ESCO Corp. v. Cashman Equip. Co.

158 F.Supp.3d 1051

ESCO Corporation et al., Plaintiffs,

v.Cashman Equipment Company et al., Defendants.

2:12–cv–01545–RCJ–CWH

United States District Court, D. Nevada.

Signed January 26, 2016

Eric J. Hamp, Binal J. Patel, Charles W. Shifley, Timothy J. Rechtien, Banner & Witcoff, Chicago, IL, Michael D. Rounds, Adam K. Yowell, Brownstein Hyatt Farber Schreck, LLC, Adam P. McMillen, Watson Rounds, Reno, NV, Randolph C. Foster, Stoel Rives LLP, Portland, OR, for Plaintiffs.

Gregory J. Commins, Jr., Baker & Hostetler LLP, Washington, DC, for Plaintiffs and Defendants.

Michael E. Anderson, Paul E. Poirot, Robert G. Abrams, Shawnna M. Yashar, Baker Hostetler LLP, Washington, DC, Robert W. Hernquist, Howard & Howard Attorneys PLLC, Todd M. Touton, Lionel, Sawyer & Collins, Colby Brian Springer, Lewis and Roca LLP, John L. Krieger, Joel Z. Schwarz, Dickinson Wright PLLC, Las Vegas, NV, for Defendants.

ORDER

ROBERT C. JONES, United States District Judge

This case arises from Defendants' alleged infringement of multiple patents held by Plaintiffs that relate to wear members used on excavating and mining equipment. In response, Defendants have filed counter infringement claims based on patents owned by Defendants Caterpillar, Inc. (“CAT”) and Caterpillar Global Mining (“CGM”), as well as counterclaims for inequitable conduct, patent misuse, and antitrust violations. Pending before the Court are Plaintiffs' Motion to Dismiss (ECF No. 160), Motion to Strike (ECF No. 164), Motion to Sever (ECF No. 165), Motion to Stay (ECF No. 166), and Motion for Reconsideration (ECF No. 179). Defendants have submitted Responses to the Motions, (ECF Nos. 182, 186), and Plaintiffs have replied, (ECF Nos. 188, 191).

I. FACTS AND PROCEDURAL HISTORY

Plaintiff ESCO Corporation (“ESCO”) manufactures ground engaging tools that are incorporated into heavy equipment. (Countercl. ¶ 8, ECF No. 137). Among these tools are wear parts that are fastened to excavation and mining machinery in order to reduce the amount of direct contact the machinery has with the ground. This allows the more expensive parts of the equipment, such as an excavation bucket, to last longer while the wear parts themselves are replaced once they have worn down. Wear parts were traditionally installed and removed from ground engaging equipment using large hammers, which was both difficult and dangerous. So to facilitate the process, ESCO designed wear parts that use hammerless locking systems.

These locking systems are covered by six of the patents-in-suit: U.S. Patent No. 7,178,274 (“the '274 patent”), U.S. Patent No. 7,640,684 (“the '684 patent”), U.S. Patent No. 8,122,621 (“the 621 patent”), U.S. Patent No. RE43,693 (“the '693 patent”), U.S. Patent No. 8,689,472 (“the '472 patent”), and U.S. Patent No. 5,241,765 (“the '765 patent”). ESCO Corp. owns each of these patents by assignment, with the exception of the '684 patent, which is held by Plaintiff ESCO Canada. Though these systems employ different locking mechanisms, they each allow wear parts to be replaced without the use of a hammer. These patents cover a number of ESCO's products including the Nemisys® tooth system.

Defendant CAT manufactures heavy equipment that is used in construction and mining. (Countercl. ¶ 8). CAT also produces certain wear parts that incorporate a hammerless lock known as the CapSure® system, which is covered by U.S. Patent No. 7,762,015 (“the '015 patent”). (Id. ¶¶ 39, 56). Defendant CGM owns U.S. Patent No. 6,565,146 (“the '146 patent”), which covers the design for a curved dump body to be used by haulage vehicles known as the “Mechanically Attached Wear Plate System.” (Id. ¶ 57). The Raptor Defendants manufacture and sell the Predator® system for heavy machinery and equipment, which allegedly utilizes a version of CAT's locking system.

On July 22, 2011, ESCO sent a letter to CAT claiming that CAT's CapSure® system might infringe the '684 patent, the '693 patent, and the application that issued as the '621 patent (“ESCO July 2011 Letter”). (Id. ¶ 39). On January 21, 2012, CAT filed suit in the Central District of Illinois (“Illinois Action”) seeking, among other things, declaratory judgement of noninfringement. (Id. ¶ 48). On August 29, 2012, ESCO filed an action in the District of Nevada against CAT, CGM, Defendant Raptor Mining Products, and Defendant Cashman Equipment Company claiming that the CapSure®, MAWPS, and Predator® systems infringe its patents.

Meanwhile, ESCO sought dismissal of the Illinois Action, which was denied, but the case was transferred to this District on December 18, 2012. (Id. ¶ 52). ESCO's infringement case was then consolidated with the Illinois Action. After additional argument, motions, and orders regarding venue, this Court retained the consolidated actions. On April 7, 2014, ESCO filed another lawsuit against Defendants asserting infringement of the '472 patent, which was ultimately consolidated with the other cases into a single action.

On February 9, 2015, the Court ordered that ESCO file an amended complaint setting out all causes of action related to the patents-in-suit. The Amended Complaint (“AC”) was filed on March 2, 2015 reflecting all claims asserted by ESCO against the various Defendants that had been alleged in the separately filed cases, which were subsequently consolidated. On March 19, 2015, Defendants filed their Answers to the AC, including counterclaims. In addition to claims for declaratory judgment of noninfringement and invalidity, Defendants included allegations that ESCO engaged in patent misuse (Count III) and inequitable conduct (Count IV, seventh affirmative defense), infringed on the '146 patent (Count V) and the '015 patent (Count VI), and violated the Sherman Act by practicing anticompetitive behavior (Count VII).¹

On May 12, 2015, following a Markman hearing, the Court issued its order on claim construction, construing some terms while leaving others to their plain and ordinary meaning. (ECF No. 159). The next day, ESCO filed the instant Motions to dismiss, strike, sever, and stay. (ECF Nos. 160, 164, 165, 166). The Motions seek dismissal of Defendants' counterclaims for inequitable conduct, patent misuse, and anticompetitive behavior pursuant to Rule 12(b)(6) and Rule 9(b). It seeks to strike Defendants' affirmative defenses premised on these same allegations pursuant to Rule 12(f). If the antitrust counterclaim is not dismissed, however, ESCO requests that it be severed from the other counterclaims and stayed, pending the outcome of the remaining causes of action. On June 9, 2015, ESCO also filed a Motion for Reconsideration on the Court's Markman ruling arguing that the Court clearly erred in its construction of certain claims.

II. ESCO's Motions to Dismiss and Strike

The Court first deals with ESCO's Motions to Dismiss and Strike. Because it finds dismissal warranted, the Court need not reach the question whether severing and staying the antitrust claim is appropriate.

A. Legal Standards

1. Rule 12(b)(6) Motion

The purpose of a Rule 12(b)(6) motion to dismiss for failure to state a claim is to test the legal sufficiency of a complaint. Navarro v. Block , 250 F.3d 729, 732 (9th Cir.2001). The issue is not whether a plaintiff will ultimately prevail, but whether the claimant is entitled to offer evidence to support the claims. Gilligan v. Jamco Dev. Corp. , 108 F.3d 246, 249 (9th Cir.1997) (quotations omitted). To avoid a Rule 12(b)(6) dismissal, a complaint does not need detailed factual allegations, but it must plead “enough facts to state a claim to relief that is plausible on its face.” Clemens v. DaimlerChrysler Corp. , 534 F.3d 1017, 1022 (9th Cir.2008) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ); Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (stating that a “claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged”).

Furthermore, the Federal Circuit has found the heightened pleading standard under Rule 9(b) applies to allegations of inequitable conduct, Exergen Corp. v. Wal – Mart Stores, Inc. , 575 F.3d 1312, 1326 (Fed.Cir.2009), and antitrust violations based on fraud on the U.S. Patent and Trademark Office (“PTO”), Medimmune, Inc. v. Genentech, Inc. , 427 F.3d 958, 967 (Fed.Cir.2005), overruled on other grounds , 549 U.S. 118, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007). Rule 9(b) states that “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake,” and it “requires identification of the specific who, what, when, where, and how” of the alleged fraud or inequitable conduct, Exergen , 575 F.3d at 1327. “Malice, intent, knowledge and other conditions of a person's mind may be allegedly generally,” Fed. R. Civ. P. 9(b), but only if the pleadings “allege sufficient underlying facts from which a court may reasonably infer that a party acted with the requisite state of mind,” Exergen , 575 F.3d at 1327. The purpose of the specificity requirement is to give defendants notice of the particular misconduct “so they can defend against the charge and not just deny that they have done anything wrong.” Bly – Magee v. California , 236 F.3d 1014, 1019 (9th Cir.2001) (quotation marks and citation omitted).

2. Rule 12(f) Motion

Federal Rule of Civil Procedure 12(f) states that “[t]he court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” The standard for properly pleading an affirmative defense does not rise to the same level of pleading a cause of action. See Rockwell Automation, Inc. v. Beckhoff Automation, LLC , 23 F.Supp.3d 1236, 1241–42 (D.Nev.2014). Rather, “[t]he key to determining the sufficiency of pleading an affirmative defense is whether it gives plaintiff fair notice of the defense.” Wyshak v. City Nat'l Bank , ...