Case 1:12-cv-00931-SLR Document 26 Filed 05/16/13 Page 1 of 11 PageID #: 444
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`IN THE UNITED STATES DISTRICT COURT
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`FOR THE DISTRICT OF DELAWARE
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`VERSATA SOFTWARE, INC. and
`VERSATA DEVELOPMENT
`GROUP, INC.,
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`Plaintiffs,
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`v.
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`CALLIDUS SOFTWARE INC.,
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`Defendant.
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`Civ. No. 12-931-SLR
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`Jack B. Blumenfeld, Esquire and Julia Heaney, Esquire of Morris, Nichols, Arsht &
`Tunnell LLP, Wilmington, Delaware. Counsel for Plaintiff. Of Counsel: Alan D.
`Albright, Esquire, Michael Chibib, Esquire, Conor M. Givins, Esquire, and Benjamin L.
`Bernell, Esquire of Bracewell & Guiliani LLP.
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`Arthur G. Connolly, Ill, Esquire of Connolly Gallagher LLP, Wilmington, Delaware.
`Counsel for Defendant. Of Counsel: Deborah E. Fishman, Esquire, Assad H. Rajani ,
`Esquire, and MichaelS. Tonkinson, Esquire, of Dickstein Shapiro LLP.
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`MEMORANDUM OPINION
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`Dated: May Ill>, 2013
`Wilmington, Delaware
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`Ex. 1024 - 1/11
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`Case 1:12-cv-00931-SLR Document 26 Filed 05/16/13 Page 2 of 11 PageID #: 445
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`~O~Judge
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`I. INTRODUCTION
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`On July 19, 2012, Versata Software, Inc. and Versata Development Group, Inc.
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`(collectively, "Versata") filed a complaint against defendant Callidus Software Inc.'s
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`("Callidus") alleging that certain Callidus software, "including Callidus' SPM
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`Suite, and specifically including Callidus' TrueComp and TrueProducer products"
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`(collectively "the accused products"), infringe U.S. Patent Nos. 7,958,024 ("the '024
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`patent"), 7,908,304 ("the '304 patent"), and 7,904,326 ("the '326 patent"). (D.I. 1)
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`Presently before the court are Callidus' motions to transfer this action to the Northern
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`District of California (D.I. 9) and to dismiss for failure to state a claim under Fed. R. Civ.
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`P. 12(b)(6) (D.I. 14). The court has jurisdiction over this matter pursuant to 28 U.S.C.
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`§§ 1331 and 1338(a). For the reasons that follow, both motions are denied.
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`II. BACKGROUND
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`Plaintiffs Versata Software, Inc. and Versata Development Group, Inc. are both
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`Delaware corporations with their principal place of business at 6011 West Courtyard
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`Drive, Austin, Texas 78730. (D. I. 1 at 1f1-2) Versata has no offices or employees in
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`California.
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`Callidus was incorporated in Delaware in 1996 and maintains its principal place
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`of business at 6200 Stoneridge Mall Road, Suite 500, Pleasanton, California 94588.
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`(D. I. 1 at 1f3; D. I. 2-3) Callidus avers that the accused products were primarily
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`designed and developed in their California location and any continued maintenance is
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`also conducted from there. (D.I. 10 at 3) Further, its internal company servers, which
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`contain technical documents for the accused products, sales and marketing documents,
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`Ex. 1024 - 2/11
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`Case 1:12-cv-00931-SLR Document 26 Filed 05/16/13 Page 3 of 11 PageID #: 446
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`and other company documents, are located at its California headquarters. (D.I. 10 at 3)
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`While 135 of Callidus' 494 employees work in the California headquarters, the balance
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`work in sales and service facilities throughout the United States (but not in Delaware).
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`Callidus also has international offices. (D.I. 10 at 3; D.l. 18 at 4)
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`Ill. VENUE
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`A. Standard of Review
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`Section 1404(a) of Title 28 of the United States Code grants district courts the
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`authority to transfer venue "[fjor the convenience of parties and witnesses, in the
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`interests of justice ... to any other district or division where it might have been
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`brought." 28 U.S.C. § 1404(a). Much has been written about the legal standard for
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`motions to transfer under 28 U.S.C. § 1404{a). See, e.g., In re Link_A_Media Devices
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`Corp., 662 F.3d 1221 (Fed. Cir. 2011 ); Jumara v. State Farm Ins. Co., 55 F.3d 873 (3d
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`Cir. 1995); Helicos Biosciences Corp. v. lllumina, Inc., 858 F. Supp. 2d 367 (D. Del.
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`2012).
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`Referring specifically to the analytical framework described in Helicos, the court
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`starts with the premise that a defendant's state of incorporation has always been "a
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`predictable, legitimate venue for bringing suit" and that "a plaintiff, as the injured party,
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`generally ha[s] been 'accorded [the] privilege of bringing an action where he chooses."'
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`858 F. Supp. 2d at 371 (quoting Norwood v. Kirkpatrick, 349 U.S. 29, 31 (1955)).
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`Indeed, the Third Circuit in Jumara reminds the reader that "[t]he burden of establishing
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`the need for transfer ... rests with the movant" and that, "in ruling on defendants'
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`motion, the plaintiff's choice of venue should not be lightly disturbed." 55 F.3d at 879
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`2
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`Ex. 1024 - 3/11
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`Case 1:12-cv-00931-SLR Document 26 Filed 05/16/13 Page 4 of 11 PageID #: 447
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`(citation omitted).
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`The Third Circuit goes on to recognize that,
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`[i]n ruling on§ 1404(a) motions, courts have not limited their
`consideration to the three enumerated factors in§ 1404(a)
`(convenience of parties, convenience of witnesses, or interests
`of justice), and, indeed, commentators have called on the courts
`to "consider all relevant factors to determine whether on
`balance the litigation would more conveniently proceed and the
`interests of justice be better served by transfer to a different
`forum."
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`ld. (citation omitted). The Court then describes some of the "many variants of the
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`private and public interests protected by the language of§ 1404(a)." /d.
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`The private interests have included: plaintiff's forum of preference
`as manifested in the original choice; the defendant's preference;
`whether the claim arose elsewhere; the convenience of the parties
`as indicated by their relative physical and financial condition; the
`convenience of the witnesses - but only to the extent that the
`witnesses may actually be unavailable for trial in one of the
`fora; and the location of books and records (similarly limited to
`the extent that the files could not be produced in the alternative
`forum).
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`The public interests have included: the enforceability of the
`judgment; practical considerations that could make the trial
`easy, expeditious, or inexpensive; the relative administrative
`difficulty in the two fora resulting from court congestion; the
`local interest in deciding local controversies at home; the
`public policies of the fora; and the familiarity of the trial judge
`with the applicable state law in diversity cases.
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`ld. (citations omitted) (emphasis added).
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`B. Analysis
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`With the above "jurisdictional guideposts" in mind, the court turns to the "difficult
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`issue of federal comity" that transfer motions present. E. E. D.C. v. Univ. of Pa., 850
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`F.2d 969, 976 (3d Cir. 1988). Versata has not challenged Callidus' assertion that the
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`3
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`Ex. 1024 - 4/11
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`Case 1:12-cv-00931-SLR Document 26 Filed 05/16/13 Page 5 of 11 PageID #: 448
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`instant action could have been brought in the Northern District of California. 1 See 28
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`U.S.C. § 1404(a); (D.I. 18 at 2-3)
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`The parties have all chosen legitimate forums in which to pursue the instant
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`litigation. In this regard, certainly a party's state of incorporation is a traditional and
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`legitimate venue, as is the locus of a party's business activities. Given that
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`"convenience" is separately considered in the transfer analysis, the court declines of
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`elevate a defendant's choice of venue over that of a plaintiff based on defendant's
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`convenience. Therefore, the fact that plaintiffs have historically been accorded the
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`privilege of choosing their preferred venue for pursuing their claims remains a
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`significant factor.
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`A claim for patent infringement arises wherever someone has committed acts of
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`infringement, to wit, "makes, uses, offers to sell, or sells any patented invention" without
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`authority. See generally 35 U.S.C. § 271 (a); Red Wing Shoe Co., Inc. v. Hockerson-
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`Halberstadt, Inc., 148 F.3d 1355, 1360 (Fed. Cir. 1998) (an infringement claim "arises
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`out of instances of making, using, or selling the patented invention"). While Versata
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`asserts that alleged infringing aCtivities have taken place in Delaware as Callidus
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`"makes, uses, licenses, sells, offers for sale, and/or imports the infringing products in
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`Delaware," Callidus responds that Versata has not "identif[ied] any act of alleged
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`infringement in Delaware, and Callidus is aware of none."
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`The Third Circuit in Jumara indicated that, in evaluating the convenience of the
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`parties, a district court should focus on the parties' relative physical and financial
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`1Versata requests, in the alternative, that the instant action be transferred to the
`Western District of Texas, where its headquarters are located. (D.I. 18 at 3)
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`4
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`Ex. 1024 - 5/11
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`Case 1:12-cv-00931-SLR Document 26 Filed 05/16/13 Page 6 of 11 PageID #: 449
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`condition. In this case, there is no information provided to compare the size of Versata
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`to Callidus' 494 employees. However, the parties' litigation history shows each has
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`litigated in several states, including Delaware.2
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`Considering the convenience of the witnesses and specifically whether witnesses
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`"actually may be unavailable for trial in one of the fora," Callidus argues that at least
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`one of "seven third-party witnesses with potentially relevant knowledge" has expressed
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`unwillingness to attend a trial in Delaware.3 (D.I. 10 at 12; D.l. 20 at 7)
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`According to Callidus, its server at its California headquarters contains the
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`potentially relevant technical, financial, marketing, and sales documents, negating any
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`argument that the documents would not be readily transferable to Versata's counsel in
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`Texas or available for trial in Delaware. 4 (D.I. 10 at 3, 14)
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`The court recognizes that trial in California would be less expensive and easier
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`for Callidus. As Delaware and Northern California are nearly equidistant from Versata's
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`Austin headquarters, it would most likely be equally expensive for Versata to litigate in
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`either venue.
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`2Searches by party name in the PACER case locator reveal Versata as a party to
`47 civil cases and Callidus to 15 cases.
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`3With respect to trials, in the nine patent jury trials this judicial officer conducted
`between March 2010 and October 2011, an average of three fact witnesses per party
`appeared live for trial, with the average length of trial being 28 hours (with the parties
`often using less time than allocated, on average, 25 hours). Further, depositions in the
`cases over which this judicial officer presides are generally taken where the deponents
`reside or work. There is no suggestion that this case will be an exception.
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`4Callidus' arguments that Versata will have to travel to California to view source
`code is not persuasive as source code can be viewed in any secure location selected
`by the parties. See, e.g., District of Delaware's Default Standards for Access to Source
`Code (adopted Dec. 8, 2011 ).
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`5
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`Ex. 1024 - 6/11
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`With respect to administrative difficulty, trial in this case will be scheduled
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`consistent with the parties' proposals. Local interest in deciding local controversies is
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`not a dispositive factor, as patent litigation does not constitute a local controversy in
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`most cases. Indeed, patent litigation implicates constitutionally protected property
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`rights, is governed by federal law reviewed by a court of appeals of national (as
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`opposed to regional} stature, and affects national (if not global} markets. See Cradle
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`IP, LLC v. Texas Instruments, Inc.,--- F.Supp.2d ----, 2013 WL 548454, at *4 (D. Del.
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`February 13, 2013}. In this regard, the instant litigation involves software sold and
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`distributed throughout the United States. The remaining Jumara public interest factors -
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`the enforceability of a judgment, the public policies of the fora, and the familiarity of the
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`judge with state law - carry no weight in this transfer analysis.
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`In sum, Callidus has the burden of persuading the court that transfer is
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`appropriate, not only for its convenience but in the interests of justice. In this case,
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`Versata chose a legitimate forum which all parties have in common -their state of
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`incorporation. As is usual in these cases, the convenience factors do not weigh in favor
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`of transfer, because discovery is a local event and trial is a limited event. Although
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`Delaware is not the locus of any party's business activities, it is a neutral forum and no
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`more inconvenient for Calllidus than Texas, the locus of Versata's business activities.
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`Given that both Versata and Callidus have experience litigating in multiple jurisdictions,
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`the court is not persuaded that transfer is warranted in the interests of justice.
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`IV. FAILURE TO STATE A CLAIM
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`A. Standard of Review
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`6
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`Ex. 1024 - 7/11
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`Case 1:12-cv-00931-SLR Document 26 Filed 05/16/13 Page 8 of 11 PageID #: 451
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`In reviewing a motion filed under Federal Rule of Civil Procedure 12(b)(6), the
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`court must accept all factual allegations in a complaint as true and take them in the light
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`most favorable to plaintiff. See Erickson v. Pardus, 551 U.S. 89, 94 (2007); Christopher
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`v. Harbury, 536 U.S. 403, 406 (2002). A court may consider the pleadings, public
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`record, orders, exhibits attached to the complaint, and documents incorporated into the
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`complaint by reference. Tel/abs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322
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`(2007); Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384-85 n.2 (3d
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`Cir. 1994 ). A complaint must contain "a short and plain statement of the claim showing
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`that the pleader is entitled to relief, in order to give the defendant fair notice of what the
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`... claim is and the grounds upon which it rests." Bell At/. Corp. v. Twombly, 550 U.S.
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`544, 545 (2007) (internal quotation marks omitted) (interpreting Fed.R.Civ.P. 8(a)). A
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`complaint does not need detailed factual allegations; however, "a plaintiffs obligation to
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`provide the 'grounds' of his entitle[ment] to relief requires more than labels and
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`conclusions, and a formulaic recitation of the elements of a cause of action will not do."
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`/d. at 545 (alteration in original) (citation omitted). The "[f]actual allegations must be
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`enough to raise a right to relief above the speculative level on the assumption that all of
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`the complaint's allegations are true." /d. Furthermore, "[w]hen there are well-ple[d]
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`factual allegations, a court should assume their veracity and then determine whether
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`they plausibly give rise to an entitlement to relief." Ashcroft v. Iqbal, 556 U.S. 662, 129
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`S.Ct. 1937, 1950 (2009). Such a determination is a context-specific task requiring the
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`court "to draw on its judicial experience and common sense." /d.
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`Under 35 U.S.C. § 271(b), "[w]hoever actively induces infringement of a patent
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`7
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`Ex. 1024 - 8/11
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`Case 1:12-cv-00931-SLR Document 26 Filed 05/16/13 Page 9 of 11 PageID #: 452
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`shall be liable as an infringer." To demonstrate inducement of infringement, the
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`patentee must establish, first, that there has been direct infringement and, second, that
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`the alleged infringer had "knowledge that the induced acts constitute patent
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`infringement." Global-Tech Appliances, Inc. v. SEB S.A.,- U.S.-, 131 S. Ct.
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`2060, 2068 {2011 ). "Inducement requires evidence of culpable conduct, directed to
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`encouraging another's infringement, not merely that the inducer had knowledge of the
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`direct infringer's activities." OSU Medical Corp. v. JMS Co., Ltd., 471 F.3d 1293, 1306
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`{Fed. Cir. 2006) {en bane in relevant part).
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`Under 35 U.S.C. § 271{c), a patentee must demonstrate that an alleged
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`contributory infringer has sold, offered to sell or imported into the United States a
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`component of an infringing product "knowing the same to be especially made or
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`especially adapted for use in an infringement of such patent, and not a staple article or
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`commodity of commerce suitable for substantial noninfringing use." Therefore,§ 271{c)
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`"require[s] a showing that the alleged contributory infringer knew that the combination
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`for which [its] component was especially designed was both patented and infringing."
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`Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 488 {1964).
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`B. Analysis
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`Versata alleges that "Callidus makes, uses, licenses, sells, offers for sale, and/or
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`imports in[to] the State of Delaware, in this judicial district, and elsewhere within the
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`United States software that infringes the '024, '304 and '326 patents, including
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`Callidus's SPM Suite, and specifically including Callidus's TrueComp and TrueProducer
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`products." (D. I. 1 at~ 11) For each of the three patents, Versata alleges that "Callidus
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`8
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`Ex. 1024 - 9/11
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`Case 1:12-cv-00931-SLR Document 26 Filed 05/16/13 Page 10 of 11 PageID #: 453
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`has been and is now directly infringing, and indirectly infringing by way of inducing the
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`infringement of and/or contributing to the infringement of, the ... patent in the State of
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`Delaware, in this judicial district, and elsewhere within the United States by, among
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`other things, making, using, licensing, selling, offering for sale, or importing software,
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`including ... software and related services covered by one or more claims of the ...
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`patent, all to the injury of Versata." (/d. at mf 13, 18, 23)
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`With respect to Callidus' allegations that Versata's claims of direct infringement
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`do not adequately identity the accused products, the court finds that Versata's
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`complaint sufficiently identifies the accused software, as "including Callidus's [sic] SPM
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`Suite, and specifically including Callidus's [sic] TrueComp and TrueProducer," as
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`required by Fed. R. Civ. P. Form 18. No more is required of a plaintiff at the pleading
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`stage. See McZeal v. Sprint Nextel Corp., 501 F.3d 1354 (Fed. Cir. 2007); Eon Corp.
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`IP Holdings LLC v. Flo TV Inc., 2011 WL 2708945 (D. Del. July 12, 2011 ).
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`Callidus' allegations that Versata's complaint does not sufficiently plead indirect
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`infringement are equally unavailing. Consistent with this court's holding in Walker
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`Digital LLC v. Facebook, Inc., 852 F. Supp. 2d 559 (D. Del. 2012), Versata's claims of
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`indirect infringement are facially plausible and provide Callidus with adequate notice.
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`Versata's complaint asserts that Callidus had knowledge of its infringement "at least as
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`of the date of the filing of this complaint." (D.I. 1 at ,-r 15); Walker Digital, 852 F. Supp.
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`2d at 565 (explaining that "defendant's receipt of the complaint and decision to continue
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`its conduct despite the knowledge gleaned from the complaint satisfies the
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`requirements of Global-Tech").
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`9
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`Ex. 1024 - 10/11
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`Versata argues that, as Cadillus licenses and/or sells the accused products,
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`Versata need not specifically identify a particular customer to support a pleading of
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`induced infringement. (D.I. 1 at ,-r 13) As Versata alleges that Callidus directly infringes
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`the claims, these two allegations taken together suffice to support the pleading burden.
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`(/d. at W 13-14)
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`With respect to contributory infringement, Versata has alleged that Callidus
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`directly infringes and has knowledge that its products lack substantial non-infringing
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`uses. As with inducement, this sets forth a plausible claim for contributory infringement
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`under the pleading requirements. The court concludes that Versata has sufficiently
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`identified the products at issue for the purposes of claiming direct infringement, as well
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`as satisfied the requirements of Twombly and Iqbal with respect to the allegations of
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`indirect infringement found in the complaint.
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`V. CONCLUSION
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`For the foregoing reasons, Callidus' motions to transfer venue (D.I. 9) and to
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`dismiss for failure to state a claim (D.I. 14) are denied.
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`10
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`Ex. 1024 - 11/11
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