Hunter Douglas, Inc. v. Comfortex Corp., 98-CV-0479(LEK/DNH).

• Decision Date: 03 March 1999
• Docket Number: No. 98-CV-0479(LEK/DNH).,98-CV-0479(LEK/DNH).
• Citation: 44 F.Supp.2d 145
• Parties: HUNTER DOUGLAS, INC., Plaintiff, v. COMFORTEX CORPORATION, Defendant.
• Court: U.S. District Court — Northern District of New York

44 F.Supp.2d 145

HUNTER DOUGLAS, INC., Plaintiff, v. COMFORTEX CORPORATION, Defendant.

No. 98-CV-0479(LEK/DNH).

United States District Court, N.D. New York.

March 3, 1999.

COPYRIGHT MATERIAL OMITTED

Pennie & Edmonds, L.L.P., New York City (James W. Dabney, James G. Markey, Brian M. Rothery, of counsel), DeGraff, Foy, Holt-Harris, Mealey and Kunz, L.L.P., Albany, NY (James T. Potter, of counsel), for Plaintiff.

Baker & Botts, L.L.P., New York City (Robert Neuner, Karen Wuertz, David W. Whealan, of counsel), Harris Beach & Wilcox, Albany, NY (Daniel M. Sleasman, of counsel), for Defendant.

MEMORANDUM-DECISION AND ORDER

KAHN, District Judge.

I. Facts

Plaintiff Hunter Douglas, Inc. ("Hunter Douglas") brings this action against Defendant Comfortex Corporation ("Comfortex") alleging that Comfortex has infringed Hunter Douglas patents 5,313,999 (the "'999 patent")¹ and 6,631,217 (the "'217 patent").² Presently before this Court are parties' cross-motions for separation pursuant to Federal Rule of Civil Procedure 42(b). Hunter Douglas seeks to present the patent issues first and then all remaining counterclaims as well as Comfortex's patent misuse defense in a second phase. Comfortex, on the other hand, recommends trying liability and damages issues separately such that all claims (patent issues and Comfortex's counterclaims) would be presented in a first liability phase and then any remaining damages issues would be presented in a second phase. For the following reasons, Hunter Douglas's motion is hereby GRANTED-in-part and DENIED-in-part; Comfortex's motion is hereby GRANTED-in-part and DENIED-in-part.

II. Discussion

Fed.R.Civ.P. 42(b) governs the present cross-motions. Rule 42(b) provides the following:

The court, in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy, may order a separate trial of any claim, cross-claim, counterclaim, or third-party claim, or of any separate issue or of any number of claims, cross-claims, counterclaims, third-party claims, or issues, always preserving inviolate the right of trial by jury as declared by the Seventh Amendment to the Constitution or as given by statute of the United States.

"In deciding whether one trial or separate trials will best serve the convenience of the parties and the court, avoid prejudice, and minimize expense and delay, the major consideration is directed toward the choice most likely to result in a just final disposition of the litigation." In re Innotron Diagnostics, 800 F.2d 1077, 1084 (Fed.Cir. 1986). "[A] district court has broad discretion in separating issues and claims for trial...." Gardco Manufacturing, Inc. v. Herst Lighting Co., 820 F.2d 1209, 1212 (Fed.Cir.1987).

The claims presented by both Hunter Douglas and Comfortex form the matrix of this Court's analysis. Hunter Douglas alleges that Comfortex has infringed several claims of the subject patents. In response to the infringement action, Comfortex asserts the following affirmative defenses: (1) both the 1999 and `2l7 patents are invalid for failing to comply with one or more sections of the patent law, see Comfortex's Answer and Counterclaims, Dkt. # 4, ¶¶ 21, 23; (2) Comfortex has not infringed either the '999 or '217 patent, see id. ¶¶ 22, 24; (3) Hunter Douglas's claims are barred by the doctrines of unclean hands, see id. ¶ 25, (4) patent misuse, see id. ¶ 26, and (5) prosecution history estoppel. See id. ¶ 28. In addition, Comfortex has propounded counterclaims based on patent, federal antitrust, and state tort law. Specifically, Comfortex makes the following counterclaims: (1) a declaratory judgment as to the invalidity of both the '999 and '217 patents and Comfortex's noninfringement of same; (2) Lanham Act false advertising and false representation; (3) injurious falsehood; (4) malicious prosecution; (5) unfair competition under New York State common law; (6) federal antitrust violations predicated on 15 U.S.C. §§ 2, 4, and 16; (7) tortious interference with contractual relationships; (8) tortious interference with prospective advantage; and (9) prima facie tort. Given their complexity, the antitrust issues are likely to dominate the presentation of Comfortex's counterclaims. In pertinent part, therefore, this case falls within the amorphous area of patent/antitrust overlap.

Upon first blush, the areas of patent and antitrust law seem at odds with one another. A patent confers specific property rights for a limited time period. It also places the sovereign's imprimatur upon the patentee's right to exclude others from the use, sale, and practice of the invention that is defined within the patent document. 35 U.S.C. § 154.³ Antitrust principles, however, mandate the preservation of competition, see Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458, 113 S.Ct. 884, 122 L.Ed.2d 247 (1993) ("The law directs itself ... against conduct which unfairly tends to destroy competition itself"), and endeavor to limit actions which tend to consolidate. See gen., Stephen F. Ross, Principles of Antitrust Law, 3-11 (1993) (describing goals of antitrust law). Unlike patent law where it is commonplace, under certain circumstances one may survive antitrust scrutiny but rarely receives an affirmative and prospective license to exclude.

The conflict between patent and antitrust arises when a patentee seeks to protect the property rights granted vis-a-vis the patent. See 35 U.S.C. § 1, et seq. (delineating rights conferred by patent statute). An effort to enforce those rights may be viewed as an attempt to extend them, temporally or otherwise, beyond the bounds set by the patent statute. In that sense, an ostensible desire to protect is charged with a more inimical design that allegedly runs afoul of the antitrust laws. See e.g., 15 U.S.C. § 2.

From a policy perspective, however, patent and antitrust are entirely consistent. That is, both seek to promote innovation and enhance consumer welfare. See United States Dept. of Justice and Fed. Trade Comm'n Antitrust Guidelines for the Licensing of Intellectual Property (1995). See also Atari Games Corp. v. Nintendo of America, Inc., 897 F.2d 1572, 1576 (Fed. Cir.1990), ("[T]he aims and objectives of patent and antitrust laws may seem, at first glance, wholly at odds. However, the two bodies of law are actually complementary, as both are aimed at encouraging innovation, industry and competition.") (citation omitted).⁴ Official recognition of this principle was concomitant with the transformation in antitrust jurisprudence from encouragement of expedient per se rules to more fact-intensive inquiries requiring examination of the anticompetitive effects stemming from a party's allegedly wrongful action or actions. See gen., SCM Corp. v. Xerox Corp., 645 F.2d 1195, 1203 (2nd Cir.1981). Compare Standard Sanitary Mfg. Co. v. United States, 226 U.S. 20, 33 S.Ct. 9, 57 L.Ed. 107 (1912) and Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502, 513, 37 S.Ct. 416, 61 L.Ed. 871 (1917) with discussion in Ward S. Bowman, Jr., Patent and Antitrust Law: A Legal & Economic Appraisal (1973). The fusion of patent and antitrust principles as a matter of policy has permeated the patent/antitrust overlap from a doctrinal perspective as well. In accordance therewith, efforts to enforce patent rights no longer automatically raise the specter of monopolistic intent. Instead, like other aspects of antitrust law, courts partake in a fuller examination of the effects such efforts have in the relevant markets.

As in the case sub judice, the propriety of a patentee's actions relative to antitrust concerns is commonly raised by a defendant in response to a charge of patent infringement. This practice has left courts with the unenviable task of trial management in light of the complex legal and factual issues brought to bear in patent/antitrust cases. Specifically, courts are called upon to review the factors reflected in Fed.R.Civ.P. 42(b) to determine the extent to which patent and antitrust issues must be distinct in order to warrant separation.

Several courts, including the Federal Circuit, have addressed the foregoing by separating the patent issues from those grounded in antitrust. See, e.g., In re Innotron Diagnostics, 800 F.2d 1077 (Fed. Cir.1986); Virginia Panel Corp. v. Mac Panel Co., 887 F.Supp. 880, 883-84 (W.D.Va.1995), aff'd, 133 F.3d 860 (Fed. Cir.1997); Alarm Device Mfg. Co. v. Alarm Products Intern., Inc., 60 F.R.D. 199, 202 (E.D.N.Y.1973) ("More often than not, separate trials of patent validity-infringement claims and misuse-antitrust claims have been found to be salutary.") (citing cases).⁵ In In re Innotron, for example, the Federal Circuit noted with approval the "standard practice of separating for trial patent issues and those raised in an antitrust counterclaim." 800 F.2d at 1084. See also Brandt, Inc. v. Crane, 97 F.R.D. 707, 708 (N.D.Ill.1983) (adopting the `general rule' that separating patent and antitrust issues serves the purposes of convenience, expedience, and economy). After examining the four standard Rule 42(b) factors, the Innotron court concluded that the district court's decision to separate the patent and antitrust issues was appropriate because of the following reasons:

(1) Economy is served because in the trial of the patent issues the validity of the patent and Innotron's affirmative defenses will be determined and will become law of the case and thus removed from trial on the original antitrust issues; (2) Convenience of all is served in trying the less complex patent issues first; (3) Expedition is served because the patent issues on the present schedule will be ready for trial more than a year before the antitrust issue can be ready; (4) Avoidance of prejudice and confusion is served in trying first the patent issues, without injecting the different counterclaim issues which require different proof and different witnesses.

Id. at 1085. This...