Am. Fireglass, Corp. v. Moderustic, Inc.

• Decision Date: 15 March 2019
• Docket Number: Case No.: 15-CV-2866 JLS (BGS)
• Parties: AMERICAN FIREGLASS, a California corporation, Plaintiff, v. MODERUSTIC, INC., a California corporation, Defendant.
• Court: U.S. District Court — Southern District of California

365 F.Supp.3d 1062

AMERICAN FIREGLASS, a California corporation, Plaintiff,

v.MODERUSTIC, INC., a California corporation, Defendant.

Case No.: 15-CV-2866 JLS (BGS)

United States District Court, S.D. California.

Signed March 15, 2019

Charles F Reidelbach, Jr., Phillip C. Samouris, Higgs Fletcher and Mack LLP, San Diego, CA, for Plaintiff.

Jennifer Fischer, Pro Hac Vice, Lisa C. Secor, Ronnie Fischer, Fischer & Fischer, P.C., Denver, CO, Lewis Mark Brande, Law Office of Lewis Brande, Rancho Cucamonga, CA, Ralph Michael Martin, Patent Law Offices of Rick Martin, P.C., Longmont, CO, for Defendant.

ORDER: (1) GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT; AND (2) GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

(ECF Nos. 122, 123)

Hon. Janis L. Sammartino, United States District Judge

Presently before the Court is Plaintiff American Fireglass' Motion for Summary Judgment of Defendant's infringement and false advertising and unfair business practices claims. ("Pl. MSJ," ECF No. 122 ). Defendant Moderustic, Inc. filed a Response in Opposition to ("Def. Opp'n," ECF No. 129 ) and Plaintiff filed a Reply in Support of ("Pl. Reply," ECF No. 131 ) Plaintiff's Motion.

Also before the Court is Defendant's Motion for Summary Judgment of Plaintiff's false advertising and unfair business practices claims. ("Def. MSJ," ECF No. 123 ). Plaintiff filed a Response in Opposition to ("Pl. Opp'n," ECF No. 125 ) and Defendant filed a Reply in Support of ("Def. Reply," ECF No. 132 ) Defendant's Motion.

The Court heard oral argument on March 7, 2019, and took the matter under submission. Having considered the parties' arguments, the evidence, and the law, the Court (1) GRANTS IN PART AND DENIES IN PART Plaintiff's Motion and (2) GRANTS Defendant's Motion as follows.

BACKGROUND

Since 2005, Plaintiff American Fireglass has manufactured and sold pieces of broken tempered glass for use in fireplaces and fire pits. Declaration of Matt Doll ("Doll Decl.") ¶ 4, ECF No. 122-3. Defendant Moderustic is Plaintiff's competitor and has manufactured, sold, and distributed fireglass for use in aquariums, fireplaces, and firepits through its website since April 2003. Declaration of Edgar Jaunzemis ("Jaunzemis Decl.") ¶¶ 2–3, ECF No. 123-7.

I. Defendant's Related Patent Applications

The long journey toward the issuance of the patent at issue began on April 14, 2003 when Defendant's founder, Mr. Edgar Jaunzemis, filed patent application number 10/413,620 seeking to patent a process related to tumbled or vibrated, polished, and broken tempered glass pieces. Pl. Ex. 28 at 1, ECF No. 83-29.¹ Defendant eventually abandoned that patent application. See id. On December 28, 2005, Defendant filed patent application 11/319,957 (the "'957 Application"). Pl. MSJ at 8 (citing Pl. Ex. 10 at 93–94, ECF No. 83-11 ). The U.S. Patent and Trademark Office ("PTO") considered two prior art references: U.S. Patent No. 6,409,500 B2 (the "Georgantas Patent") and U.S. Patent No. 5,486,135 (the "Arpaio Patent"). Id. at 8–9 (citing Pl. Ex. 9 at 1–3, ECF No. 83-10 ; Pl. Ex. 4 at 9, ECF No. 83-5 ).

The PTO issued a final office action on March 26, 2008, rejecting all claims in the '957 Application because it would have "been obvious to one having ordinary skill in the art at the time the invention was made to modify the method of Georgantas with the tumbling and vibrating steps disclosed by Arpaio in order to polish glass fragments." Id. at 9 (quoting Pl. Ex. 11 at 6, ECF No. 83-12 ; Declaration of Charles Reidelbach ("Reidelbach Decl.") ¶ 6, ECF No. 122-2 ).

Mr. Jaunzemis appealed the PTO's decision to the Board of Patent Appeals and Interferences; the Board rejected most of Mr. Jaunzemis' claims as obvious in light of the prior art, but reopened prosecution on six claims. Id. (citing Pl. Ex. 12 at 8, ECF No. 83-13 ; Reidelbach Decl. ¶ 7). Mr. Jaunzemis repackaged his claims and, on July 12, 2011, the PTO issued U.S. Patent No. 7,976,360 (the "'360 Patent"). Id. (citing Pl. Ex. 14 at 1-18, ECF No. 83-15 ; Reidelbach Decl. ¶ 8).

After the '360 Patent issued, Plaintiff filed an inter partes review petition with the PTO. Id. at 10. The PTO re-examined the '360 Patent and rejected all of the '360 Patent claims as obvious in light of prior art. Id. (citing Pl. Ex. 6, ECF No. 83-7 ). Defendant appealed that ruling to the Patent Trial and Appeal Board, which affirmed, and then re-affirmed, the PTO's decision. Id. (citing Pl. Ex. 22 at 21, ECF No. 83-23 ; Pl. Ex. 29 at 10, ECF No. 83-30 ). Defendant appealed those rulings to the Federal Circuit, which affirmed the PTO's decision. Id. (citing Pl. Ex. 30 at 3, ECF No. 83-31 ; Reidelbach Decl. ¶ 9).

II. The '505 Patent

On July 11, 2011, while the '360 Patent was pending, Defendant filed another patent application as a continuation of the '957 Application. Id. (citing Reidelbach Decl. ¶ 10). The PTO granted Defendant's application, resulting in the issuance of the patent at issue, U.S. Patent No. 8,419,505 (the "'505 Patent") on April 16, 2013. Id. at 11 (citing Reidelbach Decl. ¶ 12).

During prosecution of the '505 Patent, Plaintiff's counsel sent several letters to Defendant's attorney of record because Plaintiff believed Defendant had failed to disclose the prior rejection of the related '360 Patent. Reidelbach Decl. ¶ 12. Plaintiff's counsel considered the failure to disclose the rejection to be inequitable conduct in violation of Defendant's duty of candor and good faith in dealing with the PTO. Id. (citing Pl. Ex. 19 at 1–3, ECF No. 83-20 ). After receiving these letters, and after the '505 Patent issued, Defendant filed a Request for Supplemental Examination. Pl. MSJ at 11 (citing Pl. Ex. 21, ECF No. 83-22 ). On reexamination, the PTO rejected all claims as obvious. Id. (citing Pl. Ex. 23 at 1, 4, ECF No. 83-24 ; Reidelbach Decl. ¶ 13).

Defendant then submitted an amendment to narrow the '505 Patent's claims. Id. at 12 (citing Pl. Ex. 24 at 6–7, ECF No. 83-25 ). After several exchanges between Defendant and the PTO Examiner, the PTO issued an ex parte reexamination certificate of the '505 Patent on November 26, 2014. Id. at 13 (citing Pl. Ex. 28 at 1–2, ECF No. 83-29 ; Reidelbach Decl. ¶ 16).

The final '505 Patent is described as follows:

This invention is directed to the creation of smoothed, heat-treated glass fragments. The invention places heat-treated glass fragments (i.e., glass that has been previously heated so that it will not crack or shatter under later heat) into a tumbling or vibrating apparatus. These glass fragments are then tumbled or vibrated for a period of time so that the surfaces of the glass fragments are smoother than prior to tumbling. The glass fragments are thereafter removed from either apparatus, resulting in smoothed, heat-treated glass fragments that are suitable for direct handling without hand protection.

Claim Construction Order at 5–6, ECF No. 111.

III. Defendant's Enforcement Threats

Following the issuance of the '505 Patent, Mr. Jaunzemis began contacting Plaintiff, Plaintiff's dealers, and other glass sellers regarding alleged infringement of the '505 Patent. Pl. MSJ at 16 (citing Doll Decl. ¶ 11). Defendant sent one such email on February 10, 2015, to The Magic of Fire, a company that purchases fireglass from Plaintiff. ECF No. 12-2. In that email, Mr. Jaunzemis stated that

"Moderustic is proud to have been issued 2 U.S. Patent Numbers, 7,976,360 B2 (in reconsideration), and 8,419,505 C1.... These patents and applications cover our method of creating tumbled tempered glass for use in fireplaces and fire pits.... Since [Moderustic was] the first to file (with the patent office) we do hold the patent rights, and we may, if we so choose, [ ] enforce our intellectual property rights.... We need to see whether you are (allegedly) infringing as there may be legal repercussions."

Id. at 4–5. In October 2015, Defendant stated in a newspaper article, printed in The Sun Business, that Mr. Jaunzemis is "going after the companies he says are infringing on his patents" and that "he hopes to shut down competition and bring his annual sales up." ECF No. 12-4 at 2. Throughout the patent application process for both the '360 and '505 Patents, Defendant posted updates on its website about its patent rights, making various threats about potential enforcement. See Doll Decl. ¶ 16 (citing ECF No. 12-12 at 1–3 ).

IV. Plaintiff's References to Tumbling on Its Website

In 2005, Plaintiff began selling tempered glass fragments for use in firepits. Doll Decl. ¶ 4. Although Plaintiff originally tumbled many of its products, by November 2014 it had completely "stopped tumbling the tempered glass fragments that it sold because tumbling slowed production and caused the glass fragments to become scratched and dull and less desirable." Id. ¶ 9. During this shift in its production methods and beginning on or about March 1, 2010, Plaintiff "began removing references to tumbling its fireglass from its advertising and promotional material, including its web site." Id. Plaintiff "mistakenly overlooked some products that appeared on its website" but "removed these remaining references to tumbling ... immediately after it was brought to [Plaintiff's] attention in August 2016." Id.; see also Juanzemis Decl. ¶ 9–13.

LEGAL STANDARD

Under Federal Rule of Civil Procedure 56(a), a party may move for summary judgment as to a claim or defense or part of a claim or defense. Summary judgment is appropriate where the Court is satisfied 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) ; Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Material facts are those that may affect the outcome of the case. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A genuine dispute of material fact exists only if "the evidence is such that a reasonable jury could return a verdict for the...