SV INTERNATIONAL, INC. et al v. FU JIAN QUANYA INDUSTRY CO., LTD.
Filing
68
MEMORANDUM OPINION AND ORDER denying 44 MOTION to Dismiss Amended Counterclaim. IT IS THEREFORE ORDERED that the motions of SV International and ECMD to dismiss Fu Jian's counterclaim for patent infringement pursuant to Federal Rule of Civil Procedure 12(b)(6), to dismiss Fu Jian's counterclaim for breach of contract pursuant to Federal Rule of Civil Procedure 12(b)(1), and for a more definite statement pursuant to Federal Rule of Civil Procedure 12(e) (Doc. 44 ) are DENIED. Signed by JUDGE THOMAS D. SCHROEDER on 10/26/2011. (Solomon, Dianne) .
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
SV INTERNATIONAL, INC.
and ECMD, INC.,
)
)
)
)
)
)
)
)
)
)
)
Plaintiffs,
v.
FU JIAN QUANYU INDUSTRY
CO., LTD.,
Defendant.
1:09cv862
MEMORANDUM OPINION AND ORDER
THOMAS D. SCHROEDER, District Judge.
Before
the
court
is
the
motion
of
Plaintiffs
SV
International, Inc. (“SV International”) and ECMD, Inc. (“ECMD”)
(collectively
“Plaintiffs”),
to
dismiss
the
counterclaims
of
Defendant Fu Jian Quanyu Industry Company, Ltd. (“Fu Jian”),
pursuant
12(b)(1).
to
Federal
(Doc. 44.)
infringement
Rules
of
Civil
Procedure
12(b)(6)
and
The motion contends that Fu Jian‟s patent
counterclaim
fails
to
state
a
claim
upon
which
relief can be granted pursuant to Rule 12(b)(6) because it is
precluded by prior litigation between the parties.
It
also
contends that without the patent infringement counterclaim, this
court
lacks
subject
matter
jurisdiction
over
Fu
Jian‟s
counterclaim for breach of contract pursuant to Rule 12(b)(1).
In
the
alternative,
Plaintiffs
move
for
a
more
definite
statement
of
Fu
Jian‟s
patent
and
counterclaims pursuant to Rule 12(e).
breach
of
contract
For the reasons set forth
below, the motions will be denied.
I.
BACKGROUND
Plaintiffs‟
motion
stems
from
a
longstanding
dispute
between the parties concerning their respective product lines.
Both Fu Jian and Plaintiffs manufacture, sell, and/or distribute
newel posts that are used to support staircase handrails.
Fu
Jian holds the rights to U.S. Patent No. 6,662,519 (“the ‟519
Patent”) through an assignment dated September 25, 2007.
(Doc.
40-1 at 2.) The ‟519 Patent purports to cover “wooden newel
posts” made of a combination of higher and lower quality woods.
(Doc. 36-1.)
In 2007, Fu Jian brought suit in the Western District of
Wisconsin
alleging
that
ECMD,
through
its
subsidiary
Crown
Heritage, and retailer Lowe‟s Company, Inc., were infringing the
‟519
Patent.
Complaint
and
Demand
for
Jury
Trial,
Fu
Jian
Quanyu Indus. Co. v. ECMD, Inc., No. 1:07cv905 (M.D.N.C. Sept.
26, 2007), Doc. 2.
infringing
the
‟519
As to ECMD, Fu Jian alleged that it was
Patent
“by
making,
using,
importing,
offering products for sale, and/or selling products, including
wooden Newel Posts manufactured and/or imported by itself or its
subsidiary Crown Heritage, which are covered by one or more
claims of the ‟519 Patent.”
First Amended Complaint and Demand
2
for Jury Trial at 2, Fu Jian Quanyu Indus. Co. (No. 1:07cv905),
Doc. 20.
In response, SV International sued Fu Jian and an
affiliate in the Middle District of North Carolina, seeking,
among other relief, a declaratory judgment that its products did
not
infringe
Judgment
Fu
Jian‟s
of
patent.
Complaint
Non-Infringement,
for
Declaratory
Invalidity,
and/or
Unenforceability of U.S. Patent Nos. 6,582,021 and 6,662,519, SV
Int‟l Corp. v. Xiamen Quan Yu Wood Prods. Co., No. 1:07cv754
(M.D.N.C.
Oct.
10,
2007),
Doc.
1.
Fu
Jian
counterclaimed,
alleging that SV International was infringing the ‟519 Patent
“by making, using, importing, offering products for sale, and/or
selling
products,
including
wooden
Newel
Posts
manufactured
and/or imported by itself or its subsidiaries, which are covered
by one or more claims of the Newel Post Patent.”
Complaint
1:07cv754),
and
Doc.
Counterclaims
15.
The
at
7,
parties
Answer to
SV
Int‟l
Corp.
(No.
agreed
to
transfer
the
Wisconsin lawsuit to the Middle District of North Carolina, and
the two suits were consolidated on September 16, 2008.
SV Int‟l
Corp. v. Xiamen Quan Yu Wood Prods. Co., No. 1:07cv754 (M.D.N.C.
Sept. 16, 2008) (SV International I), Doc. 21.
After engaging in discovery, the parties agreed to settle
SV
International
I
and,
on
March
3
17,
2009,
entered
into
a
confidential settlement agreement (the “Settlement Agreement”).1
The Settlement Agreement provided in pertinent part:
1
The parties filed the complete Settlement Agreement under seal
pursuant to an Order of this court. (Docs. 37; 43.) However, Fu Jian
quoted paragraph 2.e. in full in its Amended Counterclaim (Doc. 36
¶ 17), so it is already publicly available.
The question is whether
any other portion of the Settlement Agreement should be disclosed.
The parties have been informed of the court‟s intention and have
consented to the disclosure noted herein, which redacts only the
monetary amounts of the Settlement Agreement.
(Doc. 67.)
Thus, the
question is whether the monetary amounts of the parties‟ prior
agreement should be disclosed.
A court‟s power over its records is
constrained by two separate legal principles: the public‟s presumptive
common-law right of access to judicial records, Nixon v. Warner
Commc‟ns, Inc., 435 U.S. 589, 598 (1978), and the First Amendment‟s
grant of access to judicial records, Rushford v. New Yorker Magazine,
Inc., 846 F.2d 249, 253 (4th Cir. 1988) (citing Press Enter. Co. v.
Superior Court, 457 U.S. 596, 607 (1982)).
The common law right of
access applies to “all „judicial records and documents.‟”
Stone v.
Univ. of Md. Med. Sys. Corp., 855 F.2d 178, 180 (4th Cir. 1988)
(quoting Nixon, 435 U.S. at 597). The First Amendment, on the other
hand, only applies to particular records and documents, including
documents filed in connection with motions for summary judgment in
civil cases.
Id.
In fact, the Fourth Circuit has noted that the
“more rigorous First Amendment standard should . . . apply to
documents filed in connection with a summary judgment motion.”
Rushford, 846 F.2d at 253.
Where particular documents are important
to a court‟s decision, the court may either use the information in an
opinion or unseal the documents relied upon. See Stone, 855 F.2d at
182 (disclosing portion of sealed record necessary for adjudication of
case); Cumberland Packing Corp. v. Monsanto Co., 184 F.R.D. 504, 505
(E.D.N.Y. 1999) (“[A] document submitted as the principal basis for a
dispositive motion is given a strong presumption [of public
access].”); see also Dorsett v. Cnty. of Nassau, 762 F. Supp. 2d 500,
518 (E.D.N.Y. 2011) (Tomlinson, Mag. J.) (“[T]he presumption in favor
of public access to judicial documents will be given the strongest
weight possible where the documents played a role in determining the
litigants‟ substantive rights.”), aff‟d, No. 10-cv-1258 (ADS) (ATK),
2011 WL 3438438 (E.D.N.Y. Aug. 8, 2011).
Here, the court is disclosing those portions of the Settlement
Agreement that are integral to its decision on the pending motion to
dismiss Fu Jian‟s patent infringement counterclaim.
The court
discerns no significant public interest in revealing the amount the
parties may have exchanged, and such amounts do not materially affect
the court‟s analysis.
Because disclosure of the monetary amounts
could subject the parties to a future competitive disadvantage, the
court elects not to disclose them in its discussion. See Vista India,
Inc. v. Raaga, LLC, No. 07-1262, 2008 WL 834399, at *4 (D.N.J.
4
2.
SV International‟s Agreement
a.
SV International and ECMD will jointly
pay Fu Jian [redacted] U.S. within 30 days of the
execution of this Agreement.
b.
SV International and ECMD will jointly
pay Fu Jian [redacted] within one year of the
execution of this Agreement in addition to the amount
paid in 2a.
c.
SV International will have eighteen
months from the date of execution of this Agreement to
sell its inventory of newel posts which are the
subject of the Proceedings.
d.
SV International will provide Fu Jian
with an inventory of the newel posts subject to the
Proceedings within 30 days of the execution of this
Agreement.
SV International will give Fu Jian a
report each month thereafter of the number of such
newel posts that have been sold during the previous
month.
If SV International constructs newel
e.
posts with a bottom square made of lower quality wood
and a lamella, there must be some lower quality wood
in the upper post section.
In addition, if the post
has an upper square, it must have a lamella on all
four sides of the square.
In this Agreement, the
upper post section is defined as the portion above the
lower unturned portion.
In this Agreement, “lower
quality wood” means wood that is rubber wood and pine
wood from plantation forests, high density fiber
material, or is off color, blemished, visually
dissimilar from surrounding higher quality wood,
mineral
streaked,
sap,
wormhole,
discolored,
or
otherwise defective.
Mar. 27, 2008) (Salas, Mag. J.) (explaining that the disclosure of the
terms of license and settlement agreements could put the parties to
those agreements at a competitive disadvantage with future competitors
and customers); cf. K.S. v. Ambassador Programs Inc., No. 1:10CV439,
2010 WL 3565481, at *3 (E.D. Va. Sept. 3, 2010) (rejecting parties‟
contention that disclosure of settlement amounts would cause a
competitive disadvantage where subsequent litigation was unlikely).
5
(Doc.
41
at
3.)
The
Settlement
Agreement
also
contained
identical mutual releases, which provided in relevant part as to
Fu Jian as follows:
Upon the Parties‟ dismissal of the Proceedings
with prejudice as described above, Fu Jian . . . does
covenant not to sue, and releases and discharges SV
International, ECMD, and Lowe‟s and any and all of
their customers or subsequent purchasers, including
without limitation, from any and all causes of action,
claims, and liabilities of any kind or nature
whatsoever, at law or in equity, relating to any and
all claims that Fu Jian asserted in the Proceedings.
(Id. at 4.)
Finally, the Settlement Agreement provided:
The express undertakings and mutual releases set
forth by the Parties in this Agreement do not
constitute an admission of liability by any party to
the Proceedings.
(Id. at 5.)
Pursuant
to
the
terms
of
the
Settlement
Agreement,
the
parties dismissed their respective claims with prejudice in a
filing submitted to this court on April 21, 2009.
Stipulation
of Dismissal, SV Int‟l Corp. (No. 1:07cv754), Doc. 36.
Less
than
five
months
later,
SV
commenced this action against Fu Jian.
International
and
ECMD
Plaintiffs allege that
Fu Jian has improperly marked newel posts with the ‟519 Patent
even though the newel posts are not covered by the patent in
violation of 35 U.S.C. § 292 and that Fu Jian has engaged in
unfair or deceptive trade practices in violation of N.C. Gen.
Stat. § 75-1.1 (2009).
Fu Jian counterclaimed, alleging in its
6
Amended Counterclaim that SV International has been infringing
the
‟519
Patent
since
March
17,
2009
–
the
date
of
the
Settlement Agreement – by “making, using, importing, offering
products
Newel
for
Posts
sale,
and/or
manufactured
selling
and/or
products,
imported
including
by
itself
wooden
or
its
subsidiaries, which are covered by one or more claims of the
Newel Post Patent.”
alleges
that
Agreement
SV
(Doc. 36 at 2.)
International
has
In addition, Fu Jian
breached
by making wooden newel posts not
the
Settlement
permitted by it.
(Id. at 4.)
Plaintiffs now move to dismiss Fu Jian‟s counterclaims on
the ground that its patent infringement claim is barred by the
dismissal in SV International I and, without it, Fu Jian has
provided
no
jurisdiction
basis
over
for
Fu
Settlement Agreement.
this
Jian‟s
court‟s
exercise
counterclaim
for
of
federal
breach
of
the
In the alternative, Plaintiffs move for a
more definite statement of both claims.
Fu Jian contends that
its patent infringement counterclaim is not barred because it is
based on conduct that occurred, and thus claims that accrued,
after
the
released.
Settlement
Because
Agreement
the
court
and
which
has
infringement claim, Fu Jian argues,
were
not
jurisdiction
expressly
over
the
supplemental jurisdiction
exists over its breach of contract counterclaim.
Finally, Fu
Jian contends that its counterclaims provide sufficient notice
7
of the products that allegedly infringe or breach the Settlement
Agreement
so
that
there
is
no
need
for
a
more
definite
statement.
Plaintiffs‟ motions will be addressed in turn.
II.
ANALYSIS
A.
Claim Preclusion
Plaintiffs contend that Fu Jian is barred from claiming
that Plaintiffs‟ wooded newel posts infringe the ‟519 Patent
because the first lawsuit, SV International I, involved the same
parties, included the same patent infringement claim, and, by
virtue of the Settlement Agreement, reached a final judgment on
the merits.
The claims are the same, Plaintiffs argue, because
both allege infringement of the ‟519 Patent “by making, using,
importing, offering products for sale, and/or selling products,
including
wooden
Newel
Posts
itself or its subsidiaries.”
Doc. 32-4 at 5-6 ¶ 6.)
manufactured
and/or
imported
by
(Compare, e.g., Doc. 36 ¶ 6, with
Plaintiffs rely on the mutual release
provisions of the Settlement Agreement to argue that Fu Jian
released all future claims, including the present ones.
If the
court declines to grant Plaintiffs‟ motion as a matter of law,
Plaintiffs
invite
it
to consider
the affidavit of
Robert H.
Green, President of a division of ECMD (Doc. 32-5 at 3), which
states that all of Plaintiffs‟ current wooden newel posts are
either “identical to” or “essentially the same as” those they
8
sold at the time of the Settlement Agreement, which Plaintiffs
contend proves that Fu Jian‟s present counterclaim is precluded.2
Fu Jian does not contest that the same parties entered into
the Settlement Agreement in the prior lawsuit,3 but it argues,
first, that the dismissal of the parties‟ prior claims
with
prejudice does not preclude later claims that involve acts of
subsequent infringement.
its
infringement
claims
As such, because Fu Jian has limited
in
this
lawsuit
to
events
occurring
after the March 17, 2009 Settlement Agreement, it contends, its
claim is not precluded.
court
does
consider
Second, Fu Jian argues that if this
materials
outside
the
pleadings,
they
2
Ordinarily, a court may not consider materials outside the pleadings
without converting a motion to dismiss into one for summary judgment.
Am. Chiropractic Ass‟n v. Trigon Healthcare, Inc., 367 F.3d 212, 234
(4th Cir. 2004) (“[A]s a general rule extrinsic evidence should not be
considered at the 12(b)(6) stage.”).
An exception exists if a
document “was integral to and explicitly relied on in the complaint
and
[if]
the
[non-moving
party]
do[es]
not
challenge
its
authenticity.”
Phillips v. LCI Int‟l, Inc., 190 F.3d 609, 618 (4th
Cir. 1999).
Here, it is proper for the court to consider the
Settlement Agreement without converting Plaintiffs‟ motion to dismiss
into a motion for summary judgment.
The Settlement Agreement was
attached to Fu Jian‟s Amended Counterclaim (Doc. 41), the counterclaim
explicitly refers to it (Doc. 36 at 4), and nothing in either parties‟
submissions to the court indicates that they doubt its authenticity.
Green‟s affidavit, on the other hand, is outside the pleadings and
will not be considered at this stage in the litigation.
3
This does not appear to be accurate, however. The present motions
are filed on behalf of both Plaintiffs, but Fu Jian‟s counterclaims in
this case name and seek relief only from Plaintiff SV International.
It is unclear why ECMD would be seeking to dismiss a counterclaim to
which it is not a party. Given the court‟s disposition of the pending
motions infra, ECMD‟s standing to request a dismissal appears to be
moot.
However, because both Plaintiffs are referred to in the
briefing, the court will continue to attribute their arguments to both
of them herein.
9
demonstrate
that
disagreement
up
the
to
parties
that
only
time
and
claims for future infringement.
intended
never
to
resolve
intended
to
their
resolve
Third, Fu Jian argues that the
purpose of paragraph 2.e. of the Settlement Agreement was to
impose
restrictions
on
the
types
of
wooden
newel
posts
SV
International may make that supplement the restrictions in the
‟519 Patent.
(Doc. 49 at 12-13.)
Rule 12(b)(6) permits parties to move to dismiss claims
that fail to state a claim upon which relief can be granted.
Fed. R. Civ. P. 12(b)(6).
The purpose of a motion under Rule
12(b)(6)
legal
is
to
test
the
sufficiency
of
a
complaint.
Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008).
such,
a
Rule
surrounding
12(b)(6)
the
motion
facts,
the
applicability of defenses.”
“does
merits
construed
in
the
light
of
resolve
a
contests
claim,
or
the
Republican Party of N.C. v. Martin,
980 F.2d 943, 952 (4th Cir. 1992).
be
not
As
most
Instead, the “claim[] must
favorable
to
the
non-moving
party,” Martin Marietta Corp. v. Int‟l Telecomm. Satellite Org.,
991 F.2d 94, 97 (4th Cir. 1992), and the claim must contain
“enough facts to state a claim to relief that is plausible on
its face,” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).4
4
Fu Jian‟s brief relies on Edwards v. City of Goldsboro, 178 F.3d 231,
243-44 (4th Cir. 1999), to contend that a complaint should be
dismissed only when “it appears certain that the plaintiff cannot
prove any set of facts in support of his claim entitling him to
relief.”
(Doc. 49 at 5.)
In Twombly, the Supreme Court explained
10
Of course, like all claims, counterclaims are subject to motions
to dismiss.
See Walker Process Equip., Inc. v. Food Mach. &
Chem. Corp., 382 U.S. 172, 178 (1965).
Claim preclusion is a proper ground for bringing a motion
to dismiss under Rule 12(b)(6).
524
n.1
(4th
Cir.
2000).
Andrews v. Daw, 201 F.3d 521,
Under
the
doctrine
of
claim
preclusion, a claim in a prior lawsuit will bar a subsequent
claim if the party moving for claim preclusion can demonstrate
three elements: (1) the parties in the two actions are identical
or are in privity; (2) the judgment in the first action was a
final judgment on the merits; and (3) the “claims in the two
actions are identical.”
Bouchat v. Bon-Ton Dep‟t Stores, Inc.,
506 F.3d 315, 326-27 (4th Cir. 2007).
Here, the parties do not
contest that the same parties in the first lawsuit are involved
in the present
litigation
(although, as noted in
supra,
not
in
ECMD
is
named
the
present
footnote
counterclaim).
3
In
addition, the Fourth Circuit recognizes that when a prior suit
is dismissed with prejudice – as was SV International I – the
that the “no set of facts” language “is best forgotten as an
incomplete, negative gloss on an accepted pleading standard.”
550
U.S. at 562-63; see also Ferdinand-Davenport v. Children‟s Guild, 742
F. Supp. 2d 772, 779 n.4 (D. Md. 2010) (citing Twombly to reject
language suggesting a motion to dismiss should be granted only if “it
is certain that no relief could be granted under any set of facts
provable by the plaintiff”).
11
judgment is a final judgment on the merits.5
F.2d 665, 669 (4th Cir. 1987).
Kenny v. Quigg, 820
Plaintiffs argue that Fu Jian‟s
infringement counterclaim is the same claim Fu Jian made in the
prior litigation and thus meets the third prong of the claim
preclusion test.
Plaintiffs bear the burden of demonstrating that the two
claims are identical.
Young Eng‟rs, Inc. v. U.S. Int‟l Trade
Comm‟n, 721 F.2d 1305, 1316 (Fed. Cir. 1983).
While the court
looks to Fourth Circuit law as to general principles of claim
preclusion,6 Plaintiffs
are correct to note
that whether two
patent infringement claims are identical is an issue specific to
patent
law
and,
thus,
must
be
governed
by
legal
principles
5
Fu Jian does not contest that the dismissal of SV International I
with prejudice operates as a final judgment on the merits. See Hallco
Mfg. Co. v. Foster, 256 F.3d 1290, 1297 (Fed. Cir. 2001) (finding that
a dismissal with prejudice supported by a settlement agreement “is a
judgment on the merits”).
Plaintiffs do not contest Fu Jian‟s
assertion that any claim preclusion should be based on the date of the
Settlement Agreement and not the stipulation of dismissal.
The
Settlement Agreement provides that its effective date is March 17,
2009. (Doc. 41 at 2.) Therefore, the court will apply this date for
any preclusive effect of SV International I. See Johnson v. Ashcroft,
445 F. Supp. 2d 45, 50 (D.D.C. 2006) (applying res judicata to claims
that arose between litigants before the effective date of their
underlying settlement agreement).
6
The Federal Circuit has recognized that there is “no significant
difference” with respect to the applicable law of claim preclusion
between the Federal Circuit and a regional circuit that applies the
Restatement (Second) of Judgments approach for determining whether
causes of action in two lawsuits are the same for claim preclusion
purposes. Acumed LLC v. Stryker Corp., 525 F.3d 1319, 1323 n.3 (Fed.
Cir. 2008).
Both the Federal Circuit and the Fourth Circuit have
adopted the Restatement (Second) approach. Young Eng‟rs, 721 F.2d at
1314; Pittston Co. v. United States, 199 F.3d 694, 704 (4th Cir. 1999)
(citing Restatement (Second) of Judgments § 24 (1982)).
12
established by the Federal Circuit.
See Acumed LLC v. Stryker
Corp., 525 F.3d 1319, 1323 (Fed. Cir. 2008).
The question is
“whether the claim presented in the new litigation „arises out
of the same transaction or series of transactions as the claim
resolved
by
the
prior
judgment.‟”
Pittston
Co.
v.
United
States, 199 F.3d 694, 704 (4th Cir. 1999) (quoting Harnett v.
Billman, 800 F.2d 1308, 1313 (4th Cir. 1986)).
Thus, Plaintiffs
here must demonstrate that Fu Jian‟s counterclaim for patent
infringement
arises
from
the
same
transaction
or
series
of
transactions as the patent infringement claim presented in SV
International I.
In attempting to do so, Plaintiffs rely primarily on three
cases.
The first two cases, Hallco Manufacturing Co. v. Foster,
256 F.3d 1290 (Fed. Cir. 2001), and Roche Palo Alto LLC v.
Apotex, Inc., 531 F.3d 1372 (Fed. Cir. 2008), Plaintiffs argue,
establish that claim preclusion prevents a party from bringing a
patent infringement claim as to any product that is the same or
essentially the same as that involved in a prior infringement
lawsuit between the parties.
Insofar as the allegations in both
of Fu Jian‟s counterclaims are identical, Plaintiffs contend,
the lawsuits must involve the same (or essentially the same)
products;
therefore,
the
present
claim
Hallco and Roche, however, are not on point.
13
must
be
precluded.
In
Hallco
Manufacturing,
the
owner
of
a
patent
for
reciprocal conveyors sued Hallco for infringement as to Hallco‟s
“4000”
and
defenses.
“6000”
products,
and
Hallco
raised
invalidity
The district court (after an interim appeal) granted
summary judgment for the patent holder, finding infringement,
and the parties settled, with Hallco taking a non-exclusive,
royalty-bearing
holder
a
for
license.
Thereafter,
declaratory
judgment
Hallco
of
sued
the
patent
non-infringement
as
to
redesigned products and contested the validity of the patent.
The patent holder argued that Hallco‟s challenges were precluded
by the first lawsuit, but the district court disagreed.
appeal,
decision,
the
Federal
finding
Circuit
that
on
vacated
remand
the
the
district
district
On
court‟s
court
should
compare the products in the two cases, and if it found that the
two
devices
different,”
were
“essentially
Hallco
would
infringement or validity.
In
Roche,
Corporation,
Roche
alleging
be
the
same
precluded
or
from
only
colorably
challenging
non-
Hallco Mfg., 256 F.3d at 1298.
(and
that
its
the
affiliates)
latter‟s
drug
sued
Apotex
application
infringed Roche‟s patent, and Apotex raised invalidity defenses.
The district court found, on summary judgment, that Apotex‟s
drug formulation infringed Roche‟s patent, and after a bench
trial the court rejected Apotex‟s invalidity claim.
Thereafter,
Roche sued Apotex, alleging that a new drug application filed by
14
Apotex infringed its patent, and Apotex again raised invalidity
defenses.
The district court found infringement and granted
Roche‟s motion for summary judgment, and the Federal Circuit
affirmed.
The Federal Circuit held that Apotex‟s new product
formulation fell within the literal scope of the first drug
application found to be infringing and that Apotex failed to
establish
non-infringement
equivalents.
under
the
Consequently,
unenforceability
challenges
were
reverse
Apotex‟s
barred
doctrine
invalidity
by
claim
of
and
preclusion.
Roche, 531 F.3d at 1380-81.
Both
merits
of these cases involved an initial finding on the
that
concerned
a
an
product
attempt
infringed
in
a
the
subsequent
patent
at
issue
case
to
find
infringement and to contest the patent‟s validity.
and
non-
If the newly
accused products were essentially the same as those previously
held to be infringing, the courts reasoned, they arise from the
same
transaction;
thus,
whether
they
infringe
has
been
determined by judgment, and any challenge to the validity or
infringing
nature
of
the
product
7
cannot
be
re-litigated.7
These cases addressed claim preclusion as applied to invalidity
defenses.
As noted by the Federal Circuit, “„[t]he public interest
requires that an invalid patent be [held invalid] at as early a date
as possible.‟”
Foster v. Hallco Mfg. Co., 947 F.2d 469, 476 (Fed.
Cir. 1991) (second alternation in original) (quoting Schlegel Mfg. Co.
v. USM Corp., 525 F.2d 775, 781 (6th Cir. 1975)). Thus, once a court
determines (or could have determined) the validity of a patent, the
defense is precluded in further litigation between the parties as to
the same claim.
If parties “were given a second chance to litigate
15
Neither case reached the issue here: namely, whether, after the
parties
settle
an
(e.g.,
attacking
covered
by
initial,
broadly
“products,
the
‟519
worded
including
Patent)
infringement
wooden
without
an
Newel
express
claim
Posts”
finding
of
infringement or invalidity and dismiss it with prejudice, a new,
identically worded infringement claim based on post-settlement
acts is precluded.
As a result, these cases do not control the
outcome of this motion to dismiss.
Plaintiffs next point to Acumed for the proposition that
where a patent infringement claim relates to the same products
accused in an earlier infringement claim, the second claim is
precluded.
T2PHN
In Acumed, Acumed sued Stryker, alleging that its
surgical
device
infringed
Acumed‟s
patent.
During
discovery, Acumed learned that a longer version of the Stryker
T2PHN
product
existed
and
considered
adding
a
claim
of
infringement as to it but declined doing so because it would
delay the impending trial.
The case was tried to a jury, which
found that the T2PHN device infringed.
Thereafter, Acumed sued
Stryker, alleging that the longer version of the T2PHN product
infringed the same patent.
Stryker moved to dismiss the claim
on the grounds it was precluded by the judgment in the first
case, and the district court agreed.
On appeal, the Federal
the issue of validity, alleged infringers might well accept a license
under a consent decree and forego an attack on validity until” a more
opportune time. Id. at 476-77.
16
Circuit
reversed,
infringement
do
holding
not
that
arise
the
“two
from
the
same
claims
for
patent
transactional
facts
unless the accused devices in each claim are „essentially the
same.‟”
F.2d
Id. at 1326 (quoting Foster v. Hallco Mfg. Co., 947
469,
479-80
Stryker
because
essentially
the
(Fed.
Cir.
conceded
same,
1991)).
that
The
two
failed
Stryker
the
to
court
held
products
meet
that,
were
burden
its
not
of
demonstrating that the infringement claim in the first action
was the same as the infringement claim in the second action.
Plaintiffs
argue
that
whereas
Acumed
rejected
claim
preclusion because the products were not essentially the same,
the pleadings in the present case, which repeat nearly verbatim
the
allegations
Jian‟s
of
infringement
products.
SV
International
counterclaim
(Doc. 45 at 6.)
I,
relates
demonstrate
to
the
that
exact
Fu
same
Thus, Plaintiffs argue, the present
case is the precise scenario that Acumed contemplated for claim
preclusion.
Again, Plaintiffs misread the opinion.
Importantly, the Acumed court noted that whether devices
are the same is a determination of only “one of the essential
transactional facts giving rise to a patent infringement claim.”
Acumed, 525 F.3d at 1326.
that
device
condition
for
equivalence
claim
Thus, the court tacitly recognized
is
a
preclusion.
necessary
Because
but
not
it
found
sufficient
that
the
devices were not essentially the same, the court had no reason
17
to reach the issue of whether and to what extent, if the devices
were
the
same,
a
patent
infringement
claim
seeking
accruing after a previous judgment would be precluded.
damages
Here, Fu
Jian‟s patent infringement counterclaim is limited to conduct
after SV International I was settled, and thus Acumed is not on
point.
Because
these
three
cases
fail
to
support
Plaintiffs‟
arguments, the court turns to the merits of Plaintiffs‟ claim
preclusion
contentions.
Plaintiffs
contend
that
Fu
Jian‟s
infringement counterclaim in SV International I adjudicated all
of Fu Jian‟s claims (and those that it could have brought) as to
all
of
Plaintiffs‟
identically
wooden
worded
present
newel
posts
and
counterclaim
that
Fu
(i.e.,
Jian‟s
“products,
including wooden Newel Posts . . . , which are covered by one or
more claims of the Newel Post Patent” (Doc. 36 at 2)), is thus
barred.
Under general claim preclusion rules, all claims that were
brought
or
could
have
been
brought
precluded in subsequent litigation.
Aracoma
Coal
Co.,
556
F.3d
177,
same
that
broad
counterclaim
language
accuses
SV
as
in
the
SV
210
prior
(4th
Cir.
International
claim
are
2009),
cert.
Although Fu Jian‟s patent
International
current
18
a
Ohio Valley Envtl. Coal. v.
dismissed, 131 S. Ct. 51 (2010).
infringement
in
I
infringement
of
employed
the
counterclaim
wrongdoing,
ordinary
application of claim preclusion rules will not bar subsequent
litigation
over
subsequent
conduct.
This
is
because
claim
preclusion generally does not apply to acts that occur after a
lawsuit is ended – even if the new lawsuit alleges violations of
the same legal rights.
See Lawlor v. Nat‟l Screen Serv. Corp.,
349 U.S. 322, 328 (1955).
As the Fourth Circuit has explained,
“res judicata has very little applicability to a fact situation
involving a continuing series of acts, for generally each act
gives rise to a new cause of action.”
184, 187 (4th Cir. 1977).
Crowe v. Leeke, 550 F.2d
Holding otherwise would “entitle the
[wrongful actor] to continue or repeat the unlawful conduct with
immunity from further suit” by virtue of a prior suit on the
same legal theory.
Smith v. Potter, 513 F.3d 781, 783 (7th Cir.
2008).
Lawlor is the leading case.
There, the plaintiffs raised
antitrust claims against the defendants in successive suits.
An
initial
by
lawsuit
alleging
antitrust
violations
was
settled
agreement, with the defendants providing certain motion picture
products to plaintiffs in exchange for an exclusive license, and
the lawsuit was dismissed with prejudice.
The same plaintiffs
then sued the same defendants (as well as others), alleging that
the settlement was merely a device to perpetuate a conspiracy
and monopoly and that five other producers joined the conspiracy
after the settlement.
The district court dismissed the lawsuit
19
based
on
claim
According
preclusion,
to
the
but
Court,
the
Supreme
although
both
Court
reversed.
suits
“involved
„essentially the same course of wrongful conduct,‟” that fact
was “not decisive” because the first suit could not bar claims
that arose after the original settlement agreement.
U.S.
at
327-28.
violations
at
Because
different
the
two
points
in
suits
time,
Lawlor, 349
involved
the
antitrust
suits
did
not
involve the same cause of action.
Lawlor‟s
infringement
principle
context.
has
In
been
Cordis
applied
Corp.
v.
in
the
Boston
patent
Scientific
Corp., 635 F. Supp. 2d 361 (D. Del. 2009), the court was faced
with deciding whether the plaintiff‟s claim that the defendant‟s
product
infringed
the
plaintiff‟s
patent
was
barred
by
the
plaintiff‟s previous lawsuit against the defendant for patent
infringement as to the same product.
Id. at 364, 366.
In
concluding that “claim preclusion [did] not bar” the subsequent
suit,
the
litigation
court
noted
occurred
that
after
“[t]he
the
conduct
first
at
judgment
issue
and
possibly have been sued upon in the [prior case].”8
8
in
could
this
not
Id. at 370.
Cordis admittedly involved a more extreme case, because there the
newly-accused product had not been awarded final regulatory approval
at the time of the first lawsuit, and the plaintiff could not have
accurately predicted the level of sales or availability of noninfringing alternatives three years prior to the product‟s launch.
635 F. Supp. 2d at 370.
These facts do not undermine the legal
principle as applied, however.
20
Similarly, in Williams v. Gillette Co., 887 F. Supp. 181
(N.D. Ill. 1995), a plaintiff‟s patent infringement suit was
dismissed
with
settlement
whether
patents.
prejudice
agreement,
the
after
but
defendant‟s
the
the
parties
agreement
products
entered
into
not
determine
did
infringed
the
a
plaintiff‟s
Thereafter, the plaintiff sued the defendant a second
time, claiming that the defendant‟s continued sale of those same
products
after
the
first
suit
infringement of her patent.
settled
constituted
new
Citing Lawlor, the district court
held that because Williams sought “only damages for infringement
after the dismissal of the [first] lawsuit,” the suit was not
barred by claim preclusion.9
Because
the
Id. at 184.
plaintiffs
in
Lawlor,
Cordis,
and
Williams
limited their claims to acts occurring after the judgment in the
first
lawsuit,
claim
preclusion
did
not
bar
their
claims.
Likewise, under general rules of claim preclusion, the prior
dismissal
with
counterclaim
in
prejudice
SV
of
Fu
International
9
Jian‟s
I
would
patent
not
infringement
bar
Fu
Jian‟s
In finding no claim preclusion for claims of post-judgment
infringement, the Williams court‟s analysis reinforces why Acumed does
not help Plaintiffs here.
Williams recognized that having the same
device is a “necessary but not sufficient condition to apply claim
preclusion” and distinguished Foster v. Hallco Manufacturing Co., 947
F.2d 469 (Fed. Cir. 1991), on the ground that “[t]he Foster court had
no occasion to address the issue here, namely, whether the Lawlor rule
applies to a patent case seeking damages for infringement accruing
after a judgment in a previous case.” Williams, 887 F. Supp. at 185.
21
present claim seeking redress only for post-dismissal acts of
infringement.
1.
Effect of the Mutual Release
Nevertheless,
provision
of
the
Plaintiffs
Settlement
argue
that
Agreement
the
mutual
precludes
release
Fu
Jian‟s
present infringement claim against products that existed at the
time of the first suit.
In doing so, Plaintiffs rely on Pactiv
Corp. v. Dow Chemical Co., 449 F.3d 1227 (Fed. Cir. 2006), to
argue that a dismissal with prejudice bars future claims unless
the
parties
expressly
preserve
them
in
their
settlement
agreement, which Plaintiffs contend Fu Jian failed to do in the
mutual
release.10
(Doc.
54
at
10
6-7.)
In
advancing
their
Fu Jian, in contrast, argues that because claim preclusion does not
apply to its present claims (because they involve new conduct postdating the prior lawsuit) and SV International I was resolved by
settlement, the question of whether the Settlement Agreement bars any
future claims is one of “issue preclusion.”
More specifically, Fu
Jian contends that Plaintiffs are actually arguing that the dismissal
of
SV
International
I
determined
the
issue
of
whether
SV
International‟s wooden newel posts “extant at the time” that case
commenced infringed the ‟519 Patent.
(Doc. 49 at 10-11.)
Fu Jian
contends that if this is Plaintiffs‟ argument, this issue was not
actually litigated and Plaintiffs are therefore barred from looking to
the Settlement Agreement to preclude the counterclaim against their
products.
The only exception, it contends, is where, even though an
issue was not actually litigated, the parties‟ settlement agreement,
when narrowly construed, manifests a clear intent to resolve the issue
conclusively.
Here, Fu Jian concludes, the Settlement Agreement,
properly
construed,
reflects
the
parties‟
intent
to
settle
infringement claims up to that date, and no more. (Id. at 12-13.)
Under issue preclusion, a party is prevented from re-litigating
an issue it has already litigated and lost, and the moving party must
demonstrate five elements: (1) the issue to be precluded is identical
to an issue in a previous suit; (2) issue was actually determined; (3)
the issue was “a critical and necessary” part of the determination in
the prior proceeding; (4) the prior judgment was final and valid; and
22
arguments,
however,
Plaintiffs
seek
to
have
Pactiv
and
the
mutual release provision carry more weight than they can bear.
In Pactiv, Dow sued Pactiv for patent infringement, and
Pactiv
raised
invalidity
and
unenforceability
counterclaims.
The parties reached a settlement in which Dow granted Pactiv a
license requiring royalty payments to Dow, and the case was
dismissed with prejudice pursuant to a joint stipulation.
years
sought
later,
a
Pactiv
declaration
unenforceable.
ceased
that
making
Dow‟s
its
royalty
patents
were
Five
payments
and
invalid
and
The district court held that Pactiv‟s challenges
were barred by claim preclusion.
In affirming, the Federal
Circuit concluded that Pactiv did “not expressly reserve the
(5) the non-moving party “had a full and fair opportunity to litigate
the issue in the previous forum.” Collins v. Pond Creek Mining Co.,
468 F.3d 213, 217 (4th Cir. 2006) (internal citations and quotation
marks omitted).
Claim preclusion, in contrast, is much broader and
“bar[s] the relitigation of any issue that was, or might have been,
raised in respect to the subject matter of the prior litigation.”
Sutliffe v. Epping Sch. Dist., 584 F.3d 314, 328 (1st Cir. 2009)
(internal emphasis, citations, and quotation marks omitted).
In SV International I, Fu Jian‟s claim that Plaintiffs‟
“products, including wooden Newel Posts” infringed its ‟519 was raised
and was disposed of by the Settlement Agreement and dismissal with
prejudice.
The Federal Circuit appears to have addressed such cases
as ones of claim preclusion. See, e.g., Nystrom v. Trex Co., 580 F.3d
1281 (Fed. Cir. 2009). Moreover, the premise of Fu Jian‟s argument –
that the parties only addressed the wooden newel posts extant at the
time SV International I commenced – is contrary to the express terms
of paragraph 2.e. of the Settlement Agreement (providing that “[i]f SV
International
constructs
newel
posts
. . .
“),
which
clearly
contemplates the future manufacture of products.
Even assuming this
to be a question of issue preclusion, Fu Jian acknowledges that the
court may look to a consent settlement where the parties have clearly
indicated their intention to give the document preclusive effect.
United States v. Sherwin-Williams Co., 165 F. Supp. 2d 797, 803 (C.D.
Ill. 2001). Here, the court determines that the parties did just that
as to paragraph 2.e. of the Settlement Agreement, as noted infra.
23
right
to
maintain
challenges.”
future
invalidity
Pactiv, 449 F.3d at 1232.
and
enforceability
Thus, Pactiv was barred
from challenging the validity of the patents at issue as to
those infringement claims.
Pactiv differs significantly from the present case.
Pactiv
had the opportunity to challenge the validity of the patent in
the
first
lawsuit
but
settled
that
license and royalty payments.
claim
by
agreeing
to
a
The parties agreed that under
rules of claim preclusion, the dismissal of the first lawsuit
with
prejudice
normally
would
bar
re-litigation
of
invalidity defenses as to those infringement claims.
1230-31.
However,
the
court
acknowledged
that
an
the
Id. at
exception
exists if the parties expressly “reserve the right to litigate a
claim that would otherwise be barred by res judicata.”
Id. at
1231
cmt.
(citing
(1982)).
Restatement
(Second)
of
Judgments
§
26
a
Not only did Pactiv not reserve the right to re-
litigate its validity challenge, the court found, the settlement
agreement
patents.”11
expressly
waived
Id. at 1232.
“all
claims
„relating
to‟
those
In this respect, Pactiv is like the
11
Plaintiffs also rely on language in Hallco to support their argument
that the failure to expressly reserve a claim in a settlement
agreement precludes the claim in later litigation. As noted, however,
Hallco is distinguishable in the same way as Pactiv.
The party
asserting invalidity in Hallco was precluded from later doing so
because it had raised the argument in a prior lawsuit, accepted a
royalty-bearing license in a settlement agreement, and failed to
expressly reserve the right to sue at a later date. 256 F.3d at 1293,
1297.
24
other cases that apply claim preclusion in the context of an
invalidity defense rather than an infringement claim.12
It does
not support the construction Plaintiffs urge; namely, that any
subsequent
infringement
expressly preserved.
based
on
new
claim
is
unless
it
is
This is because a later infringement claim
conduct
would
not
“otherwise
Plaintiffs‟
be
barred
by
res
Cf. Pactiv at 1231.
judicata” under the Lawlor rule.
Moreover,
precluded
effort
to
construe
the
Settlement
Agreement to have released all future claims that Fu Jian might
have against their wooden newel posts fails.
To determine the
preclusive effect of a lawsuit resolved by agreement, the court
may
look
to
a
settlement
agreement
to
examine
whether
the
parties expressed their intent to foreclose future litigation.
Keith v. Aldridge, 900 F.2d 736, 740 (4th Cir. 1990) (analyzing
claim preclusion as applied to a prior consent judgment); see
also Greenberg v. Bd. of Governors of the Fed. Reserve Sys., 968
F.2d
164,
settlement
168
is
settlement.”);
(2d
Cir.
1992)
measured
by
Hallco
Mfg.,
the
(“The
intent
256
F.3d
preclusive
of
the
at
1297
effect
parties
of
to
(finding
a
the
that
“there is no legally dispositive difference for claim preclusion
purposes between a consent judgment based on a settlement . . .
and a dismissal with prejudice which is based on a settlement”);
12
See supra note 7.
25
Langton v. Hogan, 71 F.3d 930, 935 (1st Cir. 1995) (“A judgment
that is entered with prejudice under the terms of a settlement,
whether
by
stipulated
dismissal,
a
consent
judgment,
or
a
confession of judgment, is not subject to collateral attack by a
party or a person in privity, and it bars a second suit on the
same
claim
or
cause
of
action.”).
This
court‟s
objective,
therefore, is to determine the intent of the parties based on
the plain language of the contract, and in doing so the court
must apply contract principles.13
Keith, 900 F.2d at 741.
Where
“the parties intended to foreclose through agreement litigation
of a claim, assertion of that claim in a later suit, whether or
not formally presented in an earlier action, is precluded.”
Here,
Plaintiffs
the
“from
mutual
any
release
and
all
provision
causes
of
merely
action,
Id.
discharged
claims,
and
liabilities . . . relating to any and all claims that Fu Jian
asserted in the Proceedings.”
(Doc. 41 at 4.)
Since Fu Jian at
that time could not have asserted damages claims for future acts
of infringement, the Settlement Agreement does not bar Fu Jian
from raising such claims now.
Indeed, the Settlement Agreement
reflects that the parties contemplated the opposite, recognizing
that future acts of infringement were possible.
Paragraph 2.e
of the Settlement Agreement, after all, specifically addresses
13
The Settlement Agreement states that it should be governed by the
law of North Carolina, but no party has argued that this affects the
result in any way.
26
how SV International should manufacture wooden newel posts to
avoid infringing the ‟519 Patent.
In
summary,
Plaintiffs‟
(Doc. 41 at 3.)
attempt
to
bar
Fu
Jian‟s
counterclaim on the basis of the mutual release contained in the
Settlement Agreement is unavailing, and the general principle
that claim preclusion does not bar suits for post-judgment acts
of infringement continues to apply to Fu Jian‟s counterclaim.
Applicability
of
Other
Settlement Agreement
2.
Provisions
of
the
This leaves the question of whether any other portion of
the Settlement Agreement, when viewed in the context of claim
preclusion,
bringing
parties‟
products
manifests
its
present
Settlement
into
two
an
intent
to
infringement
Agreement
categories.
preclude
Fu
counterclaim.
divides
Paragraphs
SV
Jian
Here,
from
the
International‟s
2.a.
through
2.d.
refer to (but do not define) wooden newel posts that “are the
Paragraph 2.e. describes wooden
subject of the Proceedings.”
newel
posts
that,
if
designed
according
to
the
description
therein, will be permitted to be sold and thus ostensibly do not
infringe the ‟519 Patent to that extent.
Plaintiffs do not
argue that the former provision in itself carries any preclusive
effect,14 so the court addresses only the latter.
14
Plaintiffs‟ argument is only that the extrinsic evidence and
paragraphs 2.a. through 2.e. demonstrate that in SV International I Fu
Jian claimed patent infringement as to all of Plaintiffs‟ products and
that the parties divided them into certain groups described in the
27
Paragraph
2.e.
of
the
Settlement
Agreement
identifies
a
type of wooden newel post that Fu Jian will permit Plaintiffs to
make and sell and thus ostensibly would not infringe the ‟519
Patent: specifically, a wooden newel post with a square bottom
where both the bottom and upper sections are made from lower
quality wood.
(Id. at 3.)
This paragraph is consistent with
the Settlement Agreement provision that states that nothing in
Settlement Agreement.
(Doc. 54 at 5-6.)
For example, the parties
explain that, pursuant to the Settlement Agreement, six wooden newel
post product numbers were identified that ultimately constituted the
products that were the “subject of the Proceedings.” (Docs. 49 at 12;
54 at 5-6; 41-1 at 1, 4.) Plaintiffs refer to paragraphs 2.a. through
2.d. only to support their previous argument that because SV
International I involved all of its newels, the dismissal of that case
with prejudice precludes Fu Jian‟s present counterclaim.
The court
has rejected Plaintiffs‟ argument that the mere fact that the first
litigation may have involved all of Plaintiffs‟ wooden newel posts as
insufficient to require claim preclusion for alleged infringement that
post-dates the dismissal, and the court therefore need not consider
any extrinsic evidence that might otherwise convert this motion into
one for summary judgment.
Of course, paragraphs 2.a. through 2.d by their express terms
provide SV International the right to sell its inventory of newel
posts that were determined to be the “subject of the Proceedings” for
eighteen months from the date of the Agreement.
(Doc. 41, ¶ 2.c.)
“[A]n authorized sale of a patented product places that product beyond
the reach of the patent.” Intel Corp. v. ULSI Sys. Tech., Inc., 995
F.2d 1566, 1568 (Fed. Cir. 1993); cf. De Forest Radio Tel. & Tel. Co.
v. United States, 273 U.S. 236, 241 (1927) (“Any language used by the
owner of the patent, or any conduct on his part exhibited to another,
from which that other may properly infer that the owner consents to
his use of the patent in making or using it, or selling it, upon which
the other acts, constitutes a license, and a defense to an action.”);
McCoy v. Mitsuboshi Cutlery, Inc., 67 F.3d 917, 920 (Fed. Cir. 1995)
(same); Anton/Bauer, Inc. v. PAG, Ltd., 329 F.3d 1343, 1350 (Fed. Cir.
2003) (explaining that an express or implied license is a defense to
patent infringement).
Thus, this grant to SV International,
permitting it to sell certain potentially-infringing newels, limits Fu
Jian‟s patent rights as to those products for the eighteen month
period. Fu Jian seems to acknowledge this limitation in its briefing.
(Doc. 49 at 12-13.)
28
it “constitute[s] an admission of liability by any party.”
at 5.)
(Id.
It resolves what is not infringing, is supported by a
dismissal
effect.
with
prejudice,
and
therefore
can
have
preclusive
Hallco Mfg., 256 F.3d at 1297.
Under
judgment
the
has
doctrine
determined
of
claim
that
a
preclusion,
particular
where
product
a
prior
does
not
infringe a particular patent, the patent holder is precluded
from raising another infringement claim against products that
are the same or essentially the same.
In Nystrom v. Trex Co.,
580 F.3d 1281 (Fed. Cir. 2009), for example, a prior lawsuit
determined
patent.
Trex‟s
that
Trex‟s
products
did
not
infringe
Nystrom‟s
When Nystrom brought a second infringement suit against
second-generation
products,
the
court
held
that
claim
preclusion barred Nystrom‟s claim because the second-generation
products were the same or essentially the same as the first
generation
products.
The
court
concluded
that
“[w]here
an
accused infringer has prevailed in an infringement suit, „the
accused devices have the status of noninfringements, and the
defendant
acquires
the
status
of
a
noninfringer
to
that
extent.‟”
Id. at 1285 (quoting Young Eng‟rs, 721 F.2d at 1316).
Or as the Federal Circuit explained in another case, “[i]f a
patent owner has unsuccessfully attacked an alleged infringer
for the same infringing acts in a prior court proceeding, no
substantive argument has been advanced as to why the patent
29
owner
should
be
given
an
opportunity
charge of infringement again.”
to
put
forth
the
same
Young Eng‟rs, 721 F.2d at 1315.
Nystrom and Young Engineers therefore make clear that any
product that is the same or essentially the same as a product
found
to
be
non-infringing
in
a
prior
claim
cannot
be
the
subject of a later infringement suit under the doctrine of claim
“Accused devices are „essentially the same‟ where
preclusion.
the
differences
between
them
are
merely
„unrelated to the limitations in the claim
„colorable‟
or
of the patent.‟”
Acumed, 525 F.3d at 1324.
The court concludes, therefore, that Fu Jian is precluded
from
basing
any
patent
infringement
claim
against
SV
International on a design permitted under paragraph 2.e. of the
Settlement Agreement.
Of course, whether a particular product
is the same or essentially the same as those described within
paragraph 2.e. is a question of fact that cannot be determined
at the motion to dismiss stage.
Andrew v. Clark, 561 F.3d 261,
267 (4th Cir. 2009) (explaining that disputed issues of material
fact cannot be decided on a motion to dismiss pursuant to Rule
12(b)(6)); Bosinger v. U.S. Airways, Inc., 510 F.3d 442, 450
(4th
Cir.
2007)
(explaining
that
a
district
court
may
not
resolve factual questions without converting a motion to dismiss
under Rule 12(b)(6) into a motion for summary judgment under
Rule 56).
While this court has the discretion to convert a
30
motion to dismiss into a motion for summary judgment, see George
v. Kay, 632 F.2d 1103, 1106 (4th Cir. 1980), it declines to do
so on the current record.15
3.
Conclusion
The dismissal of SV International I with prejudice resolved
litigation between SV International and Fu Jian, who are also
parties
to
Fu
infringement,
Jian‟s
present
and
constitutes
a
counterclaim
final
judgment.
for
Fu
patent
Jian‟s
current infringement counterclaim against SV International as to
any of the latter‟s products made or sold after the date of the
Settlement Agreement is precluded only to the extent the claim
bases liability on a design that is the same or essentially the
same as that described within paragraph 2.e. of the Settlement
Agreement (which was determined to be non-infringing to that
extent).16
To
determine
whether
Fu
Jian‟s
counterclaim
for
15
Of course, infringement claims may not be barred as to products
that are different from and not in existence at the time of those made
the subject of an earlier patent infringement claim.
See Del Mar
Avionics, Inc. v. Quinton Instrument Co., 836 F.2d 1320, 1324 (Fed.
Cir. 1987) (“[A]bsent a prior determination of infringement with
respect to [a new device], neither res judicata nor issue preclusion
applied.
A device not previously before the court, and shown to
differ
from
those
structures
previously
litigated,
requires
determination on its own facts.”); Young Eng‟rs, 721 F.2d at 1316-17
(explaining that patent infringement claims against “„new‟ models” not
in existence at the time of a prior infringement suit could not be
barred by the prior litigation where they were not essentially the
same as those in the prior suit).
16
The parties have not argued, and thus the court need not decide,
whether paragraph 2.e. has any preclusive effect beyond that noted:
that is, whether products essentially the same as those described in
paragraph 2.e. cannot be the basis of any claim they infringe the ‟519
31
patent infringement is barred in any respect, the court will
need to make a factual determination whether SV International‟s
products are the same or essentially the same as those described
in
paragraph
2.e.
of
the
Settlement
Agreement.
Such
a
determination cannot be made at the motion to dismiss stage.
See Smith v. Smith, 589 F.3d 736, 740 (4th Cir. 2009) (finding
error
where
considering
the
a
trial
motion
court
to
examined
dismiss).
issues
of
Accordingly,
fact
when
Plaintiffs‟
motion to dismiss Fu Jian‟s patent infringement counterclaim for
failure to state a claim upon which relief can be granted will
be denied.
B.
Subject Matter Jurisdiction over Settlement Agreement
Plaintiffs
move
under
Federal
Rule
of
Civil
Procedure
12(b)(1) to dismiss Defendant‟s counterclaim for breach of the
parties‟ Settlement Agreement, claiming that this court lacks
subject matter jurisdiction to adjudicate Fu Jian‟s state law
breach of contract counterclaim.
According to Plaintiffs, if
the court dismisses Fu Jian‟s patent infringement counterclaim
for failure to state a claim, this court lacks subject matter
jurisdiction over the state law counterclaim.
(Doc. 45 at 9.)
Plaintiffs concede, however, that if the court chooses not to
dismiss
Fu
Jian‟s
patent
infringement
counterclaim,
it
may
Patent at all. And, as noted, patent liability cannot be based on the
sales expressly permitted by paragraphs 2.a. through 2.d. of the
Settlement Agreement.
32
properly exercise supplemental jurisdiction over the breach of
contract counterclaim.
Federal
(Id.)
courts
exercise
limited
jurisdiction,
as
“authorized by Article III of the Constitution and the statutes
enacted by Congress.”
Bender v. Williamsport Area Sch. Dist.,
475 U.S. 534, 541 (1986).
civil
action
jurisdiction,
of
which
the
Congress has provided that “in any
the
district
district
courts
courts
shall
have
have
original
supplemental
jurisdiction over all other claims that are so related to claims
in the action within such original jurisdiction that they form
part of the same case or controversy under Article III of the
United States Constitution.”
28 U.S.C. § 1367(a).
As a result,
federal courts may resolve “state law claims over which federal
courts would otherwise lack jurisdiction, so long as they form
part of the same case or controversy as the federal claims.”
Shanaghan v. Cahill, 58 F.3d 106, 109 (4th Cir. 1995) (citing
United
Mine
Workers
Whether
to
exercise
of
Am.
v.
Gibbs,
jurisdiction
over
383
a
U.S.
state
715
law
(1966)).
claim,
however, is a matter left to the discretion of the district
court.
Id.
In this case, the court has original jurisdiction over Fu
Jian‟s patent infringement counterclaim.
28 U.S.C. § 1338(a)
(granting to district courts “original jurisdiction” over “any
civil
action
arising
under
any
33
Act
of
Congress
relating
to
patents”).
Plaintiffs‟
Because
motion
the
to
court
dismiss
will
Fu
deny
Jian‟s
(at
this
patent
stage)
infringement
counterclaim, the court retains jurisdiction over the breach of
the
Settlement
Agreement
counterclaim
not
only
because
Plaintiffs concede as much, but because the breach of contract
claim arises out of the same case or controversy.
See Crater
Corp. v. Lucent Techs., Inc., 255 F.3d 1361, 1369-70 (Fed. Cir.
2001) (concluding that where the district court has “original
jurisdiction over [a] case” because of a patent infringement
claim, the court also has discretion to exercise “supplemental
jurisdiction
over
[plaintiff]
Crater‟s
state
law
claims
for
breach of contract . . . because those claims „form part of the
same case or controversy‟” (quoting 28 U.S.C. § 1367(a))); Madey
v. Duke Univ., 307 F.3d 1351, 1364 (Fed. Cir. 2002) (holding
that
because
viable,
the
plaintiff‟s
district
jurisdiction
over
patent
court
infringement
could
plaintiff‟s
have
state
claim
exercised
law
was
still
supplemental
breach
of
contract
claim).
Here, Fu Jian‟s patent infringement and breach of contract
claims both arise from the method in which Plaintiffs construct
their
wooden
introduction
Moore‟s
newel
of
similar
Federal
(explaining
posts
that
will
evidence.
Practice
one
and
–
Civil
basis
for
34
See
likely
16
§ 106.23
involve
the
James
Wm.
Moore
(3d
ed.
2011)
exercising
supplemental
jurisdiction is the need to “avoid duplicative evidence” for the
sake of judicial economy).
discretion
to
retain
Accordingly, the court exercises its
the
infringement
claim,
and
Plaintiffs‟
motion to dismiss the breach of contract counterclaim for lack
of subject matter jurisdiction will be denied.
C.
Motion for a More Definite Statement
In the alternative, Plaintiffs move for a more definite
statement
of
Jian‟s
Fu
contract counterclaims.
to
specify
which
of
patent
infringement
and
breach
of
According to Plaintiffs, Fu Jian fails
SV
International‟s
products
allegedly
infringe the ‟519 Patent or breach the Settlement Agreement.
Plaintiffs
contend
that
this
vagueness
prevents
them
from
framing an accurate response to the counterclaim.
Federal Rule of Civil Procedure 12(e) permits a party to
“move for a more definite statement of a pleading . . . which is
so vague or ambiguous that the party cannot reasonably prepare a
response.”
to
ensure
opposing
pleading.
Fed. R. Civ. P. 12(e).
that
party‟s
the
moving
claim
so
party
that
The purpose of Rule 12(e) is
has
it
adequate
can
prepare
notice
a
of
the
responsive
Armstrong v. Snyder, 103 F.R.D. 96, 100 (E.D. Wis.
1984) (citing Equal Emp‟t Opportunity Comm‟n v. Gen. Electric
Co., 370 F. Supp. 1258, 1259 (W.D. Va. 1973)).
Lack of detail
in a complaint is not enough to sustain a motion for a more
definite
statement,
however.
Sheen
35
v.
Bil-Jax,
Inc.,
No.
93 C 6390, 1993 WL 524211, at *1 (N.D. Ill. Dec. 10, 1993).
Rather, the pleading must be “incomprehensib[le].”
Id.
Because
motions under Rule 12(e) raise the prospect of “increase[ing]
the
time
and
effort
to
refine
the
pleadings
without
circumscribing the scope of discovery or defining the issues,”
Hicks v. Arthur, 843 F. Supp. 949, 959 (E.D. Pa. 1994), they
“are not favored by the courts,” Innovative Digital Equip., Inc.
v. Quantum Tech., Inc., 597 F. Supp. 983, 989 (N.D. Ohio 1984).
Whether to grant a motion for a more definite statement is left
to
the
court‟s
sound
exercise
of
its
discretion.
Old
Time
Enters. v. Int‟l Coffee Corp., 862 F.2d 1213, 1217 (5th Cir.
1989); see also Hodgson v. Va. Baptist Hosp., Inc., 482 F.2d
821, 824 (4th Cir. 1973).
As Plaintiffs rightly point out, a complaint may not simply
allege
that
patent.
“products
for
sale
. . .
infringe”
a
particular
See Agilent Techs., Inc. v. Micromuse, Inc., No. 04
Civ. 3090, 2004 WL 2346152, at *6 (S.D.N.Y. Oct. 19, 2004).
Moreover, alleging broadly that all of an alleged infringer‟s
products infringe and then providing examples of specifically
infringing products is not enough to survive a motion under
12(e).
Static Control Components, Inc. v. Future Graphics, LLC,
No. 07cv00007, 2008 WL 160827, at *2 (M.D.N.C. Jan. 15, 2008).
Fu
Jian‟s
counterclaim
against
SV
International‟s
“products,
including wooden Newel Posts . . . , which are covered by one or
36
more claims of the Newel Post Patent” clearly approaches making
a claim against all of SV International‟s products.
In
a
tacit
admission
of
this
problem,
Fu
Jian‟s
brief
expressly limits its counterclaims to a specific category of
products at issue: “SV newel posts.”
(Doc. 49 at 17.)
By so
limiting its allegations, Fu Jian‟s counterclaims, while not a
model of clarity, comply with the Federal Rules.
See Symbol
Techs., Inc. v. Hand Held Prods., Inc., No. Civ-A 03-102-SLR,
2003 WL 22750145, at *3 (D. Del. Nov. 14, 2003) (denying a
motion
the
complaint
identified a “finite number of infringing products”).
Moreover,
Fu
for
Jian‟s
a
more
definite
counterclaim
(as
statement
limited)
where
conforms
to
the
example
forms approved by the Federal Rules of Civil Procedure.
Fed. R.
Civ. P. App‟x Form 18 (giving an example allegation that the
patent infringer “has infringed and is still infringing [the
patent]
by
embody
the
Licensing
making,
selling,
patented
LLC
v.
and
using
invention”);
Sprint
Nextel
see
Corp.,
electric
also
No.
motors
Digital
07-5432,
that
Tech.
2008
WL
4068930, at *2 (D.N.J. Aug. 27, 2008) (Shipp, Mag. J.) (“Form 18
does not require that the Plaintiff specify the exact product
name, model number, or manner in which the offending products
infringe
upon
counterclaim
the
patent(s)
achieves
this
at
level
issue.”).
of
particularity,
cannot say that the claim is incomprehensible.
37
Since
Fu
the
Jian‟s
court
See Keranos, LLC
v. Analog Devices, Inc., No. 2:10-cv-207-TJW, 2011 WL 4027427,
at
*5
(E.D.
Tex.
Sept.
12,
2011)
(“A
patent
infringement
complaint that pleads at least the facts in Form 18 must be
sufficient to state a claim under Rule 8(a) because to hold
otherwise
would
practitioners
render
to
the
. . .
[Rule]
example
forms
84[,
in
which
the
points
Appendix,]
a
nullity.”).
Indeed, a review of the docket in SV International
I
that
reveals
allegation
definite
in
SV
that
International
counterclaim
statement.
answered
the
identical
without
Answer
Compare
requesting
a
more
to
Complaint
and
Counterclaims at 7, SV Int‟l Corp. (No. 1:07cv754), Doc. 15,
with
Answer
to
Counterclaim
at
1,
SV
Int‟l
Corp.
(No.
1:07cv754), Doc. 17.17
Any additional information
Plaintiffs
seek
numbers
infringing
(such
as
product
of
its
allegedly
products) can be obtained through discovery.
524211,
at
*1
(denying
moving
party‟s
See Sheen, 1993 WL
request
for
a
more
definite statement even though the complaint failed to reference
the model numbers and names of products involved in a products
liability lawsuit because the information was available through
discovery); Beery v. Hitachi Home Elecs., 157 F.R.D. 477, 480
(C.D. Cal. 1993) (“If the detail sought by a motion for more
17
Before the cases were consolidated, Plaintiff ECMD also answered an
identical allegation in SV International I.
Compare First Amended
Complaint and Demand for Jury Trial at 2, Fu Jian Quanyu Indus. Co.
(No. 1:07cv905), Doc. 20, with Answer to First Amended Complaint at 1,
Fu Jian Quanyu Indus. Co. (No. 1:07cv905), Doc. 22.
38
definite statement is obtainable through discovery, the motion
should be denied.”).
Therefore,
Plaintiffs‟
motion
for
a
more definite statement will be denied.
III. CONCLUSION
For the reasons set forth above,
IT
IS
THEREFORE
ORDERED
that
the
motions
of
SV
International and ECMD to dismiss Fu Jian‟s counterclaim for
patent infringement pursuant to Federal Rule of Civil Procedure
12(b)(6),
to
dismiss
Fu
Jian‟s
counterclaim
for
breach
of
contract pursuant to Federal Rule of Civil Procedure 12(b)(1),
and for a more definite statement pursuant to Federal Rule of
Civil Procedure 12(e) (Doc. 44) are DENIED.
/s/
Thomas D. Schroeder
United States District Judge
October 26, 2011
39
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