U.S. Water Services, Inc. v. Novozymes A/S et al

Filing 77

ORDER denying 28 Motion to Transfer to District of Minnesota; denying 25 Motion to Dismiss amended complaint; denying as moot 57 Motion to Stay discovery; granting 71 Motion to Compel discovery. Signed by District Judge Barbara B. Crabb on 6/11/14. (krj)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - U.S. WATER SERVICES, INC. and
ROY JOHNSON,
OPINION AND ORDER
Plaintiffs,
13-cv-864-bbc
v.

NOVOZYMES A/S and NOVOZYMES
NORTH AMERICA, INC.,
Defendants.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - In this civil action, plaintiffs U.S. Water Services, Inc. and Roy Johnson contend that
defendants Novozymes A/S and Novozymes North America, Inc. indirectly infringe
plaintiffs’ patents and induce their customers to infringe the patents. Defendants have
moved to transfer the case to the District of Minnesota under 28 U.S.C. § 1404(a), dkt.
#28, and they have moved to dismiss the complaint for failing to provide fair notice of
plaintiffs’ claims as required by Fed. R. Civ. P. 8. Dkt. #25. I am declining to transfer the
case because defendants have not shown that the District of Minnesota would be a more
convenient forum. In addition, I am denying defendants’ motion to dismiss. Although
plaintiffs’ complaint is sparse, it meets the requirements for notice pleading of patent
infringement. In re Bill of Lading Transmission & Processing System Patent Litigation, 681
F.3d 1323, 1335 (Fed. Cir. 2012). Finally, defendants have moved to stay discovery until

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after the disposition of their motion to dismiss, dkt. #57 (motion for protective order), and
have refused to produce discovery until after the court decides their motion. Their position
to do so prompted plaintiffs to file a motion to compel. Dkt. #71. I will deny defendants’
motion to stay as moot, and I will order defendants to respond to plaintiffs’ discovery
requests, either by producing the requested evidence or by filing substantive objections.

BACKGROUND
Plaintiff U.S. Water Services, Inc. is a Minnesota corporation with headquarters in
St. Michael, Minnesota. Plaintiff Roy Johnson lives in Oconomowoc, Wisconsin, in the
Eastern District of Wisconsin. He is the named inventor on U.S. Patent No. 8,415,137 and
U.S. Patent No. 8,609,399. Both plaintiffs are co-owners of these patents. The ‘137 and
‘399 patents disclose methods for using phytase enzymes to combat the build up of deposits
of certain materials on ethanol production equipment.
Defendant Novozymes A/S is a Danish corporation; defendant Novozymes North
America, Inc. is incorporated in New York, with its headquarters in Franklinton, North
Carolina. Defendants sell products called Phytaflow and 50161, which contain phytase
enzymes.
Plaintiffs contend that defendants induce and contribute to infringement of the ‘137
and ‘399 patents by selling the Phytaflow and 50161 products and encouraging their
customers to use those products in the ways prescribed by the methods of the ‘137 and ‘399
patents. Furthermore, they allege that defendants had knowledge of the ‘137 and ‘399

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patents because plaintiffs sent them a letter about an earlier patent that involved similar
technology and plaintiffs publicly announced the issuance of the ‘137 and ‘399 patents.
Finally, plaintiffs allege that Phytaflow and 50161 have no substantial noninfringing uses
as sold and marketed.
Approximately two percent of defendants’ sales of the Phytaflow product occurred in
Wisconsin in 2012-2013; about six percent of sales of Phytaflow occurred in Minnesota in
the same period.
In 2011, plaintiff U.S. Water Services, Inc. filed a lawsuit against its competitor
ChemTreat, Inc., in the District Court for the District of Minnesota. U.S. Water Services,
Inc. v. ChemTreat, Inc., No. 11-cv-895-PNS-TNL (D. Minn. Jan. 16, 2013). In that suit,
U.S. Water Services contended that ChemTreat, Inc. had misappropriated trade secrets
related to the phytase enzyme technology. ChemTreat, Inc. countersued on the basis of
noninfringement and invalidity of U.S. Patent No. 8,039,244, which issued during the
course of that litigation. The district court held that ChemTreat, Inc. did not infringe the
‘244 patent. Plaintiff appealed that ruling on the sole issue of subject matter jurisdiction.
The appeal is pending in the Court of Appeals for the Federal Circuit, case no. 2013-1236.
The ‘244 patent involves methods for using phytase enzymes to combat deposits and
scaling in ethanol production. The technology is similar to that in the ‘137 and ‘399
patents. The only claim at issue in the ‘244 patent litigation with ChemTreat, Inc. was the
addition of phytase “to said thin stillage, backset, or mixtures thereof.” Plts.’ Br., dkt. #44,
at 14. The claims at issue in the present litigation, pertaining to the ‘137 and ‘399 patents,

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include the pH level in one section of the process and the “addition of an acidic compound
that can break down organic phosphates and phosphonates into soluble inorganic
phosphates in the presence of an oxidizer, oxidizing agent, or ultraviolet light.” Id. at 15.

OPINION
A. Transfer of Action
Under 28 U.S.C. § 1404(a), “[f]or the convenience of parties and witnesses, in the
interest of justice, a district court may transfer any civil action to any other district or
division where it might have been brought.” The parties agree that either district is a
permissible venue for this case, but they dispute whether convenience and the interests of
justice favor transfer. As the movants, defendants bear the burden of establishing that the
transferee forum is clearly more convenient or that the interests of justice favor transfer.
Coffey v. Van Dorn Iron Works, 796 F.2d 217, 219-20 (7th Cir. 1986).
“With respect to the convenience evaluation, courts generally consider the availability
of and access to witnesses, and each party’s access to and distance from resources in each
forum . . . .” Research Automation, Inc. v. Schrader-Bridgeport International, Inc., 626 F.3d
973, 978 (7th Cir. 2010). Defendants argue that the Western District of Wisconsin is not
a convenient forum because none of the parties and few of the potential witnesses are
located here; the relevant documents and evidence are not kept in this district; and only
minimal sales of the accused products occurred in here. In response, plaintiffs argue that
Roy Johnson lives closer to the Western District of Wisconsin than to the District of

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Minnesota and that several third party witnesses are also closer to the Western District of
Wisconsin than to the District of Minnesota. It is not clear that these reasons support
transfer.

It is unlikely that Johnson would need to testify, E-Pass Technologies, Inc. v.

3Com Corp., 343 F.3d 1364, 1370 n.5 (Fed. Cir. 2003) (“inventor evidence is of little
probative value for purposes of claim construction”) (citing Solomon v. Kimberly-Clark
Corp, 216 F.3d 1372, 1380 (Fed. Cir. 2000)), and many customers and other third party
witnesses are located relatively close to either forum.
Defendants argue that, by comparison, the District of Minnesota would be more
convenient because plaintiff U.S. Water Services, Inc. has its headquarters in St. Michael,
Minnesota, and “[p]resumably most or all of the key U.S. Water witnesses reside in
Minnesota or routinely travel to Minnesota as part of their duties.” Dfts.’ Br., dkt. #29, at
9. Defendants do not support this allegation with evidence, but even if they had, plaintiffs
are entitled to disregard their own convenience in favor of other factors in choosing the forum
in which they litigate. Semiconductor Energy Laboratory Co., Ltd. v. Samsung Electronics
Co., Ltd., 2009 WL 1615528, *4 (W.D. Wis. 2009) (denying motion to transfer in part
because “defendants focus on plaintiff’s convenience and not their own. Presumably, if
plaintiff chose to file suit in Wisconsin, it is willing to overlook any inconvenience associated
with litigating in this forum.”). See also Atlantic Marine Construction Co., Inc. v. U.S.
District Court for Western District of Texas, 134 S. Ct. 568, 583 n.6 (2013) (“The [c]ourt
must also give some weight to the plaintiffs’ choice of forum . . . .”). In short, defendants
have not made a persuasive argument for transfer.

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Nevertheless, the “interests of justice” can justify transfer even when the transferee
forum is not clearly more convenient. Research Automation, Inc., 626 F.3d at 978 (internal
citations omitted). “For [‘the interests of justice’] element, courts look to factors including
docket congestion and likely speed to trial in the transferor and potential transferee forums,
each court’s relative familiarity with the relevant law, the respective desirability of resolving
controversies in each locale, and the relationship of each community to the controversy.”
Id. Defendants argue that the interests of justice favor transfer to the District of Minnesota
because plaintiffs were parties to a case in the District of Minnesota in which that court
construed the ‘244 patent, U.S. Water Services, Inc. v. ChemTreat, Inc., 11-CV-0895
PJS/TNL, 2013 WL 173736 (D. Minn. Jan. 16, 2013). The ‘244 patent involves similar
technology on phytase enzymes used for removing deposits on ethanol production
equipment. This patent and the ‘137 and ‘399 patents also share the same specification.
It is true that successive litigation on the same patents or on related technology
weighs in favor of transfer in order to avoid duplicate or inconsistent rulings or claims
construction. Rembrandt Data Storage, LP, 2011 U.S. Dist. LEXIS 153364, 8; Kraft Foods
Holdings, Inc. v. Procter & Gamble Co., 2008 WL 4559703 (W.D. Wis. Jan. 24, 2008).
However, in this case, the patents are different. Although defendants say that “some of the
claim terms at issue in the ChemTreat action will likely be relevant here,” Dfts.’ Br., dkt.
#29, at 12, they do not point to any specific claims that would be at issue in both lawsuits.
On the other hand, plaintiffs argue that none of the claims asserted in this litigation were
considered by the District of Minnesota in the ChemTreat, Inc. case, and the claims in this

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litigation involve different aspects of the technology (namely, the pH of the “beer column”
during ethanol production, the use of an acidic compound and the use of said compound
with an oxidizer, oxidizing agent or ultraviolet light). Because defendants have not rebutted
plaintiffs’ argument, defendants have failed to show that judicial resources would be saved
by litigating the ‘137 and ‘399 patents in the District of Minnesota.
Although I agree that the parties’ connections to the Western District of Wisconsin
are tenuous, I conclude that defendants have not met their burden of showing that the
interests of justice favor transfer or that transfer would be clearly more convenient.

B. Dismissal
Defendants have moved to dismiss plaintiffs’ amended complaint on the ground that
the complaint does not allege sufficient facts to state claims of indirect, induced or
contributory infringement under Fed. R. Civ. P. 8. Defendants argue that plaintiffs (1) do
not identify the accused method with sufficient specificity; (2) do not state plausible facts
with respect to defendants’ knowledge and intent, as required to state induced and
contributory infringement claims; and (3) acknowledge the existence of substantial,
noninfringing uses for the phytase product, which contradicts a contributory infringement
claim. Defendants’ first two arguments fail because plaintiffs’ allegations are sufficient to
state a claim under Federal Circuit precedent. Defendants’ third argument fails because the
relevant inquiry is not whether phytase enzymes have substantial noninfringing uses but
whether defendants’ products have substantial noninfringing uses, as sold and marketed.

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Plaintiffs have alleged this sufficiently.
Defendants say that they were not put on notice with respect to the activity or device
plaintiffs accuse of infringement. Under the law of the Court of Appeals for the Federal
Circuit, a plaintiff need not plead specific claims or offer more than a general statement of
the defendant’s infringing activities. Plaintiff’s complaint need not provide any more detail
than the sample set forth in Appendix Form 18 of the Federal Rules of Civil Procedure. Id.
(“defendant has infringed and is still infringing the Letters Patent by making, selling, and
using electric motors that embody the patented invention . . . .”); In re Bill of Lading
Transmission & Processing System Patent Litigation, 681 F.3d 1323, 1335 (Fed. Cir. 2012)
(applying Fed. R. Civ. P. Form 18 to provide standard for stating claims in patent
infringement actions). See also Fed. R. Civ. P. 84 (“The forms in the Appendix suffice under
these rules and illustrate the simplicity and brevity that these rules contemplate.”). In their
amended complaint, plaintiffs allege that
Upon information and belief, in recent months, Novozymes, with knowledge
of the ‘137 Patent and ‘399 Patent, has approached a number of U.S. Water
customers with its Phytaflow® and/or 50161 products with instructions to use
Phytaflow® and/or 50161 in the same manner as U.S. Water’s patented
pHytOUT® method, i.e., to carry out the methods claimed in the ‘137 Patent
and the ‘399 Patent. Upon information and belief, Novozymes has offered to
sell Phytaflow® to Badger State Ethanol, LLC (BSE), a dry-mill ethanol
production facility in Monroe, Wisconsin and a long-time customer of U.S.
Water, with instructions to use Phytaflow® in the same manner as U.S.
Water’s patented pHytOUT® methods, i.e., to carry out the method(s)
claimed in the ‘137 Patent and/or the ‘399 Patent.
Plts.’ Am. Cpt., dkt. #21, at ¶23. Plaintiffs are not required to provide any greater detail
than this. In re Bill of Lading, 681 F.3d at 1335 (complaints met requirements of Rule 8

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when they “assert[ed] that a specific customer or customers are infringing the ’078 patent
by using the patented method”).
Defendants argue that plaintiffs’ amended complaint is too vague and conclusory with
respect to defendants’ knowledge of infringement, which is an element of plaintiffs’ induced
and contributory infringement claims. Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct.
2060, 2068 (2011) (like contributory infringement, “induced infringement under § 271(b)
requires knowledge that the induced acts constitute patent infringement”); In re Bill of
Lading, 681 F.3d at 1339 (“To survive Appellees’ motion to dismiss, therefore, R+L’s
amended complaints must contain facts plausibly showing that Appellees specifically
intended their customers to infringe the ‘078 patent and knew that the customer’s acts
constituted infringement.”). Defendants also say that plaintiffs do not provide any facts
about defendants’ specific intent to infringe, as required to state a claim for induced
infringement. In re Bill of Lading, 681 F.3d at 1339.
With respect to defendants’ knowledge, plaintiffs allege “[u]pon information and
belief” that defendants have knowledge of the ‘137 and ‘399 patents. Plts.’ Am. Cpt., dkt.
#21, at ¶22. They allege two relevant facts: (1) plaintiffs sent defendants a letter about the
‘244 patent, which was substantially related technology; and (2) plaintiffs made a public
announcement to the industry of the issuance of their ‘137 and ‘399 patents. Id. Although
these facts do not prove defendants’ knowledge, they are sufficient to allow the court to infer
defendants’ knowledge of the ‘137 and ‘399 patents, which is enough to state induced and
contributory infringement claims. In re Bill of Lading, 681 F.3d at 1342 (“ At this stage of

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the litigation a plaintiff is only required to plead enough facts to enable a court ‘to draw the
reasonable inference that the defendant is liable for the misconduct alleged.’”) (quoting
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
With respect to specific intent, plaintiffs allege that defendants “approached a
number of U.S. Water customers . . . with instructions to use Phytaflow® and/or 50161 in
the same manner as U.S. Water’s patented pHytOUT® method, i.e., to carry out the
methods claimed in the ‘137 Patent and the ‘399 Patent.” Plts.’ Am. Cpt., dkt. #21, at 23.
Plaintiffs allege that defendants knew of plaintiffs’ technology and patents and that they
instructed potential customers to buy their product and use it in the same way as plaintiffs’
patented methods. Such allegations are sufficient to satisfy the specific intent element.
Grice Engineering, Inc. v. JG Innovations, Inc., 691 F. Supp. 2d 915, 927 (W.D. Wis. 2010)
(specific intent to induce infringement sufficiently stated when “plaintiff allege[d] that
[defendant] founded, owns and operates [accused company] and that [defendant] is aware
of plaintiff’s patent rights . . . [and] that defendant Grice participated in marketing the
allegedly infringing products and acted willfully to infringe plaintiff’s patent”).
Finally, defendants argue that plaintiffs acknowledge that defendants’ products have
substantial noninfringing uses and fail to allege that these products were made for the
purpose of infringing plaintiffs’ patents, as required to state a contributory infringement
claim. Defendants say that the phytase enzymes that are the physical component of their
Phytaflow and 50161 products have numerous other uses aside from those described by the
claims in the ‘137 and ‘399 patents. However, the patents are methods patents, meaning that

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the physical component alone is not the relevant unit of inquiry. Rather, the question is
whether the Phytaflow and 50161 products as sold or marketed to customers have other
uses, which plaintiffs allege they do not. Golden Blount, Inc. v. Robert H. Peterson Co., 438
F.3d 1354, 1363 (Fed. Cir. 2006) (“Relying on . . . evidence that the instruction sheets
taught only the infringing configuration, the district court had ample basis to conclude that
Golden Blount had made out a prima facie showing that [plaintiff’s] product was not ‘suitable
for substantial non-infringing use . . . .’”) (quoting 35 U.S.C. § 271(c)) (emphasis in
original). Unlike in In re Bill of Lading, 681 F.3d at 1338, plaintiffs do not allege that
defendants’ marketing of Phytaflow and 50161 includes “repeated descriptions of noninfringing uses to which the accused products can be put.” Instead, plaintiffs allege the
opposite: Phytaflow and 50161 have been sold only as infringing components of plaintiffs’
patented methods and that the products were designed specifically for that use.
I conclude that plaintiffs have stated viable claims. Accordingly, defendants’ motion
to dismiss will be denied. Defendants’ motion to stay discovery pending the disposition of
their motion to dismiss will be denied as moot. Defendants must respond to plaintiffs’
discovery requests by producing the appropriate evidence or by supplying objections on a
basis other than the anticipation of the granting of their motion to dismiss.

ORDER
IT IS ORDERED that
1. Defendants Novozymes A/S’s and Novozymes North America, Inc.’s motion to

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transfer this case to the District of Minnesota under 28 U.S.C. § 1404(a), dkt. #28, is
DENIED.
2. Defendants’ motion to dismiss plaintiffs U.S. Water Services, Inc.’s and Roy
Johnson’s amended complaint, dkt. #25, is DENIED.
3. Defendants’ motion to stay discovery pending the disposition of their motion to
dismiss, dkt. #57, is DENIED as moot.
4. Plaintiffs’ motion to compel discovery, dkt. #71, is GRANTED. Defendants are
ordered to respond to plaintiffs’ requests by July 10, 2014 by either providing the evidence
requested or objecting to the request on grounds other than awaiting the outcome of
defendants’ motion to dismiss.
Entered this 11th day of June, 2014.
BY THE COURT:
/s/
BARBARA B. CRABB
District Judge

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