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Co-Star Realty Information, Inc v. Civix-Ddi

May 15, 2013

CO-STAR REALTY INFORMATION, INC., PLAINTIFF,
v.
CIVIX-DDI, LLC, DEFENDANT.
CIVIX-DDI, LLC, PLAINTIFF,
v.
LOOPNET, INC., DEFENDANT.
CIVIX-DDI, LLC, PLAINTIFF,
v.
LOOPNET, INC., DEFENDANT.



The opinion of the court was delivered by: James F. Holderman, Chief Judge:

MEMORANDUM ORDER AND OPINION

These three consolidated patent cases involve allegations of patent infringement by patent holder CIVIX-DDI, LLC ("CIVIX") against CoStar Realty Information, Inc. ("CoStar") and LoopNet, Inc. ("LoopNet"). In 12 C 4968, CIVIX alleges that CoStar has infringed three of its patents, U.S. Patent No. 6,385,622 ("the '622 Patent"), U.S. Patent No. 6,415,291 ("the '291 Patent"), and 8,296,335 ("the '335 Patent"). (Dkt. No. 108 ("CIVIX's Countercl.").) CoStar alleges that the '622 Patent, the '291 Patent, and the '335 Patent are all unenforceable because of inequitable conduct. (Dkt. No. 99 ("CoStar's Third Am. Compl.").) Similarly, in 12 C 8632, CIVIX alleges that LoopNet infringed the '335 Patent. (12 C 8632, Dkt. No. 1 ("CIVIX's Compl.").) In response, LoopNet alleges that the '335 Patent is unenforceable because of inequitable conduct. (12 C 8632, Dkt. No. 71 ("Loopnet's Second Am. Countercl.").)

CIVIX has now moved to dismiss both CoStar's (Dkt. No. 109) and LoopNet's (Dkt. No. 112) allegations that its patents are unenforceable. CIVIX's motion to dismiss against LoopNet also seeks to strike LoopNet's Sixth Affirmative Defense, which also alleges inequitable conduct. (Dkt. No. 112.) Because the allegations of inequitable conduct are substantively identical in each case, the court will address the two motions to dismiss together. For the reasons explained below, CIVIX's motions to dismiss are each granted in part and denied in part.

FACTUAL BACKGROUND

CIVIX is the owner of the '622 and '291 Patents, both of which claim methods to locate points of interest in a particular geographical region by accessing a database from a remote location, and of the '335 Patent, which claims methods for using the Internet to provide a user of such a database advertising information related to the requested geographic region or item of interest. (See Dkt. No. 99, Exs. A, B, & F.)

CoStar's allegations regarding inequitable conduct are substantively identical to LoopNet's allegations regarding inequitable conduct.*fn1 For ease of reference, the following factual summary refers only to CoStar's Third Amended Complaint (Dkt. No. 99), the allegations of which the court accepts as true for purposes of these motions to dismiss.*fn2

I. Alleged Inequitable Conduct in Prosecution of '622 and '291 Patents

Both the '622 and '291 Patents were filed on March 23, 2001, as continuations of United States Patent Nos. 5,682,525 ("the '525 Patent") and 6,408,307 ("the '307 Patent). (CoStar's Third Am. Compl. ¶ 68; see also id. Exs. A-B.) The '622 Patent issued on May 7, 2002 (Id. Ex. A), and the '291 Patent issued on July 2, 2002 (Id. Ex. B). The inventors of the '622 Patent and the '291 Patent are W. Lincoln Bouve, William T. Semple, and Steven W. Oxman.

CoStar alleges that the prosecution histories for the '622 and '291 Patents indicate that CIVIX failed to inform the PTO of certain prior proceedings involving the '525 and '307 Patents. The proceedings that CoStar alleges were omitted include a lawsuit against Navigation Technologies Corporation ("NavTech") in the Northern District of Illinois for infringement of the '525 Patent (Id. ¶ 69), an interference application filed by NavTech before the PTO seeking to be declared the first inventor of the technology claimed in the '525 Patent (Id. ¶ 70), and a lawsuit against Microsoft Corp. in the District of Colorado*fn3 for infringement of the '525 Patent (Id. ¶¶ 73-74). CoStar alleges, in particular, that CIVIX failed to disclose to the PTO that the court in the Microsoft litigation construed terms in the '525 Patent that are also in the '622 and '291 Patents, and granted summary judgment of non-infringement of the '525 Patent. (Id. ¶ 74.) CoStar alleges that CIVIX had the "specific intent" to deceive the PTO by failing to disclose the above information. (Id. ¶¶ 72, 77.)

On November 5, 1999, Microsoft moved for summary judgment that the '525 Patent was invalid in the Microsoft litigation on the basis of three prior art references. (Id. ¶ 78.) At the time, CIVIX's application for the '307 Patent was pending.*fn4 CIVIX's '307 Patent application included three prior Information Disclosure Statements ("IDSs"), but none of those three IDSs included any of the prior art that Microsoft contended invalidated the '525 Patent. (Id. ¶¶ 78-79.) Fifteen months after Microsoft's motion for summary judgment of invalidity, CIVIX filed a fourth IDS as part of its application for the '307 Patent. (Id. ¶ 80.) The fourth IDS referred to the prior art on which Microsoft relied, but did so in the middle of "a mountain of material," including 244 patents, 64 patent applications, and 290 non-patent references. (Id.) The PTO requested that CIVIX identify the most relevant material among those references, but CIVIX failed to identify the three references on which Microsoft relied in its invalidity argument. (Id. ¶¶ 81-82.)

The IDS CIVIX submitted on January 17, 2002, as part of its prosecution of the '291 Patent included approximately 600 references. (Id. ¶ 85.) CIVIX did not, however, submit an IDS as part of its prosecution of the '622 Patent. (Id. ¶ 86.) CoStar alleges that CIVIX's decisions to submit an excessive number of references and not to submit any IDS, respectively, were driven by the specific intent to deceive and mislead the PTO. (Id. ¶ 87.)

CoStar alleges that CIVIX's deceit continued during the reexaminations of the '622 and '291 Patents. During those processes, on January 21, 2009, CIVIX submitted a declaration signed by Bouve and Semple "describ[ing] the circumstances surrounding the claimed invention so as to establish a priority date that antedates a dispositive prior art reference" (the "Bouve Declaration"). (Id. ¶ 89.) Prior to submitting the Bouve declaration, however, Bouve had suffered at least two strokes, had substantial memory loss, and had difficulty speaking intelligibly. (Id. ¶ 91.) Although CIVIX's counsel were aware of Bouve's condition because they had previously stated that he was unfit for depositions because of his health problems, the Bouve Declaration did not disclose Bouve's health issues. (Id. ¶¶ 91-92.) Moreover, despite other counsel bringing the matter to its attention, CIVIX never informed the PTO of the unreliability of the Bouve Declaration. (Id. ¶¶ 93-94.) Nonetheless, CIVIX submitted a supplemental declaration by Semple, attesting to essentially the same facts as the Bouve Declaration, on May 8, 2009. (Id. ¶ 96.) CoStar alleges that CIVIX had the specific intent to deceive the PTO by failing to disclose Bouve's health issues, that CIVIX concealed its wrongdoing by submitting a later declaration without Bouve's signature, and that the PTO would have found the information important in deciding whether the '622 and '291 Patents survived reexamination. (Id. ¶¶ 95, 97.)

On January 21, 2009, Semple submitted another declaration on behalf of CIVIX as part of the reexamination proceedings for the '622 and '291 Patents explaining his understanding that the terms "Internet" and "internet" had the same meaning at the time of the invention. (Id. ¶¶ 98-99.)

That declaration contradicted CIVIX's position during claim construction of the '622 and '291 Patents in other litigation, during which CIVIX had argued that there were differences between the two terms. (Id.¶¶ 100-04.) CoStar alleges that CIVIX had the specific intent to deceive the PTO when it submitted Semple's declaration contradicting CIVIX's litigation position, and failed to disclose the inconsistency. (Id. ¶ 105.)

II. Alleged Inequitable Conduct in Prosecution of '335 Patent

The '335 Patent is a continuation of the '291 Patent. (Id. ¶ 107.) CoStar alleges that the '335 Patent is "not sufficiently distinct" from the '291 Patent to avoid unenforceability because of the '291 Patent's unenforceability. (Id.) CoStar also alleges several other reasons for the '335 Patent's enforceability. First, CoStar alleges that CIVIX submitted three IDSs during prosecution of the '335 Patent that included an excessive number of documents. (Id. ¶ 109 (31-page IDS including 245 U.S. patents, 63 foreign documents, and 270 non-patent documents); id. ¶ 112 (IDS listing 36 U.S. patents and 109 non-patent documents); id. ¶ 113 (50-page IDS listing more than 580 U.S. patents and non-patent documents). In response, the patent examiner asked CIVIX to identify relevant references and highlight relevant sections within those references. (Id. ¶¶ 110-11, 114.) CIVIX attempted to comply by designating 120 documents that "may be relevant with respect to advertising," but the examiner found that designation insufficient. (Id. ¶¶ 115-17.)

CIVIX then submitted a declaration by Semple identifying just 34 of the disclosed references. (Id. ¶ 118.) CoStar alleges that the list of 34 references failed to identify other references from the IDSs that were relevant to the asserted claims of the '335 Patent, which relates to "advertising over the Internet." (Id. ¶¶ 119, 126.)*fn5 In addition, the 34 references were allegedly "cherry-picked" to include only references to the Internet that post-dated CIVIX's purported conception date, so that CIVIX could "swear behind" those references if the examiner used them to support the obviousness of the use of the Internet. (Id. ¶ 121.)*fn6

CoStar alleges that although CIVIX knew that the omitted references were relevant, and that the obviousness of the Internet was important to the examiner, CIVIX omitted the references with an intent to deceive the PTO. (Id. ¶¶ 122-24, 127, 131.) In particular, the Third Amended Complaint alleges that CIVIX argued to the PTO that none of the cited references suggested use of the Internet (Id. ¶ 127), indicating that it knew of the materiality of the Internet references.

Finally, CoStar alleges that during prosecution of the '335 Patent CIVIX alternately argued that the terms "Internet" and "internet" were similar and that they were different, depending on the situation. (Id. ¶¶ 132-37.)

ANALYSIS

Under the Federal Rules of Civil Procedure, a complaint need contain only "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The complaint must "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Although "detailed factual allegations" are not required, "labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. The complaint must "contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at ...


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