Case 1:16-cv-02690-AT Document 71 Filed 04/06/16 Page 1 of 10
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`TYLER DIVISION
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`SIPCO, LLC, and IP CO, LLC
`(d/b/a INTUS IQ),
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`
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` v.
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`EMERSON ELECTRIC CO., EMERSON
`PROCESS MANAGEMENT LLLP, FISHER-
`ROSEMOUNT SYSTEMS, INC.,
`ROSEMOUNT INC., BP, p.l.c., BP
`AMERICA, INC., and BP AMERICA
`PRODUCTION COMPANY,
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`
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`
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`Defendants.
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`Plaintiffs,
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`
`
` Civil Action No. 6:15-cv-907
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`JOINT MOTION OF DEFENDANTS TO SEVER AND STAY
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`Defendants Emerson Electric Co., Emerson Process Management LLLP, Fisher-
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`Rosemount Systems, Inc., Rosemount, Inc. (collectively the “Emerson Defendants”), BP
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`America, Inc., and BP America Production Company (collectively the “BP Defendants”)1 jointly
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`request an Order severing the infringement claims against the BP Defendants, purchasers of
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`certain of the Emerson products accused of infringement, from the infringement claims against
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`the Emerson Defendants, the manufacturers/suppliers of the products accused of infringement,
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`and staying the severed action against the BP Defendants.
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`I.
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`BACKGROUND
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`This is the second of two actions involving the plaintiffs, the Emerson Defendants, the
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`same two patent families (i.e., the family of U.S. Patent No. 7,103,511 (“the ‘511 patent family”)
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`and the family of U.S. Patent No. 6,044,062 (“the ‘062 patent family”)), and the Emerson Smart
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`1 Defendant BP, p.l.c. is a foreign entity. It has not been served with the First Amended
`Complaint and it has not appeared in this action.
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`Case 1:16-cv-02690-AT Document 71 Filed 04/06/16 Page 2 of 10
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`Wireless product line. The Emerson Defendants initiated the first-filed action by filing a
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`Declaratory Judgment Complaint in the U.S. District Court for the Northern District of Georgia
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`on January 30, 2015, asserting that the ‘511 and ‘062 patents, owned by Plaintiff SIPCO, LLC
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`(“SIPCO”) and IP CO, LLC (“IPCO”), respectively, were invalid and not infringed by
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`Emerson’s Smart Wireless products. Plaintiffs answered that Complaint six months later on July
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`27, 2015 with a counterclaim of infringement of those two patents. On October 16, 2015,
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`plaintiffs initiated this action accusing the same Emerson Smart Wireless products of infringing a
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`total of ten other patents in the ‘511 and ‘062 patent families. Given this overlap, the Emerson
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`Defendants moved to dismiss or transfer this action on December 10, 2015. (See Doc. 10). On
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`December 30, 2015, plaintiffs amended their Complaint in this action to add the BP Defendants
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`as alleged infringers – limiting, however, the scope of the BP Defendants’ alleged infringement
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`to the purchase and use of the Emerson Smart Wireless products already accused of
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`infringement.2 (Toohey Declaration ¶ 4, attached as Exhibit 1; see also, Doc. 19). Plaintiffs
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`have subsequently relied upon the inclusion of the BP Defendants as a reason to deny the
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`Emerson Defendants’ Motion to Dismiss or Transfer. (See, e.g., SIPCO’s Surreply, Doc. 42, p.
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`7).
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`II.
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`
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`ARGUMENT
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`Plaintiffs Amended Complaint identifies two distinct defendant groups, the Emerson
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`group and the BP group. The differences between the two groups are significant. Of relevance
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`to this case, the Emerson Defendants make and sell the accused Smart Wireless products. By
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`contrast, the BP Defendants are in the field of energy production. The BP Defendants are only
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`relevant to this case because they, like dozens of other companies, have purchased and used
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`2 Plaintiffs also added an eleventh patent to the case, a further patent from the same SIPCO
`patent family.
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`-2-
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`Case 1:16-cv-02690-AT Document 71 Filed 04/06/16 Page 3 of 10
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`certain of the accused Smart Wireless products. Each and every one of plaintiffs’ infringement
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`allegations against the BP Defendants is limited to their use of the identified Emerson Smart
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`Wireless products. (See, e.g., Doc. 19 ¶ 101 (a-d)). Given the nature of the relationship between
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`the two defendant groups, it is clear that the Emerson Defendants are the real parties in interest in
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`this case. The BP Defendants, as mere purchasers of certain of the accused products, should not
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`be forced to bear the burden of defending a patent infringement action when the dispute can be
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`resolved without them. This is especially true where, as here, the purchaser of the accused
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`products was added to the dispute solely to anchor the dispute in this forum.
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`A.
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`The Claims against the BP Defendants Should Be Severed and Stayed
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`It is well settled that a district court “may properly sever a claim against one defendant to
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`permit transfer of the cause against the remaining defendant where the administration of justice
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`would be materially advanced thereby” especially where the defendant to be severed is only
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`indirectly connected to plaintiff’s cause of action. Allway Tools, Inc. v. American Safety Razor,
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`1979 WL 24969 *1 (S.D. Tex July 6, 1979) (severing and staying action against reseller of
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`accused infringing products and transferring infringement action against accused manufacturer to
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`more convenient forum), citing Wyndham Associates v. Bintliff, 398 F.2d 614 (2nd Cir. 1968); see
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`also Haworth, Inc. v. Herman Miller, 821 F.Supp. 1476, 1481-82 (N.D. Ga. 1992) (severing co-
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`defendant CWC, a local Georgia company, on the grounds that CWC was neither subject to
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`jurisdiction in the transferee court and the accused manufacturer of the infringing product,
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`Hermann Miller, was the primary defendant).
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`In deciding between the forum chosen by a patent owner and the forum chosen by the
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`accused infringer, courts have considered both the “first-filed rule,” where the first court to have
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`jurisdiction over the matter takes both cases, and the “customer suit exception,” where, as the
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`-3-
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`Case 1:16-cv-02690-AT Document 71 Filed 04/06/16 Page 4 of 10
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`title implies, the first-filed court does not take the case if the first case involves only purchasers
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`or re-sellers of the accused product and the manufacturer of the accused product, the real party in
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`interest, files a subsequent action. See In re Nintendo of America, Inc., 757 F.3d 1363, 1365-66
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`(Fed. Cir. 2014) (reversing district court’s refusal to sever customer and to transfer claims
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`against manufacturer); see also Spread Spectrum Screening, LLC v. Eastman Kodak Co., 2010
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`WL 3516106 at 2-3 (N.D. Ill. September 1, 2010) (severing claims against “peripheral”
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`purchasers of accused products added to establish venue in the chosen forum). Here, the result is
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`the same under both analyses. Emerson is the manufacturer of the products accused of
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`infringement. It is the real party in interest. At most, the BP defendants merely purchase and
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`use certain of those products.3
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`A patent infringement claim against a retailer, distributor or customer of infringing
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`products is peripheral to a claim against a manufacturer of the products. See LG Electronics, Inc.
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`v. Advance Creative Computer Corp., 131 F. Supp. 2d 804, 811 (E.D. Va. 2001). In Corry v.
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`CFM Majestic, Inc., 16 F. Supp. 2d 660 (E.D. Va. 1998), the court ruled that a distributor’s
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`involvement was peripheral to the case because (1) the distributor was secondarily involved, (2)
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`did not manufacture the alleged infringing device, and (3) would be liable only if the
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`manufacturer was liable. Id. at 665. In this case, the BP entities are peripheral.
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`Every infringement allegation SIPCO makes against the BP Defendants is derivative of a
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`contention that SIPCO first levels against Emerson. Moreover, the only infringement allegations
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`made against the BP Defendants are based on the BP Defendants’ use of the Emerson Smart
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`Wireless products. (Toohey Decl. ¶ 2). No other company’s product is ever identified. (Id. at ¶
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`3 Because Defendant BP America Production Company operates the facilities identified in the
`SIPCO complaint, it is not clear at this juncture where Defendant BP America, Inc. has
`purchased or used any of the accused Emerson products.
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`-4-
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`3). Nor does SIPCO contend that the BP Defendants had any hand in designing, manufacturing
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`or selling the accused Emerson products. Rather, in its amended complaint, SIPCO creates a
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`collection of three parallel claims for many of the asserted patents. In the first, SIPCO accuses
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`Emerson of infringing various patents by making, using, offering for sale, selling and importing
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`a list of Emerson Smart Wireless products (see e.g., Count I), SIPCO then accuses BP of
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`infringing the same patent by using or importing the same list of Emerson products (see, e.g.,
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`Count II), and SIPCO concludes each set with a claim that the defendants have jointly infringed
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`(see, e.g., Count III). (See Amended Complaint (Doc. 19), see also Toohey Decl. ¶ 4).
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`As grounds for its joint infringement claims, SIPCO alleges that, “BP performs at least
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`one, but less than all the [claimed] steps” and, for its part, Emerson supplies BP products that are
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`“preconfigured to perform at least one, but less that all of the remaining [claimed] steps.” (See,
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`e.g., Doc. 19 at p. 18). Not only does SIPCO fail to properly plead an allegation of joint
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`infringement, discussed in Section B, below, but SIPCO’s allegations themselves establish the
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`relationship between the defendant parties – the BP Defendants buy certain of the accused
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`products from the Emerson Defendants and use them as designed. That is the classic customer
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`suit exception – BP buys and uses Emerson’s products. Emerson is the real party in interest.
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`Given their vendor/customer relationship, Emerson is indemnifying and defending BP against
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`SIPCO’s claims in this action. (Declaration of Robert Karschnia, ¶ 9, attached as Exhibit 2).
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`SIPCO does not allege that: (i) BP designed the accused Emerson products, (ii) Emerson
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`manufactured these products according to BP’s specifications, or (iii) BP has modified
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`Emerson’s commercially available product offering. Nor is there any contention that BP and
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`Emerson operate these products in concert, with BP performing some of the recited steps and
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`Emerson performing others. SIPCO’s “joint infringement” allegations against Emerson are
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`limited to the allegation that Emerson is selling products that are capable of being operated in an
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`infringing manner. Although the two defendant groups have a close relationship, including
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`potential post-sales support, that relationship remains one of a manufacturer and buyer.
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`The Emerson products accused of infringement in this action are not specially
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`constructed for use in the production or transportation of oil, and have been purchased by
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`customers operating in a wide variety of industries throughout the United States. Moreover,
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`should Emerson be found liable in the Georgia action, whatever damages it is required to pay
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`will license all uses of the products Emerson has sold to the BP Defendants and will exhaust any
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`claim SIPCO may have against BP relating to these products. Quanta Computer, Inc. v. LG
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`Electronics, Inc., 553 U.S. 617, 634-36 (2008) (sale authorized by license exhausts patent
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`rights).4 Conversely, should Emerson prevail in that action, SIPCO’s claims against BP will be
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`mooted. Katz v. Lear Siegler, Inc., 909 F.2d 1459, 1464 (Fed. Cir. 1990).
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`In light of the above and the extensive briefing of Emerson’s transfer request, it should be
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`clear that SIPCO added the BP Defendants in this action for the sole purpose of anchoring the
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`case in a forum far from its home court in Atlanta. Under these circumstances, a severance and
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`stay of the claims against the BP Defendants is warranted regardless of whether this Court grants
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`the Emerson Defendants’ Motion to Dismiss or Transfer. Hines v. D’Artois, 531 F.2d 726, 733
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`(5th Cir. 1976) (recognizing the power of the district court to stay proceedings before it in the
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`control of its docket and in the interests or justice). A court may issue a stay to ensure “economy
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`of time and effort for itself, for counsel and for litigants.” Itel Corp. v. M/S Victoria U (Ex
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`4 As the Plaintiffs have advised, Emerson Electric Co. is a large Fortune Global 500 company
`with more than $24 billion in revenue in 2015 alone. (See Doc. 58, Exh. A, p. 4). This is not a
`case in which the remaining defendant’s ability to satisfy a judgment is uncertain.
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`-6-
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`Pishtaz Iran), 710 F.2d 199, 202-03 (5th Cir. 1983). The removal of BP will materially promote
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`the interests of justice.
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`B.
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`Plaintiffs Misconstrue the Concept of “Joint Infringement”
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`Plaintiffs attempt to tie the BP and Emerson entities together by asserting that they are
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`joint infringers. (See Section A, above). Plaintiffs do so to create the false impression that the
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`BP Defendants are necessary parties to the action. Classically, all patented steps must be
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`performed by a single party. Limelight Networks, Inc. v. Akamia Tech., Inc., 134 S.Ct. 2111,
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`2119-20 (2014). For method patent claims, one party must perform all of the recited steps for
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`infringement to exist. Id. SIPCO nevertheless attempts to tie Emerson and BP by asserting that
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`they are jointly liable. SIPCO’s analysis, however, fails to follow any recognized theory of
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`“joint infringement.”
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`The theory of “joint infringement” is limited to the circumstance in which one of the
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`alleged joint infringers “exercises ‘control or direction’ over the entire process such that every
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`step is attributable to the controlling party, i.e., the ‘mastermind.’” Muniauction, Inc. v. Thomson
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`Corp., 532 F.3d 1318, 1329 (Fed. Cir. 2008); see also BMC Resources, Inc. v. Paymentech, L.P.,
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`498 F.3d 1373, 1380-81 (Fed. Cir. 2007). “The control or direction standard is satisfied in
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`situations where the law would traditionally hold the accused direct infringer vicariously liable
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`for the acts committed by another party that are required to complete performance of a claimed
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`method.” Muniauction, 532 F.3d at 1330.
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`The Federal Circuit has also recognized a limited “joint enterprise” theory of
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`infringement. Akamai Tech., Inc. v. Limelight Networks, Inc., 797 F.3d 1020, 1023 (Fed. Cir.
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`2015). Under Akamai, a joint enterprise requires four elements: (1) an agreement among the
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`members of the group; (2) a common purpose to be carried out; (3) a community of pecuniary
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`-7-
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`Case 1:16-cv-02690-AT Document 71 Filed 04/06/16 Page 8 of 10
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`interest in that purpose; and (4) an equal right to a voice providing equal control over the
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`enterprise. Akamai, 797 F.3d at 1023.
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`Here, SIPCO has alleged that BP performs some, but not all, method steps, and that the
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`products BP purchased from Emerson perform the remaining steps. There is no allegation that
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`BP or Emerson controls or directs the other party. SIPCO’s specific joint infringement
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`allegations are limited to BP’s purchase and use of Emerson’s products combined with BP’s own
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`actions. SIPCO’s Complaint further includes general allegations directed to the joint enterprise
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`issue, see Complaint paragraphs 69 and 70, but those allegations fall short of the mark as well.
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`Emerson does not condition participation in an activity or receipt of a benefit upon performance
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`of a step or steps of a patented method and nor establish the manner or timing of that
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`performance. (Karschnia Decl. ¶ 7).
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`BP installs and operates the equipment it purchases from Emerson. Emerson plays no
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`role in the operation of that equipment. (Karschnia Decl. ¶ 7). The products Emerson sells to
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`BP are not specifically made for BP and they are not specifically adapted for the oil and gas
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`industry. (Id. at ¶ 9). Emerson is not contractually obligated to sell its Smart Wireless products
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`to BP. (Id. at ¶ 5). Emerson neither places conditions on the use of the equipment it sells to BP
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`nor exchanges any wireless communications with the products it sells to BP. (Id. at ¶ 6-7).
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`Emerson has no say in what BP does with the products it purchases from Emerson. (Id. at ¶ 8).
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`Nor does Emerson realize any pecuniary benefit from the commercial uses BP may make of
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`Emerson’s product. Specifically, Emerson receives no compensation based on how BP operates
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`the products it buys from Emerson. (Id. at ¶ 7). Selling a product allegedly capable of
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`performing some of the infringing steps does not qualify as either a “joint infringement” or a
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`Case 1:16-cv-02690-AT Document 71 Filed 04/06/16 Page 9 of 10
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`“joint enterprise.” Indeed, if it did, every manufacturer and every customer could be treated as
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`joint infringers. That is not the law and nor should it be.
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`III. CONCLUSION
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`Accordingly, the Emerson and BP Defendants jointly move this Court for an Order
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`severing and staying SIPCO’s infringement claims against the BP Defendants from those against
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`the Emerson Defendants.
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`Dated: April 6, 2016
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`Respectfully submitted,
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`__/s/ Melissa R. Smith
`Melissa R. Smith
`State Bar No. 24001351
`GILLAM & SMITH, LLP
`303 South Washington Avenue
`Marshall, Texas 75670
`Telephone: (903) 934-8450
`Facsimile: (903) 934-9257
`Email: melissa@gillamsmithlaw.com
`
`Donald L. Jackson
`James D. Berquist
`J. Scott Davidson
`DAVIDSON BERQUIST JACKSON &
`GOWDEY, LLP
`8300 Greensboro Dr., Suite 500
`McLean, VA 22102
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`ATTORNEYS FOR DEFENDANTS EMERSON
`ELECTRIC CO., EMERSON PROCESS
`MANAGEMENT LLLP, FISHER-ROSEMOUNT
`SYSTEMS, INC., ROSEMOUNT INC., BP
`AMERICA, INC., AND BP AMERICA
`PRODUCTION COMPANY
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`-9-
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`Case 1:16-cv-02690-AT Document 71 Filed 04/06/16 Page 10 of 10
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`CERTIFICATE OF SERVICE
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`The undersigned hereby certifies that on this 6th day of April, 2016, a true and correct
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`copy of the foregoing document has been served via the Court’s ECF system to all counsel of
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`record.
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`/s/ Melissa R. Smith
`Melissa R. Smith
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`CERTIFICATE OF CONFERENCE
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`Pursuant to L.R. CV-7(i), the undersigned hereby certifies that counsel for Defendants
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`met and conferred on April 5, 2016 and have complied with L.R. CV- 7(h). Plaintiff opposes the
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`motion to sever and stay, conclusively leaving the parties at an impasse, and an open issue for
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`the Court to resolve.
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`/s/ Melissa Smith
`Melissa Smith
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