Delaware IP Law Blog

In a recent Report and Recommendation in Wyeth Holdings Corp., et al. v. Sandoz, Inc., C.A. No. 09-955-LPS-CJB, Judge Burke concluded that plaintiffs’ motion to dismiss defendant’s inequitable conduct counterclaim and to strike defendant’s affirmative defense based on inequitable conduct should be denied. Id. at 1, 30. In this case, plaintiffs initially filed a complaint against defendant for patent infringement arising from defendant’s filing of an ANDA seeking to market a generic version of an injectable antibiotic drug. Id. a 1-2. In the complaint, plaintiffs alleged that defendant’s generic product infringed two of their patents, and sought a permanent injunction to bar defendant from the manufacture, sale, use or importation of that product in the U.S. Id. at 2. Defendant conceded (and actually stipulated to) infringement, but challenged both the validity and enforceability of the patents-in-suit, including counterclaiming that one of the patents-in-suit was “unenforceable based on several acts of inequitable conduct” and asserting “unenforceability based on inequitable conduct” as an affirmative defense. Id. at 2. In part, as bases for its allegations of inequitable conduct, defendant alleged that during prosecution of one of the patents-in-suit, plaintiffs “deceived the Examiner” by, among other things, “misrepresent[ing] the teachings of the prior art” and “omitt[ing] key information regarding experimental error and discrepancies in data.” Id. at 6.

In response to these allegations, plaintiffs filed a motion to dismiss defendant’s counterclaim for inequitable conduct and to strike the accompanying inequitable conduct affirmative defense. Id. at 2. Plaintiffs argued that, in light of the Fed. Cir.’s decision in Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir 2011), defendant’s inequitable conduct defense should be dismissed because defendant “did not plead any facts that would allow the Court to conclude that the single most reasonable inference from the applicants’ alleged conduct is that the applicants had the specific intent to deceive the PTO.” Id. at 11 (emphasis in original). Defendant countered that the “single most reasonable inference” language from Therasense did not apply and is not the appropriate standard. Id. at 12. Rather, in assessing the sufficiency of the intent prong of defendant’s inequitable conduct defense, the “whether deceptive intent could be ‘reasonably inferred’ from the facts as pled” standard articulated by the Fed. Cir. in Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009) should be applied. Id. at 12 (brackets omitted). The Court agreed, holding that “in order to adequately plead the intent prong of an inequitable conduct defense, the claimant need only allege facts from which the Court could reasonably infer that the patent applicant made a deliberate decision to deceive the PTO.” Id. at 13-14 (emphasis in original).

Reconciling the Fed. Cir.’s language in Therasense and Exergen, the Court held that the single most reasonable inference requirement of Therasense was an “evidentiary standard that must be satisfied at the proof stage, not a pleading standard.” Id. at 14. In its analysis, the Court found that defendant had pled inequitable conduct with sufficient clarity to survive dismissal, satisfying both the “but-for” materiality and the specific intent to deceive prongs of the standard. Regarding the “but-for” materiality prong, the Court found: (1) that defendant had “properly and specifically identified the ‘who, what, where, when and how’ of the alleged material misrepresentations” id. at 17 (citation omitted) and (2) that there was a reasonable inference that one of the patens-in-suit would not have issued “but for the alleged misrepresentations” as pled by defendant. Id. at 19. Likewise, regarding the specific intent to deceive prong, the Court found that defendant had, indeed, “pled sufficient facts, with sufficient particularity, to give a reasonable inference that [plaintiff’s] representatives deliberately acted to deceive the PTO during the prosecution of [one of the patents-in-suit].” Id. at 25.

Continue reading "Reconciling Therasense and Exergen, Judge Burke Recommends That Motion to Dismiss Inequitable Conduct Counterclaim and to Strike Inequitable Conduct Affirmative Defense Be Denied" »

Magistrate Judge Burke recently considered a motion to consolidate two pending patent cases in Eastman Chem. Co. v. Alphapet Inc., C.A. No. 09-971-LPS-CJB (Dec. 29, 2011). Finding for the defendant and ordering consolidation, Magistrate Judge Burke noted that “there are numerous common questions of law and fact between the 971 action and the 702 action.” Id. at 6.

For example, the court found that both actions “involve patents that cover similar technology relating to polyesters, and . . . [t]his court has frequently ordered consolidation where the technology at issue in the separate actions appeared to be similarly related.” Id. As part of this finding, the court observed that all five of the patents asserted in the two actions belong to one USPTO class, and that three of them belong to the same subclass. “Moreover, the two matters involve related technologies that were allegedly utilized at a single [defendant] facility . . . . This will likely result in other commonalities of fact and law.” Id. at 7. The court also found that “there are likely to be a number of efficiencies that result from consolidation.” These included “significant overlap of parties between the two actions,” and the efficiency of “coordinat[ing] deposition testimony and document discovery issues.” Id. at 8-9.

The court next concluded that consolidation would not significantly delay resolution of the actions. The two cases had progressed beyond infringement allegations and non-infringement and invalidity counterclaims. But no scheduling order had yet been entered in one of the actions, and no responses to discovery requests had yet been served. Although the plaintiff objected to consolidation based in part on its proposed schedule in one action, the court found that the “proposed schedule for the 702 action is not dramatically different from the schedule currently in place in the 971 action.” Therefore, “[w]hile it may be (though it is not certain) that some aspects of discovery on the patent claims in the 702 action could move more quickly than they might if that case were consolidated with the 971 action, the overlapping nature of discovery applicable to both cases means that efficiency will best be aided by consolidation.” Id. at 14. Given each of these considerations, Magistrate Judge Burke found that “the relationship between the cases and the efficiencies that would be gained by combining these cases into a single action weighs strongly in favor of consolidation.” Id. at 16.

Finally, the court considered the potential for jury confusion if the actions were to be consolidated for trial and pointed out that consolidation under Rule 42(a) “does not foreclose the possibility of separate trials.” Id. Noting that decisions regarding trial would ultimately be left to Judge Stark, Magistrate Judge Burke ordered consolidation of the cases for pretrial purposes only.

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In Eastman Chemical Co. v. Alphapet Inc., et al., C.A. No. 09-971-LPS-CJB, Judge Burke denied plaintiff’s motion to substitute two parties, but ruled that the two proposed parties be joined as plaintiffs in the action. Id. at 1. On the one hand, the original plaintiff argued that because it had sold “certain assets and technology” to the two parties it was seeking to be substituted for, including assigning the patents-in-suit to at least one of those parties, it should be dismissed from the lawsuit and that the two new parties should substituted in its place as the named plaintiffs. Id. at 2. On the other hand, in opposition to plaintiff’s motion for substitution, the defendants argued that the original plaintiff should not be dismissed because it “failed to provide sufficient evidence that all of the intellectual property, agreements, and other assets at issue had been transferred to the proposed new plaintiffs” and that, if anything, the appropriate course of action is to “join the two proposed plaintiffs rather than substitute them” for the plaintiff. Id. at 3. The Court agreed. The Court found that while the plaintiff had shown that “certain” of its relevant interests had been transferred to the proposed plaintiffs, the plaintiff had failed to offer sufficient evidence demonstrating that “all” of its interests relating to the litigation had been transferred. Id. at 7. The Court further found that, as a practical matter, joinder of the two new plaintiffs to the action (rather than substitution) would better facilitate the conduct of the litigation, and that the case is likely to proceed more efficiently if the original plaintiff remained a party. Id. at 10-11. The Court noted that while it did “not doubt that [the plaintiff] would fully comply with its discovery obligations under Rule 45 if [the proposed plaintiffs] were substituted for it in this action . . . such an outcome would likely add a significant layer of complication that would slow the progress of the case.” Id. at 11 (citation and internal quotations omitted). In addition, the Court noted that “Rule 25(c) does not explicitly provide for substitution or joinder on a claim-by-claim basis” and that the two proposed plaintiffs were being joined as parties to the entire action. Id. at 13.

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In Eastman Chemical Co. v. Alphapet Inc., et al., C.A. No. 09-971-LPS-CJB (D. Del. Nov. 18, 2011), the plaintiff offered three arguments in support of its motion for jurisdictional discovery to determine whether the Court could exercise personal jurisdiction over a Thai parent company defendant. Judge Burke first rejected the notion that the Thai parent was bound by a forum selection provision contained in an agreement entered into by one of the parent’s subsidiary co-defendants, explaining that the plaintiff could advance no non-frivolous argument that the Thai parent was bound by that provision because (1) the parent was not a third party beneficiary of the agreement containing the provision, id. at 13-17, and (2) there was no suggestion that the parent received any direct monetary or non-monetary benefit from the agreement containing the provision such that it could be considered “closely related” to the agreement containing the forum-selection clause. Id. at 19-25. Judge Burke next rejected the plaintiff’s argument that discovery should be permitted to show that the Thai parent was subject to general jurisdiction, through an agency theory, based on its subsidiary’s continuous and systematic contacts with Delaware. Although the plaintiff alleged sufficient facts to suggest an agency relationship, the plaintiff “offer[ed] no evidence suggesting that the subsidiaries in question have any . . . significant Delaware contacts.” Id. at 28-30. Finally, the Court considered whether discovery should be permitted to determine whether the Thai parent could be subjected to personal jurisdiction in Delaware based on the stream-of-commerce theory. Judge Burke outlined Delaware’s “unique” stream-of-commerce body of law, explaining that jurisdiction may be found where there is a showing of “(1) an intent to serve the Delaware market; and (2) that this intent results in the introduction of the product [at issue] into the market and that plaintiff’s cause of action arises from injuries caused by that product.” Id. at 33 (quoting Belden Techs., Inc. v. LS Corp., 626 F. Supp. 2d 448, 456 (D. Del. 2009) (alteration in original)). Judge Burke emphasized that under the second prong, the relevant inquiry is not whether the defendants sold their products in Delaware, but rather “whether there are any Delaware sales of Defendants’ . . . products, or of other products that incorporate Defendants’ . . . products (even if those products themselves are not directly sold or marketed in Delaware).” Id. at 34 (emphasis added). Based on that standard, Judge Burke granted-in-part the plaintiff’s motion and permitted limited discovery into whether the Thai parent could be subjected to personal jurisdiction in Delaware based on the stream-of-commerce theory in connection with the “sales and distribution of . . . products in the U.S. and Delaware.” Id. at 38.

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In Eastman Chemical Co. v. Alphapet Inc., et al., C.A. No. 09-971-LPS-CJB (D. Del. Nov. 10, 2011), Judge Burke granted-in-part the defendants’ motion to dismiss claims for breach of contract and trade secret misappropriation. The plaintiff filed an amended complaint against the defendants for patent infringement, breach of contract and trade secret misappropriation. Id. at 1. Regarding the breach of contract and trade secret misappropriation claims, the plaintiff alleged that, at the direction of the defendants, certain former employees improperly disclosed confidential, proprietary and trade secret information relating to a manufacturing technology owned by the plaintiff and subject to a license agreement. Id. at 2-3. The defendants moved to dismiss these claims pursuant to Fed. R. Civ. P. 12(b)(6). Id. at 1. In their motion, the defendants argued that the plaintiff’s claim for trade secret misappropriation should be dismissed because it failed to satisfy the notice pleading standard of Rule 8. Id. at 6. The defendants further argued that the claim for breach of contract should be dismissed because: (1) not all of the defendants were parties to the alleged license agreement at issue; (2) the plaintiff had failed to sufficiently plead breach of contract; and because (3) the plaintiff had failed to identify any implied contractual provision that might support an implied breach of contract claim. Id. at 18-19. The Court granted-in-part defendants’ motion by dismissing without prejudice the breach of contract claim asserted against one of the defendants and the claim for breach of any implied contractual provisions against all of the defendants. Id. at 2. The Court denied the defendants’ motion in all other respects. Id. at 2. In denying the defendants’ motion with respect to the trade secret misappropriation claim, the Court concluded that the claim was sufficiently pled under the standards of Rule 8 and that the defendants had “been given sufficient factual information to provide adequate notice of the plausible grounds for [p]laintiff’s misappropriation claim under the Twombly/Iqbal standard. Id. at 9. The Court noted that under Rule 8, “even if a complaint is somewhat ‘lacking in specificity,’ that is not a reason to dismiss the complaint, unless that lack of specificity deprives the defendants of fair notice of the claim itself.” Id. at 14 (citation omitted). Regarding the implied breach of contract claim, the Court concluded that the plaintiff “failed to identify any implied contractual term that should be read into the [license agreement at issue], and . . . likewise failed to state a claim for breach of any such implied provision.” Id. at 28-29.

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On November 3, 2011 the District of Delaware judges signed an Order Relating to Utilization of Magistrate Judges. Among other things, the Order kicked off a one year Pilot Project “to evaluate Magistrate Judge utilization.” As part of the Pilot Project, the Clerk of the Court will randomly assign cases to Magistrate Judges. These matters will not initially be assigned to a District Judge and the Magistrate Judge will "be responsible for all pretrial management of the case, including determination of all nondispositive motions and scheduling." Within 60 days from assignment of the Magistrate Judge, the parties may consent to Magistrate Judge jurisidiction by filing Form AO85. If they consent, the case will remain assigned to the Magistrate Judge for all purposes, including trial. After 60 days, if the parties do nothing, or if a case dispositive motion is filed within that time, the case will be randomly re-assigned to a District Judge. These cases, however, will be eligible for referral back to a Magistrate Judge for discovery purposes, ADR or for case management through case dispositve motions. There are categories of cases that will not be assigned to a Magistrate Judge as part of this Pilot Project, including patent cases in which one or more “related” case is pending. See Standing Order, section D. As always, parties to a matter not directly assigned to a Magistrate Judge may also consent to Magistrate Judge’s jurisdiction by filing the Consent Form (Form AO85).

The Standing Order also clarified the procedure for objecting to Magistrate Judge Rulings and Recommendations. See Standing Order, section C.

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In Kone Corp. v. Thyssenkrupp USA, Inc., C.A. No. 11-465-LPS-CJB (D. Del. Sept. 26, 2011), Magistrate Judge Burke granted-in-part the plaintiff's motion for expedited discovery in connection with the plaintiff's motion for a preliminary injunction. Judge Burke stated that the appropriate test for evaluating a request for expedited discovery in the context of a preliminary injunction is the "good cause"/"reasonableness" standard, requiring "the party seeking discovery to show 'good cause' for its motion, such that the request is 'reasonable' in light of the relevant circumstances." Id. at 7, 12.

Applying this standard to the facts of the case, the court found that "[t]he circumstances of this case, including its procedural posture, weigh in favor of granting expedited discovery" with respect to the pending preliminary injunction motion. Id. at 12. First, the preliminary injunction motion had already been pending for approximately three months, and the defendants had already filed answers more than six weeks earlier. Id. Thus, "absent the pending preliminary injunction motion, the Court would already have scheduled a Rule 16 teleconference and the parties would otherwise have commenced the discovery process." Id. Second, "because much of the information at issue would likely have been turned over anyway by Defendants soon after a Rule 16 conference[,]" expedited discovery was likely to streamline the case. Id. at 13. Third, "expedited discovery is more likely to be an efficient use of the parties' resources when it relates to a pending preliminary injunction hearing, where it can help to ensure a clear and focused factual record." Id.

Although the plaintiff was able to show "a need for discovery relating to certain, circumscribed subject-matter that may illuminate issues at play at the preliminary injunction hearing[,]" Judge Burke found that the plaintiff's discovery requests were "not narrowly tailored." Id. at 14. Thus, the court granted the motion for expedited discovery, but only with respect to "the key disputed factual issue relevant to the P.I. motion hearing[.]" Id. at 15.

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