Summary
In Knauf, the court concluded that the claim for coercive relief under section 285 "continue[d] to present a live case or controversy arising under federal law," and was "ancillary to a case that ha[d] been within the court's subject matter jurisdiction."
Summary of this case from Samsung Electronics Co. v. Rambus, Inc.Opinion
1:02-cv-01215-DFH-WTL
March 24, 2004
ENTRY ON PENDING MOTIONS
This action for patent infringement now presents several motions for decision. Plaintiff Knauf Fiber Glass, GmbH filed this action against defendant CertainTeed Corporation alleging infringement of U.S. Patent No. 6,270,865. The `865 patent claims a type of duct board lined with smooth fiberglass to enhance smooth flow of air in ventilation, heating, and cooling systems. CertainTeed answered and asserted counterclaims for a declaratory judgment to the effect that it did not infringe the `865 patent and that the `865 patent is invalid and is unenforceable because of Knauf's inequitable conduct in obtaining it. CertainTeed's counterclaims also seek a declaration that the case is "exceptional" under 35 U.S.C. § 285, so as to justify an award of costs and attorney fees.
The parties conducted discovery, the court construed disputed terms of the patent claims, and the parties filed motions for summary judgment. After the last round of summary judgment briefing, plaintiff Knauf filed a motion to dismiss pursuant to Rule 41(a)(2) of the Federal Rules of Civil Procedure. Knauf s motion seeks to dismiss its infringement claims voluntarily, accompanied by a declaration that it will not sue CertainTeed for infringement of any claim of the `865 patent by any product currently or previously made, used, sold, offered for sale, and/or imported into the United States by CertainTeed. Knauf contends that its unconditional declaration requires dismissal of CertainTeed's counterclaims pursuant to Super Sack Mfg. Corp. v. Chase Packaging Corp., 57 F.3d 1054, 1058, 1060 (Fed. Cir. 1995). The Federal Circuit held in Super Sack that where a patentee makes an unconditional declaration that the patentee will not sue the defendant for infringement of any claim of the patent based on any past or existing product, the declaration removes any justiciable case or controversy under Article III of the Constitution regarding counterclaims for declaration of non-infringement and invalidity, so that such counterclaims should be dismissed for lack of subject matter jurisdiction.
Knauf's motion seeks dismissal of CertainTeed's counterclaims with prejudice. Although Super Sack itself affirmed dismissal with prejudice, see 57 F.3d 1054, later Federal Circuit law makes clear that dismissal of counterclaims in response to a Super Sack declaration should be without prejudice. See, e.g., Intellectual Prop. Dev., Inc. v. TCI Cablevision of Cat, Inc., 248 F.3d 1333, 1342 (Fed. Cir. 2001). Dismissal for lack of subject matter jurisdiction is ordinarily without prejudice, of course, because the court has not adjudicated the merits of the claim and the decision does not bar a future decision on the merits. The dismissal here should be without prejudice to make clear that it does not bar the defendant from asserting its counterclaims in another action against Knauf (on a future product, for example) or against any other party.
CertainTeed agrees that Knaufs claims of infringement should be dismissed with prejudice and that CertainTeed's first counterclaim should be dismissed without prejudice. However, CertainTeed wishes to pursue its efforts to have the `865 patent declared unenforceable for inequitable conduct, to have the case declared "exceptional" under 35 U.S.C. § 285, and to recover its attorney fees and costs incurred in this case. The parties disagree about the proper handling of the inequitable conduct issue and the § 285 issue. Also, CertainTeed has filed a motion to compel production of documents otherwise protected by the attorney-client privilege and attorney work product doctrine on the theory that it has shown sufficient evidence of fraud on the Patent Office so as to warrant production notwithstanding those privileges.
The Super Sack doctrine derives from the Article III requirement that there be a live case or controversy for a federal court to exercise jurisdiction. In Super Sack, the Federal Circuit addressed counterclaims seeking only declaratory relief. 57 F.3d at 1058. The court did not have occasion to apply its principles and reasoning to a counterclaim that sought coercive, as well as declaratory, relief. See also Intellectual Property Devevlopment, Inc. v. TCICablevision of Cal, Inc., 248 F.3d 1333, 1342 n. 9 (Fed. Cir. 2001) (Super Sack doctrine applied to counterclaim for declaration of unenforceability, as well as of non-infringement and invalidity). Pursuant to § 285, CertainTeed's counterclaim seeks a damages award, for costs and attorney fees that have already been incurred. Moreover, the counterclaim was already seeking that relief before Knauf filed its Super Sack motion to dismiss.
Accordingly, this court retains jurisdiction over CertainTeed's counterclaim for coercive relief, in the form of an award of attorney fees and costs, on the basis that this case should be deemed "exceptional" under § 285. The Federal Circuit at least implicitly approved the exercise of similar jurisdiction over a § 285 claim and a request for Rule 11 sanctions after voluntary dismissal of the underlying case in Cambridge Products, Ltd. v. Penn Nutrients, Inc., 962 F.2d 1048, 1050 (Fed. Cir. 1992) (affirming district court's denial of Rule 11 sanctions and denial of "exceptional" status under § 285); see also H.R. Technologies, Inc. v. Astechnologies, Inc., 275 F.3d 1378, 1386 (Fed. Cir. 2002) (counterclaim for attorney fees under § 285 not affected by dismissal of plaintiffs claims for lack of standing); Paragon Podiatry Lab. v. KLM Labs., 984 F.2d 1182, 1188 n. 6 (Fed. Cir. 1993) (claim for attorney fees based on inequitable conduct was not moot despite holding that patent was invalid).
This result is consistent with the Supreme Court decisions holding that a district court may exercise jurisdiction over a Rule 11 sanctions motion even if the underlying case has been dismissed or even if the district court did not have subject matter jurisdiction over the underlying case. Willy v. Coastal Corp., 503 U.S. 131, 137-38 (1992) (affirming Rule 11 sanction imposed after dismissal of underlying case for lack of subject matter jurisdiction); Cooter Gell v. Hartmarx Corp., 496 U.S. 384, 395-96 (1990) (affirming Rule 11 sanction imposed against plaintiffs and their attorneys after voluntary dismissal of underlying case).
The "safe harbor" amendment to Rule 11 modified the ruling of Cooter Gell in part, but the amendment did not affect the point that is relevant here. See De La Fuente v. D.C.I. Telecomms., Inc., 259 F. Supp.2d 250, 257 n. 4 (S.D.N.Y. Mar. 4, 2003), aff'd in relevant part, De La Fuente v. D.C.I. Telecomms., Inc., 82 Fed. Appx. 723 (2d Cir. 2003).
Knauf has attempted to distinguish H.R. Technologies and Cambridge Products and similar cases on several grounds. See Knauf Reply Br. at 6-8. Although there were some procedural differences, the grounds for distinction are not persuasive. The key point in those cases is that the defendants sought coercive relief in the form of attorney fee awards under § 285. The dismissal of all other claims in the lawsuits, for a variety of reasons in those several cases, simply did not render moot the defendants' claims for coercive relief in the form of attorney fees. Also, contrary to Knauf's argument, the fact that defendant CertainTeed has not yet submitted a detailed petition for attorney fees does not authorize dismissal of its counterclaim for such fees. The court has not yet determined whether the case should be deemed "exceptional" under § 285, which is a prerequisite for such an award. The counterclaim for the coercive relief, however, is presented by the pleadings. The counterclaim by itself continues to present a live case or controversy arising under federal law, and it is also ancillary to a case that has been within the court's subject matter jurisdiction. Accordingly, the court retains jurisdiction over the counterclaim for coercive relief. That jurisdiction includes the jurisdiction to make the relevant factual and legal determinations needed to decide the merits of the counterclaim.
Knauf has suggested in its reply that the court should exercise its discretion not to decide CertainTeed's counterclaim for fees under § 285. The suggestion seems to be based on the assumption that CertainTeed is seeking only declaratory relief, so that the court would have discretion under 28 U.S.C. § 2201 not to entertain the counterclaim. Because the pleadings set forth a counterclaim for coercive relief as distinct from purely declaratory relief, however, the court sees no basis for any decision not to exercise the jurisdiction that Congress has given it. See generally Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976) (federal courts have a "virtually unflagging obligation" to exercise the jurisdiction they have been given).
Based on the foregoing considerations, the court takes the following actions. First, plaintiff Knauf's claims for infringement of the `865 patent are dismissed with prejudice. Second, plaintiff Knauf's motion for summary judgment on the issues of invalidity and unenforceability is denied as moot. Third, defendant CertainTeed's first counterclaim seeking a declaratory judgment of non-infringement and invalidity is dismissed without prejudice. Fourth, defendant's motion for summary judgment on the issue of invalidity is denied as moot.
That leaves two additional matters pending before the court. CertainTeed has moved for summary judgment as to whether Knauf engaged in inequitable conduct in obtaining the `865 patent, which is a foundation for the § 285 counterclaim. CertainTeed has also moved to compel production of privileged documents, arguing that it has made a prima facie showing of fraud sufficient to pierce the attorney-client privilege and attorney work product privilege.
CertainTeed's motion for summary judgment on the issue of inequitable conduct is denied. To show inequitable conduct, CertainTeed must prove that the patentee failed to disclose material information or submitted false material information to the PTO, and that the patentee did so with intent to deceive the PTO. Juicy Whip, Inc. v. Orange Bang, Inc., 292 F.3d 728, 744 (Fed. Cir. 2002); Critikon, Inc. v. Becton Dickinson Vascular Access, Inc., 120 F.3d 1253, 1256 (Fed. Cir. 1997); Kingsdown Medical Consultants, Ltd. v. Hollister, Inc., 863 F.2d 867, 872 (Fed. Cir. 1988). CertainTeed must establish both materiality and intent to deceive by clear and convincing evidence. Id. To win summary judgment, CertainTeed would have to show that the evidence, even when viewed in the light reasonably most favorable to Knauf, and giving Knauf the benefit of all reasonable, favorable inferences from the evidence, would require any reasonable trier of fact to find inequitable conduct by clear and convincing evidence. It is not necessarily impossible as a matter of law to make that showing on a summary judgment motion. See, e.g., Paragon Podiatry Lab., Inc. v. KLM Labs., Inc., 984 F.2d 1182, 1191-92 (Fed. Cir. 1993) (affirming finding of inequitable conduct on motion for summary judgment despite affidavits denying intent to defraud). But it is an extraordinarily high standard, especially on the matter of intent. See Ulead Sys., Inc. v. Lex Computer Mgmt. Corp., 351 F.3d 1139, 1148 (Fed. Cir. 2003) (reversing grant of summary judgment on inequitable conduct; denials of deceptive intent were not merely conclusory and presented genuine factual issue concerning intent). In this case, Knauf has come forward with evidence which, at a minimum, would allow a reasonable trier of fact to find a lack of intent to defraud.
Certain Teed's motion to compel presents a different question — whether there is prima facie evidence of a fraud on the PTO such that the court should order disclosure of communications otherwise protected by the attorney-client privilege and communications and other materials otherwise protected by the attorney work product privilege. The court still has that question under advisement and will rule in the near future on the motion to compel and meet with counsel to set a schedule for bringing this matter to a conclusion.
So ordered.