Nalco Company v. Chem-Mod, LLC

Filing 119

MEMORANDUM Opinion and Order. Signed by the Honorable John W. Darrah on 4/20/2016.(gcy, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
NALCO COMPANY,
Plaintiff,
v.
CHEM-MOD, LLC; ARTHUR J. GALLAGHER & CO.;
GALLAGHER CLEAN ENERGY, LLC;
AJG COAL, INC.; AJG IOWA REFINED COAL LLC;
MANSFIELD REFINED COAL LLC;
COPE REFINED COAL LLC;
CROSS REFINED COAL LLC;
JEFFERIES REFINED COAL LLC;
JOPPA REFINED COAL LLC;
THOMAS HILL REFINED COAL LLC;
WAGNER COALTECH LLC;
WALTER SCOTT REFINED COAL LLC;
WINYAH REFINED COAL LLC;
BEDFORD MIX LLC;
BRANDON SHORES COALTECH LLC;
CANADYS REFINED COAL, LLC;
CORONADO REFINED COAL LLC;
FRM TRONA FUELS LLC;
FRM VIRGINIA FUELS LLC;
GEORGE NEAL NORTH REFINED COAL LLC;
GEORGE NEAL REFINED COAL LLC;
LOUISA REFINED COAL, LLC;
REFINED FUELS OF ILLINOIS, LLC; and
BELLE RIVER FUELS COMPANY, LLC,
Defendants.

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Case No. 14-cv-2510
Judge John W. Darrah

MEMORANDUM OPINION AND ORDER
Plaintiff Nalco Company (“Nalco”) filed a Fourth Amended Complaint (“4AC”) against
Defendants Chem-Mod, LLC (“Chem-Mod”); Arthur J. Gallagher & Co. (“A.J. Gallagher”);
Gallagher Clean Energy, LLC (“Gallagher Clean Energy”); AJG Coal, Inc. (“AJG Coal”); and

21 limited liability companies named: AJG Iowa Refined Coal LLC; Mansfield Refined Coal
LLC; Cope Refined Coal LLC; Cross Refined Coal LLC; Jefferies Refined Coal LLC; Joppa
Refined Coal LLC; Thomas Hill Refined Coal LLC; Wagner Coaltech LLC; Walter Scott
Refined Coal LLC; Winyah Refined Coal LLC; Bedford Mix LLC; Brandon Shores Coaltech
LLC; Canadys Refined Coal, LLC; Coronado Refined Coal LLC; FRM Trona Fuels LLC; FRM
Virginia Fuels LLC; George Neal North Refined Coal LLC; George Neal Refined Coal LLC;
Louisa Refined Coal, LLC; Refined Fuels of Illinois, LLC; and Belle River Fuels Company,
LLC (collectively “Refined Coal LLCs”). The Complaint alleges patent infringement of United
States Patent No. 6,808,692 (the “’692 Patent”), entitled “Enhanced Mercury Control in CoalFired Power Plants.” Defendants previously moved to dismiss Nalco’s First Amended
Complaint (“FAC”). On February 4, 2015, Defendants’ Motion was granted, and Plaintiff’s First
Amended Complaint was dismissed without prejudice. On April 24, 2015, Plaintiff filed a Third
Amended Complaint (“TAC”). Defendants filed Motions to Dismiss [68, 89] Plaintiff’s Third
Amended Complaint and on October 15, 2015, Defendants’ Motion was granted. Plaintiff’s
TAC was dismissed without prejudice. On November 16, 2015, Plaintiff filed a 4AC.
Defendants filed a Motion to Dismiss [114] Plaintiff’s 4AC, pursuant to Federal Rule of Civil
Procedure 12(b)(6), for failure to state a claim. For the reasons set forth below, the Motion is
granted.
BACKGROUND
The following is taken from the 4AC, which is assumed to be true for purposes of a
motion to dismiss. See Reger Dev., LLC v. Nat’l City Bank, 592 F.3d 759, 763 (7th Cir. 2010).
For a more detailed background of this case, see the Memorandum Opinion and Order dated
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October 15, 2015. Nalco is the exclusive licensee of the ‘692 Patent, which claims a method to
reduce mercury emission from flue gases evolved during the combustion of coal. The ‘692
Patent was issued by the United States Patent & Trademark Office (“USPTO”) on
October 26, 2004, and reexamined by the USPTO in April, 2014. Claim 1 of the ‘692 Patent is
directed to: A method of treating coal combustion flue gas containing mercury, comprising:
injecting a bromide compound that is a thermolabile molecular bromine precursor
into said flue gas to effect oxidation of elemental mercury to a mercuric bromide
and providing alkaline solid particles in said flue gas ahead of a particulate
collection device, in order to absorb at least a portion of said mercuric bromide.
(See, e.g., 4AC Exh. A.)
The 4AC alleges that Defendants infringed the ‘692 Patent through their use, licensing,
sale, and offer of a coal additive system known as “Chem-Mod Solution.” Nalco alleges that
Chem-Mod has directly infringed the ‘692 Patent under 35 U.S.C. § 271 (a) literally or under the
doctrine of equivalents by using, selling, and/or offering to sell the Chem-ModTM Solution and
the additives MerSorb, and S-Sorb in the United States. Similar to the Third Amended
Complaint (“TAC”), the 4AC asserts claims for direct infringement through Defendants’ use of
the Chem-ModTM Solution and/or through their control and direction of entities that have used
the Chem-ModTM Solution. (4AC ¶ 22.) The 4AC also alleges that Defendants indirectly
infringe the ‘692 Patent by actively inducing and contributing to the infringing use of the ChemModTM Solution by others. (4AC ¶ 23.)
LEGAL STANDARD
Rule 12(b)(6) permits a defendant to move to dismiss a complaint for “failure to state a
claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). To survive a motion to
dismiss, a complaint must allege “enough facts to state a claim to relief that is plausible on its
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face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). Facial plausibility exists when
the court can “draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “Threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do not suffice.” Id. (citing Twombly,
550 U.S. at 555). Rather, the complaint must provide a defendant “with ‘fair notice’ of the claim
and its basis.” Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008) (quoting Fed. R.
Civ. P. 8(a)(2) and Twombly, 550 U.S. at 555). When ruling on a motion to dismiss, the court
accepts all well-pleaded factual allegations as true and construes all reasonable inferences in
favor of the plaintiff. Tamayo, 526 F.3d at 1081.
A direct infringement claim that meets or exceeds Form 18 of the Federal Rules of Civil
Procedure meets Rule 8’s “short and plain statement” requirement. In re Bill of Lading, 681
F.3d 1323, 1332 (Fed. Cir. 2014). Form 18 requires:
(3) a statement that defendant has been infringing the patent ‘by making, selling,
and using [the device] embodying the patent’; (4) a statement that the plaintiff has
given the defendant notice of its infringement; and (5) a demand for an injunction
and damages.
Bill of Lading, 681 F.3d at 1334.
ANALYSIS
Direct Infringement
Defendants argue that Nalco has failed to state a claim for direct infringement because
the Chem-ModTM Solution is different from the method claimed in the ‘692 Patent. Defendants
further argue that the 4AC fails to allege that any Defendants exercise direction and control over
operators of coal-fired power plants or that they formed joint enterprises with operators of coal-

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fired power plants. As in its responses to Defendants’ previous motions to dismiss, Nalco argues
that Defendants’ arguments are a premature attempt at claim construction.
Nalco argues that the claims of the ’692 Patent do not restrict whether the step of
“injecting a bromide compound that is a thermolabile molecular bromine precursor into said
[coal combustion] flue gas to effect oxidation of elemental mercury to a mercuric bromide” be
performed by injecting only a thermolabile molecular bromine precursor, or injecting a
thermolabile molecular bromine precursor in combination with other compounds. (FAC ¶ 19.)
Nalco also argues that during operation of a coal combustion furnace, gases injected via coal
injectors flow under pressure into areas where flue gas exists. Thus, the MerSorb additive
component of the Chem-Mod Solution Mixture is “injected into . . . coal combustion flue gas.”
(FAC ¶ 31.) As stated in the Memorandum and Order dated October 15, 2015, the Chem-Mod
Solution differs from the ‘692 Patent in both the location and method of application. Even
accepting all well pled allegations as true, the 4AC fails to establish a claim for direct
infringement by the use of the Chem-Mod Solution.
Nalco further argues that even if the claims required that the “injecting” occur at a
particular time or location in a coal-fired plant or to require that the “injecting is limited to only a
thermolabile molecular bromine precursor as opposed to a mixture of a thermolabile molecular
bromine precursor mixed with other additives and/or coal, then the Chem-Mod Solution would
nevertheless infringe the claims of the ’692 Patent under the doctrine of equivalents. (FAC
¶ 33.) “A finding of infringement under the doctrine of equivalents requires a showing that the
difference between the claimed invention and the accused product or method was insubstantial or
that the accused product or method performs the substantially same function in substantially the
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same way with substantially the same result as each claim limitation of the patented product or
method.” AquaTex Indus. v. Techniche Solutions, 479 F.3d 1320, 1326 (Fed. Cir. 2007). To find
infringement under the doctrine of equivalents, the accused product must contain each limitation
of the claim in the patented invention or its equivalent. Warner-Jenkinson Co. v.
Hilton Davis Chemical Co., 520 U.S. 17, 40 (1997). Nalco fails to provide support that all the
steps or the equivalent claim limitations of the ‘692 Patent are performed. Particularly, the
“injection” of the bromide into flue gas. The 4AC does not sufficiently allege that the method in
the ‘692 Patent “performs the substantially same function in substantially the same way with
substantially the same result” as the method of the Chem-Mod Solution.
Nalco again argues that Defendants attempt to improperly ask the Court to construe its
patent claim at the pleadings stage, stating that, “the Federal Rules of Civil Procedure do not
require a plaintiff to plead facts establishing that each element of an asserted claim is met.”
Bill of Lading, 681 F.3d at 1335. However as with Nalco’s TAC, “where the facts of record at
the pleading stage will so clearly and explicitly indicate that an ‘undivided’ claim of direct
infringement cannot stand — in a manner that could not plausibly be challenged at a later claim
construction hearing — that dismissal will be appropriate.” Pragmatus AV, LLC v. Yahoo! Inc.,
CIV.A. 11-902-LPS, 2012 WL 6044793, at *8 (D. Del. Nov. 13, 2012). Nalco fails to establish
that the methods of the Chem-Mod Solution directly infringe on the method in the ‘692 Patent.
Therefore, where there are no facts of direct infringement at the pleadings stage, dismissal is
proper.

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Divided Infringement
Even if Nalco could plead that the Chem-Mod Solution does infringe on the ‘692 Patent,
Defendants argue that Nalco fails to allege that any Defendant is directly responsible for all of
the method steps of the ‘692 Patent. “Direct infringement under § 271(a) occurs where all steps
of a claimed method are performed by or attributable to a single entity.” Akamai Techs., Inc. v.
Limelight Networks, Inc., 797 F.3d 1020, 1022 (Fed. Cir. 2015). “Where more than one actor is
involved in practicing the steps, a court must determine whether the acts of one are attributable
to the other such that a single entity is responsible for the infringement. We will hold an entity
responsible for others' performance of method steps in two sets of circumstances: (1) where that
entity directs or controls others' performance, and (2) where the actors form a joint enterprise.”
Id.
Directs or Controls
“Liability under § 271(a) can also be found when an alleged infringer conditions
participation in an activity or receipt of a benefit upon performance of a step or steps of a
patented method and establishes the manner or timing of that performance.” Id. at 1023.
Nalco’s 4AC alleges that the Defendants direct and control coal-fired power plants by giving
financial compensation for performing the Chem-Mod Solution. The compensation is either in
the form of lease payments from the Refined Coal LLCs or a reduced price for the purchase of
the Chem-Mod Solution Mixture in comparison to raw coal. The 4AC further alleges that ChemMod and the Refined Coal LLCs establish the manner and timing of the coal-fired power plant’s
performance. The basis for these allegations is again based on Defendants’ qualification for
Section 45 tax credits and the actions they take in order to qualify.
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As stated in the Memorandum and Opinion dated October 15, 2015, “any argument that
compliance with Section 45 of the tax code is evidence that Defendants direct and control the
infringement of a patent is unpersuasive.” An offer to sell coal at a reduced price does not
adequately demonstrate control over coal plants. Similarly, instructing power plants on how to
use the Chem-Mod Solution Mixture does not show any control over the plants’ performance of
any alleged infringing method steps. Nalco’s claim that Chem-Mod maintains control over
power plants is not plausibly supported by the factual allegations in the 4AC.
Joint Enterprise
“A joint enterprise requires proof of four elements: (1) an agreement, express or implied,
among the members of the group; (2) a common purpose to be carried out by the group; (3) a
community of pecuniary interest in that purpose, among the members; and (4) an equal right to a
voice in the direction of the enterprise, which gives an equal right of control.” Id. Nalco’s FAC
fails to allege facts to support its claim that Defendants partner in a joint enterprise with the
operators of coal-fired power plants. The existence of a contract between Refined Coal LLCs
and several power plants for purchase of the Chem-Mod Solution Mixture is not sufficient
support for the allegation of a joint enterprise. Similarly, there is no showing of equal right of
control of this alleged joint enterprise. Nalco claims that the equal right of control rises out of
the fact that the power plants can stop using the Chem-Mod Solution and Refined Coal LLCs can
stop selling it. This is contradictory to Nalco’s argument that Chem-Mod directs and controls the
power plants. Therefore, Nalco’s claim that Chem-Mod directs and controls the power plants is
unsupported by the factual allegations of the 4AC.

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Indirect Infringement
To prevail on an inducement claim, a “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.” Broadcom Corp. v.
Qualcomm Inc., 543 F.3d 683, 697 (Fed. Cir. 2008). Nalco has not sufficiently pled a claim for
direct infringement or intent to cause infringement.
“To establish contributory infringement, the patent owner must show the following
elements relevant to this appeal: 1) that there is direct infringement, 2) that the accused infringer
had knowledge of the patent, 3) that the component has no substantial noninfringing [sic] uses,
and 4) that the component is a material part of the invention.” Fujitsu Ltd. v. Netgear Inc., 620
F.3d 1321, 1326 (Fed. Cir. 2010). Again, as Nalco has not established a claim for direct
infringement, it has failed to establish a claim for contributory infringement as well.
Nalco was provided several opportunities to re-plead its allegations but has failed to
plead a plausible case of patent infringement. Thus, Nalco’s Fourth Amended Complaint is
dismissed.
CONCLUSION
For the reasons discussed above, Defendants’ Motion to Dismiss [114] is granted.
Nalco’s Fourth Amended Complaint is dismissed with prejudice.

Date:

April 20, 2016
JOHN W. DARRAH
United States District Court Judge

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