Southeast Litigation Update: March And April 2024

This is part of a series of articles discussing recent orders of interest issued in IP cases by the United States District Courts in the Southeast.

In Aqua EZ, Inc. v. Resh, Inc., No. 1:23-cv-00790-MLB (N.D. Ga. Mar. 11, 2024), Judge Brown ordered Defendant Resh to produce information related to its pending patent applications, concluding a lengthy discovery dispute.

Courts apply a heightened relevancy standard in discovery disputes involving pending patent applications and related materials, which involves weighing the requesting party's interest in materials against the objector's legitimate interest in secrecy. Here, Resh did not dispute the relevance of information related to its pending applications but instead argued that 35 U.S.C. § 122 requires that the unpublished materials it submitted to the USPTO remain confidential. The court rejected this argument, holding that § 122 applies to the Patent Office but is not binding on the courts. Notably, the court gave Resh the opportunity to assert a secrecy interest beyond § 122, but Resh failed to provide such details. Alternatively, Resh argued that its pending patent applications were protected work product. However, the court rejected this argument as well, noting that under Federal Rule of Evidence 502(a), intentional disclosure to a federal office or agency waives attorney-client privilege and work product protection.

In PerDiemCo LLC v. NexTraq LLC, No. 1:23-cv-00193-MHC (N.D. Ga. Mar. 13, 2024), Judge Cohen granted Defendant NexTraq LLC's motion to dismiss for failure to state a claim under Rule 12(b)(6) in a patent infringement case.

In its complaint, Plaintiff PerDiemCo LLC asserted seven patents against NexTraq involving location tracking systems for computers. The tracking systems allow users to preset defined "zones of interest" that will then send alerts to certain groups when mobile devices cross any boundary of the zone of interest. NexTraq moved to dismiss, arguing all seven patents are invalid for claiming patent-ineligible subject matter.

Representative Claims

As a preliminary matter, the court analyzed whether it could treat a select subset of claims as representative of the remaining claims before assessing subject matter eligibility. NexTraq argued that the claims of U.S. Patent Nos. 9,680,941 and 11,064,038 were representative. The court first found that NexTraq had failed to provide "any explanation as to how the allegedly representative claims are substantially similar to the represented claims." Notwithstanding NexTraq's deficiency, and after undertaking an independent examination of the seven asserted patents, the court held the claims of the '941 patent representative of all asserted claims. While PerDiem argued that certain claims differed from those in the '941 patent, the court was unmoved. Particularly, the court highlighted that despite the claims requiring different devices or different event conditions, the underlying systems for both patents are directed to the same idea. The court found that while there may be differences, those differences were not significant to warrant separate review.

Alice Step 1

Turning to the Alice two-step test, the court first found that the claims of the '941 patent are directed to the abstract idea of "collecting, analyzing, and distributing information from geo-tracking devices." PerDiem provided two main counterpoints: (1) the claims go to improvements of computerized location tracking systems; and (2) the claims' "access privileges" go toward patent eligible security measures.

As to the former argument, the court found the distinction apparent in reference to the Federal Circuit's holding in Enfish LLC v. Microsoft Corp., 822 F.3d 1327 (Fed. Cir. 2016). The Enfish court found a specific improvement to computer technology patentable whereas an idea that just uses computers as tools constitutes an abstract idea and, thus, remains ineligible for patenting. Here, the court concluded there had been no improvement given that the representative claims only use a computer tool in its normal, expected manner.

As to the latter argument, the court again differentiated between reciting additional functions that may make a computer more secure versus improving the actual security-related computer functionality itself. Finding PerDiem likewise failed to identify the "specific improvement in security-related computer functionality," the court found the claims, as a whole, are directed to excluded subject matter.

Alice Step 2

Reviewing the claims individually and as an ordered combination, the court found the claims lack an inventive concept that would transform the nature of the claims to a patent-eligible application of the inventive concept. PerDiem argued portions of the specification with respect to elements that deal with server capability and interface permissions transformed the claims to a patent-eligible inventive concept. Together, the court found both features are "generic components (servers and interfaces), reciting routine and conventional functions (data storage and the assignment of levels of access to various users)." Likewise, PerDiem's lone cited case in support was distinguishable in that the patentee was able to provide "specific improvements" to go beyond an abstract idea, unlike PerDiem's patents that take well-understood and conventional functions of data recognition and storage and apply them in a non-inventive way.

Accordingly, the court granted NexTraq's motion to dismiss all asserted patents because they claim patent-ineligible subject matter.

In Luan v. Yang01 Store, No. 1:23-cv-60848 (S.D. Fla. Mar. 20, 2024), Judge Cannon denied a motion for final default judgment in a patent infringement case after finding the record reflected substantial questions about the validity of the asserted patent.

Plaintiff Jianbin Luan sued four companies for infringement of U.S. Patent No. D978,995. The '995 patent is a design patent for a barbell pad used by weightlifters to provide cushion and protection from a weighted bar. Shortly after filing the complaint, the plaintiff moved for a temporary restraining order and asset freeze.

One of the now-dismissed defendants opposed the motion for a temporary restraining order by invoking the on-sale bar invalidity exception to patentability under 35 U.S.C. § 102. The on-sale bar renders a patent invalid if the invention was offered for commercial sale in the United States (by the inventor or by another party) more than one year before the priority date of the application. In support of the argument, the defendant included pictures from its Amazon page showing that it sold the allegedly infringing product more than one year before the priority date of the '995 patent. Two of the other defendants entered an appearance and adopted the same on-sale arguments, and the court denied injunctive relief. Yang01 Store was the only remaining defendant who did not enter an appearance. Therefore, the plaintiff moved for final default judgment against them.

The court denied the plaintiff's motion for final default judgment because the on-sale bar argument raised by the other defendants raised a serious question regarding the validity of the patent. A default judgment is only proper if there is sufficient basis to state a claim. Once the other defendants raised the argument substantially questioning validity, the sufficient basis was in question, and the burden shifted to the plaintiff to show that it would likely succeed at trial by showing the defense lacked merit. Instead of rebutting the defense, the plaintiff provided speculatory arguments questioning the authenticity of the pictures of the Amazon website without providing any opposing evidence. Therefore, the plaintiff did not satisfy its burden, and the substantial question of validity remained.

The court noted that although a presently dismissed defendant made the on-sale argument, there was no reason to ignore the unrebutted factual and legal support that questioned the validity of the '995 patent.

In Oakley, Inc. v. Galaxy Lenses, LLC, No. 6:24-cv-00145-PGB-RMN (M.D. Fla. Apr. 23, 2024), Judge Byron granted Plaintiff Oakley, Inc.'s motion to strike Defendant Galaxy Lenses, LLC's Answer.

Oakley initiated this action, asserting various causes of action against Kenny Jiang and Galaxy. Shortly thereafter, the parties notified the court of a settlement agreement, contingent on certain conditions, and the court administratively closed the file. Subsequently, Oakley moved to reopen the case but only as to Galaxy. The court granted the motion and ordered Galaxy to file its responsive pleading within twenty-one days. On the deadline to file its responsive pleading, Galaxy filed an answer that was signed by Kenny Jiang and Galaxy as "self-represented." Oakley moved to strike the answer.

Explaining that generally a limited liability company may not represent itself but must be represented by counsel and that under the Local Rules, "[a] party, other than a natural person, can appear through [a] lawyer only," the court granted Oakley's motion to strike because Galaxy was a limited liability company and Kenny Jiang was not an attorney licensed to practice in the Middle District of Florida.

In Dynatemp International, Inc, v. R421A, LLC, No. 5:20-cv-00142-FL and -00147 (E.D.N.C. Apr. 24, 2024), Judge Flanagan denied defendants' motion to compel production of documents and information subject to plaintiffs' advice of counsel waiver.

On April 6, 2020, plaintiffs filed a complaint asserting that Defendant RMS of Georgia and its distribution company issued a press release that falsely claimed that Dynatemp's products infringed RMS's U.S. patents. Two days later, on April 8, 2020, R421A LLC (an entity related to RMS) filed a complaint asserting that Dynatemp's products infringed R421A's patents. In response, the Dynatemp plaintiffs asserted an advice-of-counsel defense based on invalidity of the patents at issue. The two actions were consolidated into the first action.

Patent law provides enhanced damages in cases of willful infringement. In such cases, defendants may advance an advice of counsel defense to establish the lack of willfulness because it relied upon the advice of counsel that the patent at issue was invalid, unenforceable, and/or not infringed. Once a party relies on an advice of counsel defense, that party waives attorney-client privilege over all communications relating to the same subject matter.

Here, plaintiffs asserted an advice of counsel defense based on invalidity of the patents at issue. The parties agreed that plaintiffs had waived privilege over communications related to invalidity but disagreed with whether such waiver should extend also to communications on infringement. The legal opinion at issue included advice of counsel related to infringement, but those discussions were redacted. R421A further argued that plaintiffs improperly refused to produce communications from the entire period of infringement, including after the litigation began, and communications involving trial counsel.

Courts are split on whether presenting an advice of counsel defense under one theory waives privilege only as to that specific theory or as to all other theories. Here, the court declined to broaden waiver, concluding that waiver is limited to the particular asserted defense for three reasons. First, case law permits redactions and production on only some defenses, even within the same document. Second, other courts within the Fourth Circuit favor plaintiffs' position. And third, regarding prejudice to the parties, R421A's position would "wipe out privilege over a slew of subjects unrelated to the issues the parties have presented," and "these circumstances present no danger of plaintiffs using privilege as both a sword and a shield."

The court also rejected R421A's remaining arguments. The court found that plaintiffs had already produced all relevant communications from all time periods within the topical scope and rejected R421A's' attempt to expand the temporal waiver. The court further noted that generally, a court will not waive privilege over communications with trial counsel, absent "chicanery." Interpreting the ordinary meaning of chicanery as "bad faith, deceptive, or gamesman-like conduct," the court found that while the opinion counsel worked for the same firm as plaintiffs' former trial counsel, the opinion counsel had left the firm six months after the filing of the complaint and was not actively involved in the litigation to blur the lines between "objective advisor" and "partisan advocate." Since the opinion counsel did not remain actively engaged in this litigation for an impermissible length of time, the court also found that waiver would not have also transferred over to the former trial counsel. Accordingly, the court denied R421A's motion to compel.

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