Anascape, Ltd v. Microsoft Corp. et al

Filing 286

SUR-REPLY to Reply to Response to Motion re 225 Joint MOTION for Summary Judgment -- Defendants' Joint Motion for Summary Judgment of No Willful Infringement of U.S. Patent No. 6,906,700 filed by Anascape, Ltd. (Cawley, Douglas)

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Anascape, Ltd v. Microsoft Corp. et al Doc. 286 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS LUFKIN DIVISION Anascape, Ltd., Plaintiff, v. Microsoft Corp., and Nintendo of America, Inc., Defendants. ANASCAPE, LTD.'S SUR-REPLY TO DEFENDANTS' JOINT MOTION FOR SUMMARY JUDGMENT OF NO WILLFUL INFRINGEMENT OF U.S. PATENT NO. 6,906,700 Anascape, Ltd. ("Anascape") files its sur-reply to Defendants' Joint Motion for Summary Judgment of No Willful Infringement of U.S. Patent No. 6,906,700 ("Summary Judgment Motion"), and respectfully shows as follows: I. INTRODUCTION Defendants' Reply has not eliminated the fact issue that exists between the parties as to whether Defendants had pre-suit knowledge of the `700 patent. Nor has it eliminated the fact issue that exists as to whether Seagate's objective inquiry is satisfied. Notably, Defendants have not put forth any evidence that eliminates the fact issue that exists between the parties with respect to Seagate's subjective inquiry. Finally, Defendants have not established that Anascape would be precluded from a willfulness finding from post-suit conduct only. For these reasons, Defendants' Summary Judgment Motion should be denied. Civil Action No. 9:06-cv-158-RC ANASCAPE'S SUR-REPLY TO DEFENDANTS' JOINT MOTION FOR SUMMARY JUDGMENT OF NO WILLFUL INFRINGEMENT Dallas 254593v1 PAGE 1 OF 9 Dockets.Justia.com II. ARGUMENT A. A Fact Issue Still Exists as to Whether Defendants Had Pre-Suit Knowledge of the `700 Patent Defendants' Reply makes much of the fact that Anascape did not specifically notify Defendants of the `700 patent's issuance prior to filing suit. 1 Whether Anascape specifically provided Defendants with notice of the `700 patent, however, is not the relevant inquiry, as Anascape need not prove that it notified Defendants of the patent-in-suit, only that the Defendants had knowledge of it. It is immaterial how Defendants received knowledge of the patent-in-suit. See, e.g., State Indus., Inc. v. A.O. Smith Corp., 751 F.2d 1226, 1236 (Fed. Cir. 1985) ("To willfully infringe a patent, the patent must exist and one must have knowledge of it."). Anascape has introduced credible summary judgment evidence that would allow a reasonable jury to conclude that Defendants did, in fact, have pre-suit knowledge of the `700 patent. Notably, Defendants' Summary Judgment Motion states only that "[t]here is no record evidence indicating that Nintendo or Microsoft had knowledge of the `700 patent prior to the filing of this action[.]" (Summary Judgment Motion at 2; see also Reply at 1.) Anascape's Response laid out twelve pages of record evidence detailing Defendants' interactions with Anascape, and knowledge of Anascape's technology and patents, prior to the filing of this lawsuit. (Response at 2-14.) Among other things, Anascape notified Defendants of a number of its patents (including the parents to the `700 patent) and that it had a number of pending patent applications (while the `700 patent was pending). Anascape asked Defendants to review certain of their products in light of Anascape's intellectual property. Anascape specifically notified Microsoft of the `700 patent application, and advised it that a notice of allowance had been Anascape certainly notified Defendants when it filed the instant suit on the `700 patent. For the reasons described in Anascape's Response, a willfulness finding is still justified in the event the jury finds that Defendants did not have pre-suit knowledge of the `700 patent. (Response at 26-28.) 1 ANASCAPE'S SUR-REPLY TO DEFENDANTS' JOINT MOTION FOR SUMMARY JUDGMENT OF NO WILLFUL INFRINGEMENT Dallas 254593v1 PAGE 2 OF 9 granted. Moreover, both Defendants prepared for and anticipated litigation against Anascape for a number of years, including during the period of time following the `700 patent's issuance and prior to this lawsuit. Based on the totality of the evidence detailed by Anascape, a reasonable jury could conclude that Defendants had pre-suit knowledge of the `700 patent. 2 Defendants appear to believe that there must be a "smoking gun" conclusively demonstrating that they had knowledge of the `700 patent pre-suit. There is no such requirement and Defendants cannot explain why a jury would not reasonably believe, from the evidence laid out by Anascape, that Defendants acquired knowledge of the `700 patent pre-suit. This conclusion is strengthened by the fact that Defendants--two large, sophisticated corporations-- prepared for litigation against Anascape after the `700 patent issued and pre-suit. The circumstantial evidence of knowledge adduced by Anascape justifies a finding of pre-suit knowledge of the `700 patent. B. A Fact Issue Still Exists as to Whether Seagate is Satisfied Defendants' main argument seems to be that no reasonable jury could find that they willfully infringe the `700 patent because the PTO granted Microsoft's reexamination request. 3 This argument should be rejected, as a reasonable jury could determine that Seagate is satisfied despite the PTO's reexamination decision. First, the `700 patent is presumed valid. This presumption does not change by the mere granting of a reexamination request. Second, the PTO considered the validity of the `700 2 In an attempt to prove lack of knowledge of the `700 patent, Defendants submitted ex parte evidence to this Court. (See Reply, Docket No. 258 at 4 n.3; see also Docket Nos. 269, 271.) Anascape objected to this improper attempt to ask this Court to decide the Summary Judgment Motion based on ex parte evidence. (See Objection to Defendants' Notices of Submission of Documents for In Camera Review (Docket No. 272).) Defendants thereafter withdrew the submitted documents from this Court's consideration, and asked that this Court decide the Summary Judgment Motion without reference to the ex parte documents. (Docket No. 279 at 2.) The summary judgment evidence before this Court establishes that Defendants do not have a single employee with knowledge of the reexamination decision, much less who believes in its accuracy. (See Response at 18.) 3 ANASCAPE'S SUR-REPLY TO DEFENDANTS' JOINT MOTION FOR SUMMARY JUDGMENT OF NO WILLFUL INFRINGEMENT Dallas 254593v1 PAGE 3 OF 9 patent (including whether the `700 patent should issue as a continuation of the `525 patent) during the `700 patent's prosecution history. The examiner plainly identified and considered the issue of whether the `700 patent was properly a continuation or a continuation-in-part of the `525 patent and concluded that it was a continuation whose claims did not rely on new material. See Exs. B-D attached to Anascape's Response to Defendants' Joint Motion in Limine (Docket No. 280); see also Pirkle v. Ogontz Controls Co., 90-2430, 1992 U.S. Dist. LEXIS 9601, at *7 n.6 (D. Pa. July 9, 1992) (noting that "no continuation claim will be accepted if it would constitute a new matter if inserted into the parent"). Third, as this Court is aware, the PTO grants reexamination requests at a much greater rate than it invalidates the patents subject to the reexamination request. (See, e.g., Anascape's Consolidated Response to Defendants' Motion to Stay (Docket No. 62) at 2.) And fourth, Anascape has yet to respond in the reexamination, and the PTO's reexamination decision is by no means final. Anascape expects that, with the benefit of Anascape's input, the PTO will reach the same conclusion that it did during the prosecution of the `700 patent--that the `700 patent is valid as written. Additional summary judgment facts demonstrating Defendants' reckless behavior vis--vis the `700 patent include: Defendants continue to sell their infringing products and have not attempted to design around the `700 patent despite being advised of its validity and of their infringement; Defendants lack any employee who has read the reexamination decision; At Markman, Defendants lost their "single input member" construction argument; This Court denied Defendants' non-infringement summary judgment motions; This Court denied Defendants' invalidity summary judgment motion; Defendants have taken a non-infringement position despite claiming that the Sony Dual Shock controller anticipates certain claims of the `700 ANASCAPE'S SUR-REPLY TO DEFENDANTS' JOINT MOTION FOR SUMMARY JUDGMENT OF NO WILLFUL INFRINGEMENT Dallas 254593v1 PAGE 4 OF 9 patent even though Defendants' controllers contain the same features of the Sony Dual Shock; Defendants have not obtained an opinion of counsel; and Defendants never conducted any investigation of the scope of the `700 patent. (See Response at 24-26 and citations to Additional Material Facts cited therein.) 4 All of these facts are relevant to Seagate's objective inquiry, as none hinge on Defendants' state of mind. Regarding Seagate's subjective inquiry, the summary judgment evidence before this Court includes Defendants' knowledge of all of the facts identified above and also that: Defendants have no employees who believe that the reexamination decision is accurate; Defendants have no employees who believe that Defendants are not willfully infringing the `700 patent; Defendants never formed a good faith belief that the `700 patent was invalid or not infringed; and Defendants' motive to continue their infringement is the pursuit of profit and increased market penetration. (See Response at 24-26 and citations to Additional Material Facts cited therein.) All of the above referenced facts are relevant to the willfulness inquiry, which considers the totality of the circumstances under which a defendant infringed. See, e.g., TGIP v. AT&T, 2:06-cv-00105-RHC (E.D. Tex. Sept. 19, 2007) (Jury Instructions, Docket No. 499 at 1314) (listing willfulness factors); In re Seagate Technology, LLC, 497 F.3d 1360, 1371 n.5 (Fed. Cir. 2007) (suggesting that the standards of commerce "would be among the factors a court might consider") (emphasis added); Computer Acceleration Corp. v. Microsoft, 9:06-cv-140- Defendants have not disputed a single one of the facts listed in Anascape's sixteen pages of Additional Material Facts. 4 ANASCAPE'S SUR-REPLY TO DEFENDANTS' JOINT MOTION FOR SUMMARY JUDGMENT OF NO WILLFUL INFRINGEMENT Dallas 254593v1 PAGE 5 OF 9 RHC (E.D. Tex. Nov. 15, 2007) (Jury Instructions, at 13) ("In deciding whether [a Defendant] acted with reckless disregard for [a plaintiff's] patent, you should consider all of the facts surrounding the alleged infringement[.]"). Defendants have adduced no summary judgment evidence negating or contradicting these facts (and even if they had, the facts must be construed in Anascape's favor for summary judgment purposes). Defendants' Reply, in supposedly addressing "each of Anascape's allegations," wholly ignores many facts laid out in Anascape's Response, including that: (i) Defendants lost on one of their key Markman terms; (ii) Defendants lost their three summary judgment motions; (iii) Defendants continue to sell accused products despite being advised of the `700 patent and their infringement; and (iv) Defendants contest infringement of certain claims of the `700 patent but argue that the Sony Dual Shock controller (a controller with features found in their own controllers) anticipates these same claims. Defendants' Reply's argument regarding the other facts is not persuasive. The lack of a single employee who believes that Defendants are not infringing or with knowledge of the reexamination is certainly relevant to Seagate's subjective inquiry. The lack of an opinion of counsel is one of the factors this Court has recognized as relevant to the willfulness inquiry postSeagate. TGIP v. AT&T, 2:06-cv-00105-RHC (E.D. Tex. Sept. 19, 2007) (Jury Instructions, Docket No. 499 at 13-14) (listing willfulness factors). The failure to investigate the scope of the `700 patent and failure to attempt a design around relate to, at a minimum, Seagate's subjective inquiry. 5 Evidence of Defendants' bad faith motive to cause harm certainly informs Seagate's subjective inquiry. Defendants point out that a survey of post-Seagate cases "reveal[s] no decision in which Read's failure to investigate and form beliefs factor has been used to support a finding of willfulness." (Reply at 7.) This, of course, if true is not surprising, as Seagate was decided only months ago. The same is true for what post-Seagate cases supposedly "reveal" through other omissions. (Id.) 5 ANASCAPE'S SUR-REPLY TO DEFENDANTS' JOINT MOTION FOR SUMMARY JUDGMENT OF NO WILLFUL INFRINGEMENT Dallas 254593v1 PAGE 6 OF 9 III. CONCLUSION The summary judgment evidence before this Court indicates that Defendants had pre-suit knowledge of the `700 patent, there was an objectively high likelihood of infringement, and that Defendants knew they were infringing and failed to take any remedial action to alleviate their infringement. For these reasons, and those described above and in Anascape's Response, this Court should deny Defendants' Summary Judgment Motion. ANASCAPE'S SUR-REPLY TO DEFENDANTS' JOINT MOTION FOR SUMMARY JUDGMENT OF NO WILLFUL INFRINGEMENT Dallas 254593v1 PAGE 7 OF 9 DATED: April 21, 2008 PARKER, BUNT & AINSWORTH P.C. Robert M. Parker Texas State Bar No. 15498000 rmparker@pbatyler.com Robert Christopher Bunt Texas State Bar No. 00787165 rcbunt@pbatyler.com Charles Ainsworth Texas State Bar No. 00783521 charley@pbatyler.com Parker, Bunt & Ainsworth P.C. 100 E. Ferguson Street, Suite 1114 Tyler, Texas 75702 Telephone: (903) 531-3535 Telecopier: (903) 533-9687 Respectfully submitted, McKOOL SMITH, P.C. By: /s/ Douglas A. Cawley Douglas A. Cawley Lead Attorney Texas State Bar No. 04035500 dcawley@mckoolsmith.com Theodore Stevenson, III Texas State Bar No. 19196650 tstevenson@mckoolsmith.com Christopher T. Bovenkamp Texas State Bar No. 24006877 cbovenkamp@mckoolsmith.com Anthony M. Garza Texas State Bar No. 24050644 agarza@mckoolsmith.com Jason D. Cassady Texas State Bar No. 24045625 jcassady@mckoolsmith.com Steven Callahan Texas State Bar No. 24053122 scallahan@mckoolsmith.com McKool Smith, PC 300 Crescent Court, Suite 1500 Dallas, Texas 75201 Telephone: (214) 978-4000 Telecopier: (214) 978-4044 Sam Baxter Texas State Bar No. 01938000 sbaxter@mckoolsmith.com P.O. Box O 104 East Houston Street, Suite 300 Marshall, Texas 75670 Telephone: (903) 923-9000 Telecopier: (903) 923-9099 ATTORNEYS FOR PLAINTIFF ANASCAPE, LTD. ANASCAPE'S SUR-REPLY TO DEFENDANTS' JOINT MOTION FOR SUMMARY JUDGMENT OF NO WILLFUL INFRINGEMENT Dallas 254593v1 PAGE 8 OF 9 CERTIFICATE OF SERVICE The undersigned certifies that the foregoing document was filed electronically in compliance with Local Rule CV-5(a) on April 21, 2008. As such, this notice was served on all counsel who have consented to electronic service. Local Rule CV-5(a)(3)(A). /s/ Steven Callahan Steven Callahan ANASCAPE'S SUR-REPLY TO DEFENDANTS' JOINT MOTION FOR SUMMARY JUDGMENT OF NO WILLFUL INFRINGEMENT Dallas 254593v1 PAGE 9 OF 9

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