Am. Traffic Solutions, Inc. v. B&W Sensors, LLC

Decision Date27 March 2014
Docket NumberCase No. 4:13CV0229 AGF
CourtU.S. District Court — Eastern District of Missouri

Plaintiff American Traffic Solutions, Inc. ("Plaintiff") brings this action alleging ongoing infringement by Defendant B & W Sensors LLC's ("Defendant") of Plaintiff's patents, U.S. Patent Nos. 8,184,863 ("the '863 patent") and 8,213,685 ("the '685 patent") (collectively the "patents-in-suit"). In Counts I and II, respectively, Plaintiff asserts that Defendant's U.S. Patent No. 8,284,996 ("the '996 patent") infringes Plaintiff's '863 patent and its '685 patent. In Counts III and IV, respectively, Plaintiff asserts claims for tortious interference and unfair competition.1 Now before the Court is Defendant's motion for judgment on the pleadings and to dismiss Counts III and IV. For the reasons set forth below, Defendant's motion for judgment on the pleadings is denied.

I. The Allegations

Plaintiff, an Arizona corporation, is engaged in the business of providing, servicing, and operating video traffic enforcement devices, including red light cameras and speed detection devices. Plaintiff does not currently practice either the '863 or the '685 patents and has not commercialized or licensed any of the speed detection systems described in those patents. Plaintiff does, however, market two other speed detection systems, RADAR and LiDAR. Plaintiff alleges that these systems directly compete with Defendant's system, the Multiple Vehicle Speed Tracking system ("MVST"), described in Defendant's '996 patent. Plaintiff also alleges that MVST infringes the '863 and the '685 patents. Plaintiff markets and maintains business relationships and contracts involving the RADAR and LiDAR systems with municipalities throughout the United States, including the Saint Louis Metropolitan area.

Defendant is a Missouri limited liability company with a place of business in St. Louis, Missouri. Defendant also is engaged in the business of providing, servicing, and operating video traffic enforcement and speed detection devices for municipalities throughout the United States. Plaintiff acknowledges that the MVST is a direct competitor of RADAR and LiDAR but denies that it has infringed either the '863 or the '685 patent.

Plaintiff alleges that it has on-going customer relationships with multiple municipal governments, has made significant investments in maintaining and cultivating these relationships, and has entrusted these customers with confidential and sensitivecompetitive information about its research, development, and business such that, in the absence of Defendant's interference, there was a reasonable probability that these customers "would have contracted with [Plaintiff] for speed detection systems based on their existing relationship with Plaintiff." Complaint, Doc. No. 1 at ¶ 33. Plaintiff further alleges that Defendant, upon learning of Plaintiff's relationships with these customers, actively recruited those customers by falsely stating that: Plaintiff does not own video speed detection technology; Plaintiff could not offer or support speed detection systems and services; and Plaintiff is an expert only in red light cameras and not video speed detection cameras. See id. at ¶ ¶ 21 & 34. In addition, Plaintiff alleges that Defendant falsely represented that Defendant, rather than Plaintiff, developed the patented video speed detection technology, and promoted itself as a superior source of that technology, and falsely claimed an endorsement of its technology by the Texas Transportation Institute and Texas A&M University. See id. at ¶¶ 7, 21, 34.

Plaintiff next alleges that Defendant's intentional interference and wrongful acts "were neither privileged, nor justified," because they were "based on false or misleading information Defendant had provided to [Plaintiff's] customers," or "were designed to wrongfully effect, induct, and contribute to the infringement" of Plaintiff's patents or "motivated by the improper purpose of supplying knock-off products that infringe [Plaintiff's] patented technology into the market." Id. at ¶ 35. Further, Plaintiff contends that Defendant's acts of interference caused Plaintiff's customers "to break off their dealings with [Plaintiff]" and thereby caused damage to Plaintiff's business, market, reputation, and goodwill. Id. at ¶¶ 34, 36, 38, 39..

Finally, Plaintiff alleges that Defendant, in the course of promoting its competing products to Plaintiff's customers and prospective customers, made false representations and deceptive statements concerning Plaintiff and its products, including, among other things, falsely stating that Plaintiff does not own and cannot offer or support video speed detection technology. Plaintiff also asserts that these misrepresentations were made to gain competitive advantage and have caused Plaintiff's customers to break off their dealings with Plaintiff and resulted in damage to Plaintiff's business, market share, reputation, and goodwill. See id.

II. The Arguments of the Parties

Defendant first argues that Plaintiff's common law claims for tortious interference and unfair competition are preempted under federal patent law. Defendant further contends that Plaintiff has not pled the elements necessary to state a claim for relief on either count. With respect to Plaintiff's allegations that Defendant made false representations in the marketing of MVST, Defendant further contends that Plaintiff is required and fails to plead fraud with particularity, as set forth in Federal Rule of Civil Procedure 9(b). Specifically, Defendant argues that compliance with Rule 9(b) is required because Plaintiff's tort claims include allegations of fraud or a fraudulent scheme.

In response, Plaintiff asserts that the tort claims alleged here are not preempted by federal patent law because they require additional elements of proof apart from those necessary to demonstrate the alleged infringement. In the alternative, Plaintiff contends that even if preemption were applicable here, Defendant has waived the preemptionargument by failing to plead preemption as an affirmative defense. Plaintiff further argues that it has alleged facts adequate to state a claim for relief with respect to each of the common law tort claims. Finally, Plaintiff asserts that Rule 9(b) is not applicable to the claims alleged, but even if it were, that Plaintiff has alleged fraud with sufficient particularity to satisfy the requirements of Rule 9(b).

I. Standard of Review

"After the pleadings are closed-but early enough not to delay trial-a party may move for judgment on the pleadings." Fed. R. Civ. P. 12(c). In ruling upon either a Rule 12(c) motion for judgment on the pleadings or a Rule 12(b)(6) motion to dismiss for failure to state a claim, courts in this Circuit apply the same standard of review. See Bass v. Anoka County, 2014 WL 683969, at *1 (D. Minn. Feb. 21, 2014) (citing Clemons v. Crawford, 585 F.3d 1119, 1124 (8th Cir. 2009)). For purposes of either type of motion, a court must view the allegations of the complaint in the light most favorable to the plaintiff. See Kottschade v. City of Rochester, 319 F.3d 1038, 1040 (8th Cir. 2003). The complaint must state "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A pleading that offers [merely] 'labels and conclusions' or 'naked assertion[s]' devoid of 'further factual enhancement' does not plausibly establish entitlement to relief under any theory." C.N. v. Willmar Public Schools, Dist. No. 347, 591 F.3d 624, 634 (8th Cir. 2010) (quoting Iqbal, 556 U.S. at 678) (internal quotation omitted)). The purpose of this threshold pleading requirementis to allow a defendant "to test the legal sufficiency of a complaint so as to eliminate those actions which are fatally flawed in their legal premises and designed to fail, thereby sparing litigants the burden of unnecessary pretrial and trial activity." Flynn v. CTB, Inc., No. 1:12-CV-68 SNLJ, 2013 WL 28244, *1 (E.D. Mo. Jan. 2, 2013) (citing Young v. City of St. Charles, Mo., 244 F.3d 623, 627 (8th Cir. 2001) (internal quotation omitted)).

II. Preemption
A. Preemption as an Affirmative Defense

Federal preemption is an affirmative defense. Wuebker v. Wilbur-Ellis Co., 418 F.3d 883, 886 (8th Cir. 2005) (recognizing that "preemption is an affirmative defense"); see also Fed. R. Civ. P. 8(c) (noting that "[i]n responding to a pleading, a party must affirmatively state any avoidance or affirmative defense"); Jacobs Mfg. Co. v. Sam Brown Co., 19 F.3d 1259, 1266 (8th Cir. 1994). Failure to plead an affirmative defense may, but will not always, result in waiver of that defense. See First Union Nat. Bank v. Pictet Overseas Trust Corp., 477 F.3d 616, 622 (8th Cir. 2007) (quotation omitted). The Eighth Circuit has rejected a formalistic approach to Rule 8(c) and the waiver of affirmative defenses. Instead it holds that "[w]hen an affirmative defense is raised in the trial court in a manner that does not result in unfair surprise . . . technical failure to comply with Rule 8(c) is not fatal." Id.; see also Sanders v. Dep't of the Army, 981 F.2d 990, 991 (8th Cir. 1992) (concluding that a district court did not abuse its discretion by allowing an affirmative defense to be raised for the first time on a motion to dismiss).

B. Patent Law and the Preemption of State Tort Claims

The Supreme Court recognizes three types of preemption: express, field, and conflict. English v. Gen. Elec. Co., 496 U.S. 72, 78-79 (1990). Pursuant to the doctrine of conflict preemption, which the parties agree is at issue here, state law is preempted "to the extent that it actually conflicts with federal law" or where it '"stands as an obstacle to the...

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