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CFL Technologies LLC v. Osram Sylvania, Inc.

United States District Court, D. Delaware

July 9, 2019


          Megan C. Haney and John C. Phillips, Jr., PHILLIPS GOLDMAN McLAUGHLIN & HALL, P.A., Wilmington, DE; William W. Flachsbart (argued), Jonathan Hill, and Robert P. Greenspoon, FLACHSBART & GREENSPOON, LLC, Chicago, IL. Attorneys for Plaintiff.

          Nathan Hoeschen, John W. Shaw, and David M. Fry, SHAW KELLER LLP, Wilmington, DE; Kevin P. Martin (argued) and Srikanth K. Reddy, GOODWIN PROCTER LLP, Boston, MA; Monte M. F. Cooper, GOODWIN PROCTER LLP, Redwood City, CA. Attorneys for Defendants.



         Presently before me is Defendants' Motion to Dismiss Complaint on the Basis of Claim Preclusion and Issue Preclusion. (D.I. 9). The Parties have fully briefed the issues. (D.I. 10, 18, 19, 23). I heard oral argument on May 14, 2019. (D.I. 26 ("Tr.")). For the reasons discussed more fully below, I will grant Defendants' motion as to willful infringement and deny their motion as to the rest.

         Plaintiff filed this suit on September 17, 2018. (D.I. 1). It alleges that Defendants infringe the claims of five related patents: U.S. Patent Nos. 6, 459, 213 ('"213 Patent"); 6, 172, 464 ("'464 Patent"); 5, 757, 140 ('"140 Patent"); 5, 510, 681 ('"681 Patent"); and 5, 510, 680 ("'680 Patent"). (Id.). All five patents are expired. (D.I. 10 at 3). The Accused Products are Defendants' compact fluorescent lightbulbs ("CFLs").[1] (D.I. 1 at ¶¶ 26-30).

         I. Background

         Plaintiffs predecessor in interest and the named inventor on all of the patents-in-suit, Mr. Ole K. Nilssen, [2] sued Defendants in this District on August 1, 2000. (D.I. 1 at ¶ 42). He alleged that Defendants' CFLs infringed 26 patents, including the '680 and '681 Patents. (D.I. 10 at 4). The case was transferred to the Northern District of Dlinois. In February 2006, that court held a bench trial to decide whether certain patents, including the '680 and '681 Patents, were unenforceable due to inequitable conduct. On July 6, 2006, the court concluded that they were. Nilssen v. Osram Sylvania, Inc., 440 F.Supp.2d 884, 911 (N.D. Ill. 2006) ("OSRAMF), aff'd, 504 F.3d 1223 (Fed. Cir. 2007). The court's unenforceability finding as to the '680 and '681 patent was based on Mr. Nilssen: (1) failing to pay large entity maintenance fees; (2) improperly including a March 20, 1978 patent in the ancestry of the asserted patents; (3) failing to disclose ongoing litigation with Motorola; and (4) as to the '681 Patent, failing to disclose known prior. art that he had disclosed in other pending applications. Id. at 902-11. The court found that Mr. Nilssen's excuses for the conduct were not credible and found that Mr. Nilssen intended to deceive the Patent Office. Id. The court, however, declined to apply the doctrine of unclean hands to extend its findings of unenforceability to all of the related patents-in-suit. Id. at 911.

         Mr. Nilssen filed a second lawsuit ("OSRAM IF) against Defendants on May 2, 2003. (D.I. 16, Exh. 7). There, he alleged that Defendants' CFLs infringed 15 additional patents, including the '464 and' 140 Patents. (Id. at ¶¶ 14, 25). After receiving Defendants' invalidity contentions, Mr. Nilssen dropped his claims that Defendants infringed the '464 and' 140 Patents from the suit. (D.I. 16, Exh. 8 at 7). At a status conference on April 15, 2004, Mr. Nilssen voluntarily moved to dismiss the remaining claims with leave to reinstate the case by June 25, 2004. Minute Order, Nilssen v. Osram Sylvania Inc., No. 03-2962 (N.D. Ill. April 15, 2004), D.I. 28. The court granted his motion. Id. Over the next year, the court repeatedly extended the deadline for Mr. Nilssen to reinstate the case, with the last recorded deadline arriving on July 22, 2005. See Nilssen v. Osram Sylvania Inc., No. 03-2962, D.I. 30-42 (minute entries extending deadline). On September 27, 2005, the court again entered a minute entry dismissing the case. Id. at D.I. 49. The court later characterized the dismissal as "with prejudice." (D.I. 16 at Exh.9).

         On August 13, 2004, during the pendency of OSRAM I and OSRAM II, Mr. Nilssen filed an additional lawsuit against Wal-Mart. See Nilssen v. Wal-Mart Stores, Inc. ("Wal-Marf), 2008 WL 11350028 (N.D. Ill. Mar. 17, 2008). In that lawsuit, he initially asserted, among others, the '680, '681, and '464 Patents. Id. at *1. On summary judgment, Mr. Nilssen acknowledged the unenforceability ruling in OSRAM I and only pursued his claim of infringement of the '464 Patent. Id. As in OSRAM I, the Wal-Mart court found the '464 Patent unenforceable due to Mr. Nilssen's improper payment of small entity fees and his failure to disclose litigation with Motorola. Id. at *3.

         Geo Foundation, Ltd., Mr. Nilssen's co-plaintiff in Wal-Mart, filed an appeal of the district court's denial of its motion to vacate the Wal-Mart unenforceability determination as it applied to Geo. Notice of Appeal, Nilssen v. Wal-Mart Stores, Inc., No. 04-5363 (N.D. Ill. Nov. 19, 2009), D.I. 307; see Motion by Plaintiff GEO Foundation Ltd to Vacate Judgment Pursuant to Fed.R.Civ.P. 60(b)(4), Nilssen v. Wal-Mart Stores, Inc., No. 04-5363 (N.D. Ill. Nov. 19, 2009), D.I. 303. During the pendency of that appeal, the law of inequitable conduct changed dramatically when the Federal Circuit issued its en banc decision in Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011). The Federal Circuit ordered the parties to submit supplemental briefing on the impact of the Therasense decision. Nilssen v. Wal-Mart Stores, Inc., 394 Fed.Appx. 709 (Fed. Cir. 2010). The court issued a Rule 36 affirmance once that briefing was complete. Nilssen v. Wal-Mart Stores, Inc., 438 Fed.Appx. 898 (Fed. Cir. 2011).

         After Mr. Nilssen's death, his patents were assigned to his widow, who assigned the rights to Beacon Point Capital, LLC, who, in turn, assigned the rights to Plaintiff. (D.I. 10 at 4).

         II. Legal Standard

         When reviewing a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the Court must accept the complaint's factual allegations as true. See BellAtl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007). Rule 8(a) requires "a short and plain statement of the claim showing that the pleader is entitled to relief." Id. at 555. The factual allegations do not have to be detailed, but they must provide more than labels, conclusions, or a "formulaic recitation" of the claim elements. Id. ("Factual allegations must be enough to raise a right to relief above the speculative level... on the assumption that all the allegations in the complaint are true (even if doubtful in fact)."). Moreover, there must be sufficient factual matter to state a facially plausible claim to relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The facial plausibility standard is satisfied when the complaint's factual content "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. ("Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." (internal quotation marks omitted)). A court may decide a Rule 12(b)(6) motion to dismiss based on preclusion grounds so long as the affirmative defense of preclusion is apparent on the face of the complaint. See Brody v. Hankin, 145 Fed.Appx. 768, 771-72 (3d Cir. 2005).

         III. Analysis

         Defendants argue for dismissal of Plaintiff s complaint on three grounds: claim preclusion as to claims stemming from the '464, '140, '681 and '680 Patents, issue preclusion as to the enforceability of all patents-in-suit, and failure to state a willfulness claim. I will address each of their arguments in turn.

         A. Claim Preclusion

         Plaintiff is not claim precluded from litigating Defendants' alleged infringement of the '464, '140, '681, and '680 Patents. The Federal Circuit applies the law of the regional circuit when deciding whether claim preclusion applies. Mentor Graphics Corp. v. EVE-USA, Inc., 851 F.3d 1275, 1298 (Fed. Cir. 2017), cert, dismissed, 139 S.Ct. 44 (2018). In the Third Circuit, a claim is precluded if "there has been (1) a final judgment on the merits in a prior suit involving (2) the same parties or their privies and (3) [the current] suit [is] based on the same cause of action." Lubrizol Corp. v. Exxon Corp., 929 F.2d 960, 963 (3d Cir. 1991). The Federal Circuit applies its own law to determine "[w]hether two infringement allegations constitute the same ... cause of action." Mentor Graphics Corp., 851 F.3d at 1298. Under Federal Circuit precedent, an infringement action is not the same cause of action as a previous action if the accused products did not exist at the time of the previous suit. Aspex Eyewear, Inc. v. Marchon Eyewear, Inc., 672 F.3d 1335, 1342 (Fed. Cir. 2012). This is the result of the common law principle that "a party who sues a tortfeasor is ordinarily not barred by a prior judgment from seeking relief for discrete tortious action by the same tortfeasor that occurs subsequent to the original action." Id. In Aspex, the Federal Circuit explained that, as each act of patent irifringement is a discrete tort, claim preclusion does not attach to later acts of infringement. Id. at 1343. This remains true even if the products are "essentially the same" or, in fact, the same. Mentor Graphics Corp., 851 F.3d at 1299; Brain Life, LLC v. Elekta Inc., 746 F.3d 1045, 1056 (Fed. Cir. 2014).

         The Parties do not dispute that the first two factors of the claim preclusion test are met in this case.. (See D.I. 10 at 9-11; D.I. 18 at 5-6). They do, however, disagree as to whether these are the same causes of action as in the earlier suits. (See D.I. 10 at 11-12; D.I. 18 at 5-6). It is not clear from the record how similar the accused CFLs in this case are to those previously accused. (See D.I. 1 at ¶ 29; see also Tr. at 25:16-26:3). What is clear, however, is that Plaintiff seeks damages only for alleged tortious conduct that occurred after the termination of the earlier OSRAM lawsuits. Thus, under Aspex and Mentor Graphics, Plaintiffs cause of action is not the same cause of action as was previously litigated.

         Defendants separately argue that the Kessler doctrine, a supplement to claim preclusion, should apply in this case. Kessler v. Eldred, 206 U.S. 285 (1907). The Kessler doctrine is a sparsely used tool that "allow[s] an adjudged non-infringer to avoid repeated harassment for continuing its business as usual post-final judgment in a patent action where circumstances justify that result." Brain Life, 746 F.3d at 1056 (emphasis in original). It gives an accused infringer "rights with respect to specific products that had been held to be noninfringing, even when the specific acts of infringement would not be barred by claim preclusion because they occurred postfinal judgment." Id. at 1057 (emphasis in original). The Federal Circuit has expressed reservations about the Kessler doctrine and has expanded its reach only in limited circumstances. See SimpleAir, Inc. v. Google LLC, 884 F.3d 1160, 1170 (Fed. Cir. 2018) (characterizing Kessler as a claim preclusion gap-filler for postfinal judgment actions of adjudged noninfringers); Brain Life, 746 F.3d at 1058 (noting that the continued existence of the Kessler doctrine is "questionable" in light of modern claim and issue preclusion law).

         As Defendants are not adjudged noninfringers, the Kessler doctrine does not apply. Defendants admit that the OSRAM I was resolved by a finding of inequitable conduct and that OSRAMII was resolved by Plaintiff voluntarily moving to dismiss the case. (D.I. 19 at 4). Neither case was resolved by a finding of noninfringement. (Id.). They argue, however, that the Kessler doctrine should extend to dismissals with prejudice as a general matter. (See id.). They cite Brain Life as support for this proposition. (Id.). In Brain Life, the defendant was found not to infringe two patents during a first lawsuit. Brain Life, 746 F.3d at 1058. Prior to that final decision, the plaintiff had'dismissed with prejudice its claims related to a third patent. Id. The Federal Circuit held that the defendant was an adjudged noninfringer and that the Kessler doctrine precluded the plaintiff from again accusing the products of infringement. Id. at 1058-59. It noted, "[plaintiff] could have continued to assert [the dropped] claims." Id. at 1058. Those circumstances are distinguishable from this case. In Brain Life, the Federal Circuit held that, because the plaintiff chose to drop one of its patents, it had to live with the consequences of that decision. That is, the defendant's status as an adjudged noninfringer could not be defeated by the plaintiffs own choice not to pursue certain claims. Here, no court has determined that Defendants do not infringe Plaintiffs patents. Thus, Defendants are not adjudged noninfringers, regardless of the fact that Plaintiffs cases were dismissed with prejudice. The Kessler doctrine does not apply.[3]

         Plaintiff is not claim precluded or barred by the Kessler doctrine from pursuing infringement claims against Defendants. Thus, I will not dismiss Plaintiff's complaint as to the '464, '140, ...

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