Feit Electric Company, Inc. v. Beacon Point Capital, LLC
Filing
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MEMORANDUM Opinion and Order Signed by the Honorable Sharon Johnson Coleman on 2/9/2015:Mailed notice(rth, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
FEIT ELECTRIC COMPANY, INC.,
Plaintiff,
v.
BEACON POINT CAPITAL, LLC,
Defendant.
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Case No. 13-cv-09339
Judge Sharon Johnson Coleman
MEMORANDUM OPINION AND ORDER
Feit Electric Company, Inc. (“Feit”) filed a five-count declaratory judgment complaint, seeking
inter alia to have defendant Beacon Point Capital, LLC, (“Beacon”) collaterally estopped from asserting
infringement of U.S. Patent Nos. 5,757,140 (the ‘140 patent) and 6,172,464 (the ‘464 patent), or,
alternatively, to have the patents declared unenforceable for inequitable conduct. Beacon moves to
dismiss [14] Count I in part, Count II in part, and Count V entirely, pursuant to Federal Rule of Civil
Procedure 12(b)(1) and 12(b)(6). For the reasons stated herein, the Court grants in part and denies in
part Beacon’s motion.
Background
Plaintiff, Feit Electric Company, Inc., sells, among other things, self-ballasted screw-in compact
fluorescent lamps (“CFLs”). Defendant, Beacon Point Capital, LLC, is the owner of a portfolio of
patents formerly owned by the inventor of those patents, Ole K. Nilssen. Beacon is a limited liability
company co-managed by Mr. Nilssen’s daughter and son-in-law (Linda and Kenneth Sutton). The
Nilssen CFL patents have been the subject of several cases: Nilssen, et al. v. Osram Sylvania, Inc., 440
F.Supp.2d 884 (N.D.Ill. 2006), aff’d 504 F.3d 1223 (Fed. Cir. 2007); Nilssen v. Wal-Mart Stores, Inc., No.
04 C 5363, 2008 WL 5087967, at *2, 2008 U.S. Dist. LEXIS 96543 (N.D. Ill. Nov. 24, 2008); Nilssen v.
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General Elec. Co., No. 06 C 4155, 2011 WL 633414, 2011 U.S. Dist. LEXIS 13615 (N.D. Ill. Feb. 11,
2011).
Feit alleges in its complaint on information and belief that the estate of Ole K. Nilssen assigned
the ‘140 and ‘464 patents to Beacon, and Beacon now owns and has all substantial rights under the ‘140
and ‘464 patents, including the right to past damages. Feit asserts that the ‘140 and the ‘464 patents
were part of an extensive and complicated scheme of patent applications that included the patents
declared unenforceable for multiple grounds of inequitable conduct in the Osram and Wal-Mart cases.
On or about May 24, 2012, Nilssen and Geo Foundation Ltd. commenced an action against Feit in the
United States District Court for the Middle District of Florida, alleging infringement of the ‘140 patent
by CFLs sold by Feit. In that complaint, Nilssen also asserted infringement of U.S. Patent No.
4,857,806 (expired as of August 15, 2006), U.S. Patent No. 5,233,270 (expired September 10, 2008), and
U.S. Patent No. 5,341,067 (expired September 10, 2008), all of which were found unenforceable in the
Osram and Wal-Mart cases. Nilssen and Geo Foundation voluntarily dismissed the Florida complaint
without prejudice. The ‘140 patent is set to expire on May 26, 2015, and the ‘464 patent is set to expire
on January 9, 2018.
Feit filed the instant five count complaint seeking a declaration that the patents that were
declared unenforceable remain unenforceable, that Beacon is collaterally estopped from asserting the
‘140 and ‘464 patents against Feit, that the ‘140 and ‘464 patents are unenforceable due to inequitable
conduct, and the ‘140 and ‘464 patents are uneneforceable based on prosecution laches estoppel.
Beacon moves to dismiss in part.
Legal Standard
When evaluating a motion to dismiss brought under Rule 12(b)(1) and 12(b)(6), the Court
accepts as true all well-pleaded factual allegations and draws all reasonable inferences in the plaintiff’s
favor. See G & S Holdings LLC v. Cont'l Cas. Co., 697 F.3d 534, 539 (7th Cir. 2012) (citing Scanlan v.
Eisenberg, 669 F.3d 838, 841 (7th Cir. 2012)). For jurisdictional challenges, the Court may look beyond
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the facts in the Complaint to extrinsic material submitted on the issue. See Apex Digital, Inc. v. Sears,
Roebuck & Co., 572 F.3d 440, 443-44 (7th Cir. 2009). On a motion brought pursuant to Federal Rule of
Civil Procedure 12(b)(6), the Court’s review is limited to the allegations in the complaint. In order to
survive dismissal, the Complaint must contain sufficient factual material to raise the right to relief above
the speculative level.
Discussion
1. Count I - Subject Matter Jurisdiction
Beacon moves to dismiss Count I for lack of subject matter jurisdiction, arguing that the only
patents-in-suit are the ‘140 and the ‘464 patent, and therefore no case or controversy exists as to the
other patents referenced in Count I. “[T]here is no bright line in determining whether declaratory
judgment actions satisfy the case or controversy requirement. Rather, the question in each case is
whether the facts alleged, under all the circumstances, show that there is a substantial controversy,
between parties having adverse legal interests, of sufficient immediacy and reality to warrant the
issuance of a declaratory judgment.” Pac. Sci. Energetic Materials Co. LLC v. Ensign-Bickford Aero. & Def.
Co., 281 F.R.D. 358, 361 (D. Ariz. 2012) (quoting MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127,
127 S. Ct. 764, 166 L. Ed. 2d 604 (2007)). Courts evaluate the existence of jurisdiction on the basis of
the facts existing at the time the plaintiff filed the complaint. GAF Bldg. Materials Corp. v. Elk Corp., 90
F.3d 479, 483 (Fed. Cir. 1996). “[W]here a patentee asserts rights under a patent based on certain
identified ongoing or planned activity of another party, and where that party contends that it has the
right to engage in the accused activity without license, an Article III case or controversy will arise and
the party need not risk a suit for infringement by engaging in the identified activity before seeking a
declaration of its legal rights.” SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372, 1381 (Fed. Cir.
2007).
Here, Feit alleges jurisdiction “with respect to whether Beacon may assert the Nilssen patents,
which Feit alleges are unenforceable.” (Dkt. 1 at ¶ 9). Feit then limits that statement to Beacon’s threats
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to sue Feit for infringement of the ‘140 and the ‘464 patents. Id. Indeed, the opening paragraph of the
complaint states: “This is a complaint for a declaratory judgment that Defendant is collaterally estopped
from asserting infringement of U.S. Patent Nos. 5,757,140 and 6,172,464 (‘the ‘140 patent’ and ‘the ‘464
patent,’ respectively) and, in the alternative, a declaratory judgment of unenforceability for inequitable
conduct.” Id. at ¶ 1. It would thus appear that Feit is only seeking relief as to the ‘140 and the ‘464
patent. Count I, however, refers to fifteen additional patents that were the subject of litigation in Nilssen
v. Osram Sylvania, Inc. 440 F.Supp.2d 884 (N.D. Ill. 2006), aff’d 504 F.3d 1223 (Fed. Cir. 2007). In Nilssen,
et al. v. Wal-Mart Stores Inc., et al., No. 1:04-CV-5363 (N.D. Ill.), the court found unenforceable several of
the patents included in the Osram litigation as well as the ‘464 patent at issue here. Therefore, the
complaint appears generally to base jurisdiction on the ‘140 and the ‘464 patents, seeking relief only as
to those patents, but Count I seems more expansive to include all the “Nilssen patents”. There is
undoubtedly a case or controversy as to the ‘140 and the ‘464 patents. Furthermore, a case or
controversy is adequately alleged through email correspondence incorporated by reference as to three
additional patents: U.S. Patent Nos. 5,166,578; 5,191,262; and 5,446,347. (Dkt. 1 at ¶ 26-28). With
respect to the remaining patents, however, the complaint lacks adequate factual enhancement to
indicate a substantial controversy with sufficient immediacy to support subject matter jurisdiction. Feit
is seeking relief that has effectively already been granted by the Osram and the Wal-Mart litigation and
the finding that the patents named therein are unenforceable. Accordingly, this Court grants without
prejudice Beacon’s motion to dismiss for lack of jurisdiction as to the patents referenced in Count I
except the ‘140, ‘464, ‘578, ‘262, ‘347, ‘806, ‘270, and the ‘067 patents.
2. Count II – Collateral Estoppel
Beacon moves to dismiss Count II for failure to state a claim for collateral estoppel because the
enforceability of the ‘140 patent was not an issue that was previously litigated. Collateral estoppel
protects a party from having to relitigate issues that have been fully and fairly tried in a previous action
and adversely resolved against the opposing party. Ohio Willow Wood Co. v. Alps South, LLC, 735 F.3d
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1333, 1342 (Fed. Cir. 2013). Generally, courts apply regional circuit precedent to a collateral estoppel
determination, but apply Federal Circuit precedent to those aspects of such a determination that
involve substantive issues of patent law. Id. (citing Aspex Eyewear, Inc. v. Zenni Optical Inc., 713 F.3d 1377,
1380 (Fed. Cir. 2013), and Aspex Eyewear, Inc. v. Marchon Eyewear, Inc., 672 F.3d 1335, 1341 n.1 (Fed. Cir.
2012)). Federal Circuit precedent does not limit collateral estoppel to patent claims that are identical. “If
the differences between the unadjudicated patent claims and adjudicated patent claims do not materially
alter the question of invalidity, collateral estoppel applies.” Ohio Willow Wood Co., 735 F.3d at 1342
(citing Bourns, Inc. v. U.S., 537 F.2d 486, 493, 210 Ct. Cl. 642 (Ct. Cl. 1976)).
Here, Feit alleges that “while the ‘140 patent was not directly at issue in the Osram case,
collateral estoppel applies and it is unenforceable for the same reasons set forth in the Wal-Mart case as
to the ‘464 patent.” (Dkt. 1 at ¶ 57). Feit’s opposition brief fleshes out this assertion by stating that
“due to the similarities between the prosecution histories of the ‘140 and the ‘464 patents” collateral
estoppel applies with equal force to the ‘140 patent. (Dkt. 28 at 15). While the Court agrees with Feit’s
reasoning, without expressing an opinion on the merits of the claim, a plaintiff may not amend a
complaint through argument in a brief. See Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Walgreen
Co., 631 F.3d 436, 448 (7th Cir. 2011). This Court therefore grants Beacon’s motion on this issue
without prejudice. The remainder of Beacon’s argument regarding whether collateral estoppel can apply
despite a change in the law with respect to inequitable conduct, is a legal question ill-suited for
resolution in a Rule 12(b)(6) motion that does not reach the merits of a claim.
3. Count V – Prosecution Laches
Beacon moves to dismiss Count V for failure to state a claim for prosecution laches because
Feit alleges no facts demonstrating any purported prosecution delay was unreasonable or prejudicial.
“Prosecution laches is an equitable defense to a charge of patent infringement. The doctrine ‘may
render a patent unenforceable when it has issued only after an unreasonable and unexplained delay in
prosecution’ that constitutes an egregious misuse of the statutory patent system under the totality of the
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circumstances.” Cancer Research Tech. Ltd. v. Barr Labs., Inc., 625 F.3d 724, 728 (Fed. Cir. 2010) (internal
citations omitted). “[T]o establish prejudice an accused infringer must show evidence of intervening
rights, i.e., that either the accused infringer or others invested in, worked on, or used the claimed
technology during the period of delay.” Id. at 729.
Here, Feit alleges that the ‘140 and the ‘464 patents each have over 20 years of prosecution
history. (Dkt. 1 at ¶¶ 116, 120). However, there does not appear to be a per se point at which an
unexplained delay becomes unreasonable. Twenty years of patent prosecution is undoubtedly a long
period of time, but without more, this Court finds that Feit has failed to adequately allege
unreasonableness of the delay. Furthermore, there are no facts from which this Court may infer that
Feit has stated prejudice. This Court dismisses Count V without prejudice.
Conclusion
Based on the foregoing, this Court grants in part and denies in part Beacon’s Motion to Dismiss
[14]. Federal Rule of Civil Procedure 15(a) provides that leave to amend should be freely given as
justice requires. This Court grants Feit leave to amend its Complaint in a manner consistent with this
opinion within 21 days. Status hearing set for February 27, 2015, at 9:00 a.m. will stand.
IT IS SO ORDERED.
Date: February 9, 2015
Entered: _____________________________
SHARON JOHNSON COLEMAN
United States District Judge
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