Last Week in Texas with Michael Smith | Episode 19

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Teaching moments in Texas. Trial guidance from Judge Gilstrap and guidance on infringement complaints.

Episode Transcript

Wayne Stacy  00:00

Welcome, everyone to the Berkeley Center for Law and Technology’s Last Week in Texas podcasts. We’re here again with Michael Smith. And Michael has a whole host of I think what he described as teaching moments for us this week. So Michael, thanks for joining us.


Michael Smith  00:17

Well, thank you for having me. Wayne, it’s it’s certainly been a fun week. And it is the last week in Texas because the whole state shutting down tomorrow for our winter winter storm. So maybe you’ll see us next week. Maybe you won’t.


Wayne Stacy  00:31

After spending my life growing up in the panhandle of Texas, I’m not sure that a Marshall winter storm scares me, but I understand freezing rain. Well, so Michael. We’re talking about teaching moments and things that loggers do for themselves and to themselves. You want to start with motion for leave to amend invalidity contentions.


Michael Smith  00:54

Yeah, we talked about one of these motions last week. And fortunately, we came up with two more orders on this out of martial this past week on motions for leave to amend infringement contentions and invalidity contentions. And let me start with the invalidity. Here the defendant was seeking leave to supplement with some additional information that it obtained from third party subpoenas. It was limited to background and support for systems that were disclosed in the original contentions and the plaintiff probably shouldn’t have oppose this one. Judge Gilstrap agreed that the definitive been diligent in supplementing, and that the delay was just caused by the inevitable time necessary for third parties to respond to subpoenas and provide nonpublic information regarding prior art systems. So there’s an order saying, yes, you can amend your invalidity contentions to add the things that you get through discovery. We had another case out of the Marshall courthouse last week where Judge Payne ruled on a plaintiff’s motion for leave to amend its infringement contentions. And the interesting thing here was, it was just one document that was received from a third party and the defendant was was claiming this is only important if the original contentions are wrong, and they have to change to save their case. I mean, very theatrical objections which the judge was very receptive to, but the teaching moment here is not just don’t be a jerk when a party wants to amend. But it was that the defendant hadn’t explained how it was prejudiced. The plaintiff noted the defendant hadn’t asked to brief additional terms or construction hadn’t said we need to go back and need to change terms or constructions or anything else. So the defendant complained about the amendment, but they were given an opportunity to show prejudice, and they didn’t. So that’s kind of a double lesson there. Number one, make sure the record is clear that the other side is not providing something short of striking the contentions. And number two, don’t be a jerk.


Wayne Stacy  02:59

Well, Michaels, we move on there was Judge Gilstrap had a motion to dismiss against direct and indirect and willfulness. It was just a big motion.


Michael Smith  03:10

Yeah. And and we see those a lot at the beginning of cases. And I mentioned this because it’s a good case for the marshal judges 26 standards on when you’ve adequately pleaded direct and indirect infringement. In fact, earlier this morning, I was reading the same kind of order by Judge Albright in Waco that we’ll probably talk about next week. The only thing that got granted here was the plaintiffs claims of pre suit willful infringement. And as a matter of fact, I was just on the phone earlier this morning talking with a co counsel who had read the case. And he was saying, Well, what was the point? That that really wasn’t going to go anywhere anyway, so why bother with the motion. So again, this is kind of an educational order in that it tells you what the standards are. And it knocked out the thing, the plaintiff probably wasn’t going to be able to predicate willful infringement on anyway.


Wayne Stacy  04:06

So Michael, we kind of go through this there was another interesting procedural motion on a motion to sever you don’t see a huge number of those come through.


Michael Smith  04:16

Well, in this one, this is one that arises out of one of the cases we talked about last week, where there was a motion to stay because of what was going on at the patent office, and the Court ruled on the motion to stay. Well, that was one where the patent office was going to reissue the patents following amendments. So the parties came in and said, Judge, we agreed that the lead case should be deconsolidated as a result of this stuff coming back from the patent Patent Office. The difference is the plaintiff said well, but let’s keep doing discovery in the lead case. And the defendant said no, we want it stayed in all respects. And the resolution was, well you’re both wrong, instead of d, consolidating the lead cases say, what we’re going to do is we’re going to sever the claims regarding the patents that we don’t have those certificates back on, and then we’ll go forward on everything else. So he maintained his consolidated everything else with respect to the two patents that we’re good to go. And the the middle image I’ve got here is every movie about the Battle of Midway, were the guys out on the field saying everything that can fly needs to get in the air. You have to be aware, that’s kind of Judge Gilstraps approach. His focus is on getting the disputes to trial. So when the party he saw things very differently than the party’s did and said, look, let’s go forward with everything that we know there’s not an issue on because to paraphrase Winston Churchill, that’s the statement that nothing focuses the mind like being shot at nothing focuses settlement discussions like having to go to trial on something. So that’s something to keep in mind when you’re going to the court and saying we need to rejigger things, realize the court is not looking this court is not looking to take a week off of trying cases. In fact, we all know judge Gill strap is unhappy if all the cases fall through so that he has a week set aside for a jury trial. And there’s no trials left. So be aware he’s looking for ways to get the taxpayers value for their dollar having that courtroom there. So when you go into him and you ask to rejigger a case like this, be aware, he he’s not going to just look at well, either you win or you win, he may find a third way.


Wayne Stacy  06:38

We’ll continue with Judge Gilstrap and the acorn case he gave a pretty strong reminder about prejudgment interest rates and when those issues need to be raised.


Michael Smith  06:49

Right. And this was a case where I initially got excited because it said it was a JMOL and I love JMOLs, but it wasn’t an interesting JMOL. It was the plaintiff simply coming back and saying judge, we would like you to amend the prejudgment interest rate. That’s in the final judgment. What we want you to do is change it from the five year US T bill rate to our true cost of borrowing money over the relevant period, which is considerably higher. And Judge Gilstrap declined, but not really on the merits. He said, This is something that should have been presented earlier. So if you’ve got that kind of argument, you’ve got to raise that earlier, and not wait until there’s a final judgment and then say, Oh, wait, we forgot to ask, we want to ask for a higher interest rate, we’re all used to fighting over interest rates in the context of briefing before the final judgement so that that it was not presented the way the court wanted it to be.


Wayne Stacy  07:42

And these are the kinds of things that sometimes parties overlook, is their handling everything else that they think is more important in trial, coming up from or getting ready for case coming down from a case gets delegated off, it’s important to find these kinds of cases and know this because the end of the day, if there’s a big interest gap here, the law firm may be on the hook for that it was their mistake.


Michael Smith  08:06

Right. Right. And and you do you do have to think ahead on these things and raise them because judges, sometimes the judges are more tolerant than others about raising issues that could have been raised earlier. But you don’t want to be counting on the judge to as a matter of discretion reopen something by arguing that there when it’s something that he knows is raised in every case, he’s used to these fights, but that you would let a final judgment get asserted and then raise it. That was the thing that was a little unusual. You just kind of need to know how how flexible your judges going to be. And flexibility in terms of judges is kind of the theme of another case that we saw this week. And this one is actually over in Sherman. This was a case where the plaintiff filed a trademark case in state court in Collin County, the defendant removed it to judge mazanec court in Sherman. And they then amend take out the federal cause of action and just assert a state trademark claim not a federal trademark claim. And the defendant screams bloody murder and says no, this is a transparent effort to avoid federal jurisdiction. Well, with some judges that works. Some judges really react not well, to a party trying to get out of there court. Other judges, they don’t mind that you have a right to amend. And what judgment Sant decided here is he said, Look, there’s no dispute that they get to amend dispute. There’s not jurisdiction, do still have jurisdiction. Your actions have not divest divested me of jurisdiction, but I declined to exercise that jurisdiction over the case. Now if this case was in front of Judge Cobb 2025 years ago, you’re staying in federal court, but It’s a useful point to know that some judges will exercise their discretion. Let the case go back. So that’s it. That’s a useful one that I’ll keep in my back pocket when I’m looking at cases being removed into that judges court. I kind of know now, how he feels about me coming in and in saying I’ve I’ve amended to take out the jurisdiction and I want to go back to state court.


Wayne Stacy  10:25

So Michael, this is the case I’ve been wanting to talk to you about the gesture case. Just basically, a series of ex parte re exams request to stay in Gilstraps court. This seems like it was would it be dead on arrival, what what’s behind this that would cause somebody to file stays in an ex parte case with with this fact pattern to well miss Trial?


Michael Smith  10:52

It is an unusual fact pattern, because it’s not this defendant that filed the cases, there was another case where a different defendant filed for IPRs. And then, in this case, this defendant filed for ex parte reexaminations and said, Look, Judge, you’ve got these eight proceedings going. And Judge Gilstrap denied the motion, he said the defendant hadn’t agreed to be bound by the result of any of these proceedings. And the case was at a late stage with trial just two months away. So under these facts, you’re not going to get a stay. It is interesting to me that we’re seeing more and more situations where defendants are filing ex parte reexaminations. And my interest in that is well, it’s a little less likely to get a stay on that. But it is an interesting thing that I understand we’re seeing happening all over the country recently.


Wayne Stacy  11:42

Well, it’s interesting ex parte reexaminations have been around since what the mid 80s. And were just hated for for 25 years or maybe even longer. And it’s interesting to see them coming to life again here.


Michael Smith  12:01

Yeah, it looks like I get the impression it looks to the judges like it’s just trying to get multiple bites at the apple. And that’s, I think the judges are seeing it that way. We’re not seeing people have a lot of success, getting stays based on ex parte re exams. We had another jury verdict in the Eastern District last week. And interestingly, it was not in Marshall, it was in Tyler. It was a Tyler jury and Judge Jeremy Kernodle. Court found for the defendant in this case. Now the case started out as a copyright infringement trade secret misappropriation case, having to do with parties fighting over who had control of a have a company after one of the owners left and moved up to the northeast, the parties dropped the copyright infringement claims during the trial. And the jury then came back pretty much across the board for the defendant finding that the plaintiff did not have an interest continue to have an interest in the company. The reason why this is interesting is we don’t see I mean, you and I have tried a couple of cases. And Tyler, we don’t see a lot of trials over there. So it’s good to see that they are still having jury trials. And we have a place to go to kind of see how the judges and Tyler are handling jury trials. How do they what do they do in their charges? What do they do on their verdict forms? How do they conduct the proceedings? It’s good to see cases going to trial around here.


Wayne Stacy  13:32

Well, in Michael, you’d pointed out something. I think that that’s telling about these kinds of cases, there were huge wins before the verdict, because the the damages number went from 100 million to 10 million. And sometimes lawyers don’t get enough recognition for those big wins before they get to a jury.


Michael Smith  13:51

That’s That’s correct. The damages claim in front of the jury was 10 million. But the media reports that I saw were that it was originally much higher than that. So the defendant ended up whittling this thing down to the point where they they they won on essentially, everything that was presented to the jury. There was one unusual finding where the jury said that the plaintiff continued to have an equal right to control the company, which is a little inconsistent with the other ones. So I’ve already seen filings. They’re asking the court to say well, that’s just inconsistent. So we’ll see what the court does on that. But but it is interesting to see we’re seeing intellectual property cases going to trial in Tyler, which will keep keep people coming in and and keep kind of keep the system lubricated, where you can tell how the judges over there try things.


Wayne Stacy  14:45

So Michael, Judge Payne put out two cases Whirlpool and Atlas on alternate alternative service. What should practitioners be taking away from this to avoid needless motion practice?


Michael Smith  14:58

Well, I think what practitioners need to look at is if you think you’ve got an argument for alternative service, there’s no one size fits all, figure out what’s the right fix for what you’re in your case. In one case, he said electronic mail is okay. In the other case, he said Federal Express. I guess I should say, FedEx, FedEx is okay. So figure out what the best means is for your case and go ask for that. And and, I mean, it seems like about every other week, we get an order out of some Texas court approving a form of alternative service. So as long as you do your homework, you can get it just to ask for the most logical form of service.


Wayne Stacy  15:40

But it’s a good reminder for for defendants dodging service is not going to be tolerated for long.


Michael Smith  15:49

Oh, absolutely. Absolutely. Nobody’s really interested in fighting over adequacy of service, get your extension, and then go ahead and get started. And when we have one last eastern district case that I wanted to talk about today.


Wayne Stacy  16:03

So yeah, you’re gonna have to explain why this one goes in your podcast?


Michael Smith  16:09

Well, it’s a case from the Eastern District of Virginia. And I don’t normally talk about what’s happening in the Eastern District of Virginia. But this is kind of an unusual situation. What happened here is you had a north, I’m sorry, Eastern, Virginia, claim construction report and recommendation from a special master to a district judge that was sitting in Norfolk. And the reason why our listeners might be interested in is who the special mastery is, the Special Master is one of judge all brights go to technical advisors, his former law clerk, Dr. Joshua Yee. Now, since the reason why I suggest people read this is because it’s sort of like watching game tape. It’s like, when, last fall, people were talking about the Cowboys, cornerback that was getting some interceptions. And I asked him how he did it. And he said, Well, I watch game tape, I see. What are the what routes, do these receivers run? What is the quarterback do, and kind of find out how they run their offense. And that tells me kind of where I want to where I want to go? Well, in this case, Dr. Ghee is often a technical adviser for Judge Albright. But we have the same issue that we have in the Eastern District. When you have a technical adviser, and a experienced law clerk with a paddle litigation background and a district judge experienced in patent litigation, you can’t really tease out well, they they like they have this approach to these types of motions. I get those questions a lot. Well, so and so was appointed ta does he like or not? Like? Does he tend to find this? Does he not tend to find this? And I have to tell him? I don’t know, because there’s just too many variables. That’s why this is interesting, because in this case, Dr. Yee was appointed as a special master in the Eastern District of Virginia. And he generates a report and recommendation to judge young with proposed constructions. So you don’t have the interfere? Well, what is the district input? Well, was law clerks input, you just have Dr. GIS input on here. The cases I think, are important. Here’s my take on how this happens. Now, it’s conceivable that this reflects some input from the district judge, because he might have gone in and said, This is what I’m looking at. Is there anything about this that gives you heartburn? Do you Do you believe in going a different direction on some things here? So we don’t know that but but at least it gives us some insight into how Dr. Yi sees things, what he looks at what he thinks the relative relevant questions are here. So I thought that might be of interest to people, even though it’s it’s far from the green grass of Texas.


Wayne Stacy  18:51

Michael, as we move north, we find two opinions that are pretty good examples of things not to do.


Michael Smith  19:01

I think so. They’re both opinions by Magistrate Judge David who ran out of the Northern District of Texas. And the first one is over discovery sanctions and the fight there was that the party had had not adequately prepared an opponent. And in previous orders, the judge had granted the motion to compel and included a fee provision. And it’s not a sanction, it’s that fees you get your fees and expenses, if the other side position was not reasonably justified, or whatever the standard is. The court noted it had denied a motion to reconsider the order and that the party had filed objections with Chief Judge Barbara Lin. The parties didn’t reach agreement on expenses. So this lengthy order deals with the application for fees how fee applications work, and then says the appropriate fee Ward is $1,766.50. But we’re not done yet. Because they even that award is stayed pending judge lands for consideration of the objections to the original order. Why are we fighting over an award of this sort of amount? I think that’s the lesson here is I mean, as Jerry Spence used to say, when the horse dies get off.


Wayne Stacy  20:15

Yeah, what 17 $1,700? Just, what, three hours of time these days on modern billing rates? Maybe two?


Michael Smith  20:24

Oh, yeah. And you’re going to spend half an hour reading this one opinion standing alone, not counting the briefing, not counting everything else happened. I mean, it’s just, it’s just not in anyone’s interest to have this much fighting over something. This minor, the numbers were a little bit higher, in the other opinion from Judge Moran. And in that case, it was a default judgment in a trademark case. And there wasn’t any issue with the plaintiffs counsels expenses of about $31. But what did was marked down the court costs that were that were sought. And this one’s a pretty basic mistake. If you’re going to seek court costs, the rule is they’ve got to be in 28 USC 1920, you can’t come in and treat it like litigation expenses. And that’s kind of what the plaintiff did here. They had private process servers posted online legal research pacer fees. And the court said, that’s not enough. So you get $448 in costs, you don’t get the 3000 Plus that you were asking for. Now, again, there’s a cost to the briefing on this. And there’s a cost to having to see what the court does on this, that might well exceed what you thought you were going to get. So just pay attention to what the rules are. I write in my my rulebook and on my weblog pretty regularly on what’s recoverable and what’s not recoverable.


Wayne Stacy  21:50

So the as we move down, south, you get to the other case, which in my mind is close to what were they thinking, but it was a request to vacate a Markman, post transfer denial. And what’s going on here? And what kind of bad bloods is this type of motion where you’re attacking another judge? Cause?


Michael Smith  22:15

Well, it’s, it’s, it’s an interesting situation, because this is a case that was pending before Judge Albright in the Western District. And I can’t recall if this is one that voluntarily transferred, or if it was one that was mandamus. But it it’s an oil and gas case, it went to judge Hughes in the Southern District of Texas in Houston. And the defendant comes in and says, Oh, okay, Judge Hughes, we’d like you to vacate judge all brights prior claim construction. There’s this thing that wasn’t considered and should have been considered. So Please vacate that. And judge who says, Look, I may disagree with how judge Albright conducts his case management and discovery. I don’t like the way the plaintiff has conducted itself, its conduct has clearly tainted this case. But I’m still, but that’s not the test for whether the claim construction is erroneous, or whether there’s a been a sufficient change to justify a departure from the law the case. So it’s kind of an interesting opinion, you can tell the judge is not happy with anybody except the defendant. But now he’s not happy with the defendant either for asking him to redo something without giving him a sufficient basis for it.


Wayne Stacy  23:27

Do you think that causes some, some long term bad taste in the mouth?


Michael Smith  23:35

On the part of whom?


Wayne Stacy  23:39

I’m gonna go with? We’ll start with Judge Hughes. And then I’m sure Judge Albright saw this too.


Michael Smith  23:44

Well, the I don’t know. I, I don’t know that district judges really care what other district judges think about how they run their court. And Judge judge uses his got a reputation for being somewhat outspoken. So this is actually an extremely well, let me let me put it this way. On a Judge Hughes scale, this is about a three Oh, in terms of the sorts of things that he might say that someone might might get hurt feelings over, it could certainly be worse. I don’t know to what extent the defendant is going to get dinged. But you certainly start have started loading bad things on your side of the V. When previously the judge just didn’t like the plaintiff.


Wayne Stacy  24:33

Well, that takes us a little bit further north to Austin and to Waco into judge all brides courts. I guess maybe we should say that just waco these days, but he’s caught a a great named case the de la Vega case against Microsoft. Pretty interesting motion to dismiss there.


Michael Smith  24:56

Yeah, and this is actually kind of an evergreen won in front of Judge Albright several years ago in the dela Vega case, when when Judge Albright was not issuing a lot of written opinions, and early on very few people were getting orders granting 12 B six motions He granted one in De la Vega, and every case after that, and I’ll plead the fifth as to whether I do it in mind too. But every case after that we say Judge, this is just like De la Vega. It’s the McDonald’s hot coffee case. When you’re asserting 12 B six motions, you’re saying, well, their pleadings are just like De la Vega. And Judge Albright here said, Nope, this is not like De la Vega. And he points out De la Vega was really an extraordinarily poorly pleaded case. It’s not the kind of case whose facts you want to point to and say, what the plaintiff is doing is just like this, because judge Albright knows it’s not. It’s a very, very different situation. So it’s, it’s fun to cite to dela Vega, but you know, we we should be leaving the De La Vega behind and focusing a little more on the actual contentions. Its there just aren’t going to be many cases that match up with it.


Wayne Stacy  26:08

So we have another original waco case that was transferred to walk down to Austin, this Neo case, notably was Dell that was a defendant here. Is there anything for the non Austin giant tech companies to learn from a transfer from Waco to Austin?


Michael Smith  26:28

I don’t know that the giant tech companies can take much from this because Dell has the unique position that they’re in the Austin division. They’re actually in Round Rock. So they’re about 20 miles north of Austin, only about 60 miles south of Waco, the thing that I took away from this is more from the plaintiffs perspective. Judge Allbright kinda took the plaintiff to task for not providing a non identifying witnesses that might be division don’t get, they didn’t give me facts. So even though the factors only tilted slightly in favor of transfer, in this case, the factors that weighed against transfer word enough to keep the case in Waco. He also noted here that I’m recognizing that the Federal Circuit’s changed the balance a little bit here. So I’m weighing weighing the practical problems factor a little bit less, you can clearly tell that if it weren’t for the Federal Circuit cases, he would be assigning more more weight to the fact that he can get to trial quicker than Austin can. But the direction he has been given by the Federal Circuit is that he can’t consider that. So that helps kind of tilt the analysis, a little more towards trance transfer. But it’s one more data point that we’re looking at to see which cases go to Austin in which cases would stay in Waco.


Wayne Stacy  27:49

Well, one other interesting really from Judge all brights, this mirror PNC case, it’s got two, two teachable moments in this a 12, B six, and a one on one determination. So pick where you want to start and take us through that. Well,


Michael Smith  28:05

it was a little unusual in that it you’re right, it did raise two things. It raised a basis of collateral estoppel and judge Albright kind of wave that went out before it even came in the garage and said, look, the decision you’re pointing to was vacated. And at this point, I can’t tell you that the patents would be sufficiently similar anyway, when he got to patentable subject matter. Again, this is like the the Kajeet case, I think it was last week, where he talked about in the absence of claim construction, I can’t make an eligibility determined in this case. Now, he points out a claim construction isn’t always necessary to make this determination. But after I look at these terms that have been identified, I am not ready to go forward with saying that this is sufficient to grant a motion to dismiss especially at this stage where I can tell that the pleadings are sufficient to go past this point. He also provides some very interesting language here you’re talking about when the complaint contains concrete allegations of A, B and C, then asserted claims can survive a section 101 motion at the 12 B six stage. So that’s this is an order that I would study pretty closely, because we’ve seen orders going the other way from Judge Albright in the last few weeks where he has granted 12 B six motions at the beginning of the case saying you haven’t sufficiently pleaded a plausible case of infringement. Here he thought there was a plausible case of patent eligibility. So again, we’re starting to develop a pretty decent little database of 12 B six rulings that tell defendants whether emotion really is likely to be granted or not.


Wayne Stacy  29:47

Well, in the precise language you used, really should be shouldn’t be monitored what what is the individual elements and the claim combination are not well understood routine or conventional activity. Any refer to that as being a concrete allegation? Other courts would, would say that that’s just a summary statement.


Michael Smith  30:10

Right? So conclusory statements. So that’s No, that’s, that’s exactly what I’m talking about. You can see he says, if you put this in here, that is enough to survive a section 101 motion in the context of rule 12 B, six other judges would not hold that. And I know from being at pre trial, so judge Albright, when you get down to the pre trial stage, and you have an expert stand up and say something like that, and there’s nothing behind it, you’re experts going to get struck. That’s not That’s not a rare rare occurrence down there. So he’s, you have to recognize there are different different judges have different standards at different at this same stage. So that’s why I’m saying you need to study this. Make sure you comply with it. But realize that what if you file your case, you get transferred to Austin, you get in front of judge why they may not have the same standard. So you need to be aware of that. Where possible, make sure you’ve got enough to get get over the hump with any judge you might be in front of.


Wayne Stacy  31:15

Well, I know when I won motions are are trendy, and people have to try them because clients demand it. But they’re not always going to be winners. And it seems like Judge Albrights got a pretty, pretty tough standard compared with, for example, the Northern District of California


Michael Smith  31:32

to get exactly at an earliest at this stage. That’s absolutely correct. We don’t see people having a lot of success with with 101. Arguments early in cases, but that’s the it’s not like that’s news to anyone. The news is that we’re starting to see some cracks in that early on some situations where he says, You can’t even get past the pleading standard. At this stage. We have seen a ruling like that and the case got dismissed. And to my knowledge wasn’t refiled.


Wayne Stacy  32:04

Well, Michael, once again, thank you. The state continues to have all sorts of teachable moments every


Michael Smith  32:12

week. Oh, yeah, we do our best.


Wayne Stacy  32:16

Talk to you next week.


Michael Smith  32:17

All right. Thanks very much. See you then.