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AVERY DENNISON CORP v. CONTINENTAL DATALABEL

November 30, 2010

AVERY DENNISON CORP., PLAINTIFF,
v.
CONTINENTAL DATALABEL, INC., DEFENDANT.



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge:

MEMORANDUM OPINION AND ORDER

Avery Dennison Corp. has sued Continental Datalabel, Inc., claiming that Continental infringed a patent owned by Avery. Continental has asserted a five-count counterclaim against Avery. Avery has moved to dismiss counts 3, 4, and 5. For the reasons set forth below, the Court grants Avery's motion.

Background

Avery*fn1 is a Delaware corporation with its principal place of business in Pasadena, California. Pl.'s Compl. ¶ 4. It produces and sells pressure-sensitive adhesive labels and other office products. Id. Avery is also the assignee of U.S. Patent No. 7,709,071 ("the '071 patent"), entitled "Label Sheet Design for Easy Removal of Labels." Id. ¶ 7. According to its abstract, the '071 patent describes "[a] label sheet having a release liner and a column of labels releasably attached thereto," such that "a user can tear off the liner . . . thus leaving a minor edge of a column of labels exposed for easy removal from the label sheet." Def.'s Mem., Ex. E at 1 (internal citations omitted).

The '071 patent was issued based on Application 10/504,600 ("the application"), originally filed with the United States Patent and Trademark Office ("PTO") on February 28, 2003. Id. During the prosecution of the Application, Avery submitted an information disclosure statement ("IDS") identifying certain prior art references, including U.S. Patent Nos. 3,038,597 and 3,588,829 ("Brady '597" and "Brady '829" respectively, but collectively the "Brady references"). Pl.'s Mem., Ex. 2. The patent examiner assigned to the application at the time was Nasser Ahmad. Id. at 1. He initialed these references on the IDS on June 21, 2007, indicating that he had considered them. Id. at 1-2.

In a final office action dated May 5, 2009, the PTO rejected certain claims in the application, relying on PCT International Publication No. WO 01/89825 ("the Do publication") and U.S. Patent Nos. 2,765,205 and 3,480,198 (the "Capella patent" and the "Repko patent" respectively). See Def.'s Mem., Ex. B at 18. On January 12, 2010, Avery filed an interview response and amendment ("the amendment") in reply to the final office action. Id. at 1-18. By this time, the PTO had reassigned the application to examiner Victor S. Chang. See id. at 1. The amendment canceled all previous claims in the application and presented thirty-four new claims. Id. at 8-17. The amendment contained a section ("the bullet points") distinguishing the new claims from the Do publication and the Capella and Repko patents. Id. at 2-4.

On May 4, 2010, the PTO issued the '071 patent. That same day, Avery filed the present action. Continental filed its answer and counterclaim on June 25, 2010.

Discussion

In considering Avery's motion to dismiss under Rule 12(b)(6), the Court accepts the facts stated in the counterclaims as true and draw all reasonable inferences in favor of Continental. Parish v. City of Elkhart, 614 F.3d 677, 679 (7th Cir. 2010). Though a complaint need not contain "detailed factual allegations, . . . a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Rather, the complaint must contain "enough facts to state a claim to relief that is plausible on its face." Id. at 570. A complaint fails to state a claim under Rule 8(a)(2) "where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct[.]" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009).

1. Inequitable conduct claim

In count 3, Continental alleges that the '071 patent is unenforceable because Avery engaged in inequitable conduct before the PTO during the prosecution of the Application.

The Federal Circuit has held that "a patent may be rendered unenforceable for inequitable conduct if an applicant, with intent to mislead or deceive the examiner, fails to disclose material information or submits materially false information to the PTO during prosecution." Dippin' Dots, Inc. v. Mosey, 476 F.3d 1337, 1345 (Fed. Cir. 2007) (internal citation and quotation marks omitted). "Information is 'material' when there is a substantial likelihood that a reasonable examiner would have considered the information important in deciding whether to allow the application to issue as a patent." Molins PLC v. Textron, Inc., 48 F.3d 1172, 1179 (Fed. Cir. 1995).

In count 3, Continental alleges two bases for concluding that Avery engaged in inequitable conduct. The first involves allegedly misleading statements in the bullet points, while the second involves an omission ...


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