Intellectual Tech LLC v. Zebra Techs. Corp.
| Docket Number | 6:19-cv-00628-ADA |
| Decision Date | 03 August 2022 |
| Parties | INTELLECTUAL TECH LLC, Plaintiff, v. ZEBRA TECHNOLOGIES CORPORATION, Defendant. |
| Court | U.S. District Court — Western District of Texas |
Came on for consideration this date is the Joint Motion for Entry of Disputed Bill of Costs, ECF No. 148, and Plaintiff Intellectual Tech LLC's Motion for Reconsideration and Reinstatement. ECF No. 147 (the “Motion”). Defendant Zebra Technologies Corporation (“Zebra”) responded to the Motion on June 29 2022, ECF No. 150, to which Intellectual Tech LLC (“IT”) replied on July 6, 2022, ECF No. 151. After careful consideration of the motions, the parties' briefs, and the applicable law, the Court GRANTS-IN-PART and DENIES-IN-PART the Joint Motion for Entry of Disputed Bills of Costs, ECF No. 148, and DENIES Plaintiff's Motion for Reconsideration and Reinstatement, ECF No. 147.
Whether IT suffered a constitutional injury sufficient to give it standing depends on a series of interrelated agreements IT entered into with its parent, OnAsset Intelligence, Inc. (“OnAsset”), and OnAsset's creditor, Main Street Capital Corporation (“Main Street”). OnAsset gave Main Street a security interest in U.S. Patent No. 7,233,247 (the “'247 patent”) in exchange for a loan. And when OnAsset defaulted on that loan, Main Street gained certain rights in the '247 patent by dint of its security interest. OnAsset and Main Street later entered a forbearance agreement to deal with OnAsset's default. IT sprung from that forbearance and was given, along with title to the '247 patent, a mandate to monetize the '247 patent. In furtherance of that mandate, IT sued Zebra in this Court on October 22, 2019, alleging infringement of the '247 patent. See ECF No. 1. But the rights Main Street maintained in the '247 patent-through security interests followed by defaults-deprived IT of constitutional standing.
The Court concluded as much in an opinion rendered May 20, 2022. See Intellectual Tech LLC v. Zebra Techs. Corp., No. 6:19-cv-00628-ADA, 2022 U.S. Dist. LEXIS 90905, at *19 (W.D. Tex. May 20, 2022) (the “Dismissal Op. ”). The Court determined that, on October 22, 2019- when IT initiated this Action-IT was in default on a loan from Main Street. See id. at *10. According to the relevant contractual provisions, Main Street received certain rights the moment IT defaulted. See id. These included the unfettered right to enforce, “sell, assign, transfer, pledge, encumber or otherwise dispose of' the ‘247 patent. See id. The Court concluded that IT had no exclusionary right against Zebra at the time IT initiated this Action because Main Street could have licensed Zebra's allegedly infringing conduct on that day. Id. This, the Court opined, inevitably followed from one vein of relevant caselaw. Id. .
IT asks the Court to reconsider that ruling under Federal Rule of Civil Procedure 59(e) to correct what it sees as manifest errors. Identifying no manifest error, the Court declines to do so.
“The law of Article III standing, which is built on separation-of-powers principles, serves to prevent the judicial process from being used to usurp the powers of the political branches.” Town of Chester v. Laroe Estates, Inc., 137 S.Ct. 1645, 1650, 198 L.Ed.2d 64 (2017). To have standing, IT “must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547, 194 L.Ed.2d 635 (2016). “Th[at] triad of injury in fact, causation, and redressability constitutes the core of Article III's case-or-controversy requirement,” and IT, as “the party invoking federal jurisdiction[,] bears the burden of establishing its existence.” Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 103-04, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) (footnote omitted).
Regional circuit law governs standards for the “dismissal of a complaint for lack of standing unless the issue is unique to patent law and therefore exclusively assigned to the Federal Circuit.” Univ. of S. Fla. Rsch. Found., Inc. v. Fujifilm Med. Sys. U.S.A., 19 F.4th 1315, 1323 (U.S. Fed. Cir. 2021). Federal Circuit law governs an entity's constitutional standing in a patent infringement action. See WiAV Sols. LLC v. Motorola, Inc., 631 F.3d 1257, 1263 (Fed. Cir. 2010).
“[E]ach element of Article III standing must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, with the same evidentiary requirements of that stage of litigation.” Legacy Cmty. Health Servs., Inc. v. Smith, 881 F.3d 358, 366 (5th Cir.), as revised (Feb. 1, 2018), cert. denied, 139 S.Ct. 211, 202 L.Ed.2d 126 (2018) (quotation marks omitted). Thus, at summary judgment, IT cannot rely on “mere allegations”; it “must set forth by affidavit or other evidence specific facts” supporting standing. Lujan v. Defs. of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) (quotation marks omitted).
Ascertaining standing in a patent-infringement case requires an inquiry into both Article III or “constitutional” standing and what has been called “statutory” or “prudential” standing. To have constitutional standing, a plaintiff must have an “exclusionary right.” Morrow v. Microsoft Corp., 499 F.3d 1332, 1340 (Fed. Cir. 2007). To have statutory standing, a plaintiff must have “all substantial rights” to the asserted patent. Id.
Motions for reconsideration are made under Rule 59(e) of the Federal Rules of Civil Procedure. “Under Rule 59(e), amending a judgment is appropriate (1) where there has been an intervening change in the controlling law; (2) where the movant presents newly discovered evidence that was previously unavailable; or (3) to correct a manifest error of law or fact.” Demahy v. Schwarz Pharma, Inc., 702 F.3d 177, 182 (5th Cir. 2012).
Federal Rule of Civil Procedure 54(d)(1) provides: “Unless a federal statute, these rules, or a court order provides otherwise, costs-other than attorney's fees-should be allowed to the prevailing party.” Fed.R.Civ.P. 54(d)(1). Federal Circuit law governs the definition of a “prevailing party” in patent cases. See, e.g., Raniere v. Microsoft Corp., 887 F.3d 1298 (Fed. Cir. 2018). Section 1920 of Title 28 “control[s] a federal court's power to hold a losing party responsible for the opponent's fees” by limiting what costs can be awarded. Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 444, 107 S.Ct. 2494, 96 L.Ed.2d 385 (1987).
The WiAV and Uniloc opinions laid down the following principle: a patent title holder can deprive itself of exclusionary rights by vesting a third party with a right to assign or sublicense the patent (even if the third party never exercises those rights). The Court cannot stress this point enough: holding title to a patent is not the same as holding exclusionary rights to a patent. In the Uniloc opinions, the patent title holders, the Unilocs, did not have exclusionary rights because they vested a third party, Fortress, with a right to sublicense the patent. Fortress did not have an exclusionary right in the asserted patent, but Fortress's right to sublicense the same sufficed to deprive the Unilocs of their exclusionary right. See Dismissal Op. at *15-17.
IT has not grasped these concepts. Its briefing returns, again and again, to whether Main Street received exclusionary rights in the '247 patent. To whether Main Street ever deprived IT of title to the '247 patent.[1] That is not the critical question. The Court affirms that, upon default, title to the '247 patent remained with IT. See Dismissal Op. at *7 (). The critical question is whether Main Street received rights upon IT's default that deprived IT-the undisputed title holder-of exclusionary rights. Just as Fortress's unfettered right to sublicense deprived the title holder, the Unilocs, of exclusionary rights, Main Street's unfettered right to license and/or assign the '247 patent deprived IT of exclusionary rights.[2] Main Street did not have to take title to the '247 patent to achieve this. It bears repeating: Main Street did not have to take title to the '247 patent to achieve this. The Motion's fixation on Main Street not taking title to the '247 patent is, therefore, misplaced.
Despite IT's holding title to the '247 patent, IT lacked exclusionary rights because, on default, Main Street had the right to assign or license the '247 patent to Zebra (or anyone else). In ceding these rights to Main Street, IT opened the door for Main Street to license Zebra's accused conduct such that IT could not exercise its exclusionary rights against Zebra. Cf. WiAV, 631 F.3d at 1266 (). And it is Zebra's ability to receive a license to the patent[3] that destroys IT's exclusionary rights against Zebra.
IT may be correct that it is more accurate to say that, on default Main Street has an unfettered right to license and/or assign the '247 patent in IT's name. It...
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