American Patents LLC v. Mediatek, Inc. et al

Western District of Texas, txwd-6:2018-cv-00339

Exhibit A [American Patents' SUR-REPLY to Lenovo's Motion to Sever and Stay]

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IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS WACO DIVISION AMERICAN PATENTS LLC, Plaintiff, v. CIVIL ACTION NO. 6:18-CV-339 MEDIATEK INC., ET AL., JURY TRIAL DEMANDED Defendants. AMERICAN PATENTS' SUR-REPLY TO LENOVO'S MOTION TO SEVER AND STAY PURSUANT TO THE CUSTOMER-SUIT EXCEPTION DOCTRINE I. INTRODUCTION As the Opposition pointed out, no caselaw requires this Court to sever and stay claims against Lenovo Group and Lenovo Shanghai (collectively, "Lenovo"). And even after Lenovo's Reply, it makes no sense to do so. Lenovo admits that it is unwilling to be bound by the Court's rulings in a way that would necessarily dispose of the claims against it; Lenovo is a manufacturer that incorporates infringing chipsets into its products, not a mere reseller of chips; and it is unclear—before contentions, discovery, or claim construction—whether the co-defendant chip makers are the only suppliers for the accused Lenovo products. Lenovo fails to cite a single case where a court severed claims against a manufacturer in such circumstances. And two stay cases involving chip and computer makers—DSS and Vantage Point—go directly against Lenovo. II. ARGUMENT A. Lenovo Admits That It Never Would Agree To An Appropriate Stipulation. Lenovo's newfound willingness on Reply to be bound as to "technical infringement" misses the point; infringement involves more than simply showing that an accused product meets all claim limitations. The holding in Vantage Point is instructive. There, the court faulted the moving computer makers for "hav[ing] only agreed to be bound by findings made 'regarding the technical operation of the' chipsets"—precisely what Lenovo does here. Vantage Point Tech., Inc. v., Inc., 2:13-CV-909-JRG, 2015 WL 123593, at *3 (E.D. Tex. Jan. 6, 2015). The Reply only proves that Lenovo is unwilling to be bound by this Court's rulings in a way that would actually resolve the severed claims against it. Lenovo admits that whether it infringes "'in the U.S.' is an inquiry independent of Qualcomm and MediaTek, such that any stipulation to be bound would make no sense anyway." Reply at 3, fn. 1 (emphasis added). But this is precisely what American Patents' counsel said to Lenovo's counsel in explaining why a stipulation was not feasible! Yip Decl., Exh. A [email correspondence]. Lenovo's so-called "agreement" never materialized because, as Lenovo now acknowledges, the kind of stipulation that American Patents needed was not something Lenovo would ever be willing to provide. Lenovo cites additional cases to argue that a moving defendant's agreement to be bound 1 is not required to grant a customer stay. But these cases involve "mere resellers" whose only act of infringing is selling the same, unaltered products they received from the manufacturer. (Reply, at 3-4.) For example, Lenovo relies heavily on Opticurrent, LLC v. Power Integrations, Inc., 2016 WL 9275395, at *5 (E.D. Tex. Oct. 19, 2016). Not only was that a "mere reseller" case, but Lenovo's quote from that opinion truncates the language revealing that fact. Compare id. at *5 with Reply, at 5 ("a finding that [manufacturer] infringes is a prerequisite to recovery from [customer] given that [customer] is merely a "distributor or reseller of the accused products.") (emphasis added to the language left out by Lenovo). In addition, none of these cases involves severing claims against a manufacturer such as Lenovo that incorporates infringing components into its own products. See Mirror Worlds Techs., LLC v. Dell Inc., 2014 WL 11268268, at *1 (E.D. Tex. Sept. 29, 2014) ("When it applies, the customer-suit exception justifies a stay as to retailer defendants while litigation continues against a manufacturer defendant." [emphasis added]); Microsoft Corp. v. Commonwealth Sci. & Indus. Research Organisation, 2007 WL 4376104, at *2 (E.D. Tex. Dec. 13, 2007) (denying a stay where the suit was "not the typical 'customer suit exception' case where a patent holder is suing a mere 'reseller' of the goods"). B. Severance Would Not Dispose of All Issues. Since Lenovo acknowledges that it is unwilling to be bound to all rulings as to infringement liability, severance would not dispose of all issues. Courts have routinely refused to apply the customer-suit exception where the main action would not resolve all issues in the stayed action, even if it would resolve some issues. See, e.g., InfoGation Corp. v. ZTE Corp., 2016 WL 9525235, at *3 (S.D. Cal. Dec. 21, 2016) ("[T]he customer-suit exception is generally inapplicable where the issues of infringement as to the manufacturer and the customer are 'not entirely common,' for example, where proof of infringement by the manufacturer would not necessarily establish infringement by the customer."; Kahn v. Gen. Motors Corp., 889 F.2d 1078, 1081 (Fed. Cir. 1989) (customer suit exception has been held to favor the second action when it "would resolve all charges against the customers in the stayed suit, including liability for 2 damages"; Erfindergemeinschaft Uropep GbR v. Eli Lilly & Co., 2016 WL 1659924, at *3, fn.2 (E.D. Tex. Apr. 26, 2016) (stay denied where infringement issues would remain). Lenovo attempts to dismiss DSS Technology Management in a footnote, but it is directly on point. DSS also involved a chip maker (Intel), a maker of products incorporating Intel chips (Dell), and retailer-customers like Wal-Mart. DSS Tech. Mgmt., Inc. v. Intel Corp., 2015 WL 12806514, at *1 (E.D. Tex. Nov. 12, 2015). 1 As in this case, any potential application of the customer-suit exception was complicated by the foreign supply chain. Where at least some chips included in Dell products were manufactured overseas, the "infringing act" as to Dell would occur when it imported or offered to sell those products in the U.S. Id. at *2. "Thus," the court wrote, "absent Intel stipulating to be liable for these foreign-sourced chips, DSS must pursue subsequent litigation against [Dell and the retail customers] in the event DSS prevails at trial." Id. The court declined to apply the customer-suit exception, contrasting the case with the "typical situation where courts stay claims against mere retailers because the manufacturer can be held responsible for the full injury." Id. at *3. Similarly, neither Qualcomm nor MediaTek have stipulated to be liable for any Lenovo liability based on products incorporating their chips. If claims against Lenovo were stayed, American Patents would be forced to relitigate liability against Lenovo, and litigate issues of whether Lenovo imports infringing products into the US or offers them for sale in the US.2 Like in DSS, Lenovo's proposal would force American Patents (and this Court) into "subsequent and highly duplicative litigation to recover a large portion of the damages." Id. at *2. C. Lenovo Is Not a "Mere Reseller." 1 Lenovo misquotes the case, asserting that the "customer" agreed it was estopped from arguing that chips would not infringe. But it was Intel, the chip maker, who acknowledged it would be estopped—and even then only "from arguing those chips do not infringe in any subsequent litigation." Id., at *3. The court found this concession insufficient to justify a stay because it did not resolve the customer's liability for products that incorporate Intel chips made abroad. Id. 2 American Patents provided evidence of both these acts in connection with the motion to dismiss. 3 On Reply, Lenovo now attempts to shoehorn itself into the cases where courts have justified a severance and stay for "mere resellers" by arguing that it, too, is a "mere reseller." Reply at 5. It is not. Lenovo asserts, with no support, that it merely incorporates the chipsets into the accused end products. Reply at 5-6. It also asserts, with no support, that the infringement claims as to the chip makers and Lenovo fully overlap—ignoring how foreign supply chains impact the proof of infringing acts by each defendant. Reply at 6. But these arguments in a reply brief are woefully inadequate to constitute actual evidence. And such assertions are incredibly premature before contentions, discovery, and claim construction. As was true in Mirror Worlds, "[t]he Court is not in a position, nor could it be prior to discovery, to determine the merit of each allegation" about the infringing acts of defendants. Mirror Worlds Techs., LLC v. Dell Inc., 2014 WL 11268268, at *2 (E.D. Tex. Sept. 29, 2014). Lenovo also argues that even if it is not a mere reseller, the court should still sever the case, citing Global Equity Management and Google. Reply at 6. Yet each case involved multiple different lawsuits proceeding in different districts, "a classic case for a stay." In re Google Inc., 588 F. App'x 988, 990 (Fed. Cir. 2014) (five Texas actions and one California action); Glob. Equity Mgmt. (SA) Pty. Ltd. v. Ericsson, Inc., No. 2017 WL 365398, at *3 (E.D. Tex. Jan. 25, 2017) (37 Texas actions and one Virginia action). Lenovo seeks the opposite—to essentially split one action into two. That harms, not helps, judicial economy. And in Global Equity Management, the customers were akin to mere resellers—they were simply "users" of "virtualized operating systems. . . and databases run hosted [sic] by Amazon." Id. at *3. Since Amazon itself provided the accused services in the U.S., a non- infringement ruling for Amazon would necessarily dispose of the over 30 customer suits based on that same activity. Id. at 3, 6. By contrast, Lenovo has not shown that Qualcomm and MediaTek make, sell, use, or import every chip Lenovo buys from them in the United States—so a non-infringement victory for those chip makers may not resolve the case against Lenovo. D. Lenovo's Motion is Premature at Best. At best, Lenovo's motion is premature, because it is impossible to analyze key stay 4 factors before contentions, discovery, and claim construction. Not only does Lenovo's Reply fail to dispel these arguments, it actually highlights why a stay at this point is unwarranted. American Patents pointed out that Lenovo may be using infringing chipsets from other chip makers, in which case the damages awarded against Qualcomm and MediaTek would not cover all infringements by Lenovo. Lenovo asserts (inappropriately on Reply through a new fact witness) that the only suppliers of chipsets in the Lenovo Tab 3 10, Tab 4 8, and Tab 4 10 are Qualcomm and MediaTek. Reply at 5; Madderon Decl. ¶ 3. Mr. Madderom is an employee of Motorola Mobility LLC, not Defendants Lenovo Group or Lenovo Shanghai. Id. ¶ 1. Given that Defendants have maintained that they engage in no U.S.-based activities related to this case in their motion to dismiss, how does a U.S. employee of a third Lenovo "affiliate" know what Lenovo Group or Lenovo Shanghai does with the chipsets oversees?3 Further, Mr. Madderom identifies only three products that use the co-defendants' chipsets. But this case has not even reached infringement contentions, much less full discovery. So it is highly likely that there are other accused products—including the Lenovo ThinkVision 28—that use chips from other non-defendant manufacturers. Lenovo argues that ThinkVision 28 is irrelevant because it was not expressly named in the Complaint. But that is not what the law requires, as the opposition showed. Lenovo contends that American Patents' cases to the contrary are not good law because they predated Form 18's abrogation in 2005. But despite that change, courts continue to "recognize[] that plaintiff need not exhaustively identify each and every infringing product and component thereof in its complaint." Nichia Corp. v. VIZIO, Inc., 2017 WL 3836141, at *2 (E.D. Tex. July 24, 2017); see also Promos Techs., Inc. v. Samsung Elecs. Co., 2018 WL 5630585, at *3 (D. Del. Oct. 31, 2018) ("Under Twombly and Iqbal, pleading an exemplary product is sufficient to satisfy Rule 12(b)(6)."). (Alternatively, American Patents asks for leave to amend the complaint to explicitly name additional accused products.) 3 Defendants similarly provided the Declaration of a Lenovo U.S.A. employee in connection with Lenovo Group and Lenovo Shanghai's motion to dismiss, pending before this Court. 5 Dated: April 18, 2019 Respectfully submitted, /s/ Michael D. Ellis Matthew J. Antonelli (admission pending) Texas Bar No. 24068432 Zachariah S. Harrington (admission pending) Texas Bar No. 24057886 Larry D. Thompson, Jr. (admission pending) Texas Bar No. 24051428 Christopher Ryan Pinckney (admission pending) Texas Bar No. 24067819 Michael D. Ellis Texas Bar No. 24081586 ANTONELLI, HARRINGTON & THOMPSON LLP 4306 Yoakum Blvd., Ste. 450 Houston, TX 77006 (713) 581-3000 Stafford Davis State Bar No. 24054605 Catherine Bartles Texas Bar No. 24104849 THE STAFFORD DAVIS FIRM The People's Petroleum Building 102 North College Avenue, 13th Floor Tyler, Texas 75702 (903) 593-7000 (903) 705-7369 fax Attorneys for American Patents LLC 6