Whitewater West Industries, LTD. v. Pacific Surf Designs, Inc. et al

Filing 47

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)

Download PDF
1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 WHITEWATER WEST INDUSTRIES, LTD., a Canadian corporation, 15 16 17 ORDER: Plaintiff, 13 14 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. 18 19 Defendants Pacific Surf Designs, Inc. (“PSD”) and Flow Services, Inc. (“Flow”) 20 21 (collectively, “Defendants”) move this Court to dismiss the Complaint with prejudice for 22 failure to state a claim. (Mot., ECF No. 18). Defendants’ motion argues that the 23 inequitable conduct of Plaintiff’s counsel renders the patent-in-suit unenforceable. 24 Plaintiff Whitewater West Industries, Ltd. (“Whitewater”) opposes the motion. (Opp’n, 25 ECF No. 27). In addition to its opposition, Whitewater also filed an ex parte motion for 26 leave to file a surreply. (ECF No. 37). The Court DENIES the ex parte motion. For the 27 reasons stated below, the Court DENIES the motion to dismiss. 28 /// 1 3:17-cv-01118 1 BACKGROUND 2 Whitewater has sued Defendants for infringement of United States Patent No. 3 6,491,589 (the “’589 Patent”). Thomas Lochtefeld invented the patent. The Patent and 4 Trademark Office (“PTO”) issued the ’589 Patent in 2002 with Light Wave, Ltd. as the 5 assignee. In May 2011, Light Wave assigned the patent to Surf Park PTE, Ltd. On 6 January 31, 2014, Surf Park conveyed all substantial rights in the patent to FlowRider 7 Surf Ltd. which, in turn, transferred all substantial rights to Whitewater. Since that date, 8 Whitewater has been the exclusive licensee of the patent. This motion concerns a delayed maintenance fee payment for the ’589 patent. The 9 10 maintenance fee payment was not paid when due on December 10, 2014. On February 11 20, 2015, an attorney at Greenberg Traurig (“GT”), the law firm representing Plaintiff in 12 this action, filed a Petition to Accept Unintentionally Delayed Payment of Maintenance 13 Fee (the “Petition”) with the PTO. A month later, the GT attorney filed a power of 14 attorney listing Light Wave as the assignee. The power of attorney was executed by Mr. 15 Lochtefeld as managing member of Light Wave. The GT attorney also filed a statement 16 of ownership that identified Light Wave as the assignee. Again, this form was completed 17 by Mr. Lochtefeld as managing member of Light Wave. In fact, Surf Park was the 18 assignee at the time. Defendants argue that these two documents—the power of attorney 19 and statement of ownership—are materially false submissions to the PTO that warrant 20 dismissal of the Complaint. The PTO granted the Petition on August 25, 2015. The PTO’s decision stated, 21 22 “There is no indication that the person signing the instant petition was ever given a power 23 of attorney or authorization of agent to prosecute the above-identified application. In 24 accordance with 37 C.F.R. 1.34(a), the signature appearing on the petition shall constitute 25 a representation to the United State Patent and Trademark Office that he/she is authorized 26 to represent the particular party in whose behalf he/she acts.” 27 /// 28 /// 2 3:17-cv-01118 1 LEGAL STANDARD 2 A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) must be 3 granted where the pleading fails to state a claim upon which relief can be granted. 4 Dismissal is warranted where the complaint lacks a cognizable legal theory or sufficient 5 facts to support a cognizable legal theory. See Balistreri v. Pacific Police Dep’t, 901 6 F.2d 696, 699 (9th Cir. 1990). To survive a motion to dismiss, a plaintiff must allege 7 “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. 8 Twombly, 550 U.S. 544, 570 (2007). “A claim is facially plausible ‘when the plaintiff 9 pleads factual content that allows the court to draw the reasonable inference that the 10 defendant is liable for the misconduct alleged.’” Zixiang Li v. Kerry, 710 F.3d 995, 999 11 (9th Cir. 2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). The court 12 “accept[s] as true facts alleged and draw[s] inferences from them in the light most 13 favorable to the plaintiff.” Stacy v. Rederite Otto Danielsen, 609 F.3d 1033, 1035 (9th 14 Cir. 2010). 15 DISCUSSION 16 Defendants argue that inequitable conduct concerning the revival of the ’589 17 Patent—specifically, the two allegedly false submissions to the PTO—renders the patent 18 unenforceable. Inequitable conduct is an equitable defense to patent infringement. Am. 19 Calcar, Inc. v. Am. Honda Motor Co., 768 F.3d 1185, 1188 (Fed. Cir. 2014). “To prove 20 inequitable conduct, the challenger must show by clear and convincing evidence that the 21 patent applicant (1) misrepresented or omitted information material to patentability, and 22 (2) did so with specific intent to mislead or deceive the PTO.” Network Signatures, Inc. 23 v. State Farm Mut. Auto. Ins. Co., 731 F.3d 1239, 1242 (Fed Cir. 2013). Defendants 24 contend that the power of attorney and statement of ownership are false because they 25 listed Light Wave, not Surf Park, as the assignee of the patent. They argue that the false 26 statements were material because “[b]ut for the submission of these false documents, the 27 PTO would not have allowed Plaintiff’s counsel to file the petition to revive, and the ’589 28 /// 3 3:17-cv-01118 1 Patent would remain expired.” (Mot. at 8). Defendants assert that the second prong is 2 satisfied based on inferences from the evidence. 3 Defendants’ Rule 12(b)(6) motion to dismiss rests almost entirely on an 4 evidentiary theory outside of the complaint. Id. When considering a motion to dismiss, a 5 court typically does not look beyond the complaint in order to avoid converting a motion 6 to dismiss into a motion for summary judgment. Spy Optic, Inc. v. Alibaba.Com, Inc., 7 163 F. Supp. 3d 755, 760 (C.D. Cal. 2015) (citing Mack v. S. Bay Beer Distribs., Inc., 8 798 F.3d 1279, 1282 (9th Cir. 1986)). Notwithstanding this precept, a court may 9 consider material which is included in, referenced in, or relied upon by the complaint 10 under the doctrine of incorporation by reference. United States v. Ritchie, 342 F.3d 903, 11 908 (9th Cir. 2003). A court may also take judicial notice of facts “not subject to 12 reasonable dispute” that are “generally known within the trial court’s territorial 13 jurisdiction” or “can be accurately and readily determined from sources whose accuracy 14 cannot reasonably be questioned.” Fed. R. Evid. 201(b); Ritchie, 342 F.3d at 909. 15 Defendants ask the Court to take judicial notice of the ’589 Patent’s file history 16 and proceedings in other courts to decide the motion to dismiss. Alternatively, they 17 request that the Court convert their motion to dismiss to a motion for summary judgment 18 under Federal Rule of Civil Procedure 56. Plaintiff argues that Defendants’ inequitable 19 conduct defense is not properly decided on a motion to dismiss and, even as a motion for 20 summary judgment, their motion fails. 21 “Although the existence of a document may be judicially noticeable, the truth of 22 statements contained in the document and its proper interpretation are not subject to 23 judicial notice if those matters are reasonably disputable.” J.W. ex rel. J.E.W. v. Fresno 24 Unified Sch. Dist., 626 F.3d 431, 440 (9th Cir. 2010) (emphasis in original). The Court 25 grants Defendants’ request for judicial notice of the existence of the patent file 26 documents and the filings in other litigations. However, because the facts are subject to 27 reasonable dispute, the Court does not take judicial notice of the truth of the statements 28 contained in those documents. This dooms Defendants’ motion. 4 3:17-cv-01118 Defendants’ motion relies not just on the existence of judicially noticeable 1 2 documents, but on how to interpret those documents. Those matters are subject to 3 reasonable dispute. For example, to prove materiality, Defendants argue that the PTO 4 would not have granted Plaintiff’s Petition but for the allegedly false statements in the 5 power of attorney and statement of ownership. That interpretation is reasonably 6 disputable as the PTO’s decision granting the Petition expressly states that it relied on the 7 signature appearing on the Petition as a representation that the signer had authority to act. 8 The PTO’s decision said nothing about relying on the power of attorney and statement of 9 ownership. Similarly, Defendants argue that Mr. Lochtefeld and Plaintiff’s counsel acted with 10 11 the specific intent to deceive the PTO because they supposedly knew that Surf Park was 12 the proper assignee as of March 2015—when the GT attorney submitted the two 13 documents identifying Light Wave as the assignee. Defendants point to a complaint filed 14 by Plaintiff’s counsel in March 2014, a year before the Petition was filed, in which 15 FlowRider Surf sued Defendant PSD for the first time. See FlowRider Surf, Ltd. v. 16 Alleshouse, No. 3:14-cv-01110-GPC-BLM (S.D. Cal.). Therein, FlowRider Surf alleged 17 that it was the exclusive licensee of the ’589 Patent. Defendants contend that the “only 18 possible basis for making that statement was Plaintiff’s counsel’s knowledge of the 19 license agreement between licensee FlowRider [Surf] and licensor/patent owner Surf 20 Park.” (Mot. at 9). In other words, Defendants argue that Plaintiff’s counsel knew that 21 Surf Park owned the ’589 Patent a year before an attorney at the same firm filed the two 22 documents with the PTO. Even if true, it does not follow that Plaintiff’s counsel 23 intentionally deceived the PTO. At the time the GT attorney filed the power of attorney 24 and statement of ownership, the assignment from Light Wave to Surf Park had not yet 25 been recorded with the PTO. That attorney may not have been aware of the unrecorded 26 assignment. The evidence is subject to reasonable dispute; it is not “clear and 27 convincing.” 28 /// 5 3:17-cv-01118 1 Defendants’ arguments require the Court to weigh evidence and draw inferences 2 against the non-moving party. That is improper on a motion to dismiss. The Court 3 declines to convert the motion into a motion for summary judgment. Accordingly, 4 Defendants’ motion to dismiss is DENIED. 5 Plaintiff asks the Court to order Defendants to pay for its reasonable fees and costs 6 in opposing the motion, pursuant to 28 U.S.C. § 1927. That statute provides that “[a]ny 7 attorney . . . who so multiplies the proceedings in any case unreasonably and vexatiously 8 may be required by the court to satisfy personally the excess costs, expenses, and 9 attorneys’ fees reasonably incurred because of such conduct.” The Court has considered 10 11 12 Plaintiff’s request and declines to impose fees and costs at this time. IT IS SO ORDERED. Dated: October 10, 2017 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6 3:17-cv-01118

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.

Why Is My Information Online?