Blue Gentian, LLC v. Tristar Products, Inc.
Filing
347
OPINION. Signed by Judge Noel L. Hillman on 1/30/2018. (dmr)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
BLUE GENTIAN, LLC, NATIONAL
EXPRESS, INC., and TELEBRANDS
CORP., 1
No. 1:13-cv-1758 (NLH/AMD)
OPINION
Plaintiffs,
v.
TRISTAR PRODUCTS, INC. and
WAL-MART STORES, INC. d/b/a
SAM’S CLUB and SAM’S
WHOLESALE CLUB,
Defendants.
APPEARANCES:
THOMAS R. CURTIN
GEORGE C. JONES
GRAHAM CURTIN, P.A.
4 HEADQUARTERS PLAZA
P.O. BOX 1991
MORRISTOWN, NEW JERSEY 07962-1991
Counsel for Plaintiffs Blue Gentian, LLC and National
Express, Inc.
EDWARD F. MCHALE
BRIAN M. TAILLON
KENNETH W. COHEN
ANDREW D. LOCKTON
MCHALE & SLAVIN, P.A.
2855 PGA BOULEVARD
PALM BEACH GARDENS, FLORIDA 33410
Appearing pro hac vice on behalf of Plaintiffs Blue
Gentian, LLC and National Express, Inc.
1
By a June 19, 2017 Order, Telebrands Corp. was added as a
party plaintiff and counterclaim defendant.
1
EDWARD P. BAKOS
NOAM J. KRITZER
BAKOS & KRITZER
147 COLUMBIA TURNPIKE, SUITE 102
FLORHAM PARK, NEW JERSEY 07932
Counsel for Defendants
J. STEVEN BAUGHMAN
PAUL, WEISS, RIFKIND, WHARTON & GARRISON, LLP
2001 K STREET, NW
WASHINGTON, DC 20006-1047
Appearing pro hac vice on behalf of Defendant Tristar
Products, Inc.
HILLMAN, District Judge
This is a patent-infringement action relating to an
expandable hose product.
Plaintiffs allege Blue Gentian, LCC is
the owner of U.S. Patent No. 8,757,213, which is a continuation
of several other patents.
Additionally, Plaintiffs allege Blue
Gentian, LLC is the owner of U.S. Design Patent D722,681, which
is a continuation in part of an earlier design patent.
Plaintiffs assert claims of direct infringement of these patents
pursuant to 35 U.S.C. § 271(a) and indirect infringement of
these patents pursuant to 35 U.S.C. § 271(b) and (c).
Defendants contest these claims and assert counterclaims of
noninfringement and invalidity against Plaintiffs.
Defendants now move under Federal Rule of Civil Procedure
42(b) 2 for a Separate Hearing on Correction of Inventorship
2
Federal Rule of Civil Procedure 42(b) provides: “For
convenience, to avoid prejudice, or to expedite and economize,
the court may order a separate trial of one or more separate
2
pursuant to 35 U.S.C. § 256.
In particular, Defendants ask this
Court to schedule a one-day evidentiary hearing on the issue of
inventorship to resolve whether Gary Ragner should be named as
an inventor on the patents-in-suit.
Currently, only Michael
Berardi is named as an inventor.
Plaintiffs argue Defendants do not have standing to make
such a motion, that the motion is too delayed and is barred by
equitable estoppel, and that the claim of an error in
inventorship is meritless.
The Court finds Defendants do have
standing, that the motion is not fatally delayed and equitable
estoppel does not apply, and that any arguments relating to the
merits of Ragner being added as an inventor must be reserved for
an evidentiary hearing.
Accordingly, the Court grants
Defendants’ motion and will conduct an evidentiary hearing on
inventorship.
35 U.S.C. § 256 provides:
(a)
Correction.
Whenever through error a person is
named in an issued patent as the inventor, or
through error an inventor is not named in an issued
patent, the Director may, on application of all the
parties and assignees, with proof of the facts and
such other requirements as may be imposed, issue a
certificate correcting such error.
(b)
Patent valid if error corrected.
The error of
omitting inventors or naming persons who are not
issues, claims, crossclaims, counterclaims, or third-party
claims. When ordering a separate trial, the court must preserve
any federal right to a jury trial.”
3
inventors shall not invalidate the patent in which
such error occurred if it can be corrected as
provided in this section. The court before which
such matter is called in question may order
correction of the patent on notice and hearing of
all parties concerned and the Director shall issue
a certificate accordingly.
The Court first addresses whether Defendants have standing
to bring this motion.
Plaintiffs argue Defendants do not have
an ownership interest and will not acquire an ownership
interest, and thus cannot bring a § 256 claim for lack of
standing.
Plaintiffs argue there is no precedent for the
proposition that a licensee has a sufficient financial interest
to confer standing. 3
“[Section 256] provides a cause of action to interested
parties to have the inventorship of a patent changed to reflect
the true inventors of the subject matter claimed in the patent.”
Fina Oil & Chem. Co. v. Ewen, 123 F.3d 1466, 1471 (Fed. Cir.
1997).
“[A]n expectation of ownership of a patent is not a
prerequisite for a putative inventor to possess standing to sue
to correct inventorship under § 256.”
Chou v. Univ. of Chi.,
254 F.3d 1347, 1358 (Fed. Cir. 2001).
“The statute imposes no
requirement of potential ownership in the patent on those
seeking to invoke it.”
Id.
3
Plaintiffs also argue Defendants cannot invoke third-party
standing. Defendants only argue they have direct standing based
on their “own concrete financial interest and injury-in-fact.”
Defendants agree third-party standing is inapplicable here.
4
“The validity of a patent requires that the inventors be
correctly named.”
Id. at 1359.
“It follows that parties with
an economic stake in a patent’s validity are entitled to be
heard on Inventorship issues . . . .”
Id.
Accordingly, the
Federal Circuit “interpret[s] § 256 broadly,” both for the
benefit of inventors and for “the public interest of assuring
correct Inventorship designations on patents.”
Id. at 1358.
The Court will interpret § 256 similarly.
The question before the Court is then whether Defendants
have an economic stake in the patents sufficient to confer
standing.
The Court finds Chou, 254 F.3d 1347 and Larson v.
Correct Craft, Inc., 569 F.3d 1319 (Fed. Cir. 2009) instructive.
In Chou, the Federal Circuit found the district court erred in
concluding that Chou did not have standing to sue for correction
of inventorship.
254 F.3d at 1353.
Chou had sued for
correction of inventorship under 35 U.S.C. § 256, seeking to be
named as a sole inventor or co-inventor.
Id. at 1354.
The
district court found Chou lacked standing “because she could
claim no ownership of the patents, having surrendered all her
rights to the University under an employment agreement.”
Id.
The Federal Circuit considered the issue of “whether a putative
inventor who is obligated to assign her invention to another is
entitled to sue for correction of Inventorship under § 256.”
Id. at 1358.
5
The Federal Circuit found “Chou has alleged a concrete
financial interest in the patent, albeit an interest less than
ownership.”
Id.
The University was required to provide a
percentage of royalties from licensing activities, among other
things.
Id.
The Federal Circuit found “[i]f Chou has indeed
been deprived of an interest in proceeds from licensing the
invention and in stock ownership by the conduct that she
alleges, then she will have suffered an injury in fact, i.e.,
the loss of those benefits.”
Id.
That loss would be directly traceable to Roizman’s
alleged conduct in naming himself as the sole inventor
of discoveries that she at least partly made, and it
would be redressable by an order from the district court
to the Director of the PTO to issue a certificate naming
Chou as an inventor, which would entitle her under the
University’s policy to a share of the licensing
proceeds . . . .
Id.
Accordingly, the Federal Circuit found “Chou [wa]s entitled
to sue for correction of inventorship under § 256.”
Id.
In Larson, the Federal Circuit distinguished Chou, finding
Larson “affirmatively transferred title to the patents to
Correct Craft, and he stands to reap no benefit from a
preexisting licensing or royalties agreement.”
569 F.3d at
1327.
While both Chou and Larson addressed an inventor
transferring his interest to another party, the reasoning of the
Federal Circuit translates here.
Chou dealt with an individual
6
with no ownership interest in the patents, but who received a
financial benefit from the patents.
The same is true here.
Defendants argue they have “a concrete financial interest
in the correction of the patents” due to Tristar Products, Inc.
being an exclusive licensee of Ragner Technology pursuant to a
License Agreement.
Thus, Defendants derive a financial benefit
from the patents and have an economic stake in their validity,
making Defendants analogous to Chou.
Plaintiffs rely on Armor Screen Corp. v. Storm Catcher,
Inc., No. 07-81091, 2008 WL 5746938 (S.D. Fla. Nov. 10, 2008).
In Armor Screen, the parties were in the business of
manufacturing and installing hurricane protection screens.
at *1.
Id.
On November 16, 2007, the plaintiff filed a complaint
against the defendants alleging patent infringement, among other
claims.
Id.
The defendants sought correction of inventorship
pursuant to 35 U.S.C. § 256 by way of a May 15, 2008 motion.
Id.
The defendants alleged a former president of the plaintiff
was a co-inventor.
Id.
The defendants claimed this individual
assigned his rights to one of the defendants on June 11, 2008,
such that the defendants would have an ownership interest.
at *3.
Id.
The court found that “at the time Defendants filed their
Motion to Correct Inventorship, no Defendant claimed to be a
putative inventor of [the patent], nor did any Defendant claim
any ownership or concrete financial interest in [the patent].”
7
Id. at *10.
Armor Screen is distinguishable, as the reason for the
court’s decision hinged on the assignment occurring after the
motion was filed.
Indeed, the court stated: “The Court declines
to find that Defendants acquired standing to seek correction of
inventorship under section 256 based on events occurring after
Defendants’ filed the instant Motion.”
Id.
The License
Agreement in this case predates the original filing in this
action, and long predates this motion.
Given Defendants’
economic stake in the patents, the Court finds Defendants have
standing to bring this motion.
Plaintiffs also argue Defendants’ motion is too belated, as
they never previously asserted Ragner was a co-inventor and have
never before requested correction of inventorship, and they
never sought to add Ragner as a party or relevant witness.
Plaintiffs claim Defendants waived the inventorship issue and
that opening this issue would be unduly prejudicial and unfair
to Plaintiffs.
The Court acknowledges that granting this motion and
scheduling a hearing could further delay resolution of this
case.
However, the Court does not find this a sufficient reason
to deny such a hearing, particularly given the Federal Circuit’s
broad interpretation of § 256 and interest in having inventors
correctly listed on patents, and given that Defendants’ success
8
at the hearing could expedite resolution of this matter and
related matters. 4
Plaintiffs also argue Defendants’ claim is barred under
equitable estoppel because of extreme delay, citing MCV, Inc. v.
King-Seeley Thermos Co., 870 F.2d 1568 (Fed. Cir. 1989).
In
Jamesbury Corp. v. Litton Industrial Products, Inc., 839 F.2d
1544 (Fed. Cir. 1988), the Federal Circuit set forth the
following test for equitable estoppel: “(1) unreasonable and
inexcusable delay in filing suit, (2) prejudice to the
infringer, (3) affirmative conduct by the patentee inducing the
belief that it abandoned its claims against the alleged
infringer, and (4) detrimental reliance by the infringer.”
Id.
at 1553-54.
This test was adjusted to an inventorship claim in MCV,
cited by Plaintiffs, as follows: “(1) unreasonable and
inexcusable delay in filing suit, (2) prejudice to the defendant
as a result of the delay, (3) affirmative conduct by the party
against whom estoppel is asserted inducing the belief that it
had abandoned its claim, and (4) detrimental reliance by the
party asserting estoppel.”
870 F.2d at 1571.
In A. C. Aukerman Co. v. R. L. Chaides Construction Co.,
4
The Court notes, as Defendants point out, that just last
June, Plaintiffs moved to add Telebrands Corp. as a plaintiff,
which was granted by Magistrate Judge Donio. The motion was
granted despite concerns of delay.
9
960 F.2d 1020 (Fed. Cir. 1992), the Federal Circuit determined
this test “confusingly inter[t]wines the elements of laches and
equitable estoppel” and “expressly overruled” it.
Id. at 1042.
Accordingly, the new test, in the inventorship context, is as
follows:
(1) the patentee, through misleading words, conduct, or
silence, led the alleged infringer to reasonably infer
that the patentee did not intend to enforce its patent
rights; (2) the alleged infringer relied on the
patentee’s conduct; and (3) due to its reliance, the
alleged infringer will be materially prejudiced if the
patentee is allowed to proceed with its claim.
Intel Corp. v. Future Link Sys., LLC, No. 14-377, 2017 WL
3334703, at *4 (D. Del. July 31, 2017).
Neither party addressed the correct test for equitable
estoppel in their briefs.
Regardless, under what the Court
determines is the correct test, the claim does not succeed.
Plaintiffs have not presented the Court with sufficient evidence
of any misleading conduct as to Defendants’ belief that
inventorship was incorrect.
Accordingly, it was not reasonable
for Plaintiffs to infer Defendants would never contest this by
asking for correction of inventorship, despite not having done
so earlier. 5
Equitable estoppel does not apply here.
5
Despite
Defendants direct our attention to Defendant Tristar
Products, Inc.’s Answer to Fifth Amended Complaint, Affirmative
Defenses, and Counterclaims, which provides that, following an
August 23, 2011 meeting with Ragner, Berardi filed a patent
application “that purported to claim novel features of the
prototypes of the Microhose product demonstrated by Ragner” at
10
the lateness of this motion in the litigation, there are no
indications of misleading conduct from Defendants.
Finally, Plaintiffs argue the claim that Ragner is a coinventor is “substantively baseless.”
Plaintiffs argue Ragner
“never conceived of an expandable hose with the structure and
composition of the hose claimed by Mr. Berardi in his patents.”
This is an issue that should be reserved for an evidentiary
hearing.
This leaves the issue of whether the pleadings need to be
amended.
Defendants argue that, “while Defendants’ pleadings do
not expressly call out a motion under § 256, those pleadings
affirmatively request relief that the Court deems ‘proper and
just.’”
The Court does not find Defendants’ request for any
“proper and just” relief encompasses relief under § 256.
Accordingly, an amendment of Defendants’ pleadings is required.
Under Federal Rule of Civil Procedure 15(a)(2), “a party
may amend its pleading . . . with . . . the court’s leave,”
which should be freely granted “when justice so requires.”
“[A]
district court justifiably may deny leave to amend on grounds
the meeting. This is further repeated in Defendant Wal-Mart
Stores, Inc.’s Answer to Fifth Amended Complaint, Affirmative
Defenses, and Counterclaims. Plaintiffs, in their opposition
brief, also acknowledge that “Tristar and Ragner Technology even
filed a separate action directed specifically to the claim that
Mr. Berardi ‘stole’ his patented invention from Mr. Ragner. See
Civil Action No. 1:15-cv-07752-NLH-AMD.”
11
such as undue delay, bad faith, dilatory motive, and prejudice,
as well as on the ground that an amendment would be futile.”
Smith v. NCAA, 139 F.3d 180, 190 (3d Cir. 1998).
The Court notes Plaintiffs’ arguments on undue delay and
prejudice.
The Court acknowledges that granting this motion
will require expending additional resources as well as delay a
decision on the Markman issue which is presently before the
Court.
The Court also notes Defendants certainly had prior
opportunities to amend the pleadings, and Defendants do not
appear to provide the Court with an explanation for the delay.
However, given the nature of the amendment, and that facts to
support such an amendment are laid out in the pleadings to an
extent already, the Court grants Defendants leave to file
amended pleadings.
Accordingly, for “convenience” and to “expedite and
economize,” Fed. R. Civ. P. 42(b), the Court grants Defendants
leave to amend their pleadings and will schedule an evidentiary
hearing to decide the inventorship issue prior to the Court
issuing the Markman rulings.
The parties are permitted to
submit simultaneous thirty-page briefs thirty days before the
hearing and simultaneous thirty-page briefs thirty days after
the hearing.
Date: January 30, 2018
At Camden, New Jersey
s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.
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