Summary
observing that the logic underlying the Federal Circuit's opinion in Adams USA is still viable despite Supreme Court reversal
Summary of this case from Armament Sys. Procedures v. Emissive Energy Corp.Opinion
Civil No. 03-4121 ADM/JSM.
November 15, 2004
Mark E. Ferguson, Esq., and Sean W. Gallagher, Esq., Bartlit, Beck, Herman, Palenchar Scott, LLP, Chicago, IL, and Ann N. Cathcart Chaplin, Esq., Fish Richardson P.C., P.A., Minneapolis, MN, appeared for and on behalf of Field Hybrids, LLC, Bruce F. Field, and Spencer E. Adler.
John W. O'Meara, Esq., and James A. Oliff, Esq., Oliff Berridge, PLC, Alexandria, VA, and Cynthia A. Bremer, Esq., and Barbara Jean D'Aquila, Esq., Flynn, Gaskins Bennett, LLP, Minneapolis, MN, appeared for and on behalf of Toyota Motor Corp. and Toyota Motor Sales, U.S.A., Inc.
MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
On October 6, 2004, oral argument before the undersigned United States District Judge was heard on Toyota Motor Corp. and Toyota Motor Sales, U.S.A., Inc.'s ("Toyota") Motion to Dismiss [Docket No. 67]. Argument was also heard on Bruce F. Field and Spencer E. Adler's ("Field" and "Adler") Motion to Dismiss [Docket No. 49] Toyota's counterclaims. In its Amended Complaint [Docket No. 21], Plaintiff Field Hybrids, LLC ("Field Hybrids") alleges patent infringement claims against Toyota. Toyota's counterclaims requests declaratory judgment against Field Hybrids, as well as Field and Adler in their individual capacities. Toyota's counterclaims also request attorney's fees. For the reasons set forth below, both Toyota's and Field and Adler's Motions to Dismiss are denied.
II. BACKGROUND
In considering motions to dismiss, courts construe the pleadings in the light most favorable to the non-moving party, and view the facts alleged in the complaint as true. See Hamm v. Groose, 15 F.3d 110, 112 (8th Cir. 1994).
Bruce Field has, since the early 1990s, applied for and received a number of patents relating to electric hybrid vehicles. One of his earliest patent applications, filed in 1990, resulted in the issuance in January 1992 of U.S. Patent No. 5,081,365 (the "365 Patent"), titled "Electric Hybrid Vehicle and Method of Controlling It." 365 Patent (O'Meara Decl. [Docket No. 69] Ex. 3). The 365 Patent related to a type of hybrid vehicle known as a "parallel hybrid." Field Hybrid's Supplemental Responses to Toyota Interrogatories at 5 (Ex. Index [Docket No. 119] 4). On September 26, 1991, Charles Bricher (Field's co-applicant on the 365 Patent) assigned his rights in the 365 patent to Field ("1991 Assignment"). 1991 Assignment (O'Meara Decl. Ex. 4). Both Field and Bricher provided deposition testimony stating that the assignment gave Bricher a 10% interest in the instant litigation. Bricher Dep. at 200-01 (O'Meara Decl. Ex. 6); Field Dep. at 567 (O'Meara Decl. Ex. 7).
On September 30, 1991, Spencer Adler incorporated United Power Corporation ("UPC") in the State of Delaware. Certificate of Incorporation (O'Meara Decl. Ex. 8). Thereafter, on March 23, 1992, Field executed a document transferring his rights in "any patent(s) or other intellectual property in which he has right(s) . . . involving `The Electric Hybrid Vehicle and the Means for Controlling It'" to UPC (the "UPC Assignment"). UPC Assignment (O'Meara Decl. Ex. 11). The assignment was never recorded with the Patent Office. Adler Decl. ¶ 11 (Ex. Index 6). At some point after this assignment, Field and Adler agreed that they did not want UPC to own any patent rights. Field Decl. ¶ 12 (Ex. Index 1); Adler Decl. ¶ 10. Instead, Field and Adler orally agreed that Field would retain any patent rights. Id.
Prior to the UPC Assignment, Field and Adler filed applications on May 8, 1992, both entitled "Electric Hybrid Vehicle." O'Meara Decl. Exs. 12 and 13. These applications led to the issuance of U.S. Patent Nos. 6,481,516 and 6,668,954 (the "516 Patent" and "954 Patent"). 516 and 954 Patents (O'Meara Decl. Exs. 12 and 13). The 516 and 954 patents describe hybrid vehicles which Field called "combined series-parallel electric hybrid vehicles." 516 Patent at C1/L10-13.
In March 1993 UPC became "inoperative and void" under Delaware law due to non-payment of taxes. O'Meara Decl. Ex. 14. Delaware records indicate that UPC has not been revived since March 1993. O'Meara Decl. ¶ 3 and Ex. 14.
Field filed for personal bankruptcy in January, 1994. In his petition, Field stated under oath that he had no interests in "patents, copyrights and other intellectual property." Field Bankruptcy Petition (O'Meara Decl. Ex. 16).
In October, 2000, Adler incorporated a limited liability corporation in Delaware that eventually was renamed Field Hybrids, LLC. Certificate of Formation, Amendment to Certificate of Formation, and Certificate of Correction (O'Meara Decl. Exs. 17, 18, and 19). In 2002, Adler registered a limited liability company in Minnesota also named as Field Hybrids, Inc. Articles of Organization, Notice of Change (O'Meara Decl. Exs. 20 and 21). Shortly after incorporating Field Hybrids in Minnesota, Field executed an Assignment assigning his rights in U.S. Patent No. 6,044,922 as well as two patent applications to Field Hybrids (Delaware). July 12, 2002 Assignment (O'Meara Decl. Ex. 1). In 2003, Field Hybrids (Delaware) assigned patent rights to Field Hybrids (Minnesota), which included the 516 Patent. Nov. 20, 2003 Assignment (O'Meara Decl. Ex. 2).
On July 18, 2003, Field Hybrids filed the instant lawsuit, alleging various patent infringement claims against Toyota. Toyota filed its answer and counterclaims on October 14, 2003. The complaint was amended on February 13, 2004 ("Amended Complaint"). On February 27, 2004, Toyota filed its amended answers and counterclaims ("Counterclaims"), naming Field Hybrids as well as Field and Adler in their individual capacities. In its Counterclaims, Toyota alleges five counts for declaratory relief. Count IV of the Counterclaims alleges that Field and Adler made various misrepresentations to the United States Patent and Trademark Office, while Count V seeks attorney's fees based on 35 U.S.C. § 285. Field and Adler have moved to dismiss the counterclaims. Toyota has moved to dismiss Field Hybrid's entire Amended Complaint.
III. DISCUSSION
A. Motion to Dismiss Standard
A party may move to dismiss a claim if the court lacks subject matter jurisdiction, or if the complaint fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(1), 12(b)(6). In considering motions to dismiss, courts construe the pleadings in the light most favorable to the non-moving party, and view the facts alleged in the complaint as true. See Hamm v. Groose, 15 F.3d 110, 112 (8th Cir. 1994). Courts must also draw all reasonable inferences in the non-moving party's favor.See United States ex rel. Kinney v. Stoltz, 327 F.3d 671, 674 (8th Cir. 2003). A claim should be dismissed only if it is clear that no relief can be granted under any set of facts that could be proved consistent with the allegations. Hafley v. Lohman, 90 F.3d 264, 266 (8th Cir. 1996); Frey v. City of Herculaneum, 44 F.3d 667, 671 (8th Cir. 1995) (citations omitted).
In order to establish standing, three conditions must be satisfied:
First, a plaintiff must demonstrate that he has suffered an injury in fact which is actual, concrete, and particularized. Second, the plaintiff must show a causal connection between the conduct complained of and the injury. Third, the plaintiff must establish that the injury will be redressed by a favorable decision.Delorme v. United States, 354 F.3d 810, 815 (8th Cir. 2004) (citations omitted). Additionally, a court may make "factual determinations about the availability of . . . relief" in considering a Fed.R.Civ.P. 12(b)(1) motion. Faibisch v. University of Minnesota, 304 F.3d 797, 801 (8th Cir. 2002).
B. Toyota's Motion to Dismiss Field Hybrids' Amended Complaint
Toyota avers that Field Hybrids lacks standing to bring a patent infringement claim based on the 516 and 954 Patents because Field Hybrids had no interest in the 516 and 954 Patents on the date it filed the instant lawsuit. Toyota argues that the UPC Assignment served to transfer any interest in the 516 and 954 Patents to UPC. Since UPC did not transfer these interests back to Field before UPC became inoperative, Toyota contends that UPC still owns the rights to these patents. As a result, any alleged transfer of patent rights in the 516 and 954 Patents from Field to Field Hybrids was without effect. Moreover, because Field Hybrids has no interest in the 516 and 954 Patents, it cannot bring a patent infringement lawsuit.
Toyota cites Delaware law for the proposition that an inactive corporation can still have assets. These assets cannot be transferred, however, unless the corporation is revived. City Investing Company Liquidating Trust v. Continental Casualty Co., 624 A.2d 1191, 1194-95 (Del. 1993).
A plaintiff must hold "all substantial rights" in a patent in order to bring a patent infringement action. Paradise Creations, Inc. v. UV Sales, Inc., 315 F.3d 1304, 1308 (Fed. Cir. 2003) (citation omitted). Therefore, if Toyota can demonstrate that UPC holds the rights to the 516 and 954 Patents, Field Hybrids' Amended Complaint must be dismissed for lack of subject matter jurisdiction. Resolution of this issue turns on whether Toyota can demonstrate that the rights to the 516 and 954 Patents were transferred to UPC, as Toyota avers. As the contractual language within the UPC Assignment does not explicitly designate the 516 and 954 Patents by number, and is therefore ambiguous, parol evidence will be examined in determining the intent of the UPC Assignment. Bunker v. Meshbesher, 147 F.3d 691, 697 (8th Cir. 1998) (citing Material Moves, Inc. v. Hill, 316 N.W.2d 13, 17 (Minn. 1982).
Toyota first points to the language of the UPC Assignment, which describes the invention to be transferred as: "The Hybrid Electric Vehicle and the Means for Controlling it," including "any related patent(s) or other intellectual property and any improvement patent(s) or other intellectual property." UPC Assignment. Toyota contends this language is broad enough to cover the 516 and 954 Patents, which, Toyota alleges, were improvements upon the 365 Patent. Additionally, Toyota proffers other parole evidence as evidence that Field intended to transfer the 516 and 954 Patent rights to UPC. First, Toyota points to Field's personal bankruptcy filing of 1994, in which Field disclaimed any personal interest in any intellectual property. Field Bankruptcy Petition. Field has admitted designs were in existence which would become the 516 and 954 Patents at the time of the bankruptcy filing. Toyota argues this is persuasive evidence demonstrating the rights to those patents had been previously transferred in the UPC Assignment. Next, Toyota references Charles Bricher's deposition, in which Bricher testified that he maintained a 10% interest in the instant litigation. Finally, Toyota argues Bricher's interest in the current lawsuit supports the contention that the UPC Assignment included transfer of the 516 and 954 Patents because the 1991 Assignment contains similar language to the UPC Assignment and, according to Field Hybrids, covers those patents.
In response, Field Hybrids argues that the UPC Assignment did not include the 516 and 954 Patents. Specifically, Field Hybrids contends the language within the UPC Assignment circumscribes the assignment to the 365 Patent, stating the "The Hybrid Electric Vehicle and the Means for Controlling it" refers specifically to the 365 Patent, which is described on the patent form as "Electric Hybrid Vehicle and Method of Controlling It." UPC Assignment; 365 Patent. Moreover, Field Hybrids avers the invention which spawned the 516 and 954 Patents was not an improvement upon the 365 Patent, but rather an entirely new invention with a different name — the "combination series-parallel hybrid." If the UPC Assignment included this invention, Field Hybrids contends, the new inventions would have been listed by name. In any event, the "combination series-parallel hybrid" was sufficiently different from the car described in the 365 Patent to place it beyond the language employed in the UPC Assignment.
Field Hybrids also contends that Bricher's interest in the current lawsuit does not stem from the UPC Assignment, but rather from the 1991 Assignment, which was drawn more broadly than the UPC Assignment. Additionally, Field Hybrids asserts that Field's bankruptcy petition requested information on intellectual property that had value at the time of the filing. As the 516 and 954 Patents did not hold any value at that time, according to Field Hybrids, Field was not required to disclose his interest in those patents in his petition.
Although the evidence presented by Toyota makes resolution of this issue a close question, the documentary evidence demonstrates the rights to the 516 and 954 Patents were not transferred with the UPC Assignment. The car described by the 365 Patent, which is powered by a different type of hybrid motor than the car described in the 516 and 954 Patents, is sufficiently distinct from the inventions set forth in the 516 and 954 Patents to hold the UPC Assignment was not intended to cover the 516 and 954 Patents. Additionally, the description of the patent to be transferred in the UPC Assignment closely resembles the language of the 365 Patent. Furthermore, the 1991 Assignment and the UPC Assignment are not identical assignments, and therefore can be prescribed distinct interpretations. Bricher's interest in the current lawsuit can be attributed to the 1991 Agreement. Although Field's bankruptcy petition declaration is troubling, it is not conclusive evidence that intent existed to assign the 516 and 954 Patent rights to UPC. As a result, Field Hybrids has standing to bring the instant action against Toyota.
C. Field and Adler's Motion to Dismiss Toyota's Counterclaims
Field and Adler, in their Motion to Dismiss Toyota's counterclaims, allege that Toyota has failed to show requisite standing to sue them in their individual capacities. Field and Adler also argue that Toyota has not pled a claim on which relief may be granted. Specifically, the argument for dismissal is based on the contention that Toyota has not alleged a claim that can be directed at Field and Adler in their individual capacities. Field and Adler suggest that Toyota is basing its claim on 35 U.S.C. § 285, which is an attorney's fees statute they claim cannot form a cause of action.
In response, Toyota avers that it has standing to sue Field and Adler in their personal capacities, and further argues it has adequately alleged a claim of inequitable conduct before the U.S. Patent and Trademark Office ("PTO") against Field and Adler. Furthermore, Toyota claims this case is an "exceptional case" under 35 U.S.C. § 285. Much of the dispute between the parties centers on the interpretation of Ohio Cellular Prod. Corp. v. Adams USA, Inc., a Federal Circuit case which was later reviewed by the Supreme Court. 175 F.3d 1343 (Fed. Cir. 1999). Toyota relies on the holding of this case to support its argument that individuals can be held liable for inequitable conduct before the PTO. Conversely, Field and Adler point to the Supreme Court decision reversing Ohio Cellular as evidence that such a claim cannot be pled against an individual. Nelson v. Adams USA, Inc., 529 U.S. 460 (2000).
Here, Field and Adler focus on the argument that Toyota's fifth claim for declaratory relief cannot survive their motion to dismiss on the basis of lack of standing and failure to state a claim upon which relief can be granted, arguing that 35 U.S.C. § 285 is not a stand alone cause of action. Field and Adler's argument, however, fails to recognize that Toyota's 35 U.S.C. § 285 claim is predicated on behavior alleged in Toyota's fourth claim for declaratory relief. In the fourth claim for declaratory relief, Toyota alleges that Field and Adler personally engaged in inequitable conduct before the PTO. Given the Federal Circuit authority, this claim can be asserted against Field and Adler personally without piercing the corporate veil.
This point was ably noted by the Federal Circuit in Ohio Cellular. Even if Ohio Cellular is no longer good law, other precedent supports this conclusion. InHoover Group, Inc. v. Custom Metalcraft, Inc., the Federal Circuit held: "[i]n general, a corporate officer is personally liable for his tortious acts, just as any individual may be liable for a civil wrong. This general rule `does not depend on the same grounds as "piercing the corporate veil."'" 84 F.3d 1408, 1411 (Fed. Cir. 1996). The Court went on to state: "[t]hus when a person in a control position causes the corporation to commit a civil wrong, imposition of personal liability requires consideration of the nature of the wrong, the culpability of the act, and whether the person acted in his/her personal interest or that of the corporation." Id.; see also Hughes v. Novi American, Inc., 724 F.2d 122, 124-25 (Fed. Cir. 1984) (court awarded attorney's fees under 35 U.S.C. § 285, finding that plaintiff Hughes' oath in the patent applications constituted a misrepresentation before the PTO). Here, Toyota has clearly alleged in its fourth claim for declaratory relief that Field and Adler acted in their personal interests in making misrepresentations before the PTO. Assuming at this juncture the truth of Toyota's allegations, Field and Adler's misrepresentations were done wilfully, and were for their own benefit.
Field and Adler argue that following Nelson, nothing was left of the Ohio Cellular judgment. This argument is fallacious. Nelson reversed Ohio Cellular on the grounds that Nelson had been denied his due process right to defend himself. This resulted when following judgment at the trial court level, the complaint was amended to add Nelson as a party. Consequently, Nelson was not afforded a chance to defend himself from liability. On these grounds, the Supreme Court reversed Ohio Cellular. However, the reasoning does not disturb the logic behind the Federal Circuit's opinion that Nelson could be held personally liable for his corporation's tortious conduct, which is the ruling of moment to this case.
Because Toyota has adequately alleged a claim against Field and Adler in their personally capacities in Count IV, Count V's claim for attorney's fees under 35 U.S.C. § 285 is justiciable. Toyota has standing to claim attorney's fees. First, Toyota has allegedly suffered an injury in fact in its defense of this lawsuit. Second, it is undisputed that Field and Adler's conduct has led to the defense of this lawsuit. Finally, an award of attorney's fees will redress Toyota's alleged injuries. Accordingly, Toyota has standing to allege Count V against Field and Adler in their personal capacities. Delorme, 354 F.3d 810 at 815. Moreover, for the reasons cited above in regard to the adequacy of Toyota's claims against Field and Adler, they have successfully alleged a claim upon which relief can be granted. As a result, Field and Adler's Motion to Dismiss will be denied.
IV. CONCLUSION
Based on the foregoing, and all the files, records and proceedings herein, IT IS HEREBY ORDERED that:1. Toyota's Motion to Dismiss [Docket No. 67] is DENIED, and
2. Field and Adler's Motion to Dismiss [Docket No. 49] is DENIED.