This post summarizes some of the significant developments in the Northern District of Texas and the Eastern District of Texas for the month of October 2020.

Deep Web, LLC v. Kakao Corporation, No. 2:20-cv-00139-JRG-RSP (E.D. Tex. Oct. 3, 2020) Plaintiff’s Motion for Leave to Effect Alternative Service of Foreign Defendant

Plaintiff Deep Web, LLC filed its complaint on May 6, 2020, alleging that South Korean Defendant Kakao Corporation infringed two of Deep Web’s patents. After unsuccessfully attempting to serve Kakao through the Texas Secretary of State’s office, Deep Web filed a Motion for Leave to Effect Alternative Service via email pursuant to Federal Rule of Civil Procedure 4(f)(3). Federal Rule of Civil Procedure 4(f)(3) allows the service of process to an individual not within any judicial district of the United States by means not prohibited by international agreement, as a court orders.[1]

The court noted the United States and South Korea are both signatories to the Hague Convention.[2] In its Motion, Deep Web argued it should be allowed to serve Kakao via email because Deep Web believed service through the Hague Convention would be delayed due to COVID-19 quarantine regulations that were in place at the time this lawsuit was filed. The court denied Deep Web’s Motion for Alternative Service for three reasons.

First, the court found Deep Web did not meet its burden to show that Korea allowed alternative methods of service beyond the Hague Convention. By failing to address how South Korea applied the Hague Convention or to cite to case law where a Korean defendant was served via alternative service, Plaintiff did not adequately establish alternative service was not prohibited by an international agreement. Second, the court found that even if alternative service was allowed, Deep Web did not establish service by email was appropriate to give Kakao proper notice. Although Deep Web cited a case where a plaintiff’s service by email to an address shown on a defendant’s website, along with additional service by mail and fax, was sufficient, the court found that Deep Web’s plan to only serve Kakao at an email address where Deep Web had not previously contacted Kakao before this litigation did not “apprise [Kakao] of the pendency of the action and afford [Kakao] an opportunity to present [its] objections.” Third, the court found that Deep Web, by failing to provide South Korea’s COVID-19 regulations and to explain how these regulations would delay service, provided no evidence to support its assertion that service in Korea pursuant to the Hague Convention has been slowed due to COVID-19 to an impracticable level.

The court noted that although district courts are more likely to permit alternative service by email if service in compliance with the Hague Convention is attempted, Deep Web made no such attempt. The court did not conclude that email could never be considered a proper way to serve a foreign defendant, but rather that Deep Web did not meet its burden to show this alternative method of service was appropriate in this matter.

General Access Solutions, Ltd. V. Sprint Spectrum, L.P. et. al., No. 2:20-CV-00007-RWS (E.D. Tex. October 6, 2020): Motion to Compel the Production of Information Regarding Defendant’s Valuation

Plaintiff General Access Solutions, Ltd. filed a patent infringement lawsuit and contended that the patent it was asserting enabled a more efficient use of spectrum by addressing beamforming in a time division duplex or network. After receiving Defendant Sprint Spectrum, L.P.’s discovery responses, General Access moved to compel the production of documents regarding the valuation of Sprint’s spectrum and argued that the valuation of Sprint’s spectrum was necessary to calculate damages. Sprint argued that General Access failed to meet its burden of showing that the requested documents were relevant to the lawsuit and that General Access had not identified any evidence in the asserted patent to support General Access’s claims about the patent’s contributions to the more efficient use of available spectrum.

The court denied General Access’s motion to compel, stating that General Access failed to show the relevance of the requested material. In doing so, the court reasoned that the asserted patent did not claim spectrum and that General Access does not argue that it does. The court found “because the spectrum is not an infringing feature, [General Access’s] valuation of Sprint’s spectrum cannot form the basis of a damages award.”

Unicorn Global, Inc., et. al. v. Golabs, Inc. d/b/a Go Trax, et. al.; No. 3:19-CV-754-N-BT (N.D.Tex. October 7, 2020) Defendants’ Motion to Sever and Stay

In Unicorn Global, Defendants Walmart, Inc., Wal-Mart Stores Texas, LLC, and Walmart.com USA, LLC (“Walmart”) filed a motion to sever and stay Plaintiffs’ claims against them until Plaintiffs’ claims of willful infringement against Defendant Golabs, Inc., the manufacturer of various hoverboard products sold by Walmart, were resolved. Walmart’s arguments for severance focused on Walmart being a downstream retail customer of Golabs and the “customer-suit expectation”[3] applying to Plaintiffs’ claims against it.

In granting Walmart’s motion, the court applied the customer-suit exception’s three factor test to determine “(1) whether the customer-defendant in the later-filed lawsuit is merely a reseller; (2) whether the customer-defendant agrees to be bound by any decision in the later-filed case that is in favor of the patent owner; and (3) whether the manufacturer is the only source of the infringing product.”[4]

The court found that because Walmart is clearly a reseller of the hoverboard products and agreed to be bound by the court’s decision regarding the issues of infringement, invalidity, and enforceability, the first two factors favored severing the case. With respect to the third factor, the court accepted Walmart’s position that Zhejiang, the parent of Golabs, was the manufacturer and no other party was the source of the infringing products. The court’s customer-suit exception analysis concluded that Golabs is the true defendant and that Walmart is merely a downstream retailer. The court ultimately found that any ruling on Plaintiffs’ willful infringement claims against Golabs will necessarily reach Plaintiffs’ claims against Walmart, and thus, that judicial expediency favors severing and staying Plaintiffs’ case against Walmart.

[1] See Fed. R. Civ. P. 4(f)(3).

[2] The Convention on Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters (the “Hague Convention”) is a multi-national treaty that governs service of summons on persons in signatory foreign countries.

[3] The “customer-suit exception” is an exception to the first-to-file rule “whereby litigation” against or brought by the manufacturer of infringing goods takes precedence over a suit by a patent owner against customers of the manufacturer.” Katz v. Leir Seigler, Inc., 909 F.2d 1459, 1464 (Fed. Cir. 1990).

[4] CyWee Group Ltd. v. Huawei Device Co. Ltd., No. 2:17-CV-495-WCB, 2018 WL 4002776, at *5 (E.D. Tex. Aug. 22, 2018).

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