Gen. Protecht Grp., Inc. v. Leviton Mfg. Co.

• Decision Date: 12 May 2012
• Docket Number: No. CIV 10-1020 JB/LFG,CIV 10-1020 JB/LFG
• Parties: GENERAL PROTECHT GROUP, INC., f/k/a ZHEJIANG DONGZHENG ELECTRICAL, CO.; G-TECHT GLOBAL CORPORATION; SECURELECTRIC CORPORATION; WAREHOUSE- LIGHTING.COM LLC; CENTRAL PURCHASING, LLC; and HARBOR FREIGHT TOOLS USA, INC., Plaintiffs, v. LEVITON MANUFACTURING CO., INC., Defendant.
• Court: U.S. District Court — District of New Mexico

GENERAL PROTECHT GROUP, INC., f/k/a ZHEJIANG DONGZHENG ELECTRICAL, CO.;G-TECHT GLOBAL CORPORATION; SECURELECTRIC CORPORATION;WAREHOUSE- LIGHTING.COM LLC; CENTRAL PURCHASING, LLC;and HARBOR FREIGHT TOOLS USA, INC., Plaintiffs,

v.LEVITON MANUFACTURING CO., INC., Defendant.

No. CIV 10-1020 JB/LFG

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO

Dated: May 12, 2012

MEMORANDUM OPINION AND ORDER

THIS MATTER comes before the Court on: (i) GPG's Motion to Dismiss Leviton's Trade Secret Misappropriation Counterclaim for Lack of Subject Matter Jurisdiction, filed January 10, 2011 (Doc. 73)("GPG's MTD"); (ii) Defendant Leviton Manufacturing Co., Inc.'s Motion to Dismiss Patent Claims and Counterclaims, filed October 11, 2011 (Doc. 144)("Leviton's MTD"); (iii) the Plaintiffs' Motion for Summary Judgment that Leviton Breached Its Implied License, filed March 8, 2012 (Doc. 171)("Plaintiffs' MSJ"); and (iv) Leviton's Cross-Motion for Summary Judgment and, Alternatively, to Strike Plaintiffs' Motion for Summary Judgment on Plaintiffs' Breach of Implied License Claim, filed March 26, 2012 (Doc. 184)("Leviton's MSJ").¹ The Courtheld hearings on February 16, 2012, and on March 21, 2012. The Court will grant GPG's MTD, and will grant in part and deny in part Leviton's MTD consistent with the parties' agreement at the February 16, 2012, hearing. Based on the lack of allegations in Defendant Leviton Manufacturing Co.'s pleadings that indicate there is any common nucleus of operative fact between the patent dispute in this case and the trade-secret dispute, the Court concludes that it cannot properly exercise supplemental jurisdiction over Leviton Manufacturing's trade-secret claim Counterclaim III. As to Leviton's MTD, the Court will accept the parties' agreements to dismiss Leviton Manufacturing's patent-infringement counterclaims -- Counterclaims I and II -- with prejudice. The Court will accept the parties' agreement to dismiss Counts III through VIII. The Court concludes that, following dismissal with prejudice of Counterclaims I and II for patent infringement, Count II is moot based on the lack of an actual controversy. Because no federal claims remain in this case, the Court will decline to exercise supplemental jurisdiction over the remaining state-law claims -- Count I and Count X. Because Count II is moot, and because the Court is declining to exercise jurisdiction over Count I, the Court will deny the Plaintiffs' MSJ and Leviton's MSJ as moot. Because the Court believes that bringing this case to a conclusion is in the Plaintiffs' best interests to permit them to enforce, if necessary, the dismissal with prejudice under the doctrines of res judicata and collateral estoppel, the Court will proceed to enter final judgment on the claims asserted in this case. The Court retains jurisdiction over the request for attorney's fees under 35 U.S.C. § 285 as collateral to the merits of the case.

FACTUAL BACKGROUND

Plaintiff General Protecht Group, Inc. ("GPG")² and Leviton Manufacturing manufactureand sell competing ground fault circuit interrupter ("GFCI") products. Leviton Mfg. Co. v. Nicor, Inc., 557 F.Supp.2d 1231, 1235 (D.N.M. 2007)(Browning, J.); Leviton Mfg. Co. v. Nicor, Inc., No. 04-0424, 2006 WL 4079129, at *1 (D.N.M. May 23, 2006)(Browning, J.); Memorandum Opinion and Order at 3, filed November 30, 2010 (Doc. 41)("MOO"). GFCIs are safety devices that reduce the risk of electrocution. See Leviton Mfg. Co. v. Nicor, Inc., 2006 WL 4079129, at *1. GPG markets and sells GFCI products to United States distributors, including Plaintiffs Harbor Freight Tools USA, Inc., Central Purchasing, LLC, G-Techt Global Corp., SecurElectric Corp., and Warehouse Lighting.com LLC. See Leviton Mfg. Co. v. Zhejiang Dongzheng Elec. Co., 506 F.Supp.2d 646, 648-49 (D.N.M. 2007)(Browning, J.); Leviton Mfg. Co. v. Nicor, Inc., 557 F.Supp.2d at 1235; MOO at 3. GPG manufactures its GFCI products in China. See Leviton Mfg. Co. v. Zhejiang Dongzheng Elec. Co., 506 F.Supp.2d at 648-49; MOO at 3.

1. The Prior Actions.

In 2004 and 2005, Leviton Manufacturing asserted claims of patent infringement of U.S. Patent Nos. 6,246,558 ("the '558 Patent") and 6,864,766 ("the '766 patent") in the District Court for the District of New Mexico. See MOO at 3. In these actions, Leviton Manufacturing alleged that GPG, Harbor Freight, Central Purchasing, and Nicor Inc. infringed Leviton Manufacturing's '558 patent and '766 patent through their sale of GFCIs that GPG manufactured. See MOO at 4. On March 5, 2007, the Court made a Markman³ ruling, which adopted GPG, Harbor Freight, Nicor, and Central Purchasing's construction of the terms "movable bridge," "predetermined condition,"and "reset portion." Leviton Mfg. Co. v. Zhejiang Dongzheng Elec. Co., 506 F.Supp.2d at 648. On July 10, 2007, the Court granted summary judgment of non-infringement to GPG, Harbor Freight, and Nicor with respect to Claim 3 of the '558 patent. See Leviton Mfg. Co. v. Nicor, Inc., 557 F.Supp.2d at 1235, 1250-51.

2. The Confidential Settlement Agreement.

In October 2007, Leviton Manufacturing, GPG, Harbor Freight, Nicor, and Central Purchasing, LLC entered into a Confidential Settlement Agreement ("CSA") to resolve the patent-infringement actions pending in the Court. MOO at 4. The CSA included a covenant not to sue. The covenant stated:

2.1 Leviton . . . hereby covenants not to sue (1) Defendants, their officers, directors, shareholders, members, employees, subsidiaries, or affiliates for alleged infringement of the '558 and/or '766 patents based on the Dongzheng products currently accused of infringement in the '558 and/or'766 actions; and (2) Defendants, their officers, directors, shareholders, members, employees, subsidiaries, or affiliates for alleged infringement of the '558 patent and/or the '766 patent with respect to an anticipated future new GFCI product that Defendant Dongzheng has indicated its intent to market in the U.S. in the future . . . .

2.2 The dismissals and covenant not to sue by Leviton in Article 2.1 shall also apply to Defendants' customers of the Dongzheng Products including, but not limited to, Interline Brands, Inc., provided such customers do not seek to invalidate any claim of the '558 or '766 patents or seek to have those patents declared invalid or unenforceable through any presently existing or future court action or administrative filing.

CSA §§ 2.1, 2.2, at 4-5, filed November 2, 2010 (Doc. 8-1).

The CSA also contained a section regarding the District of New Mexico's '766 Markman order.

The parties will jointly request that the Court vacate its '766 Order in . . . the Court's Memorandum Opinion and Order dated March 5, 2007, by submitting a joint motion and proposed form of Order to the Court . . . . However, Leviton agrees not to challenge any proposed claim construction of a '766 patent claim that is reflected inthe '766 Markman Order, which any of the Defendants, their officers, directors, shareholders, members, employees, subsidiaries, affiliates (or their customers) may propose in connection with any claim of infringement of a '766 patent claim. Defendants and their officers, directors, shareholders, members, employees, subsidiaries, affiliates (or their customers) are not precluded from proposing said claim construction in any action or proceeding asserting infringement of any patent related to the '766 patent, although Leviton may challenge such proposed claim construction. Leviton and defendants agree that neither the fact of the Court's decision to vacate or not vacate its '766 Markman Order, nor the fact that the parties requested that the Court vacate its '766 Markman Order, can be used by a party to this Agreement to support or challenge a proposed construction of a claim related to the '766 patent.

CSA § 4.1, at 8-9.

The CSA also contained a section entitled "Governing Law/Venue." CSA § 11.2, at 11. This section states: "Any dispute between the Parties relating to or arising out of this [CSA] shall be prosecuted exclusively in the United States District Court for the District of New Mexico. The Parties consent to the venue and jurisdiction of such court for this purpose." CSA § 11.2, at 11.

3. Leviton Manufacturing's '124 and '151 Patents.

After the CSA, Leviton Manufacturing secured two new patents -- U.S. Patent Nos. 7,463,124 ("the '124 patent") and 7,764,151 ("the '151 patent"). MOO at 5. On December 9, 2008, the '124 patent issued from application no. 10/977,929 ("the '929 application"), which was filed on October 28, 2004. See MOO at 5-6. The '151 patent issued on July 27, 2010 from application no. 12/176,735 ("the '735 application"), which was filed on July 21, 2008. MOO at 6. The '929 application was filed as a continuation⁴ of the '766 patent. See MOO at 6. The '735 application wasfiled as a continuation of the '929 application. See MOO at 6.

4. Actions Asserting Infringement of Leviton Manufacturing's '124 and '151 Patents.

In September 2010, Leviton Manufacturing filed patent-infringement complaints with the United States International Trade Commission ("ITC") and in the United States District Court for the Northern District of California, alleging that GPG and the following Defendants infringed Leviton Manufacturing's '124 and '151 patents: (i) G-Techt Global Corporation; (ii) SecurElectric Corporation; (iii) Warehouse Lighting.com, LLC; (iv) Central Purchasing; (v) Harbor Freight Tools USA, Inc.; (vi) and other entities not involved in this litigation. MOO at 6.⁵ In its complaint filed in the ITC, Leviton Manufacturing asserts that six of GPG's GFCI products infringe the '124 and '151 patents. See MOO at 6-7; Declaration of Huaiyin Song ¶¶ 8-11, at 4-5 (dated October 29, 2010), filed November 2, 2010 (Doc. 8)("Song Decl."); Amended Complaint Under Section 337 of the Tariff Act of 1930, as Amended at i-ii, 1-9, 26-46, filed November 3, 2010 (Doc. 10-1). Leviton Manufacturing's complaint in the Northern District of California...