when it would “unnecessarily delay the trial”). Accordingly, Plaintiffs’ Motion to Strike Non-Infringing Alternatives is GRANTED. Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 22 of 45 PageID #: 23890 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 35 of 71 Pageid#: 626 23 Elbit does not identify which specific portions of Defendants’ reports should be struck. It appears that paragraphs 67-71 of Dr. Wicker’s report include opinions that the iDirect, Iridium and Gilat products are noninfringing alternatives. Accordingly, the Court STRIKES paragraphs 67-71 of Dr. Wicker’s March 6, 2017 report. See Dkt. 315-3. Mr. Bakewell appears to reference Dr. Wicker’s opinions in paragraphs 209, 214, and 357 (fifth bullet point only) in his March 6, 2017 rebuttal damages report. See Dkt. 315-4. The Court therefore STRIKES paragraphs 209, 214, and 357 (fifth bullet point only) from Mr. Bakewell’s report. 5. Hughes’ Motion to Strike Infringement Opinions (Dkt. 316) Hughes moves to strike two theories of infringement allegedly undisclosed until Elbit served its expert reports: (1) functionality and source code in Hughes’ accused HN/HX products allegedly corresponding to the “switching means” claim limitation; and (2) opinions regarding transmitter structure allegedly corresponding to the “first communication means.” Dkt. 316 at 1- 2. With respect to the first theory, Hughes argues Richard Goodin’s infringement report “marks the first instance of Elbit identifying that the HN/HX systems performed a comparison of an amount of data to the size of an Aloha burst and identifying that such functionality satisfied the ‘switching means’ claim limitation.” Id. at 7. Elbit’s December 2015 Contentions, however, disclose the relationship between the Aloha burst and the amount of data that can be transmitted: “If the Aloha logical channels are configured to be large enough, the remote terminal may be able to send a complete transaction within the Aloha burst, depending on the application.” See Dkt. 337 at 3 (quoting P.R. 3-1 Contentions). Hughes argues this disclosure is insufficient to provide notice of the theory as it relates to the “switching means” element because, according to Hughes, this disclosure relates to a different Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 23 of 45 PageID #: 23891 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 36 of 71 Pageid#: 627 24 “means for switching” element. See Dkt. 356 at 2. The claim limitation, however, recites a “switching means compris[ing] means for switching.” See Dkt. 363 at 1. Elbit’s December 2015 Contentions therefore provide adequate notice of the “switching means” theory described in Mr. Elbert’s expert report. Hughes also complains that Elbit did not disclose the specific lines of source code underlying Elbit’s expert reports, i.e., that Elbit “abandoned” the original source code cited in its contentions in favor of new source code. See Dkt. 316 at 1. Elbit cites persuasive authority, however, explaining that as long as an infringement theory is adequately disclosed, every underlying item of proof (such as source code) does not need to be disclosed, provided the notice purpose of the local patent rules is satisfied through a disclosure of an infringement theory. See Adobe Sys. Inc. v. Wowza Media Sys., No. 11-CV-02243-JST, 2014 WL 709865, at *16 (N.D. Cal. Feb. 23, 2014). More important, however, Mr. Goodin testified during his deposition that the functionality of the source code cited in his report is consistent with the source code cited in Elbit’s infringement contentions. See Dkt. 337-4 at 123:10-23. According to Mr. Goodin, he chose the source code cited in his report simply because “it was just in one place in two functions versus being distributed a little more, you know, across multiple files or across multiple areas of a single file.” Id. at 123:14- 17. Finally, Hughes has articulated its substantive disagreements with Mr. Goodin’s theory (and moved for summary judgment on that theory, see Dkt. 291) suggesting any prejudice is minimal. See SSL Services, LLC v. Cisco Sys., Inc., Case No. 2:15-cv-433-JRG-RSP (E.D. Tex. Feb. 24, 2016). The remaining prejudice Hughes identifies does not persuade the Court that any discovery violation that may have occurred warrants correction. Hughes contends that if it had been on notice Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 24 of 45 PageID #: 23892 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 37 of 71 Pageid#: 628 25 of Elbit’s new “switching means” theory, it could have identified comparable source code in the Aloha processor module in its prior art Personal Earth Station system. See Dkt. 316 at 10. Hughes was aware of the Court’s claim constructions when it developed its invalidity position, however, and Hughes knew as much about the scope of the claims as Elbit did. Hughes also had the source code for the Personal Earth Station system. See id. It is not clear why Elbit’s infringement theory should match Hughes’ invalidity theory. Hughes’ motion as to the “switching means” theory is therefore DENIED. With respect to the second allegedly undisclosed theory, the Court determined during claim construction that the “first communication means” recited in the ’073 patent claims is governed by § 112, ¶ 6 and that the corresponding structure is “the random access transmitter as depicted in Figure 5 in its entirety.” See Dkt. 208 at 11, 14. Hughes argues that Elbit’s infringement contentions “did not map the structure identified in the Court’s claim construction order (‘Figure 5 in its entirety’) to any Hughes product structure.” Dkt. Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 25 of 45 PageID #: 23893 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 38 of 71 Pageid#: 629 26 316 at 12. Rather, according to Hughes, Elbit’s infringement contentions “identify only a ‘High- Level Inroute IpoS Diagram” with “no discussion of the depicted components, or how any of the components in this high-level figure correspond to the required structure for the ‘first communication means.’” Id. Local Patent Rule 3-1(c) requires a party alleging infringement to identify “where each element of each asserted claim is found within each Accused Instrumentality, including for each element that such party contends is governed by 35 U.S.C. § 112(6), the identity of the structure(s), act(s), or material(s) in the Accused Instrumentality that performs the claimed function.” Consistent with that standard, Elbit’s contentions identify a diagram depicting a number of structural components, including an encoder, scrambler, and “16-bit CRC,” among others. See Dkt. 337 at 8 (citing P.R. 3-1 Contentions). Hughes’ argument is simply that more detail or explanation should have been included, but “the preparation and supplementation of infringement contentions is a matter of pleading and merely notifies a defendant of the asserted theories of infringement in order to provide adequate notice and streamline discovery.” See Realtime Data, LLC v. Packeteer, Inc., No. 6:08CV144, 2009 WL 2590101, at *5 (E.D. Tex. Aug. 18, 2009). To the extent Hughes’ argument rests on the assumption that a party alleging infringement must map each structural component corresponding to a “means” limitation to an accused component, the Court disagrees that such a requirement exists. “The individual components, if any, of an overall structure that corresponds to the claimed function are not claim limitations.” Odetics, Inc. v. Storage Technology Corp., 185 F.3d 1259, 1268 (Fed. Cir. 1999). “Rather, the claim limitation is the overall structure corresponding to the claimed function. This is why structures with different numbers of parts may still be equivalent under § 112, ¶ 6, thereby meeting the claim limitation.” Id. Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 26 of 45 PageID #: 23894 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 39 of 71 Pageid#: 630 27 It is true, as Hughes points out, that the Court rejected Elbit’s argument during claim construction that Figure 5 without any sub-components (an “empty box” as Hughes characterizes it) could constitute structure corresponding to the “first communication means.” See Dkt. 208 at 14. But it is unclear how this should affect Hughes’ infringement contentions or what decision Elbit should be “forced to live with,” see Dkt. 316 at 11. Elbit unsuccessfully argued for a broad category of structure corresponding to the “first communication means.” Elbit is not thereafter precluded from detailing how components in a diagram disclosed through infringement contentions correspond to the structure of the “first communication means.” Hughes’ motion as to the “first communication means” theory is therefore DENIED. C. Daubert Motions Both Elbit and Defendants challenge each others’ expert testimony under Federal Rule of Evidence 702. When evaluating a party’s challenge to an opponent’s expert witness, the Court assumes the role of gatekeeper to ensure the reliability and relevance of the expert’s testimony. Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 597 (1993); Kumho Tire Co. v. Carmichael, 526 U.S. 137, 150 (1999). Rule 702 guides the inquiry, specifying that a qualified expert may testify as long as his opinion will aid the fact finder and is reliable, i.e., the opinion must stand on sufficient data, reliable methods, and the facts of the case. See Daubert, 509 U.S. at 590; Fed. R. Evid. 702(a)-(d); see also Micro Chem., Inc. v. Lextron, Inc., 317 F.3d 1387, 1391 (Fed. Cir. 2003) (“In 2000, Rule 702 was amended in response to Daubert and cases applying it.”). 1. Elbit’s Infringement Expert Motion (Dkt. 312) Elbit moves to exclude four portions of Dr. Wicker’s testimony. First, Elbit argues Dr. Wicker’s opinions that the PES prior art system anticipates the ’073 patent claims are unreliable because Dr. Wicker allegedly concedes the PES system does not include every element Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 27 of 45 PageID #: 23895 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 40 of 71 Pageid#: 631 28 of the asserted claims. Elbit’s complaint appears to be that Dr. Wicker’s opinions rely on a comparison between the accused products and the prior art PES system. With respect to the claimed “first communications means,” Dr. Wicker includes opinions that rest on a factual analysis of the allegedly prior PES system, as compared to the asserted claims. See Dkt. 327-2 ¶ 230. The same is true for the claimed “second communication means.” See id. ¶ 248. While Dr. Wicker’s report does make comparisons between the PES system and the accused products, there is enough standalone factual basis for Dr. Wicker’s opinions to withstand exclusion under Rule 702. See Verizon Servs. Corp. v. Cox Fibernet Virginia, Inc., 602 F.3d 1325, 1339 (Fed. Cir. 2010) (“[A] reasonable jury could conclude, based on evidence in the record and separate and apart from any alleged ‘practicing the prior art’ argument, that the Feature Patents were invalid.”). Second, Elbit argues Dr. Wicker’s invalidity opinions are unreliable because Dr. Wicker used the broadest reasonable construction for a claim term in a manner that is inconsistent with the Phillips standard. See Dkt. 312 at 1. Elbit’s objection is based on a typographical error or oversight in Dr. Wicker’s report. Dr. Wicker clarified in deposition that he “was using what one of ordinary skill at the time of the invention would have understood the claims to mean, which would be within the broadest reasonable interpretation, but it would be narrower than that.” See Dkt. 327-3 at 430:3- 8. Dr. Wicker will not be permitted to testify about a claim term’s broadest reasonable interpretation, regardless of what is his expert report says, and it does not appear that he intends to do so. Third, Elbit contends Dr. Wicker’s opinions describing noninfringing alternatives should be excluded. According to Elbit, Dr. Wicker provided no factual basis or analysis for his noninfringing alternatives opinions. See Dkt. 312 at 1-2. Hughes contends that Dr. Wicker intends Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 28 of 45 PageID #: 23896 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 41 of 71 Pageid#: 632 29 to support this opinions at trial by pointing to testimony from live fact witnesses. Dr. Wicker cites relevant deposition testimony in his report, and there is no dispute that an expert may rely on fact testimony presented at trial. For these reasons, Elbit’s Infringement Expert Motion is DENIED (Subject to the Court’s ruling on Plaintiffs’ Motion to Strike Non-Infringing Alternatives, Dkt. 315). 2. Hughes’ Motion to Exclude Patent Office Expert Testimony (Dkt. 313) Hughes asks the Court to exclude certain opinions of Elbit’s patent office practice and procedure expert, Stephen Kunin, because Hughes contends that some of his opinions are “not relevant to any issue in the case and are based on unreliable methodologies.” Dkt. 313 at 1. First, Hughes argues “Mr. Kunin improperly opines regarding [the prosecuting attorney’s] supposed state of mind and knowledge of the ’073 patent, and actions Mr. Plastrik must have taken in responding to an office action.” Id. Mr. Kunin’s testimony emphasizes that Elbit’s ’073 patent was cited as prior art to one of Hughes’ patent applications. See, e.g., Dkt. 313-1 ¶¶ 37-48. Mr. Kunin includes an analysis of the prosecution of Hughes’ patent application, including Mr. Kunin’s assertion that the prosecuting attorney, “in order to distinguish [the ’073 patent] disclosure from the limitations set forth in the then pending claims of the ’755 application,” “would have had to review the ’073 patent to reach the conclusion that it ‘does not teach or suggest the feature of a network control cluster . . . .” Id. ¶ 44. Whatever relevance this testimony might have, the Court agrees with Hughes that the testimony does not satisfy the Daubert standard. Mr. Kunin does not have personal knowledge of what Hughes’ prosecuting attorney may or may not have necessarily done to prosecute Hughes’ patent application. See Daubert, 509 U.S. at 599, 113 S.Ct. 2786 (requiring more than “subjective Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 29 of 45 PageID #: 23897 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 42 of 71 Pageid#: 633 30 belief or unsupported speculation” from expert testimony). Nor would Mr. Kunin’s testimony be relevant or helpful to the trier of fact. See Daubert, 509 U.S. at 595 (trial court must ensure “that an expert’s testimony both rests on a reliable foundation and is relevant to the task at hand”). Accordingly, Mr. Kunin will not be permitted to testify about what Hughes’ prosecuting attorney “would have had to review” as part of prosecuting Hughes’ patent application. See Dkt. 313-1 ¶¶ 44, 45, 48. Second, Hughes contends Mr. Kunin’s opinion that the ’073 patent is “foundational” should be excluded. See Dkt. 313 at 1-2. Mr. Kunin characterizes the ’073 patent as “foundational” because the patent was cited as prior art during the prosecution of “at least three Hughes patent applications,” “has been applied by the Examiners as anticipatory prior art to then pending claims in at least the ’755 Hughes patent application,” and has been cited “in 52 United States patents.” Dkt. 313-1 ¶¶ 55-56. These facts, according to Mr. Kunin “is an indicator of the foundational nature of a patent.” Id. ¶ 58. The Court agrees with Hughes that Mr. Kunin’s testimony does not meet the Daubert standard. Mr. Kunin cites two studies reporting the mean and median number of patent citations, and Mr. Kunin compares these mean and median citation numbers with the number of times the ’073 patent has been cited. Even assuming these studies compel a statistically significant conclusion, it is not clear how the number of times a patent is cited renders the patent “foundational.” See Dkt. 313-1 ¶ 62 n. 12. Indeed, Mr. Kunin’s testimony suggests that a patent may be cited by Examiners more frequently if the patent has a “a large omnibus specification.” Id. ¶ 59. An omnibus specification of course has nothing to do with the technical merits of a patent specification or the patentability of its claims. See Sundance, Inv. v. DeMonte Fabricating Ltd., 550 F.3d 1356, 1361-62 (Fed. Cir. 2008) (reversing trial court for erroneously permitting a patent Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 30 of 45 PageID #: 23898 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 43 of 71 Pageid#: 634 31 prosecution expert to testify on the technical merits of a patent in suit). Moreover, the term “foundational” is not clearly defined by Mr. Kunin and thus unhelpful to the jury. Nor is it clear what relevance, if any, Mr. Kunin’s testimony about the supposedly foundational nature of the ’073 patent has to the questions the jury will be required to resolve. See Daubert, 509 U.S. at 595 (trial court must ensure “that an expert’s testimony both rests on a reliable foundation and is relevant to the task at hand”). In sum, Mr. Kunin’s testimony about the foundational nature of the ’073 patent will not assist the trier of fact. See id. Accordingly, Mr. Kunin’s testimony based on paragraphs 55 through 62 of his expert report is excluded. See Dkt. 313-1. 2. 2. Hughes’ Motion to Exclude Patent Office Expert Testimony is therefore GRANTED. 3. Defendants’ Motion to Exclude Damages Expert Testimony (Dkt. 314) Hughes moves to exclude opinions by Elbit’s expert, Mr. Martinez, related to: (1) his royalty analysis for the ’073 Patent that relies on an allegedly non-comparable settlement agreement and fails to apportion value to the claimed invention; (2) his lost profits analysis for the ’073 patent that allegedly fails to consider non-infringing alternatives; and (3) his damages opinion with respect to the ’874 patent in view of his failure to separately calculate damages for this patent. See Dkt. 314. The parties’ arguments about Mr. Martinez’s royalty and apportionment analysis are less about reliability and more about credibility, i.e., they raise questions for the jury to resolve. The parties do not dispute that the patents-in-suit have not been licensed before. Dkt. 331 at 2-3. Mr. Martinez opines that the Gilat license is comparable, while Hughes’ expert opines that the Caltech license is comparable. Id. Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 31 of 45 PageID #: 23899 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 44 of 71 Pageid#: 635 32 The Gilat License resulted from a lawsuit Hughes brought against a competitor in the satellite communication industry for infringing patents related to Hughes’ one-way DirecPC systems, i.e., technology that preceded Hughes’ allegedly infringing two-way systems. Dkt. 331- 1 ¶¶ 207-39. Defendants highlight differences between the Gilat License and the hypothetical negotiation involving the patents-in-suit, but comparable licenses need not be identical as long as they are “sufficiently comparable to the hypothetical license at issue in suit.” Lucent Techs., Inc. v. Gateways, Inc., 580 F.3d 1301, 1325, 1328-30 (Fed. Cir. 2009). An expert may rely on past licenses involving different technology as long as the expert “account[s] for differences in the technologies and economic circumstances of the contracting parties.” Virnetx, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1330 (Fed. Cir. 2014). Mr. Martinez’s report adequately accounts for such differences. See Dkt. 331-1 ¶¶ 207-39. Moreover, Mr. Martinez’s explanation of the differences between the accused technology and the technology subject to the Gilat license adequately accounts for his apportionment of the value of the patents-in-suit. See id. ¶¶ 208-224, 228-235, 238-239, 267-273. “[E]stimating a reasonable royalty and apportionment is never an exact science. At some level an expert must be allowed to rely on and use his or her judgment, provided the opinion is supported by facts and data.” PerdiemCo, LLC v. Industrack LLC, No. 2:15-CV-726-JRG-RSP, 2016 WL 6611488, at *3 (E.D. Tex. Nov. 9, 2016). Mr. Martinez’s opinion is not so opaque as to be immune from rigorous cross-examination, the “traditional and appropriate means of attacking shaky but admissible evidence.” See Daubert, 509 U.S. at 596. Hughes’ objection to Mr. Martinez’s lost profits opinion is based on Mr. Martinez’s alleged failure to consider noninfringing alternatives. See, e.g., Dkt. 314 at 4-5. The parties’ arguments concerning lost profits reveal a complex disagreement about what is required to establish lost Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 32 of 45 PageID #: 23900 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 45 of 71 Pageid#: 636 33 profits. Mr. Martinez’s opinion accounts for the existence and effect of noninfringing alternatives, assuming those alternatives exist (which is a factual dispute for the jury to resolve) by conducting a market share apportionment analysis. See Dkt. 331-1 ¶¶ 276-92. Mr. Martinez’s report also accounts for the possibility that certain alternatives are not satisfactory noninfringing alternatives. See Dkt. 331-1 ¶¶ 161-77. Mr. Martinez’s opinion is consistent with Federal Circuit authority. Indeed, as the Federal Circuit explained in State Indus., Inc. v. Mor-Flo Industries, Inc., calculating lost profits in a multiple-competitor environment is difficult, but not impossible: Frequently, the patent owner and infringer are the only suppliers in the market, and the owner is seeking to recover profits lost through every sale made by the infringer. In the two-supplier market, it is reasonable to assume, provided the patent owner has the manufacturing and marketing capabilities, that it would have made the infringer’s sales. In these instances, the Panduit test is usually straightforward and dispositive. Here we have multiple competitors and the patent owner contends that all the competitors infringed or sold a far less preferable alternative-fiberglass. The district court made the absence of acceptable substitutes, Panduit item (2), a neutral factor by crediting all the other competitors with their market shares as State requested. If the court is correct in its finding that the other competitors were likely infringers of one or the other of State’s patents, State would have been entitled to their shares of the market on top of its own, and a correspondingly greater share of Mor-Flo’s sales. If it is wrong in whole or in part, State would have been entitled to its current share or to a lesser increase in share. We need not decide which it is because it would make no difference to the outcome. State would get at least what it asked for, because as discussed further below the district court found, and we agree, that State’s share of the market was proven. 883 F.2d 1573, 1578 (Fed. Cir. 1989) (citations omitted). Because Mr. Martinez’s opinion is based on a market share approach similar to that described in Mor-Flo, the opinion does not violate Daubert and Rule 702. Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 33 of 45 PageID #: 23901 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 46 of 71 Pageid#: 637 34 Hughes’ complaint with Mr. Martinez’s opinion concerning compensation for the alleged infringement of the ’874 patent is based on Mr. Martinez’s lack of a separate royalty opinion for the ’874 patent. See Dkt. 294; Dkt. 314 at 14-15. Hughes fails to adequately demonstrate why Mr. Martinez’s opinion that the parties would have engaged in a single hypothetical negotiation for both asserted patents is unreliable simply because the ’874 patent had not yet issued. Mr. Martinez’s opinions satisfy the Daubert standard. See, e.g., Comcast IP Holdings I LLC v. Sprint Commc’ns Co., L.P., 850 F.3d 1302 (Fed. Cir. 2017) (“[a] hypothetical negotiation in 2006 would include each of the asserted patents, even if they issued later, and the resulting negotiation would include the fact that two of the patents issued later.”). For these reasons, Defendants’ Motion to Exclude Damages Expert Testimony is DENIED. 4. Elbit's Motion to Exclude Damages Expert Testimony (Dkt. 319) Elbit asks the Court to strike five portions of Mr. Bakewell’s report, namely opinions concerning: (1) “standard essential patents” (SEPs) and the related requirement to license such patents on fair, reasonable, and nondiscriminatory (FRAND) terms because, according to Elbit, the asserted patents are not SEPs and Elbit is under no FRAND obligations; (2) market approach royalty calculations based on a valuation by third party iLeverage; (3) an allegedly arbitrary royalty baseline; (4) third party patent licenses that Mr. Bakewell allegedly fails to establish are comparable; and (5) non-infringing alternatives for which Mr. Bakewell allegedly cites no evidence of their availability at the time of the hypothetical negotiation. See Dkt. 319. The Court concludes that Elbit’s objections to Mr. Bakewell’s opinions go more toward the weight of his testimony than to its admissibility. With respect to Mr. Bakewell’s SEP opinions, the parties dispute whether the patents-in-suit, notably the ’073 patent, are SEPs. Mr. Bakewell contends at least the ’073 patent is a SEP because it includes a claim that is “necessarily infringed” Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 34 of 45 PageID #: 23902 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 47 of 71 Pageid#: 638 35 by a system that utilizes technology incorporated into the IPoS standard. See Dkt. 346 at 1. Elbit emphasizes the lack of noninfringing alternatives for the accused Hughes products that practice the IPoS standard, and thus Mr. Bakewell’s SEP analysis is at least supported by the possible conclusion that the ’073 patent is essential to the IPoS standard. See In re Innovatio IP Ventures, LLC Patent Litig., 956 F. Supp. 2d 925, 939 n.5 (N.D. Ill. 2013) (“If there are no commercially and technically feasible non-infringing alternatives, a claim is necessary. Similarly, if a claim is necessary, it means that there are no feasible alternatives with which to implement the standard.”). Elbit argues Mr. Bakewell’s discussions of FRAND obligations would confuse the jury, but this argument goes more to whether his testimony should be excluded under Rule 403, not Rule 702. Cross-examination is the “traditional and appropriate means of attacking shaky but admissible evidence.” See Daubert, 509 U.S. at 596. Elbit’s objection to Mr. Bakewell’s reliance on the iLeverage valuation is more of a disagreement about the reasonableness of Mr. Bakewell’s valuation. Mr. Bakewell’s iLeverage valuation opinions are not so unreliable as to warrant exclusion under Daubert and Rule 702. There are numerous factual disputes underlying Mr. Bakewell’s iLeverage valuation, see Dkt. 346 at 4- 7, and Elbit’s objection goes to the weight of Mr. Bakewell’s testimony, not its admissibility. See Robocast, Inc. v. Microsoft Corp., No. 10-1055-RGA, 2014 WL 202399, *2-3 (D. Del. January 16, 2014) (declining to exclude valuation relied upon by expert because “it is up to the jury to determine the weight accorded the valuation”). Similarly, Elbit disagrees with Mr. Bakewell’s royalty baseline, his reliance on the allegedly comparable Caltech license, and his discussion of noninfringing alternatives, but Mr. Bakewell’s economic analysis is sufficiently detailed to avoid exclusion under Daubert. As for the royalty baseline, Mr. Bakewell provides a range of values derived from economic analysis, Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 35 of 45 PageID #: 23903 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 48 of 71 Pageid#: 639 36 see, e.g. Dkt. 346-1 ¶¶ 358, 364, 368, 486, 488, and this range can be tested through cross- examination. See Summit6, LLC v. Samsung Elecs. Co., Ltd., 802 F.3d 1283, 1299 (Fed. Cir. 2015) (“[D]isputes over the expert’s credibility or over the accuracy of the underlying facts are for the jury”). As for the Caltech license, the real dispute is whether the license is sufficiently comparable, and thus the weight of Mr. Bakewell’s testimony is at issue, at least when the Court is satisfied that the allegedly comparable license bears a sufficient technological relationship to the patented technology, as is the case here. See Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201, 1227 (Fed. Cir. 2014) (“[T]hat a license is not perfectly analogous generally goes to the weight of the evidence, not its admissibility.”). Finally, as for Mr. Bakewell’s discussion of noninfringing alternatives, the dispute is one that will be resolved by the jury when they determine which alternatives, if any, are adequate noninfringing substitutes, and what affect that may have on any damages award, see Dkt. 346-1 ¶ 203, 358, subject to the Court’s ruling on Plaintiff’s Motion to Strike Non-Infringing Alternatives (Dkt. 315). For these reasons, Elbit’s Motion to Exclude Damages Expert Testimony is DENIED. D. Defendants’ Motions to Transfer and Stay (Dkts. 372 and 373) Hughes and BlueTide move to transfer the case under 28 U.S.C. § 1406(a), contending that venue is improper in this district in view of the Supreme Court’s recent decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (2017)-a decision that reaffirmed the Supreme Court’s 1957 holding that 28 U.S.C. § 1400(b) is the “sole and exclusive provision controlling venue in patent infringement actions.” See Fourco Glass Co. v. Transmirra Prod. Corp., 353 U.S. 222, 229. TC Heartland clarified that venue is proper under § 1400(b) “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,” and that the term “resides” refers Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 36 of 45 PageID #: 23904 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 49 of 71 Pageid#: 640 37 “only to the State of incorporation.” TC Heartland, 137 S. Ct. at 1521. Hughes and BlueTide1 contend they are not incorporated in Texas and have no regular and established place of business in the district. Elbit disputes whether Hughes waived objections to venue and whether venue over Hughes is proper on the merits. See Dkt. 386. The Court need not address the merits because Hughes and BlueTide waived their venue defense or objection to venue under Federal Rules of Civil Procedure 12(g)(2) and 12(h)(1)(A). 1. Relevant Procedural Background In response to Elbit’s initial complaint, Hughes filed a motion to dismiss under Rule 12(b)(6), asking the Court to dismiss Elbit’s claims for willful patent infringement. See Dkt. 22. Hughes made no assertion that venue was improper. See id. Hughes renewed its motion on April 20, 2015, and again on December 14, 2015, in response to Elbit’s amended complaints. See Dkt. 34; Dkt. 69. Hughes’ renewed motions made no claim of improper venue. In Hughes’ answer to the complaint filed on April 13, 2016, Hughes stated that it “does not contest that venue is proper for Hughes in this District” but that Hughes “reserves the right to contest that venue is proper in this District based on In re TC Heartland, Case No. 16-0105, currently pending before the Federal Circuit. . . .” Dkt. 110 at 3. Hughes later filed a sealed document requesting transfer under 28 U.S.C. § 1404(a), arguing that venue would be more convenient in the District of Maryland. See Dkt. 130 at 5. Notably, the sealed document makes no mention of transfer under § 1406(a), which is the appropriate provision for requesting transfer of a case “laying venue in the wrong division or district.” See § 1406(a). 1 Elbit responded to Defendants’ motion to transfer by stating it does not oppose “the Court dismissing the action against BlueTide on venue grounds at this time.” Dkt. 386 at 1. The Court declines to do so without a joint motion to dismiss BlueTide. Elbit also requests “that the Court exercise its power to dismiss Country Home under Rule 41(a)(2).” Id. at 1 n.1. The Court will consider Elbit’s request if Elbit or the parties file a motion to dismiss Country Home. Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 37 of 45 PageID #: 23905 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 50 of 71 Pageid#: 641 38 For its part, BlueTide filed a motion to dismiss for improper venue on March 16, 2015, acknowledging the existing Federal Circuit precedent holding that § 1391(c) supplements § 1400(b), and thus, according to that Circuit precedent, venue is proper in a patent case where a defendant is subject to personal jurisdiction. See VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1584 (Fed. Cir. 1990). Indeed, BlueTide stated in its motion that “[a] corporate defendant is deemed to reside for purposes of venue ‘in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question.’” Dkt. 23 at 2 (quoting § 1391(c)(2)). The remainder of BlueTide’s motion assumes § 1391(c)(2) applied to this case and to patent cases generally. BlueTide’s objection was based solely on the argument that this district did not have personal jurisdiction over BlueTide (assuming the district was a state under § 1391(c)(2)). See id. at 3-9. The same assumption held in BlueTide’s second and third motions to dismiss for improper venue filed on April 20, 2015, and on December 14, 2015, both in response to Elbit’s amended complaints. See Dkt. 35 at 3; Dkt. 67 at 3. In BlueTide’s answer filed on April 13, 2016, BlueTide again denied that venue is proper, but for the first time stated that it “reserves the right to contest that venue is proper in this District based on In re TC Heartland, Case No. 16-0105, currently pending before the Federal Circuit.” See Dkt. 111 ¶ 10. In sum, neither Hughes nor BlueTide affirmatively sought dismissal or transfer because of the lack of “resid[ence]” or the lack of a “regular and established place of business” under § 1400(b) as interpreted by Fourco, 353 U.S. at 229, until June 3, 2017-less than two months from trial. See Dkt. 351 (Docket Control Order); Dkt. 372. 2. Waiver of Venue Defense “A party waives any defense listed in Rule 12(b)(2)-(5) by . . . omitting it from a motion in the circumstances described in Rule 12(g)(2).” Fed. R. Civ. P. 12(h)(1)(A). Under Rule 12(g)(2), Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 38 of 45 PageID #: 23906 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 51 of 71 Pageid#: 642 39 “a party that makes a motion under this rule must not make another motion under this rule raising a defense or objection that was available to the party but omitted from its earlier motion.” Rules 12(h)(2) and (3) exempt certain defenses from Rule 12(g)(2)’s consolidation requirement, including “[f]ailure to state a claim upon which relief can be granted,” failure “to join a person required by Rule 19(b),” failure “state a legal defense to a claim,” and lack of subject-matter jurisdiction. See, e.g., Nationwide Bi-Weekly Admin., Inc. v. Belo Corp., 512 F.3d 137, 141 (5th Cir. 2007) (discussing Rule 12(h)(2)’s exemption of a motion for failure to state a claim from Rule 12(g)’s consolidation requirement); see also Doe v. Columbia-Brazoria Indep. Sch. Dist. by & through Bd. of Trustees, 855 F.3d 681, 687 (5th Cir. 2017). Rule 12(g)(2) does not exempt a venue defense or objection to venue under Rule 12(b)(3). See Albany Ins. Co. v. Almacenadora Somex, S.A., 5 F.3d 907, 909 (5th Cir. 1993). Thus, by filing a motion to dismiss for failure to state a claim under Rule 12(b)(6) and omitting its venue defense, Hughes waived the defense-assuming that defense “was available” to Hughes at the time. See Fed. R. Civ. P. 12(g)(2), 12(h)(1)(A). Rule 12(g)(2) (and by extension Rule 12(h)(1)(A)) applies only to defenses or objections that were “available to the party.” Fed. R. Civ. P. 12(g)(2). Consistent with the text of the Rule and its applicability to “available” defenses and objections, courts in this Circuit recognize that waiver under Rule 12(h)(1)(A) does not apply to personal defenses that were unavailable to the party when waiver would have otherwise occurred. See, e.g., Peacock v. Ins. & Bonds Agency of Texas, PLLC, No. 3:12-CV-1710-D, 2012 WL 3702920, at *1 (N.D. Tex. Aug. 28, 2012). Hughes and BlueTide argue the defense was unavailable because TC Heartland is an intervening change in law. Dkt. 372 at 14 n.4 (citing Holzsager v. Valley Hop., 646 F.2d 792, 796 (2d Cir. 1981)). The Court need not reach Defendants’ argument that a change in law constitutes Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 39 of 45 PageID #: 23907 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 52 of 71 Pageid#: 643 40 an exception to waiver under Rule 12(h)(1)(A) because the Supreme Court’s decision in TC Heartland does not qualify. Fourco was decided in 1957. While the Federal Circuit’s decision in VE Holding was inconsistent with Fourco, the Federal Circuit cannot overturn Supreme Court precedent. See Thurston Motor Lines. Inc. v. Jordan K. Rand, Ltd., 460 U.S. 533, 535 (1983) (“Needless to say, only this Court may overrule one of its precedents.”). As one court in the Eastern District of Virginia concluded, “TC Heartland does not qualify for the intervening law exception to waiver because it merely affirms the viability of Fourco.” Cobalt Boats, LLC v. Sea Ray Boats, Inc., No. 2:15-CV-21, 2017 WL 2556679, at *3 (E.D. Va. June 7, 2017).2 Hughes argues “it was well known that any motion under § 1400(b) suggesting that proper venue required either incorporation within the state of Texas or ‘a regular and established place of business’ by the defendant would be viewed as meritless.” Dkt. 372 at 14 n.4. While such a motion might have been viewed as meritless in a lower court, that does not change the harsh reality that Hughes would have ultimately succeeded in convincing the Supreme Court to reaffirm Fourco, just as the petitioner in TC Heartland did. See Cobalt Boats, 2017 WL 2556679, at *3. The Supreme Court’s decision in TC Heartland does not exempt Hughes from the waiver that occurred when Hughes left the venue defense out of its motion to dismiss for failure to state a claim. See Fed. R. Civ. P. 12(g)(2), 12(h)(1)(A). Furthermore, Hughes waived its venue defense in its answer to Elbit’s complaint filed on April 13, 2016, by stating that it “does not contest that venue is proper for Hughes in this District . . . .” See Dkt. 110 at 3. Hughes has “fallen victim to the well-settled rule that a party is 2 After the decision in Cobalt Boats, the defendant petitioned for writ of mandamus, and the Federal Circuit denied the petition “[u]nder the circumstances” and “on the eve of trial,” over Judge Newman’s dissent. See In re Sea Ray Boats, Inc., Case No. 2017-124, Dkt. 15, Slip Op. at 2 (Fed. Cir. June 9, 2017). This Court confronts similar circumstances with trial on the horizon. Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 40 of 45 PageID #: 23908 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 53 of 71 Pageid#: 644 41 bound by what it states in its pleadings.” See Soo Line R. Co. v. St. Louis Sw. Ry. Co., 125 F.3d 481, 483 (7th Cir. 1997); see also Sunday Riley Modern Skin Care, L.L.C. v. Maesa, No. CIV.A. H-12-1650, 2014 WL 722870, at *6 (S.D. Tex. Feb. 20, 2014). Hughes argues that Defendants “each expressly reserved their rights to challenge venue in the event TC Heartland changed the law,” see Dkt. 372 at 14 n.4; Dkt. 110 at 3, but a defendant cannot state that it does not dispute venue while reserving the ability to later contest it. To conclude otherwise would undermine the purpose of Rule 12(g) and (h) to promote efficiency and finality. See Tiernan v. Dunn, 295 F. Supp. 1253, 1256 (D.R.I. 1969) (“To permit this defense to be raised now would undermine the very purpose of Rule 12(g), (h), which is the avoidance of time-consuming, piece-meal litigation of pre-trial motions.”). A party’s conduct in the course of a proceeding can justify waiver even when the requirements of Rule 12(h)(1) are not satisfied. See, e.g., Yeldell v. Tutt, 913 F.2d 533, 539 (8th Cir. 1990) (“A delay in challenging personal jurisdiction by motion to dismiss has resulted in waiver, even where, as here, the defense was asserted in a timely answer.”) (emphasis added). Unlike Hughes, BlueTide has consistently denied that venue is proper in the district, and BlueTide has filed three motions articulating its arguments. See Dkts. 23, 35, 67. Yet in each of these motions, BlueTide acknowledged the applicability of § 1391(c) to patent cases, a position that is not and never was controlling Supreme Court law, at least not since 1957-notwithstanding the fact that lower courts may have been bound by VE Holding. See TC Heartland, 137 S. Ct. at 1520 (“In Fourco, this Court definitively and unambiguously held that the word ‘reside[nce]’ in § 1400(b) has a particular meaning as applied to domestic corporations: It refers only to the State of incorporation.”). By filing motions to dismiss for improper venue and omitting its objection to venue under § 1400(b)-as that provision was interpreted by Fourco-BlueTide waived its objection under Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 41 of 45 PageID #: 23909 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 54 of 71 Pageid#: 645 42 Rule 12(g)(2) and 12(h)(1)(A). BlueTide raised the defense of improper venue, but Rule 12(g)(2)’s consolidation requirement, and hence Rule 12(h)(1)(A) waiver, is not limited to a “defense.” The Rule requires a party to include “a defense or objection that was available to the party.” Fed. R. Civ. P. 12(g)(2) (emphasis added); see also Albany Ins. Co., 5 F.3d at 909-10 (applying waiver to an available venue objection omitted from a prior motion to dismiss for improper venue). If a party can preserve any objection to venue by simply raising a venue defense-regardless of the objection underlying that defense-then the word “objection” in Rule 12(g)(2) would be superfluous. “[C]ourts ‘must give effect, if possible, to every clause and word of a statute.’” See Loughrin v. United States, 134 S. Ct. 2384, 2390 (2014) (citation omitted). BlueTide’s venue objection is therefore waived. Hughes and BlueTide move to transfer § 1406, which applies only to cases “laying venue in the wrong division or district.” Hughes and BlueTide waived their objections to venue. See § 1406(b) (“Nothing in this chapter shall impair the jurisdiction of a district court of any matter involving a party who does not interpose timely and sufficient objection to venue.”); In re Vitamins Antitrust Litig., 263 F. Supp. 2d 67, 68 n.1 (D.D.C. 2003) (“The Court need not address Defendants’ motion pursuant to 28 U.S.C. § 1406(a). It is undisputed that Defendants have failed to timely object to venue or personal jurisdiction. The Federal Rules clearly provide that such objections are waivable defenses unless raised in a responsive pleading or by motion under Rule 12.”); see also Broad. Co. of the Carolinas v. Flair Broad. Corp., 892 F.2d 372, 377 (4th Cir. 1989). The motion to transfer is therefore DENIED, and the motion to stay pending Defendants’ motion to transfer under § 1406 is DENIED AS MOOT. Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 42 of 45 PageID #: 23910 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 55 of 71 Pageid#: 646 43 3. Defendants’ Pending Motion to Transfer under § 1404 (Dkt. 130) Shortly before Defendants filed their motion to transfer under § 1406, Defendants alerted the Court to a document Defendants filed via ECF on May 24, 2016 simply as a “Sealed Document.” See Dkt. 130. Although the document was titled “motion,” the Court was not aware of it because the ECF system did not identify the document as a pending motion because Defendants’ counsel did not file it as such. The Court is now aware of the motion and will resolve it in due time, but under the circumstances, a stay pending resolution of the motion to transfer under § 1404 is not warranted. Defendants had numerous occasions to alert the Court to the motion, and no such notice was given until more than a year after the motion was filed. Accordingly, Defendants’ motion to stay pending transfer under § 1404 is DENIED. An Order on the pending motion to transfer under § 1404 will be forthcoming. Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 43 of 45 PageID #: 23911 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 56 of 71 Pageid#: 647 44 CONCLUSION For the foregoing reasons, IT IS ORDERED that the parties’ pending motions are resolved as follows: Motion Dkt. Disposition Elbit’s Motion to Strike Invalidity Opinions 275 GRANTED-IN-PART and DENIED- IN-PART Hughes’ Motion to Strike Infringement Contentions 276 DENIED Hughes’ Priority Date Motion 277 GRANTED Elbit’s Infringement Expert Motion (Dkt. 312) 312 DENIED Hughes’ Motion to Exclude Patent Office Expert Testimony 313 GRANTED Defendants’ Motion to Exclude Damages Expert Testimony 314 DENIED Plaintiffs’ Motion to Strike Non-Infringing Alternatives 315 GRANTED Hughes’ Motion to Strike Infringement Opinions 316 DENIED Elbit's Motion to Exclude Damages Expert Testimony 319 DENIED Defendants’ Motion to Transfer 372 DENIED Defendants’ Motion to Stay 373 DENIED AS MOOT Additionally, the Court RECOMMENDS the following motions for summary judgment be resolved as follows: Motion Dkt. RECOMMENDATION Defendants’ “Switching Means” Motion 291 Deny Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 44 of 45 PageID #: 23912 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 57 of 71 Pageid#: 648 45 Defendants’ “Means for Generating Request” Motion 292 Deny Defendants’ GMR-1 Products Motion 293 Deny Defendants’ Damages Motion 294 Deny Hughes’ Copying Motion 295 Deny Hughes’ Willfulness Motion 296 Deny Hughes’ Marking Motion 297 Deny Motion for Summary Judgment of Noninfringement of the ’874 Patent 298 Deny A party’s failure to file written objections to the findings, conclusions, and recommendations contained in this report within fourteen days after being served with a copy shall bar that party from de novo review by the district judge of those findings, conclusions, and recommendations and, except on grounds of plain error, from appellate review of unobjected-to factual findings and legal conclusions accepted and adopted by the district court. Fed. R. Civ. P. 72(b)(2); see Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1430 (5th Cir. 1996) (en banc). Case 2:15-cv-00037-RWS-RSP Document 388 Filed 06/20/17 Page 45 of 45 PageID #: 23913 . ____________________________________ ROY S. PAYNE UNITED STATES MAGISTRATE JUDGE SIGNED this 3rd day of January, 2012. SIGNED this 20th day of June, 2017. Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 58 of 71 Pageid#: 649 EXHIBIT C Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 59 of 71 Pageid#: 650 1 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION ILIFE TECHNOLOGIES, INC., Plaintiff, v. NINTENDO OF AMERICA, INC., Defendant. § § § § § § § § § No. 3:13-cv-04987 MEMORANDUM OPINION AND ORDER Before the Court is Nintendo of America, Inc.’s Motion to Dismiss or Transfer for Improper Venue Under 28 U.S.C. § 1406(a) [ECF No. 206]. On June 23, 2017, the Court heard oral argument on the Motion. As stated on the record at the hearing, the Motion is DENIED. The Court now issues this Memorandum Opinion and Order describing its reasons for denying the Motion. 1. Background iLife filed this patent infringement suit on December 23, 2013. Nintendo filed its Answer on April 28, 2014. In ¶ 7 of the Answer, Nintendo stated: Defendant admits that venue is proper in this District pursuant to 28 U.S.C. §§ 1391 and 1400(b). Defendant denies that the Northern District of Texas is a convenient venue for this dispute and reserves the right to transfer pursuant to 28 U.S.C. § 1404. Answer ¶ 7. On April 29, 2014, Nintendo filed a Motion to Transfer Venue pursuant to § 1404(a). Nintendo broadly argued that the convenience factors under § 1404(a) supported a transfer to the Western District of Washington, where Nintendo’s headquarters are located in Redmond, Washington. In the alternative, Nintendo asked for the case to be transferred to the Northern Case 3:13-cv-04987-M Document 245 Filed 06/27/17 Page 1 of 12 PageID 17125 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 60 of 71 Pageid#: 651 2 District of California. Neither the motion nor the reply mentioned § 1406. After oral argument on the § 1404 Motion, the Court denied Nintendo’s Motion to Transfer. The Court noted that Nintendo’s headquarters were in Redmond, Washington, but that most of Nintendo’s witnesses would be travelling from Japan, and the difference in distance between Washington and Texas for foreign witnesses was not significant for venue purposes. Nintendo moved for reconsideration of the denial, which the Court denied. On November 28, 2014, Nintendo moved to file its Amended Answer to assert an affirmative defense of inequitable conduct. The Court granted Nintendo’s motion; the Amended Answer contained the same paragraph on venue as Nintendo’s first Answer: Defendant admits that venue is proper in this District pursuant to 28 U.S.C. §§ 1391 and 1400(b). Defendant denies that the Northern District of Texas is a convenient venue for this dispute and reserves the right to transfer pursuant to 28 U.S.C. § 1404. Am. Answer [ECF No. 61] ¶ 7. On May 22, 2017, the Supreme Court decided TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (2017), holding that for purposes of the patent venue statute, a corporation “resides” only in its state of incorporation. Nintendo moves to dismiss or transfer this case to the Western District of Washington under § 1406(a), contending that in light of TC Heartland, venue is improper in the Northern District of Texas. Jury selection and the pretrial conference for this case is scheduled for August 14, 2017. Trial is scheduled to begin the week of August 21, 2017. 2. Legal Background Section 1400(b), the patent venue statute, provides that: 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. Case 3:13-cv-04987-M Document 245 Filed 06/27/17 Page 2 of 12 PageID 17126 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 61 of 71 Pageid#: 652 3 28 U.S.C. § 1400(b); see also Act of June 25, 1948, ch. 646, 62 Stat. 869, 936. In Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 226 (1957), the Supreme Court considered the relationship between § 1400(b) and the general venue statute, § 1391. The Supreme Court had earlier considered a similar question in Stonite Products. Co. v. Melvin Lloyd Co., 315 U.S. 561 (1942), specifically whether Section 48 of the Judicial Code, governing venue in patent litigation, was supplemented by Section 52, the general venue provision that predated Section 48.1 In Stonite, the Court held that Section 52 did not alter the scope of Section 48, which was “the exclusive provision controlling venue in patent infringement proceedings,” and enacted as “a restrictive measure, limiting a prior, broader venue.” Id. at 566. “Congress did not intend the Act of 1897 to dovetail with the general provisions relating to the venue of civil suits, but rather that it alone should control venue in patent infringement proceedings.” Id. at 565. In 1948, the current version of the patent venue statute, § 1400(b), was enacted. Act of June 25, 1948. Ch. 646, 62 Stat. 869, 936. The general venue statute was amended in the same enactment, and consisted of one sentence which read: (c) A corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes. Id. at 935. The Supreme Court in Fourco was again called upon to consider the interplay between the patent venue statute and the general venue statute. When discussing the significance of recent changes made to § 1391 and § 1400(b), the Supreme Court held that for purposes of § 1400(b), a corporation “resides” only in its State of incorporation: 1Section 52 was derived from R.S. § 740, which in turn stemed from the Act of May 4, 1858, c. 27, 11 Stat. 272. Stonie, 315 U.S. at 566. Section 48 was enacted from the Act of March 3, 1897, c. 395, 29 Stat. 695. Id. Case 3:13-cv-04987-M Document 245 Filed 06/27/17 Page 3 of 12 PageID 17127 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 62 of 71 Pageid#: 653 4 Substitution of words “where the defendant resides” for “of which the defendant is inhabitant” in patent infringement venue statute, on ground that words “inhabitant” and “resident” were synonymous as respects venue, negatived intention to make corporations suable in patent infringement cases where they are merely “doing business,” since the synonymous words mean “domicile” and in respect of corporations mean the state of incorporation only. Id. The Supreme Court in Fourco also discussed the interplay between § 1400(b) and § 1391, the general venue statute: We think it is clear that § 1391(c) is a general corporation venue statute, whereas [§] 1400(b) is a special venue statute applicable, specifically, to all defendants in a particular type of actions, i.e., patent infringement actions. In these circumstances the law is settled that “However inclusive may be the general language of a statute, it ‘will not be held to apply to a matter specifically dealt with in another part of the same enactment. . . . ’” . . . We hold that 28 U.S.C. § 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. § 1391(c). Id. at 229 (emphasis added). Since the decision in Fourco, Congress has not amended § 1400(b). In 1988, however, Congress amended § 1391(c) to read as follows: (c) For purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced. Judicial Improvements and Access to Justice Act, Pub. L. No. 100-702, tit. X, § 1013(a), 102 Stat. 4642, 4669 (1988) (emphasis added). In VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1578 (Fed. Cir. 1990), the Federal Circuit held that amendments to § 1391(c) regarding the applicability of § 1391(c)-namely, the 1988 revision that stated it applied “[f]or purposes of venue under this chapter- “redefine[d] the meaning of the term ‘resides’ in” § 1400(b). Id. In making this Case 3:13-cv-04987-M Document 245 Filed 06/27/17 Page 4 of 12 PageID 17128 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 63 of 71 Pageid#: 654 5 decision, the Federal Circuit considered the Supreme Court’s decision in Fourco, and whether Congress, in enacting the 1988 amendments, intended § 1400(b) to be interpreted differently: The Supreme Court's decision in Fourco is generally viewed as holding that § 1400(b) is the ‘exclusive’ venue statute in patent infringement actions. Thus it is sometimes said that, since Fourco, the only way to change the way that venue in patent infringement actions is determined is to change § 1400(b). This argument fails, however, because the Supreme Court, in Brunette, 406 U.S. 706, 92 S.Ct. 1936 [1972], refused to impose such a disablement upon the Congress' ability to enact or amend legislation. The issue in Brunette was whether § 1400(b) governed venue in a patent suit involving a foreign corporation, or whether the general venue provision applicable to aliens, 28 U.S.C. § 1391(d), governed. The Court held § 1391(d) applied, and that § 1400(b) was supplemented by the provision governing suits against aliens. Fourco and Stonite were distinguished. The specific question in Fourco was whether the statutory language previously enacted by the Congress as § 1391(c) supported a conclusion that Congress intended to have §§ 1391(c) and 1400(b) read together. On the basis of the nonspecific language of § 1391(c) and prior history as the Court read it, the Court concluded the answer was no. Section 1391(c) as it was in Fourco is no longer. We now have exact and classic language of incorporation: “For purposes of venue under this chapter . . . .” Congress could readily have added “except for section 1400(b),” if that exception, which we can presume was well known to the Congress, was intended to be maintained. Certainly it would not be sensible to require Congress to say, “For purposes of this chapter, and we mean everything in this chapter . . . ,” in order to ensure that it has covered everything in a chapter of the statutes. The issue, then, is not whether the prior cases, including Supreme Court cases, determined that under different statutory language Congress' intent was that § 1400(b) stood alone. The issue is, what, as a matter of first impression, should we conclude the Congress now intends by this new language in the venue act. Id. at 1579 (second emphasis added). The Federal Circuit concluded that the plain meaning of the statute, coupled with the lack of any evidence of Congress’s intent to the contrary and the Supreme Court’s holding in Brunette Mach. Works, Ltd. V. Kockum Indus., Inc., 406 U.S. 706, 714 (1972),2 indicated that Congress intended § 1400(b) and § 1391(c) to be read together. Thus, since the Federal Circuit decided 2 In Brunette, the Supreme Court expressly distinguished Fourco and Stonite, holding that § 1400(b) was supplemented by § 1391(d), the general venue provision applicable to aliens, in patent suits involving a foreign corporation. 406 U.S. at 714. Case 3:13-cv-04987-M Document 245 Filed 06/27/17 Page 5 of 12 PageID 17129 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 64 of 71 Pageid#: 655 6 VE Holding in 1990, “the first test for venue under § 1400(b) with respect to a defendant that is a corporation, in light of the 1988 amendment to § 1391(c), is whether the defendant was subject to personal jurisdiction in the district of suit at the time the action was commenced.” Id. at 1584. The general venue statute, § 1391, was again amended in 2011. Section 1391 now provides: (a) Applicability of section.-Except as otherwise provided by law- (1) this section shall govern the venue of all civil actions brought in district courts of the United States; and . . . (c) Residency.-For all venue purposes- . . . (2) an entity with the capacity to sue and be sued in its common name under applicable law, whether or not incorporated, shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court's personal jurisdiction with respect to the civil action in question and, if a plaintiff, only in the judicial district in which it maintains its principal place of business; 28 U.S.C. § 1391(a), (c)-(d) (emphasis added). After these amendments, the Federal Circuit reaffirmed the validity of VE Holding in In re TC Heartland LLC, 821 F.3d 1338 (Fed. Cir. 2016), rev’d sub nom. TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (2017). In TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (2017), the Supreme Court reversed the Federal Circuit’s decision in VE Holding: In Fourco, this Court definitively and unambiguously held that the word “reside[nce]” in § 1400(b) has a particular meaning as applied to domestic corporations: It refers only to the State of incorporation. Congress has not amended § 1400(b) since Fourco, and neither party asks us to reconsider our holding in that case. Accordingly, the only question we must answer is whether Congress changed the meaning of § 1400(b) when it amended § 1391. When Congress intends to effect a change of that kind, it ordinarily provides a relatively clear indication of its intent in the text of the amended provision. The current version of § 1391 does not contain any indication that Congress intended to alter the meaning of § 1400(b) as interpreted in Fourco. Id. at 1520 (citations omitted). Case 3:13-cv-04987-M Document 245 Filed 06/27/17 Page 6 of 12 PageID 17130 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 65 of 71 Pageid#: 656 7 Thus, post-TC Heartland, venue is proper in the case of a corporate patent defendant, where (a) the corporation is incorporated, or (b) the defendant has committed acts of infringement and has a regular and established place of business. 3. Discussion Nintendo argues that under TC Heartland, venue is improper in the Northern District of Texas because (a) Nintendo is incorporated in Washington, and (b) Nintendo lacks a regular and established place of business in the Northern District of Texas. The Federal Circuit has held that the test to determine whether a defendant has a “regular and established business” is “whether the corporate defendant does its business in that district through a permanent and continuous presence there,” and is not a question of whether it has a “fixed physical presence in the sense of a formal office or store.” In re Cordis Corp., 769 F.2d 733, 737 (Fed. Cir. 1985). Nintendo argues that it does not operate an office in Texas, employ anyone in Texas, or maintain any offices in Texas.3 Nintendo also contends that iLife has not alleged any facts supporting that Nintendo has a “regular and established business” in Texas, and that it is the plaintiff’s burden to do so. See Med. Designs, Inc. v. Orthopedic Tech., Inc., 684 F. Supp. 445, 446 (N.D. Tex. 1988) (“[T]he plaintiff bears the burden of proving both acts of infringement and a regular place of business in order to establish proper venue.”). Nintendo maintains that if this case were filed today, venue in the Northern District would be improper under TC Heartland. Nintendo further argues that TC Heartland has retroactive effect on pending cases. iLife argues that Nintendo affirmatively admitted that venue was proper in its Answer and Amended Answer, and by failing to make a “timely and sufficient” objection to venue, Nintendo waived its venue defense. It did not file a Rule 12 motion in this case, and as stated 3 For support, Nintendo cites to the declaration of Richard Medway, Nintendo’s Vice President and Deputy General Counsel, which was provided as an exhibit to Nintendo’s Earlier Motion to Transfer. ECF No. 11-2 at APP.166. Case 3:13-cv-04987-M Document 245 Filed 06/27/17 Page 7 of 12 PageID 17131 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 66 of 71 Pageid#: 657 8 above, in its Answer and Amended Answer, it “admit[ed] that venue is proper in this District pursuant to 28 U.S.C. §§ 1391 and 1400(b).” However, Nintendo maintains that it did not waive improper venue, because before the TC Heartland decision was issued, the defense of improper venue was not available, due to the Federal Circuit precedent of VE Holding. For support, Nintendo cites to various cases recognizing that a change in controlling law-or an “intervening change in law”-can permit parties to assert previously unraised grounds. iLife makes two main arguments in response to Nintendo’s contention that TC Heartland is new intervening law that permits Nintendo to raise a venue challenge at this late stage. First, iLife argues that the decision in TC Heartland did not qualify as a change in law. Second, iLife argues the Fifth Circuit does not recognize an intervening change of law doctrine so as to overcome Nintendo’s venue waiver under Rule 12. For the reasons below, the Court concludes that TC Heartland does not qualify as an intervening change in law, and accordingly, does not reach whether the Fifth Circuit recognizes an exception to waiver in circumstances such as these. iLife argues that “[t]he Supreme Court plainly stated that its decision in TC Heartland was not a change of law, and that its decision in Fourco interpreting § 1400(b) has been good law for the past 60 years.” In making its argument that TC Heartland did not create “new law,” iLife relies on the opinions of two Courts that have considered venue transfer post-TC Heartland: Senior Judge Harry Coke Morgan, Jr., in the Eastern District of Virginia in Cobalt Boats, LLC v. Sea Ray Boats, Inc., No. 2:15-cv-21, 2017 WL 2556679 (E.D. Va. June 7, 2017), and Magistrate Judge Payne in the Eastern District of Texas in Elbit Systems Land v. Hughes Network Systems, LLC, No. 2:15-CV-00037, 2017 WL 2651618, at *18 (E.D. Tex. June 20, 2017). In Cobalt Boats, the defendant moved to transfer under TC Heartland and asserts virtually the same arguments Nintendo does here, namely that TC Heartland qualified as Case 3:13-cv-04987-M Document 245 Filed 06/27/17 Page 8 of 12 PageID 17132 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 67 of 71 Pageid#: 658 9 intervening new law permitting it to reassert an otherwise waived venue challenge. Judge Henry Morgan disagreed, and held instead that TC Heartland did not create new law: Based on the Supreme Court's holding in TC Heartland, Fourco has continued to be binding law since it was decided in 1957, and thus, it has been available to every defendant since 1957. Accordingly, the Court FINDS that TC Heartland does not qualify for the intervening law exception to waiver because it merely affirms the viability of Fourco. Defendant Brunswick’s assumption that Fourco was no longer good law was reasonable but wrong, and it cannot be excused from its waiver by saying there was a change in the law. Cobalt Boats, 2017 WL 2556679, at *3. Similarly, in Elbit Systems, Magistrate Judge Payne held that TC Heartland did not qualify as an intervening change in law, noting that “[w]hile the Federal Circuit’s decision in VE Holding was inconsistent with Fourco, the Federal Circuit cannot overturn Supreme Court precedent.” 2017 WL 2651618, at *20. During oral argument on the Motion to Transfer, Nintendo’s counsel argued that in VE Holding, the Federal Circuit did not overrule the Supreme Court’s Fourco decision, but instead held that Congress had amended the general venue statute in such a way that abrogated the effect of Fourco. Nintendo argues that VE Holding addressed a different question than Fourco and Stonite-namely, whether Congress intended the 1988 amendments to § 1391(c) to supplement § 1400(b)-and thus, until the Supreme Court in TC Heartland reaffirmed the validity of Fourco, the Federal Circuit’s decision in VE Holding was the definitive authority on the relationship between § 1400(b) and § 1391(c), as amended in 1988 and 2011. See In re TC Heartland, 821 F.3d at 1342 (“In VE Holding, we found that the Supreme Court’s decision in Fourco with regard to the appropriate definition of corporate residence for patent cases in the absence of an applicable statute to be no longer the law because in the 1988 amendments Congress had made the definition of corporate residence applicable to patent cases.”). Nintendo’s argument thus appears to be that following the decision in VE Holding in 1990 up until the Supreme Court Case 3:13-cv-04987-M Document 245 Filed 06/27/17 Page 9 of 12 PageID 17133 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 68 of 71 Pageid#: 659 10 decided TC Heartland in May of 2017, the highest authority available had deemed Fourco overridden by congressional action, and accordingly the Supreme Court’s reaffirming of Fourco constituted a change of law. “In the domain of statutory interpretation, Congress is the master,” and “obviously has the power to correct [the Supreme Court’s] mistakes.” W. Va. Uni. Hosp., Inc. v. Casey, 499 U.S. 83, 113 (1991) (Stevens, J., dissenting), superseded by statute, Civil Rights Act of 1991, Pub. L. No. 102-166 § 113, 105 Stat. 1072, as recognized in Landgraf v. USI Film Prods., 511 U.S. 244, 251 (1994). However, absent clear legislative history, identifying when Congress acts to undo Supreme Court action is far from simple.4 Similarly, the effect of congressional action in abrogating Supreme Court precedent is unclear, especially when the intent of Congress is not divulged. It is clear that the Supreme Court has the final authority on statutory interpretation and the continuing validity of its decisions. In the context of overrides, the Supreme Court has expressly acknowledged when it deems congressional enactments to have overridden an earlier decision. See, e.g., Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 557 (2005) (“In Finley we emphasized that ‘[w]hatever we say regarding the scope of jurisdiction conferred by a particular statute can of course be changed by Congress.’ In 1990, Congress accepted the invitation. It passed the Judicial Improvements Act, which enacted § 1367, the provision which 4 Numerous academics have devoted substantial efforts to identifying congressional overrides, with varying methodologies and criteria for what qualifies as an override. See, e.g., Matthew R. Christiansen & William N. Eskridge, Jr., Congressional Overrides of Supreme Court Statutory Interpretation Decisions, 1967-2011, 92 Tex. L. Rev. 1317, 1325 (2014); William N. Eskridge, Jr., Overriding Supreme Court Statutory Interpretation Decisions, 101 Yale L.J. 331, 332 n.1 (1991) (“This Article will use the term “override” to mean any time Congress reacts consciously to, and modifies a statutory interpretation decision. . . . With only a few exceptions, this Article will not use the term “override” to include statutes for which the legislative history-mainly committee reports and hearings-does not reveal a legislative focus on judicial decisions.”); see also James Buatti & Richard L. Hasen, Conscious Congressional Overriding of the Supreme Court, Gridlock, and Partisan Politics, 93 Tex. L. Rev. See Also 263, 264 (2015) (discussing the significance of considering both conscious and inadvertent congressional overrides). Case 3:13-cv-04987-M Document 245 Filed 06/27/17 Page 10 of 12 PageID 17134 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 69 of 71 Pageid#: 660 11 controls these cases.” (citations omitted)); Landgraf, 511 U.S. at 251 (“Other sections of the [Civil Rights Act of 1991] were obviously drafted with ‘recent decisions of the Supreme Court’ in mind.”). What is unclear, however, is the extent to which a lower court, such as the Federal Circuit, has the authority to deem a Supreme Court decision overridden by an act of Congress. It is particularly unclear when the congressional act in question, such as the one reviewed by the Federal Circuit in VE Holding, contains no reference to the Supreme Court decision allegedly being overridden, or even the statute at issue. See VE Holding, 917 F.2d at 1580-81 (“While the legislative history reveals that a purpose of the amendment is to define venue of corporate defendants and to prescribe the venue determination in multidistrict states, it does not speak to how or whether this amendment is intended to affect § 1400(b), or for that matter other sections of chapter 87.”). The Court concludes, therefore, except where congressional abrogation of a Supreme Court decision is express, “only [the Supreme] Court may overrule one of its precedents”- whether through its own opinion or recognition of congressional override-and until that occurs, Fourco is and still was the law. See Thurston Motor Lines, Inc. v. Jordan K. Rand, Ltd., 460 U.S. 533, 533 (1983) (per curiam). In VE Holding, the Federal Circuit clearly thought that Congress had implicitly overridden Fourco by statutory amendment. However, until the Supreme Court considered the question, Fourco remained the law. The intervening twenty- seven years may have created reliance on VE Holding by litigants, including Nintendo, but that “does not change the harsh reality” that a party could have “ultimately succeeded in convincing the Supreme Court to reaffirm Fourco, just as the petitioner in TC Heartland did.” Elbit Systems, 2017 WL 2651618, at *20. Case 3:13-cv-04987-M Document 245 Filed 06/27/17 Page 11 of 12 PageID 17135 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 70 of 71 Pageid#: 661 12 For the foregoing reasons, the Court concludes that TC Heartland does not qualify as an intervening change in law. Accordingly, the Court does not reach the issue of whether Nintendo may raise a previously waived challenge to improper venue on the basis of TC Heartland. Nintendo’s Motion to Transfer is DENIED. SO ORDERED. June 27, 2017. _________________________________ BARBARA M. G. LYNN CHIEF JUDGE Case 3:13-cv-04987-M Document 245 Filed 06/27/17 Page 12 of 12 PageID 17136 Case 3:16-cv-00047-GEC Document 48-1 Filed 07/05/17 Page 71 of 71 Pageid#: 662