Vertical Computer Systems, Inc. v. Interwoven, Inc. et al

Filing 87

RESPONSE in Opposition re 84 SEALED MOTION to Sever and Transfer Claims filed by Vertical Computer Systems Inc. (Attachments: # 1 Exhibit Declaration of Luiz Claudio Valdetaro (signed), # 2 Exhibit A - Google Information on LG Electronics, # 3 Exhibit B - Complaint (Vertical Computer Systems, Inc. v. Interwoven, Inc., et al; Civil Action No. 210-cv-490), # 4 Exhibit C - Samsung's Claim Charts, # 5 Exhibit D - LG's Claim Charts, # 6 Exhibit E - U.S. Court of Appeals for the Federal Circuit - Brief of Petitioner - Vertical Computer Systems, Inc, # 7 Exhibit F - U.S. Court of Appeals for the Federal Circuit - Petition on Writ of Mandamus Order, # 8 Exhibit G - U.S. District Court for the Northern District of California - Claims Construction Order, # 9 Exhibit H - Declaration of Seo Won Kwon, # 10 Exhibit I - LexisNexis Documents, # 11 Exhibit J - LexisNexis Documents, # 12 Text of Proposed Order)(Davis, William)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
VERTICAL COMPUTER SYSTEMS, INC.,
Plaintiff,
v.
INTERWOVEN, INC.,
LG ELECTRONICS MOBILECOMM
U.S.A., INC., LG ELECTRONICS
INC., SAMSUNG ELECTRONICS CO.,
LTD., SAMSUNG ELECTRONICS
AMERICA, INC.,
Defendants.

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Civil Action No. 2:10-cv-490
JURY TRIAL DEMANDED

PLAINTIFF, VERTICAL COMPUTER SYSTEMS, INC.'S, RESPONSE
IN OPPOSITION TO LG ELECTRONICS MOBILECOMM U.S.A., INC. AND
LG ELECTRONICS INC.’S MOTION TO SEVER AND TRANSFER
CLAIMS TO THE U. S. DISTRICT COURT FOR THE DISTRICT OF
NEW JERSEY OR IN THE NORTHERN DISTRICT OF CALIFORNIA

TABLE OF CONTENTS
I.

INTRODUCTION .............................................................................................................. 1

II.

THE FACTS ....................................................................................................................... 2
A.
B.

The Subject Matter of this Lawsuit ......................................................................... 3

C.

Procedural History of This Litigation and the
Litigation in the Northern District of California ..................................................... 4

D.

Cooperation Between LG, Samsung and Google ................................................... 9

E.
III.

The Parties to this Action ........................................................................................ 2

This Court is the Most Convenient for all the Parties ............................................. 9

ARGUMENT .................................................................................................................... 10
A.

Severance Is Improper Under the Standard of In re EMC Corp. .......................... 10

B.

None of the Relevant Factors Support Transfer ................................................... 12
1.

Vertical was the First-to-File .................................................................... 12

2.

Judicial Economy is the "Paramount" Factor ........................................... 12

3.

The Most Convenient Forum for this
Dispute is the Eastern District of Texas .................................................... 14
a.
b.

The Convenience Of The Parties
Favors the Eastern District of Texas ............................................. 14

c.
IV.

The Convenience of the Witnesses
Favors the Eastern District of Texas ............................................. 14

The Location of Relevant Documents and
Other Evidence Favors the Eastern District of Texas ................... 15

CONCLUSION ................................................................................................................. 15

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TABLE OF AUTHORITIES
Page(s)
FEDERAL CASES
Continental Grain Co. v. Barge FBL-585,
364 U.S. 19 (1960) ...................................................................................................................13
Electronics for Imaging, Inc. v. Tesseron, Ltd,
2008 U.S. Dist. LEXIS 10844 (N.D. Cal. Jan. 29, 2008) ........................................................13
Genentech, Inc. v. GlaxoSmithKline, LLC,
2010 U.S. Dist. LEXIS 126773 (N.D. Cal. Nov. 30, 2010).....................................................14
In re EMC Corp.,
677 F.3d 1351 (Fed. Cir. 2012) (Decision dated May 4, 2012).....................................1, 10, 11
In re Google,
2011 U.S. App. LEXIS 4381 (Fed. Cir. Mar. 4, 2011) ......................................................12, 13
Kahn v. General Motors Corp.,
889 F.2d 1078 (Fed. Cir. 1989)................................................................................................12
Meru Networks, Inc. v. Extricom, Ltd.,
2010 U.S. Dist. LEXIS 90212 (N.D. Cal. Aug. 31, 2010) (Whyte, J.) ....................................12
Panduit Corp. v Dennison Mfg. Co.,
836 F.2d 1329 (Fed. Cir. 1987)..................................................................................................8
Thill v. Edward D. Jones & Co., L.P.,
2006 U.S. Dist. LEXIS 69485 (N.D. Cal. Sept. 18, 2006) ......................................................13

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I.

INTRODUCTION
Vertical Computer Systems, Inc. ("Vertical") submits this memorandum and the

appended Declaration of Luiz C. Valdetaro in opposition to the pending motion to sever and
transfer filed by LG Electronics Mobilecomm U.S.A., Inc. and LG Electronics, Inc. (collectively
"LG").
Nearly two years after the start of this action and more than a year after this Court denied
the very same motion as to the Samsung defendants, LG has decided that it no longer wishes to
defend against Vertical's claims in the same action with Samsung and that it wants to transfer the
case against it to either the Northern District of California or the District of New Jersey. It cites
the recent decision of the Court of Appeals for the Federal Circuit in In re EMC Corp. (dealing
with severance under Fed. R. Civ. P. 20) as justification for this latest disruption of the present
litigation, but the fact that it has not asked for severance without transfer as an alternative
remedy shows its true intent – to remove the case to what it believes is a more favorable forum.
The evidence relating to the issues of infringement, invalidity and unenforceablity are
almost identical as to both LG and Samsung. The basis of infringement for both defendants is
the Android operating system provided by Google.

Both LG and Samsung meet the

compatibility requirements of Google. And, as shown below, Vertical's showing of infringement
for LG is essentially the same as that for Samsung. Thus, under the standard of In re EMC
Corp., requiring that the claims against each defendant "show an aggregate of operative facts,"
the present case presents the most compelling situation for joinder of two independent
defendants.
The same factors considered by this Court in denying Samsung's motion to transfer apply
to the present motion by LG. The first-to-file doctrine establishes a plaintiff's "presumptive
rights" to select the forum of its choice. Vertical chose its home forum where all the documents
and witnesses reside. Judicial economy, which plays a paramount role in trying to maintain an
orderly and effective administration of justice, compels having one case for Samsung and LG to

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minimize the waste of time, energy and money. And, this forum is the most convenient because
almost all of the witnesses and documents reside in it or near it. A foreign corporation should
not dictate where it wants an aggrieved plaintiff's claim decided.
Therefore, for the reasons outlined below, Vertical respectfully requests that the Court
deny LG's motion.
II.

THE FACTS
A.

The Parties to this Action

This is a patent infringement action between Vertical, a software company located in this
district, and two groups of Korean-based companies, Samsung and LG.
Plaintiff Vertical is a publicly held corporation that develops and sells software products.
It has its principal place of business in the Eastern District of Texas at 101 W. Renner Road,
Richardson, Texas 75082. It started this line of lawsuits back in 2007 by filing suit against
Microsoft in Vertical Computer Systems, Inc. v Microsoft Corporation, Civil Action No. 2:07cv-00144 (E.D. Tex.) and then followed that lawsuit by filing the present action.
LG Electronics Mobilecomm U.S.A., Inc. is a California corporation and has its principle
places of business in San Diego, CA and in Englewood Cliffs, NJ 07632. In the declaration
supporting the present motion, Mr. James Fishler, an LG senior vice president for marketing,
declares that the business of LG Electronics Mobilecomm U.S.A., Inc. "is in the process of being
transitioned from San Diego to Englewood Cliffs, N.J."
LG Electronics, Inc. is a corporation organized under the laws of the Republic of Korea
and has its principal place of business at LG Twin Towers 20, Yeouido dong, Yeongdeungpo-gu,
Seoul, Republic of Korea 150-721. It designs and manufactures the accused smartphones and
tablet computers in Korea and then imports them into the United States.
Defendant Samsung Electronics America, Inc. is a New York corporation and has its
principal place of business at 85 Challenger Road, Ridgefield Park, NJ 07660. (The Samsung

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companies have not joined LG in the present motion, but they essentially tried to do previously
what the LG companies are attempting to do now.)
Defendant Samsung Electronics Co., Ltd. is a corporation organized under the laws of the
Republic of Korea and has its principal place of business at 1320-10, Seocho 2-dong, Seocho-gu,
Seoul 137-857, Republic of Korea. It designs and manufactures the accused smartphones and
tablet computers in Korea and China and then imports them into the United States.
Samsung Telecommunications America, LLC (a non-party) ("STA") is a subsidiary of
Samsung Electronics Co., Ltd. and a Delaware corporation headquartered in Richardson, Texas,
less than one mile from Vertical's offices in Richardson. From this location, it distributes,
throughout the United States, all the Samsung smart phones and computers that Samsung Korea
imports into the United States.
LG, collectively, is a multinational corporation with offices around the world. In the
United States, it has offices in San Diego, CA; in Englewood Cliffs, NJ; in Huntsville, AL; and
in Fort Worth, TX. The San Diego and New Jersey locations are marketing companies; the
Alabama location is a service location; and the Fort Worth, Texas location, like the Samsung
Richardson location, is a distribution and service center. (See Google search results showing
this information, attached as Exhibit A.)
B.

The Subject Matter of this Lawsuit

The subject matter of Vertical's complaint here (attached as Exhibit B) is United States
Patent No. 6,826,744 ("the '744 patent") titled "System and Method for Generating Web Sites in
an Arbitrary Object Framework" and United States Patent No. 7,716,629 ("the '629 patent")
having the same title. The '744 patent describes and claims a method for generating computer
applications on a host system in an arbitrary object framework. The method includes creating
arbitrary objects and managing and deploying them. The '629 patent is a continuation of the '744
patent and has essentially the same specifications and drawings. Vertical is the owner of the '744
and '629 patents and has standing to sue for infringement.

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Samsung and LG infringe these two patents through their manufacture, importation and
sale of cellular telephones and tablet computers having an Android operating system. In fact, for
purposes of this litigation, the accused products of Samsung and LG are essentially the same.
They all include the Android operating system which forms the basis of Vertical's claims of
infringement. (The Android Operating system originates from one company – Google.) Thus,
the infringement contentions and claim charts provided by Vertical in this action cover the same
claims and the same accused technology. Vertical attaches its claim charts for Samsung as
Exhibit C and for LG as Exhibit D. A comparison of these two sets of claim charts shows that
the evidence on the issue of infringement is essentially the same for both Samsung and LG.
C.

Procedural History of This Litigation and the
Litigation in the Northern District of California

Almost two years ago, on October 14, 2010, Interwoven, Inc. filed suit in the United
States District Court for the Northern District of California, seeking a declaration of noninfringement, invalidity and unenforceability of the '744 and '629 patents. Interwoven, Inc. v.
Vertical Computer Systems, Inc., Civil Action No. 3:10-cv-04645-RS ("the Interwoven Action").
A month later, on November 15, 2010, (but before Interwoven served its Complaint on Vertical),
Vertical filed the present lawsuit against Interwoven, Samsung and LG, alleging infringement of
the patents-in-suit by Interwoven's TeamSite software platform and LG's and Samsung's Android
smartphones and tablets. The following month (December 7, 2010) Vertical also filed a motion
in the Northern District of California to transfer venue to this Court or to dismiss Interwoven's
Complaint (Interwoven Action, Dkt. No 8). The California Court denied this motion based on
the first-to-file rule and its conclusion that neither district was demonstrably more or less
convenient than the other as to Interwoven and Vertical (Interwoven Action, Dkt. No 35).
On January 12, 2011, Samsung filed suit against Vertical in the Northern District of
California, seeking the same declaration that Interwoven had sought in the Interwoven Action.
Samsung Electronics Co., Ltd. v. Vertical Computer Systems, Inc., Civil Action No. 3:11-cv-

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00189-RS ("the Samsung Action"). In response, Vertical, on February 3, 2011, filed a motion to
dismiss Interwoven's Complaint under Fed. R. Civ. P. 12(b)(6) and renewed its motion to
transfer the Interwoven Action to this Court (Interwoven Action, Dkt. No 38). Vertical also filed
(on February 4, 2011) a motion to transfer the Samsung Action to this Court (Samsung Action,
Dkt. No. 16). On February 25, 2011, Samsung countered by filing a motion in this Court to
dismiss, stay or transfer this case to the Northern District of California (Dkt. No. 31).
(Interwoven had filed a similar motion in this Court on January 10, 2011, (Dkt. No. 19)).
Throughout all of this procedural activity, LG did not file any declaratory judgment
action in any other district; it did not move to dismiss, transfer or stay this litigation; and it
did not join either Interwoven or Samsung in any of their motions. And, until now, LG has
also not moved to sever its case from that of Samsung.
On May 2, 2011, the Northern District of California denied Vertical's renewed motion to
transfer the Interwoven Action, but granted Vertical's motion to transfer the Samsung action.
(Interwoven had filed an amended complaint which mooted the Fed. R. Civ. P. 12(b)(6) portion
of Vertical's motion.) The California Court held as follows:
Vertical’s infringement suit filed in the Eastern District of Texas alleges
that Samsung infringes the subject patents through its manufacture, importation
and sale of cellular telephones operating an Android system. Samsung’s suit in
California seeks a declaratory judgment of noninfringement. Roughly around the
time of the hearing on Vertical’s motion to dismiss or transfer Interwoven's
declaratory judgment Complaint, this Court learned that the Samsung companies
had filed a declaratory judgment action of their own in this district. This Court
then related Samsung’s suit to Interwoven's, pursuant to Civil Local Rule 3-12,
and the instant motion duly followed.
Vertical maintains its principal place of business in Richardson, Texas,
which is located within the Eastern District of Texas. Until 2003, Vertical was
based in Los Angeles, California, and at least two senior employees continue to
operate out of this state. These employees work out of their respective homes, and
the company does not maintain any official offices within the State. The
employees Vertical characterizes as material witnesses, however, all reside in
Texas, and most of them specifically within the Eastern District of Texas. Vertical
insists that the bulk of all other witnesses and documents relevant to the patents
are located near its headquarters in Richardson.

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Samsung Electronics, Ltd. is a corporation organized under the laws of the
Republic of Korea. Samsung Electronics America is a New York corporation with
its principal place of business in New Jersey. It does not claim to operate any
offices in California, or maintain documents within this state. Samsung does note,
however, that the phones and tablet computers it manufactures use an Android
operating system, which was developed and distributed by Google, headquartered
in the Northern District of California. Accordingly, Samsung surmises that at least
some documents and material witnesses potentially relevant to its alleged acts of
infringement are located within this district. Samsung also makes the rather weak
observation that California is geographically closer than Texas to Korea, where
Samsung researches and manufactures its Android-powered products. Samsung
does acknowledge, however, that witnesses and documents relevant to defending
its suit are also located in Texas. STA, a Delaware corporation headquartered in
Richardson, apparently purchases the accused phones and computers from Korea,
and is responsible for the importation of Samsung products to the United States.
In other words, the accused product’s point of entry into the United States is the
Eastern District of Texas. That company also markets and sells Samsung’s
products to wireless carriers and, accordingly, witnesses and documents relevant
to importation, marketing and sales of Samsung’s accused products are located in
that judicial district.
***
Vertical and Samsung agree that the Court should honor the first to file
presumption. Interestingly, both parties assert that its action represents the firstfiled Complaint. Vertical plainly is the only party who can claim that title in this
particular instance. Although Samsung suggests the Court should consider the
date on which Interwoven filed a declaratory judgment suit, it presents no legal or
even logical authority for that proposition. Vertical also has the better argument as
to convenience factors, the interests of judicial economy (and, in particular, the
avoidance of inconsistent results). On account of witness and document location,
it would obviously be more convenient for Vertical if the suit were litigated in
Texas. As to Samsung (unlike Interwoven), there is ample reason to believe
litigation in Texas would actually be more convenient than it would be in this
district. Samsung, after all, has substantial ties to the Eastern District of Texas
(apparently, the accused products themselves enter the United States through that
district), and houses documents and witnesses relevant to this litigation there.
As to efficiency, a district court in Texas is presiding over Vertical's
infringement suit against the Samsung plaintiffs. All that is before this Court is a
declaratory judgment action brought by a separate plaintiff against Vertical. As
Vertical is quick to acknowledge, Samsung’s products are distinct from
Interwoven's. It is simply not persuasive, as Samsung argues, that it would be a
better use of resources and would stem the risk of inconsistent results for this
Court to hear both declaratory judgment actions.3 For all these reasons, transfer
of Samsung’s declaratory judgment suit to the Eastern District of Texas is
warranted and Vertical's motion, with respect to C 11-0189 RS, is therefore
granted. [Footnote omitted]

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A week later, on May 10, 2011, this Court similarly granted Interwoven's motion to
transfer but denied Samsung's motion for the same relief. (Dkt. No. 41). It held:
The Court appreciates that given the same patents are asserted in all three
cases, there is a potential for overlap regarding claim construction issues,
infringement issues, invalidity issues, and unenforceability issues. However,
given that the Court will sever Interwoven from the present case, the risk of
inconsistent rulings as it relates to the specific parties is significantly decreased.
Moreover, the Court finds that the plaintiffs in the second-filed cases should not
be rewarded for the procedural hooks they attempted to create with their
respective filings. That is, Samsung is incorrect to assume that simply because it
filed its action in the same district as Interwoven, it automatically obtains
Interwoven's first-filed status. As discussed, the Samsung Action was filed after
the present action and is not entitled to first-filed status. Thus, in the interest of an
orderly administration of justice, the Court DENIES Samsung's motion with
respect to Defendants Samsung and LG.
In addition to adhering to the first-to-file rule, the Court finds that
Samsung has failed to prove that the Northern District of California is clearly
more convenient for the remaining Defendants in this case. First, Defendant LG
has not answered in the present case and has not expressed any interest in
joining any of the lawsuits in the Northern District of California. Moreover,
the record before the Court is insufficient to determine whether the Northern
District of California is clearly more convenient for LG.
Similarly, Samsung has failed to prove that the Northern District of
California is clearly more convenient. In fact, Samsung concedes that relevant
witnesses and documents are located in Texas. Specifically, Samsung
Telecommunications America, LLC (“STA”) is a Delaware corporation
headquartered in Richardson, Texas, that purchases the accused devices from
Samsung Electronics Co., Ltd. (“SEC‟) in Korea. (Dkt. No. 31-1.) STA imports
the accused devices into the United States and then markets and sells the devices
to wireless carriers (e.g., Sprint, Verizon, AT&T), which distribute them to
retailers and end users. Id. Mr. Kwon's declaration confirms that witnesses and
documents relevant to the importation, marketing and sales of the accused devices
are located in Texas. Considering these facts, and finding Samsung's other
arguments relating to transfer unpersuasive, the Court concludes that Samsung
has not shown that the Northern District of California is clearly more convenient.
Accordingly, because there is no persuasive reason to deviate from the first-to-file
preference as it relates to the remaining defendants, the Court concludes that the
matter should proceed in this Court with respect to Defendants LG and Samsung.
[Emphasis Added]
On May 11, 2011, Vertical filed a petition for a writ of mandamus in the Court of
Appeals for the Federal Circuit, seeking to have the Federal Circuit (a) vacate the May 2, 2011
order of the District Court for the Northern District of California which had denied Vertical's

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Renewed Motion to Transfer and (b) instruct the Northern District to compel the transfer of the
Interwoven Action to this Court (petition attached as Exhibit E). The Federal Circuit denied
Vertical's Petition on August 17, 2011. (Federal Circuit decision attached as Exhibit F).
The Northern District of California then proceeded to construe the claims of the patentsin-suit; and on December 30, 2011 issued its claim construction Order (attached as Exhibit G).
Interwoven responded by filing requests for reexamination for both the '744 and '629 patents-insuit. It also filed a motion to stay the Interwoven action pending the reexaminations (Interwoven
Action, Dkt. No. 86). The Northern District denied the stay motion (Interwoven Action Dkt. No.
102) and set the close of fact discovery for October 12, 2012 and the trial for August 12, 2013
(See Scheduling order, Interwoven Action, Dkt. No. 117).
The Patent Office granted reexamination of both of the patents-in-suit; and those
reexamination proceedings remain pending. The Patent Office has rejected some of the patent
claims that Vertical had asserted against Interwoven, LG and Samsung. But, the Patent Office
has also confirmed the patentability of many of the patent claims that Vertical has asserted
against all those companies. It is axiomatic that Vertical need only prove infringement of only
one claim of a patent-in-suit to prevail on the issue of infringement. Panduit Corp. v Dennison
Mfg. Co., 836 F.2d 1329, 1330, fn. 1 (Fed. Cir. 1987).
This Court has set trial for May 7, 2014.

Vertical has served its infringement

contentions; and Samsung and LG have served their invalidity contentions in this case. Vertical
served written discovery and Samsung and LG have responded. The parties have also exchanged
documents. Interestingly, only LG has served written discovery on Vertical to which Vertical
responded. LG has also led the negotiations for a protective order. It appeared that the parties
had resolved the differences with respect to the protective order, but, LG has neglected to follow
through and finalize the order. (This allows LG to conveniently argue that Vertical has not
examined its source code, which Vertical cannot examine adequately before retaining experts.)

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D.

Cooperation Between LG, Samsung and Google

As stated above, LG and Samsung, for purposes of these patents-in-suit, have essentially
the same products, with relevant parts sourced from the same company (Google) which
cooperates with LG and Samsung to see that these parts (the Android operating system) adhere
to Google's compatibility requirements. When Samsung filed its motion to transfer on February
25, 2011, STA's director of project management, Seo-Won Kwon, filed a declaration stating that:
10.
STA maintains a development lab in San Jose, California, which works
with Google on the Android-related aspects of Samsung's Android Devices. This
lab performs a variety of software engineering work related to the Android
platform, including optimizing device performance and conducting internal
benchmarking. The lab also works closely with the Android team at Google to
ensure that Samsung's Android Devices adhere to Google's compatibility
requirements.
(Declaration of Seo-Won Kwon attached as Exhibit H).
Mr. James Fishler, LG's Marketing Vice President, in his declaration supporting LG's
present motion was not quite as forthcoming as Mr. Kwon, but he, nonetheless, admitted that LG
"works with Google's Android focused engineers and support staff located in Mountain View,
California." (See ¶11 of Fishler Declaration).

Based on these admissions, one can easily

conclude that both LG and Samsung use the same operating system and they both cooperate with
Google to meet Google's compatibility requirements. The evidence on infringement, invalidity
and unenforceability is entirely the same for both LG and Samsung.
E.

This Court is the Most Convenient for all the Parties

As outlined above and in the declaration of Luiz C. Valdetaro, Vertical resides in this
district and all its witnesses reside in this district or in Dallas. The inventor resides in Austin;
and Vertical keeps all of its documents here in this district. (See ¶¶ 2-5 of the Valdetaro
Declaration). As further shown in Mr. Valdetaros' declaration, Vertical has absolutely no
presence or activity in New Jersey and hardly any presence or activity in California. The
material witnesses that LG employs, especially the technical witnesses, reside where most of the

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LG design and development occurs – in Korea. Accordingly, for the reasons developed more
fully below, this district is the most convenient forum for the litigation against both Samsung and
LG. A review of the Pacer system for cases in this district shows that LG and Samsung have
been plaintiffs as well as defendants (many times joint defendants) in countless cases here.
III.

ARGUMENT
A.

Severance Is Improper Under the Standard of In re EMC Corp.

In In re EMC Corp., 677 F.3d 1351 (Fed. Cir. 2012) (Decision dated May 4, 2012,
attached as Exhibit I), the Court of Appeals for the Federal Circuit considered a petition for a
writ of mandamus filed by eight of eighteen companies named as defendants in a single
complaint in this Court. The petitioners had sought to sever the cases against them and have
those cases transferred to four different districts around the country. This Court denied the
defendants' motions based, in part, on a finding that the claims against the defendants arose out
of the same transaction, occurrence, or series of transactions or occurrences because the accused
services were "not dramatically different."
The Federal Circuit granted the petition for mandamus and directed this Court to
reconsider the motions to sever under a different standard. The Federal Circuit held that:
Defendants may be joined in a single action only if the two independent
requirements of Rule 20 are satisfied:  (1) the claims against them must be
asserted 'with respect to or arising out of the same transaction, occurrence, or
series of transactions or occurrences,' and (2) there must be a 'question of law or
fact common to all defendants.' Fed.R.Civ.P. 20(a)(2). Rule 20 clearly
contemplates joinder of claims arising from a 'series of transactions or
occurrences'—a single transaction is not required.
***
The Supreme Court has stated that under the Federal Rules of Civil Procedure,
'the impulse is toward entertaining the broadest possible scope of action consistent
with fairness to the parties;  joinder of claims, parties and remedies is strongly
encouraged.' Gibbs, 383 U.S. at 724, 86 S.Ct. 1130.
Thus, independent defendants satisfy the transaction-or-occurrence test of Rule 20
when there is a logical relationship between the separate causes of action. The
logical relationship test is satisfied if there is substantial evidentiary overlap in the
facts giving rise to the cause of action against each defendant. In other words, the
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defendants' allegedly infringing acts, which give rise to the individual claims of
infringement, must share an aggregate of operative facts.
***
We agree that joinder is not appropriate where different products or processes are
involved. Joinder of independent defendants is only appropriate where the
accused products or processes are the same in respects relevant to the patent. But
the sameness of the accused products or processes is not sufficient. Claims
against independent defendants (i.e., situations in which the defendants are not
acting in concert) cannot be joined under Rule 20's transaction-or-occurrence test
unless the facts underlying the claim of infringement asserted against each
defendant share an aggregate of operative facts. To be part of the 'same
transaction' requires shared, overlapping facts that give rise to each cause of
action, and not just distinct, albeit coincidentally identical, facts. The sameness of
the accused products is not enough to establish that claims of infringement arise
from the 'same transaction.' Unless there is an actual link between the facts
underlying each claim of infringement, independently developed products using
differently sourced parts are not part of the same transaction, even if they are
otherwise coincidentally identical.
***
The district court enjoys considerable discretion in weighing the relevant factors.4
In exercising its discretion, the district court should keep in mind that even if
joinder is not permitted under Rule 20, the district court has considerable
discretion to consolidate cases for discovery and for trial under Rule 42 where
venue is proper and there is only 'a common question of law or fact.'
_____________________________
4

As discussed above, we do not decide today whether the new joinder provision
at 35 U.S.C. §299 changes the test for joinder of defendants in patent
infringement actions, and our approach to the new provision is not dictated by
this case. The new statute only allows joinder of independent defendants whose
acts of infringement involve "the same accused product or process." Id.
§299(a)(1) (emphasis added). We need not decide whether the sameness test in
the new legislation is identical to the sameness test we adopt here for cases not
covered by the new legislation.

677 F.3d at 1356-1359.
As shown in the facts and analysis of In re EMC Corp., the Federal Circuit expressed
concern about complicated patent litigation involving a large number of defendants with hardly a
connection between them other than that their services or products infringe the same patents.
That is not the case in the present litigation. First, the only defendants are LG and Samsung; and

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Vertical does not plan to add any other parties to this action. Second, Vertical has asserted the
same claims of each of the patents-in-suit against both LG and Samsung. Third, LG's and
Samsung's products have the same components with respect to the asserted patent claims; and
LG and Samsung source them from Google with which they cooperate to implement the Android
operating system in the same way. Clearly, the defendants' infringing acts share an aggregate of
operative facts. Even evidence for the damage calculation is substantially overlapping because
Vertical seeks a reasonable royalty from both LG and Samsung; and any established royalty or
license would apply to both.
B.

None of the Relevant Factors Support Transfer
1.

Vertical was the First-to-File

The first-to-file doctrine establishes a plaintiff's "presumptive right" to select the forum
for litigation. See Kahn v. General Motors Corp., 889 F.2d 1078, 1081-82 (Fed. Cir. 1989). This
rule applies to patent cases, as to any other type of case. Meru Networks, Inc. v. Extricom, Ltd.,
2010 U.S. Dist. LEXIS 90212, at *3 (N.D. Cal. Aug. 31, 2010) (Whyte, J.) (citing Genentech,
Inc. v. Eli Lilly & Co., 998 F.2d 931, 938 (Fed. Cir. 1993)). The facts of this case do not present
any reason to depart from this well-established principle: Vertical's "presumptive right" as the
first litigant to file, vis-à-vis LG, weighs heavily in Vertical's favor and denial of LG's motion is
necessary in this case "to prevent wrong or injustice." See Kahn, 889 F.2d at 1081-82. LG has
not established, and cannot establish, that Vertical had no "sound reason" for filing its suit in the
Eastern District of Texas nor that its choice "was motivated by inequitable conduct, bad faith, or
forum shopping," as is required to disturb the presumption. As shown above, Vertical resides in
the Eastern District of Texas and conducts its business here.
2.

Judicial Economy is the "Paramount" Factor

The Court of Appeals for the Federal Circuit emphasized judicial economy in In re
Google, 2011 U.S. App. LEXIS 4381 (Fed. Cir. Mar. 4, 2011) (Exhibit J) where it denied a
defendant’s petition for writ of mandamus to move its case to California, instead finding that the

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defendant should remain in a case in this Court, a case which included other defendants. In that
case, the Federal Circuit denied the defendant’s petition because "[c]ourts have consistently held
that judicial economy plays a paramount role in trying to maintain an orderly, effective,
administration of justice and having one trial court decide all of these claims clearly furthers that
objective." Id. at *7.
Here, too, Vertical’s case against LG should proceed in this district because the case here
already includes another defendant, Samsung, and therefore proceeding here would help
maintain an orderly and effective administration of justice, while avoiding the potential for
inconsistent outcomes. This is consistent with the objectives that the Federal Circuit has
described as "paramount." Id.
Thus, one of the most compelling reason that this case should stay in this district is the
existence of related litigation pending here. Thill v. Edward D. Jones & Co., L.P., 2006 U.S.
Dist. LEXIS 69485 (N.D. Cal. Sept. 18, 2006). Vertical brought suit on November 15, 2010, in
this Court against Interwoven, the two LG companies, and the two Samsung companies. The LG
Android cell phones are essentially the same as the Samsung Android cell phones. Vertical's case
against the Samsung and LG defendants here has almost all overlapping legal and factual issues.
Thus, the most convenient place for the suit between Vertical and LG is the same court.
As the Supreme Court observed in Continental Grain Co. v. Barge FBL-585, 364 U.S. 19
(1960):
To permit a situation in which two cases involving precisely the same issues are
simultaneously pending in different District Courts leads to the wastefulness of
time, energy and money that § 1404(a) was designed to prevent. Moreover, such a
situation is conducive to a race of diligence among litigants for a trial in the
District Court each prefers.
364 U.S. at 26. "Consideration of the interest of justice, which includes judicial economy, may
be determinative to a particular transfer motion…" Electronics for Imaging, Inc. v. Tesseron,
Ltd, 2008 U.S. Dist. LEXIS 10844 at *3 (N.D. Cal. Jan. 29, 2008) (citing Regents of the

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University of California v. Eli Lilly & Co., 119 F.3d 1559, 1565 (Fed. Cir. 1997)). Judicial
economy, thus, can be served by keeping the LG case here.
3.

The Most Convenient Forum for this
Dispute is the Eastern District of Texas
a.

The Convenience of the Witnesses
Favors the Eastern District of Texas

Above all factors, "[t]he convenience of witnesses is often the most important factor
considered by the court when deciding a motion to transfer for convenience." Genentech, Inc. v.
GlaxoSmithKline, LLC, 2010 U.S. Dist. LEXIS 126773, at *6 (N.D. Cal. Nov. 30, 2010).
Vertical's headquarters is located approximately 125 miles from this Court and almost all of the
witnesses are in or near this district. The chief technical officer of Vertical, Mr. Valdetaro,
resides in Dallas. The chief executive officer, Mr. Richard Wade, also resides in Dallas, Texas.
The chief financial officer of Vertical resides in this district. The inventor of the '744 and '629
patents resides in Austin, Texas; and this district is convenient for this witness. Vertical does not
have any presence as it relates to this litigation in either California or New Jersey. LG identifies
a marketing executive and an accountant as examples of witnesses located in New Jersey. The
declaration that the marketing executive submitted in favor of the present motion shows that he
is definitely not a material witness for this case; and the accountant certainly is not a material
witness. The material LG witnesses are all in Korea.
b.

The Convenience of the Parties
Favors the Eastern District of Texas

Vertical's offices, personnel and documents are located in Texas. Clearly, Texas is the
most convenient forum for Vertical. (See Valdetaro's Declaration, ¶¶2-5). The accused product
is located in Texas. Important third parties, e.g., LG's Texas customers, reside in Texas. LG
should not have any problem in defending this lawsuit in Texas under all of these circumstances.
Indeed, LG's claim that the Eastern District of Texas is inconvenient is unfounded. LG has been
a party to a myriad of other cases in that district. In fact, LG has even chosen to file a number of

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cases in that district. (See LG Electronics, Inc. v. Petters Group Worldwide, LLC; Case No 5:08cv-00163 (E.D. TX); LG Electronics, Inc. v. Vizio, Inc., et al, Case No. 5:10-cv-00161 (E.D.
TX); LG Electronics, Inc. v. Funai Electric Co, et al, Case No. 5:09-cv-00114 (E.D. TX); and
LG Electronics, Inc. v. TTE Technology, Inc. et al, Case No. 5:07-cv-00026 (E.D. TX)).
Accordingly, the Eastern District of Texas is not inconvenient and this litigation should proceed
here.
c.

The Location of Relevant Documents and
Other Evidence Favors the Eastern District of Texas

The location of documents, records, and other sources of proof is a factor the Court may
properly consider when deciding whether to transfer venue. This factor weighs heavily in favor
of keeping the case in the Eastern District of Texas. As such, virtually all the documents and
other evidence relevant to this litigation are either located in this district or are more easily and
economically transported from their locations to this district than to the Northern District of
California or to the District of New Jersey. LG cannot argue that its documents are located in
California or New Jersey because its research and manufacturing facilities are located in Korea.
Thus, all the documents present in this country are located in Texas; and almost all of the
witnesses are located here as well. This includes the most important witness – the inventor,
Aubrey McAuley.
IV.

CONCLUSION
In view of the foregoing, Vertical respectfully requests that the Court deny LG's motion

to sever and transfer.

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Dated: August 10, 2012

Respectfully submitted,
By: /s/ William E. Davis, III
William E. Davis, III
Texas State Bar No. 24047416
The Davis Firm, PC
111 West Tyler Street
Longview, Texas 75601
Telephone: [phone]
Facsimile: [phone]
Email: [e-mail]
Vasilios D. Dossas
Illinois State Bar No. 6182616
Niro, Haller & Niro
181 West Madison Street, Suite 4600
Chicago, Illinois 60602
Telephone: [phone]
Facsimile: [phone]
Email: [e-mail]
Attorneys for Plaintiff,
Vertical Computer Systems, Inc.

CERTIFICATE OF SERVICE
The undersigned certifies that the foregoing document was filed electronically in
compliance with Local Rule CV-5(a). As such, this document was served on all counsel who are
deemed to have consented to electronic service. Local Rule CV-5(a)(3)(A). Pursuant to Fed. R.
Civ. P. 5(d) and Local Rule CV-5(d) and (e), all other counsel of record not deemed to have
consented to electronic service were served with a true and correct copy of the foregoing by
email, on this the 10th day of August, 2012.
/s/ William E. Davis, III
William E. Davis, III