Ill. Tool Works Inc. v. Termax LLC

1

ILLINOIS TOOL WORKS INC., Plaintiff, v. TERMAX LLC, Defendant.

No. 20 C 5416

United States District Court, N.D. Illinois, Eastern Division

July 24, 2023

MEMORANDUM OPINION AND ORDER

Virginia M. Kendall United States District Judge

Plaintiff Illinois Tool Works Inc. (ITW) claims Defendant Termax, LLC infringed its patents on plastic automobile fasteners. (Dkt 105). Termax has counterclaimed, alleging ITW's patents are unenforceable, including for inequitable conduct. (Dkt 108). ITW moves to dismiss Termax's Counterclaim in part alleging Counts V and VI-claiming unenforceability for inequitable conduct-fail to state a claim. (Dkt. 112). ITW also moves to strike certain factual allegations from Termax's Counterclaim. (Id.) For the reasons below, ITW's motions [112] are granted.

BACKGROUND

In resolving ITW's motion to dismiss, the factual allegations taken from Termax's Counterclaim (Dkt. 108) are assumed true. W. Bend Mut. Ins. Co. v Schumacher, 844 F.3d 670, 675 (7th Cir. 2016). The Court assumes familiarity with its prior Opinion resolving motions to dismiss by Termax and LISI Automotive SA. (Dkt. 48); Ill. Tool Works Inc. v. Termax LLC, 2021 WL 1239215 (N.D. Ill. Apr. 2, 2021).

ITW manufacturers push-in type W-base retainers or fasteners, designed to secure automobile components. (Dkt. 105 ¶ 9). Ideally, these fasteners should minimize the gap between the components they hold together. (Id. at ¶ 10). Termax-a competitor in the automotive-fastener industry-makes and sells “Plastic Bird Beak Sealing Fasteners.” (Id. at ¶¶ 20-21). According to ITW, Termax's fasteners infringe two patents: (1) U.S. Patent No. 11,578,740 (the '740 Patent), entitled “Push Through Retainer Connection with Integrated Hinging Seal,” and (2) U.S. Design Patent No. D897,826 (the D'826 Patent), entitled “Fastener.” (Id. at ¶¶ 28-65).

ITW sued Termax and its French affiliate in September 2020, alleging infringement of a predecessor to the '740 Patent, U.S. Patent No. 10,683,882 (the '882 Patent), also entitled “Push Through Retainer Connection with Integrated Hinging Seal,” and the D'826 Patent. (Dkts. 1, 11). On April 2, 2021, ruling on Defendants' motion to dismiss ITW's amended complaint, the Court dismissed ITW's claims against LISI, while allowing ITW's claims against Termax to proceed. (Dkt. 48); Ill. Tool Works, 2021 WL 1239215. At the end of April 2021, the Court granted Termax's unopposed motion to stay this case pending resolution of its inter partes review (IPR) petition challenging ITW's '882 Patent before the United States Patent Trial and Appeal Board (PTAB). (Dkts. 49, 52, 55).

The '740, '882, and '694 Patents

The '740 Patent is a continuation of the '882 Patent, which is a continuation of U.S. Patent No. 9,982,694 (the '694 Patent). The '694 Patent's Figure 1 (left) and the '882 Patent's Figure 1 (right) are reproduced below:

(Image Omitted)

In prosecuting the '694 and '882 Patents, ITW “emphasized that the invention was an improved seal designed to avoid ‘stack-up' problems” that occurred with prior-art fasteners using “rigid seals” or relying on compression of the support panel and the bottom of the lower platform. (Dkt. 108 at 75 ¶ 173). The circular shape offers “the best adhesion for the overlying seal”; it is “the ideal shape . . . to seal circular openings,” which are common in automotive construction. (Id. at 78 ¶¶ 182-83). The “stepped construction” of the circular lower platform helps prevent interference and maintain the seal. (Id. at 77-78 ¶¶ 181-82). ITW distinguished prior art by pointing to the function of the fasteners' lower platform: creating and maintaining a seal with “substantially zero gap between the surface element and the support structure.” (Id. at 76-77 ¶¶ 175-81). During normal use, Termax asserts, the “lower platform is hidden from view by the peripheral seal.” (Id. at 78 ¶ 184).

In a final written decision on October 4, 2022, the PTAB invalidated the '882 Patent. (Dkt. 108 at 62 ¶ 129; Dkt. 108-6); Termax LLC v. Ill. Tool Works Inc., No. IPR2021-00724, 2022 WL 5062060, at *1 (P.T.A.B. Oct. 4, 2022). The PTAB found the '882 Patent's Claims 1-7, 9-15, and 17-20 unpatentable over U.S. Patent No. 8,561,265 (the Benedetti reference, after inventor Steven Benedetti) and other references. Termax, No. IPR2021-00724, 2022 WL 5062060, at *25. Benedetti and other references “disclose[] all the limitations of [the '882 Patent's] claims 1-7, 9- 15, and 17-20,” the PTAB concluded. Id. at *24-25.

Relevant here, “Benedetti discloses a sealing foot disposed outboard from the second platform.” (Dkt. 108 at 65 ¶ 134); Termax, No. IPR2021-00724, 2022 WL 5062060, at *21-22. The same language-“sealing foot . . . disposed outboard from the second platform”-appeared in Claim 1 of the '882 Patent, making it unpatentable. Termax, 2022 WL 5062060, at *5. Although ITW argued that the '882 Patent's claim required “a sealing foot disposed entirely outboard from the second platform,” the PTAB found that construction unconvincing. Id. at *5-7, 21-22. Even if ITW's proposed construction of the “disposed outboard” limitation had been correct, a footnote in the PTAB's decision reasoned, Benedetti still discloses the limitation. Id. at *22 n.21.

ITW appealed. See Ill. Tool Works, Inc. v. Termax Co., 2023 WL 2398751 (Fed. Cir. Mar. 8, 2023). While that appeal was pending, on October 17, 2022, this Court continued the stay as to the '882 patent but lifted the stay as to the D'826 Patent. (Dkt. 65 at 3).

Meanwhile, ITW pursued the '740 Patent. (See Dkt. 105-2). Attorney Nicholas Schmidbauer represented ITW in the application, which was filed on June 10, 2020. (Dkt. 108 at 61-62 ¶¶ 127-28). In September 2022, the patent examiner-“who had no involvement in the earlier IPR proceeding” on the '882 Patent-rejected the application, finding the '740 Patent's claims were not “patentably distinct” from the '882 Patent's claims. (Id. at 66, 70 ¶¶ 137, 153; Dkt. 116-1 at 2). On November 9, 2022, ITW amended the '740 Patent application's Claim 1, in pertinent part, to require a “sealing foot . . . disposed entirely outboard from the collar.” (Dkt. 108 at 66 ¶ 138; Dkt. 116-1 at 3). According to Termax, ITW's addition of the word “entirely” to the “disposed outboard” limitation is “[t]he only material difference” between the '740 Patent's Claim 1 and the invalidated '882 Patent's Claim 1. (Dkt. 108 at 67 ¶ 141).

In a November 16, 2022 Information Disclosure Statement supporting the amended '740 Patent application, Schmidbauer cited the PTAB's decision invalidating the '882 Patent to the patent examiner, including the reference in a list of seven non-patent references. (Dkt. 116-1 at 9). Yet, Schmidbauer did not “draw the patent examiner's attention to” the PTAB's footnote suggesting that Benedetti's “disposed outboard” limitation would render unpatentable a claim of the same scope as Claim 1 of the '740 Patent. (Dkt. 108 at 68 ¶ 147). Schmidbauer instead tried to portray ITW's amendments to the '740 Patent as promoting “clarity”-urging the patent examiner to allow the amended claim “without further searching.” (Id. at 69 ¶¶ 149-50, 153). ITW could have presented the same amendments to the PTAB during the IPR proceedings on the '882 Patent; but it did not. (Id. at 69 ¶ 151). As amended, the patent examiner allowed the '740 Patent's claims on February 23, 2023. (Id. at 67 ¶ 139; Dkt. 116-1 at 16-20).

After obtaining the '740 Patent, ITW withdrew its appeal of the PTAB's decision on the '882 Patent. Ill. Tool Works, 2023 WL 2398751. ITW then filed its Second Amended Complaint in this case, alleging infringement of the '740 Patent instead of the'882 Patent. (Dkt. 105).

The D'826 Patent and the Scroggie Reference

Setting up the present dispute over the D'826 Patent requires journeying further into the past. Back in August 2007, ITW filed U.S. Patent Application No. 11/891,700 (the '700 Application), later published as U.S. 2008/0066266, entitled “Fastener Assembly,” and its international counterpart, PCT/US2007/077064 (the PCT'064 Application) published as WO 2008/033667 A1 (collectively, the Scroggie reference, after inventor Derek Scroggie). (Dkt. 108 at 73-74 ¶¶ 166-67). Then, in December 2012, ITW filed U.S. Provisional Application No. 61/739,604 (the P'604 Application), entitled “Push Through Fastener with Integral Seal” and listing Scroggie as an inventor and applicant. (Id. at 80 ¶ 190). Both the '882 and '694 Patents claim priority to the P'604 Application. (Id. at 79 ¶ 188). Included in the P'604 Application were “figures of fasteners identical to those disclosed in the [Scroggie reference].” (Id. at 80 ¶ 191). ITW acknowledged in the P'604 Application that the Scroggie-reference fasteners were “prior art.” (Id.) Further, more than one year before the D'826 Patent's earliest priority date of June 17, 2015, ITW offered for sale or sold fasteners embodying the Scroggie reference. (Id. at 80 ¶ 192).

On April 27, 2020, Schmidbauer, on ITW's behalf, filed the application for the D'826 Patent. (Dkt. 108 at 79 ¶ 185). As a design patent, the D'826 Patent's single claim is to “[t]he ornamental design for a fastener, as shown and described.” (Id. at 71 ¶ 162). The D'826 Patent, like the '740 Patent, claims priority to the applications for the '882 and '694 Patents. (Dkt. 108 at 75 ¶ 171). Schmidbauer informed the Patent and Trademark Office (PTO) that the application for the D'826 Patent was a continuation of the '882 Patent's application, which, in turn, was a continuation of the '694 Patent's application. (Id. at 79 ¶ 185).

In prosecuting the D'826 Patent, Schmidbauer told the PTO that he had searched for prior art related to the '882 Patent. (Id. at 81 ¶ 193). Since “the '882 Patent discloses a seal,” though, ...