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

Case 1:07-cv-00459-GMS

Document 51

Filed 03/10/2008

Page 1 of 12

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE INOVIS, INC., Plaintiff, v. DISTANCE DIGITAL CO., LLC and CLASSIFIED INFORMATION, INC., Defendants. ) ) ) ) ) ) ) ) ) )

C.A. No. 07-459 (GMS) EXHIBITS C-J FILED SEPARATELY UNDER SEAL

PLAINTIFF INOVIS' OPENING BRIEF IN SUPPORT OF ITS MOTION TO DISMISS DEFENDANT CLASSIFIED'S COUNTERCLAIM FOR LACK OF SUBJECT MATTER JURISDICTION MORRIS, NICHOLS, ARSHT & TUNNELL LLP Jack B. Blumenfeld (#1014) Julia Heaney (#3052) 1201 North Market Street P.O. Box 1347 Wilmington, DE 19899-1347 (302) 658-9200 [email protected] Attorneys for Plaintiff Inovis, Inc. OF COUNSEL: David J. Wolfsohn Lynn B. Morreale Jordan L. Jonas WOODCOCK WASHBURN LLP Cira Centre, 12th Floor 2929 Arch Street Philadelphia, PA 19104 (215) 568-3100 March 10, 2008

Case 1:07-cv-00459-GMS

Document 51

Filed 03/10/2008

Page 2 of 12 i.

TABLE OF CONTENTS Page I. II. III. IV. V. NATURE AND STAGE OF THE PROCEEDINGS ....................................................... 1 SUMMARY OF THE ARGUMENT .............................................................................. 2 STATEMENT OF FACTS.............................................................................................. 3 ARGUMENT.................................................................................................................. 5 CONCLUSION............................................................................................................... 8

Case 1:07-cv-00459-GMS

Document 51

Filed 03/10/2008

Page 3 of 12 ii.

TABLE OF AUTHORITIES CASES PAGE(S) Arachnid, Inc. v. Merit Indus., Inc, 939 F.2d 1574 (Fed. Cir. 1991) .......................................................................................... 6-7 Gaia Techs., Inc. v. Reconversion Techs., Inc., 93 F.3d 774 (Fed. Cir. 1996), amended, 104 F.3d 1296 (Fed. Cir. 1996) ............................ 6-8 Paradise Creations, Inc. v. U V Sales, Inc., 315 F.3d 1304 (Fed. Cir. 2003) .......................................................................................... 5-6 Procter & Gamble Co. v. Paragon Trade Brands, Inc., 917 F. Supp. 305 (D. Del. 1995) ........................................................................................... 5 Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245 (Fed. Cir. 2000) ............................................................................................. 8 UD Tech. Corp. v. Phenomenex, Inc., C.A. No. 05-842-GMS, 2007 U.S. Dist. LEXIS 642 (D. Del. Jan. 4, 2007) ........................... 7 United States v. Montana, 199 F.3d 947 (7th Cir. 1999) (Posner, J.) .............................................................................. 6 STATUTES 35 U.S.C........................................................................................................................... 2-3, 6-7 Federal Rules of Civil Procedure 12(b)(1) .............................................................................. 2, 8

Case 1:07-cv-00459-GMS

Document 51

Filed 03/10/2008

Page 4 of 12 1.

I.

NATURE AND STAGE OF THE PROCEEDINGS Plaintiff Inovis USA, Inc. ("Inovis") filed its First Amended Complaint against

Classified Information, Inc. ("Classified") and Distance Digital Co., LLC ("Distance Digital") on August 17, 2007, seeking a declaratory judgment of non-infringement, invalidity, and/or unenforceability of U.S. Patent No. 5,812,669 ("the 669 Patent") and asserting claims of unfair competition under the Lanham Act and tortious interference with business relationships against Classified.1 (D.I. 12). Classified responded by moving to dismiss the First Amended Complaint for lack of subject-matter jurisdiction on September 7, 2007. (D.I. 15). Among other things, in the briefing on its motion, Classified claimed that the fact that it had offered Inovis a covenant not to sue those customers of Inovis' to whom Classified had sent letters threatening infringement lawsuits defeated subject matter jurisdiction over Inovis' declaratory judgment count. (D.I. 25 at 5). Inovis pointed out that Classified appeared to be reserving the right to sue other customers of Inovis and that Inovis had indemnification agreements and obligations to those customers--facts that, based on the case law, meant that the Court still had subject matter jurisdiction. (D.I. 19 at 10-14). At the oral argument on Classified's motion, Classified's counsel claimed to have "some questions about what exactly, whether there is an indemnification that's as broad as was stated in [Inovis'] brief and what exactly that indemnification involves, because we haven't seen it." (Ex. A, Tr. of Oct. 29, 2007 Conference at 11:3-7.) Noting that the issue of Inovis' indemnification obligations was "where, as we say, the rubber meets the road," the Court granted the parties leave to conduct limited discovery on issues relating to subject matter jurisdiction and then to serve supplemental briefs. (Id. at 11:9-11, 11:18-23, 13:24-15:1.)

1

Distance Digital was voluntarily dismissed from the lawsuit on December 26, 2007. (D.I. 43).

Case 1:07-cv-00459-GMS

Document 51

Filed 03/10/2008

Page 5 of 12 2.

On December 7, 2007, Inovis produced to Classified indemnification agreements with its customers indisputably showing that Inovis not only had written indemnification agreements, but that it had honored them specifically with respect to the three customers whom Classified had threatened with infringement suits under the 669 Patent. Notwithstanding this indisputable evidence, Classified failed to withdraw its motion. On December 21, 2007, Inovis served its supplemental brief in opposition to Classified's motion to dismiss for lack of subject matter jurisdiction, which pointed out the uncontroverted evidence of Inovis' indemnity obligations and practices. (D.I. 42). Classified never disputed Inovis' position and, in fact, failed even to file a supplemental brief in support of its motion to dismiss. But Classified nonetheless did not withdraw its motion. Finally, on January 28, 2008, nearly five months after it had filed its motion and wasted the Court's time and Inovis' time and money, Classified withdrew it. (D.I. 45). On February 19, 2008, seven months after Inovis filed its First Amended Complaint, Classified filed its Answer to the First Amended Complaint along with a Counterclaim against Inovis for patent infringement. (D.I. 48). In fact, as explained further below, Classified does not have standing to assert the 669 Patent against Inovis. Accordingly, Inovis is hereby moving to dismiss Classified's

Counterclaim in its entirety pursuant to F.R.C.P. 12(b)(1) for lack of subject matter jurisdiction. II. SUMMARY OF THE ARGUMENT It is axiomatic that, to have standing to assert a claim for patent infringement, a putative patentee must prove that it holds enforceable title to the patent at the time it files its claim. Under section 261 of the Patent Act, Classified must produce a written assignment from an owner of the patent to Classified, conveying ownership of the 669 Patent such that it would have standing to sue, on its own, for infringement of that patent. Yet Classified's own filings

Case 1:07-cv-00459-GMS

Document 51

Filed 03/10/2008

Page 6 of 12 3.

with the Patent and Trademark Office show that there is no such document.

Indeed, the

document that Classified falsely characterized to the PTO as an "assignment" is in fact a letter that refers vaguely to some earlier "transfer" of certain vaguely described assets. This letter, which is inadmissible hearsay, does not even state the date of the purported transfer, does not say whether the transfer was in writing, does not state what interests were transferred, and does not mention the 669 Patent. Remarkably, even Classified's attorneys concede that this letter is not an assignment, thereby failing to meet the requirements of section 261. Because Classified cannot produce an "instrument in writing" that in fact assigned the 669 Patent to Classified prior to the date Classified filed its Counterclaim, Classified lacks standing to bring its Counterclaim for patent infringement and this Court lacks subject matter jurisdiction over Classified's Counterclaim. Accordingly, the Counterclaim should be dismissed. III. STATEMENT OF FACTS Classified alleges that it "is the assignee and sole owner of all right, title and interest in and to the `669 patent." (D.I. 48 at Counterclaim ¶ 7). Based on what Classified has recorded with the Patent and Trademark Office ("PTO"), Classified appears to base its claim of assignee status upon a purported transaction between an entity called CI (Software Solutions) Limited located in San Marcos, California and Classified. (Ex. B, Recordation Form Cover Sheet, 000009). The only purported evidence of this supposed transaction is an April 10, 2003 letter from one Martin Pickard addressed to the "Directors" of Classified Information Inc. [sic] that states as follows: I confirm that, in so far [sic] as CI Solutions Ltd right and title [sic], the name `Templar', all source code relating to the Templar product, intellectual property rights, Patent and associated trademarks, these were transferred to Classified Information Inc in respect of the consideration agreed and paid.

Case 1:07-cv-00459-GMS

Document 51

Filed 03/10/2008

Page 7 of 12 4.

(Ex. B, Pickard to Directors of Classified, 000010). Under Mr. Pickard's name are the words "Creditors Voluntary Liquidator." (Id.). The letter appears on the stationery of an entity called "Mazars." (Id.). Mr. Pickard's letter does not state when the described assets were transferred, does not say whether or not any instrument effectuated the transfer, does not state whether the assets were transferred via a writing as opposed to orally, does not state what the nature of the interest was that purportedly was transferred, does not state what consideration was agreed upon or paid, and does not mention the 669 Patent. Despite the fact that Mr. Pickard's letter refers to a "transfer" in the past tense from an entity called CI Solutions Ltd and that he fails to mention the 669 Patent at all, Classified's counsel represented to the PTO that the letter was somehow a "conveyance" and "assignment" of the 669 Patent from an entity called "CI (Software Solutions) Limited" of San Marcos, California, to Classified, located at the same address, which supposedly took place on April 10, 2003--the same date of Mr. Pickard's letter.2 (Ex. B, Recordation Form Cover Sheet, 000009). Tellingly, even Classified's own attorneys have noted the fact that Mr. Pickard's letter is "not an assignment"--notwithstanding the position taken by Classified before the PTO. Compare "Patent Ownership Timeline" prepared by Baker Botts noting that the Pickard Letter is "not an assignment" (Ex. C, Patent Ownership Timeline at n.2; Ex. D, Putnam Dep. at 45:1747:11), with "Recordation Form Cover Sheet" signed by Lisel M. Ferguson, Esq. (Ex. B, 000009). Indeed, the timeline prepared by Classified's attorneys at Baker Botts purporting to show all the transactions involving title to the 669 Patent noticeably fails to contain any notation
2

The 669 Patent appears to have gone through several purported changes of ownership since title initially vested in the inventors. This motion challenges only the purported "transfer" of certain ostensible rights to Classified, and does not address any issues there may be with the other purported assignments of title higher up the chain of title.

Case 1:07-cv-00459-GMS

Document 51

Filed 03/10/2008

Page 8 of 12 5.

or date for the putative "transfer" referred to in Mr. Pickard's letter. (Ex. C, Patent Ownership Timeline). Indeed, the gap in the chain of title between CI Solutions Ltd and Classified was the reason Classified's attempted sale of a patent it does not own fell apart. In its negotiations with Distance Digital, which was named as a defendant in this case because Mr. Putnam had falsely told Inovis that he had already sold the 669 Patent to that entity, Distance Digital eventually realized that Classified was never assigned the 669 Patent. (Ex. D, Putnam Dep. at 44:1-45:5, 50:20-51:2, 59:3-62:7, 92:22-97:17; Ex. E-I, Emails between Putnam and Distance Digital). Moreover, Distance Digital was skeptical that Classified would ever be able to resolve its "UK issue," i.e., the lack of any assignment from the UK company CI Solutions Ltd to Classified. (Ex. E, H, I, Emails between Putnam and Distance Digital). Accordingly,

notwithstanding Mr. Putnam's false representation to Inovis that, as of July 12, he had "assigned 100% of the title" of the 669 Patent (Ex. J, Email from Putnam to Bates), the deal as of that date was going nowhere because Distance Digital realized that Classified had never owned any interest in the 669 Patent, much less the interest necessary to have standing to sue for infringement. IV. ARGUMENT A party must establish that it has standing at the time it filed suit. Paradise Creations, Inc. v. U V Sales, Inc., 315 F.3d 1304, 1308 (Fed. Cir. 2003); Procter & Gamble Co. v. Paragon Trade Brands, Inc., 917 F. Supp. 305, 310 (D. Del. 1995). "The Patent Act provides that only `[a] patentee shall have remedy by civil action for infringement of his patent.'" Paradise Creations, 315 F.3d at 1308 (quoting 35 U.S.C. § 281). The "patentee" includes the successors in title to the patent. Id. (citing 35 U.S.C. § 100(d)). "[I]n order to assert standing for

Case 1:07-cv-00459-GMS

Document 51

Filed 03/10/2008

Page 9 of 12 6.

patent infringement, the plaintiff must demonstrate that it held enforceable title to the patent at the inception of the lawsuit." Id. at 1309 (emphasis in original). A patent assignment must be by an instrument in writing: Applications for patent, patents, or any interest therein, shall be assignable in law by an instrument in writing. The applicant, patentee, or his assigns or legal representatives may in like manner grant and convey an exclusive right under his application for patent, or patents, to the whole or any specified part of the United States. 35 U.S.C. § 261; Gaia Techs., Inc. v. Reconversion Techs., Inc., 93 F.3d 774, 777 (Fed. Cir. 1996), amended, 104 F.3d 1296 (Fed. Cir. 1996). The April 10, 2003 letter signed by one "Martin Pickard" is not an "instrument in writing," much less one that assigned any rights to Classified. The Patent Act requires that, to constitute a patent assignment, a written instrument must express the patent owner's present intention to transfer title. See Arachnid, Inc. v. Merit Indus., Inc, 939 F.2d 1574, 1580-1581 (Fed. Cir. 1991) (agreement stating that rights "will be assigned" does "not rise to the level of a present assignment" transferring title under federal law). The April 10, 2003 letter does not express a present intention to do anything, but rather refers to some vague past "transfer" of an unspecified interest in some vaguely described assets that do not include the 669 Patent. Mr. Pickard's letter is not an instrument at all, but rather a hearsay statement by someone containing his vague characterization of some other purported event.3 To satisfy the "instrument in writing"

3

The letter is hearsay because it is an out-of-court statement offered to prove the truth of the matter asserted--that there was a transfer of certain assets at some unspecified point in time. F.R.E. 801. A true assignment, like other instruments, is not hearsay because it is a "verbal act." United States v. Montana, 199 F.3d 947, 950 (7th Cir. 1999) (Posner, J.) ("Performative utterances are not within the scope of the hearsay rule, because they do not make any truth claims. Had the marshal overheard Dodd tell Montana, `your father has promised me $ 10,000,' Dodd's overheard statement would have been hearsay, because its value as evidence would have depended on its being truthful, that is, on such a

Case 1:07-cv-00459-GMS

Document 51

Filed 03/10/2008

Page 10 of 12 7.

requirement of section 261, there must be a document to which both assignor and assignee are parties that contains present-tense language of conveyance. See Arachnid, 939 F.2d at 1580 (agreement did not "rise to the level of a present assignment of an existing invention, effective to transfer all legal and equitable rights therein to [plaintiff] and extinguish any rights of [third party]" where it contained merely a promise to convey in the future); Gaia Techs., 93 F.3d at 778-79 (board of directors' minutes describing agreement to sell assets could not constitute an "assignment" but rather were "at most, [] a memorialization of an agreement to sell all assets... ."). Here, notwithstanding Classified's false characterization to the PTO of the April 10, 2003 letter as an assignment,4 it contains no language purporting to convey anything, but instead refers to some other purported transaction that took place at an unspecified time in the past, whereby certain vaguely described assets were supposedly transferred to Classified. (Ex. B, Pickard to Directors of Classified, 000010). As admitted by Classified's own attorneys (Ex. C, Patent Ownership Timeline; Ex. D, Putnam Dep. at 45:17-47:11), and acknowledged by Distance Digital, the letter "is not an assignment." Classified has the burden to prove it has standing. UD Tech. Corp. v.

Phenomenex, Inc., C.A. No. 05-842-GMS, 2007 U.S. Dist. LEXIS 642, at *13 (D. Del. Jan. 4, 2007) ("The party asserting the existence of subject matter jurisdiction bears the burden of proof promise having actually been made. But what in fact was overheard was merely a demand--in effect, `give me $ 10,000'--and so the only issue of credibility was whether the marshal was reporting the demand correctly, and his testimony was not hearsay.").
4

Of course, Classified's false characterization of the letter as an "assignment" as of the date of the letter is not dispositive. 37 C.F.R. § 3.54 ("The recording of a document pursuant to § 3.11 is not a determination by the Office of the validity of the document or the effect that document has on the title to an application, a patent, or a registration."); Gaia Techs, 93 F.3d at 778 n.3 ("[T]he mere fact that an assignment was recorded in the PTO does not, without more, prove that a valid assignment actually took place.").

Case 1:07-cv-00459-GMS

Document 51

Filed 03/10/2008

Page 11 of 12 8.

when contesting a Rule 12(b)(1) motion."); see also Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245, 1250 (Fed. Cir. 2000) (putative patentee "must produce a written instrument documenting the transfer of proprietary rights in the patents" in order to have standing). Because the letter signed by one Martin Pickard is not an "instrument in writing," and because there appears to be no such document that in fact assigned the 669 Patent to Classified, Classified lacks standing to bring its Counterclaim and it should therefore be dismissed. Gaia Techs., 93 F.3d at 780 (held: plaintiff lacked standing to bring patent claims against defendants because plaintiff "failed to come forward with the requisite evidence necessary to establish that an assignment, in writing, of the Intellectual Property took place before the lawsuit was filed"). V. CONCLUSION For the reasons stated above, Classified lacks standing to assert its Counterclaim for patent infringement. Pursuant to F.R.C.P. 12(b)(1), Classified's Counterclaim should be dismissed it its entirety. MORRIS, NICHOLS, ARSHT & TUNNELL LLP

/s/ Julia Heaney (#3052)
Jack B. Blumenfeld (#1014) Julia Heaney (#3052) 1201 North Market Street P.O. Box 1347 Wilmington, DE 19899-1347 (302) 658-9200 [email protected] Attorneys for Plaintiff Inovis, Inc.

OF COUNSEL: David J. Wolfsohn Lynn B. Morreale Jordan L. Jonas WOODCOCK WASHBURN LLP Cira Centre, 12th Floor 2929 Arch Street Philadelphia, PA 19104 (215) 568-3100 March 10, 2008
1856254

Case 1:07-cv-00459-GMS

Document 51

Filed 03/10/2008

Page 12 of 12

CERTIFICATE OF SERVICE I, the undersigned, hereby certify that on March 10, 2008, I electronically filed the foregoing with the Clerk of the Court using CM/ECF which will send notification of such filing to the following: Steven J. Balick John G. Day Tiffany Geyer Lydon ASHBY & GEDDES and that copies were caused to be served upon the following individuals in the manner indicated: BY ELECTRONIC MAIL Steven J. Balick John G. Day Tiffany Geyer Lydon ASHBY & GEDDES 500 Delaware Avenue, 8th Floor P.O. Box 1150 Wilmington, DE 19899 Michael A. Lee Vineet Bhatia Stephen F. Schlather SUSMAN GODFREY LLP 1000 Louisiana, Suit 5100 Houston, TX 77002-5096

/s/ Julia Heaney (#3052)
Julia Heaney (#3052) [email protected]

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 1 of 24

EXHIBIT A

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 2 of 24

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 3 of 24

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 4 of 24

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 5 of 24

EXHIBIT B

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 6 of 24

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 7 of 24

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 8 of 24

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 9 of 24

EXHIBIT C

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 10 of 24

FILED SEPARATELY UNDER SEAL

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 11 of 24

EXHIBIT D

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 12 of 24

FILED SEPARATELY UNDER SEAL

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 13 of 24

EXHIBIT E

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 14 of 24

FILED SEPARATELY UNDER SEAL

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 15 of 24

EXHIBIT F

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 16 of 24

FILED SEPARATELY UNDER SEAL

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 17 of 24

EXHIBIT G

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 18 of 24

FILED SEPARATELY UNDER SEAL

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 19 of 24

EXHIBIT H

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 20 of 24

FILED SEPARATELY UNDER SEAL

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 21 of 24

EXHIBIT I

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 22 of 24

FILED SEPARATELY UNDER SEAL

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 23 of 24

EXHIBIT J

Case 1:07-cv-00459-GMS

Document 51-2

Filed 03/10/2008

Page 24 of 24

FILED SEPARATELY UNDER SEAL