Gen. Components, Inc. v. Micron Tech., Inc.

GENERAL COMPONENTS, INC., Plaintiff, v. MICRON TECHNOLOGY, INC., et al., Defendants.

Civil Action No. 2:11cv152

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Norfolk Division

Date: May 31, 2012

OPINION AND ORDER

This matter comes before the Court on remaining Defendants Mott Corp.'s ("Mott") and Setra Systems, Inc.'s ("Setra") (collectively, "Defendants") Motion to Declare this an Exceptional Case Pursuant to 35 U.S.C. § 285.¹ Doc. 79. After examination of the briefs and record, the Court determines that oral argument is unnecessary because the facts and legal arguments are adequately presented, and the decisional process would not be significantly aided by oral argument. Accordingly, for the reasons stated herein, the Court DENIES Defendants' Motion.

I. BACKGROUND

A. The Patent License Agreement between GCI and Fujikin

On July 8, 1994, Plaintiff General Components, Inc. ("GCI") and third party Fujikin, Inc. ("Fujikin") entered into a patent license agreement ("PLA") covering GCI's U.S. Patent No.5,505,464 ("'464 Patent"), entitled "Minimum Dead Volume Fitting." Doc. 80-2 (PLA). The PLA grants Fujikin the right to "make, have made, use and sell" all products licensed under the agreement. Doc. 80-2 at § 2.1. Licensed products are defined as "all fittings which are covered by claims in issued patents included among the Licensed Patents and sold by Licensee or any Licensee Affiliate, including without limitation the metal gaskets and other component parts comprising such fittings." Id. at § 1.2.

Further, the PLA provides that the Licensor "agrees not to assert any infringement or other claim or right under the Licensed Patents against any purchaser or user of a Licensed Product with respect to that purchaser's or user's installation or use of a Licensed Product. Doc. 80-2 at § 2.1. However, the PLA does provide procedures by which the parties may bring suit against any alleged third party infringers that are not considered "purchasers" or "users" of the licensed products. Id. at §§ 6.2-6.3. The PLA also requires that a party "promptly so notify the other party" if that party believes that a licensed patent is being infringed by a third party not covered by the PLA. Doc. 80-2 at § 6.1. The PLA specifically does "not include a right to grant sublicenses." Id. at § 2.1.

Finally, the PLA includes a "Binding Arbitration" clause, which provides that "[a]ny dispute with respect to the interpretation, application or enforcement of this Agreement shall be subject to binding arbitration pursuant to the 'International Arbitration Rules' of the American

Arbitration Association then in effect . . . ." Id. at § 8.12.

B. The Dispute between GCI and Fujikin

In 1997, Fujikin filed a patent for its "W-seal" technology. Doc. 80-21 at 38 (Article by Frank Murch detailing the history of the W-seal). W-seal technology is primarily used by semiconductor equipment manufacturers to create a seal between components in gas deliverysystems found in their manufacturing equipment. Id. at 36-37. Fujikin initially licensed the W-seal to companies for a fee. Id. at 38. Thereafter, Fujikin began providing the W-seal technology to the semiconductor industry as a whole, without any fee, through an "Open Design Program." Id.; see also doc. 80-5 (2004 Article written by GCI's President & CEO) (noting that Fujikin has been licensing their W-seal to third parties under an "open architecture" policy).

GCI believed that Fujikin's W-seal technology was covered by the '464 patent, see e.g., doc. 80-5, and in 2001, GCI sued Fujikin in the United States District Court for the District of Maryland, General Components, Inc. v. Fujikin. Inc., No. DKC 2001-1790 ("District of Maryland case"), alleging patent infringement and improper sublicensing of the '464 patent by Fujikin. Doc. 80-6 at 2-3. In response, Fujikin moved to dismiss based on the "Binding Arbitration" clause in the PLA. Doc. 80-9 at 2.

On July 9,2002, the court granted Fujikin's motion to dismiss. Doc. 80-9 at 5. First, the court noted that GCI's complaint alleged "that Fujikin is 'currently marketing, selling, licensing, and inducing others to sell and use . . . products that infringe one or more claims of [GCI's] '464 patent.'" Id. at 4-5. Based on this language, the court held that "[t]he licensing agreement undeniably governs the non-exclusive license granted to Fujikin by GCI for the '464 patent and the current dispute falls within its reach." Doc. 80-9 at 5. Thus, the court found that "Fujikin has shown all of the elements to require arbitration of this dispute," and the court granted Fujikin's motion to dismiss. Id.

On May 28, 2011, GCI submitted its claim against Fujikin to the American Arbitration Association for arbitration. Doc. 80-13. On August 16, 2011, GCI paid the arbitration proceed fee, allowing the arbitration to continue. Doc. 80-14.

C. GCI'S Dispute with Mott and Setra

After the district court in Maryland dismissed its suit against Fujikin but before submitting its claim for arbitration, Raymond McGarvey, the President & CEO of GCI, submitted an article, which was published in the January/February 2004 issue of "Gases and Technology." Doc. 80-5. There, Mr. McGarvey summarized GCI's position for the industry with regard to third parties using Fujikin's W-seal technology. McGarvey stated that "[i]n our opinion, Fujikin's W-seal technology is clearly covered by our '464 patent." Id. at 36. McGarvey noted that GCI's suit against Fujikin had been "referred to arbitration," but stated that "any decision in the arbitration proceedings is only binding on the parties, GCI and Fujikin." Id. Thus, McGarvey concluded, "Accordingly, any product using this [W-seal] technology that is manufactured, assembled, sold, or used in the U.S. requires a license from GCI unless the W-seal hardware is purchased by or from Fujikin." Id.

Thereafter, GCI sent letters to Mott and another firm, Applied Materials, informing the firms that GCI believed that they were making, using, or selling W-seal design fittings and that this violated the '464 patent. Doc. 80-11 (May 26, 2010 Letter to Mott); Doc. 80-10 (December 22, 2008 Letter to Applied Materials). According to GCI, neither GCI nor its counsel ever received a response from Mott to this letter. Doc. 85-2 at ¶ 8 (Raymond McGarvey Decl.).

On March 10, 2011, GCI filed its Complaint in the instant action, alleging that five companies, including Mott and Setra, "infringed one or more claims of the '464 patent . . . through, among other activities, the manufacture, use, offer for sale, and/or sale of products and components that either wholly utilize and/or induce and contribute to the use of face sealing fittings that employ the inventions of the claims of the '464 patent." Doc. 1 at ¶ 13. TheComplaint further alleged that Defendants used, offered for sale, and/or sold W-seal products and/or components, and that these actions infringed the '464 patent. Id.

With respect to the source of GCI's belief that Mott and Setra infringed the '464 patent, GCI submitted a declaration by Mr. McGarvey, averring that his "understanding is that other companies in the United States manufacture and sell W-seal products that are not manufactured by or for Fujikin," doc. 85-2 at ¶ 5, and that, specifically, "Bar Manufacturing, LLC of El Dorado Hills, California manufactured and sold W-seal component base blocks to Mott and Setra that were not licensed under GCI's '464 patent." Id. at ¶ 6. Mr. McGarvey further declared that he had previously asked Fujikin for a list of companies that it alleged were licensed under the PLA, but that "Fujikin has never provided such a list." Id. at ¶ 9. Additionally, GCI noted that both Mott's and Setra's websites offer components for use in W-seal technology, but do not refer to Fujikin in any way. Doc. 85 at 10; see also doc. 85-5 (screenshots from Mott's website); doc. 85-6 (screenshots from Setra's website).

On April 1,2011, GCI sent a letter to Fujikin, informing it that GCI had recently filed suit against "several U.S. infringers" of the '464 patent in the Eastern District of Virginia, based on GCI's belief that the '464 patent "cover[ed] Fujikin's 1.125" and 1.5" W-seal designs." Doc. 80-12 at 1. GCI also stated in its letter that it was "preparing to file arbitration against Fujikin as called for in the" PLA. Id. However, GCI sent no other notice to Fujikin that its patent was being infringed by unlicensed third parties. Doc. 86 at 13.

D. The Parties' Actions during Litigation

On May 12, 2011, Mott and Setra answered GCI's Complaint and pleaded affirmative defenses and counterclaims. Doc 45; Doc. 46. Mott pleaded that it could not be sued by GCI under the PLA because it "purchased the accused products from Fujikin, Inc . . . . a licensedparty." Doc. 46 at 4, ¶ 18; see also id. at 8, ¶ 16. Similarly, Setra pleaded that it could not be liable for patent infringement because its W-seal products "were made by Setra for and on behalf of Fujikin, and are Licensed Products authorized for sale pursuant to the Patent License Agreement." Doc. 45 at 4-5, ¶¶ 21-22; see also id. at 11, ¶¶ 15-16. Both parties also asserted claims that GCI breached the PLA and the District of Maryland's previous order by filing suit, doc. 45 at 4-8, 10-12; doc. 46 at 4-5, 7-8, and that they believed this case was exceptional under 35 U.S.C. § 285. Doc. 45 at 11, ¶ 17; Doc. 46 at 8, ¶ 17.

On June 10, 2011, the Court entered a Rule 16(b) Scheduling Order requiring that discovery be completed in October and that expert discovery be completed by early November, 2011. Doc. 56. The Court also entered an Order on June 10, 2011, directing the parties to confer and submit a joint statement apprising the Court of the portions of the '464 patent actually in dispute by October 3, 2011. Doc. 57.

In order to explain its actions from June through August, GCI submitted declarations by two of its attorneys, Matthew G. McAndrews and Benje Selan, and various emails...