California Expanded Metal Products Company et al v. James A Klein et al

Filing 72

ORDER GRANTING PLAINTIFFS MOTION TO STRIKE AFFIRMATIVE DEFENSES 46 by Judge Dean D. Pregerson: Defendants affirmative defenses of patent invalidity andpatent unenforceability are STRICKEN, with prejudice. Defendants affirmative defense of patent misuse is STRICKEN, with leave to amend. Any amended Answer shall be filed within fourteen days of the date of this Order. (lc)

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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CALIFORNIA EXPANDED METAL
PRODUCTS COMPANY, ET AL.,

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Plaintiff,
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v.
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JAMES A. KLEIN, ET AL.,
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Defendants.
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___________________________

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Case No. CV 16-05968 DDP (MRWx)
ORDER GRANTING PLAINTIFFS’ MOTION
TO STRIKE AFFIRMATIVE DEFENSES
[Dkt. 46]

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Presently before the court is Plaintiffs’ Motion to Strike

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Defendants’ Affirmative Defenses.

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submissions of the parties, the court grants the motion and adopts

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the following Order.

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I.

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Having considered the

Background
Defendant James Klein (“Klein”) is the named inventor on

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several patents for building materials.

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assigned some of those patents to a company he helped form,

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Defendant Blazeframe Industries, Ltd.

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Klein, Blazeframe, and Plaintiffs California Expanded Metal

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Products Company (“CEMCO”) and ClarkWestern Dietrich Building

(Complaint ¶ 9.)

(“Blazeframe”).

Klein

(Id. ¶ 10.)

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Systems LLC (“Clark”) litigated several questions regarding the

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ownership, licensing, and alleged infringement of the patents in a

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prior case before this court.

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DDP(MRWx) (“the prior case”).

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(Compl. ¶ 11.)

See No. CV 12-10791-

The parties settled all claims in the prior case.

(Compl. ¶

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12.)

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Blazeframe to assign the patents to CEMCO in consideration for an

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up-front payment.

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license to “commercialize the Patents in a restricted territory”

Plaintiffs allege that the settlement agreement requires

(Id. ¶ 16.)

Blazeframe retained a royalty-free

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spanning six states.

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license to Clark in exchange for royalty payments, a portion of

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which would be paid to Blazeframe.

(Id. ¶¶ 16-17.)

CEMCO also agreed to grant a

(Id.)

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Plaintiffs allege that CEMCO made an $800,000 payment to

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Blazeframe, as required by the settlement agreement, and that

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Plaintiffs have otherwise complied with the agreement.

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22-23, 35.)

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settlement agreement by, among other things, selling licensed

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products outside the agreed-upon six state area.

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Plaintiffs further allege that these sales have been “orchestrated

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by Klein.”

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licensed products outside of the agreed-upon geographical area,

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Blazeframe is infringing upon the patents owned by CEMCO, to which

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Clark has an exclusive license outside of Blazeframe’s territory.

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(Id. ¶¶ 44-45.)

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(Compl. ¶¶

Plaintiffs allege that Blazeframe is breaching the

(Id. ¶ 37.)

(Compl. ¶ 28.)

Plaintiffs also allege that by selling

Defendants’ First Amended Answer alleges several affirmative

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defenses, including patent invalidity, patent unenforceability, and

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patent misuse.

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defenses.

Plaintiffs now move to dismiss those affirmative

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II.

Legal Standard
Federal Rule of Civil Procedure 12(f) provides that a court

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“may order stricken from any pleading any insufficient defense or

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any redundant, immaterial, impertinent, or scandalous matter.” Fed.

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R. Civ. P. 12(f). “To show that a defense is ‘insufficient,’ the

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moving party must demonstrate that there are no questions of fact,

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that any questions of law are clear and not in dispute, and that

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under no set of circumstances could the defense succeed.” Cal.

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Dep’t of Toxic Substances Control v. Alco Pac., Inc., 217 F.

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Supp.2d 1028, 1032 (C.D. Cal. 2002).
In considering a motion to strike, the court views the

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pleadings in the light most favorable to the non-moving party. See

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In re 2TheMart.com Secs. Litig., 114 F. Supp. 2d 955, 965 (C.D.

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Cal. 2000)).

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apparent from the face of the pleadings or from materials that may

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be judicially noticed. Fantasy, Inc. v. Fogerty, 984 F.2d 1524,

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1528 (9th Cir. 1993) rev’d on other grounds, 510 U.S. 517 (1994).

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While motions to strike are generally disfavored, “where [a] motion

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[to strike] may have the effect of making the trial of the action

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less complicated, or have the effect of otherwise streamlining the

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ultimate resolution of the action, the motion to strike will be

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well taken.”

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(N.D. Cal. 1981). This is because the purpose of Rule 12(f) is “to

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avoid the expenditure of time and money that must arise from

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litigating spurious issues by disposing of those issues prior to

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trial . . . .”

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970, 973 (9th Cir. 2010) (quoting Sidney–Vinstein v. A.H. Robins

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Co., 697 F.2d 880, 885 (9th Cir. 1983)).

Grounds for a motion to strike must be readily

California v. United States, 512 F. Supp. 36, 38

Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d

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III. Discussion

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A.

Patent Invalidity and Patent Unenforceability

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Defendants allege that one or more of the patents at issue

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here “may be invalid,” citing “all prior art that CEMCO cited in

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the prior litigation.”

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Similarly, Defendants allege that the patents are unenforceable

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“for all the reasons cited by CEMCO in the prior case . . . .”

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(FAA at 18.)

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estoppel bars Defendants from asserting patent invalidity and

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(First Amended Answer (“FAA”) at 17.)

Plaintiffs argue that the doctrine of assignor

patent unenforceability defenses.

(Motion at 7, 10.)

“Assignor estoppel is an equitable doctrine that prevents one

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who has assigned the rights to a patent . . . from later contending

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that what was assigned is a nullity.”

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Ambico, Inc., 848 F.2d 1220, 1224 (Fed. Cir. 1988).

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of justice and fairness dictate that “an assignor should not be

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permitted to sell something and later to assert that what was sold

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is worthless, all to the detriment of the assignee.”

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Brilliant Instruments, Inc. v. GuideTech, Inc., No. C 09-5517 CW,

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2014 WL 576244, at *2 (N.D. Cal. Feb. 12, 2014).

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the assignor estoppel doctrine is not automatic, and should

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consider the balance of the equities between the parties.

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Scientific, 848 F.2d at 1225.

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is the measure of unfairness and injustice that would be suffered

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by the assignee if the assignor were allowed to raise defenses of

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patent invalidity.”

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Diamond Scientific Co. v.
Considerations

Id.; see also

Application of

Diamond

“[T]he primary consideration . . .

Id.

Here, CEMCO paid Blazeframe $800,000 to transfer ownership of
the patents.

To allow Blazeframe to now argue, despite its having

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received payment from CEMCO, that “what was sold is worthless”

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would be grossly unfair.

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Defendants appear to suggest that the balance of equities

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nevertheless tips in their favor because in the prior litigation,

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CEMCO made the same invalidity and unenforceability arguments that

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Defendants seek to assert here.

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In other words, Defendants argue, CEMCO had adequate notice of

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possible weaknesses in the patents before it agreed to buy them,

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and CEMCO’s $800,000 payment placed it “in the position of a buyer

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Diamond Scientific, 848 F.2d at 1224.

(Opposition at 8-9; FAA at 17-18.)

who purchased a used car ‘as is.’”
This argument has no merit.

(Opposition at 9:3.)
There is no dispute that CEMCO

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raised invalidity and unenforceability defenses in response to

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allegations of infringement.

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however, and those defenses were never fully adjudicated.

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defenses proved successful, CEMCO clearly would not have agreed to

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pay Blazeframe anything for worthless patents.

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had notice of those possible challenges to the patents, however,

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makes it no more equitable for the named inventor or seller of

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those patents to exploit those weaknesses after pocketing the

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buyer’s money.

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analogy to the purchase of a used car applies at all, the buyer of

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a used car would not expect that car’s previous owner to be

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permitted . . . to blow up the car after selling it.”

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6:21-22.)

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“notice exception” to the assignor estoppel doctrine where none

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exists.

The prior litigation settled,
Had the

The fact that CEMCO

As Plaintiffs aptly state, “Even if Defendants’

(Reply at

The court declines Defendants’ invitation to create a

Given the fairly ordinary circumstances here, the court

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concludes that the balance of equities weighs entirely in

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Plaintiffs’ favor.1

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Defendants also argue that even if Blazeframe is not permitted

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to raise invalidity or unenforceability defenses, Klein should not

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be estopped from raising those defenses.

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(Opp. at 9.)

Assignor estoppel bars both the assignor and other parties in

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privity with the assignor, such as a corporation founded by the

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assignor.

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C-04-3923 MMC, 2005 WL 1562779, at *2 (N.D. Cal. July 1, 2005)

Synopsys, Inc. v. Magma Design Automation, Inc., No.

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(citing Diamond Scientific, 848 F.2d at 1224 and Shamrock

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Technologies, Inc. v. Medical Sterilization, Inc., 903 F.2d 789,

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793 (Fed.Cir.1990)).

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received no money (qua individual) as part of the . . . settlement”

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and that “[t]o say that Klein and BlazeFrame were ‘in privity’ . .

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. is arguable.”

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parenthetical in original).)

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is no dispute that Klein was the named inventor of the patents, co-

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founded Blazeframe, assigned the patents to Blazeframe, and was a

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50% shareholder at the time of the settlement.2

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merit to Defendants’ suggestion that Klein did not consent to the

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settlement agreement, either on Blazeframe’s behalf or

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individually.

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which constitutes the settlement agreement, Blazeframe’s counsel

Defendants contend that Klein “arguably

(Opp. at 9:22, 10:1-2 (emphases omitted,
These arguments are baseless.

There

Nor is there any

At the settlement conference, the transcript of

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Extraordinary circumstances, such as fraud or duress in the
assignment of a patent or express contractual reservations of
rights to challenge a patent, might warrant an exception from
assignor estoppel. See Brilliant Instruments, 2014 WL 576244 at
*3. No such circumstances are present here.
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Plaintiffs’ counsel has further represented that Klein is
currently the sole owner of Blazeframe. (Reply at 9:13-14.)
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appeared “for limited purposes today, for Jim Klein, as well” and

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stated an understanding “that he agrees to the settlement.”

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(Compl., Ex. 1 at 4:16-17, 5:20-21.)

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phone with Mr. Klein and with his personal attorney, and he

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consented to the settlement.”

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undoubtedly in privity with Blazeframe at the time of the

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settlement, and remains so at the present time.

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court declines to apply a “relaxation of the doctrine of assignor

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estoppel with respect to Klein.”

Counsel also spoke “on the

(Id. at 6:24-25.)

Klein was

Accordingly, the

(Opp. at 10:12.)

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B.

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Plaintiffs also ask that the court strike Defendants’

Patent Misuse

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affirmative defense of patent misuse.3

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that they “believe that all of [their] affirmative defenses are

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properly pled[,]” Defendants do not substantively oppose

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Plaintiffs’ patent misuse argument.

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Defendants contend that counsel “scrambled to file a hasty answer”

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because he was retained relatively late.

(Opp. at 11:1.)

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Defendants therefore seek leave to amend.

(Opp. at 10.)

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the court notes that the answer at issue here is in fact

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Defendants’ First Amended Answer, the court grants Plaintiffs’

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motion to strike the patent misuse affirmative defense with leave

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to amend.

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IV.

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Although Defendants state

(Opp. at 10:23-24.)

Instead,

Although

Conclusion
For the reasons stated above, Plaintiffs’ Motion to Strike is

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GRANTED.

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patent unenforceability are STRICKEN, with prejudice.

Defendants’ affirmative defenses of patent invalidity and
Defendants’

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Plaintiffs move to strike the patent misuse defense under
Rule 12(b)(6) rather than Rule 12(f).
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affirmative defense of patent misuse is STRICKEN, with leave to

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amend.

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the date of this Order.

Any amended Answer shall be filed within fourteen days of

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IT IS SO ORDERED.

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Dated: March 3, 2017
DEAN D. PREGERSON
United States District Judge

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