Polyclad v. MacDermid CV-99-162-M 02/13/01
UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Polvclad Laminates, Inc.,
and Fry Metals, Inc., d/b/a
PC Fab Division of Alpha Metals, Inc.,
Plaintiffs
v. Civil No. 99-162-M
Opinion No. 2001 DNH 027
MacDermid, Inc.,
Defendant
O R D E R
Polyclad Laminates, Inc. ("Polyclad") and Fry Metals, Inc.,
doing business as PC Fab Division of Alpha Metals, Inc.
("Alpha"), bring this patent infringement action against
MacDermid, Inc. See 35 U.S.C. § 271, et seg. Polyclad is the
exclusive licensee of United States Patent No. 5,800,859 (the
"'859 patent"). According to plaintiffs. Alpha is the only
organization licensed by Polyclad to manufacture and sell the
chemicals used in carrying out the patented processes. It also
possesses the right, exercisable in its sole discretion, to
sublicense third parties to practice the patented processes. See
Amended complaint at para. 6.
The '859 patent teaches a process for copper coating circuit
boards, the first step in creating a printed circuit board. Part
of that coating process involves the use of a surface active
agent, or "surfactant." A substantial dispute in this case
relates to the type of surfactant actually claimed in the patent
and whether, as MacDermid asserts, plaintiffs knew, but failed to
disclose to the United States Patent and Trademark Office (the
"PTO"): (1) that only a process utilizing cationic (i.e.,
negatively charged) surfactants was novel over prior art; and/or
(2) that the processes taught by the '859 patent actually reguire
a cationic surfactant in order to function as claimed.
Plaintiffs say that MacDermid is infringing one or more
claims of the '859 patent and is actively inducing others to
infringe that patent. MacDermid denies that its conduct
infringes the patent. Alternatively, it asserts that the '859
patent is invalid and unenforceable. MacDermid also raises two
counterclaims. First, it seeks a judicial declaration that the
'859 patent is invalid and unenforceable due to plaintiffs'
alleged "ineguitable conduct" before the PTO. Next, it brings a
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claim for tortious interference with prospective and existing
customers, based on plaintiffs' having informed MacDermid's
customers of the alleged patent infringement.
Plaintiffs move for partial summary judgment with regard to
MacDermid's counterclaims (as well as its third affirmative
defense which, like its first counterclaim, relies upon
plaintiffs' alleged ineguitable conduct before the PTO).
MacDermid objects and, in turn, moves for judgment of non
infringement as a matter of law. MacDermid also moves to dismiss
Alpha as a party plaintiff, asserting that as a "non-exclusive
licensee" of the '859 patent. Alpha lacks standing to sue for
alleged infringement of that patent. See Fed. R. Civ. P.
12 (b) (1) .
Standard of Review
I. Motion to Dismiss.
"When faced with a motion to dismiss for lack of subject
matter jurisdiction. Rule 12(b)(1), Fed. R. Civ. P., the party
asserting jurisdiction has the burden to establish by competent
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proof that jurisdiction exists." Stone v. Dartmouth College, 682
F. Supp. 106, 107 (D.N.H. 1988) (citing O'Toole v. Arlington
Trust C o .,
681 F.2d 94, 98 (1st Cir. 1982); C. Wright & A.
Miller, 5 Federal Practice and Procedure § 1350, at 555 (1969 &
Supp. 1987)). Furthermore, the court "may consider pleadings,
affidavits, and other evidentiary materials without converting
the motion to dismiss to a motion for summary judgment." Lex
Computer & Management Corp. v. Eslinqer & Pelton, P.O.,
676 F.
Supp. 399, 402 (D.N.H. 1987); see also Richmond, F & P R. Co. v.
United States,
945 F.2d 765, 768 (4th Cir. 1991); Lawrence v.
Dunbar,
919 F.2d 1525, 1529 (11th Cir. 1990). But, the court
"should apply the standard applicable to a motion for summary
judgment, under which the nonmoving party must set forth specific
facts beyond the pleadings to show that a genuine issue of
material fact exists." Richmond,
945 F.2d at 768 (citing Celotex
Corp. v. Catrett,
477 U.S. 317, 323-24 (1986)). "The moving
party should prevail only if the material jurisdictional facts
are not in dispute and the moving party is entitled to prevail as
a matter of law."
Id. (citing Trentacosta v. Frontier Pacific
Aircraft Indus., Inc.,
813 F.2d 1553, 1558(9th Cir. 1987)).
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II. Summary Judgment.
When ruling upon a party's motion for summary judgment, the
court must "view the entire record in the light most hospitable
to the party opposing summary judgment, indulging all reasonable
inferences in that party's favor." Griqqs-Ryan v. Smith, 904
F.2d 112, 115 (1st Cir. 1990). Summary judgment is appropriate
when the record reveals "no genuine issue as to any material fact
and . . . the moving party is entitled to a judgment as a matter
of law." Fed. R. Civ. P. 56(c). In this context, "a fact is
'material' if it potentially affects the outcome of the suit and
a dispute over it is 'genuine' if the parties' positions on the
issue are supported by conflicting evidence." Intern'1 Ass'n of
Machinists and Aerospace Workers v. Winship Green Nursing Center,
103 F.3d 196, 199-200 (1st Cir. 1996) (citations omitted).
Discussion
I. MacDermid's Motion to Dismiss Alpha.
According to the amended complaint. Polyclad is the
exclusive licensee of the '859 patent and is vested with the
right to enforce that patent and sue for all past infringements.
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See Amended complaint, at para. 5. Alpha, in turn, is alleged to
be:
a licensee of the '859 patent from Polyclad and has the
right and license in the United States of America, its
territories and dependencies, to manufacture, use,
import and sell materials and processes relating to the
claimed subject matter of the '859 Patent and the
right, at its sole discretion, to sublicense rights
under the '859 Patent.
Amended complaint, at para. 6. Based upon those allegations and
the record evidence, MacDermid claims that Alpha is merely a
"bare licensee" of the '859 patent, without the right to sue for
past infringement and, therefore, without standing to appear as a
plaintiff in this litigation. See, e.g.. Textile Productions,
Inc. v. Mead Corp., 134 F.3d 1481, 1484 (Fed. Cir. 1998) ("abare
licensee has no standing at all."); Ortho Pharmaceutical Corp. v.
Genetics Institute, Inc., 52 F.3d 1026, 1034 (Fed. Cir. 1995)
(holding that a "bare" or nonexclusive licensee has no standing
to bring or join a suit for infringement).
The Patent Act of 1952 provides that "a patentee shall have
remedy by civil action for infringement of his patent." 35
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U.S.C. § 281. Generally speaking, therefore, a party suing for
patent infringement must have held legal title to the patent at
the time of the alleged infringement. See Rite-Hite Corp. v.
Kelley C o ., Inc.,
56 F.3d 1538, 1551 (Fed. Cir. 1995); Ortho
Pharmaceutical Corp,
52 F.3d at 1030. As this court has
observed, however, "[a] party need not . . . hold all proprietary
rights to a patent in order to have standing to sue for
infringement as a co-plaintiff with the patentee." Ricoh C o .,
Ltd. v. Nashua Corp.,
947 F. Supp. 21, 23 (D.N.H. 1996) (emphasis
in original).
For instance, under certain circumstances, a licensee
may possess sufficient interest in the patent to have
standing to sue as a co-plaintiff with the patentee.
Such a licensee is usually an "exclusive licensee." In
contrast, a non-exclusive licensee does not have
standing to sue for infringement, even as a co
plaintiff .
To be an exclusive licensee for standing purposes, a
party must have received, not only the right to
practice the invention . . ., but also the patentee's
express or implied promise that others shall be
excluded from practicing the invention. It is the
licensee's beneficial ownership of a right to prevent
others from making, using or selling the patented
technology that provides the foundation for co
plaintiff standing, not simply that the word
"exclusive" may or may not appear in the license.
Therefore, if a party has not received a promise of
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exclusivity under the patent, it cannot have co
plaintiff standing in an infringement action. It is
important to stress, however, that the exclusive
license need not be express; it may be implied.
Id., at 23-24 (citations and internal guotation marks omitted)
(emphasis in original).
Here, plaintiffs assert that the allegations set forth in
the amended complaint, taken together with the record evidence,
establish that Alpha has been granted sufficient rights to the
'859 patent to vest it with standing to proceed as a co-plaintiff
in this litigation. The court agrees. Among other things, the
amended complaint alleges that Alpha has the right, exercisable
in its sole discretion, to sublicense rights under the '859
patent. Thus, Alpha plainly possesses, at a minimum, the
patentee's implicit promise that others will be prevented from
practicing the patented technology, absent Alpha's consent. See,
e.g., Rite-Hite, 56 F.3d at 1552 ("To be an exclusive licensee
for standing purposes, a party must have received, not only the
right to practice the invention within a given territory, but
also the patentee's express or implied promise that others shall
be excluded from practicing the invention within that territory
as well."). See also Textile Productions, 134 F.3d at 1484.
Additional support for Alpha's assertion that it has
standing as an "exclusive licensee" can be found in the record,
including evidence of its intimate relationship with Polyclad and
Cookson Group, PLC, the parent corporation of both companies.
See, e.g.. Affidavit of Mark Dingley, Exhibit 3 to plaintiffs'
memorandum; Affidavit of Richard Mahoney, Exhibit 4 to
plaintiffs' memorandum. See generally Ricoh, 947 F. Supp. at 24;
Kalman v. Bervln Corp.,
914 F.2d 1473, 1482 (Fed. Cir. 1990).
That evidence strongly supports plaintiffs' claim that, at a
minimum. Alpha Fry, Ltd. (the assignee of the '859 patent).
Polyclad (the exclusive licensee of the '859 patent), and Cookson
Group, PLC (the parent corporation of all those entities)
intended to vest Alpha with the right to practice the processes
taught by the '859 patent and the right to preclude others from
doing so (at least within the United States and its territories).
Alpha has, therefore, pled sufficient facts (and pointed to
sufficient evidence in the record) to satisfy its burden under
Rule 12(b)(1) and demonstrate that it has standing, as a co
plaintiff, to sue for alleged infringement of the '859 patent.
Conseguently, MacDermid's motion to dismiss is denied.
II. MacDermid Counterclaims.
A. First Counterclaim - Inequitable Conduct.
Applicants for patents and their agents are reguired to
prosecute patent applications "with candor, good faith, and
honesty." Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178 (Fed.
Cir. 1995). See also
37 C.F.R. § 1.56 ("Rule 56") ("Each
individual associated with the filing and prosecution of a patent
application has a duty of candor and good faith in dealing with
the Office, which includes a duty to disclose to the Office all
information known to that individual to be material to
patentability as defined in this section."). "Ineguitable
conduct includes affirmative misrepresentation of a material
fact, failure to disclose material information, or submission of
false material information, coupled with an intent to deceive."
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Molins, 48 F.3d at 1178. Rule 56 defines "material information,"
subject to the disclosure requirement, as follows:
Under this section, information is material to
patentability when it is not cumulative to information
already of record or being made of record in the
application, and
(1) It establishes, by itself or in
combination with other information, a prima
facie case of unpatentability of a claim; or
(2) It refutes, or is inconsistent with, a
position the applicant takes in:
(i) Opposing an argument of
unpatentability relied on by the Office;
or
(ii) Asserting an argument of
patentability.
37 C.F.R. § 1.56.
Claim 1 of the '859 patent teaches "a process for treating a
metal surface to promote adhesion thereto" and specifies the use
of a surfactant to form "a microroughened conversion-coated
surface." Claim 8, which is dependent upon claim 1, teaches a
process "according to claim 1 in which the surfactant is a
cationic surfactant." Although the patent describes the use of a
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cationic surfactant as the "preferred embodiment" of the process
described in the patent, claim 1 plainly teaches a process that
utilizes surfactants that need not necessarily be cationic. That
is to say, claim 1 teaches a process in which, at least
theoretically, one might employ an anionic surfactant (i.e., one
having a positive charge) or a nonionic surfactant (i.e., one
carrying no charge).
The core of MacDermid's ineguitable conduct claim is its
assertion that, during the course of prosecuting their patent
applications in Europe, plaintiffs (or, more accurately, their
predecessors in interest) learned that: (1) use of a non
specified surfactant was taught by prior art; and, perhaps more
importantly, (2) the processes taught in the '859 patent only
worked when a cationic surfactant was used. In support of that
argument, MacDermid points out that, in attempting to distinguish
prior art, plaintiffs reported to the European Patent Office:
In accordance with the process of the present invention
a metal surface is treated in order to micro-roughen it
and it is submitted that is exactly the opposite of the
polishing step taught in the prior art Document. The
micro-roughening treatment is obtained by incorporating
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into the adhesion promoting compositions as an
essential ingredient a cationic surfactant. . . . [A]
person skilled in the art would consider that if other
surfactants were substituted for the surfactants taught
in Document D1 a brilliant chemically polished surface
would be obtained. Accordingly, it is submitted that
Document D1 teaches exactly the opposite of the result
reguired to be obtained by the process invention.
Letter to EPO dated November 27, 1996, Exhibit C to defendant's
memorandum (emphasis supplied). And, in an effort to distinguish
other prior art before the EPO, plaintiffs reported:
Although the solutions of document D2 contain a
corrosion inhibitor they do not contain a cationic
surfactant and in the absence of a cationic
surfactant/corrosion inhibitor combination the copper
surface is not coated.
Letter to EPO dated May 15, 1998, Exhibit F to defendant's
memorandum (emphasis supplied).
Ultimately, says MacDermid, plaintiffs were forced to limit
the European patent's claims to cover only a coating process that
employed a cationic surfactant. And, although MacDermid seems to
acknowledge that plaintiffs brought all relevant prior art to the
attention of the United States Patent Office, it says plaintiffs
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were required (but failed) to disclose the results of testing
that revealed that the process taught in claim 1 of the '859
patent would not work in the absence of a cationic surfactant.
At this stage of the litigation, (which, parenthetically, is
prior to a Markman hearing and any determination of the scope of
the '859 patent), the court is unable to definitively conclude,
as a matter of law, that plaintiffs honored their obligations of
full and candid disclosure to the PTO. If, as MacDermid asserts,
plaintiffs knew that the process taught in the '859 patent could
not be accomplished unless a cationic surfactant was used, and if
plaintiffs failed to disclose to the PTO the results of their own
testing revealing that fact, plaintiffs might well have violated
their obligation of good faith and candor. Consequently,
plaintiffs' motion for judgment as a matter of law as to
MacDermid's first counterclaim (and its third affirmative
defense) is necessarily denied, without prejudice.
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B. Second Counterclaim - Tortious Interference.
MacDermid says that it "developed and owns a chemical
composition particularly useful in the production of multilayer
printed circuits, covered by U.S. Patent No. 5,869,130 and
marketed under the tradename MultiBond." MacDermid's Answer and
Counterclaim (document no. 29), at 7. According to MacDermid,
"MultiBond has no surfactant. Nor is a surfactant recommended.
MacDermid is not aware of any customer using a surfactant in its
MultiBond product." MacDermid's memorandum at 5.
MacDermid also asserts that plaintiffs "misrepresented to
prospective and existing MultiBond customers that MacDermid's
marketing of MultiBond was a violation of the Plaintiffs' patent
applications and the '859 patent." Id. Additionally, it claims
that plaintiffs knew that the '859 patent was necessarily
"limited to an adhesion promotion process incorporating a
cationic surfactant and did not cover processes utilizing other
types of surfactants or no surfactant at all."
Id. Thus, says
MacDermid, plaintiffs tortiously interfered with their business
relationships with customers and that unlawful conduct is
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intimately intertwined with plaintiffs' inequitable conduct
before the PTO (i.e., conduct that resulted in its allegedly
wrongful receipt of an overly broad patent).
In response, plaintiffs rely on their denial of inequitable
conduct before the PTO and, therefore, assert that MacDermid has
failed to support an essential element of its tortious
interference claim: that the patent holder was guilty of bad
faith or fraudulent conduct before the PTO. See generally Zenith
Electronics Corp. v. Exzec, Inc., 182 F.3d 1340, 1355 (Fed. Cir.
1999) ("bad faith is a prerequisite to [plaintiff's] state-law
tortious interference claim; without it, the claim is preempted
by patent law."). See also Polvclad Laminates, Inc. v.
MacDermid, No 99-162-M, slip op. at 1 (D.N.H. July 22, 1999). As
noted above, however, the record is not sufficiently developed at
this point to permit any conclusion, as a matter of law, as to
whether plaintiffs did or did not engage in inequitable conduct
before the PTO. Consequently, the court cannot conclude that
MacDermid's second counterclaim fails to state a viable claim.
That is to say, the record evidence does not establish that, as a
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matter of law, MacDermid's second counterclaim is preempted by
federal law.
III. MacDermid's Motion for Summary Judgment.
Finally, MacDermid moves the court to hold that, as a matter
of law, it does not infringe the '859 patent "because its accused
product, MultiBond, does not contain the 'surfactant' element
required by all the claims of the '859 patent." MacDermid's
motion for summary judgment (document no. 107) at 1. In
response, plaintiffs point out that, in order to resolve
MacDermid's motion, the court must first determine: (1) precisely
what is meant by the term "surfactant," as used in the '859
patent; and, then, (2) whether MacDermid's allegedly infringing
product actually employs a surfactant.
As noted above, the scope of the '859 patent has yet to be
determined (the parties having only recently requested a Markman
hearing). Because MacDermid's motion for summary judgment is
essentially one for claim construction, it must necessarily be
denied, without prejudice, pending the Markman hearing and the
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court's legal construction of the scope of the '859 patent, and
the meaning of the term "surfactant," as used in that patent.
Conclusion
For the foregoing reasons, plaintiffs' motion for partial
summary judgment (document no. 33) is denied, without prejudice.
Defendant's motion for summary judgment (document no. 107) is
likewise denied, without prejudice, as is defendant's motion to
dismiss (document no. 101) .
Finally, the following motions are denied as moot:
plaintiff's motion to defer responding to defendant's motion for
summary judgment (document no. Ill); plaintiff's motion to extend
time to respond to defendant's motion for summary judgment
(document no. 114); and plaintiff's motion for leave to file a
surreply to defendant's motion to dismiss (document no. 116).
SO ORDERED.
Steven J. McAuliffe
United States District Judge
February 13, 2001
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cc: Howard J. Susser, Esq.
Garry R. Lane, Esq.
John M. Delehanty, Esq.
James K. Robertson, Esq.
Steven M. Gordon, Esq.
Steven M. Bauer, Esq.
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