Judge Andrews Grants Motion to Dismiss Counterclaims for Unclean Hands and State Law Claims for Deceptive Trade Practices, Tortious Interference and Unfair Competition, But Denies Motion to Dismiss Lanham Act Counterclaim
In Kimberly-Clark Worldwide, Inc. v. Cardinal Health 200, LLC, C.A. No. 11-1228-RGA (D. Del. July 27, 2012), Judge Andrews recently issued a memorandum order dismissing with prejudice defendant’s unclean hands counterclaim and dismissing without prejudice defendant’s state law counterclaims for deceptive trade practices, tortious interference and unfair competition, but denying plaintiffs’ motion to dismiss defendant’s Lanham Act counterclaim. Id. at 1. Plaintiffs filed suit against defendant for infringement of two patents relating to sterilization products and methods used to sterilize surgical instruments. In its answer to the complaint, defendant denied plaintiffs’ claims for patent infringement, asserting a number of affirmative defenses and counterclaims, including counterclaims for: (a) unclean hands; (b) unfair competition and false advertising under the Lanham Act; (c) deceptive trade practices; (d) tortious interference; and (e) common law unfair competition. Id. at 1. In response, plaintiffs moved to dismiss each of these counterclaims under Rule 12(b)(6) for failure to state a claim. The Court granted the motion in part and denied it in part. In granting the motion to dismiss defendant’s unclean hands counterclaim, the Court found that “unclean hands is more in the nature of an affirmative defense than a separate cause of action” and that is was not a “stand-alone” counterclaim. Id. at 2. In granting the motion to dismiss defendant’s counterclaim for deceptive trade practices, the Court found that the counterclaim was lacking because it failed to assert “at a minimum, a violation of a particular state’s deceptive trade practices act, including allegations of which subsection is violated.” Id. at 7. Similarly, with respect to dismissal of defendant’s state law counterclaims for tortious interference and common law unfair competition, relying on post-Twombly cases, the Court concluded that those counterclaims should be dismissed because they failed to identify a valid business relationship or expectancy and how plaintiffs’ conduct allegedly interfered with that business relationship or expectancy. Id. at 8. On the other hand, in denying the motion to dismiss defendant’s Lanham Act counterclaim, the Court concluded that defendant’s noninfringement allegations provided a “sufficiently detailed foundation for alleging that Plaintiffs’ statements of infringement are false” and that defendant’s allegations regarding sham litigation and whether certain statements are literally false were each issues of fact “best left for summary judgment or trial.” Id. at 4-5. Regarding certain oral statements and allegations that customers have been misled, the Court further concluded that those allegations had been sufficiently pled for purposes of surviving the motion to dismiss. Id. at 6-7.
Federal Circuit to consider issue of whether it has jurisdiction to hear appeal in case bifurcating liability and damages
Today, the Federal Circuit announced that the appeal from Judge Robinson's decision in Robert Bosch LLC v. Pylon Mfg. Corp., C.A. No. 08-542 (D. Del. 2012) (the Court's post-trial opinion is discussed here), will be heard en banc to determine whether the Federal Circuit has jurisdiction "to entertain appeals from patent infringement liability determinations when a trial on damages has not yet occurred[,]" and "when willfulness issues are outstanding and remain undecided[.]" In recent years, absent unusual circumstances, Judge Robinson has bifurcated liability and damages in all patent infringement cases before her, such that a trial on damages will commence after the issue of liability is fully adjudicated on appeal.
Chief Judge Sleet recently denied a plaintiff’s request to modify a protective order to exempt its lead trial attorney from a prosecution bar. In re Bear Creek Technologies Inc. (‘722 Patent Litigation), MDL No. 12-2344 (GMS) (D. Del. July 25, 2012). The Court explained that “where a separate court [here, the Eastern District of Virginia] has already found that a party met its burden with respect to the need for a prosecution bar on reexamination proceedings, as Verizon has done here, the burden shifts to the other party to prove an exemption on a counsel-by-counsel basis[.]” Id. at 3 (citing In re Deutsche Bank Trust Co. Ams., 605 F.3d 1373 (Fed. Cir. 2010) (alteration added)). Proving that an exemption is needed “requires demonstrating that: (1) counsel’s representation of the client in matters before the PTO does not and is not likely to implicate competitive decision-making related to the subject matter of the litigation so as to give rise to a risk of inadvertent use of confidential information learned in litigation; and (2) the potential injury to the moving party from restrictions imposed on its choice of litigation and prosecution counsel outweighs the potential injury to the opposing party caused by such inadvertent use[.]” Id. at 4.
The Court denied the plaintiff’s motion, explaining that the plaintiff failed to satisfy its burden of showing “(1) that [its lead trial attorney’s] involvement in the … Reexamination will not implicate competitive decision-making; and (2) even if [he] would not be involved in such decision-making, that the potential injury to [the plaintiff] in precluding its choice of counsel outweighs the potential injury to Verizon that would result from inadvertent confidential disclosure(s)[.]” The Court noted that, as the Federal Circuit has held, “strategically amending or surrendering claim scope during prosecution can implicate competitive decision-making necessitating a denial of an exemption request.” Id. at 5 n.6. Further, the Court noted that as a result of discovery under the protective order, the plaintiff’s lead trial attorney already had developed "in-depth knowledge of Verizon’s highly confidential information on nearly all aspects of its voice telecommunications network …” Id. at 5 n.7 (internal quotation marks omitted). On balance, the Court found that exempting the plaintiff’s lead trial attorney from the prosecution bar was unwarranted in light of the knowledge he already had gained through the litigation, coupled with the significant harm Verizon would incur through any inadvertent disclosure. Id. at 6 n.7.
Magistrate Judge Burke recently issued a report and recommendation construing claims of U.S. Patent No. 6,973,229, titled “Node Architecture for Modularized and Reconfigurable Optical Networks, and Methods and Apparatus Therefor.” Lambda Optical Solutions, LLC v. Alcatel-Lucent USA Inc., C.A. No. 10-487-RGA-CJB (D. Del. Aug. 3, 2012). Judge Burke recommended constructions of the following terms:
“optical access ingress subsystem”
“optical access ingress subsystem which is adapted to receive an optical signal associated with an access network”
“optical access egress subsystem”
“optical access egress subsystem which is adapted to direct the optical signal toward an access network”
“transport ingress subsystem”
“transport egress subsystem”
“adapted to selectively provide optical coupling between the transport ingress subsystem and at least one of (1) the optical access egress subsystem, and (2) the transport egress subsystem”
“adapted to selectively provide optical coupling between the transport egress subsystem and at least one of (1) the optical access ingress subsystem and (2) the transport ingress subsystem”
“specified optical input”
“specified optical output”
In addition, Judge Burke recommended the parties’ agreed-upon construction of the following terms:
Joinder proper for claims stemming from defendants' use a third-party's gene expression system in their manufacturing processes
Judge Sue L. Robinson recently denied defendant Alexion's motion to dismiss Novartis's complaint for improper joinder. Novartis Vaccines & Diagnostics, Inc. v. Medimmune, LLC, et al., C.A. No. 11-084-SLR (D. Del. Aug. 2, 2012). Novartis's complaint alleged that defendants infringed its patent by, among other things, the use of "a commercial gene expression system manufactured by non-party Lonza Group AG . . as a common step in what may otherwise be divergent manufacturing processes." Id. at 2-3. Alexion argued that joinder was improper because the defendants use differing manufacturing processes that result in different drug products. Id. at 5. Judge Robinson noted, however, that because defendants modify and incorporate Lonza's system into their own manufacturing processes, "there is necessarily some degree of overlap in defendants' manufacturing processes[.]" Id. at 6. Judge Robinson acknowledged that defendants didn't have a "tangible business or legal relationship[,]" but noted that the absence of such a relationship is "just one of several considerations when determining whether defendants' actions are part of the same transaction, occurrence, or series of transactions or occurrences." Id. In addition, the court found that it would be inefficient "to construe claims and determine invalidity separately for each defendant[,] and the parties' stipulated protective order would alleviate any concerns that defendants would have to disclose sensitive business information to co-defendants who are also potential competitors. Id. at 7.
Judge Robinson grants-in-part plaintiff’s motion to strike finding affirmative defense of invalidity inappropriate due to assignor estoppel
In Juniper Networks, Inc. v. Palo Alto Networks, Inc., C.A. No. 11-1258-SLR (D. Del. Aug. 2, 2012), Judge Robinson granted-in-part plaintiff’s motion to strike defendant’s affirmative defense of invalidity finding that the doctrine of assignor estoppel barred such a defense as to one of the patents-in-suit. Plaintiff argued that the inventors of the patents-in-suit were issued the patents while employed by plaintiff. Id. at 2-3. They subsequently left plaintiff to start another company (the defendant) and brought to defendant “the very same technology that they had previously developed and then assigned to [plaintiff] during their employment.” Id. at 3. Defendant disputed these facts arguing, among other things, that the inventors were not officers or founders of defendant. Id. at 2.
Judge Robinson noted that the Federal Circuit “reaffirmed the existence of the doctrine of assignor estoppel” in Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220 (Fed. Cir. 1988). In Diamond, the Federal Circuit explained that assignor estoppel “is an equitable doctrine that prevents one who assigned the rights to a patent (or patent application)[, or other parties in privity with the assignor,] from later contending that what was assigned was a nullity” Id. at 4 (quoting Diamond, 848 F.2d 1224).
As to four of the patents-in-suit, Judge Robinson denied plaintiff’s motion because the issue of privity between the inventors and defendant could not be determined at “the pleadings stage” and that summary judgment was a “more appropriate venue[.]” Id. at 8-9. “Because the determination of privity . . . with respect to these four patents is a fact-sensitive inquiry that must be resolved outside the pleadings, and given the standard of review applicable to motions to strike, the court denies plaintiff’s motion at this time.” Id. at 9. Judge Robinson similarly denied plaintiff’s motion as to the fifth patent-in-suit because only one of the two inventors assigned his rights to plaintiff, which would require plaintiff to prove assignment by other means. Id. at 9-10. But, as to the sixth patent-in-suit, the sole inventor indisputably assigned the patent to plaintiff and he acknowledged being a founder of defendant, thereby establishing privity. Judge Robinson, therefore, granted plaintiff’s motion striking defendant’s invalidity defense as to that patent. Id. at 10.
Judge Leonard Stark has issued an interesting opinion allowing a plaintiff to amend its complaint for patent infringement to assert willful infringement and add additional patents. The Plaintiff, Cloud Farm Associates, filed a patent infringement action against Volkswagen and ZF Sachs for infringement of two patents. Cloud Farm later filed a first motion to amend the complaint to add allegations of willful infringement and a second motion to amend to add claims for infringement of two additional patents. Judge Stark addressed each motion in turn.
Volkswagen knew of the patents-in-suit since 1999 because of a letter sent to Rolls-Royce and copying Volkswagen regarding alleged infringement of the patents by a Rolls-Royce product. Despite this fact, however, Judge Stark determined that there was no undue delay in seeking to amend the complaint, as “knowledge of the patents-in-suit alone is not sufficient to prove willful infringement . . . [and] Cloud Farm asserts willful infringement for accused product lines that did not even exist in 1999. Thus, the Court focuses for purposes of undue delay on the thirteen month period from the time Cloud Farm filed its initial complaint until the time that Cloud Farm filed its First Proposed Amended Complaint.” Cloud Farm Associates, L.P. v. Volkswagen Group of America, Inc., C.A. No. 10-502-LPS at 4 n.2 (D. Del. Jul. 27, 2012). Similarly, Judge Stark found that “any prejudice resulting from delay prior to the filing of this lawsuit is not properly within the scope of consideration of the First Motion to Amend. Rather, the Court must consider whether Volkswagen has suffered prejudice in the time that has passed since the filing of this lawsuit.” Because there was “no evidence that Volkswagen suffered unfair prejudice during the time between the filing of the initial complaint and the filing of the First Proposed Amended Complaint,” Judge Stark granted the motion for leave to amend. Id. at 8. Furthermore and for similar reasons, Judge Stark concluded that “Cloud Farm’s claim against Volkswagen for willful infringement of the ‘354 patent is not barred by the equitable doctrine of laches [and] consequently, amendment is not futile.” Id. at 7. And in response to the Defendants’ claim that the First Proposed Amended Complaint did not adequately plead claims for willful infringement, Judge Stark found that Cloud Farm’s allegations regarding the letter to Rolls-Royce were sufficient to plead a claim for willful infringement. Id. at 5-6.
Considering the second motion to amend, which related to the addition of two new patents, Judge Stark stated: “The Court concludes that Plaintiff has demonstrated good cause to amend as it did not have sufficient factual information to allege infringement of the ‘616 patent and ‘115 patent until after the depositions of Defendants’ corporate representatives.” Id. at 9-10. While “the parties have already engaged in substantial discovery,” the case was not so far along that the schedule could not be amended to allow the Defendants time to respond to the new patents. Additionally, Judge Stark recognized that “if the Court were to deny leave to amend, the likely result would be that Plaintiff would assert the claims it attempts to add to this lawsuit in a new lawsuit against Defendants—which will require completely new discovery, another Markman hearing, and a separate trial—likely resulting in even higher increased costs for Defendants and further delay in resolution of the parties’ disputes. In these circumstances, the Court does not find undue prejudice [in allowing the addition of the new patents].” Id. at 10-11.
Judge Andrews: Motion to Dismiss Counterclaims Denied and Motion for Judgment of Invalidity on the Pleadings Granted
Judge Richard Andrews recently issued an order granting judgment of invalidity as a matter of law in a District of Delaware ANDA case. See Shire LLC v. Teva Pharms. USA Inc., C.A. No. 10-329-RGA (D. Del. Jul. 23, 2012). Plaintiff Shire dedicated its patent to the public but left it listed in the Orange Book. Shire then moved to dismiss all counterclaims relating to that patent and Defendant Teva cross-moved for judgment on the pleadings that the patent was invalid. Judge Andrews found that the Court “retains jurisdiction over a patent dedicated to the public where, as here, it remains listed on the Orange Book and therefore has the potential to create a triggering event for the first-filer’s exclusivity.” Furthermore, judgment of invalidity was appropriate because “express dedication to the public comprises abandonment under 35 U.S.C. § 102(c).” Judge Andrews therefore granted judgment of invalidity on the pleadings and denied Shire’s motion to dismiss. Referring to the Federal Circuit’s decision in Teva Pharms. USA, Inc. v. Eisai Co., 620 F.3d 1341 (Fed. Cir. 2010) (discussed at Patently-O), Judge Andrews further found that the Court retained jurisdiction over the Defendants’ remaining claim for attorneys’ fees.
In a recent order, Judge Andrews rejected a plaintiff’s argument against amendment of an answer and counterclaims. XpertUniverse Inc. v. Cisco Systems Inc., C.A. No. 09-157-RGA (D. Del. July 27, 2012). The plaintiff had argued that “the amended portions of Cisco’s Proposed Answer and Counterclaims are unlikely to survive summary judgment. Thus, Cisco’s proposed amendment is futile…” (D.I. 236 at 8) The Court explained that even accepting the argument that the amended portions of the answer and counterclaims likely would not survive summary judgment, “it is not the same thing as stating that amendment would be futile. Thus, Plaintiff has advanced no valid argument against amendment.”