Nano-Second Technology Co Ltd v. Dynaflex International

Filing 267

ORDER Re: Defendants' Motion for Partial Summary Judgment of Tort Claims, § 292(A) False Marking Claim, and To Limit Patent Damages Period 235 by Judge Ronald S.W. Lew: The Court hereby GRANTS in Part and DENIES in PartDefendants Motion for Partial Summary Judgment. SEE ORDER FOR FURTHER AND COMPLETE DETAILS. (jre)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 NANO-SECOND TECHNOLOGY CO., ) LTD., a Taiwanese ) 12 Corporation ) ) 13 ) Plaintiff, ) 14 ) v. ) 15 ) ) 16 DYNAFLEX INTERNATIONAL, ) a California Corporation., ) 17 and GFORCE Corp. d/b/a DFX ) SPORTS & FITNESS, a Nevada ) 18 Corporation ) ) 19 Defendants. ) 20 CV 10-9176 RSWL (MANx) ORDER Re: Defendants’ Motion for Partial Summary Judgment of Tort Claims, § 292(A) False Marking Claim, and To Limit Patent Damages Period [235] On April 30, 2013, Defendants Dynaflex 21 International and GForce Corporation’s (“Defendants”) 22 Motion for Partial Summary Judgment of Tort Claims, § 23 292(A) False Marking Claim, and To Limit Patent Damages 24 Period [235] came on for regular calendar before the 25 Court. The Court having reviewed all papers submitted 26 pertaining to this Motion and having considered all 27 arguments presented to the Court, NOW FINDS AND RULES 28 AS FOLLOWS: 1 1 The Court hereby GRANTS in Part and DENIES in Part 2 Defendants’ Motion for Partial Summary Judgment. 3 4 I. BACKGROUND This Motion stems from a patent infringement case. 5 Plaintiff Nano-Second Technology Co. (“Plaintiff”) 6 alleges that Defendant Dynaflex International and 7 Defendant GForce Corporation d/b/a DFX Sports & Fitness 8 (“Defendants”) have sold and continue to sell products 9 that infringe on Plaintiff’s patent, which is United 10 States Patent No. 5,800,311 (“‘311 Patent”). In 11 addition to the patent infringement claim, Plaintiff 12 has alleged claims for (1) False Marking Against 13 Dynaflex; (2) Unfair Competition Against All 14 Defendants; (3) Intentional Interference with 15 Prospective Economic Advantage Against Dynaflex; (4) 16 Negligent Interference with Prospective Economic 17 Advantage Against Dynaflex; and (5) Breach of Contract 18 Against Dynaflex. 19 Plaintiff alleges that Defendants have infringed 20 upon its ‘311 Patent by selling, importing, making, 21 offering, or using wrist exercisers (“Accused 22 Products”) that fall within the scope of the claims of 23 the ‘311 Patent. First Amended Complaint (“FAC”) ¶ 12. 24 Further, Plaintiff alleges that these unpatented 25 Accused Products and their packaging are marked with 26 the patent number of the ‘311 Patent without 27 Plaintiff’s consent. Id. ¶¶ 21, 41. Plaintiff claims 28 that in addition to falsely marking their Accused 2 1 Products and infringing Plaintiff’s patent, Defendants 2 have contacted Plaintiff’s potential and existing 3 customers misrepresenting that they own the ‘311 4 Patent. Id. ¶ 25. 5 6 II. LEGAL STANDARD Summary judgment is appropriate when there is no 7 genuine issue of material fact and the moving party is 8 entitled to judgment as a matter of law. 9 P. 56. Fed. R. Civ. A genuine issue is one in which the evidence is 10 such that a reasonable fact-finder could return a 11 verdict for the non-moving party. Anderson v. Liberty 12 Lobby, 477 U.S. 242, 248 (1986). 13 A party seeking summary judgment always bears the 14 initial burden of establishing the absence of a genuine 15 issue of material fact. 16 U.S. 317, 322 (1986). Celotex Corp. v. Catrett, 477 “Where the moving party will 17 have the burden of proof on an issue at trial, the 18 movant must affirmatively demonstrate that no 19 reasonable trier of fact could find other than for the 20 moving party.” Soremekun v. Thrifty Payless, Inc., 509 21 F.3d 978, 984 (2007). 22 Once the moving party makes this showing, the 23 non-moving party must set forth facts showing that a 24 genuine issue of disputed material fact remains. 25 Celotex, 477 U.S. at 322. The non-moving party is 26 required by Federal Rule of Civil Procedure 56(e)1 to go 27 1 28 The Federal Rules of Civil Procedure were amended on December 1, 2010. Federal Rule of Civil Procedure 3 1 beyond the pleadings and designate specific facts 2 showing a genuine issue for trial exists. 3 4 Id. at 324. III. ANALYSIS Defendants seek partial summary judgment as to 5 Plaintiff’s (1) second cause of action, false marking 6 under 35 U.S.C. § 292(a); (2) third cause of action, 7 unfair competition; and (3) fourth and fifth causes of 8 action, intentional and negligent interference with 9 prospective economic advantage. Defendants also assert 10 that the Court should find that Plaintiff is limited to 11 claiming damages for patent infringement occurring 12 after September 10, 2010. 13 1. Plaintiff’s False Marking Claims - 14 GRANT IN PART AND DENY IN PART 15 In Plaintiff’s second cause of action, Plaintiff 16 asserts that Defendants marked its goods with the 17 number of the ‘311 Patent without permission, and thus 18 is liable under 35 U.S.C. § 292. Plaintiff’s FAC seeks 19 an order fining Dynaflex in an amount of $500 per 20 falsely marked article according to 35 U.S.C. § 292(a)21 (b) or “an alternative amount the Court deems equitable 22 and just.” 23 The False Marking Statute as amended in September 24 2011, by the Leahy–Smith America Invents Act (“AIA”), 25 provides in relevant part that: 26 27 28 56(e) has now been codified as Federal Rule of Civil Procedure 56(c). 4 1 (a) Whoever, without the consent of the 2 patentee, marks upon, or affixes to, or uses in 3 advertising in connection with anything made, 4 used, offered for sale, or sold by such person 5 within the United States, or imported by the 6 person into the United States, the name or any 7 imitation of the name of the patentee, the 8 patent number, or the words “patent,” 9 “patentee,” or the like, with the intent of 10 counterfeiting or imitating the mark of the 11 patentee, or of deceiving the public and 12 inducing them to believe that the thing was 13 made, offered for sale, sold, or imported into 14 the United States by or with the consent of the 15 patentee; or 16 Whoever marks upon, or affixes to, or uses in 17 advertising in connection with any unpatented 18 article, the word “patent” or any word or 19 number importing that the same is patented, for 20 the purpose of deceiving the public . . . 21 [s]hall be fined not more than $500 for every 22 such offense. 23 for the penalty authorized by this subsection. 24 (b) A person who has suffered a competitive 25 injury as a result of a violation of this 26 section may file a civil action in a district 27 court of the United States for recovery of 28 damages adequate to compensate for the injury. Only the United States may sue 5 1 35 U.S.C. § 292 (emphasis added). Congress made the 2 amendments to Section 292 retroactive on pending cases. 3 Leahy–Smith America Invents Act, Pub.L. No. 112–29, § 4 16(b)(4), 125 Stat. 329 (2011); Cyclone USA, Inc. v. 5 Sei Kim, 461 F. App’x 638, 639 (9th Cir. 2011). 6 The Court GRANTS Defendants’ Motion as to 7 Plaintiff’s request for remedies under Section 292(a), 8 because the remedy in Section 292(a) is reserved 9 exclusively for the United States. 10 However, the Court DENIES the remainder of the 11 Motion addressing Plaintiff’s false marking claim, 12 which also seeks remedies under Section 292(b). It 13 appears that Plaintiff’s FAC was filed before the 14 amendments to Section 292 took effect, and thus 15 requested the $500 per offense penalty that it now 16 cannot recover. However, it is clear from the FAC that 17 Plaintiff is seeking whatever remedies are available to 18 it under 35 U.S.C. § 292. The FAC also fairly alleges 19 the requirements of false marking and competitive 20 injury: Plaintiff alleges that Defendants marked their 21 unpatented goods with the ‘311 Patent with the intent 22 to deceive and mislead the public. FAC ¶¶ 41, 43. 23 Based on this activity, Plaintiff suffered competitive 24 injury under Section 292(b) because Defendants impeded 25 competition in the market and unjustly gained a 26 substantial share of the wrist exerciser market, in 27 which Plaintiff competes, as a result of their false 28 marking activities. Id. ¶ 42. 6 Defendants did not 1 move for summary judgment as to Plaintiff’s claims 2 under Section 292(b). Thus their request to dismiss 3 Plaintiff’s entire false marking claim is DENIED. 4 2. Plaintiff’s Intentional and Negligent Interference 5 with Prospective Economic Disadvantage Claims - 6 DENY 7 Defendants argue that Plaintiff’s claims for 8 intentional and negligent interference with prospective 9 economic disadvantage are barred by the statute of 10 limitations. 11 The statute of limitations for tortious 12 interference with prospective economic advantage is two 13 years. Knoell v. Petrovich, 76 Cal.App.4th 164, 168 14 (1999) (referring to Cal. Code Civ. Proc. § 339(1)). 15 The statute of limitations is an affirmative defense, 16 and Defendants bear the burden of proving that the 17 statute of limitations applies. Ladd v. Warner Bros. 18 Entm’t, Inc., 184 Cal.App.4th 1298, 1309 (2010). A 19 cause of action accrues at “the time when the cause of 20 action is complete with all of its elements.” 21 v. Upjohn Co., 21 Cal.4th 383, 397 (1999). Norgart An 22 important exception to this rule of accrual, however, 23 is the “discovery rule,” which postpones accrual until 24 the plaintiff discovers, or has reason to discover, the 25 facts underlying the cause of action. 26 Id. This Action was filed on November 30, 2010 [1]. 27 Thus, the relevant date for the statute of limitations 28 analysis is November 30, 2008. 7 Here, the Court finds 1 that there is a genuine dispute as to when Plaintiff 2 discovered the facts underlying the tortious 3 interference claims. Of particular note is an undated 4 cease and desist letter from Tom Smith, President of 5 Dynaflex, sent to Louis J. Stack of Fitter 6 International, claiming that Dynaflex International has 7 an “exclusive” license over the ‘311 Patent covering 8 the lighted and counter mechanisms disclosed in the 9 Patent. 10 B. See Docket 19, Decl. of Pei Sung Chuang, Ex. Neither party has offered any evidence as to the 11 date of this letter or when Plaintiff became aware of 12 this letter. Therefore, the Court DENIES Defendants’ 13 Motion as to this issue. 14 The Court observes that Plaintiff’s Opposition 15 appears to be asserting that Defendants’ tortious 16 actions are continuing. Although not clearly 17 articulated in its Opposition, Plaintiff appears to be 18 invoking the theory of continuous accrual, which if 19 applicable would toll the statute of limitations. 20 However, the theory of continuous accrual does not toll 21 the statute of limitations for tortious interference 22 claims, and should not be invoked in this Action. See 23 DC Comics v. Pacific Pictures Corp., 2013 WL 1389969, 24 at *7 (C.D. Cal. April 4, 2013). 25 3. Plaintiff’s Unfair Competition Claim - GRANT IN 26 PART, DENY IN PART 27 Plaintiff’s unfair competition claim is based on 28 Dynaflex’s alleged acts of patent infringement, false 8 1 marking, and misrepresenting the ownership of the ‘311 2 Patent. Defendants seek to dismiss Plaintiff’s unfair 3 competition claim, arguing that it is just a recasting 4 of Plaintiff’s other claims, which are either already 5 covered by federal law or barred by the statute of 6 limitations. 7 California’s unfair competition law prohibits “any 8 unlawful, unfair or fraudulent business act or 9 practice.” Cel–Tech Commc’ns, Inc. v. Los Angeles 10 Cellular Tel. Co., 20 Cal.4th 163, 180 (1999). “By 11 proscribing ‘any unlawful’ business practice, section 12 17200 ‘borrows’ violations of other laws and treats 13 them as unlawful practices that the unfair competition 14 law makes independently actionable.” Id. (citation 15 omitted); Farmers Ins. Exch. v. Superior Court, 2 16 Cal.4th 377, 383 (1992). 17 “Federal patent law limits the states’ ability to 18 regulate unfair competition. . . . [A] state law is 19 preempted when it enters a field of regulation which 20 the patent laws have reserved to Congress. . . .” 21 Summit Mach. Tool Mfg. Corp. v. Victor CNC Sys., Inc., 22 7 F.3d 1434, 1439 (9th Cir. 1993). In a preemption 23 analysis, a court must analyze whether the state law 24 claim contains an element not shared by the federal law 25 that changes the nature of the action “so that it is 26 qualitatively different from [a patent] claim.” Id. at 27 1439-40 (citing Balboa Ins. Co. v. Trans Global 28 Equities, 218 Cal.App.3d 1327, 1340 (1990); Del Madera 9 1 Props. v. Rhodes & Gardner, Inc., 820 F.2d 973, 977 2 (9th Cir. 1987)). “[P]reemption law . . . requires 3 analysis of each theory [of unfair competition] to 4 determine whether it contains the necessary 5 qualitatively different extra element distinguishing it 6 from [patent] protection.” 7 Id. First, the Court rejects Defendants’ contention 8 that Plaintiff’s unfair competition claim should be 9 dismissed because allegedly the statute of limitations 10 applicable to Plaintiff’s tortious interference claims 11 also bars Plaintiff’s unfair competition claim. As 12 discussed above, Defendants argue that Plaintiff cannot 13 bring its tortious interference claims because they are 14 barred by the statute of limitations. According to 15 Defendants, because the same facts used to support 16 Plaintiff’s tortious interference claims are also proof 17 of Plaintiff’s unfair competition claims, Plaintiff’s 18 unfair competition is also barred. Defendants cite to 19 no authority supporting this contention. Defendants 20 rely upon Cel-Tech Commc’ns, Inc. v. Los Angeles 21 Cellular Telephone, 20 Cal.4th 163 (1999), but the case 22 does not hold that the statue of limitations of a claim 23 covering the same facts as the unfair competition claim 24 also applies to the unfair competition claim. Rather, 25 the case stands for the proposition that if another 26 statute permits certain conduct, thus limiting the 27 judiciary’s power to declare that conduct unfair, a 28 plaintiff cannot assert an unfair competition action 10 1 based on that conduct. 20 Cal.4th at 182. Even if the 2 Court assumed that Defendants’ theory is correct, there 3 is a genuine dispute of fact with respect to whether 4 the tortious interference claims are even time-barred, 5 as discussed above. 6 The statute of limitations for an unfair 7 competition claim is four years. 8 Code § 17208. Cal. Bus. & Prof. The California Supreme Court has held 9 that a plaintiff’s unfair competition cause of action 10 is governed by the four-year statute of limitations, 11 even though the unfair competition claim is based on 12 similar facts as another statutory violation with a 13 shorter statute of limitations. Cortez v. Purolator 14 Air Filtration Prods. Co., 23 Cal.4th 163, 179 (2000). 15 “That is because Business and Professions Code section 16 17208 states that any action to enforce any cause of 17 action under the [unfair competition law] chapter shall 18 be commenced within four years after the cause of 19 action accrued.” In re Vaccine Cases, 134 Cal. App. 20 4th 438, 458 (2005). Thus, Plaintiff’s unfair 21 competition claim based on Defendants’ conduct of 22 misrepresenting the ownership of the ‘311 Patent 23 remains, and Defendants’ Motion is DENIED as to this 24 issue. 25 Second, the Court finds that the unfair competition 26 claim is preempted where it is based on the same 27 conduct that gives rise to a Section 292 false marking 28 claim or patent infringement claim. 11 Plaintiff has not 1 alleged or shown that there is an additional element 2 that distinguishes the unfair competition claim from 3 its patent claims. See, e.g., Champion Labs., Inc. v. 4 Parker-Hannifin Corp., No. 1:10-CV 02371 OWW-DLB, 2011 5 WL 1883832, at *12 (E.D. Cal. May 17, 2011)(finding 6 preemption where allegation of unfair competition is 7 based entirely on the allegation of false marking). 8 The Court GRANTS Defendants’ Motion on this issue. 9 For the foregoing reasons, the Court GRANTS IN PART 10 AND DENY IN PART Defendants’ Motion as to the unfair 11 competition claim. 12 4. The Period of Damages Available To Plaintiff For 13 Its Patent Infringement Claims - GRANT 14 Defendants assert that Plaintiff cannot seek 15 damages for patent infringement that occurred before 16 September 10, 2010, because Plaintiff did not have 17 legal title to the ‘311 Patent before that date. The 18 Court agrees. 19 “The general rule is that one seeking to recover 20 money damages for infringement of a United States 21 patent . . . must have held the legal title to the 22 patent during the time of the infringement.” Arachnid, 23 Inc. v. Merit Indus., Inc., 939 F.2d 1574, 1579 (Fed. 24 Cir. 1991). A party may sue for infringement occurring 25 before it obtained legal title if a written assignment 26 expressly grants the party a right to do so. Id. at 27 1579 n.7. (citing, inter alia, Moore v. Marsh, 74 U.S. 28 (7 Wall.) 515 (1868) (“It is a great mistake to suppose 12 1 that the assignment of a patent carries with it a 2 transfer of the right to damages for an infringement 3 committed before such assignment.”) (emphasis added); 4 see also Abraxis Bioscience, Inc. v. Navinta LLC, 625 5 F.3d 1359, 1367 (Fed. Cir. 2010). 6 To create an assignment, a contract must transfer: 7 (1) the entire exclusive patent right, (2) an undivided 8 interest in the patent right, or (3) the entire 9 exclusive right within any geographical region of the 10 Minco, Inc. v. Combustion Engineering, Inc., 95 F.3d 11 1109, 1117 (Fed. Cir. 1996). In construing patent 12 assignments, courts apply ordinary principles of state 13 contract law. 14 Id. On September 10, 2010, Pei-Sung Chuang (“Chuang”), 15 the inventor of the ‘311 Patent, assigned the ‘311 16 Patent to Plaintiff. The assignment states, in 17 relevant part, 18 [Chuang has] sold, assigned, transferred, and . 19 . . unto [Nano-Second Technology Co., Ltd.], 20 its successors or assigns, the entire right, 21 title and interest for all countries in and to 22 all inventions and improvements disclosed in 23 the [‘311 Patent] . . . . 24 [Chuang] will testify in all legal proceedings 25 and generally do all things which may be 26 necessary or desirable more effectually to 27 secure to and vest in [Plaintiff] the entire 28 right, title and interest in and to the 13 1 improvements, inventions, applications . . . 2 hereby sold. 3 Schwartz Decl. Ex. 8 (emphasis added). The assignment 4 is unambiguous and clearly transfers all interest in 5 the ‘311 Patent to Plaintiff. However, the assignment 6 is completely silent as to whether Plaintiff acquired a 7 right to sue for infringement that occurred prior to 8 the date of the assignment, in this case September 10, 9 2010. Absent any explicit language conveying such 10 right, the Court finds that Plaintiff lacks standing to 11 sue for infringement of the ‘311 Patent occurring 12 before September 10, 2010. 13 Although Plaintiff claims that Chuang subjectively 14 intended to convey rights to Plaintiff to sue for past 15 infringement, Plaintiff points to no language in the 16 contract supporting such intent. Under California law, 17 the goal of contract interpretation is “to give effect 18 to the mutual intent of the parties.” In re Imperial 19 Credit Indus., Inc., 527 F.3d 959, 966 (9th Cir. 2008). 20 This standard, however, is an objective one and does 21 not depend on the parties’ subjective intents. 22 Cedars–Sinai Med. Ctr. v. Shewry, 137 Cal.App.4th 964, 23 980 (2006) (“California recognizes the objective theory 24 of contracts, under which it is the objective intent, 25 as evidenced by the words of the contract, rather than 26 the subjective intent of one of the parties, that 27 controls interpretation.”) (internal quotations and 28 citations omitted). 14 1 Plaintiff further contends that because Chuang 2 agreed to testify in all legal proceedings in the 3 assignment, he must have intended to allow Plaintiff to 4 sue for past infringement. However, the contractual 5 language makes clear that the basic purpose for his 6 agreeing to testify is to effectuate the rights granted 7 in the assignment, which are not retroactive. The 8 language cannot be reasonably interpreted in the manner 9 that Plaintiff suggests. 10 Therefore, the Court GRANTS Defendants’ Motion to 11 limit the period of damages available to Plaintiff. 12 III. CONCLUSION 13 For the foregoing reasons, the Court 14 - DENIES the Motion as to the tortious interference 15 claims; 16 - GRANTS IN PART AND DENIES IN PART the Motion as to 17 the Unfair Competition Claim; 18 - GRANTS IN PART AND DENIES IN PART the Motion as to 19 the Section 292(b) claim; and, 20 - GRANTS as to limiting the damages period for the 21 patent infringement claim. 22 23 IT IS SO ORDERED. 24 DATED: May 1, 2013 25 26 HONORABLE RONALD S.W. LEW Senior, U.S. District Court Judge 27 28 15

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