Packet Intelligence LLC v. NetScout Systems, Inc.

CourtDistrict Court, E.D. Texas
DecidedJanuary 7, 2023
Docket2:16-cv-00230
StatusUnknown

This text of Packet Intelligence LLC v. NetScout Systems, Inc. (Packet Intelligence LLC v. NetScout Systems, Inc.) is published on Counsel Stack Legal Research, covering District Court, E.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Packet Intelligence LLC v. NetScout Systems, Inc., (E.D. Tex. 2023).

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS MARSHALL DIVISION

PACKET INTELLIGENCE LLC, § § Plaintiff, § § v. § CIVIL ACTION NO. 2:16-CV-00230-JRG § NETSCOUT SYSTEMS, INC., § TEKTRONIX COMMUNICATIONS, § TEKTRONIX TEXAS, LLC, § § Defendants. §

MEMORANDUM OPINION AND ORDER Before the Court are the following motions and accompanying briefing filed by Plaintiff Packet Intelligence LLC (“PI”) and Defendants NetScout Systems, Inc. and NetScout Systems Texas, LLC (formerly known as Tektronix Texas, LLC d/b/a Tektronix Communication) (collectively, “NetScout”): 1. PI’s Motion to Enforce Liability on Supersedeas Bond (the “Motion to Enforce”) and the related briefing (Dkt. Nos. 398, 403, 405, and 407); 2. NetScout’s Motion to Approve Supersedeas Bond and Stay Enforcement of Judgment (the “Motion to Stay Enforcement”) and the related briefing (Dkt. Nos. 400, 402, 404, and 409); and 3. NetScout’s Motion to Substitute Supersedeas Bond for One of a Reduced Amount (the “Motion to Substitute”) and PI’s response thereto (Dkt. Nos. 408 and 412). Having considered the motions, the related briefing, relevant authorities, and counsel’s oral arguments, the Court finds that the Motion to Enforce (Dkt. No. 398) should be and hereby is GRANTED-AS-MODIFIED herein, the Motion to Stay Enforcement (Dkt. No. 400) is DENIED, and the Motion to Substitute (Dkt. No. 408) is DENIED-AS-MOOT. I. BACKGROUND PI filed its Complaint against NetScout asserting infringement of U.S. Patent Nos. 6,665,725 (the “ʼ725 Patent”), 6,939,751 (the “ʼ751 Patent”), and 6,954,789 (the “ʼ789 Patent”)

(collectively, the “Asserted Patents”) on March 15, 2016. (Dkt. No. 1.) The case was tried to a jury beginning on October 10, 2017. The jury returned a verdict on October 13, 2017 that NetScout willfully infringed at least one claim of the Asserted Patents, that the asserted claims of the Asserted Patents were not invalid, and that PI was entitled to a $3.5 million award for pre-suit infringement and a $2.25 million award for post-suit infringement, totaling $5,750,000. (Dkt. No. 237.) The jury indicated that such sums were intended as a running royalty. (Id. at 6.) The jury also found NetScout’s infringement to be willful. (Id. at 3.) On September 7, 2018, the Court entered Final Judgment. (Dkt. No. 307.) The Final Judgment awarded PI: $5,750,000 in compensatory damages as a running royalty and enhanced damages in the amount of $2,800,000. The Final Judgment also set an ongoing royalty rate of 1.55

percent of the revenue received by NetScout, which was generated by the post-verdict infringing conduct of the accused G10 and GeoBlade products through the life of the Asserted Patents, the last of which expired in June 2022. (Id.) NetScout filed a Notice of Appeal with the Federal Circuit on June 12, 2019 (the “First Appeal”). (Dkt. No. 347.) In the First Appeal, NetScout challenged the determinations of eligibility and validity of the asserted claims, infringement, pre-suit damages, and NetScout’s willfulness. (Id.) In this connection, the Court granted NetScout’s Unopposed Motion to Approve Supersedeas Bond and Stay Enforcement of Judgment on July 5, 2019. (Dkt. No. 351.) On July 14, 2020, the Federal Circuit issued its opinion affirming the judgment of the district court as to infringement, validity, and willfulness. Packet Intelligence LLC v. NetScout Sys., Inc., 965 F.3d 1299, 1316 (Fed. Cir. 2020). However, the Federal Circuit held that “[t]he district court’s award of pre-suit damages is reversed, and any enhancement thereof is vacated.” Id. at 1316 (emphasis added). The Federal Circuit “affirm[ed] the district court’s judgment in all

other respects” other than the award of pre-suit damages and the enhancement related thereto. Id. at 1303. Petitions for Panel Rehearing and Rehearing En Banc were filed and subsequently denied. (Dkt. No. 356.) The Federal Circuit issued its mandate on October 23, 2020. (Dkt. No. 357.) NetScout later filed a Petition for Writ of Certiorari to the Supreme Court, which was denied. (Dkt. No. 359-1 at 4.) Following the First Appeal, the parties briefed their respective positions on the amount of enhanced damages tied to the pre-suit jury award vacated by the Federal Circuit, along with certain issues raised by NetScout concerning the running royalty. (See Dkt. Nos. 367, 368, 369, 372, 373,

375, 376, 377, and 378.) Complying with the Federal Circuit’s mandate, the Court issued an order eliminating the $3.5 million pre-suit damages award and removing $1,704,347.83 of the enhancement (proportionally tied to the reversed $3.5 million pre-suit damages award). (Dkt. No. 396.) The Court, finding NetScout’s arguments persuasive, also exercised its discretion to amend the ongoing royalty rate from 1.55% to 1.355% (eliminating the impact of the pre-suit damages award as a factor in the ongoing royalty rate). (Id.) The Court then issued an Amended Final Judgment implementing these changes. (Dkt. No. 397) (the “Amended Final Judgment”). NetScout filed a motion for reconsideration under Fed. R. Civ. P. 59(e) to alter or amend the Amended Final Judgment, which the Court denied on June 22, 2022. (Dkt. No. 411.) The Court found that NetScout had ample opportunity in its prior briefing (but failed) to raise its new argument that the effective date of any amendment to the ongoing royalty should be October 23, 2020—the date of the Federal Circuit’s mandate. (Id. at 4.) The Court also found that it was within its discretion to modify the ongoing royalty rate and make it effective on a prospective basis (i.e., from May 4, 2022), and that new arguments first presented in a motion for reconsideration

are improper per se. (Id. at 4–5.) Meanwhile and elsewhere, inter partes review (“IPR”) petitions filed by third parties Juniper Networks, Inc. and Palo Alto Networks, Inc. challenging the Asserted Patents were instituted in September 2020, two years after this Court entered Final Judgment in this case. (Dkt. No. 380 at 3.) On September 8 and 9, 2021, the Patent Trial and Appeal Board (“PTAB”) issued Final Written Decisions (“FWDs”) finding each of the asserted claims in the Asserted Patents unpatentable as obvious under 35 U.S.C. § 103. (Dkt. No. 379.) NetScout filed an opposed motion to dismiss and enter final judgment in its favor or, in the alternative, to stay the case based on the PTAB’s FWDs. (Dkt. No. 380.) The Court denied NetScout’s motion on May 4, 2022, noting

that unreviewed PTAB decisions are not final and cannot nullify a final judgment of a district court1 and finding that all factors weighed against granting a stay. (Dkt. No. 396.) On July 20, 2022, NetScout filed another Notice of Appeal with the Federal Circuit (the “Second Appeal”). (Dkt. No. 414.) In the Second Appeal, NetScout challenges the award of enhanced damages and the ongoing royalty rate, including whether the effective date of any amended royalty rate should be October 23, 2020. NetScout also argues, in the Second Appeal, that the FWDs issued in the third party IPRs should have immediate issue-preclusive effect in this case, requiring this Court’s judgment be vacated. NetScout, in essence, seeks to upend the entire

1 As to validity and infringement, this Court’s Final Judgment had been affirmed by the Federal Circuit when the FWDs issued. adjudicative process overseen by this Court and the Federal Circuit by virtue of IPRs filed by third parties, and decided by the PTAB years after the jury’s verdict was returned and accepted in this case.

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Bluebook (online)
Packet Intelligence LLC v. NetScout Systems, Inc., Counsel Stack Legal Research, https://law.counselstack.com/opinion/packet-intelligence-llc-v-netscout-systems-inc-txed-2023.