ARTEMI LTD. v. SAFE-STRAP CO, INC.
Filing
41
OPINION. Signed by Judge Joseph E. Irenas on 5/30/2013. (tf, )
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
ARTEMI LTD.,
Plaintiff,
v.
SAFE-STRAP CO., INC.,
Defendant.
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HONORABLE JOSEPH E. IRENAS
Civ. Action No. 03-3382(JEI/AMD)
MCELROY, DEUTSCH, MULVANEY & CARPENTER, LLP
By: Joseph P. Lasala, Esq.
1300 Mount Kemble Avenue
P.O. Box 2075
Morristown, New Jersey 07962
and
PAZUNIAK LAW OFFICE
By: George Pazuniak, Esq.
1201 North Orange Street
7th Floor, Suite 7114
Wilmington, Delaware 19801
Counsel for Plaintiff
MULLEN & REYNOLDS, LLC
By: Eugene G. Reynolds, Esq.
101 Gibraltar Drive, Suite 1E1
Morris Plains, New Jersey 07950
and
OSTRELENK FABER LLP
By: Louis C. Dujmich, Esq.
1180 Avenue of the Americas
New York, New York 10036
Counsel for Defendant
OPINION
IRENAS, Senior District Judge:
On July 16, 2003, Plaintiff Artemi Ltd. initiated this
patent infringement action against Defendant Safe-Strap Co., Inc.
Several months later, upon the parties’ consent, the Court stayed
the case pending the United States Patent and Trademark Office’s
(“USPTO”) decision on reexamination and reissue of the patent at
issue.
The USPTO issued its decision on July 26, 2011.
Almost a
year and a half after the USPTO proceedings concluded, Artemi
filed the instant Motion to Reopen this case.
Artemi also seeks
to amend the Amended Complaint to reflect the USPTO’s decision.
Safe-Strap opposes both Motions.
For the reasons stated herein, the Motion to Reopen will be
granted, and the Motion to Amend will be granted in part and
denied without prejudice in part.
I.
Paul Artemi is the owner and managing director of Plaintiff
Artemi Ltd.
Mr. Artemi invented the “Spacemaker,” which is a
hook used by garment retailers and distributors to increase the
amount of garments that can be hung on a rail.
The USPTO issued
U.S. Patent 5,584,455 (the “‘455 Patent”) (Dujmich Decl. Ex. 1)
to Artemi on December 17, 1996.
According to Aretmi, the
Spacemaker is used by well-known national clothing retailers,
including Banana Republic and Kohl’s.
2
On May 10, 2002, Artemi submitted the ‘455 Patent for ex
parte reexamination by the USPTO, and on August 8, 2002, the
USPTO granted the request for reexamination.1
While the reexamination proceeding was pending, on July 16,
2003, Artemi filed suit against Safe-Strap alleging that SafeStrap’s apparel hook, known as the “Hanger Under,” infringed upon
the claims of the ‘455 Patent.
District Judge Pisano.
The case was assigned to U.S.
Safe-Strap answered the Amended Complaint
on October 1, 2003.
Shortly thereafter, in light of the reexamination
proceedings, and at the joint request of the parties, Judge
Pisano entered an Order staying and administratively terminating
the action “pending completion of the ongoing reexamination
proceeding before the USPTO pertaining to [the ‘455 Patent].”
(Dkt. Entry No. 14)
The Order further stated that Artemi “shall
notify the Court and [Safe-Strap] when said reexamination
proceeding is completed and the matter can be reinstated to the
active docket.”
Id.
That same day, Judge Pisano also entered an
Administrative Termination Order terminating the action “without
prejudice to the right of the parties to reopen the proceedings
for good cause shown.”
(Dkt. Entry No. 15)
1
During reexamination, any claim of the patent may be
reexamined in light of new prior art in order to determine
whether the claim remains patentable. “Any person . . . may file
a request for reexamination . . . of any claim on the basis of
any prior art.” 35 U.S.C. § 302.
3
In the following years, Artemi continued to pursue
reexamination, and then reissue, before the USPTO.2
These prolonged proceedings concluded with the issuance of
U.S. Reissue Patent 42,568 (the “RE‘568 Patent”) (Exhibit 1 to
Proposed Second Amended Complaint) on July 26, 2011.
patent has ten claims: Claim 2 and Claims 8-16.
The reissue
Relevant to the
instant Motions, Artemi concedes that Claims 8-16 of the RE‘568
Patent are entirely new (i.e., not substantially identical to any
of the claims of the ‘455 Patent).
The parties dispute whether
Claim 2 of the RE‘568 Patent is substantially identical to Claim
2 of the ‘455 Patent.
On June 24, 2011, Artemi’s counsel sent a letter to SafeStrap’s counsel stating that the RE‘568 Patent was about to be
issued and that Artemi intended to seek to reopen this case.
(Pazuniak Decl. Ex. F)
On July 1, 2011, Safe-Strap’s counsel
responded that Safe-Strap would oppose any effort by Artemi to
revive the litigation.
(Dujmich Decl. Ex. 6)
On December 27, 2012, seventeen months after the issuance of
the RE‘568 Patent, Artemi’s counsel wrote to Judge Pisano
2
Although the record is not entirely clear, it seems that
during the reexamination proceeding, Claim 1, and Claims 3-7 of
the original patent were cancelled. Thereafter, Artemi filed an
appeal with the USPTO Board of Appeals and Interferences.
On April 4, 2006, while the appeal was still pending, Artemi
filed an application for reissue of the patent and withdrew the
appeal. On February 17, 2009, the USPTO merged the reexamination
and reissue proceedings into a single proceeding. See 37 C.F.R.
§ 1.565(d).
4
advising that the reexamination proceeding was completed and
requesting that the case be reinstated to the active docket.
The case was then reassigned to the undersigned.
As indicated supra, presently pending are Artemi’s Motion to
Reopen and Motion to Amend the Amended Complaint.
Safe-Strap
opposes both Motions, asserting that the case should not be
reopened because of the seventeen-month delay in seeking to
reopen the case, and that Artemi’s proposed amendments to the
Amended Complaint are meritless.
II.
Fed. R. Civ. P. 15(a)(2) provides that “[t]he court should
freely give leave” to amend “when justice so requires.”
The
decision to grant leave to amend rests within the discretion of
the court.
Foman v. Davis, 371 U.S. 178, 182 (1962).
However,
the court may deny leave to amend when the amendment would be
futile.
Free Speech Coal., Inc, v. Attorney Gen. of U.S., 677
F.3d 519, 545 (3d Cir. 2012).
Futility “means that the
complaint, as amended, would fail to state a claim upon which
relief could be granted.”
Burtch v. Milberg Factors, Inc., 662
F.3d 212, 231 (3d Cir. 2011), cert. denied, 132 S. Ct. 1861
(2012).
5
III.
The Court first addresses the Motion to Reopen and then the
Motion to Amend.
A.
Safe-Strap argues that this case should not be reopened
because of the seventeen month delay that occurred between the
issuance of the RE‘568 Patent (i.e., the termination of the
reexamination proceeding) and the instant Motion to Reopen.
It
relies on the language of Judge Pisano’s Order staying and
administratively terminating the case, which states in relevant
part, “IT IS HEREBY ORDERED THAT: . . . Plaintiff shall notify
the Court and Defendant when said reexamination proceeding is
completed, and the matter can be reinstated to the active
docket.”
According to Safe-Strap, notifying the Court seventeen
months after the reexamination proceeding was completed was not
notifying the Court “when” the proceeding was completed.
Safe-
Strap essentially argues that Judge Pisano intended this case to
be reopened within a reasonable time after reexamination
concluded, and that the delay in this case was unreasonable.
Assuming arguendo that Safe-Strap’s interpretation of the
Order is correct, the Court concludes that in this particular
case, the delay in notifying the Court was not unreasonable.
Nothing about the delay alone is per se unreasonable.
6
Paul
Artemi states in his declaration that the delay resulted from two
factors: (1) financial inability to support this litigation
immediately after the conclusion of the proceedings before the
USPTO; and (2) the need to find new lead counsel after prior
counsel changed law firms.
He further states that he retained
current counsel approximately one to two months prior to seeking
to reopen this case.
Thus, nothing in the record suggests that
Artemi’s delay was in bad faith.3
Nor does it appear that Safe-Strap was prejudiced in any way
by the delay.
Safe-Strap argues that “prejudice may be presumed”
from the delay (Opposition Brief p. 14), however, the case it
cites for that proposition, Johnson-Shavers v. MVM, Inc., 2008
U.S. Dist. LEXIS 6320 at *8 (D.N.J. Jan. 29, 2008), is easily
distinguishable.
Johnson-Shavers involved an unopposed motion
pursuant to Fed. R. Civ. P. 41(b) to dismiss a pro se plaintiff’s
open employment discrimination case for failure to prosecute.
The Court concluded that involuntary dismissal was the only
remedy for the plaintiff’s repeated failure to respond to
discovery requests, and that further delay in prosecuting the
case would prejudice the defendant.
This case, however, involves a represented plaintiff, in a
patent infringement action, who seeks to reopen a case that was
3
Safe-Strap argues, without any citation to authority,
that bad faith can be inferred from the delay alone. The Court
disagrees.
7
administratively terminated with the defendant’s consent.
Rule
41(b) and Johnson-Shavers are simply inapplicable here.4
Accordingly, the Court holds that Artemi’s delay was not in
bad faith and Safe-Strap will not be prejudiced by reopening this
case5; therefore the Motion to Reopen will be granted.
B.
Safe-Strap opposes Artemi’s Motion to Amend arguing that
amendment would be futile because the proposed Second Amended
Complaint fails to state a claim.
The proposed Second Amended
Complaint alleges that Safe-Strap “directly infringed,
contributorily infringed, and/or actively induced infringement
[of]” Artemi’s patent.
The Court analyzes the direct
infringement claims before turning to the indirect infringement
claims.
4
Also contrary to Safe-Strap’s argument, Poulis v. State
Farm Fire and Casualty, 747 F.2d 863 (3d Cir. 1984) does not
apply. Like Johnson-Shavers, Poulis involved dismissal with
prejudice of an open case, not reopening of an administratively
terminated case.
5
Safe-Strap also argues that prejudice will result because
Artemi’s claims are “frivolous.” (Opposition Brief, p. 3)
However, as explained next in Section III., B., the Court holds
that Aretmi’s claims, at least at this stage of the litigation,
are not frivolous.
8
(1)
Direct Infringement
Alleged infringement of RE‘568 Claim 2
Safe-Strap contends that Artemi cannot pursue a direct
infringement action based on any of Safe-Strap’s alleged
infringement prior to July 26, 2011, the effective date of the
RE‘568 Patent, because the ‘455 Patent was surrendered upon the
reissue.
(Opposition Brief, p. 16-21)
The Court disagrees.
It is true that an original patent is surrendered upon the
issuance of a reissue patent and can no longer be infringed.
Seattle Box Co. v. Indus. Crating & Packing, Inc., 731 F.2d 818,
827 (Fed. Cir. 1984) (“Seattle Box I”).
However, the effect of a
reissued patent on pending litigation is governed by the first
paragraph of 35 U.S.C. § 252, which provides:
[E]very reissued patent shall have the same effect and
operation in law, on the trial of actions for causes
thereafter arising, as if the same had been originally
granted in such amended form, but in so far as the
claims of the original and reissued patents are
substantially identical, such surrender shall not
affect any action then pending nor abate any cause of
action then existing, and the reissued patent, to the
extent that its claims are substantially identical
with the original patent, shall constitute a
continuation thereof and have effect continuously from
the date of the original patent.
35 U.S.C. § 252 (emphasis added).
Thus, reissued claims which are substantially identical to
those of the original patent “have effect continuously from the
date of the original patent.”
Bloom Eng’g Co. v. N. Am. Mfg.
9
Co., 129 F.3d 1247, 1250 (Fed. Cir. 1997).
Accordingly, a
reissued patent can be enforced against infringing activity that
allegedly occurred from the time the original patent was issued
if the claims of the original and reissue patents are
substantially identical.
Predicate Logic, Inc., 544 F.3d at
1305.6
In the instant case, Artemi’s Proposed Second Amended
Complaint alleges that Claim 2 of the RE‘568 Patent is
substantially identical to the original Claim 2 of the ‘455
Patent.
(Prop. Second Amended Compl. ¶8)
If the Court concludes
that ‘455 Patent Claim 2 and RE‘568 Patent Claim 2 are indeed
substantially identical,7 in accordance with § 252, Artemi may
pursue a direct infringement action for alleged activity dating
back to the issuance of the ‘455 Patent.
While Safe-Strap contends that the claims are not
substantially identical, such a determination cannot be made at
6
Reissued patent
the original claims if
Predicate Logic, Inc.,
129 F.3d at 1250); see
claims are “substantially identical” to
they are “without substantive change.”
544 F.3d at 1305 (quoting Bloom Eng’g Co.,
also Seattle Box I, 731 F.2d at 827-28.
7
Whether claims are substantially identical is a question
of law. Westvaco Corp. v. Int’l Paper Co., 991 F.2d 735, 741
(Fed. Cir. 1993); see also Laitram Corp. v NEC Corp., 163 F.3d
1342, 1347 (Fed. Cir. 1998) (“Laitram IV”)(“the interpretation
and construction of patent claims, which define the scope of the
patentee’s rights under the patent, is a matter of law,
exclusively for the court”)(quoting Markman v. Westview
Instruments, Inc., 52 F.3d 967, 970-71 (Fed. Cir. 1995)(en banc),
aff'd, 517 U.S. 370 (1996)).
10
the pleading stage.
Rather, the issue of whether the claims are
substantially identical is most appropriately decided after claim
construction.8
Indeed, courts have refused to rule on whether
claims are substantially identical before formal claim
construction hearings.
See, e.g., Etagz, Inc. v. Quicksilver,
Inc., No. SACV 10–0300 DOC (MLGx), 2012 WL 2135497, at *3 (C.D.
Cal. June 11, 2012); Sorensen v. Emerson Elec. Co., Nos. 08cv0060
BTM (CAB), 08cv0070, 08cv0305, 2011 WL 6752559, at *7 (S.D. Cal.
Dec. 22, 2011); StemCells Inc. v. Neuralstem Inc., No.
AW–06–1877, 2009 WL 3681653, at *3 (D. Md. Oct. 30, 2009).
Consequently, Safe-Strap’s futility argument concerning the
alleged infringement of ‘455 Patent / RE‘568 Patent Claim 2
fails.
Alleged infringement of RE’568 Claims 8-16
Additionally, Safe-Strap argues that Artemi’s direct
infringement claim fails because Safe-Strap acquired intervening
rights prior to the issuance of the RE’568 Patent.
8
(Opposition
To determine whether claims are substantially identical,
the court “must discern whether the scope of the claims are
identical, not merely whether different words are used.” Laitram
IV, 163 F.3d at 1346 (citing Slimfold Mfg. Co. v. Kinkead Indus.,
810 F.2d 1113, 1115 (Fed. Cir. 1987)). In so doing, “the claims
must be construed in light of the specification, prosecution
history, prior art, and other pertinent information.” Laitram
Corp. v. NEC Corp., 952 F.2d 1357, 1361 (Fed. Cir. 1991)
(“Laitram I”)(citing Tillotson, Ltd. v. Walbro Corp., 831 F.2d
1033, 1036-39 (Fed. Cir. 1987)).
11
Brief, p. 24)
However, this issue, like the question of whether
Claim 2 of the RE‘568 Patent is substantially identical to Claim
2 of the ‘455 Patent, cannot be decided at this stage of the
litigation.
The doctrine of intervening rights is codified in the second
paragraph of 35 U.S.C. § 252, which provides in relevant part:
A reissued patent shall not abridge or affect the
right of any person . . . in business who, prior to
the grant of a reissue, made, purchased, offered to
sell, or used within the United States, . . . anything
patented by the reissued patent, to continue the use
of, to offer to sell, or to sell to others to be used,
offered for sale, or sold, the specific thing so made,
purchased, offered for sale, used, or imported unless
the making, using, offering for sale, or selling of
such thing infringes a valid claim of the reissued
patent which was in the original patent. The court
before which such matter is in question may provide
for the continued manufacture, use, offer for sale, or
sale of the thing made, purchased, offered for sale,
used,
or
imported
as
specified,
or
for
the
manufacture, use, offer for sale, or sale in the
United States of which substantial preparation was
made before the grant of the reissue, . . . to the
extent and under such terms as the court deems
equitable for the protection of investments made or
business commenced before the grant of the reissue.
35 U.S.C. § 252.
In short, the doctrine of intervening rights provides that
“when certain conditions are present a reissue shall not abridge
or affect certain rights of those who acted before the reissue
was granted.”
Seattle Box Co. v. Indus. Crating & Packing, Inc.,
756 F.2d 1574, 1579 (Fed. Cir. 1985) (“Seattle Box II”).
statute therefore allows the Court to grant an infringer a
The
12
“‘personal intervening right’ to continue what would otherwise be
infringing activity after reissue. . . . if the court decides
that equity dictates such a result.”
Id. (quoting Chisum on
Patents).
As an initial matter, intervening rights is an affirmative
defense.
Fortel Corp. v. Phone-Mate, Inc., 825 F.2d 1577, 1580
(Fed. Cir. 1987); Windsurfing Int’l Inc. v. AMF, Inc., 782 F.2d
995, 1003 (Fed. Cir. 1986).
Thus, Artemi need not plead in its
Proposed Second Amended Complaint that Safe-Strap has no
intervening rights; therefore as a matter of law, amendment
cannot be futile because the futility analysis tests the adequacy
of Artemi’s pleading.
See Burtch v. Milberg Factors, Inc., 662
F.3d 212, 231 (3d Cir. 2011) (futility “means that the complaint,
as amended, would fail to state a claim upon which relief could
be granted.”).
Moreover, case law makes clear that whether to grant
intervening rights is a highly fact-specific inquiry.
Even if an
infringer proves the necessary elements of § 252 (e.g., prereissue sales in the United States, and substantial pre-reissue
preparation), the Court may, as a matter of equity, deny
intervening rights.
See Westvaco Corp. v. Int’l Paper Co., 991
F.2d 735, 743 (Fed. Cir. 1993) (affirming district court’s denial
of intervening rights, even though the infringer had established
a prima facie case for intervening rights, because the district
13
court concluded that under “the factual circumstances of the
case” allowing the defense would be inequitable).9
Thus, it is abundantly clear that the Court cannot rule on
intervening rights at the very outset of this case, without any
factual record upon which to make a ruling.
Accordingly, the
Court concludes that Amending the Amended Complaint to include
alleged infringement of Claims 8-16 of the RE‘568 Patent will not
be futile.10
(2)
Indirect Infringement
9
See generally Seattle Box II, 756 F.2d at 1577-78
(criticizing the district court for failing to make findings of
fact in support of its intervening rights decision, explaining
“it was error for the court to limit its statement on the
equitable components of intervening rights to a mere ultimate
conclusion, without any explanation whatever of the particular
factors and facts it considered.”); cf. Windsurfing Int’l Inc.,
782 F.2d at 1003 (“That [Defendant] pleaded [the intervening
rights] defense is insufficient. That it failed to make any
attempt to prove the defense at trial is in this case fatal.”).
10
At oral argument on the instant Motions, defense counsel
asked that if the Court allowed Plaintiff to reopen this case and
amend the Amended Complaint that the Court should at least impose
sanctions for the delay in moving to reopen the case. Counsel
seemed to suggest that such sanction should take the form of
limiting Plaintiff’s potential damages recovery to damages
incurred from the date this case was reopened, as opposed to the
date that the RE‘568 patent was issued.
Nothing presently before the Court suggests that sanctions
are appropriate. To the extent Defendant is asserting that the
delay in reopening this case should be an equitable consideration
weighed by this Court, Defendant is free to make such an argument
at the appropriate stage of this litigation.
14
In conclusory fashion, the Proposed Second Amended Complaint
asserts that Safe-Strap “actively induced infringement” of, and
“contributorily infringed,” its patent.
With respect to induced infringement, 35 U.S.C. § 271(b)
states, “[w]hoever actively induces infringement of a patent
shall be liable as an infringer.”
Artemi pleads no facts
concerning, for example, what Safe-Strap allegedly did to induce
infringement, nor whom it allegedly induced.
Accordingly, the
Proposed Second Amended Complaint fails to plead sufficient facts
supporting a patent infringement claim based on induced
infringement.
See generally Superior Indus., LLC v. Thor Global
Enters., 700 F.3d 1287, 1295-96 (Fed. Cir. 2012) (explaining that
Twombly and Iqbal apply to claims of indirect infringement).
Likewise, the Proposed Second Amended Complaint fails to
plead sufficient facts supporting a cause of action for
contributory infringement.
35 U.S.C. § 271(c) states,
[w]hoever offers to sell or sells within the United
States or imports into the United States a component
of a patented machine, manufacture, combination or
composition, or a material or apparatus for use in
practicing a patented process, constituting a material
part of the invention, knowing the same to be
especially made or especially adapted for use in an
infringement of such patent, and not a staple article
or commodity of commerce suitable for substantial
noninfringing use, shall be liable as a contributory
infringer.
Artemi does not plead any facts concerning which “component”
of the Spacemaker Safe-Strap has sold or offered to sell within
15
the United States, nor does it plead that Safe-Strap acted with
the requisite intent.
See generally Superior Indus., 700 F.3d at
1295-96 (explaining that Twombly and Iqbal apply to claims of
indirect infringement).
Accordingly, the Proposed Second Amended Complaint fails to
state a claim for indirect infringement because it contains no
factual allegations supporting the legal claim.
The Motion to
Amend will be denied without prejudice.
IV.
For the foregoing reasons, Artemi’s Motion to Reopen this
case will be granted.
Artemi’s Motion Amend the Amended Complaint will be granted
in part and denied in part.
The Motion to Amend will be granted
as to the direct infringement claims and denied without prejudice
as to the indirect infringement claims.
An appropriate Order accompanies this Opinion.
Date: May 30, 2013
s/ Joseph E. Irenas
JOSEPH E. IRENAS, S.U.S.D.J
16
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