Floodbreak, LLC v. Art Metal Industries, LLC et al
Filing
236
ORDER granting in part and denying in part 142 Sealed Motion for Partial Summary Judgment of No Direct or Indirect Infringement by Kevin Biebel and No Willful Infringement by Art Metal Industries or Kevin Biebel; granting in part and denying in part 162 Redacted Motion for Partial Summary Judgment of No Direct or Indirect Infringement by Kevin Biebel and No Willful Infringement by Art Metal Industries or Kevin Biebel. Signed by Judge Stefan R. Underhill on 9/3/2020. (Simon, K)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
FLOODBREAK, LLC,
Plaintiff,
No. 3:18-cv-503 (SRU)
v.
ART METAL INDUSTRIES, LLC, et al.,
Defendants.
RULING ON DEFENDANTS’ MOTION FOR PARTIAL SUMMARY JUDGMENT
FloodBreak, LLC (“FloodBreak”) filed this patent infringement action against Art Metal
Industries, LLC (“AMI”) and its principal owner, Kevin F. Biebel (collectively, “Defendants”).
The complaint alleges that Biebel and AMI are directly infringing and inducing infringement of
FloodBreak’s United States Patent No. 9,752,324 (“the ‘342 patent”), entitled “Flood Protection
for Underground Air Vents.” It further alleges that Defendants’ infringement is willful.
Defendants have moved for summary judgment on FloodBreak’s claims against Biebel
for direct and induced infringement, and against both Biebel and AMI for willful infringement.
In support of their motion, they contend that: (1) there is no evidence suggesting that Biebel is
an alter ego of AMI, which defeats the direct infringement claim; and (2) Biebel could not have
intended to induce infringement as a matter of law because, when Biebel learned of the ‘342
patent, he obtained an opinion of non-infringement from counsel and relied on that opinion in
good faith, which defeats the indirect infringement claim. Defendants additionally argue that,
because they obtained and reasonably relied on an opinion of counsel, they are also entitled to
summary judgment on the willful infringement claim.
As discussed below, I conclude that Biebel is entitled to summary judgment on the direct
infringement claim because FloodBreak has not sufficiently shown that declining to pierce the
corporate veil would perpetuate a fraud or other injustice. I further conclude that the record
sufficiently demonstrates that Biebel knew of the ‘342 patent and of a high likelihood that his
actions infringed on the patent months before he obtained an opinion of counsel, and that the
opinion of counsel is not reliable enough to foreclose a finding of intent in any event. For those
reasons, I grant summary judgment to Defendants on the direct infringement claim against
Biebel; deny summary judgment on the indirect infringement claim against Biebel; and deny
summary judgment on the willful infringement claim against AMI and Biebel.
I.
Standard of Review
A court shall grant summary judgment when the movant demonstrates that there is no
genuine dispute with respect to any material fact and that the movant is entitled to judgment as a
matter of law. Fed. R. Civ. P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256
(1986). When reviewing a summary judgment motion, a court must construe the facts of record
in the light most favorable to the nonmoving party and must resolve all ambiguities and draw all
reasonable inferences against the moving party. Anderson, 477 U.S. at 255; Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Adickes v. S.H. Kress & Co., 398
U.S. 144, 158–59 (1970).
When a motion for summary judgment is properly supported by documentary and
testimonial evidence, however, the nonmoving party may not rest upon the mere allegations or
denials of the pleadings and instead must present sufficient probative evidence to establish a
genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986); Colon v.
Coughlin, 58 F.3d 865, 872 (2d Cir. 1995). To present a “genuine” issue of material fact, there
must be contradictory evidence “such that a reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248. “Only disputes over facts that might affect the
2
outcome of the suit under the governing law will properly preclude the entry of summary
judgment.” Id.
If the nonmoving party has failed to make a sufficient showing on an essential element of
his case with respect to which he has the burden of proof at trial, then summary judgment is
appropriate. Celotex, 477 U.S. at 322. In that instance, “there can be ‘no genuine issue as to any
material fact,’ because a complete failure of proof concerning an essential element of the
nonmoving party’s case necessarily renders all other facts immaterial.” Id. at 322–23; accord
Goenaga v. March of Dimes Birth Defects Found., 51 F.3d 14, 18 (2d Cir. 1995) (holding that a
movant’s burden is satisfied if he can point to an absence of evidence to support an essential
element of the nonmoving party’s claim).
II.
Background
A. Statement of Facts1
1. Background of AMI & Kevin Biebel
AMI—an LLC with its principal place of business in Connecticut—manufactures and
sells metal products. Defs. Local Rule 56(a)1 Statement of Facts, Doc. No. 144, at ¶¶ 2, 3; Pl.
Local Rule 56(a)2 Statement of Facts, Doc. No. 174, at ¶ 3. According to AMI’s testimony,
AMI has a number of customers spanning various industries and, as of February 2019, had 18
employees with job functions that include welding, metal fabrication, polishing, painting, and
assembly work. See Defs. Local Rule 56(a)1 Statement of Facts, Doc. No. 144, at ¶¶ 7, 8; Pl.
Local Rule 56(a)2 Statement of Facts, Doc. No. 174, at ¶¶ 7, 8.
The facts are primarily drawn from the parties’ Local Rule 56(a)1 and Local Rule 56(a)2 Statements of
Fact. Unless otherwise indicated, the facts are not disputed.
1
3
Among the products manufactured and sold by AMI are the mechanical closure devices
(“MCDs”) currently in dispute, which are designed to fit within air vents of the New York City
subway system. Defs. Local Rule 56(a)1 Statement of Facts, Doc. No. 144, at ¶ 10. AMI sells
its MCDs to two customers: T. Moriarty & Sons, Inc. (“Moriarty”) and Gramercy Group Inc.
(“Gramercy”). Id. at ¶ 11. Moriarty and Gramercy have each been awarded a contract from the
MTA, part of which involves the installation of MCDs. Id. at ¶ 12.
Biebel joined AMI in 2009 and rose to the ranks of Vice President in 2014. See Defs.
Local Rule 56(a)1 Statement of Facts, Doc. No. 144, at ¶¶ 4, 5; Pl. Local Rule 56(a)2 Statement
of Facts, Doc. No. 174, at ¶ 5. He purchased AMI from his wife in 2014 and now serves as
CEO. Pl. Local Rule 56(a)2 Statement of Facts, Doc. No. 174, at ¶ 84; Defs. Local Rule 56(a)1
Statement of Facts, Doc. No. 144, at ¶¶ 4, 5. AMI has no directors, and Biebel testified that he is
the company’s only officer. Pl. Local Rule 56(a)2 Statement of Facts, Doc. No. 174, at ¶ 83.
At his deposition, Biebel described his job responsibilities as “[j]ust about everything that
pertains to running the company” and remarked that he is the “[c]hief cook and bottle washer” of
AMI. Pl. Local Rule 56(a)2 Statement of Facts, Doc. No. 174, at ¶¶ 85, 88. Biebel confirmed
that he “handle[s] all estimating, contract negotiations, manages [the] plant and is head of all
R&D.” Id. at ¶ 86. Biebel also confirmed that he is in charge of quality control and field project
management. Id. at ¶ 87.
From March to April 2017, Biebel wrote himself checks for thousands of dollars from
AMI’s checking account.2 See id. at ¶¶ 101, 102. The memo line identified those checks as
loans. Id. Citing to an email dated March 29, 2018, FloodBreak also contends that a bank
2
Specifically, he wrote checks to himself for $5,000 on March 3, 2017; for $1,000 on March 15, 2017; for
$1,200 on March 20, 2017; for $10,000 on March 22, 2017; for $15,000 on April 14, 2017; for $1,000 on April 18,
2017; for $5,000 on April 26, 2017; and for $500 on April 27, 2017. Id. at ¶¶ 101, 102.
4
representative for an AMI account once wrote to Biebel: “Your deposit is all set. I also want to
let you know your personal account is overdrawn. Would you like us to transfer funds for you.”
Pl. Local Rule 56(a)2 Statement of Facts, Doc. No. 174, at ¶ 104.
According to FloodBreak, AMI has not generated basic corporate financial documents
such as profit and loss statements. Id. at ¶ 105. As support, FloodBreak points to the testimony
of Defendants’ damages expert that she previously asked for AMI’s profit and loss statement,
and was told that “it wasn’t available.” Id.
2. MCD Contracts
In early 2015, FloodBreak signed its first contract to supply its MCD units to Earth
Construction Corporation. Id. at ¶ 57. Around that time, Christopher Taylor, an engineer with
Arup Group Limited, had recommended Biebel as someone who might be able to assist with
fabrication work or with local contacts to help with field inspections, shop drawings, or
installation work. Id. at ¶ 58. Louis Waters, FloodBreak’s President, then reached out to Biebel
to see if Biebel could provide assistance. Id. at ¶ 59.
Waters testified that, in March 2016, he learned that Biebel had been bidding against
FloodBreak on an MTA contract with “a copy of” FloodBreak’s MCD. Id. at ¶ 61; Bannon Ex.
5, Doc. No. 176-5, at 224:9–228:4. He thereafter “explained to [Biebel] that [FloodBreak] had a
patent pending on it.” Id. Waters further testified that, after he informed Biebel of FloodBreak’s
patent application, Biebel said that “he would withdraw his bids because he didn’t want to be in
that situation.” Bannon Ex. 5, Doc. No. 176-5, at 229:12–19. Biebel did not follow through on
that promise.
5
a. Railroad Construction Company/Beach Erectors Contract
Railroad Construction Company (“RCC”), another MTA contractor, hired Beach Erectors
as its subcontractor. Pl. Local Rule 56(a)2 Statement of Facts, Doc. No. 174, at ¶ 65. Biebel
testified that Beach Erectors “was then to buy the MCDs from me. So I would have worked for
Beach, Beach would have worked for RCC.” Id.
According to FloodBreak, on April 6, 2016, Biebel e-mailed RCC, informing them that
he decided to manufacture a prototype MCD “to have for feel and touch in plant as well as wet
test and certify to enable [RCC] to present same to MTA for approval.”3 Id. at ¶ 90. Biebel then
asked Tucker Murphy from Beach Erectors to send him FloodBreak’s drawings that were
submitted with FloodBreak’s bid. Id. at ¶ 91. Biebel instructed Murphy to “tell them you’re
planning how to install and need real numbers to understand means and methods - use the 37612
job as a reference - weights handling etc.” Id. at ¶ 92. Murphy testified that he felt “[v]ery
uncomfortable with the request” and that “it didn’t feel right.” Bannon Ex. 15, Doc. No. 176-15,
at 181:15–183:6.
Around July 8, 2016, Beach Erectors submitted to the MTA the first of many “Or-Equal”
submissions for Biebel’s “equal” of FloodBreak’s MCD. Id. at ¶ 64. The MTA appears to have
required contractors using MCDs supplied by companies other than FloodBreak to seek approval
of the use of those MCDs as an alternative to the approved MCD model manufactured by
FloodBreak. See Doc. No. 142-3, at AMI 002899; Defs. Local Rule 56(a)1 Statement of Facts,
Doc. No. 144, at ¶ 13.
As part of the “Or-Equal” submission, Biebel submitted a letter dated June 15, 2016,
which stated that “[n]othing in our design infringes on patents pending or received for this device
3
The next day, on April 7, 2016, FloodBreak’s application for the ‘342 patent was published and publicly
available. Id. at ¶ 73.
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or any IP rights owned by another manufacture[r].” Defs. Local Rule 56(a)1 Statement of Facts,
Doc. No. 144, at ¶ 54; Pl. Local Rule 56(a)2 Statement of Facts, Doc. No. 174, at ¶ 66. The
letter was “[s]worn and signed by” Biebel. Pl. Local Rule 56(a)2 Statement of Facts, Doc. No.
174, at ¶ 67.
Biebel testified that he did not recall whether he consulted with an attorney before he
wrote that or other patent assurance letters. See id. at ¶ 72. He further testified that he did not
conduct a patent search beforehand because he “didn’t feel it was necessary” and because
“[w]hat I was doing was my own design.” Bannon Ex. 14, Doc. No. 176-14, at 72:5–73:2.
Murphy of Beach Erectors testified that the MTA required the letter from Biebel and that Beach
Erectors relied on it. Pl. Local Rule 56(a)2 Statement of Facts, Doc. No. 174, at ¶ 68.
On August 8, 2016, Kenneth Feng of New York City Transit e-mailed Michael Bruno of
RCC about a Freedom of Information Law (“FOIL”) request for AMI’s “Or-Equal” submission.
Id. at ¶ 74. In that e-mail, Feng wrote that FloodBreak submitted the FOIL request “to determine
. . . whether AMI has infringed on FloodBreak’s intellectual property/patent(s).” Bannon Ex. 18,
Doc. No. 176-18. The e-mail was shared with Murphy and Biebel. Id.
Murphy testified that, at least as of that date, he was aware that there was a patent
infringement issue involving Biebel’s MCDs. Bannon Ex. 15, Doc. No. 176-15, at 171:24–72:2.
Murphy also opined that Biebel, too, “would certainly have been aware that there was a patent
infringement issue” as of August 8, 2016. Id. at 172:23–173:1. Moreover, according to
Murphy’s testimony, Waters had shared with Murphy his opinion that there was a patent
infringement problem with Biebel’s MCDs and Murphy discussed “the patent infringement
issue” with Biebel “[o]n occasion.” Id. at 172:3–172:15.
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b. Other Patent Assurance Letters
Biebel also submitted a patent assurance letter dated June 15, 2016 in connection with the
MTA-Zafra Minhas contract, declaring that “[n]othing in our design infringes on patents pending
or received for this device or any IP rights owned by another manufacture[r].” Pl. Local Rule
56(a)2 Statement of Facts, Doc. No. 174, at ¶ 78. The letter was “[s]worn and signed by” Biebel.
Id. Biebel submitted another patent assurance letter dated November 16, 2016 as part of the “OrEqual” submission package in connection with the MTA-Moriarty contract, which again swore
that “[n]othing in our design infringes on patents pending or received for this device or any IP
rights owned by another manufacture[r].” Id. at ¶ 79.
After the ‘342 patent was issued on September 5, 2017, Biebel submitted a patent
assurance letter dated October 10, 2017 as part of Gramercy’s “Or-Equal” submission package.
Id. at ¶ 80. In that letter, Biebel affirmed that “[n]othing in our design infringes on patents
pending or received for this device or any IP rights owned by another manufacture[r].” Id. at ¶
80.
3. FloodBreak’s Drawings
On January 4, 2017, Biebel received Drawings B-511 to B-514 from Lauren Anchor of JTrack LLC, which he referred to as “new drawings from MTA – (floodbreak).” See id. at ¶ 95.
Biebel subsequently sent those drawings to his draftsman, Domenic Cartelli, instructing him to
“[g]o thr[ough] all of these new details and include in our drawings.” See id. at ¶ 96.
4. AYR’s Opinion of Non-Infringement
Guy Yale, a partner at the law firm Alix, Yale & Ristas (“AYR”), testified that Biebel
contacted him to request assistance with preparing a patent application in 2016. Bannon Ex. 1,
8
Doc. No. 176-1, at 23:16–26:1.4 AYR thereafter assisted Biebel with prosecuting a patent
application for AMI’s MCD. See id. at 74:7–76:22; Bannon Ex. 14, Doc. No. 176-14, at 215:4–
17.
On February 22, 2018, Edmond Bannon, counsel for FloodBreak, sent a letter to AMI
accusing it of infringing FloodBreak’s ’342 patent. Defs. Local Rule 56(a)1 Statement of Facts,
Doc. No. 144, at ¶ 25. Biebel testified that, once he received the letter on February 23, 2018, he
forwarded a copy to Yale. Ex. R, Doc. No. 142-18, at 213:3–214:1. At Yale’s deposition, Yale
noted that he and Tim Ceislak, an associate at the time, visited the AMI production facility to
inspect AMI’s MCDs on March 6, 2018.5 See Defs. Local Rule 56(a)1 Statement of Facts, Doc.
No. 144, at ¶¶ 35, 40; Pl. Local Rule 56(a)2 Statement of Facts, Doc. No. 174, at ¶¶ 35, 40. Yale
explained that, during the inspection, he orally communicated to Biebel that they were of the
strong opinion that AMI’s MCD device did not infringe the ‘342 patent. Defs. Local Rule 56(a)1
Statement of Facts, Doc. No. 144, at ¶ 41; Pl. Local Rule 56(a)2 Statement of Facts, Doc. No.
174, at ¶ 41.
As Yale testified, AYR’s opinion that the AMI MCDs did not infringe the ‘342 patent is
memorialized in an internal two-page memorandum. Doc. No. 142-21, at 50:7–17; see also Ex.
X, Doc. No. 162-24 (AYR’s internal memorandum). According to Yale, “the substance” of the
memorandum was verbally communicated to Biebel. Doc. No. 142-21, at 50:7–17. Yale
recalled orally advising Biebel that AMI’s MCDs did not meet the “profile,” “stops,” and
“gravitational” features of the ‘342 patent claims. See id. at 47:19–48:2. Yale additionally
4
As Yale testified, he received his law degree in 1976, started practicing as a patent attorney in 1979, and
has since accumulated experience prosecuting patents and in patent litigation. Ex. U, Doc. No. 142-21, at 8:8–16,
20:21–23:5.
5
Yale testified that Ceislak had prepared “more than one or two opinions” before analyzing FloodBreak’s
infringement allegations, but that he did know exactly how many. Doc. No. 142-21, at 121:23-22:02.
9
testified that he and Biebel “were involved in numerous telephone conversations throughout the
period of maybe a month after that meeting with him.” Doc. No. 142-21, at 50:10–13.
B. Procedural History
FloodBreak filed the instant suit on March 26, 2018. See Compl., Doc. No. 1. As
asserted in its complaint, FloodBreak alleges that Defendants infringed, and continue to infringe,
multiple claims of the ‘342 patent by making, using, offering to sell, and selling MCDs covered
by the ‘342 patent. Id. at ¶¶ 21–22. The complaint specifically alleges that AMI is directly
infringing the patent and that, because AMI is the alter ego of Biebel, Biebel is also directly
infringing the ‘342 patent. Id. The complaint further alleges that both Biebel and AMI are
inducing infringement of the ‘342 patent, and that their infringement is willful. Id. at ¶¶ 23–26.
FloodBreak seeks an order permanently enjoining Defendants’ allegedly-infringing activities as
well as monetary damages. Id. at 7.
Defendants answered the complaint on May 11, 2018, doc. no. 23, and filed the instant
motion on February 12, 2020 following the close of discovery, doc. no. 142. FloodBreak
opposed the motion on March 13, 2020, doc. no. 173, and Defendants replied on March 27,
2020, doc. no. 188. Oral argument was held on June 11, 2020 on all pending motions.6
6
Defendants have filed four other motions: (1) a motion for summary judgment based on a patent license
(doc. no. 60); (2) a motion for summary judgment of non-infringement and invalidity (doc. no. 147); (3) a motion to
exclude testimony of FloodBreak’s damages expert (doc. no. 135); and (4) a motion for summary judgment of no
lost profits damages (doc. no. 130). I address those in separate opinions.
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III.
Discussion
A. Biebel is Not Liable for Direct Patent Infringement under 35 U.S.C. § 271(a) as a Matter
of Law Because the Circumstances Do Not Justify Piercing the Corporate Veil Under
Either the Identity or Instrumentality Rule.
The Patent Act provides that “whoever without authority makes, uses, offers to sell, or
sells any patented invention . . . infringes the patent.” 35 U.S.C. § 271(a). “The ‘corporate veil’
shields a company’s officers from personal liability for direct infringement [under 35 U.S.C. §
271(a)] that the officers commit in the name of the corporation, unless the corporation is the
officers’ ‘alter ego.’” Wordtech Sys., Inc v. Integrated Networks Sols., Inc., 609 F.3d 1308, 1313
(Fed. Cir. 2010). Accordingly, in order for corporate officers to be held personally liable for the
direct infringement of a corporation under section 271(a), “there must be evidence sufficient to
justify piercing the corporate veil.” Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544,
552 (Fed. Cir. 1990); see also Wordtech Sys., Inc., 609 F.3d at 1313 (“To determine whether
corporate officers are personally liable for the direct infringement of the corporation under §
271(a) requires invocation of those general principles relating to piercing the corporate veil.”).
Because AMI was incorporated in Connecticut, Connecticut law governs the question
whether AMI is the alter ego of Biebel. Chapco, Inc. v. Woodway USA, Inc., 282 F. Supp. 3d
472, 481 (D. Conn. 2017) (“In determining whether to pierce corporate formalities because two
entities are alter egos of each other, the court must apply the law of the state of incorporation, in
this case Connecticut.”). Under Connecticut law, “[o]rdinarily the corporate veil is pierced only
under exceptional circumstances, for example, where the corporation is a mere shell, serving no
legitimate purpose, and used primarily as an intermediary to perpetuate fraud or promote
injustice.” Naples v. Keystone Bldg. & Dev. Corp., 295 Conn. 214, 233 (2010) (internal citations
omitted). “The improper use of the corporate form is the key to the inquiry.” Id.
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As the Supreme Court of Connecticut has observed, “courts decline to pierce the veil of
even the closest corporations in the absence of proof that failure to do so will perpetrate a fraud
or other injustice.” Id. at 234. “No hard and fast rule, however, as to the conditions under which
the entity may be disregarded can be stated as they vary according to the circumstances of each
case.” Id. at 233 (internal citations omitted). Whether the circumstances justify disregarding the
corporate entity is a question of fact. Id. at 234 (internal citations omitted).
Connecticut courts have recognized two theories under which a corporate veil may be
pierced: the “instrumentality” theory and the “identity” theory. RBC Bearings, Inc. v. Thin
Section Bearings, Inc., 2007 WL 2727160, at *1 (D. Conn. Sept. 18, 2007). Defendants argue
that there is insufficient evidence to justify piercing the corporate veil under either rule. For the
reasons that follow, I agree.
a. Instrumentality Theory
To pierce the corporate veil under the instrumentality theory, a plaintiff must
establish the following three elements:
(1) “Control, not mere majority or complete stock control, but complete domination,
not only of finances but of policy and business practice in respect to the
transaction attacked so that the corporate entity as to this transaction had at the
time no separate mind, will or existence of its own;”
(2) that “[s]uch control must have been used by the defendant to commit fraud or
wrong, to perpetrate the violation of a statutory or other positive legal duty, or a
dishonest or unjust act in contravention of [the] plaintiff's legal rights;” and
(3) that “the aforesaid control and breach of duty must proximately cause the injury
or unjust loss complained of.”
Am. Wholesalers Underwriting, Ltd. v. Am. Wholesale Ins. Group., Inc., 312 F. Supp. 2d 247,
257–58 (D. Conn. 2004) (citing Zaist v. Olson, 154 Conn. 563, 575 (1967)).
12
i. A Reasonable Factfinder Could Conclude that Biebel Exercised Complete
Domination over AMI.
Courts consider a number of factors in determining whether an individual possesses the
requisite level of control, including, as relevant here: “(1) the absence of corporate formalities;
(2) inadequate capitalization; (3) whether funds are put in and taken out of the corporation for
personal rather than corporate purposes; (4) overlapping ownership, officers, directors,
personnel; (5) common office space, address, phones; [and] (6) the amount of business discretion
by the allegedly dominated corporation.”7 Roth Staffing Companies, L.P. v. Brown, 2016 WL
308773, at *4 (D. Conn. Jan. 25, 2016) (internal citations omitted). “When proof is adduced on
some or all of these factors are satisfied, courts may pierce the corporate veil to hold both the
individual owner or shareholder and the dominant or more adequately capitalized corporation
responsible for the dominated corporation’s liabilities, making their assets available to satisfy
judgments.” Id. at *8.
Applying the foregoing factors, I conclude that there is a genuine dispute of material fact
regarding whether Biebel exercised complete domination over AMI. This case is analogous to
Connecticut Light & Power Co. v. Westview Carlton Grp., LLC, 108 Conn. App. 633, 641
(2008), where a Connecticut appellate court identified “more than ample evidence” to support
the lower court’s conclusion that the corporate veil should be pierced under the instrumentality
test. In so holding, the court emphasized, among other things, how funds were transferred out of
the corporation to pay off personal loans, and how the corporate entity did not file tax returns or
mandatory annual reports and lacked any other documentation required for a LLC. Id. at 641.
7
Courts also consider factors such as: “(7) whether the corporations dealt with each other at arm’s length;
(8) whether the corporations are treated as independent profit centers; (9) payment or guarantee of debts of the
dominated corporation; and (10) whether the corporation in question had property that was used by the other
corporations as if it were its own.” Id. (internal citations omitted). Those factors, however, are not relevant here
because they relate to multiple corporate entities, rather than a closely held corporation. In re Rouette, 564 B.R.
157, 176 n.6 (Bankr. D. Conn. 2017).
13
Here, although FloodBreak points to no evidence indicating that AMI was or is
undercapitalized,8 AMI is similar in other respects to the corporation in Connecticut Light &
Power Co. Of particular note, the record reflects an absence of basic corporate documents. As
Defendants’ damages expert testified, when she requested a profit and loss statement from AMI,
she was informed that such a document was not available. Pl. Local Rule 56(a)2 Statement of
Facts, Doc. No. 174, at ¶ 105. Moreover, according to FloodBreak, the only corporate financial
documents produced were “scraps of paper,” bank statements, invoices, and checks. Mem. in
Opp., Doc. No. 173, at 16.
In addition, FloodBreak has adduced evidence demonstrating that funds were repeatedly
transferred out of the corporation for personal rather than corporate purposes. For instance,
FloodBreak has introduced multiple checks indicating that thousands of dollars were taken from
AMI’s checking account and given to Biebel as loans. Also revealing is an e-mail to Biebel from
AMI’s bank representative that states, “Your deposit is all set. I also want to let you know your
personal account is overdrawn. Would you like us to transfer funds for you.” Pl. Local Rule
56(a)2 Statement of Facts, Doc. No. 174, at ¶ 104.
Moreover, in In re Rouette, the court weighed how the defendant was solely responsible
for the corporate entity’s finances, policies, and business practices in concluding that the
During oral argument, I asked FloodBreak’s counsel if there was evidence that Defendants were
undercapitalized. FloodBreak’s counsel responded that Defendants were asked during a deposition whether, if there
was a judgment of over ten million dollars, AMI would be able to pay it, to which Defendants replied in the
negative. That fact, however, does not demonstrate that AMI has insufficient capital to operate its regular business,
and thus does not support FloodBreak’s assertion that AMI is undercapitalized. BLACK'S LAW DICTIONARY (11th
ed. 2019) (defining “undercapitalization” as “[t]he financial condition of a firm that does not have enough capital to
carry on its business”); In re Packaged Seafood Prod. Antitrust Litig., 338 F. Supp. 3d 1118, 1155 (S.D. Cal. 2018)
(“Adequate capitalization means capital reasonably regarded as adequate to enable [the corporation] to operate its
business and pay its debts as they mature.”) (internal quotation marks and citations omitted). Because a judgment
has yet to be rendered in this case, the ten million dollar judgment in question is a purely hypothetical liability,
rather than a prospective one. Cent. Illinois Carpenters Health & Welfare Tr. Fund v. Struben, 2009 WL 497393, at
*16 (C.D. Ill. Feb. 24, 2009) (“’Undercapitalized’ means that the company has failed to set aside ‘unencumbered
capital reasonably adequate for the corporation's prospective liabilities.’”) (internal citations omitted).
8
14
evidence presented at trial established that the defendant exercised sufficient control over the
corporation under the instrumentality rule. 564 B.R. 157, 175–76 (Bankr. D. Conn. 2017). Here,
too, the evidence reflects that Biebel enjoyed a wide range of responsibilities at AMI. Biebel
serves as AMI’s CEO, and he testified that he is the sole officer of AMI and that there are no
directors. Pl. Local Rule 56(a)2 Statement of Facts, Doc. No. 174, at ¶ 83. He described his job
responsibilities as “[j]ust about everything that pertains to running the company” and remarked
that he is the “[c]hief cook and bottle washer.” Id. at ¶¶ 85, 88. He also testified that he
“handle[s] all estimating, contract negotiations, manages [the] plant and is head of all R&D,” and
is in charge of quality control and field project management. Id. at ¶¶ 86, 87.
For those reasons, and viewing the facts of record in the light most favorable to
FloodBreak, I conclude that there is a triable issue regarding whether Biebel employed the
requisite level of control over AMI to permit piercing of the corporate veil.
ii. Regardless, FloodBreak Has Failed to Sufficiently Show That Biebel Used
His Control Over AMI to Perpetuate a Fraud or Wrong.
To prevail on the second prong, a plaintiff must establish that the individual defendant
leveraged its control “to commit fraud or wrong, to perpetrate the violation of a statutory or other
positive legal duty, or a dishonest or unjust act in contravention of [the] plaintiff’s legal rights.”
Naples v. Keystone Bldg. & Dev. Corp., 295 Conn. 214, 233 (2010). Courts have commonly
pierced the corporate veil in patent infringement actions when the evidence suggests that the
corporate entity is a legal fiction and was formed merely to escape liability. For instance, in
Minnesota Min. & Mfg. Co v. Eco Chem, Inc., after the underlying patent infringement suit was
filed, the founding officers stripped the infringing corporation of its assets, established a new
corporation, and transferred the assets to the newly-formed corporation. 757 F.2d 1256, 1257–
59 (Fed Cir. 1985). The Minnesota district court concluded that the officers, as well as the new
15
corporation, were alter egos of the infringing corporate defendant and that the court therefore had
personal jurisdiction over them. Id. at 1264.
The Federal Circuit affirmed the decision on appeal, emphasizing how the officers
“purposely manipulated” the infringing corporation “so as to thwart [the plaintiff’s] recovery of
its judgment.” Id. at 1265. The court observed that, “[t]his is precisely the situation in which
courts feel most comfortable in using their equitable powers to sweep away the strict legal
separation between corporation and stockholders.” Id.
Similarly, in Pfizer Inc. v. Synthon Holding, B.V., a case on which FloodBreak relies, a
patentee brought a patent infringement action against three companies based on their abbreviated
new drug application (“ANDA”) for a generic equivalent to the patentee’s medication; one of the
defendants, Synthon Labs, later moved to dismiss for lack of personal jurisdiction. 386 F. Supp.
2d 666, 670–71 (M.D.N.C. 2005). The North Carolina district court denied the motion. Id.
Applying North Carolina’s instrumentality test, which is identical to Connecticut’s, the court
reasoned that Synthon Labs was the alter ego of the two other corporate defendants, Synthon
Pharma and Synthon Holding, both of which were based in North Carolina. Id. at 670–71, 677–
79. Central to the court’s conclusion was that “Synthon Labs was created solely to file the
ANDA for Synthon Pharma and Synthon Holding in an effort to manipulate jurisdiction
regarding the ANDA.” Id. at 679.
Moreover, in Chapco, Inc. v. Woodway USA, Inc., two corporations, Chapco and
Samsara, brought an action seeking a declaratory judgment that their treadmill products did not
infringe Woodway’s patent. 282 F. Supp. 3d 472, 476 (D. Conn. 2017). The plaintiffs thereafter
moved for summary judgment on Woodway’s counterclaims that they directly and indirectly
16
infringed its patents and were the alter egos of Brian Weinstein, who was the president of
Chapco and the managing member of Samsara. Id. at 479–82.
District Judge Janet C. Hall denied the motion on the alter ego claim, concluding that a
genuine issue of fact existed regarding whether Chapco and Samsara were the alter egos of
Weinstein. See id. at 481–82. Although Judge Hall did not explicitly conclude that the
corporations were formed to evade liability, she relied on facts illustrating that the corporations
were undercapitalized and heavily dependent on Weinstein—namely, that (1) Weinstein had
personally guaranteed the debts of both corporations; (2) Samsara had a year-to-date loss of
around $340,000; and (3) Samsara owed Chapco $800,000 with no current payment plan. Id.
Judge Hall also noted that Samsara had no employees of its own. Id. at 482.
Unlike Minnesota Min., Pfizer, and Chapco, there is no evidence here indicating that
AMI is undercapitalized or that it was created solely to escape liability for patent infringement.
On the contrary, the record establishes that AMI existed years before it manufactured and sold
the MCDs at issue, that it has 18 employees, and that it creates and sells metal products to a
number of different customers. Although Biebel might have transferred several tens of
thousands of dollars out of AMI’s bank account in the first half of 2017, there is no evidence to
suggest that he did so to evade a judgment in this lawsuit, which was filed in 2018.
Those facts render the case analogous to Manville Sales Corp. v. Paramount Sys., Inc.,
where the Federal Circuit reversed a Pennsylvania district court’s decision, following a bench
trial, to pierce the corporate veil and hold the corporate officers personally liable for direct patent
infringement based on its finding that the officers helped copy the design. 917 F.2d 544, 552–53
(Fed. Cir. 1990). On appeal, the Federal Circuit concluded that such assistance was within the
17
scope of the officers’ employment and, therefore, the officers could not have been “attempting to
avoid liability under the protection of the corporate veil.” Id. at 553.
Applying the standard set forth in Manville, the Southern District of New York in Aspex
Eyewear, Inc. v. Altair Eyewear, Inc. similarly concluded that there was no basis to pierce the
corporate veil and hold a parent company liable for the alleged infringement of its subsidiary.
361 F. Supp. 2d 210, 216–17 (S.D.N.Y. 2005). As in the case at bar, the plaintiffs in Aspex
Eyewear “offered no evidence that recognizing the separate corporate existences of [the
subsidiary] and [the parent] would permit [the parent] to commit fraud and illegitimately escape
liability.” Id. at 217. There was likewise no evidence that the parent company had
“undercapitalized [the subsidiary] or diverted assets from it in order to avoid liability.” Id.
FloodBreak’s assertion that the veil must be pierced because Biebel spearheaded the
design, manufacture, and sale of the allegedly infringing MCDs is unavailing. As the Federal
Circuit instructed in Manville, those actions do not rise to the level of a wrong sufficient to
justify the extreme remedy of disregarding AMI’s corporate existence. 917 F.2d at 552–53.
Indeed, as the District of Delaware in Mobil Oil Corp. v. Linear Films, Inc. reasoned:
Any breach of contract and any tort—such as patent infringement—is, in
some sense, an injustice. Obviously this type of “injustice” is not what is
contemplated by the common law rule that piercing the corporate veil is
appropriate only upon a showing of fraud or something like fraud. The
underlying cause of action does not supply the necessary fraud or
injustice. To hold otherwise would render the fraud or injustice element
meaningless, and would sanction bootstrapping.
718 F. Supp. 260, 268 (D. Del. 1989).
In the absence of any evidence indicating that AMI is a legal fiction or undercapitalized,
or that declining to pierce the corporate veil would allow Defendants to escape liability, a
reasonable factfinder could not find that exceptional circumstances warrant holding Biebel
18
directly liable for AMI’s actions. For those reasons, FloodBreak cannot sufficiently demonstrate
that the second prong is met and thus cannot satisfy the instrumentality test as a matter of law.9
b.
Identity Rule
I further conclude that there is no triable issue regarding whether the identity rule has
been satisfied. Under the identity rule, a plaintiff must show that: (1) “there was such a unity of
interest and ownership that the independence of the corporations had in effect ceased or had
never begun;” and (2) “an adherence to the fiction of separate identity would serve only to defeat
justice and equity by permitting the economic entity to escape liability arising out of an operation
conducted by one corporation for the benefit of the whole enterprise.” Naples, 295 Conn. at
232–33 (internal citations omitted).
As discussed with respect to the instrumentality test, FloodBreak has sufficiently
demonstrated that Biebel had the requisite level of control over AMI and has therefore satisfied
the first element of the identity test. Roth Staffing Companies, L.P., 2016 WL 308773, at *4
(noting that courts consider the same factors in determining whether an individual has exercised
the requisite amount of control under either the instrumentality or identity rule). Regardless,
because FloodBreak has failed to put forth evidence suggesting that declining to pierce the
corporate veil would allow Defendants to escape liability, FloodBreak’s claim fails on the second
prong. Naples, 295 Conn. at 236–38.
For the above reasons, I conclude that FloodBreak has failed to sufficiently demonstrate
that disregarding AMI’s corporate form is warranted in this case, and grant Defendants’ motion
for summary judgment with respect to the direct infringement claim against Biebel.
9
Because FloodBreak’s argument fails on the second prong, I need not address whether the third prong is
met.
19
B. A Reasonable Juror Could Conclude that Biebel Induced Patent Infringement under 35
U.S.C. § 271(b).
Biebel also moves for summary judgment on the inducement claim against him,
contending that he could not have harbored the requisite intent because he obtained an opinion of
non-infringement from counsel promptly after he learned of the ‘342 patent. Mot. for Summ. J.,
Doc. No. 143, at 11–13. I disagree.
Under 35 U.S.C. § 271, “[w]hoever actively induces infringement of a patent shall be
liable as an infringer.” 35 U.S.C. § 271(b). “[C]orporate officers who actively assist with their
corporation’s infringement may be personally liable for inducing infringement regardless of
whether the circumstances are such that a court should disregard the corporate entity and pierce
the corporate veil.” Lego Sys. A/S v. Rubicon Commc'ns, LP, 2017 WL 2423051, at *3 (D.
Conn. June 5, 2017) (citing Wordtech Sys., Inc. v. Integrated Networks Sols., Inc., 609 F.3d
1308, 1316 (Fed. Cir. 2010); Global Traffic Techs. LLC v. Morgan, 620 F. App’x 895 (Fed. Cir.
2015)) (emphasis omitted).
In order to succeed on an inducement claim, “the patentee must establish first that there
has been direct infringement, and second that the alleged infringer knowingly induced
infringement and possessed specific intent to encourage another’s infringement.” ACCO Brands,
Inc. v. ABA Locks Mfrs. Co., 501 F.3d 1307, 1312 (Fed. Cir. 2007) (internal citations and
quotation marks omitted). Specific intent requires a showing that the alleged infringer “knew of
the patent in question and knew the induced acts were infringing.” Commil USA, LLC v. Cisco
Sys., Inc., 135 S. Ct. 1920, 1927 (2015) (citing Global-Tech Appliances, Inc. v. SEB S.A., 563
U.S. 754 (2011)).
“The inducement knowledge requirement may be satisfied by a showing of actual
knowledge or willful blindness.” Info-Hold, Inc. v. Muzak LLC, 783 F.3d 1365, 1372 (Fed. Cir.
20
2015). Willful blindness is a stringent standard, and requires that (1) “[t]he defendant must
subjectively believe that there is a high probability that a fact exists,” and (2) “the defendant
must take deliberate actions to avoid learning of that fact.” Global-Tech, 563 U.S. at 769.
“Under this formulation, a willfully blind defendant is one who takes deliberate actions to avoid
confirming a high probability of wrongdoing and who can almost be said to have actually known
the critical facts.” Id.
Here, as an initial matter, it is well-settled that Biebel cannot be held liable under section
271(b) for actions before the ‘342 patent was issued, which was on September 5, 2017. See
National Presto Industries, Inc. v. West Bend Co., 76 F.3d 1185, 1196 (Fed. Cir. 1996) (“[A]s a
matter of law § 271(b) does not reach actions taken before issuance of the adverse patent.”).
Nonetheless, the record raises genuine issues regarding whether, after September 5, 2017, Biebel
willfully blinded himself to the infringing nature of the sales that he facilitated.
Construing all inferences in FloodBreak’s favor, a reasonable factfinder could conclude
that he was willfully blind to, if not knowledgeable of, infringement as early as October 10,
2017. That day, Biebel submitted a patent assurance letter as part of Gramercy’s “Or-Equal”
submission package. Pl. Local Rule 56(a)2 Statement of Facts, Doc. No. 174, at ¶ 80. In that
letter, he guaranteed that “[n]othing in our design infringes on patents pending or received for
this device or any IP rights owned by another manufacture[r].” Id. A reasonable factor could
infer from the letter that Biebel performed a patent search to assure the MTA that no
infringement issues existed and, in doing so, came across FloodBreak’s ‘342 patent.10
10
I am aware that Biebel testified that he did not remember whether he consulted with an attorney before
he wrote the patent assurance letters and that he did not conduct a patent search beforehand. Id. at ¶ 72; Bannon Ex.
14 Vol. 1, Doc. No. 176-14, at 72:5–73:2. But the credibility of Biebel’s testimony is a question for the jury. U.S.
Philips Corp. v. Windmere Corp., 861 F.2d 695, 704 (Fed. Cir. 1988) (“The jury was not required to accept his
expert testimony, even if it was uncontradicted.”). And as the Federal Circuit instructed, “[w]hile proof of intent is
necessary, direct evidence is not required; rather, circumstantial evidence may suffice.” DSU Med. Corp. v. JMS
Co., 471 F.3d 1293, 1306 (Fed. Cir. 2006) (internal citations omitted).
21
A reasonable juror could further conclude that, once Biebel learned of the patent in
October 2017, he subjectively believed that there was a “high probability” that his MCDs
infringed the ‘342 patent and “took deliberate actions to avoid learning whether it actually did”
until at least February 2018, when he sought an opinion of counsel. Info-Hold, Inc., 783 F.3d at
1373. That conclusion is buttressed by the evidence indicating that Biebel was previously put on
notice of possible future infringement. For example, the August 8, 2016 e-mail from New York
City Transit, which discussed the FOIL request for AMI’s “Or-Equal” submission “to determine
. . . whether AMI has infringed on FloodBreak’s intellectual property/patent(s)” was forwarded
to Biebel. Bannon Ex. 18, Doc. No. 176-18. In addition, Murphy testified that he and Biebel
discussed “the patent infringement issue” on occasion, and that Biebel “would certainly have
been aware that there was a patent infringement issue” as of August 8, 2016. Bannon Ex. 15,
Doc. No. 176-15, at 172:14–172:16, 172:23–73:1.
Also revealing is the e-mail exchange dated January 4, 2017, which indicates that Biebel
received a number of FloodBreak’s MCD drawings and forwarded them to his draftsman,
instructing him to “[g]o thr[ough] all of these new details and include in our drawings.” Pl.
Local Rule 56(a)2 Statement of Facts, Doc. No. 174, at ¶¶ 95, 96. Defendants counter that the
drawings are openly available specifications that the MTA had distributed to interested parties
bidding to supply an “or-equal” MCD. Reply, Doc. No. 188, at 1–2. Construing all ambiguities
in FloodBreak’s favor, however, a reasonable juror could conclude that the exchange illustrates
that Biebel knowingly copied FloodBreak’s MCD technology, which could support a finding of
induced infringement. Digital Reg of Texas, LLC v. Adobe Sys., Inc., 2014 WL 4090550, at *8
(N.D. Cal. Aug. 19, 2014) (“Evidence supporting an inference of copying may also be relevant to
proving induced infringement.”).
22
Taken together, the evidence is more than sufficient for a reasonable juror to find that, as
early as October 2017, Biebel knew that the ‘342 patent existed, subjectively believed that there
was a high probability that AMI’s manufacture and sale of competing MCDs infringed the
patent, and deliberately avoided confirming that it did until at least February 2018. See InfoHold, Inc., 783 F.3d at 1373 (concluding that issues of material fact existed regarding whether
the alleged infringer, Muzak, had knowledge that its actions constituted patent infringement
when the evidence suggested that the patentee “repeatedly contacted Muzak in an effort to put
Muzak on notice of the ‘374 patent and Muzak’s patent infringement” and counsel for Muzak
failed to investigate the infringement claims). Accordingly, a reasonable juror could find that,
from October 2017 to at least February 2018, Biebel intended to induce patent infringement.
Moreover, the record raises triable issues regarding whether Biebel continued to induce
infringement with the requisite intent after he received FloodBreak’s letter on February 23, 2018
accusing Defendants of infringing the ’342 patent. Defendants mount the defense that Biebel
could not have possessed the necessary intent because, immediately after he received the letter,
he sought an opinion from his patent counsel, who advised him that the MCDs did not infringe
the patent. Mot. for Summ. J., Doc. No. 143, at 12–13. I am not persuaded.
The existence of an opinion of counsel, although significant, does not automatically
warrant summary judgment for the defendants on an induced infringement claim. SEB, S.A. v.
Montgomery Ward & Co., 412 F. Supp. 2d 336, 345 (S.D.N.Y. 2006) (“Defendants cannot avoid
liability under § 271(b) simply because they obtained opinions from counsel.”). In order for an
opinion of counsel to help preclude liability under section 271(b), the opinion must be competent
and the alleged infringer must have reasonably relied on it. SDS USA, Inc. v. Ken Specialties,
Inc, 2002 WL 31055997, at *7–*8 (D.N.J. Aug. 28, 2002) (denying motion for summary
23
judgment on a section 271(b) claim because genuine issues existed regarding whether the
defendant “relied on the opinion of counsel in good faith and if so, whether such reliance was
reasonable”); see also Comark Commc'ns, Inc. v. Harris Corp., 156 F.3d 1182, 1191 (Fed. Cir.
1998) (“Those cases where willful infringement is found despite the presence of an opinion of
counsel generally involve situations where opinion of counsel was either ignored or found to be
incompetent.”) (internal citations omitted).
In assessing whether an opinion of counsel was competent, and whether it was reasonable
for the accused infringer to rely on such guidance, courts consider the following factors: “(1)
whether counsel examined the patent file history; (2) whether the opinions were oral or written;
(3) the objectivity of the opinions; (4) whether the attorneys rendering the opinions were patent
lawyers; (5) whether the opinions were detailed or merely conclusory; and (6) whether material
information was withheld from the attorney.” Chiron Corp. v. Genentech, Inc., 268 F. Supp. 2d
1117, 1121 (E.D. Cal. 2002) (citing Comark Communications, Inc., 156 F.3d at 1190–93; 7
Chisum, Chisum on Patents § 20.03[4][b][v][D], at 20–368 to 20–374 (2002)) (analyzing
whether advice of counsel negated willful infringement liability, which encompasses the same
test—whether reliance was reasonable—as the induced infringement analysis). Courts also
consider “the level of the defendant’s sophistication (especially about patent issues).” Sharper
Image Corp. v. Honeywell Int'l, Inc., 222 F.R.D. 621, 632 (N.D. Cal. 2004) (addressing willful
infringement claim).
The test is an objective one: “the focus should be on how a reasonable client, similarly
situated, would view the advice she received—whether it was reasonable for her to view the
opinion as ‘competent.’” Id. at 633. “In pursuing this question, what is most important is what
24
the client could see, what the client knew, and whether the client should have been satisfied or
should have asked for more.” Id.
Applying the foregoing principles, I conclude that FloodBreak has sufficiently challenged
the reliability of AYR’s opinion for multiple reasons. First, although Yale testified that their
opinion of non-infringement is memorialized in an internal memorandum (doc. no. 162-24), the
evidence suggests that the memorandum was never shared with Biebel. Instead, Yale testified
that “the substance” of that memorandum was conveyed orally. Doc. No. 142-21, at 50:7–17.
As the Federal Circuit has observed, “oral opinions are not favored” and “carry less weight.”
Minnesota Min. and Mfg. Co. v. Johnson & Johnson Orthopaedics, Inc., 976 F.2d 1559, 1580
(Fed. Cir. 1992).11
Second, a reasonable juror could find the memorandum, and therefore Yale’s oral
opinion, defectively conclusory. The first page of the memorandum identifies three features of
the four independent claims recited in the ‘342 patent—stops, profiles, and gravitational
impetus—as significant for the infringement analysis and provides a brief overview of each
feature. Ex. X, Doc. No. 162-24, at 2. The second page discusses, for half a page, various
characteristics of AMI’s MCDs and concludes that the MCDs do not contain the three key
elements recited in the ‘342 patent. Id. at 3. For the second half of the page, the memorandum
summarizes the prosecution history of the ‘342 patent. Id.
In my view, a reasonable factfinder could find the memorandum inadequate to defeat a
finding of inducement, principally because the two-page analysis is cursory and does not cite to
One reason why oral opinions are not favored is because “they have to be proved perhaps years after the
event, based only on testimony which may be affected by faded memories and the forces of contemporaneous
litigation.” Minnesota Min. and Mfg. Co., 976 F.2d at 1580.
11
25
any law.12 SRI Int'l, Inc. v. Advanced Tech. Labs., Inc., 127 F.3d 1462, 1467 (Fed. Cir. 1997)
(“To serve as exculpatory legal advice the opinion of counsel is viewed objectively, to determine
whether it was obtained in a timely manner, whether counsel analyzed the relevant facts and
explained the conclusions in light of the applicable law, and whether the opinion warranted a
reasonable degree of certainty that the infringer had the legal right to conduct the infringing
activity.”) (emphasis added); Applera Corp. v. MJ Research Inc., 372 F. Supp. 2d 233, 240 (D.
Conn. 2005) (discrediting counsel’s opinion of noninfringement when the opinion “provided a
only conclusory statement, without any citation to applicable legal authority”).
Moreover, although the memorandum premises its conclusion of non-infringement on the
absence of three claim limitations—stops, profiles, and gravitational impetus—in AMI’s MCDs,
it offers no meaningful analysis on the proper construction of those limitations. Its discussion of
the patent’s prosecution history is also fatally conclusory. Without citing to any law in support,
the memorandum asserts that “under the theory of prosecution history estoppel, it would seem
that solely by gravitational impetus is required by all independent claims”—an interpretation that
I rejected in my claim construction ruling. Doc. No. 162-24, at 3 (emphasis added); Claim
Construction Order, Doc. No. 94, at 9–12 (concluding that “AMI’s suggested meaning of the
term ‘gravitational rotation’ cannot be applied generally throughout the patent” and that one of
ordinary skill in the art would not incorporate “only” into the definition of “gravitational
impetus” as used in claims 23 and 24). Those defects weigh against a determination that a
reasonable jury could only find reasonable reliance. Coition, Inc. v. Becton Dickinson Vascular
12
Defendants note that, on March 12, 2018, Yale sent a letter to Bannon, counsel for FloodBreak,
conveying his opinion that AMI did not infringe the ‘342 patent, and that both Yale and Biebel believe that Yale
sent a copy of the letter to Biebel. Doc. No. 143, at 6; see also Ex. Y, Doc. No. 142-25 (letter from Yale to
Bannon). Regardless, the letter does not support Defendants’ reasonable reliance argument because the letter
contains even less detail than the memorandum.
26
Access, Inc., 120 F.3d 1253, 1259–60 (Fed. Cir. 1997) (holding that the district court clearly
erred in determining that the opinion of counsel negated willful infringement claim, partly
because the opinion included “no interpretation of claim language” and “no meaningful
discussion of the prosecution history”).
Third, Defendants concede that AYR had prosecuted AMI’s patent application relating to
its MCDs, doc. no. 143, at 14, which calls AYR’s objectivity into question. See Chiron Corp. v.
Genentech, Inc., 268 F. Supp. 2d 1117, 1125 (E.D. Cal. 2002) (concluding that evidence that an
attorney prosecuted several patents for the alleged infringer reasonably raised questions about the
objectivity of the attorney’s opinion of non-infringement).
Fourth, although the evidence is thin, FloodBreak has proffered sufficient evidence from
which a reasonable jury could infer that Biebel did not share “material information” with AYR
for its infringement analysis, which counsels against a finding of reasonable reliance. Comark
Commc'ns, Inc. v. Harris Corp., 156 F.3d 1182, 1191 (Fed. Cir. 1998) (“Whenever material
information is intentionally withheld, or the best information is intentionally not made available
to counsel during the preparation of the opinion, the opinion can no longer serve its prophylactic
purpose of negating a finding of willful infringement.”). For example, the evidence suggests
that Biebel did not forward to AYR his e-mail to his draftsman that instructed him to through the
details of FloodBreak’s drawings and include them in AMI’s drawings. As discussed, that
evidence is probative of induced infringement, of which FloodBreak’s cease and desist letter
accuses Biebel.
To be sure, the memorandum does state that the file history for the ‘342 patent was
reviewed, and Yale and Ceislak were patent lawyers. Further, contrary to FloodBreak’s
contention, I do not believe the mere fact that AMI had a patent application pending reasonably
27
suggests that Biebel was “highly sophisticated in matters of patent law ” prior to the instant
litigation. Johns Hopkins Univ. v. CellPro, Inc., 152 F.3d 1342, 1364 (Fed. Cir. 1998).
On balance, however, a reasonable jury could find that most—four out of seven—of the
relevant factors counsel against a finding that Biebel reasonably relied on the opinion of counsel.
I therefore conclude that genuine issues of material fact exist regarding whether Biebel intended
to induce infringement, and deny Defendants’ motion for summary judgment on the induced
infringement claim against Biebel.
C. FloodBreak Has Sufficiently Demonstrated that Biebel and AMI Willfully Infringed the
‘342 Patent.
Both Biebel and AMI additionally move for summary judgment on the willful
infringement claim, propounding the same argument as with respect to induced infringement—
that is, that FloodBreak cannot show actual knowledge because Biebel promptly sought an
opinion of counsel. Mot. for Summ. J., Doc. No. 143, at 15–16. That argument is equally
unavailing here.
Section 284 of the Patent Act provides that, in a case of infringement, courts “may
increase the damages up to three times the amount found or assessed.” Halo Elecs., Inc. v. Pulse
Elecs., Inc., 136 S. Ct. 1923, 1928 (2016) (citing 35 U.S.C. § 284). In Halo Electronics, the
Supreme Court instructed that awards of enhanced damages are “not to be meted out in a typical
infringement case, but are instead designed as a ‘punitive’ or ‘vindictive’ sanction for egregious
infringement behavior.” Id. at 1932. It further clarified that “[t]he subjective willfulness of a
patent infringer, intentional or knowing, may warrant enhanced damages, without regard to
whether his infringement was objectively reckless.” Id. at 1933. Subjective willfulness, in turn,
may be established when “the risk of infringement ‘was either known or so obvious that it should
have been known to the accused infringer.’” Id. at 1928 (citation omitted). “[C]ulpability is
28
generally measured against the knowledge of the actor at the time of the challenged conduct.”
Id. at 1933.
Accordingly, “[t]he question of willful infringement turns on whether, at the time of [the
defendant’s] infringement, [the defendant] knew or, it was so obvious that [the defendant] should
have known, that its actions constituted infringement of a valid and enforceable patent.” Apple
Inc. v. Samsung Elecs. Co., 258 F. Supp. 3d 1013, 1027 (N.D. Cal. 2017) (internal citations and
quotation marks omitted). Facts substantiating a claim of induced infringement can also support
a claim of willful infringement. Pres. Techs. LLC v. MindGeek USA Inc., 2019 WL 3213585, at
*4 (C.D. Cal. Apr. 2, 2019) (concluding that the allegations of knowledge relating to an induced
infringement claim supported a claim for willful infringement).
For the reasons discussed with respect to induced infringement, I conclude that
FloodBreak has sufficiently shown that, by October 2017, Biebel was well aware that his actions
amounted to patent infringement. Specifically, a reasonable juror could infer from Biebel’s
October 10, 2017 patent assurance letter that Biebel conducted a patent search beforehand and,
as a result, learned that FloodBreak’s MCD technology had been patented. Because FloodBreak
and an MTA subcontractor had raised patent infringement concerns with Biebel previously, a
reasonable factfinder could conclude that, once Biebel learned of the patent in October 2017, it
became “so obvious” that continuing to place AMI’s MCDs on the market would constitute
infringement. That is particularly so in light of the evidence suggesting that Biebel copied
FloodBreak’s drawings. See Apple Inc. v. Samsung Elecs. Co., 258 F. Supp. 3d 1013, 1028
(N.D. Cal. 2017) (discussing how evidence of copying supports a finding of willfulness).
AYR’s opinion of non-infringement is not enough to defeat the willful infringement
claim at this stage. As is the case with induced infringement claims, courts have recognized that
29
reasonable reliance on competent advice of counsel can foreclose a claim of willful infringement.
See, e.g., Vulcan Eng’g Co. v. Fata Aluminum, Inc., 278 F.3d 1366, 1378–79 (Fed. Cir. 2002)
(“[T]he focus [of willful infringement] is generally on whether the infringer exercised due care to
avoid infringement, usually by seeking the advice of competent and objective counsel, and
receiving exculpatory advice. When it is found that the infringer acted without a reasonable
belief that its actions would avoid infringement, the patentee has established willful
infringement, which may be accompanied by enhanced damages.”).
Here, a reasonable factfinder could conclude that Biebel’s reliance on AYR’s opinion
was unreasonable because: (1) the opinion was conveyed orally; (2) the memorandum on which
the oral opinion was based was conclusory; (3) AYR prosecuted a patent application for AMI for
a related technology; and (4) Biebel may not have shared with AYR important evidence relating
to intent.
I therefore conclude there is a material question for the jury regarding whether Biebel and
AMI willfully infringed the ‘342 patent, and deny Defendants’ motion for summary judgment on
the willful infringement claim.
IV.
Conclusion
For the foregoing reasons, Defendants’ motion for summary judgment is granted in part
and denied in part. It is granted with respect to the direct infringement claim against Biebel;
denied with respect to the indirect infringement claim against Biebel; and denied with respect to
the willful infringement claim against AMI and Biebel.
So ordered.
Dated at Bridgeport, Connecticut, this 3rd day of September 2020.
30
/s/ STEFAN R. UNDERHILL
Stefan R. Underhill
United States District Judge
31
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