Whitewater West Industries, LTD. v. Pacific Surf Designs, Inc. et al
Filing
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ORDER: (1) Denying 18 Motion to Dismiss; and (2) Denying 37 Ex Parte Motion for Leave to File Surreply. Signed by Judge Roger T. Benitez on 10/10/2017. (knb)
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UNITED STATES DISTRICT COURT
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SOUTHERN DISTRICT OF CALIFORNIA
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WHITEWATER WEST INDUSTRIES,
LTD., a Canadian corporation,
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ORDER:
Plaintiff,
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Case No.: 3:17-cv-01118
v.
(1) DENYING MOTION TO DISMISS
(ECF No. 18); and
PACIFIC SURF DESIGNS, INC., a
Delaware corporation, and FLOW
SERVICES, INC., a California
corporation,
(2) DENYING EX PARTE MOTION
FOR LEAVE TO FILE SURREPLY
(ECF No. 37)
Defendants.
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Defendants Pacific Surf Designs, Inc. (“PSD”) and Flow Services, Inc. (“Flow”)
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(collectively, “Defendants”) move this Court to dismiss the Complaint with prejudice for
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failure to state a claim. (Mot., ECF No. 18). Defendants’ motion argues that the
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inequitable conduct of Plaintiff’s counsel renders the patent-in-suit unenforceable.
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Plaintiff Whitewater West Industries, Ltd. (“Whitewater”) opposes the motion. (Opp’n,
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ECF No. 27). In addition to its opposition, Whitewater also filed an ex parte motion for
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leave to file a surreply. (ECF No. 37). The Court DENIES the ex parte motion. For the
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reasons stated below, the Court DENIES the motion to dismiss.
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3:17-cv-01118
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BACKGROUND
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Whitewater has sued Defendants for infringement of United States Patent No.
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6,491,589 (the “’589 Patent”). Thomas Lochtefeld invented the patent. The Patent and
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Trademark Office (“PTO”) issued the ’589 Patent in 2002 with Light Wave, Ltd. as the
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assignee. In May 2011, Light Wave assigned the patent to Surf Park PTE, Ltd. On
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January 31, 2014, Surf Park conveyed all substantial rights in the patent to FlowRider
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Surf Ltd. which, in turn, transferred all substantial rights to Whitewater. Since that date,
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Whitewater has been the exclusive licensee of the patent.
This motion concerns a delayed maintenance fee payment for the ’589 patent. The
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maintenance fee payment was not paid when due on December 10, 2014. On February
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20, 2015, an attorney at Greenberg Traurig (“GT”), the law firm representing Plaintiff in
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this action, filed a Petition to Accept Unintentionally Delayed Payment of Maintenance
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Fee (the “Petition”) with the PTO. A month later, the GT attorney filed a power of
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attorney listing Light Wave as the assignee. The power of attorney was executed by Mr.
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Lochtefeld as managing member of Light Wave. The GT attorney also filed a statement
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of ownership that identified Light Wave as the assignee. Again, this form was completed
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by Mr. Lochtefeld as managing member of Light Wave. In fact, Surf Park was the
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assignee at the time. Defendants argue that these two documents—the power of attorney
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and statement of ownership—are materially false submissions to the PTO that warrant
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dismissal of the Complaint.
The PTO granted the Petition on August 25, 2015. The PTO’s decision stated,
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“There is no indication that the person signing the instant petition was ever given a power
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of attorney or authorization of agent to prosecute the above-identified application. In
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accordance with 37 C.F.R. 1.34(a), the signature appearing on the petition shall constitute
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a representation to the United State Patent and Trademark Office that he/she is authorized
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to represent the particular party in whose behalf he/she acts.”
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3:17-cv-01118
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LEGAL STANDARD
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A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) must be
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granted where the pleading fails to state a claim upon which relief can be granted.
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Dismissal is warranted where the complaint lacks a cognizable legal theory or sufficient
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facts to support a cognizable legal theory. See Balistreri v. Pacific Police Dep’t, 901
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F.2d 696, 699 (9th Cir. 1990). To survive a motion to dismiss, a plaintiff must allege
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“enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v.
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Twombly, 550 U.S. 544, 570 (2007). “A claim is facially plausible ‘when the plaintiff
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pleads factual content that allows the court to draw the reasonable inference that the
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defendant is liable for the misconduct alleged.’” Zixiang Li v. Kerry, 710 F.3d 995, 999
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(9th Cir. 2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). The court
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“accept[s] as true facts alleged and draw[s] inferences from them in the light most
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favorable to the plaintiff.” Stacy v. Rederite Otto Danielsen, 609 F.3d 1033, 1035 (9th
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Cir. 2010).
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DISCUSSION
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Defendants argue that inequitable conduct concerning the revival of the ’589
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Patent—specifically, the two allegedly false submissions to the PTO—renders the patent
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unenforceable. Inequitable conduct is an equitable defense to patent infringement. Am.
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Calcar, Inc. v. Am. Honda Motor Co., 768 F.3d 1185, 1188 (Fed. Cir. 2014). “To prove
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inequitable conduct, the challenger must show by clear and convincing evidence that the
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patent applicant (1) misrepresented or omitted information material to patentability, and
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(2) did so with specific intent to mislead or deceive the PTO.” Network Signatures, Inc.
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v. State Farm Mut. Auto. Ins. Co., 731 F.3d 1239, 1242 (Fed Cir. 2013). Defendants
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contend that the power of attorney and statement of ownership are false because they
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listed Light Wave, not Surf Park, as the assignee of the patent. They argue that the false
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statements were material because “[b]ut for the submission of these false documents, the
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PTO would not have allowed Plaintiff’s counsel to file the petition to revive, and the ’589
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3:17-cv-01118
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Patent would remain expired.” (Mot. at 8). Defendants assert that the second prong is
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satisfied based on inferences from the evidence.
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Defendants’ Rule 12(b)(6) motion to dismiss rests almost entirely on an
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evidentiary theory outside of the complaint. Id. When considering a motion to dismiss, a
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court typically does not look beyond the complaint in order to avoid converting a motion
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to dismiss into a motion for summary judgment. Spy Optic, Inc. v. Alibaba.Com, Inc.,
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163 F. Supp. 3d 755, 760 (C.D. Cal. 2015) (citing Mack v. S. Bay Beer Distribs., Inc.,
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798 F.3d 1279, 1282 (9th Cir. 1986)). Notwithstanding this precept, a court may
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consider material which is included in, referenced in, or relied upon by the complaint
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under the doctrine of incorporation by reference. United States v. Ritchie, 342 F.3d 903,
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908 (9th Cir. 2003). A court may also take judicial notice of facts “not subject to
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reasonable dispute” that are “generally known within the trial court’s territorial
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jurisdiction” or “can be accurately and readily determined from sources whose accuracy
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cannot reasonably be questioned.” Fed. R. Evid. 201(b); Ritchie, 342 F.3d at 909.
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Defendants ask the Court to take judicial notice of the ’589 Patent’s file history
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and proceedings in other courts to decide the motion to dismiss. Alternatively, they
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request that the Court convert their motion to dismiss to a motion for summary judgment
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under Federal Rule of Civil Procedure 56. Plaintiff argues that Defendants’ inequitable
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conduct defense is not properly decided on a motion to dismiss and, even as a motion for
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summary judgment, their motion fails.
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“Although the existence of a document may be judicially noticeable, the truth of
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statements contained in the document and its proper interpretation are not subject to
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judicial notice if those matters are reasonably disputable.” J.W. ex rel. J.E.W. v. Fresno
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Unified Sch. Dist., 626 F.3d 431, 440 (9th Cir. 2010) (emphasis in original). The Court
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grants Defendants’ request for judicial notice of the existence of the patent file
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documents and the filings in other litigations. However, because the facts are subject to
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reasonable dispute, the Court does not take judicial notice of the truth of the statements
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contained in those documents. This dooms Defendants’ motion.
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3:17-cv-01118
Defendants’ motion relies not just on the existence of judicially noticeable
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documents, but on how to interpret those documents. Those matters are subject to
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reasonable dispute. For example, to prove materiality, Defendants argue that the PTO
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would not have granted Plaintiff’s Petition but for the allegedly false statements in the
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power of attorney and statement of ownership. That interpretation is reasonably
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disputable as the PTO’s decision granting the Petition expressly states that it relied on the
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signature appearing on the Petition as a representation that the signer had authority to act.
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The PTO’s decision said nothing about relying on the power of attorney and statement of
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ownership.
Similarly, Defendants argue that Mr. Lochtefeld and Plaintiff’s counsel acted with
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the specific intent to deceive the PTO because they supposedly knew that Surf Park was
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the proper assignee as of March 2015—when the GT attorney submitted the two
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documents identifying Light Wave as the assignee. Defendants point to a complaint filed
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by Plaintiff’s counsel in March 2014, a year before the Petition was filed, in which
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FlowRider Surf sued Defendant PSD for the first time. See FlowRider Surf, Ltd. v.
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Alleshouse, No. 3:14-cv-01110-GPC-BLM (S.D. Cal.). Therein, FlowRider Surf alleged
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that it was the exclusive licensee of the ’589 Patent. Defendants contend that the “only
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possible basis for making that statement was Plaintiff’s counsel’s knowledge of the
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license agreement between licensee FlowRider [Surf] and licensor/patent owner Surf
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Park.” (Mot. at 9). In other words, Defendants argue that Plaintiff’s counsel knew that
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Surf Park owned the ’589 Patent a year before an attorney at the same firm filed the two
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documents with the PTO. Even if true, it does not follow that Plaintiff’s counsel
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intentionally deceived the PTO. At the time the GT attorney filed the power of attorney
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and statement of ownership, the assignment from Light Wave to Surf Park had not yet
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been recorded with the PTO. That attorney may not have been aware of the unrecorded
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assignment. The evidence is subject to reasonable dispute; it is not “clear and
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convincing.”
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3:17-cv-01118
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Defendants’ arguments require the Court to weigh evidence and draw inferences
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against the non-moving party. That is improper on a motion to dismiss. The Court
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declines to convert the motion into a motion for summary judgment. Accordingly,
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Defendants’ motion to dismiss is DENIED.
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Plaintiff asks the Court to order Defendants to pay for its reasonable fees and costs
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in opposing the motion, pursuant to 28 U.S.C. § 1927. That statute provides that “[a]ny
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attorney . . . who so multiplies the proceedings in any case unreasonably and vexatiously
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may be required by the court to satisfy personally the excess costs, expenses, and
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attorneys’ fees reasonably incurred because of such conduct.” The Court has considered
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Plaintiff’s request and declines to impose fees and costs at this time.
IT IS SO ORDERED.
Dated: October 10, 2017
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