Am. GNC Corp. v. LG Elecs., Inc., Case No. 17-cv-01090-BAS-BLM

AMERICAN GNC CORP., Plaintiff, v. LG ELECTRONICS, INC., et al., Defendants.

Case No. 17-cv-01090-BAS-BLM

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

January 12, 2018

ORDER:

(1) GRANTING IN PART AND DENYING IN PART MOTION FOR LEAVE TO FILE FIRST AMENDED ANSWER [ECF No. 40];

(2) GRANTING MOTION TO FILE SURREPLY [ECF No. 50];

AND

(3) GRANTING IN PART AND DENYING IN PART EX PARTE MOTION [ECF No. 73]

Pending before the Court are three motions: (1) a motion for leave to file an amended answer by LG Electronics, Inc., LG Electronics MobileComm U.S.A., Inc., and LG Electronics Mobile Research U.S.A., LLC (collectively "Defendants" or "LGE") (ECF No. 40); (2) a motion by Plaintiff American GNC ("AGNC") for leave to file a surreply in connection with Defendants' motion to file an amended answer (ECF No. 50); and (3) an ex parte motion filed by Defendants concerning issues related to the claim construction hearing in this case (ECF No. 73). AGNC has opposed both the motion for leave to file an amended answer (ECF No. 46) and the ex parte motion (ECF No. 76). For the reasons herein, the Court grants in part and denies in part Defendants' motion for leave to file an amended answer, grants Plaintiff's motion for leave to file a surreply, and grants in part and denies in part Defendants' ex parte motion.

I. BACKGROUND

A. Background Relevant to Proposed Amended Answer

AGNC filed this case on May 26, 2017, alleging that LGE has infringed sixteen claims across seven patents. (See generally ECF No. 1, Complaint.) A First Amended Complaint ("FAC") was subsequently filed on June 14, 2017. (ECF No. 6.) The Patents-In-Suit, which Plaintiff owns, are: 6,311,555 ('555 patent), 6,415,227 ('227 patent), 6,508,122 ('122 patent), 6,516,283 ('283 patent), 6,671,648 ('648 patent), 6,697,758 ('758 patent), and 6,792,353 ('353 patent). (Id. ¶28.) Plaintiff alleges that it "specializes in inventing and applying advanced and innovative technologies to contemporary problems within the fields of Guidance, Navigation, Control and Communications (GNCC), Inertial Sensors, Health Monitoring, Intelligent Processing, and Autonomous Robotics." (Id. ¶19.) Plaintiff also alleges that Defendants have infringed the Patents-in-Suit by "making, using, offering for sale, selling and/or importing" an assortment of "accused smartphones, tablets, and other mobile wireless devices." (Id. ¶¶38-39.)

LGE filed its Answer to the FAC on June 30, 2017, asserting seven affirmatives defenses to AGNC's suit. (ECF No. 12.) On September 7, 2017, this Court granted a joint motion by the parties to extend the deadline to file amended pleadings and set September 22, 2017 as the appropriate deadline. (ECF Nos. 34, 35.) The Court subsequently denied in part a motion by Plaintiff to strike LGE's second and third defenses respectively related to non-infringement and invalidity and granted in part the motion as to Defendants' seventh defense that AGNC'sclaims are barred by 35 U.S.C. §288. (ECF No. 52.) Thereafter, Defendants timely filed the instant motion for leave to file a first amended answer on September 22, 2017. (ECF No. 40.) Defendants' Proposed First Amended Answer ("PFAA") seeks to add an eighth defense of inequitable conduct and a ninth defense of unclean hands by AGNC in its prosecution of the '353 patent before the United States Patent Trade Office ("PTO"). (ECF Nos. 40-1, Ex. A; 40-2, Ex. B ("PFAA").)

B. Background Relevant to Ex Parte Motion

Pursuant to the Case Management Order (ECF No. 33), the parties were required to submit a Joint Claim Construction Chart, Worksheet, and Hearing Statement (the "Joint Statement") by December 18, 2017 in accordance with Patent Local Rule 4.2(a). The Rule requires that parties in a patent litigation submit a joint statement which identifies "terms whose construction will be most significant to the resolution of the case up to a maximum of ten (10) terms." S.D. CAL. PATENT L.R. 4.2(a). If the parties cannot agree on the ten most significant terms, the parties must identify the ones which they do agree are most significant and may evenly divide the remainder of the permitted terms subject to the overall ten term limitation. Id. Prior to filing the Joint Statement (ECF No. 72), the parties met and conferred on multiple occasions regarding the most significant terms to be construed at the claim construction hearing by this Court. (ECF No. 73 at 2.) LGE indicates that it raised the possibility of the parties submitting a joint request to the Court to increase the ten term limit due to the breadth of the claims and issues involved in this case and to separately address indefinite terms. (Id.; ECF No. 73-1 ¶¶1-3.) The parties indicate that they sought the Court's intervention through a voicemail request. (ECF Nos. 73 at 2; 76 at 7.) LGE proposed submitting a joint request on the issue to Court once more, but, according to LGE, Plaintiff refused that request. (ECF Nos. 73 at 2; 73-1 ¶5.) LGE thereafter notified AGNC of its intent to file the instant ex parte motion. (ECF Nos. 73 at 2; 73-1 ¶6.)

On December 18, 2017, the parties timely filed their Joint Statement. (ECFNo. 72.) In the Joint Statement, AGNC and LGE divided between them the ten terms permitted under the Patent Local Rules, with each side identifying five terms it deemed to be "most significant" to resolution of this case. (Id.) In addition to the total ten terms identified by the parties, LGE identified additional terms it believes the Court should construe at the claim construction hearing above the ten term limit, which are also the subject of the ex parte motion. (Id.; see generally ECF No. 73.)

II. THE MOTION FOR LEAVE TO FILE AN AMENDED ANSWER¹

Defendants' proposed eighth and ninth defenses concern two sets of conduct by AGNC in its prosecution of the application for the '353 patent by Ching-Fang Lin, the inventor of the patent, and/or Raymond Chan, the prosecutor of the patent (collectively, "Applicant"). (PFAA ¶¶617, 622-23.) First, the Applicant allegedly failed to disclose the Ebner/McDonough references combination and the PTO Examiner's prior rejection of identical claims in a parent patent application based on that combination. (Id. ¶¶630-646.) Second, the Applicant allegedly failed to disclose the Millington/Tabbara references, which were cited during the prosecution of the '227 application. (Id. ¶¶647-658.) Both parties dispute whether Defendants' proposed amendments concerning this conduct would be futile. The Court determines that whereas LGE's allegations concerning the Ebner/McDonough combination and prior rejection are sufficient to plead a defense of inequitable conduct and therefore not futile, the allegations concerning the second are not sufficient and would be futile.²

A. Legal Standard

Generally, a motion for leave to amend is governed by Federal Rule of Civil Procedure Rule 15(a), which establishes a policy favoring amendments to pleadings with "extreme liberality." Price v. Kramer, 200 F.3d 1237, 1250 (9th Cir. 2000). Indeed "a court must be guided by the underlying purpose of . . . Rule 15 to facilitate decision on the merits." Id. Against this backdrop, a district court determines the propriety of a motion to amend by ascertaining the presence of any of four factors: bad faith, undue delay, prejudice to the opposing party, and/or futility. Griggs v. Pace Am. Group, Inc., 170 F.3d 877, 880 (9th Cir. 1999). Amendment is futile if the amended pleading fails to state a claim on which relief may be granted. See Vaughan v. California, No. 10-cv-1179, 2013 WL 4517294, at *1 (S.D. Cal. Aug. 23, 2013). Where, as here, a party seeks to plead a defense of inequitable conduct by an individual who prosecuted a patent, the pleading must satisfy the requirements of Federal Rule of Civil Procedure 9(b), as interpreted by the Federal Circuit. See Exergen Corp. v. Wal-Mart, 575 F.3d 1312, 1326 (Fed. Cir. 2009) ("[W]e apply our own law, not the law of the regional circuit, to the question of whether inequitable conduct has been pleaded with particularity under Rule 9(b).").

Rule 9(b) generally requires that "a party must state with particularity the circumstances constituting fraud or mistake" but "intent . . . and other conditions of a person's mind may be alleged generally." FED. R. CIV. P. 9(b). To plead inequitable conduct in a patent case, "Rule 9(b) requires identification of the specificwho, what, when, where, and how of the material misrepresentation or omission committed before the PTO." Exergen, 575 F.3d at 1327. A pleading that simply avers the substantive elements of inequitable conduct without setting forth the particularized factual bases for the claim does not satisfy Rule 9(b). See id. at 1326-27. Rather, the facts alleged must give rise to a reasonable inference that "a specific individual (1) knew of the withheld information or of the falsity of the material misrepresentation, and (2) withheld or misrepresented this information with a specific intent to deceive the PTO." Id. at 1328-29. "A reasonable inference is one that is plausible and that flows logically from the facts alleged, including any objective indications of candor and good faith." Id. at 1329 n.5. A motion for leave to amend a pleading to add an inequitable conduct defense may be denied where the proposed amendments fail to satisfy these standards. See id. at 1331 (court did not abuse discretion in denying motion for leave to amend answer where allegations of inequitable conduct were deficient); see generally Chamberlain Group, Inc. v. Techtronic Indus. Co., No. 16 C 6097, 2017 WL 1101092 (N.D. Ill. Mar. 22, 2017) (denying in part motion for leave to file an amended answer as to inequitable conduct allegations futile under Exergen).

A defendant confronting a patent infringement suit has several equitable defenses that it can use to invalidate a patent, including a claim of inequitable conduct, formerly known as "fraud on the patent office." See Front Row Techs., LLC v. NBA...