IP Law Tracker Docket Review – III

Wednesday, July 15, 2015

Each month, we review significant intellectual property decisions from the U.S. Court of Appeals for the Sixth Circuit and the U.S. District Courts for the Eastern District and Western District of Michigan. Below is the summary for June 2015.

JDS Technologies, Inc. v. Avigilon USA Corp., Case No. 15-10385, 2015 WL 3603525 (E.D. Mich. June 5, 2015)

U.S. District Judge Avern Cohn denied Avigilon’s motion to dismiss for failing to adequately plead allegations of indirect infringement and willful infringement. Avigilon argued that the complaint was inadequate because it did not properly claim that Avigilon had the requisite knowledge of the asserted patents before the complaint was filed.

The court, relying on several allegations from the complaint, rejected Avigilon’s arguments.  For indirect infringement, the court emphasized that the plaintiff had alleged that: (1) Avigilon and plaintiff are competitors, and (2) Avigilon knew about the plaintiff’s patents and technology from the plaintiff’s marketing, appearance at trade shows, and prior publicized litigation involving the patented technology. The court concluded “this is all that is required to plead a claim for indirect or induced infringement.”  JDS Technologies, Inc. v. Avigilon USA Corp., Case No. 15-10385, 2015 WL 3603525, at *2 (E.D. Mich. June 5, 2015).

For similar reasons, the court held that the complaint adequately plead knowledge of the patents to support a cause for willful infringement. “To state a claim for willful infringement, the plaintiff must provide ‘a pleading equivalent to with knowledge of the patent and of his infringement.’” Id. at *3. The court concluded that the complaint “states sufficient facts to support a claim for willful infringement of the patents by making a bare factual assertion that Avigilon had knowledge of the patents prior to suit.” Id.

Relying on In re Seagate Tech., L.L.C., 497 F.3d 1360 (Fed. Cir. 2007), Avigilon argued that “a party must plead facts to support a plausible claim that the infringer acted despite an ‘objectively high likelihood that its actions constituted infringement of a valid patent’ and that the infringer acted in reckless disregard of the plaintiff’s patents” in order to properly plead a claim for willful infringement.  Id. The court, however, rejected Avigilon’s argument because it was based on the requirements for proving ˗ rather than pleading ˗ willful infringement.  Accordingly, the court denied Avigilon’s motion to dismiss ˗ concluding that “whether the allegations will prove out after discovery and trial and whether JDS will otherwise prevail on its claims is for another day.”  Id. at *4.

Catherine Puetz v. Spectrum Health Hospitals, Case No. 1:14-cv-275, 2015 WL 3935984 (W.D. Mich. June 26, 2015)

U.S. District Court Judge Gordon J. Quist granted defendant’s motion to dismiss plaintiff’s declaratory judgment of ownership of copyrighted material for lack of subject matter jurisdiction because none of the plaintiff’s claims invoked a federal question of jurisdiction under the Copyright Act.

Plaintiff alleged that independent of her duties to defendant Spectrum Health Hospitals (“SHH”), she had developed several materials relating to treatment of children in observational units. Plaintiff further alleged that SHH viewed her as a competitor and took steps designed to restrict her ability to compete in the area of observational medicine.  Those steps included inserting an intellectual property clause into her clinical advisor contract in an attempt to gain control of her materials, and license and distribute them in SHH’s name.

In response to SHH’s actions, the plaintiff filed a six count complaint against SHH and various individuals alleging defamation, false light invasion of privacy, breach of contract and the covenant of good faith and fair dealings, declaratory judgment of intellectual property ownership, and tortious interference with business expectancy. Plaintiff alleged that she had proper subject matter jurisdiction because plaintiff’s claims arose under the Copyright Act. But the court concluded that the only claim that could have even arguably arisen under the Copyright Act was plaintiff’s claim for declaratory judgment that she was the owner of the copyrighted material.

To make a determination whether subject matter jurisdiction was proper under the Copyright Act, the court applied the T.B. Harms test from the Second Circuit.  Under that test, an action arises under the Copyright Act:

if and only if the complaint is for a remedy expressly granted by the Act, e.g., a suit for infringement or for the statutory royalties for record reproduction, or asserts a claim requiring construction of the Act, . . .  or, at the very least and perhaps more doubtfully, presents a case where a distinctive policy of the Act requires the federal principles control the disposition of the claim.

Catherine Puetz v. Spectrum Health Hospitals, Case No. 1:14-cv-275, 2015 WL 3935984, at *3 (W.D. Mich. June 26, 2015). Applying that rule, the court stated that “a complaint that alleges solely state law claims is not within a federal court’s original jurisdiction, even if the complaint asserts that federal law deprives the defendant of a defense he may raise or that a federal defense the defendant may raise does not defeat the plaintiff’s claim.” Id.

Further, because the plaintiff’s claim was framed as a request for declaratory relief, the court acknowledged that the parties’ positions were reversed and the court must consider the issue of jurisdiction from the perspective of the defendant’s hypothetical claim. “In other words, this court must look to the face of plaintiff’s well pleaded complaint to determine whether any course of action that SHH might have brought to enforce its rights would necessarily present a federal question.” Id.

Relying on Sixth Circuit case law, the court examined two factors:  “(1) whether the defendants could have sued the plaintiffs for copyright infringement under the theory that they were not the authors or owners of the works in question; and (2) whether such an action would have arisen under federal law.”  Id. at *4. First, the court held that factor 1 did not apply because none of the plaintiff’s allegations accused defendants of asserting a copyright infringement claim. Instead, the court pointed out that plaintiff’s allegations show that “to the extent a dispute existed, it concerned ownership and control of the observation medicine materials that plaintiff created – whether the material that plaintiff created were subject to the intellectual property clause in the plaintiff’s clinical advisory agreement.”  Catherine Puetz, 2015 WL 3935984, at *5.

Second, the court held that factor 2 did not apply because it did not arise under federal law but instead the dispute boiled down to ownership of the copyright based on the employment contract.  “Plaintiff does not allege that SHH authored, or claimed to have authored, the materials.  In fact, Plaintiff’s request for declaratory relief does not request a declaration pertaining to authorship, but instead is limited solely to a declaration that ‘she is the owner of the copyrighted material.’” Id. at *5.

Accordingly, the court held that plaintiff’s complaint lacked subject matter jurisdiction because her declaratory judgment claim for copyright ownership did not arise under the Copyright Act.

 

Everlight Electronics Co., Ltd. v. Nichia Corp., Case No. 12-cv-11758, 2015 WL 3745212 (E.D. Mich. June 15, 2015)

U.S. District Judge Gershwin A. Drain sustained some, and overruled other, Nichia objections to several of Everlight’s theories on inequitable conduct.

First, the court sustained Nichia’s objection to Everlight’s infectious unenforceability allegations.  Everlight’s first amended complaint included allegation of inequitable conduct for the ‘960 patent based on purported inequitable conduct concerning the related ‘925 patent. But the court found that allegation unwarranted and dismissed it from the first amended complaint. Everlight then included its theory of infectious unenforceability in its second amended complaint. Nichia objected to that allegation based on the law of the case doctrine. The court stated that the “law of the case doctrine precludes this court from allowing Everlight to proceed on this theory when it has not alleged any inequitable conduct during the preparation and prosecution of the ‘960 patent.”  Everlight Electronics Co., Ltd. v. Nichia Corp., Case No. 12-cv-11758, 2015 WL 3745212, at *2 (E.D. Mich. June 15, 2015). The court emphasized that it had held that “Everlight’s infectious unenforceability argument lacks merit; ‘even if the ‘925 patent is found to be unenforceable, the ‘960 patent would not be affected.’”  Id.  Accordingly the court sustained Nichia’s objection to Everlight’s infectious unenforceability allegations.

Second, the court overruled Nichia’s objection regarding Everlight’s inequitable conduct theories that were first raised in Everlight’s opposition to Nichia’s motion for summary judgment ˗ well beyond the fact and expert discovery cut-offs for the matter. Everlight argued that the second amended complaint explicitly plead facts regarding those theories. Nichia countered that the paragraphs relied on by Everlight were in “the factual background section of the second amended complaint and not the sections providing actual notice of its allegations concerning materiality and specific intent.” Id. at *3. The court disagreed with Nichia, holding that the allegations in the second amended complaint by Everlight provided Nichia with sufficient notice of Everlight’s inequitable conduct theories.

Third, the court overruled Nichia’s objection regarding Everlight’s allegations concerning inventor test results, which were first disclosed in Everlight’s opposition to Nichia’s motion for summary judgment. Nichia contended that by adding the test results Everlight had altered its argument. Everlight argued that the second amended complaint alleged that the inventors’ failure to disclose the test results further bolstered its claim that the inventors had made a false claim of inventorship. The court, emphasizing that “Rule 9(b) of the Federal Rules of Civil Procedure does not require a party to plead every piece of evidence that supports its claims,” overruled Nichia’s objection. Id. at *4.

Finally, the court sustained Nichia’s objection to inequitable conduct allegations naming Nichia rather than the inventors. The court concluded that “the vague reference to Nichia is improper as the second amended complaint is limited to alleging inequitable conduct against the three named inventors.”  Id.