Datatreasury Corporation v. Small Value Payments Company - 48

Datatreasury Corporation v. Small Value Payments Company Doc. 48 Case 2:04-cv-00085-DF Document 48 Filed 02/27/2006 Page 1 of 27 IN THE UNITED STATESDISTRICTCOURT FOR THE EASTERNDISTRICT OF TEXAS MARSHALL DIVISION DATATREASURYCORPORATION. Plaintiff V. SMALL VALUE PAYMENTS COMPANY, Defendant. $ $ $ $ NO.2:04cv85-DF $ $ $ $ PLAINTIFF DATATREASURY CORPORATION'SRESPONSE AND OPPOSITIONTO DEFENDANT SMALL VALUE PAYMENT COMPANY'S MOTION TO STAY Dockets.Justia.com Case 2:04-cv-00085-DF Document 48 Filed 02/27/2006 Page 2 of 27 TABLE OF AUTHORITIES Page(s) AccentDesigns,Inc. v. Jan JewelryDesigns,Inc.,1994 U.S. Dist. L E X I S 4 1 3 0( S . D . . Y . A p r . 6 , 1 9 9 4 ) . N ......6,13 Accord Output Technologl,t Corp. v. DataproductsCorp.,l99l U.S. Dist. ( L E X I S 2 0 1 6 8 W . D . W a .N o v . 2 5 , l 9 9 l ) . ..........7 (S.D. Tex. 1997). Agar Corp. v. Multi-Fluid,lnc.,983 F.Supp.1126 ....6,20 AmphenolT & M Antennas,Inc. v. CenturionIntn'1,lnc.,2001 U.S. Dist. ( .....6,8,19 L E X I S 1 3 7 9 5 N . D .I l 1 .S e p . 5 , 2 0 0 1 ) . Ariad Pharm., Inc. v. Mass.Inst. Of Tech.,2005U.S. Dist. L E X I S 1 , 0 9 4( D . M a s s . u n .6 , 2 0 0 5 ) . 1 J ArthrocareCorp. v. Smith&Nephew,Inc.,3l5 F. Supp.2d615 (D. DeI. 2004) Marine,Inc.,484F. Supp. 201 (8.D. Tex. 1980) Castanhov. Jackson CF NexMed Holdings, Inc. v. Block Investment,lnc.,2006 U.S. Dist. L E X I S 3 1 5 0( D . U t . J a n .t 9 , 2 0 0 6 ) . ......5 ..........6 ...........6 CognexCorp. v. Nat'l InstrumentsCorp.,2001 U.S. Dist. LEXIS 25555 (D.Del.Jwr.29,2001). Dow Chem.Co. v. Astro-Valcour, lnc.,110 F. Supp.2d 104 ( N . D .N . Y . 2 0 0 0 ) ..6,19 .....13 Emhart Industries,Inc. v. Sanlryo SeikiMfg. Co.,Ltd.,1987 U.S. Dist. ( L E X I S 1 5 0 3 3 N . D .I l l . F e b . 2 , 1 9 8 7 ) . ..........16 EnprotechCorp. v. AutotechCorp.,1990 U.S. Dist. LEXIS (N.D. 1990). nr. Ethicon,Inc. Qrigg,849F,2d1422(Fed.Cir. 1988). v. Gladishv. Tyco Toys,lnc.,1993 U.S. Dist. LEXIS 20211 (E.D. Cal. Sep.16, 1993). .....r5 .......11 ..6,16,19,20 Case 2:04-cv-00085-DF Document 48 Filed 02/27/2006 Page 3 of 27 HoechstCelanese Ltd.,78 F. 3d 1575 Corp v. BP Chemicals, ( F e d . i r . ) ,c e r t .d e n i e d , 5 l 9 . S . 9 1 1( 1 9 9 6 ) U C IMAX Corp. v. In-Three,fnc.,385 F. Supp.2d 1030 (C.D.Ca1.2005). In Re: Columbia Univ. PatentLitigation, 330 F. Supp.2d12 (D.Mass. 004). 2 ..........7 ...5,6,15,16 ........6,14,15 Jainv. TrimasCorp.,2005 U.S.Dist.LEXIS 28950(E.D.Cal. $ep.27,2005)....6 Landisv. N. Amer. Co.,299 U.S. 248 (1936). Motorola Inc. v. STMicroelectronics. E.D.T.X.No. 1:03-cv0407. lnc.,2006 U.S. Dist. NexMedHoldings,Inc. v. Block Investment, LEXIS 3150(D. Ut. Jan.19,2006). NTP, Inc. v. Research Motion, Ltd.,397 F.Supp.2d785 In (E.D. a.2005) V NTP, Inc. v. Research Motion, Ltd.,397 F.Supp.2d785 In (E.DVa.2005). . Output Technolog,, Corp. v. DataproductsCorp.,l99l U.S. Dist. ( L E X I S 2 0 1 6 8 W . D . W a .N o v . 2 5 , 1 9 9 1 ) San GiacomoN.A., Ltd. v. Pilliod Furniture, Inc.,1996 U.S. Dist (M.D. N.C. Aug. 13,1996). LEXIS 14440 LLC v. Amazon.Com,356 SoverainSofnuare F.Supp.2d660 ( E . D .T e x . 2 0 0 5 ) . . . .. ..5 ...........9 .......8 ........5 .............6,8 ...........13 ...6,15 ...........3,5,6,10,11 Stryker Corp. v. IntermedicsOrthopedics, lnc.,891 F. Supp.751 ( 8 . D .N . Y . 1 9 9 5 ) . .....13 TranslogicTech.,Inc. v. Hitachi, Ltd.,2005 U.S. Dist. LEXIS 38853 ( D . O r .D e c .1 3 , 2 0 0 5 ) . .......6,8,13 Visknse Corp. v. Amer. Nat'l Can Co., 261 F.3d 1316 ( F e dC i r . 2 0 0 1 ) . . Xerox Corp. v. 3Com Corp.,69 F.Supp.zd404 (W.D.N.Y. 1999) 6,8,14 ...........5 lll Case 2:04-cv-00085-DF Document 48 Filed 02/27/2006 Page 4 of 27 OTHER AUTHORITIES CheckTechnology CaseStaysin Texas,IP Law Bulletin,Oct. 13, 2005. .............2 DataTreasury SuitsStayingPut, AmericanBanker,OcL24,2005. ............2 DataTreasuryWins Another Round, Electronic PaymentsWeek, N o v .1 5 , 2 0 0 5 . ...........1 David Slays Another Goliath in Check-Imaging Infringement Cases,Digital T r a n s a c t i o n so v . 7 , 2 0 0 5 . N, ......................2 JPM Settles Check21 Patent in Battle,AmericanBanker,Jul. 7, 2005. ........2 J.P.Morean ChaseSettles PatentClaims,New York Times,Jul. 7,2005. ...........2 JP Morean SettlesPatent Suit Over Check knaeing Process,Wall StreetJournal, Ju1.7,2005. ..........2 Manual of PatentExaminingProcedure, (8thed.2drev.).. Sec.1901.06 ....19 Melville Company Takes on Nation's Lareest Banks in Court Over Check 21 Rules, Long IslandBusiness News, Oct.14,2005. .......2 PatentInfrineement Win Has hnplications for Check 21 knplementation, The Green S h e e tJ u l .2 8 , 2 0 0 5 . , ..........2 w Case 2:04-cv-00085-DF Document 48 Filed 02/27/2006 Page 5 of 27 COMES NOW DataTreasuryCorporation("DataTreasury"),Plaintiff in the and above-entitled numbered and civil action,and files the instantResponse Opposition to the Motion to Stay filed January27, 2006 by DefendantSmall Value Payrnents ("SVPCo"). Company INTRODUCTION For several years, 'oa wide variety of banks and financial services institutions" (quoting SVPCo Motion to Stay, pg. 2) have been infringing patents duly issued by the United StatesPatent and Trademark Ofhce ("USPTO") and held by DataTreasury. Since 2002, DataTreasury has sought redress for these widespread and ongoing infringing actions in the courts of the Eastern District of Texas. The press has taken note of DataTreasury's "courtroom war to enforce its patentfs] on the ideas comprising much of the check-imaging business."l A series of articles has chronicled the significant number and the breadth of companies within and outside the financial industry which have concededthe validity, enforceability, and infringement of DataTreasury'spatents. Those concessionshave come through the settlementof lawsuits, and by licensing agreements outside the litigation arena.' Machinations by various defendants to derail the ' DataTreasur.v Wins Another Round, Electronic Paynents Week, Nov. 15, 2005 (Exhibit A). " See,inter alia: Id. "DataTreasury ... won anotherround last week when France's Groupe Ingenico settled with DataTreasuryon the day of trial and agreedto a licensing agreement. The last-minute deal brings to six the number of such settlements:previously, J.P. Morgan Chase& Co., Bank One, NetDeposit, Inc., RDM Corp. and ACS Corp. surrenderedto DataTreasury ..."; David Slays Another Goliath in CheckImaging Infringement Cases,Digital Transactions,Nov. 7, 2005 (Exhibit B); Melville Company Takes on Nation's Largest Banks in Court Over Check 2l Rules, Long Island BusinessNews, Oct. 14, 2005 (Exhibit C); Patent Infringement Win Has Implications fqr Check 21 Irnplementation,The Green Sheet,Jul. 28, 2005 (Exhibit D); JPM Settlesin Check 21 PatentBattle, American Banker, Jul. 7, 2005 (Exhibit E); JP Morgan SettlesPatent Suit Over Check Imaging Process,Wall StreetJournal, JuI.7,2005 (Exhibit F); J.P. Morgan ChaseSettlesPatent Claims, New York Times, Jul. 7, 2005 (Exhibit G); Will Zions' Check 2l Patent Deal Lead to More?, American Banker, Jun. 20,2005 (Exhibit H). Case 2:04-cv-00085-DF Document 48 Filed 02/27/2006 Page 6 of 27 DataTreasury litigation or to move the suits outside the Eastern District of Texas have failed.3 These efforts to avoid reckoning in DataTreasury's chosen forum continue. Several defendantswith looming trial dates have asked the Court to stay the ongoing DataTreasurylitigation. They arguethat the lawsuits ongoing before this Court should be shelvedbecauseone defendant,First Data Corporation, veered off course en route to the '988 Texarkana federal courthouse and filed with the USPTO for reexamination of the and'137 patents. SVPCo was the first to advancethis position, with the Motion to Stay opposed herein. These latest attempts to bottle up this litigation should be rejected. While SVPCo's arguments in support of the requestedstay are misplaced, and will be addressedin turn, there is an additional, critical new factor weighing strongly against filed a new lawsuit SVPCo's stay motion. On Friday, February24,2006, DataTreasury against various defendants, including SVPCo, for infringement of additional patents recently acquired by DataTreasury. (EDTX CauseNo. 2:06cv72 (DF); see also Exhibit K). As a result, the parties to this action will be litigating against one another in the Eastem District of Texas regardlessof the reexaminationproceedingsrecently requested by First Data Corporation. Accordingly, SVPCo's efficiency and cost argumentshave been rendered moot.a DataTreasury will soon file a motion to consolidate the abovecaptionedsuit with this new litigation, regarding United StatesPatentNo. 5,265,007("the DataTreasurySuits Staying Put, American Banker, Oct.24,2005 (Exhibit I) ("A judge in the Northern District of Texas denied Viewpointe's motion to move its suit there, and the Charlotte check image archive provider declined to pursue the matter further ... Citi withdrew its motion to move its suit to the Southern District of New York after a New York judge endorseda DataTreasuryletter requestingthat the casebe heard where it was first filed)" Check Technology Case Stays in Texas, IP Law Bulletin, Oct. 13,2005 (Exhibit J) ("A Texas check imaging company that has rattled money-centerbanks with sweepingpatent litigation has successfully fought back an attempt led by Citigroup to move the caseto another jurisdiction'). 3 Case 2:04-cv-00085-DF Document 48 Filed 02/27/2006 Page 7 of 27 '007patent")tandUnitedStates ("the'868patent").6 patent Patent 5,717,868 Neither No. is in USPTO reexamination. In light of all the foregoing, "staying the case,basedsolely on speculationof what might possibly happen during reexamination, would be inefficient and inappropriate." SoverainSoftwareLLC v. Amazon.Com,356 F.Supp.2d660,663 (E.D. Tex. 2005). STATEMENT OF FACTS This is not a new lawsuit by any definition. The Complaint was filed nearly two years ago - on March 4,2004. Not only has the casebeen pending for an extendedperiod of time, but it is also on the downward slope of its tenure on the Court's docket. A final pretrial conference this casehas been scheduled October 3,2006.7 By agreement in for of the parties, the Court has ordered jury selection to commence on October 10, 2006 (less than eight months hence). Much more than just the passage of almost two years has transpired in this lawsuit. Consistentwith the agreed-toand Court-orderedschedulein the case: A motion to dismiss for want of venue and jurisdiction has been filed by SVPCo, fully briefed by the parties, and ruled upon by the Court, with an opinion and order authoredand issued; Preliminary infringement contentions have been prepared by DataTreasury and transmittedto SVPCo; SVPCo has preparedpreliminary invalidity contentions,and has transmittedtheseto DataTreasurv: - - " DataTreasuryanticipatesthat the SVPCo witnessesto be deposedduring discovery as to the new lawsuit will be similar, if not identical, to those whom DataTreasurywill deposeon the '988 and'137 litigation. 5 The '007 patent duly and legally issued on Novernber 23, lgg3, with John L. Barnhard, Jr., Thomas K. Bowen, Terry L. Geer, and John W. Liebersbachas the named inventors, for an invention of a central check clearing system. 'The '868 patent duly and legally issued on February 10, 1993, with David L. Jamesas named inventor, for an invention with an electronic payment interchange concentrator. 7 Document 22, Amended Agreed CaseManagementOrder (f,rledJuly 27,2005). Case 2:04-cv-00085-DF Document 48 Filed 02/27/2006 Page 8 of 27 - Initial disclosureshave been made by the parties, , including, as SVPCco concedes,8 comprehensivedisclosures by DataTreasury with data on hundreds of individuals with relevant knowledge; A motion to compel amendedpreliminary infringement contentionshas been frled by SVPCo and fully briefed by the parties; The parties have exchangedproposedterms and claim elementsfor construction;e The parties have exchangedpreliminary claim constructionsand extrinsic evidence; Claim construction discovery has closed; Meticulous and comprehensive claim construction briefing has been filed by DataTreasury,including a detailed expert affidavit;lO SVPCo's responsiveclaim constructionbriefing will be filed tomorrow, February 28, 2005 (if timely filed); DataTreasuryhas filed a motion to consolidateclaim constructionproceedingsin this lawsuit with those in DataTreasury v. MagTek, No. 2:03cv-459,just as the Court did earlier with severallawsuits in this samelitisation.ll In addition to the events detailed ubouJ, each representing an investment of - - - - significant time and money by the litigants, large-scale discovery exchange has transpired. SVPCo's characterization of the document exchange in this case as comprising "several thousandsof pages" (SVPCo Motion to Dismiss, pg. 4) is, to be charitable, understated. In fact, DataTreasury has produced some two hundred thirty thousand (230,000) pages of discovery material, and SVPCo has produced about fiftythree thousand (53,000) pages of discovery material thus far - much more than several t SVPCo Motion to Stay, pg. 4. e Although SVPCo arguesthat "many of the terms of the patents-in-suitare in dispute between the parries here" (SVPCo Motion to Stay, pg. 3) the construction on '988 and '137's claims in this casewill not be the Court's frst encounterwith these terms. The '988 and '137 terms have already been exhaustively construed,parsed and defined as a result of Marlcrnanproceedingsin earlier DataTreasurylitigation before the Court. to While SVPCo has not deposedany of DataTreasury's experts,and vice-versa,it is not altogetheraccurate to say, as SVPCo does,that "there has been no expert discovery" (SVPCo Motion to Stay, pg. 3) in view of the Hiles expert affidavit and the work it represents. Case 2:04-cv-00085-DF Document 48 Filed 02/27/2006 Page 9 of 27 thousand pages. Significant resources have been expended by DataTreasury in cataloging and reviewing the discovery materials received, and DataTreasurypresumes that the same is true for SVPCo's counsel as to the nearly quarter of a million pagesof documentsDataTreasuryproduced. ARGUMENT On this much DataTreasury and SVPCo agree - this Court has the inherent authority to manage its docket. A district court is vested with concomitant plenary licenseto deny a litigant's requestfor stay of suit. ViskaseCorp. v. Amer. Nat'l Can Co., 261 F.3d 1316, 1328(Fed. Cir. 2001) ("the court is not requiredto stayjudicial resolution in view of the reexaminations"); Soverain SofnuareLLC v. Amazon.Com,356 F.Supp.2d 660,662 (E.D. Tex. 2005); Landis v. N. Amer. Co.,299 U.S. 248, 254 (1936);NTP, Inc. v. ResearchIn Motion, Ltd.,397 F.Supp.2d785,787 (E.D. Va. 2005) ("a court is under no obligation to delay its own proceedings by yielding to ongoing PTO patent reexaminations,regardlessof their relevancy to infringement claims which the court must analyze"). The rule in this district and elsewhereis that the burden of proof and persuasionto establishthe need for and propriety of this stay rests squarely with SVPCo, as the party seeking delay. "The supplicant for a stay must make out a clear case of hardship or inequity in being required to go forward, if there is even a fair possibility that the stay for which he prays will work damageto someoneelse." Castanho v. Jacl