Evonik Degussa GMBH v. Materia, Inc.

305 F.Supp.3d 563

EVONIK DEGUSSA GMBH, Plaintiff,

v.MATERIA, INC., Defendant.

09–cv–636 (NLH/JS)

United States District Court, D. Delaware.

Signed March 28, 2018

ERIC JAMES EVAIN, GRANT & EISENHOFER, P.A., 123 JUSTISON STREET, WILMINGTON, DELAWARE 19801, On behalf of Plaintiff

R. ERIC HUTZ, RUDOLPH E. HUTZ, RYAN P. COX, REED SMITH LLP, 1201 MARKET STREET, SUITE 1500, WILMINGTON, DELAWARE 19801, On behalf of Plaintiff

JACK B. BLUMENFELD, THOMAS C. GRIMM, MORRIS, NICHOLS, ARSHT & TUNNELL, 1201 NORTH MARKET STREET, P.O. BOX 1347, WILMINGTON, DELAWARE 19899, On behalf of Defendant

HILLMAN, District Judge:

Before the Court are three separate but overlapping motions filed by Evonik. First is an informal motion by Evonik to find inequitable conduct. Second is Evonik's Motion to set aside the judgment of no willfulness, find Materia's pre-verdict infringement willful on summary judgment, and find Materia's post-verdict infringement willful on summary judgment. Third is Evonik's Motion for enhanced damages pursuant to 35 U.S.C. § 284.

These motions come to the Court following a January 2017 jury trial on the issues of lack of enablement, lack of an adequate written description, willfulness of Materia's infringement, and damages. The jury found for Evonik on both invalidity counterclaims and awarded damages to Evonik for Materia's infringement of the '528 patent, but found for Materia on the issue of the willfulness of that infringement. Subsequently, on August 9, 2017, the Court found for Evonik on Materia's counterclaim of invalidity due to indefiniteness. The Court then entered Judgment on the jury's verdict.¹

For the reasons that follow, all of Evonik's motions will be denied.

I. Inequitable Conduct

Before the Court is Evonik's "Opening Brief in Support of Inequitable Conduct." Although not filed as a formal motion, "Evonik requests that the Court find the '590 patent unenforceable due to inequitable conduct." The Court, however, has already held that it lacks jurisdiction to rule on whether the '590 patent is enforceable because Materia has granted Evonik a broad covenant not to sue.

Nonetheless, a finding that Materia engaged in inequitable conduct would support a conclusion that Materia's counterclaim against Evonik for infringement of the '590 patent—in which Evonik prevailed on the basis of noninfringement (hereafter "the '590 infringement action")—is an exceptional case under 35 U.S.C. § 285. A holding that the '590 infringement action is an exceptional case would then open the door to an award of reasonable attorneys' fees to Evonik in connection with that suit. See 35 U.S.C. § 285 ("The court in exceptional cases may award reasonable attorney fees to the prevailing party."); Sulzer Textil A.G. v. Picanol N.V., 358 F.3d 1356, 1370 (Fed. Cir. 2004) ("An award of attorneys' fees under § 285 follows a two-step analysis. The court first determines whether the case is ‘exceptional,’ and, if so, then determines whether an award of attorneys' fees is appropriate."); Ruiz v A.B. Chance Co., 234 F.3d 654, 669 (Fed. Cir. 2000) ("A finding of inequitable conduct can be the basis for awarding attorney fees under section 285."). In short, Evonik's application is ultimately about attorneys' fees.²

The Court heard oral argument on June 20, 2017. Supplemental briefing was completed on August 9, 2017. For the reasons that follow, the Court finds Evonik has failed to prove Materia engaged in inequitable conduct during the prosecution of the '590 patent.³

Evonik contends that Materia's inequitable conduct began during the USPTO interference proceedings (Nos. 105,373 and 105,374) between Professor Grubbs and Professor Nolan, and continued on through post-interference prosecution of the '590 patent. Evonik asserts four separate, but related, bases of inequitable conduct.

First, it is undisputed that Materia did not disclose the existence of Materia's '125 patent, and related information concerning the '125 patent.⁴ Evonik contends the '125 patent is "but-for prior art," which Materia disputes. More specifically, Evonik asserts Mark Trimmer⁵ "knew that the '125 patent covered what the '590 patent claimed, making the '125 patent invalidating prior art."

Second, Evonik asserts that Materia did not disclose Professor Nolan's alleged derivation of the subject matter of the '590 patent. Materia disputes derivation, and as will be discussed further below, the jury apparently rejected any finding of derivation when it rendered its verdict against Evonik and in favor of Materia on the issue of Materia's willfulness in infringing the '528 patent.

Third, Evonik asserts that Materia failed to disclose the factual bases for a list of preliminary motions filed by Materia in the interferences, which challenged the patentability of the '590 patent.

Lastly, it is undisputed that the Grubbs v. Nolan interferences were settled. Evonik contends that the parties to the interferences "settled with the intent to conceal from the USPTO Nolan's derivation, the Boulder Information, and the bases underlying Materia's preliminary motions."

"To prevail on inequitable conduct, an accused infringer must show that the applicant: ‘(1) made an affirmative misrepresentation of material fact, failed to disclose material information, or submitted false material information, and (2) intended to deceive the [PTO].’ " Leviton Mfg. Co. v. Universal Sec. Instruments, Inc., 606 F.3d 1353, 1358 (Fed. Cir. 2010) (alteration in original) (quoting Cargill, Inc. v. Canbra Foods, Ltd., 476 F.3d 1359, 1363 (Fed Cir. 2007) ); see also Transweb, LLC v. 3M Innovative Props. Co., 812 F.3d 1295, 1303–04 (Fed. Cir. 2016) ("A judgment of inequitable conduct requires ... materiality, knowledge of materiality, and a deliberate decision to deceive." (citing Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1290 (Fed. Cir. 2011) ).

"Intent and materiality are separate requirements. A district court should not use a ‘sliding scale,’ where a weak showing of intent may be found sufficient based on a strong showing of materiality, and vice versa. Moreover, a district court may not infer intent solely from materiality. Instead, a court must weigh the evidence of intent to deceive independent of its analysis of materiality." Therasense, 649 F.3d at 1290.

In extreme cases of "egregious misconduct," or "affirmative misconduct," "materiality [can be] presumed." Apotex, Inc. v. UCB, Inc., 763 F.3d 1354, 1362 (Fed. Cir. 2014) (referencing Therasense ); see also Transweb, LLC, 812 F.3d at 1304 ("Except in cases of egregious misconduct, the materiality must reach the level of but-for materiality.").

A. Burden of Proof

The Court ordered supplemental briefing from the parties to help determine what the burden of proof is for inequitable conduct in the context of a § 285 entitlement to attorneys' fees. Specifically, the Court asked: "[M]ust Evonik prove inequitable conduct by clear and convincing evidence ... or must Evonik prove inequitable conduct by a preponderance of the evidence."

In Therasense, 649 F.3d 1276, the Federal Circuit established the burden of proof for finding inequitable conduct. The Federal Circuit held that "[t]o prevail on the defense of inequitable conduct, the accused infringer must prove that the applicant misrepresented or omitted material information with the specific intent to deceive the PTO. The accused infringer must prove both elements—intent and materiality—by clear and convincing evidence." Id. at 1287 (citation omitted) (citing Star Sci. Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365 (Fed. Cir. 2008) ). In applying this heightened burden, the Court noted that "prevailing on a claim of inequitable conduct often makes a case ‘exceptional,’ leading potentially to an award of attorneys' fees under 35 U.S.C. § 285." Id. at 1289. The Federal Circuit mentioned this in connection with its observation that a finding of inequitable conduct has "far-reaching consequences." Id.

As for the burden of proof for finding a case exceptional, prior to Octane Fitness, LLC v. Icon Health & Fitness, Inc., ––– U.S. ––––, 134 S.Ct. 1749, 188 L.Ed.2d 816 (2014), the standard for finding a case exceptional was "clear and convincing." Brooks Furniture Mfg. v. Dutailier Int'l, Inc., 393 F.3d 1378, 1382 (Fed. Cir. 2005) ("[T]he underlying improper conduct and the characterization of the case as exceptional must be established by clear and convincing evidence."), overruled by Octane Fitness, 134 S.Ct. 1749. In Octane Fitness, the Supreme Court decided:

[W]e reject the Federal Circuit's requirement that patent litigants establish their entitlement to fees under § 285 by "clear and convincing evidence." We have not interpreted comparable fee-shifting statutes to require proof of entitlement to fees by clear and convincing evidence. And nothing in § 285 justifies such a high standard of proof. Section 285 demands a simple discretionary inquiry; it imposes no specific evidentiary burden, much less such a high one. Indeed, patent-infringement litigation has always been governed by a preponderance of the evidence standard, and that is the "standard generally applicable in civil actions," because it "allows both parties to ‘share the risk of error in roughly equal fashion.’ "

Octane Fitness, 134 S.Ct. at 1758 (citations omitted) (first quoting Brooks Furniture, 393 F.3d at 1382 ; and then quoting Herman & MacLean v. Huddleston, 459 U.S. 375, 390, 103 S.Ct. 683, 74 L.Ed.2d 548 (1983) ).

The question for this Court is whether Octane Fitness changed the burden of proof for inequitable conduct when used to establish an exceptional case. The supplemental briefing received from the parties confirms the Court's initial finding that courts are split on their interpretation of Octane Fitness as it applies in this context. Based on the Court's review of Octane Fitness and Therasense, the Court finds the appropriate burden of proof to apply in this case to be clear and convincing evidence.

The Court's reading...