Richards Layton & Finger
 

Intellectual Property - Pleadings and Motions to Dismiss

March 25, 2010

Judge Farnan Grants Defendants’ Motion for Leave to Amend Answer
In WebXchange Inc. v. Dell Inc., C.A. No. 08-132-JJF (D. Del. Jan. 20, 2010), and WebXchange Inc. v. FedEx Corp., et al., C.A. No. 08-133-JJF (D. Del. Jan. 20, 2010), Judge Farnan granted defendants’ motion for leave to amend their answers.  Defendants wished to file a second amended answer to supplement their inequitable conduct defense and counterclaim although the scheduling order deadline for amendments to pleadings had passed.  Judge Farnan found good cause to allow the belated amendment under F.R.C.P. 16(b).  Two of the paragraphs of the amended answer related to disclosure statements filed by plaintiff with the PTO after the scheduling order deadline had passed.  Furthermore, the Court found that plaintiff’s earlier production of business plans did not contain sufficient information to allow defendants to argue that plaintiff had failed to disclose prior art, given the requirement that inequitable conduct be pleaded with particularity.  Plaintiff did not produce documents that tied information in the business plans to the development of the patents-in-suit until after the deadline for amendment had passed.

Under F.R.C.P. 15(a), Judge Farnan held that amendment would not be futile because the factual allegations of knowledge on the part of the inventor raised a right to relief above the speculative level.  Plaintiff would not be prejudiced because the amendment did not add new defenses, but supplemented inequitable conduct theories originally pleaded.  In granting the motion, Judge Farnan noted that it was still early in the case, no Markman hearing had been held, and no trial date had been scheduled.  For these reasons, he granted leave to amend. 

Judge Robinson Grants Summary Judgment of Invalidity Based on 35 U.S.C. § 112
In Boston Scientific Corporation, et al. v. Johnson & Johnson, Inc., et al., C.A. Nos. 07-333-SLR, 07-348-SLR, 07-409-SLR, 07-765-SLR (D. Del. Jan. 20, 2010), Judge Robinson granted plaintiffs’ motion for summary judgment of invalidity based on 35 U.S.C. § 112, and denied plaintiffs’ motions for summary judgment of noninfringement and invalidity based on 35 U.S.C. § 103 as well as defendants’ motion for summary judgment of infringement.

The four patents-in-suit relate to drug-eluting coronary stents used in the treatment of coronary artery disease.  In granting the motion for summary judgment of invalidity based on 35 U.S.C. § 112 as to each of the patents-in-suit, the Court found that for the three patents-in-suit that are members of the same patent family and share a common specification, no reasonable jury could find that the written description requirement was met with respect to the claimed analogs in the patents and that the limitations at issue were not enabled.  Defendants did not identify anything in the specification discussing or exemplifying a structural analog and could point to no evidence that one of skill in the art would recognize a description of the claimed analogs in the patents’ disclosure.  The Court noted that describing certain functions of the genus of claimed analogs does not equate to a description of the claimed analogs themselves.  With respect to enablement for the family of patents, the Court initially found that because the specification indicated that the drug was “still under active investigation,” there was no clear starting point for the modification of the drug.  Then, analyzing the Wands factors for enablement, the Court concluded that the limitations at issue were not enabled.  For the fourth patent-in-suit, the Court found that, because the inventors did not describe at least one representative analog, the patent was invalid for lack of a written description.  The Court rejected defendants’ argument that a description of function and biological properties is sufficient.

Magistrate Judge Thynge Grants Motion for Summary Judgment Based on Laches
In Crown Packaging Technology, et al. v. Rexam Beverage Can Co., C.A. No. 05-608-MPT (D. Del. Jan. 15, 2010), Magistrate Judge Thynge granted counterclaim-defendant Crown’s motion for summary judgment based on laches.  By way of background, the Federal Circuit reversed the Court’s grant of summary judgment of noninfringement and Crown’s motion for summary judgment for failure to mark. Thereafter, the parties stipulated to the dismissal of Crown’s infringement claim, and the only remaining issue before Magistrate Thynge was Rexam’s counterclaim of infringement.
 
Arguing the equitable defense of laches, Crown asserted that Rexam’s counterclaim was nothing more than a “litigation inspired after-thought” and that Rexam’s delay in filing was fatal to its counterclaim.  Crown asserted that the laches clock was triggered at least seven years prior to Rexam’s filing of its counterclaim and that Crown was therefore entitled to a presumption that Rexam’s delay was both unreasonable and prejudicial.  Conversely, Rexam denied that it delayed in bringing its claim for infringement of the patent and refuted that it knew or should have known of Crown’s alleged infringing activities.  The Court granted Crown’s motion for summary judgment based on laches because Rexam failed to raise a genuine issue regarding the fact that it should have known of Crown’s alleged infringing activities.  The Court held that Crown’s activities in the business were open, pervasive and notorious, but Rexam never undertook any investigation of the circumstances associated with Crown’s alleged infringing activities.  Since Rexam delayed more than six years before filing its counterclaim, the Court presumed that the delay was both unreasonable and prejudicial.

Judge Farnan Denies Defendants’ Motion to Bifurcate Trial on Inequitable Conduct
In WebXchange Inc. v. Dell Inc., C.A. No. 08-132-JJF (D. Del. Dec. 30, 2009), and WebXchange Inc. v. FedEx Corp. et al., C.A. No. 08-133-JJF (D. Del. Dec. 30, 2009), Judge Farnan denied defendants’ motion to bifurcate and for an early trial on the issue of inequitable conduct.  Judge Farnan stated that bifurcation would not necessarily promote efficient adjudication of the dispute.  Efficiency would only result from defendants’ success on their inequitable conduct defense, which was uncertain given the high standard for proving inequitable conduct.  Also, since the same prior art was common both to defendants’ inequitable conduct and invalidity defenses, the risk of duplicative evidence being presented at successive trials also weighed against bifurcation.

Magistrate Judge Stark Recommends that Defendants’ Motion to Strike Inequitable Conduct Counterclaim Be Granted in Part and Denied in Part               
In Power Integrations, Inc. v. Fairchild Semiconductor International, Inc., et al., C.A. No. 08-309-JJF-LPS (D. Del. Dec. 18, 2009), Magistrate Judge Stark recommended that Fairchild’s motion to strike and dismiss Power’s counterclaim of inequitable conduct be granted in part and denied in part.  Magistrate Judge Stark analyzed the motion under the pleading standards for Rule 9(b) and Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009).  Fairchild argued that, as to the first of the three patents at issue, Power did not sufficiently allege that the inventor had knowledge of prior art, but Power noted that the inventor discussed the prior art in contemporaneously filed patent applications.  Magistrate Judge Stark recommended that the Court deny the motion to strike on this issue but recommended that the motion be granted as to two other individuals, since Power did not show that the patent agent for the other two patents at issue filed or prosecuted this patent, and did not allege that the attorney who prosecuted this patent had knowledge that the facts he presented to the PTO were false or misleading. 

Power also alleged infectious unenforceability, because the specifications of this first patent and the two others at issue were related, shared some figures, had substantively the same limitations, and were all asserted against Power products.  Magistrate Judge Stark did not consider this sufficient to establish an immediate and necessary relationship so as to infect the other two patents and recommended that the Court grant the motion to strike on this issue.  Magistrate Judge Stark found that Power’s inequitable conduct claim against the second of the three patents at issue failed to allege the “what” and the “where” under Exergen and further found that Power’s allegations that the inventor had knowledge of prior art and deceptive intent relied on an “attenuated chain of logic”; therefore, Magistrate Judge Stark recommended that the motion to strike be granted.

Because Power alleged in its counterclaim that the inventor, in his applications for other patents, had described prior art for the last of the three patents at issue, Power sufficiently alleged knowledge on his part.  Magistrate Judge Stark inferred that the inventor failed to disclose these references with deceptive intent and recommended that the Court deny the motion to strike on this issue.  The same allegation against the patent agent for this third patent did not suffice, however, because Power did not allege that the agent prosecuted the inventor’s other patents, which included the prior art descriptions.  But Power failed to allege that the patent agent or the inventor knew that products described in an article with which they were familiar contained material prior art for this third patent, so Magistrate Judge Stark recommended that the motion to strike be granted on this issue.  Finally, Magistrate Judge Stark noted that, by satisfying Exergen and Rule 9(b), those claims for which he recommended that the motion to strike be denied also satisfied the standards to survive a Rule 12(b)(6) motion to dismiss. 

Judge Farnan Grants Defendant’s Motion to Modify Scheduling Order and for Leave to Amend Answer                                   
In ICU Medical, Inc. v. Rymed Technologies, Inc., C.A. No. 07-468-JJF (D. Del. Dec. 16, 2009), Judge Farnan granted defendant’s motion to modify scheduling order and for leave to file second amended answer.  Defendant sought leave to add an inequitable conduct defense to its answer.  Because inequitable conduct must be pleaded with particularity, Judge Farnan found that defendant could not have pleaded the defense until it received and confirmed a new set of relevant facts.  This did not occur until after the scheduling order deadline had passed.  Judge Farnan held that defendant established good cause to modify the scheduling order by diligently pursuing the facts necessary to plead the defense and filing the motion to amend within days of confirming the availability of the defense.

Magistrate Judge Stark Issues Recommendations on Motions for Summary Judgment                                           
In In re Rosuvastatin Calcium Patent Litigation, C.A. No. 08-1949 (D. Del. Dec. 11, 2009), Magistrate Judge Stark made recommendations on motions for summary judgment and a renewed motion to dismiss, and ruled on evidentiary motions.  Defendant Aurobindo USA moved for summary judgment of no subject matter jurisdiction on the grounds that it did not submit the ANDA application as an authorized agent of its parent.  Magistrate Judge Stark held that a wholly owned subsidiary of a foreign ANDA applicant who signs the ANDA application as an agent of its parent and who would benefit from its approval would be subject to suit as one who “submitted” the application.  Because there was a dispute as to whether Aurobindo USA’s former employee signed the application in his capacity as an employee of the company, Magistrate Judge Stark recommended that the Court deny the motion for summary judgment. 

Defendant Aurobindo India moved for summary judgment of no personal jurisdiction and dismissal for nonjoinder.  Magistrate Judge Stark treated this summary judgment motion as a renewed motion to dismiss.  Aurobindo India argued that it was not subject to personal jurisdiction in Delaware, and without its presence in the case Aurobindo USA should be dismissed because of the absence of a necessary party.  Consistent with his earlier opinion on this issue, Magistrate Judge Stark again recommended denial.  Under both alter ego and agency theories, a reasonable factfinder could find fraud or inequity on the part of the parent or a sufficient degree of control over the subsidiary.  Because the U.S. subsidiary engaged in a persistent course of conduct in Delaware by incorporating itself in Delaware and selling its foreign parent’s products, Magistrate Judge Stark imputed the subsidiary’s contacts to the foreign parent and recommended that the renewed motion to dismiss be denied. 

Defendant Apotex, Inc. renewed its motion to dismiss for lack of personal jurisdiction or, in the alternative, for transfer.  Magistrate Judge Stark found no general jurisdiction because the company had no continuous and systematic contacts with Delaware—its repeated appearances in Delaware as a defendant and counterclaim plaintiff did not establish general jurisdiction.  Plaintiffs argued that its subsidiary, Apotex Corp., functioned as Apotex, Inc.’s agent, but, unlike with Aurobindo, there was not sufficient evidence of a principal-agent relationship.  Magistrate Judge Stark recommended transfer under 28 U.S.C. § 1631.

Magistrate Judge Stark recommended that the Court deny plaintiffs’ motion for summary judgment of no inequitable conduct, explaining that deciding intent is generally inappropriate on a summary motion and a reasonable factfinder could conclude that plaintiffs did intend to withhold prior art from the PTO.  On the discovery motions, Magistrate Judge Stark granted defendants’ motion to exclude the testimony of one of plaintiffs’ experts, which, under Daubert and FRE 702, was impermissible circumstantial evidence of intent to deceive the PTO.  Defendants’ motion to exclude expert testimony of another of plaintiffs’ witnesses was granted in part and denied in part.  Magistrate Judge Stark denied the motion to exclude testimony regarding the closest prior art because it would have required him to assess the correctness of the expert’s opinion, which he could not do under FRE 702 and Daubert.  For the same reasons as his decision on defendants’ discovery motion, he excluded a portion of this expert’s testimony as to intent. 

Judge Farnan Grants Defendants’ Motion for Summary Judgment of On-Sale Bar
In Honeywell International Inc. and Honeywell Intellectual Properties Inc. v. Nikon Corp., et al., C.A. No. 04-1337-JJF (consolidated) (D. Del. Dec. 4, 2009), Judge Farnan granted defendants’ motion for summary judgment based on the on-sale bar of 35 U.S.C. § 102(b).  Defendants alleged that the patent-in-suit was described in a sales proposal that plaintiffs presented to Boeing more than a year before the patent application.  Under the first element of the Pfaff test, whether the product was the subject of a commercial offer for sale, plaintiffs claimed that the proposal was not an offer because it did not create the power of acceptance in Boeing.  In addition, plaintiffs argued that the proposal did not concern the claim at issue of the allegedly infringed patent.  An examination of the proposal revealed that it contained definite terms for price and delivery, thus constituting an offer.  Plaintiff argued that, because of industry custom and the parties’ previous dealings, Boeing would never have accepted the proposal at that stage.  Judge Farnan ruled that, even though further negotiations might have been expected, on its face the proposal’s terms constituted an offer that could have been made binding by acceptance. 

Plaintiffs argued that defendants were relying on the “totality of the circumstances” approach to commercial activity from RCA Corp. v. Data Gen. Corp., 887 F.2d 1056, 1062 (Fed. Cir. 1989), which was overruled by Pfaff.  Judge Farnan disagreed, pointing out that a formal offer to sell survived Pfaff as an essential element of the on-sale bar defense, and that the totality of the circumstances test was not used here to create a formal offer where none existed.  The terms of the proposal itself constituted a formal and sufficiently definite offer.

The descriptions in the sales proposal, as well as prototypes constructed for the purpose of the proposal, offered the patented invention.  Hence, by clear and convincing evidence the product was the subject of a commercial offer for sale, satisfying the first Pfaff element.  Plaintiff admitted that the invention was reduced to practice before the critical date, satisfying the second element of Pfaff.  Judge Farnan granted defendants’ motion for summary judgment.

Judge Sleet Denies Defendant’s Motion to Dismiss
In Mark IV Industries Corp. v. Transcore, L.P., et al., C.A. No. 09-418-GMS (D. Del. Dec. 2, 2009), Judge Sleet denied defendant’s motion to dismiss the complaint for failure to state a claim because it lacked the specificity required under Fed. R. Civ. P. 8(a), for breach of settlement agreement and for bad faith.  Judge Sleet found that Mark IV’s complaint satisfied the requirements of Fed. R. Civ. P. Form 18, which sets forth a model complaint for direct patent infringement.  Judge Sleet disagreed with defendant’s contention that the U.S. Supreme Court’s recent decision in Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), heightened the pleading requirements for patent infringement.  Instead, a complaint of direct patent infringement need only cite the asserted patent and does not require the plaintiff to specifically plead each element of the claims of the asserted patent.  Judge Sleet also held that none of the grounds for dismissal set forth in Fed. R. Civ. P. 12(b) supported granting a dismissal for breach of the parties’ settlement agreement.  Judge Sleet also found that a dismissal for bad faith was not appropriate at this stage of the proceedings and defendant did not provide sufficient authority to support the requested relief.

Judge Farnan Grants in Part Defendants’ Motion to Dismiss for Failure to State a Claim and Denies Defendants’ Motion to Transfer                   
In Mallinckrodt Inc. and Liebel-Flarsheim Co. v. E-Z-EM Inc. and ACIST Medical Systems, Inc., C.A. No. 09-228-JJF (D. Del. Nov. 20, 2009), Judge Farnan granted in part defendants’ motion to dismiss for failure to state a claim and denied defendants’ motion to transfer.  The Court found that plaintiffs sufficiently alleged the elements of a claim for direct infringement because the complaint asserted ownership, named the defendants, cited the patent-in-suit as allegedly infringed, explained the means by which it was allegedly infringed, described the relevant patent law, and identified the allegedly infringing product incorporating the patent made and sold by defendants.  As a result, the Court denied the motion.  The Court did, however, grant the motion to dismiss the contributory infringement claim for failure to allege knowledge.

Defendants requested transfer because the Eastern District of Texas was hearing an earlier-filed case involving the same parties, related technology and the same product.  Judge Farnan found that this action could have been brought in the Eastern District of Texas, since defendants conducted business and sold the allegedly infringing product within that jurisdiction.  The private factors, however, weighed against transfer: though not the plaintiffs’ “home turf,” plaintiffs had rational, legitimate concerns as Delaware corporations and defendants were themselves Delaware corporations.  According to Judge Farnan, defendants merely speculated as to where the cause of action arose, and neither the convenience factors nor the location of books and records favored transfer.  The main argument among the public interest factors was that the interests of justice favored transfer because of the pending Texas action.  While both actions involved the same parties and product, it was not clear from the record how much the cases involved similar technologies or a common field of prior art.

Judge Sleet Grants in Part and Denies in Part Defendant’s Motion to Dismiss for Lack of Personal Jurisdiction and Improper Venue                   
In CNH America LLC et al. v. Kinzenbaw et al., C.A. No. 08-945 (GMS) (D. Del. Nov. 9, 2009), Judge Sleet granted defendants’ motion to dismiss for lack of personal jurisdiction over Kinzenbaw and denied defendants’ motion to dismiss for improper venue and to transfer venue.  Judge Sleet found that the Court did not have personal jurisdiction over Kinzenbaw and dismissed him from the case because the only basis upon which the complaint asserted personal jurisdiction over Kinzenbaw was that Kinze Manufacturing, the other named defendant, was the alter ego of Kinzenbaw through Kinzenbaw’s ownership.  Furthermore, the allegations of infringement in this case were directed at Kinze, not Kinzenbaw.  Judge Sleet held that it is well established that mere ownership or direction of a corporate entity, without more, is insufficient to disregard the corporate form under the alter ego doctrine.  The Court held that the complaint did not allege any fraud, injustice or inequity stemming from the alleged disregard of the corporate formalities at Kinze.  Judge Sleet also found that defendant had failed to sufficiently show that plaintiffs’ choice of venue should be disturbed because defendant did not contend that the court lacked personal jurisdiction over Kinze, venue was improper, or Kinze lacked the resources to litigate this case in Delaware.

Judge Sleet Grants Defendant’s Motion to Dismiss for Failure to State a Claim
In LG Electronics U.S.A., Inc. v. Whirlpool Corporation, C.A. No. 08-234-GMS (D. Del. Nov. 9, 2009), Judge Sleet granted defendant’s motion to dismiss two counts of plaintiff’s second amended complaint for failure to state a claim.  Judge Sleet found that plaintiff’s complaint did not contain well-pleaded factual allegations, but merely contained legal conclusions without any specifically alleged facts.
 

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