Accordant Energy, LLC v. Vexor Technology, Inc. et al

Filing 64

Memorandum of Opinion and Order: Plaintiff Accordant Energy, LLC's Motion to Dismiss Vexor Technology, Inc.'s & Vexor Technology, LLC's Amended Inequitable Conduct Counterclaim and to Strike Affirmative Defense of Inequitable Conduct (Doc. #37 ) is GRANTED. Judge Patricia A. Gaughan on 9/19/17. (LC,S)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

Accordant Energy, LLC,
Plaintiff,
Vs.
Vexor Technology, Inc., et al.,
Defendant.

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CASE NO. 1:17 CV 411
JUDGE PATRICIA A. GAUGHAN

Memorandum of Opinion and Order

INTRODUCTION
This matter is before the Court upon Plaintiff Accordant Energy, LLC’s Motion to
Dismiss Vexor Technology, Inc.’s & Vexor Technology, LLC’s Amended Inequitable Conduct
Counterclaim and to Strike Affirmative Defense of Inequitable Conduct (Doc. 37). This is a
patent infringement case. For the reasons that follow, the motion is GRANTED.
FACTS
For purposes of ruling on the pending motion, the facts asserted in the amended
counterclaim are presumed true.

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Plaintiff Accordant Energy, LLC (“Accordant”) filed this lawsuit against defendants,
Vexor Technology, Inc. and Vexor Technology, LLC (collectively, “Vexor”)1 alleging patent
infringement of United States Patent No. 9,062,268 (“ ’268 Patent”) and United States Patent
No. 9,523,051 (“ ’051 Patent”). The patents are both entitled “Engineered Fuel Feedstock.”
Starting at least as early as 2003, Vexor began the research and development to create an
engineered fuel product utilizing solid waste streams that otherwise hold no value and
historically have been disposed of in landfills. Those solid waste streams include but are not
limited to non-recyclable residue from material recovery facilities and virgin industrial waste
streams. The resulting fuel can be used as a coal replacement for ceratin purposes.
By late 2005, Vexor had received customer approval to begin shipping its engineered
fuel. By 2010, Vexor and/or its customers had received various awards related to the fuel. Due
to is wide success, as of June of 2012, Vexor began looking for additional suppliers of feed stock
material. According to the counterclaim, starting in 2012, Accordant2 began supplying “MRF
fluff” to Vexor, which is combined with “MRF fluff” from other suppliers plus the
aforementioned industrial waste streams to form Vexor’s engineered fuel. MRF fluff is the
nonrecyclable residual material that forms 10-30% of the original waste stream received by
material recovery facilities.
Ultimately, Vexor shared with Accordant certain proprietary information regarding its

1

Two other Vexor related entities were initially named as parties,
but subsequently dismissed by agreement of the parties.

2

In actuality, it was ReCommunty, Accordant’s predecessor, that
first supplied the MRF fluff. For ease of reference, however, the
Court will refer to ReCommunity as “Accordant.”
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fuel. Vexor alleges that the material was shared with the understanding that it would be
maintained as confidential and used solely to further the parties’ mutual beneficial relationship
as feed stock supplier and fuel manufacturer. Approximately two years after Accordant received
a sample of Vexor’s engineered fuel, Accordant filed the application that resulted in the issuance
of the ’268 Patent. Thereafter, approximately two years following detailed discussions between
the top-level executives of Vexor and Accordant, the application that resulted in the ’051 Patent
was filed. Vexor alleges that those applications were drafted specifically to broadly claim the
process by which Vexor has been making its engineered fuel.
Accordant approached Vexor about licensing the processes covered by the patents-insuit. Vexor responded that it has been using this process since long before Accordant filed its
patent applications. Thereafter, Accordant filed the instant two-count patent infringement
complaint against Vexor. In response, Vexor filed an amended answer containing a number of
affirmative defenses, including the affirmative defense of inequitable conduct. In addition,
Vexor filed an amended three-count counterclaim. Count one is a claim for invalidity. Count
two is a claim for unenforceability based on inequitable conduct, and count three is a claim for
non-infringement.
Accordant moves to dismiss count two and strike Vexor’s affirmative defense of
inequitable conduct. Vexor opposes the motion.
ANALYSIS
At the outset, the Court recognizes the Federal Circuit’s aversion to unfounded
inequitable conduct claims. See, e.g., Burlington Indus., Inc. v. Dayco Corp., 849 F.2d 1418,
1422 (Fed. Cir. 1988) (opining that “the habit of charging inequitable conduct in almost every

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major patent case has become an absolute plague”). Accordingly, litigants may not assert
inequitable conduct without first establishing a solid factual foundation for the claim. See id.
(counseling that “an unsupported charge of ‘inequitable conduct in the Patent Office’ is a
negative contribution to the rightful administration of justice”).
One way to implement the Federal Circuit’s holdings in this regard is to rigorously
enforce Fed. R. Civ. P. 9(b). Because inequitable conduct claims draw their essence from
fraudulent conduct before the PTO, parties must plead inequitable conduct with particularity. See
Ferguson Beauregard v. Mega Sys., LLC, 350 F.3d 1327, 1344 (Fed. Cir. 2003) (holding that
“inequitable conduct, while a broader concept than fraud, must be pled with particularity”). The
Federal Circuit has held that, “in pleading inequitable conduct in patent cases, Rule 9(b) requires
identification of the specific who, what, when, where, and how of the material misrepresentation
or omission committed before the PTO.” Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d
1312, 1327 (Fed. Cir. 2009).
Although ‘knowledge’ and ‘intent’ may be averred generally, a pleading of inequitable
conduct under Rule 9(b) must include sufficient allegations of underlying facts from
which a court may reasonably infer that a specific individual (1) knew of the withheld
material information or of the falsity of the material misrepresentation, and (2) withheld
or misrepresented this information with a specific intent to deceive the PTO.
Id. at 1328-29.
In this case, Vexor alleges that Accordant engaged in fraudulent conduct in prosecuting
the patents-in-suit by making affirmative misrepresentations as well as omitting material
information. The Court will address each type of alleged misconduct separately.
1. Material misrepresentations
Vexor alleges as follows:

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In response to the Examiner’s rejection, the patentee argued that the Benson and Johnston
patents teach HHV and O/C ranges that are outside of the amended claims. Additionally,
one of the named inventors, Dingrong Bai, submitted a sworn declaration stating that (1)
he was ‘familiar with the disclosure’ of the Benson and Johnston patents and (2) ‘a
skilled person reading Johnston would expect to produce a fuel pellet of at least 9,055
BTU/lb, which is above the claimed range of 3,000 BTU/lb to 8,000 BTU/lb.
(Doc. 29-1 at ¶ 66).
Vexor alleges that these statements are false because Benson and Johnston actually teach
ranges that fall within the allowed claims. According to Vexor’s allegations, Jonhston teaches
that pelletized wood can have a heating value of less than 7,000 BTUs per pound and Benson
teaches that MSW has a low average heating value of 4,000-5,000 BTUs and that Refuse
Derived Fuel typically has a heat content of approximately 4,500 to 8,000 BTUs per pound. In
addition, Vexor alleges that the fine processed RDF has a heat content value of 5,600 to 6,000
BTUs or further processed RDF has a heat content value of about 6,000 to 8,000 BTUs per
pound.
In its motion to dismiss, Accordant argues that the allegations regarding the meaning of
Benson and Johnston are simply inaccurate and not supported by a full reading of those patents.
Accordant points out that the claimed invention in Benson involves “a solid fuel comprising a
recycled lignin-comprising residue from anaerobic digestion of a ligno-cellulosic organic
material which produces said recycled lignin-comprising residue with a heat content value of
approximately 8,500 to 10,500 Btu/lb dry matter...” (Doc. 37-5; 8:51-58). In addition,
Accordant points out that Johnston teaches that the fuel pellets that are the subject of the patent
“generally have a gross heating value in excess of 9,000 BTU’s per pound, and can have a gross
heating value in excess of 10,000 BTU’s per pound.” (Doc. 37-4; 2:56-61). Thus, Accordant
argues that it made no misstatements to the USPTO. Vexor does not respond to this argument.
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Upon review, the Court finds that Vexor fails to state a claim for inequitable conduct
based on any alleged material misrepresentation. As an initial matter, the Court finds that the
only specific misrepresentation set forth in the amended counterclaim is the statement identified
in the Bai declaration. Although Vexor alleges that “[i]n response to the Examiner’s rejection,
the patentee argued that the Benson and Johnston patents teach HHV and O/C ranges that are
outside of the amended claims,” this allegation does not specifically identify any particular
misstatement appearing in the prosecution history or otherwise. Nor does Vexor identify which
individual allegedly made this “argument.” Rather, in Paragraph 54 of the amended
counterclaim, Vexor identifies the “patentee” as both Ms. Calabrese and Dr. Bai. Yet Vexor
fails to specifically identify which individual “argued” to the USPTO regarding the teachings of
Benson and Johnston.
Vexor does, however, identify with particularly an allegedly false statement specifically
made by Dr. Bai. Dr. Bai submitted a sworn declaration stating that (1) he was ‘familiar with
the disclosure’ of the Benson and Johnston patents and (2) ‘a skilled person reading Johnston
would expect to produce a fuel pellet of at least 9,055 BTU/lb, which is above the claimed range
of 3,000 BTU/lb to 8,000 BTU/lb. The Court notes that, although the amended counterclaim
discusses both the Benson and Johnston references, the only statement made by Dr. Bai involves
the Johnston patent.3 As noted above, the Johnston patent does in fact teach that the fuel pellets
that are the subject of the patent “generally have a gross heating value in excess of 9,000 BTU’s
per pound, and can have a gross heating value in excess of 10,000 BTU’s per pound.” (Doc. 37-

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Dr. Bai does aver that he is “familiar” with the Benson patent, but
Vexor does not allege that this statement, in and of itself, is false
or material.
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4; 2:56-61). Vexor does not respond to Accordant’s argument on this point. Although Johnston
mentions that pelletized wood can have a heating value of less than 7,000 BTUs per pound, there
is simply nothing in this cited portion of Johnston that renders Dr. Bai’s statement false.
Regardless, Vexor falls far short of sufficiently identifying facts from which this court
could reasonably infer that Dr. Bai knew of the falsity of the material misrepresentation and
misrepresented this information with a specific intent to deceive the PTO. In support of its
position, Vexor points to the following allegations:
60.

Upon information and belief, the patentee and its counsel purposefully prosecuted
the applications that resulted in the Asserted Patents through affirmative
misrepresentation of material facts, failures to disclose material facts, and the
submission of false information;

61.

The Accordant Patents claim priority to provisional patent application No.
61/076,020, which was filed on June 26, 2008. Between this provisional
application and the applications that resulted in the Accordant Patents –
applications No. 14/478,149, filed on September 5, 2014 and No. 14/715,384,
filed on May 18, 2015 – patentee and its counsel submitted a series of
continuation and continuation-in-part patent applications: Nos. 12/492,096, filed
on June 25, 2009, 12/644/974, filed on December 22, 2009, and 13/708,532, filed
on December 7, 2012;

62.

The prosecution history for just the application families that eventually resulted in
the Accordant Patents spans well over 4,000 pages. This history reveals a
complex and lengthy effort by the patentee to repeatedly narrow the claimed
ranges, as well as add new claim range limitations, all in an effort to avoid a
multitude of prior art references, even when such claim amendments had no
novelty or tie to the original claims specification. Within the 096 application
alone, the patentee amended or cancelled the original independent claims at least
nine times before abandoning the application by failure to respond to an office
action;

63.

Upon information and belief, the claims first submitted by the patentee for the
384 application (that resulted in the 051 patent) were identical to the claims the
patentee submitted several years earlier with the 096 application. Not
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surprisingly, these claims were again rejected by the examiner;
64.

As with the 096 application, the patentee amended the claims to add new
elements even though such elements had no novelty or tie to the original claims
specification. Specifically, the independent claims were amended (or new
independent claims added) to claim “a HHV of between about 3,000 BTU/lb and
about 8,000 BTU/lb” and/or claim “an O/C ratio of between about 0.6 (w/w) and
about 1.0 (w/w)[.]”;

65.

Upon information and belief, the examiner rejected these amended claims for
reasons that included anticipatory and obviousness-based references found in
Benson (U.S. Patent No. 5,429,645) and Johnston (U.S. Patent No. 4,236,897).
The examiner had cited to at least the Johnston reference in notices of rejection
for the earlier 096 application that was abandoned; and

90.

Upon information and belief, Accordant utilized information obtained from public
filings by Vexor and/or its customers to purposely draft patent claims broad
enough to cover Vexor’s manufacturing process in continuation applications filed
long after the initial provisional patent application.

In essence, Vexor alleges that the “patentee and its counsel” submitted a series of
continuation and continuation-in-part patent applications and the histories reveal a complex and
lengthy effort by the patentee to repeatedly narrow the claimed ranges, as well as add new claim
range limitations, all in an effort to avoid a multitude of prior art references. In addition, the
patentee submitted previously rejected claims and added new elements even though such
elements had no novelty or tie to the original claims. On the whole, the Court finds that these
allegations fall far short of sufficiently alleging that Dr. Bai knew the statement about the
Johnston reference contained in his affidavit was false and that Dr. Bai made the statement with
the intent to deceive the USPTO. In fact, not one single allegation references Dr. Bai by name.
The vast majority of the allegations involve commonplace occurrences within the patent world.
Many patent prosecutions involve the submission of continuation applications with complex

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histories. The allegations identified by Vexor, standing alone and in combination, do not satisfy
Exergen’s stringent pleading requirements. Moreover, many of these allegations simply assert
disagreement with the USPTO’s conclusion regarding anticipation and obviousness. The Court
finds that Vexor has not stated a claim for inequitable conduct based on any material
misrepresentation.
2. Material omissions
Vexor’s claim for inequitable conduct based on material omissions fares worse. Here,
Vexor alleges that there are three bases for its omission claims: the failure of the patentee and its
counsel to disclose the “inherent teachings” of Morrison, which is prior art disclosed by
Accordant to the USPTO; the decision by the patentee to insert into the application randomly
determined ranges and ratios that were not tied to the original specification; and the failure to
disclose Vexor’s engineered fuel as prior art. Each alleged omission will be addressed in turn.
A. Morrison
Accordant argues that a claim for inequitable conduct based on Morrison fails.
According to Accordant, Vexor does not identify a specific person that omitted material
information in connection with Morrision. Rather, the amended counterclaim asserts that “the
Patentee and its counsel” engaged in wrongdoing, but the amended counterclaim does not
identify any facts relating to any particular individual’s conduct in this regard. In addition,
Accordant argues that it did disclose Morrison to the USPTO and that the patents-in-suit clearly
provide as such. In the alternative, Accordant argues that the “inherent” teachings of Morrison
would have been available to the examiner through other materials. Accordant claims that two
databases disclosed to the USPTO identify the elemental makeup of waste derived fuels. As

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such, the “inherent” teachings of Morrison are cumulative to other materials available to the
examiner and cannot form the basis of an inequitable conduct claim.
Vexor makes no specific argument directed at Morrison in response. Rather, Vexor
generically argues that its allegations satisfy the pleading standard because they do, in fact,
identify the “who, what, when, where, and how” of the material omissions. Specifically, Vexor
argues:
During the prosecution of the independent claims of [the applications] (the “when” and
identification of the specific claims, see Dkt No. 29-1 at ¶¶74, 77, 81, 85), the inventors,
the attorneys prosecuting the application, and/or others involved in strategy, preparation,
or prosecution of the application (the “who,” see id. at ¶¶54-58) knowingly and
intentionally failed to disclose the inherent teaching of Morrison with respect to the
naturally occurring ranges and ratios of carbon, hydrogen, oxygen, moisture, sulfur,
chlorine, and volatile matter, as well as the heat value (in BTUs) of RDF (“what” was
knowingly omitted, see id. at ¶¶ 34-50, 73, 79-81, and specific intent, see id. at ¶¶60-62,
71, 82-83, 90), which the examiner would have found either anticipated or rendered the
subject matter of the 268 patent and the 051 patent ineligible for patent protection. (“but
for” materiality, see id. at ¶¶72, 77-78, 82, 84-89).
Upon review, the Court finds that Vexor fails to state a claim for inequitable conduct
based on any alleged failure on the part of Accordant to disclose the “inherent teachings” of
Morrison. Here, it is undisputed that Accordant did in fact identify the Morrison reference
during prosecution of the patents-in-suit. If an applicant discloses a prior art reference, the
contents of the reference are presumed to be before the examiner. See, McKesson Info.
Solutions, Inc. v. Bridge Med., Inc., 487 F.3d 897, 924 (Fed. Cir. 2007). This is so even if the
“contents” of the reference are features inherent therein. See, Avery Dennison Corp. v.
Continental Datalabel, Inc. 2010 WL 4932666 (N.D. Ill. Nov. 30, 2010)(finding supporting
decisions persuasive in light of the fact that the Federal Circuit deems a patent examiner “to have
experience in the field of the invention.”). Here, because Accordant disclosed Morrison, the

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examiner is presumed to have the inherent teachings contained therein and, as such, there is no
“omission” on which to base an equitable conduct claim.
B. Insertion of randomly determined ranges and ratios that were not tied to the
original specification
Vexor also argues that it has stated a claim for inequitable conduct based on Accordant’s
insertion of various ranges and ratios into its patent applications. Although cryptic, it appears
that Vexor is claiming that the ranges and ratios Accordant inserted occur naturally and are
inherent properties. The Court finds that Vexor fails to state a claim for inequitable conduct by
omission because Vexor alleges that Accordant did in fact disclose the specific ranges at issue.
To the extent Vexor is somehow alleging that Accordant had a duty to disclose that the ranges
occur naturally, the Court rejects the argument. As an initial mater, Vexor points to no
allegation in the amended counterclaim that expressly alleges that its omission claim is based on
this precise omission. Rather, in its brief, Vexor argues that Accordant “knowingly and
intentionally added randomly determined ranges and ratios that had no tie to the original
specification in order to cover the BTU range claimed in Johnston.” (Doc. 40 at PageID 660).
In addition, Vexor alleges that “typical ultimate-proximate analyses for the waste streams
identified in Morrison and in RDF made from those streams fell within the ranges of carbon,
hydrogen, and oxygen and other constituents identified in the independent claims...” (Doc. 40 at
PageID 659, citing amended counterclaim ¶ 79). As Accordant points out, however, it did in fact
disclose both Johnston and Morrison to the examiner. As set forth above, disclosure of those
references necessarily includes disclosure of the inherent teachings contained therein. Because
Vexor wholly fails to point to any specific omission on the part of Accordant regarding the
express insertion of ranges, the Court finds that Vexor’s inequitable conduct claim fails to state a
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claim for which relief may be granted.
C. Vexor’s engineered fuel as prior art
In its brief in opposition, Vexor argues that it has stated a claim for inequitable conduct
based on Accordant’s failure to disclose the existence of Vexor’s engineered fuel to the USTPO.
According to Vexor, it is prior art that would have prevented the issuance of the patents-in-suit.
Specifically, Vexor argues as follows:
During prosecution of [the patent applications], the inventors, the patent attorneys, and/or
other individuals involved in the strategy, or prosecution of those applications were
aware that the claims being prosecuted read upon Vexor Engineered Fuel or that prior art
Vexor Engineered Fuel was material to the patentability of the claims being prosecuted.
In addition, Vexor provides the Court with a paragraph containing information obtained
during discovery that it claims establishes the plausibility of this claim.
In response, Accordant argues that this claim does not appear in the amended
counterclaim. In addition, Accordant argues that the Court cannot consider Vexor’s evidence at
this stage in the litigation. Even so, Accordant disagrees with the statements and evidence upon
which Vexor relies.
Upon review, the Court finds that Vexor fails to state an inequitable conduct claim based
on the existence of Vexor Engineered Fuel or any failure to disclose the process to the USPTO.
Although the amended counterclaim contains a heading “Inequitable Conduct During
Prosecution of the Accordant Patents,” there is no mention of the Vexor Engineered Fuel
underneath that heading. Nor is there any allegation that Accordant failed to disclose the Vexor
Engineered Fuel to the USPTO. In addition, to the extent the amended counterclaim could
somehow be read to include an allegation that the Vexor engineered fuel constituted prior art that
was not disclosed during prosecution, the amended complaint wholly fails to identify any
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specific individual that was aware that Vexor’s fuel constituted prior art at the time of the filing
of the applications. Rather, the amended complaint generically refers to Accordant’s
predecessor, “top-level executives,” “Accordant’s attorney,” or simply Accordant. See, e.g.,
amended counterclaim at ¶¶ 20-30; 89-91; 105. These allegations fall far short of identifying the
“who” necessary to state an inequitable conduct claim under Exergen.
To the extent the amended counterclaim alleges that its inequitable conduct claim is
based on Accordant purposefully drafting its patents to cover Vexor’s process, the claim does
not satisfy Exergen’s pleading requirements. As set forth above, Vexor fails to identify any
specific individual that engaged in this alleged wrongdoing. See, e.g., amended counterclaim at
¶¶ 20-30; 89-91; 105. The Court further notes that it will not consider any evidence on which
Vexor relies in its brief in opposition. As Vexor is surely aware, the Court cannot consider
evidence when assessing a motion to dismiss.
D. Affirmative defense
Accordant argues that, to the extent the Court dismisses the counterclaim for inequitable
conduct, Vexor’s affirmative defense of inequitable conduct also fails. Vexor offers no response
to this argument. Having concluded that dismissal of the counterclaim is warranted, Vexor may
not rely on inequitable conduct as an affirmative defense.
CONCLUSION
For the foregoing reasons, Plaintiff Accordant Energy, LLC’s Motion to Dismiss Vexor
Technology, Inc.’s & Vexor Technology, LLC’s Amended Inequitable Conduct Counterclaim
and to Strike Affirmative Defense of Inequitable Conduct (Doc. 37) is GRANTED.

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IT IS SO ORDERED.

/s/ Patricia A. Gaughan
PATRICIA A. GAUGHAN
United States District Judge
Chief Judge
Dated: 9/19/17

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