UnifiedOnline Inc fka UOIP

[Monte_Cristo]

RECENT UOIP/CHANBOND WINS and what they mean for us as shareholders.

First, you must understand that there are two complex frameworks of resolving patent disputes which co-exist (https://www.google.ca/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0ahUKEwjs2cDWtMfUAhXD1IMKHVISAEQQFggkMAA&url=http%3A%2F%2Fscholarship.law.duke.edu%2Fcgi%2Fviewcontent.cgi%3Farticle%3D6267%26context%3Dfaculty_scholarship&usg=AFQjCNHA2qv5T7IP5BHhu41-1RxqHvzCnw&sig2=EPcMfoUKCbJsQDBY2fHfdw&cad=rja):

(I) ordinary infringement litigation and declaratory judgment actions in Article III courts ("Article III Courts") ; AND
(II) administrative invalidation actions in the U.S. Patent and Trademark Office Patent and Trial Appeal Board ("PTAB").

PTAB
First, we won at the PTAB:
https://archive.is/lhgDu

ARTICLE III COURTS
Now we are en route to a win in civil court with the patent litigation. In fact, we are probably closer to receiving a settlement given the way this case has gone. The scheduled stages in the case are, chronologically, (i) Fact Discovery, (ii) Status Conference, (iii) Any Summary Judgment/Daubert (i.e. expert witness testimony) motions, (iv) Pretrial Conference, and (v) Jury Trial.

Here's why I think settlement is imminent:

OBLIGATION TO TRY TO SETTLE
Initially, for the joint submission brief, these parties were to discuss the possibility of settlement. By the time of (iv), they must specifically certify (basically affirm) that they have engaged in a good faith effort to explore the resolution of controversy by settlement (see Rule 16.3(c)(12) of the Local Rules of Civil Practice and Procedure of the United States District Court for the District of Delaware). Initially, they have to state whether there's a possibility of settlement whereas, later along in the case, they must undertake to engage in a good faith effort to settle. Despite getting smoked at the Markman hearing, it appears the Defendants haven't yet tried to engage in a good faith effort to settle.

COSTS ASSESSED AGAINST THE LOSING PARTY
Also keep in mind that the longer the case drags on, the higher the costs that can be incurred against the losing party (even if the case settles). For example, it appears that you can get a jury cost assessment against you if the case is settled less than 3 days before the scheduled jury selection (Rule 54.2). It also appears that you can still apply for attorneys' fees even in connection with settled cases (Rule 54.3).

It doesn't leave much room to play games and push the matter to trial before you settle as costs can be assessed against you the further the case progresses. I read somewhere that the average cost of taking a patent case through trial is over $2 Million per case.

CLAIM CONSTRUCTION HEARING (A.K.A. MARKMAN HEARING)
Keep in mind that there is also a pretrial hearing that the parties go through, called a Markman hearing, which was already heard by Justice Andrews December 9, 2016. As per Wikipedia: "Markman hearings are before a judge, and generally take place before trial. A Markman hearing may occur before the close of discovery, along with a motion for preliminary injunction, or at the end of discovery, in relation to a motion for summary judgment. A Markman hearing may also be held after the trial begins, but before jury selection."

In any case, this Markman hearing was very important because the issues of law are adjudicated and it basically encourages settlement, particularly in Judge Andrews' court room. If you read about Andrews (who is set to try the case if you haven't been paying attention), it appears he has the fewest patent-specific procedures and guidelines out of all four Article III judges that sit on the Delaware court. He apparently has a unique procedure for these Markman hearings. I read that "instead of having the parties file separate claim construction charts and briefs for the Markman hearing, he requires the parties to exchange their proposed claim terms for construction, exchange their proposed constructions, confer, and file a Joint Claim Construction Chart, as well as a Joint Claim Construction Brief." In other words, he gets the parties to sit down and really pinpoint what the contentious issues are. This leads to less strong-arming and taking a tunnel-vision approach with one's own case. This makes the aspect of settlement more conducive, particularly as Andrews found in favor of ChanBond after the December 9th Markman hearing (http://www.morrisjames.com/assets/htmldocuments/patent%20blog%20-%20Chanbond%20-%201826.pdf). I encourage you to read Judge Andrews' decision as he outlines how the defendants were struggling to make a case and rules against every single one of the Defendants' proposed constructions. I also encourage everyone to read the last law review article in this post under the heading "New Changes in the Law Affecting this Case" and truly see how instrumental it was for ChanBond to win the Markman hearing.

BACKGROUND OF JUSTICE ANDREWS AND DELAWARE'S DISTRICT COURT
From Law Review Article of 2016 (Do Not Pass Go, Do Not Stop for Summary Judgment: The U.S. District Court for the District of Delaware’s Seemingly Disjunctive Yet Efficient Procedures in Hatch-Waxman Litigation, Katherine Rhoades, Northwestern Journal of Technology and Intellectual Property):

It is no secret that the District of Delaware’s four Article III judges have extensive patent experience and are some of the most experienced in the country in handling patent infringement cases. The District of Delaware leads all other district courts with the most patent case filings per judge, which results in an experienced bench. In fact, Judge Andrews, Judge Robinson, Judge Sleet, and Chief Judge Stark are among the U.S. district court judges who hear the most patent cases, and they are the four judges that hear the most ANDA cases in the country.

The District of Delaware’s lack of local patent rules does not seem to have affected the district’s case efficiency or time-to-trial. Research “suggests that districts with local patent rules process patent cases faster than districts lacking such rules.” However, this research is not dispositive. Additionally, experienced judges can resolve cases more quickly. The District of Delaware has an overall faster time-to-trial - time from the day the complaint is filed to the first day of trial—than the District of New Jersey for patent cases that do not settle. While local patent rules can decrease the time-to-trial,
Delaware’s experienced bench is efficient in resolving patent disputes.

In other words, due to the venue and the fact it's being heard by Judge Andrews, this isn't a case that will be bogged down by a slow court system or, worse, be adjudicated before an inexperienced judge. Efficient venue + reputable judge = quick route to trial or settlement.

NEW CHANGES IN THE LAW AFFECTING THIS CASE
Maybe you think the Defendants will play strategic games and appeal Justice Andrews' ruling in the Markman hearing? Think again. On January 20, 2015, the Supreme Court changed the standard under which trial court claim construction rulings will be reviewed on appeal, holding that a trial court’s factual findings underlying its claim construction rulings must be given deference. Teva Pharm. USA, Inc. v. Sandoz, Inc., 135 S.Ct. 831 (2014). In a 7-2 decision, the Teva Court concluded that a trial court’s findings of fact underpinning a claim construction ruling must be reviewed under a “clearly erroneous” standard, rather than under the general de novo standard previously applied by the Federal Circuit. Without getting into the details, this means that it's much harder for the Defendants to appeal Justice Andrews' Markman ruling due to this heightened review standard from Teva which, in turn, will lead to an increased likelihood of settlement.

The impact of the Teva Court ruling on Markman hearings is discussed in this law review article (https://www.google.ca/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwiqzpjPq8fUAhUh4oMKHeXABJ4QFggqMAE&url=http%3A%2F%2Fscholarship.shu.edu%2Fcgi%2Fviewcontent.cgi%3Farticle%3D1899%26context%3Dstudent_scholarship&usg=AFQjCNFew5ibGAhGXpmYWSsOYxJpz58gDw&sig2=yR6MLF4_zUCpgz8duodAWw)

MY OPINION
So I personally think settlement will happen soon enough. Maybe not next week, but certainly quite soon given the mounting costs, the potential to have costs assessed against you even in the midst of settlement, the fact that the Markman hearing has already taken place and the issues of law have been adjudicated in favor of ChanBond as per Andrews' order (which also has to be submitted to the jury if it gets as far as a jury trial), and the fact that Markman hearings - after the Teva ruling - are now more important than ever in patent litigation.