The opinion of the court was delivered by: Buckwalter, S.J.
Currently pending before the Court are Plaintiff CSB-System International, Inc.'s ("CSB") Motion for Summary Judgment of No Inequitable Conduct and No Unclean Hands, and Plaintiff CSB's Motion to Strike. For the following reasons, the Motion for Summary Judgment is granted and the Motion to Strike is denied as moot.
I. STATEMENT OF FACTS*fn1
The patent involved in this case is U.S. Patent No. 5,631,953 ("the '953 Patent"), which claims a system or apparatus. (Def.'s Mot. Summ. J., Ex. 2 ("953 Patent").) In the simplest of terms, the technology in this case concerns circuit arrangements of hardware and software that allow the integration of speech (telephone systems) with data systems. These systems permit agents in customer service call centers to obtain information from their personal computer about the person calling for assistance at the same time he or she takes the call. The U.S. application which led to the '953 patent was filed on August 25, 1995. The United States Patent & Trademark Office ("USPTO") allowed the claims as set forth in the '953 Patent. Ultimately the '953 patent issued on May 20, 1997.
The accused products are the SAPphone Interface and the Integrated Communication Interface ("ICI") (collectively the "Accused Products"), manufactured by Defendant SAP America, Inc. ("SAP"). The SAPphone was first introduced to the market in 1998. Subsequently, SAP developed the ICI, the successor product to SAPphone, and began to market it in 2003.
Plaintiff CSB brought the present patent action against Defendant SAP in this Court on May 11, 2010, alleging that the Accused Products infringe on the '953 Patent held by Plaintiff. Due to the existence of several disputed claim terms, the parties proceeded to a one-day Markman hearing,*fn2 at which time each side offered a short tutorial and the testimony of an expert witness. Thereafter, on July 27, 2011, the Court issued a lengthy opinion construing each of the disputed claims, but declining to rule on SAP's claims of indefiniteness until the summary judgment stage.
On April 2, April 17, and April 25, 2012, the Court respectively denied Defendants' Motions for Summary Judgment on Invalidity, Non-infringement, and No Willful Infringement. On April 30, 2012, the Court granted Defendant's Motion for Partial Summary Judgment to Limit CSB's Damage Claim. On May 1, 2012, the Court dismissed as premature Defendant's Motion for Summary Judgment as to CSB's Request for Injunctive Relief. Finally, on May 2, 2012, the Court denied as moot five of CSB's Motions for Summary Judgment as to SAP's defenses. The Court now turns its attention to the final pending summary judgment request-CSB's Motion for Summary Judgment of No Inequitable Conduct and No Unclean Hands. In addition, the Court simultaneously considers Plaintiff's Motion to Strike Defendant's New Theory of Inequitable Conduct.
Summary judgment is proper "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c)(2). A factual dispute is "material" only if it might affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). For an issue to be "genuine," a reasonable fact-finder must be able to return a verdict in favor of the non-moving party. Id.
On summary judgment, the moving party has the initial burden of identifying evidence that it believes shows an absence of a genuine issue of material fact. Conoshenti v. Pub. Serv. Elec. & Gas Co., 364 F.3d 135, 145--46 (3d Cir. 2004). It is not the court's role to weigh the disputed evidence and decide which is more probative, or to make credibility determinations. Boyle v. Cnty. of Allegheny, 139 F.3d 386, 393 (3d Cir. 1998) (citing Petruzzi's IGA Supermkts., Inc. v. Darling-Del. Co. Inc., 998 F.2d 1224, 1230 (3d Cir. 1993)). Rather, the court must consider the evidence, and all reasonable inferences which may be drawn from it, in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citing United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)); Tigg Corp. v. Dow Corning Corp., 822 F.2d 358, 361 (3d Cir. 1987). If a conflict arises between the evidence presented by both sides, the court must accept as true the allegations of the non-moving party, and "all justifiable inferences are to be drawn in his favor." Anderson, 477 U.S. at 255.
Although the moving party must establish an absence of a genuine issue of material fact, it need not "support its motion with affidavits or other similar materials negating the opponent's claim." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). It can meet its burden by "pointing out . . . that there is an absence of evidence to support the nonmoving party's claims." Id. at 325. Once the movant has carried its initial burden, the opposing party "must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec., 475 U.S. at 586. "[T]he non-moving party must rebut the motion with facts in the record and cannot rest solely on assertions made in the pleadings, legal memoranda, or oral argument." Berckeley Inv. Group. Ltd. v. Colkitt, 455 F.3d 195, 201 (3d Cir. 2006). If the non-moving party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden at trial," summary judgment is appropriate. Celotex, 477 U.S. at 322. Moreover, the mere existence of some evidence in support of the non-movant will not be adequate to support a denial of a motion for summary judgment; there must be enough evidence to enable a jury to reasonably find for the non-movant on that issue. Anderson, 477 U.S. at 249--50.
The Motion currently before the Court presents a question regarding
the viability of Defendant's inequitable conduct defense.*fn3
"Inequitable conduct is an equitable defense to patent
infringement that, if proved, bars enforcement of a patent."
Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1285 (Fed.
Cir. 2011). "This judge-made doctrine evolved from a trio of Supreme
Court cases that applied the doctrine of unclean hands to dismiss
patent cases involving egregious misconduct." Id. The burden of proving inequitable conduct
lies with the accused infringer. Star Scientific, Inc. v. R.J.
Reynolds Tobacco Co., 537 F.3d 1357, 1365 (Fed. Cir. 2008). To
successfully prove inequitable conduct, the accused infringer must
present "evidence 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]." Cargill, Inc. v. Canbra Foods, Ltd., 476 F.3d
1359, 1363--64 (Fed. Cir. 2007) (citing Impax Labs., Inc. v. Aventis
Pharm., Inc., 468 F.3d 1366, 1374 (Fed. Cir. 2006)). "Further, at
least a threshold level of each element-i.e., both materiality and
intent to deceive-must be proven by clear and convincing evidence."
Star Scientific, 537 F.3d at 1365. Even if the defendant meets this
"elevated evidentiary burden as to both elements," the district court
must still engage in a balancing of equities to determine if the
applicant's conduct before the PTO was so egregious as to warrant
holding the entire patent unenforceable. Id.
In the present case, the Court's consideration of the inequitable conduct defense is complicated by the dual theories promulgated by Defendant. In its Answer and Counterclaim, as well as subsequent discovery responses, Defendant claimed that the alleged inequitable conduct was committed by Gottfried Thomas, Ulrich Mergemann, Peter Schimitzek, and Michael Striker. In its present Response to Plaintiff's Motion for Summary Judgment of No Inequitable Conduct, Defendant now claims that the inequitable conduct was perpetrated only by Mr. Peter Haussingen. For clarity of discussion, the Court considers each theory individually.
A. Inequitable Conduct by Mssrs. Thomas, Mergemann, Schimitzek, and Striker
Defendant's original theory of inequitable conduct appeared in its Answer and Counterclaim. Defendant's Third Affirmative Defense stated that, "[t]he 953 patent is unenforceable due to inequitable conduct before the United States Patent and Trademark Office ("USPTO") during prosecution of the application for the 953 patent." (Answer, Aff. Defense No. 3.) Defendant's Third Counterclaim then sought a declaratory judgment of unenforceability based on the inequitable conduct before USPTO during prosecution of the '953 Patent. (Countercl. ¶ 41.) As grounds for its inequitable conduct defense, Defendant argued that four individuals were associated with the filing and prosecution of the application leading to the '953 Patent: (1) Gottfried Thomas, one of the inventors of the '953 Patent; (2) Ulrich Mergemann, the other inventor of the '953 Patent; (3) Peter Schimitzek, CSB's founder, chairman, and CEO; and (4) Michael J. Striker, the attorney who prosecuted the '953 Patent application on behalf of the inventors and CSB. (Countercl. ¶ 45.) This group-repeatedly defined by Defendant as "the CSB prosecution group"-allegedly had a duty of candor and good faith in dealing with the USPTO, were aware of prior art that was material to the pending application leading to the '953 Patent, yet failed to disclose either the existence or materiality of the concealed prior art to the USPTO. (Id. ¶¶ 46--57.)
Plaintiff's current Motion seeks summary judgment on this defense, alleging that Defendant cannot prove intent to deceive, as required for its inequitable conduct claim. More specifically, it asserts that "[t]here is simply no evidence showing a deliberate plan by the inventors, the prosecuting attorneys or even anybody affiliated with CSB to deceive the USPTO." (Pl.'s Mem. Supp. Mot. Summ. J. 6.) It goes on to point out that the lead U.S. patent prosecutor, Michael Striker, testified that he was not aware of either of the two prior art references cited in foreign prosecutions and, if he had been made aware of them, he would have brought them to the USPTO's attention. (Id.) As such, the only evidence relevant to inequitable conduct actually contradicts an intent to deceive. (Id.)
In the face of Plaintiff's lengthy briefing, Defendant's Response remains silent. Defendant effectively concedes that Mr. Striker did not commit inequitable conduct. (Def.'s Resp. Opp'n Mot. Summ. J. 2; Def.'s Resp. Opp'n Mot. to Strike 2 ("SAP is . . . not alleging that Mr. Striker committed inequitable conduct.").) Further, Defendant offers no mention, let alone argument, in support of its theory that Mssrs. Thomas, Mergemann, and Schimitzek had an intent to deceive the USPTO. As the record shows no genuine issue of material fact on this issue-and given that Defendant has not explicitly withdrawn this defense-the Court grants the Motion for Summary Judgment of No Inequitable Conduct with respect to the members of the CSB prosecution group, as defined by Defendant in its Counterclaim.
B. Inequitable Conduct by Peter Haussingen
Defendant's second theory of inequitable conduct-raised in its Response to the Motion for Summary Judgment-alleges that Peter Haussingen, the patent attorney for German company CSB-System GmbH, committed inequitable conduct attributable to Plaintiff. (Def.'s Resp. Mot. Summ. J. 2.) More precisely, Defendant argues that "Mr. Haussingen was subject to the duty of candor, knew about material prior art, and failed to provide that art to the U.S. counsel or the U.S. Patent Office." (Id.) Defendant then spends the remainder of its Response setting forth evidence in support of a prima facie case that, with deceptive intent, Mr. Haussingen withheld material prior art from the U.S. Patent Office during prosecution of the '953 Patent. (Id. at 2--9.)
Presented with this new allegation, Plaintiff contends that "[i]nstead of opposing CSB's Motion on the only theory of inequitable conduct that it pled and disclosed during discovery, SAP has now concocted a new theory of inequitable conduct; one that has never before been disclosed." (Pl.'s Combined Mot. to Strike and Reply Supp. Mot. Summ. J. 1.) Accordingly, it requests that the Court either (a) strike this new theory; or alternatively (b) grant summary judgment because this new theory has no merit. The Court takes each request separately.
1. Motion to Strike Defendant's New Theory
"[I]nequitable conduct, while a broader concept than fraud, must be pled with particularity" under Federal Rule of Civil Procedure Rule 9(b). Ferguson Beauregard/Logic Controls, Div. of Dover Res., Inc. v. Mega Sys., LLC, 350 F.3d 1327, 1344 (Fed. Cir. 2003). Rule 9(b) requires that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). "A pleading that simply avers the substantive elements of inequitable conduct, without setting forth the particularized factual bases for the allegation, does not satisfy Rule 9(b)." Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1326--27 (Fed. Cir. 2009). Rather, "the pleading must identify the specific who, what, when, where, and how of the material misrepresentation or omission committed before the PTO." Id. at 1328. Notably, only individuals can breach the duty of candor owed to the USPTO and thus give rise to a finding of inequitable conduct. Avid Identification Sys, Inc. v. Crystal Import Corp., 603 F.3d 967, 974 n.1 (Fed. Cir. 2010), cert. denied, 131 S. Ct. 909 (2011). As such, in order to state a claim for inequitable conduct, a pleading must "name the specific individual associated with the filing or prosecution of the application . . . who both knew of the material information and deliberately withheld or misrepresented it." Exergen, 575 F.3d at 1329; see also Sanders v. Mosaic Co., 418 F. App'x 914, 919 (Fed. Cir. 2011) ("At the pleading stage the proponent of the inequitable conduct theory need only plead facts supporting a reasonable inference that a specific individual knew of the misrepresentation and had the specific intent to deceive the PTO.") (emphasis added); Delano Farms Co. v. Cal. Table Grape Comm'n, 655 F.3d 1337, 1350 (Fed. Cir. 2011) ("A charge of inequitable conduct based on a failure to disclose will survive a motion to dismiss only if the plaintiff's complaint recites facts from which the court may reasonably infer that a specific individual both knew of invalidating information that was withheld from the PTO and withheld that information with a specific intent to deceive the PTO.") (emphasis added). Ultimately, "[w]hether inequitable conduct has been pleaded with particularity under Rule 9(b) is a question governed by Federal Circuit law." Exergen, 575 F.3d at 1318.
In the present case, Defendant's Counterclaim identified only four individuals as perpetrating the alleged inequitable conduct: Mssrs. Thomas, Mergemann, Schimitzek, and Striker. Mr. Haussingen was never mentioned in any pleading. Moreover, during written discovery, Defendant failed to disclose any allegations regarding Mr. Haussingen's purported behavior. For example, Plaintiff directed an interrogatory to Defendant asking that it "[i]dentify each event . . . which Defendant contends pertains to invalidity or unenforceability of any claim of the '953 Patent, and identify the person(s) believed to be knowledgeable as to the same." (Pl.'s Mot. Summ. J., Ex. 3, Interrogatory No. 4.) In its response, dated October 21, 2010, Defendant stated, in pertinent part, as follows:
SAP also responds that the 953 Patent is unenforceable due to inequitable conduct. SAP's investigation of this matter is continuing, and it reserves the right to supplement its responses to this interrogatory as discovery proceeds. . . .
The inventors named on the 953 Patent (Messrs. Gottfried Thomas, Ulrich Mergemann), CSB's founder, chairman and CEO (Dr. Peter Schimitzek), and/or the attorney who prosecuted the 953 patent on behalf of the patent application inventors and CSB (Mr. Michael J. Striker) (collectively "the CSB prosecution group"), were associated with the filing and prosecution of the application leading to the 953 patent. During prosecution of the application leading to the 953 patent, each member of the CSB prosecution group had a duty of candor and good faith in dealing with the ...