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Giles Sutherland Rich Memorial Moot Court Competition 2012-2013 This case involves a decision from the United

States District Court for the District of Summerset (District Court), within the jurisdiction of the Court of Appeals for the Twelfth Circuit. On September 17, 2011, Plaintiff Edward Ed Clark (Clark) and Clark Innovations, Inc. (Clark Innovations) filed suit against The Copper Throne (Copper Throne), Bannister, Inc. (Bannister) and Taggary LLC (Taggary), alleging infringement of Claim 1 of U.S. Patent No. 9,998,604 (the 604 patent). Bannister and Taggary have created software applications that run on smartphones. These applications are available to the public through the online service offered by Copper Throne known as the Program Store. Copper Throne timely filed its Answer denying infringement. In addition to filing their Answers, Bannister and Taggary filed a motion to sever and transfer the cases. Clark filed a motion for preliminary injunction, seeking an injunction that prevents Bannister and Taggary from selling infringing software applications, and to have Copper Throne remove Bannisters and Taggarys applications from Copper Thrones Program Store. The District Court heard arguments on the motions to sever and transfer and the motion for a preliminary injunction. The District Court denied Bannisters and Taggarys motion to sever and transfer and granted Clarks motion for a preliminary injunction. Pursuant to 28 U.S.C. 1292, Bannister and Taggary timely filed a Notice of Appeal in the United States Court of Appeals for the Federal Circuit, seeking to appeal the district courts denial of their motion to sever and the district courts grant of Clarks motion for a preliminary injunction. The District Court certified the appeal, and the Federal Circuit has proper jurisdiction over both issues. The Appeal was docketed as Appeal No. 12-1974. All of the facts recited herein are supported by substantial evidence of record. Any facts not recited herein are without support in the record. Record Facts: Clarkister 1. Edward Ed Clark and Thomas Bannister were co-founders of a company, Clarkister, Inc. Clarkister Inc.s product was primarily a web-based social networking site, also called Clarkister. Mr. Clark and Mr. Bannister jointly wrote the Clarkister software, but Mr. Clark was responsible for marketing and sales for Clarkister. 2. Mr. Clark and Mr. Bannister assigned the Clarkister software copyrights to Clarkister, Inc. Through their work together, Mr. Clark and Mr. Bannister were granted numerous patents, which were also assigned to Clarkister, Inc. One such patent granted to Mr. Clark and Mr. Bannister was the 604 patent with claims directed to a highly efficient method for calculating routes with multiple stops. The 604 patent

represented a significant improvement over past methods, and relied upon map data maintained on the Clarkister servers. Clarkister used the claimed method in web pages that allowed users to calculate the fastest way to visit each of several Buddies registered with Clarkisters social networking site. Clarkister Smartphone App 3. In 2009, Mr. Clark and Mr. Bannister developed a smartphone application based on the Clarkister mapping technology. The application, the Clarkister App, included a mapping feature that used the method claimed in the 604 patent. As with the webbased version of the software, this mapping feature rapidly calculated routes with multiple way-points and allowed users to map the fastest way to visit multiple Clarkister Buddies. 4. A notice in the Clarkister Apps About file, written by Mr. Bannister, stated that the Clarkister App was covered by certain Clarkister patents, including the 604 patent. The About file also contained a contact address, email address, and phone number for Mr. Clark. 5. Mr. Clark and Mr. Bannister developed the Clarkister App based on software code from an online software code library, Open Source USA. Open Source USA allows use of its code under a permissive free software license with the following terms: Copyright (c) 2007, Open Source USA All rights reserved. Redistribution and use of this software in source and binary forms, with or without modification, are permitted free of charge to any person, provided that the following conditions are met: 1. All copies of the source code of this software must include the above copyright notice, along with this list of conditions and the following disclaimer. 2. All copies of this software in binary form must reproduce the above copyright notice, this list of conditions and the following disclaimer in the documentation and/or other materials provided with the the copies. THIS SOFTWARE IS PROVIDED AS IS'' AND WITHOUT ANY EXPRESS OR IMPLIED WARRANTIES, INCLUDING, WITHOUT LIMITATION, THE

IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. 6. Mr. Clark and Mr. Bannister relied on the Open Source USA code as the framework for integrating the Clarkister routing functions with specific smartphone platforms. Mr. Clark and Mr. Bannister spent months writing the Clarkister App and altering the code for the specific needs of each particular platform. The open source software code contained basic functions for interacting with the GPS capabilities of a variety of smartphones. 7. During the prosecution of the Clarkister patents, the Open Source USA software was disclosed to the Patent Office and considered by the patent examiner. 8. During the hearing on Clarks motion for preliminary injunction, Mr. Bannister admitted that he had not fully complied with the terms of Open Source USAs license by removing the copyright and warranty notices from Open Source USAs software prior to incorporating it in the Clarkister App. 9. The Open Source USA developers had also included coding in the software to cause the copyright notice and license to display if show c were typed in, and the warranty notice to display if show w were typed in a search window. Mr. Bannister did not remove the coding related to these commands. Clarkister, Inc. v. X-Map LLC 10. Shortly after releasing the Clarkister App, Mr. Bannister and Mr. Clark became aware of a competitor, X-Map LLC, which also used a highly efficient routing method in its mapping application, also called X-Map. 11. After further investigation, Mr. Bannister satisfied himself that X-Map practiced the methods claimed in the 604 patent. Clarkister filed a lawsuit against X-Map, alleging infringement of the 604 patent, and moved for a preliminary injunction against XMap to halt its sales and distribution of the X-Map application.

12. In support of the preliminary injunction, Mr. Bannister filed an affidavit stating that the 604 patent was valid and enforceable, and that the 604 patent was critical to the efficient running of the X-Map routing function, an advantage that Clarkister had developed and which X-Map was taking advantage of. Mr. Bannister stated that the public interest would be served by a preliminary injunction because it was in the public interest to protect the rights of inventors. 13. Further, Clarkister learned that its customers were abandoning their use of the Clarkister App in favor of X-Map, partly because X-Map offered its product for 50% less than the Clarkister App. Over X-Maps objections, the district court granted Clarkisters motion, stating that there was a likelihood of irreparable injury because of X-Maps status as a competitor and because X-Map was eroding Clarkisters market share. After the preliminary injunction issued, the parties settled for a small sum, and X-Map developed a workaround, which was inferior to the methods claimed in the 604 patent. Clarkister bankruptcy and IP transfers 14. Clarkister, Inc. was never a financial success, and the company declared bankruptcy and dissolved shortly after the settlement with X-Map. 15. The dissolution of Clarkister, Inc. was less than amicable. Mr. Clark lost his home, having sunk large portions of his personal wealth into the company. Mr. Clark blamed Mr. Bannister for spending too much of Clarkisters money on the X-Map litigation and for not providing enough funding to the marketing efforts of the company. Mr. Bannister blamed the failure on Mr. Clarks inadequate sales and marketing efforts. 16. Mr. Bannister and Mr. Clark had numerous loud arguments at the Clarkister offices. In the midst of one such argument, Mr. Clark swore he would ruin Mr. Bannister in the same way that he had been ruined. Mr. Clark demanded a copy of the code for

the Clarkister App from Mr. Bannister, which Mr. Bannister refused. Mr. Clark and Mr. Bannister had previously exchanged copies of the source code via e-mail. To prevent Mr. Clark from getting the source code, Mr. Bannister changed the passwords to Mr. Clarks Clarkister email account. 17. The patents assigned to Clarkister were sold off to TRU Patents, Inc. during Clarkisters bankruptcy proceeding, which Mr. Bannister primarily handled. In conducting due diligence regarding the sale, TRU Patents representatives interviewed Mr. Bannister about any potential invalidity or inequitable conduct committed during prosecution of the patents. Mr. Bannister assured them in a signed statement that he had conducted searches before Clarkister filed its patent applications and had disclosed all material references. The file wrappers confirmed that Mr. Bannister had zealously filed over 400 references with the USPTO, and that the examiner had considered every one. 18. Mr. Bannister originally did not list the copyrights as a part of the bankruptcy estate. Six months after the bankruptcy was discharged, and without telling Mr. Clark, Mr. Bannister re-opened the bankruptcy and added the copyrights to the Clarkister app to the bankruptcy estate. 19. Mr. Clark never received notices of the re-opening of the bankruptcy because he had moved from his home where the court notices were sent and he no longer had access to his email account. Mr. Bannister bought the copyrights to the Clarkister application for $1000. The sole complete copy of the Clarkister map data, software code and smartphone application code was on Mr. Bannisters personal computer, which was also not included in the bankruptcy. Clark Innovations, Inc. 20. Following the dissolution of Clarkister, Mr. Clark rebuilt his life. Mr. Clark founded Clark Innovations, Inc. in 2010. Clark Innovations, a family-owned company that is

based in the District of Summerset, develops web-based programs such as search engines, flash video players and smartphone applications for a variety of industries such as retail, restaurants and music providers. In his spare time, Mr. Clark worked to create a smartphone mapping application - Crows Flight. Using the knowledge of the software code that he retained from his time at Clarkister, Mr. Clarks new mapping application included new improvements on the mapping capabilities of the Clarkister App. Like the Clarkister App, Crows Flight relies on map data stored on servers. Mr. Clark developed a completely new set of map data for use with Crows Flight, and placed that data on servers at Clark Innovations. 21. Crows Flight requires the user to enter a starting location and an ending location. The application calculates the shortest distance from the starting location to the ending location via intermediate way-points. Crows Flight is used by business and personal users, to calculate the fastest route through a series of destinations. 22. Mr. Clark was worried that Crows Flight infringed the 604 patent, so Clark Innovations licensed the 604 patent from TRU Patents, Inc., as the exclusive licensee. 23. Clark Innovations offered Crows Flight for sale for $5, but sales were slow, with approximately 500 sales occurring by the end of September 2011. Bannister, Inc. and Taggary LLC 24. Following the dissolution of Clarkister, Mr. Bannister started a family-owned smartphone application development company called Bannister, Inc., which sells an application called BannisterMap. BannisterMap plots the quickest route and sequence of locations for people who need to visit several locations in a row - e.g. time-strapped shoppers who want to run their errands in the most efficient way possible. BannisterMap relies upon map data maintained on Bannisters servers.

25. Bannister, Inc. also occasionally does some consulting work with Taggary LLC, owned by Mr. Bannisters brother-in-law, Mr. Mark Taggary. 26. Taggary LLC sells a software service called Tagg-U that allows small businesses to map the fastest way to deliver their products to local distributors. The Tagg-U software eliminates the need for centralized dispatchers. Businesses that purchase the software have come to critically rely on it for their daily operations and would suffer significant injury to their ability to operate if they were not able to use the software. 27. Bannister, Inc. assisted Taggary LLC in developing Tagg-U by demonstrating how the Clarkister application worked and providing portions of the Clarkister application code to help solve certain difficult coding issues. Although Taggary LLC had to rewrite many portions of code in order for Tagg-U to function, it admittedly copied portions of the Open Source USA code. 28. Tagg-U also incorporated several portions of the Clarkister applications routing code, including the use of map data maintained on Taggary LLCs servers. Taggary had developed its own independent collection of map data prior to receiving any information from Bannister, Inc. 29. The re-worked Clarkister code used in Tagg-U was only used as a check against Tagg-Us primary routing code developed by Tagg-U programmers. In operation, the Tagg-U software used its own code to create a Suggested Route and then, as a check, used the Clarkister code to calculate the same route. If the two routes differed, the Tagg-U software would display the route calculated by the Clarkister code as an Alternative Route for customers to select. The evidence presented by Tagg-U showed, however, that customers predominately selected the Suggested Route when asked and only selected the Alternative Route two percent of the time.

30. Although Tagg-U has several non-infringing uses, the methods claimed in the 604 patent are used to implement the Alternative Route features quickly. Indeed, 95 percent of Tagg-Us customers pay a higher price and monthly subscription to receive these speed-routing and re-routing features along with several features unrelated to the 604 patent, such as detail maps and traffic information. Although Tagg-U could have been designed to avoid using the 604 patents methods, the redesign would have caused Tagg-U to run noticeably slower and provide alternative routes that were less efficient 30% of the time. 31. Both Bannister Inc. and Taggary LLC contacted Copper Throne to make their applications available for download from Copper Thrones online Program Store. 32. Offered at $2, BannisterMap proved to be popular. BannisterMap received favorable reviews in the electronic press, and won an award in early 2011 as best new application of 2010. Sales stand at 100,000 apps as of the end of September 2011, with monthly sales at 15,000. Sales are increasing on a monthly basis. 33. Tagg-U was offered at $5, with $2 extra per month for the subscription-based features. Tagg-U proved to be wildly popular among business users. Sales stand at 80,000 apps as of the end of September 2011, with monthly sales at 10,000. Small businesses have found that they can save substantial amounts of money by using the Tagg-U software. 34. BannisterMap and Tagg-Us appearance in search engines directed web traffic to Copper Thrones online Program Store. Copper Throne found that purchasers of BannisterMap were more likely to recommend Tagg-U to their business associates. 35. Copper Throne studied the effect of Tagg-Us popularity and found that business users that bought Tagg-U also bought, on average, two additional unrelated applications when they bought the Tagg-U application.

Copper Throne 36. Copper Throne requires parties who submit applications for public sale to the Program Store to comply with a terms of use (TOU) agreement. Included in the TOU agreement is the following term: To the best of your knowledge, your application infringes no patents, trademarks, copyrights, or other intellectual property rights. The TOU agreement also states that: Copper Throne, in its sole discretion, may remove your application from its Program Store if your app infringes, or is accused of infringing, the intellectual property rights of a third party. Copper Thrones copyright policy and procedures permit third parties to send takedown notices to Copper Throne, and permits developers such as Bannister to respond with counter-takedown notices, per 17 U.S.C. Section 512 (c), (g), and (i). 37. Copper Thrones copyright policy further states that if a developer has been a subject of a takedown notice more than once in a months period, Copper Throne will review the developers activities to determine if the user engaged in infringement. Copper Thrones policy states that it will deactivate a developers account if Copper Throne determines that the user is engaging in infringement and will shut down a developers account if Copper Throne determines that the user engages in willful infringement. 38. In addition to its copyright policy, Copper Throne has filed the appropriate paperwork, Interim Designation of Agent to Receive Notification of Claimed Infringement, with the Copyright Office so that Copper Throne may avoid liability for third party copyright infringement. Tagg-U: Allegations of infringement 39. While preparing to offer Crows Flight on the Copper Throne Program Store, Mr. Clark received a call from Open Source USA. Open Source USA had located TaggU on Copper Throne, and had identified its software code in Tagg-U. Open Source

USA found the Clarkister Apps About notice in Tagg-U, and had tracked down Mr. Clark from the contact information. Open Source USAs representative asked Mr. Clark why he was not following its license terms. Mr. Clark responded that he did not release Tagg-U. Open Source USA directed Mr. Clarks attention to the Copper Throne website, where Mr. Clark bought the Tagg-U application. 40. Mr. Clark analyzed the Tagg-U and BannisterMap applications. He found that they both contained some of the same errors and misspellings that the Clarkister App had contained. He ran the software and typed show c and show w to see if the Open Source USA copyright notice and warranty would appear, and they did. The version was the same version used in the Clarkister app. Mr. Clark looked at the About file, and found the Clarkister About statement, including the statement that the app was covered by the 604 patent. 41. Mr. Clark investigated Taggary LLC and discovered that it was owned by Mr. Taggary, who he remembered meeting during the time Mr. Clark and Mr. Bannister worked together on the Clarkister application. Mr. Clark contacted the Open Source USA representative and explained that he believed his former business partner, Mr. Bannister, had released the Tagg-U app. 42. Mr. Clark reviewed the source code for Crows Flight and determined that it did not contain any Open Source USA code. 43. On April 2, 2011, Open Source USA filed a takedown notice with Copper Throne regarding the Tagg-U and BannisterMap apps. Copper Throne did not take down either app immediately. Instead, Copper Throne sent the takedown notice to Bannister and Taggary. Mr. Bannister filed a counter takedown notice, and both apps remained available for purchase on Copper Throne.

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44. Mr. Clark contacted TRU Patents to determine if TRU Patents had granted a license to Bannister or Taggary. TRU Patents confirmed that it had not sold any license to the 604 patent to anyone except Clark Innovations. 45. On April 16, 2011, Mr. Clark sent a letter to Copper Thrones general contact email address, stating that Tagg-U app infringed the 604 patent and that the About file, written by Mr. Bannister, acknowledged that the Clarkister App practiced the 604 patent. Mr. Clark demanded that Tagg-U and BannisterMap be taken down from the Program Store. Mr. Clark also mentioned Open Source USAs calls regarding copyright infringement. 46. Copper Throne sent Mr. Clarks letter to Bannister and Taggary. Mr. Bannister denied infringement and sent Copper Throne a letter titled Counter-takedown Notice. Copper Throne notified both parties about Mr. Bannisters letter and said it would continue to offer Tagg-U while the parties resolved their dispute. 47. As word spread in the open source community of Tagg-U and BannisterMaps failure to follow Open Source USAs license terms, Mr. Clark felt the brunt of the blame, because his contact information was in the Clarkister Apps About file that appeared in Tagg-U and BannisterMap. Mr. Clarks Clark Innovations website was frequently hacked and taken offline. 48. Clark Innovations (as exclusive licensee of the 604 patent) and TRU patents (as the 604 patent owner) brought suit against Copper Throne, Bannister, and Taggary for infringement of the 604 patent by BannisterMap and Tagg-U. 49. Shortly after filing the lawsuit, Clark Innovations filed a motion for preliminary injunction seeking to stop sales of BannisterMap and Tagg-U, and seeking to halt all subscription-based features of Tagg-U. Defendants filed a motion to sever and transfer the suits against Bannister, Inc and Tagg-U.

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50. Clark Innovations agreed to pay all legal expenses for bringing the lawsuit and the same counsel represent both Clark Innovations and TRU patents. Similarly, Bannister, Inc. agreed to pay the costs of Copper Throne, Bannister, and Taggary in defending the suit through the hearings on preliminary injunction and joinder. Counsel for Bannister, Inc. has taken the lead on all filings to date for the Defendants. 51. In opposing the motion for preliminary injunction, Mr. Bannister filed an affidavit stating that there were questions as to the validity of the 604 patent, and that the 604 patent did not provide a competitive advantage over other existing mapping methods. The District Court held that Mr. Bannister was estopped from providing testimony that contradicted his earlier testimony in the Clarkister v. X-Map litigation, and therefore struck Mr. Bannisters affidavit.1 52. Defendants counsel conceded that Mr. Clark would be harmed but argued that such harm could be recovered in damages if Bannister and Taggary continued to sell the Tagg-U app. Defendants challenge to the validity of the 604 patent during the preliminary injunction hearing fell apart without Mr. Bannisters testimony, but Defendants reserved the right to challenge the 604 patent during litigation. The Defendants admitted at the preliminary injunction hearing that their primary defenses against the 604 patent are based on non-infringement, and that these defenses would rely on narrow claim constructions and would likely lead to a battle between experts. 53. The Defendants primary arguments against the injunction were based on a balance of the equities. Defendants asserted that a preliminary injunction ruling was not in the public interest due to the harm it would cause to downstream customers that
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The District Courts holding on estoppel is not a subject of the present appeal, and the Defendants have preserved their rights to review this or any other estoppel issues that might arise after this appeal.

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would be prevented from using the Tagg-U and BannisterMap software. Defendants also argued that their actions were not willful because Bannister owned the copyrights to the Clarkister code and because any alleged use of the Clarkister code served a minimal function within the Tagg-U and BannisterMap apps. 54. In response, Clark Innovations argued that the Defendants infringement was likely to be found willful and that the equities therefore favored the injunction. Clark Innovations argued that the Tagg-U app used blatantly copied software, including copyright notices and references to the Open Source USA licenses and that users of the subscription-based features in the Tagg-U software had paid extra to reap the benefits of the patented mapping tools. 55. In support of the Bannister and Taggary motion to sever and transfer, Defendants argued that the code supporting the Tagg-U and BannisterMap applications did not arise from the same operative facts as they were developed separately and ultimately used very different code. Bannister and Taggary also argued that their respective products use wholly separate mapping data and that they were competitors in the market because they could be used for similar purposes. 56. Furthermore, Defendants argued that the theories of infringement against the parties were dissimilar, because Tagg-U had non-infringing uses. Defendants also argued that Copper Throne planned to challenge the validity of the 604 patent, which put it in conflict with Mr. Bannisters previous statements. Conclusions of Law: 1.The District Court considered arguments from both parties and granted the motion for preliminary injunction, but denied the motion to sever and transfer. 2.The District Court held that the joinder provisions, 35 U.S.C. 299, under the America Invents Act governed the joinder issues.

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3.The District Court reasoned that joinder remained appropriate because the allegations of infringement arise from common facts Mr. Bannister copied the Clarkister software and re-used at least part of that software in BannisterMap and Taggarys Tagg-U software. Further, according to the District Court, any infringement by Copper Throne resulted from this same copying. 4.As to the preliminary injunction, the District Court noted the extraordinary nature of this remedy. The Court explained that in order to prevail on a motion for a preliminary injunction, Mr. Clark and Clark Innovations would have to show a likelihood of success on the merits, a likelihood of irreparable injury, the balance of the hardships weighed in its favor, and that the public interest favored the grant of the preliminary injunction. The District Court found that the likelihood of success and injury to Clarkister and the public favored a grant of the preliminary injunction, but noted that the issue was a close one and ultimately came down to whether the hardships favor Clarkister. The District Court therefore granted the motion for preliminary injunction because it found that Defendants should not be allowed to profit from its infringing software. 5.The District Court found that Mr. Bannister had copied the Clarkister source code, and had therefore likely infringed the claims of the 604 patent - given that he had argued previously that the Clarkister software incorporated the inventions claimed in the 604 patent. The district court further found that the infringement of the 604 patent was likely to be willful, given Mr. Bannisters prior knowledge of the 604 patent. 6.The District Court noted that the Federal Circuit had been reluctant to apply similar reasoning in the preliminary injunction context (see Illinois Tool Works, Inc. v. Grip-Pak, Inc., 906 F.2d 679, 683-84 (Fed. Cir. 1990)), but reasoned that its finding of willfulness created a unique situation with parallels to copyright law. See Concrete Mach. Co. v. Classic Lawn Ornaments, Inc., 843 F.2d 600, 612 (1st Cir. 1988); Triad Sys. Corp. v. Southeastern Express Co., 64 F.3d 1330, 1338 (9th Cir. 1995). The District Court

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therefore cited Concrete Machinery and Triad Systems as persuasive precedent. The District Court noted that Clarkister had not raised any copyright claims, and emphasized that it intended merely to draw from copyright law to address the equities of Clarkisters patent-based preliminary injunction. Based on this reasoning, the District Court held that the willful patent infringement by Copper Throne, Bannister, and Taggary prevented them from relying upon the balancing of the equities to defeat the motion for preliminary injunction. The District Court refused to consider the effect of the injunction on thirdparty users of the Tagg-U software service. 7.The District Court held alternatively that even if Copper Thrones infringement was not willful, the balance of the equities favored Mr. Clark and Clark Innovations because of: a) the damage done to Mr. Clark and Clark Innovations due to the denial of service attacks and the web site hacking; b) Defendants status as competitors of Mr. Clark and Clark Innovations; and c) due to the contractual relationship between Copper Throne, Bannister, and Taggary.

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