Ecojet, Inc. v. Pure Spa Components, Inc. et al

NOTICE OF MOTION AND MOTION to Dismiss Case [COUNTERCLAIMS]

C.D. Cal.December 19, 2016

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 John Shaeffer (SBN 138331) jshaeffer@foxrothschild.com Jeff Grant (SBN 218974) jgrant@foxrothschild.com FOX ROTHSCHILD LLP 1800 Century Park East, Suite 300 Los Angeles, CA 90067-1506 Telephone: 310-598-4150 Facsimile: 310-556-9828 Tom Dao (SBN 200925) tdao@koslaw.com KLEIN, O’NEILL & SINGH, LLP 16755 Von Karman, Suite 275 Irvine, CA 92606 Telephone: 949-955-1920 Facsimile: 949-955-1921 Attorneys for Plaintiff and Counterclaim Defendant ECOJET, INC. and Counterclaim Defendants, LEXOR, INC. and CHRISTOPHER LUONG UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION ECOJET, INC., Plaintiff, v. PURE SPA COMPONENTS, INC., and THAI PHAM, Defendants. Case No.: 16-CV-01463-CJC-KES Hon. Judge Cormac J. Carney NOTICE OF MOTION AND MOTION TO DISMISS COUNTERCLAIMS PURE SPA COMPONENTS, INC., and THAI PHAM, Counterclaim Plaintiffs, v. ECOJET, INC., LEXOR, INC., and CHRISTOPHER L. LONG, Counterclaim Defendants. Hearing Date: January 30, 2017 Hearing Time: 1:30 pm Courtroom: 9B Case 8:16-cv-01463-CJC-KES Document 25 Filed 12/19/16 Page 1 of 22 Page ID #:150 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 i TABLE OF CONTENTS Page I. INTRODUCTION ........................................................................................................................ 2 II. BACKGROUND .......................................................................................................................... 3 III. LEGAL STANDARDS ............................................................................................................ 5 A. Rule 12(b)(1) - Legal Standard for Jurisdiction Over Declaratory Judgment Claims .............. 5 B. Rule 12(b)(6) – Allegations Must Allege Plausible Claims for Relief ..................................... 6 IV. ARGUMENT ............................................................................................................................ 7 A. All of the Claims Against Luong and Three of the Claims Against Lexor Must Be Dismissed Under Rule 12(b)(1) .......................................................................................................................... 7 1. The Declaratory Judgment Claims Against Luong and Lexor Fail Where there is No Case or Controversy Between the Named Parties ................................................................................. 7 2. The Correction of Inventorship Claim Against Luong Fails .............................................. 10 B. All of Defendants’ Counterclaims Must be Dismissed Under Rule 12(b)(6) For Failure to State a Claim ................................................................................................................................... 11 1. Defendants’ First Counterclaim for Correction of Inventorship Fails to State a Plausible Claim for Relief and Should be Dismissed Under Rule 12(b)(6) ............................................... 11 2. Defendants’ Second Counterclaim for a Declaratory Judgment Regarding Intervening Rights Should be Dismissed Under Rule 12(b)(6) ..................................................................... 13 3. Defendants’ Third Counterclaim for a Declaratory Judgment Regarding Non-Infringement Should be Dismissed Under Rule 12(b)(6) ................................................................................. 14 4. Defendants’ Fourth Counterclaim for a Declaratory Judgment Regarding Invalidity Should be Dismissed Under Rule 12(b)(6) ............................................................................................. 15 5. Defendants’ Fifth Counterclaim for False Marking Should be Dismissed Under Rule 12(b)(6) ....................................................................................................................................... 16 V. CONCLUSION ........................................................................................................................... 17 Case 8:16-cv-01463-CJC-KES Document 25 Filed 12/19/16 Page 2 of 22 Page ID #:151 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 ii TABLE OF AUTHORITIES Page(s) Cases 3M Co. v. Avery Dennison Corp., 673 F.3d 1372 (Fed. Cir. 2012)........................................................................................................5 Acme Highway Prods. Corp. v. Maurer, 524 F.Supp.1130 (D.D.C. 1981) ..................................................................................................8, 9 Aetna Life Ins. Co. v. Haworth, 300 U.S. 227 (1937) .........................................................................................................................5 Aevoe Corp. v. AE Tech. Co., LTD., 2013 WL 876036 (D.Nev. March 7, 2013) ....................................................................................16 Beco Dairy Automation, Inc. v. Global Tech Systems, Inc., 2015 WL 925588 (E.D. Cal. 2015) ................................................................................................12 The Beer Barrel, LLC v. Deep Wood Brew Products, LLC, 2016 WL 5936874 (D. Utah Oct. 12, 2016) ..................................................................................15 Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) .............................................................................................................6, 11, 15 BIC Leisure Products, Inc. v. Windsurfing Intern., Inc., 1 F.3d 1214 (Fed. Cir. 1993)..........................................................................................................13 In re Bill of Lading, 681 F.3d 1323 (Fed. Cir. 2012)........................................................................................................6 Burroughs Wellcome Co. v. Barr Laboratories, Inc., 40 F.3d 1223 (Fed. Cir. 1994)........................................................................................................11 Caldwell Mfg. Co. v. Unique Balance Co., 18 F.R.D. 258 (S.D.N.Y. 1955) .....................................................................................................10 Cardinal Chemical Co. v. Morton International, 508 U.S. 83 (1993) ...........................................................................................................................6 Chou v. Univ. of Chi., 254 F.3d 1347 (Fed. Cir. 2001)......................................................................................................10 Coda Development s.r.o. v. Goodyear Tire & Rubber Company, 2016 WL 5463058 (N.D. Ohio 2016) ............................................................................................12 CopyTele, Inc. v. E Ink Holdings, Inc., 962 F.Supp.2d 1130 (C.D. Cal. 2013) ...........................................................................................10 Case 8:16-cv-01463-CJC-KES Document 25 Filed 12/19/16 Page 3 of 22 Page ID #:152 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 iii Crye Precision LLC v. Duro Textiles, LLC, 2015 WL 3751658 (S.D. N.Y. 2015) .............................................................................................15 Dainippon Screen Mfg. Co. v. CFMT, Inc., 142 F.3d 1266 (Fed. Cir. 1998)........................................................................................................9 Footbalance System Inc. v. Zero Gravity Inside, Inc., 2016 WL 5786936 (S.D. Cal. Oct. 4, 2016) ....................................................................................6 Fort James Corp. v. Solo Cup Co., 412 F.3d 1340 (Fed. Cir. 2005)........................................................................................................8 Helene Curtis Indus. v. Sales Affiliates, Inc., 199 F.2d 732 (2d Cir. 1952)...........................................................................................................10 Imatec, Ltd. v. Apple Computer, Inc., 81 F.Supp.2d 471 (S.D.N.Y. 2000) .................................................................................................9 Juniper Networks, Inc. v. Shipley, 643 F.3d 1346 (Fed. Cir. 2011)......................................................................................................16 Larson v. Correct Craft, Inc., 569 F.3d 1319 (Fed. Cir. 2009)......................................................................................................10 Marine Polymer Techs., Inc. v. Hemcon, Inc., 672 F.3d 1350 (Fed. Cir. 2012)......................................................................................................13 McZeal v. Sprint Nextel Corp., 501 F.3d 1354 (Fed. Cir. 2007)........................................................................................................6 MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007) .........................................................................................................................5 Meng v. Chu, 643 Fed.Appx. 990, 2016 WL 1321127 (Fed. Cir. Apr. 5, 2016) .................................................11 Minnesota Mining & Mfg. Co. v. Norton Co., 929 F.2d 670 (Fed. Cir. 1991)..........................................................................................................5 Octane Fitness LLC v. Icon Health and Fitness, Inc., 134 S.Ct. 1749 (2014) ....................................................................................................................17 Pharmachemie B. V. v. Pharmacia S.p.A., 934 F. Supp. 484 (D. Mass. 1996) .................................................................................................10 Preston v. Marathon Oil Co., 684 F.3d 1276 (Fed. Cir. 2012)........................................................................................................9 Quality Edge, Inc. v. Rollex Corp., 2015 WL 4392980 (W.D. Mich. 2015) ..........................................................................................15 Case 8:16-cv-01463-CJC-KES Document 25 Filed 12/19/16 Page 4 of 22 Page ID #:153 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 iv Red Carpet Studios v. Midwest Trading Group, Inc., 2016 WL 5661681 (S.D. Ohio 2016).............................................................................................12 Seattle Box Co., Inc. v. Industrial Crating and Packing Inc., 756 F.2d 1574 (Fed. Cir. 1985)......................................................................................................13 Sherman Treaters, Ltd. v. Ahlbrandt, 607 F. Supp. 939 (D.D.C. 1985) ......................................................................................................8 Shockley v. Arcan, Inc., 248 F.3d 1349 (Fed. Cir. 2001)......................................................................................................14 Supreme Court in Ashcroft v. Iqbal, 556 U.S. 662 (2009) .............................................................................................................6, 11, 15 Tannerite Sports, LLC v. Jerent Enterprises, LLC, 2016 WL 1737740 (D. Or., 2016)..................................................................................................15 Teva Pharms. USA, Inc. v. Pfizer, Inc., 395 F.3d 1324 (Fed. Cir. 2005)..................................................................................................8, 10 Wilton v. Seven Falls Co., 515 U.S. 277 (1995) .........................................................................................................................6 Statutes 28 U.S.C. § 2201(a) ...............................................................................................................................5 35 U.S.C. § 101 ...................................................................................................................................15 35 U.S.C. § 252 ................................................................................................................................4, 13 35 U.S.C. § 256 ..............................................................................................................................11, 12 35 U.S.C. § 285 ....................................................................................................................................17 35 U.S.C. § 292 ....................................................................................................................................16 Other Authorities Rule 9 ...................................................................................................................................................16 Rule 9(b) ..............................................................................................................................................16 Rule 12(b)(1) ..................................................................................................................................2, 5, 7 Rule 12(b)(6) ................................................................................................................................ passim U.S. Constitution Article III...................................................................................................................5 Case 8:16-cv-01463-CJC-KES Document 25 Filed 12/19/16 Page 5 of 22 Page ID #:154 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 1 PLEASE TAKE NOTICE that on January 30, 2017, at 1:30 pm., or as soon thereafter as this matter may be heard, in Courtroom 9B of the United States District Court for the Central District of California, located at 411 West Fourth Street, Santa Ana, CA 92701, Plaintiff and Counterclaim Defendant Ecojet, Inc. (“Ecojet”) and Counterclaim Defendants Lexor, Inc. (“Lexor”) and Christopher Luong (“Luong”), will and do hereby move this Court, pursuant to Rule 12 of the Federal Rules of Civil Procedure, for an order dismissing the counterclaims asserted by Defendants and Counterclaim Plaintiffs Pure Spa Components, Inc. and Thai Pham (“Counterclaimants”). This Motion is made in accordance with Federal Rule of Civil Procedure 12(b)(1) and (b)(6). Specifically, there is no subject matter jurisdiction for any of Counterclaimants’ claims against Luong. There is furthermore no subject matter jurisdiction for Counterclaims two, three, and four against Lexor, for declaratory judgment regarding intervening rights, non-infringement and invalidity, respectively. Finally, all of Counterclaimants’ claims against Ecojet, Lexor, and Luong are subject to dismissal under Rule 12(b)(6) for the failure to state a claim. This Motion shall be based upon this Notice of Motion, the attached Memorandum of Points and Authorities, the Declaration of Chris Luong submitted herewith, the pleadings and records on file herein, and upon such other matters as may be presented to the Court at the time of the hearing. This Motion is made following the conference of counsel pursuant to L.R. 7-3 which took place on December 15, 2016. Dated: December 19, 2016 FOX ROTHSCHILD LLP KLEIN, O’NEILL & SINGH, LLP By /s/ Jeff Grant John Shaeffer Jeff Grant Tom Dao Attorneys for Plaintiff and Counterclaim Defendant ECOJET, INC. and Counterclaim Defendants LEXOR, INC. and CHRIS LUONG Case 8:16-cv-01463-CJC-KES Document 25 Filed 12/19/16 Page 6 of 22 Page ID #:155 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 2 MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION Plaintiff Ecojet, Inc. (“Ecojet”) brought a straightforward action against Defendants and Counterclaim Plaintiffs Pure Spa Components, Inc. and Thai Pham (“Defendants” or “Counterclaimants”) for the infringement of Ecojet’s patented, highly valuable pump design that is the subject of U.S. Patent No. RE45,844 (the “‘844 Patent” or “Patent-in-Suit”). Defendants responded with poorly-assembled counterclaims – which they have already been amended once – against the wrong parties and that fail to state legally tenable claims. Defendants’ Answer, Affirmative Defenses and First Amended Counterclaims, Dkt. No. 23, (“Counterclaims”). Defendants’ Counterclaims should be dismissed under Rule 12(b)(1) and/or (b)(6). First, Defendants brought two parties into the case – Lexor, Inc. (“Lexor”) and Chris Luong – who have absolutely no business being in this litigation. While Defendants brought numerous declaratory judgment claims against Lexor and Luong, there is no case or controversy between Defendants, on the one hand, and Lexor or Luong, on the other. Neither Luong nor Lexor have threatened to bring a claim on the ‘844 Patent. Indeed, neither Luong nor Lexor would have standing to bring such a claim. There is, therefore, no case or controversy that could give rise to the declaratory relief actions asserted against Lexor and Luong. Further, the two non- declaratory relief claims brought against Lexor, and the single non-declaratory relief claim brought against Luong, are subject to dismissal under Rule 12(b)(6) as they are legally untenable. Second, all of Defendants’ Counterclaims are also subject to dismissal under Rule 12(b)(6) for failure to state a claim. None of the Counterclaims satisfy the Iqbal/Towmbly pleading standard. Defendants’ Counterclaims are replete with legal errors and should be dismissed. // // Case 8:16-cv-01463-CJC-KES Document 25 Filed 12/19/16 Page 7 of 22 Page ID #:156 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 3 II. BACKGROUND Luong is the named inventor of the ‘844 Patent. Declaration of Chris Luong, (“Luong Decl.”), ¶ 2. He assigned the rights to that invention to Lexor. Id., ¶ 2. Lexor is the largest spa pedicure corporation in the world. Id., ¶ 3. Among other things, Lexor makes and manufacturers high quality spa pedicure chairs and related equipment. Id. Lexor assigned substantially all of its rights to the ‘844 Patent to Ecojet pursuant to the parties Exclusive License Agreement. Id., ¶ 4 and Exhibit (“Ex.”) B. Ecojet makes jet pumps for spa pedicure chairs, including pumps that feature the invention claimed in the ‘844 Patent. Pursuant to the Exclusive License Agreement, Ecojet has had the exclusive right to “make, have made, use, sell, offer to sell, and import” products that practice the ‘844 Patent. Luong Decl., Ex. B, § II.A. The Exclusive License Agreement also gives Ecojet exclusive right to enter into sublicenses. Id. The Exclusive License Agreement furthermore gives Ecojet the right to enforce the ‘844 Patent and “have complete control of” any litigation. Id., § II.D. On August 8, 2016, Ecojet filed its (still-operative) Complaint against Defendants. Dkt. No. 1. Ecojet’s Complaint alleges that Defendants sell water jet pumps under the mark “EZ Jet” that infringe the ‘844 Patent. On September 27, 2016, Defendants filed their original answer and counterclaims, which included counterclaims against Ecojet and two additional parties, – Lexor and Luong. Dkt. No. 15. On October 19, 2016, Defendants filed their first amended answer and counterclaims (which was previously defined as “Counterclaims”). Dkt. No. 23. Defendants’ Counterclaims include five separate claims. First, Defendants assert that Defendant Thai Pham is a co-inventor of the invention claimed in the ‘844 Patent. Counterclaims, ¶¶ 56-62. The Counterclaims allege that Pham previously worked for Lexor and that Pham was supposedly part of a “team” responsible for the Case 8:16-cv-01463-CJC-KES Document 25 Filed 12/19/16 Page 8 of 22 Page ID #:157 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 4 invention.1 Id., ¶ 20. Defendants seek two types of relief based on these assertions. Defendants first ask for a declaratory judgment from this Court that Pham is a co- inventor. Id., ¶ 62. Defendants also ask for an order directing the USPTO to add Pham as a named inventor on the ‘844 Patent. See Counterclaims, Request for Relief on Counterclaims, pg. 28, ¶ C. Defendants’ second, third, and fourth claims are for declaratory relief. In their second claim, Defendants seek a declaration that they have “intervening rights” under 35 U.S.C. § 252. Counterclaims, ¶¶ 63-83. Defendants allege that they supposedly started selling the accused product prior to the issuance of the ‘844 Patent. Id., ¶¶ 70- 71. Defendants assert that they are entitled to absolute and equitable intervening rights, which would ostensibly shield Defendants from liability associated with their infringement of the ‘844 Patent. Id., 78-83. Defendants’ second counterclaim merely restates one of the affirmative defenses Defendants had previously asserted. Counterclaims, pg. 14:18-20. Defendants’ third and fourth claims seek a declaratory judgment of non-infringement and invalidity, respectively. Counterclaims, ¶¶ 84-95. Again, these claims are duplicative of already-asserted affirmative defenses. Counterclaims, pg. 11-12. Defendants fifth and final claim is for false marking. Counterclaims, ¶¶ 96- 105. Here, Defendants claim that Ecojet, Lexor, and Luong improperly marked “their Ecojet spa jet products” with U.S. Patent No. 8,272,079 (the “‘079 Patent”). Defendants’ conclusorily allege that this “false marking” resulted in a “competitive injury” to the Defendants. Counterclaims, ¶ 103. As set forth below, Defendants’ scattershot pleadings are riddled with errors and their Counterclaims must be dismissed. Two of the named counterclaim 1 In reality, Defendants’ Counterclaims are utterly baseless. Third-parties confirm that Pham had no role, whatsoever, in developing the invention claimed by the ‘844 Patent. However, the focus of this Motion is on the legal sufficiency of the Counterclaims, not their complete lack of factual support. Case 8:16-cv-01463-CJC-KES Document 25 Filed 12/19/16 Page 9 of 22 Page ID #:158 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 5 defendants – Lexor and Luong – are improperly named and should be dismissed from this lawsuit. Further, all of the claims are subject to dismissal under Rule 12(b)(6) for failure to state a claim. III. LEGAL STANDARDS A. Rule 12(b)(1) - Legal Standard for Jurisdiction Over Declaratory Judgment Claims The Declaratory Judgment Act provides that, “[i]n a case of actual controversy within its jurisdiction ... any court of the United States ... may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a). In order for the District Court to have subject matter jurisdiction of a declaratory judgment action, the action must meet the “case or controversy” requirement of Article III of the U.S. Constitution. Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239 (1937). For this determination in a patent case, Federal Circuit law is controlling. Minnesota Mining & Mfg. Co. v. Norton Co., 929 F.2d 670, 672 (Fed. Cir. 1991). A case or controversy must be “‘definite and concrete, touching the legal relations of parties having adverse legal interests,’” “‘real and substantial,’” and concern “‘specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.’” 3M Co. v. Avery Dennison Corp., 673 F.3d 1372, 1376 (Fed. Cir. 2012) (quoting MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007)). The Supreme Court summarized the standard as follows: Basically, the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment. MedImmune, 549 U.S. at 127. The allegations of the pleadings are not presumed to be Case 8:16-cv-01463-CJC-KES Document 25 Filed 12/19/16 Page 10 of 22 Page ID #:159 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 6 true, but if the facts alleged are contested, the declaratory complainant bears the burden of proof on such allegations. Cardinal Chemical Co. v. Morton International, 508 U.S. 83, 95 (1993). (“In the trial court, of course, a party seeking a declaratory judgment has the burden of establishing the existence of an actual case or controversy.”). Finally, even if there were a case or controversy based on proper pleadings, “district courts possess discretion in determining whether and when to entertain an action under the Declaratory Judgment Act, even when the suit other-wise satisfies subject matter jurisdictional prerequisites.” Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995). B. Rule 12(b)(6) – Allegations Must Allege Plausible Claims for Relief Courts have historically looked to “Form 18” to assess the sufficiency of allegations in patent cases. In re Bill of Lading, 681 F.3d 1323, 1334 (Fed. Cir. 2012). However, Form 18 has been withdrawn and the “pleading standards as construed by the Supreme Court in Ashcroft v. Iqbal, 556 U.S. 662 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) govern in patent cases.” Footbalance System Inc. v. Zero Gravity Inside, Inc., 2016 WL 5786936, at *2 (S.D. Cal. Oct. 4, 2016).2 To state a legally tenable claim, “‘a [claimant] must ‘provide the ‘grounds’ of his ‘entitle[ment] to relief’... and a formulaic recitation of the elements of a cause of action will not do.’” Twombly, 550 U.S. at 555 (2007) (citations omitted). To survive dismissal, a complaint must allege “sufficient factual matter, accepted as true, to ‘state a claim that is plausible on its face.’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). “A claim has facial plausibility when the Plaintiff pleads factual content that allows the court to draw the reasonable inference that the Defendant is liable for the misconduct alleged.” Id. (quoting Twombly, 550 U.S. at 556-57). 2 A Rule 12(b)(6) motion raises purely procedural issues and, consequently, Ninth Circuit law applies. McZeal v. Sprint Nextel Corp., 501 F.3d 1354, 1355-56 (Fed. Cir. 2007). Case 8:16-cv-01463-CJC-KES Document 25 Filed 12/19/16 Page 11 of 22 Page ID #:160 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 7 IV. ARGUMENT A. All of the Claims Against Luong and Three of the Claims Against Lexor Must Be Dismissed Under Rule 12(b)(1) Defendants’ claims against Luong and Lexor are specious and are subject to dismissal. Defendants named Luong as a defendant on their first, third, and fourth counterclaims, for correction of inventorship, declaratory judgment of non- infringement, and declaratory judgment of invalidity, respectively. All of these are subject to dismissal under Rule 12(b)(1). Defendants named Lexor on all of the claims set forth in their Counterclaims. Three of these, including Defendants’ second counterclaim (for a declaratory judgment of intervening rights), third counterclaim (for a declaratory judgment of non-infringement), and fourth counterclaim (for a declaratory judgment of invalidity) are also subject to dismissal under Rule 12(b)(1). 1. The Declaratory Judgment Claims Against Luong and Lexor Fail Where there is No Case or Controversy Between the Named Parties All of the Defendants’ counterclaims against Luong seek a declaratory judgment.3 Three of the five claims naming Lexor as a defendant seek a declaratory judgment exclusively.4 However, there is no case or controversy between the Defendants, on the one hand, and Luong and/or Lexor, on the other. All of the declaratory judgment claims against Luong and Lexor must therefore be dismissed. In a case involving patent rights, an “‘actual controversy’” exists only where there is “‘an explicit threat or other action by the patentee, which creates a reasonable 3 Defendants’ first claim for correction of inventorship seeks both a declaratory judgment and an order directing the USPTO to name Pham as an inventor on the ‘844 Patent. 4 Defendants’ fifth claim for false marking, which names both Ecojet and Lexor, does not seek declaratory relief. Case 8:16-cv-01463-CJC-KES Document 25 Filed 12/19/16 Page 12 of 22 Page ID #:161 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 8 apprehension on the part of the declaratory judgment plaintiff that it will face an infringement suit.’” Teva Pharms. USA, Inc. v. Pfizer, Inc., 395 F.3d 1324, 1332 (Fed. Cir. 2005) (citation omitted). Counterclaims for declaratory relief must also satisfy the “actual controversy” requirement. See Fort James Corp. v. Solo Cup Co., 412 F.3d 1340, 1348 (Fed. Cir. 2005). “‘When there is no actual controversy, the court has no discretion to decide the case.’” Teva Pharms., 395 F.3d at 1331 (citation omitted). In this case, Ecojet, the exclusive licensee of the ‘844 Patent, brought an action against Defendants. An “actual controversy” exists only between Ecojet and Defendants, and not between Lexor and Luong and the Defendants. Defendants have not and cannot allege that Lexor or Luong have threatened Defendants with an infringement action. Indeed, neither Lexor nor Luong would have standing to bring such an action. Luong no longer has any rights in the ‘844 Patent as such was assigned to Lexor. Lexor assigned substantially all of its rights – including the right to bring a lawsuit – in the ‘844 Patent to Ecojet. Defendants have not – and cannot – allege that there is an actual controversy involving Lexor or Luong. Where, as here, the exclusive licensee seeks to enforce the patent, there is no justiciable controversy with the patent owner (and certainly not with the original inventor who signed away all rights). Sherman Treaters, Ltd. v. Ahlbrandt, 607 F. Supp. 939, 941 (D.D.C. 1985) (finding no justiciable controversy between the patent owner and the defendant and dismissing the action for lack of jurisdiction). To establish an actual controversy, the plaintiff must show a reasonable apprehension of an infringement suit, “by the defendant presently before the court.” Id. at 943 (quotations omitted). “The patentee should not be subjected to a declaratory judgment action for charges of infringement which he did not level himself or allow another to level.” Id. at 943. Neither Lexor nor Luong level any accusations of infringement and neither should be subjected to this lawsuit. Identical facts were also before the court in Acme Highway Prods. Corp. v. Case 8:16-cv-01463-CJC-KES Document 25 Filed 12/19/16 Page 13 of 22 Page ID #:162 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 9 Maurer, 524 F.Supp.1130, 1131 (D.D.C. 1981), where the plaintiff brought a declaratory judgment action against the patent owner in response to infringement claims brought by the licensee against the plaintiff in a separate action. The court granted the defendant/patent owner’s motion to dismiss because the plaintiff failed to show that a justiciable controversy existed between it and the defendant/patent owner: [A]n exclusive licensee of a patent can maintain its action against an infringer without the advice, request, or participation of the licensor. In such a case, only the exclusive licensee has made a charge of infringement, the licensor making no charge, direct, or indirect. Consequently, there would be no controversy between the alleged infringer and the licensor, and therefore no basis for an action for declaratory relief by the former against the latter. Id., at 1131. Further still, neither Lexor nor Luong are indispensable parties to this litigation. Luong has no rights, whatsoever, in the Patent-in-Suit and no place, whatsoever, being a named party in this action. It is well established that “once an inventor has assigned the rights in a future invention, neither the inventor nor a subsequent assignee of the inventor has standing to sue” for claims arising from the previously-assigned invention. Imatec, Ltd. v. Apple Computer, Inc., 81 F.Supp.2d 471, 481 (S.D.N.Y. 2000) (citing FilmTec Corp. v. Allied-Signal, Inc., 939 F.2d 1568, 1573 (Fed. Cir. 1991)); see also Preston v. Marathon Oil Co., 684 F.3d 1276 (Fed. Cir. 2012) (finding that employee lacked standing because his invention was subject to the assignment clause of his employment agreement). While Lexor is the owner of the ‘844 Patent, it assigned substantially all of its rights to Ecojet. Courts hold that a patent owner is not an indispensable party when the licensee has the right to sue for infringement. See, e.g., Dainippon Screen Mfg. Co. v. CFMT, Inc., 142 F.3d 1266, 1272 (Fed. Cir. 1998) (even if holding company would be prejudiced by a finding of invalidity, it is not automatically an indispensable Case 8:16-cv-01463-CJC-KES Document 25 Filed 12/19/16 Page 14 of 22 Page ID #:163 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 10 party); CopyTele, Inc. v. E Ink Holdings, Inc., 962 F.Supp.2d 1130, 1144 (C.D. Cal. 2013) (patentee that assigned substantially all rights to exclusive licensee had no standing to bring infringement action); Helene Curtis Indus. v. Sales Affiliates, Inc., 199 F.2d 732, 733 (2d Cir. 1952) (patent owner is not indispensable where defendant licensee controls and represents the patent); Pharmachemie B. V. v. Pharmacia S.p.A., 934 F. Supp. 484, 490 n.7 (D. Mass. 1996) (nominal titleholder of patent not considered indispensable party); Caldwell Mfg. Co. v. Unique Balance Co., 18 F.R.D. 258, 263 (S.D.N.Y. 1955) (exclusive licensee who created justiciable controversy by charging another with infringement may be sued by an accused infringer for a declaration of invalidity or non-infringement without joining the patent owner). Finally, even if this Court were to find that it had subject matter jurisdiction over some portion of Defendants’ Counterclaims against Lexor or Luong, it should decline to exercise that jurisdiction. “Even if there is an actual controversy, [a] district court is not required to exercise declaratory judgment jurisdiction, but has substantial discretion to decline that jurisdiction.” Teva Pharms., 395 F.3d at 1331. The Court should decline to exercise its discretion to hear declaratory judgment claims against Lexor and Luong. Neither Lexor nor Luong is a necessary party for this Court to properly determine whether the ‘844 Patent is valid and whether Defendants’ products infringe. The only purpose in adding Lexor and Luong is to harass, and such objectives should not be countenanced by the Court. 2. The Correction of Inventorship Claim Against Luong Fails Defendants’ first claim for an inventorship correction against Luong also fails because Luong no longer has any economic stake in the ‘844 Patent. As set forth above, Luong assigned his rights to the invention to Lexor. Luong therefore has no interest in whether Pham is, or is not, named as an inventor on the ‘844 Patent. Chou v. Univ. of Chi., 254 F.3d 1347, 1359–60 (Fed. Cir. 2001) (only parties with an “economic stake” in the patent are proper defendants in a § 256(b) action); Larson v. Correct Craft, Inc., 569 F.3d 1319 (Fed. Cir. 2009) (inventor assignor had no financial Case 8:16-cv-01463-CJC-KES Document 25 Filed 12/19/16 Page 15 of 22 Page ID #:164 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 11 stake in the patent). Without any economic stake, Luong is not a proper defendant on the claim. B. All of Defendants’ Counterclaims Must be Dismissed Under Rule 12(b)(6) For Failure to State a Claim Defendants’ throw-everything-and-everyone-against-the-wall-and-see-what- sticks strategy resulted in a set of counterclaims that fail to state a plausible claim for relief. In addition to the flaws identified above in the claims asserted against Lexor and Luong, each and every one of Defendants’ claims should be dismissed under Rule 12(b)(6) for failing to satisfy the pleading standards set forth by the Supreme Court in Iqbal and Twombly. 1. Defendants’ First Counterclaim for Correction of Inventorship Fails to State a Plausible Claim for Relief and Should be Dismissed Under Rule 12(b)(6) “Because issued patents are presumed to correctly name their inventors, the burden of proving nonjoinder of inventors is a heavy one, which must be demonstrated by clear and convincing evidence.” Meng v. Chu, 643 Fed.Appx. 990, 2016 WL 1321127, at *4 (Fed. Cir. Apr. 5, 2016) (quotation marks and citation omitted). To establish a correction of inventorship under 35 U.S.C. § 256, “an alleged co-inventor must show that he contributed to the conception of the claimed invention and that his contribution was ‘not insignificant in quality, when that contribution is measured against the dimension of the full invention.’” Meng, 2016 WL 1321127, at *4. See Burroughs Wellcome Co. v. Barr Laboratories, Inc., 40 F.3d 1223, 1227-28 (Fed. Cir. 1994) (conception occurs when one has “a specific, settled idea, a particular solution to the problem”). Defendants’ first counterclaim for the correction of inventorship is, charitably, threadbare. The claim avers that “[t]he stated inventorship of the ‘844 [P]atent is incorrect” and that “Counterclaim Plaintiff Pham is at least a joint inventor of the subject matter claimed in the ‘844 [P]atent.” Counterclaims, ¶¶ 57-58. In the body of Case 8:16-cv-01463-CJC-KES Document 25 Filed 12/19/16 Page 16 of 22 Page ID #:165 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 12 the Counterclaims, Defendants assert that Pham was one of three individuals that were part of the “Lexor Spa Jet Design Team,” that this Team was instructed to “develop a new spa jet design in-house,” that the Team “designed a number of different spa jet designs that came to be known as the ‘Pure Flo,’” and that “[s]ome” of those designs are claimed in the ‘844 Patent. Id., ¶¶ 20-26. Defendants’ Counterclaims fail to identify whether the “inventor” that Defendants seek to add to the ‘844 Patent – Thai Pham – actually contributed anything inventive to the designs that the “Team” developed. The Counterclaims furthermore fail to specify whether any of the “Team’s” designs were subsequently claimed in the ‘844 Patent. Defendants fail to identify what specific contributions Pham allegedly provided, as would be required to show conception. Defendants fail to identify even a single element of any claims of the ‘844 Patent that Pham supposedly co-invented. These facts fall far short of a plausible showing that Pham conceived of a “specific, settled idea” that was clearly defined and embodied in a particular claim of the ‘844 Patent. Courts routinely dismiss inventorship claims like those set forth in the Counterclaims. See, e.g., Coda Development s.r.o. v. Goodyear Tire & Rubber Company, 2016 WL 5463058, at *4 (N.D. Ohio 2016) (dismissing inventorship claim where complaint failed to adequately identify the contribution of the proposed inventor); Red Carpet Studios v. Midwest Trading Group, Inc., 2016 WL 5661681, at *4 (S.D. Ohio 2016) (correction claim dismissed where complaint failed to specifically identify inventor’s contribution to patented invention); Beco Dairy Automation, Inc. v. Global Tech Systems, Inc., 2015 WL 925588, *5 (E.D. Cal. 2015) (claim under section 256 by allegedly omitted inventor dismissed where complaint failed to identify how putative inventor contributed to at least one claim of the patents). // // Case 8:16-cv-01463-CJC-KES Document 25 Filed 12/19/16 Page 17 of 22 Page ID #:166 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 13 2. Defendants’ Second Counterclaim for a Declaratory Judgment Regarding Intervening Rights Should be Dismissed Under Rule 12(b)(6) Defendants’ second counterclaim seeks a declaration of intervening rights. It names as Counterclaim defendants Ecojet and Lexor. The doctrine of intervening rights is codified in 35 U.S.C. § 252. That provision notes that: A reissued patent shall not abridge or affect the right of any person or that person’s successors in business who, prior to the grant of a reissue, made, purchased, offered to sell, or used within the United States, or imported into the United States, anything patented by the reissued patent, to continue the use of, to offer to sell, or to sell to others to be used, offered for sale, or sold, the specific thing so made, purchased, offered for sale, used, or imported unless the making, using, offering for sale, or selling of such thing infringes a valid claim of the reissued patent which was in the original patent. 35 U.S.C. § 252. The doctrine “originated as a defense against patents modified through reissue procedures.” Marine Polymer Techs., Inc. v. Hemcon, Inc., 672 F.3d 1350, 1362 (Fed. Cir. 2012). Intervening rights exist to protect the public’s right to use that which is not specifically claimed in the patent. Seattle Box Co., Inc. v. Industrial Crating and Packing Inc., 756 F.2d 1574, 1579 (Fed. Cir. 1985). There are two types of intervening rights – absolute and equitable. Absolute intervening rights allows the accused infringer to use or sell “anything made, purchased, or used before the grant of the reissue patent. In other words, it covers products already made at the time of reissue.” BIC Leisure Products, Inc. v. Windsurfing Intern., Inc., 1 F.3d 1214, 1220-21 (Fed. Cir. 1993). In accordance with the doctrine of equitable intervening rights, a court has the discretion to award an equitable right to continue to make, use, or sell an infringing device where the accused infringer undertook “substantial preparation before the grant of the reissue.” 35 Case 8:16-cv-01463-CJC-KES Document 25 Filed 12/19/16 Page 18 of 22 Page ID #:167 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 14 U.S.C. § 252. The Counterclaims contain only cursory allegations regarding intervening rights. Defendants allege merely that “[t]he ‘844 Patent does not claim, as patentable subject matter, any of the original claims 1-3 of the ‘079 [P]atent.” Counterclaims, ¶ 73. Defendants fail to offer any specificity, whatsoever, regarding how the scope of the two patents differ. Further, while Defendants allege, on information and belief, that Lexor and Ecojet were “aware” that Defendants sold the accused product before the ‘844 Patent was issued, Defendants failed to offer a single fact that would support their conclusion in that regard. Defendants’ Counterclaim furthermore does not allege that they had in their possession any accused products that they could use or sell at the time of the reissue. Shockley v. Arcan, Inc., 248 F.3d 1349, 1360 (Fed. Cir. 2001) (“a ‘specific thing’ qualifies for absolute intervening rights only if in existence at the time of reissue”). Defendants also fail to set forth a single equitable factor that would support a claim that they are entitled to equitable intervening rights. Defendants’ second counterclaim fails to state a viable claim and should be dismissed. 3. Defendants’ Third Counterclaim for a Declaratory Judgment Regarding Non-Infringement Should be Dismissed Under Rule 12(b)(6) For their third counterclaim, Defendants seek a declaratory judgment that their EZ Jet pumps – which Ecojet’s Complaint alleges infringe the ‘844 patent – do not, in fact, infringe. Defendants name as Counterclaim Defendants Ecojet and, curiously, Lexor and Luong.5 Defendants simply allege that their EZ Jet pumps “do[] not and ha[ve] not infringed any valid and enforceable claim of the ‘844 Patent.” Counterclaims, ¶ 87. Defendants however failed to identify any facts that, if true, would support a reasonable inference that the accused products do not practice the ‘844 Patent. Defendants’ Counterclaims do not identify a single aspect of the accused 5 As set forth above, neither Luong nor Lexor are proper defendants on this claim. Case 8:16-cv-01463-CJC-KES Document 25 Filed 12/19/16 Page 19 of 22 Page ID #:168 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 15 products that remove them from the scope of the claims of the ‘844 Patent, and they do not identify a single element of a single claim that the accused products do not practice. Defendants’ third counterclaim is manifestly insufficient under Iqbal and Twombly and should be dismissed. Tannerite Sports, LLC v. Jerent Enterprises, LLC, 2016 WL 1737740, at *5 (D. Or., 2016) (dismissing declaratory judgment claim for non-infringement where the pleadings failed to allege facts to support the claim); The Beer Barrel, LLC v. Deep Wood Brew Products, LLC, 2016 WL 5936874, at *5 (D. Utah Oct. 12, 2016) (dismissing conclusory, non-infringement declaratory judgment claim). 4. Defendants’ Fourth Counterclaim for a Declaratory Judgment Regarding Invalidity Should be Dismissed Under Rule 12(b)(6) Defendants’ fourth counterclaim seeks a declaration that Ecojet’s ‘844 Patent is invalid. Defendants name Ecojet, as well as Lexor and Luong. Again, Defendants rest on conclusory allegations: “The ‘844 Patent is invalid for failure to comply with one or more provisions of 35 U.S.C. § 101 et seq., including but not limited to §§ 102, 103, 112, 116, 132, 251, and/or 256.” Counterclaims, ¶ 92. Again, these allegations fail to satisfy Defendants’ pleading burden. See, e.g., Quality Edge, Inc. v. Rollex Corp., 2015 WL 4392980, *1-*4 (W.D. Mich. 2015) (dismissing bare bones counterclaim for declaratory judgment regarding invalidity); Crye Precision LLC v. Duro Textiles, LLC, 2015 WL 3751658, *9-*10 (S.D. N.Y. 2015) (“Duro’s counterclaims seeking declaratory judgment of invalidity of Crye’s Patents can be dismissed with reference to the pleading standard alone, as they allege without more that each of Crye’s Patents is ‘invalid for failure to satisfy one or more of the conditions of patentability set forth in Title 35 of the United States Code, including but not limited to 35 U.S.C. §§ 102, 103, 112 and/or 171,’ . . . These conclusory allegations of invalidity are unsupported by any factual allegations.”). Case 8:16-cv-01463-CJC-KES Document 25 Filed 12/19/16 Page 20 of 22 Page ID #:169 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 16 5. Defendants’ Fifth Counterclaim for False Marking Should be Dismissed Under Rule 12(b)(6) Defendants’ fifth counterclaim, alleged against Ecojet and Lexor, is for false patent marking under 35 U.S.C. § 292. Defendants allege that Ecojet and Lexor improperly marked Ecojet’s spa jet products as practicing the ‘079 Patent, that those markings were “false,” and that Defendants “suffered a competitive injury as a result of” this false marking. Counterclaims, ¶¶ 100-103. Not only are these allegations conclusory, but Defendants have failed to even give lip service to certain elements of the claim. The false marking statute requires proof that (1) a defendant affixed patent indicia to an unpatented article, (2) the false marking was done with an intent to deceive the public, and (3) that the claimant suffered a “competitive injury.” Aevoe Corp. v. AE Tech. Co., LTD., 2013 WL 876036, at *3 (D.Nev. March 7, 2013). A party alleging false marking must do so with specificity as false marking “sounds in fraud.” Juniper Networks, Inc. v. Shipley, 643 F.3d 1346, 1350 (Fed. Cir. 2011). “As such, false marking claims must satisfy the heightened pleading standard of” Rule 9. Id. “Rule 9(b) requires a plaintiff to plead in detail ‘the specific who, what, when, where, and how’ of the alleged fraud.” Id. (quotations omitted). Here, Defendants have not even acknowledged the requirement that they plead an intent to deceive the public, much less satisfied that element under the Rule 9’s heightened pleading standard. See, Aevoe, 2013 WL 876036, at *3 (dismissing false marking counterclaim where defendants failed to mention intent element). Further, Defendants allegations regarding a “competitive injury” are barebones and conclusory. “Defendants must allege additional facts that, when taken as true, plausibly establish that Defendants’ ability to compete in this market was impaired, and that Defendants suffered tangible economic loss as a result. Defendants’ conclusory statement of competitive injury is insufficient to satisfy the pleading standard.” Id. Case 8:16-cv-01463-CJC-KES Document 25 Filed 12/19/16 Page 21 of 22 Page ID #:170 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION TO DISMISS ACTIVE\43685640.v1-12/19/16 17 V. CONCLUSION For all of the foregoing reasons, Defendants’ Counterclaims should be dismissed.6 Dated: December 19, 2016 Respectfully submitted, FOX ROTHSCHILD LLP KLEIN, O’NEILL & SINGH, LLP By /s/ Jeff Grant John Shaeffer Jeff Grant Tom Dao Attorneys for Plaintiff and Counterclaim Defendant ECOJET, INC. and Counterclaim Defendants LEXOR, INC. and CHRIS LUONG 6 Ecojet, Lexor, and Luong reserve the right to seek attorneys’ fees under 35 U.S.C. § 285 upon the dismissal of one or more of the Counterclaimants’ claims under the Patent Act. In particular, Counterclaimants’ declaratory relief claims for non- infringement and invalidity against Luong – who has no right whatsoever to the Patent-in-Suit – plainly “stand out” from other claims brought under the Patent Act. See Octane Fitness LLC v. Icon Health and Fitness, Inc., 134 S.Ct. 1749, 1756 (2014) (holding that “an ‘exceptional case’ is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”). 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