Patentee/plaintiff Dustcap appeals to the Federal Circuit from the order of Judge Ann Montgomery dismissing its action for lack of personal jurisdiction.  J&S is incorporated and located in Pennsylvania, the case brought in Minnesota.  The case involved 6,874,541, generally directed to a slip cover for protecting HVAC components during installation and construction.

Dustcap conceded there was not general jurisdiction–J&S did not have any continuous or systematic contacts with Minnesota.  Rather, it argued specific jurisdiction.  Specific jurisdiction exists if (1) the exercise of jurisdiction is permitted by the forum state’s long-arm statute; and (2) the exercise of jurisdiction by the courts of the forum state comports with the Due Process Clause of the United States Constitution. See Genetic Implant Sys., Inc. v. Core-Vent Corp., 123 F.3d 1455, 1458 (Fed. Cir. 1997) (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-76 (1985)).

Minnesota interprets its long-arm statute commensurate with the Due Process Clause.  The combined inquiry thus asks (1) whether the defendant “purposefully directed” its activities at residents of the forum; (2) whether the claim “arises out of or relates to the defendant’s activities with the forum;” and (3) whether the assertion of personal jurisdiction is “reasonable and fair.”  Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1360
(Fed Cir. 2001).

The Court summarized the alleged contacts here as follows:

Plaintiff alleges J&S purposefully directed activities at residents of Minnesota by: (1) mailing advertisements to several [6] Minnesota businesses;1 (2) placing an advertisement in a nationally circulated magazine; and (3) operating a website that allows prospective customers to purchase the Smith Slip over the internet.

Order, p. 5.  The Court further noted that J&S had no offices or employees in Minnesota, and had never sold any of the allegedly infringing product in Minnesota, including via the website.  Id.

Judge Montgomery found these allegations insufficient to establish personal jurisdiction.  The mailing of circulars received particular attention because Dustcap contended that the mailings were “offers to sell” and therefore infringing acts.  This would not only satisfy the first prong of the test, but also the second–that the infringement claim “arises out of or relates to the defendant’s activities with the forum.”

However, the Court found that the mailings were not offers for sale, using the Federal Circuit’s decisions in Rotec and Group One.  The Court wrote:

Plaintiff relies on 3D Systems, Inc. v. Aarotech Laboratories., Inc., 160 F.3d 1373 (Fed. Cir. 1998) to support his assertion that an offer to sell is any communication by the defendant to prospective buyers that includes a description and price. However, in Rotec Industries, Inc., v. Mitsubishi Corp., 215 F.3d 1246, 1255 (Fed. Cir. 2000), the Federal Circuit revisited its interpretation of “offer to sell” in 3D Systems and concluded that the phrase must be read according to the norms of traditional contract law. Id. at 1254-55. Under contract law, an offer is a communication “which the other party could make into a binding contract by simple acceptance.” Group One, Ltd. v. Hallmark Cards, Inc., 254 F.3d 1041, 1048 (Fed. Cir. 2001). Based on this principle, courts often conclude that advertisements and promotional materials do not constitute offers. Moldflow Corp. v. Simcon, Inc., 296 F. Supp. 2d 34 (D. Mass. 2003). Here, J&S’s advertisement listed a variety of options available to prospective buyers, but lacked the definite terms that would create a binding contract between J&S and the recipient if the recipient simply accepted. Additional, material terms, including price, quantity, and terms of delivery, needed to be negotiated. J&S’s advertisements were merely invitations to bargain, not offers to sell.

Order, p. 6.  The Court then quickly dispensed with the national advertising (via a national publication) and the website arguments.  Opinion, p. 7

2010-1158 Order

PATalert is tied to the CAFC’s Opinions and Orders webpage, which is usually updated between 11 am and 1 pm US eastern.  Shortly after the court announces the new decisions, our RSS feed will alert you of the decision with case name (hyperlinked to a pdf of the opinion), case number, whether the decision is precedential or not, and the lower court/agency from which the case was appealed.

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Pitt appeals from the order of Judge Schwab dismissing its complaint without prejudice instead of allowing it to file an amended complaint alleging its standing to sue.  The case was just back to the district court after the Federal Circuit ruled for Pitt in 2008-1441 that the district court erred in dismissing with prejudice.  You can read our coverage of Judge Schwab’s earlier decision, and Dennis Crouch at Patently-O covered the first CAFC decision here.

Underlying both dismissals is the fact that Pitt was not the sole owner of the patent when it first filed the complaint, but a co-owner with Carnegie-Mellon.  Because Carnegie-Mellon was not a party, the action violated the rule that all co-owners of the patent must join in the suit.  Isr. Bio-Eng’g Project v. Amgen Inc., 475 F.3d 1256, 1264–65 (Fed. Cir. 2007).   Since then, however, Pitt acquired Carnegie-Mellon’s interest and is now the sole owner.

The Federal Circuit wrote in the first appeal:

Pitt also asserts that the district court further erred when it designated its dismissal as a dismissal “with prejudice.” We find that argument persuasive. Namely, we hold that even if Carnegie Mellon is a necessary party, and even if dismissal is a proper consequence for Pitt’s failure to join Carnegie Mellon, the dismissal should have been without prejudice.

Following the CAFC’s mandate, Judge Schwab amended the judgment to dismiss Pitt’s case without prejudice.

But because Pitt is now the sole owner and can sue by itself, it moved the court for leave to amend its complaint to add the allegations that it is the sole owner.  The court declined, finding that the Federal Circuit’s mandate did not allow for it:

After careful consideration of plaintiff’s motion and brief in support, defendant Varian Medical Systems Inc.’s response and brief in opposition, and the Opinion and Mandate of the Court of Appeals for the Federal Circuit, the Court agrees with defendant that plaintiff’s motion must be dismissed. Although plaintiff’s legal position with respect to the effect of a dismissal without prejudice is not without appeal, in the abstract, the Court deems the Opinion and Mandate of the Court of Appeals to foreclose the relief plaintiff requests in this case.

Opinion, p. 2.

PATracer Note: It appears to me that the court could have allowed Pitt to amend.  While standing to sue is normally based on the facts that existed at the time of filing and cannot be retroactively cured or fixed, Paradise Creations v. UV Sales, 315 F.3d 1304, 1309 (Fed. Cir. 2003), requiring all patentees to join in the suit is not a constitutional requirement, but a prudential one.  Unlike constitutional standing issues, problems with prudential standing can be cured post-filing.

Also, it is not clear from these materials why Pitt didn’t just file a new complaint?  Perhaps the 6 year limitation on damages comes into play.  If so, maybe they should have filed a new action when it first became the sole owner.

2010-1157 Order

Pantentee Sorensen again attempts to appeal from the Order of Judge Barry Moskowitz granting defendants’ motion to stay the case pending reexamination of patent no. 4,935,184.  This is the same plaintiff, patent, judge, and subject as on appeal in 2010-1142.  Defendant in the 2010-1142 action have moved to dismiss the appeal for lack of jurisdiction, but no decision as of yet.

Stay: Orders granting motions to stay pending reexamination are not generally considered “final” and are therefore not generally appealable.  See, e.g., Gould v. Control Laser Corp., 705 F.2d 1340 (Fed. Cir. 1983); Soliami v. Kennametal, 2008-1345 (Fed. Cir. 2008).

However, an exception exists where the stay “effectively could put one of the appellants out of court” or if some “patent issue would escape review by a federal court if the case is stayed.”  See, e.g., Slip Track Sys., Inc. v. Metal Lite, Inc., 159 F.3d 1337, 1340 (Fed. Cir. 1998).  There is nothing in the record to indicate whether any facts supporting the exception exists here, so the appeal may not stick around.

Dismissing/Striking Counterclaims: Before staying the case the Court did grant Sorensen’s motion to dismiss Spectrum’s counterclaims and to strike affirmative defenses on invalidity.  On the counterclaim, the Court used the standard from Ashcroft v. Iqbal, — U.S. –, 129 S.Ct. 1937 (2009) to find the allegations insufficient to state a claim:

Here, Count II of Defendant’s counterclaim is nearly devoid of factual assertions. Defendant only alleges that “[t]he claim of the ‘184 patent are invalid under 35 U.S.C. §§ 101, 102, 103, and/or 112.” This threadbare statement is precisely the type of allegation that is insufficient to state a claim under the Iqbal standard. Accordingly, Count II of Defendant’s counterclaim is DISMISSED without prejudice.

Order, p. 2.  For the motion to strike, the Court applied a similar standard to reach the same result:

Under Rule 8 of the Federal Rules of Civil Procedure, an affirmative defense must be pled with the minimal specificity to give the plaintiff “fair notice” of the defense. Wyshak v. City Nat’l Bank, 607 F.2d 824, 827 (9th Cir. 1979). Here, Defendant’s Affirmative Defense D merely states, “One or more claims of the ‘184 patent are invalid for failure to comply with the conditions of patentability set forth in title 35 of the United States Code, including §§ 101, 102, 103 and/or 112.” Sections 101, 102, 103, and 112 provide several grounds for finding a patent invalid, and Defendant has failed to give Plaintiff fair notice of the basis of its affirmative defense.  Advanced Cardiovascular Syss., Inc. v. Medtronic, Inc., No. C-96-0942, 1996 WL 467273, at *3 (July 24, 1996). Accordingly, Plaintiff’s motion to strike is GRANTED, and the Court strikes Affirmative Defense D from Defendant’s answer without prejudice.

Id. Although these ruling are not on appeal, it is further evidence of what appears to be a trend around the country against accused infringers simply alleging invalidity without any factual allegations in support.  This shouldn’t be a big deal, however, if scheduling orders give some time for discovery and prior art searching before invalidity contentions are due and pleadings closed.

2010-1155 Order on Motion to Stay

2010-1151 Taylor Brands v.  GB II Corp

Patentee Taylor appeals from the order of Judge Dennis Inman granting GB II summary judgment of non-infringement.  The case involves U.S. Patent No. 6,651,344 which is generally directed to a spring assisted opening knife.  At issue was the claim term “a set block situated at one side of the said blade” and whether the accused knife’s lack of a side set block could infringe.

In claim construction, just like dream analysis, sometimes claim term simply require just what it says.  This appears to be case here based on the Court opinion.

The claims are directed to a spring-assisted opening knife in which the knife blade is set on a pivot and a spring (located in the knife handle) applying tension at the knife base.  When released, the spring pushes on the knife base causing the knife to pivot into the open position.  At issue is the “set block limitation” from claim 1, the only independent claim:

a set block situated at one side of the said blade adjacent to the pivotable conjoinment position of the said handle, with the said set block having a detent notch in the circumferential edge at the confluence of its maximum outer diameter and minimum outer diameter such that when the said blade is drawn out of and extended from the said receiving slot, the said detent notch faces the opposing end of the said receiving slot

The set block is item 7 in the drawing.

GB II’s knife, however, did not have a set block at one side of the blade, but instead used the knife blade base itself.  The court found that the phrase “at one side” actually meant “at one side” and found no literal infringement. As for equivalents, the Court invoked the “all limitations rule”–that equivalents cannot be applied so broadly as to effectively eliminate the limitation altogether–and found that using the knife base and omitting the side set block could not be the equivalent of having a side set block.

2010-1151 SJ Order

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Defendants appeal from the orders of Judge Patel finding their patent, 6,831,287 unenforceable due to inequitable conduct before the PTO and then sanctioning them under § 285 and inherent powers.  The ‘287 patent relates to a dual sensor design for vapor deposition processing of silicon wafers.

Applied develops machines and systems for manufacturing semiconductor wafers and, in 2001, worked with Multimetrixs on an improved sensor and position system for the shutter disks used in its physical vapor deposition process.

Three engineers from Multimetrixs ultimately filed the patent application that became the ‘287 patent.  Applied recently filed suit to correct inventorship under 35 U.S.C. § 256, and Multimetrixs counterclaimed for infringement.

During the bench trial on inventorship, Applied elicited testimony from one of the Multimetrixs’ inventors that a signature of the third named inventor had twice been forged in documents submitted to the PTO.  Indeed, this third inventor had died in 2002, yet “signed” submissions to the PTO in 2003 and 2004.

Based on this testimony the court sua sponte raised the issue of inequitable conduct.  After briefing and additional argument, the court found the patent unenforceable.  In its order, the court first found that an inventor’s signature is material, rejecting defendants’ argument that the forgery of a deceased co-inventor is immaterial because they could have proceeded anyway (see, e.g., MPEP Appendix R, § 1.42 ):

Likewise, in this case, the issue is not whether the surviving inventors could have successfully prosecuted the patent without resort to forging the deceased inventor’s signature. The availability of valid alternatives is not the issue. The issue is whether what the surviving inventors in fact chose to do was inequitable conduct. David Margulis died in 2002 and his signatures on both the 2003 and 2004 documents were forgeries. The court concludes that there is clear and convincing evidence of the submission of materially false information that a reasonable examiner would substantially likely consider relevant and important.

Inequitable Conduct Order, p. 9.

The court also found clear and convincing evidence of deceptive intent, based mostly on the remaining inventors’ testimony and litigation tactics.  The each tried to testify that the third inventor died in 2004 and, according to court, repeatedly tried to hide the forgeries.  Once confronted with the truth, they offered no explanation for the forgeries:

Other than ex post rationalization based on that fact that the surviving inventors could have pursued other valid alternatives, the defendant has offered no explanation for why David Margulis’ signature appeared on documents submitted to the PTO in 2003 and again in 2004, when in fact he died in 2002. Even after the forgeries were revealed at trial, Multimetrixs and its witnesses offered no explanation or excuse for their conduct. Nor has Multimetrixs explained how its witnesses provided the same parallel but false testimony about the (incorrect) date of Margulis’ death. Based on the evidence presented at trial, the court finds clear and convincing evidence that the surviving inventors intentionally submitted documents to the PTO knowing that David Margulis was dead and knowing that his signature was forged. The court concludes that the forged documents were submitted with intent to deceive the PTO.

Inequitable Conduct Order, p. 12-13.

After finding the patent unenforceable and some more maneuvering (including Multimetrixs filing for bankruptcy), the court also found the case exceptional and award fees and costs against Multimetrixs.

Sanctions: Up to this point, the co-inventors were not named defendants to the case, but Applied sought and obtained leave under Fed. R. Civ. P. 15 to amend its complaint and add them.  It then asked for an exceptional case finding and award of fees against the individuals, which the court granted to the tune of about $1.4 million.

Most of the individual defendants’ arguments at this point are based on being sanctioned for litigation conduct that occurred when they were not actually parties to the case.  The court was unpersuaded, finding that they were afforded notice and opportunity to defend against the § 285 claim.  Also, the court found that these individuals controlled Multimetrixs and were therefor responsible for its litigation conduct.

PATracer Note: Multimetrixs’ counsel sought to withdraw (an a sealed motion) after the bench trial, which the court ultimately allowed:

Pursuant to California Rule of Professional Conduct 3-700(C)(1)(c) and (d), an attorney may request permission to withdraw if the client insists that the attorney pursue a course of conduct that is illegal or that is prohibited under the rules of professional conduct, or if the client by his conduct renders it unreasonably difficult for the member to carry out the employment effectively.

California law imposes a duty of candor on all attorneys. Bus. & Prof. Code § 6068; Rule of Professional Conduct 5-200(B). “Counsel should not forget that they are officers of the court, and while it is their duty to protect and defend the interests of their clients, the obligation is equally imperative to aid the court in avoiding error and in determining the cause in accordance with justice and the established rules of practice.” Datig v. Dove Books, Inc., 73 Cal. App .4th 964, 980 (1999). Given the conduct of defendants during the course of trial, the court recognizes the existence of conflicts which may make it impossible or unreasonably difficult for defense counsel to continue representation. Accordingly, the request of defense counsel to withdraw is GRANTED.

Inequitable Conduct Order, p. 14.

2010-1149 Inequitable Conduct Order

2010-1149 Exception Order

Dorman appeals from the preliminary injunction order entered against it by Judge O’Meara stopping sales of its regenerative air pumps, used in automobile emission controls systems, as a likely infringement of BorgWarner’s 5,527,149 and 6,422,808 patents.

The court’s rejection of the “permissible repair” defense and its use of a presumption of irreparable harm are the substantive highlights of this case.

Infringement: The asserted claims essentially all require (a) an impeller housing; (b) an impeller; (c) motor, (d) a flow chamber; and (e) a casing enclosing the impeller.  Dorman’s product consisted of everything but the casing (e), and was sold to customers so that they would combine it with the casing from an original BorgWarner unit.  Dorman’s defense to indirect infringement is the permissible repair doctrine.

Permissible repair is a defense derived from the first sale of a patented article that gives the buyer “an implied license to use the device for its useful life,” which includes “the right to repair the patented article and necessarily to purchase repair parts from others.”  Order, p. 5 citing Kendall Co. v. Progressive Medical Tech., 85 F.3d 1570, 1573-74 (Fed. Cir. 1996).  However, as the court noted, the line at which permissible repair turns to infringing reconstruction is hard to define.  Id.

BorgWarner contended (un-rebutted) that the only component of its product that could fail and need repair is the motor–which can be replaced by simply removing the impeller and 4 screws.  Dorman, however, was replacing not only the motor, but also the impeller, impeller housing and flow chamber.  The court held the wide-spread replacement of the components to be a reconstruction of the patented article and found that the repair defense was unlikely to succeed.  Order, p. 7.

PATracer Note: The court appears to be saying that Dorman could have permissibly sold just a replacement motor, but instead infringes because it included with the motor some additional components that did not need to be replaced.  But why would the gratuitous and apparently unnecessary replacement of functioning parts turn an otherwise non-infringing repair into an infringing reconstruction?

Irreparable Harm: BorgWarner argued that its market share, goodwill and reputation were being injured by Dorman’s competing product, and also that it was facing price erosion.  Dorman countered that there was no actual evidence presented, only conclusory allegations.

The Court nevertheless found irreparable harm because Dorman had not rebutted the presumption of irreparable harm.  The court found this presumption under Smith Int’l, Inc. v. Hughs Tool Co., 718 F.2d 1573, 1581 (Fed. Cir. 1983), Atlas Powder Co. v. Ireco Chems., 773 F.2d 1230, 1233 (Fed. Cir. 1985) and Polymer Techs. Inc. v. Bridwell, H.A., 103 F.3d 970, 975 (Fed. Cir. 1996).  See Order, p. 9.

PATracer Note: Of course, all of the cases relied upon by Judge O’Meara significantly pre-date the Supreme Court’s decision in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 392-94 (2006), which rejected the presumption in permanent injunction cases.  While a few Federal Circuit case post eBay avoided addressing the presumption issue vis-a-vis preliminary injunctions, Dennis Crouch at Patently-O recently covered (link) a non-precedential CAFC decision in Automated Merchandising Systems v. Crane, 2009-1158, where Chief Judge Michel (with Judges Clevenger and Dyk) held that there was no presumption.

It will be interesting to see if another panel at the CAFC reaches the same conclusion– or, for that matter, whether it gets to this issue at all.

2010-1146 PI Order

Defendants GraphOn et al appeal from the order of Judge Gerald Bruce Lee striking their motion for attorneys’ fees under § 285 for being late:  the motion was filed on December 10, 2009—15 days after the Clerk entered the order of dismissal.

Fed. R. Civ. P. 54(d)(2)(B)(i) provides that a motion for attorneys’ fees must “be filed no later than 14 days after entry of judgment” unless a statute or court order provides otherwise.

Because the filing of motion for attorneys’ fees is an act required to be done “within a specified amount of time,” the Court found that Fed. R. Civ. P. 6(b)(1) applies:

When an act may or must be done
within a specified time, the court may, for good
cause, extend the time:

(A) with or without motion or notice if the court
acts, or if a request is made, before the
original time or its extension expires; or

(B) on motion made after the time has expired if
the party failed to act because of excusable
neglect.

Because defendants did not timely request more time under part (A)–which only would require a showing of “good cause,”, Judge Lee ruled that the late filing could only be accepted if defendants could show “excusable neglect.”

Defendants argued that such neglect occurred because (1)they miscounted by skipping over Thanksgiving Day and (2) they were somehow confused because the dismissal entry did not say “with prejudice.”

“Excusable neglect,” sayeth Judge Lee, is:

an equitable concept, and courts will consider “the relevant circumstances surrounding the party’s omission” to determine whether an extension is warranted under Rule 6(b)(2).  Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 395 (1993). However, “inadvertence, ignorance of the rules, or mistakes construing the rules do not usually constitute excusable neglect.”  Id. at 392.

Based on this, Judge Lee found no excusable neglect.  Opinion, pp. 3-4.

Defendants argue that their delay was due to a miscalculation given the intervening Thanksgiving holiday and the fact that the Court’s Order did not state that dismissal was “with prejudice.” The Court finds Defendants’ reasons insufficient to establish excusable neglect. Federal Rule of Civil Procedure 6 makes clear that intervening holidays are included in the fourteen days allowed for a Rule 54(d) (2) (B) motion. Defendants’ miscalculation does not constitute excusable neglect.

. . .

[and] to the extent that Defendants were unclear about whether the Court’s Order dismissing the case for lack of jurisdiction constituted a dismissal with prejudice, Defendants could have moved for clarification.

2010-1143 Order

Pantentee Sorensen (sometimes also spelled “Sorenson”) attempts to appeal from the Order of Judge Barry Moskowitz granting defendants’ motion to stay the case pending reexamination of patent no. 4,935,184.  The Court did deny defendants’ motions to dismiss or to transfer in favor of the first-filed declaratory judgment action in the Eastern District of Pennsylvania.

Stay: Orders granting motions to stay pending reexamination are not generally considered “final” and are therefore not generally appealable.  See, e.g., Gould v. Control Laser Corp., 705 F.2d 1340 (Fed. Cir. 1983); Soliami v. Kennametal, 2008-1345 (Fed. Cir. 2008).  Indeed, Dorman has filed a motion to dismiss the appeal.

“Generally,” I write, because an exception exists where the stay “effectively could put one of the appellants out of court” or if some “patent issue would escape review by a federal court if the case is stayed.”  See, e.g., Slip Track Sys., Inc. v. Metal Lite, Inc., 159 F.3d 1337, 1340 (Fed. Cir. 1998).  There is nothing in the record to indicate whether any facts supporting the exception exists here, so the appeal may not stick around.

Dismiss/Transfer: Although not being appealed, the decision is interesting in that it explains that the “first to file rule” is not really a rule but a guide.  The Court declined to dismiss or transfer in favor of the earlier case because, in part, the Court has 30 other cases involving the ‘184 patent, and therefore judicial economy, etc. favor keeping the case.  Order, pp. 4-5.

Failure to State a Claim: The Court also rejected defendants’ argument that the Complaint was too vague and unspecific to state a patent infringement claim under the “heightened” pleading requirements from the Supreme Court’s decisions in Twombly and Iqbal.  Judge Moskowitz wrote:

The Federal Circuit, in a post-Twombly decision, stated that the following allegations were sufficient to state a cause of action for patent infringement: “(1) an allegation of jurisdiction; (2) a statement that the plaintiff owns the patent; (3) a statement that defendant has been infringing the patent by making, selling, and using [the device] embodying the patent; (4) a statement that the plaintiff has given the defendant notice of its infringement; and (5) a demand for an injunction and damages.” McZeal v. Sprint Nextel Corp., 501 F.3d 1354, 1356–57 (Fed. Cir. 2007). Plaintiff has pled facts supporting each of these elements, and has identified two specific products—the “Ergo Stripper” and the “Crimper”—that allegedly infringe on Plaintiff’s ‘184 Patent. The alleged facts are plausible, sufficiently specific, and form an adequate basis for Plaintiff’s infringement claim. See Bender v. Broadcom Corp., No. 09cv1147 MHP, 2009 WL 3571286, at *4 (N.D. Cal. Oct. 30, 2009) (denying motion to dismiss under Twombly and Iqbal standard even where complaint listed virtually all defendant’s products because list could include infringing products).

Order, p. 2.

2010-1142 Order