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ORBCOMM Inc. v. CalAmp Corp.

United States District Court, E.D. Virginia, Richmond Division

September 9, 2016

ORBCOMM INC., Plaintiff,
v.
CALAMP CORP., Defendant.

          MEMORANDUM OPINION (PLAINTIFFS MOTION TO DISMISS DEFENDANT'S INEQUITABLE CONDUCT COUNTERCLAIM)

          Henry E. Hudson United States District Judge

         THIS MATTER is before the Court on Plaintiff ORBCOMM, Inc.'s ("Plaintiff) Motion to Dismiss Defendant CalAmp Corp.'s ("Defendant") Counterclaim and to Strike Its Inequitable Conduct Defense (ECF No. 38), filed on August 9, 2016. On July 19, 2016, Defendant filed its First Amended Answer (ECF No. 27) to this patent infringement suit. Defendant's First Amended Answer included an affirmative defense and a counterclaim both alleging that one of the patents-in-suit is unenforceable because of Plaintiff s inequitable conduct. Plaintiff has moved to dismiss the inequitable conduct counterclaim pursuant to Federal Rule of Civil Procedure 12(b)(6) and to strike the inequitable conduct defense pursuant to Federal Rule of Civil Procedure 12(f). Each side has filed memoranda supporting their respective positions. For the reasons set forth below, the Court will deny Plaintiffs Motion.

         I. BACKGROUND

         This lawsuit involves five separate but interrelated patents. Only one of them, U.S. Patent No. 6, 611, 686 ("the '686 patent"), is the subject of the inequitable conduct allegations.

         As required by Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Court assumes the claimant's well-pleaded allegations to be true and views all facts in the light most favorable to it. T.G. Slater & Son v. Donald P. & Patricia A. Brennan, LLC, 385 F.3d 836, 841 (4th Cir. 2004) (citing Mylan Labs, Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993)). At this stage, the Court's analysis is both informed and constrained by the four corners of Defendant's Counterclaim. However, the Court may also consider documents attached to the counterclaim, "so long as they are integral to the complaint and authentic." Philips v. Pitt Cty. Mem'l Hosp., 572 F.3d 176, 180 (4th Cir. 2009). Viewed through this lens, the facts are as follows.

         In 2014, the '686 patent was owned by Joseph Smith ("Smith"), the patent's named inventor. (Am. Answer ¶ 178, ECF No. 27.) On June 3, 2014, Smith filed separate lawsuits in the Eastern District of Texas against Honeywell International, Inc. and ORBCOMM, Inc., alleging infringement of the '686 patent by both Honeywell and ORBCOMM. (Id. ¶¶ 178-79.) On July 14, 2014, Smith filed yet another action in the Eastern District of Texas, this time against SkyBitz, Inc., again alleging infringement of the '686 patent. (Id. ¶ 180.) On October 13, 2014, the district court consolidated the Honeywell and SkyBitz cases, designating Honeywell as the lead case ("Honeywell case"). (Id. ¶181.)

         On June 19, 2015, the district court issued a claim construction memorandum opinion and order ("Honeywell Claim Construction Order") in the Honeywell case. (Id. ¶ 184.) In the Honeywell Claim Construction Order, the court concluded that the patent examiner had made an obvious clerical error in the '686 patent that could be corrected by the court. (Id.) Specifically, the court construed the term "inputs to be controlled" in claims 15 and 48 of the '686 patent to mean "inputs to be monitored." (Id.) SkyBitz moved for reconsideration of this construction, arguing that the '686 patent did not contain a clerical error and that the district court did not have the authority to change the claim language. (Id. ¶ 85-86.)

         On August 3, 2015, the district court consolidated the Honeywell case and the ORBCOMM case, designating ORBCOMM as the lead case ("ORBCOMM case"). (Id. ¶ 187). The court vacated its Honeywell Claim Construction Order so that claim construction could start over in the newly consolidated case. (Id. Ex. 3, at 2.)[1] The court thus denied SkyBitz's motion for reconsideration as moot. (Id. Ex. 3, at 3.) At the time of the ORBCOMM case consolidation, and throughout the remainder of the Eastern District of Texas litigation, Herbert Kerner ("Kerner") represented ORBCOMM. (Id. ¶ 183.)

         In its claim construction brief for the newly consolidated case, ORBCOMM stated that it had "decided to adopt the position of Skybitz" with respect to the term "inputs to be controlled." (Id.¶ 188.) This was a change in ORBCOMM's position. Before the consolidation, ORBCOMM and Smith had agreed to the court's construction from the Honeywell case. (Id. Ex.4, at 8 n.l.) In its claim construction brief, ORBCOMM also argued that there was "no basis to 'correct' the term at issue." (Id. ¶ 189.) ORBCOMM asserted that "inputs to be controlled" did not meet the requirements for judicial correction because there was not an error obvious on the face of the patent. (Id. Ex. 4, at 13.) ORBCOMM maintained that it was improper for the court to rely on the patent's prosecution history in making a correction to the claim language. (Id. Ex. 4, at 14, 17 n.2.) As evidence of there being no obvious error on the face of the '686 patent, ORBCOMM pointed to Smith's arguments in the Honeywell claim construction where he, as the inventor, denied any error in the "inputs to be controlled" language. (Id. ¶ 189). ORBCOMM also went on to argue that, because there was no obvious error on the face of the patent, the term "inputs to be controlled" was indefinite, rendering claims 15 and 48 invalid. (Id. Ex. 4, at 17-20.)

         The district court adopted ORBCOMM's argument. It issued a claim construction memorandum opinion and order ("ORBCOMM Claim Construction Order") in the consolidated case on September 10, 2015. (Id. ¶ 190.) The court found that "the error is not evident from the face of the patent, " and thus the court "does not have the authority to correct the patent in such circumstances." (Id. Ex. 5, at 14). The court further found that "said inputs to be controlled" was indefinite, rendering claims 15 and 48 of the '686 patent invalid. (Id.) At the heart of the court's analysis was the fact that throughout both the Honeywell and ORBCOMM claim construction processes Smith "argue[d] for an alternative construction of the phrase 'input to be controlled.'" (Id. ¶ 190.)

         On October 13, 2015, the district court granted a stipulated motion to dismiss the ORBCOMM case. (Id. ¶ 191.) In conjunction with the lawsuit being dismissed, ORBCOMM became the owner of the '686 patent. (Id. ¶ 192.)

         On November 4, 2015, Kerner, representing ORBCOMM, the new patent owner, petitioned the United States Patent and Trademark Office ("PTO") seeking to change the "inputs to be controlled" language of the '686 patent-the same language subject to the previous litigation. (Id. at 194). Kerner sought an expedited issuance of certificate of correction pursuant to Manual of Patent Examining Procedure ("MPEP") § 1480.01. (Id. at 195). To demonstrate that the "inputs to be controlled" language was an error attributable solely to the PTO, Kerner only included the patent examiner's amendment to the '686 patent language dated December 13, 2010, and the district court's vacated Honeywell Claim Construction Order. (See Id. Ex. 6.) Kerner did not disclose, however, that the Honeywell Claim Construction Order had been vacated, nor did he provide any other documents from the Honeywell or ORBCOMM litigation. (See id.) The PTO granted Kerner's request for correction on December 21, 2015. (Id. ¶ 194.)

         II. LEGAL STANDARD

         "A motion to dismiss under Rule 12(b)(6) tests the sufficiency of a complaint; importantly, it does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Republican Party of N.C. v. Martin,980 F.2d 943, 952 (4th Cir. 1992). A reviewing court must consider the well-pleaded allegations as true and view the complaint in the light most favorable to the claimant; legal conclusions enjoy no such deference. Ashcroft v. Iqbal,556 U.S. 662, 678 (2009). The Federal Rules of Civil Procedure generally "require[] only 'a short and plain statement of the claim showing that the pleader is entitled to relief, ' in order to 'give the defendant fair notice of what the ... claim is and the grounds upon which it rests."' Bell Atl. Corp. v. Twombly,550 U.S. 544, 555 (2007) (quoting Conley v. Gibson,355 U.S. 41, 47 (1957)). However, the defense of inequitable conduct in patent cases triggers the more stringent pleading requirements of Rule ...


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