Data Scape Limited v. Dell Technologies, Inc. et al

Western District of Texas, txwd-6:2019-cv-00129

MOTION to Dismiss Inequitable Conduct Counterclaim and Strike Inequitable Conduct Affirmative Defense by Data Scape Limited.

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6 UNITED STATES DISTRICT COURT IN THE WESTERN DISTRICT OF TEXAS WACO DIVISION DATA SCAPE LIMITED, C.A. No. 6:19-cv-00129-ADA Plaintiff, v. JURY TRIAL DEMANDED DELL TECHNOLOGIES INC., DELL INC., and EMC CORPORATION, Defendants. PLAINTIFF DATA SCAPE LIMITED'S MOTION TO DISMISS INEQUITABLE CONDUCT COUNTERCLAIM AND STRIKE INEQUITABLE CONDUCT AFFIRMATIVE DEFENSE 6 Table of Contents I. INTRODUCTION .......................................................................................1 II. FACTUAL BACKGROUND ......................................................................2 A. Oblon, McClelland, Maier & Neustadt, L.L.P. Prosecutes and Obtains the '893 Patent on Sony's Behalf .......................................3 B. Data Scape Acquires the '681 Application Shortly Before Notice of Allowance ....................................................................................4 C. Data Scape Files the Morohashi Continuation.................................4 III. LEGAL STANDARD ..................................................................................5 IV. ARGUMENT ...............................................................................................6 A. Dell's Nonspecific References to Alleged Wrongdoers and Prior Art References Fail the Exergen Requirements ...............................6 B. Dell Insufficiently Alleges Mr. Kramer's Knowledge of, Duty to Disclose, and Specific Intent to Conceal the '537 Patent and the Bharat Reference ..............................................................................7 C. Dell Insufficiently Alleges Materiality of the '537 Patent and the Bharat Reference ..............................................................................9 V. CONCLUSION ..........................................................................................10 i 6 Table of Authorities Cases 1st Media, LLC v. Electronic Arts, Inc., 694 F.3d 1367 (Fed. Cir. 2012)............................................................................... 8 Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) ............................................................................................ 5 Audionics Sys., Inc. v. AAMP of Fla., Inc., No. CV1210763MMMJEMX, 2015 WL 12712288 (C.D. Cal. July 10, 2015) ..... 3 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ................................................................................................ 5 Cabin Foods, LLC v. Rich Prod. Corp., No. EP-11-CV-318-KC, 2012 WL 433115 (W.D. Tex. Feb. 8, 2012) ............. 5, 10 Delano Farms Co. v. Cal. Table Grape Comm'n, 655 F.3d 1337 (Fed. Cir. 2011)............................................................................... 5 Eagle View Techs., Inc. v. Xactware Sols., Inc., 325 F.R.D. 90 (D.N.J. 2018) ................................................................................... 3 Eon Corp. IP Holdings, LLC v. T-Mobile USA, Inc., No. 6:10-CV-379-LED-JDL, 2011 WL 13134896 (E.D. Tex. Dec. 13, 2011) ................................................................................. 9, 10 Ericsson Inc. v. TCL Commc'n Tech. Holdings, Ltd., 161 F. Supp. 3d 438 (E.D. Tex. 2015) .................................................................... 3 Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009)................................................................. 2, 5, 6, 10 Gen. Elec. Co. v. Mitsubishi Heavy Indus., Ltd., No. 3:10-CV-276-F, 2011 WL 13201876 (N.D. Tex. Mar. 3, 2011) ..................... 9 Summit 6 LLC v. Research in Motion Corp., No. 3:11-CV-367-O, 2013 WL 12124321 (N.D. Tex. June 26, 2013) ................... 8 Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011)............................................................................... 5 Yeti Coolers, LLC v. Rtic Coolers, LLC, No. 1:15-CV-00597-RP, 2016 WL 5956081 (W.D. Tex. Aug. 1, 2016) ............... 6 Statutes 37 C.F.R. § 1.56(c).............................................................................................................. 9 ii 6 Rules Fed. R. Civ. P. 12(b)(6)....................................................................................................... 5 Fed. R. Civ. P. 9(b) ............................................................................................................. 5 iii 6 I. INTRODUCTION Defendants Dell Technologies Inc., Dell Inc., and EMC Corporation (collectively, "Dell") raise an affirmative defense and assert a declaratory judgment counterclaim that all claims of U.S. Patent No. 9,715,893 ("the '893 patent") are unenforceable for alleged inequitable conduct. Dell claims—with no evidence whatsoever—that Terry W. Kramer, the patent lawyer who made the issue payment for the '893 patent but was otherwise totally uninvolved in its prosecution, intentionally lied to the U.S. Patent Office by withholding material prior art. According to Dell, Mr. Kramer "knew" of certain prior art referenced in the prosecution of a separate and unrelated patent family (the "Morohashi family") because "Kramer and his colleagues" filed a continuation in the Morohashi family soon after the allowance date of the '893 patent. As Dell's obfuscatory verbiage suggests, the relevant (and judicially noticeable) prosecution histories tell a different story. In reality, the Morohashi continuation was prepared and signed by Eric J. Nuss, and filed by a legal assistant, Wendy Spradlin, using Mr. Kramer's PTO filing account. Nonetheless, from these facts, Dell demands the Court to infer that Mr. Kramer personally knew that the Morohashi family, and prior art referenced during the prosecution thereof, was "material" to the issuance of the '893 patent. Dell charges Mr. Kramer with specific intent to deceive the PTO through his alleged failure to disclose that art, even though a different law firm—Oblon, McClelland, Maier & Neustadt, L.L.P.—was solely responsible for the substantive elements prosecution of the '893 patent. Spurious allegations of professional misconduct against a fellow member of the bar have no place in patent litigation. Accordingly, a claim or defense of inequitable conduct 1 6 must not only be plead with the particularity required under Federal Rule of Civil Procedure 9(b), it must be supported by factual allegations concerning a specific individual about whom the Court can make a "reasonable inference of scienter, including both (1) knowledge of the withheld material information or of the falsity of the material misrepresentation, and (2) specific intent to deceive the PTO." Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1327–28 (Fed. Cir. 2009) . Dell's allegations concerning Mr. Kramer fall short of the high bar set by the Federal Circuit in Exergen. Therefore, its inequitable conduct counterclaim should be dismissed, and its related affirmative defense should similarly be stricken. II. FACTUAL BACKGROUND Data Scape claims that Dell's products and services infringe certain patents that it owns by assignment. See generally Dkt. 1. At issue in Dell's inequitable conduct counterclaim and defense are (1) the '893 patent to Hirano, which is one of the four patents asserted in this case, and (2) U.S. Patent Nos. 7,617,537 ("the '537 patent"); 7,720,929; and 8,386,581 (the "Morohashi family"), which together comprise the three other patents asserted by Data Scape. Dell's inequitable conduct claim revolves around alleged unethical omissions by patent prosecutors involved with the '893 patent—specifically Terry W. Kramer, a member of the Patent Bar and partner at the Kramer Amado law firm based in Alexandria, Virginia. See Declaration of Paul A. Kroeger ("Kroeger Declaration"), Ex. A1; Dkt. 35, ¶ 98 (Dell specifically identifying Mr. Kramer as alleged wrongdoer). Dell alleges that the Morohashi family patents are material prior art to the '893 patent, as are the "corresponding prior art 1Citations to exhibits herein refer to the exhibits attached to the concurrently-filed Kroeger Declaration. 2 6 [references]" discussed in the prosecution of the '537 patent. See Dkt. 35, ¶¶ 94–98. Dell further alleges that Mr. Kramer "knew of the Morohashi patent family and their respective file histories" during the "prosecution of at least the '893 patent while it was pending," and that he "never disclosed either the Morohashi patent family or corresponding prior art." Id. ¶ 98. Dell's claim flows directly from what is—and what is not—in the file and assignment histories of Data Scape's patents. Those documents are judicially noticeable texts appropriate for consideration here. See, e.g., Ericsson Inc. v. TCL Commc'n Tech. Holdings, Ltd., 161 F. Supp. 3d 438, 452 n. 6 (E.D. Tex. 2015) (taking judicial notice of file history in claim construction order); Eagle View Techs., Inc. v. Xactware Sols., Inc., 325 F.R.D. 90, 97 (D.N.J. 2018) (taking judicial notice of "electronic prosecution histories" and dismissing inequitable conduct claim); Audionics Sys., Inc. v. AAMP of Fla., Inc., No. CV1210763MMMJEMX, 2015 WL 12712288, at *29 (C.D. Cal. July 10, 2015) (taking judicial notice of patent prosecution history and striking inequitable conduct defense). Moreover, those public documents show that Dell's theory of scienter is not only unreasonable but a meritless attack on Mr. Kramer's professional reputation. A. Oblon, McClelland, Maier & Neustadt, L.L.P. Prosecutes and Obtains the '893 Patent on Sony's Behalf On March 25, 2016, Johnny Ma, a law partner with Oblon, McClelland, Maier & Neustadt, L.L.P., filed U.S. Application No. 15/080,681 ("the '681 application") on behalf of Sony Corporation, which later issued as the '893 patent. See Ex. B. From March 25, 2016, through January 31, 2017, Mr. Ma (presumably along with his associates at Oblon) handled the responses, remarks, and other filings with the Patent Office on Sony's behalf. 3 6 See, e.g., Ex. C. On January 31, 2017, Mr. Ma filed a terminal disclaimer, which was the applicant's filing before notice of allowance was mailed on March 25, 2017. See Ex. D. B. Data Scape Acquires the '681 Application Shortly Before Notice of Allowance After the terminal disclaimer was filed on January 31, 2017, but shortly before the March 25, 2017 notice of allowance, Data Scape and Sony executed an agreement assigning the patents and applications at issue to Data Scape. See Ex. E (assignment of patents-in-suit executed on March 3, 2017). After Data Scape's acquisition of the '681 application, Dell alleges, "Terry Kramer … took over the prosecution of the '893 patent." Dkt. ¶ 98. But Mr. Kramer's only role in the "prosecution" of the '681 application was: (a) paying the issue fee on June 20, 2017 (Ex. F); and (2) filing a power of attorney, which was subsequently denied, on July 13, 2017 (Ex.G). The '681 application issued as the '893 patent on July 25, 2017. C. Data Scape Files the Morohashi Continuation On July 17, 2017, Eric J. Nuss, a partner of Mr. Kramer at the Kramer Amado firm, filed U.S. Application 15/651,949 ("the Morohashi continuation"), which issued on July 17, 2018 as U.S. Patent No. 10,027,751. See Ex. H. The '893 patent and the Morohashi continuation do not share any claims, specification, written disclosure, or priority; they are entirely different patent families. Although Mr. Nuss was the applicant's correspondent and signatory in the prosecution of the Morohashi continuation, the initial transmittal of the application to the PTO was performed by a legal assistant, Wendy Spradlin, using Mr. Kramer's electronic USPTO account. See Ex. H, at 7. This appears to be the only basis on which Dell alleges 4 6 that Mr. Kramer had "knowledge of the material prior art" that Dell contends Mr. Kramer concealed during the prosecution of the '893 patent. III. LEGAL STANDARD For Dell's inequitable conduct counterclaim to survive a Fed. R. Civ. P. 12(b)(6) motion, it must be supported by factual allegations that are "more than labels and conclusions" and which, if accepted as true, state a plausible claim for relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); see also Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). An inequitable conduct claim must also be pled with the particularity required under Fed. R. Civ. P. 9(b), which requires "identification of the specific who, what, when, where, and how of the material misrepresentation or omission committed before the PTO." Exergen, 575 F.3d at 1327. The pleading must recite "facts from which the court may reasonably infer that a specific individual both knew of invalidating information that was withheld from the PTO and withheld that information with a specific intent to deceive the PTO." Delano Farms Co. v. Cal. Table Grape Comm'n, 655 F.3d 1337, 1350 (Fed. Cir. 2011) (citing Exergen, 575 F.3d at 1318, 1330). The materiality required to establish inequitable conduct is "but- for materiality," that is, "the court must determine whether the PTO would have allowed the claim if it had been aware of the undisclosed reference." Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1291 (Fed. Cir. 2011). Exergen and Therasense constrain not only Dell's counterclaim but also its inequitable conduct affirmative defense. See. Cabin Foods, LLC v. Rich Prod. Corp., No. EP-11-CV-318-KC, 2012 WL 433115, at *3 (W.D. Tex. Feb. 8, 2012) ("The affirmative defense of inequitable conduct in patent law is subject to the heightened pleading standard 5 6 of Rule 9(b)."). Moreover, a party's failure to satisfy the Exergen requirements is sufficient basis for striking an inequitable conduct affirmative defense. Id. at *6 ("Although motions to strike are disfavored, so are unsubstantiated assertions of the inequitable conduct defense."); Yeti Coolers, LLC v. Rtic Coolers, LLC, No. 1:15-CV-00597-RP, 2016 WL 5956081, at *9 (W.D. Tex. Aug. 1, 2016) ("Having found insufficient basis to allow RTIC's counterclaim on the basis of inequitable conduct, the Court finds RTIC's defense of inequitable conduct to be 'insufficient.'"). IV. ARGUMENT A. Dell's Nonspecific References to Alleged Wrongdoers and Prior Art References Fail the Exergen Requirements To begin, much of Dell's charging allegations are facially insufficient under Exergen and are therefore irrelevant to the analysis. First, Dell leans on generalized categories of people as purported bad actors in its theory of inequitable conduct. See, e.g., Dkt. 35, ¶ 93 ("Data Scape and its attorneys"), ¶ 96 ("Data Scape and its representatives" and "Data Scape's principals and its legal counsel"), ¶ 98 ("Data Scape's principals and its attorneys (including both its litigation and prosecution counsel)"). Second, Dell identifies nonspecific groups of prior art as the purported material withheld from the PTO. See, e.g., id. ¶ 93 ("Morohashi patent family as well as prior art cited in connection with [its] prosecution"). None of this is sufficient under Exergen. Dell is required to identify with specificity the individuals and material prior art which grounds its inequitable conduct claim. But Dell's vague and generalized references to Data Scape's "principals," "attorneys," and "legal counsel" are insufficient for the same reason that Wal-Mart's use of verbiage like "Exergen, its agents and/or attorneys" was deemed insufficient by the Federal Circuit. 6 6 Exergen, 575 F.3d at 1329. Similarly, Dell's reference to generalized and undefined groups of prior art cannot, by definition, satisfy Dell's obligation to identify "which claims, and which limitations in those claims, the withheld references are relevant to, and where in those references the material information is found." Id. Nonetheless, read in the light most favorable to the pleadings, Dell's allegations admittedly do identify a single individual: Terry Kramer. Dkt. 35, ¶ 98. Dell also specifically identifies two prior art references: the '537 patent to Morohashi, and (2) U.S. Patent No. 6,577,735 (the "Bharat reference"). See Dkt. 35, ¶ 95. As explained below, Dell's allegations concerning Mr. Kramer fail to meet the stringent standard set by Exergen. B. Dell Insufficiently Alleges Mr. Kramer's Knowledge of, Duty to Disclose, and Specific Intent to Conceal the '537 Patent and the Bharat Reference Tellingly, Dell's allegations about Mr. Kramer are limited to two sentences in paragraph 98 of its Answer, which are reproduced below: Data Scape's attorney Terry Kramer of the law firm KramerAmado took over prosecution of the '893 patent following Data Scape's acquisition. Mr. Kramer submitted the issue fee for the '893 patent on June 20, 2017. Shortly thereafter, Mr. Kramer and his colleagues filed a new application in the Morohashi patent family on July 17, 2017, further confirming his and Data Scape's knowledge of the material prior art, before the '893 patent was granted. Dkt. 35, ¶ 98. But the file wrappers and assignment histories of Data Scape's patents— which, again, the Court may review and cite on resolving this motion—plainly show that Mr. Kramer was never substantively involved in neither the prosecution of '893 patent nor that of the Morohashi continuation (or, for that matter, the '537 patent to Morohashi whose claims traversed the Bharat reference). See generally supra Section II.A-C. In reality, the extent of his involvement in the prosecution of the '893 patent appears to have been purely 7 6 ministerial: i.e., payment of an issue fee and filing of a power of attorney, after attorneys at another firm had secured allowance of the patent. This is hardly sufficient factual basis from which to infer Mr. Kramer's knowledge of the '537 patent and Bharat reference during prosecution of the '893 patent, much less specifically during the period between when Mr. Kramer paid the issue fee, on June 20, 2017, and July 25, 2017, when the '893 patent issued. Indeed, by its use of the phrase "and his colleagues" at Dkt. 35 ¶ 98, Dell tacitly acknowledges the tertiary nature of Mr. Kramer's involvement in the prosecution of the '893 patent as well as the implausibility of him knowing about the "but-for materiality" of the '537 patent and Bharat reference. This, in turn, underscores the implausibility of Dell's allegation that Mr. Kramer had specific intent to deliberately conceal the '537 patent or the Bharat reference from the PTO. See 1st Media, LLC v. Electronic Arts, Inc., 694 F.3d 1367, 1372–73 (Fed. Cir. 2012) ("A court can no longer infer intent to deceive from non- disclosure of a reference solely because that reference was known and material."). This also poses an additional, independent reason why Dell's claim fails: it has not sufficiently alleged Mr. Kramer is an individual with a duty of candor to the PTO in the context of the '893 patent's prosecution. This is a problem for Dell, because "only individuals who have a duty of candor can commit inequitable conduct." Summit 6 LLC v. Research in Motion Corp., No. 3:11-CV-367-O, 2013 WL 12124321, at *11 (N.D. Tex. June 26, 2013). In turn, the people with a duty of candor to the PTO are: (1) Each inventor named in the application; (2) Each attorney or agent who prepares or prosecutes the application; and (3) Every other person who is substantively involved in the preparation or prosecution of the application and who is associated with the inventor, the applicant, an assignee, or anyone to whom there is an obligation to assign 8 6 the application. 37 C.F.R. § 1.56(c)(1)–(3). And, as set forth herein, Mr. Kramer did not "prepare" or "prosecute" the '893 patent, and the judicially noticeable file history contradicts Dell's allegation to the contrary. Neither could Dell plausibly allege, pursuant to Section 1.56(c)(3), that Mr. Kramer was "substantively involved in the preparation or prosecution" of the '893 patent—which would require allegations sufficient to show that Mr. Kramer's "involvement relates to the content of the application or decisions related thereto, and that the involvement is not wholly administrative or secretarial in nature," because he plainly was not. Gen. Elec. Co. v. Mitsubishi Heavy Indus., Ltd., No. 3:10-CV-276-F, 2011 WL 13201876, at *3 (N.D. Tex. Mar. 3, 2011). C. Dell Insufficiently Alleges Materiality of the '537 Patent and the Bharat Reference Finally, Dell falls short in sufficiently alleging the materiality of the '537 patent or the Bharat reference to the issued claims of the '893 patent. Dell needed to sufficiently allege "but-for" materiality per Therasense—i.e., "that the PTO would not have granted questioned claims but for alleged misrepresentation." Eon Corp. IP Holdings, LLC v. T- Mobile USA, Inc., No. 6:10-CV-379-LED-JDL, 2011 WL 13134896, at *4 (E.D. Tex. Dec. 13, 2011). After Therasense, "a pleading that does not show but-for materiality or that bases intent solely on the materiality of the withheld reference would [] not survive the pleading stage." Id. at *3. Instead, Dell goes only half-way; it selects certain language from claim 1 of the '893 patent, contrasts it with certain language from claim 1 of the '537 patent, and then concludes that one anticipates the other. See Dkt. 35, ¶ 95. But "labels and conclusions" are not factual allegations under Twombly, and they cannot cure Dell's failure to even try 9 6 to allege how the prior art discloses the other elements of claim 1 of the '893 patent, for example: "automatically displaying transferring status of the one of the files of source data by a symbolic figure." Dkt. 1-4, at 33-34. Compare Eon Corp., 2011 WL 13134896, at *4 ("claim-by-claim and limitation-by-limitation" allegations satisfactory under Exergen). In addition, Dell fails to allege how the language it does quotes from the '537 patent is not "cumulative to the information already of record in the prosecution history" of the '893 patent. Exergen, 575 F.3d at 1325. Both defects are fatal to Dell. Dell gives the Bharat reference even shorter shrift. Dell does not even try to describe how the Bharat reference is material to the issuance of '893 patent, and instead, inexplicably, alleges only that the Bharat reference was identified in an October 7, 2008 office action in the prosecution of the '537 patent. See Dkt. 35, ¶ 95. This, however, does not come close to even alleging "how the examiner would have used the information in assessing the patentability of the claims." Cabin Foods, LLC v. Rich Prod. Corp., No. EP- 11-CV-318-KC, 2012 WL 433115, at *8 (W.D. Tex. Feb. 8, 2012). V. CONCLUSION Because Dell (1) fails to identify the "specific who, what, when, where, and how of the material misrepresentation or omission committed before the PTO" (Exergen, 575 F.3d at 1327), (2) fails to sufficiently allege the materiality of the '537 patent or the Bharat reference, or the (3) deceptive intent of Mr. Kramer, Dell's inequitable conduct counterclaim should be dismissed and its corollary affirmative defense stricken. 10 6 Dated: May 13, 2019 Respectfully submitted, /s/ Paul A. Kroeger RUSS AUGUST & KABAT Marc A. Fenster (CA SBN 181067) Email: mfenster@raklaw.com Reza Mirzaie (CA SBN 246953) Email: rmirzaie@raklaw.com Brian D. Ledahl (CA SBN 186579) Email: bledahl@raklaw.com Paul A. Kroeger (CA SBN 229074) Email: pkroeger@raklaw.com C. Jay Chung (CA SBN 252794) Email: jchung@raklaw.com Philip X. Wang (CA SBN 262239) Email: pwang@raklaw.com 12424 Wilshire Boulevard, 12th Floor Los Angeles, California 90025 Telephone: (310) 826-7474 Facsimile: (310) 826-6991 Jose E. de la Fuente Lloyd Gosselink Rochelle & Townsend, PC 816 Congress Avenue, Suite 1900 Austin, TX 78701 Email: jdelafuente@lglawfirm.com Telephone: (512) 322-5800 Attorneys for Plaintiff Data Scape Limited 11 6 CERTIFICATE OF SERVICE The undersigned certifies that on May 13, 2019, all counsel of record who are deemed to have consented to electronic service are being served with a copy of this document via the Court's CM/ECF system pursuant to Local Rule CV-5(b)(1). /s/ Paul A. Kroeger 12