Case 4:20-cv-00180-ALM Document 45 Filed 05/11/20 Page 1 of 10 PageID #: 1759
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`United States District Court
`EASTERN DISTRICT OF TEXAS
`SHERMAN DIVISION
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`Civil Action No. 4:19-CV-00752
`Judge Mazzant
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`§§§§§§
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`INNOVATION SCIENCES, LLC
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`v.
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`HTC CORPORATION
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`MEMORANDUM OPINION AND ORDER
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`Pending before the Court is Defendant HTC Corporation’s Rule 12(b)(6) Motion to
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`Dismiss for Improper Claim Splitting and Circumvention of Patent Local Rules (Dkt. #7). Having
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`considered the motion and the relevant pleadings, the Court finds that the motion should be denied.
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`BACKGROUND
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`The facts of this case and the question presented by Defendant’s motion requires the Court
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`to discuss how this suit is intertwined with another ongoing case involving the same parties:
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`Innovation Sciences, LLC v. HTC Corporation, Case No. 4:18-CV-00476 (“HTC I”). In HTC I,
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`Plaintiff Innovation Sciences brings three counts of patent infringement against Defendant for
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`alleged infringement of U.S. Patent No. 9,912,983 (“the ’983 patent”), U.S. Patent No. 9,942,798
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`(“the ’798 patent”), and U.S. Patent No. 9,729,918 (“the ’918 patent”). Case No. 4:18-CV-00476,
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`(Dkt. #1). The accused devices in HTC I are the HTC U11 and U12 smartphones (“First Accused
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`Devices”). Case No. 4:18-CV-00476, (Dkt. #1 ⁋ 16).
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`This action—“HTC II”—asserts infringement of the same three patents. But it asserts
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`infringement against three different HTC devices: the Pixel 2 phone, the Exodus 1 phone, and the
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`HTC 5G Hub (“Second Accused Devices”) (Dkt. #1 ⁋ 16). And while Plaintiff’s infringement
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`analysis against the First Accused Devices was limited to the HTC Alexa App and the information
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`communicated by the First Accused Devices to the Amazon cloud, Plaintiff’s infringement
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`analysis against the Second Accused Devices is limited to the device’s operation with Google
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`technology. See Case No. 4:18-CV-00476, (Dkt. #1); (Dkt. #1; Dkt. 11 at pp. 4–6).
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`On December 30, 2019, Defendant filed its Rule 12(b)(6) Motion to Dismiss for Improper
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`Claim Splitting and Circumvention of Patent Local Rules (Dkt. #7). On January 8, 2020, Plaintiff
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`responded (Dkt. #11). Defendant replied on January 15, 2020; Plaintiff filed its sur-reply on
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`January 23, 2020 (Dkt. #14). Defendant also filed two notices of new facts after the briefing had
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`closed: Defendant filed the first notice on March 20, 2020 (Dkt. #21), and it filed the second notice
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`on March 31, 2020 (Dkt. #25). The Court heard argument from the parties regarding this motion
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`on April 1, 2020 (Dkt. #30). The parties also submitted a proposed case schedule in the event that
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`Defendant’s motion to dismiss is denied and the Court consolidates all related Innovation-HTC
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`matters (Dkt. #32).
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`LEGAL STANDARD
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`The Federal Rules of Civil Procedure require that each claim in a complaint include a “short
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`and plain statement . . . showing that the pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2). Each
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`claim must include enough factual allegations “to raise a right to relief above the speculative level.”
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`Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
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`A Rule 12(b)(6) motion allows a party to move for dismissal of an action when the
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`complaint fails to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6). When
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`considering a motion to dismiss under Rule 12(b)(6), the Court must accept as true all well-pleaded
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`facts in the plaintiff’s complaint and view those facts in the light most favorable to the plaintiff.
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`Bowlby v. City of Aberdeen, 681 F.3d 215, 219 (5th Cir. 2012). The Court may consider “the
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`complaint, any documents attached to the complaint, and any documents attached to the motion to
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`dismiss that are central to the claim and referenced by the complaint.” Lone Star Fund V (U.S.),
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`L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010). The Court must then determine
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`whether the complaint states a claim for relief that is plausible on its face. “A claim has facial
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`plausibility when the plaintiff pleads factual content that allows the [C]ourt to draw the reasonable
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`inference that the defendant is liable for the misconduct alleged.” Gonzalez v. Kay, 577 F.3d 600,
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`603 (5th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “But where the well-
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`pleaded facts do not permit the [C]ourt to infer more than the mere possibility of misconduct, the
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`complaint has alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief.’” Iqbal,
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`556 U.S. at 679 (quoting FED. R. CIV. P. 8(a)(2)).
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`In Iqbal, the Supreme Court established a two-step approach for assessing the sufficiency
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`of a complaint in the context of a Rule 12(b)(6) motion. First, the Court should identify and
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`disregard conclusory allegations, for they are “not entitled to the assumption of truth.” Iqbal, 556
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`U.S. at 664. Second, the Court “consider[s] the factual allegations in [the complaint] to determine
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`if they plausibly suggest an entitlement to relief.” Id. “This standard ‘simply calls for enough
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`facts to raise a reasonable expectation that discovery will reveal evidence of the necessary claims
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`or elements.’” Morgan v. Hubert, 335 F. App’x 466, 470 (5th Cir. 2009) (citation omitted). This
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`evaluation will “be a context-specific task that requires the reviewing court to draw on its judicial
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`experience and common sense.” Iqbal, 556 U.S. at 679.
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`Thus, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter,
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`accepted as true, to ‘state a claim to relief that is plausible on its face.”’ Id. at 678 (quoting
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`Twombly, 550 U.S. at 570).
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`I. The Rule Against “Claim Splitting”
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`ANALYSIS
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`When a case turns on general principles of claim preclusion, the law of the regional circuit
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`in which the district court sits applies. Acumed LLC v. Stryker Corp., 525 F.3d 1319, 1323 (Fed.
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`Cir. 2008). But where the claim-preclusion issue is whether two claims for patent infringement
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`are identical, Federal Circuit law applies without reference to regional circuit law. Id.; see also
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`Nystrom v. Trex Co., 580 F.3d 1281, 1285 (Fed. Cir. 2009) The latter is the situation here—
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`Defendant asserts that Plaintiff is engaged in “claim splitting” by filing a second lawsuit alleging
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`infringement of the same patents against the same functionality (Dkt. #7 at p. 6). See In re ASM
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`Int’l, N.V., 774 F. Appx. 650, 653 (Fed. Cir. 2019) (“Generally, the claim-splitting doctrine is a
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`form of claim preclusion . . . .”).
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`In applying the doctrine of claim preclusion, courts applying Federal Circuit law are guided
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`by the Restatement (Second) of Judgments. Acumed, 525 F.3d at 1323. That means that a claim
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`is defined by the transactional facts from which it arises—with regard to a patent, that means the
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`structure of the device or devices in issue. Id. at 1324 (quoting Foster v. Hallco Mfg. Co., 947
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`F.2d 469, 479 (Fed. Cir. 1991)). So, unless the accused device in the action before the Court is
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`“essentially the same” as the accused device in a prior action, claim preclusion does not apply. Id.
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`And it is the party asserting claim preclusion that has the burden of showing the accused devices
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`are “essentially the same,” which means the party asserting claim preclusion must show that any
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`differences between the devices are “merely colorable” or “unrelated to the limitations in the claim
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`of the patent.” Id. (quoting Foster, 947 F.2d at 480).
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`II. HTC II Is Not Barred by Claim Preclusion
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`Defendant has not carried its burden of showing that Plaintiff has impermissibly split its
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`claims. Defendant—relying heavily on Adaptix, Inc. v. AT&T Mobility LLC, 6:12-CV-120, 2015
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`WL 12696204 (E.D. Tex. May 12, 2015) (Craven, M.J.)—argues that Plaintiff accuses essentially
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`the same products in both lawsuits. Defendant asserts that just like the plaintiff in Adaptix did,
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`Plaintiff has alleged infringement of different devices for essentially the same reason in two
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`lawsuits (Dkt. #7 at p. 18). Defendant submits that although differences do exist between the First
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`Accused Products and the Second Accused Products, those differences are immaterial to the
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`infringement inquiry (Dkt. #7 at p. 18). Specifically, Defendant argues that the First Accused
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`Products and the Second Accused Products both allegedly infringe for the same reasons: both
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`products use video conversion and smart-home functionality claimed in the patents (Dkt. #7 at p.
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`18). The only differences are colorable, Defendant argues, and are that the devices are physically
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`different and the alleged method of infringement relies on different smart-home assistants (Dkt. #7
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`at p. 20).
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`In Adaptix, the plaintiff filed multiple suits for patent infringement against a series of
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`wireless carriers and handset manufacturers. 2015 WL 12696204, at *1. Several of those suits
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`were transferred to the Northern District of California (“the California Cases”). Id. at *2. Judge
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`Grewal entered final judgment for the defendants in the California Cases on all of the plaintiff’s
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`claims for infringement; Judge Grewal also ruled that four of the asserted claims were invalid. Id.
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`at *3. The Defendants moved for summary judgment on preclusion grounds in the Eastern District
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`of Texas, arguing that the only remaining claims were a subset of the patent claims on which the
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`California court granted summary judgment of non-infringement. Id. The court agreed. Id. at *1.
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`The court noted that although the accused handsets in the California Cases were different,
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`the plaintiff’s infringement contentions were identical in both sets of cases. Id. at *13. And the
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`plaintiff did not dispute that it had sought relief in the California Cases under the same theory of
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`direct infringement that it was pursuing in the Eastern District of Texas, which was that “the
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`accused devices operating on the accused carrier networks allegedly infringe[d] through their use
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`of Mode 3 CQI reporting as defined in the 3GPP LTE industry standard.” Id. In fact, the plaintiff
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`could not identify any difference between “the LG/Pantech handsets in these cases and the
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`Apple/HTC handsets in the California cases,” let alone any differences related to the limitations in
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`the claims of the patent. Id. at *15. Under those facts, the court found that the California Cases
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`and the cases before the Eastern District of Texas involved the same infringement cause of action.
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`Id.
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`Plaintiff distinguishes Adaptix, arguing that unlike Adaptix, the differences between the
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`First Accused Products in the HTC I suit and the Second Accused Products in the HTC II suit
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`matter to the infringement analysis (Dkt. #14 at p. 3; Dkt. #30 at p. 60). Plaintiff asserts that the
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`important differences include the fact that—rather than utilizing the HTC Alexa Application and
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`operating over the Amazon Cloud like the First Accused Products do—the Second Accused
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`Products operate only using their built-in Google technology over the Google cloud, which
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`requires a different infringement analysis in order for Plaintiff to be able to prove its apparatus
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`claims (Dkt. #14 at p. 3; Dkt. #30 at pp. 56–57). Plaintiff also points to specific differences
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`between the First Accused Products and the Second Accused Products, including the fact that the
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`5G Hub does not use the same processor found in any of the First Accused Products and the fact
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`that all of the accused products have their own circuitry that impacts Plaintiff’s claims of
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`infringement (Dkt. #14 at p. 4; Dkt. #30 at p. 57). Thus, Plaintiff asserts that the devices are not
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`“essentially the same” for purposes of claim preclusion. (Dkt. #30 at p. 57). The Court agrees
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`with Plaintiff. Defendant has not carried its burden of showing that the differences between the
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`First Accused Products and the Second Accused Products are merely colorable or unrelated to the
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`limitations of the patents.
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`As Plaintiff correctly points out, the situation here is much different than the situation the
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`court dealt with in Adaptix. Not only did the plaintiff in Adaptix admit that it could not identify
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`any differences between the accused handsets in the California Cases and the accused handsets
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`before the court, but the plaintiff’s infringement contentions in the two actions were identical. On
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`the other hand, the differences outlined by Plaintiff here relate to the limitations of the patents: for
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`example, claim 22 of the ’983 patent discusses a “wireless HUB system for managing information
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`comprising: an input interface configured to receive a wireless signal . . . a decoder; and a network
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`interface configured to provide a communication through a network communication channel . . .”
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`(Dkt. #31, Exhibit 1 at p. 12). As Plaintiff argues, the First Accused Products and the Second
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`Accused Products contain numerous physical differences, and the method that the devices use to
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`allegedly infringe differ from the First Accused Products to the Second Accused Products.1 These
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`differences impact the limitations expressed in the claims and require individual and unique claim
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`charts to prove infringement for each device. That these devices are not “essentially the same” is
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`magnified by the fact that Plaintiff essentially conceded that a finding of infringement against one
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`device would not necessarily mean another of Defendant’s devices infringed (Dkt. #30 at p. 58).
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`Defendant’s retort to this argument is twofold: (1) Defendant claims that it was not
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`contained in any of the briefing, and it is thus improper for the Court to consider it; and (2) because
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`the transceivers and infringement contentions based on the transceivers is subject to an ITC
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`protective order, Plaintiff cannot submit them to the Court—but even if Plaintiff could, Plaintiff
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`would not be able to present evidence that the devices are different (Dkt. #30 at pp. 66–69).
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`Defendant’s arguments miss the mark.
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`First, Plaintiff’s argument was properly presented in Plaintiff’s sur-reply. See (Dkt. #14 at
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`pp. 3–4). This gave Defendant an opportunity to retort to the argument at the hearing. Nor was it
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`a new argument—Plaintiff contested from the outset that the Second Accused Devices were
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`essentially the same as the First Accused Devices (Dkt. #11 at p. 5). And second, the burden is on
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`Defendant to show that the accused devices are “essentially the same.” The burden is not on
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`1 As Plaintiff points out, one of the Second Accused Devices—the 5G Hub—does not use a processor found in any of
`the First Accused Devices (Dkt. #14 at p. 4).
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`Plaintiff to show that the devices are different. Based on the evidence before the Court, Defendant
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`has not carried this burden.
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`Additionally, “[c]laim preclusion implicates both ‘the weighty policies of judicial economy
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`and fairness to parties.’” SimpleAir, Inc. v. Google LLC, 884 F.3d 1160, 1169 (Fed. Cir. 2018)
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`(quoting United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 724 (1966)). Even if Plaintiff had
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`split its claims, the Court finds that dismissal would be improper under these facts. In special
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`circumstances, a “plaintiff should be left with an opportunity to litigate in a second action that part
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`of the claim which he justifiably omitted from the first action.” Davis-Lynch, Inc. v. Hilcorp
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`Energy Co., 6:09-CV-168, 2009 WL 10659687, at *2 (E.D. Tex. Nov. 18, 2009), adopted by 6:09-
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`CV-168, 2010 WL 11553311 (E.D. Tex. Jan. 4, 2010) (quoting RESTATEMENT (SECOND) OF
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`JUDGMENTS § 26, cmt. b). As Defendant admits, two of the Second Accused Devices were released
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`after Plaintiff filed its first action (Dkt. #7 at p. 25). While Defendant argues that this means
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`Plaintiff should have moved for leave to add the Second Accused Products to its infringement
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`contentions in HTC I, Plaintiff explains that it did not seek leave to amend given the differences
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`between the First Amended Products and the Second Amended Products, as well as the advanced
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`stage of HTC I (Dkt. #11 at p. 13). Just as the court in Davis-Lynch held under similar facts,
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`“forever barring [Plaintiff’s] claim for being a collateral attack would be inconsistent and unfair.”
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`Id. at *3. The Court finds that the Second Accused Products were justifiably omitted from HTC I.
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`Accordingly, the Court denies Defendant’s Motion to Dismiss on claim-splitting grounds.
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`Defendant also argues that Plaintiff’s complaint should be dismissed because it
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`circumvents the Court’s procedural rules, wastes judicial resources, and prejudices HTC, but the
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`argument is often duplicative of its claim-splitting arguments. See (Dkt. #7 at pp. 26–29). To the
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`extent that Defendant’s argument raises alternate grounds for dismissal, the Court finds that there
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`is no ground to dismiss Plaintiff’s complaint under Rule 12(b)(6) for circumventing the Court’s
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`rules or wasting judicial resources.
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`III.
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`Consolidation Is Appropriate
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`Plaintiff requested “[i]n the alternative” that the Court should either consolidate HTC I and
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`HTC II or grant Plaintiff leave to amend its infringement contentions in HTC I to include the
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`Second Accused Devices (Dkt. #11 at p. 16). Defendant opposes this request, arguing again that
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`it is an end run around the Court’s rules. The Court disagrees with Defendant’s contention, and
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`the Court finds that consolidation of all Innovation-HTC matters is appropriate.
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`“Federal district courts have very broad discretion in deciding whether or not to
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`consolidate.” Core Wireless Licensing S.A.R.L. v. LG Elecs. Inc., 2:14-CV-911-JRG-RSP, 2015
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`WL 11120719, at *1 (E.D. Tex. July 1, 2015) (quoting Frazier v. Garrison I.S.D., 980 F.2d 1514,
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`1532 (5th Cir. 1993)). Although framed by Plaintiff as an alternative to dismissal, the Court finds
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`that consolidation of these two actions—both involving alleged infringement of the same three
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`patents—will avoid the unnecessary cost of empaneling two juries and requiring both juries to
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`learn the technology at issue without prejudicing either party. The Court will also, as contemplated
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`by the parties’ joint scheduling order, consolidate HTC I and HTC II with a third, related
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`declaratory-judgment action: Case No. 4:20-CV-00180. The first-filed case, Case No. 4:18-CV-
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`00476, shall serve as the lead case.
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`The Clerk of the Court shall add the parties from the consolidated cases to the lead case,
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`as well as Lead and Local Counsel only. Any other counsel who wishes to appear in the lead case
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`shall file a notice of appearance in that case. The individual cases will remain active for trial.
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`Additionally, all pending motions will be considered as filed and without prejudice due to
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`consolidation. All future motions shall be filed in the lead case until further notice of the Court.
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`CONCLUSION
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`It is therefore ORDERED that Rule 12(b)(6) Motion to Dismiss for Improper Claim
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`Splitting and Circumvention of Patent Local Rules (Dkt. #7) is hereby DENIED. The Clerk is
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`directed to consolidate Case No. 4:19-CV-00752 and Case No. 4:20-CV-00180 with the
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`lead case, Case No. 4:18-CV-00476, in accordance with the instructions above. The Clerk is
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`directed to docket all future filings in the above-listed matters under Case No. 4:18CV00476.
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`The Court hereby CANCELS the May 12, 2020 Scheduling Conference. The Court will
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`enter a new scheduling order for the lead case based on the parties’ proposed case schedule
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`(Dkt. #32).
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