Free Letter - District Court of Delaware - Delaware

Case 1:O4—cv—O1338-JJF Document 693 Filed O1/24/2007 Paget of3
Monkrs, NICHOLS, Ansar & TUNNELL LLP
1201 Noivru MARKET STREET
P.O. Box 1347
WILMINGTON, DELAWARE 19899-1347
302 658 9200
THOMAS C.GmMM FAX
302 351 9595
302 425 4661 FAX January 24, 2007
[email protected]
BY E-FILING X
The Honorable Mary Pat T ynge
United States Magistrate Jup ge
United States District Courq
for the District of Delaware
844 North King Street
Wilmington, DE 19801
Re: Honeywell International Inc., et al. v. Apple Computer, Inc., et al.
C.A. No. 04-1338-KAJ {Consolidated)
Dear Magistrate Judge Thynge:
1 am writing pursuant to the Court’s Order from January 18, 2007, asking for the pa1ties’
thoughts regarding strategies for the efficient handling of the remainder of the case. In summary,
in light of the position taken by several of the Manufacturer Defendants (described below),
Honeywell submits that a discussion regarding such strategies first requires clarity on the
fundamental issue of who will answer Honeywell’s charge of infringement at trial in the first
instance: the Manufacturer Defendants or the Customer Defendants?
The original Scheduling Order, entered by Judge Jordan, did not specify how, when, and
against whom infringement issues would be tried. Judge Jordan stayed the original action
against the Customer Defendants on the assumption that the Manufacturer Defendants would
stand behind their customers in a marmer that would substantially reduce, if not eliminate
entirely, the need for further proceedings. However, contrary to Judge J ordan’s expectations, the
Manufacturer Defendants, by their actions, have not committed to defending their customers
from Honeywell’s allegations.
For example, the is ue of indirect sales figured prominently in the mediations held in
December. The Manufact er Defendants are clearly relying on their assertion that a substantial
portion of sales to the Cus omer Defendants occurs outside the United States in order to avoid
liability for those sales. To compound this, the Manufacturer Defendants are now requesting that


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The Honorable Mary Pat Thynge
January 24, 2007
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the damages issues be put off to some indeterminate future date.l By this recent conduct, the
Manufacturer Defendants apparently prefer to avoid, rather than embrace, the potential liability
of their customers.
Indeed, the differentl legal status ofthe Manufacturer Defendants may require Honeywell
to resort to indirect infringement theories under the patent law——theories that require different
elements of proof than direct infringement against the Customer Defendants. The differences
between these two types of infringement claims (indirect versus direct) have been heightened by
the Federal Circuit’s recent change in the standard for proving indirect infringement under
35 U.S.C. §27l(b). See DSU Med. Corp. v. JMS C0., Ltd., 04-1620, 05-1048, -1052, slip op.
(Fed. Cir. Dec. l3, 2006) (en banc in pertinent part). A copy of that decision is attached hereto
for the Cou1t’s convenience. Essentially, the Federal Circuit now requires that allegations of
inducement be supported by proof that a defendant both: (l) knew of the patent in suit; and
(2) knew that its activities were causing others to directly infringe the patent. These new
standards do not apply to direct infringers such as the stayed Customer Defendants.
The new inducement standards have implications on both the scope of discovery and on
the efficient handling of the case. Discovery regarding certain issues will now take on newly
increased importance; such discovery includes: (1) any opinions of counsel and related requests
for legal advice sought regarding Honeywell’s original allegations; (2) communications between
manufacturers and customers regarding those allegations, including customer requests for
indemnification and responses thereto; and (3) a precise date upon which each Manufacturer
Defendant became aware of the patent. Honeywell has not had an opportunity to fully explore
these topics, and relevant information is likely to be in the hands of the Customer Defendants
(e. g. , their expectations with regard to indemnification).
More fundamentally, the impact of the DSU decision could undermine the fundamental
premise of Judge J ordan’s reorganization of the case. The Manufacturer Defendants may seek to
avoid—in whole or in part—answering for the infringement and damages caused by their
customers on the grounds that they did not know of the patent, or did not believe direct
infringement was occurring. If that becomes the case, then it makes little sense to proceed
against them in the first instance because resolution of these unique inducement issues would, at
best, resolve only a small portion of Honeywell’s direct claims against the Customer Defendants.
ln that event, what Judge Jordan intended as an efficient means for handling this action could
become a wasteful rehearsal for the real trial.
Accordingly, to efficiently handle the remainder of the case, Honeywell suggests the
following. First, the Court should direct the Manufacturer Defendants and the Customer
Defendants to caucus among themselves and decide whether the former intends to defend the
latter against the full extent of Honeywell’s allegations, regardless of whether the sales were
direct or indirect. lf they do, then all parties can be reassured that proceeding against the
1 The Manufacturer liefendants do not appear to be requesting that damages discovery
itself be stayed, only damages expert reports and the damages component of the trial.

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The Honorable Mary Pat Thynge
January 24, 2007
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Manufacturer Defendants first will still likely resolve the majority of Honeywell’s allegations. lf
not, then the Court should schedule a subsequent hearing to address why the first trials should
not be against the Customer Defendants.2
Second, once it is clear which class of defendants is best suited to answer Honeywell’s
infringement allegations in the first instance, Honeywell will work with these defendants to
develop a timetable and plan for trying infringement and damages.
To avoid delay, the i urrent stay against the Customer Defendants should be lifted so that
Honeywell can obtain i formation regarding the commercial success of end products
incorporating the accused odules (relevant to the issues of validity and damages) and to begin
developing a record that ad resses the new standards set forth in DSU (to the extent necessary).
As the Court is aware, Honeywell and the Manufacturer Defendants have agreed to a
three-month extension of all the deadlines set forth in the current Scheduling Order (D.l. 376).
While the agreed-upon extension provides short-term relief, it does not address this broader issue
of a global strategy for efficiently handling the remainder of the case.
Honeywell looks forward to discussing this issue with the Court on Thursday.
Respectfully, `
Thomas C. Grimm
Enclosure
cc: All Counsel of Record-/\ll Defendants (via e—filing, w/encl.)
Matthew L. Woods, Esquire (via e-mail, w/encl.)
Seong Yoon Jeong, BOE Hydis Technology (via Fed. Ex., w/encl.)
2 It may well be that the substantial settlements executed to date will impact the scope of
the remaining claims against the Customer Defendants, and Honeywell would work with
the Customer Defendants to ensure that further proceedings reflect the scope of those
settlements.