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PersonalWeb Technologies LLC v. International Business Machines Corp.

United States District Court, N.D. California, San Jose Division

May 9, 2017



          EDWARD J. DAVILA United States District Judge.

         Plaintiffs PersonalWeb Technologies LLC (“PersonalWeb”) and Level 3 Communications, LLC (“Level 3”) (collectively, “Plaintiffs”) bring the instant action for patent infringement against Defendant International Business Machines Corporation (“IBM” or “Defendant”). Presently before the Court are two motions filed by IBM: IBM's Motion for to Dismiss (Dkt. No. 212) and IBM's Motion for Summary Judgment (Dkt. No. 218). Having carefully considered the moving, opposing, and reply papers for both motions as well as the arguments of counsel from the hearing on these matters, the Court DENIES IBM's Motion to Dismiss and GRANTS IN PART and DENIES IN PART IBM's Motion for Summary Judgment.

         I. BACKGROUND

         A. Factual Background

         PersonalWeb is a limited liability company organized under the laws of Texas with its principal place of business in Tyler, Texas. Dkt. No. 29 ¶ 4. Level 3 is a limited liability company organized under the laws of Delaware with its principle place of business in Broomfield, Colorado. Id. ¶ 5. IBM is a New York corporation with its principal executive offices at Armonk, New York. Id. ¶ 7. PersonalWeb and Level 3 each own a fifty percent (50%) undivided interest in U.S. Patent No. 8, 099, 420 (the “'420 patent”). Id. ¶ 1. IBM is a technology company which makes software and storage products, including the Tivoli Storage Manager (“TSM”). Id. ¶¶ 8-9.

         i. The Asserted Patent

         The '420 patent relates to “data processing systems wherein data items are identified by substantially unique identifiers which depend on all of the data in the data items and only on the data in the data items.” '420 patent, col. 1 ll. 20-22. The '420 patent belongs to a chain of several continuation and divisional patent applications, the earliest of which was filed on April 11, 1995. The '420 patent expired on April 11, 2015.

         Currently at issue is claim 166, which recites:

166. A system comprising hardware, including at least a processor, and software, in combination with said hardware to:
(A) for a particular data item in a set of data items, said particular data item comprising a corresponding particular sequence of bits:
(a1) determine one or more content-dependent digital identifiers for said particular data item, each said content-dependent digital identifier being based at least in part on a given function of at least some of the bits in the particular sequence of bits of the particular data item, wherein two identical data items will have the same digital identifiers as determined using said given function; and
(a2) selectively permit the particular data item to be made available for access and to be provided to or accessed by or from at least some of the computers in a network of computers, wherein the data item is not to be made available for access or provided without authorization, as resolved based, at least in part, on whether or not at least one of said one or more content-dependent digital identifiers for said particular data item corresponds to an entry in one or more databases, each of said one or more databases comprising a plurality of identifiers, each of said identifiers in each said database corresponding to at least one data item of a plurality of data items, and each of said identifiers in each said database being based, at least in part, on at least some of the data in a corresponding data item.

'420 patent, col. 56 l. 51-col. 57 l. 13.

         ii. The Accused Product

         PersonalWeb currently asserts claim 166 against a single product: TSM. TSM is a data storage, back-up, and recovery product sold by IBM. See Dkt. No. 217-4, Joint Statement of Undisputed Facts (“JSUF”), ¶¶ 37-38. IBM touts TSM as currently “support[ing] organizations ranging from small businesses to large enterprises.” Dkt. 232-1, Declaration of Benjamin J. Christoff in Support of PersonalWeb's Opposition to IBM's Motion for Summary Judgment (“Christoff MSJ Decl.”), Ex. 5 at 9. Customers can download the TSM software suite from IBM using a website called Passport Advantage. JSUF ¶ 40. TSM can be deployed in a wide variety of complex environments, including “virtual, physical, and cloud environments.” Dkt. No. 218-1, Declaration of Kenneth R. Adamo in Support of IBM's Motion for Summary Judgment (“Adamo MSJ Decl.”), Ex. 7 at 10.

         TSM includes “client-side deduplication” and “server-side deduplication” features which help prevent duplicate copies of the same data from being backed up. JSUF ¶¶ 44-45. At a high level, this works by calculating hash values on chunks of data and then using those hash values to determine if that data has already been backed up. See Christoff MSJ Decl., Ex. 3 at 40-42. “Server-side deduplication” has been included in TSM versions 6.1 and later. JSUF ¶ 44. “Client-side deduplication” has been included in TSM versions 6.2 and later. JSUF ¶ 45.

         iii. Licensing History

         Over the years, the '420 patent (as well as other patents not at issue here) has been part of several acquisitions and patent licensing agreements. Several are relevant here:

         On June 12, 1996, the original assignee of the '420 patent, Kinetech, Inc. (“Kinetech”), entered into a Technology Transfer Agreement (“TTA”) with Connected Corporation (“Connected”). Dkt. 212-1, Declaration of Kenneth R. Adamo in Support of IBM's Motion to Dismiss (“Adamo MTD Decl.”), Ex. 5. The TTA granted an exclusive, field of use license to Connected, reciting:

On the terms and subject to the conditions set forth in this Agreement, Kinetech grants to Connected, and Connected accepts, a perpetual, exclusive, worldwide, transferable (subject to Section 4) right and license to make, sell, use and sublicense the Invention under the Patent Application, but such license is limited solely for the purposes of developing and operating value-added, online backup and file recovery products and services, and Kinetech further grants to Connected, and Connected accepts, a perpetual nonexclusive, world-wide right and license to use and sublicense the Invention under the Patent Application, but such license is limited solely for purposes of developing and operating value-added online remote desktop system configuration management products and services (collectively, the “Licensed Use”). . . . In addition, Connected shall not during the pendancy of the Patent Application and the life of any related patent use the Invention in any manner outside of the Licensed Use and Kinetech reserves all other rights not expressly granted to Connected hereunder.

Id. at 2 (TTA § 2.1). The TAA defined the “Patent Application” as U.S. Patent Application No. 08/425, 160 (the “'160 application”) “including any . . . subsequently issued patent or patents and all divisions, continuations, continuations-in-part, and reissues thereof.” Id. at 1. The '420 patent is a continuation of an application which is a continuation of the '160 application. '420 patent.

         The TTA also granted to Connected “the right, at its own expense, to prosecute any infringer who is infringing on the Licensed Use or the Software and any recovery in connection therewith shall be the property of Connected.” Id. at 7 (TTA § 2.7.4). However, it also provided that

Kinetech shall have the right to join in the prosecution of any claims referred to in the foregoing sentence, provided that Kinetech shall bear its own costs and expenses, including the cost of any separate counsel, and provided, further, that in the event Kinetech wishes to join in the prosecution of such claims without engaging separate counsel, Kinetech shall share equally with Connected the cost of prosecuting any such claims. Each party shall cooperate with the other in connection with any infringement suits or claims involving the Invention or the Software.


         In 1999, IBM and the Hewlett-Packard Company (“HP”) entered into a cross-license that granted to IBM ___ Adamo MTD Decl., Ex. 8 at 3 (Cross-License § 2.1(a)). ___ Id. at 2 (Cross-License § 1.5(b)). On September 1, 2000, Kinetech entered into an agreement with Digital Island, Inc. (“Digital Island”) in which Kinetech assigned a 50% undivided interest in the '420 patent[1] to Digital Island. Adamo MTD Decl., Ex. 1. Digital Island assigned its 50% undivided interest to Savvis Asset Holdings, Inc. on February 13, 2004, which then assigned its interest to Mount Shasta Acquisition, LLC on January 22, 2007, which merged with Level 3 that same day. Adamo MTD Decl., Exs. 2, 3. On July 5, 2011, Kinetech assigned its own 50% undivided interest the '420 patent to PersonalWeb. Adamo MTD Decl., Ex. 4.

         Meanwhile, the rights granted under the TTA changed hands several times. In November 2004, Iron Mountain, Inc. (“IM”) acquired Connected, including the TTA. Adamo MTD Decl.. Ex. 6 at 1. In May 2011, Autonomy, Inc. (“Autonomy”) purchased the digital assets of IM, including the TTA. Id. at 2. In October 2011, HP acquired Autonomy, including the TTA. Adamo MTD Decl.. Ex. 7 at 1.

         In August 2012, PersonalWeb initiated an arbitration against IM, alleging material breach of the TTA and related claims. Adamo MTD Decl.. Ex. 6 at 2. The arbitration ended in a settlement agreement between PersonalWeb, IM, Autonomy, and HP, dated May 19, 2014, in which IM, Autonomy, and HP agreed to “transfer and assign to PersonalWeb[] the TTA and any license rights included therein.” Id. at 9 (Settlement Agreement § 5.1.1). Thus, as of May 19, 2014, PersonalWeb not only held a 50% undivided interest in the '420 patent, but also obtained the exclusive field of use license granted under the TTA. See id.

         B. Procedural History

         Meanwhile, on September 17, 2012, Plaintiffs (PersonalWeb and Level 3) initiated the instant lawsuit in the Eastern District of Texas, claiming that IBM infringed the '420 patent, as well as U.S. Patent Nos. 5, 978, 791 (the “'791 patent”); 6, 415, 280 (the “'280 patent”); 6, 928, 442 (the “'442 patent”); and 7, 802, 310 (the “'310 patent”). Dkt. No. 1. On September 3, 2013, Plaintiffs amended their Complaint to additionally accuse IBM of infringing U.S. Patent Nos. 7, 945, 539 (the “'539 patent”); 7, 945, 544 (the “'544 patent”); 7, 949, 662 (the “'662 patent”); and 8, 001, 096 (the “'096 patent”).[2] Dkt. No. 29 ¶¶ 1, 48. The Amended Complaint identified TSM, as well as eight other IBM products, [3] as infringing each of the nine Originally Asserted Patents. Id. at ¶¶ 1, 9.

         PersonalWeb[4] served Infringement Contentions on June 28, 2013, identifying seven of the Originally Accused Products[5] as infringing five of the Originally Asserted Patents.[6] Adamo MSJ Decl. Exs. 1-2. PersonalWeb supplemented its Infringement Contentions on November 19, 2013, adding accused products and modifying the list of asserted claims. Adamo MSJ Decl. Exs. 3-4.

         On March 11, 2016, Judge Gilstrap in the Eastern District of Texas issued a claim construction order. Dkt. No. 103. Four days later, Judge Gilstrap transferred this case to this district. Dkt. No. 107.

         On May 31, 2016, PersonalWeb sought leave in this district to amend its Infringement Contentions to (1) make clarifying changes related to certain terms that were construed by Judge Gilstrap, (2) add an accused product, and (3) add claims asserted against TSM. Dkt. No. 139. Magistrate Judge Cousins granted PersonalWeb's first request, but denied the remaining two. Dkt. No. 160. PersonalWeb served amended infringement contentions pursuant to Judge Cousins's order on August 11, 2016. Dkt. Nos. 189-3, 188-6.

         That fall, the parties took steps to narrow the case. In a letter dated September 4, 2016, PersonalWeb agreed to limit the accused products to TSM and CommonStore. JSUF ¶ 26. In an email dated October 19, 2016, PersonalWeb stated that it would not pursue infringement claims against CommonStore. JSUF ¶ 27. Fact discovery closed on December 6, 2016. Dkt. Nos. 165, 175, 176. On December 9, 2016, PersonalWeb served an expert report on infringement, in which it only covered infringement of claim 166 of the '420 patent by TSM. Adamo MSJ Decl., Ex. 5. Expert discovery closed on February 24, 2017. Dkt. Nos. 165, 208.

         Meanwhile, claims 1-3, 29 and 35 of the '791 patent and claims 1 and 10 of the '280 patent were invalidated through inter partes review and/or reexamination proceedings. Dkt. No. 215. The parties stipulated to dismissing these claims with prejudice, which the Court granted on March 6, 2017. Dkt. No. 219. The parties have not stipulated to dismissal of any other claims in this case.

         IBM now moves to dismiss all of PersonalWeb's infringement claims for lack of prudential standing under 35 U.S.C. § 281. Dkt. No. 212. IBM also moves for partial summary judgment that (1) IBM's manufacture, sale, importation, and/or offer for sale of TSM software does not infringe claim 166 of the '420 patent; (2) TSM does not infringe claim 166 of the '420 patent under the doctrine of equivalents; (3) IBM does not indirectly or jointly infringe claim 166 of the '420 patent; (4) TSM without the “client-side deduplication” feature does not infringe claim 166 of the '420 patent; (5) the claims no longer asserted by PersonalWeb and not yet dismissed are not infringed; and (6) IBM has not willfully infringed claim 166 of the '420 patent. Dkt. No. 218.


         A. Federal Rule of Civil Procedure 12(b)(6)

         Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim with sufficient specificity to “give the defendant fair notice of what the ... claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Although particular detail is not generally necessary, the factual allegations “must be enough to raise a right to relief above the speculative level” such that the claim “is plausible on its face.” Id. at 556-57. A complaint which falls short of the Rule 8(a) standard may be dismissed if it fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). Dismissal of a claim under Rule 12(b)(6) may be based on a “lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988); see Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008).

         When deciding whether to grant a motion to dismiss, the court generally “may not consider any material beyond the pleadings.” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990). However, the court may consider material submitted as part of the complaint or relied upon in the complaint, and may also consider material subject to judicial notice. See Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). In the event that a motion to dismiss is granted, “leave to amend should be granted ‘unless the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency.'” DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992) (quoting Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986)).

         B. Federal Rule of Civil Procedure 56

         A motion for summary judgment should be granted if “there is no genuine dispute to any material fact and the movant is entitled to a judgment as a matter of law.” Fed. R. Civ. R. 56(c); Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1134 (9th Cir. 2000). The moving party bears the initial burden of informing the court of the basis for the motion and identifying the portions of the pleadings, depositions, answers to interrogatories, admissions, or affidavits that demonstrate the absence of a triable issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

         If the moving party meets this initial burden, the burden then shifts to the non-moving party to go beyond the pleadings and designate specific materials in the record to show that there is a genuinely disputed fact. Fed.R.Civ.P. 56(c); Celotex, 477 U.S. at 324. The court must draw all reasonable inferences in favor of the party against whom summary judgment is sought. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). However, the mere suggestion that facts are in controversy, as well as conclusory or speculative testimony in affidavits and moving papers, is not sufficient to defeat summary judgment. See Thornhill Publ'g Co. v. GTE Corp., 594 F.2d 730, 738 (9th Cir. 1979). Instead, the non-moving party must come forward with admissible evidence to satisfy the burden. Fed.R.Civ.P. 56(c); see also Hal Roach Studios, Inc. v. Feiner & Co., Inc., 896 F.2d 1542, 1550 (9th Cir. 1990).

         A genuine issue for trial exists if the non-moving party presents evidence from which a reasonable jury, viewing the evidence in the light most favorable to that party, could resolve the material issue in his or her favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986); see also Barlow v. Ground, 943 F.2d 1132, 1134-36 (9th Cir. 1991). Conversely, summary judgment must be granted where a party “fails to make a showing sufficient to establish the existence of an element essential to that party's case, on which that party will bear the burden of proof at trial.” Celotex, 477 U.S. at 322.


         A. Motion to Dismiss

         IBM moves to dismiss PersonalWeb's[7] infringement claims on the grounds that it did not have standing under 35 U.S.C. § 281 at the time it filed this lawsuit in September 2012.

         i. Legal Principles

         Under § 281, only a “patentee” has standing to sue for patent infringement. 35 U.S.C. § 281. This creates a prudential standing requirement that a plaintiff in a patent infringement action must satisfy in addition to Article III standing. Alps S., LLC v. Ohio Willow Wood Co., 787 ...

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