Orbcomm Inc. v. Calamp Corp.
Filing
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MEMORANDUM OPINION. Signed by District Judge Henry E. Hudson on 9/9/2016. (jsmi, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Richmond Division
ORBCOMM INC.,
Plaintiff,
Civil Action No.: 3:16CV208-HEH
V.
CALAMP CORP.,
Defendant.
MEMORANDUM OPINION
(Plaintiffs Motion to Dismiss Defendant's Inequitable Conduct Counterclaim)
THIS MATTER is before the Court on Plaintiff ORBCOMM, Inc.'s
("Plaintiff) Motion to Dismiss Defendant CalAmp Corp.'s ("Defendant") Counterclaim
and to Strike Its Inequitable Conduct Defense (ECF No. 38), filed on August 9, 2016. On
July 19,2016, Defendant filed its First Amended Answer (ECF No. 27) to this patent
inMngement suit. Defendant's First Amended Answer included an affirmative defense
and a counterclaim both alleging that one of the patents-in-suit is unenforceable because
of Plaintiff s inequitable conduct. Plaintiffhas moved to dismiss the inequitable conduct
counterclaim pursuant to Federal Rule of Civil Procedure 12(b)(6) and to strike the
inequitable conduct defense pursuant to Federal Rule of Civil Procedure 12(f). Each side
has filed memoranda supporting their respective positions. For the reasons set forth
below, the Court will deny Plaintiffs Motion.
I. BACKGROUND
This lawsuit involves five separate but interrelated patents. Only one of them,
U.S. Patent No. 6,611,686 ("the '686 patent"), is the subject of the inequitable conduct
allegations.
As required by Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Court
assumes the claimant's well-pleaded allegations to be true and views all facts in the light
most favorable to it. T.G. Slater & Son v. Donald P. & Patricia A. Brennan, LLC, 385
F.3d 836, 841 (4th Cir. 2004) (citing Mylan Labs, Inc. v. Matkari, 1 F.3d 1130, 1134 (4th
Cir. 1993)). At this stage, theCourt's analysis is both informed and constrained by the
four corners of Defendant's Counterclaim. However, the Court may also consider
documents attached to the counterclaim, "so long as they are integral to the complaint
and authentic." Philips v. Pitt Cty. Mem'l Hosp., 572 F.3d 176, 180 (4th Cir. 2009).
Viewed through this lens, the facts are as follows.
In 2014, the '686 patent was owned by Joseph Smith ("Smith"), the patent's
named inventor. (Am. Answer H178, ECF No. 27.) On June 3, 2014, Smith filed
separate lawsuits in the Eastern District ofTexas against Honeywell International, Inc.
and ORBCOMM, Inc., alleging infringement of the '686 patent by both Honeywell and
ORBCOMM. (Id. It 178-79.) On July 14,2014, Smith filed yet another action in the
Eastern District of Texas, thistime against SkyBitz, Inc., again alleging infringement of
the '686 patent. {Id. T1180.) On October 13, 2014, the district court consolidated the
Honeywell and SkyBitz cases, designating Honeywell as the lead case {"-Honeywell
case"). {Id 1181.)
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On June 19, 2015, the district court issued a claim construction memorandum
opinion and order{^'Honeywell Claim Construction Order") in the Honeywell case. {Id. ^1
184.) In the Honeywell Claim Construction Order, the court concluded that the patent
examiner had made an obvious clerical error in the '686 patent that could be corrected by
the court. (Jd.) Specifically, the court construed the term "inputs to be controlled" in
claims 15 and 48 of the '686 patent to mean "inputs to be monitored." (Jd.) SkyBitz
moved for reconsideration of this construction, arguing that the '686 patent did not
contain a clerical error and that the district court did not have the authority to change the
claim language. {Id. ^185-86.)
On August 3,2015, the district court consolidated the Honeywell case and the
ORBCOMM case, designating ORBCOMM as the lead case (^'ORBCOMM czst"), {Id. t
187). The court vacated its Honeywell Claim Construction Order so that claim
construction could start over in the newly consolidated case. {Id. Ex. 3, at2.)' The court
thus denied SkyBitz's motion for reconsideration as moot. {Id. Ex. 3, at 3.) At the time
of the ORBCOMM CQSQ consolidation, and throughout the remainder of the Eastern
District of Texas litigation, Herbert Kerner ("Kemer") represented ORBCOMM. {Id.
1183.)
In its claim construction brief for the newly consolidated case, ORBCOMM stated
that it had "decided to adopt the position of Skybitz" with respect to the term "inputs to
be controlled." {Id. ^ 188.) This was a change in ORBCOMM's position. Before the
consolidation, ORBCOMM and Smith had agreed to the court's construction from the
' All citations to specific pages ofexhibits reference the overall page within the ECF entry, not to the exhibits'
internal pagination.
Honeywell case. {Id. Ex.4, at 8 n.l.) In its claim construction brief, ORBCOMM also
argued that there was "no basis to 'correct' the term at issue." {Id. 1189.) ORBCOMM
asserted that"inputs to be controlled" did not meet the requirements forjudicial
correction because there was not an error obvious on the face of the patent. {Id, Ex. 4, at
13.) ORBCOMM maintained that it was improper for the court to rely on the patent's
prosecution history in making a correction to the claim language. {Id, Ex. 4, at 14, 17
n.2.) As evidence of there beingno obvious error on the face of the '686 patent,
ORBCOMM pointed to Smith's arguments in theHoneywell claim construction where
he, as the inventor, denied any errorin the "inputs to be controlled" language. {Id, ^
189). ORBCOMM also went onto argue that, because there was no obvious error on the
face ofthe patent, the term "inputs to be controlled" was indefinite, rendering claims 15
and 48 invalid. {Id. Ex. 4, at 17-20.)
The district court adopted ORBCOMM's argument. It issued a claim construction
memorandum opinion and order ("(9/?5C0MA/Claim Construction Order") in the
consolidated case on September 10, 2015. {Id, ^ 190.) The court found that "the error is
not evident from the face of the patent," and thus the court "does not have the authority to
correct thepatent in such circumstances." {Id. Ex. 5, at 14). The court further found that
"said inputs to be controlled" was indefinite, rendering claims 15 and 48 of the '686
patent invalid. {Id.) At theheart of the court's analysis was the fact that throughout both
the Honeywell and ORBCOMM cXviim construction processes Smith"argue[d] for an
alternative construction of the phrase 'input to be controlled.'" {Id, ^ 190.)
On October 13, 2015, the district court granted a stipulated motion to dismiss the
ORBCOMMcqsq. {Id. H 191.) In conjunction with the lawsuit being dismissed,
ORBCOMM became the owner of the '686 patent. {Jd. If 192.)
On November 4,2015, Kemer, representing ORBCOMM, the new patent owner,
petitioned the United States Patent and Trademark Office ("PTO") seeking to change the
"inputs to be controlled" language of the '686 patent—the same language subject to the
previous litigation. {Id. at 194). Kemer sought an expedited issuance of certificate of
correction pursuant to Manual of Patent Examining Procedure ("MPEP") § 1480.01. {Id.
at 195). To demonstrate that the "inputs to be controlled" language was an error
attributable solely to the PTO, Kemer only included the patent examiner's amendment to
the '686 patent language dated December 13, 2010, and the district court's vacated
Honeywell Claim Constmction Order. {See id. Ex. 6.) Kemer did notdisclose, however,
that the Honeywell Claim Constmction Order had been vacated, nor did he provide any
other documents from the Honeywellor 0i?5C0A/A/litigation. {See id.) The PTO
granted Kerner's request for correction on December 21, 2015. {Id. H194.)
II. LEGAL STANDARD
"A motion to dismiss under Rule 12(b)(6) tests the sufficiency of a complaint;
importantly, it does not resolve contests surrounding the facts, the merits of a claim, or
the applicability of defenses." Republican Party ofN.C. v. Martin, 980 F.2d 943, 952
(4th Cir. 1992). A reviewing court must consider the well-pleaded allegations as true and
view the complaint in the light most favorable to the claimant; legal conclusions enjoy no
such deference. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The Federal Rules of Civil
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Procedure generally "require[] only 'a short andplain statement of the claim showing that
the pleader is entitled to relief,' in orderto 'give the defendant fair notice of what the ...
claim is and the grounds upon which it rests."' BellAtl Corp. v. Twombly, 550 U.S. 544,
555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). However, the defense of
inequitable conduct in patent cases triggers the more stringent pleading requirements of
Rule 9(b). Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1326 (Fed. Cir. 2009).
"Whether inequitable conduct has been pleaded with particularity under Rule 9(b) is a
question governed by Federal Circuit law." Id. at 1318.
Rule 9(b) requires that when "alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud ormistake. Malice, intent, knowledge,
and other conditions of a person's mind may be alleged generally." Fed. R. Civ. P. 9(b).
To sufficiently plead inequitable conduct under Rule 9(b), "the pleading must identify the
specific who, what, when, where, and how of the material misrepresentation or omission
committed before the PTO." Exergen, 575 F.3d at 1327. These elements must be
supported by "particularized factual bases"; pleadings that merely recite "the substantive
elements of inequitable conduct" do not pass muster. Id. at 1326-27. In addition,
although the text of Rule 9(b) permits general assertions in support of mental conditions
like knowledge or intent, a pleading of inequitable conduct must include sufficient facts
"from which a court may reasonably inferthat 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 intentto deceive the PTO."
Id. at 1328-29. A "reasonable inference," for the purposes of Rule 9(b), "is one that is
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plausible and that flows logically from the facts alleged, including any objective
indications of candor and good faith." Id. at 1329 n.5 (citations omitted).
Under Rule 12(f), a district court may "strike from a pleading an insufficient
defense or any redundant, immaterial, impertinent, or scandalous matter." A court's
decision on such a motion is discretionary. Renaissance Greeting Cards, Inc. v. Dollar
Tree Stores, Inc., 221 F.App'x 239, 246 (4th Cir. 2007) (citations omitted). However,
"Rule 12(f) motions are generally viewed with disfavor 'because striking a portion of a
pleading is a drastic remedy and because it is often sought by the movant simply as a
dilatory tactic.'" Waste Mgmt. Holdings v. Gilmore, 252 F.3d 316, 347 (4th Cir. 2001)
(quoting 5A A. Charles Alan Wright et ai. Federal Practice &Procedure § 1380, 647
(2d ed. 1990)).
III. DISCUSSION
Plaintiff moves to dismiss Defendant's inequitable conduct counterclaim pursuant
to Rule 12(b)(6) and to strike Defendant's inequitable conduct defense pursuant to Rule
12(f).
Inequitable conduct, the "atomic bomb" of patent law, is an equitable defense to
patent infnngement that can barthe enforcement of an otherwise valid patent.
Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1285, 1288 (Fed. Cir.
2011). Because it can have such draconian consequences, the accused infringer faces a
high bar to prevail on a claim of inequitable conduct. First, he must prove that the patent
holderacted with the specific intentto deceive the PTO. Id. at 1290. Next, the claimant
must prove but-for materiality—in other words, but for the patentee's inequitable
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conduct, the PTO would not have issued the patent. Id. at 1291. However, a narrow
exception to the but-for materiality requirement exists for cases where thepatentee has
engaged in affirmative egregious misconduct. Id. at 1292. Affirmative egregious
misconduct, such as filing an unmistakably false affidavit, is deemed to be material. Id.
Plaintiffmaintains that Defendant's pleadings are insufficient to allege both
specific intent and materiality. However, Defendant has met its burden at this stage by
pleading facts that allow the court to "reasonably infer that [Kemer] acted with the
requisite state ofmind" and identifying "the specific who, what, when, where, and how of
the material misrepresentation or omission committed before the PTO." Exergen, 575
F.3d at 1327-28.
a. Specific Intent
First, Defendant has sufficiently pleaded specific intent. While Rule 9(b) permits
"'knowledge' and 'intent' tobeaverred generally," inequitable conduct allegations must
include sufficient underlying facts "fromwhich a court may reasonably inferthata
specific individual (1) knew ofthe withheld material information or ofthe falsity ofthe
material misrepresentation, and (2) withheld ormisrepresented this information with a
specific intentto deceive the PTO." Id. at 1328-29.
Defendant's inequitable conduct allegations include sufficient facts forthis Court
to reasonably infer that Kemer knew of the withheld material information or the falsity of
the material misrepresentation. Kernerrepresented ORBCOMM throughout the Eastern
District of Texas '686 patent litigation. He was certainly aware of the motions and
memoranda filed as well as the court's orders. Moreover, the court's ORBCOMM C\aim
Construction Order adopted many of the arguments that ORBCOMM itselfhad made in
its memorandum bearing Kemer's name. (See Am. Answer Ex. 5, ECF No. 27.) As
ORBCOMM's counsel, Kemer would have understood the disparity between the
Honeywell Claim Construction Order, which he provided to the PTO, andthe
ORBCOMM C\d\m. Construction Order accepting ORBCOMM's arguments. Therefore,
this Court can reasonably infer Kemer's knowledge.
Defendant has also pleaded sufficient facts for this Court to draw the reasonable
inference of Kemer's intentto deceive the PTO. The expedited process that Kerner used
to correct the '686 patent is only applicable for errors attributable to the PTO. MPEP §
1480.01 (9th ed. Rev. 7, Nov. 2015). This type of correction is done expeditiously,
without reference to thepatent file, but is only permitted where the request is
"accompanied by documentation that unequivocally supports the patentee's assertion."
Id.
In his request for correction, Kemer attached the district court's vacated
Honeywell Claim Constmction Order concluding that the patent examiner had made an
obvious clerical error. (Am. AnswerEx. 6, ECF No. 27.) Kerner did not, however,
indicate that theHoneywell Claim Construction Order had been vacated, nor did he attach
any of theother '686 patent litigation documents. {Id.) In particular, inthe ORBCOMM
Claim Constmction Order, the district court concluded that the claims did not include an
obvious clerical error, largely based on the fact that Smith, the inventor, made two
mutually exclusive arguments. (Jd. Ex. 5, at 13.) Smith first asserted that"inputs to be
controlled" was a clerical error attributed to the PTO. (Id. Ex. 5, at 9-10.) But, in the
alternative, Smith argued that the court need not find that the patent contain a clerical
error because it could construe the disputed language to refer to definition data. {Id. Ex.
5, at 9.) These conflicting arguments compelled the court's determination that the error
was not evident on the face of the patent. {Id. Ex. 5, at 13.)
If Kemer had included a more complete record of the '686 patent litigation, it
would not have "unequivocally support[ed]" his assertion that the error was attributable
to the PTO. In fact, it would have raised a question about whether there was an error in
the patent at all. Therefore, when accepting Defendant's well-pleaded allegations as true,
this Court can draw a reasonable inference of Kemer's specific intent to mislead the
PTO.
b. Materiality
Likewise, Defendant has sufficiently pleaded a material misrepresentation or
omission. Rule 9(b) requires the pleading to "identify the specific who, what, when,
where, and how of the material misrepresentation or omission committed before the
PTO." Exergen, 575 F.3d at 1328.
First, Defendant's counterclaim identifies a specific individual, Kerner, who
allegedly engaged in inequitable conduct. {See Am. Answer ^ 183, ECF No. 27.) Thus,
the pleading sufficiently identifies the "who" of the material misrepresentation or
omission. Defendant has also clearly identified the "what," "when," and "where" by
detailing the '686 patent litigation history and pointing to specific allegedly material
documents. {Id.
178-91.) Finally, Defendant has sufficiently pleaded "how" a
material misrepresentation and omission occurred. Defendant has outlined how Kemer
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potentially mislead the PTO by providing only the vacated Honeywell Claim
Construction Order and how that omission was material to the PTO's decision to grant
the certificate of correction. {Id.
193-208.) Therefore, Defendant has pleaded
sufficient facts to identify a material misrepresentation or omission.
Having sufficiently pleaded both specific intent and materiality, Defendant's
inequitable conduct counterclaim will survive this stage of the proceedings. Similarly,
because Defendant has survived the Rule 12(b)(6) stage by meeting the heightened Rule
9(b) pleading standard for its counterclaim, its defense of inequitable conduct is also
sufficient to survive Rule 12(f) analysis.
IV. CONCLUSION
Based on the foregoing, Plaintiffs Motion to Dismiss Defendant's Inequitable
Conduct Counterclaim and Strike Its Inequitable Conduct Defense will be denied.
An appropriate Order will accompany this Memorandum Opinion.
/s/
Henry E. Hudson
United States District Judge
Date:Sept f? 2^/^
Richmond, Virginia
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