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Chamberlain Group, Inc. v. Techtronic Industries Co., Ltd.

United States District Court, N.D. Illinois, Eastern Division

March 22, 2017




         Defendants' Motion for Leave to File a Revised First Amended Answer [ECF No. 258] is granted in part and denied in part. Defendants may amend their Answer to include the proposed allegations, counterclaims, and inequitable conduct affirmative defense relating to the '966 patent, except for those charging misrepresentation of '966 patent claims and non-disclosure of the '676 prior art patent. The Court denies as futile Defendants' Motion with respect to the proposed allegations, counterclaims, and affirmative defenses concerning the '275 patent. The Court also denies as futile leave to amend to include the proposed patent misuse affirmative defense.

         I. BACKGROUND

         A. Procedural Background

         Plaintiff Chamberlain Group, Inc. (“Chamberlain”) brought this litigation alleging that certain models of Defendants' Ryobi garage door openers (“GDOs”) infringe claims of two patents it holds on GDO technology: U.S. Patent Nos. 7, 224, 275 (“the '275 patent”) and 7, 635, 966 (“the '966 patent”). The '275 patent recites a GDO featuring a wireless status condition data transmitter that wirelessly relays status condition messages to one or more remote peripherals, such as a smart phone. The '966 patent covers a GDO with a rechargeable, removable battery that can be used to power other electrical equipment physically separate from the GDO.

         Defendants filed their first Answer and Counterclaims on July 5, 2016 [ECF No. 50]. Several months later, Defendants moved for leave to amend [ECF No. 154] based on Chamberlain's alleged failure to disclose to the United States Patent and Trademark Office (the “PTO”) prior art material to the '966 patent. On January 5, 2017, the Court denied Defendants' Motion because their proposed answer failed to allege adequately the materiality of the withheld prior art. (See, ECF No. 242 at 4-5 (citing Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1329-30 (Fed. Cir. 2009)).)

         On January 18, 2017, Defendants again moved for leave to amend [ECF No. 258], this time attaching a more detailed proposed answer and also alleging inequitable conduct in the procurement of the '275 patent. Defendants seek to add affirmative defenses of inequitable conduct, patent misuse, and unclean hands to infringement of both patents. The proffered affirmative defenses derive from Defendants' allegations - fully detailed in their proposed inequitable conduct and antitrust counterclaims - that Chamberlain procured the two patents at issue by withholding material prior art from the PTO during prosecution and, in the case of the '966 patent, materially misrepresenting the scope of certain claims.

         B. Factual Background

         Defendants' proffered Answer and Counterclaims contain the following allegations. Mr. James J. Fitzgibbon (Fitzgibbon”) is an engineer who holds and at all relevant times held the position of “Director of Intellectual Capital” at Chamberlain. His responsibilities include maintaining the company's patent portfolio and working with inventors and patent counsel during prosecution. (ECF No. 258-1 (“Ctrclm.”) ¶ 17, 19.) Once Chamberlain determines to pursue a patent application, Fitzgibbon meets with outside patent counsel to prepare the application. (Id. ¶ 24.) During prosecution, Fitzgibbon reviews office actions and assists outside counsel in responding to them. (Id. ¶ 25.)

         1. Prosecution of the '275 Patent

         Chamberlain filed the '275 patent application on May 29, 2003, the same day that it filed a patent application that issued as U.S. Patent No. 7, 071, 813 (“the '813 patent”). (Ctrclm. ¶¶ 15, 20.) The '813 patent discloses a movable barrier opener that transmits status signals to reflect its own operational states and a corresponding remote control apparatus that receives such signals and effects a variety of user-facilitated control strategies. (Id. ¶¶ 15, 35). On March 28, 2005, the Examiner rejected certain proposed claims of the '813 patent application, finding them anticipated by U.S. Patent No., 388, 559 to Cohen (“Cohen”). Cohen teaches a movable barrier operator that transmits a state signal indicating whether a garage door or lock is opening, open, closing or closed. (¶¶ 16, 61-62.)

         Fitzgibbon is the sole named inventor on both the '275 and '813 patents. (Ctrclm. ¶ 19.) During prosecution of these patents, he reviewed copies of office actions with Chamberlain's outside patent counsel, Fitch, Even, Taben & Flannery (“Fitch Even”), and had access to the prior art references cited therein, including Cohen. Although Fitzgibbon admits that he reviewed Cohen, he failed to disclose it to the Examiner during prosecution of the '275 patent. (Id. ¶¶ 30, 61-62.) Just prior to the rejection of the '813 patent claims over Cohen, on March 16, 2005, the Examiner issued a non-final rejection of the proposed claims of the '275 patent, finding them anticipated and obvious in view of U.S. Patent No. 5, 402, 105 to Doyle, et al. (“Doyle”). (Id. ¶ 34.) In a June 21, 2005 Office Action Response, Fitzgibbon and Fitch Even counsel attempted to overcome the rejection by arguing that Doyle did not transmit status condition signals corresponding to a present operational status condition defined, at least in part, by at least two operating states. (Id. ¶ 34.) They did not disclose Cohen, which the PTO had cited during prosecution of the '813 patent as teaching “automatically wirelessly transmitting a status signal 111 (i.e., state signal).” (Id. ¶¶ 36, 40.)

         2. Prosecution of the '966 Patent

         On behalf of Chamberlain, Mr. Kenneth Samples of Fitch Even filed the '966 patent application. Whereas the named inventor, Mr. Butler, had no involvement in the decision to file the application or in writing the application, Fitzgibbon again played a prominent role both in reviewing Mr. Butler's invention disclosure form and in prosecution. (Ctrclm. ¶¶ 71-72.) Fitzgibbon was also involved in prosecuting Chamberlain's U.S. Patent App. No. 2003/0063715 (“Peplinski”) and U.S. Patent No. 7, 786, 619 (“the '619 patent”), of which he is the named inventor. (Id. ¶ 73.) Fitzgibbon was also aware of a GDO line Chamberlain developed for Sears retail stores (“Craftsman”), which practices the '619 patent and was modified in the course of developing the disclosures for the '966 patent. (Id. ¶ 156.) Defendants allege that Fitzgibbon had knowledge of all four references, whereas the Fitch Even lawyers (Messrs. Samples, Peters, and Levstik) lacked knowledge of Craftsman. (Id. ¶ 159.)

         In a May 11, 2009 Office Action Response, Chamberlain, through Fitzgibbon and attorney Nicholas Peters of Fitch Even, amended the claims of the '966 patent to overcome the Examiner's obviousness rejection over two cited references, U.S. Patent No. 7, 002, 312 to Wojciak (“Wojciak”) in view of U.S. Patent No. 5, 781, 107 to Ji (“Ji”). (They had previously overcome a rejection based on Wojciak in view of U.S. App. No. 2002/0180600 to Kirkland, et al. (“Kirkland”).) They argued that Wojciak does not teach two limitations of claim 1: a rechargeable battery connected through circuitry to provide power to the head unit of a barrier movement operator; and electrically powered equipment other than and physically separable from the barrier movement operator. (Id. ¶ 78.) They further argued that Ji does not disclose that (1) this equipment comprises “an apparatus for receiving the at least one rechargeable battery where the equipment can be powered by the at least one rechargeable battery to perform a predetermined function, ” or (2) “the rechargeable battery is charged by and used by a barrier movement operator.” (Ibid.) (Both of these are limitations of claim 1.) In addition, they represented that claims 9 and 19 of the '966 patent contain limitations similar to that of claim 1 and argued for their patentability over Wojciak and Ji for the same reasons. (Id. ¶¶ 79, 148.) Those claims, in fact, do not require the presence of such electrically powered equipment but instead relate to a rechargeable battery “being removably connectable to” and “configured” to connect to such equipment. (Id. ¶ 148.)

         The Examiner issued a notice of allowance on August 8, 2009, stating that the prior art fails to disclose or suggest the following limitations of claims 1, 9, 15, and 19: “battery charging station in electrical communication with at least one rechargeable battery and in electrical communications with the head unit to supply power”; “barrier movement operable [sic] having head unit”; “circuitry electrically connected to the battery charging station to supply power from the at least rechargeable [sic] battery to the head unit [sic]”; “powered equipment . . . physically separate or separable from the barrier movement operator”; and “perform predetermined function.” (Ctrclm. ¶ 80.)

         In sum, no one involved in prosecuting the '966 patent disclosed Peplinski, which describes a barrier movement operator with a battery backup system, or the '619 patent, which discloses a barrier movement operator with a backup battery system. Similarly, no one disclosed U.S. Patent No. 6, 923, 676 (“the '676 patent”), which was previously cited against the '619 patent as disclosing “a plug allowing the battery to be replaced and the battery could be used with a moveable barrier operator” and other electrically powered equipment. (Ctrclm. ¶¶ 114, 160.) Further, Fitzgibbon did not disclose the Craftsman GDO, which features a battery backup system whose batteries can be interchanged with another GDO to open or close its garage door. Indeed, Chamberlain and its counsel failed to disclose any prior art reference in connection with the '966 patent application. (Id. ¶¶ 67, 74.)


         A plaintiff may amend its complaint “only with the opposing party's written consent or the court's leave.” Fed.R.Civ.P. 15(a)(2). This leave should be “freely given, ” but not “always” or “automatically.” Hukic v. Aurora Loan Servs., 588 F.3d 420, 432 (7th Cir. 2009); see also, Crest Hill Land Dev., LLC v. City of Joliet, 396 F.3d 801, 804 (7th Cir. 2005). District courts have broad discretion to deny leave to amend where there is undue delay, bad faith, dilatory motive, repeated failure to cure deficiencies, undue prejudice to the non-movant, or where amendment would be futile. Hukic, 588 F.3d at 432 (quotation omitted); see also, Independent Trust Corp. v. Stewart Info. Servs. Corp., 665 F.3d 930, 943 (7th Cir. 2012). An amendment is futile if the amended claims could not survive a Rule 12(b)(6) motion to dismiss. See, Arlin-Golf, LLC v. Village of Arlington Heights, 631 F.3d 818, 822-23 (7th Cir. 2011).

         To survive a Rule 12(b)(6) motion, “the complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Independent Trust, 665 F.3d at 934 (internal quotation marks omitted). The issue is not whether the claimant will ultimately prevail but whether it is entitled to offer evidence to support the claims. AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011) (quotation omitted). Indeed, an asserted claim “need not be probable, only plausible: ‘a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.'” Independent Trust, 665 F.3d at 935 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). The plausibility standard, while not akin to a probability requirement, “asks for more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). Where a complaint pleads facts that are merely consistent with liability, it “stops short of the line between possibility and plausibility.” Id. (internal quotation marks omitted).


         A. Inequitable Conduct

         “Patent applicants have a duty to prosecute patent applications in the PTO with candor, good faith, and honesty.” Advanced Magnetic Closures, Inc. v. Rome Fastener Corp., 607 F.3d 817, 829 (Fed. Cir. 2010) (internal quotation marks and alteration omitted); see also, 37 C.F.R. § 1.56(a). Breach of this duty - “including affirmative misrepresentations of material facts, failure to disclose material information, or submission of false material information - coupled with an intent to deceive, constitutes inequitable conduct.” Honeywell Int'l Inc. v. Universal Avionics Sys. Corp., 488 F.3d 982, 999 (Fed. Cir. 2007). An inequitable conduct claim therefore has two elements: “(1) an individual associated with the filing and prosecution of a patent application . . . failed to disclose material information” to the PTO; and “(2) the individual did so with a specific intent to deceive” the PTO. Exergen, 575 F.3d at 1327 n.3. Federal Circuit law governs whether the facts alleged suffice to plead inequitable conduct. Id. at 1318.

         Concerned that inequitable conduct could “devolve into a magic incantation to be asserted against every patentee, ” the Federal Circuit requires that inequitable conduct be pleaded with particularity under Rule 9(b). Exergen, 575 F.3d at 1326-27, 1331. “A pleading that simply avers the substantive elements of inequitable conduct, without setting forth the particularized factual bases for the allegation, does not satisfy Rule 9(b).” Id. at 1326-27. Support for an inequitable conduct claim requires “[a] reasonable inference . . . that is plausible and that flows logically from the facts alleged.” Id. at 1329 n.5. Chamberlain first contends that Defendants' motion is untimely. More substantively, Chamberlain argues that Defendants fail to plead both the materiality and intent elements of the inequitable conduct counterclaims.

         1. Timeliness

         Defendants first sought leave to amend the Answer on October 31, 2016. Although the allegations in Defendants' new proposed Answer with respect to the '966 patent are largely consistent with their prior Motion, Defendants have added an entirely new inequitable conduct counterclaim based on the '275 patent. Defendants claim that, in light of the December 2016 deposition of James Fitzgibbon, they injected the '275 patent inequitable conduct counterclaim and the corresponding affirmative defenses. (ECF No. 258 (“Defs.' Mot.”) at 2.) Chamberlain argues that both counterclaims are untimely and unduly prejudicial.

         The Court sees no reason to dismiss the inequitable conduct counterclaims for untimeliness. First, a discovery cutoff has not yet been imposed, and the fact that Markman briefing (typically an arduous enterprise) is already complete only lessens the opportunity cost of additional discovery on inequitable conduct issues. Second, in seeking leave to amend, Defendants have not spurned a court-imposed deadline. Indeed, Defendants' Federal Circuit appeal largely mooted the Court's original scheduling order, and the Court postponed Markman activities and the trial date as a result. (See, ECF No. 217.)

         The result is no different simply because Defendants have already sought and been denied leave to amend the Answer to add '966 patent inequitable conduct allegations. The Court did not engage the untimeliness arguments advanced there because, without more, Defendants' knowledge of the prosecuting attorneys' identities and prior art references a few months before moving to amend does not clearly amount to undue delay. Cf., e.g., Continental Bank, N.A. v. Meyer,10 F.3d 1293, 1297-98 (7th Cir. 1993) (upholding denial of motion to amend when the defendant was in possession of facts on which the proposed amendment was based for more than two years); Collaboration Properties, Inc. v. Tandberg ASA, No. 05 C 1940, at *2 (N.D. Cal. Jan. 25, 2007) (rejecting an untimeliness argument where the defendant possessed “nearly all of the evidence it now cites in support of its proposed inequitable conduct defense for more than a year”); Inline Connection Corp. v. AOL Time Warner Inc.,237 F.R.D. 361 (D. Del. 2006) (denying leave to amend where the defendants ...

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