Free Opening Brief in Support - District Court of Delaware - Delaware

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Not Reported in F.Supp.2d Not Reported in F.Supp.2d, 2002 WL 1489555 (N.D.Tex.) (Cite as: 2002 WL 1489555 (N.D.Tex.))

Only the Westlaw citation is currently available. United States District Court, N.D. Texas, Dallas Division. ADVANCED DISPLAY SYSTEMS, INC. Plaintiff, v. KENT STATE UNIVERSITY, et al. Defendants. Nos. 3-96-CV-1480-BD, 3-96-CV-1608-BD. July 10, 2002. Company that developed and promoted polymer-free liquid crystal displays (LCDs) brought action against patent owner and its licensee seeking declaration of patent invalidity. Owner and licensee brought action for infringement, and actions were consolidated. Following initial judgment for company and reversal by Court of Appeals, 212 F.3d 1272, jury in second trial found patent was valid, enforceable, and infringed by company's devices and methods. Patent owner and licensee moved for entry of judgment on the verdict, and company moved for judgment as a matter of law or for a new trial. The District Court, Kaplan, United States Magistrate Judge, held that: (1) patent terms were sufficiently definite to meet enablement requirement; (2) verdicts finding both literal infringement and infringement under the doctrine of equivalents were not fatally inconsistent; (3) reasonable royalty for infringement was improperly calculated; (4) owner and licensee were entitled to enhanced damages; (5) owner and licensee were entitled to prejudgment interest on award of compensatory damages; (6) injunction was sufficiently specific; and (7) declaration of validity would not be limited to those defenses actually rejected by the jury. Ordered accordingly. West Headnotes [1] Patents 101(6) 291k101(6) Most Cited Cases Patent claim directed to polymer-free liquid crystal display (LCD) device, which defined "visible spectrum" to include wavelengths between about 350 nanometers (nm) and 850 nm, was sufficiently defin-

ite to meet enablement requirement, even if light with wavelength above 750 nm was infrared and thus not visible, in view of testimony that patent included broader range to account for individual differences in ability to perceive the visible spectrum and supporting testimony regarding the phenomenon of "psychophysics." 35 U.S.C.A. § 112, para. 2. [2] Patents 101(6) 291k101(6) Most Cited Cases Term "stable," as used in limitation requiring that cell wall structure and liquid crystal cooperate to form focal conic and twisted planar textures that were stable in the absence of a field, in patent claim directed to polymer-free liquid crystal display (LCD) device, was sufficiently definite to meet enablement requirement, although patent did not specify how long cell had to remain stable in the absence of a field, as one skilled in the art could still determine the meaning of the term. 35 U.S.C.A. § 112, para. 2. [3] Patents 101(6) 291k101(6) Most Cited Cases Term "pulse" as used in limitation describing electric field pulse of a specified magnitude, in patent claim directed to polymer-free liquid crystal display (LCD) device, was sufficiently definite to meet enablement requirement; testimony of patentee's experts that allegedly similar patent did not involve a "pulse" did not show ambiguity in term, as distinction between patents was adequately explained by one skilled in the art, who testified that, unlike patent at issue, similar patent did not specify any particular magnitude. 35 U.S.C.A. § 112, para. 2. [4] Patents 101(6) 291k101(6) Most Cited Cases Limitation in patent claim directed to polymer-free liquid crystal display (LCD) device requiring a means for addressing said liquid crystal material was sufficiently definite to meet enablement requirement; patent provided that addressing means could be of any type known in the art, and, in describing preferred embodiments of the patent, specification made clear that material could be addressed in various ways and incorporated in other types of cells. 35 U.S.C.A. §

© 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

Case in F.Supp.2d Document 17-2 Not Reported1:07-cv-00138-JJF Not Reported in F.Supp.2d, 2002 WL 1489555 (N.D.Tex.) (Cite as: 2002 WL 1489555 (N.D.Tex.))

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112, para. 2. [5] Patents 314(6) 291k314(6) Most Cited Cases Although the requirements of literal patent infringement and infringement under the doctrine of equivalents are unquestionably different, they are not necessarily fatally inconsistent, and jury verdict finding both types of infringement did not require a new trial, although verdict would be reformed and court would enter judgment only on finding of literal infringement. [6] Patents 319(1) 291k319(1) Most Cited Cases Reasonable royalty damages awarded to patent owner and licensee for infringement could not include amount based on up-front payments paid to infringer by licensees of infringing technology, absent evidence that such payments reflected amount that patent owner and licensee would have demanded for patented technology in a hypothetical negotiation with infringer, at the time the infringement occurred. 35 U.S.C.A. § 284. [7] Patents 319(3) 291k319(3) Most Cited Cases Patent owner and licensee were entitled to treble damages for competitor's willful infringement of patent directed to polymer-free liquid crystal display (LCD) device, as jury implicitly found that competitor did not rely on competent legal advice when it took infringing actions, and, although jury in first trial had found in favor of competitor, competitor used improper litigation tactics to secure that verdict. 35 U.S.C.A. § 284. [8] Patents 319(4) 291k319(4) Most Cited Cases Patent owner and licensee were entitled to prejudgment interest on award of compensatory damages representing reasonable royalty rate in patent infringement action, as there was no evidence that royalty rate included prejudgment interest; interest would be awarded at average prime rate from date that patent issued and infringement commenced, until the date of judgment.

[9] Patents 319(4) 291k319(4) Most Cited Cases Pre-judgment interest was not recoverable on award of enhanced damages in patent infringement action. 35 U.S.C.A. § 284. [10] Patents 287(6) 291k287(6) Most Cited Cases President of patent infringer who willfully induced infringement was jointly and severally liable for compensatory and enhanced damages awarded to patent owner and licensee for infringement. [11] Patents 317 291k317 Most Cited Cases Permanent injunction entered in patent infringement action, which referred to claims of patent and prohibited any further infringement by competitor, was sufficiently specific to provide adequate notice of conduct enjoined, even if it did not include limiting language requested by competitor to exclude competitor's new product, since any determination that new product did not infringe patent would be premature. Fed.Rules Civ.Proc.Rule 65(d), 28 U.S.C.A. [12] Declaratory Judgment 385 118Ak385 Most Cited Cases Declaratory relief requested by patent owner and licensee in their successful infringement action, as to validity of patent, would not be limited to those defenses that were actually considered and rejected by the jury; rather, owner and licensee were entitled to declaration that patent was valid and enforceable in all respects, as patents were entitled to presumption of validity until adjudged invalid, and, to extent that other defenses existed, infringer was precluded from litigating them under doctrine of collateral estoppel. 35 U.S.C.A. § 282. MEMORANDUM OPINION AND ORDER KAPLAN, Magistrate J. *1 Kent Display Systems, Inc. ("KDS"), Kent State University ("KSU") and Kent Research Corporation ("KRC"), collectively referred to as "Kent," have filed a motion for entry of judgment on the verdict and other relief in this patent case. Advanced Display Systems, Inc. ("ADSI") and Dr. Bao Gang Wu

© 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

Case in F.Supp.2d Document 17-2 Not Reported1:07-cv-00138-JJF Not Reported in F.Supp.2d, 2002 WL 1489555 (N.D.Tex.) (Cite as: 2002 WL 1489555 (N.D.Tex.))

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("Wu"), collectively referred to as "ADS," have filed a motion for judgment as a matter of law or, alternatively, for a new trial. For the reasons stated herein, both motions are granted in part and denied in part. I. KSU owns a patent on a polymer-free liquid crystal display ("LCD") device using cholesteric visible material that is stimulated and sustained through a single electric field pulse of sufficient duration and voltage to create a contrast between the material's light reflecting and light scattering textures. (U.S. Patent No. 5,453,863, also known as the "West patent"). [FN1] The patent is licensed through KRC to KDS. In early 1996, Kent learned that ADSI was promoting a polymer-free LCD and threatened suit to enforce its patent. This prompted ADSI to file a declaratory judgment action to declare the West patent invalid. After settlement negotiations failed, Kent sued ADSI and its president, Dr. Bao Gang Wu, for infringement. The two cases were consolidated and proceeded to trial in November 1997. FN1. LCDs are used in a variety of electro-optic products, such as digital watches and notebook computer screens, to display images and information. Following two weeks of testimony and extensive deliberations, a jury found that the West patent was invalid for anticipation and obviousness and was not infringed. The court entered a final judgment in favor of ADS. On appeal, the Federal Circuit Court of Appeals reversed and remanded for a new trial. Advanced Display Systems, Inc. v. Kent State University, 212 F.3d 1272 (Fed.Cir.2000), cert. denied, 532 U.S. 904, 121 S.Ct. 1226, 149 L.Ed.2d 136 (2001). This decision was based, in large part, on the deposition testimony of Hongxi "Victor" Zhou, a former ADSI engineer, taken in another case. Zhou testified that ADSI's own efforts to develop a polymer-free LCD had been wholly unsuccessful until Dr. Zvi Yaniv, the former president of KDS, visited ADSI in early 1994 and brought with him a prototype of Kent's cholesteric LCD and its electrical driver. While Yaniv was at lunch, Zhou and other ADSI engineers were instructed to surreptitiously disassemble the prototype, photograph its component parts, and

then reassemble the device in such a manner so as to avoid any indication of tampering. Within a month, ADSI had replicated the circuitry necessary to operate the device and filed its own patent application for a polymer-free LCD. Although Zhou testified to essentially the same facts during the first trial, his prior deposition was never produced to Kent. In fact, ADSI's former counsel claimed that Zhou's deposition was subject to an oral protective order by a state court judge and characterized the photograph of Kent's prototype as "attorney work product" on its privilege log. [FN2] The Federal Circuit found this evidence potentially outcome determinative on the issues of non-obviousness and infringement and chastised ADSI's counsel for their role in the cover-up. In reversing and remanding the case for a new trial, the court wrote: FN2. Despite the fact that this photograph was taken more than two years before ADSI filed suit, counsel refused to produce the picture because the original print was photocopied by attorney. The Federal Circuit condemned this conduct as an "egregious discovery ploy." Advanced Display Systems, 212 F.3d at 1288-89 ("This court ... is unable to find any legal principle that even remotely supports the notion that an otherwise discoverable document alchemically metamorphisizes into privileged work product simply because an attorney photocopies it."). *2 From the record below, it appears to this court that ADS's development of its LCD technology consisted of deceitful and conniving machinations that amounted to nothing short of corporate espionage. Regretfully, the conduct of ADS's counsel in defending such actions was equally egregious. Indeed, to say that counsel's conduct during discovery raises the collective eyebrow of this court would be to understate the severity of their transgressions. Id. at 1288. After the parties conducted additional limited discovery, a second trial was held from December 3-20, 2001. This time, the jury found that the West patent

© 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

Case in F.Supp.2d Document 17-2 Not Reported1:07-cv-00138-JJF Not Reported in F.Supp.2d, 2002 WL 1489555 (N.D.Tex.) (Cite as: 2002 WL 1489555 (N.D.Tex.))

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was valid and enforceable and that 22 devices or methods made, used, or sold by ADSI infringed claims 1-8 and 10 of the patent both literally and under the doctrine of equivalents. The jury also found that ADSI and Wu induced others to infringe the patent and acted willfully. A total of $1.5 million in damages was awarded as a reasonable royalty to compensate KDS for such infringement. Kent now moves for entry of judgment on the verdict while ADS seeks judgment as a matter of law or, alternatively, a new trial. Both motions have been briefed by the parties and are ripe for determination. II. The jury returned a verdict in favor of Kent and against ADS as to all claims and defenses raised in this case. As a result, the court is required to "promptly approve the form of the judgment and the clerk shall thereupon enter it." Fed. R. Civ. P. 58. By contrast, a party is entitled to judgment as a matter of law if "there is no legally sufficient evidentiary basis" to submit an issue to the jury. Fed. R. Civ. P. 50(a)(1); Conkling v. Turner, 18 F.3d 1285, 1300 (5th Cir.1994). A mere "scintilla" of evidence is insufficient. There must be a conflict in substantial evidence to create an issue of material fact. Boeing Co. v. Shipman, 411 F.2d 365, 374 (5th Cir.1969) (en banc). A Rule 50(a) motion should be granted only "if the facts and inferences point so strongly and overwhelmingly in favor of the moving party ... that reasonable jurors could not have arrived at a contrary verdict." Crist v. Dickson Welding, Inc., 957 F.2d 1281, 1285 (5th Cir.), cert. denied, 506 U.S. 864, 113 S.Ct. 187, 121 L.Ed.2d 132 (1992); Shipman, 411 F.2d at 374. The entire record must be viewed in the light most favorable to the party opposing the motion. Resolution Trust Corp. v. Cramer, 6 F.3d 1102, 1109 (5th Cir.1993). III. Five issues are raised by the cross-motions filed by Kent and ADS: (1) whether the West patent is invalid for indefiniteness; (2) whether a new trial is required because of inconsistent verdicts on the claims of literal infringement and infringement under the doctrine of equivalents; (3) whether the evidence supports damages in the amount of $1.5 million; (4) whether Kent is entitled to enhanced damages, pre-judgment

and post-judgment interest, and injunctive and declaratory relief; and (5) whether Wu is jointly and severally liable for any damage award. The court will address each issue in turn. A. *3 The West patent claims, inter alia: A light modulating polymer-free reflective cell comprising cell wall structure and a chiral nematic liquid crystal light modulating material having positive dielectric anisotropy and a pitch length effective to reflect light in the visible spectrum, said cell wall structure and liquid crystal cooperating to form focal conic and twisted planar textures that are stable in the absence of a field, and a means for addressing said liquid crystal material, said means adapted to selectively establish an electric field pulse of a magnitude effective to transform at least a portion of said liquid crystal from a focal conic texture to a light reflecting twisted planar texture, and an electric field pulse of a magnitude effective to transform at least a portion of the liquid crystal from a light reflecting twisted planar texture to a focal conic texture. (ADS App. at 300-01) (emphases added). ADS contends that the patent is invalid because the terms "visible spectrum," "stable," "pulse," and "addressing means" lack a clear and definite meaning. [FN3] FN3. In an attempt to impose reasonable limits on post-trial briefing, the court restricted the opening briefs of each party to 30 pages. See ORDER, 1/29/02 at 1, ¶ 2. ADS now requests an opportunity to submit additional briefing on the issue of invalidity for indefiniteness in order to provide "more detailed support from the record and supporting case law ..." (ADS Mem. at 24-26, n. 48-51). Ordinarily, the court would not hesitate to modify these briefing limitations to allow for a full and fair presentation of the issues. However, ADS has elected to devote the first five pages of its opening brief to attacking opposing counsel and rehashing arguments that already have been rejected by the Federal Circuit and this court. Had ADS been more prudent in its briefing decisions, it could have adequately presented its argu-

© 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

Case in F.Supp.2d Document 17-2 Not Reported1:07-cv-00138-JJF Not Reported in F.Supp.2d, 2002 WL 1489555 (N.D.Tex.) (Cite as: 2002 WL 1489555 (N.D.Tex.))

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ments and authorities in the space allotted. 1. A patent specification must contain "a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains ... to make and use the same ..." 35 U.S.C. § 112, ¶ 2. More particularly, the specification must "distinctly claim[ ] the subject matter which the applicant regards as his invention." Id. The claims must have a clear and definite meaning when construed in light of the entire patent document. Miles Laboratories, Inc. v. Shandon Inc., 997 F.2d 870, 874-75 (Fed.Cir.1993), cert. denied, 510 U.S. 1100, 114 S.Ct. 943, 127 L.Ed.2d 232 (1994). A claim is sufficiently definite if one skilled in the art would understand the bounds of the claim when read in light of the specification. North American Vaccine, Inc. v. American Cyanamid Co., 7 F.3d 1571, 1579 (Fed.Cir.1993), cert. denied, 511 U.S. 1069, 114 S.Ct. 1645, 128 L.Ed.2d 365 (1994); Miles Laboratories, 997 F.2d at 875. A patent that fails to meet this requirement is invalid for indefiniteness. See Exxon Research and Engineering Co. v. United States, 265 F.3d 1371, 1375 (Fed.Cir.2001). However, a patent is presumed to be valid once it has issued. In order to overcome this presumption, a party must present clear and convincing evidence of invalidity. 35 U.S.C. § 282; North American Vaccine, 7 F.3d at 1579. 2. [1] The West patent defines the "visible spectrum" to include wavelengths between "about 350 [nanometers] and 850 [nanometers]." (ADS App. at 296). ADS argues that this term is indefinite because light with a wavelength above 750 nm is infrared and, therefore, not visible. (See ADS Sur-Reply at 9). The court disagrees. Although there is some evidence that the visible spectrum encompasses a range of wavelengths with an upper limit of 750 nm, Dr. West testified that his patent includes a broader range to account for individual differences in the ability to perceive the visible spectrum. (Kent Reply App. at 987). This conclusion is supported by Dr. Meyer's testimony regarding the phenomenon of "psychophysics." (See ADS Reply App. at 54). [FN4] ADS has

failed to show by clear and convincing evidence that the wavelengths contained in the West patent do not encompass the "visible spectrum" as that term is used in the specification. FN4. In technical terms, psychophysics is "[t]he science of the general relations between mind and body" such as "the investigation of the relations between physical stimuli and psychic action in the production of sensations." OXFORD ENGLISH DICTIONARY ONLINE, http: // dictionary.oed.com/cgi/entry/00191666/00191666s e2. As more simply explained by Dr. Meyer, the phenomenon involves "testing of many people to see what they would report ..." (ADS Reply App. at 54). 3. *4 [2] Next, ADS contends that the term "stable" is indefinite because the West patent does not specify how long the cell must remain stable in the absence of a field. Although the patent itself does not expound on the stability requirement, one skilled in the art may still be able to determine the meaning of the term. Claims may be sufficiently definite even when some degree of testing or experimentation is required to define the boundaries of the claimed invention. See Exxon Research and Engineering, 265 F.3d at 1380 (claim limitation specifying that catalyst should be treated "for a period sufficient to increase substantially the initial catalyst activity" not invalid for indefiniteness where persons skilled in the art could perform periodic activity checks to determine if limitation was met); Application of Caldwell, 50 C.C.P.A. 1464, 319 F.2d 254, 258 (U.S.Ct. Cust. & Pat.App.1963) (upholding claim language referring to aspirin dosage in "an effective amount ... for stimulating growth"). The mere fact that the West patent does not specify how long the cell must remain stable in the absence of a field does not make the patent invalid for indefiniteness. 4. [3] ADS further contends that the term "pulse" as used in the West patent is ambiguous and therefore indefinite. In support of this argument, ADS points out that although the West patent and the Haas patent

© 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

Case in F.Supp.2d Document 17-2 Not Reported1:07-cv-00138-JJF Not Reported in F.Supp.2d, 2002 WL 1489555 (N.D.Tex.) (Cite as: 2002 WL 1489555 (N.D.Tex.))

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both apply voltages above and below the nematic threshold to achieve changes in state, Kent's experts testified that only the method described in the West patent involves a "pulse." Without a more precise definition of this critical term, ADS maintains that it is impossible to determine "what kind of electrical signal can be used without infringement." (ADS Mem. at 25). This simplistic argument ignores the plain language of the patent specification. The West patent claims an "electric field pulse of a magnitude effective to transform at least a portion of said liquid crystal from a focal conic texture to a light reflecting twisted planar texture" and back again. (ADS App. at 300-01). As Dr. Meyer testified, the Haas patent does not describe a pulse because it does not specify any particular magnitude. (Id. at 42, 319 F.2d 254). In light of this logical explanation by one skilled in the art, the court is not persuaded that the term "pulse" is indefinite. 5. [4] Finally, ADS contends that the West patent is indefinite because it fails to describe a specific "means for addressing" the liquid crystal material. Such is not the case. The patent provides that "[t]he addressing means can be of any type known in the art, such as an active matrix, a multiplexing circuit, electrodes and lasers ..." (Id. at 296, 319 F.2d 254). In describing the preferred embodiments of the patent, the specification makes clear that: [T]he material can be addressed in various ways and incorporated in other types of cells. For example, instead of being addressed by externally activated electrodes, the material can be addressed by an active matrix, a multiplexing scheme or other type of circuitry, all of which will be evident to those working in the art. *5 (Id. at 297, 319 F.2d 254). This description is more than adequate to satisfy the requirements of section 112. In sum, ADS has failed to prove by clear and convincing evidence that the West patent is invalid for indefiniteness. Judgment as a matter of law is not proper on this ground. B.

Alternatively, ADS seeks a new trial because the jury found that all the accused devices infringed claims 1-8 and 10 of the West patent both literally and under the doctrine of equivalents. (Jury Charge at 44, 46). According to ADS, these verdicts are "fatally inconsistent" because the doctrine of equivalents applies only where there is no literal infringement. The court agrees that the doctrine of equivalents applies only where there is no literal infringement. See Hormone Research Foundation v. Genetech, Inc., 904 F.2d 1558, 1564 (Fed.Cir.1990), cert. denied, 499 U.S. 955, 111 S.Ct. 1434, 113 L.Ed.2d 485 (1991). A patent is infringed if every limitation set forth in a claim is present in an accused product either literally or by a substantial equivalent. Seal Flex, Inc. v. Athletic Track and Court Construction, 172 F.3d 836, 842 (Fed.Cir.1999); Jurgens v. McKasy, 927 F.2d 1552, 1560 (Fed.Cir.), cert. denied, 502 U.S. 902, 112 S.Ct. 281, 116 L.Ed.2d 232 (1991). Literal infringement occurs when every element of the patented device is literally present in the accused device. Texas Instruments v. U.S. International Trade Commission, 805 F.2d 1558, 1562 (Fed.Cir.1986). By contrast, the equitable doctrine of equivalents permits a finding of infringement where the accused device, although not literally infringing, performs the same function in substantially the same way to achieve the same result as the patented device. Graver Tank & Manufacturing Co. v. Linde Air Products Co., 339 U.S. 605, 608, 70 S.Ct. 854, 856, 94 L.Ed. 1097 (1950); Malta v. Schulmerich Carillons, Inc., 952 F.2d 1320, 1325 (Fed.Cir.1991), cert. denied, 504 U.S. 974, 112 S.Ct. 2942, 119 L.Ed.2d 566 (1992). Stated differently, infringement under the doctrine of equivalents is shown if the differences between the accused and patented devices are insubstantial to one of ordinary skill in the art. WarnerJenkinson Co. v. Hilton Davis Chemical Co., 520 U.S. 17, 40, 117 S.Ct. 1040, 1053, 137 L.Ed.2d 146 (1997); Catalina Marketing International, Inc. v. Coolsavings.com, Inc., 289 F.3d 801, 812 (Fed.Cir.2002). [5] Although the requirements of literal infringement and infringement under the doctrine of equivalents are unquestionably different, they are not necessarily "fatally inconsistent." Indeed, the Federal Circuit has

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Case in F.Supp.2d Document 17-2 Not Reported1:07-cv-00138-JJF Not Reported in F.Supp.2d, 2002 WL 1489555 (N.D.Tex.) (Cite as: 2002 WL 1489555 (N.D.Tex.))

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tacitly approved the common practice of submitting patent cases under both theories. See, e.g. Southwest Software, Inc. v. Harlequin Inc., 226 F.3d 1280, 1282 (Fed.Cir.2000); Mahurkar v. C.R. Bard, Inc., 79 F.3d 1572, 1575 (Fed.Cir.1996); Laitram Corp. v. NEC Corp., 62 F.2d 1388, 1395 (Fed.Cir.1995); Joy Technologies v. Flakt, Inc., 820 F.Supp. 802, 807-08 (D.Del.1993), aff'd, 38 U.S.P.Q.2d 1216, 1218 (Fed.Cir.1995), cert. denied, 516 U.S. 1172, 116 S.Ct. 1264, 134 L.Ed.2d 212 (1996); Goodwall Construction Co. v. Beers Construction Co., 824 F.Supp. 1044, 1054-55 (N.D.Ga.1992), aff'd, 991 F.2d 751, 757-58 (Fed.Cir.1993). Absent controlling authority to the contrary, the court will not disturb the verdict merely because the jury found both literal infringement and infringement under the doctrine of equivalents. Instead, the court will reform the verdict and enter judgment on the finding of literal infringement. C. *6 At the conclusion of the trial, the jury awarded $1.5 million in damages to KDS as compensation for the infringing activities of ADS. (Jury Charge at 49). This sum is based largely on the testimony of Ed J. Lynch, a certified public accountant, and purportedly represents reasonable royalty damages. ADS now contends that this damage award is not supported by the evidence. 1. Section 284 of the Patent Act provides, in pertinent part: Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court. 35 U.S.C. § 284. Compensatory damages under this statute may be established by one of three methods: (1) lost profits; (2) an established royalty; or (3) a reasonable royalty. Mobile Oil Corp. v. Amoco Chemicals Corp., 915 F.Supp. 1333, 1340 (D.Del.1994). In the absence of an established royalty, a reasonable royalty may be determined by reference to "a hypothetical royalty resulting from arm's length negotiations between a willing licensor and a willing licensee." Trell v. Marlee Electronics Corp.,

912 F.2d 1443, 1445 (Fed.Cir.1990) (citation omitted). 2. [6] The evidence adduced at trial showed that ADSI realized $881,000 from the foreign and domestic sales of its 22 accused devices. According to Lynch, a reasonable royalty for the alleged infringement of the West patent was five percent of these sales, or $44,073. (ADS App. at 81; ADS Reply App. at 122, 143). ADS does not dispute this aspect of the damage calculation. However, Lynch also noted that, unlike Kent, ADSI included other types of fees in its license agreements. For example, ADSI received $10,305,500 in up-front "technology transfer fees," "license fees," and "development fees" from thirdparty licensees. (See ADS App. at 84, 87). Lynch concluded that "a 50 percent sharing ratio of these paid-up fees is appropriate and that amount is $2,082,750." (Id. at 101). [FN5] The jury ultimately awarded KDS $1.5 million in reasonable royalty damages. FN5. Some of these fees were not considered by Lynch in calculating damages "[b]ecause of the nature of the payment." (ADS App. at 101). ADS argues that "[t]he methodology used and the assumptions employed by Mr. Lynch clearly did not meet the standards for expert testimony established by Daubert ..." (ADS Mem. at 5). In response, Kent maintains that the damages suggested by Lynch represent a reasonable "lump-sum" royalty payment that KDS could have demanded in addition to a running royalty. See Studiengesellschaft Kohle. m.b.H. v. Dart Industries, Inc., 862 F.2d 1564, 1568 (Fed.Cir.1988), citing Stickle v. Heublein, Inc., 716 F.2d 1550, 1561- 63 (Fed.Cir.1983). Although "lumpsum" payments may be used to calculate a reasonable royalty, there is no evidence that any of the $10.3 million in fees paid to ADSI qualified as such. In fact, Lynch eschewed any analogy to a "lump sum paid-up royalty," instead referring to his 50 percent figure as a "sharing ratio" or "forced sharing." (Id. at 76, 84-85, 101, 107). *7 Moreover, Lynch's damages figure was derived

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Case in F.Supp.2d Document 17-2 Not Reported1:07-cv-00138-JJF Not Reported in F.Supp.2d, 2002 WL 1489555 (N.D.Tex.) (Cite as: 2002 WL 1489555 (N.D.Tex.))

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from two faulty premises. The first was that ADSI's licensing arrangements were relevant to the calculation of what KDS would have demanded in a hypothetical negotiation between the parties. (Id. at 137-138). See Leesona Corp. v. United States, 220 Ct.Cl. 234, 599 F.2d 958, 969 (Ct.Cl.), cert. denied, 444 U.S. 991, 100 S.Ct. 522, 62 L.Ed.2d 420 (1979) ("The proper measure [of damages] is what the [patent] owner has lost, not what the taker has gained."). A hypothetical royalty cannot be based on something that the patentee itself never insisted upon. See Dow Chemical Co. v. United States, 226 F.3d 1334, 1348 (Fed.Cir.2000). The second shortcoming in Lynch's analysis was his reliance on Victor Zhou's deposition. According to Lynch, this deposition: played a great role in looking at what a forced sharing should be, in my opinion, because it was--the way the deposition read, and I'm speaking particularly of the '97 deposition that I read, shows that there was a copying and photographing and a taking. So if I assume that what I am being told is right about the basis and the alleged infringement of the West patent, it influenced what percentage sharing between a patent holder and an alleged infringer that I came to. And, in fact, I have never come to a ratio this high for sharing, nor did I ever expect I would, but I have never seen circumstances quite like I've seen in this case. (ADS App. at 107). Assuming arguendo that Lynch's "sharing ratio" constitutes a royalty, that figure was based on what the parties might have negotiated had they known the facts that had come to light by the time of trial. (See id. at 112, 137) (testifying that "the payment for the two million really comes from subsequent things that happened" and that "[b]ased on what we know today," parties "should have agreed" to a forced sharing). However, "[a] reasonable royalty determination for purposes of making a damages evaluation must relate to the time infringement occurred, and not be an after-the-fact assessment." Unisplay, S .A. v. American Electronic Sign Co., 69 F.3d 512, 518 (Fed.Cir.1995) (emphasis added). Lynch's opinion testimony, formulated with the wisdom of 20-20 hindsight, violated this cardinal rule. See id .

Kent counters that the $1.5 million jury verdict can be upheld even without Lynch's testimony based on ADSI's license agreements and a 1994 business plan projecting millions of dollars in anticipated sales. As previously noted, the license agreements are not relevant to the calculation of damages. Moreover, the only evidence linking these agreements or the ADSI business plan to a hypothetical royalty was Lynch's testimony. The documents themselves cannot support the jury award in a vacuum. See Unisplay, S.A., 69 F.3d at 518-19. For these reasons, the evidence is insufficient to support an award of compensatory damages in excess of $44,037. The court will reform the verdict accordingly. D. *8 Kent also seeks enhanced damages under section 284 of the Patent Act. This statute authorizes the court to "increase the amount of damages up to three times the amount found or assessed." 35 U.S.C. § 284. The determination whether to award such damages involves a two-step process. First, there must be a factual determination that the infringer has engaged in conduct warranting an award of enhanced damages. Jurgens v. CBK, Ltd., 80 F.3d 1566, 1570 (Fed.Cir.1996); Read Corp. v. Portec, Inc., 970 F.2d 816, 826 (Fed.Cir.1992). A finding of willful infringement, such as was rendered in this case, is sufficient to meet the first prong of the test. Jurgens, 80 F.3d at 1570. Next, the court must determine whether and to what extent to increase damages. Id.; Read Corp., 970 F.2d at 826. Factors relevant to this decision include: (1) whether the infringer deliberately copied the ideas or design of another, (2) whether the infringer, when he knew of the other's patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed, (3) the infringer's behavior as a party to the litigation, (4) the infringer's size and financial condition, (5) the closeness of the case, (6) the duration of the infringer's misconduct, (7) any remedial action by the infringer, (8) the infringer's motivation for harm, and (9) whether the infringer attempted to conceal its misconduct. Johns Hopkins University v. CellPro, Inc., 152 F.3d

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1342, 1352, n. 16 (Fed.Cir.1998), citing Read Corp., 970 F.2d at 827. Although the court has discretion in making this determination, it must articulate reasons for not enhancing a damage award where there has been a finding of willful infringement. Tate Access Floors, Inc. v. Maxcess Technologies, Inc., 222 F.3d 958, 972 (Fed.Cir.2000); Jurgens, 80 F.3d at 1572. [7] Despite the findings of willful infringement and willful inducement of infringement, ADS argues that damages should not be enhanced because it mounted a good faith challenge to the West patent based on the opinions of counsel and a prior jury verdict in its favor. As to the first argument, the jury was specifically instructed to consider whether ADSI and Wu relied in good faith on the opinions of counsel in determining the issue of willfulness. (Jury Charge at 33-34). [FN6] Given the resolution of this issue in light of these instructions, the court will not disturb the implicit finding that ADS did not rely on competent legal advice in acting as it did. Jurgens, 80 F.3d at 1572. FN6. The jury instruction read, in pertinent part: The affirmative duty of care normally entails obtaining advice of legal counsel, although the absence of such advice does not mandate a finding of willfulness. Exercising due care, ADS may continue the accused infringement without risk of being found on that basis alone a willful infringer, if in good faith it believes it had a legitimate defense ... In deciding whether ADS and Wu had a reasonable basis for reaching a good faith conclusion that they could act as they did, you may consider whether ADS and Wu received and relied upon an opinion of counsel, and whether or not that opinion was competent ... (Jury Charge at 33-34). The jury was also instructed that oral opinions could be accorded less weight than written ones and that any opinion was not relevant unless ADSI and Wu specifically relied on it in acting as they did. (Id. at 34). Nor could ADS have justifiably relied on the prior

jury verdict. Any such reliance was tainted by the improper litigation tactics used to secure that verdict. Indeed, the gross misconduct of ADS and its former counsel in this litigation is the overriding factor militating in favor of a full award of enhanced damages. These tactics, which were soundly condemned by the Federal Circuit, need not be reiterated in this opinion. See Advanced Display Systems, 212 F.3d at 1276-80, 1285-86, 1288-89. Suffice it to say that the actions of ADS and its former counsel in covering up knowledge of potentially relevant evidence were sufficiently egregious to warrant the imposition of treble damages. See Read, 970 F.2d at 827, 831 (bad faith in conduct of litigation may be considered in assessing degree of culpability of infringer once willfulness is found). The court will treble the amount of actual damages legally recoverable and award KDS enhanced damages in the sum of $132,219. E. *9 As part of its motion, Kent seeks pre-judgment interest on all compensatory damages awarded by the jury and post-judgment interest on all sums provided in the judgment. ADS concedes that Kent is entitled to post-judgment interest. Such interest is due on "any money judgment in a civil case," including punitive damages. 28 U.S .C. § 1961(a); see also Brown v. Petrolite Corp., 965 F.2d 38, 51 (5th Cir.1992). [8][9] However, ADS opposes any award of prejudgment interest because the jury was asked to determine "[w]hat amount of money, if paid now in cash, would represent a reasonable royalty adequate to compensate KDS for such infringement or inducement of infringement." (Jury Charge at 49) (emphasis added). This argument is rendered moot by virtue of the fact that the court has reformed the verdict to award damages based only on a reasonable royalty for infringing sales. There is absolutely no evidence that these royalties, totaling $44,073, include prejudgment interest. Therefore, KDS is entitled to interest on this sum "to ensure that [it] is placed in as good a position as [it] would have been had the infringer entered into a reasonable royalty agreement." Electro Scientific Industries, Inc. v. General Scanning, Inc., 247 F.3d 1341, 1354 (Fed.Cir.2001). [FN7] Pre-judgment interest will be awarded at the average prime rate from September 26, 1995, the date

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Case 1:07-cv-00138-JJF Document 17-2 Not Reported in F.Supp.2d Not Reported in F.Supp.2d, 2002 WL 1489555 (N.D.Tex.) (Cite as: 2002 WL 1489555 (N.D.Tex.))

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the West patent issued and the infringement commenced, until the date of judgment. See Lam, Inc. v. Johns-Manville Corp., 718 F.2d 1056, 1066 (Fed.Cir.1983) (district court properly exercised discretion in awarding interest at prime rate where patent holder was shown to have borrowed money at or above prime rate). FN7. Pre-judgment interest is not recoverable on the award of enhanced damages. Lam, Inc. v. Johns-Manville Corp., 718 F.2d 1056, 1066 (Fed.Cir.1983). F. [10] The jury found that Wu willfully induced infringement of the West patent. (Jury Charge at 47-48). Consequently, he is jointly and severally liable for compensatory and enhanced damages. See Crystal Semiconductor Corp. v. TriTech Microelectronics International, Inc., 246 F.3d 1336, 1361 (Fed.Cir.2001). Wu's argument that any jury award against him is precluded by the mandate rule has been raised previously and rejected by the court. G. The remaining issues involve the scope of injunctive or declaratory relief in this case. ADS recognizes that, based on the jury's verdict, Kent is entitled to a permanent injunction and a declaratory judgment. However, ADS maintains that any injunction must be limited to the accused devices and any other products or methods that "use cholesteric liquid crystals with a pitch length that reflects visible color." (ADS Mem. at 27). ADS further contends that the West patent should be declared valid and enforceable only with respect to those defenses that were actually litigated at trial. 1. Injunctions in patent cases are subject to the requirements of Rule 65(d) of the Federal Rules of Civil Procedure. This rule provides: Every order granting an injunction and every restraining order shall set forth the reasons for its issuance; shall be specific in terms; shall describe in reasonable detail, and not by reference to the complaint or other document, the act or acts sought to be restrained; and is binding only upon the parties

to the action, their officers, agents, servants, employees, and attorneys, and upon those persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise. *10 Fed. R. Civ. P. 65(d); see also KSM Fastening Systems, Inc. v. H.A. Jones Co., 776 F.2d 1522, 1525 (Fed.Cir.1985) A permanent injunction must be sufficiently specific to provide adequate notice of the conduct enjoined. Signtech USA, Ltd. v. Vutek, Inc., 174 F.3d 1352, 1359 (Fed.Cir.1999), citing Additive Controls & Measurement Systems Inc. v. Flowdata Inc., 986 F.2d 476, 479-80 (Fed.Cir.1993). [11] ADS argues that the injunction must include language limiting its scope to the accused devices and any other products or methods that "use cholesteric liquid crystals with a pitch length that reflects visible color." (ADS Mem. at 27). Without this language, ADS fears that it may be subject to contempt for selling a new "Black and White" cholesteric liquid crystal display product that is similar to the patented invention but does not reflect color in the visible spectrum. The court appreciates this concern. However, it is beyond the scope of this proceeding to determine whether this new ADS product infringes the West patent. [FN8] Nor does the language requested by ADS make the injunction any more specific or less vague. The patent, as construed by the court, says what it says. The injunction will refer to the claims of the West patent and prohibit any further infringement by ADS. This satisfies the specificity requirements of Rule 65(d). See KSM Fastening Systems, 776 F.2d at 1526 (permanent injunction in a patent case enjoins the making, use, or sale both of devices actually found to infringe as well as any other devices that are no more than colorably different from the infringing products). FN8. The parties dispute whether "white" is a color in the visible spectrum covered by the West patent. Clearly, this issue cannot be resolved on the basis of letter briefs. 2. [12] ADS also wants to limit the scope of declaratory relief to those defenses that were actually considered and rejected by the jury. Such a declaration would

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Case 1:07-cv-00138-JJF Document 17-2 Not Reported in F.Supp.2d Not Reported in F.Supp.2d, 2002 WL 1489555 (N.D.Tex.) (Cite as: 2002 WL 1489555 (N.D.Tex.))

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provide that the West patent is "not invalid for obviousness, for failure to name the correct inventors, for failure to contain a sufficient written description, for failure to disclose the best mode, and for failure to obtain an enabling disclosure." (ADS Prop. Jmt. at 2). However, there is no sound reason for the court to enter a declaratory judgment leaving open the possibility that the West patent may be invalid on some other ground. A patent is entitled to a presumption of validity until it is adjudged invalid. 35 U.S.C. § 282; North American Vaccine, 7 F.3d at 1579. All the invalidity defenses raised by ADS have been rejected by either the court or the jury. [FN9] To the extent that any other defenses exist, ADS is precluded from litigating them under the doctrine of collateral estoppel. See Pall Corp. v. Fisher Scientific Co., 962 F.Supp. 210, 213 (D.Mass.1997), citing Zip Dee, Inc. v. Dometic Corp., 905 F.Supp. 535, 537-38 (N.D.Ill.1995). Accordingly, Kent is entitled to a declaration that the West patent is valid and enforceable in all respects. FN9. The court has determined that West patent is not invalid by anticipation or indefiniteness. See ORDERS, 12/3/01 & 12/4/01; supra at § III-A. The jury rejected the defenses of obviousness, inequitable conduct, failure to name all inventors, failure to adequately describe the patented invention, failure to meet the enablement requirement, and failure to disclose the best mode for practicing the invention. (Jury Charge at 3843). CONCLUSION Kent's motion for entry of judgment and ADS's motion for judgment as a matter of law or, alternatively, for new trial are granted in part and denied in part. The court will enter judgment as follows: *11 1. KDS shall have and recover actual damages against ADSI and Wu, jointly and severally, in the amount of $44,073, together with pre-judgment interest at the average prime rate from September 26, 1995 until the date of judgment, and post-judgment interest at the legal rate until paid; 2. KDS shall have and recover enhanced damages

against ADSI and Wu, jointly and severally, in the amount of $132,219, together with post-judgment interest at the legal rate from the date of judgment until paid; 3. ADSI and Wu, along with their officers, agents, servants, employees, attorneys, successors in interest and assigns, and any persons, corporations, organizations, or entities in active concert or participation with them who receive actual notice of this injunction by personal service or otherwise, are hereby permanently enjoined and restrained from directly or indirectly making, using, selling, offering for sale in the United States or importing into the United States, and from causing to be made, used, sold, or offered for sale in the United States or imported into the United States, any devices or methods that may infringe claims 1-8 and 10 of the West patent, including, without limitation, any of the 22 devices accused in this action, and from offering or advertising so to do, and from otherwise in any way infringing or inducing, aiding and abetting, or contributing to the infringement of any claim of the West patent; 4. Claims 1-8 and 10 of the West patent are valid and enforceable in all respects; and 5. All costs of court are taxed against ADSI and Wu, jointly and severally. The parties are directed to confer on a form of proposed judgment, including the calculation of prejudgment and post-judgment interest. A proposed final judgment must be hand delivered to the chambers of the magistrate judge by July 19, 2002 . The judgment must be approved as to form by all counsel of record. The court determines that this is an exceptional case warranting an award of reasonable attorney's fees to Kent as the prevailing party. See 35 U.S.C. § 285. The Supreme Court has admonished that "[a] request for attorney's fees should not result in a second major litigation." Hensley v. Eckerhart, 461 U.S. 424, 437, 103 S.Ct. 1933, 1941, 76 L.Ed.2d 40 (1983). Ideally, the parties should be able to stipulate to a reasonable fee. Id., 103 S.Ct. at 1941. With this admonishment in mind, counsel are directed to confer on the amount

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Case 1:07-cv-00138-JJF Document 17-2 Not Reported in F.Supp.2d Not Reported in F.Supp.2d, 2002 WL 1489555 (N.D.Tex.) (Cite as: 2002 WL 1489555 (N.D.Tex.))

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of attorney's fees and costs to be awarded in this case. If agreement cannot be reached, Kent shall file an application for attorney's fees and costs by August 5, 2002. The fee application must be supported by detailed and itemized records of the time spent and services performed by each attorney, the hourly rate charged for each service, and the costs incurred in connection with this case. Any fees awarded must be proportionate to the amount of the judgment and the results obtained on behalf of the client. In addition, counsel must exercise appropriate billing judgment in writing-off any excessive, redundant, or otherwise unnecessary time. Kent is directed to keep these and the other Johnson factors in mind when preparing its fee request. *12 SO ORDERED. *** Not Reported in F.Supp.2d, 2002 WL 1489555 (N.D.Tex.) END OF DOCUMENT

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Only the Westlaw citation is currently available. United States District Court, E.D. Texas, Marshall Division. LEAP WIRELESS INTERNATIONAL, INC. and Cricket Communications, Inc., Plaintiffs, v. METROPCS COMMUNICATIONS, INC., Defendant/Counterclaim Plaintiff, v. Leap Wireless International, Inc., et al., Counterclaim Defendants. Civil Action No. 2:06-CV-240 (TJW). Feb. 15, 2007. William Christopher Carmody, Susman Godfrey LLP, Dallas, TX, Andrew Wesley Spangler, Elizabeth L. Derieux, Sidney Calvin Capshaw, III, Brown McCarroll, Longview, TX, Brooke Ashley-May Taylor, John M. Neukom, Susman Godfrey, LLP, Seattle, WA, Charles Ainsworth, Robert Christopher Bunt, Robert M. Parker, Parker Bunt & Ainsworth, Otis W. Carroll, Jr., Ireland Carroll & Kelley, Tyler, TX, Franklin Jones, Jr., Jones & Jones, Marshall, TX, Max Lalon Tribble, Jr., Susman Godfrey LLP, Houston, TX, for Plaintiffs. Robert Martin Chiaviello, Jr., Brett Christopher Govett, Fulbright & Jaworski, Michael Joseph Fogarty, III, Slater & Matsil, L.L.P., Dallas, TX, Eric M. Albritton, Attorney at Law, Longview, TX, Harry Lee Gillam, Jr., Gillam & Smith, LLP, Marshall, TX, William David Carter, Sr., Mercy Carter Tidwell, L.L.P., Texarkana, TX, for Defendant/Counterclaim Plaintiff. Brian A. Coleman, Joseph R. Delmaster, Jr., Drinker Biddle & Reath, Washington, DC, Michael Charles Smith, Carl R. Roth, The Roth Law Firm, Marshall, TX, William Christopher Carmody, Susman Godfrey LLP, Barry Frank McNeil, Sarah Rae/Brandt Teachout, Haynes and Boone, Dallas, TX, Frank E. Rogozienski, Attorney at Law, San Diego, CA, for Counterclaim Defendants.

MEMORANDUM ORDER T. JOHN WARD, United States District Judge. *1 Before the Court are Third Party Defendants Thomas Bernard and Harvey White's Motions to Dismiss (# 39 and # 40, respectively). After reviewing the parties' briefs and applicable case law, the Court DENIES the motions for the reasons set forth below. I. Introduction Plaintiffs Leap Wireless International, Inc. [FN1] ("Leap") and Cricket Communications, Inc. filed this lawsuit against MetroPCS Communications, Inc. ("MetroPCS") for infringement of U.S. Patent No. 6,813,497 ("the '497 patent") entitled "Method for Providing Wireless Communication Services and Network and System for Delivering Same." MetroPCS subsequently filed a third-party complaint against numerous third-party defendants, including Thomas Bernard ("Bernard") and Harvey White ("White"). In its third-party complaint, MetroPCS alleges that Bernard and White, former senior officers at Qualcomm Inc. ("Qualcomm") [FN2], misappropriated confidential information and trade secrets in order to obtain patents, including the patent-in-suit, for Leap. Bernard and White now move to dismiss MetroPCS's third-party complaint against them pursuant to Fed.R.Civ.P. 12(b)(2) for lack of personal jurisdiction or, in the alternative, for improper venue pursuant to Fed.R.Civ.P. 12(b)(3). FN1. Leap Wireless International, Inc. was formed by Qualcomm Inc. and later spun off as its own independent company. FN2. During the time at issue in these claims, Bernard was Senior Vice President and General Manager of the Infrastructure Division at Qualcomm, and White was President, Chief Executive Officer, and Board Vice Chairman of Qualcomm. Bernard and White later became founding members of Leap. White eventually became the Chief Executive Officer of Leap. II. Discussion

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A. Personal Jurisdiction A federal court may exercise personal jurisdiction over a nonresident defendant to the extent permitted by the applicable state law. See Fed.R.Civ.P. 4(e)(1). In this action, the Texas long-arm statute allows for the exercise of personal jurisdiction to the extent allowed by the Due Process Clause of the Fourteenth Amendment. See Tex. Civ. Prac. & Rem.Code Ann. § 17 .042; Alpine View Co. v. Atlas Copco AB, 205 F.3d 208, 214 (5th Cir.2000). In the exercise of personal jurisdiction over a nonresident defendant, due process requires that 1) the defendant purposefully avail himself of the benefits and protections of the forum state by establishing minimum contacts with the forum state, and 2) the exercise of jurisdiction does not offend traditional notions of fair play and substantial justice. Felch v. Transportes Lar-Mex, 92 F.3d 320, 323 (5th Cir.1996); International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945). "Minimum contacts" can be established through specific or general jurisdiction. [FN3] Alpine View Co., 205 F.3d at 215. FN3. MetroPCS does not contend that Bernard or White's contacts are sufficient to support general jurisdiction. The Court's analysis, therefore, will focus on specific jurisdiction. Specific jurisdiction exists if the nonresident defendant "purposefully direct [s][his] activities at the forum state and the litigation results from alleged injuries that arise out of or relate to those activities." Id. (quoting Burger King Corp. v. Rudzewick, 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)). When specific jurisdiction is asserted, the minimum contacts analysis focuses on the relationship between the nonresident defendants, the forum state and the litigation. See Guidry v. United States Tobacco Co., Inc., 188 F.3d 619, 624-25 (5th Cir.1999). The defendants' conduct and connections with the forum state must show that they "should reasonably anticipate being haled into court there." Burger King Corp., 471 U.S. at 474 (quoting World-Wide Volkswagen v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980)). The defendant, however, does

not have to physically enter the state. Cole v. Tobacco Inst., 47 F.Supp.2d 812, 815 (E.D.Tex.1999). *2 The following three-part test is used when deciding whether there is specific jurisdiction: (1) Did the defendant have minimum contacts with the forum state-purposely directing its activities toward the forum state or purposely availing itself of the privilege of conducting activities therein? (2) Did the plaintiff's cause of action arise out of or result from the defendant's forum-related contacts? (3) Would the exercise of personal jurisdiction be reasonable and fair? Guidry, 188 F.3d at 625 (citation omitted). In addressing the third prong of the test, the defendants "must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable." Id. at 630 (citations omitted). The following areas are normally examined when making a determination of fairness: 1) the defendant's burden, 2) the forum state's interests, 3) the plaintiff's interest in convenient and effective relief, 4) judicial system's interest in efficient resolution of controversies, and 5) the shared interest of several states in furthering fundamental social policies. Id. at 630 (citations omitted). When the Court decides a motion to dismiss without holding an evidentiary hearing, the plaintiff only needs to make a prima facie showing of the facts on which jurisdiction is predicated. Alpine View Co., 205 F.3d at 215. In deciding whether a prima facie case exists, the Court must accept as true the plaintiff's "uncontroverted allegations, and resolve in [their] favor, all conflicts between the facts contained in the parties' affidavits and other documentation." Id. 1. Thomas Bernard The first prong of the specific jurisdiction test is met with respect to Bernard because there is no dispute that he directed certain activities toward the State of Texas. These activities include phone calls to Texas, at least one meeting in Texas, and a "commitment letter" sent to General Wireless. [FN4] FN4. General Wireless was MetroPCS's predecessor.

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The second prong of the test is in dispute. Bernard argues that his activities directed toward Texas relate only to Qualcomm's efforts to sell and finance infrastructure equipment to General Wireless and, therefore, do not give rise to the plaintiffs' cause of action. MetroPCS, however, alleges that during the phone calls to Texas and during the meeting in Texas, Bernard was given trade secret information which was later misappropriated. At this stage, any conflict must be construed in favor of MetroPCS. Accordingly, the prima facie evidence indicates that MetroPCS's cause of action for misappropriation of trade secrets arose, in part, out of Bernard's contacts with the State of Texas. The court now turns to the third prong of the test to see if the exercise of personal jurisdiction would be reasonable and fair. Bernard argues that he is now retired and that traveling to Texas would be unduly burdensome and expensive. MetroPCS, on the other hand, argues that Bernard is a key witness in the case and may be called to testify at trial. At this stage, the Court must resolve the conflict in favor of MetroPCS and, therefore, agrees with MetroPCS that Bernard would not be unduly or unreasonably burdened. The parties do not dispute that the State of Texas has a substantial interest in this litigation because Bernard is alleged to have committed tortious acts directed at the State of Texas. It is also clear that MetroPCS has a strong interest in the convenient and effective relief of this lawsuit. The judicial system also shares an interest in the resolution of all controversies in this case, including the original complaint of patent infringement suit and the third-party complaint for misappropriation of trade secrets which are closely aligned with each other. In summary, the Court finds that the exercise of personal jurisdiction over Bernard would be fair and reasonable. *3 MetroPCS has established a prima facie case for this Court to exercise personal jurisdiction over Bernard. Accordingly, Bernard's motion to dismiss for lack of personal jurisdiction is denied. 2. Harvey White The court now turns to the first prong of the specific jurisdiction test as it applies to White. White argues

that he has never had any contact MetroPCS in Texas or its representatives in Texas while employed at Qualcomm or Leap, nor did he have any direct involvement with the efforts to sell infrastructure equipment to General Wireless. White, however, states that he may have met with some people at MetroPCS as part of a "grip and grin" or "meet and greet" situation. White also argues that MetroPCS has provided no evidence of telephone calls, correspondence, or personal visits with MetroPCS. MetroPCS, on the other hand, argues that White had several contacts and attended several meetings with representatives from MetroPCS where he obtained confidential information. MetroPCS further contends that White, as President and Chief Executive Officer of Qualcomm and Leap, was in a position to instruct other individuals to meet with MetroPCS's representatives in an effort to obtain trade secrets under the guise of trying to sell wireless equipment. At this stage, the Court must resolve the conflict between the affidavits offered by the parties in favor of MetroPCS and finds that White purposefully directed activities toward MetroPCS in the State of Texas. The second prong of the test is also satisfied. As with Bernard, MetroPCS contends that, at the meetings with MetroPCS, White was given confidential and trade secret information which was later misappropriated. As to the third prong of the test, White makes the same arguments as Bernard regarding the fairness and reasonableness of this Court exercising personal jurisdiction. The third prong is, therefore, satisfied as discussed above in Bernard's case. MetroPCS has established a prima facie case for this Court to exercise personal jurisdiction over White. Accordingly, White's motion to dismiss for lack of personal jurisdiction is denied. B. Improper Venue Bernard and White also argue that this case should be dismissed because venue does not exist in this district as to them. MetroPCS, however, contends that venue is proper under the doctrine of ancillary venue. The doctrine of ancillary venue states that third-party de-

© 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

Case 1:07-cv-00138-JJF Slip Copy Slip Copy, 2007 WL 541428 (E.D.Tex.) (Cite as: 2007 WL 541428 (E.D.Tex.))

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fendants have no standing to raise a defense that venue is improper. One Beacon Ins. Co. v. JNB Storage Trailer Rental Corp., 312 F.Supp.2d 824, 828 (E.D.Va.2004). Ancillary venue applies to parties who are added in connection with compulsory counterclaims. 6 Charles Alan Wright, et al., Federal Practice and Procedure § 1436 (2d ed., current through 2006 update). In their reply brief, Bernard and White argue that ancillary venue is not applicable because MetroPCS's counterclaim is not compulsory, but permissive. Therefore, the issue is whether MetroPCS's counterclaim is compulsory or permissive. *4 A compulsory counterclaim "arises out of the transaction or occurrence that is the subject matter of the opposing party's claim." Fed.R.Civ.P. 13(a). The appropriate inquiry in determining whether a counterclaim is compulsory is to ask: 1) whether the issues of fact and law raised by the claim and counterclaim largely are the same; 2) whether res judicata would bar a subsequent suit o