Luv N' Care, LTD. et al v. Jackel International, Ltd. et al

Filing 22

MEMORANDUM OPINION AND ORDER. Signed by Judge Rodney Gilstrap on 11/10/2014. (ch, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
LUV N’ CARE, LTD. and ADMAR
INTERNATIONAL, INC.
Plaintiffs,
v.
JACKEL INTERNATIONAL LIMITED
and MAYBORN USA, INC.,

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Civil Action No. 2:14-cv-00855-JRG

Defendants.

MEMORANDUM OPINION AND ORDER
Before the Court is Defendants Jackel International Limited and Mayborn USA, Inc.’s
(collectively, “Jackel”) Motion to Stay (Dkt. No. 10). The Plaintiff, Luv N’ Care, Ltd. and
Admar International (collectively, “LNC”), oppose the motion. After considering the parties’
written submissions, the Court finds that the Motion should be and is hereby DENIED
WITHOUT PREJUDICE.
I.

Background

At issue in this case is whether a pending Federal Circuit appeal in a separate case will
have enough of an impact in the present case to justify a stay of the current proceedings. The
patents at issue in both cases are related, which makes a discussion of their previous history
relevant.
On December 12, 2011, LNC filed a lawsuit in the Eastern District of Texas against
Koninklijk Philips NV (the “Philips Action”) asserting infringement of five United States Patents
that trace their roots back to LNC’s U.S. Patent No. 6,321,931 (the “parent ’931 patent”). The
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parent ’931 patent, entitled a “No-spill drinking cup apparatus,” discloses “[a]n improved nospill cup construction and valve assembly which provides an extremely secure seal against
accidental liquid flow from the cup spout.” U.S. Patent ’931 [57].
The ’931 patent has already been litigated in the Western District of Louisiana (the
“Louisiana litigation”). 1

In the Louisiana litigation, the court found that the claim term

“opening” from the patent was not as broad as claimed because the inventors made specific
disclaimers in the prosecution history of the ’931 patent (the “’931 disclaimer”). With much of
the scope disclaimed, the Louisiana court found that the alleged product did not infringe the ’931
patent. The Court in the alternative went on to say that “were the court not to construe the patent
in this manner, then the invalidity of the . . . patent ’931 is assured.” Hakim v. Cannon Avent
Grp., PLC, No. CIV.A. 3-02-1371, 2005 WL 1793760, at *6 (W.D. La. May 4, 2005) aff'd, 479
F.3d 1313 (Fed. Cir. 2007).
The claim term “opening”—and the accompanying ’931 disclaimer—are at the heart of
the current dispute. In the face of the adverse ruling in the Louisiana litigation, the inventors of
the ’931 patent applied for and were granted several child patents, five of which are at issue in
the Philips Action and one of which—U.S. Patent No. 8,695,841 (the “’841 patent”)—is at issue
in the current action. LNC contends that the ’931 disclaimer (and claim limitation) found in the
parent ’931 patent was rescinded during the prosecution of the child patents, and particularly
during the prosecution of the patent in issue in this case—the ’841 patent.

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Hakim v. Cannon Avent Grp., PLC, No. CIV.A. 3-02-1371, 2005 WL 1793760 (W.D. La. May 4, 2005) aff'd, 479
F.3d 1313 (Fed. Cir. 2007).

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A. History of the Philips Action and the Federal Circuit Appeal
This Court issued a claim construction ruling in the Philips Action on July 9, 2013,
finding among other things that the same disclaimer concerning the parent ’931 patent from the
Louisiana litigation applied to the five child patents in the Philips Action. This disclaimer led
LNC to concede that the accused Philips product did not infringe under the Court’s
interpretation. The parties filed a Joint Motion for Entry of Judgment of Non-Infringement, and
LNC appealed the Court’s claim construction ruling to the Court of Appeals for the Federal
Circuit.
At the Federal Circuit, LNC filed its opening appeal brief on May 23, 2014, arguing that
this Court had erred in finding that the ’931 disclaimer applied because that disclaimer had been
rescinded.

In doing so, LNC relied on arguments it raised with the USPTO during the

prosecution of the ’841 patent—being one of the patents at issue in this present case but neither
at issue nor construed in the original Philips Action. LNC contends that it can use evidence of an
Examiner Interview that took place during the prosecution of the ’841 patent as evidence that
LNC rescinded the ’931 disclaimer during the prosecution of the five patents-in-suit in the
Philips Action. Therefore, argues LNC, the ’931 disclaimer (and claim scope limitation) does
not apply to the five patents-in-suit in the Philips Action.
In Philip’s responsive brief to the Federal Circuit, Philips disagrees that evidence from
the Examiner Interview from the ’841 patent is relevant to the Philips Action and the five
patents-in-suit there. Alternatively, Philips argued that the prosecution history and Examiner
Interview concerning the ’841 patent that allegedly shows a rescission of the ’931 disclaimer is
insufficient to rescind the disclaimer for the five patents-in-suit in the Philips Action because the
statements made by LNC are too vague and not specific enough to overcome the prior
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disclaimer. Finally, Philips argues that even if LNC rescinded the ’931 disclaimer, then the five
patents would be invalid in light of the prior art, just as the Louisiana litigation suggested for the
parent ’931 patent.
B. The Prosecution of the ’841 Patent
The underlying patent application that eventually issued as the ’841 patent (U.S. Patent
Application Serial No. 12/797,061—the “’061 patent application”) was filed on June 9, 2010.
On March 9, 2012, LNC submitted a response to the first Office Action, an Action that rejected
the pending patent claims in the ’061 patent application. Referring to the various related patent
applications which issued as the patents-in-suit in the Philip’s Action, LNC stated that “no
limitations or prosecution disclaimers on the language of the claims should be imported into any
claim from earlier prosecution or prior versions of the claims or prior patents.” Pl. Res. Ex. A at
7. LNC further stated that “[a]ny disclaimers or alleged disclaimers during prosecution [of the
parent ’931 patent] should be deemed rescinded herein.” Id. The Examiners considered these
statements.
In response to a Final Office Action, LNC filed a Request for Continued Examination
(“RCE”) on October 18, 2012. In the RCE, LNC told the USPTO of the filing of the Complaint
in the Philips Action, identified the five patents-in-suit in that Action, and provided an update on
the status of the litigation. On January 3, 2013, in a subsequent response to a Notice of
Allowability, LNC filed a second RCE and updated the Examiner on the status of the Philips
Action and submitted additional prior art identified by Philips during discovery. On October 29,
2013, in response to another Notice of Allowability, LNC filed a third RCE and an additional
IDS containing all the briefing on the claim construction issues in the Philips Action, the
transcript from the Markman hearing of the Philips Action, and a copy of the claim construction
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order from the Philips Action. LNC informed the USPTO that the claim construction order
addressed the issues of the ’931 disclaimer and the rescission of such disclaimer in connection
with earlier patents in the same family as the present ’061 application. LNC also confirmed that
the claim construction order construed the term “opening” that also appears in the pending
claims in the related ’061 application.
LNC’s patent counsel then initiated and attended an in-person interview at the USPTO on
November 25, 2013. According to LNC, the summary of the discussion during the interview
shows that the Examiners considered the ’931 prosecution disclaimer and considered it rescinded
not just for the ’061 patent application, but also for the five related patents involved in the Philips
Action. LNC further alleges that the very prior art from the Louisiana litigation that would have
invalidated the parent ’931 patent in the absence of the disclaimer was considered during the
prosecution of the ’061 patent application. LNC contends that the USPTO therefore considered
everything before it including the claim construction order in the Philips Action, the discussion
of the rescission, and all prior art disclosed during the Philips Action and the Louisiana litigation.
After considering all this evidence and prior art, the USPTO issued the ’061 patent application as
the ’841 patent on April 15, 2014.
In August of 2014, LNC filed the present case against Jackel alleging patent
infringement, a state-law breach of contract claim, and a claim for unfair competition.
II.

Applicable Law

“The district court has the inherent power to control its own docket, including the power
to stay proceedings.” Soverain Software LLC v. Amazon, Inc., 356 F.Supp.2d 660, 662 (E.D.
Tex. 2005) (citations omitted). Management of the court’s docket requires “the exercise of
judgment, which must weigh competing interests and maintain an even balance.” Landis v. N.
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Am. Co., 299 U.S. 248, 254 (1936). In striking that balance, courts typically consider three
factors: (1) whether a stay will unduly prejudice or present a clear tactical disadvantage to the
nonmoving party; (2) whether a stay will simplify issues in question and trial of the case, and; (3)
whether discovery is complete and whether a trial date has been set. Soverain Software LLC,
356 F.Supp.2d at 662. “Essentially, courts determine whether the benefits of a stay outweigh the
inherent costs based on those factors.” EchoStar Techs. Corp. v. TiVo, Inc., No. 5:05-CV-00081,
2006 WL 2501494, at *1 (E.D. Tex. July 14, 2006).
III.

Discussion

The first factor the Court addresses is whether a stay will unduly prejudice or present a
clear tactical disadvantage to the nonmoving party. As noted, this case has three separate but
interrelated parts: (1) a patent infringement claim; (2) a state-law breach of contract claim; and
(3) a state-law unfair competition claim.
Jackel argues that the breach of contract and unfair competition claims are reliant on a
determination of the scope of the proprietary rights—tied to the ’841 patent—alleged to have
been misappropriated in violation of the relevant contracts. LNC, on the other hand, argues that
the breach of contract and unfair competition claims are not tied to the ’841 patent, noting that
LNC’s proprietary rights and patent rights are not coextensive. LNC alleges that its proprietary
rights include (among other things) patents, trademarks, trade names, and copyrights. The
contracts at issue also contain language that is outside the patent scope; for example, preventing
Jackel from copying or utilizing any of LNC’s product packaging, business plans, prototypes,
etc. Regardless of the outcome of the Federal Circuit appeal concerning the five related patents,
the issue of breach and unfair competition concerning these contracts will remain an issue.

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This Court places emphasis on the speedy resolution of a party’s rights—including patent
rights, contract rights, and the right to be free from unfair competition. A stay in the proceedings
at this point would hinder and delay the adjudication of those important rights. When combined
with the uncertain nature of the results of the appeal, this factor does not favor a stay. See
Allergan, Inc. v. Sandoz, No. 2:12-cv-207, 2013 WL 1222347, at *1 (E.D. Tex. March 25, 2013)
(finding that the uncertain nature of a Federal Circuit appeal weighs against granting a stay under
this factor).
Under the second factor, the Court assesses whether a stay will simplify issues in
question and trial of the case. The parties focus much of their argument on this factor.
As an initial matter, the parties do not agree on an answer to the basic question of
whether the Federal Circuit will consider the evidence of the Examiner Interview from
November of 2013.

That evidence was not before this Court when it issued its claim

construction ruling, and Jackel argues that it is irrelevant. However, the Examiner Interview is
relevant to the present case, as it took place during the prosecution of the patent that is at issue in
the present case—the ’841 patent. Therefore the Federal Circuit appeal may not simplify this
issue.
Next, Jackel argues that LNC—by putting the Examiner Interview of November 2013 in
issue in the Federal Circuit appeal—has sought a substantive ruling on the alleged disclaimer
rescission. Any substantive ruling, alleges Jackel, will have a direct influence in the present case
and may be case dispositive. In other words, Jackel argues that if the Federal Circuit finds that
the alleged rescission of the ’931 disclaimer was invalid as to the five patents-in-suit in the
Philips Action, then the rescission is invalid (and may be case dispositive) in the present action.

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On the other hand, LNC argues that the central issue in the Federal Circuit appeal is
whether LNC properly rescinded the ’931 disclaimer in the five related patents-in-suit in the
Philips Action, not whether LNC rescinded the ’931 disclaimer in the ’841 patent. LNC argues
that the Examiner Interview was not submitted to the Federal Circuit for what it said about the
pending claims in the ’841 patent, but instead was submitted to the Federal Circuit as evidence of
how the Examiners viewed the alleged rescission vis-à-vis the patents-in-suit in the Philips
Action. The Court finds this argument persuasive. 2 The ’841 patent, and the prosecution history
of the ’841 patent, is not before the Federal Circuit; therefore any substantive ruling regarding
how that Examiner Interview affects the five related patents in the Philips Action does not de
facto affect the ’841 patent. In fact, the prosecution history of the ’841 patent contains explicit
statements regarding the rescission that the other related patents lack. The Examiners allowed
the ’841 patent to issue despite these explicit statements. As a result, the Federal Circuit
ruling—even if it favors Philips (and therefore Jackel)—does not automatically simplify the case
because the factual situation surrounding the issuance of the ’841 patent is manifestly different
than the factual situation surrounding the issuance of the parent ’931 patent and the five patentsin-suit in the Philips Action.
In addition, even if the Court assumes that Jackel is correct and a substantive ruling
regarding the rescission would apply to the ’841 patent, then the Court may have to make
another logical leap to render the issues simplified. Jackel argues that even if the Federal Circuit
sides with LNC and finds the rescission valid—giving rise to a broader interpretation of the

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Without deciding any factual issue, the Court notes that the Examiner summary does state that the disclaimer was
rescinded for the five patents-in-suit in the Philips Action. That summary was not before the Court during the
Philips Action (as the interview had not yet taken place), but the Court did consider rescission arguments during the
Philips Action and nevertheless found the rescission invalid.

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claims—then the Federal Circuit will follow the reasoning of the Louisiana litigation and render
the five patents-in-suit invalid over the prior art. Jackel alleges that if the Federal Circuit
invalidates the five patents-in-suit in that action, then the ’841 patent ultimately would be
invalidated as well. The Louisiana litigation suggested (but did not hold) that the parent ’931
patent would be invalid over the prior art under the broader interpretation that would result if the
rescission was valid. Jackel admits, however, that an invalidity finding, if any, 3 regarding the
five patents-in-suit in the Philips Action at the Federal Circuit would not directly apply to the
present case.
On the other hand, LNC points out that the prior art which would have invalidated the
parent ’931 patent in the Louisiana litigation was before the Examiner during the prosecution of
the ’841 patent. The Examiners allowed the patent to issue over this prior art. Therefore, Jackel
requires the Court to assume that the Federal Circuit’s ruling regarding five related patents,
combined with a suggestion from the Louisiana litigation regarding the parent ’931 patent, would
render the present ’841 patent invalid over prior art that the Examiners reviewed when
prosecuting the ’841 patent.

The Court does not currently believe this assumption to be

warranted.
Based on the above, the Court believes that the results of the Federal Circuit appeal
could, but may not, have an effect on the simplicity of the present case. An appellate decision on
different patents with different disclaimers, rescissions, prosecution history, and prior art will not
necessarily impact the validity and infringement issues here. Allergan, Inc. v. Sandoz Inc., No.

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As LNC correctly points out, there is no guarantee that the Federal Circuit will reach the issue of invalidity of the
five patents-in-suit. The appeal was taken from a final judgment concerning non-infringement, not invalidity.

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2:12-cv-207, 2013 WL 1222347, at *2 (E.D. Tex. March 25, 2014). This factor does not favor a
stay.
The third factor is whether discovery is complete and whether a trial date is set. This
case is still in its early stages. However, the Court has set a trial date and Markman date for this
case, although the parties have yet to file the proposed Docket Control Order. As a result, this

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factor favors a stay to some degree.
The Court finds that two of the three factors weigh against a stay in this case. The Court
places, what it believes to be, a proper emphasis on the prompt resolution of a party’s rights and
does not believe that the Federal Circuit ruling will necessarily (if at all) simply the issues in this
case. On balance, these two factors outweigh the third factor. Therefore Jackel’s Motion to Stay
is DENIED WITHOUT PREJUDICE to refiling after the Federal Circuit has ruled.

SIGNED this 19th day of December, 2011.
So ORDERED and SIGNED this 10th day of November, 2014.

____________________________________
RODNEY GILSTRAP
UNITED STATES DISTRICT JUDGE

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