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Evonik Degussa GmbH v. Materia Inc.

United States District Court, D. Delaware

March 28, 2018

MATERIA, INC., Defendant.




          NOEL L. HILLMAN, U.S.D.J.

         Before the Court are three separate but overlapping motions filed by Evonik. First is an informal motion by Evonik to find inequitable conduct. Second is Evonik's Motion to set aside the judgment of no willfulness, find Materia's pre-verdict infringement willful on summary judgment, and find Materia's post-verdict infringement willful on summary judgment. Third is Evonik's Motion for enhanced damages pursuant to 35 U.S.C. § 284.

         These motions come to the Court following a January 2017 jury trial on the issues of lack of enablement, lack of an adequate written description, willfulness of Materia's infringement, and damages. The jury found for Evonik on both invalidity counterclaims and awarded damages to Evonik for Materia's infringement of the ‘528 patent, but found for Materia on the issue of the willfulness of that infringement. Subsequently, on August 9, 2017, the Court found for Evonik on Materia's counterclaim of invalidity due to indefiniteness. The Court then entered Judgment on the jury's verdict.[1]

         For the reasons that follow, all of Evonik's motions will be denied.

         I. Inequitable Conduct

         Before the Court is Evonik's “Opening Brief in Support of Inequitable Conduct.” Although not filed as a formal motion, “Evonik requests that the Court find the ‘590 patent unenforceable due to inequitable conduct.” The Court, however, has already held that it lacks jurisdiction to rule on whether the ‘590 patent is enforceable because Materia has granted Evonik a broad covenant not to sue.

         Nonetheless, a finding that Materia engaged in inequitable conduct would support a conclusion that Materia's counterclaim against Evonik for infringement of the ‘590 patent - in which Evonik prevailed on the basis of noninfringement (hereafter “the ‘590 infringement action”) - is an exceptional case under 35 U.S.C. § 285. A holding that the ‘590 infringement action is an exceptional case would then open the door to an award of reasonable attorneys' fees to Evonik in connection with that suit. See 35 U.S.C. § 285 (“The court in exceptional cases may award reasonable attorney fees to the prevailing party.”); Sulzer Textil A.G. v. Picanol N.V., 358 F.3d 1356, 1370 (Fed. Cir. 2004) (“An award of attorneys' fees under § 285 follows a two-step analysis. The court first determines whether the case is ‘exceptional, ' and, if so, then determines whether an award of attorneys' fees is appropriate.”); Ruiz v A.B. Chance Co., 234 F.3d 654, 669 (Fed. Cir. 2000) (“A finding of inequitable conduct can be the basis for awarding attorney fees under section 285.”). In short, Evonik's application is ultimately about attorneys' fees.[2]

         The Court heard oral argument on June 20, 2017. Supplemental briefing was completed on August 9, 2017. For the reasons that follow, the Court finds Evonik has failed to prove Materia engaged in inequitable conduct during the prosecution of the ‘590 patent.[3]

         Evonik contends that Materia's inequitable conduct began during the USPTO interference proceedings (Nos. 105, 373 and 105, 374) between Professor Grubbs and Professor Nolan, and continued on through post-interference prosecution of the ‘590 patent. Evonik asserts four separate, but related, bases of inequitable conduct.

         First, it is undisputed that Materia did not disclose the existence of Materia's ‘125 patent, and related information concerning the ‘125 patent.[4] Evonik contends the ‘125 patent is “but-for prior art, ” which Materia disputes. More specifically, Evonik asserts Mark Trimmer[5] “knew that the ‘125 patent covered what the ‘590 patent claimed, making the ‘125 patent invalidating prior art.”

         Second, Evonik asserts that Materia did not disclose Professor Nolan's alleged derivation of the subject matter of the ‘590 patent. Materia disputes derivation, and as will be discussed further below, the jury apparently rejected any finding of derivation when it rendered its verdict against Evonik and in favor of Materia on the issue of Materia's willfulness in infringing the ‘528 patent.

         Third, Evonik asserts that Materia failed to disclose the factual bases for a list of preliminary motions filed by Materia in the interferences, which challenged the patentability of the ‘590 patent.

         Lastly, it is undisputed that the Grubbs v. Nolan interferences were settled. Evonik contends that the parties to the interferences “settled with the intent to conceal from the USPTO Nolan's derivation, the Boulder Information, and the bases underlying Materia's preliminary motions.”

         “To prevail on inequitable conduct, an accused infringer must show that the applicant: ‘(1) made an affirmative misrepresentation of material fact, failed to disclose material information, or submitted false material information, and (2) intended to deceive the [PTO].'” Leviton Mfg. Co. v. Universal Sec. Instruments, Inc., 606 F.3d 1353, 1358 (Fed. Cir. 2010) (alteration in original) (quoting Cargill, Inc. v. Canbra Foods, Ltd., 476 F.3d 1359, 1363 (Fed Cir. 2007)); see also Transweb, LLC v. 3M Innovative Props. Co., 812 F.3d 1295, 1303-04 (Fed. Cir. 2016) (“A judgment of inequitable conduct requires . . . materiality, knowledge of materiality, and a deliberate decision to deceive.” (citing Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1290 (Fed. Cir. 2011)).

         “Intent and materiality are separate requirements. A district court should not use a ‘sliding scale, ' where a weak showing of intent may be found sufficient based on a strong showing of materiality, and vice versa. Moreover, a district court may not infer intent solely from materiality. Instead, a court must weigh the evidence of intent to deceive independent of its analysis of materiality.” Therasense, 649 F.3d at 1290.

         In extreme cases of “egregious misconduct, ” or “affirmative misconduct, ” “materiality [can be] presumed.” Apotex, Inc. v. UCB, Inc., 763 F.3d 1354, 1362 (Fed. Cir. 2014) (referencing Therasense); see also Transweb, LLC, 812 F.3d at 1304 (“Except in cases of egregious misconduct, the materiality must reach the level of but-for materiality.”).

         A. Burden of Proof

         The Court ordered supplemental briefing from the parties to help determine what the burden of proof is for inequitable conduct in the context of a § 285 entitlement to attorneys' fees. Specifically, the Court asked: “[M]ust Evonik prove inequitable conduct by clear and convincing evidence . . . or must Evonik prove inequitable conduct by a preponderance of the evidence.”

         In Therasense, 649 F.3d 1276, the Federal Circuit established the burden of proof for finding inequitable conduct. The Federal Circuit held that “[t]o prevail on the defense of inequitable conduct, the accused infringer must prove that the applicant misrepresented or omitted material information with the specific intent to deceive the PTO. The accused infringer must prove both elements - intent and materiality - by clear and convincing evidence.” Id. at 1287 (citation omitted) (citing Star Sci. Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365 (Fed. Cir. 2008)). In applying this heightened burden, the Court noted that “prevailing on a claim of inequitable conduct often makes a case ‘exceptional, ' leading potentially to an award of attorneys' fees under 35 U.S.C. § 285.” Id. at 1289. The Federal Circuit mentioned this in connection with its observation that a finding of inequitable conduct has “far-reaching consequences.” Id.

         As for the burden of proof for finding a case exceptional, prior to Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S.Ct. 1749 (2014), the standard for finding a case exceptional was “clear and convincing.” Brooks Furniture Mfg. v. Dutailer Int'l, Inc., 393 F.3d 1378, 1382 (Fed. Cir. 2005) (“[T]he underlying improper conduct and the characterization of the case as exceptional must be established by clear and convincing evidence.”), overruled by Octane Fitness, 134 S.Ct. 1749. In Octane Fitness, the Supreme Court decided:

[W]e reject the Federal Circuit's requirement that patent litigants establish their entitlement to fees under § 285 by “clear and convincing evidence.” We have not interpreted comparable fee-shifting statutes to require proof of entitlement to fees by clear and convincing evidence. And nothing in § 285 justifies such a high standard of proof. Section 285 demands a simple discretionary inquiry; it imposes no specific evidentiary burden, much less such a high one. Indeed, patent-infringement litigation has always been governed by a preponderance of the evidence standard, and that is the “standard generally applicable in civil actions, ” because it “allows both parties to ‘share the risk of error in roughly equal fashion.'”

Octane Fitness, 134 S.Ct. at 1758 (citations omitted) (first quoting Brooks Furniture, 393 F.3d at 1382; and then quoting Herman & MacLean v. Huddleston, 459 U.S. 375, 390 (1983)).

         The question for this Court is whether Octane Fitness changed the burden of proof for inequitable conduct when used to establish an exceptional case. The supplemental briefing received from the parties confirms the Court's initial finding that courts are split on their interpretation of Octane Fitness as it applies in this context. Based on the Court's review of Octane Fitness and Therasense, the Court finds the appropriate burden of proof to apply in this case to be clear and convincing evidence.

         The Court's reading of Octane Fitness does not show an intention to change the burden of proof established in Therasense. First, Therasense is not cited or referenced in the Octane Fitness opinion. If it had been the Supreme Court's intention to overrule that case, one would certainly expect mention of Therasense. Further, the reasons behind the Octane Fitness Court determining a preponderance of the evidence standard applies to the exceptional case analysis do not translate into the inequitable conduct analysis. And the policy reasons behind the Therasense court's decision still hold true even in light of the Octane Fitness decision.

         In Octane Fitness, the Supreme Court compared § 285 with comparable fee-shifting statutes - a comparison that certainly has no connection with the burden of proof for inequitable conduct. The Octane Fitness Court also noted that “nothing in § 285 justifies such a high standard of proof.” 134 S.Ct. at 1758. For proving inequitable conduct, however, the Federal Circuit in Therasense pointed out a multitude of “far-reaching consequences” that justified a higher standard of proof. 649 F.3d at 1289. While the Octane Fitness Court noted that “patent-infringement litigation has always been governed by a preponderance of the evidence standard, ” and referenced that this standard is generally applicable in civil cases to allow for both parties to equally share in the risk of error, Octane Fitness, 134 S.Ct. at 1758 (citing Huddleston, 459 U.S. at 390), the inequitable conduct clear and convincing standard was an established exception to that generalization at the time Octane Fitness was decided and, again, the Federal Circuit explained the need for a departure from the preponderance of the evidence standard in Therasense. Sharing equally in the risk of error, when there are such “far-reaching” consequences, justified to the Therasense court that a clear and convincing evidence burden of proof was necessary.

         Accordingly, the Court finds that neither Octane Fitness's clear holding that an exceptional case is governed by a preponderance of the evidence standard, nor the reasoning behind that decision, evidence the Supreme Court's intent to change the burden of proof for showing inequitable conduct, nor does the reasoning support such a result. And without so much as a reference to Therasense, the Court is convinced the Supreme Court did not intend to change the inequitable conduct burden of proof established in that case.

         This same position has been adopted by other district courts post-Octane Fitness. For instance, the Eastern District of Texas determined as follows:

The parties dispute what the correct burden of proof is as to Tyson's allegations of inequitable conduct. It is undisputed that proof of inequitable conduct requires “clear and convincing evidence.” Tyson, however, argues that it need only put forward a preponderance of the evidence per the standard in Octane Fitness; it claims to use the label “inequitable conduct” merely as a shorthand. Since inequitable conduct is neither a necessary nor a sufficient condition for a finding of exceptionality, the evidence supporting the allegation stands on its own. Thus, the Court will consider that evidence as part of the “totality of the circumstances” inquiry required by Octane, and the totality of the evidence (including both evidence of alleged inequitable conduct and other evidence) will be weighed using the preponderance of the evidence standard. If the evidence of inequitable conduct is sufficient to satisfy the clear and convincing standard, the proof of inequitable conduct will be entitled to substantial weight in that calculation.

DietGoal Innovations LLC v. Chipotle Mexican Grill, Inc., Nos. 12-764, 12-338, 2015 WL 1284669, at *5 (E.D. Tex. Mar. 20, 2015) (first quoting Star Sci., Inc., 537 F.3d at 1365; see also Essociate, Inc. v. 4355768 Can., Inc., No. 14-679, 2015 WL 12766051, at *1-2 (C.D. Cal. Apr. 1, 2015) (refusing to engage in an inequitable conduct analysis, but noting that “a defendant must show by clear and convincing evidence” that there was inequitable conduct in determining when a case is exceptional under § 285); Robbins Co. v. Herrenknecht Tunnelling Sys. USA, Inc., No. 13-2113, 2015 WL 3454946, at *4 (N.D. Ohio May 29, 2015) (applying a clear and convincing evidence standard); Stretchline Intellectual Props. Ltd. v. H&M Hennes & Mauritz LP, No. 10-371, 2015 WL 5175196, at *6 (E.D. Va. Sept. 3, 2015) (following DietGoal's approach).[6]

         The Court recognizes those cases that have come down the other way, finding a preponderance of the evidence standard applicable in light of Octane Fitness. See Snap-on Inc. v. Robert Bosch, LLC, No. 09-6914, 2016 WL 1697759, at *4 (N.D. Ill. Apr. 28, 2016) (“Assuming that the preponderance standard applicable to § 285 attorney fee motions applies (ordinarily, the clear and convincing standard applies to an inequitable conduct defense to patent enforceability), Bosch has not proven inequitable conduct.”); E. Coast Sheet Metal Fabricating Corp. v. Autodesk, Inc., No. 12-517, 2015 WL 4603463, at *5 (D.N.H. July 30, 2015) (“When raised as a defense, inequitable conduct must be proved by clear and convincing evidence. But where . . . inequitable conduct is raised as a basis for an award of attorney fees under 35 U.S.C. § 285, the court applies the preponderance of the evidence standard prescribed by Octane Fitness.” (first citing Am. Calcar, Inc. v. Am. Honda Motor Co., 768 F.3d 1185, 1188 (Fed. Cir. 2014); and then citing Octane Fitness, 134 S.Ct. at 1758))).[7] However, none of these cases provide a detailed analysis on the choice of this particular burden of proof, and none of these cases convince the Court that a preponderance of the evidence standard is the correct one to apply post-Octane Fitness.

         B. The asserted nondisclosure of alleged derivation

         Before turning to this Court's findings of fact and conclusions of law, the issue of Professor Nolan's alleged derivation, and Materia's asserted failure to disclose such derivation (Evonik's second asserted basis for a finding of inequitable conduct) must be separately addressed.

         Materia asserts, and the Court agrees, that this Court cannot find that Professor Nolan did, in fact, derive his invention covered by the ‘590 patent from Professor Herrmann. All of the facts supporting Evonik's argument in this regard were put before the jury at trial. In finding against Evonik, and for Materia, on the issue of willful infringement of the ‘528 patent, the jury necessarily must not have found that Professor Nolan stole his idea from Professor Herrmann. The Court cannot, as a matter of law, make a finding of fact that directly conflicts with the jury's verdict in this regard. See Door-Master Corp. v. Yorktowne, Inc., 256 F.3d 1308, 1314 (Fed. Cir. 2001) (“[T]he district court may reweigh evidence in deciding whether the case is exceptional so long as the court's findings do not conflict with the jury's findings.” (citing Jurgens v. CBK, Ltd., 80 F.3d 1566, 1572 (Fed. Cir. 1996))).

         Thus, the Court rejects Evonik's second basis for inequitable conduct. Moreover, to the extent that the other asserted bases are dependent in part on alleged derivation - namely, Evonik's assertion that the Grubbs v. Nolan interferences were settled to hide the fact of derivation, among other things; and the assertion that the alleged derivation was the underlying factual basis of at least two of Materia's listed preliminary motions - the Court does not consider those aspects of Evonik's arguments.

         C. The remaining grounds for inequitable conduct

         Evonik's first and third bases of inequitable conduct are based on nondisclosures which Evonik asserts were but-for material to the ‘590 patent prosecution. Evonik's theory concerning the fourth basis - settlement of the interference - is based not on deliberate withholding of material information, but rather what Evonik asserts is egregious misconduct aimed at preventing the need for ever disclosing but-for material information.

         As to all of these bases, however, Evonik must establish that Materia made a “deliberate decision to deceive.” Transweb, 812 F.3d at 1304. As Evonik itself quotes in its brief, “the specific intent to deceive must be the single most reasonable inference to be drawn from the evidence . . . . Indeed, the evidence must be sufficient to require a ...

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