United States District Court, E.D. Virginia, Norfolk Division
E. I. DU PONT D NEMOURS & CO., Plaintiff,
AGFA NV, et al., Defendants,
COKE MORGAN, JR. SENIOR UNITED STATES DISTRICT JUDGE.
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. The parties have filed several objections
to the Report. See Docs. 140, 146.
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.
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.
Agfa NV ("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.
Findings of Fact
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
European Patent Office Lawsuit
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.
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.
Pitman Acquisition and Distribution Agreement
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"), 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.
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.
Agfa Business Difficulties
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.
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.
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.
Negotiations with DuPont
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.
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.
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.
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 of the patent is a 'sham* transaction
aimed to divest another court of jurisdiction is irrelevant
to futility of amendment here." Id. at 25.
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.
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.
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.
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 ...