Case 2:15-cv-00037-RWS-RSP Document 83 Filed 01/19/16 Page 1 of 8 PageID #: 1891
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
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`ELBIT SYSTEMS LAND AND C4I LTD. and
`ELBIT SYSTEMS OF AMERICA, LLC,
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`C.A. No. 2:15-cv-00037-RWS-RSP
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`JURY TRIAL DEMANDED
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`Plaintiffs,
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`v.
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`HUGHES NETWORK SYSTEMS, LLC,
`BLACK ELK ENERGY OFFSHORE
`OPERATIONS, LLC, BLUETIDE
`COMMUNICATIONS, and COUNTRY
`HOME INVESTMENTS, INC.,
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`
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`Defendants.
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`PLAINTIFFS’ SUR-REPLY TO DEFENDANT’S
`RENEWED PARTIAL MOTION TO DISMISS AS TO WILLFULNESS
`AND INDIRECT INFRINGEMENT FOR FAILURE TO STATE A CLAIM
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`

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`Case 2:15-cv-00037-RWS-RSP Document 83 Filed 01/19/16 Page 2 of 8 PageID #: 1892
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`Defendant Hughes Network Systems, LLC (“Hughes”) challenges Plaintiffs’ allegations
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`of its knowledge of asserted U.S. Patent No. 6,240,073 (“’073 Patent” or “Reichman”) and the
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`direct infringement by its customers, arguing they are based solely on a “patent examiner
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`citation” of the ’073 Patent. See, e.g., Dkt. 76 at 1. But Hughes disregards the allegations that it
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`gained a working knowledge of the ’073 Patent during the prosecution of several Hughes patent
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`applications. In one instance, Hughes even submitted a detailed analysis of the ’073 Patent to the
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`U.S. Patent & Trademark Office (“PTO”). Hughes nevertheless relies on cases with materially
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`different facts, in which notice was based solely on an examiner’s citation of the asserted patent.
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`But much more occurred here; Hughes thoroughly reviewed the ’073 Patent and, with its
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`working knowledge of the patent, surely must have known that any manufacture, use, or sale of
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`the accused broadband satellite systems would directly infringe. The Complaint also details
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`Hughes’ knowledge and encouragement of the direct infringement, explaining how Hughes fully
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`implemented, supported, and managed its customers’ infringing use. These allegations amply
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`support the reasonable inference that Hughes knew of the ’073 Patent (for Plaintiffs’ willfulness
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`and indirect infringement claims), and of the infringing acts (for Plaintiffs’ indirect infringement
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`claims).
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`I.
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`PLAINTIFFS ADEQUATELY PLEADED KNOWLEDGE OF THE PATENT.
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`Plaintiffs sufficiently pleaded Hughes’ pre-suit knowledge of the ’073 Patent, which
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`supports their willfulness and indirect infringement claims. In seeking dismissal of those claims,
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`Hughes ignores the extent of Plaintiffs’ allegations. Instead, Hughes incorrectly recasts them
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`and then seeks shelter in case law inapposite to how Plaintiffs actually pleaded the facts. But the
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`allegations establish Hughes’ pre-suit knowledge and the faults of its position; a reasonable
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`inference of notice is certainly plausible. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
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`1
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`Case 2:15-cv-00037-RWS-RSP Document 83 Filed 01/19/16 Page 3 of 8 PageID #: 1893
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`At minimum, Hughes gained an extensive knowledge of the ’073 Patent during the
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`prosecution of its own patent. Dkt. 53 (“Compl.”) ¶ 46. Hughes thoroughly analyzed the ’073
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`Patent in a response to a PTO rejection,1 leaving no doubt that Hughes knew of the ’073 Patent: 2
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`Claims 1–5, 8, 10, 23–28, 31 and 32 were rejected under 35 U.S.C. § 102(e)
`as being anticipated by Reichman et al. (US Patent 6,240,073). Claims 11 and
`33 were rejected under 35 U.S.C. § 103(a) as being unpatentable over
`Reichman et al. (US Patent 6,240,073) in view of Heath et al. (US Patent
`6,564,274). Applicant traverses these rejections.
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`Specifically, Reichman does not teach or suggest the feature of a network
`control cluster configured to dynamically manage available bandwidth
`associated with the plurality of return channels during transmission as recited
`in independent claim 1, and similarly recited in independent claim 23.
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`Reichman discloses a multiple access configuration for the reverse link of a
`two way satellite communication system, where
`the
`reverse
`link
`accommodates various data rates in accordance with the transmitter power and
`the size of the antennae in addition to the type of information to be transmitted
`(col. 9, lines 38-44). The reverse link is utilized to transmit three different
`types of communication to the hub. A first message type includes short
`messages that require transmission rates lower than a certain number of
`bytes/sec and typically requires immediate access to the channel. A second
`message type requires transmission rates higher than a certain number of
`bytes/sec and includes large files of information. A third message type
`include messages that are known to require a continuous type communications
`channel, and includes messages generated from two way bandwidth intensive
`applications such as video conferencing, Internet phone, etc. (col. 9, line 52-
`col. 10, line 7).
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`The multiple access configuration of Reichman has two modes of operation:
`random access (RA) and a channel assignment (CA) mode. Communications
`always start in the random access mode using the random access frequency
`sub band in such a way that the user is able to start communications at any
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`1 The rejection over the ’073 Patent was not a routine event: all claims of Hughes’ application
`had previously been allowed to pass to issue, but the PTO withdrew the application from issue
`on July 14, 2005 (in a communication personally signed by the Director of the Technology
`Center), Decl. of Ranganath Sudarshan, Ex. 1, U.S. Patent Appl. 09/785,755, July 14, 2005
`Miscellaneous Communication, at 1, in order to issue the rejection over the ’073 Patent, Dkt. 72-
`2, U.S. Patent Appl. 09/785,755, July 28, 2005 Final Rejection, at 2–5.
`2 Hughes nevertheless implies the Complaint is insufficient “to infer that the applicant even
`looked at the content of [the prior] art.” Dkt. 76 at 4.
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`2
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`Case 2:15-cv-00037-RWS-RSP Document 83 Filed 01/19/16 Page 4 of 8 PageID #: 1894
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`point in time. After communications have begun, the system decides whether
`to continue in random access mode such as when the user is browsing, for
`example, or whether to assign a channel with optimal bandwidth in
`accordance with the users application/message type, e.g., video conferencing
`or Internet phone applications (col. 10, lines 30-40). Once the system goes
`into CA mode, a FDMA technique is applied to allocate a single user (col. 14,
`lines 26-29) to a specific frequency band to administer bandwidth allocation
`among the various users (col. 14, lines 49-57).3
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`Thus, Reichman does not manage available bandwidth, but merely allocates
`frequencies to users based on a detected application or message type.
`Reichman calculates a total bandwidth (BT), and divides it by the average data
`rate (R) to determine the maximum number of users (N) that may be assigned
`a specific frequency band (col. 14, lines 29-47). Reichman has no way of
`determining what available bandwidth exists during transmission – it follows
`that Reichman also cannot teach the management of available bandwidth as
`well.
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`Dkt. 72-4, U.S. Patent Appl. 09/785,755, Oct. 20, 2005 Response, at 9–10 (emphasis in original).
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`Against this backdrop, Hughes somehow asserts that there was only a “patent examiner citation”
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`to the ’073 Patent. See, e.g., Dkt. 76 at 1. Hughes cannot brush off the prolonged prosecution
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`exchange as a mere one-way citation by a patent examiner.4
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`The cases on which Hughes relies are thus readily distinguishable. For example,
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`Chalumeau Power Systems LLC v. Alcatel-Lucent, No. 11-1175-RGA, 2012 WL 6968938, at *1
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`(D. Del. July 18, 2012), according to Hughes, involved a complaint that “alleged only that a
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`patent examiner asserted that the patent-in-suit was prior art in three patent applications assigned
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`to defendant.” Dkt. 76 at 2. By contrast, Hughes had an extensive dialogue with the PTO about
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`3 Hughes’ descriptions of their accused systems closely resemble Hughes’ analysis of the ’073
`patent. See, e.g., Decl. of Ranganath Sudarshan, Ex. 2, HX System, System Overview at 17
`(“The Hughes HX System is a dynamic bandwidth-assignment system. If a remote site has no
`traffic, system resources are not assigned to that site. Once a site receives a traffic assignment
`(via the aloha channel) the remote terminal goes into a stream (noncontention) mode, and the
`amount of bandwidth assigned is based on the QoS plan of the individual remote terminal.”).
`4 The Complaint also explains that the ’073 Patent was cited as relevant prior art during the
`prosecution of two other Hughes patents. Compl. ¶¶ 45, 47.
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`3
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`Case 2:15-cv-00037-RWS-RSP Document 83 Filed 01/19/16 Page 5 of 8 PageID #: 1895
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`the ’073 Patent. Moreover, the complaint in Chalumeau was inadequate because “[t]he
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`connection between the moving defendants and the patent applications from nearly a decade ago
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`are not explained sufficiently to make plausible that either of the defendants had actual
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`knowledge,” not because the prosecution failed to give notice. 2012 WL 6968938, at *1.
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`Hughes also makes much of a distinction drawn in the cases that has no bearing here—
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`that a PTO examiner’s citation to a later-asserted patent is insufficient to support an inference of
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`knowledge, whereas an applicant’s own citation may be sufficient. Dkt. 76 at 3. Here, there was
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`much more than an examiner’s citation. And even before the rejection based on the ’073 Patent,
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`Hughes did identify the international counterpart of the ’073 Patent (WO 99/26422), which
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`contains substantially the same disclosure as the ’073 Patent, to the PTO. Decl. of Ranganath
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`Sudarshan, Ex. 3, U.S. Patent Appl. 09/785,755, Nov. 15, 2001 Information Disclosure
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`Statement, at 1. Hughes can thus find no relief in the case law. 5
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`II.
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`PLAINTIFFS ADEQUATELY PLEADED KNOWLEDGE OF INFRINGEMENT.
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`The Complaint contains detailed allegation of Hughes’ collaboration in its customers’
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`infringement, establishing Hughes’ knowledge of the direct infringement. Compl. ¶¶ 15–23, 31–
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`37, 44–45, 65–67. Detailed factual support is not needed for every element of indirect
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`infringement, and specific intent to encourage infringement can be shown through circumstantial
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`evidence. See DSU Med. Corp. v. JMS Co., 471 F.3d 1293, 1306 (Fed. Cir. 2006); InMotion
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`Imagery Techs. v. Brain Damage Films, No. 2:11-CV-414-JRG, 2012 WL 3283371, at *3 (E.D.
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`Tex. Aug. 10, 2012). Factual allegations plausibly showing the identity of the direct infringer,
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`knowledge and encouragement of the infringing acts, notice of the asserted patent, and notice
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`5 Hughes also proffers an inapposite policy argument, that imposing a duty to investigate every
`reference cited during prosecution discourages patent applications. Dkt. 76 at 4. Plaintiffs seek
`no such duty, and Hughes did actually investigate the ’073 Patent to further its interests.
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`4
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`Case 2:15-cv-00037-RWS-RSP Document 83 Filed 01/19/16 Page 6 of 8 PageID #: 1896
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`that the accused acts constitute infringement are sufficient. See Achates Reference Pub., Inc. v.
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`Symantec Corp., No. 2:11-CV-294-JRG-RSP, 2013 WL 693955, at *3 (E.D. Tex. Jan. 10, 2013).
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`The Complaint contains factual allegations on all these points, all related to Hughes—Hughes
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`had knowledge of the ’073 Patent (Section I supra) and the asserted U.S. Patent No. 7,245,874
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`(“’874 Patent”) (Compl. ¶ 65),6 and Hughes had knowledge of its customers’ infringing activity.
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`Compl. ¶¶ 15–23, 31–37, 44–45, 65–67. Hughes fully implemented, managed, and supported
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`the infringing systems at least for Defendants Black Elk and Country Home, and non-parties
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`Triton Diving Services, LLC, Hercules Offshore, Inc., and Bee Mar LLC. Id.
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`Spreadsheet Automation Corp. v. Microsoft Corp., 587 F. Supp. 2d 794, 804 (E.D. Tex.
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`2007) defeats Hughes’ argument. There, the Court allowed the plaintiff’s expert to testify on
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`pre-suit damages for inducement because a jury could reasonably find the requisite intent. 587
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`F. Supp. 2d at 804. The defendant had acknowledged “that the [PTO] cited the [asserted] ’009
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`Patent as prior art on other patent applications filed by Defendant.” Id. The Court thus reasoned
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`that “a reasonable jury could find the requisite intent from Defendant’s knowledge of the ’009
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`Patent, viewed in light of the accused functionality.” Id. Plaintiffs’ similar evidence here is
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`certainly sufficient at the pleading stage. In re Bill of Lading Transmission & Processing Sys.
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`Patent Litig., 681 F.3d 1323, 1339 (Fed. Cir. 2012) (“This does not mean, however, that
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`[plaintiff] must prove its case at the pleading stage.”).
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`Accordingly, Hughes’ renewed partial motion to dismiss should be denied.
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`6 In a footnote, Hughes insinuates that its post-filing knowledge of the ’874 Patent is insufficient.
`Dkt. 76 at 4, n. 3. But the very case Hughes cites shows that Plaintiffs’ allegation of post-suit
`knowledge is adequate. Rembrandt Soc. Media, LP v. Facebook, Inc., 950 F. Supp. 2d 876, 882
`(E.D. Va. 2013) (“Thus, there is no sound basis for precluding a plaintiff from alleging the
`requisite knowledge for indirect infringement on the basis of the filing of the lawsuit.”).
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`5
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`Case 2:15-cv-00037-RWS-RSP Document 83 Filed 01/19/16 Page 7 of 8 PageID #: 1897
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`Dated: January 19, 2016
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`Respectfully submitted,
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`/s/ Kurt G. Calia by permission Wesley Hill
`Kurt G. Calia – LEAD ATTORNEY
`Cal. Bar No. 214300
`Covington & Burling LLP
`333 Twin Dolphin Drive, Suite 700
`Redwood Shores, CA 94065
`(650) 632-4700
`kcalia@cov.com
`
`Ranganath Sudarshan
`Cal. Bar No. 244984
`Covington & Burling LLP
`One CityCenter
`850 Tenth Street, NW
`Washington, DC 20001
`(202) 662-6000
`rsudarshan@cov.com
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`Wesley Hill
`Tex. Bar No. 24032294
`Ward, Smith & Hill, PLLC
`1127 Judson Road, Ste 220
`Longview, Texas 75601
`(903) 757-6400
`wh@wsfirm.com
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`Attorneys for Plaintiffs
`Elbit Systems Land and C4I Ltd. and Elbit
`Systems of America, LLC
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`6
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`Case 2:15-cv-00037-RWS-RSP Document 83 Filed 01/19/16 Page 8 of 8 PageID #: 1898
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`CERTIFICATE OF SERVICE
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`The undersigned hereby certifies that all counsel of record who are deemed to have
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`consented to electronic service are being served with a copy of the foregoing document via the
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`Court’s CM/ECF system per Local Rule CV-5(a)(3) this 19th day of January 2016.
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`/s/ Wesley Hill