Dow Chemical Co. v. Exxon Corp.

30 F.Supp.2d 673

The DOW CHEMICAL COMPANY, Plaintiff, v. EXXON CORP. and Exxon Chemical Patents, Inc., Defendants.

C.A. No. 96-584-SLR.

United States District Court, D. Delaware.

December 14, 1998.

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Richard K. Herrmann, of Blank, Rome, Comisky & McCauley L.L.P., Wilmington, DE, for plaintiff. Of counsel: Robert G. Krupka, P.C., Donald G. Kempf, Jr., P.C., Chaim T. Kiffel, Jeffrey D. Mills, Wendy L. Bloom, and Michael J. Munn, of Kirkland & Ellis, Chicago, IL. Charles J. Kalil, of The Dow Chemical Company, Midland, Michigan. L. Wayne White, of The Dow Chemical Company, Freeport, TX.

William J. Wade, and Frederick L. Cottrell, III, of Richards, Layton & Finger, Wilmington, DE, for defendants. Of counsel: Richard C. Levin, P.C., Scott R. Jacobs, Lisa S. Gallerano, Richard J. Smith, and John L. Hendricks, of Akin, Gump, Strauss, Hauer & Feld, L.L.P., Dallas, TX.

OPINION

SUE L. ROBINSON, District Judge.

I. INTRODUCTION

On December 2, 1996, plaintiff The Dow Chemical Company ("Dow") filed this action against defendants Exxon Corp. and Exxon Chemical Patents, Inc. ("ECPI") (collectively "Exxon"), alleging violations of the federal Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., and state law. (D.I.2) Specifically, Dow alleges that Exxon, through a pattern of mail and wire fraud, made fraudulent misrepresentations to the Patent and Trademark Office ("PTO") in order to dominate and control the market for polyethylenes made using single-site, metallocene catalysts, and thereby injured Dow. (D.I.2) The court has jurisdiction over plaintiff's RICO claims pursuant to 18 U.S.C. § 1964 and 28 U.S.C. § 1338 and supplemental jurisdiction over the state law claims under 28 U.S.C. § 1367.

On March 29, 1997, defendants filed a motion to dismiss, or alternatively to stay, plaintiff's complaint on the grounds that the court lacks subject matter jurisdiction. (D.I.34) Defendants also moved to dismiss plaintiff's complaint for failure to state a claim on which relief may be granted. (D.I.34) The court heard oral argument on defendants' request on November 17, 1997. (D.I.67) For the reasons that follow, defendants' motion to dismiss shall be granted.¹

II. BACKGROUND

A. The Technology

Both Dow² and Exxon³ are involved in the manufacture and sale of polyethylene. Polyethylene is a widely used plastic, the worldwide market for which is enormous. To create polyethylene, a catalyst is combined with ethylene and an optional comonomer to form a polymerization reaction. There are four types of polymerization processes: gasphase, slurry, solution, and high pressure. Regardless of the type of polymerization process employed, the result is the formation of polyethylene pellets, which are sold to intermediate-level fabricators who use the pellets to produce plastic articles such as films, sheets, fibers, and blends. These intermediate-use products are then used to produce end-use products such as disposable diapers, car bumpers, and food storage bags.

Polyethylenes made using single-site catalysts exhibit particularly desirable traits and, as a result, are employed in a variety of end-use products. One such single-site catalyst is a metallocene catalyst. These catalysts have "as one component, a metallocene metal complex having one or more cyclopentadienyl groups (substituted or unsubstituted) attached to a transition metal atom, such as titanium or zirconium." (D.I. 2, ¶ 5 n. 1) Exxon began commercial production of polyethylenes using metallocene catalysts in 1991. It calls its single-site catalyst technology "EXXPOL Technology" and markets the polyethylene produced thereby under the tradename EXACT®. Dow, on the other hand, began commercial production of polyethylene using metallocene catalysts in 1993. It calls its technology "INSITE® Technology" and markets the polymers produced thereby both directly and through a joint venture with E.I. DuPont de Nemours (DuPont Dow Elastomers L.L.C.) under the tradenames AFFINITY®, ENGAGE®, ELITE®, and NORDELL®.

B. The Complaint

In its complaint, Dow alleges that Exxon has set out to dominate the market with respect to polyethylenes produced using single-site catalysts. (D.I.2, ¶ 11) In particular, Dow contends that Exxon has targeted Dow's INSITE® Technology. (D.I.2, ¶ 11) In order to further its objective, Dow contends that Exxon has

institut[ed] a deliberate strategic objective fraudulently to obtain and assert patents and technology rights in a manner calculated to (i) disrupt and take business of competitors, including Dow; (ii) take, destroy or devalue the intellectual property rights of competitors, including Dow; (iii) threaten competitors, including Dow, and their actual and potential customers; (iv) create confusion among Dow's customers about their freedom to use INSITE® Technology polymers; and (v) create a misperception that a license from Exxon is required to manufacture polyethylenes using any single-site catalyst, including Dow's.

(D.I.2, ¶ 12) According to Dow, "a defined group of experienced Exxon in-house attorneys and outside counsel (all of whom are specialists in patent law) engaged in fraudulent conduct before the PTO to acquire or assert patent rights." (D.I.2, ¶ 15)

Specifically, Dow details seven allegedly fraudulent schemes undertaken by Exxon with the express objective of "attain[ing] dominance and control over the polyethylene business, and especially the business for polyethylenes produced using single-site catalysts." (D.I.2, ¶ 15) The combination of these schemes, Dow contends, form a pattern of racketeering activity under 18 U.S.C. § 1961(1), (5). (D.I.2, ¶ 186) Dow alleges that Exxon has committed 41 predicate acts of mail fraud beginning in November 1988 and continuing through at least July 1996 in furtherance of its scheme to defraud:

(i) by mailing to the PTO documents and papers containing fraudulent misrepresentations and fraudulent omissions of material fact designed to obtain issuance of patents; and (ii) by mailing to Dow and the PTO documents containing fraudulent misrepresentations designed to provoke and maintain interference proceedings against Dow and to prevent Dow from peacefully enjoying the valid patent rights it has obtained as a reward for its intensive research and development efforts.

(D.I.2, ¶¶ 191, 194)

1. Exxon's First Allegedly Fraudulent Scheme (Scheme 1)

Initially, Dow alleges that Exxon fraudulently procured U.S. Patent No. 5,405,922 ("the '922 patent"), covering a condensed mode gas-phase polymerization process for producing polyethylene using a metallocene catalyst. (D.I.4, Ex. 9) Specifically, Dow contends that Exxon attorney, "A",⁴ knowingly misrepresented the prior art to the PTO examiner. In order to distinguish the '922 patent from the prior art, and thereby overcome the PTO's rejection of the pending claims, EA-A made the following assertion:

Thus, it was surprising that a metallocene catalyst[], being soluble in hydrocarbon solvents, would polymerize olefins in a condensed mode process which utilizes a hydrocarbon solvent as a condensable inert. In a gas-phase operating in a noncondensed mode, should a hydrocarbon be used, it is in a gaseous state and by definition, cannot solubilize a metallocene catalyst.

In essence, based upon the prior art disclosure, one of ordinary skill in the art would have expected that there was nothing to be gained but much to be lost in the use of a metallocene catalyst in a condensed mode process using as a condensable inert a material in which the metallocene is soluble. Thus, it is respectfully submitted that there is no[] motivation for using a metallocene catalyst in a condensed mode process.

(D.I.4, Ex. 13 at 5) Dow contends that EA-A knew at the time he made the statement to the PTO that the catalyst was not soluble, such knowledge coming "from express statements or teachings in Exxon's own prior patents and patent applications, including two Exxon patents EA-A had listed in the '922 patent specification itself — U.S. Patent Nos. 4,808,561 [(D.I.4, Ex. 14)] and 5,240,894 [(D.I.4, Ex. 15)]."⁵ (D.I. 2 at 14) All of these references, or a counterpart thereof, were cited in the specification of the '922 patent application as describing "methods of supporting the catalyst of this invention." (D.I.4, Ex. 9, col.5, Ins.25-37)

The examiner initially refused to accept EA-A's contentions that there was no motivation for using the metallocene catalyst in the prior art. (D.I.4, Ex. 21 at 8) However, after EA-A agreed to limit all of the independent claims in the application to a silica-supported metallocene catalyst, the examiner allowed all of the pending claims. In his Statement of Reasons for Allowance, the PTO examiner adopted EA-A's conclusion with regard to the prior art's characterization of metallocene catalysts:

Thus, one of ordinary skill in the art would recognize [based upon the prior art⁶] that metallocene catalysts, whether or not they are supported, are soluble in a hydrocarbon solvent.... One skilled in the art would not have expected metallocene catalysts to remain on the support in an amount sufficient to produce a desired polymer.

(D.I. 4, Ex. 18 at 2) The examiner concluded that "applicants['] unexpected use [of] a supported metallocene catalyst," in combination with previously submitted amendments to the claims, rendered the claims allowable over the prior art. (D.I.4, Ex. 18 at 2-3) The '922 patent issued on April 11, 1995.

Dow contends that Exxon has used the '922 patent "in a manner that benefitted its competitive position to the detriment of its competitors, including Dow." (D.I.2 at 15) Specifically, Dow points to (1) Exxon's conversion of a polyethylene plant to employ the '922 technology (D.I.4, Ex. 5 at 7, Ex. 19) and (2) the Exxon-Union Carbide joint venture which, if it succeeds, according to Dow, will enable Exxon to dominate the...