Evonik Degussa GmbH v. Materia Inc.

Filing 693

OPINION granting 665 motion to dismiss counterclaim. Signed by Judge Noel L. Hillman on 4/6/2016. (bkb)

UNITED STATES DISTRICT COURT
DISTRICT OF DELAWARE

Evonik Degussa GmbH,
Plaintiff,
v.
Materia Inc.,
Defendant.

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Civil Action No.
09-cv-636 (NLH/JS)
(consolidated with
10-cv-200)
OPINION

Hillman, District Judge1
Presently before the Court is Materia’s motion to dismiss
Evonik’s inequitable conduct counterclaim, or in the
alternative, motion to bifurcate [D.I. 665].
oral argument on March 29, 2016.

The Court held

For the reasons that follow,

the Court will dismiss the inequitable conduct counterclaim.2
On December 21, 2015, the Court entered an Order granting
Evonik’s motion for partial summary judgment that it does not

United States District Court Judge for the District of New
Jersey, sitting by designation.
1

This Court exercises subject matter jurisdiction pursuant to 28
U.S.C. § 1331, federal question jurisdiction, and 28 U.S.C. §
1338(a), federal jurisdiction for matters arising under federal
patent law.
2

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infringe Materia’s U.S. Patent No. 7,622,590 (the ’590 Patent)
[D.I. 649].

Following the Court’s decision, Materia provided

Evonik with a broad covenant not to sue (“CNS”) on the ’590
Patent.

Based on Federal Circuit precedent, the parties agree

that the CNS moots Evonik’s counterclaim for invalidity and the
parties intend to submit a stipulation dismissing that
counterclaim.

The parties disagree whether under governing case

law the CNS moots Evonik’s counterclaim for declaratory judgment
as to inequitable conduct regarding the ’590 Patent.3
A declaratory judgment counterclaim may only be brought to
resolve an actual controversy between interested parties.

SL

Waber, Inc. v. American Power Conversion Corp., 135 F. Supp. 2d
521, 524 (D.N.J. 1999) (citing Super Sack Mfg. Corp. v. Chase
Packaging Corp., 57 F.3d 1054, 1058 (Fed. Cir. 1995), cert.
denied, 516 U.S. 1093, 116 S.Ct. 815, 133 L.Ed.2d 760 (1996)
(quoting 28 U.S.C. § 2201(a))).

“The existence of a

sufficiently concrete dispute between the parties remains ... a
jurisdictional predicate to the vitality of such an action;
[i]deed, an actual controversy must be extant at all stages of
review, not merely at the time the [counterclaim] is filed.”
The parties also agree that if the Court dismisses the
inequitable conduct counterclaim, it will not impact Evonik’s
ability to raise inequitable conduct in the context of a § 285
motion for attorneys’ fees after trial.
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2

Id. (citing Super Sack, 57 F.3d at 1058) (other citations and
quotations omitted).
Jurisdiction under the Declaratory Judgment Act arises
where “there is a substantial controversy, between parties
having adverse legal interests, of sufficient immediacy and
reality to warrant the issuance of a declaratory judgment.”
SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372, 1381
(Fed. Cir. 2007) (citing MedImmune, Inc. v. Genentech, Inc., 549
U.S. 118, 126, 127 S. Ct. 764, 770, 166 L. Ed. 2d 604 (2007)).
A party seeking declaratory judgment bears the burden of showing
there is an actual controversy.

Benitec Australia, Ltd. v.

Nucleonics, Inc., 495 F.3d 1340, 1342 (Fed. Cir. 2007).
The question before the Court is whether following a
partial summary judgment determination as to noninfringement, a
CNS covering noninfringement, invalidity, and all future claims
moots a counterclaim for inequitable conduct.

The Court has

reviewed the evolving case law and finds that under the specific
facts of this case Evonik’s inequitable conduct counterclaim is
moot.
In Super Sack, 57 F.3d 1054 (Fed. Cir. 1995), the Federal
Circuit held that a CNS may resolve the actual controversy
between the parties so that the court has no Article III
jurisdiction to hear a declaratory judgment action regarding the
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validity or enforceability of that patent.

In Super Sack, the

patentee's covenant not to sue was filed prior to consideration
or resolution of the underlying infringement claim.

The Federal

Circuit found that the CNS rendered the declaratory judgment
counterclaim nonjusticiable because “[t]he residual possibility
of a future infringement suit based on Chase's future acts is
simply too speculative a basis for jurisdiction over Chase's
counterclaim for declaratory judgments of invalidity.”

Id. at

1060.
The Federal Circuit carved out an exception to the Super
Sack rule in Fort James Corp. v. Solo Cup Co., 412 F.3d 1340,
1348 (Fed. Cir. 2005).

In contrast to Super Sack, the Fort

James CNS was offered after a verdict of noninfringement and
invalidity.

The Fort James court held that the jury verdict

which decided both noninfringement and validity “did not moot
Solo Cup's counterclaim for unenforceability nor did it act to
divest the district court of jurisdiction to hear that
unlitigated counterclaim.”

Id. at 1348-49.

Materia argues Fort James is distinguishable because its
CNS covers not only noninfringement, which was previously
adjudicated by the Court on summary judgment, but also
invalidly, making the CNS so broad as to remove any justiciable
issue.

Additionally, Materia argues that the Court should focus
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its analysis on Revolution Eyewear, Inc. b. Aspex Eyewear, Inc.,
556 F.3d 1294, 1297 (Fed. Cir. 2009), which clarifies that the
focus of the constitutional analysis should not be on the timing
of the CNS, but “[w]hether a covenant not to sue will divest the
trial court of jurisdiction depends on what is covered by the
covenant.”

See also Dow Jones & Co. v. Ablaise Ltd., 606 F.3d

1338, 1348 (Fed. Cir. 2010) (“In the case at bar, Ablaise's
covenant not to sue avowed that Ablaise would not sue Dow Jones
for any acts of infringement of its ′530 patent. The covenant
therefore extinguished any current or future case or controversy
between the parties, and divested the district court of subject
matter jurisdiction.”).

Materia argues that because its

covenant covers all potential claims, it moots Evonik’s
inequitable conduct counterclaim.
The Court believes Fort James and Revolution Eyewear are
not in conflict.

While at first blush Fort James appears to

draw a hard line between a CNS provided before or after
judgment, the focus on the timing of the CNS in Fort James was
part of the court’s analysis in defining the scope of the
covenant at issue.

In Fort James the Federal Circuit found that

a counterclaim questioning the validity or enforceability of a
patent raised issues beyond the initial claim for infringement.
The court held that the jury verdict had removed any reasonably
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apprehensible justiciable controversy between the parties,
rendering the covenant promising never to sue for infringement
of the patents-in-suit meaningless.

In Fort James the jury made

a determination as to noninfringement and invalidity, while here
a judgment was only made as to noninfringement.

Thus Materia’s

CNS promises something more meaningful and broader than the
Court’s Opinion granting partial summary judgment as to
noninfringement.

Materia’s CNS covers invalidity claims as

wells as noninfringement claims, extends to future infringement,
and applies to all successors, licensees, and users.

The Court

is satisfied that based on the CNS it is “absolutely clear the
allegedly wrongful behavior could not reasonably be expected to
recur.”

Already, LLC v. Nike, Inc., 133 S. Ct. 721, 723, 184 L.

Ed. 2d 553 (2013) (based on the breadth of a CNS a trademark
case was rendered moot).
Also distinguishing this case from Fort James is that
while the Court previously ruled on Evonik’s partial summary
judgment motion, it has not yet expended the considerable
resources of a trial.

See also Tech. Licensing Corp. v.

Technicolor USA, Inc., 800 F. Supp. 2d 1116, 1121 (E.D. Cal.
2011) (“Fort James is a narrow exception to the general rule
that a covenant not to sue divests the court of subject matter
jurisdiction. Two factors set Fort James apart: (1) the court
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had already gone through the considerable effort” connected with
a trial, and (2) in Fort James, the jury's verdict of noninfringement[, rather than the covenant not to sue,] had removed
any reasonably apprehensible justiciable controversy between the
parties.”) (internal citations and quotations omitted).
In sum, Materia’s CNS is sufficiently broad to remove any
case or controversy regarding the ’590 Patent and therefore
Evonik has failed to meet its burden of showing a substantial
controversy exists as to the ’590 Patent.

The Court agrees with

Materia that for all intents and purposes the CNS “kills the
’590 Patent vis-à-vis Evonik.”

Accordingly, the Court will

dismiss the inequitable conduct counterclaim.
It does not follow, however, that all the evidence that
would have been offered to prove the inequitable conduct claim
is therefore inadmissible evidence regarding the matters left to
be tried.

In fact, this Court believes at this juncture that

most, if not all, of that evidence will be admissible for other
purposes.

In general, this evidence appears highly relevant to

the issues of willfulness and the § 112 defenses of enablement
and written description.

Specifically, evidence regarding

inequitable conduct will be relevant in determining whether
Materia had a reason to doubt the validity of its patents and
whether the alleged infringement was willful.
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The Court wishes to make perfectly clear that the parties
may not use this evidence to argue inequitable conduct because
that is not a jury question.

Materia expressed its concern that

this evidence will be used improperly as a “parade of horribles”
to poison the jury.

The Court is confident that through

carefully crafted jury instructions (before and after evidence
is offered), the restraint of counsel, and this Court’s
management, this evidence may be used in appropriate way which
avoids prejudice to Materia.

The Court believes that with these

steps, relevant evidence can be presented in accordance with
F.R.E. 404(b) in a way that does not outweigh the danger of
prejudice.

F.R.E. 403.

The final contours of what evidence

will be admissible and for what purpose will be decided by the
Court upon the appropriate submission of motions in limine.
Additionally, after consultation with the parties, the
Court will consider the use of special interrogatories which
asks the jury to make factual findings which will be helpful for
the Court in its consideration of the appropriateness of
attorneys’ fees after trial.

Fed.R.Civ.P. 49.

V. CONCLUSION
For all the foregoing reasons, Evonik’s inequitable conduct
counterclaim will be dismissed as moot.

Evidence previously

relevant and admissible as tending to prove the dismissed
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counterclaim of inequitable conduct has been determined by the
Court to be presumptively admissible on other issues and claims
that remain in contention as set forth above.

Either side may

submit, at the appropriate time, properly supported motions in
limine to include or exclude certain clearly defined evidence.
An appropriate Order follows.
s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.

At Camden, New Jersey
Dated:
April 6, 2016

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