Kemin Foods v. Pigmentos Vegetales Del Centro

• Decision Date: 10 August 2005
• Docket Number: No. 4:02-CV-40327.,4:02-CV-40327.
• Parties: KEMIN FOODS, L.C., the Catholic University of America, Plaintiffs, v. PIGMENTOS VEGETALES DEL CENTRO S.A. DE C.V., Defendant.
• Court: U.S. District Court — Southern District of Iowa

384 F.Supp.2d 1334

KEMIN FOODS, L.C., the Catholic University of America, Plaintiffs, v. PIGMENTOS VEGETALES DEL CENTRO S.A. DE C.V., Defendant.

No. 4:02-CV-40327.

United States District Court, S.D. Iowa, Central Division.

August 10, 2005.

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Christine Lebron-Dykeman, Edmund J. Sease, Jeffrey D. Harty, John Darrell Goodhue, McKee, Voorhees & Sease, PLC, Edward M. Mansfield, Roger T. Stetson, Belin Lamson McCormick Zumback & Flynn PC, Des Moines, IA, John F. Lynch, Howery Simon Arnold & White LLP, Michelle Replogle, Scott W. Clark, Susan K. Knoll, Howery LLP, Houston, TX, for Plaintiffs.

G. Brian Pingel, Michael A. Dee, Camille Lynne Urban, Brown Winick Graves Gross Baskerville & Schoenebaum PLC, Des Moines, IA, for Defendant.

ORDER ON DEFENDANT'S MOTION TO STAY, DEFENDANT'S MOTION FOR LEAVE TO AMEND COUNTERCLAIMS, PLAINTIFFS' MOTION TO DISMISS, AND PLAINTIFFS' RULE 11 MOTION TO DISMISS

GRITZNER, District Judge.

Currently pending before the Court are Defendant's Motion to Stay Counter-claims (Clerk's No. 361) and Motion for Leave to Amend and Supplement Counter-claims (Clerk's No. 360), and Plaintiffs' Motion to Dismiss (Clerk's No. 344) and Motion Under Rule 11 to Dismiss (Clerk's No. 350). Attorneys for Plaintiffs are Susan K. Knoll, Scott W. Clark, Michelle Replogle, and Ed Mansfield; attorneys for Defendant are G. Brian Pingel, Michael A. Dee, and Camille L. Urban Brown. The pending motions are fully submitted following oral argument on August 3, 2005.

PROCEDURAL AND FACTUAL BACKGROUND¹

Plaintiffs, Kemin Foods, L.C. and The Catholic University of America (herein-after "Kemin") filed a Complaint alleging infringement of two patents (the '564 and '714 patents) on July 9, 2002. Defendant, Pigmentos Vegetales del Centro S.A. de C.V. ("PIVEG") filed its Answer on September 20, 2002, responding to Plaintiffs' allegations and asserting certain counterclaims of unfair competition and other antitrust violations. On May 9, 2003, this Court entered an Order bifurcating the patent infringement from the antitrust/unfair competition counterclaims. A jury rendered a verdict on the patent issues on September 24, 2004, following a ten-day trial. The jury found the '714 patent valid but not infringed and the '564 patent valid and infringed under the doctrine of equivalents. Thereafter, this Court held as a matter of law that both the '714 and '564 patents were valid and enforceable and otherwise upheld the jury determinations in its Order on Post-Trial Motions filed February 8, 2005. The Court subsequently certified its decisions as final in its May 9, 2005 Order, in which the Court also issued a permanent injunction in accordance with the Court's claim construction and the jury determination of infringement of the '564 patent. PIVEG filed its Notice of Appeal on June 7, 2005, while Kemin filed its Notice of Cross Appeal on June 20, 2005. The Federal Circuit officially docketed the appeal and cross-appeal on July 20, 2005, and that appeal on the already decided patent issues is currently pending before that court.

ANALYSIS

Consistent with the history of this action, there has been a flurry of filings since the Court's May 9, 2005, Order, all of which deal with the counterclaims previously bifurcated by this Court. The counterclaims brought by PIVEG allege antitrust and unfair competition violations by Kemin in its obtaining and protecting its purified lutein patents and in its marketing of those products. In this latest round between the parties, PIVEG has first moved to stay any further action with relation to the unfair competition/antitrust counterclaims. In addition, as a result of the outcomes of the jury trial and this Court's post-trial orders, PIVEG has moved for leave to amend and supplement its counterclaims. On the other side, Kemin has resisted both of PIVEG's motions. Additionally, Kemin moves for dismissal of nearly all of PIVEG's original counterclaims, initially in a motion to dismiss applicable to a majority of the counter-claims, and subsequently in a motion pursuant to Fed.R.Civ.P. 11 to dismiss the counterclaim based upon an alleged noncompete agreement. PIVEG, of course, resists these motions. These motions will be discussed and analyzed in seriatim.

A. Defendant's Motion to Stay²

PIVEG moves for a stay of its counterclaims pending resolution of the appeal docketed by the Federal Circuit regarding the patent issues previously decided by a jury verdict and this Court. PIVEG asserts such a stay is desirable based on the potential outcome of its appeal before the Federal Circuit. Kemin resists a stay and urges the Court to consider its pending motions to dismiss that go to the merits of PIVEG's counterclaims.

1. The Factors Analyzed in Determining Whether to Issue Stay

When determining "whether to stay a matter pending appeal, an essentially procedural question, the law of our regional circuit rather than that of the Federal Circuit Court of Appeals is applicable." Pioneer Hi-Bred Int'l, Inc. v. J.E.M. AG Supply, Inc., 33 F.Supp.2d 794, 796 (N.D.Iowa 1999) (citing Dethmers Mfg. Co. v. Automatic Equip. Co., 23 F.Supp.2d 974, 988 (N.D.Iowa 1998)). The Eighth Circuit factors considered by this Court when determining the appropriateness of a stay pending appeal are as follows: (1) the likelihood that the party seeking the stay will prevail on the merits of the appeal; (2) the likelihood that the moving party will be irreparably harmed absent a stay; (3) the prospect that others will be harmed if the court grants a stay; and (4) the public interest in granting the stay. Id. at 797.

a. Likelihood of Success on Appeal

The first factor in determining the appropriateness of a stay pending appeal concerns the likelihood of success by the movant on appeal. Id. This does not require the movant to establish an absolute certainty of success; rather, the movant only needs a "strong argument" in its favor. Iowa Utils. Bd. v. FCC, 109 F.3d 418, 423 (8th Cir.1996).

PIVEG contends it is likely to succeed in its appeal before the Federal Circuit on the issue of the enforceability of the '714 patent, a key issue in PIVEG's unfair competition counterclaims. Specifically, PIVEG points out the jury provided advisory determinations that Kemin withheld a material prior art reference with the intent to withhold the specified material from the PTO. While this Court ultimately concluded the level of materiality and intent did not rise to the level necessary to render the '714 patent unenforceable, PIVEG asserts the Federal Circuit will find otherwise.

In support of its position, PIVEG argues this Court made an error of law by discussing enablement in finding the patent enforceable despite the jury's findings, and that the Federal Circuit, which previously stated in this case that "the materiality of the article is not negated by the fact that the method disclosed therein may have required some modification in order to be operative," will find otherwise. PIVEG's appeal asks the appellate court to review the determination of the level of materiality and then reapply the sliding scale determination of inequitable conduct. See GFI, Inc. v. Franklin Corp., 265 F.3d 1268, 1273 (Fed.Cir.2001) (quoting Halliburton Co. v. Schlumberger Tech. Corp., 925 F.2d 1435, 1439 (Fed.Cir.1991)). PIVEG is convinced the Federal Circuit will agree with its position and consequently that PIVEG has thus demonstrated a good likelihood of prevailing on the merits of its appeal.

Kemin counters that PIVEG lacks support for its proposition that this Court erred in ruling on the enforceability of the '714 patent. To the contrary, Kemin points out the Federal Circuit has upheld a District Court determination that a reference not sufficiently enabled supported the court's determinations on materiality such that no finding of inequitable conduct was warranted. See FMC Corp. v. Manitowoc Co., Inc., 654 F.Supp. 915, 935 (N.D.Ill.1987), aff'd, 835 F.2d 1411 (Fed.Cir.1987). Kemin contends that this Court correctly assessed the materiality and intent elements in finding no inequitable conduct sufficient to render the '714 patent unenforceable.

In addition, Kemin contends that PIVEG ignores the high standard necessary to reverse this Court's factual findings, i.e., the clearly erroneous standard,³ see Baxter Healthcare Corp. v. Spectramed, Inc., 49 F.3d 1575, 1584 (Fed.Cir.1995), which is "significantly deferential" to the district court's findings. Concrete Pipe & Prods., Inc. v. Const. Laborers Pension Trust, 508 U.S. 602, 623, 113 S.Ct. 2264, 124 L.Ed.2d 539 (1993).⁴ In fact, to satisfy this burden on appeal, PIVEG must "show `serious questions going to the merits.'" Knutson v. AG Processing, Inc., 302 F.Supp.2d 1023, 1035 (N.D.Iowa 2004) (citations omitted). A reiteration of objections and arguments already considered by the district court is usually insufficient to meet this burden. Id. at 1023.

Kemin asserts that like the defendant in Knutson, PIVEG has done nothing more than restate its previously heard and decided arguments and has provided no case law to support its assertion that it is likely to succeed on the merits of its appeal. Furthermore, even a different finding on the issue of materiality may not be sufficient for PIVEG to succeed as the Federal Circuit would still be required to review this Court's "ultimate determination of whether inequitable conduct occurred for abuse of discretion," Duro-Last, Inc. v. Custom Seal, Inc., 321 F.3d 1098, 1110 (Fed.Cir.2003) (citations omitted), and Kemin asserts PIVEG is fighting an uphill battle in its attempts to reverse this Court's conclusions as to the inequitable conduct of Kemin in procuring the '714 patent.

Contrary to PIVEG's assertions, this Court did not conclude the Poultry Science article was not material because it was not enabled. The Court accepted the jury's advisory finding that the article was material but then assessed a low...