CLRB Hanson Industries, LLC et al v. Google Inc.

Filing 213

TRANSCRIPT of Proceedings held on 2/26/08 before Judge James Ware. Court Reporter: Jana L. Ridenour.. (srm, COURT STAFF) (Filed on 3/20/2008)

CLRB Hanson Industries, LLC et al v. Google Inc.

Doc. 213

1 ROBERT T. HASLAM (Bar No. 71134) 2 MICHAEL K. PLIMACK (Bar No. 133869) 3 CHRISTINE SAUNDERS HASKETT (Bar No. 188053) 4 SAMUEL F. ERNST (Bar No. 223963) 5 COVINGTON & BURLING LLP 6 San Francisco, CA 94111 7 Facsimile:
Telephone: One Front Street [phone] [phone] [e-mail] [e-mail] [e-mail] [e-mail]

8 ALAN H. BLANKENHEIMER (Bar No. 218713) 9 LAURA E. MUSCHAMP (Bar No. 228717) 10 JO DALE CAROTHERS (Bar No. 228703) 11 COVINGTON & BURLING LLP 12 San Diego, CA 92122-1225 13 Facsimile:
Telephone: [phone] [phone] [e-mail] 9191 Towne Centre Drive, 6th Floor [e-mail] [e-mail]

14 Attorneys for Defendants and Counterclaimants SAMSUNG ELECTRONICS CO., LTD., 16 AMERICA, INC. 17 18 19 20 ADVANCED MICRO DEVICES, INC., et al., 21 22 v. 23 SAMSUNG ELECTRONICS CO., LTD., et al., 24
Defendants and Counterclaimants. Plaintiffs and Counterdefendants,

15 SAMSUNG ELECTRONICS AMERICA, INC., SAMSUNG TELECOMMUNICATIONS
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA Case No. 3:08-CV-0986-SI

SAMSUNG SEMICONDUCTOR, INC., SAMSUNG AUSTIN SEMICONDUCTOR, LLC, AMERICA, LLC, SAMSUNG TECHWIN CO., LTD., and SAMSUNG OPTO-ELECTRONICS

SAMSUNG'S REPLY MEMORANDUM IN SUPPORT OF MOTION FOR LEAVE TO AMEND ANSWERS AND COUNTERCLAIMS DATE: May 8, 2009 TIME: 9:00 a.m. COURTROOM: 10, 19th Floor JUDGE: The Honorable Susan Illston

25 26 27 28

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Dockets.Justia.com

1 2 3 I. 4 II. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
III. 2. D. B. C.

TABLE OF CONTENTS Page INTRODUCTION............................................................................................................... 1 ARGUMENT ...................................................................................................................... 2 A. AMD's Opposition Concedes That Three of the Four Relevant Factors Favor Granting Leave To Amend. .......................................................................... 2 AMD Cannot Make the Required "Strong Showing" that Samsung's Proposed Amendments Are Futile. ......................................................................... 3 Samsung's Proposed Amended Pleadings State Viable Inequitable Conduct Defenses and Counterclaims..................................................................... 5 1. 2. The Cheng `990 Patent................................................................................ 5 The Iacoponi `592 Patent. ........................................................................... 7

Samsung's Inequitable Conduct Defenses And Counterclaims Are Pled With Particularity. ................................................................................................. 10 1. Samsung's Defenses And Counterclaims Plead Materiality Of The Withheld References With Particularity. .................................................. 10 Samsung Properly Alleges Intent to Deceive the USPTO with Respect to Both Patents............................................................................. 12

CONCLUSION ................................................................................................................. 13

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1 2 3 4 5 6
CASES

TABLE OF AUTHORITIES Page Allen v. City of Beverly Hills, 911 F.2d 367 (9th Cir. 1990)................................................................................................. 3, 4 Board of Trustees of the Leland Stanford Junior Univ. v. Roche Molecular Sys., Inc., No. C05-04158 MHP, 2008 WL 624771 (N.D. Cal. Mar. 4, 2008) ......................................... 2 476 F.3d 1359 (Fed. Cir. 2007)......................................................................................... 12, 13 Dong Ah Tire & Rubber Co., Ltd. v. Glasforms, Inc., No. 06-3359, 2009 WL 667171 (N.D. Cal. Mar. 10, 2009)...................................................... 3

7 Cargill, Inc. v. Canbra Foods, Ltd., 8 9 10

Eminence Capital LLC v. Aspeon, Inc., 316 F.3d 1048 (9th Cir. 2003)............................................................................................... 1, 3 11

12 Energy Absorption Sys., Inc. v. Roadway Safety Serv. Inc., 13 14

No. 93-C-2147, 1993 WL 389014 (N.D. Ill. Sept. 16, 1993) ................................................. 11

G & C Auto Body Inc. v. GEICO General Ins. Co., No. C06-04898, 2007 WL 3306629 (N.D. Cal. Nov. 6, 2007)................................................. 8

15 Golden Hour Data Systems v. Health Servs. Integration, Inc., No. C06-7477 SI, 2008 WL 2622794 (N.D. Cal. Jul. 1, 2008)........................................... 8, 12 16 17 Grantley Patent Holdings, Ltd. v. Clear Channel Commc'ns, Inc., 18 19
No. 9:06CV259, 2008 WL 901175 (E.D. Tex. Mar. 31, 2008) ................................................ 7

Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542 (9th Cir. 1990)................................................................................................... 9

20 Hill-Rom Servs., Inc. v. Verses Tech., Inc., Nos. 1:03CV1227, 1:04CV1116, 2006 WL 1540851 (M.D.N.C. June 2, 2006).................... 11 21 22 Hynix Semiconductor Inc. v. Toshiba Corp., 23 24
No. C-04-04708 VRW, 2006 WL 3093812 (N.D. Cal. Oct. 31, 2006) ........................ 1, 3, 4, 8

In re Vantive Corp. Sec. Litig., 283 F.3d 1079 (9th Cir. 2002)............................................................................................... 3, 4 958 F.2d 1066 (Fed. Cir. 1992)........................................................................................... 7, 12 845 F.2d 209 (9th Cir. 1988)..................................................................................................... 3 - ii REPLY IN SUPPORT OF MOTION FOR LEAVE TO AMEND ANSWERS AND COUNTERCLAIMS CV-08-0986-SI

25 LaBounty Mfg., Inc. v. U.S. Int'l Trade Com'n, 26 27 Miller v. Rykoff-Sexton, Inc., 28

1 Morongo Band of Mission Indians v. Rose, 2 3 4
893 F.2d 1074 (9th Cir. 1990)................................................................................................... 2 Netbula, LLC v. Distinct Corp., 212 F.R.D. 534 (N.D. Cal. 2003) .............................................................................................. 4

Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306 (Fed. Cir. 2008)................................................................................................. 7 5

6 Semiconductor Energy Laboratory Co., Ltd. v. Chi Mei Optoelectronics Corp., 7 8 9
No. C04-04675 MHP, 2006 WL 3826726 (N.D. Cal. Dec. 27, 2006)................................ 9, 10 Sprewell v. Golden State Warriors, 266 F.3d 979 (9th Cir. 2001)................................................................................................. 8, 9

United States v. Webb, 655 F.2d 977 (9th Cir. 1981)..................................................................................................... 2 10

11 OTHER AUTHORITIES 12 Fed. R. Civ. P. 9(b).............................................................................................................. 9, 11, 12 13 Fed. R. Civ. P. 12(b)(6)............................................................................................................... 4, 9 14 Fed. R. Civ. P. 15(a).................................................................................................................... 2, 4 15 William W. Schwarzer, et al, 2 Cal. Prac. Guide: Fed. Civ. Proc. Before Trial 8:423 ........................................................................................ 3, 4 16 17 18 19 20 21 22 23 24 25 26 27 28
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1 I. 2

INTRODUCTION Samsung seeks the Court's leave to amend Samsung's Answers and Counterclaims to add

3 affirmative defenses and declaratory relief counterclaims alleging that two of AMD's asserted 4 patents, the `990 and `592 patents, are unenforceable under the doctrine of inequitable conduct. In 5 opposition, AMD concedes by silence that three of the four factors to be considered when deciding 6 such a motion favor granting Samsung leave to amend. Indeed, AMD does not even attempt to 7 argue that it would be prejudiced by Samsung's proposed amendments. It is a critical concession 8 because this Court has ruled that "it is the consideration of prejudice to the opposing party that 9 carries the greatest weight." Hynix Semiconductor Inc. v. Toshiba Corp., No. C-04-04708 VRW, 10 2006 WL 3093812 at *1 (N.D. Cal. Oct. 31, 2006). Absent a showing of prejudice, AMD must 11 make a "strong showing" on one or more of the other factors in order to overcome a presumption 12 that leave to amend is proper. Eminence Capital LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th 13 Cir. 2003). But AMD argues only one of the factors--the alleged futility of Samsung's proposed 14 amendments--and its arguments fall far short of the required "strong showing." 15
In response to Samsung's proposed amendment regarding the Cheng `990 patent, AMD

16 argues that failed attempts to disclose the Young `899 application that was eventually issued as the 17 Young `421 patent satisfy any obligations to the USPTO. Plaintiffs' Opposition to Samsung's 18 Motion for Leave to Amend Answers and Counterclaims ("Opp.") at 6-8. But as AMD 19 acknowledges, the USPTO repeatedly and expressly declined to consider the `899 application 20 because of technical errors in the submission of the patent application as a prior art reference. Once 21 the Young `421 patent issued, AMD should have submitted it to the USPTO, but failed to do so. 22 And tellingly, AMD treated the `899 application and resulting Young `421 patent differently than 23 another pending application that it tried to disclose during prosecution of the '990 patent. There, 24 AMD did give the USPTO a copy of the prior art patent soon after it issued. This discrepancy 25 between AMD's treatment of these two similarly situated patent applications strongly suggests that 26 AMD knew the Young `421 patent was a material prior art reference and made a conscious--and 27 bad faith--decision not to disclose it to the USPTO. 28
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1

Samsung's proposed amendments also contend that the Iacoponi `592 patent is

2 unenforceable because the named inventor possessed and was aware of over sixty relevant 3 references from VMIC conferences that he intentionally failed to disclose. In response, AMD 4 contends that because not all of Samsung's proposed allegations are explicitly confirmed in Mr. 5 Iacoponi's deposition testimony, amendment is futile and must be refused eight months before the 6 close of discovery. But Samsung is not trying the case in its pleadings. Whether certain self7 serving portions of Mr. Iacoponi's deposition testimony are credible is a question of fact that is best 8 resolved at trial. AMD's arguments are therefore premature and must be rejected. 9
Finally, AMD contends that Samsung does not plead the materiality of the alleged

10 inequitable conduct or the intent to deceive the USPTO with sufficient particularity under Rule 11 9(b). Yet Samsung offers far more than bare allegations that the deceptions were material and 12 intentional; it specifies the factual basis for the allegations and alleges supporting facts sufficient to 13 allow AMD to investigate and respond to Samsung's claims and defenses. This Court should 14 therefore grant Samsung leave to file the First Amended Answers and Counterclaims ("FAAC"). 15 II. 16 17 18 19 20 21 22 23 24 25 26 27 28
ARGUMENT A. AMD's Opposition Concedes That Three of the Four Relevant Factors Favor Granting Leave To Amend.

AMD's opposition attempts to convince the Court to apply a more stringent standard than is appropriate on a motion for leave to amend. In particular, leave to amend a pleading "shall be freely given when justice so requires." Fed. R. Civ. P. 15(a). Moreover, the rule freely granting leave is to be "applied with extreme liberality." Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990). Of the four factors relevant to a motion for leave to amend (undue delay, improper motive, futility, prejudice), AMD does not make any argument at all regarding three of them. See Board of Trustees of the Leland Stanford Junior Univ. v. Roche Molecular Sys., Inc., No. C05-04158 MHP, 2008 WL 624771 (N.D. Cal. Mar. 4, 2008) (citing United States v. Webb, 655 F.2d 977, 980 (9th Cir. 1981)) (listing factors). AMD concedes that Samsung's motion has not been unduly delayed or brought for an improper purpose. Moreover, AMD concedes that the most important factor--the -2REPLY IN SUPPORT OF MOTION FOR LEAVE TO AMEND ANSWERS AND COUNTERCLAIMS CV-08-0986-SI

1 threat of prejudice to the opposing party--favors granting leave to amend. This Court has 2 previously ruled that "it is the consideration of prejudice to the opposing party that carries the 3 greatest weight." Hynix Semiconductor Inc., 2006 WL 3093812 at *1. AMD makes no attempt to 4 argue that it would be prejudiced by Samsung's proposed amendments. And that concession means 5 that, unless AMD can make a "strong showing of . . . the remaining . . . factors, there exists a 6 presumption under Rule 15(a) in favor of granting leave to amend." Eminence Capital LLC, 316 7 F.3d at 1052 (emphasis added). 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
B. AMD Cannot Make the Required "Strong Showing" that Samsung's Proposed Amendments Are Futile.

AMD's sole argument in opposition is that Samsung's proposed amendments would be "futile." In the context of a motion for leave to amend, however, futility exists only when there is "no set of facts [that] can be proved under the amendment to the pleadings that would constitute a valid and sufficient claim or defense." Miller v. Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988). Because of the extremely liberal standard applicable to motions to amend pleadings, "[c]ourts rarely deny a motion for leave to amend for reason of futility." Hynix Semiconductor Inc., 2006 WL 3093812 at *2 (citation omitted); see also William W. Schwarzer, 2 Cal. Prac. Guide: Fed. Civ. Proc. Before Trial 8:423 (same). As an example of the difficulty AMD faces in trying to carry the day with nothing more than a futility argument, this Court has recently declined to find futility even where the theory alleged appeared "both logically strained and factually problematic" and the proposed "fraud claim appears to have a tenuous basis in the record and to be fraught with contradictions." Dong Ah Tire & Rubber Co., Ltd. v. Glasforms, Inc., No. 06-3359, 2009 WL 667171 at *2 (N.D. Cal. Mar. 10, 2009) (finding no futility but denying leave to amend on the basis of prejudice and undue delay after close of discovery). Futility of a proposed amendment appears to be most commonly found in situations in which the party seeking leave to amend has already been granted leave to amend its pleadings (often more than once) and has failed to state a viable claim in those previous amendments. See, e.g., In re Vantive Corp. Sec. Litig., 283 F.3d 1079, 1097 (9th Cir. 2002) (denying leave to amend where "plaintiffs had three opportunities to plead their best possible case" but failed to do so); Allen -3REPLY IN SUPPORT OF MOTION FOR LEAVE TO AMEND ANSWERS AND COUNTERCLAIMS CV-08-0986-SI

1 v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990) (courts have more discretion to deny 2 motions for leave to amend when "plaintiff has previously amended the complaint"). AMD, of 3 course, does not argue that Samsung's proposed amendments are a second, third, or fourth attempt 4 to add the same claims that have already been rejected several times over and that it would thus be 5 "pointless" to afford Samsung one more attempt. Cf. Vantive, 283 F.3d at 1097. Instead, AMD is 6 attempting to use the Foman futility factor to convert its Opposition to the motion for leave to 7 amend into a motion to dismiss. Indeed, the first sentence of AMD's argument section IIIA 8 explicitly invokes the Federal Rule governing motions to dismiss.1 And AMD's argument that 9 Samsung's amendments fail to state a claim for inequitable conduct is based entirely on the Rule 10 12(b)(6) standard and cases deciding on motions to dismiss, not motions for leave to amend. In 11 fact, the section of AMD's brief arguing that Samsung's proposed amendments fail to state a claim 12 does not cite a single case finding a proposed inequitable conduct amendment futile for purposes of 13 Rule 15(a). 14
In other words, AMD is asking the Court to rule--in the context of a motion for leave to

15 amend--that Samsung's claims should be dismissed. The Court should decline to do so. As has 16 been recently observed, "courts ordinarily defer consideration of challenges to the merits of a 17 proposed amended pleading until after leave to amend is granted and the amended pleading is 18 filed." Hynix Semiconductor Inc., 2006 WL 3093812 at *2 (citing William W. Schwarzer, 2 Cal. 19 Prac. Guide: Fed. Civ. Proc. Before Trial 8:423); see also Netbula, LLC v. Distinct Corp., 212 20 F.R.D. 534, 538-39 (N.D. Cal. 2003). One good reason for declining to consider AMD's challenge 21 to the merits is simply that it is raised first in AMD's opposition brief, meaning that Samsung 22 would be forced to oppose it within the confines of a 15-page reply brief that must also address 23 other arguments rather than in the full opposition brief that Samsung would be entitled to if the 24 AMD had actually moved for dismissal under Rule 12(b)(6). Because of the procedural prejudice 25 26 27 28
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See Opp. at 6 ("Under Federal Rule of Civil Procedure 12(b)(6), a claim may be dismissed if it does not `state a claim upon which relief can be granted.'").

1

1 that would befall Samsung in that situation, the Court should not entertain a motion to dismiss 2 unless and until AMD files one. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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C.

Samsung's Proposed Amended Pleadings State Viable Inequitable Conduct Defenses and Counterclaims.

Expressing outrage that it has been accused of inequitable conduct, AMD attempts to defeat Samsung's allegations before they have been afforded a hearing, or even a chance for further factual development through ongoing discovery, by arguing that Samsung's carefully-pled inequitable conduct allegations fail to state a claim. AMD's effort fails as to both the `990 and the `592 patents. 1. The Cheng `990 Patent. AMD cannot avoid the following facts that give rise to Samsung's counterclaim for inequitable conduct during the prosecution of the Cheng `990 patent: (a) AMD tried to disclose the `899 patent application to the Cheng `990 patent examiner, but the examiner repeatedly refused to consider that application as prior art, due to technical errors in its submission; (b) the examiner did not consider the `899 Reference because of the submission errors and so informed AMD; (c) AMD's failed attempts to submit the `899 patent application to the examiner demonstrate that information contained in the `899 patent application was material to the patentability of the Cheng `990 patent; (d) the `899 patent application ultimately matured into the Young `421 patent; (e) the Young `421 patent issued during the prosecution of the Cheng `990 patent; and (f) AMD did not disclose the Young `421 patent to the examiner for the Cheng `990 patent. These allegations, which AMD has made no serious effort to dispute, either in its Opposition or in its responses to Samsung's discovery requests, establish the viability of Samsung's claims of inequitable conduct. AMD's prosecution conduct appears even more suspect, and Samsung's counterclaim even stronger, when AMD's treatment of the Young `594 patent as a prior art reference is considered. At the same time that AMD incorrectly submitted the Young `899 patent application to the Patent Office, it also incorrectly submitted the Young `033 patent application. As with the Young `899 patent application, the Cheng `990 patent examiner refused to consider the Young `033 patent application as prior art. Yet, after the Young `033 patent application issued as the Young `594

1 patent, AMD disclosed it to the Patent Office. AMD failed to take a similar step with the Young 2 `421 patent. The obvious implicationwhich Samsung intends to prove through discoveryis that 3 AMD intentionally withheld the `421 patent from the patent examiner, despite knowing that it was 4 a material prior art reference. 5
AMD makes a number of arguments to justify the failure to disclose the issuance of the `421

6 patent during the prosecution of the `990 patent, but none of these arguments either dispute the 7 allegations set forth above, nor do they demonstrate that Samsung's claims would be futile. 8
First, AMD argues that the applicants "fulfilled their disclosure obligations with regard to"

9 the Young `421 patent by attempting to submit the Young `899 application to the USPTO. Yet 10 AMD acknowledges, as it must, that the Cheng `990 patent examiner twice stated that she would 11 not consider the Young `899 application because it had been incorrectly submitted. See FAAC ¶ 70 12 (patent examiner stated "applications 07/558,033 and 07/557,899 were not considered by the 13 examiner"); Opp. at 3 (admitting that the examiner twice noted that she did not consider the 14 improperly submitted Young `899 application). As such, there is no question that the Patent Office 15 did not believe that the Young `899 application had been submitted, nor was it considered as prior 16 art. AMD was therefore obligated to submit the admittedly material `421 patent to the patent office 17 for consideration. 18
AMD also argues that it was relieved of the obligation to submit the Young `421 patent to

19 the Cheng `990 patent examiner, because "the Young `899 application and the `421 patent are 20 identical in their disclosures in all material respects." Opp. at 6-7 (emphasis original). Yet in the 21 very next sentence of its Opposition, AMD concedes that there is a "substantive difference" 22 between the application and the issued patent, as the latter includes two extra figures and additional 23 descriptions. Opp. at 7. Moreover, AMD's argument is disingenuous because, as AMD admits, the 24 Cheng `990 patent examiner was explicit in her refusal to consider the Young `899 patent 25 application as a result of AMD's submission errors. It cannot be that, because AMD had 26 triedunsuccessfullyto submit the Young `899 application to the Cheng `990 patent examiner, 27 AMD was somehow relieved from the duty to submit the Young `421 patent. AMD knew that the 28
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1 Cheng `990 patent examiner had not considered the Young `899 application and knew the `421 2 patent was not cumulative to the information considered by the examiner. 3
In support of its argument that the failed disclosure of the Young `899 application

4 eliminated the need to inform the USPTO of the issuance of the `421 patent, AMD apparently relies 5 on Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306 (Fed. Cir. 2008), and a decision from the Eastern 6 District of Texas, Grantley Patent Holdings, Ltd. v. Clear Channel Commc'ns, Inc., No. 7 9:06CV259, 2008 WL 901175 at *5 (E.D. Tex. Mar. 31, 2008), both concerning the non-materiality 8 of cumulative references. These cases are inapposite in that they simply restate the basic principle 9 of law that cumulative prior art is not material. They do not answer the question of whether the `421 10 patent is cumulative of the `899 application, nor do they address whether AMD's knowing failure 11 to disclose the Young `421 patent, after the examiner's refusal to consider the Young `899 12 application, demonstrates an intent to deceive. Even if this were a close case as to whether the `421 13 patent was cumulativewhich it is not"[c]lose cases should be resolved by disclosure, not 14 unilaterally by the applicant." LaBounty Mfg., Inc. v. U.S. Int'l Trade Com'n, 958 F.2d 1066, 1076 15 (Fed. Cir. 1992). 16
AMD makes a series of additional arguments to the effect that any amendments to the

17 Young `421 patent are not prior art or even if prior art, they do not disclose any new matter that was 18 not already contained in the Young `899 application. But these contentions miss the point, given 19 that Samsung has pled that the Young `421 patent was material as a whole. The issue is not 20 whether any particular amendment is material or new; it is that AMD knew that the Young `899 21 application was not properly disclosed, but nonetheless withheld the Young `421 patent from the 22 USPTO. Moreover, AMD's dissimilar treatment of the similarly situated Young `594 patent 23 provides a strong inference that AMD's decision to withhold the Young `421 patent was made with 24 an intent to deceive the USPTO. The facts as pled far exceed the threshold for asserting an 25 inequitable conduct allegation, and the Court should grant leave to amend Samsung's pleadings. 26 27
2. The Iacoponi `592 Patent. AMD also contends that Samsung's proposed amendment regarding the `592 patent is futile.

28 But instead of addressing Samsung's claims as alleged--and making all inferences in Samsung's
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1 favor as required at this stage--AMD invites the Court to weigh evidence such as the credibility 2 and content of John Iacoponi's deposition testimony. Samsung's pleading unambiguously states 3 that Mr. Iacoponi committed inequitable conduct when he knowingly failed to disclose to his 4 attorneys or the PTO a stack of highly material references that he had personally collected over the 5 course of several years. In response, AMD simply argues that those facts are disputed. According 6 to AMD, Samsung cannot "add an inequitable conduct claim based on the notion that Mr. Iacoponi 7 knew about specific references and yet failed to disclose them to the PTO" because "his deposition 8 testimony . . . shows the opposite." Opp. at 9. AMD continues, "Mr. Iacoponi testified that he had 9 not seen and was unable to recognize two of the three VMIC papers that were presented to him." 10 Id. 11
It comes as no surprise that AMD's witness provided at least some self-serving testimony in

12 his deposition. AMD's attempt to use this testimony to defeat Samsung's claims and defenses, 13 however, is utterly premature and wholly inappropriate for an opposition to a motion to amend the 14 pleadings. See Golden Hour Data Sys. v. Health Servs. Integration, Inc., No. C06-7477 SI, 2008 15 WL 2622794 at *3 (N.D. Cal. Jul. 1, 2008) ("To the extent that [the plaintiff] argues that the 16 proposed amendments are futile because the named inventors met their legal disclosure duty and 17 did not withhold operational details or . . . documents, resolution of this argument would require a 18 factual inquiry inappropriate at this stage."); G & C Auto Body Inc. v. GEICO Gen. Ins. Co., No. 19 C06-04898, 2007 WL 3306629 at *4 (N.D. Cal. Nov. 6, 2007) ("G & C's efforts to attack the 20 evidentiary basis for GEICO's counterclaim are premature at this stage. The appropriate inquiry at 21 this stage is whether the proposed counterclaim is futile, not whether GEICO will ultimately be able 22 to carry its burden of proof with admissible evidence."); Hynix Semiconductor, 2006 WL 3093812 23 at *2 ("[T]he relevant inquiry is not whether [the amending party] has proffered enough evidence to 24 succeed on the merits, it is whether [the party opposing amendment] has demonstrated there is no 25 set of facts under which the affirmative defenses would be valid. . . . [T]o establish futility, [one] 26 cannot simply note that the facts underlying [the] proposed affirmative defenses are disputed."). 27
AMD's repeated citations to Sprewell v. Golden State Warriors, 266 F.3d 979 (9th Cir.

28 2001)--apparently for the proposition that the Court should give dispositive weight to Mr.
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1 Iacoponi's self-serving testimony--are unavailing. In Sprewell, the material that the Court found to 2 be fatally contradictory to the at-issue claims was attached to the complaint by the plaintiff himself. 3 Id. at 988 (prior arbitration award attached to complaint by plaintiff). It thus became a part of the 4 pleading for purposes of a Rule 12(b)(6) motion to dismiss, and, as a result, the 9th Circuit held that 5 the plaintiff had "plead himself out of a claim by including unnecessary details contrary to his 6 claims." Id.; see also Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 7 n.19 (9th Cir. 1990) (documents attached to complaint may be considered on Rule 12(b)(6) motion 8 to dismiss). Here, it is AMD that has introduced the allegedly contradictory portions of the 9 deposition transcript by attaching them as exhibits to its opposition brief. The Court should thus 10 give them no consideration in deciding whether Samsung's proposed amendments are futile for 11 failure to state cognizable defenses and counterclaims. See Hal Roach Studios, 896 F.2d at 1555 12 n.19 ("Generally, a district court may not consider any material beyond the pleadings in ruling on a 13 12(b)(6) motion."). 14
AMD's reliance on Semiconductor Energy Laboratory Co., Ltd. v. Chi Mei Optoelectronics

15 Corp., No. C04-04675 MHP, 2006 WL 3826726 (N.D. Cal. Dec. 27, 2006), is likewise misplaced. 16 AMD appears to cite the case for the proposition that Samsung was required to depose Mr. Iacoponi 17 exhaustively on all sixty-four prior art references cited in its proposed amendment. See Opp. at 9. 18 But in fact, Semiconductor Energy Laboratory merely suggests that inequitable conduct may be 19 difficult to allege with sufficient particularity to meet Rule 9(b)'s requirements before gathering at 20 least some information through discovery. See id. at *3. It does not stand for the principle that a 21 defendant must prove inequitable conduct before adding the claim or defense to the pleadings, let 22 alone prove the conduct solely through the deposition testimony of a single witness long before the 23 close of discovery. Moreover, the ruling in Semiconductor Energy Laboratory actually supports 24 Samsung's position: there, the Court granted the defendant leave to amend its pleadings to assert 25 26 27 28
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1 claims and defenses for inequitable conduct even though the plaintiff "suggest[ed] that [the] 2 defendants' proffered evidence does not support their proposed defenses."2 3 4 5 6 7 8 9
D. Samsung's Inequitable Conduct Defenses and Counterclaims Are Pled with Particularity.

Finally, AMD attempts to overcome the extremely liberal standard applied to motions leave to amend pleadings by arguing that Samsung's amendments fail to plead inequitable conduct with adequate particularity. This contention fares no better than AMD's other arguments. 1. Samsung's Defenses and Counterclaims Plead Materiality of the Withheld References with Particularity.

AMD does not challenge the adequacy of Samsung's amended pleadings with respect to the

10 materiality of the reference that the `990 applicants failed to disclose to the USPTO. Instead, AMD 11 focuses exclusively on the materiality of the set of VMIC conference materials that Mr. Iacoponi 12 failed to disclose. Contrary to AMD's argument, however, Samsung's amended pleadings do not 13 make bare allegations of materiality; the factual bases are made explicit. According to Samsung's 14 proposed amended pleadings, Mr. Iacoponi possessed relevant "abstracts related to the field of 15 semiconductor interconnect technology, which includes the formation of contacts in semiconductor 16 devices." FAAC at ¶ 81. Furthermore, the cited abstracts "were highly material . . . in that they 17 disclosed processes for forming nitrided contacts in semiconductor devices, including processes
3 18 utilizing nitrogen ionized in a plasma." Id. at ¶ 83. This is the exact type of process claimed in

19 the `592 patent and forms the basis of a key limitation of the claims of that patent. See, e.g., `592 20 patent, claim 1 ("A method for forming a contact to a semiconductor body, said method comprising 21 . . . exposing said metal silicide layer to nitrogen ionized in a plasma, thereby converting a portion 22 of said metal silicide layer to a first metal nitride layer . . . ."). 23
2

24 these factual disputes need not be resolved at this stage. The court finds that any factual defects in
defendants' evidence do not render their proposed defenses futile. . . ." 2006 WL 3826726 at *4.
3

The Court further stated that, "while [it] may question some of defendants' inferences,

25

The proposed amendment similarly alleges that Iacoponi's paper, entitled "Single Chamber Implementation of a Coherent Ti/TiN Process for Sub-Half Micron Technologies" was 26 "highly material" as "it addressed several of the same concepts as the claims of the `592 patent, 27 including the use of titanium and titanium nitride to form contacts in semiconductor devices." Id. at ¶ 87.

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1

These allegations are sufficient to allow AMD to identify the relevant references and the

2 reasons for their materiality. The two cases AMD relies on for the proposition that Samsung fails 3 to plead materiality with sufficient particularity--both of which were decided in the context of 4 motions to strike rather than motions to amend the pleadings--do nothing to undermine that 5 conclusion. See Hill-Rom Servs., Inc. v. Verses Tech., Inc., Nos. 1:03CV1227, 1:04CV1116, 2006 6 WL 1540851 (M.D.N.C. June 2, 2006); Energy Absorption Sys., Inc. v. Roadway Safety Serv. Inc., 7 No. 93-C-2147, 1993 WL 389014 (N.D. Ill. Sept. 16, 1993). 8
In Hill-Rom, the court struck allegations of inequitable conduct when the defendant alleged

9 only that "the claims asserted in the Amended Complaint are barred, in whole or in part, because 10 the [two patents at issue] are invalid and/or unenforceable because Plaintiff or its predecessors in 11 interest engaged in inequitable conduct in the prosecution of the [patents]" and that "the [patents 12 are] unenforceable because of, among other things, Plaintiff's inequitable conduct is [sic] 13 prosecuting the patent[s], and its misuse of its patents." 2006 WL 1540851 at *6. 14
Similarly, in Energy Absorption, the court struck affirmative defenses when the defendant

15 merely averred that the patent at issue was "invalid, void and unenforceable in that [the patent] and 16 the claims thereof fail to comply with the requirements of the Patent Statutes, 35 USC notably § 17 102, § 103, and § 112 thereof." 1993 WL 389014 at *1. The court allowed the defendant to amend 18 the allegations, but once again found the following averment inadequate under Rule 9(b): the 19 patent at issue "is unenforceable by reason of plaintiff's inequitable conduct . . . before the 20 [USPTO] in that the plaintiff failed to disclose . . . [a certain other patent] and/or the barrier 21 disclosed therein, with knowledge of the materiality thereof and with intent to deceive the 22 [USPTO]." Id. The defendant offered no explanation at all as to why the omission was material or 23 even relevant other than a vague reference to a "barrier" mentioned in the undisclosed patent. 24
Samsung's proposed amendments are far more detailed and specific. They identify the

25 named inventor as the individual who knew of relevant and material references, identify the times 26 and places where he learned of the prior art, list the specific abstracts by name and author, and state 27 reasons why the references are material. These averments are sufficient to meet the Rule 9(b) 28 standards. AMD is effectively demanding that Samsung do more than allege its claims with
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1 specificity--it seeks proof of materiality at the pleadings stage. In Golden Hour Data Systems, this 2 Court noted, "to the extent that [the plaintiff] argues the futility of the proposed amendments on the 3 basis that the facts or information in question were not material, this argument fails because [the 4 defendant] is not precluded, at this stage, from alleging the materiality of the facts or information." 5 2008 WL 2622794 at *3. Samsung has sufficiently alleged materiality with particularity so that 6 AMD may respond to its claims and defenses. Whether Samsung "is ultimately able to . . . prove 7 its allegations of inequitable conduct is a question for another day, after the close of discovery." Id. 8 9
2. Samsung Properly Alleges Intent to Deceive the USPTO with Respect to Both Patents.

AMD also argues that Samsung fails to allege with particularity that the applicants for the

10 `592 and `990 patents acted with any intent to deceive the USPTO. As a preliminary matter, while 11 "a party must state with particularity the circumstances constituting fraud or mistake," the same is 12 not true of conditions of a person's mind: "intent . . . may be alleged generally." Fed. R. Civ. P. 13 9(b). Indeed, "[d]irect proof of wrongful intent is rarely available but may be inferred from . . . the 14 surrounding circumstances." LaBounty Mfg., Inc., 958 F.2d at 1076. At the pleading stage, it is 15 certainly sufficient to allege those surrounding circumstances, and Samsung has done so. 16
With respect to the `592 patent, Samsung's FAAC explicitly alleges that the applicants

17 "associated with the filing and prosecution of the `592 patent withheld material information from 18 the [USPTO] with an intent to deceive." FAAC ¶ 78. The inference is "warranted in light of" at 19 least four supporting allegations: "(a) the high level of materiality of the materials presented at the 20 1993 to 1996 VMIC conferences, including the [64] references listed in paragraph 83; and/or (b) 21 the fact that the VMIC conference was well-known to those working in the field of semiconductor 22 interconnect technology; and/or (c) the large volume of highly material information distributed at 23 the VMIC conferences . . . and/or (d) the high level of materiality of the Iacoponi paper and the fact 24 that this paper was co-authored by the inventor himself." FAAC ¶ 88; see also Cargill, Inc. v. 25 Canbra Foods, Ltd., 476 F.3d 1359, 1367 (Fed. Cir. 2007) ("[A] high degree of materiality, coupled 26 with evidence that the applicant should have known of that materiality, creates a strong inference of 27 an intent to deceive."). Samsung also specifically alleges that Mr. Iacoponi was not only "aware 28 of" the abstracts and articles "distributed at the VMIC conferences that he attended" but that those
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1 materials contained at least one article that he co-authored. FAAC ¶¶ 84-86. The thrust of these 2 allegations is plain: Mr. Iacoponi went to VMIC conferences between 1993 and 1996, collected 3 and preserved highly material references from these conferences (including his own article), knew 4 that he had relevant references, but failed to disclose them, with the intention of ultimately 5 deceiving the USPTO. 6
Samsung's allegations regarding the `990 patent are also sufficiently robust for the pleading

7 stage. The proposed amended pleadings allege that "Attorney Shenker and/or others withheld the 8 `421 patent reference from the USPTO with an intent to deceive, as the claims of the `990 patent 9 would not have issued in their current form had the `421 patent reference been provided to the 10 USPTO." FAAC ¶ 75. "Moreover, an inference of an intent to deceive . . . is warranted, in light of: 11 (a) the high level of materiality of the `421 patent reference; and/or (b) Attorney Shenker's 12 unsuccessful attempt to have the patent examiner consider the `899 Patent Application coupled with 13 his subsequent failure to disclose the issuance of the `421 patent reference to the patent examiner." 14 Id; see also Cargill, 476 F.3d at 1367 ("a high degree of materiality, coupled with evidence that the 15 applicant should have known of that materiality, creates a strong inference of an intent to 16 deceive."). In addition, the proposed amendment also alleges that an agent of the USPTO stated 17 that the patent applicants improperly cited the `899 application on the wrong form, and specifically 18 noted that the applications "were not considered by the examiner." FAAC ¶ 70; see also Opp. at 3. 19 Then, when AMD's attorneys filed yet another Information Disclosure Statement--armed with the 20 knowledge that the USPTO did not consider either of the applications--they listed only one of the 21 two newly-issued patents and elected not to disclose the Young `421 patent to the USPTO. FAAC 22 ¶¶ 70-75. The applicants' repeated but inadequate attempts to cite the `899 application demonstrate 23 that they knew of its high degree of materiality. Samsung not only alleges intent to deceive, but 24 provides supporting sufficient supporting facts to satisfy pleading standards. 25 III. 26
CONCLUSION Based on the foregoing, Samsung respectfully requests that the Court grant Samsung's

27 Motion for Leave to Amend Answers and Counterclaims. 28
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1 DATED: April 24, 2009 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

COVINGTON & BURLING LLP

By: /s/ Christine Saunders Haskett CHRISTINE SAUNDERS HASKETT Attorneys for Defendants and Counterclaimants SAMSUNG ELECTRONICS CO., LTD., SAMSUNG SEMICONDUCTOR, INC., SAMSUNG AUSTIN SEMICONDUCTOR, LLC, SAMSUNG ELECTRONICS AMERICA, INC., SAMSUNG TELECOMMUNICATIONS AMERICA, LLC, SAMSUNG TECHWIN CO., LTD., and SAMSUNG OPTO-ELECTRONICS AMERICA, INC.

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