Knauf Fiber Glass, Gmbh v. Certainteed Corp.

• Decision Date: 24 March 2008
• Docket Number: Case No. 1:02-cv-1215-DFH-WTL.
• Citation: 554 F.Supp.2d 838
• Parties: KNAUF FIBER GLASS, GMBH, Plaintiff, v. CERTAINTEED CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of Indiana

Page 838

554 F.Supp.2d 838

KNAUF FIBER GLASS, GMBH, Plaintiff, v. CERTAINTEED CORPORATION, Defendant.

Case No. 1:02-cv-1215-DFH-WTL.

United States District Court, S.D. Indiana, Indianapolis Division.

March 24, 2008.

COPYRIGHT MATERIAL OMITTED

Deborah Pollack-Milgate, Paul B. Hunt, Barnes & Thornburg, Indianapolis, IN, for Plaintiff.

David O. Tittle, Kandi Kilkelly Hidde, Bingham McHale LLP, Indianapolis, IN, Edward M. Reisner, Marilyn Neiman, Cohen Pontani Lieberman & Pavane, New York, NY, for Defendant.

FINDINGS OF FACT AND CONCLUSIONS OF LAW ON DEFENDANT'S COUNTERCLAIM

DAVID F. HAMILTON, Chief Judge.

Introduction

This patent infringement action is now before the court on the trial of the sole remaining claim, defendant's counterclaim seeking to have the case declared "exceptional" under 35 U.S.C. § 285 so that defendant may recover its attorney fees incurred in the action. The court now states its findings of fact and conclusions of law after a trial on that counterclaim. As explained below, the court finds that defendant has failed to prove its counterclaim by clear and convincing evidence.

Plaintiff Knauf Fiber Glass, GmbH, filed this suit against defendant CertainTeed Corporation in August 2002 alleging infringement of U.S. Patent No. 6,270,865, which issued on August 7, 2001 after an eight-year prosecution history. The '865 patent claims a narrow but commercially successful niche in a mature and "crowded" art, insulated fiberglass duct board. The patent describes a fiberglass duct board with a smooth fiberglass mat facing on the air-stream side of the board. According to the patent, the fiberglass mat facing permits smoother, faster, and less turbulent air-flow, and provides a tougher, more durable surface than other linings for duct board. In recent years, such matfaced products have come to dominate the market for rigid fiberglass duct board.

Claim 3 of the '865 patent claims:

A rigid air duct for conducting flowing air, the air duct comprising:

a fiber glass board having an interior surface and an exterior surface, the fiber glass board being deformed to cause the interior surface to define a channel for conducting flowing air, and a mat facing adhered to the interior surface of the fiber glass board to provide a smooth air-contacting surface lining the channel to maximize laminar flow of air flowing through the channel, the mat facing being a fabric including glass fibers, wherein the fiber glass board further includes a first shiplap edge adjacent to the interior surface and the mat facing is adhered to the shiplap edge.¹

The adherence of the mat to the shiplap edges themselves was critical in ultimately obtaining the '865 patent. The significance of this feature has been highly controversial in the litigation.

In May 2003, the court construed disputed claim terms. The parties responded to the claim construction ruhng by stipulating that defendant CertainTeed's accused products infringed the '865 patent. CertainTeed then moved for summary judgment on several grounds, including anticipation, obviousness, and inequitable conduct. When CertainTeed filed its reply brief on summary judgment on invalidity, it submitted prior art that it had not previously provided to Knaufs counsel. Dkt. No. 119, Ex. D, also Trial Ex. 61. That prior art shows the '865 patent is almost certainly invalid as anticipated by a product already on the market in Europe. That prior art persuaded Knauf, where earlier submissions of prior art had not, to dismiss its patent infringement claims against CertainTeed. CertainTeed dismissed without prejudice its counterclaims for declarations of invalidity and unenforceability but continued to pursue its counterclaim for coercive relief under 35 U.S.C. § 285. See Knauf Fiber Glass, GmbH v. CertainTeed Corp., 2004 WL 771257 (S.D.Ind. March 24, 2004) (granting Knaufs motion to dismiss its claims and denying cross-motions for summary judgment on CertainTeed's counterclaim for damages under section 285).

After the court resolved a long-pending discovery dispute concerning claims of fraud to pierce the attorney-client privilege, see Knauf Fiber Glass, GmbH v. CertainTeed Corp., 2006 WL 3240520 (S.D.Ind. Sept. 28, 2006) (denying reconsideration), discovery was completed and the counterclaim was tried to the court in February 2007. As a reader will see, the legal standards that apply to that counterclaim require the court to consider the entire prosecution history and numerous issues of validity and enforceability, as well as the entire course of the litigation itself: After trial, the parties submitted more than 200 pages of proposed findings of fact and conclusions of law. The court now states its findings of fact and conclusions of law. Substance rather than the court's label shall govern whether a particular item is treated as a finding of fact or conclusion of law.

A summary of applicable law may make the findings of fact easier to follow. In "exceptional" patent infringement cases, the court may award reasonable attorney fees to the prevailing party. 35 U.S.C. § 285. Section 285 serves two purposes: (1) to compensate the prevailing party for its expenses in prosecuting or defending the suit, and (2) to deter clearly unwarranted infringement suits. See Automated Business Cos. v. NEC America, Inc., 202 F.3d 1353, 1355 (Fed.Cir.2000). In cases against infringers, section 285 can also provide a useful deterrent against both infringement and frivolous challenges to patents. See, e.g., Eli Lilly and Co. v. Zenith Goldline Pharmaceuticals, Inc., 264 F.Supp.2d 753, 759 (S.D.Ind.2003) (awarding fees under § 285 where generic drug manufacturer's challenge to prescription drug patent was objectively baseless and reckless).

The Federal Circuit has recognized many varieties of misconduct that can make a case exceptional, including inequitable conduct before the Patent and Trademark Office (PTO) and litigation misconduct, which may include bringing an unjustified and frivolous suit for infringement. See Epcon Gas Systems, Inc. v. Bauer Compressors, Inc., 279 F.3d 1022, 1034 (Fed.Cir.2002); Yamanouchi Pharmaceutical Co. v. Danbury Pharmacol, Inc., 231 F.3d 1339, 1346-47 (Fed.Cir. 2000); accord, Evident Corp. v. Church & Dwight Co., 399 F.3d 1310, 1315 (Fed.Cir. 2005). In cases like this one, where accused infringers prevail on the merits, exceptional cases are normally those of bad faith litigation and/or fraud or inequitable conduct by the patentee in procuring the patent. Superior Fireplace Co. v. Majestic Products Co., 270 F.3d 1358, 1377-78 (Fed. Gir.2001); Cambridge Products, Ltd. v. Penn Nutrients, Inc., 962 F.2d 1048,1050-51 (Fed.Cir.1992).

Patent applicants have a duty to prosecute applications in the Patent and Trademark Office with candor, good faith, and honesty. Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178 (Fed.Cir.1995); 37 C.F.R. § 1.56(a) (duty applies to each individual associated with filing and prosecuting patent application). Inequitable conduct may include both deliberate misrepresentations and deliberate omissions or failures to disclose material information. Monsanto Co. v. Bayer Bioscience N.V., 514 F.3d 1229, 1233-34 (Fed.Cir. 2008); Bruno independent Living Aids, Inc. v. Acorn Mobility Services, Ltd., 394 F.3d 1348, 1351 (Fed.Cir.2005); Nobelpharma AB v. Implant Innovations, Inc., 141 F.3d 1059, 1070 (Fed.Cir.1998). The key elements are that the misrepresentation or omission must have been both (a) material and (b) made with intent to deceive the PTO. Bruno Independent Living Aids, 394 F.3d at 1351.

The party claiming inequitable conduct must prove its case by clear and convincing evidence. Monsanto, 514 F.3d at 1233-34; Refac International, Ltd. v. Lotus Development Corp., 81 F.3d 1576, 1581 (Fed.Cir.1996). When the showing of materiality is especially strong, the showing of intent may be proportionately less, and vice versa, but both elements still must be shown by clear and convincing evidence. See Digital Control, Inc. v. Charles Machine Works, 437 F.3d 1309, 1313 (Fed.Cir.2006). Deceptive intent need not be proved with direct evidence, but may be inferred from all the circumstances, especially where the evidence shows a knowing failure to disclose material information and no credible explanation for the failure. E.g., Bruno Independent Living Aids, 394 F.3d at 1354. Where both elements are proved, the court must also then weigh the evidence to determine whether the equities warrant a finding of inequitable conduct. Digital Control, 437 F.3d at 1313; Monsanto Co. v. Bayer Bioscience N.V., 363 F.3d 1235, 1239 (Fed. Cir.2004).

In deciding whether a case is exceptional, the district court must consider the totality of the circumstances. Yamanouchi Pharmaceutical, 231 F.3d at 1347. Even where a case is found to be exceptional, an award of attorney fees is not automatic:

The subsequent decision to award attorney fees, vel non, is discretionary and "permits the judge to weigh intangible as well as tangible factors: the degree of culpability of the infringer [or, presumably, the patentee], the closeness of the question, litigation behavior, and any other factors whereby fee shifting may serve as an instrument of justice."

Superior Fireplace, 270 F.3d at 1378, quoting National Presto Industries, Inc. v. West Bend Co., 76 F.3d 1185, 1197 (Fed. Cir.1996).

The Federal Circuit has described charges of inequitable conduct as "an absolute plague" in patent litigation, Burlington Industries, Inc. v. Dayco Corp., 849 F.2d 1418, 1422 (Fed.Cir.1988), one that is "diverting the court from genuine issues and simply spawning satellite litigation." Multiform Desiccants, Inc. v. Medzam, Ltd., 133 F.3d 1473, 1482 (Fed.Cir.1998). At the same time, where there is genuine inequitable conduct, sanctions under section 285 can provide important compensation for victims and deterrence against Similar abuses of the patent system by others.

CertainTeed contends the case is...