Lodsys, LLC v. Combay, Inc. et al

Filing 4

MOTION to Intervene by Apple, Inc.. (Attachments: # 1 Text of Proposed Order, # 2 Exhibit A - Answer and Counterclaims, # 3 Affidavit of Sanders, # 4 Exhibit B to Sanders Declaration, # 5 Exhibit C to Sanders Declaration, # 6 Exhibit D to Sanders Declaration, # 7 Exhibit E to Sanders Declaration, # 8 Exhibit F to Sanders Declaration)(Findlay, Eric)

Exhibit E

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IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
TYLER DIVISION
U.S. ETHERNET INNOVATIONS, LLC,
Plaintiff,
v.
ACER, INC.,
ACER AMERICA CORP.,
APPLE, INC.,
ASUS COMPUTER, INTERNATIONAL,
ASUSTeK COMPUTER, INC.,
DELL INC.,
FUJITSU LTD.,
FUJUITSU AMERICA, INC.,
GATEWAY, INC.,
HEWLETT PACKARD, CO.,
HP DEVELOPMENT COMPANY LLC,
SONY CORP. OF AMERICA,
SONY ELECTRONICS, INC.,
TOSHIBA CORP.,
TOSHIBA AMERICA, INC., AND
TOSHIBA AMERICA
INFORMATION SYSTEMS, INC.,
Defendants.

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Civil No. 6:09-cv-448-JDL

JURY TRIAL DEMANDED

ORDER
Before the Court is Intel Corporation’s (“Intel”) Motion to Intervene (“Motion”) (Doc. No.
107), wherein Intel asserts is should be allowed to intervene in the instant action to protect both its
interests and the interests of its customers.1 Plaintiff U.S. Ethernet Innovations, LLC (“USEI”) has
1

The Intel customers named as Defendants in this action are: Acer, Inc., Acer America Corporation, Apple,
Inc. (“Apple”), ASUS Computer International, ASUSTek Computer Inc. (collectively, “Asus”), Dell Inc. (“Dell”),
Fujitsu Ltd., Fujitsu America, Inc.(collectively, “Fujitsu”), Gateway, Inc., Hewlett Packard Co., HP Development
Company LLC, Sony Corporation, Sony Corporation of America, Sony Electronics Inc. (collectively, “Sony”),
Toshiba Corporation, Toshiba America, Inc., and Toshiba America Information Systems, Inc. (collectively,
“Toshiba”).

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filed a Response to Intel’s Motion to Intervene (Doc. No. 126) (“Response”). Intel has also filed a
Reply in support its Motion (Doc. No. 131) (“Reply”). Having considered the parties’ arguments
and submissions, the Court hereby GRANTS Intel’s Motion to Intervene (Doc. No. 107).
DISCUSSION
On October 9, 2009, USEI filed the instant action against sixteen Defendants. Intel represents
that all Defendants in this action are its customers and that it has executed partial indemnification
agreements with six of the Defendants.2 MOTION at 4. Intel also states that Intel components are
integrated into the accused products.3 As the manufacturer of a networking component implicated
in USEI’s infringement allegations, Intel contends that it can offer its customers technical knowledge
and expertise in this action and future actions when the court considers questions of claim
construction, validity, and infringement. Id. at 2. Based on these arguments, Intel concludes that its
interest in this case cannot be adequately represented by the original parties. USEI responds that not
only is Intel’s motion premature, but Intel has also failed to demonstrate a sufficient interest to justify
intervention. RESPONSE at 1–2. Specifically, USEI alleges that Intel has failed to identify the specific
claims for which its customers have requested indemnity, and “without the benefit of this
information, it is not possible to determine whether any of the indemnified claims will even be at
2

The Defendants who have an indemnification agreement with Intel premised on their customer
relationship are: Asus, Apple, Dell, Fujitsu, Sony, and Toshiba. M O TIO N at 4 (relying on M O TIO N , E XH . 2, L ABBEE
D ECL .).
3

Intel explains that it manufactures and sells “networking solutions,” such as “the Intel® PRO/100 and
PRO 1000 network adapters and computer motherboard chipsets with integrated adapters” that enable computers to
connect to and communicate with networks and the Internet. M O TIO N at 3.
Intel argues that USEI’s Complaint expressly accuses an Intel component of infringement when making allegations
against Dell: “Dell imports, makes, uses, offers for sale, and/or sells certain products and devices which embody one
or more claims of the Patents-in-suit, including, without limitation, the Intel Pro/100, E1405, D420, and Inspiron
1525 (collectively, the ‘Dell Accused Products’).” M O TIO N at 3(emphasis in original) (citing C O M PLAIN T (Doc. No. 1
at ¶25)).

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issue in this litigation.” Id. at 2.
Rule 24 of the Federal Rules of Civil Procedure provides that the court may permit
intervention by a third-party who “has a claim or defense that shares with the main action a common
question of law or fact.” FED . R. CIV . P. 24(b)(1)(B). Allowing permissive intervention under
Rule 24(b) is wholly discretionary even where there is a common question of law or fact. Reid v.
General Motors Corp., 240 F.R.D. 257, 259 (E.D. Tex. 2006) (citing New Orleans Pub. Serv., Inc.
v. United Gas Pipe Line Co., 732 F.2d 452, 470–71 (5th Cir. 1984)).
In this case, USEI has alleged that Dell’s accused products utilizing the Intel® PRO/100
infringe the asserted patents. MOTION at 3; REPLY at 2 (citing COMPLAINT at ¶ 25). Based on these
accusations, Intel has brought declaratory counterclaims, as well as defenses of non-infringement
and invalidity that share common questions of law and fact with similar defenses and claims asserted
by Defendant Dell.(Doc. No. 107–1) (“Intel’s Proposed Complaint in Intervention”). These common
questions of law and fact include (1) whether the claims asserted in the accused patents are valid and
enforceable, and (2) whether Intel’s customers’ products that incorporate Intel networking
technology infringe the patents-in-suit. INTEL’S PROPOSED COMPLAINT IN INTERVENTION at 4–6.
Based on the evidence of record, it appears that the Intel® PRO/100 is central to Dell and Intel’s
claims for non-infringement, and Intel products are also likely to be implicated in USEI’s
infringement case against Dell and other Intel customers.
Further, the indemnification agreements between Intel and six of its customers supports
granting Intel’s requested relief because an offer or agreement to indemnify its customers against
enforcement of a patent establishes a legal relationship that traditionally warrants declaratory
jurisdiction in a dispute between the manufacturer and a patentee who has threatened or brought suit
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against the manufacturer’s customers. Fujitsu Ltd. v. Nanya Technology Corp., No. C 06-6613, 2008
WL 3539503, at *2–3 (N.D. Cal. Aug. 12, 2008); Microchip Technology Inc. v. Chamberlain
Group, Inc., 441 F.3d 936, 941–44 (Fed. Cir. 2006) (citing Arrowhead Indus. Water, Inc. v.
Ecolochem, Inc., 846 F.2d 731, 739 (Fed. Cir. 1988)). Courts have held that beyond the injury that
might arise from having to indemnify customers, a manufacturer such as Intel faces the loss of its
customer base and reputation as a result of patent infringement allegations. See WS Packaging
Group, Inc. v. Global Commerce Group, LLC, 505 F. Supp.2d 561, 566 (E.D. Wis. 2007). As argued
by Intel, many of the Defendants in this action are significant customers, “accounting for more than
one third of Intel’s net revenue in 2007.” MOTION at 3 (internal citation omitted). Thus, customer
relationships with Defendants in this action suggest that Intel has a financial interest in the outcome
of this litigation and that interest is borne out by agreements to indemnify losses sustained by its
customers.
Finally, allowing Intel to intervene will not unduly delay or prejudice the adjudication of the
original parties’ rights. FED . R. CIV . P. 24(b)(3). The architecture of the Intel® PRO/100 is already
implicated in USEI’s claims against Dell, and therefore, discovery regarding Intel products is already
required. With fact discovery in this case not closing until March 4, 2011, the parties will be afforded
ample time to conduct any further discovery resulting from the intervention by Intel. DOCKET
CONTROL ORDER (Doc. No. 169) at 4.
CONCLUSION
Having found common questions of law and fact, as well as no undue delay or prejudice
resulting from Intel’s intervention, the Court finds that Intel should be permitted to intervene in the

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instant action as a defendant pursuant to Rule 24(b)(2).4 For all the foregoing reasons, Intel’s Motion
to Intervene is GRANTED. Intel is further GRANTED leave to file its Proposed Complaint in
.
Intervention.

So ORDERED and SIGNED this 10th day of May, 2010.

___________________________________
JOHN D. LOVE
UNITED STATES MAGISTRATE JUDGE

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The Court, therefore, declines to decide whether intervention must be permitted as a matter of right
pursuant to Rule 24(a)(2).

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