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Microthin.com, Inc. v. Siliconezone USA

November 14, 2006

MICROTHIN.COM, INC., PLAINTIFF, COUNTER-DEFENDANT,
v.
SILICONEZONE USA, LLC DEFENDANT, COUNTER-PLAINTIFF,
v.
DANIEL O'MALLEY, COUNTER-DEFENDANT.



The opinion of the court was delivered by: Honorable Virginia M. Kendall

MEMORANDUM OPINION AND ORDER

Plaintiff, Microthin.com, Inc. ("Plaintiff"), filed a complaint against Siliconezone USA, LLC ("Defendant"), for patent infringement under 35 U.S.C. § 271 et seq. In response, Defendant filed six affirmative defenses and five counterclaims.*fn1 This opinion addresses four separate motions. First, Plaintiff moves to dismiss Defendant's Amended Second, Third, Fourth and Fifth Counterclaims pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(1) and 12(b)(6). Second, Counter-Defendant Daniel O'Malley ("O'Malley") moves to dismiss the two counterclaims implicating him, the Second and Fifth Counterclaims, pursuant to Rule 12(b)(1) and Rule 21. Third, Plaintiff moves to dismiss Defendant's Amended First Counterclaim, or in the alternative for a more definite statement of the claim pursuant to Rule 12(e). Fourth, Plaintiff moves pursuant to Rule 12(f) to strike Defendant's Amended Fourth, Fifth and Sixth Affirmative Defenses.

Because Defendant's Second, Third, Fourth and Fifth Counterclaims do not derive from a common nucleus of operative fact with respect to Plaintiff's patent infringement claim but do state an independent basis for jurisdiction, Plaintiff's Motion to Dismiss and O'Malley's Motion to Dismiss are denied with respect to Rule 12(b)(1), and granted in part and denied in part with respect to Rule 12(b)(6). Plaintiff's Motion to Dismiss Defendant's First Amended Counterclaim under Rule 12(b)(6), or in the alternative require a more definite statement under Rule 12(e), is denied because Defendant alleges sufficient facts to state a claim upon which relief can be granted and to which Plaintiff can reasonably frame a response. Lastly, Plaintiff's Motion to Strike Defendant's amended Fourth, Fifth and Sixth Affirmative Defenses is denied as to the Fourth and Fifth defenses because Defendant sufficiently pleaded these defenses, and granted without prejudice as to the Sixth defense.

FACTS

The following facts are taken from Plaintiff's Amended Complaint and Defendant's Amended Counterclaim and are common to all four motions. Plaintiff obtained two patents for a "Non-Slip Mat or Pad," numbers 5,942,311 ("311") and 5,977,995 ("995"), entitled (Compl. ¶ 1, ¶ 8-9.) Patent 311 issued on August 24, 1999; patent 995 issued December 7, 1999. (Compl. ¶¶ 8-9). Specifically, Plaintiff alleges that Defendant's "Kitchenzone" cutting boards infringe upon Plaintiff's 311 and 995 patents, and that Defendant has been marketing and selling, and continues to market and sell, the infringing products (Id. ¶ 11.)

In response, Defendant filed six affirmative defenses: (i) that Defendant's cutting boards do not infringe upon Plaintiff's patents; (ii) that Plaintiff's patents are unenforceable and invalid; (iii) that Plaintiff suffered no damages; (iv) that Plaintiff's conduct was inequitable; (v) that Plaintiff has unclean hands; and (vi) that the doctrines of laches, waiver, and estoppel bar Plaintiff's claim. Additionally, Defendant advanced five counterclaims: (i) declaration of invalidity and/or unenforceability; (ii) assault and battery; (iii) trespassing; (iv) breach of contract; and (v) interference with prospective advantages.

The events that transpired at the International Home and Housewares Show (the "Show"), which took place in Illinois in March 2006, form the basis of Defendant's counterclaims now at issue. Both Defendant and Plaintiff operated vendor booths at the Show. (Am. Answer Countercl. ¶ 32.) Defendant alleges that it attended the Show to meet retailers and potential buyers. (Id. ¶ 26-29.) The Show rules prohibit unauthorized entry into vendor booths and "prohibit vendors from interfering with or disrupting another vendor's personal or legitimate activities." (Id. ¶ 31.) Defendant claims that Plaintiff's employees "were surreptitiously going into [Defendant's] booth throughout the Show, in violation of the Show's rules, and handling and inspecting [Defendant's] products, including new and prototype products" without Defendant's permission. (Id. ¶¶ 35-36.) Defendant alleges that at least two of Plaintiff's employees entered Defendant's booth and made comments "about [Defendant's] alleged 'rip off' of [Plaintiff's] patent rights, in front of potential buyers." (Id. ¶ 37.)

In response to Plaintiff's actions, Defendant's president, Michael Karyo ("Karyo"), and Defendant's vice president of sales, Larry Cornick ("Cornick") attempted to speak with Plaintiff and "resolve the problem cordially." (Id. ¶ 40.) Cornick approached Plaintiff's booth first where he asked to speak with O'Malley. O'Malley is Plaintiff's founder, executive vice-president, corporate secretary and principle shareholder. O'Malley shook Cornick's hand with excessive force and told him to cease infringing on Plaintiff's patents. (Id. ¶¶ 45-47.) Subsequently, Karyo approached Plaintiff's booth and requested to speak with O'Malley, who emerged from the booth "bumping into Karyo's chest and knocking him backward." (Id. ¶¶ 50-51.) O'Malley responded to Karyo's inquiries "by yelling 'You're ripping us off! You're ripping off our patents.'" (Id. ¶ 57.) Karyo responded by giving O'Malley his attorney's contact information and requesting that O'Malley direct his legal issues to Defendant's attorney. O'Malley continued to yell at Karyo as he walked away from Plaintiff's booth; Defendant contends that following this encounter, Plaintiff's employees continued to enter Defendant's booth in violation of the show rules. (Id. ¶¶ 62-65.) Defendant alleges that it lost potential future business that it would have obtained at the Show because of Plaintiff's and O'Malley's "interference and confrontation." (Id. ¶ 69.)

DISCUSSION

I. Motion to Dismiss Amended Second, Third, Fourth and Fifth Counterclaims

Plaintiff alleges that Defendant's Amended Second, Third, Fourth and Fifth Counterclaims should be dismissed pursuant to Rule 12(b)(6) and Rule 12(b)(1). Plaintiff challenges both the sufficiency of pleading and the Court's subject matter jurisdiction over the Counterclaims. FED. R. CIV. P. 12(b)(1), 12 (b)(6). When examining Rule 12(b)(6) and Rule 12(b)(1) motions to dismiss, "the district court must accept as true all well-pleaded factual allegations and draw reasonable inferences in favor of the plaintiff." Capitol Leasing Co. v. Fed. Deposit Ins. Corp., 999 F.2d 188, 191 (7th Cir. 1993) (giving the standard of review for Rule 12(b)(1) motions); see also Royal Towing, Inc. v. City of Harvey, 350 F. Supp.2d 750, 752 (N.D. Ill. 2004) (when challenging the facial sufficiency of a complaint, dismissal via Rule 12(b)(1) motion "mirrors the standard applied for 12(b)(6)").

Because the Motion to Dismiss questions subject matter jurisdiction, subject matter jurisdiction must be addressed first. See Cook v. Winfrey, 141 F.3d 322, 324 (7th Cir. 1998) (stating "[i]t is axiomatic that a federal court must assure itself that it possesses jurisdiction over the subject matter of an action before it can proceed to take any action respecting the merits of the action"); Angsten v. Blameuser, 2005 WL 3095513, * 2 (N.D. Ill. Nov. 16, 2005) (commenting that subject matter jurisdiction is the first consideration in every case). Once a court determines that it has jurisdiction over claims, it may then proceed to test the sufficiency of the claim's pleadings pursuant to Rule 12(b)(6). Id.

This Court exercises original jurisdiction over Plaintiff's allegations because they arise under federal patent law. 28 U.S.C. § 1331, § 1338. However, Defendant's Second, Third, Fourth and Fifth Counterclaims arise under Illinois law. Therefore, the issue of whether the Court has jurisdiction over these Counterclaims hinges upon whether supplemental jurisdiction is proper under 28 U.S.C. §1367. If it does not, then the Court must decide first whether Defendant has an alternate basis for federal jurisdiction, and if so, whether the Court will permit the state law claims to remain.

A. Supplemental Jurisdiction Under § 1367: Common Nucleus of Operative Fact

Defendant's Second, Third, Fourth and Fifth Counterclaims do not fall within the supplemental jurisdiction of the Court. Congress codified supplemental jurisdiction at 28 U.S.C. §1367, which states "in any civil action which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III." 28 U.S.C. § 1367(a). In order for state claims to be within the court's supplemental jurisdiction, "[t]he state and federal claims must derive from a common nucleus of operative fact." United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 725 (1966) (stating that a plaintiff's claims must be "such that he would ordinarily be expected to try them all in one judicial proceeding").

Courts examine the underlying operative facts of the federal and state claims to determine whether they share common factual connections. See Eager v. Commonwealth Edison Co., 187 F. Supp. 2d 1033, 1040 (N.D. Ill. 2002). Although "[a] loose factual connection" is usually enough to satisfy the requirements of supplemental jurisdiction, "the facts at issue must be both 'common' and 'operative.'" Angsten, 2005 WL 3095513, at * 3, see also G.M. Harston Const. v. City of Chi., 2006 WL 642641, * 2 (N.D. Ill. March 3, 2006) (discussing procedure for analyzing supplemental jurisdiction). Generally, it is insufficient that the state and federal claims share a factual background. Berg v. BCS Fin. Corp., 372 F. Supp. 2d 1080, 1093 (N.D. Ill. 2005). Stated alternatively, courts look to whether the state claims can be resolved or dismissed without affecting the federal claims. Eager,187 F. Supp. 2d at 1040.

A comparison of the operative facts required for the federal and state claims in this case reveals that these claims do not arise out of a common nucleus of operative facts. Plaintiff's Complaint confers original jurisdiction on this Court through 28 U.S.C. § 1331 and 28 U.S.C. § 1338. See 28 U.S.C. § 1331 (giving district courts jurisdiction over all claims arising under the laws of the United States); 28 U.S.C. § 1338 (conferring jurisdiction to district courts over any civil action arising under federal patent law); (Compl. ¶ 6); see also Holmes Group, Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S. 826, 830 (2002) (stating that "linguistic consistency" requires the application of the same test to determine whether a case arises under § 1338(a) and § 1331). Direct patent infringement "consists of making, using, offering to sell or selling the invention defined by claims of the patents." Kenall Mfg. Co. v. Genlyte Thomas Group LLC, 439 F. Supp. 2d 854, 864-65 (N.D. Ill. 2006) citing Hoechst-Roussel Pharm., Inc. v. Lehman, 109 F.3d 756, 759 (Fed. Cir. 1997). Plaintiff alleges that Defendant willfully infringed upon Plaintiff's 311 and 995 patent's by manufacturing, importing, offering for sale, selling, and promoting "Kitchenzone" cutting boards. (Compl.¶ 12).

By contrast, the operative facts supporting Defendant's counterclaims revolve around torts committed at the Show and only the Show. While the two competing products were allegedly marketed at the show, the tortious actions between the employees of the two companies have no impact on whether or not Defendant's product infringes on Plaintiff's patented product. In other words, the resolution of the patent infringement claim will have no effect on the resolution of the state law claims. See General Auto Service Station v. City of Chi., 2004 WL 442636, * 12 (N.D. Ill. March 9, 2004) (finding no supplemental jurisdiction because resolution of the federal claim would have no effect on the state claim). Though the operative facts of the counterclaims may have transpired because the parties were emotional about the patent dispute, the operative facts of the patent dispute and the Show disputes are not common enough to support the extension of supplemental jurisdiction. See Am. Dev., Inc. v. Int'l Union of Operating Eng'r, 1998 WL 246455, *3 (N.D. Ill. Apr. 29, 1998) (holding that supplemental jurisdiction "requires a more rigorous factual connection than a claim that events roughly transpired over the same ...


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