Versata Software Inc. et al v. Callidus Software Inc.

Filing 26

MEMORANDUM OPINION. Signed by Judge Sue L. Robinson on 5/16/2013. (fms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

VERSATA SOFTWARE, INC. and
VERSATA DEVELOPMENT
GROUP, INC.,
Plaintiffs,

v.
CALLIDUS SOFTWARE INC.,
Defendant.

)
)
)

)
)
)
)
)
)
)
)

Civ. No. 12-931-SLR

Jack B. Blumenfeld, Esquire and Julia Heaney, Esquire of Morris, Nichols, Arsht &
Tunnell LLP, Wilmington, Delaware. Counsel for Plaintiff. Of Counsel: Alan D.
Albright, Esquire, Michael Chibib, Esquire, Conor M. Givins, Esquire, and Benjamin L.
Bernell, Esquire of Bracewell & Guiliani LLP.
Arthur G. Connolly, Ill, Esquire of Connolly Gallagher LLP, Wilmington, Delaware.
Counsel for Defendant. Of Counsel: Deborah E. Fishman, Esquire, Assad H. Rajani ,
Esquire, and MichaelS. Tonkinson, Esquire, of Dickstein Shapiro LLP.

MEMORANDUM OPINION

Dated: May llP, 2013
Wilmington, Delaware

~O~Judge
I. INTRODUCTION
On July 19, 2012, Versata Software, Inc. and Versata Development Group, Inc.
(collectively, "Versata") filed a complaint against defendant Callidus Software Inc.'s
("Callidus") alleging that certain Callidus software, "including Callidus' SPM
Suite, and specifically including Callidus' TrueComp and TrueProducer products"
(collectively "the accused products"), infringe U.S. Patent Nos. 7,958,024 ("the '024
patent"), 7,908,304 ("the '304 patent"), and 7,904,326 ("the '326 patent"). (D.I. 1)
Presently before the court are Callidus' motions to transfer this action to the Northern
District of California (D.I. 9) and to dismiss for failure to state a claim under Fed. R. Civ.
P. 12(b)(6) (D.I. 14). The court has jurisdiction over this matter pursuant to 28 U.S.C.

§§ 1331 and 1338(a). For the reasons that follow, both motions are denied.
II. BACKGROUND
Plaintiffs Versata Software, Inc. and Versata Development Group, Inc. are both
Delaware corporations with their principal place of business at 6011 West Courtyard
Drive, Austin, Texas 78730. (D. I. 1 at 1f1-2) Versata has no offices or employees in
California.
Callidus was incorporated in Delaware in 1996 and maintains its principal place
of business at 6200 Stoneridge Mall Road, Suite 500, Pleasanton, California 94588.
(D. I. 1 at 1f3; D. I. 2-3) Callidus avers that the accused products were primarily
designed and developed in their California location and any continued maintenance is
also conducted from there. (D.I. 10 at 3) Further, its internal company servers, which
contain technical documents for the accused products, sales and marketing documents,

and other company documents, are located at its California headquarters. (D.I. 10 at 3)
While 135 of Callidus' 494 employees work in the California headquarters, the balance
work in sales and service facilities throughout the United States (but not in Delaware).
Callidus also has international offices. (D.I. 10 at 3; D.l. 18 at 4)

Ill. VENUE
A. Standard of Review

Section 1404(a) of Title 28 of the United States Code grants district courts the
authority to transfer venue "[f]or the convenience of parties and witnesses, in the
interests of justice ... to any other district or division where it might have been
brought." 28 U.S.C. § 1404(a). Much has been written about the legal standard for
motions to transfer under 28 U.S.C. § 1404(a). See, e.g., In re Link_A_Media Devices
Corp., 662 F.3d 1221 (Fed. Cir. 2011 ); Jumara v. State Farm Ins. Co., 55 F.3d 873 (3d
Cir. 1995); Helicos Biosciences Corp. v. //lumina, Inc., 858 F. Supp. 2d 367 (D. Del.
2012).
Referring specifically to the analytical framework described in Helicos, the court
starts with the premise that a defendant's state of incorporation has always been "a
predictable, legitimate venue for bringing suit" and that "a plaintiff, as the injured party,
generally ha[s] been 'accorded [the] privilege of bringing an action where he chooses.'"
858 F. Supp. 2d at 371 (quoting Norwood v. Kirkpatrick, 349 U.S. 29, 31 (1955)).
Indeed, the Third Circuit in Jumara reminds the reader that "[t]he burden of establishing
the need for transfer ... rests with the movant" and that, "in ruling on defendants'
motion, the plaintiffs choice of venue should not be lightly disturbed." 55 F .3d at 879

2

(citation omitted).
The Third Circuit goes on to recognize that,
[i]n ruling on§ 1404(a) motions, courts have not limited their
consideration to the three enumerated factors in§ 1404(a)
(convenience of parties, convenience of witnesses, or interests
of justice), and, indeed, commentators have called on the courts
to "consider all relevant factors to determine whether on
balance the litigation would more conveniently proceed and the
interests of justice be better served by transfer to a different
forum."

/d. (citation omitted). The Court then describes some of the "many variants of the
private and public interests protected by the language of§ 1404(a)." /d.
The private interests have included: plaintiff's forum of preference
as manifested in the original choice; the defendant's preference;
whether the claim arose elsewhere; the convenience of the parties
as indicated by their relative physical and financial condition; the
convenience of the witnesses - but only to the extent that the
witnesses may actually be unavailable for trial in one of the
fora; and the location of books and records (similarly limited to
the extent that the files could not be produced in the alternative
forum).
The public interests have included: the enforceability of the
judgment; practical considerations that could make the trial
easy, expeditious, or inexpensive; the relative administrative
difficulty in the two fora resulting from court congestion; the
local interest in deciding local controversies at home; the
public policies of the fora; and the familiarity of the trial judge
with the applicable state law in diversity cases.

/d. (citations omitted) (emphasis added).
B. Analysis
With the above "jurisdictional guideposts" in mind, the court turns to the "difficult
issue of federal comity" that transfer motions present. E. E. D.C. v. Univ. of Pa., 850
F.2d 969, 976 (3d Cir. 1988). Versata has not challenged Callidus' assertion that the

3

instant action could have been brought in the Northem District of Califomia. 1 See 28
U.S.C. § 1404(a); (D.I. 18 at 2-3)
The parties have all chosen legitimate forums in which to pursue the instant
litigation. In this regard, certainly a party's state of incorporation is a traditional and
legitimate venue, as is the locus of a party's business activities. Given that
"convenience" is separately considered in the transfer analysis, the court declines of
elevate a defendant's choice of venue over that of a plaintiff based on defendant's
convenience. Therefore, the fact that plaintiffs have historically been accorded the
privilege of choosing their preferred venue for pursuing their claims remains a
significant factor.
A claim for patent infringement arises wherever someone has committed acts of
infringement, to wit, "makes, uses, offers to sell, or sells any patented invention" without
authority. See generally 35 U.S.C. § 271 (a); Red Wing Shoe Co., Inc. v. HockersonHalberstadt, Inc., 148 F.3d 1355, 1360 (Fed. Cir. 1998) (an infringement claim "arises
out of instances of making, using, or selling the patented invention"). While Versata
asserts that alleged infringing aCtivities have taken place in Delaware as Callidus
"makes, uses, licenses, sells, offers for sale, and/or imports the infringing products in
Delaware," Callidus responds that Versata has not "identif[ied] any act of alleged
infringement in Delaware, and Callidus is aware of none."
The Third Circuit in Jumara indicated that, in evaluating the convenience of the
parties, a district court should focus on the parties' relative physical and financial

1

Versata requests, in the alternative, that the instant action be transferred to the
Westem District of Texas, where its headquarters are located. (D.I. 18 at 3)

4

condition. In this case, there is no information provided to compare the size of Versata
to Callidus' 494 employees. However, the parties' litigation history shows each has
litigated in several states, including Delaware. 2
Considering the convenience of the witnesses and specifically whether witnesses
"actually may be unavailable for trial in one of the fora," Callidus argues that at least
one of "seven third-party witnesses with potentially relevant knowledge" has expressed
unwillingness to attend a trial in Delaware. 3 (D.I. 10 at 12; D.l. 20 at 7)
According to Callidus, its server at its California headquarters contains the
potentially relevant technical, financial, marketing, and sales documents, negating any
argument that the documents would not be readily transferable to Versata's counsel in
Texas or available for trial in Delaware. 4 (D. I. 10 at 3, 14)
The court recognizes that trial in California would be less expensive and easier
for Callidus. As Delaware and Northern California are nearly equidistant from Versata's
Austin headquarters, it would most likely be equally expensive for Versata to litigate in
either venue.

2

Searches by party name in the PACER case locator reveal Versata as a party to
47 civil cases and Callidus to 15 cases.
3

With respect to trials, in the nine patent jury trials this judicial officer conducted
between March 2010 and October 2011, an average of three fact witnesses per party
appeared live for trial, with the average length of trial being 28 hours (with the parties
often using less time than allocated, on average, 25 hours). Further, depositions in the
cases over which this judicial officer presides are generally taken where the deponents
reside or work. There is no suggestion that this case will be an exception.
4

Callidus' arguments that Versata will have to travel to California to view source
code is not persuasive as source code can be viewed in any secure location selected
by the parties. See, e.g., District of Delaware's Default Standards for Access to Source
Code (adopted Dec. 8, 2011 ).

5

With respect to administrative difficulty, trial in this case will be scheduled
consistent with the parties' proposals. Local interest in deciding local controversies is
not a dispositive factor, as patent litigation does not constitute a local controversy in
most cases. Indeed, patent litigation implicates constitutionally protected property
rights, is governed by federal law reviewed by a court of appeals of national (as
opposed to regional) stature, and affects national (if not global) markets. See Cradle

IP, LLC v. Texas Instruments, Inc.,--- F.Supp.2d ----, 2013 WL 548454, at *4 (D. Del.
February 13, 2013). In this regard, the instant litigation involves software sold and
distributed throughout the United States. The remaining Jumara public interest factors the enforceability of a judgment, the public policies of the fora, and the familiarity of the
judge with state law - carry no weight in this transfer analysis.
In sum, Callidus has the burden of persuading the court that transfer is
appropriate, not only for its convenience but in the interests of justice. In this case,
Versata chose a legitimate forum which all parties have in common - their state of
incorporation. As is usual in these cases, the convenience factors do not weigh in favor
of transfer, because discovery is a local event and trial is a limited event. Although
Delaware is not the locus of any party's business activities, it is a neutral forum and no
more inconvenient for Calllidus than Texas, the locus of Versata's business activities.
Given that both Versata and Callidus have experience litigating in multiple jurisdictions,
the court is not persuaded that transfer is warranted in the interests of justice.

IV. FAILURE TO STATE A CLAIM
A. Standard of Review

6

In reviewing a motion filed under Federal Rule of Civil Procedure 12(b)(6), the
court must accept all factual allegations in a complaint as true and take them in the light
most favorable to plaintiff. See Erickson v. Pardus, 551 U.S. 89, 94 (2007); Christopher

v. Harbury, 536 U.S. 403, 406 (2002). A court may consider the pleadings, public
record, orders, exhibits attached to the complaint, and documents incorporated into the
complaint by reference. Tellabs, Inc. v. Makar Issues & Rights, Ltd., 551 U.S. 308, 322
(2007); Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F .3d 1380, 1384-85 n.2 (3d
Cir. 1994). A complaint must contain "a short and plain statement of the claim showing
that the pleader is entitled to relief, in order to give the defendant fair notice of what the
... claim is and the grounds upon which it rests." Bell At/. Corp. v. Twombly, 550 U.S.
544, 545 (2007) (internal quotation marks omitted) (interpreting Fed.R.Civ.P. 8(a)). A
complaint does not need detailed factual allegations; however, "a plaintiffs obligation to
provide the 'grounds' of his entitle[ment] to relief requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will not do."

/d. at 545 (alteration in original) (citation omitted). The ''[f]actual allegations must be
enough to raise a right to relief above the speculative level on the assumption that all of
the complaint's allegations are true." /d. Furthermore, "[w]hen there are well-ple[d]
factual allegations, a court should assume their veracity and then determine whether
they plausibly give rise to an entitlement to relief." Ashcroft v. Iqbal, 556 U.S. 662, 129
S.Ct. 1937, 1950 (2009). Such a determination is a context-specific task requiring the
court "to draw on its judicial experience and common sense." /d.
Under 35 U.S.C. § 271(b), "[w]hoever actively induces infringement of a patent

7

shall be liable as an infringer." To demonstrate inducement of infringement, the
patentee must establish, first, that there has been direct infringement and, second, that
the alleged infringer had "knowledge that the induced acts constitute patent
infringement." Global-Tech Appliances, Inc. v. SEB S.A.,- U.S.-, 131 S. Ct.
2060, 2068 (2011). "Inducement requires evidence of culpable conduct, directed to
encouraging another's infringement, not merely that the inducer had knowledge of the
direct infringer's activities." DSU Medical Corp. v. JMS Co., Ltd., 471 F.3d 1293, 1306
(Fed. Cir. 2006) (en bane in relevant part).
Under 35 U.S.C. § 271 (c), a patentee must demonstrate that an alleged
contributory infringer has sold, offered to sell or imported into the United States a
component of an infringing product "knowing the same to be especially made or
especially adapted for use in an infringement of such patent, and not a staple article or
commodity of commerce suitable for substantial non infringing use." Therefore, § 271 (c)
"require[s] a showing that the alleged contributory infringer knew that the combination
for which [its] component was especially designed was both patented and infringing."
Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 488 (1964).

B. Analysis
Versata alleges that "Callidus makes, uses, licenses, sells, offers for sale, and/or
imports in[to] the State of Delaware, in this judicial district, and elsewhere within the
United States software that infringes the '024, '304 and '326 patents, including
Callidus's SPM Suite, and specifically including Callidus's TrueComp and TrueProducer
products." (D.I. 1 at 1"[11) For each of the three patents, Versata alleges that "Callidus

8

has been and is now directly infringing, and indirectly infringing by way of inducing the
infringement of and/or contributing to the infringement of, the ... patent in the State of
Delaware, in this judicial district, and elsewhere within the United States by, among
other things, making, using, licensing, selling, offering for sale, or importing software,
including ... software and related services covered by one or more claims of the ...
patent, all to the injury of Versata." (ld. at mf 13, 18, 23)
With respect to Callidus' allegations that Versata's claims of direct infringement
do not adequately identity the accused products, the court finds that Versata's
complaint sufficiently identifies the accused software, as "including Callidus's [sic] SPM
Suite, and specifically including Callidus's [sic] TrueComp and TrueProducer," as
required by Fed. R. Civ. P. Form 18. No more is required of a plaintiff at the pleading
stage. See McZeal v. Sprint Nextel Corp., 501 F.3d 1354 (Fed. Cir. 2007); Eon Corp.

IP Holdings LLC v. Flo TV Inc., 2011 WL 2708945 (D. Del. July 12, 2011 ).
Callidus' allegations that Versata's complaint does not sufficiently plead indirect
infringement are equally unavailing. Consistent with this court's holding in Walker

Digital LLC v. Facebook, Inc., 852 F. Supp. 2d 559 (D. Del. 2012), Versata's claims of
indirect infringement are facially plausible and provide Callidus with adequate notice.
Versata's complaint asserts that Callidus had knowledge of its infringement "at least as
of the date of the filing of this complaint." (D.I. 1 at 1J15); Walker Digital, 852 F. Supp.
2d at 565 (explaining that "defendant's receipt of the complaint and decision to continue
its conduct despite the knowledge gleaned from the complaint satisfies the
requirements of Global-Tech").

9

Versata argues that, as Cadillus licenses and/or sells the accused products,
Versata need not specifically identify a particular customer to support a pleading of
induced infringement. (D. I. 1 at~ 13) As Versata alleges that Callidus directly infringes
the claims, these two allegations taken together suffice to support the pleading burden.
(/d. at W 13-14)

With respect to contributory infringement, Versata has alleged that Callidus
directly infringes and has knowledge that its products lack substantial non-infringing
uses. As with inducement, this sets forth a plausible claim for contributory infringement
under the pleading requirements. The court concludes that Versata has sufficiently
identified the products at issue for the purposes of claiming direct infringement, as well
as satisfied the requirements of Twombly and Iqbal with respect to the allegations of
indirect infringement found in the complaint.

V. CONCLUSION
For the foregoing reasons, Callidus' motions to transfer venue (D.I. 9) and to
dismiss for failure to state a claim (D. I. 14) are denied.

10