Opinion
CV 00-863-RSWL (CTx).
March 21, 2006
ORDER AND RULING
Alex Bellehumeur ("Plaintiff" or "Bellehumeur") filed this case against Jerome Bonnett ("Defendant" or "Bonnett") seeking an award of damages, a permanent injunction, and attorney's fees based on Defendant's infringement of U.S. Patent No. RE38,187 ("the `187 patent"). After a bench trial in the matter, this Court found in favor of Plaintiff and awarded damages in the amount of $107,826.96, attorney's fees of $45,683.66, and issued a permanent injunction. Defendant appealed this decision to the Federal Circuit.
On appeal, the Federal Circuit reversed the award of attorney's fees and also found that serious questions were raised concerning prudential standing and the enforceablility of the `187 patent based on inequitable conduct. Bellehumeur v. Bonnett, 127 Fed. Appx. 480, 481 (Fed. Cir. 2005). In light of these questions, the appellate court vacated this Court's judgment and remanded the matter for further investigation of the standing and inequitable conduct issues.
A bench trial on these matters was held on February 10, 2006. After giving full consideration to the testimony presented at trial; the exhibits received into evidence, the oral and written arguments of the parties, and all other submissions on remand, the Court now FINDS AND RULES AS FOLLOWS: I. Prudential Standing
Under United States patent law, the doctrine of prudential standing generally requires that a plaintiff seeking to bring suit for patent infringement must join all co-owners of the patent — either voluntarily or involuntarily — as plaintiffs to the suit. Israel Bio-Eng'g Project v. Amgen, Inc., 401 F.3d 1299, 1304-05 (Fed. Cir. 2005).
While Bellehumeur brought suit for infringement of the `187 patent solely in his name, other parties appear to have co-ownership rights in the patent. Specifically, the `187 patent issued to three inventors: Bellehumeur, John R. Nehmens II, and Guy W. Haarlammert. As no assignment is listed on the face of the patent, these three co-inventors are the presumptive owners of the `187 patent. In addition, under the operation of California's community property laws, Bellehumeur's wife, Linda Dyer-Bellehumeur, has a presumptive ownership interest in Bellehumeur's portion of the patent. See CAL. FAM. CODE § 760 (West 2006); CAL. CIV. CODE § 980 (West 2006). Because Bellehumeur did not initially join these parties as plaintiffs, a serious question of prudential standing arose.
But on February 9, 2006, Bellehumeur sought to amend the standing deficiency by adding his wife, Nehmens, and Haarlammert as plaintiffs through an ex parte application. Finding that there was good cause to permit the belated joinder, this Court granted the ex parte application in an order of February 13, 2006. Now that the appropriate co-owners are joined in this suit, the Court must consider whether the joinder serves to retroactively cure the jurisdictional defect raised by the appellate court.
Federal jurisdiction, of course, must ordinarily exist at the time the action is commenced. Newman-Green, Inc. v. Alfonso-Larrain, 490 U.S. 826, 830 (1989). But as with most general principles, there are recognized exceptions to the rule, and both the Supreme Court and the Ninth Circuit have found that a belated joinder may retroactively cure a jurisdictional defect when the joinder will promote judicial economy and not prejudice the defendant. Mullaney v. Anderson, 342 U.S. 415, 417 (1952); California Credit Union League v. City of Anaheim, 190 F.3d 997, 1001-02 (9th Cir. 1999).
This case falls within that recognized exception. Were this Court to dismiss the case on the grounds of prudential standing, Bellehumeur would merely re-file his original complaint, listing the co-owners as additional plaintiffs. Then, plaintiffs would submit the same materials that have already been brought before this Court, and the matter would proceed uneventfully to arrive again at this very point, with the only difference being that the co-owners would be joined at the moment the complaint is filed.
To require such action would forsake judicial economy and practical considerations "merely for the sake of hypertechnical jurisdictional purity." Newman-Green, 490 U.S. at 837.
In addition, allowing the joinder to cure the jurisdictional defect would not prejudice Bonnett. The additional parties that were added do not seek any greater relief than Bellehumeur sought as a sole Plaintiff, nor do they assert additional legal theories of recovery. Because the issues and scope of liability remain unchanged, Bonnett has received a full and fair opportunity to challenge the merits of the case against him. As Bonnett suffers no prejudice from Bellehumeur's late joinder, and as the joinder promotes judicial economy, the Court finds that under Mullaney, Newman-Green, and California Credit League that any standing defect has been retroactively cured by the addition of Nehmens, Haarlammert, and Dyer-Bellehumeur as plaintiffs.
As this Court has jurisdiction, the remaining question on remand is whether the `187 patent is unenforceable due to inequitable conduct.
II. Enforceability
In order to demonstrate that the `187 patent is unenforceable due to inequitable conduct, Bonnett must provide evidence of affirmative misrepresentations of a material fact, failure to disclose material information, or submission of false material information along with the intent to deceive. Syntex (U.S.A.), LLC v. Apotex, Inc., 407 F.3d 1371, 1383-84 (Fed. Cir. 2005). Both intent and materiality are questions of fact that must be proven by clear and convincing evidence. Id.
This analysis is performed in two steps. First the Court must determine whether the misrepresentation or omission meets a threshold level of materiality and intent to mislead. If so, the second step is to weigh the materiality and intent in light of all the circumstances to determine if the conduct is sufficiently culpable to render the patent unenforceable. Dayco Prods. Inc. v. Total Containment, Inc., 329 F.3d 1358, 1362-63 (Fed. Cir. 2003).
In this case, apparently false statements were made regarding (1) the inventorship statement in Continuation Application No. 08/590,870 ("the `870 application") and (2) statements regarding common ownership of the `870 application and the `410 parent patent.
The `870 application was one in a series of continuations based on U.S. Patent No. 5,275,410 ("the `410 patent"). The `870 application eventually issued as U.S. Patent No. 5,597,161 ("the `161 patent"); the `161 patent was then reissued as the `187 patent.
Regarding the first statement, when the `870 application was filed in January of 1996, Bellehumeur's patent counsel Edgar W. Averill, Jr. stated that the `870 application "discloses and claims only subject matter disclosed in the prior application . . . and the inventor(s) in this application are the same."
When the matter was before the Federal Circuit, it appeared that the "prior application" referenced by this statement was the application that matured into the `410 parent patent. Because Bellehumeur claimed that he was the sole inventor in the `870 application, and as the `410 parent patent issued in the names of Bellehumeur and two other inventors, it appeared that the statement was false.
There was, however, an intervening application between the `870 application and the application that became the `410 patent: Application No. 08/303,589 ("the `589 application). The `589 application was, for some inexplicable reason, omitted from the record on appeal; nevertheless, the application history shows that the `870 application was a continuation of the `589 application.
Importantly, the inventorship statement in the `589 application states that it
"discloses and claims only subject matter disclosed in the prior application . . . and the inventors in this application are less than those named in the prior application, and it is requested that the following inventor(s) identified above for the prior application be deleted: John R. Nehmens III [sic] and Guy W. Haarlammert."
Read in light of the prior `589 application, the inventorship statement in the `870 application is apparently a true statement, as the "prior application" to the `870 application was the `589 application. As the ownership statement in the `589 application requested that Nehmens and Haarlammert be removed, Bellehumeur was the only inventor listed in that application. And so, when Bellehumeur's patent counsel claimed that the `870 application had the same ownership as the prior `589 application, he was making a true statement. Since this statement was not false, it cannot render the patent unenforceable for inequitable conduct.
Even assuming, arguendo, that the inventorship statement in the `870 application is false because the "prior application" referenced is the application that matured into the `410 parent patent, rather than the `589 application, the Court finds that the statement would still not render the patent unenforceable because there is not clear and convincing evidence of intent to deceive. Mr. Averill testified that in light of the `589 application, he believed that the inventorship statement made in the `870 application was true. Thus, at worst, the evidence before the Court shows that Mr. Averill was negligently mistaken about the effect of the intervening `589 application on the truth of the inventorship statement.
Because the Court finds Mr. Averill's testimony to be credible, balancing the materiality of the statement against the fact that it was not made with the intent to deceive, the Court does not find that Bonnett has met his burden of showing that the inequitable conduct defense applies. Accordingly, the statements regarding the inventorship on the `870 application do not render the patent unenforceable.
The second set of statements at issue concerns the purported common ownership in the `870 application (which matured into the `161 patent) and the `410 parent patent.
On May 29, 1996, the `870 application was rejected for obviousness-type double patenting. In order to overcome this rejection, Mr. Averill filed a terminal disclaimer, which was submitted with documentation stating that Bellehumeur had common ownership of the `870 application and the `410 parent patent. Based on the documentation and the terminal disclaimer, the rejection was overcome and the `870 application matured into the `161 patent.
But the statements regarding Bellehumeur's common ownership of were not true because three months prior to the filing of the terminal disclaimer, Bellehumeur and his two co-inventors assigned their rights in the `410 parent patent to Roller Hockey International ("RHI") Partnership. But no such assignment was executed regarding the pending `870 application. Ownership of the `870 application and the `410 parent patent was, therefore, split between RHI Partnership and Bellehumeur.
In an attempt to rectify this problem, Mr. Averill filed documentation with the Patent and Trademark Office stating that common ownership existed in RHI Partnership. Averill made this statement because he believed that under Section 306 of the Manual of Patent Examining Procedure that by assigning the parent patent to RHI Partnership, Bellehumeur and his co-inventors also assigned all the rights to any continuation patent applications. Since the `870 application was a continuation of the `589 application, which was a continuation of the `410 parent patent, Mr. Averill believed that RHI Partnership had common ownership by virtue of the assignment of the `410 parent patent.
During the trial after remand, Mr. Averill conceded that his interpretation of Section 306 was in error, and that RHI Partnership did not own the `870 application by virtue of the assignment of the `410 patent.
Consequently, the statements regarding common ownership as to Bellehumeur and RHI Partnership were both false, as ownership was actually split amongst them. Because common ownership is required in order for a terminal disclaimer to be valid, the Court finds that these misstatements were material in nature.
This conclusion requires the Court to consider whether clear and convincing evidence demonstrates that Mr. Averill made the misstatements regarding common ownership with the intent to deceive, and whether Mr. Averill's conduct, when balanced against the materiality of the statement, is sufficiently culpable to render the patent unenforceable. Dayco Prods., 329 F.3d at 1363.
As noted, the statements of Bellehumeur's common ownership were false because Bellehumeur's interest in the `410 parent patent was assigned to RHI Partnership. But this assignment was prepared by Norman Roth, Esq., and Mr. Averill stated that because he was unaware of the assignment, he honestly believed that Bellehumeur had common ownership of the '870 application and '410 parent patent.
The Court finds Mr. Averill credible in light of the history of the patent prosecution. When Mr. Averill filed the `870 application in January of 1996, Bellehumeur had not assigned his rights in the parent `410 patent. At the time, therefore, Bellehumeur did have ownership rights in both. It was not until March of 1996, three months after the `870 application was submitted, that Bellehumeur and his co-inventors executed the assignment of the '410 parent patent to RHI Partnership.
At the time of the assignment, therefore, the `870 application was still under the patent examiner's consideration. It was not until on May 29, 1996 that the examiner informed Mr. Averill that the `870 application was rejected on the grounds of obviousness, and that the problem could be cured by a proper terminal disclaimer.
Because he was unaware of the assignment drafted by Mr. Roth, Mr. Averill believed that Bellehumeur still had an ownership interest in the `410 patent. Thus, on June 5, 1996, Mr. Averill promptly filed a terminal disclaimer, representing that Bellehumeur owned the `870 application and a portion of the `410 patent. Given the short duration of time between the rejection and filing of the terminal disclaimer, and given that at the time the `870 application was originally filed Bellehumeur did own a portion of the `410 patent, the Court finds that the application history bolsters Mr. Averill's statements. Because the Court finds Mr. Averill's testimony to be credible, and as there is not clear and convincing evidence to the contrary, the Court does not find that Mr. Averill intended to deceive the examiner when he filed a terminal disclaimer stating that Bellehumeur had common ownership of the `410 patent and `870 application.
The Court reaches a similar conclusion regarding Mr. Averill's statements of RHI Partnership's common ownership, which was based on an erroneous reading of Section 306 of the Manual of Patent Examination and Procedure. Under that Section,
"[i]n the case of a division or continuation, a prior assignment recorded against the original application is applied to the division or continuation application because the assignment recorded against the original application gives the assignee rights to the subject matter common to both applications."
MPEP § 306.
Upon learning of the assignment of the '410 parent patent, from Section 306, Mr. Averill believed that the assignment of the `410 parent patent would have the effect of automatically transferring any ownership interest in the `870 application as well.
While Mr. Averill's reading of this section establishes that he negligently misinterpreted the law, it does not show by clear and convincing evidence that he misstated RHI Partnership's ownership in the context of the '161 reissue proceedings with the intent to deceive.
In sum, the record reflects that during the prosecution of the underlying patents in this case that Mr. Averill acted negligently in failing to fully research the factual background regarding the assignment of the `410 patent and the legal effect of an assignment of a parent patent on continuation applications. Instead, he relied on his own unverified understanding of the prosecution history and the law.
But when the Court balances the materiality of the statements in relation to Mr. Averill's negligence, the Court does not find that Mr. Averill acted with sufficient culpability to render the patent unenforceable. Though the representations were negligent, Defendant Bonnett has not produced evidence to show that Mr. Averill's misstatements were the product of an intention to mislead the patent examiner rather than the result of a failure to perform due diligence regarding the factual and legal issues surrounding the `410 patent and the `870 application.
Because Defendant has not produced evidence to call Mr. Averill's credibility into question, or otherwise presented clear and convincing evidence demonstrating that the statements were made with the intent to deceive, the Court finds that Defendant has not met his burden on the inequitable conduct defense, and the patent is not rendered unenforceable.
Whereas this Court issued Orders on August 22, 2001 and on August 7, 2003 finding that Bonnett was liable for infringement, awarding a permanent injunction, damages, costs of suit, and attorney's fees; and whereas this Court has found that any standing defects have been cured and that the patent is not unenforceable due to inequitable conduct, this Court's prior Orders of August 22, 2001 and August 7, 2003 remain unaltered and in full effect except as to the award of attorney's fees.
Because Plaintiff has not shown that this case is "exceptional" within the meaning of 35 U.S.C. § 285, the portion of this Court's August 7, 2003 Order awarding attorney's fees is stricken and has no effect.