Petter Invs. Inc. v. Hydro Eng'g, Inc.

• Decision Date: 02 November 2011
• Docket Number: Case No. 1:11–CV–207.
• Citation: 828 F.Supp.2d 924
• Parties: PETTER INVESTMENTS, INC., Plaintiff, v. HYDRO ENGINEERING, INC., and Hydro Engineering Equipment & Supply Co., Defendants.
• Court: U.S. District Court — Western District of Michigan

828 F.Supp.2d 924

PETTER INVESTMENTS, INC., Plaintiff,

v.HYDRO ENGINEERING, INC., and Hydro Engineering Equipment & Supply Co., Defendants.

Case No. 1:11–CV–207.

United States District Court,W.D. Michigan,Southern Division.

Nov. 2, 2011.

Mary Lankton Pate, Christopher E. Tracy, Honigman Miller Schwartz and Cohn LLP, Kalamazoo, MI, Emily J. Zelenock, Honigman Miller Schwartz & Cohn LLP, Bloomfield Hills, MI, for Plaintiff.

Brett L. Foster, Mark A. Miller, Holland & Hart LLP, Salt Lake City, UT, Richard A. Gaffin, Miller Canfield Paddock & Stone PLC, Grand Rapids, MI, for Defendants.

OPINION

GORDON J. QUIST, District Judge.

I. Background

This case is the latest chapter in the parties' battle for sales over wash fluid containment systems. Plaintiff, Petter Investments, Inc. (“Petter”), and Defendants, Hydro Engineering, Inc. and Hydro Engineering Equipment & Supply Co. (collectively “Hydro”), are competitors in the design, manufacture, installation, and sale of wash fluid containment systems for pressure washing large vehicles such as automobiles, bulldozers, and semi-trucks. These systems incorporate a pad upon which the vehicle is placed for washing.

The dispute dates back to at least 1998, when Petter first accused Hydro of selling products that infringed its pending patent application, later issued as U.S. Patent No. 6,021,792 (the “'792 Patent”). A round of correspondence and investigation ensued, but the accusations subsided. All was quiet for several years, but in 2007, the dispute resurfaced when Hydro notified Petter that Petter's wash pads infringed Hydro's patents, U.S. Patent Nos. 6,779,591 and 7,258,749 (respectively, the “'591” and “'749” Patents). Things soon came to a head when Petter sued Hydro in this Court in Case No. 1:07–CV–1033 (the “2007 Case”), in which Petter alleged that Hydro infringed the '792 Patent and sought a declaration that it was not infringing the '591 and '749 Patents. Hydro filed counterclaims for infringement of the '591 and '749 Patents.

The Court first addressed Petter's patent and granted Hydro summary judgment of noninfringement of the '792 Patent. Thereafter, the Court addressed Hydro's infringement claims and Petter's defenses. After construing the disputed claim terms of Hydro's patents, the Court granted Hydro summary judgment on all of Petter's invalidity defenses in an Opinion and Order entered on September 8, 2009, 2009 WL 2922303 (W.D.Mich, Sep. 08, 2009). Subsequently, on October 6, 2009, 664 F.Supp.2d 816 (W.D.Mich.2011), the Court granted Hydro summary judgment, concluding that Petter's water channel side trough wash pads directly infringed claim 15 of the '591 Patent and that Petter contributorily infringed claims 2 and 3 of the '749 Patent through its sales of such wash pads. Shortly before trial, the parties settled Hydro's damage claims. The Settlement Agreement, which was referenced in the Settlement Order, called for a monetary payment by Petter and the entry of a permanent injunction. It also contained the following provision:

9. HYDRO'S PATENT VALIDITY

9.1 Neither Petter nor its attorneys shall take any action to aid, induce, assign, or participate in, directly or indirectly, any action contesting the validity or enforceability of any of the Hydro patents in suit (U.S. Patents Nos. 6,799,591 and 7,258,749) in any court or other tribunal including without limitation any litigation, declaratory judgment action, or requesting the United States Patent and Trademark Office (“PTO”) for the reexamination or cancellation of any of Hydro's patents in suit.

(Settlement Agreement § 9.1.)

Peace was short-lived. On July 24, 2010, Hydro filed a motion for contempt and discovery, alleging that Petter had violated several provisions of the permanent injunction. Hydro also alleged that Petter was selling a “pervious” wash pad that infringed Hydro's patents. After a hearing, Magistrate Judge Brenneman issued an order, without a finding of contempt, directing Petter to take certain actions, including providing Hydro discovery pertaining to the wash pads Petter was then building and had sold or installed since the permanent injunction was entered. In a separate filing in August 2010, Hydro requested entry of a stipulated consent judgment doubling the amount Petter was required to pay under the Settlement Agreement after Petter defaulted. This Court denied Hydro's request and subsequently awarded Petter attorneys' fees as the prevailing party on the consent judgment issue, in accordance with § 10.6 of the Settlement Agreement. Then, on January 31, 2011, Hydro filed a second motion for contempt alleging that Petter's redesigned “pervious” wash pads continue to infringe Hydro's patents and violate the permanent injunction. On July 18, 2011, following a contempt hearing, the Court issued an Opinion and Order denying Hydro's motion for contempt, including a finding that Petter's “pervious” wash pads do not infringe the '591 and '749 Patents. Subsequently, on September 29, 2011, the Court issued a Memorandum Order granting Hydro's motion for reconsideration and vacating that portion of its July 18, 2011, Opinion concluding that Petter's redesigned wash pads do not infringe the '591 and '749 Patents.

Petter filed the instant case on March 2, 2011, in response to Hydro's second motion for contempt, seeking declaratory judgments of noninfringement of the '591 and '749 Patents in Counts I and III, respectively, with regard to its “pervious” top wash pads having centrally-located troughs.¹ Petter also alleged claims for declarations of invalidity of the '591 and ' 749 Patents in Counts II and IV. Finally, in Counts V and VI Petter alleged claims for declarations of noninfringement and invalidity of another Hydro Patent, U.S. Patent 7,540,295 (the “'295” Patent). After serving Hydro, Petter amended its complaint to add two additional claims, Counts VII and VIII, for declaratory judgments of noninfringement and invalidity of yet another Hydro patent, U.S. Patent 7,530,362 (the “'362” Patent).

Hydro has moved to dismiss Counts II and IV of the First Amended Complaint as barred by the parties' Settlement Agreement in the 2007 Case. Hydro also moves to dismiss Counts V–VIII of the First Amended Complaint for lack of an actual case or controversy.

For the reasons set forth below, the Court will grant Hydro's motion to dismiss Counts II and IV and will grant in part and deny in part Hydro's motions to dismiss Counts V–VIII of the First Amended Complaint.

II. Discussion

A. Motion To Dismiss Or Alternatively For Summary Judgment On Counts II And IV Of The First Amended Complaint ²

Hydro contends that Counts II and IV of the First Amended Complaint, which seek declarations of invalidity with regard to the '591 and '749 Patents, respectively, should be dismissed because they are barred by § 9.1 of the Settlement Agreement. As an initial matter, the Court must decide whether to treat Hydro's motion as a motion to dismiss under Rule 12(b)(6) or as a motion for summary judgment under Rule 56. In deciding a motion to dismiss, a court is limited to considering only the pleadings. See Rondigo, L.L. C. v. Twp. of Richmond, 641 F.3d 673, 682 (6th Cir.2011) (noting that “Rule 12(b)(6) scrutiny is limited to the pleadings”). Where matters outside the pleadings are presented in support of a motion and not excluded by the court, the court must treat the motion as a motion for summary judgment, giving all parties a reasonable opportunity to present all the material that is pertinent to the motion. Fed.R.Civ.P. 12(d); see also Himes v. United States, 645 F.3d 771, 776 (6th Cir.2011) (“A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a cause of action is treated as a motion for summary judgment when matters outside the pleadings are presented to the court.”). In supporting and opposing the motion, both parties have relied upon matters outside the pleadings, including the Settlement Agreement. Therefore, the Court considers Hydro's motion under the Rule 56 summary judgment standard.

Hydro argues that Petter is contractually estopped from challenging the validity of the '591 and '749 Patents on the basis of Petter's agreement not to contest the invalidity or enforceability of those patents in § 9.1 of the Settlement Agreement, set forth above. In Flex–Foot, Inc. v. CRP, Inc., 238 F.3d 1362 (Fed.Cir.2001), the Federal Circuit held that a provision of a settlement agreement with language substantially similar to that in § 9.1 of the Settlement Agreement estopped the accused infringer from challenging the validity of the patent in suit in any subsequent action. The parties in Flex–Foot—Flex–Foot, the owner of the '363 patent, and Springlite, the alleged infringer—engaged in three rounds of litigation over the '363 patent. In the first case, Flex–Foot sued Springlite alleging that it infringed the ' 363 patent. The parties dismissed the case after they entered a settlement agreement that did not preclude future invalidity challenges by Springlite. In the second case, filed in 1993, Springlite sought a declaratory judgment of invalidity. Following discovery and the filing of a motion for summary judgment of invalidity, the parties settled the case and entered into a new settlement agreement and a corresponding license agreement. The settlement agreement contained the following language pertinent to subsequent invalidity challenges:

7.1 [Springlite] agrees not to challenge or cause to be challenged, directly or indirectly, the validity or enforceability of the '913 patent and/or the '363 patent in any court or other tribunal, including the United States Patent and Trademark Office. As to the '363 and '913 patents only, [Springlite] waives any and all invalidity and unenforceability defenses in any future litigation, arbitration, or other proceeding. This waiver applies to any product made, used, or sold by [Springlite] or any of their assignees, successors or...