RICHARD L. VOORHEES, District Judge.
Defendant/Third-Party Plaintiff Chestnut Ridge Foam, Inc. ("CRF") also moves to strike affidavits submitted by Mark Kiser ("Kiser"), President of Marx Industries, Inc. ("Marx") and Member Manager of MTJ American, LLC ("MTJ") in connection with the summary judgment motions. (Doc. 64).
Plaintiff Marx and Third-Party Defendant MTJ continue to seek additional discovery. (Docs. 97, 98). In conjunction with their filing advising the Court of the failed settlement attempt, Marx/MTJ seek leave of the Court to depose prospective trial witnesses associated with Defendant (suggesting that trial subpoenas had issued and "trial depositions" are necessary in the event the prospective witnesses are unavailable when the trial is re-calendared). Id.
The motions are fully briefed and ripe for disposition by the Court.
The case has been rescheduled for trial during the January 2015 Trial Term in the Statesville Division.
Plaintiff Marx is incorporated in North Carolina, with its principal place of business in Granite Falls, North Carolina.
Defendant/Third-Party Plaintiff CRF is a Pennsylvania corporation with its principal place of business in Latrobe, Pennsylvania.
Third-Party Defendant MTJ is a limited liability company organized under the laws of the State of North Carolina with its principal place of business in Granite Falls, North Carolina.
Marx and MTJ represent that MTJ is a separate and distinct entity from Marx.
According to CRF, it has been engaged in the manufacture of flame-resistant foam since 1986, has developed and refined its proprietary manufacturing process over the course of more than twenty-five years, is a leader in the industry, and occupies a significant market position. (CRF Counterclaim & Third-Party Complaint, ¶¶ 12-15). CRF sells its products within the private and public sectors, namely, within the aerospace, transportation, military and institutional sectors, as well as extensive sales to correctional facilities and state and local corrections departments throughout the United States. (CRF Counterclaim & Third-Party Complaint, ¶¶ 13-15). According to CRF, CRF employees John J. McManamy and Carl M. Ogburn began to develop plans for a correctional mattress with a transparent cover for the detection of contraband in early 2002.
It is undisputed that "MTJ offers mattress products to the "correctional industry" and is likely a competitor [of CRF]." (MTJ Answer, ¶ 20). Marx/MTJ admit selling foam mattresses with clear covers since November 15, 2011. (Exh. 6/Response to Requests for Admission 10 13). The two MTJ products relevant here are MTJ's "Clear Safe Detention Mattress" and "Fire Safe Detention Mattress."
This lawsuit stems from Marx's 2011 purchase of a piece of equipment Marx has used to manufacture foam and its subsequent operation by Marx/MTJ. Prior to the initiation of this action by Marx, CRF commenced a lawsuit in Pennsylvania against another foam manufacturing company, Innovative Foam Products ("IFP"). In the Pennsylvania suit, CRF asserted that IFP misappropriated trade secrets regarding CRF's process and operation of certain equipment used to manufacture foam products. As a result of IFP's insolvency, Marx purchased the equipment previously belonging to IFP — the same equipment at issue in the earlier Pennsylvania litigation.
In connection with the equipment purchase, Marx alleged it entered into a "Confidential Agreement" with IFP in which IFP represented to Marx that CRF "does not possess trade secrets relating to the equipment." (Compl. 25.) After Marx/MTJ failed to produce a copy of the alleged agreement, the Magistrate Judge issued an Order compelling production in January 2014. (Doc. 73). The inability of Marx/MTJ to produce the Agreement was a topic of the several formal discovery disputes litigated before this Court and the purported Agreement continues to be a subject of debate between the parties.
On March 17, 2014, Marx/MTJ produced an unexecuted copy of a document entitled, "Confidential Discussion Document Representations, Indemnity and Confidentiality Agreement."
Defendant CRF, believing that its "competitively sensitive operational information may have been transferred to Marx," wrote the President of Marx on April 22, 2011, and asked Marx "to confirm that [Marx] did not intend to use [CRF's] trade secrets to compete unfairly against Chestnut Ridge." (Doc. 9, at 2./Compl. Exh.2). On May 5, 2011, Marx, through counsel, responded to the letter from CRF, asking for clarification. (Compl. 17/Exh. 3). On May 18, 2011, counsel for CRF sent a second letter, detailing CRF's concerns and threatening that CRF was willing to "take any and all necessary legal actions to protect its confidential proprietary information and trade secrets." (Doc. 1, at 21./Comp. Exh. 4).
On August 31, 2011, Marx filed suit in the North Carolina General Court of Justice, Caldwell County Superior Court, against CRF seeking declaratory judgment pursuant to the North Carolina Uniform Declaratory Judgment Act, N.C. Gen. Stat. §§ 1-253 et seq. (Doc. 1). Marx seeks a declaratory judgment holding that use of the foam manufacturing equipment purchased from IFP's creditor did not constitute a misappropriation of trade secrets purportedly held by any competitor (i.e., CRF). Id. Marx also seeks damages from CRF for unfair competition, unfair trade practices under N.C. Gen. Stat. § 75-1.1, and tortious interference of Marx's alleged agreement with IFP. Id.
On September 30, 2011, CRF removed the suit to this federal district court based upon diversity of citizenship pursuant to 28 U.S.C. §§ 1441(a) and 1332. (Doc. 3). CRF simultaneously filed a Motion to Dismiss pursuant to Rules 12(b)(2) and 12(b)(6) of the Federal Rules of Civil Procedure. CRF argued that personal jurisdiction over CRF was lacking and that there was no controversy sufficient to support a claim for declaratory relief. Id. The parties were permitted to conduct limited discovery on the question of jurisdiction. (Doc. 12).
On October 12, 2012, the Court denied CRF's Rule 12 Motions. (Doc. 21).
CRF filed its Answer on October 26, 2012. (Doc. 22). CRF simultaneously asserted Counterclaims and a Third-Party Complaint alleging patent infringement of the `169 Patent by Marx/MTJ. (Doc. 22/Counterclaim & Third-Party Compl., ¶¶ 6-30). CRF also brought Counterclaims against Marx alleging two violations of the North Carolina Unfair and Deceptive Trade Practices Act, N.C. Gen. Stat. § 75-1.1, for selling an infringing product and for bringing an improper lawsuit against CRF. (CRF Counterclaim & Third-Party Compl., ¶¶ 31-36,41-48). In addition, CRF brought Counterclaims against Marx alleging unjust enrichment, unfair competition, violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and a civil conspiracy. (CRF Counterclaim & Third-Party Compl., ¶¶ 37-40, 49-53, 54-60, 61-66).
In its Third-Party Complaint, CRF brought identical causes of action against MTJ with the exception of the North Carolina Unfair and Deceptive Trade Practices claim based upon the propriety of bringing the instant lawsuit (Count Four). (Third-Party Compl.).
On January 15, 2013, Plaintiff Marx and Third-Party Defendant MTJ jointly filed an Answer.
The parties unsuccessfully mediated the case on October, 8, 2013. (Doc. 47).
On October 15, 2013, MTJ requested that it be allowed to amend its pleading to include counterclaims against CRF alleging: 1) bad faith violations of Section 43(a) of the Lanham Act; and 2) defamation and unfair trade practices. (Doc. 44, 6-9). The Magistrate Judge denied MTJ's motion and opined that to allow an amendment to the pleadings within such close proximity to trial would be "unduly prejudicial" to CRF. (Doc. 73, 12). MTJ appealed the Magistrate Judge's decision to this district judge. (Doc. 80). MTJ's objections were overruled. (Doc. 89).
Marx seeks summary judgment in its favor on all of the matters raised pursuant to N.C. Gen. Stat. §§ 1-253 et seq.
CRF seeks summary judgment in its favor denying Marx's request for declaratory judgment in its entirety. (Doc. 52). CRF only seeks a ruling on liability with respect to the alleged patent infringement.
MTJ joins Marx in contending that CRF's patent infringement claim fails as a matter of law. (Doc. 50). MTJ challenges CRF's infringement claim as well as the validity of the `169 Patent. Since Marx and MTJ advance identical legal arguments, and CRF treats the two entities as one (with one exception-Count IV), their motions are likewise considered as a joint motion by the Court.
Summary judgment is appropriate only "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a) (2010). In order to support or oppose a summary judgment motion, a party is required to cite to "materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, . . . admissions, interrogatory answers, or other materials;" or show "that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." FED. R. CIV. P. 56(c)(1); Anderson v. Liberty Lobby, 477 U.S. 242 (1986) (applying former version of Rule 56); Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (same). A genuine dispute exists only if "the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson, 477 U.S. at 248. In conducting its analysis, the Court views the evidence in the light most favorable to the non-moving party. Celotex Corp., 477 U.S. at 325.
Since the parties have filed cross-motions for summary judgment and/or partial summary judgment, the Court reviews each motion separately on its own merits. See Rossignol v. Voorhaar, 316 F.3d 516 (4th Cir. 2003) (internal citation omitted); Desmond v. PNGI Charles Town Gaming, L.L.C., 630 F.3d 351 (4th Cir. 2011) (internal citations omitted). When considering each individual motion, the court must take care to "resolve all factual disputes and any competing, rational inferences in the light most favorable" to the party opposing the motion. Rossignol, 316 F.3d at 523 (internal citation omitted).
Because the parties' competing summary judgment motions stem from the need to determine the proprietary nature of CRF's intellectual property rights, including U.S. Patent No. 8,056,169 (the `169 Patent), the undersigned will begin by analyzing the parties' respective proprietary interests.
On November 15, 2011, CRF obtained the `169 Patent entitled, "Institutional Mattress and Pillow Composite with Transparent Covering." (Doc. 55/Exh. 1). There are three claims asserted within the `169 Patent. Claim 1 is independent. Claims 2 and 3 are derivative of Claim 1. The `169 Patent protects the following:
(`169 Patent).
Pursuant to Title 35, United States Code, Section 282(a):
35 U.S.C. § 282(a)(2011); Black and Decker Mfg. Co. v. Sears, Roebuck and Co., 679 F.2d 1101, 1103 (4th Cir. 1982) ("Once a patent is issued it is entitled to a strong presumption of validity. . . ."). This presumption of validity stems from recognition [by the legislature] that the Patent Office possesses the requisite expertise and experience in passing upon a patent. See Black and Decker Mfg. Co., 679 F.2d at 1103 n. 7 (quoting Tights, Inc. v. Acme-McCrary Corp., 541 F.2d 1047, 1053 (4th Cir. 1976), cert. denied, 492 U.S. 980 (1976)).
Notwithstanding the presumption of validity that attaches upon issuance of a patent, defenses to a claim of alleged infringement include:
"Because a patent is presumed to be valid, the evidentiary burden to show facts supporting a conclusion of invalidity is one of
Before questions of validity and infringement can be reached, the Court must first determine what the `169 Patent actually covers, or what is patented. See e.g., Bell Atl. Network Servs, Inc. v. Covad Commc'ns Group, Inc., 262 F.3d 1258, 1267 (Fed. Cir. 2001) (describing infringement as a two-step process, the first step requiring the Court to construe the claims and determine the scope of the patent). Then, the trier of fact must judge whether the claims as properly interpreted cover the accused device or process. Id.; see also Witco Chem. Corp. v. Peachtree Doors, Inc., 787 F.2d 1545 (Fed. Cir. 1986).
The parties' summary judgment arguments require the Court to construe Claim One (or certain terms) within the `169 Patent.
Claim construction is typically facilitated by what is termed a "Markman hearing." "The purpose of a Markman hearing is to ascertain the meaning of a patent's claims so that it is clear precisely what has been patented and, by consequence, the protections the patent therefore affords the patent holder." Spiroflow Syss., Inc. v. Flexicon Corp., WDNC No. 3:02CV70 (Keesler, J.) (internal citations omitted); see also Bell Atl. Network Servs, Inc., 262 F.3d at 1267. In this case, the `169 Patent was introduced into the litigation by way of CRF's Third-Party Complaint in 2012, yet there was no request made for claim construction or for a Markman hearing prior to summary judgment briefing.
"It is well-settled that, in interpreting an asserted claim, the court should look first to the intrinsic evidence of record, i.e., the patent itself, including the claims, the specification and, if in evidence, the prosecution history. Such intrinsic evidence is the most significant source of the legally operative meaning of disputed claim language." Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1582 (Fed. Cir. 1996) (citation omitted). The Court should give the disputed claim terms "their ordinary and accustomed meaning as understood by one of ordinary skill in the art." Bell Atl., 262 F.3d at 1267. A person of ordinary skill in the art is deemed to read the claim terms not only in the context of the particular claims in which the disputed terms appear, but also in the context of the entire patent, including the specification and the prosecution history. See Phillips v. AWH Corp., 415 F.3d 1303, 1313 (Fed. Cir. 2005) (en banc).
The claims of the patent "provide substantial guidance as to the meaning of particular claim terms." Phillips, 415 F.3d at 1314. Specifically, the context in which a term is used within the claim, as well as the usage of that term in other claims of the patent, can be valuable in ascertaining the meaning of a particular claim term. Id. The ordinary meaning of a claim term must be viewed within "the context of the written description and the prosecution history" — not a vacuum. DeMarini Sports, Inc. v. Worth, 239 F.3d 1314, 1324 (Fed. Cir. 2001).
The specification of the patent can be highly instructive in construing the patent claims. Vitronics, 90 F.3d at 1582. In fact, the specification is usually dispositive, as "it is the single best guide to the meaning of a disputed term." Id.; Standard Oil Co. v. Am. Cyanamid Co., 774 F.2d 448, 452 (Fed. Cir. 1985). As such, the Federal Circuit has stated that it is "entirely appropriate for a court, when conducting claim construction, to rely heavily on the written description for guidance as to the meaning of the claims." Phillips, 415 F.3d at 1317.
In addition to consulting the specification, the Court also may examine the patent's prosecution history in construing the terms of the claims. Markman, 52 F.3d at 980. "Like the specification, the prosecution history provides evidence of how the PTO and the inventor understood the patent." Phillips, 415 F.3d at 1317. The prosecution history also may be helpful in determining whether the inventor disclaimed any particular interpretation during the prosecution of the patent. See Chimie v. PPG Indus., Inc., 402 F.3d 1371, 1384 (Fed. Cir. 2005).
In addition to examining the intrinsic evidence, the Court is also authorized to consider certain extrinsic evidence, "including expert and inventor testimony, dictionaries, and learned treatises." Markman, 52 F.3d at 980. Specifically with respect to expert testimony, the Federal Circuit has noted that such testimony "can be useful to a court for a variety of purposes, such as to provide background on the technology at issue, to explain how an invention works, to ensure that the court's understanding of the technical aspects of the patent is consistent with that of a person of skill in the art, or to establish that a particular term in the patent or the prior art has a particular meaning in the pertinent field." Phillips, 415 F.3d at 1318. The Federal Circuit has cautioned, however, that "conclusory, unsupported assertions by experts as to the definition of a claim term are not useful to a court." Id.
In light of the parties' respective arguments concerning infringement, claim construction focuses on the meaning of the term "inflatable" for purposes of the `169 Patent.
The claim language provides guidance as to proper construction. Claim 1 protects a "composite mattress" with a core made of "a flexible, compressible polymeric foamed filling material, cotton, polyester or synthetic batting" and forming the shape of a mattress.
The specification provides context by identifying the relevant field as well as the objectives of the `169 Patent. The "Field Of The Invention" states that the invention embodied within the `169 Patent:
(`169 Patent, 1, Field Of The Invention). According to the "Background Of The Invention" ("Background") the existing institutional bedding "does not prevent the concealment of contraband items . . . for confinement facilities."
(`169 Patent, 1-2, Background).
The prosecution history sheds light on what the Patent Examiner understood to be covered by the `169 Patent and the relevant prior art. Phillips, 415 F.3d at 1317. The prosecution file establishes that CRF was initially unsuccessful in obtaining a patent for its invention.
CRF's proposed claim construction relies on the Patent Examiner's discussion of the disclosed prior art, namely, U.S. Patent Nos. 5,669,092, and 6,260,222 (collectively, the "Lin Patent"). The Lin Patent reference, and the Patent Examiner's discussion of the same, is the only intrinsic evidence on the meaning of "inflatable."
(Doc. 55-18) (emphases added). In contrast with the `169 Patent's flexible and compressible foam core, Lin claims an "
CRF suggests that given the prosecution history, when the `169 Patent states that the protected mattress "is not inflatable," it means that the mattress is not "inflatable" in the sense that the Lin mattress is "inflatable." CRF suggests that claim construction must take into account that lack of inflatability would "destroy the functionality" of the Lin mattress as a mattress. In other words, CRF distinguishes a mattress that does not have to be inflatable in order to function (the CRF UNICOR mattress) from a mattress that must inflate to function as intended (Lin Patent).
CRF's proposed expert, Stephen Michielsen, Ph.D. ("Michielsen"), submitted a written report August 9, 2013 in support of this construction.
On the other hand, Marx/MTJ argue that the term "inflatable" should be construed as capable of being inflated regardless of intended use or function. According to Marx/MTJ, because of its patented vent, the Clear Safe and Fire Safe Detention Mattresses are just as inflatable as a common balloon or a hot air balloon. Marx/MTJ take the position that "[w]hen or how quickly the . . . mattress . . . deflates (sic) is irrelevant to initial inflation or inflatability." (Doc. ).
In support, Marx/MTJ proffer two expert reports. Marx/MTJ proffer an Investigative Analysis prepared July 5, 2013 by Mark J. Keith, PE, and Jonathan Bailey, both of IEC & Associates.
(Keith-Bailey, 2-3).Keith-Baileyopines:
(Keith-Bailey,3, 6). A second proposed expert for Marx/MTJ, Audie Bryan Mitcham ("Mitcham") reviewed the same materials synthesized within Keith-Baileyand also observed the MTJ mattress in simulated operation.
The Court finds that based upon the prosecution history and record as a whole, the Lin mattress was a self inflating mattress that required air as a component of the invention necessary to its intended use. As such, Lin necessarily contemplated trapping the air within the core to enable the structure to inflate. Keith-Bailey acknowledges that the Lin Patent reference, and the patent examiner's discussion and treatment of Lin, is the only intrinsic evidence probative of how the `169 Patent defines "inflatable." (Keith-Bailey, 2-3/Appendix 1).Significantly, even Keith-Bailey recognizes that theLin air mattress structure is designed to expand and fill with air. (Keith-Bailey, 3, 6). Nonetheless, in describing the MTJ mattresses, Keith-Baileyadopts an expansive definition of "inflatable" and loosely employs the term to advance the cause of Marx/MTJ.
In conclusion, the Court adopts CRF's proposed construction of the term "inflatable."
Marx/MTJ argue that the `169 Patent is invalid due to obviousness. As explained within Section 103, obviousness means that:
35 U.S.C. § 103. The relevant time period is "before the effective filing date of the claimed invention." Id. Significantly, this inquiry is undertaken from the viewpoint of a person having ordinary skill in the art in the relevant field. Id.
The Supreme Court recognized in Graham v. John Deere as follows:
Graham v. John Deere, 383 U.S. 1, 17-18 (1965) (internal citations omitted). Consideration of these "secondary considerations" relevant to obviousness have since been deemed
HARMON, ROBERT L., Patents and The Federal Circuit § 4.2(b)(i) (Second Ed. 1991) (internal citations omitted).
Marx/MTJ fails to produce clear and convincing evidence that the `169 Patent would have been obvious to a person of ordinary skill in the art prior to its issuance in November 2011. In support of its obviousness argument, Marx/MTJ rely on the patent examiner's non-final actions and the subsequent amendment to the `169 Patent, adding "wherein said mattress is not inflatable." (Doc. 61-2). However, the amendment to the `169 Patent only demonstrates that the challenge advanced by Marx/MTJ was squarely addressed by the USPTO. The prosecution history reveals that counsel for CRF skillfully advocated on behalf of the invention and argued that aside from the question of inflatability, the `169 Patent was not anticipated, and was not obvious, because Lin did not suggest or teach transparency or fire retardancy in the manner found in the `169 Patent, nor did Lin contemplate UV resistant and anti-microbial features. (CRF Exh. 79). Ultimately, the USPTO described the `169 Patent as an "unobvious improvement" over Lin. The findings of the USPTO are entitled to a certain amount of deference as it is the technical expertise of the USPTO that justifies the statutory presumption of validity upon issuance of a patent. 35 U.S.C. § 282(a). Marx/MTJ ignore the fact that, in the end, the lead USPTO examiner was persuaded that the `169 Patent was distinct enough from the prior art to be patentable.
In this case, the "real world story" compels the conclusion that the `169 Patent would not have been considered obvious prior to issuance of the `169 Patent. Indeed, it took McManamy and Ogburn nearly nine years to develop the CRF UNICOR Mattress. The need to improve upon the mattresses previously used in confinement facilities is detailed within the `169 Patent and is not contested. Moreover, the commercial success experienced by CRF, as well as the success experienced by MTJ with its competing product, tend to support CRF's argument that the `169 Patent met the desired goals. The demand for the CRF product protected by the `169 Patent is well established in the record.
As discussed, supra, the Lin Patent covers an inflatable air mattress while the `169 Patent, which is not inflatable, protects a solid core mattress. Given this fundamental distinction between Lin and the `169 Patent, and the lesser distinctions outlined by the Michielsen Report, the Court is of the view that no jury could reasonably find that the `169 Patent would have been obvious to a person of ordinary skill in the art prior to November 15, 2011. For these reasons, and particularly the statutory presumption of validity, 35 U.S.C. § 282(a), the Court finds, as a matter of law, that the `169 Patent is, in fact, valid and enforceable by CRF.
CRF contends that the Clear Safe Detention and Fire Safe Detention mattresses produced and marketed by MTJ infringe upon the `169 Patent. Section 271 of Title 35 provides that:
35 U.S.C. § 271(a). In order to survive summary judgment on its Counterclaim alleging patent infringement, CRF must produce evidence that Marx/MTJ "makes, uses, offers to sell, or sells any patented invention" [its `169 Patent], and does so without authority. 35 U.S.C. § 271(a).
Typically a matter for the jury, infringement requires that each element (or limitation) of a claim, or its substantial equivalent, be found in the accused device. See Pennwalt Corp. v. Durand-Wayland, Inc., 833 F.2d 931, 935 (Fed. Cir. 1987) (en banc), cert. denied, 485 U.S. 961, (1988).
According to CRF, the specification sheets for MTJ's Clear Safe and Fire Safe Detention Mattresses demonstrate infringement of each and every claim of the `169 Patent as a matter of law. (Doc. 55, 5-9)(Compare Exh. 1/`169 Patent with Exhs. 5 and 7/Specification Sheets for MTJ Clear Safe and Fire Safe Detention Mattresses). Indeed, Michielsen opines that "MTJ is practicing the `169 Patented technology in their Clear Safe Detention and Fire Safe Detention mattresses." (Michielsen Report, 9). Michielsen's Report includes a chart identifying the evidence in support of infringement as to Claims One, Two, and Three, which is instructive.
MTJ's primary argument concerning infringement is that ALL of MTJ's competing product (fire safe mattresses) are designed and advertised as "inflatable" while CRF's `169 Patent expressly states in Claim One that the CRF mattresses are not inflatable. (`169 Patent, Column 4, 1-2; Column 2, 21-23). Keith-Bailey opines that the MTJ American mattresses do not infringe as alleged by CRF. The thrust of Keith-Bailey is that the MTJ American mattress, because of its patented vent, "operates in similar fashion to the valve of [the] Lin [Patent]." (Keith-Bailey, 3). In other words, Marx/MTJ contend the MTJ mattresses are "inflatable" (can self inflate) whereas the `169 Patent expressly disclaims this characteristic. Audie Mitchum concurs with Keith-Bailey.
With respect to infringement, it is the view of the Court that whether MTJ "makes, uses, offers to sell, or sells any patented invention [the `169 Patent] within the United States" presents genuine issues of material fact.
Marx/MTJ market their Clear Safe and Fire Safe Mattresses as having a "patented vent" and the MTJ American website represents that an unidentified patent is pending. (Doc. 55/Exh. A — MTJ Webpage). Michielsen contends that the "patented vent" is the subject of two patent applications, the `498 and `575 Applications, but no registered patent.
Summary judgment is denied on this issue.
In addition to alleging direct infringement by way of MTJ's manufacturing of the purported infringing product, CRF alleges that Marx is a contributory infringer. (Doc. 55, 8-). Pursuant to 35 U.S.C. § 271(c),
35 U.S.C. § 271(c) (emphases added). This issue will be for the jury. The jury will decide whether Marx's production of foam, or other contribution to the MTJ mattress manufacturing, affects a material part of the patented invention, and whether Marx had knowledge that the foam it manufactures and/or the foam used in the MTJ's mattresses was made or especially adapted for an infringing use. Mark Kiser's relationship with Marx/MTJ, as well as the common ownership, may be considered on this issue.
Both Marx and CRF move for summary judgment on all of the issues raised within Marx's Declaratory Judgment Action, including the claims stemming from Marx's purported "Confidential Agreement" with IFP.
From the outset of the litigation, Marx has asserted that its "Confidential Agreement" with IFP, or rather its "Confidential Discussion Document," provided Marx/MTJ with the authority to both purchase the equipment from IFP and utilize the equipment, along with the consulting services provided by IFP personnel, to manufacture the foam mattresses accused of infringing the `169 Patent. Beyond the defensive posture Marx took with respect to its "Confidential Agreement," Marx also advances a tortious interference claim against CRF.
On the issue of contract formation, the CDD does not include any choice of law provision.
On this record, even when the facts and inferences are viewed in the light most favorable to Marx/MTJ, it is doubtful Marx/MTJ can sustain any affirmative action for relief, including its tortious interference claim, by relying on the unexecuted CDD. See e.g, Gupton v. Son-Lan Development Co., Inc., 695 S.E.2d 763, 770 (N.C. App. 2010) (reciting elements of tortious interference, including showing that interference was not justified by any legitimate business interest). Aside from the fact that the document is unexecuted, the label chosen is probative of the parties' intent and tends to show that the parties had not finalized their discussions, but were still in discussion. In short, the evidence presented by Marx/MTJ thus far is insufficient to establish the terms of any enforceable contractual agreement between Marx and IFP and former IFP executives.
There is no evidence of record to enlighten the Court about the nature of IFP's work for Marx/MTJ.
Marx/MTJ move for summary judgment on CRF's counterclaim alleging violation of Section 43(a) of the Lanham Act by Marx/MTJ. First, CRF contends that Marx/MTJ have engaged in the "misrepresentation of nature, characteristics or qualities of goods or services which constitutes a false designation of origin, false or misleading description or false representation of fact, each of which is likely to cause confusion, mistake or deception among consumers that Marx/MTJ are licensed, sponsored, approved, associated with or otherwise entitled to use Chestnut's [] designs." (Doc. 19 ¶ 56). Secondly, CRF contends that Marx/MTJ violated the Lanham Act by engaging in "unfair competition, false advertising, false designation of origin, false description and false representation that their products are sponsored, approved or authorized by Chestnut." (Doc. 19 ¶ 5 ). CRF claims Marx/MTJ acted willfully and deliberately. (Doc. 19 ¶ 60)
Section 43(a) of the Lanham Act imposes liability on one who engages in false advertising, by making false description or representation about one's own, or another's goods or services. See 15 U.S.C. § 1125(a)(1)(B); C.B. Fleet Co., Inc. v. SmithKline Beecham Consumer Healthcare, L.P., 131 F.3d 430, 434 (4th Cir.1997). A representation constitutes a violation of the Lanham Act when it is "false on its face, or although literally true, likely to mislead and to confuse consumers given the merchandising context." C.B. Fleet, 131 F.3d at 434. If an advertising claim is literally false, "the court may enjoin the use of the claim without reference to the advertisement's impact on the buying public." Id. (citing McNeil-P.C.C., Inc. v. Bristol-Meyers Squibb Co., 983 F.2d 1544, 1549 (2nd Cir.1991); Buffalo Wings Factory, Inc. v. Mohd, 622 F.Supp.2d 325, 334 (E.D.Va.2007).
In order to succeed on its Lanham Act counterclaim, CRF must establish the following:
Scotts Co. v. United Indus. Corp., 315 F.3d 264, 272 (4th Cir. 2002).
Because the gist of CRF's Lanham Act counterclaim is Marx/MTJ's alleged misrepresentation(s) regarding their ability to manufacture and sell the Clear Safe and Fire Safe Mattress products, genuine issues of material fact exist and preclude summary judgment on this issue.
Under North Carolina's Unfair and Deceptive Trade Practices Act, a successful plaintiff must show: "(1) defendants committed an unfair or deceptive act or practice; (2) in or affecting commerce; and (3) that plaintiff was injured thereby." Gupton, 695 S.E.2d at 771 (quoting Carcano v. JBSS, LLC, 684 S.E.2d 41, 49 (2009)). "Whether an act or practice is unfair or deceptive under this section is a question of law for the court." Id. (quoting Carcano, 684 S.E.2d at 50.) "Additionally, `it is not necessary that an act or practice be both unfair and deceptive in order to be violative of the statute.'" Id. (quoting Rucker v. Huffman, 392 S.E.2d 419, 421 (1990)) (emphasis in original).
"A practice is unfair when it offends public policy and when the practice is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers." Gupton, 695 S.E.2d at 771 (quoting Walker v. Branch Banking & Tr. Co., 515 S.E.2d 727, 729 (1999)). "Stated another way, a party is guilty of an unfair act or practice when it engages in conduct which amounts to an inequitable assertion of its power or position." Id. (quoting Carcano, 684 S.E. 2d at 50.)) "A practice is deceptive if it has the capacity or tendency to deceive." Id. (quoting Huff v. Autos Unlimited, Inc., 477 S.E.2d 86, 88 (N.C.Appp. 1996)).
The parties' factual allegations concerning whether any party has engaged in conduct that might constitute an unfair or deceptive trade practice in violation of North Carolina's Unfair & Deceptive Trade Practices Act, N.C. GEN. STAT. § 75-1.1, is dependent in large part upon the findings concerning the `169 Patent and infringement. For example, Marx/MTJ contend in the declaratory judgment action that much of CRF's conduct in seeking to protect its `169 Patent violates § 75-1.1. In a similar vein, CRF contends that Marx/MTJ violated the statute via sales of infringing products, specifically, the infringement of the `169 Patent and any other intellectual property, trade secrets and confidential proprietary information of Chestnut Ridge. CRF also contends that Marx initiated litigation "for the purpose of casting a cloud over Chestnut Ridge's exclusive right, title and interest in and to its valid United States Patents, trade secrets and/or confidential proprietary information."
For this reason, the § 75-1.1 statutory claims, which are asserted by the parties against each other, are not subject to resolution on summary judgment.
"The purpose of a laches defense is to punish dilatory patentees and in so doing to encourage all patentees to seek infringement remedies in a timely manner." Odetics, Inc. v. Storage Tech. Corp., 14 F.Supp.2d 785, 790 (E.D.Va.1998).
To succeed on a laches defense to a claim alleging patent infringement, a party must show that "(a) the patentee's delay in bringing the suit was unreasonable and inexcusable, and (b) the alleged infringer suffered material prejudice attributable to the delay."
"[A] defense of laches requires the court to look at the patentee's conduct from the patentee's perspective and also to consider its effect on the alleged infringer." Id. The length of time that may be deemed reasonable depends on the circumstances. Aukerman, 960 F.2d at 1032. Furthermore:
Id. (quoting Wafer Shave, 857 F.Supp. at 118.)
A court must also consider and weigh any justification offered by the plaintiff for its delay. Aukerman, 960 F.2d at 1033. These justifications could include, but are not limited to: 1) other litigation; 2) negotiations with the accused; 3) possible poverty or illness under limited circumstances; 4) wartime conditions; 5) the extent of the infringement; and 6) a dispute over the ownership of the asserted patent. Id.
"The defense of laches is committed to the sound discretion of the trial judge." Troxler Electronic Laboratories, Inc. v. Pine Instrument Co., 597 F.Supp.2d 574, 583 (E.D.N.C. Feb. 13, 2009) (internal citations omitted). "A successful laches defense bars all damages incurred before the filing of the suit." Id.
Marx/MTJ assert that CRF failed to mark its product as contemplated by 35 U.S.C. § 287, which imposes limitations on damages and other remedies in a patent infringement action where no notice is provided by the patentee to the accused infringer. Section 287, entitled "Limitation on damages and other remedies; marking and notice," reads:
35 U.S.C. § 287 (2011) (emphases added). Marking is not required. Id. A patentee's election to physically mark its product with the patent number or information directing the public to the patent information is one way to provide notice to the public of the patentee's patent ownership rights.
The limitation of damages issue raised by the Marx/MTJ summary judgment motion for CRF's alleged failure to mark its patent is simply not ripe. CRF's patent infringement claim, and its corresponding motion for summary judgment asserting infringement by Marx/MTJ, was explicitly limited by CRF to liability. This issue will be deferred pending jury trial.
CRF's claims alleging unfair competition, unjust enrichment, and civil conspiracy are based entirely on the factual allegations asserted in other causes of action. (Doc. 22, ¶ 51). For example, CRF's claim alleging unjust enrichment is based upon the assertion that Marx/MTJ engaged in sales (or attempts to sell) of products that infringe on CRF's mattresses and that Marx/MTJ should not be permitted to benefit from those wrongful sales. (Doc. 22, ¶¶38-39). CRF's unjust enrichment is dependent upon the jury's findings as to patent infringement. The same is true with respect to CRF's civil conspiracy claim, which alleges that Marx/MTJ acted in combination with common purpose to devalue Chestnut's name in the market and seize a portion of market share via unfair and unlawful means of competition. (Doc. 19 ¶¶ 64, 66). Summary judgment disposition is precluded.
Marx/MTJ also requested declaratory judgment stating that CRF has no protectable trade secrets and that Marx/MTJ have not violated either of the Pennsylvania or North Carolina Trade Secret Protection Acts.
For the reasons stated herein, the Court finds that genuine issues of material fact exist and preclude summary judgment disposition on all issues identified within the instant Memorandum and Order and listed below. In light of the genuine issues of material fact, the following claims or counterclaims will proceed to jury trial:
(Keith-Bailey, 11/Appendix 3).
