Data Race, Inc. v. Lucent Technologies, Inc.
| Decision Date | 29 October 1999 |
| Docket Number | No. CIV.A. SA98CA746PMA.,CIV.A. SA98CA746PMA. |
| Citation | 73 F.Supp.2d 698 |
| Parties | DATA RACE, INC., Plaintiff, v. LUCENT TECHNOLOGIES, INC., Defendant. |
| Court | U.S. District Court — Western District of Texas |
John N. McCamish, Jr., McCamish & Socks, P.C., San Antonio, TX, Floyd R. Nation, Arnold White & Durkee, Houston, TX, David D. Bahler, Arnold, White & Durkee, Austin, TX, Harold L. "Buddy" Socks, McCamish & Socks, P.C., San Antonio, TX, for Plaintiff.
Robert W. Wachsmuth, The Kleberg Law Firm, San Antonio, TX, Hubert W. Green, Jr., The Kleberg Law Firm, San Antonio, TX, Paul C. Saunders, Cravath, Swaine & Moore, New York, NY, Julie A. North, Cravath, Swaine & Moore, New York, NY, Christopher Steskal, Karin A. Guiduli, Cravath, Swaine & Moore, New York, NY, for Defendants.
FINDINGS OF FACT AND CONCLUSIONS OF LAW AND MEMORANDUM OPINION
Pursuant to the consent of the parties filed on November 6, 1998,1 in compliance with Fed.R.Civ.P. 52, 56 and 65, the Court enters the following Findings of Fact and Conclusions of Law and Memorandum Opinion in connection with the combined evidentiary hearing on plaintiff's motion for issuance of a preliminary injunction and claims construction hearing, which began on August 30, 1999 and concluded on September 17, 1999. As discussed below, this Order also decides other issues raised by defendant's motion for summary judgment and plaintiff's motion for partial summary judgment.
The Court has jurisdiction over plaintiff's claims that defendant has infringed its patent, 28 U.S.C. §§ 1331, 1338(a) and 2201(a), and over defendant's counterclaim for declaratory judgment that plaintiff's patent is invalid and not infringed by defendant, 28 U.S.C. §§ 1338(a), 2201 and 2202. Venue is proper under 28 U.S.C. § 1400(b).
This case concerns claims of alleged patent infringement. Data Race, Inc. ("plaintiff" or "Data Race") filed its original complaint and motion for issuance of a preliminary injunction on August 18, 1998 alleging that defendant Lucent Technologies, Inc. ("defendant" or "Lucent") has infringed one of its patents, United States Patent No. 5,764,639 ("'639 patent"); misappropriated confidential and proprietary information in breach of contract and theft of trade secrets; violated the Sherman Antitrust Act; and engaged in unfair competition.2 Among other allegations, Data Race averred that Lucent Technologies' operation of Lucent's Internet Telephony Server for Enterprises ("ITS-E") with Lucent's Virtual Telephone application infringed the '639 patent used in plaintiff's competing product marketed under the name "Be There!"
On September 17, 1998 the Court set a September 25, 1998 hearing to address plaintiff's request for expedited discovery and defendant's request to stay the case pending arbitration. The September 17 Order also called upon plaintiff to file an advisory on or before September 22, 1999 to inform the Court whether it wished to proceed with an evidentiary hearing on its motion for preliminary injunction on September 25.3 On September 21, 1998 defendant filed an advisory informing the Court that defendant had decided not to offer Virtual Telephone for general distribution and that no release date had been selected.4 On September 22, 1998 plaintiff filed an advisory in which it withdrew its request for a preliminary injunction.5 Therefore, the September 25, 1998 hearing did not address the issuance of a preliminary injunction.
Following the September 25 hearing, on October 2, 1998, the undersigned issued a report to the District Court recommending, inter alia, that plaintiff's motion for expedited discovery and defendant's motion for stay pending arbitration each be denied.6 With specific respect to plaintiff's motion for preliminary injunction and in reference to plaintiff's advisories,7 the undersigned recommended that the portion of the Complaint that had been construed as a motion for preliminary injunction be denied without prejudice to plaintiff "filing a separate motion for a preliminary injunction with a request for an evidentiary hearing after it has obtained the preliminary discovery which it believes it is required to support its application."8 On October 27, 1998 the District Court accepted that report.9 That same day, plaintiff's first amended complaint, which asserted only claims of patent infringement, the "live" complaint at issue in this case, was filed.10 Lucent had answered plaintiff's first amended complaint on October 19, 1998 asserting the defenses of non-infringement, invalidity (for anticipation and obviousness) and unenforceability (for inequitable conduct) and asserting a counterclaim for declaratory judgment of non-infringement and invalidity of the '639 patent.
On August 3, 1999 plaintiff filed its renewed motion for issuance of a preliminary injunction.11 In sum, plaintiff argues that after plaintiffs' first request for preliminary injunction, Lucent shifted the Virtual Telephone application from the original hardware platform (the ITS-E server) to a different platform, the MultiMedia Communications Exchange ("MMCX") server, release 3.0, and decided to offer the Virtual Telephone for sale in conjunction with the new MMCX release 3.0 server. Plaintiff argues that the Virtual Telephone continues to infringe the '639 patent because the elements of the invention claimed in the '639 patent are included in the MMCX, release 3.0, with the Virtual Telephone application. Plaintiff requests a preliminary injunction to prevent Lucent from "making, using, selling or offering to sell its ... [MMCX] ... server, release 3.0, which includes a Virtual Telephone application ("Virtual Telephone")."12 Plaintiff asserts infringement of claims 1, 14 and 39 of the '639 patent.13
Lucent argues, in sum, that Data Race's request for a preliminary injunction should be denied for five reasons. First, Lucent argues that Virtual Telephone does not infringe the '639 patent. Second, Lucent argues that even if there is infringement, the MMCX server, including the concept and technology for the Virtual Telephone, was invented prior to the date plaintiff filed its patent application and, therefore, the '639 patent is invalid. Third, Lucent argues that the '639 patent is invalid under 35 U.S.C. § 102(a) and (e) because it was anticipated by the prior art and under 35 U.S.C. § 103 because, in light of the prior art, it would have been obvious to a person of ordinary skill in the art at the time of the claimed invention. Fourth, Lucent argues that the '639 patent is unenforceable due to plaintiff's inequitable conduct before the United States Patent and Trademark Office ("PTO"). Fifth, Lucent argues that plaintiff has failed to demonstrate irreparable harm because the harm plaintiff alleges is compensable in money.
Between August 30, 1999 and September 17, 1999, the Court held an evidentiary hearing on plaintiffs' motion for preliminary injunction.14 Prior to the hearing, the parties filed Markman briefs,15 proposed claim construction statements,16 a joint proposed claim construction statement,17 and briefing on the requested preliminary injunction.18 Prior to the hearing, the parties stipulated to the admission of most of the evidence. At the hearing, three witnesses testified for plaintiff: Dr. W.B. Barker and Kenneth L. Witt, two of the three inventors of the '639 patent,19 and plaintiff's expert witness, Scott O. Bradner. Defendant called four witnesses: Bryan S. Katz, Alan J. Literati, Richard S. Vidil and defendant's expert, Dr. Stephen Weiss. At the close of defendant's case, plaintiff re-called Mr. Witt as a rebuttal witness.20
At the beginning of the hearing, Lucent made an oral motion pursuant to Fed. R.Civ.P. 65(a)(2) to consolidate the preliminary injunction hearing with the trial on the merits. Data Race opposed this motion on the ground that it had a right to a jury trial. The Court denied the motion to consolidate, ruling that Data Race had a right to jury trial if it could establish compensatory damages for its claim of infringement.21 Two motions were carried with the case: defendant's oral motion for partial findings under Rule 52(c), Fed. R.Civ.P., made at the close of plaintiff's case-in-chief22 and defendant's motion to strike the rebuttal testimony of Mr. Witt.23 At the close of the evidence the Court extended the time for the parties to file motions for summary judgment until October 1, 1999; ordered the parties to file proposed findings of fact and conclusions of law on or before October 4, 1999; and called for responses to any motions for summary judgment to be filed on or before October 8, 1999.
The Court has now reviewed the parties' proposed findings of fact and conclusions of law,24 Lucent's motion for summary judgment,25 Data Race's motion for partial summary judgment26 and the parties' responses thereto.27 For the reasons stated in this Order, the Court concludes that Data Race has not established a claim for damages and, therefore, summary judgment in favor of Lucent on damages is appropriate. Accordingly, because Data Race is not entitled to a jury trial on its remaining claim for injunctive relief, the Court may decide the remaining issues on the merits. The Court concludes that Data Race has not met its burden of proof that it is entitled to issuance of a preliminary injunction. Although, in the preliminary injunction context, Data Race has met its burden of showing a reasonable likelihood that Lucent cannot produce clear and convincing evidence that the patent is invalid, Data Race has not established reasonable likelihood that the MMCX, release 3.0 with Virtual Telephone infringes the '639 patent. The Court further concludes that there is no genuine issue of material fact regarding the issue of infringement or, in the alternative, that judgment on the issue of infringement...
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