3D Med. Imaging Sys., LLC v. Visage Imaging, Inc.

• Decision Date: 11 January 2017
• Docket Number: CIVIL ACTION NO. 2:14–CV–267–RWS
• Citation: 228 F.Supp.3d 1331
• Parties: 3D MEDICAL IMAGING SYSTEMS, LLC, Plaintiff, v. VISAGE IMAGING, INC., and Pro Medicus Limited, Defendants, v. 3D Medical Imaging Systems, LLC, Medflex, LLC, and Maurice L. Bailey, Counterclaim Defendants.
• Court: U.S. District Court — Northern District of Georgia

228 F.Supp.3d 1331

3D MEDICAL IMAGING SYSTEMS, LLC, Plaintiff,

v.VISAGE IMAGING, INC., and Pro Medicus Limited, Defendants,

v.3D Medical Imaging Systems, LLC, Medflex, LLC, and Maurice L. Bailey, Counterclaim Defendants.

CIVIL ACTION NO. 2:14–CV–267–RWS

United States District Court, N.D. Georgia, Gainesville Division.

Signed January 11, 2017

Daniel Arthur Kent, Kent & Risley, LLC, Alpharetta, GA, for Plaintiff/Counterclaim Defendants.

Greg William Meyer, Kara Renee Fussner, Rudy A. Telscher, Harness Dickey & Pierce, St. Louis, MO, Charles Conrow Murphy, Jr., Vaughan & Murphy, Atlanta, GA, for Defendants.

ORDER

RICHARD W. STORY, United States District Judge

This case comes before the Court on Counterclaim Defendants 3D Medical Imaging Systems, LLC,¹ MedFlex, LLC, and Maurice Bailey's Motion for Partial Summary Judgment [67] and Defendants Visage Imaging, Inc. and Pro Medicus Limited's Cross–Motion for Partial Summary Judgment [72]. After reviewing the record, the Court enters the following Order.

Background

This is a patent case. The patent in question is U.S. Patent No. 6,175,655 ("the '655 patent"), which the United States Patent and Trademark Office ("PTO") issued on January 16, 2001 to Integrated Medical Systems, Inc. ("IMS"), a non-party to this case. The '655 patent expired on January 16, 2013, because IMS decided not to pay the relevant maintenance fee to the PTO. After his company acquired the '655 patent out of IMS's bankruptcy estate, Counterclaim Defendant Maurice Bailey petitioned the PTO to reinstate the '655 patent under the "unintentional delay" standard for late payment of maintenance fees. See 37 C.F.R. § 1.378(a)-(b). At the time, Mr. Bailey did not know whether IMS's non-payment of the maintenance fee was in fact unintentional. Nonetheless, the PTO granted his Petition and reinstated the '655 patent. The sole issue here is whether Mr. Bailey's certification that the non-payment of the maintenance fee was "unintentional" constitutes inequitable conduct such that the '655 patent is unenforceable.

I. Statutory Background

To maintain a patent, its owner must pay maintenance fees to the PTO at various points throughout the patent's life. See 35 U.S.C. § 41(b). Those maintenance fees are due 3.5 years, 7.5 years, and 11.5 years after the patent is granted. Id. § 41(b)(1)(A)-(C). "Unless payment of the applicable maintenance fee ... is received [by the PTO] on or before the date the fee is due or within a grace period of 6 months thereafter, the patent shall expire as of the end of such grace period." Id. § 41(b)(2).

But even if a patent owner fails to pay a maintenance fee on time, 35 U.S.C. § 41(c)(1) authorizes the PTO Director to accept delayed maintenance fees and to revive an expired patent under certain circumstances. It says, in relevant part: "The Director may accept the payment of any maintenance fee required by subsection (b) after the 6–month grace period if the delay is shown to the satisfaction of the Director to have been unintentional." 35 U.S.C. § 41(c)(1). PTO regulations then lay out the specific requirements for a petition to accept an unintentionally delayed payment:

Any petition to accept an unintentionally delayed payment of a maintenance fee must include:

(1) The required maintenance fee set forth in § 1.20(e) through (g);

(2) The petition fee as set forth in § 1.17(m); and

(3) A statement that the delay in payment of the maintenance fee was unintentional. The Director may require additional information where there is a question whether the delay was unintentional.

37 C.F.R. § 1.378(b) (emphasis added). If the PTO grants a petition for late payment, "the patent shall be considered as not having expired at the end of the grace period." 35 U.S.C. § 41(c)(1).

II. Factual and Procedural Background

Just before the 11.5–year maintenance fee was due on the '655 patent, IMS's patent attorney sent letters to IMS's president advising him that, to avoid lapse of the '655 patent, IMS needed to pay the 11.5–year maintenance fee on or before January 16, 2013. (July 13, 2012 Brunda Letter, Dkt. [72–31] at 2.) IMS's president responded, "[u]nfortunately, I think we will need to let [the '655 patent ] go." (Jan. 7, 2013 Kneale Email, Dkt. [72–15] at 1.) IMS's patent attorney then confirmed that they would take no further action as to the '655 patent. (Jan. 8, 2013 Delgadillo Email, Dkt. [72–15] at 1.) Because IMS did not pay the 11.5–year maintenance fee, the '655 patent expired on January 16, 2013. (Not. of Patent Expir., Dkt. [72–16].) Shortly thereafter, IMS filed for bankruptcy. (Counterclaim Defs.' Resp. to Defs.' Statement of Undisputed Mat. Facts ("CC Defs.' SMF Resp."), Dkt. [78–1] ¶ 26.)

On February 7, 2014, the bankruptcy court authorized the sale of IMS's patent portfolio by auction. (Id. ¶ 28.) On April 8, 2014, IMS's bankruptcy trustee assigned some of IMS's patents, including the '655 patent, to Counterclaim Defendant MedFlex, LLC ("MedFlex"). (Id. ¶ 29.) Mr. Bailey is MedFlex's sole owner and member. (Defs.' Resp. to Counterclaim Defs.' Statement of Undisputed Mat. Facts ("Defs.' SMF Resp."), Dkt. [72–3] ¶ 2). MedFlex then assigned the '655 patent to Counterclaim Defendant 3D Medical Systems, LLC ("3D Medical"). (CC Defs.' SMF Resp., Dkt. [78–1] ¶ 8.) As with MedFlex, Mr. Bailey is the sole owner and member of 3D Medical. (Defs.' SMF Resp., Dkt. [72–3] ¶ 1.) He is also 3D Medical's only employee. (Bailey Depo., Dkt. [72–8] at 17.)

When MedFlex acquired the '655 patent, Mr. Bailey knew that it had expired because IMS failed to pay the 11.5–year maintenance fee. (Defs.' SMF Resp., Dkt. [72–3] ¶ 5.) He also knew that IMS had filed for bankruptcy roughly two months after the 11.5–year maintenance fee was due. (Id. ¶ 14.) Nonetheless, he understood that the PTO has a procedure by which an expired patent can be reinstated if: (1) the owner pays the original maintenance fee plus a late fee; and (2) the delay in payment was unintentional. (Id. ¶ 6). So Mr. Bailey submitted to the PTO a "Petition to Accept Unintentionally Delayed Payment of Maintenance Fee in an Expired Patent (37 CFR 1.378(b) )" ("the Petition"). (Id. ¶ 8.) He did so using the PTO's online standard form, which was pre-populated with the statement: "The undersigned certifies that the delay in payment of the maintenance fee to this patent was unintentional." (Id. ¶¶ 9–10.) The online standard form did not provide any space for further explanation about the delay in payment. (Id. ¶¶ 11–12.)

Mr. Bailey acknowledges that when he submitted the Petition he had no personal knowledge of IMS's motivations in not paying the maintenance fee on time. (Id. ¶ 17.) He also acknowledges that he submitted the Petition without any investigation into the circumstances of IMS's non-payment of the maintenance fee. (CC Defs.' SMF Resp., Dkt. [78–1] ¶ 40.) The PTO granted the Petition on the same day Mr. Bailey submitted it. (Defs.' SMF Resp., Dkt. [72–3] ¶ 13.)

On November 7, 2014, 3D Medical filed this suit against Defendants Visage Imaging, Inc. ("Visage") and Pro Medicus Limited ("Pro Medicus") (collectively "Defendants"), alleging infringement of the '655 patent. In their Amended Answers, Defendants raise the affirmative defense of inequitable conduct, alleging that the '655 patent is unenforceable because Mr. Bailey made a false statement in the Petition when he certified that IMS's failure to pay the 11.5–year maintenance fee was unintentional. (Visage's First Am. Answer, Dkt. [60] at 7–8; Pro Medicus's First Am. Answer, Dkt. [61] at 20–21.) Visage also filed four counterclaims against 3D Medical, MedFlex, and Mr. Bailey (collectively "Counterclaim Defendants") for: (1) a declaratory judgment that the '655 patent is unenforceable due to inequitable conduct; (2) bad faith assertions of patent infringement under O.C.G.A. § 10–1–770 et seq. ; (3) deceptive trade practices under O.C.G.A. § 10–1–370 et seq. ; and (4) attorney's fees and costs under 35 U.S.C. § 285. (See Visage's First Counterclaims, Dkt. [62].) Counterclaim Defendants have now filed a Motion for Partial Summary Judgment [67] on the issue of alleged inequitable conduct. Defendants have filed a Cross–Motion for Partial Summary Judgment [72] on the same issue.

Discussion

I. Legal Standard

Federal Rule of Civil Procedure 56 requires that summary judgment be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). "The moving party bears ‘the initial responsibility of informing the ... court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact.’ " Hickson Corp. v. N. Crossarm Co. , 357 F.3d 1256, 1259 (11th Cir. 2004) (quoting Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (internal quotations omitted)). Where the moving party makes such a showing, the burden shifts to the non-movant, who must go beyond the pleadings and present affirmative evidence to show that a genuine issue of material fact does exist. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 257, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

The applicable substantive law identifies which facts are material. Id. at 248, 106 S.Ct. 2505. A fact is not material if a dispute over that fact will not affect the outcome of the suit under the governing law. Id. An issue is genuine when the evidence is such that a reasonable jury could return a verdict for the non-moving party. Id. at 249–50, 106 S.Ct. 2505.

In resolving a motion for summary judgment, the court must view all evidence and draw all reasonable inferences in the light most favorable to the non-moving party. Patton v. Triad Guar. Ins. Corp. , 277 F.3d 1294, 1296 (11th Cir. 2002). But, the court is bound only to draw those inferences that are...