Gyro-Trac Corp. v. King Kong Tools LLC
| Decision Date | 04 March 2022 |
| Docket Number | Civil Action 2:21-2137-RMG |
| Parties | Gyro-Trac Corporation, Plaintiff, v. King Kong Tools, LLC, Defendant. |
| Court | U.S. District Court — District of South Carolina |
The matter before the Court is Plaintiff Gyro-Trac Corporation's Rule 12 motion to strike and/or in the alternative 12(c) motion for judgment on the pleadings as to Defendant King Kong Tools, LLC's patent invalidity and unenforceability defense. (Dkt. No. 32). For the reasons stated below, the motion is denied.
In this case, Plaintiff alleges Defendant began making, selling, and distributing cutter-teeth that incorporate Plaintiff's patented designs without permission from or compensation to Plaintiff. (Dkt. No. 21 at ¶¶ 10-11). Plaintiff sent Defendant a cease-and-desist letter on August 2, 2017 informing Defendant it was infringing on Plaintiff's patents. (Dkt. No. 21-3). The parties resolved this issue and entered into a Settlement Agreement (“the Agreement”) on January 30, 2019. (Dkt. No. 21-2). Under the Agreement, Defendant agreed to “resolve the matter” of Plaintiff's patent infringement claim to “avoid the expense, inconvenience and distraction of potential protracted litigation.” (Id. at 1). Defendant acknowledged that Plaintiff's patents were valid and enforceable, and agreed that it would not challenge “ownership, validity, enforceability, or patentability of the patents.” (Id. at 5).
Plaintiff initiated this lawsuit on July 15, 2021. (Dkt. No. 1). Plaintiff filed an Amended Complaint on November 8, 2021 bringing claims for patent infringement, breach of contract, and for preliminary injunction. (Dkt. No. 21). Plaintiff alleges Defendant continued to infringe on its patents after the parties entered an Agreement. (Dkt. No. 21). In its Answer, Defendant asserts “the unenforceability and invalidity of Plaintiff's patents for failing to comply with one or more of the requirements of patentability set forth in 35 U.S.C. §§ 101, et seq.” (Dkt. No. 26 at ¶ 69).
On January 11, 2022, Plaintiff filed Rule 12 motion to strike and/or for partial judgment on the pleadings as to Defendant's patent unenforceability and invalidity defense. (DKt. No. 32). Defendant filed a response in opposition. (Dkt. No. 36). Plaintiff filed a reply. (Dkt. No.37). The motion is ripe for the Court's review.
Rule 12(f) permits the Court to strike from a pleading “an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f). “ ‘Immaterial' matter is that which has no essential or important relationship to the claim for relief, and ‘impertinent' material consists of statements that do not pertain to, and are not necessary to resolve, the disputed issues.” CTH 1 Caregiver v. Owens, 2012 WL 2572044, at *5 (D.S.C. July 2, 2012) (internal citations omitted). “ ‘Scandalous' includes allegations that cast a cruelly derogatory light on a party to other persons.” Id. “The granting of a motion to strike scandalous matter is aimed, in part, at avoiding prejudice to a party by preventing a jury from seeing the offensive matter or giving the allegations any other unnecessary notoriety inasmuch as, once filed, pleadings generally are public documents and become generally available.” See Id. (referencing Wright & Miller 5C Fed. Prac. & Proc. Civ. § 1382 (3d ed. 2011)).
Although the decision of whether to grant a motion to strike under Rule 12(f) is within the sound discretion of the court, the Fourth Circuit views Rule 12(f) motions with disfavor “because striking a portion of a pleading is a drastic remedy and because it is often sought by the movant simply as a dilatory tactic.” Waste Mgmt. Holdings, Inc. v. Gilmore, 252 F.3d 316, 347 (4th Cir. 2001); see also Commodity Futures Trading Comm'n v. Dupont, No. 8:16-cv-03258-TMC-JDA, 2017 WL 4465700, at *2 (D.S.C. Sept. 7, 2017), adopted, No. 8:16-cv-03258-TMC, 2017 WL 4418673 (D.S.C. Oct. 5, 2017). Thus, the Court should generally deny a Rule 12(f) motion “unless the challenged allegations have no possible relation or logical connection to the subject matter of the controversy and may cause some form of significant prejudice to one or more of the parties to the action.” See Rosendall v. Voight, No. 4:17-cv-0821-BHH-TER, 2017 WL 9674476, at *4 (D.S.C. Sept. 11, 2017) (referencing Wright & Miller 5C Fed. Prac. & Proc. Civ. § 1382 (3d ed. 2011)).
“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). Rule 12(c) motions “dispose of cases in which there is no substantive dispute that warrants the litigants and the court proceeding further.” Lewis v. Excel Mech., LLC, 2:13-CV-281-PMD, 2013 WL 4585873 at * 1 (D.S.C. Aug. 28, 2013) quoting 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure, § 1368 (3d ed. 2010). A judgment on the pleadings is only warranted if “the moving party has clearly established that no material issue of fact remains to be resolved and the party is entitled to judgment as a matter of law.” Id. at * 2 (citations omitted).
Rule 12(c) motions limit the court's review to the pleadings and “any documents and exhibits attached to and incorporated into the pleadings.” Lewis, 2013 WL 4585873 at * 1 (citation omitted). See also Abell Co. v. Balt. Typographical Union No. 12, 338 F.2d 190, 193 (4th Cir. 1964). Like motions to dismiss, Rule 12(c) motions call for the pleadings to be construed in the light most favorable to the non-moving party. Burbach Broad. Co. v. Elkins Radio Corp., 278 F.3d 401, 405-06 (4th Cir. 2002). Accordingly, “[t]he court must accept all well pleaded factual allegations in the non-moving party's pleadings as true and reject all contravening assertions in the moving party's pleadings as false.” Lewis, 2013 WL 4585873, at * 2 (citation omitted).
Plaintiff moves to strike and/or for partial judgment on the pleadings as to Defendant's patent unenforceability and invalidity defense. (Dkt. No. 32-1 at 2). Plaintiff argues that Defendant entered an Agreement with Plaintiff that contained a no-challenge clause with language that clearly and unambiguously barred Defendant's right to challenge the enforceability and validity of the patents. Plaintiff cites Federal Circuit law, Baseload Energy, Inc. v. Roberts, for the proposition that a settlement barring the right to challenge patent validity in future infringement actions is sufficient so long as the language is clear and unambiguous, even if invalidity claims had not been previously at issue and had not been actually litigated. (Dkt. No. 32-1 at 4-6) (quoting Baseload Energy, 619 F.3d 1357, 1361 (Fed. Cir. 2010)).
In response in opposition to Plaintiff's motion, Defendant argues the no-challenge clause in the Agreement is unenforceable as against public policy pursuant to Lear, Inc. v. Adkins, because the Agreement is not part of an agreement to settle patent litigation. 395 U.S. 653 (1969). Defendant argues the parties' Agreement was executed pre-litigation and before Defendant had any opportunity to bring a patent validity challenge or obtain discovery relating to the patents. (Dkt. No. 36 at 2).
Federal Circuit law governs the determination of whether an argument bars a party from challenging the validity of a patent. Baseload, 619 F.3d 1361.
In Lear, Inc. v. Adkins, the United States Supreme Court rejected the doctrine of “licensee estoppel” and held that the “important public policy interest in permitting full and free competition in the use of ideas” outweighed “the technical requirements of contract doctrine.” 395 U.S. 653, 670 (1969). Under Lear, a licensee of a patent is not estopped from challenging the validity of the licensed patent by virtue of the license agreement. Id. at 671.
In Lear, the United States Supreme Court explained that the demands of contract doctrine were in tension with the policies underlying patent law. The Court stated that Id. at 670. Thus, faced with this “basic conflict in policy, ” the Court reasoned that “the technical requirements of contract doctrine must give way before the demands of the public interest in the typical situation involving negotiation of a license after a patent has issued.” Id. at 670-71.
“Subsequent to Lear, courts have found Lear's reasoning to mean that ‘no-challenge' clauses in license agreements are unenforceable.” Ocean Tomo, LLC v. PatentRatings, LLC, 262 F.Supp.3d 553, 562 (N.D. Ill. 2017) (citing Alfred C. Server & Peter Singleton, Licensee Patent Validity Challenges Following Medimmune: Implications for Patent Licensing, 3 HASTINGS SCI. & TECH. L.J. 243, 403 (2011)). In the years following Lear, the Federal Circuit has found that no-challenge clauses barring challenges to patent invalidity are enforceable in certain settlements or consent degrees. See e.g., Rates Technology v. Speakeasy, Inc., 685 F.3d 163 (2nd Cir. 2012) ().
In Flex-Foot, Inc. v. CRP, Inc., the Federal Circuit established that a no-challenge clause entered in connection with settling litigation would be enforceable under certain circumstances.
238 F.3d 1362 (Fed. Cir. 2001). In Flex-Foot, the Federal Circuit distinguished Lear, noting that the license agreement in Lear did not contain and was not accompanied by any promise by the licensee...
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