Toshiba Sanctions Bid Is Aimed At Axing Suit, E.Digital Says

By Allissa Wickham

Law360, New York (October 03, 2014, 7:20 PM ET) -- Patent licensor e.Digital Corp. has fired back at Toshiba America Information Systems Inc.'s sanctions bid in a suit accusing the electronics giant of infringing on its memory management patent, telling a California federal court Thursday that Toshiba is using the motion as a backdoor way to ax the suit.
In its opposition filing, e.Digital argues that while Toshiba’s September motion is framed as a request for sanctions, the company is primarily seeking to have the suit dismissed with prejudice, which e.Digital contends isn’t allowed under procedural rules governing sanctions.

“Quite tellingly, no mention of any sanctions or fee award is mentioned in [Toshiba’s] proposed order,” e.Digital claims. “Clearly, Toshiba’s intent with respect to this motion is to have this court dismiss the case and not to impose sanctions.”

E.Digital, which first filed suit in December, has accused Toshiba of infringing on its assigned memory patent, listed as U.S. Patent Number 5,839,108, with various flash memory storage products, according to an amended complaint. The ‘108 patent covers a system for managing memory in certain storage mediums, like flash memory, used in audio recording and playback devices.

Toshiba filed its sanctions motion on Sept. 8, six weeks after U.S. District Judge Marilyn L. Huff consolidated the case for pretrial purposes with several other suits filed by e.Digital over alleged infringement of the ‘108 patent.

In its sanctions bid, Toshiba claimed e.Digital and its lawyers had filed a frivolous “cookie-cutter” complaint without conducting a proper presuit investigation. The complaint alleged only indirect infringement without pleading direct infringement, which is a necessary predicate, Toshiba said.

Toshiba conceded that e.Digital added direct infringement allegations in its amended complaint, but called its claims conclusory, and contended that e.Digital’s “inability to articulate a coherent infringement theory when pressed” showed the company had failed to adequately vet its claims before filing suit.

“E.Digital has refused to voluntarily dismiss its implausible infringement allegations ... ,” Toshiba said. “[Toshiba] is left with no options other than to file this motion for sanctions in order to avoid unnecessary costs and burdens associated with defending itself against e.Digital’s meritless assertions.”

Toshiba therefore asked the court to dismiss the suit against it with prejudice and award the company attorneys' fees and costs, as well as any other sanctions the court felt was justified.

In its response, however, e.Digital contends that Rule 11 of federal civil procedure, which deals with sanctions, provides no authority to dismiss the company’s amended complaint. The company also pointed out that the court had already denied Toshiba’s motion to dismiss in July, with Judge Huff finding that it had sufficiently pled its allegations.

E.Digital further argued that there is “no dispute” that Toshiba sells the accused products and was aware of the ‘108 patent, supporting the contention that it had a reasonable basis for filing suit. The company also did conduct a pre-filing investigation and gave Toshiba an “extensive pre-filing privilege log,” e.Digital said.

“So, Toshiba’s allegations regarding e.Digital’s pre-filing investigation are nothing more than unfounded speculation and hearsay,” e.Digital alleged.

The company has requested that Toshiba’s motion be denied, but if it is granted, that the court allow it to amend its complaint again.

An attorney for e.Digital declined to comment Friday, while attorneys for Toshiba did not immediately respond to a request for comment.

The patent-in-suit is U.S. Patent No. 5,839,108.

E.Digital is represented by Anton N. Handal, Pamela C. Chalk and Gabriel G. Hedrick of Handal & Associates.

Toshiba is represented by Steven S. Baik, Sharon A. Lai, Robert R. Riddle and Kirin Gill of Reed Smith LLP.

The case is e.Digital Corp. v. Toshiba America Information Systems Inc., case number 3:13-cv-02909, in the U.S. District Court for the Southern District of California.

--Editing by Jeremy Barker.