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E. I. Du Pont D Nemours and Co. v. Agfa NV

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

January 22, 2019

E. I. DU PONT D NEMOURS & CO., Plaintiff,
v.
AGFA NV, et al., Defendants,

          ORDER

          HENRY COKE MORGAN, JR. SENIOR UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on the Report and Recommendation of the United States Magistrate Judge concerning two (2) Motions: E.I. DuPont de Neumours and Company's ("Plaintiffs" or "DuPont's") Motion for a Temporary Restraining Order and Preliminary Injunction, Doc. 21; and Agfa NV and Agfa-Gavaert NV's (collectively, "Agfa Defendants'") Motion to Dismiss, Docs. 57, 139.[1] The parties have filed several objections to the Report. See Docs. 140, 146.

         For the reasons stated herein, the Court OVERRULES the parties' objections and ADOPTS the Magistrate Judge's Report and Recommendation. The Court further DENIES DuPont's request for leave to amend its Complaint.

         I. BACKGROUND

         A. Parties

         Plaintiff DuPont is a Delaware corporation and the global manufacturer and supplier of Cyrel® Flexographic Printing Plates and Equipment. Doc. I at 3-4. DuPont's German subsidiary is DuPont de Nemours (Deutschland) GmbH ("DuPont Germany"). Report at 16.

         Defendant Agfa NV[2] ("Belgian Subsidiary") is a Belgium public limited company and subsidiary of Defendant Agfa-Gevaert NV ("Agfa Parent"). Doc. 1 at 3. Belgian Subsidiary operates and controls the global Agfa Graphics business. Doc. 146 at 4. Agfa Corporation ("Delaware Subsidiary") is a Delaware corporation and subsidiary of Agfa Parent that functions in the North American Regional headquarters and U.S. sales office for the global Agfa Graphics business unit. hi. Agfa Parent owns approximately eighty-five to eighty-eight percent (85-88%) of Belgian Subsidiary and one hundred percent (100%) of Delaware Subsidiary. Report at 6.

         B. Findings of Fact

          The parties have an extensive history of business relations and litigation. The Report thoroughly describes the events leading up to this lawsuit, and the parties do not challenge the findings of the Report. The findings are summarized below.

         i. European Patent Office Lawsuit

         On June 26, 2002, the European Patent Office ("EPO") granted European Patent EP 1170 121 B1 ("EP '121 patent") to Agfa Parent for a "[d]irect-to-plate flexographic printing plate precursor." Report at 3. Agfa Parent secured a patent for this technology from the German Patent and Trademark Office on March 6, 2003 (Patent DE 600 00 237 T2 "German '237 patent") and from the United States Patent and Trademark Office ("PTO") on April 22, 2003 (US 6, 551, 759 B2, '"759 patent"). Id.

         DuPont filed an opposition to the EP '121 patent on March 25, 2003. In May 2005, in response to DuPont's opposition in the EPO, counsel for Belgian Subsidiary informed DuPont's counsel that DuPont's "Cyrel Digital Fast" product infringed both the EP '121 patent and its "counterpart," the '759 patent. Id. at 3-4. Counsel for DuPont and Belgian Subsidiary discussed DuPont's potential withdrawal of its opposition action in the EPO in exchange for a license from Agfa to the EP' 121 patent and "all worldwide counterparts," including the '759 patent. Id. at 4. However, negotiations stalled as both parties awaited the outcome of the EPO dispute. Id. On February 1, 2017, the EPO rejected DuPont's request to revoke the EP '121 patent. Id. at 15.

         ii. Pitman Acquisition and Distribution Agreement

         The Harold M. Pitman Company ("Pitman") was a United States distributor of DuPont's Cyrel FAST photopolymer plates and processing equipment. Report at 5. Delaware Subsidiary moved to acquire Pitman in 2010. Report at 5. According to statements of the Agfa Graphics Management Committee ("GMC")[3], the acquisition was part of a strategy to double the U.S. market share of the global "Agfa Graphics" business group. Id. at 6. After negotiations among DuPont, Pitman, and Delaware Subsidiary, DuPont consented to Pitman's assignment of its distribution agreement with DuPont to Delaware Subsidiary as part of the acquisition. Id. at 9.

         Pitman and Delaware Subsidiary executed an asset purchase agreement on July 14, 2010, through which Delaware Subsidiary acquired Pitman, Id. Agfa Parent provided the funds for the acquisition. Id. Delaware Subsidiary also executed an assignment and assumption agreement on August 9, 2010, to assign the trademarks it received as part of the Pitman acquisition to Belgian Subsidiary. Id. The agreement acknowledged that Belgian Subsidiary was Delaware Subsidiary's "affiliate," and that Agfa Parent:

[T]he ultimate parent of both Assignor and Assignee, has concluded that it and its affiliates and subsidiaries benefit from centralized ownership and management of intellectual property related to trademarks and trade names and has therefore instituted a corporate policy that the ultimate parent of each of its businesses owns and manages all of the intellectual property related to trademarks and trade names of the respective businesses.

Id. at 10. Finally, DuPont and Delaware Subsidiary entered into a distribution agreement ("Distribution Agreement"), effective January 1, 2011, regarding several DuPont products. including Cyrel FAST polymer plates and Cyrel FAST processing equipment ("Products"). Id. The Distribution Agreement supersedes all prior agreements with Pitman and states, in relevant part:

[Delaware Subsidiary] shall promote the PRODUCTS and conduct its business in a manner that will reflect favorably, at all times, on the PRODUCTS and on the good name, goodwill and reputation of DUPONT.
. . . .
[Delaware Subsidiary] shall use information regarding the PRODUCTS provided by DuPont, including without limitation promotional and technical literature, solely for purposes of performing its obligations hereunder, including but not limited to developing its marketing programs for the PRODUCTS, [Delaware Subsidiary] shall make no claims, warranties, statements or representations with respect to the Products other than those set forth in product literature that is provided by DuPont....

Id. The Distribution Agreement did not contain a license agreement or otherwise address the dispute in the EPO. It did, however, state that "nothing contained in this Agreement shall restrict or in any way limit DUPONT's right to sell PRODUCTS to any type of customer or distributor in any geographic area, including the Territory. Id. at 11.

         iii. Agfa Business Difficulties

         After the Pitman acquisition, Agfa Parent experienced poor performance in the U.S. market. Report at 11-13. By 2012, the Agfa Graphics Management Committee asked the chairman of the board of Delaware Subsidiary to prepare a plan to stop use of the Pitman brand, which was causing confusion among customers. Id. at 13. In 2013, the GMC observed XXXXX of the Pitman revenue was Cyrel plates business, representing XXXXX of DuPont's polymer sales in the U.S. Id. Packaging was XXXXX non- Agfa branded. Id. The GMC further noted that the contract with DuPont was due for renewal, and "stress[ed] the importance to be careful in renegotiating better conditions for Agfa with DuPont." Id., at 14.

         Due to profitability issues, Delaware Subsidiary leadership apparently began to consider using the '759 patent as leverage against DuPont. Stefaan Vanhooren, identified as president of "Agfa Graphics," stated in an internal email: "[W]e need to consider what we do with this patent in light of our packaging, flexo strategy as well as our threats in the future." Id. His suggestions included selling the Pitman business and "once we sold, we monetize the patent," or "keep the business, grow it and move margins up to XXXXX using the patent power as well." Id. at 14. In an email from 2014, Vanhooren stated "DuPont relationship in USA is under pressure .... Do not forget we still have the bomb patent for flexo that I want to launch at the right moment - maybe on occasion of such strategic discussions next year?" Id., at 15.

         iv. German litigation

         On July 4, 2017, Belgian Subsidiary filed a patent infringement case against DuPont Germany in the regional court in Dusseldorf, Germany, alleging that DuPont's Cyrel FAST DFR printing plate infringed the EP '121 patent. Report at 16. The complaint included several attachments describing, inter alia, applications, technical information, production, and advantages of the Cyrel FAST technology. Id. at 17. The attorney who prepared the German complaint testified by affidavit that: "Each exhibit and figure was obtained or downloaded in Europe," and ''none of these materials were obtained or downloaded in the United States." Id. at 18.

         v. Negotiations with DuPont

         On August 31, 2017, DuPont's legal department sent a letter to corporate leaders of Agfa-Parent, Belgian Subsidiary, and Delaware Subsidiary demanding dismissal of the German litigation. Report at 18. First, DuPont asserted that the parties agreed in 2005 to "await the final decision" from the EPO regarding the validity of the EP '121 and '759 patents, and that DuPont did "not understand [Agfa's] justification or reasons for unilaterally and without notice repudiating our agreement to suspend negotiation." Id. at 19. Second, DuPont claimed it had "justifiably relied" on the 2005 agreement in the course of later relationships regarding Cyrel products in the United States and United Kingdom. Id. Third, DuPont asserted that Agfa Parent, Delaware Subsidiary, and Belgian Subsidiary impliedly licensed DuPont under the EP '121 patent and the '759 patent to market and sell Cyrel FAST plates made in Germany. Id. Finally, DuPont claimed that the use of DuPont's brochures in the German complaint violated DuPont's copyright protections and breached the Distribution Agreement. Id. Agfa agreed to a stay of sixty (60) days in the legal proceedings and requested a follow-up meeting "to determine a mutually agreeable measure of the settlement" and "how to translate it into a business solution." Id. at 20.

         Gunther Mertens, CFO of Delaware Subsidiary, testified that the goal of the discussions with DuPont was to "translate [the] compensation" for DuPont's patent infringement into more favorable business terms. Id. Mertens' proposed to "translate a potential claim . . . into a settlement paid through a distribution agreement, either an enhancement of the [Distribution Agreement] in the U.S. or an expansion of our distribution arrangements into Europe or Latin America with DuPont." Id.

         vi. Delaware Litigation

         The parties apparently did not reach an agreement at the meeting on October 17, 2017, because on November 3, 2017, DuPont filed a complaint in the United States District Court for the District of Delaware against Agfa Parent, Belgian Subsidiary, and Delaware Subsidiary. Report at 21. DuPont alleged, inter alia, patent infringement by the '759 patent, unfair competition under the Lanham Act, breach of contract, and copyright infringement. Id. at 21-22. DuPont also filed a motion for a temporary restraining order and preliminary injunction regarding what it claimed was the improper use of DuPont materials in the complaint in the German litigation. Id. at 22. Agfa Parent and Belgian Subsidiary filed a motion to dismiss pursuant to Rule 12(b)(2), asserting the court lacked personal jurisdiction over them. Id.

         After a hearing, the court issued an order on June 8, 2018, granting the motion to dismiss for lack of personal jurisdiction over Agfa Parent and Belgian Subsidiary and denying DuPont's motion for a temporary restraining order and preliminary injunction. Id. The Delaware court rejected three theories of personal jurisdiction: 1) that the U.S. Distribution Agreement and Pitman acquisition bound the Belgian Subsidiary and established sufficient contacts for personal jurisdiction; 2) that Delaware Subsidiary was an "agent" of either Agfa Parent or Belgian Subsidiary; and 3) that the court could reach the Agfa Defendants by piercing the corporate veil. Id. at 24. The Court specifically noted that "[w]hether the assignment[4] of the patent is a 'sham* transaction aimed to divest another court of jurisdiction is irrelevant to futility of amendment here." Id. at 25.

         DuPont appealed the dismissal of Agfa Parent and Belgian Subsidiary to the Court of Appeals for the Federal Circuit on August 22, 2018. Id. The appeal is still pending.

         vii. Virginia Litigation

         After the Delaware court issued its order, DuPont filed a Complaint in this Court against Agfa Parent and Belgian Subsidiary. Doc. 1. DuPont alleges that ""[Belgian Subsidiary] wrongfully and intentionally filed an action for patent infringement in Germany and wrongfully threatens issuance of an injunction as early as December 2018 that would require the cessation of DuPont's sales activities in Germany and elsewhere," and that it "misus[ed] DuPont promotional materials provided by DuPont in violation of the terms of the [Distribution Agreement]" when it filed the complaint in the German litigation." Report at 26. DuPont seeks a temporary restraining order or preliminary injunction requiring Belgian Subsidiary "to withdraw the improper German complaint and to proceed, if at all, with a complaint relying on material that is not in violation of the Distribution Agreement," or, in the alternative, to stay the German litigation pending this Court's determination "'whether it should order Agfa Graphics to withdraw the improperly filed complaint and materials." Id. DuPont alleges personal jurisdiction over Belgian Subsidiary and Agfa Parent under 35 U.S.C. § 293, which furnishes jurisdiction in the Eastern District of Virginia over certain foreign entities with U.S. patents. Doc. 1 at 2.

         DuPont asserts twelve additional claims. Counts I-V (the "patent counts") all concern the '759 patent: Count 1 seeks a declaratory judgment of invalidity; Count II requests declaratory judgment of non-infringement; Count 111 seeks declaratory judgment of implied license of the '759 patent; Count IV seeks declaratory judgment of equitable estoppel; and Count V seeks declaratory judgment of patent exhaustion. Id. Counts VI-XII ("non-patent counts") assert a variety of claims under federal, Delaware, and Virginia law: Count VI alleges unfair competition; Count VII alleges copyright infringement; Count VIII alleges breach of contract of the covenant of good faith and fair dealing; Count IX alleges breach of website terms of use; Count X alleges a violation of Delaware's Deceptive Trade Practices Act; Count XI alleges a violation of the Delaware Consumer Fraud Act; and Count XII alleges a Violation of the Virginia Business Conspiracy Statute. Doc. 1.

         viii. Patent Assignments

         On December 31, 2006, Agfa Parent assigned the '759 patent to Belgian Subsidiary. Report at 29. The parties do not dispute the validity of this first assignment. Id. When this suit was filed on June 15, 2018, Belgian Subsidiary owned the '759 patent and Delaware Subsidiary did not. Id. On or about July 2, 2018, Belgian Subsidiary and Delaware Subsidiary executed a patent assignment of the '759 patent ("assignment") for "good and valuable consideration." Id. On July 6, 2018, counsel for Agfa Defendants and Delaware Subsidiary sent an email to DuPont's counsel to inform them that, "in view of the pending actions in Delaware and Virginia between DuPont and Agfa entities, [the '759 patent] there in suit has been assigned to [Delaware Subsidiary] as of July 2, 2018." Id. at 30. She requested DuPont's "consent to file an amended answer and counterclaim in the Delaware action to add a counterclaim of patent infringement," and stated, "in light ...


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