Dsm IP Assets, B.V. et al v. Lallemand Specialties, Inc. et al

Brief in Opposition

W.D. Wis.November 22, 2016

IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WISCONSIN DSM IP ASSETS, B.V. & DSM BIO-BASED PRODUCTS & SERVICES B.V., Plaintiffs, vs. LALLEMAND SPECIALTIES, INC. & MASCOMA LLC, Defendants. Civil Action No. 16-cv-497 DEFENDANTS’ OPPOSITION TO PLAINTIFFS’ MOTION TO DISMISS DEFENDANTS’ FIRST COUNTERCLAIM Defendants-Counterclaimants Lallemand Specialties, Inc. and Mascoma LLC (together, “Lallemand”) oppose Plaintiffs-Defendants-in-Counterclaim DSM IP Assets, B.V. and DSM Bio-Based Products & Services B.V.’s (together, “DSM”) Motion to Dismiss Defendants’ First Counterclaim under Fed. R. Civ. P. 12(b)(6) (“Motion”). Lallemand provides specific prior art references and reasoning to support its invalidity counterclaim and does so with far more detail than DSM provides in support of its infringement allegations. To combat Lallemand’s well pled positions, DSM misconstrues Lallemand’s allegations and ignores well-established case law that dictates that a pleading will survive a motion to dismiss so long as it alleges a set of facts that, accepted as true, state a plausible claim for relief. Accordingly, DSM’s Motion must be denied. FACTUAL BACKGROUND DSM sued Lallemand for infringement of the ’998 Patent “arising out of [Lallemand’s] manufacture, use, sale, offer for sale, and/or importation of [Lallemand’s] TransFerm Yield+.” See Complaint (“Compl.”), ¶1. Lallemand denied infringement and counterclaimed. Lallemand’s First Counterclaim seeks a declaration that ’998 Patent is invalid under 35 U.S.C. Case: 3:16-cv-00497-wmc Document #: 28 Filed: 11/22/16 Page 1 of 11 2 §§ 102, 103, and/or 112. See Lallemand’s Affirmative Defenses and Counterclaims (“Aff. Defs. and Counterclaims”), ¶¶ 41-43. Specifically, Lallemand alleges that claims of the ’998 Patent are anticipated and obvious-and therefore, invalid under §§ 102 and 103-in light of 10 prior art references listed in the counterclaim. Id. at ¶¶ 12-17. Lallemand contends that these documents substantially disclose all of the elements of claim 1 of the ’998 patent. Id. at ¶ 13. In support of its First Counterclaim, Lallemand identifies these documents and elaborates its reasoning, which is based on many of the same facts provided by the European Patent Office (“EPO”) in its initial rejection of substantially the same patent claims in DSM’s European patent application corresponding to the patent-in-suit. Id. at ¶¶ 12-17, Although the EPO ultimately withdrew its objections under the European Patent Convention,1 Lallemand alleges that the ’998 Patent is invalid under the laws of the United States “over at least the same documents and for at least the same reasons” as provided by the EPO in its initial rejection of the application. Id. at ¶ 17. Lallemand’s First Counterclaim further alleges that the ’998 Patent is invalid under § 112 at least because “a person of ordinary skill in the art would not understand that the [DSM] patent application disclosed yeast strains having reduced activity of any enzyme required for NADH- dependent glycerol synthesis.” Id. at ¶ 18 (internal quotation marks omitted). This invalidating condition results directly from DSM’s position that infringement does not require that the accused products include the more specific reduced enzymatic activity recited in claim 1; 1 DSM contends that Lallemand “inexplicably ignore[d]” the fact that the EPO ultimately withdrew its objections under the European Patent Convention after DSM amended its claims because the document withdrawing the objections is dated October 6, 2016, five days before Lallemand filed its First Counterclaim. See Motion at 1 and 4. DSM’s contention assumes that this document was publically available on the EPO’s Web-site as of this date, and that Lallemand ignored it. There is no factual basis for either assumption. If the document had been available to Lallemand, Lallemand would have addressed it. Nonetheless, as argued herein, the EPO’s ultimate conclusion is irrelevant to these proceedings. Case: 3:16-cv-00497-wmc Document #: 28 Filed: 11/22/16 Page 2 of 11 3 namely, the inclusion of cells that “are free of NAD-dependent glycerol 3-phosphate dehydrogenase activity or have reduced NAD-dependent glycerol 3-phosphate dehydrogenase activity compared to corresponding wild-type cells.” Id. at ¶ 19 (internal quotation marks omitted). This limitation was added to claim 1 after the USPTO initially rejected the patent application under § 112, and is critical to the patentability of the claimed invention because the USPTO withdrew its § 112 objection only after the addition of the limitation to claim 1. See id. at ¶¶ 6 and 19. Lallemand has provided DSM with factual evidence that this specific reduced enzymatic activity of claim 1 is not present in the accused product. Id. at ¶¶ 5-9 and 21. Despite this, DSM accuses Lallemand of infringement while simply failing to allege that that this limitation of the claims is met. Id. at ¶¶ 10 and 20. Under DSM’s view of its own infringement case, the ’998 Patent invalid because it fails to meet one or more of the decisional requirements and/or conditions of patentability under § 112. LEGAL STANDARD The court must deny DSM’s Motion to Dismiss if Lallemand has alleged “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also Fed. R. Civ. P. 8(a) and 12(b)(6). Lallemand must plead “more than labels and conclusions, . . . a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. A counterclaim “has facial plausibility when the [counterclaimant] pleads factual content that allows the court to draw the reasonable inference that” the counterclaimant is entitled to the relief sought. Iqbal, 556 U.S. at 678. The court must “first accept all well-pleaded facts in the [counterclaim] as true and then ask whether those facts state a plausible claim for relief.” Firestone Fin. Corp. v. Meyer, 796 F.3d 822, 826 (7th Cir. 2015). Case: 3:16-cv-00497-wmc Document #: 28 Filed: 11/22/16 Page 3 of 11 4 Lallemand’s allegations supporting its First Counterclaim for a declaration of invalidity of the ’998 patent easily satisfy this standard. ARGUMENT I. Lallemand Sufficiently Alleged that the ’998 Patent is Invalid. A. Lallemand Sufficiently Alleged that the ’998 Patent is Anticipated and Obvious and is Thus Invalid Under 35 U.S.C. §§ 102 and 103. Under 35 U.S.C. § 102, a claimed invention is anticipated-and therefore not entitled to patent protection-if it was “patented, described in a printed publication, or in public use, or otherwise available to the public” more than one year before the date of the patent application. Under 35 U.S.C. § 103, “[a] patent claim is invalid . . . if the differences between the claimed invention and the prior art are such that the claimed invention as a whole would have been obvious before the effective filing date, [sic] to a person of ordinary skill in the relevant art.” Tannerite Sports, LLC v. Jerent Enters., LLC, No. 6:15-cv-00180-AA, 2016 WL 1737740, at *8 (D. Or. May 2, 2016) (counterclaim sufficiently alleged that claimed invention was invalid). Lallemand has pleaded sufficient facts to allege that the ’998 patent is invalid as anticipated and/or obvious under §§ 102 and 103. In doing so, Lallemand provides prior art references and reasoning that Lallemand contends invalidates at least claim 1 of the ’998 Patent. Aff. Defs. and Counterclaims, ¶¶ 13-14 and 17. Lallemand identified in its Affirmative Defenses and Counterclaims a number of specific prior art documents, each of which is denoted with a “D” number and each of which is known to DSM, that, if Lallemand’s factual bases are accepted as true, render claims of the ‘998 patent invalid as anticipated and/or obvious. Id. at ¶ 16. Specifically, Lallemand alleged the following:  Document D12 substantially anticipates claim 1 of the ‘998 patent. Case: 3:16-cv-00497-wmc Document #: 28 Filed: 11/22/16 Page 4 of 11 5  Documents D3 to D9 disclosed methods for producing ethanol using yeast strains with reduced glycerol synthesis, including the deletion of GPD1 and GPD2.  Documents D13 and D14 provide incentive for having the yeast strains of D3 to D9 further express a heterologous NAD+-dependent acetylating acetayldehyde dehydrogenase in combination with the reduction of glycerol. Id. at ¶¶ 13-14. The specific factual allegations as set forth by Lallemand in the First Counterclaim plead far more than a “formulaic recitation of the elements of a cause of action.” Twombly, 550 U.S. at 555. Indeed, Lallemand has alleged a set of facts that, accepted as true, both support and satisfy the elements of a claim of invalidity under 35 U.S.C. §§ 102 and 103, and therefore give rise to a “plausible inference of liability” required by Twombly/Iqbal. Contra RAH Color Techs. LLC v. Ricoh USA Inc., No. 2:15-cv-05203-JCJ, 2016 WL 3632720, at *4 (E.D. Pa. July 7, 2016) (defendant failed to meet Twombly/Iqbal pleading standard where it “pled no facts to support its claim for relief, and . . . neglected to identify a distinct legal basis for its claims, choosing instead to assert that [35 U.S.C. §§ 101-103, 112, and 132] . . . may make Plaintiff’s asserted patents invalid”). Contrary to DSM’s assertions, Lallemand does not “rely solely on the EPO’s conclusions and provide no further factual allegations.” Motion at 3. Lallemand refers to the factual contentions raised at the EPO in its allegations because they correctly describe the prior art references, and Lallemand alleges those facts specifically in its counterclaim. Following those factual allegations, Lallemand alleges: “The asserted claims of the ‘998 patent are invalid for failing to meet one or more of the requisite statutory and decisional requirements and/or conditions for patentability under 35 U.S.C. §§ 102 and/or 103 over at least the same documents and for at least the same reasons.” Aff. Defs. and Counterclaims, ¶ 17. Case: 3:16-cv-00497-wmc Document #: 28 Filed: 11/22/16 Page 5 of 11 6 DSM never argues that the factual assertions in the counterclaim are insufficient. Instead, it argues that the EPO ultimately withdrew its objections under the European Patent Convention, and that this somehow “negates” Lallemand’s counterclaim. Motion at 3-5 and 7-8. DSM’s conflation of Lallemand’s factual bases, the EPO’s legal conclusions under foreign law, and the requirements of U.S. law goes so far that DSM refers to the EPO as making objections under 35 U.S.C. §§ 102 and 103-which is, of course, jurisdictionally impossible. The fact that the EPO ultimately withdrew its initial objections under the European Patent Convention after DSM amended its claims is irrelevant. See, e.g., AIA Eng’g Ltd. v. Magotteaux Int’l S/A, 657 F.3d 1264, 1279 (Fed. Cir. 2011) (“our precedent cautions against indiscriminate reliance on the prosecution of corresponding foreign applications”); Heidelberger Druckmaschinen AG v. Hantscho Commercial Prods., Inc., 21 F.3d 1068, 1072 n.2 (Fed. Cir. 1994) (“[c]aution is required when applying the action of a foreign patent examiner to deciding whether [statutory] requirements . . . are met under United States law, for international uniformity in theory and practice has not been achieved”). Just as Lallemand cannot-and does not-rely solely on the EPO’s “conclusions” to support its First Counterclaim, DSM cannot rely solely on the EPO’s ultimate withdrawal of its objections as a basis to dismiss Lallemand’s First Counterclaim. See Quad/Tech, Inc. v. Q.I. Press Controls B.V., 701 F.Supp.2d 644, 655 (E.D. Pa. 2010) (“[F]oreign patent determinations are not binding in litigation concerning United States patent and patent law . . . [and are] not entitled to any deference.”). B. Lallemand Sufficiently Alleged that the ’998 Patent is Invalid Under 35 U.S.C. § 112. A patent must include a specification that “clear[ly],” “concise[ly],” and “exact[ly]” describes the invention. 35 U.S.C. § 112(a). The specification must “conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the inventor Case: 3:16-cv-00497-wmc Document #: 28 Filed: 11/22/16 Page 6 of 11 7 . . . regards as the invention.” 35 U.S.C. § 112(b). A patent is invalid under § 112 if the specification fails to “reasonably convey[] to those skilled in the art that the inventor had possession of the claimed subject matter as of the filing date.” Vasudevan Software, Inc. v. MicroStrategy, Inc., 782 F.3d 671, 682 (Fed. Cir. 2015) (internal quotation marks and citation omitted). Likewise, invalidity occurs when “claims, read in light of the specification delineating the patent, and the prosecution history, fail to inform with reasonable certainty, those skilled in the art about the scope of the invention.” Nautilus, Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120, 2124 (2014). Here, Lallemand alleges that the ’998 Patent is invalid because of the limitation in claim 1 that the “cells are free of NAD-dependent glycerol 3-phosphate dehydrogenase activity or have reduced NAD-dependent glycerol 3-phosphate dehydrogenase activity compared to corresponding wild-type cells.” Aff. Defs. and Counterclaims, ¶ 19 (internal quotation marks omitted). In support of its First Counterclaim, Lallemand alleged that this limitation is critical to the patentability of the claimed invention because the USPTO withdrew its § 112 objection only after the addition of the limitation to claim 1. See id. at ¶¶ 5-6 and 18-19. DSM’s infringement allegations ignore this critical claim limitation. Indeed, DSM asserts, incorrectly, that they need not address it. Motion at 9. Lallemand has provided DSM with factual evidence that this specific reduced enzymatic activity of claim 1 is not present in the accused product. Aff. Defs. and Counterclaims, ¶¶ 5-9 and 21. Despite this, DSM accuses Lallemand of infringement while simply failing to allege that that this limitation of the claims is met. Id. at ¶¶ 10 and 20. DSM necessarily asserts that the scope of its claims is the same as that found objectionable by the patent examiner. “At least because DSM now argues that the claim Case: 3:16-cv-00497-wmc Document #: 28 Filed: 11/22/16 Page 7 of 11 8 limitation that was added to address the patent examiner’s rejection under 35 U.S.C. § 112 need not be met, the asserted claims of the ‘998 patent are invalid.” Id. at ¶ 22. Again, DSM does not argue that these facts are insufficient to plead invalidity. Instead, DSM (1) mischaracterizes Lallemand’s counterclaim as being based “solely” on DSM’s infringement pleading, and (2) argues that it need not plead infringement element-by-element (citing to case law from a time before the abrogation of Form 18) and that it all it need do is say that claim 1 is infringed. Motion at 8-9. If DSM had properly pled infringement of the relevant claim limitation (it did not), Lallemand’s pleading still provides sufficient facts to make out invalidity. Lallemand asserts, and the Court must accept as true for these purposes, that the accused product does not have the critical reduced enzymatic activity that was required in the claim for § 112 purposes. DSM’s infringement claim necessarily requires a claim scope that violates § 112. Further, DSM is wrong that it need not plead infringement element by element. Until recently, Form 18 of the Federal Rules of Civil Procedure has controlled the analysis of whether a complaint alleging direct patent infringement sufficiently pleaded a claim. See K-Tech Telecomms. v. Time Warner Cable, Inc., 714 F.3d 1277, 1283 (Fed. Cir. 2013) (holding that “to the extent any conflict exists between Twombly (and its progeny) and the Forms regarding pleading requirements, the Forms control”). However, Federal Rules of Civil Procedure that took effect on December 1, 2015 abrogated Rule 84-and by association, Form 18. Since then, the majority of courts have held that the Iqbal/Twombly pleading standard now applies to direct patent infringement claims, and, accordingly, several courts have required plaintiffs to plausibly allege that the accused product meets each of the limitations found in at least one asserted claim. See, e.g., e.Digital Corp. v. iBaby Labs, Inc., No. 15-cv-05790-JST, 2016 WL 4427209, at *5 Case: 3:16-cv-00497-wmc Document #: 28 Filed: 11/22/16 Page 8 of 11 9 (N.D. Cal. Aug. 22, 2016) (holding that the complaint fails to state a claim where the court “cannot discern how [the complaint] could be said to plausibly allege [a] limitation” of a claim); Atlas IP, LLC v. Pac. Gas & Elec. Co., No. 15-cv-05469-EDL, 2016 WL 1719545, at *2 (N.D. Cal. Mar. 9, 2016) (“[S]imply reciting some of the elements of a representative claim and then describing generally how an accused product operates, without specifically tying the operation to any asserted claim or addressing all of the claim requirements, is insufficient.”); Atlas IP, LLC v. Exelon Corp., No. 15-cv-10746, 2016 WL 2866134, at *5 (N.D. Ill. May 17, 2016) (“[F]actual allegations that do not permit a court to infer that the accused product infringes each element of at least one claim are not suggestive of infringement-they are merely compatible with infringement.”); Raindance Techs., Inc. v. 10x Genomics, Inc., No. 15-cv-152-RGA, 2016 WL 927143, at *2 (D. Del. Mar. 4, 2016) (dismissing complaint after conducting an element-by- element analysis and finding that whether the various elements and limitations are met “involves quite a bit of supposition”). Accordingly, DSM’s failure to allege that the accused product meets the additional limitation to claim 1 amounts to DSM having contended that this critical claim limitation need not be met. See Aff. Defs. and Counterclaims, ¶ 22. If it need not be met, then, as Lallemand has alleged, the ’998 Patent is invalid under § 112 because “a person of ordinary skill in the art would not understand that the patent application disclosed yeast strains having ‘reduced activity of any enzyme required for NADH-dependent glycerol synthesis.’” Id. at ¶¶ 18, 22; see also Vasudevan Software, 782 F.3d at 682 (“‘[T]he disclosure of the application relied upon [must] reasonably convey[] to those skilled in the art that the inventor had possession of the claimed subject matter as of the filing date.’”) (internal quotation marks and citation omitted); Interval Licensing LLC v. AOL, Inc., 766 F.3d 1364, 1371 (Fed. Cir. 2014) (finding claims indefinite if Case: 3:16-cv-00497-wmc Document #: 28 Filed: 11/22/16 Page 9 of 11 10 they fail, “when read in light of the specification and prosecution history,” to “provide objective boundaries for those of skill in the art.”). II. In the Alternative, Lallemand Seeks Leave to Amend its First Counterclaim. If the court determines that Lallemand has not sufficiently pleaded certain aspects of its First Counterclaim, Lallemand respectfully requests leave under Rule 15(a) to amend the Counterclaim. “The court should freely give leave when justice so requires” and should grant leave absent some justification for refusal. Fed. R. Civ. P. 15(a)(2). No such justification exists here. Lallemand’s request to amend is not the product of “undue delay, bad faith, dilatory motive, repeated failure to cure deficiencies, [or] undue prejudice”; moreover, any potential defect in Lallemand’s First Counterclaim is curable. Stanard v. Nygren, 658 F.3d 792, 797 (7th Cir. 2011) (internal quotation marks and citation omitted). Lallemand has not previously amended any of its Counterclaims, and this case is in its infancy. Any amendments will not prejudice DSM. Thus, if the court grants DSM’s Motion, Lallemand requests leave to amend its Counterclaims accordingly. CONCLUSION Lallemand’s First Counterclaim states a plausible claim upon which relief can be granted. Thus, DSM’s Motion to Dismiss must be denied. In the alternative, Lallemand seeks leave to amend its First Counterclaim. Case: 3:16-cv-00497-wmc Document #: 28 Filed: 11/22/16 Page 10 of 11 11 Dated: November 22, 2016 /s/ Ronald E. Cahill Ronald E. Cahill, Esq. (pro hac vice) E-mail: rcahill@nutter.com Katy O. Meszaros, Esq. (pro hac vice admission pending) E-mail: kmeszaros@nutter.com Alison T. Holdway, Esq. (pro hac vice) E-mail: aholdway@nutter.com Nutter, McClennen & Fish, LLP Seaport West 155 Seaport Boulevard Boston, MA 02210 Telephone: (617) 439-2782 Facsimile: (617) 310-9782 Sarah A. Zylstra, Esq. E-mail: szylstra@boardmanclark.com Boardman & Clark LLP One South Pinckney, Suite 410 P.O. Box 927 Madison, WI 53701 Telephone: (608) 283-1741 Attorneys for Defendants-Counterclaimants LALLEMAND SPECIALTIES, INC. and MASCOMA CORPORATION 3439710.4 Case: 3:16-cv-00497-wmc Document #: 28 Filed: 11/22/16 Page 11 of 11