A U.S. District Court in Santa Ana California has dismissed a patent infringement lawsuit brought by an affiliate of Acacia Research Corp. (ACTG) against Alcatel-Lucent USA Inc. for lack of standing due to a clerical error and the testimony of an expert witness called to alleviate the error, which was deemed unsupported by facts.
Judge Andrew Guilford, in a ruling on Monday March 23, ruled that Labyrinth Optical Technologies LLC’s suit against Alcatel-Lucent must be thrown out because the Acacia affiliate couldn’t prove it had standing to sue because it couldn’t produce a key document that it said proved it had been assigned the rights to the patents in suit.
The patents were for methods and systems for polarization dispersion tolerant optical homodyne detection system with optimized transmission modulation.
The owner of the patents Teradvance Communications Inc. granted an exclusive license to Newport Beach, Calif.-based Acacia in November 2011, which in April 2012 assigned the patents to Labyrinth. A month later, Labyrinth filed the suit against Alcatel-Lucent.
In June 2012, Acatel-Lucent asked Labyrinth for documents proving its ownership of the patent rights. Labyrinth produced copies of the exclusive license and assignment in December 2012.
Three years later, on the eve of the trial, Alcatel-Lucent revealed to Labyrinth that the documents it produced to support its ownership of the patents appeared to be something else.
According to Judge Guilford’s ruling, Labyrinth responded by saying that “LABYRINTH-000631 was ‘mis-attached’ from an inventors’ notebook, and that the exhibit to the assignment was actually LABYRINTH-000624, which was Exhibit A to the Exclusive License.
A month later, Labyrinth filed a motion with the court to preclude Alcatel-Lucent from introducing the document mix-up as evidence that Labyrinth lacked standing to bring the case. Alcatel-Lucent opposed the motion and filed its own motion to dismiss the case.
In its motion to preclude, Judge Guilford said Labyrinth “disclosed for the first time ‘due to a drafting error, there was no physical exhibit attached to the assignment.’”
In its opposition to the motion to dismiss, Judge Guilford held that Labyrinth “cryptically asserts that ‘while a physical exhibit to the [assignment] could not be located, there are electronic files which correspond to the exhibit.
“As far as the court can tell, this is just a dangerously-phrased version of the plaintiff’s assertion that the content of the assignment’s exhibit should be understood to be the same as the content of exhibit A to the exclusive license. Thus, plaintiff has not produced ‘electronic files which correspond to the exhibit,’ unless that is a reference to Exhibit A to the Exclusive License.’”
More importantly, Judge Guilford held that the language of the assignment does not require that Labyrinth own all the patents subject to the exclusive license.
“Thus, even if plaintiff established that it does not own any patents outside those covered by the exclusive license, it does not follow that compliance with the terms of the exclusive license would require it to own all of the patents covered by the exclusive license. Further, it is possible that Acacia breached this portion of the exclusive license.”
While Labyrinth argued that Teradvance granted rights to the patent to Acacia or its affiliate, Judge Guilford held that the dispute is not whether Teradvance granted rights in all of the patents expressly identified in the exclusive license to Acacia, but instead whether Acacia then assigned rights in all those patents to Labyrinth.
The judge held that Labyrinth’s argument assumes that the assignment somewhere states that it conveys all the rights in the exclusive license, which is the very conclusion it is trying to prove.
“The assignment plainly refers to the exclusive license, but that is not enough. Indeed, defendant acknowledges that the assignment could have simply stated that it was transferring all of the rights under the exclusive license, and defendant does not contest that such incorporation by reference would be effective. But the assignment doesn’t say that. It says that it conveys all rights in the exclusive license only as such rights ‘relate to’ the ‘patents’ on the nonexistent list.”
Judge Guilford also rejected the testimony of the expert witness Labyrinth called to explain the clerical mistake and what the parties to the assignment were aware of at the time.
The judge said Alcatel-Lucent objects to the expert testimony of Darren Miller, a vice president of contracts at Acacia, asserting that Labyrinth “has not established Miller’s personal knowledge of the facts he asserts.”
Alcatel-Lucent’s “objections are well taken. Miller’s declaration consists of legal argument and unsupported conclusions.”
The judge held that Miller was not a signatory to either the licensing agreement or the assignment agreement. “He does not state that he spoke to either of the signatories — which might itself present a hearsay problem—or was involved in any way in making either agreement.”
Moreover, judge Guilford noted that “strangely, plaintiff included the person who signed the agreement for plaintiff — Clayton Haynes — on its trial witness list, and from the briefing on the defendants motion in limine to exclude Haynes, the court understands that his testimony would relate to the assignment. But plaintiff chose not to present a declaration from Haynes in opposition to this motion, and the court cannot speculate as to what such a declaration might have said.
Judge Guilford also rejected Labyrinth’s argument that Alcatel-Lucent’s motion should be rejected because it waited until the last minute to reveal it.
“Plaintiff has the responsibility to ensure that it has standing,” Judge Guilford said. “The court cannot deny this motion on the ground that it could have been brought earlier or that other procedural avenues might exist for plaintiff to move forward with its claim.
Finally, Judge Guilford indicated that he would be inclined to deny an exceptional case motion by Alcatel-Lucent filed under the idea that Labyrinth dragged it through three years of litigation when it never had standing, something entirely within it and Acacia’s control.
The judge noted that such exception case motions have become common since the U.S. Supreme Court’s ruling in Octane Fitness USA v. Icon Health and Fitness Inc. made it easier to seek fees from plaintiffs who pursue the most meritless cases.
“Defendants noticed this issue long ago, but let the case ride on plaintiff’s vague reassurances rather than demanding resolution to defendant’s satisfaction, only to resurrect the issue after many substantive defenses had failed.
“Further, assuming the case is either refiled or returns to this court following an appeal, the court could later reconsider an exceptional case motion following resolution of the remaining substantive issues in the case.”
Alcatel officials couldn’t be reached for comment. Attorneys for Alcatel declined to comment.
Acacia official couldn’t be reached immediately for comment.
Paul Lesko, a partner with Simmons Hanley Conroy in Alton, Illinois, who represents Labyrinth, couldn’t be reached for comment.
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