infringement Archives - Page 8 of 28

infringement

Seeing Starz: No Damages Bar in Copyright Discovery Rule Case

by Jodi Benassi | Aug 4, 2022 | Copyrights

The US Court of Appeal for the Ninth Circuit affirmed a district court’s denial of a motion to dismiss copyright infringement claims as barred by the statute of limitations, affirming the copyright owner’s right to sue even though more than three years had passed since the alleged infringement occurred. Starz Entertainment, LLC v. MGM Domestic Television Distribution, LLC, Case No. 21-55379 (9th Cir. July 14, 2022) (Wardlaw, Ikuta, Bade, JJ.)

Starz entered into licensing agreements for movies and television series episodes with MGM in 2013 and 2015. Under the agreements, MGM granted Starz the exclusive right to exhibit the movies and television series episodes for specified time periods. MGM agreed that it would not exhibit or license the content to any third parties during such specified time periods. From 2019 to 2020, Starz discovered that certain content it licensed from MGM was available on other streaming platforms.

Starz sued MGM in May 2020, asserting 340 claims of direct, contributory and vicarious copyright infringement, among other claims. MGM moved to dismiss, arguing that Starz’s copyright infringement claims were barred by the Supreme Court’s 2014 decision in Petrella v. MGM. MGM asserted that Petrella imposes a strict bar to collecting any damages for copyright infringement that occurs more than three years prior to the filing of the complaint. The district court determined that Petrella did not affect the discovery rule (i.e., that under the Copyright Act there exists a three-year damages bar) except when the plaintiff reasonably was not aware of the infringements at the time they occurred. MGM filed an interlocutory appeal.

The Copyright Act states: “No civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued.” The issue on appeal here was when a copyright infringement claim accrues. The Ninth Circuit noted that it, and every other circuit, has an exception to the infringement rule, known as the “discovery rule,” which starts the clock when a copyright holder knows or reasonably should know that an infringement occurred. The Court disagreed with MGM that Petrella did away with the discovery rule. Instead, the discovery rule of accrual copyright claims is alive and well, and thus the Court affirmed the district court’s finding that Starz was not barred by Petrella from bringing a lawsuit.

The Ninth Circuit next addressed the issue of whether Petrella imposed a damages bar separate from the statute of limitations. MGM argued that Petrella created a separate damages bar that limits damages to damages arising from acts of infringement within the three-year window. The Court found that a three-year lookback period would eviscerate the discovery rule and explained that MGM’s approach is a textbook example of the absurdity of such a rule. The agreements between Starz and MGM covered hundreds of titles under separate time periods, and under MGM’s approach, damages could only be recovered for a 2013 infringement if the complaint was filed by 2016. In this case, Starz did not discover [...]

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Fee Award Appropriate for Trying to Refresh and Replay Case

by Katherine Pappas | Aug 4, 2022 | Patents

The US Court of Appeals for the Federal Circuit upheld an attorneys’ fees award after the patent owner brought successive patent infringement suits attempting “to refile to wipe the slate clean” after the first court was poised to issue an adverse merits ruling. Realtime Adaptive Streaming, LLC v. Netflix, Inc., Netflix Streaming Services, Inc., Case Nos. 21-1484; -1485; -1518; -1519 (Fed. Cir. July 27, 2022) (Newman, Chen, JJ.) (Reyna, J., concurring-in-part, dissenting-in-part).

Realtime brought three patent infringement suits against Netflix alleging infringement of six different patents and the same accused products. Realtime first sued in Delaware, and Netflix moved to transfer to California for convenience (which Realtime vehemently opposed as an unfair burden) and to dismiss for failure to state a claim, arguing that four of the six patents were ineligible under 35 U.S.C. § 101 for being directed to an ineligible abstract idea. After briefing, the magistrate judge issued a report and recommendation finding the four patents ineligible under § 101. The court also denied the motion to transfer. Meanwhile, Netflix filed corresponding petitions for inter partes review (IPR) of the asserted patents, all of which were instituted by the Patent Trial & Appeal Board. Realtime moved to amend its complaint—for support pointing to five related patents that were subsequently found invalid under § 101 by the same judge—then voluntarily dismissed the Delaware action before the district court judge could rule on the magistrate judge’s report and recommendation.

The very next day, Realtime filed two new suits against Netflix in California asserting the same six patents, divvying up the four § 101-challenged patents as separate from the other two. Netflix moved to transfer both cases back to Delaware and moved for attorneys’ fees. Realtime opposed, this time arguing that California was more convenient than Delaware. However, before the California court could rule on the motion to dismiss, Realtime again voluntarily dismissed the California actions without prejudice.

Netflix renewed its motion for attorneys’ fees for the California actions, IPRs and related Delaware action. The district court awarded attorneys’ fees for the California actions under § 285 and, in the alternative, the court’s equitable powers. The district court declined to award attorneys’ fees for the related actions, IPRs or costs under Fed. R. Civ. P. 41(d). Realtime appealed the fee award, and Netflix cross-appealed the denial of fees for related proceedings.

The Federal Circuit affirmed, finding no abuse of discretion in awarding fees pursuant to equitable powers or in denying fees for related proceedings. Because the district court’s “inherent power to impose sanctions in the form of attorneys’ fees is not a substantive patent question,” the Federal Circuit considered the issue under the Ninth Circuit’s framework that “the court must find that the sanctioned behavior ‘constituted or was tantamount to bad faith.’” As for fees under § 285, “a district court ‘may award’ attorneys’ fees to ‘the prevailing party’ in ‘exceptional cases’”—an analysis unique to patent law and therefore governed by Federal Circuit precedent.

In affirming the award of fees, the [...]

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Purposeful Direction in a Forum Activates the Long Arm of the Law

by McDermott Will & Emery | Jul 28, 2022 | Copyrights

The US Court of Appeals for the Ninth Circuit again vacated the US District Court for the Central District of California’s dismissal of a case for lack of personal jurisdiction, applying Fed. R. Civ. Proc. 4(k)(2) and concluding that the copyright infringement claims involving a foreign defendant were properly litigated in the United States. Lang Van, Inc. v. VNG Corporation, Case No. 19-56452 (9th Cir. Jul. 21, 2022) (Bybee, Bennett, JJ.; Bataillon, Distr. J., sitting by designation).

Lang Van, Inc. (LVI) is a California corporation that produces and distributes Vietnamese music and entertainment and owns copyrights to more than 12,600 songs and original programs. LVI sued VNG Corporation, a Vietnamese company that makes copyrighted music available for download worldwide through its Zing MP3 website and mobile applications. LVI served discovery requests on VNG, but instead of supplying substantive information or documents, VNG moved to dismiss for lack of personal jurisdiction. The district court granted the motion, and LVI appealed to the Ninth Circuit, which vacated and remanded the case to the district court with instructions that LVI be permitted to undertake jurisdictional discovery.

On remand, LVI took third-party discovery and argued that the evidence showed that VNG intentionally chose to release its applications in the United States; consented to jurisdiction, choice of law and venue in California; and allowed hundreds of thousands of iOS downloads and tens of thousands of Android downloads.

VNG filed a renewed motion to dismiss LVI’s (now amended) complaint, arguing a lack of personal jurisdiction, forum non conveniens (that there is another, more appropriate, forum) and failure to state a claim. The district court granted VNG’s motion after finding that there was no specific personal jurisdiction over VNG in California under the Ninth Circuit’s specific personal jurisdiction test. The district court did not address the second and third arguments (forum non conveniens and failure to state a claim) and did not address the issue of long-arm jurisdiction over VNG under Rule 4(k)(2). Again, LVI appealed.

The Ninth Circuit assessed jurisdiction under Rule 4(k)(2), which provides for jurisdiction over foreign defendants that have ample contacts within the United States as a whole, but whose contacts are so scattered among states that no single state would have jurisdiction. The test requires proof that (1) the claim at issue arises from federal law and (2) the defendant is not subject to any state’s courts of general jurisdiction, such that (3) invoking jurisdiction upholds due process, with the burden shifting to the defendant to show that application of jurisdiction under the third prong would be unreasonable.

The Ninth Circuit found that the first prong was met because the case involved claims of copyright infringement under federal law, and that the second prong was met because VNG asserted that it was not subject to the personal jurisdiction of any state court of general jurisdiction in the United States.

As for the third prong, the Ninth Circuit explained that when jurisdiction is challenged, the plaintiff must show (1) purposeful activities or transactions [...]

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Court to Counsel: Be Frivolous at Your Own Risk

by Cecilia Choy, Ph.D. | Jul 28, 2022 | Patents

The US Court of Appeals for the Federal Circuit may “award just damages and single or double costs to the appellee” under the Federal Rule of Appellate Procedure 38 if an appeal is frivolous as filed or as argued. In a non-precedential decision, the Court granted-in-part and denied-in-part a party’s motion for sanctions and request to hold the opposing party’s counsel jointly and severally liable. Pop Top Corp. v. Rakuten Kobo Inc., Case No. 21-2174 (Fed. Cir. July 14, 2022) (Moore, C.J.; Newman, Stoll, JJ.) (per curiam). (Newman, J., dissenting). The Court granted attorneys’ fees and double costs, although it lowered the requested amount for attorneys’ fees.

Pop Top owns a patent describing methods and systems related to enabling highlighter functionality on web pages. The patent’s claim requires an “internet document [that] includes code for invoking a highlighting service to operate with the internet document.” Pop Top alleged that Kobo’s e-books on an app infringed as they are “highlightable” and “include code.” Kobo explained that all highlighting-related code was in the app, not the e-books, an assertion supported by a declaration from its chief technology officer. The district court granted summary judgment of noninfringement.

Pop Top appealed, arguing that the district court erred by not resolving the parties’ alleged claim construction dispute regarding the limitation “code for invoking,” and by deciding that Pop Top’s citation of the Kobo declaration and the infringement contentions (for the first time on appeal) was insufficient evidence of infringement to survive summary judgment.

An appeal is frivolous as filed if “the judgment by the tribunal below was so plainly correct and the legal authority contrary to appellant’s position was so clear that there really is no appealable issue.” The Federal Circuit decided that the appeal was frivolous as filed, explaining that there was no reasonable basis to appeal the summary judgment. The district court had determined that Pop Top offered “no evidence whatsoever” that the e-books included “code for invoking a highlighting service” but relied solely on the Kobo declaration, which stated that the app, not the e-books, contained the highlighting functionality.

An appeal is frivolous as argued if “the appellant engages in misconduct in arguing the appeal.” The Federal Circuit decided that Pop Top’s appeal was frivolous as argued because it “blatantly misconstrue[d] Kobo’s position” when arguing disputed scope for “code for invoking.” Kobo explained that there was no dispute; even under Pop Top’s construction, there was no infringement because the e-books do not contain code invoking the highlighting service. Pop Top further compounded its misconduct in arguing that it presented sufficient evidence to survive summary judgment, failing to explain how any cited evidence, such as the Kobo declaration, showed that Kobo’s e-books contain code related to highlighting.

The Federal Circuit explained that it may hold that counsel be jointly and severally liable for a sanctions award if “an appeal is frivolous due to the nature of the advocacy in support of it.” Because Pop Top’s appeal was frivolous “entirely because of the baseless [...]

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No Winners Here: A Case Can Have No Prevailing Party

by Jodi Benassi | Jul 21, 2022 | Trademarks

In a matter of first impression, the US Court of Appeals for the Eleventh Circuit found that there may be no prevailing party for purposes of assessing costs and attorneys’ fees under Federal Rule of Civil Procedure 54(d). Royal Palm Properties, LLC v. Pink Palm Properties, LLC, Case No. 21-10872 (11th Cir. July 7, 2022) (Wilson, Rosenbaum, Covington, JJ.)

Royal Palm Properties sued Pink Palm Properties for trademark infringement. Pink Palm countersued, seeking cancellation of the trademark and a declaratory judgment of noninfringement. Following a three-day trial, the jury found that Pink Palm did not infringe the trademark and that the trademark was not invalid on the grounds asserted by Pink Palm. Pink Palm moved for judgment as a matter of law (JMOL), asking the court to overrule the jury’s determination that the trademark was valid. The district granted Pink Palm’s motion and invalidated the trademark. Pink Palm subsequently moved for costs, which the district court granted because Pink Palm was the prevailing party in light of the order granting JMOL. Royal Palm appealed.

The Eleventh Circuit reversed the district court’s grant of JMOL, reinstating the jury’s verdict and the trademark’s validity. In light of this reversal, the district court, on remand, ruled that Pink Palm was no longer the prevailing party for purposes of costs and was not entitled to an award of attorneys’ fees under the Lanham Act’s exception case doctrine. Pink Palm appealed.

Before addressing whether the district court erred by failing to name Pink Palm as the prevailing party, the Eleventh Circuit addressed the threshold question of whether courts are required to name a prevailing party in every case. The Court noted that while the Supreme Court of the United States has issued multiple opinions providing guidance on how to determine the prevailing party, it has not yet addressed whether there must be a prevailing party under Federal Rule of Civil Procedure 54.

Not finding any precedent in its own circuit, the Eleventh Circuit first looked to Federal Circuit precedent, which has stated that a district court must declare a prevailing party and that “punting is not an option.” The Court next explored holdings by the Eighth, Fifth and Second Circuits. Those courts have found that where the parties each brought unsuccessful claims and outcome did not materially alter the legal relationship between the parties, there is no prevailing party.

The Eleventh Circuit agreed with Eighth, Fifth and Second Circuit precedent and concluded that the text of Rule 54(d) does not allow for multiple prevailing parties, and there is not always a prevailing party in every case. A district court in the Eleventh Circuit may find (at most) one prevailing party, but it is not required to do so in every case. The Court found that both Royal Palm and Pink Palm had rebuffed the other’s claim regarding the trademark, leading to no material alteration in the legal relationship between the parties, and thus there was no prevailing party.

A Work of Art? Ninth Circuit Analyzes Foreign Judgments and Fair Use

by Sarah Bro | Jul 21, 2022 | Copyrights

The US Court of Appeals for the Ninth Circuit analyzed the fair use doctrine of US copyright law in a dispute for recognition of a 2001 French judgment relating to a finding of copyright infringement of certain photographic works featuring the art of Pablo Picasso. The Court’s analysis ultimately resulted in a reversal of the district court’s ruling for the defendants against whom the French judgment was sought. Vincent Sicre de Fontbrune et al; v. Alan Wofsy et al, Case Nos. 19-16913; -17024 (9th Cir. July 13, 2022) (Hurwitz, VanDyke, JJ.; Ericksen, Distr. J.) The Court remanded for further proceedings for an examination of the enforceability of the judgment under California’s Uniform Foreign-Country Money Judgment Recognition Act (California Recognition Act).

In 1979, Yves Sicre de Fontbrune acquired the business capital and intellectual property rights to Cashiers d’Art, a complete published catalog of the works of Pablo Picasso. The catalog was created in 1932 by photographer Christian Zervos and featured almost 16,000 photographs of Picasso’s works. In 1991, Alan Wofsy Fine Arts obtained permission from the estate of Pablo Picasso to publish The Picasso Project, a work illustrating and describing Picasso’s works. The Picasso Project contained reproductions of certain photos from Cashiers d’Art.

Sicre de Fontbrune sued Wofsy in France for copyright infringement after The Picasso Project was offered for sale at a book fair in Paris and French police seized two volumes of the work. A trial court in France first found the photographs to be documentary in nature and ineligible for copyright protection. In 2001, however, the French Court of Appeal determined that the photographs at issue were not mere copies of Picasso’s works but added creative elements through deliberate choices of lighting, lens filters and framing. The Court of Appeal reversed the trial court, found Wofsy “guilty of infringement of copyright” and entered judgment in favor of Sicre de Fontbrune.

A long and complex procedural process followed the Court of Appeal’s ruling, during which appeals and new lawsuits were filed. Wofsy failed to appear on several occasions while also filing a review proceeding in the French courts. Before Wofsy filed the French review proceeding, however, Sicre de Fontbrune brought an action in the Superior Court of California in Alameda County, seeking recognition of the original French judgment. Wofsy removed that action to district court, which dismissed the case with prejudice pursuant to Federal Rule of Civil Procedure 12(b)(6). The Ninth Circuit reversed, finding the French judgment to be not a penalty but a sum of money cognizable under the California Recognition Act.

On remand, the parties submitted cross motions for summary judgment on eight defenses under the California Recognition Act. The district court granted summary judgment for Wofsy on only one of the defenses, finding that the French judgment was “repugnant to public policy.”

On appeal of the international diversity case, the Ninth Circuit explained that the enforceability of foreign judgments is governed by the law of the state in which enforcement is sought, making the California Recognition [...]

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Tableware Designer Gets Heavenly Results on Its Pearly Plates

by Joshua Revilla | Jul 21, 2022 | Copyrights, Trademarks

The US Court of Appeals for the Fifth Circuit reversed a district court decision, reversing the dismissal of a copyright claim based on lack of standing and finding ownership of the copyright in the claimant based on an assignment of that claim. The Fifth Circuit also found that the plaintiff had a protectible trade dress under the Lanham Act based on secondary meaning. Beatriz Ball, LLC v. Barbagallo Co., LLC, Case No. 21-30029 (5th Cir. July 12, 2022) (Jones, Haynes, Costa, JJ.) (per curiam).

Beatriz Ball, the founder of Beatriz Ball, LLC, alleged that Pampa Bay was marketing and distributing products that infringed on Ms. Ball’s registered copyrights and unregistered trade dress for its “Organic Pearl” line of tableware. Ms. Ball brought suit against Pampa Bay in Louisiana federal court, asserting claims for copyright infringement under the Copyright Act and unfair competition under § 43 of the Lanham Act.

Pampa Bay has marketed and distributed products similar to the Organic Pearl collection but made with cheaper materials since 2016. Ms. Ball alleged that Pampa Bay infringed upon her copyright and its unregistered trade dress because the products are confusingly similar and look and feel like the Organic Pearl trade dress in every way. The district court ruled against Ms. Ball, finding that it had not established that its unregistered trade dress acquired “secondary meaning” as is required for protection of an unregistered trade dress under the Lanham Act. The district court further held that Ms. Ball lacked standing to bring the copyright claims as a result of a lack of legal interest because when “Beatriz Ball Collection” transferred ownership in the copyrights to “Beatriz Ball, LLC,” the language of the assignment did not specifically transfer the right to a cause of action for prior infringements predating the assignment. The assignment clause in issue read:

Assignment. Assignor [Beatriz Ball and Beatriz Ball Collection] hereby irrevocably conveys, transfers, and assigns to Assignee [Beatriz Ball, LLC], and Assignee hereby accepts, all of Assignor’s right, title and interest in and to any and all copyrights, whether registered or not and whether or not applications have been filed with the United States Copyright Office or any other governmental body. This assignment expressly includes any and all rights associated with those copyrights.

The district court found that because the assignment did not specifically transfer the assignor’s right to causes of action for prior infringements, the LLC lacked standing to challenge infringements pre-dating the assignment. The district court therefore never reached the merits of the copyright claim.

On appeal, the Fifth Circuit first reviewed the standing issue to determine if the LLC owned the copyrights at the time of the alleged infringement or if the right to vindicate prior infringements had been effectively assigned to Ms. Ball. Reversing the district court’s ruling, the Court concluded that the LLC had standing to bring the suit as the actual copyright holder. The Court reasoned that § 411(b)(1), which provides that a registration with “inaccurate information” can support an infringement action [...]

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Patent Infringement Verdict Nixed over Judge’s Stock Ownership

by Jodi Benassi | Jul 14, 2022 | Patents

The US Court of Appeals for the Federal Circuit reversed a district court’s opinions and orders and remanded the case for further proceedings before a different district court judge because the original judge had failed to divest all financial interests in the case. Centripetal Networks, Inc. v. Cisco Systems, Inc., Case No. 21-1888 (Fed. Cir. June 23, 2022) (Dyk, Taranto, Cunningham, JJ.)

Centripetal sued Cisco for patent infringement. The original district court judge presided over a 22-day bench trial, which included a more than 3,500-page record, 26 witnesses and more than 300 exhibits. The court heard final arguments on June 25, 2020. While the case was still pending before the district court, the judge learned that his wife owned Cisco stock, valued at $4,687.99. The district court judge notified the parties on August 12, 2020, that he had discovered that his wife owned 100 shares of Cisco stock. He stated that his wife purchased the stock in October 2019 and had no independent recollection of the purchase. He explained that at the time he learned of the stock, he had already drafted a 130-page draft of his opinion on the bench trial, and virtually every issue had been decided. He further stated that the stock did not—and could not have—influenced his opinion on any of the issues in the case. Instead of selling the stock, which might have implied insider trading given his knowledge of the forthcoming order, the judge placed it in a blind trust. Under the terms of the trust, the judge was to be notified when the trust assets had been completely disposed of or when their value became less than $1,000.

Centripetal had no objections. Cisco, however, filed a motion for recusal under 28 U.S.C. § 455(a) and (b)(4). The judge ordered Centripetal to file a response. On October 2, 2020, the court denied Cisco’s motion for recusal. On October 5, 2020, the court issued a 167-page opinion and order containing the judge’s findings that Cisco willfully infringed the asserted claims of the patents-at-issue and awarded Centripetal damages of more than $755 million, pre-judgment interest of more than $13 million and a running royalty of 10%. Cisco moved for amended findings and judgment under Rule 52(b) or a new trial under Rule 59(a)(2). The court denied both motions. Cisco appealed the district court’s findings and asserted that the judge was required to recuse himself under 28 U.S.C. § 455(b) absent divestiture under § 455(f) (the only exception to the bright line rule that a federal judge is disqualified based on a known financial interest in a party).

On appeal, the Federal Circuit addressed two issues: whether the district court judge was relieved of his duty to recuse under § 455(b)(4) because his wife had divested herself of her interest in Cisco under § 455(f), and, if the requirements of § 455(f) were not satisfied, a determination as to the proper remedy.

The Federal Circuit analyzed whether placement of the stock in a blind trust satisfied the [...]

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Split Federal Circuit Reverses Contempt Order, Sanctions Award in Protective Order Dispute

by Paul Devinsky | Jul 7, 2022 | Patents

A split panel of the US Court of Appeals for the Federal Circuit reversed a district court’s contempt order and sanctions award, finding that there was a fair ground of doubt regarding whether the defendant’s counsel’s disclosure to a third party under a joint defense agreement constituted a violation of a protective order (PO). Static Media LLC v. Leader Accessories LLC, Case No. 21-2303 (Fed. Cir. June 28, 2022) (Dyk, Taranto, JJ.) (Reyna, J., dissenting).

Static Media sued Leader Accessories for infringement of a design patent relating to a stadium seat. The parties entered into a PO that restricted the disclosure of discovery documents designated as confidential. The PO restricted disclosure of confidential-designated documents to a limited group of people, including “outside independent persons” retained to provide consulting, technical or expert services or to give testimony (i.e., an independent consultant). The PO also required that an independent consultant execute a “written assurance.” The written assurance required that the independent consultant read and agree to be bound by the terms of the PO and prohibited the consultant from copying or using any confidential information except under the terms of the PO.

After the parties agreed to the PO, Static sent a cease-and-desist letter to another company, OJ Commerce, for infringement of the same patent. Counsel for OJ Commerce contacted Leader’s lawyer, and the parties entered into a joint defense group governed by a joint defense agreement. Static subsequently sued OJ Commerce in a different district, after which counsel for Leader shared a copy of the PO and written assurance, which counsel for OJ Commerce signed and returned. Counsel for Leader then shared with OJ Commerce two deposition transcripts containing “a few pages” of confidential-designated information relating to Static’s licensing and royalty agreements.

During settlement negotiations, counsel for OJ Commerce revealed to Static’s counsel (who was not involved in the Leader case and was not a signatory to the PO) that he was “fully aware” of the actual royalties Static had received in the past. Static moved for discovery sanctions and an order holding Leader in contempt for violation of the PO. The magistrate judge ordered Leader to pay Static’s attorneys’ fees and a $1,000 sanction. After the district court judge affirmed, Leader appealed.

Reviewing under an abuse of discretion standard, the Federal Circuit evaluated the legal theories used by the magistrate judge and the district court. The district court concluded that Leader’s counsel should be held in contempt because he was responsible for OJ Commerce’s counsel’s improper use of the confidential information. Separately, the magistrate judge based its finding on the fact that Leader’s counsel “knew or should have known” that OJ Commerce’s counsel would use the information to bolster its defense in its own case. The Federal Circuit disagreed with both of these views, finding that Static failed to prove by clear and convincing evidence that Leader violated the PO. The Court concluded that Leader’s counsel “did exactly what was required to ensure [OJ Commerce’s counsel] would abide by the [...]

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Lost and “Found”: Fourth Circuit Interpretation of Discovery in Support of Foreign Litigation Opens Circuit Split

by Christopher M. Bruno | Jun 23, 2022 | Patents

The US Court of Appeals for the Fourth Circuit held that a corporation that is not physically present in a district is not “found” in the district for purposes of the federal statute that authorizes courts to order discovery for use in a foreign tribunal. In re Eli Lilly and Co., Case No. 22-1094 (4th Cir. 2022) (Niemeyer, Diaz, JJ.; Floyd, Sr. J.) The Court rejected the approach of the Second Circuit, which previously had held that a district court’s power to order discovery under 28 USC § 1782 was coextensive with the minimum contacts inquiry of specific jurisdiction.

After acquiring a patent portfolio related to the psoriasis drug Taltz, Novartis AG sued Eli Lilly for patent infringement in several European courts. Eli Lilly requested discovery from Novartis in the Eastern District of Virginia under § 1782, which authorizes a district court “of the district in which a person resides or is found” to “order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal.” Novartis is based in Switzerland and has no offices or employees in the Eastern District of Virginia.

Following a magistrate judge’s grant of Eli Lilly’s ex parte application for a discovery subpoena, the district court vacated that order. The Fourth Circuit affirmed, substantially echoing the district court’s reasoning.

There was no dispute that Novartis did not “reside” in the district; the only issue was whether Novartis could be “found” there. The Fourth Circuit considered the plain meaning of “found,” Supreme Court precedent interpreting similar statutory language, and the legislative history of the statute, and held “that a corporation is found where it is physically present by its officers and agents carrying on the corporation’s business.”

The Fourth Circuit rejected Eli Lilly’s counterargument that the satisfaction of specific jurisdiction requirements was sufficient for a corporation to be “found” in a district, including Eli Lilly’s reliance on the 2019 Second Circuit decision in In re del Valle Ruiz, which held that a corporation was “found” wherever it could be subject to specific jurisdiction. The Fourth Circuit concluded that In re del Valle Ruiz failed to give “found” its plain meaning, incorrectly ignored Supreme Court precedent and did not give appropriate weight to the legislative history of § 1782.

Even if the Fourth Circuit had disagreed with the district court’s interpretation of § 1782, the Court would still have affirmed based on the deferential abuse-of-discretion standard. Because § 1782 permits, but does not require, an order of discovery, the Court found that the district court’s determination that to “request[ ] [ ] a substantial volume of data and materials located abroad [to] be brought into the United States for subsequent use in proceedings abroad, [would be] a nonsensical result” was well reasoned.

With this decision, the Fourth Circuit broke with the Second Circuit and created a circuit split in the interpretation of § 1782.

Ian Howard, a summer associate in the Washington, DC, office, also contributed [...]

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