The Chamberlain Group, Inc. v. Techtronic Industries Co., Ltd. et al

Filing 322

MEMORANDUM OPINION AND ORDER Signed by the Honorable Harry D. Leinenweber on 3/22/2017:Mailed notice(wp, )

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IN THE UNITED STATES DISTRICT COURT FOR THE NORTHER DISTRICT OF ILLINOIS EASTERN DIVISION THE CHAMBERLAIN GROUP, INC., Plaintiff, v. TECHTRONIC INDUSTRIES CO., LTD., TECHTRONIC INDUSTRIES NORTH AMERICA, INC., ONE WORLD TECHNOLOGIES, INC., OWT INDUSTRIES, INC., ET TECHNOLOGY (WUXI) CO. LTD., and RYOBI TECHNOLOGIES, INC., Case No. 16 C 6097 Judge Harry D. Leinenweber Defendants. MEMORANDUM OPINION AND ORDER Defendants’ Motion for Leave to File a Revised First Amended Answer [ECF No. 258] is granted in part and denied in part. Defendants may amend their Answer to include the proposed allegations, counterclaims, and inequitable conduct affirmative defense relating to the ’966 patent, except for those charging misrepresentation of ’966 patent claims and non-disclosure of the ’676 prior Defendants’ Motion counterclaims, patent. art and patent. with respect affirmative The to Court the defenses denies proposed as futile allegations, concerning the ’275 The Court also denies as futile leave to amend to include the proposed patent misuse affirmative defense. I. A. BACKGROUND Procedural Background Plaintiff Chamberlain Group, Inc. (“Chamberlain”) brought this litigation Ryobi garage alleging door that openers certain (“GDOs”) patents it holds on GDO technology: models infringe of Defendants’ claims of two U.S. Patent Nos. 7,224,275 (“the ’275 patent”) and 7,635,966 (“the ’966 patent”). The ’275 patent recites a GDO featuring a wireless status condition data transmitter that wirelessly relays status condition messages to one or more remote peripherals, such as a smart phone. The ’966 patent covers a GDO with a rechargeable, removable battery that can be used to power other electrical equipment physically separate from the GDO. Defendants filed their first Answer and Counterclaims on July 5, 2016 [ECF No. 50]. Several months later, Defendants moved for leave to amend [ECF No. 154] based on Chamberlain’s alleged failure Trademark patent. Office to disclose (the “PTO”) to the prior United art States material Patent to the and ’966 On January 5, 2017, the Court denied Defendants’ Motion because their proposed answer failed to allege adequately the materiality of the withheld prior art. (See, ECF No. 242 at 4-5 (citing Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1329-30 (Fed. Cir. 2009)).) - 2 - On January 18, 2017, Defendants again moved for leave to amend [ECF No. 258], this time attaching a more detailed proposed answer and also alleging inequitable conduct in the procurement of the ’275 patent. Defendants seek to add affirmative defenses of inequitable conduct, patent misuse, and unclean hands to infringement of both patents. The proffered affirmative defenses derive from Defendants’ allegations - fully detailed in their proposed inequitable conduct and antitrust counterclaims - that Chamberlain procured the two patents at issue by withholding prosecution and, in material the case prior of the art from ’966 the PTO patent, during materially misrepresenting the scope of certain claims. B. Factual Background Defendants’ proffered Answer and Counterclaims contain the following allegations. an engineer who Mr. James J. Fitzgibbon (Fitzgibbon”) is holds and at all relevant times held the position of “Director of Intellectual Capital” at Chamberlain. His responsibilities include maintaining the company’s patent portfolio and working with inventors and patent counsel during prosecution. Chamberlain Fitzgibbon (ECF No. determines meets with 258-1 to pursue outside application. (Id. ¶ 24.) (“Ctrclm.”) patent a ¶ 17, patent counsel to 19.) Once application, prepare the During prosecution, Fitzgibbon reviews - 3 - office actions and assists outside counsel in responding to them. (Id. ¶ 25.) 1. Prosecution of the ’275 Patent Chamberlain filed the ’275 patent application on May 29, 2003, the issued same as (Ctrclm. day U.S. ¶¶ 15, that it Patent No. 20.) The filed a patent 7,071,813 ’813 application (“the patent ’813 that patent”). discloses a movable barrier opener that transmits status signals to reflect its own operational states and a corresponding remote control apparatus that receives such signals and effects a variety facilitated control strategies. (Id. ¶¶ 15, 35). of user- On March 28, 2005, the Examiner rejected certain proposed claims of the ’813 patent application, No. ,388,559 to finding Cohen barrier operator a door garage anticipated (“Cohen”). that whether them Cohen transmits or lock a is by U.S. Patent a movable teaches state signal opening, open, indicating closing or closed. (¶¶ 16, 61-62.) Fitzgibbon is the sole named inventor on both the ’275 and ’813 patents. (Ctrclm. ¶ 19.) During prosecution of these patents, he reviewed copies of office actions with Chamberlain’s outside patent counsel, Fitch, Even, Taben & Flannery (“Fitch Even”), and had access therein, including Cohen. to the prior art references cited Although Fitzgibbon admits that he reviewed Cohen, he failed to disclose it to the Examiner during - 4 - prosecution of the ’275 patent. (Id. ¶¶ 30, 61-62.) Just prior to Cohen, the rejection of the ’813 patent claims over on March 16, 2005, the Examiner issued a non-final rejection of the proposed claims of the ’275 patent, finding them anticipated and obvious in view of U.S. Patent No. 5,402,105 to Doyle, et al. (“Doyle”). Response, (Id. ¶ 34.) Fitzgibbon In and a June Fitch 21, Even 2005 counsel Office Action attempted to overcome the rejection by arguing that Doyle did not transmit status condition signals corresponding to a present operational status condition defined, at least in part, by at least two operating states. (Id. ¶ 34.) They did not disclose Cohen, which the PTO had cited during prosecution of the ’813 patent as teaching “automatically wirelessly transmitting a status signal 111 (i.e., state signal).” (Id. ¶¶ 36, 40.) 2. Prosecution of the ’966 Patent On behalf of Chamberlain, Mr. Kenneth Samples of Fitch Even filed the ’966 patent application. Mr. Butler, application had or no in involvement writing the in Whereas the named inventor, the decision application, to file Fitzgibbon the again played a prominent role both in reviewing Mr. Butler’s invention disclosure form and in prosecution. (Ctrclm. ¶¶ 71-72.) Fitzgibbon was also involved in prosecuting Chamberlain’s U.S. Patent App. No. 7,786,619 No. 2003/0063715 (“the ’619 (“Peplinski”) patent”), - 5 - of which and he U.S. is the Patent named inventor. (Id. ¶ 73.) Chamberlain Fitzgibbon was also aware of a GDO line developed for Sears retail stores (“Craftsman”), which practices the ’619 patent and was modified in the course of developing the disclosures for the ’966 patent. (Id. ¶ 156.) Defendants allege references, that whereas Fitzgibbon the Fitch had Even knowledge lawyers of all (Messrs. four Samples, Peters, and Levstik) lacked knowledge of Craftsman. (Id. ¶ 159.) In a May 11, 2009 Office Action Response, Chamberlain, through Fitzgibbon and attorney Nicholas Peters of Fitch Even, amended the claims of the ’966 patent to overcome the Examiner’s obviousness rejection No. 7,002,312 to over Wojciak two cited (“Wojciak”) No. 5,781,107 to Ji (“Ji”). references, in view U.S. U.S. of Patent Patent (They had previously overcome a rejection based on Wojciak in view of U.S. App. No. 2002/0180600 to Kirkland, et al. (“Kirkland”).) does not teach two limitations They argued that Wojciak of claim 1: a rechargeable battery connected through circuitry to provide power to the head unit of a barrier movement operator; and electrically powered equipment other than and physically separable from the barrier movement operator. (Id. ¶ 78.) They further argued that Ji does not disclose that (1) this equipment comprises “an apparatus for receiving the at least equipment can be powered battery to perform a one rechargeable by the at predetermined - 6 - battery least one function,” where the rechargeable or (2) “the rechargeable battery is charged movement operator.” (Ibid.) claim 1.) by and used by a barrier (Both of these are limitations of In addition, they represented that claims 9 and 19 of the ’966 patent contain limitations similar to that of claim 1 and argued for their patentability over Wojciak and Ji for the same reasons. (Id. ¶¶ 79, 148.) Those claims, in fact, do not require the presence of such electrically powered equipment but instead relate to a rechargeable battery “being removably connectable to” and “configured” to connect to such equipment. (Id. ¶ 148.) The Examiner issued a notice of allowance on August 8, 2009, stating that the prior art fails to disclose or suggest the following limitations of claims 1, 9, 15, and 19: “battery charging station in electrical communication with at least one rechargeable battery and in electrical communications with the head unit to supply power”; “barrier movement operable [sic] having battery head unit”; charging “circuitry station to electrically supply power connected from the to at the least rechargeable [sic] battery to the head unit [sic]”; “powered equipment . . . physically barrier movement separate operator”; and or separable “perform from the predetermined function.” (Ctrclm. ¶ 80.) In sum, no one involved in prosecuting the ’966 patent disclosed Peplinski, which describes a barrier movement operator - 7 - with a battery discloses system. a backup barrier system, movement or the operator ’619 with a patent, backup which battery Similarly, no one disclosed U.S. Patent No. 6,923,676 (“the ’676 patent”), which was previously cited against the ’619 patent as disclosing “a plug allowing the battery to be replaced and the battery could be used with a moveable barrier operator” and other electrically powered equipment. (Ctrclm. ¶¶ 114, 160.) Further, Fitzgibbon did not disclose the Craftsman GDO, which features a battery backup system whose batteries can be interchanged with another GDO to open or close its garage door. Indeed, Chamberlain and its counsel failed to disclose any prior art reference in connection with the ’966 patent application. (Id. ¶¶ 67, 74.) II. LEGAL STANDARD A plaintiff may amend its complaint “only with the opposing party’s written consent or the court’s leave.” P. 15(a)(2). This leave should “always” or “automatically.” be “freely FED. R. CIV. given,” but not Hukic v. Aurora Loan Servs., 588 F.3d 420, 432 (7th Cir. 2009); see also, Crest Hill Land Dev., LLC v. City of Joliet, 396 F.3d 801, 804 (7th Cir. 2005). District courts have broad discretion to deny leave to amend where there is undue delay, bad faith, dilatory motive, repeated failure to cure deficiencies, undue prejudice to the non-movant, or where amendment would be futile. - 8 - Hukic, 588 F.3d at 432 (quotation omitted); see also, Independent Trust Corp. v. Stewart Info. Servs. Corp., 665 F.3d 930, 943 (7th Cir. 2012). An amendment is futile if the amended claims could not survive a Rule 12(b)(6) motion to dismiss. See, Arlin-Golf, LLC v. Village of Arlington Heights, 631 F.3d 818, 822-23 (7th Cir. 2011). To survive a Rule 12(b)(6) motion, “the complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Independent Trust, 665 F.3d at 934 (internal quotation marks omitted). The issue is not whether the claimant will ultimately prevail but whether it is entitled to offer evidence to support the claims. AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011) (quotation omitted). Indeed, an asserted claim “need not be probable, only plausible: ‘a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.’” Atl. Corp. plausibility requirement, Independent Trust, 665 F.3d at 935 (citing Bell v. Twombly, standard, “asks for 550 U.S. while more not than defendant has acted unlawfully.” a 544, 556 (2007)). akin to a sheer possibility The probability that a Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). Where a complaint pleads facts that are merely consistent with liability, it “stops short - 9 - of the line between possibility and plausibility.” Id. (internal quotation marks omitted). III. A. “Patent DISCUSSION Inequitable Conduct applicants have a duty to prosecute patent applications in the PTO with candor, good faith, and honesty.” Advanced Magnetic Closures, Inc. v. Rome Fastener Corp., 607 F.3d 817, 829 (Fed. Cir. 2010) (internal quotation marks and alteration omitted); see also, 37 C.F.R. § 1.56(a). this duty material – “including facts, submission of failure false affirmative to disclose material Breach of misrepresentations material information – information, coupled intent to deceive, constitutes inequitable conduct.” with of or an Honeywell Int’l Inc. v. Universal Avionics Sys. Corp., 488 F.3d 982, 999 (Fed. Cir. 2007). two elements: prosecution An inequitable conduct claim therefore has “(1) an individual associated with the filing and of a patent application . . . failed to disclose material information” to the PTO; and “(2) the individual did so with a specific intent to deceive” the PTO. at 1327 n.3. Exergen, 575 F.3d Federal Circuit law governs whether the facts alleged suffice to plead inequitable conduct. Id. at 1318. Concerned that inequitable conduct could “devolve into a magic incantation to be asserted against every patentee,” the Federal Circuit requires that inequitable - 10 - conduct be pleaded with particularity under Rule 9(b). 27, 1331. elements “A of pleading inequitable particularized factual that Exergen, 575 F.3d at 1326- simply conduct, bases avers without for the satisfy Rule 9(b).” Id. at 1326-27. the substantive setting forth allegation, the does not Support for an inequitable conduct claim requires “[a] reasonable inference . . . that is plausible and that flows logically from the facts alleged.” Id. at 1329 n.5. Chamberlain motion is untimely. Defendants fail first contends that Defendants’ More substantively, Chamberlain argues that to plead both the materiality and intent elements of the inequitable conduct counterclaims. 1. Defendants first October 31, 2016. proposed Answer Timeliness sought leave to amend the Answer on Although the allegations in Defendants’ new with respect to the ’966 patent are largely consistent with their prior Motion, Defendants have added an entirely new inequitable conduct counterclaim based on the ’275 patent. Defendants claim that, in light of the December 2016 deposition of James Fitzgibbon, they injected the ’275 patent inequitable conduct affirmative defenses. Chamberlain argues counterclaim and (ECF (“Defs.’ that No. both 258 counterclaims unduly prejudicial. - 11 - the corresponding Mot.”) are at 2.) untimely and The Court sees no reason to dismiss the inequitable conduct counterclaims for untimeliness. not yet been (typically lessens an the imposed, arduous and First, a discovery cutoff has the fact enterprise) opportunity cost inequitable conduct issues. that of is Markman already briefing complete additional only discovery on Second, in seeking leave to amend, Defendants have not spurned a court-imposed deadline. Indeed, Defendants’ Federal Circuit appeal largely mooted the Court’s original scheduling order, and the Court postponed Markman activities and the trial date as a result. (See, ECF No. 217.) The result is no different simply because Defendants have already sought and been denied leave to amend the Answer to add ’966 patent inequitable conduct allegations. engage the without untimeliness more, attorneys’ arguments Defendants’ identities and advanced knowledge prior art The Court did not of there the references because, prosecuting a few months before moving to amend does not clearly amount to undue delay. Cf., e.g., Continental Bank, N.A. v. Meyer, 10 F.3d 1293, 129798 (7th Cir. 1993) (upholding denial of motion to amend when the defendant was in possession amendment was based for of more facts than two on which years); the proposed Collaboration Properties, Inc. v. Tandberg ASA, No. 05 C 1940, at *2 (N.D. Cal. Jan. 25, 2007) (rejecting an untimeliness argument where the defendant possessed “nearly all of the evidence it now cites - 12 - in support of its proposed inequitable conduct defense for more than a year”); Inline Connection Corp. v. AOL Time Warner Inc., 237 F.R.D. 361 (D. Del. 2006) (denying leave to amend where the defendants admittedly had all the information necessary to plead new inequitable conduct allegations over two years before the proposed amendments were filed). And far from delaying unduly, Defendants refiled their revised amended answer within two weeks of the Court’s order denying leave. The likelihood particularly where of “the prejudice is availability similarly of the minimal, information regarding inequitable conduct is primarily within the control of [Chamberlain].” Cordance Corp. v., Inc., 255 F.R.D. 366, 373 (D. Del. 2009). Further, Chamberlain has known of Defendants’ intent to add inequitable conduct issues into this case for nearly six months, and it is litigating Defendants’ inequitable conduct charges in a parallel ITC proceeding. The Court appreciates that the allegations there may well implicate patents and withheld prior art that are not at issue in this case. (See, ECF No. 308 at 2.) However, the relevant individuals from whom discovery may be necessary appear to be substantially the same across both proceedings. Therefore, the Court finds that Defendants’ Motion is timely as to the proposed inequitable conduct counterclaims and affirmative defenses. - 13 - 2. a. Futility Materiality To satisfy Rule 9(b) as to materiality, a pleading must set forth the “who, what, misrepresentation or when, where, omission and how committed of the before material the PTO.” Exergen, 575 F.3d at 1327 (citing DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990)). Information withheld from the PTO is material only when “the PTO would not have allowed a claim had it been aware of the undisclosed prior art.” Therasense, Inc. v. Becton, Dickinson and Co., 649 F.3d 1276, 1291 (Fed. Cir. 2011) (en banc). Prior art disclosures are “not material if [they are] cumulative of other information already disclosed to the PTO.” Honeywell, 488 F.3d at 1000; see also, Exergen, 575 F.3d at 1329-30 (“[T]he pleading . . . does not identify the particular claim limitations, or combination of claim limitations, that are supposedly absent from the information of record. Such allegations are necessary to explain both ‘why’ the withheld information examiner is would patentability material have of the used and not this claims.”); cumulative, information 37 C.F.R. in § and ‘how’ assessing 1.56(b). an the This Court, along with others in this Circuit, rejects the notion that Exergen requires blind formalism, such as inclusion in the pleadings of the word “non-cumulative.” - 14 - See, e.g., Bone Care Int’l, LLC v. Pentech Pharms., Inc., No. 08 C 1083, 2010 WL 1655455, at *6 (N.D. Ill. Apr. 23, 2010). I. The ’275 patent The Court first notes that Defendants have adequately met the “who,” “what,” “when,” and “where” prongs of Exergen. They have identified relevant individuals by name, a specific office action response Chamberlain filed on a specific date, withheld prior art (i.e., Cohen), relevant disclosures therein, and at least claim 1 of the ’275 patent (as what would otherwise not have issued). Chamberlain does not contest that Defendants meet these prongs of Exergen. Rather, it argues that Defendants fail to identify “how the allegedly withheld prior art is material over the prior art technology considered by the examiner during prosecution . . . and identified on the face of the ’275 patent and/or the specific features that Cohen adds that TTI contends were not already present in the prior art of record.” (ECF No. 272 (“Pl.’s Opp.”) at 2.) Defendants make only a few “how” and “why” of materiality. allegations relevant to the First, they state that the PTO rejected certain claims of the ’813 patent as anticipated by Cohen’s disclosure of “automatically wirelessly transmitting a status signal 111 (i.e., state signal).” (Ctrclm. ¶ 40.) Second, they allege that Chamberlain in a June 21, 2005 Office Action Response distinguished prior art cited against the ’275 - 15 - patent application (such as Doyle) by arguing that “it did not involve transmission of state signals” but without disclosing Cohen. (Id. ¶¶ Chamberlain’s 41-42.) agents Third, “kn[ew] according that to Cohen Defendants, disclosed the transmission of state signals” and that the ’275 patent would not have issued “[b]ut for the failure of Mr. Fitzgibbon through CGI’s attorneys at Fitch Even to disclose Cohen to the PTO.” (Id. ¶¶ 42, 57.) The Court finds that these allegations are insufficient under Exergen because there is no factual basis whatsoever from which to infer that Cohen’s disclosures are non-cumulative. Smith Plastics Limited v. Plascon Packaging, Inc., No. DS 15 C 5760, 2016 WL 69632 (N.D. Ill. Jan. 6, 2016), is not to the contrary. agents There the defendants alleged that the plaintiff’s during asserting prosecution novelty of an amendment patent the filed at issue, and prior response to which “claims 1 and 11 did not issue, while after the [challenged] assertion of novelty, they did.” Id. at *5. Defendants nakedly that Chamberlain’s ’275 patent claim 1. other claims assert without omission over of Doyle associated Cohen caused when the Here, however, factual support distinguishing Examiner to allow Pleading such facts with particularity is crucial: references before the Examiner contain the if disclosures cumulative of Cohen’s, then failure to disclose Cohen was not - 16 - material to patentability. See, e.g., Exergen, 575 F.3d at 1329-30; Nalco Co. v. Turner Designs, Inc., No. 13 C 2727, 2014 WL 645365, Turner’s showing at *5 (N.D. proposed that Cal. amendment the ’380 Feb. and 19, 2014) patent reply was brief not (“Absent are from any facts of other cumulative references before the PTO.”); Aevoe Corp. v. AE Tech. Co., LTD., No. 12 C 53, 2013 WL 876036, at *8 (D. Nev. Mar. 7, 2013) (“[T]o satisfy the ‘why’ component, Defendants’ counterclaim must also plead with particularity that the withheld information is not cumulative of prosecution. counterclaim.”). the information Such facts Both the actually are face absent of the disclosed from ’275 during Defendants’ patent and the prosecution history suggest that this, in fact, was precisely the case. Besides Doyle, the face of the ’275 patent lists dozens of prior art references that the Examiner cited during prosecution. Immediately following the maligned June 21, 2005 Office Action Response, the including claim 1, arguments as based Examiner by rejected curtly “moot in the ’275 dismissing view of patent Chamberlain’s the new claims, Doyle- ground(s) of rejection” – “anticipat[ion] by either Morris or Chang, newly cited.” App. No. 10/447,663 File History, Sept. 2, 2005 Office Action, at 2, 5. The Examiner interpreted Morris to show: - 17 - [T]he movable barrier operator 112 that includes a controller 18 having a plurality of potential operational status conditions, defined at least in part by a plurality of operating states 12, 14, 16, 48; . . . and a wireless status condition data transmitter, col. 4, lines 42-44, that transmits a status condition signal that corresponds to a present operational status condition defined at least in part, by at least two operating states from the plurality of operating states, see col. 5, lines 5-13 and 37-55. Id. at 2-3. Similarly, the Examiner read Chang to disclose “the movable barrier operator comprising a controller having plural operating states as defined by the movable barrier interface sensor 20 wherein a wireless transmitter 51 transmits the status signals to a remotely located receiver, see figure 5.” Id. at 3. Therefore, it is simply not plausible that disclosing Cohen would have changed anything, because the Examiner rejected the ’275 patent claims based on references with disclosures that are apparently identical attribute to Cohen. important that in relevant part to those Defendants In this factual milieu, it is all the more Defendants plausibly allege “how” Cohen’s purportedly anticipating disclosure of “automatically wirelessly transmitting a status signal 111 (i.e., state signal)” was not cumulative of the other prior art before the Examiner. Defendants also fall short by failing plausibly to allege how the Examiner Defendants’ claim 1’s would proposed first have answer limitation deployed only that - 18 - Cohen. states Cohen For with discloses example, respect a to “remote control apparatus” that is “capable of transmitting a state signal 111,” which indicates “whether a door 140, which may be a garage door, is opening, open, closing or closed.” ¶¶ 46-47.) (Ctrclm. Therefore, Cohen’s state signal indicates only one status – that of the garage door. But the first limitation of claim 1 of the ’275 patent recites a “controller having a plurality of potential operational status conditions,” such as those related to the garage door, the operating lights, vacation mode, etc. (’966 patent at 8:6-7; 4:5-45 (emphasis added).) anticipate, a single reference must limitation of a challenged claim. disclose each and To every See, e.g., Verdegaal Bros. v. Union Oil Co. of California, 814 F.2d 628, 631 (Fed. Cir. 1987). Defendants have not plausibly alleged that such is the case with Cohen, and they have not remedied the problem by identifying any other prior Cohen in art an with which obviousness the Examiner rejection. would Because have even combined accepting Defendants’ allegations does not sufficiently “put [Chamberlain] on notice as to . . . how that information would have changed the fail examiner’s to make decision an regarding” adequate patentability, materiality showing. Defendants Cumberland Pharms., Inc. v. Mylan Institutional LLC, No. 12 C 3846, 2012 WL 6567922, at *6 (N.D. Ill. Dec. 14, 2012). Therefore, concerning the Cohen’s Court finds materiality to - 19 - that the Defendants’ ’275 patent allegations would not survive a Rule 12(b)(6) motion to dismiss. Defendants fail to plead adequately the “how” and/or “why” elements of materiality. This is “especially” problematic where Defendants “have had the benefit of extensive discovery.” Waters Indus., Inc. v. JJI Int’l, Inc., No. 11 C 3791, 2012 WL 5966534, at *6 (N.D. Ill. Nov. 28, 2012). As such, the Court denies as futile leave to amend Defendants’ Answer to add inequitable conduct affirmative defenses or counterclaims based on fraud in the procurement of the ’275 patent. II. The ’966 patent As for the ’966 patent, the Court again first notes that Defendants have adequately met the “who,” “what,” “when,” and “where” prongs of Exergen. several relevant Peters, and Their proposed answer identifies individuals Livstik), by specific name (at office least action Fitzgibbon, responses that Chamberlain filed on certain dates, where the withheld prior art references (i.e., Peplinski, the ’619 patent, the ’676 patent, and Craftsman) patent, the disclose nature of information alleged pertinent affirmative to the ’966 misrepresentations, and at least claim 9 as the subject matter of the ’966 patent that would not have issued but for the challenged conduct. Chamberlain does prongs of Exergen. not contest that Defendants meet these As it did with respect to the ’275 patent, however, Chamberlain disputes Defendants’ showing of “why” and - 20 - “how the allegedly withheld prior art is material and non- cumulative of the ’966 patent’s teaching that GDOs with backup batteries were Chamberlain known.” does misrepresentation asserts that (ECF not No. 272 appear to allegations. Defendants (“Pl.’s respond to Chamberlain have simply Opp.”) 2.) Defendants’ more revised at generally their prior inadequate allegations “to add invalidity contentions for the allegedly pleading withheld standard prior art,” required flunking show to thus but-for the heightened materiality and intent. (Ibid.) Overcoming the inadequacies explored above with respect to the ’275 patent allegations, Defendants have adequately pleaded materiality of the withheld prior art to the ’966 patent. First, Defendants have alleged facts plausibly showing that the references before the Examiner did not contain disclosures cumulative of those in the four withheld references. See, e.g., Exergen, 575 F.3d at 1329-30. The ’966 patent examiner allowed the action claims conduct. in the very next following the challenged During prosecution of the ’275 patent, by contrast, the Examiner followed the Office Action Response that Defendants claim should have disclosed Cohen by mooting all the arguments raised therein references Cohen. and instead containing citing ostensibly against equivalent the ’275 patent disclosures to In addition, the face of the ’966 patent only lists the - 21 - three references (Ji, Wojciak, and Kirkland), all of which were distinguished prior to or during the challenged Office Action Response. As in DS Smith, Defendants have pointed to an amendment and response – in which Chamberlain’s agents asserted patentability over the three cited prior art references - “prior to which” the claims did not issue but after which “they did.” DS Smith, 2016 WL 69632 at *5. Second, no apparent lacuna in Defendants’ pleading forestalls effective notice to Chamberlain of how the withheld references would have changed the Examiner’s decision. In contrast to their allegations regarding procurement of the ’275 patent, Defendants include in their ’966 counterclaim quotes from the notice of allowance clearly indicating what limitations the Examiner found missing from the cited prior art – many of which Defendants allege are disclosed in the four withheld prior art references. (Ctrclm. ¶ 80.) This suffices to plead the “why” inequitable and “how” of Chamberlain’s conduct. See, e.g., Weber-Stephen Products LLC v. Sears Holding Corp., No. 13 C 1686, 2014 WL 656753, at *5 (N.D. Ill. Feb. 20, 2014) (finding the “why” and “how” of materiality adequately pleaded where the Examiner’s defendant’s reasons for allegations allowance about were what incompatible the withheld disclosed); Sloan, 2012 WL 1108129 at *6, 9 (same). - 22 - with the prior art Similarly, Defendants have adequately pled the “how” and “why” of materiality misrepresentations. with respect Defendants allege to that the alleged Fitzgibbon and Peters made no argument relative to claims 9 and 19 independent of their argument with respect to claim 1 that Wojciak and Ji do not disclose the electrically powered equipment other than and separate or separable Instead, they from requested the that barrier the movement Examiner operator. withdraw its rejections over Wojciak and Ji simply because “[c]laims 9 and 19 contain limitations No. 10/447,663 File Response, at 10. similar to History, that May 11, of claim 2009 1.” App. Office Action However, as Defendants note, claims 9 and 19 do not require the presence of electrically powered equipment. Defendants also claim that the withheld prior art discloses this limitation of claim 1. Crucially, Defendants’ allegation that the cited misrepresentations in the May 11, 2009 Office Action Response led to issuance of the patent at issue, is supported by the Examiner’s ensuing allowance of the subject claims. Cf. Courtesy Products LLC v. Hamilton Beach Brands, Inc., No. 13 C 2012, 2015 WL 6159113, at *6 (D. Del. Oct. 20, 2015), adopting recommendation, 2016 WL 354745, at *1 (D. Del. Jan. 28, 2016) (conditioning materiality of misrepresentations on allegations that they were the but-for cause of allowance and on whether the examiner allowed or rejected the subject claims in the ensuing - 23 - office action). allowance That immediately the Examiner following issued these the statements notice of adequately establishes the “how” and “why” of materiality. Finally, the Court rejects Chamberlain’s argument that disclosure in the ’966 patent prior art background section of a barrier movement establishes operator cumulativeness with of the a battery withheld backup system references. The specification’s terse summary of the state of “current barrier movement operators” Defendants claim is were not as extensive withheld. As as far the as disclosures the Court can discern, the only relevant background statements from the ’966 patent are: first, “[s]ome current barrier movement operators can be powered via a backup battery”; second, “[t]hese battery backups are independent items which are typically used only for operating the barrier movement operator”; and third, “[t]hese systems require some method to recharge the batteries either built into the operator or as an additional power supply for battery charging.” (’966 patent at 1:31-42.) references, however, generally describe The four withheld stand-alone battery back-up units that are physically separate pieces of equipment capable of being plugged into the head unit either to receive power from it or serve as a battery back-up. describe how the same units can be removed They further and used with multiple GDOs and how these units contain electrical components - 24 - and equipment that are powered by the back-up battery. ECF No. 282 describe (“Defs.’ certain “circuitry” Reply”) aspects connecting of the at 9-10.) the head In addition, technology, unit and a (See, such they as battery the charging station, that constitute limitations of claim 9 but are entirely absent from the background section. (See, e.g., Ctrclm. ¶¶ 110- 112, 123-125, 142-145; ’966 patent at 8:19-21 (claim 9).) These alleged disclosures are not only richer and more extensive than the summary’s contradict the description; summary. at times (Compare, they e.g., even appear Ctrclm. ¶ to 122 (describing how the ’676 patent’s rechargeable backup battery can be used to power “any number of electronic devices”); with ’966 patent at 1:37-39 (“These battery backups are independent items which are typically used only for operating the barrier movement operator.”).) The cases Chamberlain cites are inapposite because they all concern proof of inequitable conduct after the presentation of evidence. See, e.g., Andrew Corp. v. Gabriel Elecs., Inc., 847 F.2d 819, 824 (Fed. Cir. 1988) (“We affirm the district court’s conclusion that inequitable conduct has not been proved by clear and convincing evidence.”); Vandenberg v. Dairy Equip. Co., 740 F.2d 1560, 1568 (Fed. Cir. 1984) (“The proof here falls short of the clear and convincing evidence needed to prove fraud.”); Bayer AG v. Housey Pharms., Inc., 128 Fed.Appx. 767 (Fed Cir. - 25 - 2005) (appeal after declaratory judgment); Berry Plastics Corp. v. Intertape Polymer Corp., No. 10 C 76, 2016 WL 4486182, at *13 (S.D. Ind. Aug. 25, 2016) (“Berry has failed to prove, by clear and convincing evidence, that the Applicants withheld the prior art. . . .”). must allege fact, some Such cases are not instructive on what Defendants under of Exergen these to cases plead inequitable actually undercut conduct. In Chamberlain’s argument, either because they state that prior art not made of record before the PTO is inherently not cumulative, Berry, 2016 WL 4486182 at *12, or because they concern withheld references that were disclosed by name in the patent specification, which is clearly not the case here. See, Bayer AG, 128 Fed.Appx. at 770 (“Dr. Housey did not knowingly withhold the Uehara 1985 and Hsiao 1986 references from the PTO. He clearly disclosed them by including them in the ’281 patent’s specification.”). At the pleading stage, Chamberlain cannot taint undisclosed prior art references with cumulativeness based purely on generic descriptions of prior art technology in the specification. Because Defendants have alleged the “who,” “what,” “where,” “when,” “how,” and “why” of the challenged conduct, the Court finds that Defendants have adequately pleaded materiality under Exergen with respect to the ’966 patent. - 26 - b. Intent “[A] pleading of inequitable conduct under Rule 9(b) must include sufficient allegations of underlying facts from which a court may reasonably infer that a specific individual (1) knew of the withheld material information or of the falsity of the material misrepresentation, and (2) withheld or misrepresented this information with a specific intent to deceive the PTO.” Exergen, 575 F.3d at 1328-29. Because an uncited reference “may be many pages long, and its various teachings may be relevant to different applications for different reasons . . . one cannot assume that an individual, who generally knew that a reference existed, also contained in knew that of the specific material Id. 1330 reference.” at information (emphasis in original). After Therasense, courts “can no longer infer intent to deceive from non-disclosure of a reference solely because that reference was known and material.” Arts, Inc., 694 F.3d 1367, 1372-73 Therasense, 649 F.3d at 1290). 1st Media, LLC v. Elec. (Fed. Cir. 2012) (citing While the inference of deceptive intent need not be the “single most reasonable” inference, it must be plausible and flow from the facts alleged. Itex, Inc. v. Westex, Inc., 2010 WL 2901793, at *2 (N.D. Ill. July 21, 2010) (citing Exergen, 575 F.3d at 1329 n.5). - 27 - I. As discussed The ’275 patent above, Defendants’ inequitable conduct allegations with respect to procurement of the ’275 patent are wanting in materiality. Nonetheless, the Court analyzes specific intent as an independent and alternative ground for denying leave to amend. Defendants allege on information and belief that Fitzgibbon “acted with specific intent to deceive the PTO when withholding the Cohen reference.” (Ctrclm. ¶¶ 58, 63.) aver specific intent based on While permissible to information and belief, the pleading must set forth the specific facts on which the belief is reasonably based. Exergen, 575 F.3d at 1330-31. Those specific facts are that Fitzgibbon reviewed Cohen at some point, was aware that the PTO cited it against the ’813 patent, and worked with Fitch Even during prosecution of both the ’813 and ’275 patents ¶¶ 61, 64.) to review and respond to office actions. (Id. In response, Chamberlain argues that Defendants fail Exergen by alleging mere knowledge of Cohen on the part of Fitzgibbon and nothing beyond simple non-disclosure to the PTO. Chamberlain also points to testimony from Fitzgibbon to the effect that he did not believe Cohen contained information that was material Defendants to have the ’275 failed to patent. plead The facts Court giving finds rise that to a reasonable belief that Fitzgibbon, to the extent he was aware of - 28 - Cohen, both knew that it contained disclosures material to the ’275 patent and withheld it from the PTO during prosecution with the specific intent to defraud the PTO. Defendants’ allegations that Fitzgibbon knew of the materiality of Cohen to the ’275 patent claims are implausible in light of deposition, discovery Fitzgibbon already obtained. testified At extensively his that second he viewed Cohen as disclosing “an independent device” separate and apart from a “conventional movable barrier operator” that was capable only of identifying the state of the garage door (and not other states of the GDO controller). (Fitzgibbon Tr. 265:2-6, 266:20267:4, 274:24-275:11, Fitzgibbon did not 276:5-7, expressly 281:6-12.) employ the To words the extent “material” or “immaterial” to describe Cohen, the thrust of his testimony is clear enough intent to implicate inadequately deposition pled testimony Waters, where that the in which the prosecuting withholding of court found attorney the gave prior art references at issue stemmed from his assessment that they were not material. Defendants See, premise Waters, the need 2012 WL for an 5966534 at amended *6. That complaint on Fitzgibbon’s testimony (see, Defs.’ Mot. at 2 (“Based on Mr. Fitzgibbon’s admissions, TTI has amended its Affirmative Defense of Inequitable include the Conduct ’275 and counts patent.”), for obviates - 29 - fraud their on the PTO argument to that evaluating his testimony here impermissibly encroaches on the merits. DS Smith is in accord. individuals associated There, the defendants alleged that with the plaintiff had “directed the filing” with the PTO of some of the references that they later failed to disclose. DS Smith, 2016 WL 69632 at *6 (describing their “oversight of the application filing of many of the prior art references”). combined with The court found that individuals’ involvement patent plaintiff’s the applications and in this in allegation, other responding to of the office actions, gave rise to a plausible inference that they knew that the withheld prior art references were material to patentability of the patent at issue. that Fitzgibbon application, Here, however, there is no indication directed and thus DS the filing Smith does of not the Cohen support patent Defendants’ allegation that he knew of specific information in Cohen that was material allegations to only the ’275 support a patent. Instead, reasonable inference Defendants’ of general knowledge of Cohen coupled with mere non-disclosure. Even if the Court ignores Fitzgibbon’s deposition testimony, the weight of case law would still counsel against validating Defendants’ allegations of scienter. situation like that presented in This is not a Cumberland, where the “inference of intent” was “bolstered . . . by allegations that - 30 - the withheld references were not simply known to [the named inventor and overseer of drug development at Cumberland], but were also previously relied upon by Cumberland and/or the FDA for the approval of the NDA filed for Acetadote [a commercial embodiment encompassed by the patent at issue].” 2012 WL 6567922 scenario akin Pharms., Inc., at to *11-12. that No. 08 Nor have Defendants in Bone Care Int’l, C 1083, 2010 WL LLC 1655455 Cumberland, presented v. a Pentech (N.D. Ill. Apr. 23, 2010), where the intent allegations satisfied Exergen. The defendants in that case alleged that two patent attorneys involved in prosecution of the patent at issue “previously had cited the specific omitted material earlier patent applications.” in connection with the Bone Care, 2010 WL 1655455 at *5. In contrast to Cumberland and Bone Care, Defendants have not alleged that Chamberlain submitted Cohen in an attempt to gain intellectual property protection, cited Cohen in connection with earlier patent applications, or otherwise deployed Cohen in its service. Rather, Defendants merely allege that Fitzgibbon was aware and of at some point reviewed Cohen because it was asserted against the separate ’813 patent. For these reasons, Defendants fail to plead facts supporting a reasonable inference that Fitzgibbon had knowledge of Cohen’s allegedly material information and intended to defraud the PTO by not disclosing it. - 31 - specifically As such, the Court denies as futile Defendants’ motion to amend with respect to the ’275 patent on the independent ground that they fail to plead scienter adequately under Exergen. II. The Court finds The ’966 patent Defendants’ ’966 allegations sufficient under Exergen to plead specific intent to defraud the PTO, at least as to references. the Peplinski, ’619 patent, and Craftsman First, Defendants have sufficiently alleged that the accused individuals had detailed knowledge of Peplinski and the ’619 patent by virtue of earlier filing with the PTO. their role in directing their Samples, at least, had detailed knowledge of Peplinski because he prosecuted that application before the PTO. Fitch Even also prosecuted the ’619 patent application on behalf of Chamberlain. Defendants claim that Fitzgibbon helped develop Peplinski, which was also cited during prosecution of the ’619 patent (for which Fitzgibbon is the named inventor), and that Chamberlain owns both Peplinski and the ’619 patent. Thus, Defendants do not plead “only that the applicants had general knowledge of the [four] undisclosed prior art references or . . . simply ‘had become aware’ of the prior art references.” omitted). Rather, DS as Smith, in DS 2016 WL Smith, 69632 the at *6 accused (quotation individuals “directed the filing of some of the uncited references with the PTO” – specifically, Peplinski and the ’619 patent. Id. - 32 - The Craftsman allegations similarly go knowledge or general awareness of a reference. beyond mere Defendants claim that Chamberlain designed and manufactured the Craftsman GDO for Sears with Fitzgibbon’s help, that the Craftsman GDO practices the ’619 patent, and that it was used as a test platform for developing knowledge the of ’966 patent Craftsman’s technology. material Inferring disclosures specific based on such intimate familiarity with the reference is reasonable and a far cry from Exergen’s prohibitions. Additionally, procurement of Defendants’ the ’966 allegations patent much more with respect to track the closely sufficient allegations in Cumberland than do their ’275 patent allegations. Unlike the third-party Cohen reference, Fitzgibbon oversaw crucial aspects of the development of Peplinski, the ’619 patent, and the Craftsman GDO. *11-12. See, 2012 WL 6567922 at Indeed, Chamberlain, through Fitzgibbon and the Fitch Even individuals, submitted the first two of these references for the purpose of gaining intellectual property protection. Therefore, Defendants have adequately pleaded facts that, when combined with their allegations on information and belief, support the reasonable inference that the identified individuals knew of the specific material information references. - 33 - in the withheld The Court finds, however, that Defendants’ intent allegations with respect to the ’676 patent are too weak to meet Exergen’s demands. Defendants allege only that the ’676 patent was cited during prosecution of the ’619 patent as disclosing a plug allowing replacement of the battery, which could be used with a movable involvement of barrier the operator. accused persons Notwithstanding in prosecuting the the ’619 patent, such allegations approximate those concerning Cohen and fail for all the same reasons. are even Fitzgibbon weaker. Whereas reviewed Cohen, respect to the ’676 patent. In fact, the allegations here Defendants there is no at least such allege that allegation with Instead, Defendants claim only that Fitzgibbon and the other individuals must have known of the ’676 patent’s specific material information because the Examiner cited the ’676 patent as prior art during prosecution of the ’619 patent. Thus, Defendants have only alleged the mere fact of these individuals’ involvement in a patent prosecution during which a third-party patent was cited as prior art. more, the disclosure Court cannot of reference a known and material.” infer “intent solely to because deceive that Without from non- reference was 1st Media, 694 F.3d at 1372-73. Second, Defendants adequately plead that non-disclosure of the Peplinski, ’619 patent, and Craftsman references product of specific intent to defraud the PTO. - 34 - was a Consider first Peplinski. Mr. Peters allegedly argued that the “cited prior art did not teach a rechargeable battery used to power a head unit” while failing to disclose Peplinski, which he knew from the ’619 patent proceedings to disclose a rechargeable battery used to power a head unit. (Ctrclm. ¶ 165.) This constitutes a “positive assertion[] of novelty about [a] feature[] critical to the issuance” of the patent, and indicates plausible allegations of specific intent to deceive. Defendants Fitzgibbon allege also other knew DS Smith, 2016 WL 69632 at *7. facts this making feature of it plausible Peplinski and, that by disclosing it, specifically intended to defraud the PTO. not (See, e.g., id. ¶ 155 (“Mr. Fitzgibbon was aware of Peplinski during the prosecution of the ’966 Patent because it was developed in CGI’s Advanced Development Group, which he founded in 1998.”).) To the extent Defendants do not levy similar allegations with respect to the ’619 patent or Craftsman, other facts in their proposed inference that answer suffice these two to entitle references specific intent to deceive. were Defendants also to withheld an with Chief among these is the allegation that no one from Chamberlain or Fitch Even filed an information disclosure during statement prosecution or of submitted the ’966 any prior patent. art This whatsoever supports a reasonable inference that non-disclosure of the references was accompanied by deceptive intent. See, e.g., Weber-Stephen, 2014 - 35 - WL 656753 at *5 (finding that the allegation that the plaintiff submitted “no prior art whatsoever in connection with” the patent application at issue supported a reasonable inference of non-disclosure with deceptive intent) (emphasis in original). The last specific intent issue concerns Defendants’ more petite allegations that Peters and Fitzgibbon made affirmative misrepresentations to the PTO. Defendants assert that, after distinguishing prior art on the basis that it did not disclose claim 1’s electrically powered equipment other than and separate or separable Fitzgibbon from the represented barrier that movement claims 9 operator, and claim 1 to gain allowance of those claims. that withheld prior art references do 19 were Peters and similar to Defendants allege indeed disclose this limitation of claim 1 and that claims 9 and 19 do not, in fact, require such equipment but instead relate to a rechargeable battery “being removably connectable” or “configured” to connect to such equipment. Defendants face two problems, each of which corresponds to the two alleged misrepresentations. First, it is not reasonable to infer that Fitzgibbon and Peters specifically intended to defraud the PTO in asserting the novelty of claim 1 over the cited prior art. In fact, they were merely representing that the cited prior art (Ji and Wojciak) does not teach claim 1’s “equipment” limitation. Nothing in Defendants’ proposed answer alleges that those two references, - 36 - alone or in combination, disclose the “equipment” limitation of claim 1. Whether limitation is concerning the affirmative withheld irrelevant cited to references whether references’ misrepresentation. As the might teach challenged teachings such, this statement amounted Defendants to have an not even pleaded facts that are consistent with a specific intent to deceive, let alone facts that make an inference of such intent reasonable. Second, with respect to the similarity posited between the limitations of claim 1 and claims 9 and 19, while Defendants have pleaded facts consistent with a specific intent to deceive, an Exergen inference reasonable. contain of Defendants “equipment” specific simply limitations intent allege that to that are deceive claims different 9 is and from not 19 the corresponding limitations of claim 1 such that these limitations cannot be said to be “similar” – at least not in context, where Chamberlain’s agents were trying to distinguish the claims over Ji and Wojciak. inquiry into It is not necessary to engage in a semantic differences between the words “similar” and “identical” (although reading claims 1, 9, and 19 leaves this generalist Court with the impression that many facets of their “equipment” limitations are indeed “similar”). The rub is that, even assuming factual inaccuracy of the statement, Defendants’ bare allegations fall too close to impermissibly “call[ing] into - 37 - question every possible mistake or misstep made by the applicants without any evidence that those mistakes or missteps were made with an intent to deceive.” Human Genome Sciences, Inc. v. Genentech, Inc., No 2:11 C 6519, 2011 WL 7461786, at *6 (C.D. Cal. Dec. 9, 2011). Absent are factual allegations that would make an inference of specific intent to deceive any more likely than other possible explanations: laziness, excusable oversight, incompetence, or indeed permissible zealous argument in favor of patentability on the part of Chamberlain’s agents. While the inference of specific intent to deceive need not be “the single most reasonable inference,” Itex, 2010 WL 2901793 at *5 (emphasis consistent beyond the in with original), liability mere Defendants plus possibility something of specific must to plead tip intent “facts the scales” to deceive. Human Genome Sciences, 2011 WL 7461786, at *3 (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). Therefore, the Court finds that Defendants have adequately pleaded specific intent to deceive the PTO under Exergen as to the withholding of the Peplinski, ’619 patent, and Craftsman references. Answer to It therefore grants Defendants leave to amend the include the allegations related to those three references and to add an inequitable conduct counterclaim and affirmative defense based on procurement of the ’966 patent. contrast, because Defendants have - 38 - failed to plead By specific intent adequately under Exergen, the Court denies lave to amend with respect to the allegations concerning non-disclosure of the ’676 patent and misrepresentations of claims 1, 9, and 19. B. Defendants under section also 2 Antitrust Act. of bring the Antitrust counterclaims Sherman Act of and unlawful under the monopoly Illinois “[T]he enforcement of a patent procured by fraud on the Patent Office may be violative of [§] 2 of the Sherman Act provided the other elements necessary to a [§] 2 case are present.” Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 174 (1965). plead both Walker Process Therefore, Defendants must fraud – which, like inequitable conduct, is subject to Rule 9(b)’s standards – and an antitrust violation. Defendants incorporate by reference their inequitable conduct allegations with respect to both asserted patents and do not state independent facts to support other wrongful conduct with respect to the ’275 patent. (Ctrclm. ¶¶ 176-177). Defendants have failed to satisfy Rule 9(b)’s Because heightened pleading standard with respect to the ’275 patent allegations, they flunk the fraud prong of Walker Process. The Court therefore denies as futile Defendants’ motion for leave to amend the Answer to add the antitrust counterclaims regarding the ’275 patent. (See, Jan. 5, 2017 Order at 6.) - 39 - However, the opposite is true with respect to the ’966 patent. finds that allegations Defendants’ suffice associated under Exergen and Because the Court inequitable Rule 9(b), conduct they have sufficiently met the fraud prong of Walker Process. To establish the antitrust prong of a Walker Process claim, Defendants must allege that Chamberlain holds “monopoly power in the relevant market” and “willfully acquired or maintained that power by anticompetitive means.” (citation omitted). Delano Farms, 655 F.3d at 1351 As a general matter, monopoly power may be inferred from the predominant share of the market. Grinnell Corp., 384 U.S. 563, 571 (U.S. 1966). U.S. v. If Defendants “fail to identify any facts from which the court can infer . . . sufficient market power to have been able to create a monopoly, their § 2 claim may be properly dismissed.” Endsley v. City of Chicago, 230 F.3d 276, 282 (7th Cir. 2000). Courts interpret the Illinois Antitrust Act in light of federal antitrust law upon which it is modeled. Laughlin v. Evanston Hosp., 550 N.E.2d 986, 990 (Ill. 1990). Defendants likewise make the requisite Walker Process antitrust allegations – namely, that a relevant market exists and that market. Chamberlain Defendants residential GDO possesses define market the monopoly relevant (Ctrclm. ¶ 184), power market with within that as U.S. the Chamberlain’s “HD950WF and [Defendants’] Ryobi GD200 [being] essentially sole - 40 - competitors at their price quotation marks omitted).) point.” (Id. ¶ 181 (internal Defendants highlight Chamberlain’s statement that it is a “two-player market – CGI and everyone else.” (Id. ¶¶ 182-183, 189.) They also assert the presence of a monopoly within this market, reiterating that Chamberlain has a 70-80 percent market share. (Id. ¶¶ 172, 190.) Further, they point to statements by Chamberlain that Defendants’ competition harms its ability to maintain its prices. (See, id. ¶¶ 185-187.) As such, the Court finds that Defendants have satisfied Walker Process with respect to the ’966 patent and grants leave to amend the Answer to include the proposed allegations. C. Patent Misuse The key patent misuse inquiry is whether the patentee has impermissibly broadened the physical or temporal scope of the patent grant in a manner that produces anticompetitive effects. See, Princo Corp. v. Int’l Trade Comm’n, 616 F.3d 1318, 1328 (Fed. Cir. 2010) (en banc) (“Where the patentee has not leveraged its patent beyond the scope of rights granted by the Patent Act, misuse has not been found.”) (citations omitted). “[P]roof of an establish misuse antitrust of a violation,” patent in suit however, unless the “does conduct not in question restricts the use of that patent and does so in one of the specific ways that have been - 41 - held to be outside the otherwise broad scope of the patent grant.” Id. at 1329 (emphasis added). Where a patent misuse defense is premised on patent enforcement, the recent trend among district courts is to allow such a defense to survive a motion to dismiss so long as Defendants can allege facts to plead “bad faith and improper purpose in bringing the suit.” Glaverbel Societe Anonyme v. Northlake Mktg. & Supply, Inc., 45 F.3d 1550, 1558 (Fed. Cir. 1995); see, e.g., ESCO Corp. v. Cashman Equip. Co., 158 F.Supp.3d 1051, 1070-71 (D. Nev. 2016); Nalco, 2014 WL 645365 at *10. A lawsuit is brought in bad faith only if “the lawsuit [is] objectively litigant could baseless in realistically the sense expect that success no on reasonable the merits.” Prof’l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60 (1993). goal is not to win a A purpose is improper “if its favorable judgment, but to harass a competitor and deter others from competition, by engaging the litigation process itself, regardless of the outcome.” Glaverbel, 45 F.3d at 1558. Therefore, to plead patent misuse, Defendants must allege facts justifying a reasonable inference that Chamberlain (1) acted with bad faith and improper purpose in bringing the suit and (2) impermissibly broadened the scope of the patent grant with anticompetitive effect. See, e.g., ESCO, 158 F.Supp.3d at - 42 - 1069-70 (citing 25 U.S.C. 271(d)(3)); Nalco, 2014 WL 645365 at *10; Rego-Fix AG v. Techniks, Inc., No. 10 C 1188, 2011 WL 471370, at *2 (S.D. Ind. Feb. 2, 2011) (citing Glaverbel, 45 F.3d at 1558). Given the Court’s determination that the ’275 patent inequitable conduct counterclaim is insufficiently pleaded, “so too is the patent misuse claim to the extent that it relies on inequitable conduct.” VDF FutureCeuticals, Inc. v. Sandwich Isles Trading Co., No. 11 C 288, 2011 WL 6820122, at *7-8 (D. Haw. Dec. 27, 2011); accord Target Training Int’l, Ltd. v. Extended Disc N. Am., Inc., No. H-10-3350, 2011 WL 3235683, at *4-5 (S.D. Tex. Jul. 27, 2011). And it fares no better to the extent it relies on the antitrust allegations, because the Court has found those allegations similarly inadequate. Because there are no other independent allegations pertinent to patent misuse, Defendants have failed to show bad faith on Chamberlain in seeking to enforce the ’275 patent. the part of Amending the Answer to add a ’275 patent misuse defense would be futile. By contrast, the Court finds Defendants’ allegations concerning the ’966 patent adequate under Exergen and WalkerProcess. Thus, bad faith is sufficiently established to survive a motion to dismiss. Further, the Court is willing to accept that Defendants, by incorporating their antitrust allegations, sufficiently plead that Chamberlain’s enforcement of the ’966 - 43 - patent is problem, likely to engender however, is the anticompetitive absence of any effects. further The allegations regarding improper purpose in bringing this litigation or how it attempts to broaden the scope of the ’966 patent grant. example, Defendants have not sufficiently alleged For that Chamberlain brought this case “to harass a competitor and deter others from competition” rather than win a favorable judgment. Glaverbel, 45 F.3d at 1558. Similarly, if a plaintiff’s conduct “is reasonably within the patent grant, i.e., [if] it relates to subject matter within the scope of the patent claims,” then “the practice does not have the effect of broadening the scope of the patent claims and thus cannot constitute patent misuse.” Virginia Panel Corp. v. MAC Panel Co., 133 F.3d 860, 869 (Fed. Cir. 1997) (citations and internal quotations omitted). Because Defendants have not pleaded facts to establish, for example, that Chamberlain brought this lawsuit against a product (the Ryobi GDO) “that no reasonable person could believe . . . infringed” the issued claims, the Court lacks a rationale for finding that Chamberlain’s litigation conduct is amenable to a patent misuse defense. Nalco, 2014 WL 645365 at *12-13; see, e.g., Otsuka Pharm. Co., Ltd. v. Torrent Pharms. Ltd., Inc., 118 F.Supp.3d 646, 658-59 (D.N.J. 2015) (dismissing as futile the defendant’s counterclaim for patent misuse because it “hinge[d] upon [the patentee’s] allegedly bad faith conduct in pursuing - 44 - its patent infringement action” but “failed to plead any allegation” that the patentee had, with anticompetitive effect, impermissibly broadened the physical or temporal scope” of the two patents); cf., Inc. v. Siliconezone USA, LLC, No. 06 C 1522, 2006 WL 3302825, at *10 (N.D. Ill. Nov. 14, 2006) (authorizing patent misuse defense where the defendant alleged that the plaintiff, after being informed in separate litigation of prior use and sale of products practicing its patents, then “attempted to ‘based mouse on against unlawfully pads,’ Defendant expand by for (quotation omitted). the scope attempting its to [of] its enforce ‘Kitchenzone’ patents, its cutting patents boards”) The gravamen of Defendants’ allegations – that Chamberlain and its agents failed to disclose prior art during prosecution and then brought this litigation – does not relate to broadening the physical or temporal scope of the patent. Therefore, the Court denies Defendants’ Motion with respect to the patent misuse affirmative defense on grounds of futility. D. Unclean Hands As relevant, establishing unclean hands requires proof of inequitable conduct plus a showing that the plaintiff’s conduct immediately relates to the claim it has asserted against the defendant. 910 F.2d See, Consol. Aluminum Corp. v. Foseco Int’l Ltd., 804, 810 (Fed. Cir. 1990). - 45 - The Court therefore examines the sufficiency of Defendants’ unclean hands pleading with these twin elements in mind. With respect to the ’275 patent, Defendants fail to state a claim of inequitable conduct under Exergen. Where an accused infringer’s unclean hands defense is based on alleged acts of inequitable conduct, allegations. 205065, See, at *7. it rises e.g., Thus, and falls Collaboration without a based on Properties, basis for those 2007 unclean WL hands independent of the alleged inequitable conduct, Defendants can only survive a Rule 12(b)(6) motion with plausible allegations of “egregious misconduct” relating to this litigation. Therasense, 649 F.3d at 1287; see also, Human Genome Sciences, Inc. v. Genentech, Inc., No. 2:11 C 6519, 2011 WL 7461786, at *8 (C.D. Cal. Dec. 9, 2011). Defendants have not done so, and the Court therefore denies leave to amend to include the proposed unclean hands defense to infringement of the ’275 patent. However, adequately that with allege their respect to inequitable unclean hands the conduct defense ’966 patent, under based on Defendants Exergen, the passes muster under the first prong of Foseco. same meaning conduct As for the second prong, the Court easily finds an immediate relationship between the alleged inequitable conduct before the PTO and Chamberlain’s claim in this litigation of infringement of the ’966 patent. See, e.g., Aptix Corp. v. Quickturn Design Sys., - 46 - 269 F.3d 1369, 1377 (Fed. Cir. 2001) (noting as part of an unclean hands analysis that “[e]ven presumably innocent licensees . . . would be properly barred from enforcing the patent, had the rights thereunder accrued through inequitable conduct”); Worldwide Home Products, Inc. v. Bed Bath and Beyond, Inc., No. 11 C 3633, 2013 WL 247839, at *1-2 (S.D.N.Y. 2013) (denying motion to dismiss where the defendants’ unclean hands defense stated that “‘Plaintiff’s claims are barred, in whole or in part, by the doctrine of unclean hands’ based on Plaintiff’s ‘misrepresentations . . . during the prosecution of the patent application . . . and, holding of further, information from Plaintiff’s the USPTO intentional that is with- material’”) (quotation omitted); Collaboration Properties, 2007 WL 205065 at *7 (noting that an unclean hands defense may rest on allegations of inequitable conduct before the PTO). As such, the Court denies leave to amend to include the affirmative defense of unclean hands with respect to the ’275 patent but grants leave to amend to include the affirmative defense of unclean hands with respect to the ’966 patent. IV. For the reasons CONCLUSION stated herein, granted in part and denied in part. Defendants’ Motion is Defendants may amend the Answer to include the proposed allegations, counterclaims, and inequitable conduct affirmative defense - 47 - relating to the ’966 patent, except for those implicating the misrepresentation of ’966 patent patent. respect The claims to and Court the non-disclosure denies proposed as futile of the ’676 Defendants’ allegations, prior art Motion with counterclaims, and affirmative defenses concerning the ’275 patent. The Court also denies as futile leave to amend to include the proposed patent misuse affirmative defense. IT IS SO ORDERED. Harry D. Leinenweber, Judge United States District Court Dated: March 22, 2017 - 48 -

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