L-3 Communications Corporation et al v. Jaxon Engineering & Maintenance, Inc. et al
OPINION AND ORDER GRANTING, IN PART, MOTION FOR SUMMARY JUDGMENT: L-3's Motion for Partial Summary Judgment 897 is GRANTED IN PART and DENIED IN PART as set forth herein. The parties' Motions to Restrict Access ( 914 ,[959 ], 960 , and 1000 ) are DENIED without prejudice to additional filings as set forth above. The parties' Joint Motion for Claim Construction Hearing 981 is DENIED without prejudice, pending the filing of a motion for summary jud gment by the Defendant within 30 days as set forth above. The Motions to Withdraw as Counsel ( 995 , 996 ) are GRANTED, and the Clerk of the Court shall terminate electronic service on Attorney Scott A. Chambers and Lacy L. Kolo. by Chief Judge Marcia S. Krieger on 9/22/14.(msksec, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Honorable Marcia S. Krieger
Civil Action No. 10-cv-02868-MSK-KMT
L-3 COMMUNICATIONS CORPORATION; and
L-3 SERVICES, INC.,
JAXON ENGINEERING & MAINTENANCE, INC.;
JONI ANN WHITE;
RANDALL K. WHITE;
KELLY RICE; and
OPINION AND ORDER GRANTING, IN PART, MOTION FOR SUMMARY
THIS MATTER comes before the Court pursuant to the Plaintiffs’ Motion for Partial
Summary Judgment (# 897), the Defendants’ response (# 941), and the Plaintiff’s reply (# 966).
Also pending are several motions seeking to restrict public access to certain filings (# 914, 959,
960, 1000), some of which are opposed; a Joint Motion (# 981) by the parties requesting a claim
construction hearing; and two motions to withdraw as counsel (# 995, 996).
The Court briefly recites the salient facts here, and elaborates as necessary in its analysis.
The Plaintiffs (collectively, “L-3”) are engaged in the business of testing electronic components
for various clients, including the United States Government and military agencies. In or about
2008, several L-3 employees, including some of the individual Defendants here, left L-3 to
create and/or join a competing business, Defendant Jaxon Engineering & Maintenance, Inc.
(“Jaxon”). L-3 alleges that these employees took various L-3 trade secrets and other proprietary
materials to use for Jaxon’s benefit, and that Jaxon is infringing on certain patents held by L-3.
The parties bring numerous claims and counterclaims against each other, most of which
fall outside the scope of this Order. In the instant motion, L-3 seeks summary judgment on
certain affirmative defenses and counterclaims by Jaxon: (i) the Defendants’ affirmative defense
that “the asserted patents are invalid and/or unenforceable under 35 U.S.C. § 102, 103, and/or
112,” with L-3 arguing that certain individual Defendants are named inventors on the patents and
thus estopped from asserting invalidity, and the remaining Defendants are in privity therewith;
(ii) the affirmative defense that “L-3 is precluded from asserting patent infringement . . . under
28 U.S.C. § 1498(a),” in that the Court has already dismissed Jaxon’s counterclaim premised on
that statute; and (iii) Jaxon’s counterclaim for a declaratory judgment that “L-3 has engaged in
patent misuse through its bad faith attempt to enforce [certain patents],” because Jaxon cannot
show the necessary elements of such a counterclaim.
Separately, the parties have filed several motions seeking to restrict public access to
various filings, requested the setting of a claim construction hearing, and certain of L-3’s counsel
have moved to withdraw.
A. Summary judgment motion
1. Standard of review
Rule 56 of the Federal Rules of Civil Procedure facilitates the entry of a judgment only if
no trial is necessary. See White v. York Intern. Corp., 45 F.3d 357, 360 (10th Cir. 1995).
Summary adjudication is authorized when there is no genuine dispute as to any material fact and
a party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). Substantive law governs
what facts are material and what issues must be determined. It also specifies the elements that
must be proved for a given claim or defense, sets the standard of proof and identifies the party
with the burden of proof. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986);
Kaiser-Francis Oil Co. v. Producer=s Gas Co., 870 F.2d 563, 565 (10th Cir. 1989). A factual
dispute is Agenuine@ and summary judgment is precluded if the evidence presented in support of
and opposition to the motion is so contradictory that, if presented at trial, a judgment could enter
for either party. See Anderson, 477 U.S. at 248. When considering a summary judgment
motion, a court views all evidence in the light most favorable to the non-moving party, thereby
favoring the right to a trial. See Garrett v. Hewlett Packard Co., 305 F.3d 1210, 1213 (10th Cir.
If the movant has the burden of proof on a claim or defense, the movant must establish
every element of its claim or defense by sufficient, competent evidence. See Fed. R. Civ. P.
56(c)(1)(A). Once the moving party has met its burden, to avoid summary judgment the
responding party must present sufficient, competent, contradictory evidence to establish a
genuine factual dispute. See Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 891 (10th
Cir. 1991); Perry v. Woodward, 199 F.3d 1126, 1131 (10th Cir. 1999). If there is a genuine
dispute as to a material fact, a trial is required. If there is no genuine dispute as to any material
fact, no trial is required. The court then applies the law to the undisputed facts and enters
If the moving party does not have the burden of proof at trial, it must point to an absence
of sufficient evidence to establish the claim or defense that the non-movant is obligated to prove.
If the respondent comes forward with sufficient competent evidence to establish a prima facie
claim or defense, a trial is required. If the respondent fails to produce sufficient competent
evidence to establish its claim or defense, then the movant is entitled to judgment as a matter of
law. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
2. Inventor estoppel
L-3 brings several claims sounding in patent infringement; the Defendants have asserted
the affirmative defense that the patents in question are invalid or unenforceable by operation of
35 U.S.C. § 102 (invalidity due to lack of novelty), § 103 (invalidity due to obviousness), and/or
§ 112 (invalidity due to differences between specification and claim language).
L-3 argues that certain individual Defendants were named inventors on the patents in
question, and thus, are barred from asserting invalidity or unenforceability under the doctrine of
“assignor estoppel.” Assignor estoppel is an equitable doctrine that prohibits an
inventor/assignor of a patent, or persons in privity with him or her, from attacking the validity of
the patent when he or she is subsequently sued for infringement by the assignee. Semiconductor
Energy Laboratory Co. v. Nagata, 706 F.3d 1365, 1269 (Fed. Cir. 2013). When, as in this case,
an assignor (certain named Defendants) is sued for infringement, the assignor may not defend or
counterclaim that the patent he or she assigned is invalid or unenforceable. Id. at 1370. The
doctrine is premised upon the “implicit representation by the assignor that the patent rights he is
assigning (presumably for value) are not worthless.” Diamond Scientific v. Ambico, Inc., 848
F.2d 1220, 1224 (Fed. Cir. 1988). Among other things, the doctrine operates to prevent
unfairness and injustice and to prevent an inventor from benefitting from his own alleged wrong.
Pandrol USA, LP v. Airboss Railway Products, Inc., 424 F.3d 1161, 1166 (Fed. Cir. 2005).
Two patents are at issue in this case, the ‘916 and ‘989 patents. Among the listed
inventors on the ‘916 patent are Defendants Youngman and Rice. They assigned their interests
in the ‘916 patent to L-3 in 2006. The listed inventors of the ‘989 patent include Defendants
Youngman and McClure, and they similarly assigned their interests in the patent to L-3 in 2006.
Thus, by operation of the assignor estoppel doctrine, they cannot now assert the affirmative
defense of invalidity in response to L-3’s infringement claims.
The more difficult question is whether the remaining Defendants are, or were, in privity
with Defendants Youngman, Rice, and McClure. The question of privity examines the nature of
the relationship between the assignor and the person sought to be estopped, in light of the alleged
infringement. Mentor Graphics Corp. v. Quickturn Design Sys.,Inc., 150 F.3d 1374, 1379 (Fed.
Cir. 1998). The closer that relationship, the more the equities will favor application of the
doctrine. Id. In making a privity determination, the central question is whether the other
Defendants “availed [themselves] of the inventor’s knowledge and assistance to conduct the
infringement.” Intel Corp. v. U.S. Int’l Trade Comm’n, 946 F.2d 821, 839 (Fed. Cir. 1991).
Privity may exist in a corporation that is founded by the assignor. Shamrock Technologies, Inc. v.
Medical Sterilization, Inc., 903 F.2d 789, 793 (Fed. Cir. 1990). However, the assignor’s mere
status as an employee of a competitor does not necessarily warrant a finding of privity. Id. at
With these principles in mind, the Court turns to the specific facts allegedly
demonstrating privity between Defendants Youngman, Rice, and McClure and the remaining
Jaxon: Jaxon was formed by Defendants Randall, Scott, and Joni White in July 2008.
Mr. Youngman resigned from L-3 in mid-2009, and immediately began working for Jaxon. A
June 2009 Jaxon business plan includes an organizational chart showing Mr. Youngman holding
the title of “Chief Scientist,” reporting directly to CEO Randy White. Corporate records reflect
that Mr. Youngman holds Jaxon’s stock (Mr. Youngman holds the same number of shares as
Kelly Rice, Jaxon’s Vice President of Engineering and Robert Smith, the company’s Chief
Financial Officer). Among other things, Mr. Youngman built pulsers for Jaxon, presumably
based off the same knowledge and experience Mr. Youngman used when designing the pulser
that is the subject of the ‘989 patent while at L-3.
Mr. McClure left L-3 in 2008 and joined Jaxon as Engineering Director in August 2009.
He also holds Jaxon stock. Mr. McClure is also involved in building pulsers for Jaxon, just as he
had been for L-3 at the time of the ‘989 patent. When asked to testify about the differences
between the pulsers he built for L-3 and those he built for Jaxon, Mr. McClure identified Jaxon’s
pulser as using a different kind of switch, although he later conceded that he had been
“experimenting” with that same kind of switch while working at L-3.
Mr. Rice left L-3’s employ in October 2009 and immediately joined Jaxon as its Vice
President of Engineering. He also holds stock in Jaxon, in similar amount as do Mr. Youngman
and Mr. McClure. Mr. Rice wrote software for “portable SE [shielding effectiveness] test
equipment” at Jaxon, having done the same task at L-3, and having embodied some of that work
in the ‘916 patent. Mr. Rice testified that the device he designed at Jaxon used many of the same
parts as the one he designed at L-3, although he states that he has improved the software in
In the face of fairly clear evidence of privity between Jaxon and Mr. McClure, Mr.
Youngman, and Mr. Rice, the Defendants offer several observations (not all of which are
favorable to them). They point out that the majority of Jaxon’s business operations consist of
“maintenance and repair work,” for which Mr. Youngman, Mr. McClure, and Mr. Rice’s talents
are not required and which does not involve the allegedly infringing devices. They argue that
“testing” – the work Mr. Youngman, Mr. McClure, and Mr. Rice assist in and that uses the
devices in question – constitutes only 10% of Jaxon’s operations and that Jaxon initially
“considered outsourcing the testing component to a third party.” (The Court thus infers that it
was the hiring of personnel such as Mr. Youngman, Mr. McClure, and Mr. Rice that allowed
Jaxon the ability to perform testing services in-house, which they could not have otherwise
done.) They argue that the assignors do not hold positions as directors or officers of Jaxon, do
not control any financial or strategic decisions, and are merely “minority shareholders.”
The Court finds that there is ample evidence in the record to warrant the conclusion that
Jaxon is in privity with the assignors with regard to the allegedly infringing devices. They
perform the same functions at Jaxon that they did at L-3, where the patented devices were
invented, sometimes using the same parts, design, and techniques that they used at L-3. The fact
that Jaxon originally lacked the ability to perform testing work, and was only able to develop that
branch of its business by hiring people like the assignors, strongly suggests that Jaxon retained
them precisely because of their knowledge and experience in designing and building pulsers at
L-3. In this regard, the Court finds the instant case quite similar to Shamrock. There, the court
found an inventor to be in privity with his employer for purposes of his former employer’s
infringement suit, where, among other things, the defendant employer had not been active in a
particular business sector and had hired the inventor specifically to manage its new operations in
that sector. 903 F.2d at 795.
The Defendants rely heavily on Accushnet Co. v. Dunlop Maxfli Sports Corp., 2000 WL
987979 (D.Del. Jun. 29, 2000) (slip op.), for the proposition that privity should only be found
where the inventor/assignor “either controlled the [defendant] corporation . . . or had a
significant financial stake in the corporation’s success.” Accushnet essentially posits a test for
privity that examines whether the assignor is his or her employer’s “corporate disguise.” Id.
This Court finds Accushnet’s reading of other cases to be needlessly cramped. For example, it
reads Shamrock to have based its privity determination on the fact that the assignor was hired as
Vice President of Operations for the defendant corporation, and that he held 50,000 shares of
stock. Id. However, beyond reciting the assignor’s job title and the number of shares he owned
in the defendant company, Shamrock makes no mention of the scope of the assignor’s control of
the company. 903 F.2d at 794. Indeed, even when the Shamrock court responds to the
defendants’ argument that the assignor was a “mere employee,” it points to the company’s
“direct involvement of [the assignor] in [the company’s] infringing operations,” not the
assignor’s corporate title or status. Id. It is clear from Shamrock that the court’s determination
turns in large part on the fact that the assignor’s joining the defendant company allowed that
company to embark upon a new field of business by infringing upon the patents assigned to the
plaintiff. Id. Thus, this Court finds Accushnet to be unpersuasive and Shamrock to clearly
suggest that a finding of privity between Jaxon and the assignors is warranted. Accordingly,
Jaxon is also estopped from asserting the invalidity of the patents at issue here.
Randy White, Scott White, and Joni White: The Whites are the founders, majority
shareholders, and officers of Jaxon. Randy White and Scott White were former employees of L3, and Randy White in particular was involved in L-3’s testing division, where he was in contact
with the assignors. In October 2008, after Jaxon had been incorporated but while still employed
at L-3, Scott White prepared a list of future Jaxon employees (and their anticipated salaries),
including fellow L-3 employees such as Mr. Youngman, Mr. Rice, and Mr. McClure. As noted
above, none of the Whites themselves appear to be sufficiently knowledgeable and capable of
performing testing services for Jaxon without the assistance of the assignors. Given the
considerable privity that the Court finds between Jaxon and the assignors, and the direct
ownership and management that the Whites have in Jaxon, it is appropriate to conclude that the
Whites are estopped to challenge invalidity to the same extent that Jaxon is. It would hardly be
logical to preclude Jaxon from contesting invalidity, but to allow its officers to do so as
Susan Rettig, Charles Rettig, Jerry Lubell: The situation is somewhat different with
these Defendants. The record reflects that Charles Rettig and Mr. Lubell perform services for
Jaxon as consultants pursuant to a contractual “Professional Services Agreement”; it is entirely
unclear from L-3’s motion how Ms. Rettig is involved with Jaxon. (L-3’s motion merely states
that Ms. Rettig “worked as a Contracts Administrator for L-3 before joining Jaxon.”)
Mr. Rettig’s contract recites that he is being retained by Jaxon to provide “preparation of
customer proposals, negotiation of terms and conditions and the negotiation of any resultant
contracts,” and “such services as may be requested . . . in support of [Jaxon’s] pricing and other
business issues.” There is no indication that Mr. Rettig is involved in any technical aspects of
testing activities or otherwise dependent upon the technologies invented by the assignors or the
assignors’ knowledge and experience when preparing customer proposals or negotiating
contracts. L-3 makes a passing contention that Mr. Rettig was among certain Defendants who
physically misappropriated materials from L-3 and delivered them to Jaxon, but it is unclear how
such conduct bears on the question of assignor estoppel.
The Court finds that L-3 has failed to show facts that would suggest that the Rettigs have
any connection, much less a substantial one, to any of the assignors relating to the alleged
infringement. (Indeed, it is somewhat unclear to the Court precisely what acts of patent
infringement the Rettigs are alleged to have committed.) The record does not reflect that the
Rettigs’ work with Jaxon even brings them into contact with the assignors, much less the
infringing devices. Although the Rettigs may enjoy some degree of financial or professional
success if Jaxon itself succeeds, this connection is far too tenuous to deem the Rettigs in privity
with the assignors for purposes of estoppel. To the extent the Rettigs are themselves accused of
infringing upon the patents at issue, the record lacks sufficient facts to warrant equitably
preventing the Rettigs from challenging the validity of those patents.1
Mr. Lubell’s contract suggests a more technical focus. He is retained to “provide
technical support to . . . Mr. Jim Youngman and work closely with . . . Mr. Kelly Rice to plan,
coordinate, and orchestrate technically sound and expedient [testing].” Given that Mr. Lubell’s
contract specifically designates him to support the testing activities of Mr. Youngman and Mr.
Rice, in the particular fields that those individuals obtained the patents at issue here, it is
This presents an interesting hypothetical procedural dilemma that the parties are
encouraged to consider and, if appropriate, address. At trial, the Rettigs may put on an invalidity
defense, and may even succeed in convincing the jury that the patents are invalid. However,
because the remaining Defendants are estopped from challenging the patents’ validity, the jury
will be instructed to enter judgment on the patent infringement claims with regard to the Rettigs,
but to assume the validity of the patents with regard to the remaining Defendants.
appropriate to conclude that any infringing activities Mr. Lubell may have engaged in at Jaxon
were done in consultation with or at the direction of Mr. Youngman or Mr. Rice. As such, Mr.
Lubell is in privity with Mr. Youngman and Mr. Rice, and thus, subject to the same assignor
estoppel that they are.
Accordingly, the Court finds that L-3 is entitled to summary judgment on all of the
Defendants’ affirmative defenses of invalidity on the grounds of assignor estoppel, with the
exception of Defendants Charles and Susan Rettigs; the Rettigs may continue to assert
affirmative defenses to patent infringement sounding in invalidity.
3. 28 U.S.C. § 1498(a)
All Defendants assert as an affirmative defense to L-3’s patent infringement claims, that
“L-3 is precluded from asserting patent infringement against Jaxon under 28 U.S.C. § 1498(a).”
Separately, Jaxon asserted a counterclaim for “Declaratory Judgment of Unenforceability Due to
Patent Misuse” that also invoked that statute. The statute provides that where an alleged patent
infringer was producing the infringing item “for the United States,” the patent-holder’s exclusive
remedy for the infringement is a suit against the United States in the Court of Federal Claims, not
an action against the infringer. L-3 seeks summary judgment on the Defendants’ invocation of
28 U.S.C. § 1498(a) as an affirmative defense, arguing that the Court has already dismissed
Jaxon’s counterclaim under that statute, and thus, the affirmative defense should follow.
A full understanding of this issue requires a brief summary of prior proceedings in this
case. Jaxon’s counterclaim for “patent misuse” is a somewhat jumbled collection of discrete,
seemingly standalone assertions such as: (i) that, by operation of 28 U.S.C. § 1498(a), Jaxon is
immune from infringement claims for work it performs for the Government; (ii) L-3 improperly
contacted Jaxon’s customers, advising them that Jaxon was infringing L-3’s patents; (iii) because
L-3 developed the patented technology pursuant to a contract with the Government, the
Government is administratively entitled to a license to use the patented technology, directly or by
commissioning others to use it on the Government’s behalf; and (iv) the Government has already
exercised a right it has to “appropriate title” to the patented technology. The Defendants’
counterclaim lumps these (and others) discrete arguments together under the general umbrella of
“patent misuse,” contending that the totality of these acts constitute unclean hands on L-3’s part,
preventing it from asserting infringement claims against Jaxon and the other Defendants.
L-3 moved to dismiss (# 317) Jaxon’s “patent misuse” counterclaim, mostly arguing: (i)
that the doctrine of “patent misuse” generally requires allegations of antitrust-like behavior,
which Jaxon failed to plead; (ii) Jaxon failed to plead facts showing that the Government
necessarily exercised its administratively-granted license to use L-3’s patented technology when
entering into contracts with Jaxon; and (iii) that the Government never appropriated title to L-3’s
patents. Notably, 28 U.S.C. § 1498(a) was mentioned only once in L-3’s motion, and only when
reciting the counterclaim’s assertions.
The Court referred L-3’s motion to the Magistrate Judge who recommended (# 559) that
the motion to dismiss the patent misuse claim be denied, at least in part. Specifically, the
Magistrate Judge found that Jaxon “allege[d that it] has statutory immunity under 28 U.S.C.
§1498(a),” but concluded that Jaxon had not adequately alleged facts showing that the
Government had given its authorization and consent to Jaxon making use of the patented
technology as part of its contract. However, the Magistrate Judge found that Jaxon had
adequately pled a counterclaim for patent misuse insofar as it alleged that L-3 knew that the
Government had either appropriated the L-3 patents itself or had retained a license to the
patented technology, and thus, L-3’s infringement claims against Jaxon were arguably frivolous
(and thus, “patent misuse”) on that ground.
Jaxon filed Objections (# 580) to that recommendation, taking issue with the Magistrate
Judge’s conclusion that it had not sufficiently alleged facts showing that that L-3’s infringement
claims were barred by 28 U.S.C. § 1498(a). Jaxon argued that the inclusion of “an express
Authorization and Consent clause” in its contract with the Government was sufficient to
demonstrate the Government’s intention to permit Jaxon to infringe on the L-3 patents. Jaxon
then pointed to particular allegations in its counterclaim that asserted the presence of such
clauses in its contracts with the Government.
Acting before L-3 submitted papers in response, this Court overruled (# 589) Jaxon’s
Objections and adopted the Recommendation. In doing so, the Court strayed somewhat from the
arguments that Jaxon had presented. Understanding Jaxon’s counterclaim to focus primarily on
L-3’s acts of contacting Jaxon’s customers and informing them that Jaxon was infringing on
patents, this Court observed that the Federal Circuit has clearly rejected the notion that a patentholder’s contacting of a competitor’s customers, threating to bring infringement claims that were
theoretically barred by 28 U.S.C. § 1498(a), constituted “patent misuse.” Citing Virginia Panel
Corp. v. MAC Panel Co., 133 F.3d 860, 868-70 (Fed. Cir. 1997). This Court apparently
overlooked Jaxon’s contention that L-3’s assertion of patent infringement claims against Jaxon
itself, the immunity conferred by 28 U.S.C. § 1498(a) notwithstanding, constituted a distinct
form of patent misuse.
Before turning to the substance of L-3’s instant motion, the Court pauses to sua sponte
address an apparent error in its prior ruling. With the benefit of hindsight and further
development of this case, the Court concedes that its prior order overruling Jaxon’s Objections
was too narrowly focused and failed to address the issues Jaxon specifically raised. However,
the Court also notes that, regardless of that error, the outcome was correct: dismissal of Jaxon’s
“counterclaim” for patent misuse, to the extent it is based on the provisions of 28 U.S.C.
§1498(a), remains appropriate for several reasons.
First, as this Court noted in a footnote to its prior order, the Virginia Panel case states
that “patent misuse is an affirmative defense.” 133 F.3d at 868. Jaxon, along with the other
Defendants, have preserved that affirmative defense in their Answer. This Court is aware of no
authority that allows parties to assert an affirmative counterclaim for declaratory relief sounding
in § 1498(a), while simultaneously asserting an affirmative defense on precisely the same
grounds. (Indeed, Jaxon’s counterclaim sought only declaratory relief, making it essentially
indistinguishable from an affirmative defense.)
Moreover, as the Magistrate Judge noted in the earlier Recommendation, a claim seeking
a declaratory judgment is appropriate only where the party lacks another vehicle that would
provide a meaningful remedy. Here, Jaxon has an appropriate remedy for its contention that L3’s infringement claims are precluded by 28 U.S.C. § 1498(a): it may seek summary judgment
on its affirmative defense. Thus, a counterclaim for declaratory judgment regarding 28 U.S.C.
§1498(a) is duplicative of the Defendants’ pending affirmative defense and properly dismissed.
This brings us back to L-3’s instant motion. L-3 argues that the Court should grant it
summary judgment on the Defendants’ affirmative defense under § 1498(a) simply because the
Court has dismissed Jaxon’s § 1498(a) counterclaim. The preceding discussion should make
clear why that argument lacks merit, but to the extent it does not, the Court expressly rejects L3’s argument that this Court “f[ound] that Jaxon did not have [section] 1498 Statute (sic)
immunity.” The Court made no such finding, having never reached Jaxon’s argument that its
contracts with the Government contained the necessary language. L-3 does not offer any
substantive argument as to the Defendants’ affirmative defense under § 1498(a), and thus, the
Court denies L-3’s motion seeking its dismissal.
4. Patent misuse
The Court turns to the remaining portion of L-3’s motion, directed at the residual portion
of Jaxon’s counterclaim for patent misuse and the Defendants’ affirmative defense on the same
grounds. L-3 argues that the claim of patent misuse is limited to cases involving antitrust-like
behavior by the patent holder, such as “tying” a patent license to some other concession that the
licensee must give. In its response, Jaxon characterizes that a counterclaim of patent misuse is
also cognizable when the patent holder is engaged in “sham litigation,” lacking any reasonable
basis to believe that its patent claims are colorable2 and simply attempting to interfere with a
This Court’s March 23, 2013 Order (# 589) partially granting L-3’s motion to dismiss
discussed the general principles governing patent misuse claims, finding the doctrine to generally
be limited to the antitrust context and expressing “profound doubts” that a misuse counterclaim
could be predicated solely on allegations that L-3 was engaging in “sham litigation.”3 Jaxon
argues here that, contrary to the Court’s prior pessimism, the Federal Circuit has recognized the
doctrine of patent misuse in “sham litigation” cases. For example, Jaxon cites to Monsanto Co.
Greatly summarizing a lengthy and factually-intensive argument, Jaxon contends that L3’s patent infringement claims are frivolous “sham litigation” because the federal government
exercised its right to appropriate title to the patented technology, which was invented by L-3 in
furtherance of a federal contract, thus depriving L-3 of the exclusive right to practice the patent.
Among other things, the Court noted that Jaxon’s counterclaim, which seeks only a
declaratory judgment of misuse and no other relief, is thus indistinguishable from the
Defendants’ affirmative defense that “the claims of the asserted patents are unenforceable for
patent misuse.” Docket # 252 at 37, ¶ 8.
v. Scruggs, 459 F.3d 1328, 1339 (Fed. Cir. 2006), for the proposition that “patent misuse may be
found even where there is no antitrust violation . . . .”
Jaxon is correct that the quoted language is present in Monsanto, but it does not carry the
weight Jaxon ascribes to it. Monsanto goes on to explain that patent misuse arises only where
the patent holder “impermissibly broaden[s] the scope of the patent grant with anticompetitive
effect,” and that actions by the patent holder that are “reasonably within the patent grant”
preclude the success of a patent misuse defense. Id. In Monsanto, the patent holder refused to
license its patented seeds unless the licensee also agreed to various other provisions, including an
agreement not to replant seeds. The defendant purchased some of the patented seeds, but
managed to avoid signing the required licensing agreement and replanted the seeds, drawing a
patent infringement suit. The defendant asserted defenses sounding an antitrust violations and
patent misuse. Following a trial, the District Court granted judgment to the patent holder on the
defenses, and on appeal, the Federal Circuit affirmed. It found the alleged behavior did not
constitute an antitrust violation, and that the various additional licensing restrictions were “a
valid exercise of its rights under the patent laws.” 459 F.3d at 1340. Monsanto does not endorse
Jaxon’s “sham litigation” theory of patent misuse; it merely recognizes that although an actual
antitrust violation is not necessary in order for patent misuse to arise, some form of
“anticompetitive” behavior beyond seeking to enforce rights inherent in the patent must be
present. Here, L-3’s infringement claims, regardless of their ultimate merit, are clearly invoking
rights that purport to arise from the scope of the patent grant itself.
This Court has reviewed the various authorities cited by Jaxon in support of its contention
that a patent misuse counterclaim can be premised solely on the assertion that the patent holder is
asserting frivolous infringement claims, and finds that none of those authorities persuasive on
this point. Indeed, the very notion is paradoxical: there is no need for a defense of patent misuse
– which precludes the patent holder from enforcing the patent against the successful defendant
until such misuse ceases – in situations where the infringement claims themselves are frivolous.
Put differently, where there is no colorable assertion of infringement, no defense to the nonexistent infringement is necessary. Accordingly, the Court grants summary judgment to L-3 on
Jaxon’s counterclaim sounding in patent misuse, as well as the Defendants’ affirmative defense
to that effect.4
B. Motions to Restrict Access
The parties filed motions seeking to restrict access to portions of each other’s summary
judgment briefing (# 914, 959, 960, and 1000). Thereafter, the Magistrate Judge convened a
hearing to discuss the proliferation of motions to restrict access and had some success in
narrowing the scope of such motions. The Magistrate Judge issued a Minute Order (# 1047)
directing the lifting of provisional restrictions on certain documents. Thereafter, the parties
conferred and filed “supplements” (# 1053, 1058, 1061), partially resolving aspects of the
pending motions to restrict, and occasionally suggesting that the parties “will be filing a
supplemental motion” with regard to other documents.
This Court confesses that it is unable, with reasonable effort, to ascertain precisely what
matters remain in dispute with regard to the Motions to Restrict Access identified above.
Accordingly, the Court denies these motions without prejudice. The parties shall confer in an
The dismissal of these defenses does not, however, compromise the Defendants’ ability
to argue that L-3 lacks the authority to assert patent infringement pursuant to 28 U.S.C. §
1498(a) or contend that the Government has appropriated title to the patented inventions; it
merely dismisses the entirely redundant assertion that these standalone defenses can be
aggregated together to constitute an additional defense of “patent misuse.” Nor does it preclude
the Defendants from seeking sanctions, including attorney fees, against L-3 should the Court
ultimately conclude that L-3’s patent infringement counterclaims were indeed objectively
unreasonable or frivolous. 35 U.S.C. § 285.
attempt to identify which documents found at Docket # 898, 942, 943, and 967 both: (i) remain
under restricted access following the Magistrate Judge’s Minute Order, and (ii) may properly
have such restrictions lifted based on the parties’ supplemental submissions. Within 30 days of
this Order, the parties shall jointly identify those documents for which remaining restrictions on
access should be lifted (or expressly withdraw a document from the Court’s consideration), and
the Clerk of the Court shall lift such restrictions. As to the remaining documents from Docket #
898, 942, 943, and 967, each party may file a single Motion to Restrict Access, specifically
identifying the documents for which restricted access should continue to be maintained and
supplying the requisite supporting argument. To the extent possible, the moving party should
also propose redacted versions of these exhibits that could be publicly-filed.
C. Claim construction
The parties have filed claim construction briefs and now request that the Court schedule a
claim construction hearing. Given the possibility that the Defendants could defeat L-3’s patent
infringement claims (in part or whole) on the collateral grounds discussed above, the Court finds
it improvident to attempt to construe the claim language unless and until the Court concludes that
the patent infringement claims will require resolution on their merits.
To expedite resolution of these issues, the Court will direct that, within 30 days of this
Order, the Defendants shall move for summary judgment on L-3’s patent infringement claims on
the grounds that: (i) the claims against the Defendants themselves are preempted by 28 U.S.C.
§1498(a); and (ii) that the Government exercised its right to appropriate title to the patented
technology. The motion and response shall further address the extent to which L-3’s patent
infringement claims would remain viable should the Court find merit in one or both of these
contentions (i.e. the extent to which Jaxon has allegedly infringed the patent in services
performed for non-governmental clients).
D. Withdrawal of counsel
Two of L-3’s counsel seek to withdraw from representation. Because L-3 continues to
enjoy the services of its remaining counsel, these motions are granted.
For the foregoing reasons, L-3’s Motion for Partial Summary Judgment (# 897) is
GRANTED IN PART and DENIED IN PART as set forth herein. The parties’ Motions to
Restrict Access (# 914, 959, 960, and 1000) are DENIED without prejudice to additional filings
as set forth above. The parties’ Joint Motion for Claim Construction Hearing (# 981) is
DENIED without prejudice, pending the filing of a motion for summary judgment by the
Defendant within 30 days as set forth above. The Motions to Withdraw as Counsel (# 995, 996)
are GRANTED, and the Clerk of the Court shall terminate electronic service on Lacy Kolo and
Scott A.M. Chambers with regard to this case.
Dated this 22nd day of September, 2014.
BY THE COURT:
Marcia S. Krieger
Chief United States District Judge
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