ARTEMI LTD. v. SAFE-STRAP CO, INC.
Filing
66
OPINION. Signed by Judge Joseph E. Irenas on 12/27/2013. (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:
This is a patent infringement suit.1
Plaintiff Artemi’s
patented device is the Spacemaker, which is a hook with a strap
attached.
The Spacemaker is used to increase the number of
clothes hangers that can be hung on a single rail.
Defendant
Safe-Strap designed and sells a similar product, the HangerUnder, which Artemi asserts infringes its patent.
Presently before the Court is Plaintiff Artemi’s Motion to
Dismiss four of Defendant Safe-Strap’s affirmative defenses and
Safe-Strap’s counterclaims.
Safe-Strap opposes the Motion, and
has also cross-moved to amend its Answer.
Artemi mainly opposes
the Motion to Amend, arguing that the proposed amendments do not
cure the asserted deficiencies in the affirmative defenses and
counterclaims.2
For the reasons stated herein, Artemi’s Motion to Dismiss
will be granted in part and denied in part, and Safe-Strap’s
Motion to Amend will be granted in part and denied in part.
I.
This Court has already written an opinion discussing the
1
The Court exercises federal question subject matter
jurisdiction pursuant to 28 U.S.C. § 1331.
2
With respect to Safe-Strap’s 11th Affirmative Defense
only, Artemi agrees that the Proposed Amended Answer cures the
legal defect identified in the initial moving papers. The issue
with respect to the 11th Affirmative Defense is now moot.
2
allegations of Artemi’s Third Amended Complaint, see Aretmi, Ltd.
v. Safe Strap Co., Inc., -- F.Supp.2d –-, 2013 WL 2367874 (D.N.J.
May 30, 2013).
Those allegations are not directly relevant to
the issues raised by the instant motions.
Rather, Safe-Strap’s
affirmative defenses and counterclaims focus on Aretmi’s alleged
actions before the USPTO during the rexamination and reissue
proceedings which resulted in the patent-in-suit, Reissue Patent
42,568 (the “RE‘568 Patent”).
Safe-Strap’s theory of its case is that Artemi became aware
of the Hanger-Under and then sought reexamination of the
Spacemaker’s patent with the express purpose of re-writing the
patent claims to encompass the Hanger-Under.
According to Safe-
Strap, the reexamination and reissue proceedings were nothing but
a set-up for this patent infringement suit, which Safe-Strap
vehemently contends is frivolous.
In support of its theory,
Safe-Strap alleges the following.
Safe-Strap began selling its Hanger-Under in 2001.
(Proposed Amended Answer, “PAA”, ¶ 26)
“Prior to any sales
activity,” Safe-Strap inquired as to whether the Hanger-Under
infringed Artemi’s patent.
(Id.)
In an opinion dated February,
28, 2001, Safe-Strap’s patent counsel “unequivocally found that
Safe-Strap’s design did not infringe the [] patent.”
(Id.)
Also
in 2001, Artemi allegedly became aware of the Hanger-Under.
(PAA
¶ 25)
3
According to Safe-Strap, the Hanger-Under and the Spacemaker
were different from the start.
Both devices have two basic
parts: a hook that resembles a coat hanger hook, and a strap that
loops down from the hook. (See PAA ¶¶ 27-31)
But the devices
have two significant differences: (1) the Spacemaker’s strap is
adjustable (i.e., the loop can be made larger or smaller),
whereas the Hanger-Under’s strap is not adjustable; and (2) the
Spacemaker’s strap is connected to the hook through a circular
ring, whereas the Hanger-Under’s strap is connected to the hook
through a rectangular slot.
(PAA ¶¶ 27-28)
Thus, according to
Safe-Strap, Artemi knew all along that the Hanger-Under did not
infringe the patent for the Spacemaker.
Artemi’s knowledge notwithstanding, Safe-Strap alleges that
on May 10, 2002, Artemi filed its Request for Reexamination with
the USPTO “with an ulterior purpose of trying to rewrite and/or
reinterpret the meaning of the patent claims . . . to try to
cover” the Hanger-Under.
(PAA ¶ 34)
In other words, Safe-Strap
asserts that Artemi filed its reexamination request to set the
stage for the patent infringement suit that it would later file
with this Court in 2003.
Safe-Strap further contends that Artemi was ultimately
successful in its plan to rewrite the patent (although Safe-Strap
still disputes that it has infringed even the re-written patent).
Safe-Strap contends that, first, during reexamination Aretmi
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tried to change the meaning of the original patent claim 1 to
effectively eliminate the difference between the Spacemaker’s
circular ring and the Hanger-Under’s rectangular slot.
35-36)
(PAA ¶¶
Claim 1, however, “was prosecuted to a final rejection.”
(PAA ¶ 37)
Undeterred, Artemi took a different approach.
It filed a
reissue application allegedly seeking to introduce an entirely
new claim-- claim 8-- which would allegedly accomplish the same
goal it tried to achieve during reexamination.
(PAA ¶ 38)
Specifically, Safe-Strap relies on the difference between the
original language of the patent (the ‘455 patent) and the
language of the reissued patent, RE‘568, to support its theory
that Artemi rewrote its patent specifically to cover the HangerUnder.
Claim 1 of ‘455 described the circular ring-portion of the
Spacemaker this way: “a first part . . . in the form of a hook .
. . the first part further having a ring spaced from the hook,
the ring having a curved upper internal surface to facilitate
carrying a plurality of garments by hand.”
(PAA ¶ 28; emphasis
in PAA)
Claim 8 of RE‘568 describes the same part of the Spacemaker
this way: “a first part . . . in the form of a hook . . . the
first part further having a ring spaced from the hook, the ring
having a curved upper internal surface located on an exterior of
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the ring and facing internally with respect to the hook to
facilitate carrying a plurality of garments by hand.” (emphasis
added).
According to Safe-Strap, this change is critical: “[t]he
curved upper internal surface of the ring was now recited as
being on ‘an exterior of the ring and facing internally with
respect to the hook.’
Artemi moved the curved upper internal
surface from the inside of the ring to the outside of the ring,”
thereby “enlarging the [original] claim” and making the
Spacemaker look more like the Hanger-Under.
(PAA ¶ 39)
Based on these alleged facts, Safe-Strap asserts two
affirmative defenses: inequitable conduct (10th Affirmative
Defense), and patent misuse (14th Affirmative Defense); and one
counterclaim: abuse of process (Counterclaim 3).3
Artemi moves
to dismiss the affirmative defenses and counterclaim as legally
insufficient.
It also moves to dismiss Safe-Strap’s
counterclaims for declarations of patent invalidity (Counterclaim
1) and noninfringement (Counterclaim 2), asserting that they do
3
In its 18th Affirmative Defense Safe-Strap asserts that
“The Complaint has been brought in bad faith as Artemi knows its
claims are frivolous in that Safe-Strap’s product clearly does
not [infringe the patent at issue]. . . . Artemi has willfully
and maliciously abused the legal process.” (PAA ¶ 61) The Court
will treat this affirmative defense as encompassed by SafeStrap’s abuse of process counterclaim. Compare PAA Counterclaim
3, ¶ 79 (“Artemi is liable for malicious prosecution and/or an
abuse of process under federal and/or common law for its knowing
and willful filing and service of a frivolous complaint based on
false allegations of patent infringement.”).
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not comply with the pleading standards articulated in Twombly and
Iqbal.
II.
Fed. R. Civ. P. 15(a)(2) provides that “[t]he court should
freely give leave” to amend a pleading “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).
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).
III.
A.
Safe-Strap argues that Artemi’s alleged actions before the
USPTO are sufficient to support affirmative defenses of
inequitable conduct and patent misuse.
The Court disagrees.
1. Inequitable conduct
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“To prevail on an inequitable conduct charge, a defendant
must present evidence that the applicant (1) made an affirmative
misrepresentation of material fact, failed to disclose material
information, or submitted false material information, and (2)
intended to deceive the PTO.”
Rothman v. Target Corp., 556 F.3d
1310, 1323 (Fed. Cir. 2009).
Safe-Strap asserts that Artemi’s entire goal during the
reexamination and reissue proceedings was to “mislead [the USPTO]
to believe that the curved upper surface of the [Spacemaker’s]
ring was on the outside of the ring and not as originally claimed
on the inside of the ring.”
(PAA ¶ 44)
Safe-Strap then gives
specific examples of how “Artemi and his attorney materially
misrepresented what the original claim meant” (PAA ¶ 43):
•
“[i]n the Reexamination Request, Artemi
misrepresented that the ‘curved upper internal
surface’ of the ring was not the internal
surface but the exterior surface of the ring
facing internally with respect to the hook,
i.e., facing the hook.” (PAA ¶ 35; emphasis in
PAA)
•
“Artemi pointed to the language of the claim
that the curved upper internal surface of the
ring was ‘to facilitate carrying a plurality of
garments by hand. Artemi asserted in sworn
declarations that this language meant that the
ring’s curved upper internal surface was really
on the exterior of the ring, despite the
express language of the claim that it was on
the inside.” (PAA ¶ 36; emphasis in PAA)
•
“In response to [the Patent Examiner’s]
rejection [of new claim 8 during reissue
proceedings], Artemi amended claim 8 to remove
the word ‘internal’ from the recitation of ‘the
8
ring having a curved upper internal surface.’
Claim 8 as further amended now recited ‘the
ring having a curved upper surface located on
an exterior of the ring and facing internally
with respect to the hook.’ This completely
changed the meaning of the original patent
claim.” (PAA ¶ 41)4
The issue is whether these alleged “material
misrepresentations” are actionable.
The Court concludes that
they are not.
None of the alleged “misrepresentations” identified by SafeStrap are misrepresentations of fact, but rather as Safe-Strap
itself contends, interpretations of meaning.
Advocating for a
particular understanding of a claim’s language during
reexamination and reissue does not violate an applicant’s duty of
candor to the USPTO.
As Artemi correctly observes, “applicants
can make their best argument to the examiner about what they
think the patent and claims say.”
(Reply Br. p. 7)
In Young v. Lumenis, Inc., the Federal Circuit held that
“attorney argument” concerning “interpretation of what prior art
discloses” was not a material misrepresentation because the
statement at issue “was not demonstrably false.”
1349 (Fed. Cir. 2007).
492 F.3d 1336,
Similarly here, whether the “curved
4
Safe-Strap later acknowledges that “[a]fter the decision
on appeal, the Examiner required Artemi to reinsert the word
‘internal’ into claim 8 and other claims where it had been
removed,” (PAA ¶ 46), and indeed, claim 8 of RE‘568, as quoted
supra, includes the word “internal.”
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surface” recited in the original patent referred to the outside
of the ring or the inside of the ring is not something that is
objectively verifiable.
Both surfaces are curved.
Accordingly, Safe-Strap’s inequitable conduct affirmative
defense fails as a matter of law.
Safe-Strap’s Motion to Amend
will be denied, and Artemi’s Motion to Dismiss will be granted as
to this issue.
2.
Misuse
Safe-Strap argues that Artemi’s alleged scheme to re-write
its patent to cover the Hanger-Under and then file this
infringement action constitute patent misuse.
The Court
disagrees.
Several decades-worth of Supreme Court jurisprudence makes
clear that the defense of patent misuse must be based on
allegations that the patentee “extend[ed] the term of his
[patent] monopoly beyond that granted by law.”
Zenith Radio
Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 136 (1969)
(emphasis added); see also Blonder-Tongue Laboratories, Inc. v.
University of Illinois Foundation, 402 U.S. 313, 343-44 (1971)
(“The far-reaching social and economic consequences of a patent .
. . give the public a paramount interest in seeing that patent
monopolies . . . are kept within their legitimate scope.
One
obvious manifestation of this principle has been the series of
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decisions in which the Court has condemned attempts to broaden
the physical or temporal scope of the patent monopoly.”);
Transparent-Wrap Mach. Corp. v. Stokes & Smith Co., 329 U.S. 637,
643-44 (1947) (stating that “a patentee [is limited] to the
monopoly found within the four corners of the grant” and may not
use that monopoly power “to acquire a monopoly not embraced in
the patent.”).
Safe-Strap does not allege facts supporting a conclusion
that Artemi misused its monopoly power to obtain a benefit in the
market, and therefore its defense fails as a matter of law.
First, the allegations concerning misrepresentations made to
the USPTO during reexamination and reissue cannot support a
defense of patent misuse because those alleged actions could not
possibly exploit the monopoly power granted by the patent.
Rather, those alleged actions could only define the scope of the
monopoly in the first place.
The distinction is chronological.
A patentee cannot exploit its monopoly power without first having
the bounds of that power defined during reexamination and
reissue.
Cf. Morton Salt Co. v. G.S. Suppiger Co., 314 U.S. 488,
492 (“the public policy which includes inventions within the
granted monopoly excludes from it all that is not embraced within
the invention.
It equally forbids the use of the patent to
secure an exclusive right or limited monopoly not granted by the
Patent Office.”) (emphasis added).
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In short, Safe-Strap alleges
that Artemi impermissibly expanded the scope of the patent
itself, not that Artemi expanded the monopoly power conferred by
the patent after it was granted by the USPTO.
Similarly, the filing of an allegedly frivolous patent
infringement suit is not misuse of the patent’s monopoly power.
Artemi’s monopoly power (no matter what its bounds) does not
enable it to bring this suit.
Rather, Artemi may pursue this
suit by virtue of Congress’s statutory grant of a remedy for
patent infringement, namely 35 U.S.C. § 271.
Safe-Strap’s patent misuse affirmative defense fails as a
matter of law.
Safe-Strap’s Motion to Amend will be denied, and
Artemi’s Motion to Dismiss will be granted as to this issue.
B.
Artemi asserts that Safe-Strap’s abuse of process
counterclaim fails to state a claim.
The Court disagrees.5
Safe-Strap alleges that Artemi filed this infringement suit,
and then after reissue, continued to pursue this suit, knowing
all along that the suit was “frivolous.”
(Reply Br., p. 6)
Safe-Strap alleges that Artemi’s motivation in pursuing this
5
Safe-Strap has asserted a counterclaim for “malicious
prosecution and/or abuse of process.” (PAA ¶ 79) A malicious
prosecution claim, however, can be based only on a criminal
proceeding, not a civil suit. See LoBiondo v. Schwartz, 199 N.J.
62, 89 (2009). Thus, Artemi is correct that the malicious
prosecution counterclaim fails as a matter of law.
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litigation lies not in protecting its patent rights (which SafeStrap asserts are not even remotely threatened), but rather in
interfering with Safe-Strap’s business.
Such allegations are
sufficient to support a “malicious use of process” claim under
New Jersey law, provided, of course, that Artemi’s infringement
claims are “terminated favorably” to Safe-Strap.
LoBiondo v.
Schwartz, 199 N.J. 62, 90-91 (2009).
Nor is the malicious use of process claim preempted by
federal law, as Artemi asserts.
The federal preemption cases
Artemi relies upon6 merely stand for the proposition that common
law tort claims of abuse of process cannot be based on “bad faith
misconduct before the PTO.”
1382.
Semiconductor Energy, 204 F.3d at
Accordingly, allegations supporting an inequitable conduct
defense cannot simultaneously support an abuse of process claim.
See id. (affirming trial court’s holding that New Jersey RICO law
counterclaims were preempted, explaining that the “counterclaims
occupy a field identical in scope with the inequitable conduct
defense.”).
Here, however, Safe-Strap’s malicious use of process claim
is not based on Artemi’s alleged actions before the PTO, but
rather the initiation and continued pursuit of the instant suit.
6
Sign-A-Way, Inc. v. Mechtronics Corp., 2000 U.S. App.
LEXIS 6230 (Fed. Cir. 2000); Semiconductor Energy Laboratory Co.,
Ltd. v. samsung Electronics Co., Ltd., 204 F.3d 1368 (Fed. Cir.
2000); and Abbott Laboratories v. Brennan, 952 F.2d 1346 (Fed.
Cir. 1991).
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The counterclaim is not preempted.
As to Safe-Strap’s “abuse of process” counterclaim Artemi’s
Motion to Dismiss will be denied and Safe-Strap’s Motion to Amend
will be granted.
C.
Lastly, Artemi’s Iqbal / Twombly argument is a red herring.
Even if the Court were to grant the Motion to Dismiss
Counterclaims 1 and 2, the issues of patent invalidity and
noninfringement would remain in the case as defenses.
Indeed,
Safe-Strap has asserted invalidity and noninfringement as
defenses (see PAA ¶¶ 15-18) and Artemi does not move to dismiss
those defenses.
Moreover, the counterclaims, when read in the context of the
Proposed Amended Answer as a whole, adequately put Artemi on
notice as to the factual basis of Safe-Strap’s defenses.
Cf.
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (“Federal
Rule of Civil Procedure 8(a)(2) requires only ‘a short and plain
statement of the claim showing that the pleader is entitled to
relief,’ in order to ‘give the defendant fair notice of what the
. . . claim is and the grounds upon which it rests.’”).
Accordingly, Artemi’s Motion to Dismiss Counterclaims 1 and
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2 will be denied.7
IV.
For the foregoing reasons, Artemi’s Motion to Dismiss will
be granted as to: (1) Safe-Strap’s affirmative defenses of
inequitable conduct and patent misuse, and (2) Safe-Strap’s
counterclaim for “malicious prosecution”; and denied in all other
respects.
Safe-Strap’s Motion to Amend will be denied as to: (1)
its affirmative defenses of inequitable conduct and patent
misuse, and (2) its counterclaim for “malicious prosecution”; and
granted in all other respects.
An appropriate Order accompanies this Opinion.
Date: December 27, 2013
s/ Joseph E. Irenas
JOSEPH E. IRENAS, S.U.S.D.J
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Artemi also objects to Safe-Strap’s claim to attorneys
fees under 35 U.S.C. § 285 if Safe-Strap prevails on its
counterclaims. Artemi’s reasoning for that objection is not
clear, particularly considering that Artemi itself seeks the same
relief in its complaint against Safe-Strap.
In any event, decisions concerning entitlement to attorneys
fees can abide the resolution of the merits of this suit.
Artemi’s Motion to Dismiss as to this issue will be denied
without prejudice.
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