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

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

REPLY to Response to Motion, filed by Data Scape Limited, re [38] MOTION to Dismiss Inequitable Conduct Counterclaim and Strike Inequitable Conduct Affirmative Defense filed by Data Scape Limited

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0 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 REPLY IN SUPPORT OF ITS MOTION TO DISMISS INEQUITABLE CONDUCT COUNTERCLAIM AND STRIKE INEQUITABLE CONDUCT AFFIRMATIVE DEFENSE 0 Table of Contents I. INTRODUCTION .......................................................................................1 II. ARGUMENT ...............................................................................................2 A. The Relevant Prosecution History Shows Dell's Allegations About Terry Kramer Are Unreasonable and Implausible ...........................2 B. Dell Failed to Allege But-For Materiality of the '537 Patent and Bharat Prior Art References .............................................................4 III. CONCLUSION ............................................................................................5 i 0 Table of Authorities Cases Cabin Foods, LLC v. Rich Prod. Corp., No. EP-11-CV-318-KC, 2012 WL 433115 (W.D. Tex. Feb. 8, 2012) ........... 2, 3, 5 Dorsey v. Portfolio Equities, Inc., 540 F.3d 333 (5th Cir. 2008) .................................................................................. 2 Eagle View Techs., Inc. v. Xactware Sols., Inc., 325 F.R.D. 90 (D.N.J. 2018) ................................................................................... 4 Eon Corp. IP Holdings, LLC v. T-Mobile USA, Inc., 2011 WL 13134896 (E.D. Tex. Dec. 13, 2011) ...................................................... 5 Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009)....................................................................... 1, 4, 5 Int'l Bus. Machines Corp. v. Priceline Grp. Inc, 2017 WL 1349175 (D. Del. Apr. 10, 2017) ............................................................ 5 Lear Auto. Dearborn, Inc. v. Johnson Controls, Inc., 528 F. Supp. 2d 654 (E.D. Mich. 2007) .................................................................. 3 Meetrix IP, LLC v. Cisco Sys., Inc., No. 1-18-CV-309-LY, 2018 WL 8261315 (W.D. Tex. Nov. 30, 2018) ................. 3 Molins PLC v. Testron, Inc., 48 F.3d 1172 (Fed. Cir. 1995)................................................................................. 5 Music Choice v. Stingray Digital Grp., 16-cv-00586-JRG-RSP (E.D. Tex. May 2, 2017) ................................................... 5 Scanlan v. Texas A&M Univ., 343 F.3d 533 (5th Cir. 2003) .................................................................................. 2 SynQor, Inc. v. Cisco Sys., Inc., No. 2:11CV54, 2012 WL 3984865 (E.D. Tex. Sept. 11, 2012) ............................. 1 Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011)........................................................................... 2, 5 Webasto Thermo & Comfort N. Am., Inc. v. Bestop, Inc., 326 F. Supp. 3d 521 (E.D. Mich. 2018) .................................................................. 5 ii 0 I. INTRODUCTION Dell acknowledges that the viability of its inequitable conduct theory rests on the sufficiency of its allegations about: (1) the knowledge and scienter of Terry Kramer; and (2) the materiality of the '537 patent and Bharat prior art to the issuance of the '893 patent. Rather than explaining the factual basis for its attack on Mr. Kramer, Dell's principal strategy is to deflect: it says Data Scape only raises "factual disputes" about Mr. Kramer's knowledge and scienter which "must be resolved at Dell's favor at this stage." Dkt. at 9; see id. at 13 n. 5. But Dell misses Data Scape's point: the factual inferences advanced by Dell about Mr. Kramer are themselves unreasonable, irrespective of whether Data Scape disputes their truth (though it does). Put simply, Dell's allegations of knowledge and scienter against Mr. Kramer are not "reasonable inferences" that survive a motion to dismiss. Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1329 n. 5 (Fed. Cir. 2009) ("A reasonable inference is one that is plausible and that flows logically from the facts alleged, including any objective indications of candor and good faith."). Neither does Dell adequately respond to the charge that its allegations about the '537 patent and Bharat prior art are conclusory pleading. In its defense, Dell says it identified "independent claim 1 as exemplary," listed "[two] relevant limitations," and "pointed to two references disclosing the specified limitations: the '537 patent [] and the Bharat reference[.]" Dkt. 42, at 9. Dell's allegations, however, do not "make a plausible case of but-for materiality" for either the '537 patent or Bharat reference. SynQor, Inc. v. Cisco Sys., Inc., No. 2:11CV54, 2012 WL 3984865, at *1 (E.D. Tex. Sept. 11, 2012).1 Dell also failed to allege "how the examiner would have used the information in assessing the 1 All emphases added, unless otherwise noted. 1 0 patentability of the claims." Cabin Foods, LLC v. Rich Prod. Corp., No. EP-11-CV-318- KC, 2012 WL 433115, at *5 (W.D. Tex. Feb. 8, 2012). The inequitable conduct theory alleged here is exactly the sort of litigation tactic— accusations of professional misconduct predicated on the "slenderest of grounds"— criticized by the Federal Circuit. Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1289 (Fed. Cir. 2011). Data Scape's Motion should be granted. II. ARGUMENT A. The Relevant Prosecution History Shows Dell's Allegations About Terry Kramer Are Unreasonable and Implausible According to Dell, the only material the Court should consider when assessing the sufficiency of its allegations against Mr. Kramer is within the four corners of Dell's pleadings. Dkt. 42, at 8. Not so. First, the Court is permitted to "rely on 'documents incorporated into the complaint by reference.'" Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 338 (5th Cir. 2008). So, too, with "documents that are referred to in the plaintiff's complaint and are central to the plaintiff's claim." Scanlan v. Texas A&M Univ., 343 F.3d 533, 536 (5th Cir. 2003). Dell's inequitable conduct allegations refer directly to and are premised on the prosecution histories of the relevant patents: it says Mr. Kramer "knew of the Morohashi patent family and their respective file histories" and was "simulanteously prosecuting a patent application in the Morohashi family" when Mr. Kramer allegedly "took over" the '893 patent's prosecution. Dkt. 42, at 10, 13. Second, the facts reflected in the prosecution history excerpts attached to Data Scape's Motion are "not subject to reasonable dispute" and "can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Meetrix IP, 2 0 LLC v. Cisco Sys., Inc., No. 1-18-CV-309-LY, 2018 WL 8261315, at *2 (W.D. Tex. Nov. 30, 2018). Those facts—which Dell does not dispute—include the following: • the '893 patent's prosecution history contains no indication that Mr. Kramer was involved in any way other than (1) paying the issue fee, and (2) filing a power of attorney; • the Morohashi Continuation was signed by Eric J. Nuss, and filed by a legal assistant, Wendy Spradlin, using Mr. Kramer's PTO filing account; and • the Morohashi Continuation's prosecution history contains no indication of substantive involvement by Mr. Kramer. The Court may, and should, consider these facts in assessing the reasonableness of Dell's allegations regarding Mr. Kramer: i.e., that Mr. Kramer "knew of the Morohashi family and their respective file histories," and "knew of the material prior art and, by failing to disclose it, acted with specific intent to deceive the PTO." Dkt. 42, at 13. Essentially, Dell's inequitable conduct case relies on multiple inferential conclusions about Mr. Kramer's knowledge, intent, and conduct that, in sum, make the story implausible. This weakness in Dell's case is evident even in its opposition brief, where Dell glosses over how Mr. Kramer's name appears in only two sentences in its charging allegations by repeatedly referencing nonspecific alleged wrongdoers like "Data Scape," "Data Scape and its prosecution counsel," and "colleagues" of Mr. Kramer. Dkt. 42, at 12-13. But allegations about amorphous groups of alleged wrongdoers cannot satisfy Rule 9(b). See Cabin Foods, 2012 WL 433115, at *4. Dell requires the Court to infer that Mr. Kramer (1) had a duty of candor to the PTO regarding the '893 patent2; (2) knew of the '537 patent and Bharat prior art references; and 2See, e.g., Lear Auto. Dearborn, Inc. v. Johnson Controls, Inc., 528 F. Supp. 2d 654, 681 (E.D. Mich. 2007) (noting that "bare identification on a power of attorney, standing alone, 3 0 (3) believed the '537 patent and the Bharat reference were material to the issuance of the '893 patent. None of the inferences are reasonable, as the prosecution histories from which those inferences are purportedy based do not support them. Any combination of basic questions reveals the spurious nature of Dell's claim: • How does Mr. Kramer have a duty of candor to the Patent Office on the '893 patent when Dell has alleged only that Mr. Kramer paid the issue fee? • How does Mr. Kramer plausibly know of the '537 patent, which issued in 2009, where Dell's only alleged basis for knowledge is that that another attorney, Mr. Nuss, filed a 2017 continuation of the '537 patent? • How is Mr. Kramer plausibly aware of the Bharat reference, where Dell's only alleged theory of knowledge requires assuming (1) Mr. Nuss reviewed the '537 patent's file history; (2) Mr. Nuss learned of the Bharat reference, which was discussed in a 2008 Office Action during the prosecution of the '537 patent; and (3) Mr. Kramer somehow learned of the Bharat reference from Mr. Nuss's work on the Morohashi Continuation? • How did Mr. Kramer plausibly act with intent to deceive the Patent Office by withholding prior art references, of which he had no reason to be aware, for a patent prosecution with which he was never substantively involved? Ultimately, like the allegations in Eagle View Techs., Inc. v. Xactware Sols., Inc., 325 F.R.D. 90, 97 (D.N.J. 2018), Dell's allegations of scienter are "conclusory and lacking factual support" in view of the file history and should be disregarded. B. Dell Failed to Allege But-For Materiality of the '537 Patent and Bharat Prior Art References Dell effectively concedes that it simply "select[ed] certain language from claim 1 of the '893 patent, contrast[ed] it with certain language from claim 1 of the '537 patent, and then conclud[ed] that one anticipates the other." Dkt. 38, at 13. But Exergen requires Dell to "allege facts sufficient to show why the alleged misstatements or omission were would not constitute 'substantive involvement' in the preparation or prosecution of a patent application" that would trigger duty of candor). 4 0 material and how the examiner would have used the information in assessing the patentability of the claims." Cabin Foods, 2012 WL 433115, at *5; see also Webasto Thermo & Comfort N. Am., Inc. v. Bestop, Inc., 326 F. Supp. 3d 521, 531 (E.D. Mich. 2018) (simply alleging certain claim terms from allegedly concealed prior art patent were "material" "does not suffice under Therasense and Exergen"). Further, Dell is silent as to Therasense's effect where "a pleading that does not show but-for materiality. . . would [] not survive the pleading stage."3 Eon Corp. IP Holdings, LLC v. T-Mobile USA, Inc., 2011 WL 13134896, at *3 (E.D. Tex. Dec. 13, 2011). Though Dell conclusorily alleges the '893 patent "would not have properly issued [if the prior art was disclosed]," it alleged no "specific reasoning as to how what was in the [prior art] show that this is the case." Int'l Bus. Machines Corp. v. Priceline Grp. Inc, 2017 WL 1349175, at *11 (D. Del. Apr. 10, 2017). Merely alleging that two elements of the '893 patent are disclosed in the prior art does not amount to a showing of "but-for materiality."4 III. CONCLUSION "[U]njustified accusations of inequitable conduct are offensive and unprofessional. . . . They should be condemned." Molins PLC v. Testron, Inc., 48 F.3d 1172, 1182 (Fed. Cir. 1995). Data Scape's Motion should be granted. 3 Neither the '537 patent nor the Bharat reference appear to disclose or suggest the "automatically displaying transferring status of the one of the files of source data by a symbolic figure" element of claim 1 of the '893 patent. And because Dell has not alleged or argued otherwise, its pleadings do not state a plausible case of "but-for" materiality. 4 It is not that Exergen requires a "limitation-by-limitation" analysis for alleging materiality, but such an analysis is often sufficient, as in the Music Choice v. Stingray Digital Grp., 16-cv-00586-JRG-RSP (E.D. Tex. May 2, 2017) (prior art alleged to "touch on each limitation of at least claim 1") recommendation cited by Dell. 5 0 Dated: May 31, 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 6 0 CERTIFICATE OF SERVICE The undersigned certifies that on May 31, 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 7