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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
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`Civil Action No. 2:14-cv-00061-JRG
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`Civil Action No. 2:13-cv-01112-JRG
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` Defendants.
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`MEMORANDUM OPINION AND ORDER
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`Before the Court are three related motions in two related cases – Google, Inc.’s (“Google”)
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`CONTENTGUARD HOLDINGS, INC.
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`Plaintiff,
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`v.
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`GOOGLE, INC.
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` Defendant.
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`CONTENTGUARD HOLDINGS, INC.
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` Plaintiff,
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`v.
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`AMAZON.COM, INC.; APPLE INC.;
`BLACKBERRY LIMITED (FKA
`RESEARCH IN MOTION LIMITED);
`BLACKBERRY CORPORATION (FKA
`RESEARCH IN MOTION CORPORATION);
`HTC CORPORATION AND HTC
`AMERICA, INC.; HUAWEI
`TECHNOLOGIES CO., LTD. AND HUAWEI
`DEVICE USA, INC.; MOTOROLA
`MOBILITY LLC; SAMSUNG
`ELECTRONICS CO., LTD., SAMSUNG
`ELECTRONICS AMERICA, INC., AND
`SAMSUNG TELECOMMUNICATIONS
`AMERICA, LLC.,
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`Case 2:13-cv-01112-JRG Document 109 Filed 04/15/14 Page 2 of 13 PageID #: 1830
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`Motion to Stay (Dkt. No. 15) in Civil Action No. 2:14-cv-00061 (the “Google Action”); 1
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`ContentGuard Holdings, Inc.’s (“ContentGuard”) Motion for Consolidation (Dkt. No. 14) in the
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`Google Action; and Motorola Mobility LLC’s (“Motorola”) Motion to Sever Plaintiff’s Claims
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`Against Motorola (Dkt. No. 55) in Civil Action No. 2:13-cv-01112 (the “Amazon Action”).
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`Given that the three motions involve common questions of underlying fact, the Court deems it
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`proper to address all three motions jointly. Having considered the parties’ written submissions
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`and for the reasons set forth below, the Court DENIES Google’s Motion to Stay; DENIES
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`ContentGuard’s Motion for Consolidation; and CARRIES Motorola’s Motion to Sever.
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`I.
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`Background
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`ContentGuard filed the Amazon Action against Amazon.com, Inc., Apple Inc., BlackBerry
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`Corporation, Huawei Device USA, Inc., and Motorola Mobility LLC on December 18, 2013,
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`alleging patent infringement. On January 17, 2014, ContentGuard amended its complaint in the
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`Amazon Action, joining HTC Corporation, Samsung Electronics Co., Ltd. and their respective
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`affiliates as additional defendants.
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`The technology at issue relates to digital rights management (“DRM”) and digital content
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`distribution. Defendants in the Amazon Action are portable device manufacturers (the
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`“Manufacturer Defendants”), who are accused of, among other things, “provid[ing] hardware and
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`software components required by the claims of the ContentGuard DRM patents to enable the
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`[Amazon] Kindle DRM solution to operate on their devices”; using Google Play Books, Google
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`Play Movies and Google Play Music (collectively, the “Google Play apps”) on their respective
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`devices to practice ContentGuard’s DRM patents; and implementing one or more versions of the
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`Unique Identifier Technology Solution (“UITS”) on their devices. (Amazon Action, Amd.
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`1 In the alternative to its Motion to Stay, Google seeks to transfer the Google Action to the Northern District of
`California. (See Dkt. No. 15 at 9-16.) The Court will address Google’s Alternative Motion to Transfer in a separate
`opinion.
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`Case 2:13-cv-01112-JRG Document 109 Filed 04/15/14 Page 3 of 13 PageID #: 1831
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`Compl. ¶¶ 50, 52, 54.) While the Google Play apps form the basis for some of ContentGuard’s
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`infringement claims against the Manufacturer Defendants, ContentGuard did not name Google as
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`a defendant in the Amazon Action, in either its original or amended complaint.
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`On January 31, 2014, Google filed a declaratory judgment action in the Northern District
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`of California, seeking a declaration that Google Play Books, Google Play Music and/or Google
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`Play Movies do not infringe ContentGuard’s DRM patents (the “NDCA Action”). (See Google
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`Action, Dkt. No. 15-2.) Five days later, on February 5, 2014, ContentGuard sued Google in this
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`Court for allegedly infringing, both directly and indirectly, the same set of patents as asserted in
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`the Amazon Action. Specifically, ContentGuard accuses Google of providing access to content
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`and apps that use the ContentGuard DRM solutions, providing instructions and advertisings for
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`using such content and apps, and providing hardware and software components required by the
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`claims of ContentGuard’s DRM patents. (Google Action, Compl. ¶ 39.)
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`On March 20, 2014, the U.S. District Court for the Northern District of California issued an
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`Order addressing Google’s request to enjoin ContentGuard from proceeding with its later-filed
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`Google Action before this Court. (See Google Action, Dkt. No. 24-1.) The California court
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`denied the injunction sought by Google on the ground of comity and judicial efficiency, and
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`invited this Court to decide whether we should stay the Google Action or transfer it. (See id. at 4.)
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`On April 7, 2014, this Court held a scheduling conference in the Amazon Action setting
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`various case management schedules including the dates for a claim construction hearing and jury
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`selection. There are no motions to stay or transfer venue currently pending in the Amazon
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`Action.
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`II.
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`Google’s Motion to Stay
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`By the instant motion, Google seeks a stay of the Google Action pending the resolution of
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`Case 2:13-cv-01112-JRG Document 109 Filed 04/15/14 Page 4 of 13 PageID #: 1832
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`the NDCA Action under the “first-to-file” rule. While the Amazon Action is the earliest-filed
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`case in the trilogy, Google argues that the NDCA action should be deemed first-filed as between
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`ContentGuard and Google, thereby taking precedence over the later-filed Google Action before
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`this Court. ContentGuard, on the other hand, contends that the Amazon Action is the first-filed
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`case, which takes precedence over Google’s DJ action in California.
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`The “first-to-file” rule “is a doctrine of federal comity, intended to avoid conflicting
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`decisions and promote judicial efficiency, that generally favors pursuing only the first-filed action
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`when multiple lawsuits involving the same claims are filed in different jurisdiction.” Merial Ltd.
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`v. Cipla Ltd., 681 F.3d 1283, 1299 (Fed. Cir. 2012). “When two actions that sufficiently overlap
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`are filed in different federal district courts, one for infringement and the other for declaratory
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`relief, the declaratory judgment action, if filed later, generally is to be stayed, dismissed, or
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`transferred to the forum of the infringement action.” Futurewei Technologies, Inc. v. Acacia
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`Research Corp., 737 F.3d 704, 708 (Fed. Cir. 2013). The first-to-file rule, however, “is not
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`rigidly or mechanically applied – an ample degree of discretion, appropriate for disciplined and
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`experienced judges, must be left to the lower courts.” Merial, 681 F.3d at 1299. Exceptions may
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`be made if justified by “considerations of judicial and litigant economy, and the just and effective
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`disposition of disputes.” Futurewei, 737 F.3d at 708. Resolution of whether the second-filed
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`action should proceed presents a question sufficiently tied to patent law that the question is
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`governed by the law of the Federal Circuit. Id.
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`Here, Google’s declaratory judgment action in California admittedly is not a mirror image
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`of the Amazon case. Google itself is not a party to the Amazon Action. Although the Google
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`Play apps do form the basis for some of ContentGuard’s claims against the Manufacturer
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`Defendants, both Google and ContentGuard seem to agree that the patented technology includes a
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`Case 2:13-cv-01112-JRG Document 109 Filed 04/15/14 Page 5 of 13 PageID #: 1833
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`hardware component, the infringement of which may depend on the different devices supplied by
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`individual Manufacturer Defendant. (See Google Action, Dkt. Nos. 15 at 5, Dkt. No. 19 at 5.)
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`To invoke the “first-to-file” rule, however, the Federal Circuit does not require the original and the
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`follow-up actions to be identical. It instead instructs lower courts to focus on whether the two
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`actions “substantially overlap,” in light of “considerations of judicial and litigant economy, and the
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`just and effective disposition of disputes.” See Futurewei, 737 F.3d at 708; accord Save Power
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`Ltd. v. Syntek Fin. Corp., 121 F.3d 947, 950 (5th Cir. 1997) (“[Defendant] argues that the “first to
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`file” rule does not apply in this case because neither the issues nor the parties are identical to those
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`in the Original Action. The rule does not, however, require that cases be identical. The crucial
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`inquiry is one of ‘substantial overlap’ [of issues].”); see also Intersearch Worldwide, Ltd. v.
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`Intersearch Group, Inc., 544 F. Supp. 2d 949, 959 (N.D. Cal. 2008) (“[E]xact identity [of parties]
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`is not required to satisfy the first-to-file rule”); ProofPoint, Inc. v. Innova Patent Licensing, LLC,
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`No. 5:11-cv-02288, 2011 WL 4915847, at *7 (N.D. Cal. Oct. 17, 2011) (holding that the focus on
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`judicial efficiency underlying the first-to-file rule supported declining jurisdiction in the later-filed
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`declaratory judgment action, even though the plaintiff to the DJ action – supplier of the accused
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`technology – had not been named as defendant in the original patent infringement suit).
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`Here, the Amazon Action and the NDCA Action substantially overlap as to whether the
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`Google Play apps infringe a set of ContentGuard’s DRM patents, which are asserted in both cases.
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`In the Amazon Action, each Manufacturer Defendant is accused of “providing products and
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`methods that use one or more of the Google Play apps to practice the claimed invention.” (See
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`Amazon Action, Amd. Compl. ¶ 52.) While infringement of the hardware component of the
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`patented technology may vary with individual device manufacturer, adjudicating the Amazon
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`Action would inevitably require a determination of whether the Google Play apps practice the
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`Case 2:13-cv-01112-JRG Document 109 Filed 04/15/14 Page 6 of 13 PageID #: 1834
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`claimed invention as alleged. However, such a determination is the very subject of the NDCA
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`Action, where Google seeks a declaration that these apps do not infringe any of the asserted
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`patents. (See NDCA Action, Compl.) Allowing the NDCA Action to proceed in parallel with
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`the Amazon Action would involve two district courts making independent decisions regarding
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`whether the same accused technology infringes the same set of patents. Such runs directly
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`counter to the principles of judicial efficiency and comity underlying the first-to-file rule.
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`Therefore, although the NDCA Action is not a mirror image of the Amazon Action, the Court finds
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`that the two cases “substantially overlap” such that the Amazon Action should be deemed
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`first-filed and accordingly take precedence over the NDCA Action. See Futurewei, 737 F.3d at
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`708.
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`Google next contends that, under the “customer-suit” exception to the first-to-file rule, the
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`NDCA Action still takes precedence because the Amazon Action is a customer suit peripheral to
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`ContentGuard’s infringement claims against Google. The Court disagrees. The “customer-suit”
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`exception applies “where the first suit is filed against a customer who is simply a reseller of the
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`accused goods, while the second suit is a declaratory action brought by the manufacturer of the
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`accused goods.” Kahn v. Gen. Motors Corp., 889 F.2d 1078, 1081 (Fed. Cir. 1989). Under such
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`circumstances, the first-to-file rule gives way to the “manufacturer’s presumed greater interest in
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`defending its actions against charges of patent infringement.” Id. In evaluating the
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`customer-suit exception, “the primary question is whether the issues and parties are such that the
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`disposition of one case would be dispositive of the other.” Proofpoint, 2011 WL 4915847 at *7
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`n.5 (citing Katz v. Siegler, 909 F.2d 1459, 1463 (Fed. Cir. 1990)).
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`In this case, resolution of Google’s declaratory judgment action would not be dispositive of
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`the Amazon Action. First, Google is not the only supplier of allegedly infringing technology in
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`Case 2:13-cv-01112-JRG Document 109 Filed 04/15/14 Page 7 of 13 PageID #: 1835
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`the Amazon case. The Manufacturer Defendants are accused of using two other features
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`unrelated to Google, namely, the Amazon Kindle DRM and the Unique Identifier Technology
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`Solution (“UITS”). Second, even the Google-related claims in the Amazon Action would not be
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`necessarily resolved upon the complete adjudication of Google’s declaratory judgment action, as
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`Google itself admits that “the issues of infringement [in the Amazon Action] could vary depending
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`on each customer’s accused use of Google’s technology on the customer’s various accused
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`devices.” (See Google Action, Dkt. No. 15 at 5.) Resolution of the NDCA Action therefore
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`would not resolve all charges against the Manufacturer Defendants in the first-filed Amazon
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`Action.2 Permitting the NDCA Action to take precedence over the Amazon Case would not
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`support the best interest of efficiency or judicial economy.
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`Google rests its argument primarily on Adobe Sys. Inc. v. Select Retrieval, No. 12-2342,
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`2014 WL 497441 (S.D. Cal. Feb. 6, 2014), where the court assumed jurisdiction in Adobe System
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`Incorporated’s (“Adobe”) later-filed declaratory judgment action of non-infringement, despite
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`earlier infringement actions filed against Adobe’s customers. The Adobe case, however, is
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`distinguishable from the present situation. The asserted patents in Adobe do not include a
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`hardware component, the infringement of which depends on each customer’s individually accused
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`device. The patentee’s allegations against each of Adobe’s customers were “essentially the same,
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`varying only to the extent that each Adobe customer maintained its own website.” Adobe, 2014
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`WL 497441 at *2. There, unlike here, the adjudication of Adobe’s declaratory judgment claim of
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`non-infringement would squarely resolve the patentee’s infringement claims against each of
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`2 Indeed, resolution of the NDCA Action, as it is currently pled, would not be dispositive of even the Google Action
`before this Court. Google sought a declaration in the NDCA Action that the Google Play apps do not infringe any of
`ContentGuard’s asserted patents. (See NDCA Action, Compl. at 22.) In the Google Action, however, Google is
`accused not only of providing the Google Play apps, but also as a device manufacturer based on its Android devices
`marketed under the trademark “Nexus.” (See Google Action, Compl. ¶16.) While the two Google actions are
`clearly related, resolution of the NDCA Action would not address the hardware component of the patented
`technology, which allegedly is infringed by Google’s Nexus devices.
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`Case 2:13-cv-01112-JRG Document 109 Filed 04/15/14 Page 8 of 13 PageID #: 1836
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`Adobe’s customers. See id. at *4. Moreover, the patentee in Adobe filed multiple lawsuits
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`against Adobe’s customers in various district courts including the courts in Delaware, Maine and
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`Illinois. See id. at 5. There, the court declining to exercise jurisdiction in Adobe’s declaratory
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`judgment action would subject Adobe (through its customers) to “potentially inconsistent
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`judgments regarding whether its technology infringes the patent.” Id. In this case, however,
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`ContentGuard did not file suits in various district courts against different device manufacturers
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`who use Google’s technology. This Court’s best understanding is that all device manufacturers
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`currently being accused by ContentGuard are before this Court in the Amazon Action.
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`ContentGuard’s infringement claims against Google are also before this Court. Having the
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`infringement claims asserted against the device manufacturers and those asserted against Google
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`adjudicated in one court would ensure judicial consistency – the very result that the Adobe court
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`sought to achieve.
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`Given the substantial overlapping of key infringement issues between the Amazon Action
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`and the NDCA Action, this Court is persuaded that the Amazon Action is the first-filed case, and,
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`as such, takes precedence over Google’s later-filed declaratory judgment action in California.
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`Accordingly, Google’s request to stay the Google Action before this Court pending the resolution
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`of the NDCA Action, based on the first-to-file rule, is hereby DENIED.
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`III. ContentGuard’s Motion for Consolidation
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`In addition to opposing Google’s Motion to Stay, ContentGuard further moves this Court
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`to consolidate the Google Action with the Amazon Action for discovery and case management
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`purposes, which motion Google opposes. (See Google Action, Dkt. Nos. 14, 20.)
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`Under Federal Rule of Civil Procedure 42(a), “[i]f actions before the court involve a
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`common question of law or fact, the court may…consolidate the actions.” Fed. R. Civ. P. 42(a)
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`Case 2:13-cv-01112-JRG Document 109 Filed 04/15/14 Page 9 of 13 PageID #: 1837
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`(emphasis added). This rule providing for the consolidation of actions is “permissive and vests a
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`purely discretionary power in the district court.” Whiteman v. Pitrie, 220 F.2d 914, 918 (5th Cir.
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`1955). However, when prejudice to rights of the parties “obviously results from the order of
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`consolidation,” the action of the trial court may be held to be reversible error. See id.
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`Here, as noted above, despite two features unrelated to Google which are also accused in
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`the Amazon Action, the Amazon and the Google Actions substantially overlap as to whether the
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`Google Play apps infringe ContentGuard’s DRM patents. Such would ordinarily justify
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`consolidation at least for certain pretrial purposes. That said, this Court shares the view of our
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`sister court in California that ContentGuard appears to have gone to “considerable effort to avoid
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`suing Google in Texas, evidently fearing a motion to transfer, until its hand was forced” by Google
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`filing the NDCA Action. (See Dkt. No. 24-1 at 4.) From the beginning, ContentGuard was well
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`aware that Google’s technology is involved in the accused infringing products. The original
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`complaint of the Amazon Action specifically identified the Google Play apps as being used to
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`practice the asserted patents. ContentGuard could have named Google as a defendant in the
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`Amazon Action, both in its original complaint and in the amended complaint, but elected not to do
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`so. To now grant ContentGuard’s request and have the Amazon and Google Actions proceed on a
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`consolidated basis might be deemed by future litigants as an invitation to follow a similar path.
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`Such is not an invitation this Court wishes to issue. Therefore, given that ContentGuard has
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`voluntarily forgone the opportunity to sue Google together with the Manufacturer Defendants, this
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`Court elects not to exercise its discretion to consolidate the Google Action into the Amazon
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`Action. ContentGuard’s Motion for Consolidation is hereby DENIED.
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`IV. Motorola’s Motion to Sever
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`By the instant motion Motorola seeks to sever ContentGuard’s claims against it from the
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`Case 2:13-cv-01112-JRG Document 109 Filed 04/15/14 Page 10 of 13 PageID #: 1838
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`Amazon Action, alleging that joinder is improper under 35 U.S.C. § 299 and Fed. R. Civ. P 20.
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`(See Amazon Action, Dkt. No. 55.)
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`Under Rule 20, joinder is proper where: (1) the claims against the defendants arise out of
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`the “same transaction, occurrence, or series of transactions or occurrences,” and (2) there is a
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`“question of law or fact common to all defendants.” Fed. R. Civ. P. 20(a)(2); In re EMC Corp.,
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`677 F.3d 1351, 1356 (Fed. Cir. 2012) (“In re EMC I”). In In re EMC I, the Federal Circuit
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`clarified the standard for joinder by holding that “[c]laims against independent defendants (i.e.,
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`situations in which the defendants are not acting in concert) cannot be joined under Rule 20’s
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`transaction-or-occurrence test unless the facts underlying the claim of infringement asserted
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`against each defendant share an aggregate of operative facts.” Id. at 1359. In addition, “joinder
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`is not appropriate where different products or processes are involved.” Id. “Unless there is an
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`actual link between the facts underlying each claim of infringement, independently developed
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`products using differently sourced parts are not part of the same transaction, even if they are
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`otherwise coincidentally identical.” Id.
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`Here, the Manufacturer Defendants are each accused of using three software applications
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`on their devices to practice ContentGuard’s DRM patents, i.e., the Amazon Kindle app, the Google
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`Play apps, and the UITS specification. The claims against the Manufacturer Defendants therefore
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`share at least a set of common facts regarding these three software applications. Despite the
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`existence of a hardware component, the infringement of which may depend on the different
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`devices supplied by individual Manufacturer Defendant, the accused instrumentality in this case –
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`the use of the three common software applications on each Defendant’s device – is not clearly
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`based on “independently developed products using differently sourced parts,” and the common
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`facts regarding the accused software may well constitute “an actual link between the facts
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`Case 2:13-cv-01112-JRG Document 109 Filed 04/15/14 Page 11 of 13 PageID #: 1839
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`underlying each claim of infringement.” See In re EMC Corp., 677 F.3d at 1359.
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`That said, “even if a plaintiff’s claims arise out of the same transaction and there are
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`questions of law and fact common to all defendants, district courts have the discretion to refuse
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`joinder in the interest of avoiding prejudice and delay, ensuring judicial economy, or safeguarding
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`principles of fundamental fairness.” Id. at 1360 (citing Acevedo v. Allsup’s Convenience Stores,
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`Inc., 600 F.3d 516, 521 (5th Cir. 2010)). “In a complicated patent litigation a large number of
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`defendants might prove unwieldy, and a district court would be justified in exercising its discretion
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`to deny joinder when different witnesses and documentary proof would be required.” Id.
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`(citations omitted).
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`Here, a total of nine ContentGuard patents are asserted in the Amazon Action against seven
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`device manufacturers. Each Defendant, except for Amazon, is accused of infringing all nine of
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`the asserted patents, while Amazon is accused of infringing seven of the nine asserted patents.
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`(See Amazon Action, Compl. ¶¶ 128-34.) The patents at issue altogether include 27 independent
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`claims and 287 dependent claims,3 and proving infringement of the hardware component of the
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`patented technology may depend on each Manufacturer Defendant’s individual devices. Clearly,
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`this case is a “complicated patent litigation” with multiple defendants where “different witnesses
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`and documentary proof would be required” from each Defendant. See In re EMC, 677 F.3d at
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`1360. In a case of this complexity, to force all Manufacturer Defendants to share a single trial
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`might prejudice their ability to build an effective defense against ContentGuard’s allegations,
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`which counsels against joinder.
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`Ultimately, however, this Court finds the record has not been sufficiently developed at this
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`point in time for it to determine with clarity whether or not joinder is proper in this case. While
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`3 To date, ContentGuard has not indicated which claims are asserted against which Manufacturer Defendant
`specifically.
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`Case 2:13-cv-01112-JRG Document 109 Filed 04/15/14 Page 12 of 13 PageID #: 1840
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`ContentGuard’s claims against each Manufacturer Defendant share the common facts underlying
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`the three accused software applications and may depend on each Defendant’s individually accused
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`devices, no evidence has been proffered regarding how the accused software-hardware
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`combination corresponds to claims of the asserted patents. If, for instance, ContentGuard’s
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`claims are predominantly software-based, then the common facts underlying such claims may
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`constitute “an actual link” connecting all Defendants sufficient to support joinder in this case. See
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`id. at 1359. On the other hand, if the hardware component turns out to play the dominant role in
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`determining how the three software applications are used specifically on each Defendant’s device,
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`then the claims against each Defendant may be sufficiently distinguished such that keeping them
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`jointly in one case would be improper. Given that the case is still in its early stage and discovery
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`has barely started, the Court deems it prudent to carry the joinder issue and let the parties further
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`develop the record to resolve, among other things, the relative significance of the software and
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`hardware components of ContentGuard’s claims. Accordingly, Motorola’s Motion to Sever is
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`hereby CARRIED by the Court. Motorola is directed to file with the Court, within the next sixty
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`(60) days, a supplemental brief of no more than ten (10) pages excluding supporting attachments,
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`to more clearly establish the facts as to such software-hardware correlation as discussed above.
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`ContentGuard shall file any opposition brief, subject to the same page limit, within fifteen (15)
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`days thereafter.
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`V.
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`Conclusion
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`For the reasons stated above, the Court hereby DENIES Google’s Motion to Stay;
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`DENIES ContentGuard’s Motion for Consolidation; and CARRIES Motorola’s Motion to Sever.
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`Case 2:13-cv-01112-JRG Document 109 Filed 04/15/14 Page 13 of 13 PageID #: 1841
`Case 2:13—cv—01112—JRG Document 109 Filed 04/15/14 Page 13 of 13 Page|D #: 1841
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`So ORDERED and SIGNED this 15th day of April, 2014.
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` RODNEY GIL RAP
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`UNITED STAT
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`DISTRICT JUDGE
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`13