The Court unsealed a memorandum order yesterday in Sensormatic Electronics, LLC v. Genetec (USA) Inc., C.A. No. 20-760-GBW (D. Del. Mar. 27, 2024), where Judge Williams found a patent case exceptional, and awarded fees against the patentee plaintiff.
The Court previously held that one of the asserted patents, the '652 patent, was invalid because it was offered for sale after it was reduced to practice and more than a year before when the inventor applied for a patent.
In this order, the core cause of the exceptional case finding was that, after a key deposition where the inventor admitted the date of reduction to practice, the plaintiff should have known that its patent was invalid under the on-sale bar:
During [inventor] Broemmelsiek's deposition on December 9, 2021, the parties were presented with the additional evidence and background necessary to estimate the claimed invention's date of reduction [to practice]. On December 9, 2021, Broemmelsiek unequivocally testified that the subject matter covered by the '652 Patent had been reduced to practice well before the patent's priority date. . . . In fact, Broemmelsiek confirmed that his statements in the Broemmelsiek Declaration were "still true" and were intended to mean "that [he] conceived and reduced to practice the subject matter claimed in the . . . '652 patent application, at least as early as August 7, 1998." . . . Broemmelsiek also recalled that he filed the '652 patent application " late, [or] later than [he] probably should have." Id. at 136:1-3. From these comments alone, it was or should have become clear to Sensormatic that it could no longer rely on the patent's presumption of validity or the ambiguity of the prosecution record [regarding reduction to practice].
The Court found that the case became exceptional after that deposition:
This case became exceptional when Plaintiff continued to assert the '652 Patent Claim after Broemmelsiek's deposition on December 9, 2021.
The Court found the patentee's challenges to the on-sale bar defense were meritless in light of the deposition testimony. First it rejected the idea that the sale was actually a development agreement:
Sensormatic [claims] (1) the on-sale bar was inapplicable because the 1998 Agreements did not involve a commercial sale . . . The Court, however, . . . found that Sensormatic's claims that the 1998 Agreements' purposes were to develop technology were irreconcilable with Broemmelsiek's deposition testimony, which revealed that the claimed invention had already been reduced to practice by the time the 1998 Agreements were signed on August 7, 1998 and December 3, 1998. . . . Broemmelsiek also revealed that he used a demonstrative of the claimed invention as "proof of concept" during his initial meetings with Sensormatic in 1998. . . . Broemmelsiek explained that the demonstrative, which he called the "VHS demo," was built " as late as . . . December '97." . . . While Broemmelsiek admitted that the VHS demo lacked the user-selection feature disclosed in the '652 Patent, Broemmelsiek noted that every other limitation was met by the VHS demo and, by the time Broemmelsiek contacted Sensormatic, Broemmelsiek had already reduced to practice the process for allowing user-selectable input in at least one other invention. . . . Thus, there would have been little reason for Broemmelsiek to enter a "joint effort" with Sensormatic "to develop" the claimed invention.
Broemmelsiek's testimony also reveals that Broemmelsiek negotiated the 1998 Agreements with Sensormatic as part of a commercial sale of the invention. Broemmelsiek recalled sending Sensormatic a letter in which he introduced the invention and explained that he created a "tracking technology" that " can (be] incorporated into your camera to steer your technology." . . . Also, by executing the 1998 Agreements, Broemmelsiek explained that he was agreeing "to build a system" for Sensormatic. . . . This testimony was consistent with the terms of the 1998 Agreements, which indicated that Broemmelsiek and Spin Logic would build the claimed apparatus and would be "responsible for providing all of the required hardware elements of the technology demo, except for the SpeedDome, UltraDome and dome power adapters." . . . Federal Circuit precedent has long held that such an offer by a patentee "to perform the steps of the patented methods for customers in exchange for payment" is commercial and thus "triggers the on-sale bar." . . . Thus, Broemmelsiek's testimony should have made it clear to Sensormatic that the 1998 Agreements involved a commercial sale of the claimed invention.
Second, it rejected the idea that the agreements were executed for an experimental purpose—and also rejected the plaintiff's reliance on authority about experimental "public uses" to in the context of the on-sale bar:
Sensormatic [claims] (2) the on-sale bar did not apply because the 1998 Agreements were executed for experimental purposes. . . . [B]inding precedent is clear that an "experimental use cannot occur after a reduction to practice." . . . Attempts by Sensormatic to challenge this established legal rule by relying on "public use" authority were wholly unavailing, given the Federal Circuit's clear instruction that experimentation under the Supreme Court's "public use" is distinguishable from experimentation under the Court's "on-sale" authority.
Finally, the Court noted that the plaintiff had previously admitted in response to RFAs that the invention was reduced to practice in July 1998. But plaintiff, after realizing the invalidity issue, attempted to amend its RFA responses to undo that admission just 11 days before the dispositive motions deadline:
The fact that Sensormatic attempted to amend its RFA responses five months after Broemmelsiek's deposition further evidences that Sensormatic's conduct became exceptional. . . . Prior to its attempt to amend, Sensormatic had already conceded through RFA responses that the '652 Patent's claimed invention was reduced to practice in July or August 1998. . . . When Sensormatic's expert, Dr. Alan Bovik, filed a rebuttal report on March 29, 2022 that undermined Sensormatic's RFA responses by claiming that the '652 Patent claims were not entitled to a priority date before August 1998, 3 Sensormatic did not immediately move to amend the responses. Instead, Sensormatic waited over three months and, "just [thirteen] days before the dispositive motion deadline," to seek permission from Genetec and the Court to amend and align their RFA responses with Dr. Bovik's rebuttal opinions. . . .
Sensormatic contends that it waited three months to amend the RFA responses because the parties were actively engaging in expert discovery from January to May 2022. . . . The Court does not find this explanation credible given the inconsistencies between Dr. Bovik's rebuttal report served in March 2023 and the RFA responses. In fact, as Magistrate Judge Burke noted, Sensormatic "had all of the information that it now relies on in seeking to amend [its] prior admissions" when it ·made the admissions on December 9, 2021. . . . Thus, the Court sees no reasonable explanation for Sensormatic' s delay in moving to amend their admissions.
Because Sensormatic made the request to amend just days before the dispositive motion deadline, the Court agrees with Genetec that the request was likely made as a final attempt to avoid the inevitable: dismissal at summary judgment. . . . While Genetec ultimately prevailed on their motion for summary judgment, the Court does not doubt that Sensormatic's attempt to amend the RFA responses just thirteen days before the dispositive motion deadline caused Genetec to incur additional cost and expend their limited time and "limited page limits for briefing dispositive motions" to argue against Sensormatic's untimely request to amend its responses.
The Court awarded fees for a period of just over one year, from December 2021 until January 2023.
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