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Frontline Technologies, Inc v. Crs

July 26, 2012

FRONTLINE TECHNOLOGIES, INC.,
PLAINTIFF,
v.
CRS, INC., DEFENDANT.



The opinion of the court was delivered by: Eduardo C. Robreno, J.

MEMORANDUM

I. INTRODUCTION

Plaintiff Frontline Technologies, Inc. ("Plaintiff") filed this patent infringement and breach of contract action against Defendant CRS, Inc. ("Defendant") over a technology that facilitates replacement of absent workers with substitute workers. Plaintiff avers that Defendant's SubFinder products infringe U.S. Patent No. 6,675,151 ("the '151 patent") for substitute worker technology. Second Am. Compl. ¶ 14, ECF No. 96. In its Second Amended Complaint, Plaintiff pleads two counts: (1) infringement of the '151 patent and (2) breach of a license agreement between Plaintiff and Defendant. Id. ¶¶ 36-43, 52-55.

Currently pending before the Court is Defendant's Motion for Summary Judgment on non-infringement, priority date, invalidity, and various contract claims. For the reasons set forth below, the Court will deny Defendant's Motion.

II. BACKGROUND

Plaintiff alleges patent infringement of its '151 patent that claims a labor database wherein customers access a website to post worker absences for which substitutes are needed. Id. ¶¶ 9, 12. Plaintiff's product practicing the claimed invention is called "Aesop." Id. ¶ 9. Substitutes access Aesop to search for posted worker absences and to commit to filling vacancies. Id. Users access Aesop via the Internet using a web interface or via a telephone interactive voice response ("IVR") system. Id.

On January 6, 2004, the U.S. Patent and Trademark Office ("PTO") issued the '151 patent for the substitute worker technology. Id. ¶ 12. The '151 patent claims priority of filing date to U.S. Patent No. 6,334,133 ("the '133 patent"). Plaintiff is the assignee and owner of the '151 patent. Second Am. Compl. ¶ 13. In February 2004, Frontline Data, Plaintiff's predecessor, filed a patent infringement suit against Defendant. Frontline Data and Defendant reached a settlement agreement in November 2004 whereby Frontline Data agreed to license its technology to Defendant in return for royalties. Id. ¶¶ 15-16.

Plaintiff alleges Defendant failed to pay royalties pursuant to the limited licensing agreement ("License Agreement"). Id. ¶¶ 18-23. In particular, and relevant here, the License Agreement required a fee on gross revenues from the sale of "Licensed Products and Services." License Agreement ¶ 3.1, Am. Compl. Ex. B, ECF No. 29-2. The agreement defines "Licensed Products and Services" as those products that would "infringe an unexpired, valid, and enforceable claim" of the '133 patent or '151 patent. Id. ¶ 1.1. After an audit in 2007, Plaintiff determined that Defendant failed to pay the proper royalties under the License Agreement. Specifically, Plaintiff alleged that Defendant failed to account for sales where a substitute teacher used a telephone to fill a wanted position. Defendant contended that the License Agreement did not cover such uses because they did not infringe either the '133 patent or '151 patent. Plaintiff disagreed, terminated the License Agreement, and filed the instant lawsuit on June 18, 2007. See Compl., ECF No. 1.

On August 8, 2007, the PTO granted an ex parte reexamination of claims 3 through 13 of the '151 patent. Second Am. Compl. ¶ 28. Accordingly, the Court placed the action in suspense on November 19, 2007. Order, Nov. 19, 2007, ECF No. 15. During the PTO reexamination, claims 14 through 55 were added to the '151 patent and claims 3, 6, 9, and 14 through 55 were listed in the reexamination certificate as patentable.*fn1 See Second Am. Compl. ¶¶ 31, 32; Am. Compl. Ex. C.

On September 30, 2008, during the '151 patent reexamination period, the PTO issued U.S. Patent No. 7,430,519 ("the '519 patent"), titled "Substitute Fulfillment System," a continuation-in-part of the '151 patent, to Roland R. Thompson, Michael S. Blackstone, and Ralph Julius. Am. Compl. ¶¶ 33-34. Plaintiff is assignee and owner of the '519 patent. Id. ¶ 35.

On January 14, 2010, Plaintiff filed an Amended Complaint, which alleges three counts against Defendant.*fn2

Plaintiff claims Defendant infringed, continues to infringe, and induced infringement of the '151 patent associated with Defendant's SubFinder products ("Count I"). Id. ¶¶ 37-39. Plaintiff claims Defendant infringed, continues to infringe, and induced infringement of the '519 patent with Defendant's SubFinder products ("Count II"). Id. ¶¶ 45-47. And Plaintiff claims Defendant breached the License Agreement ("Count III").

Plaintiff seeks declaratory and injunctive relief and damages. Id. at 9-10.

On February 3, 2010, Defendant filed an Amended Answer and Counterclaims ("Answer") that raises various affirmative defenses and counterclaims, states that Plaintiff has breached the License Agreement, and denies all claims for infringement of the '151 and '519 patents.*fn3 Defendant requests declaratory and injunctive relief and damages. Answer 16-17, ECF No. 36.

On February 23, 2010, Plaintiff filed an amended reply denying Defendant's counterclaims and asserting various affirmative defenses.

On February 8, 2011, the Court issued an order and accompanying memorandum construing certain disputed claim terms.

Order, Feb. 8, 2011, ECF No. 56; Mem. Op., Feb. 8, 2011, ECF No. 55. The parties continued with discovery.

On August 12, 2011, Plaintiff granted Defendant a

Covenant Not to Sue on the '519 patent. Mot. to Dismiss Ex. A, Aug. 15, 2011, ECF No. 66-1. On August 15, 2011, Plaintiff filed a Motion to Dismiss Counterclaims III and IV and a Motion to Amend the Complaint. Id. On September 1, 2011, Defendant opposed the Motion to Dismiss. Opp'n, Sept. 1, 2011, ECF No. 67. On December 23, 2011, the Court issued an order and accompany memorandum granting Plaintiff's Motion to Dismiss and granting Plaintiff leave to amend its Amended Complaint.*fn4 See Order, Dec. 23, 2011, ECF No. 95; Mem. Op., Dec. 23, 2011, ECF No. 94.

On November 21, 2011, Defendant filed a Motion for Summary Judgment on the issues of non-infringement, priority date, invalidity, and most favored nations defense. ECF No. 77. Plaintiff responded in opposition. ECF No. 89. Defendant filed a reply. ECF No. 91. The motion is now fully briefed and ripe for disposition.

III. STANDARD OF REVIEW

Summary judgment is appropriate if there are no genuine disputes of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). "A motion for summary judgment will not be defeated by 'the mere existence' of some disputed facts, but will be denied when there is a genuine issue of material fact." Am. Eagle Outfitters v. Lyle & Scott Ltd., 584 F.3d 575, 581 (3d Cir. 2009) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986)).

A fact is "material" if proof of its existence or non-existence might affect the outcome of the litigation, and a dispute is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248.

In undertaking this analysis, the court views the facts in the light most favorable to the non-moving party. "After making all reasonable inferences in the nonmoving party's favor, there is a genuine issue of material fact if a reasonable jury could find for the nonmoving party." Pignataro v. Port Auth. of N.Y. & N.J., 593 F.3d 265, 268 (3d Cir. 2010) (citing Reliance Ins. Co. v. Moessner, 121 F.3d 895, 900 (3d Cir. 1997)). While the moving party bears the initial burden of showing the absence of a genuine dispute of material fact, meeting this obligation shifts the burden to the non-moving party who must "set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 250.

IV. DISCUSSION

Defendant moves for summary judgment on non-

infringement, filing date priority, invalidity for failure to meet the written description requirement, and on application of the most favored nations clause in the License Agreement. The Court addresses each in turn and will deny Defendant's Motion on each issue.

A. Non-infringement

Defendant first moves for summary judgment on its counterclaim of non-infringement of the asserted claims of the '151 patent: claims 3, 6, 7, 16, 24, and 33.

1. Applicable Law

Patent infringement occurs when "whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent." 35 U.S.C. § 271(a) (2006). One can also be liable for inducing another to infringe. Id. § 271(b). A court's analysis of patent infringement is a well-established two-step process: (1) the meanings of disputed claims are construed; and (2) the allegedly infringing device is compared to the claims as construed. Markman v. Westview Instruments, Inc., 52 F.3d 967, 976 (Fed. Cir. 1995), aff'd, 517 U.S. 370 (1996); WavetroniX

L.L.C. v. EIS Elec. Integrated Sys., 573 F.3d 1343, 1354 (Fed. Cir. 2009). In this case, the Court already construed the meaning of the disputed ...


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