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Mattews International, Corporation v. Biosafe Engineering

September 27, 2011

MATTEWS INTERNATIONAL, CORPORATION, PLAINTIFF,
v.
BIOSAFE ENGINEERING, LLC, AND DIGESTOR, LLC, DEFENDANTS.



The opinion of the court was delivered by: Judge Nora Barry Fischer

MEMORANDUM OPINION

I.INTRODUCTION

Matthews International Corporation ("Matthews" or "Plaintiff") brings this action against BioSafe Engineering, LLC and Digestor, LLC (collectively, "BioSafe" or "Defendants")*fn1 for declaratory judgment of non-infringement with respect to U.S. Patent Nos. 5,332,532 (the ""532 patent"), 6,437,211 (the ""211 patent"), 6,472,580 (the ""580 patent"), 7,829,755 (the ""755 patent) (collectively, the "Method Patents"), and 7,910,788 (the ""788 patent" or "System Patent"). (See Docket No. 24 at ¶¶ 94-100). Matthews also alleges invalidity and unenforceability of the Method Patents and the System Patent. (Id. at ¶¶ 101-111). Matthews raises additional state law claims of trade libel, defamation, and tortious interference with prospective contracts. (Id. at ¶¶ 112-141). Matthews therefore requests that this Court: declare that Matthews does not infringe any of BioSafe‟s rights; declare that BioSafe‟s patents are invalid or unenforceable; enjoin BioSafe from making statements or accusations regarding Matthews‟s infringement of BioSafe‟s intellectual property rights; and award Matthews compensatory and punitive damages, including fees and costs. (Id. at pp. 24-25).

BioSafe brings the present Motion to Dismiss Plaintiff‟s First Amended Complaint. (Docket No. [25]). BioSafe makes two broad arguments in support of this motion. First, with respect to Matthews‟s claims of non-infringement, invalidity, and unenforceability (Counts I-III), BioSafe argues that Matthews has failed to state a "case or controversy" as required by the Declaratory Judgment Act and Article III of the Constitution, such that dismissal is appropriate under Rule 12(b)(1). (See Docket No. 26 at 5-15). Second, BioSafe argues that Counts IV-VI should be dismissed under Rule 12(b)(6) for failing to meet the pleading standards set forth by the Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2008) and Ashcroft v. Iqbal, 556 U.S. 871 (2009). (See Docket No. 26 at 15-20).

At its most basic, the patent portion of this motion challenges whether this Court has jurisdiction over a declaratory judgment action where the declaratory plaintiff cannot possibly be liable for direct infringement and no direct infringement has occurred such that the declaratory plaintiff could be found liable for indirect infringement. As to the state law claims, the question raised is whether Matthews‟ pleadings have satisfied the standards for Rule 12(b)(6).

The motion [25] is fully briefed, and is therefore ripe for disposition. For the following reasons, this Court finds BioSafe‟s arguments persuasive, and BioSafe‟s motion to dismiss (Docket No. [25]) will therefore be GRANTED.

II.BACKGROUND

a.Factual Background*fn2

Matthews is active in the cremation industry. (Docket No. 24 at ¶ 2). The company currently offers an environmentally-friendly alternative to flame-based cremations. (Id. at ¶ 3). This alternative is an alkaline hydrolysis process. (Id. at ¶ 4). BioSafe is a competitor to Matthews. (Id. at ¶5).

Alkaline hydrolysis is a process whereby material is subject to sodium or potassium hydroxide and heat. (Id. at ¶ 23). The chemical reaction "reduce[s]" the original material to a sterile solution that can be easily disposed. (Id.). Matthews points to U.S. Patent No. 394,982 as evidence that the alkaline hydrolysis process has been in use in the United States since the nineteenth century. (Id. at ¶ 24).

Resomation is a Scottish corporation that manufactures and licenses alkaline hydrolysis equipment for cremation of human remains. (Id. at ¶ 25). Resomation has granted Matthews an exclusive license to market and sell Resomation‟s alkaline hydrolysis equipment in the United States. (Id. at ¶ 26). Matthews has made substantial investments in marketing the Resomation equipment, under the brand name Bio CremationTM ("Bio Cremation"), to funeral directors and others for the disposal of human remains. (Id. at ¶¶ 27-30).

Monroe v. Beard, 536 F.3d 198, 205 (3d Cir. 2008). However, BioSafe disputes the appropriateness of this rule, arguing instead that a factual attack on the Court‟s jurisdiction under Rule 12(b)(1) is not subject to the requirement that facts be construed in favor of the non-movant. (See Docket No. 26 at 5) (citing Mortensen v. First Fed. Sav. and Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977); Burns v. Alexander, 2011 U.S. Dist. LEXIS 22200 (W.D. Pa. March 4, 2011)). BioSafe argues that, in a factual challenge to jurisdiction, "the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case." Mortensen, 549 F.2d at 891.

This argument ignores another statement by the Mortensen Court: "[I]t is incumbent upon the trial judge to demand less in the way of jurisdictional proof [at an early stage of litigation] than would be appropriate at a trial stage." Id. at 892. For this reason, the Court will derive its facts largely from the First Amended Complaint, except where BioSafe has produced indisputable facts in contradiction to said Complaint.

Digestor is the current assignee of the Method Patents and System Patent. These patents each have unique limitations. The "532 patent, for example, is limited to an application of an alkaline hydrolysis process to "animal tissue containing radioactive materials." See "532 patent at Abstract.*fn3 The inventors listed on the "532 patent were Gordon I. Kaye ("Kaye") and Peter B. Weber ("Weber"). See "532 patent. This patent was initially assigned to Waste Reduction by Waste Reduction, Inc ("WR2"). Id. The "532 patent is currently assigned to Digestor. (Docket No. 24 at ¶ 34). The remaining patents-in-suit are also assigned to Digestor. (Id. at ¶36).

i.The Installations

Through the 1980s and early 1990s, Kaye was employed or affiliated with the Albany Medical Center ("AMC") in Albany, New York. (Id. at ¶ 41). In January 1994, AMC installed alkaline hydrolysis equipment for the disposal of radioactive animal tissue. (Id. at ¶¶ 42-43). AMC rarely used the hydrolysis equipment to dispose of radioactive waste, so they expanded their use of the equipment to non-radioactive animal waste and "regulated medical waste" with potentially infectious agents. (Id. at ¶ 45). Also in 1994, AMC began to use the hydrolysis equipment on waste formaldehyde and glutaraldehyde, which Matthews characterizes as "hazardous wastes." (Id. at ¶ 47).

By April 1996, at the latest, a WR2 alkaline hydrolysis unit had been installed and put into operation at Shands Hospital in Gainesville, Florida. (Docket No. 24 at ¶ 48). According to Matthews, this unit (and another one installed around April 1998) were used to dispose of human remains, as well as animal carcasses and hospital anatomic material. (Id. at ¶¶ 49-51).

ii.The Applications for the '580 and '211 Patents

Kaye and Weber filed Application No. 09/171,447 on October 20, 1998. See "580 patent. Application No. 09/882,806 was filed as a continuation-in-part of the initial application. See "211 patent. These Applications matured into the "580 and "211 patents, respectively. See "580 patent, "211 patent.

In March 2000, the United States Patent and Trademark Office ("PTO") rejected the claims set forth in the 09/171,447 Application as anticipated by, and/or obvious due to prior patents, including the "532 patent. (Docket No. 24 at ¶ 54). The PTO‟s rejection was premised upon the reasoning that it would have been obvious to one skilled in the art that, if the alkaline hydrolysis process safely sterilized radioactive biological material, it would also safely sterilize regulated medical waste, including infectious agents and other hazardous materials. (Id.). After several unsuccessful attempts to persuade the PTO to grant the claims as filed, Kaye and Weber amended the claims and filed a sworn declaration alongside the Amendment. (Id. at ¶¶ 55-58). The declaration stated that one skilled in the art would not look to a method of disposing of radioactive material in order to dispose of infectious waste. (Id. at ¶¶ 60-61).

iii.Alleged Accusation of Infringement

Matthews claims that BioSafe has accused Matthews of patent infringement. (Docket No. 24 at ¶¶ 72-74). Matthews states that, in late December, 2008, BioSafe‟s then-president Bradley Crain ("Crain") spoke with Steven Schaal ("Schaal"), President of the North American Region of Matthews‟ Cremation Division. (Id. at ¶ 75). According to Matthews, Crain asserted that Matthews‟ Bio Cremation equipment would infringe BioSafe‟s intellectual property rights. (Id. at ¶ 75). Matthews sent a letter, dated December 31, 2008, to confirm the conversation between Crain and Schaal. (Id.).

On February 2, 2009, BioSafe‟s outside counsel responded with another letter. (Id. at ¶ 76). Matthews states that this letter refers to multiple BioSafe patents, and suggests that BioSafe could pursue a "variety of remedies" for "disputes involving intellectual property rights," including alleged "patent infringement." (Id.). Matthews responded to this letter. (Id. at ¶ 78). Since this response, BioSafe has taken no action to pursue a claim of infringement. However, it has not retracted its accusations. (Id. at ¶¶ 78-82).

iv.Other Allegations

Beyond the possibility of patent infringement, Matthews claims that BioSafe has made allegations of Matthews‟ patent infringement to potential customers. (Docket No. 24 at ¶ 85). Matthews points to several instances where BioSafe has told Matthews‟ customers, or potential customers, that Matthews has violated BioSafe‟s patents. (See id. at ¶¶ 86-90).

Matthews filed this suit on February 28, 2011. (See Docket No. 1). The System Patent, U.S. Patent No. "788, issued less than a month later, on March 22, 2011. (See Docket No. 24-7). Matthews then filed an Amended Complaint on May 13, 2011, (Docket No. 24), and BioSafe moved for dismissal on May 27, 2011. (Docket No. 25). Briefing ensued. (See Docket Nos. 26, 29, 30, 33).

b.The Parties' Arguments

In its opening brief, BioSafe first argues that this Court lacks jurisdiction to hear Counts I through III, which pertain to the validity, enforceability, and infringement of the patents. (Docket No. 26 at 1). It argues that Matthews is seeking an advisory opinion, and that the case and controversy is not yet ripe. (Id.). Specifically, BioSafe claims that the method patents have not yet been infringed and that the Bio Cremation equipment can operate outside the parameters set by the Method Patents. (Id.). Likewise, the System Patent had not yet issued when Matthews initiated the suit, so any alleged accusations of infringement could not have occurred. (Id.). Thus, the Court would not have jurisdiction over the case under the Declaratory Judgment Act. (Id.). As to the remaining Counts IV through VI, for trade libel, defamation, and tortious interference, ...


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