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Semcon IP Inc. v. Huawei Device USA Inc.

United States District Court, E.D. Texas, Marshall Division

December 12, 2017

SEMCON IP INC., Plaintiff,
v.
HUAWEI DEVICE USA INC., HUAWEI TECHNOLOGIES USA INC., HUAWEI TECHNOLOGIES CO., LTD., Defendants.

          MEMORANDUM OPINION AND ORDER

          ROY S. PAYNE UNITED STATES MAGISTRATE JUDGE

         Huawei moves for leave to join Texas Instruments' motion for summary judgment of no presuit damages, based on the alleged failure of Semcon's predecessor and its licensees to mark products covered by the patents-in-suit as required by 35 U.S.C. § 287(a). Dkt. No. 462. Huawei also moves to supplement its damages report to account for the alleged failure to mark. Dkt. No. 465. For the following reasons, Huawei's motion for leave to join the motion for summary judgment is denied, but the motion to supplement the damages report is granted. Accordingly, because Huawei has met its initial burden of production of notifying Semcon of products covered by the '061 patent that Huawei believes were not marked, Semcon must satisfy its burden of showing compliance with the marking statute at trial.

         DISCUSSION

         Under § 287(a) of the Patent Act, a patentee or other party selling a patented product under the patent must mark that product with the patent number to provide notice to the public that the product it may be pursuing is patented. Arctic Cat Inc. v. Bombardier Recreational Prod. Inc., No. 2017-1475, 2017 WL 6044237, at *9 (Fed. Cir. Dec. 7, 2017). A patentee's licensees must also comply with § 287(a) because the statute extends to “persons making or selling any patented article for or under” the patent. Id. at *9 (citation omitted) (quoting § 287(a)). Because it may be difficult for a patentee to ensure that licensees are complying with the statute, the Federal Circuit has held that “where third parties are involved, courts may consider ‘whether the patentee made reasonable efforts to ensure compliance with the marking requirements.'” Id. (quoting Maxwell v. J. Baker, Inc., 86 F.3d 1098, 1111-12 (Fed. Cir. 1996)).

         The patentee has the burden of “pleading and proving” compliance with the marking requirement. Id. An accused infringer who challenges a patentee's compliance with § 287(a) bears “an initial burden of production to articulate the products it believes are unmarked ‘patented articles' subject to § 287.” Id. at *10 (quoting § 287(a)). “[T]his is a low bar.” Id. The accused infringer must simply “put the patentee on notice that he or his authorized licensees sold specific unmarked products which the alleged infringer believes practice the patent.” Id. The accused infringer must only carry a burden of production, not a burden of persuasion or proof. Id. The reason for requiring the accused infringer to satisfy an initial burden of production is to narrow the universe of products that the patentee may have to prove complied with the marking statute. Id.

         In 2006, Semcon's predecessor, Transmeta, filed a lawsuit against Intel alleging that Intel processors equipped with Enhanced SpeedStep Technology infringed eleven patents, including U.S. Patent No. 7, 100, 061, one of the four patents Semcon accuses Huawei of infringing. See Dkt. No. 268 at 10 (quoting Complaint against Intel ¶ 15). Intel and Transmeta resolved the infringement claims and entered into a settlement and license agreement in December 2007. See Id. The parties agreed to a non-exclusive license “under Transmeta's Patents” to make, use, sell, offer for sale, or import “Intel Licensed Products” that were alleged to infringe the asserted patents. Id. at 11 (quoting License Agreement ¶ 3.2). Semcon has admitted that the license agreement does not require Intel to mark the products it sells with the asserted patent number. See Dkt. No. 268 at 3 (citing Semcon's response to request for admissions).

         The other three patents Semcon accuses Huawei of infringing, U.S. Patent Nos. 7, 596, 708, 8, 566, 627, and 8, 806, 247, had not issued at the time Intel and Transmeta resolved the infringement claims. These three patents issued in 2009, 2013, and 2014, respectively. There is no evidence in the record suggesting that the license agreement, when it referred to “Transmeta Patents, ” was referring to later-issued patents that may cover Intel licensed products. In other words, there is nothing in the record suggesting that Intel and Transmeta agreed that Intel would have the right to practice any patent that might subsequently issue to Transmeta, assuming such a patent covered the licensed products. Accordingly, nothing suggests that Intel had a duty to mark licensed products with later-issued patents-because Intel presumably did not receive a license to such patents. If this is an incorrect characterization of the license agreement, it is because the Court lacks a clear explanation.

         Texas Instruments (“TI”), a defendant initially accused of infringement in the consolidated Semcon cases, timely moved for summary judgment that Semcon was not entitled to presuit damages, on the basis that Semcon's predecessors had not required licensees to mark products covered by the asserted patents. See Dkt. No. 268. Part of TI's motion was based on Semcon's failure to make reasonable efforts to require Intel to mark products covered by the '061 patent. See Id. at 10-11. Semcon and TI have since settled. See Dkt. No. 476.

         After the deadline for filing motions for summary judgment lapsed, Huawei moved to join TI's motion for summary judgment of no presuit damages. Huawei requested leave to join TI's motion with respect to “section IV.B (‘Semcon is Not Entitled to Pre-Suit Damages Because it Failed to Comply with the Marking Statute'), subsection 1, ” which relates to Semcon's failure to make reasonable efforts to require Intel to mark products covered by the '061 patent. See Dkt. No. 462 at 1. Huawei did not present a clear basis that it was entitled to summary judgment of no presuit damages with respect to the other three patents-in-suit. The question is whether Huawei should be allowed to pursue a late motion for summary judgment of no presuit damages with respect to the '061 patent, the patent subject to the Transmeta and Intel license agreement.

         Huawei contends that the lateness is justified for two reasons. First, because Semcon conceded in October 2017 that it would no longer allege “Huawei had knowledge of the patents prior to the filing of the instant lawsuit.” See Dkt. No. 305 at 4. Second, because Mr. John Horsley, Transmeta's former general counsel, testified during a recent deposition that neither Transmeta nor its licensees marked products with the patents-in-suit. See Dkt. No. 462 at 1-2.

         Four factors are relevant when determining whether to excuse a party's failure to adhere to a scheduling order: (1) the explanation for the untimeliness; (2) the importance of the submission; (3) potential prejudice in allowing the submission; and (4) the availability of a continuance to cure such prejudice. See S&W Enters., L.L.C. v. Southtrust Bank of Alabama, NA, 315 F.3d 533, 536 (5th Cir. 2004).

         Huawei's explanation for the untimely motion is largely unsatisfactory. The agreement between Transmeta and Intel was produced to Huawei well before the dispositive motions deadline. See Dkt. No. 480 at 4-5. This agreement alone could have formed the basis for a timely motion for summary judgment. Like TI, who timely moved for summary judgment, Huawei had every opportunity to pursue a motion of no presuit damages on the basis of the Transmeta/Intel license agreement. Semcon's recent concession that Huawei did not have presuit knowledge of the patents-in-suit relates to Semcon's former allegations of indirect infringement. Semcon's change in course did not inform Huawei that Semcon failed to provide Huawei with actual notice of the'061 patent before filing suit. Even if Semcon's change in course had alerted Huawei to the marking issue, Huawei should have been aware of Semcon's presuit damages contentions by virtue of Semcon's damages report, which Semcon was required to provide Huawei no later than September 11, 2017. See Dkt. No. 235 at 4.

         Huawei's late motion is unquestionably important because the motion relates to Huawei's exposure to presuit damages with respect to infringement of the '061 patent. There is prejudice in allowing the late motion, however. Semcon's first notice that Huawei would seek to restrict damages, through a late summary judgment motion, came on November 28, 2017, about a month before trial. See Dkt. No. 462. Huawei's deadline for filing a summary judgment motion lapsed on October 9, 2017. The motion was about seven weeks too late-a significant delay given the Court's compressed schedule leading up to trial.

         The prejudice is mitigated, however, because Semcon was provided timely notice of the same issue by TI. By identifying a complaint in which Semcon's predecessor accused Intel products of infringing the '061 patent, which resulted in the relevant license agreement between Transmeta and Intel, TI met its initial burden of production. See Arctic Cat, 2017 WL 6044237, at *10. Thus, ...


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