Friday, September 30, 2011

Court won't perform claim construction at motion to dismiss stage

Ecolab sued International Chemical Corp. for infringement of U.S. Patent No. 7,741,257.  Ecolab argues that ICC directly infringes the '257 patent, induces third parties to infringe the '257 patent, and contributes to other's infringement of the '257 patent.  ICC asked the court to dismiss the vicarious theories of liability because Ecolab did not sufficiently plead these claims.

First, the Court acknowledged a difference in the districts as to whether or not an indirect infringement claim needs more allegations than those listed in the Form 18 model for direct infringement claims.  Some courts hold that this level of pleading is enough, while others require the plaintiff to satisfy Twombly and Iqbal's plausibility requirements.  The Court did not pick a side, finding that Ecolab had met the mark either way.

Inducement of Infringement

To plead an induced infringement claim, the plaintiff must show: (1) there has been a direct infringement; and (2) the defendant knowingly induced infringement and specifically intended to encourage another's infringement.  ICC argued that Ecolab hadn't satisfied the latter, and pointed to Ecolab's instruction's (which were attached to the complaint).  According to ICC, these instructions "do not teach how to practice any of the claims of the patents-in-suit."  But ICC disregarded Ecolab's complaint, which alleged that ICC had instructed its customers in the manner specified by the '257 patent.  As such, for pleading purposes, the claim survived.

ICC also argue that, in order to infringe, one needed to use a particular type of nozzle.  ICC supported this argument by citing to the file history of the '257 Patent.  The Court refused to indulge in claim construction issues, noting that doing so would be premature.

Contributory Infringement

To plead a contributory infringement claim, the plaintiff must show: (1) there has been a direct infringement; (2) defendant knew the combination for which its components were especially made was both patented and infringing; and (3) defendant's components have no substantial non-infringing uses.   ICC argued that Ecolab's complaint didn't have enough facts.  The Court disagreed, noting that detailed factual allegations are not necessary to plausibly allege a claim for contributory infringement.  Even without detailed factual allegations, the complaint supported a reasonable inference for liability.

Motion to dismiss denied.

Ecolab, Inc. v. International Chemical Corp., slip op., Case No. 6:10-cv-1208 (Sept. 27, 2011) (J. Conway)

Thursday, September 15, 2011

Simple knowledge of a prior art reference not disclosed to the PTO is not sufficient to plead inequitable conduct

Graphic Packaging International sued C.W. Zumbiel Co. for patent infringement related to a number of cardboard carton packages.  As part of its defense,  CW argued that one of the patents, U.S. Pat. No. 7,134,551, was not enforceable due to GPI's inequitable conduct in prosecuting the '551 Patent with the Patent and Trademark Office.  Specifically, GPI's counsel was aware of certain prior art references, but did not tell the PTO about them.

CW's counterclaim included relatively detailed allegations, including a claim chart, listing how 2 of the 3 the withheld references impacted the patentability of the '551 Patent.  GPI responded by asking the Court to dismiss the counterclaim (and strike certain allegations).

Inequitable conduct pleading requirements

While a claim for relief must only contain a "short and plain statement of the claim showing that the pleader is entitled to relief," inequitable conduct claims must satisfy Rule 9(b)'s heightened pleading requirement.  The Court explained the law:
In [Exergen v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009)], the U.S. Court of Appeals for the Federal Circuit directed  that,  “in  pleading  inequitable conduct  in  patent cases, [Federal  Rule  of Civil Procedure] 9(b) requires identification of the specific who, what, when, where, and how of the material misrepresentation or omission committed before the PTO.”  575 F.3d at 1327. In addition, the Exergen Court identified the pleading requirements for the “conditions of mind” relevant to an inequitable conduct claim, i.e., “(1) knowledge of the withheld material information  or  of the falsity  of the material misrepresentation, and (2)  specific intent to deceive the PTO.”  Id. While knowledge and intent may be averred generally, according to the Federal Circuit, pleadings must allege sufficient underlying facts from which a court may reasonably infer that a party acted with the requisite state of mind.  Id
CW's allegations of inequitable conduct related to 3 prior art references not disclosed to the PTO during prosecution.  CW's claim chart only discussed 2 of those references.  As to the third, the Court found that CW had not sufficiently plead which claim limitations the withheld reference concerned, where in the withheld reference the material information was located, and why the withheld reference was material. 

As to the other 2 references, which included a relatively detailed claim chart, the Court still found the allegations fell short because they did not give rise to a reasonable inference of scienter.
The Federal Circuit makes clear in Exergen that a reasonable inference of scienter arises only when there are factual allegations which particularly point out an individual who owed a duty of disclosure to the PTO, who knew the specific information in the reference that is alleged to be material, and who did not disclose the specific information to the PTO. 575 F.3d at 1330.  Defendant’s allegations do point to three individuals who listed the ’671 Publication and the ’991 Patent on various IDSs submitted to the PTO. (Doc. No. 55, ¶¶ 64-66, 68, 72, 74-75, 76.)  These allegations suggest that these three individuals were aware of the ’671 Publication  and the  ’991 Patent.  That is  not enough,  however.  It  is  not knowledge of a reference but rather knowledge of the material information in the reference that must be averred.  Because a “reference many be many pages long, and its various teachings may be relevant to different applications for different reasons,” the Court “cannot assume that an individual, who generally knew that a reference existed, also knew of the specific material information contained in that reference.” 575 F.3d at 1330 (emphasis in original).  Further, the “mere fact that an applicant disclosed a reference during prosecution of one application, but did not disclose it  during  prosecution of a  related  application, is insufficient to meet the threshold level of deceptive intent required to support an allegation of inequitable conduct.”  Id. at 1331.
(underlined emphasis supplied by the Court, bold emphasis supplied by me).  The closest CW came was the allegation that one of the prosecuting patent attorneys discussed one of the withheld references in response to an office action.  But this still didn't cut it:
One can draw more inferences from this allegation than from a bare recitation of omission from an  IDS,  but not many  more.  Specific  allegations  identifying  the material  information contained in a reference is needed, and none are averred here. Defendant does not identify the specific information from the ’991 Patent that was  “discussed.”  Thus, Defendant’s allegations are missing a key pleading requirement for deceptive intent.
Counterclaim dismissed.

Striking allegations from the counterclaim

GPI also asked the court to strike: (1) all allegations related to one of the withheld references because it was not actually prior art; and (2) certain affirmative defenses for failing to satisfy heightened pleading.  The Court dispensed with these quickly.

As to the first argument, the Court punted, stating that determining the reference date for an international application (the withheld reference) was "a tricky thing" and needn't be handled now.  As to the second, the Eleventh Circuit has not determined whether or not heightened pleading applied to affirmative defenses and there was split in this circuit.  Regardless, the allegations throughout the counterclaim made up for whatever shortcoming GPI complained of.  

Motion to strike denied.
Thanks Docket Navigator for bringing this case to my attention.

Graphic Packaging International, Inc. v. C.W. Zumbiel Co., slip op., Case No. 3:10-cv-891 (M.D. Fla. Sept. 12, 2011)(J. Dalton, Jr.)

Tuesday, September 13, 2011

jpg's "last modified" date is sufficient corroborating evidence to survive summary judgment on prior inventorship issue

Hurricane Shooters has sued a number of entities for infringing its plural chamber drinking cup patents.  One defendant, EMI Yoshi, claims someone else invented the cup first.  Plaintiff asked for summary judgment on this issue, arguing that Plaintiff invented first, and Defendant didn't offer enough evidence to the contrary.

To establish prior inventorship, the challenger must offer corroborating evidence.  Here, Defendant's evidence was that another person (Ted Skala) designed what appears to be the same cup patented by Plaintiff arguably before Plaintiff.  Defendants evidence consisted of Skala's testimony, and a computer forensic expert's testimony.  Plaintiff attacked the credibility of each of these pieces of evidence, but that didn't work.  Such credibility determinations are better left to the jury.

Plaintiff also attacked the reliability of the computer expert's report because the expert had simply relied on the information he had been provided by Skala.  The Court was not persuaded, and found other record evidence which sufficiently corroborated the prior inventorship theory:

Plaintiff argues that the expert report of forensic computer analyst Sharp is insufficient corroborating evidence because Sharp’s report states, in part, that he had no reason to doubt Skala’s files showing his cup design was created in October 2004.  Plaintiff contends that “[h]aving no reason to doubt Mr. Skala does not constitute corroboration of his claim.”  (Dkt. 99).  The Court disagrees with this strict interpretation.  Moreover, Sharp’s report also states that Sharp was able to locate at least two copies of the referenced image, titled “bombcup.jpg” and that both images indicate that they were last modified on October 22, 2004, which is around the same time that Skala claimed he designed the invention.   This is sufficient corroborating evidence.
So the prior inventorship issue will go to the jury.

Defendant had also asserted a lack of utility defense.  Plaintiff's request for summary judgment on that issue was also denied, as there was record evidence sufficient to send the issue to the jury.

Plaintiff's Amended Motion for Partial Summary Judgment Denied.

Hurricane Shooters, LLC v. EMI Yoshi, Inc., slip op., Case No. 8:10-cv-00762 (M.D. Fla. Sept. 8, 2011)(J. Moody)

Monday, September 12, 2011

Court declines to serve as declaratory judgment plaintiff's private counsel

United Marine Marketing Group, LLC distributes floating docks and accessories.   Jet Dock Systems and Ocean Innovations ("Defendants") manufacture and sell a number of patented dock products.  UMMG was concerned that it might infringe Defendants' "drive-on" docks.  Problem was, Defendants hadn't made such threats against UMMG (although they had sued other entities), and UMMG didn't really identify any products it was concerned it wasn't able to sell.  Rather, UMMG was asking for a declaration the components it was selling (which, potentially, could be assembled into an infringing configuration) did not themselves infringe the patents.  This does not suffice to establish subject matter jurisdiction, as this is not an actual case or controversy:
... UMMG has failed to adequately plead a “case or controversy.”  Although UMMG contends that they are involved in an “actual dispute” with Defendants concerning whether or not they can produce, and/or sell certain floating docks, UMMG fails to identify even a single dock product which they wish to produce, and/or sell.  As a result, there is nothing for a case or controversy to be about.
* * *
While UMMG identifies certain dock components which it intends to assemble into finished docks, these dock components are not at issue in this case.  Indeed, UMMG is free to sell these individual components to whoever they choose without risk of infringing Defendants’ five patents.  On the contrary, the relevant patents in the instant case relate to finished dock products, or specific configurations of components which meet the various claims contained in Defendants’ patents. 
(It's not clear here if the Court is ruling out contributory or induced theories of patent infringement, but perhaps that's a discussion for another day.)  The Court then refused to render an advisory opinion:
Plaintiff UMMG appears to be asking this Court to serve as its private counsel, asking the Court for its advice on how to design a non-infringing dock product given the particular components at UMMG’s disposal.  As federal courts only possess the authority to decide disputes which are “definite” and “concrete,” this Court must accordingly decline to dispense such advice.  Cat Tech LLC,  528 F.3d at 881; (a plaintiff cannot “obtain a declaratory judgment merely because it would like an advisory opinion on whether it would be liable for patent infringement if it were to initiate some merely contemplated activity.” (quoting Arrowhead Indus. Water, Inc. V. Ecolochem, Inc., 846 F.2d 731, 736 (Fed.Cir.1988))).   
Finally, the Court dismissed UMMG's unfair competition claims because: (1) they improperly utilize "shotgun pleading," and (2) they boil down to allegations that Defendants' asserting their patents was unfair, which was not actionable so long as the patents were valid.

Complaint dismissed.  Plaintiff allowed 20 days to replead.

United Marine Marketing Group, LLC v. Jet Dock Systems, Inc., slip op., Case No. 8:10-cv-02653 (M.D. Fla. Sept. 6, 2011) (J. Moody)

Friday, September 9, 2011

Defendant not liable for trademark infringement where plaintiff has no enforceable rights in the mark

Knights Armament Company and Optical Systems Technology, Inc. worked together for a period of time to sell night vision scopes to the U.S. government.  OSTI had the manufacturing capabilities, but needed Knights' marketing skills.  The harmonious relationship lasted for some time, but a dispute arose as to who owned the technology behind the scopes.  Knights filed an intent-to-use federal trademark application for the marks "Universal Night Sight" and "UNS."  OSTI sought cancellation and its own registrations for those same marks (which Knights opposed).  Those proceedings were stayed at the U.S. Patent and Trademark Office while the parties litigated the issues in federal court.

OSTI accused Knights of misappropriating its trade secrets and infringing its trademarks.  OSTI lost both of these issues at the trial level, and asked the Eleventh Circuit for review.

Trade Secret Statute of Limitations

The statute of limitations to bring a claim for misappropriation of a trade secret is 3 years under Florida's law.  See Fla. Stat. § 688.007.  OSTI filed its counterclaim asserting such misappropriation on December 21, 2007.  Thus, OSTI needed to learn of the misappropriation no earlier than December 21, 2004 -- otherwise the claim is time barred.  Problem is, OSTI offered the following in response to an interrogatory:
OSTI first became aware of [Knights'] intent to misappropriate OSTI's confidential information and trade secrets when [Knights] stated in a meeting that [Knights] and OSTI shared the UNS™ technology and [Maxin] stated that Knight was incorrect and that OSTI alone owned the technology.  OSTI learned through the April 21, 2003 letter from [the government] to [Knights], a copy of which . . . was emailed to OSTI on May 28, 2003[,] that [Knights] had attempted to misappropriate OSTI’s UNS™ drawings.
Further record evidence showed that OSTI had enough information that it should have been concerned, but didn't press the issue far enough.  Here is how the Court described the situation:

During 2003 and 2004, Maxin testified that OSTI had heard rumors in the marketplace (and even received anonymous tips) that [Knights] was developing a competing night vision device.  Yet OSTI or Maxin did nothing.  They did not do their due diligence.  It is incredible that, through discovery, they damningly admit, on the record, that they knew or suspected [Knights'] alleged misappropriation as early as March 2003.  In so doing, they lose on this issue.

OSTI's trade secret claim was therefore time barred, and the district court was correct to grant summary judgment to Knights on this issue.

Trademark Protection for the mark "Universal Night Sight"

Two issues needed to be addressed to resolve this issue.  First, the parties disputed ownership of the mark.  Second, Knights denied infringement.  OSTI won the battle here, but lost the war.

Ownership of a trademark goes to the senior user.  So whoever used the mark first will be considered the owner.   But prior to delving into the timing of usage, distinctiveness needed to be addressed.  Trademark protection is available to distinctive marks, which serve the purpose of identifying the source of goods or services.  The four categories of distinctiveness, in descending order of strength, are: (1) fanciful or arbitrary (i.e. Exxon for gas); (2) suggestive (i.e. drizzler for rain jackets); (3) descriptive (i.e. Tomapple for tomato-apple juice); and (4) generic (i.e. restaurant for a restaurant).  Generic marks do not get trademark protection, and descriptive marks are not protectable without establishing secondary meaning.

Here, OSTI was found to be the senior user (and thus the owner), but the mark was determined to be descriptive.  So OSTI needed to rely on secondary meaning -- the Court laid out the standard:
“A name has acquired secondary meaning when the primary significance of the term in the minds of the [consuming] public is not the product but the producer.”    Welding Servs., Inc., 509 F.3d at 1358.  The determination of whether a mark has acquired secondary meaning depends on “the length and nature of the name’s use, the nature and extent of advertising and promotion of the name, the efforts of the proprietor to promote a conscious connection between the name and the business, and the degree of actual recognition by the public that the name designates the proprietor’s product or service.”  Id.  The existence of a secondary meaning is a question of fact.  See Coach House Rest., Inc., 934 F.2d at 1560. 
OSTI first used the marks in 1999 and 2000.  Knights first used the marks in 2003.  But in the interim, 1999-2003, the products weren't clearly marked to indicate that OSTI was the producer.  In other words, consumers had no reason to associate the "Universal Night Sight" mark with OSTI's product.  Thus, it was impossible for the mark to have acquired secondary meaning in this time.  So, when Knights used the mark in 2003, it was simply using a descriptive mark that was not entitled to protection.

Decision affirmed.

Knights Armament Co. v. Optical Systems Technology, Inc., Case No. 09-14480 (11th Cir. Sept. 2, 2011)

Thursday, September 8, 2011

Personal jurisdiction for patent infringement on an out-of-state subsidiary with its own operational control? Nope.

Digitech Information Systems sued Ally Financial and Capital Auto Receivables, Inc. ("CARI") for infringement of U.S. Patent No. 7,739,180.  The '180 Patent relates to a method of selecting leases to optimize an investment portfolio.  Ally leases new and used vehicles from GM and non-GM franchised dealers.  CARI, a wholly-owned subsidiary of Ally, acts as a depositor and initial certificate holder for various asset-backed securities.  CARI is not registered in Florida, and does not do business here.  On this basis, CARI moved for dismissal for lack of personal jurisdiction.

Digitech opposed that motion, arguing that Ally's actions should be imputed to CARI for purposes of establishing personal jurisdiction.  The Court was not convinced.

General Jurisdiction

Digitech argued the Court could exercise general jurisdiction over CARI because "it is reasonable to assume that the creation and operation of CARI is a mere corporate formality."  This wasn't enough -- just being a subsidiary of a company subjected to personal jurisdiction in Florida does not necessarily extend personal jurisdiction to the sub:

“It is well settled in Florida that the mere presence of a subsidiary in Florida, without more, does not subject a non-Florida corporate parent to long-arm jurisdiction.”  Enic, PLC v. F.F. South & Co., 870 So. 2d 888, 891 (Fla. 5th DCA 2004) (citations omitted); Meier v. Sun Int’l Hotels, Ltd., 288 F.3d 1264, 1272 (11th Cir. 2002) (“Generally, a foreign parent corporation is not subject to the jurisdiction of a forum state merely because a subsidiary is doing business there.”).  However, a corporation that engages in substantial activity in Florida through a subsidiary may be subject to personal jurisdiction in FloridaUniversal Caribbean Establishment v. Bard, 543 So. 2d 447, 448 (Fla. 4th DCA 1989).  In order “[t]o determine whether a foreign corporation is liable based on a subsidiary’s substantial activity, [courts] consider the ownership of the subsidiary, the business activities of the subsidiary, and the financial relationship between the corporation and the subsidiary.” Abramson v. Walt Disney Co., 132 F. App’x 273, 275-76 (11th Cir. 2005) (citing Meier, 288 F.3d at1272-73).  
What is required for jurisdiction based on the relationship between a parent corporation and a subsidiary “is not some control but ‘operational control’ by the parent over the subsidiary.”  Gen. Cigar Holdings, Inc. v. Altadis, S.A., 205 F. Supp. 2d 1335, 1344 (S.D. Fla. 2002) (quoting State v. Am. Tobacco Co., 707 So. 2d 851, 856 (Fla. 4th DCA 1998); see also Dev. Corp. of Palm Beach v. WBC Constr., L.L.C., 925 So. 2d 1156, 1161-62 (Fla. 4th DCA 2006) (“The amount of control exercised by the parent must be high and very significant.”). 

Here, Digitech did not establish operational control by Ally over CARI.  Thus, no personal jurisdiction.

The Court next rejected Digitech's argument that CARI should be subjected to specific jurisdiction because there was not sufficient evidence to support such jurisdiction.

Motion to dismiss granted.

Digitech Information Systems, Inc. v. Ally Financial, Inc., slip op., Case No. 6:10-cv-1398 (M.D. Fla. Sept. 1, 2011)(J. Antoon)

[Note.  GrayRobinson, PA. was involved in the above-captioned matter]