Everlight Elecs. Co. v. Nichia Corp.
| Decision Date | 30 April 2013 |
| Docket Number | Civil Action No.12-cv-11758 |
| Parties | EVERLIGHT ELECTRONICS CO., LTD., and EMCORE CORPORATION, Plaintiffs and Counter-Defendants, v. NICHIA CORPORATION, and NICHIA AMERICA CORPORATION, Defendants and Counter-plaintiffs, v. EVERLIGHT AMERICAS, INC., Defendants. |
| Court | U.S. District Court — Eastern District of Michigan |
HONORABLE GERSHWIN A. DRAIN
On April 19, 2012, Plaintiffs Everlight Electronics Co., Ltd.'s and Emcore Corporation's (hereinafter "Plaintiffs") filed the instant patent infringement action against Defendants, Nichia Corporation and Nichia America Corporation (hereinafter "Defendants"). The parties are direct business competitors in the manufacture and supply of light-emitting diode ("LED") products. Presently before the Court is Plaintiffs' Motion for Leave to File Second Amended Complaint, filed on February 20, 2013. Plaintiffs seek to add inequitable conduct counts to the Second AmendedComplaint. They argue their proposed amendment addresses the inequitable conduct pleading deficiencies identified by this Court's November 2, 2012 Order dismissing Plaintiffs' claims from the First Amended Complaint. See Dkt. No. 50. Defendants counter that Plaintiffs request should be denied, not only because it is their third bite at the apple, but also because the proposed amendment does not address the specific intent nor the materiality pleading deficiencies identified by the Court's order, thus the amendment is futile and would not withstand a Rule 12(b)(6) motion to dismiss.
Also, before the Court is Defendants' Motion to Stay and Sever the '215 Patent's claims and counterclaims, filed on February 25, 2013. Defendants argue that the Court should stay all the proceedings concerning the '215 Patent pending the United States Patent and Trademark Office's (PTO) reexamination of the '215 Patent and resulting determination concerning validity of its claims. Defendants further maintain that the '215 Patent claims and counterclaims should be severed from this action pursuant to Rule 21 of the Federal Rules of Civil Procedure. Plaintiffs argue that a stay and severance of the '215 Patent claims will be severely prejudicial, as well as will not simplify the issues before the Court, thus both requests should be denied.
Additionally, the parties have submitted memoranda concerning their dispute over two provisions in their proposed protective order. Specifically, the parties have been unable to mutually agree on a party's use of non-confidential information (paragraph 6(F)(3)) and a prosecution bar prohibiting Plaintiffs' attorneys from prosecution activities before the PTO (paragraph 7).
These matters are fully briefed and the Court finds that oral argument will not aid in the resolution of these matters. Accordingly, these matters will be resolved on the briefing submitted. See E.D. Mich. L.R. 7.1(f)(2). For the reasons that follow, Plaintiffs' Motion for Leave to FileSecond Amended Complaint is granted, Defendants' Motion to Stay and Sever the proposed protective order.
On April 19, 2012, Plaintiffs filed the instant action for patent infringement of their patent entitled "Contact to N-GaN with Au Termination," United States Patent Number 6,653,215 ("'215 Patent"), and seeking declaratory judgment of non-infringement, invalidity and unenforceability of Defendants' patent entitled "Light Emitting Device Having a Nitride Compound Semiconductor and a Phosphor Containing a Garnet Fluorescent Material," United States patent number 5,998,925 ("'925 Patent"), and a declaratory judgment of non-infringement, invalidity and unenforceability of Defendants' patent entitled "Light Emitting Device with Blue Light LED and Phosphor Components," United States patent number 7,531,960 ("'960 Patent") (collectively "patents-in-suit").
Plaintiffs filed a First Amended Complaint on June 18, 2012. On July 18, 2012, Defendants filed their Answer asserting an affirmative defense of non-infringement and invalidity of the '215 Patent, as well as raised counterclaims of infringement of their patents-in-suit. Also on July 18, 2012, Defendants filed a Motion to Dismiss Plaintiffs' claims of unenforceability, Counts III and VI, of the First Amended Complaint. Before the pending motion to dismiss was resolved, this matter was reassigned to the undersigned on October 3, 2012.
Meanwhile, on September 16, 2012, Defendants filed a Petition for inter partes review of all claims of the '215 Patent, which was the first day this procedure became available at the PTO. This Court held a status conference on October 25, 2012, and entered a Scheduling Order the next day setting various deadlines and dates, most relevant for the purposes of the present motionsinclude the following:
Thereafter, on November 2, 2012, the Court entered an Order Granting Defendants' Motion to Dismiss counts III and VI of the First Amended Complaint. The Court's Order found that Plaintiffs failed to plausibly allege that Defendants' patents were unenforceable based on purported inequitable conduct before the PTO because the allegations failed to sufficiently identify the actor who engaged in the misconduct before the PTO, nor that such individual withheld or misrepresented information with the specific intent to deceive the PTO. See Dkt. No. 50 at 10-11, 16-18, and 20. The Court also rejected Plaintiffs' claim of "infectious unenforceability" relative to the '960 Patent. Id. at 19.
On November 5, 2012, the parties exchanged their preliminary infringement contentions. Defendants' invalidity contentions cover all the same grounds asserted in its Petition before the PTO. Additionally, Defendants' invalidity contentions include defenses such as laches, waiver, estoppel, and lack of standing and ownership of the '215 Patent. Discovery has just started in this matter. The parties have propounded written discovery requests, but few documents have been produced because the parties have yet to agree on a protective order nor on an agreement for the storage of electronically stored discovery information.
On February 12, 2013, the PTO granted Defendants' Petition for inter partes review of the '215 Patent. In its decision, the PTO stated "we determine that Nichia has demonstrated sufficiently that there is a reasonable likelihood that it will prevail with respect to the challenge of claims 1-17."
After an answer to the complaint has been filed, Federal Rule of Civil Procedure 15(a) provides that a party may file an amended complaint "only by leave of court or by written consent of the adverse party." Fed. R. Civ. P. 15(a). Rule 15(a) provides that such "leave shall be freely given when justice so requires." Id. Rule 15 "reinforce[s] the principle that cases should be tried on their merits rather than the technicalities of pleadings." Moore v. Paducah, 790 F.2d 557, 559 (6th Cir. 1986).
The United States Court of Appeals for the Sixth Circuit has identified various factors that this Court must consider when determining whether to grant leave to amend:
Undue delay in filing, lack of notice to the opposing party, bad faith by the moving party, repeated failure to cure deficiencies by previous amendments, undue prejudice to the opposing party, and futility of amendment are all factors which may affect the decision. Delay by itself is not sufficient reason to deny a motion to amend. Notice and substantial prejudice to the opposing party are critical factors in determining whether an amendment should be granted.
Brooks v. Celeste, 39 F.3d 125, 129 (6th Cir. 1994) (citing Head v. Jellico Housing Auth., 870 F.2d 1117, 1123 (6th Cir. 1989)). "[W]hen there is a lack of prejudice to the opposing party and the amended complaint is obviously not frivolous or made as a dilatory maneuver in bad faith, it is an abuse of discretion to deny the motion." U.S. v. Marsten Apartments, Inc., 175 F.R.D. 257, 260 (E.D. Mich. 1997).
Plaintiffs argue that they have not unduly delayed in seeking amendment. The Court's scheduling order set February 20, 2013 as the cut off date for amending the pleadings. Discovery is in its infancy, thus this is not a situation where discovery needs to be reopened. Any discovery associated with the inequitable misconduct claims does not reach beyond the subject matter of thepatents-in-suit. Thus, there is no prejudice to Defendants.
Defendants counter that Plaintiffs' motion should be denied because they have repeatedly failed to cure the deficiencies in their inequitable conduct allegations. Plaintiffs have attempted to plead inequitable conduct on two previous occasions, however both times their claims were implausible under the pleading standards for inequitable conduct under Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009) and Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011). Defendants further argue that the proposed amendment is futile because it still fails to meet the heightened pleading standards required by Exergen and Therasense, therefore it cannot defeat a Rule 12(b)(6) motion to dismiss.
"To prevail on the defense of inequitable conduct, the accused infringer must prove that the applicant misrepresented or omitted material information with the specific...
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