Opinion
No. 04 Civ. 7200 (LMM).
September 29, 2005
MEMORANDUM AND ORDER
1.
Plaintiff — whose complaint asserts claims for (i) a declaratory judgment of the invalidity and unenforceability of U.S. Patent No. 5,176,774 ("'774 patent"), and the non-infringement by plaintiff thereof, (ii) the violation of N.Y. General Business Law § 349, and (iii) tortious interference with actual and prospective business relations — moves for a default judgment, declaring the '774 patent invalid.
Defendants Moshe Har-El ("Har-El") and Argo Development Production Ltd. ("Argo") oppose the motion for a default judgment, and seek leave to file an answer, on behalf of Har-El and Argo "independently and by its exclusive American licensee Silverway International Ltd." ("Silverway") (Proposed Answer at 1), responding to the complaint and asserting a counterclaim for the infringement of U.S. Patent No. 4,848,437 ("'437 patent") and the '774 patent.
Named defendants Joseph Laniado ("Laniado") and Roll Screens, Inc. ("Roll Screens") have not appeared. The Court understands Laniado, with Har-El one of the two inventors of the '774 patent, to be deceased.
For the reasons set forth below, plaintiff's motion for a default judgment is denied, defendants' motion for leave to file an answer is granted, and defendants' motion for a preliminary injunction is denied. Defendants' oral motion during argument on September 21, 2005 for expedited discovery is granted.
2.
"The burden of proving [personal or subject matter] jurisdiction is on the party asserting it. Where, however, the district court relies solely on the pleadings and supporting affidavits, the plaintiff need only make a prima facie showing of jurisdiction." Robinson v. Overseas Military Sales Corp., 21 F.3d 502, 507 (2d Cir. 1994) (citations footnote omitted). Plaintiff has not made the requisite showing.
According to Certificates of Service filed with the Clerk, plaintiff, on February 7, 2005, sent copies of a Notice Request for Waiver of Service, a Waiver of Service form, and the complaint by Federal Express and e-mail to Argo and Har-El (spelled Harel) in care of Gideon Cohen, Advocate, at the latter's office in Israel (enclosing with the Federal Express, although not with the e-mail, communication materials for the return of the waiver). Plaintiff understood Mr. Cohen to be a lawyer who represents Argo and Har-El, and the record supports this understanding. While the docket may suggest the contrary, the waivers are not executed by anyone, nor does plaintiff contend that they were.
Documents numbered 5 and 6 on the docket.
In the docket, there appears with respect to both of items 5 and 6 the words "WAIVER OF SERVICE RETURNED EXECUTED."
While Ackerman v. Levine, 788 F.2d 830, 838-41 (2d Cir. 1986), may answer some of defendants' arguments that they were not validly served, it does not obviate at least two reasons why plaintiff cannot sustain its burden of showing prima facie that Argo and Har-El have been served.
In the first place, service was directed to Mr. Cohen. "[S]ervice of process on an attorney not authorized to accept service for his client is ineffective." Santos v. State Farm Fire Cas. Co., 902 F.2d 1092, 1094 (2d Cir. 1990) (citation omitted). "The mere relationship between a defendant and his attorney does not, in itself, convey authority to accept service." United States v. Ziegler Bolt Parts Co., 111 F.3d 878, 881 (Fed. Cir. 1997) (citations omitted). Plaintiff has made no showing that Argo or Har-El authorized Cohen to accept service of process.
Such a showing, it should be noted, cannot be made on the basis of Mr. Cohen's actions alone. Ziegler, 111 F.3d at 881-82.
In the second place, service of a request, pursuant to Fed.R.Civ.P. 4(d), that a potential defendant waive service of a summons does not constitute service of process; service is only effected when the potential defendant executes and returns the waiver, and that did not occur here. See O.J. Distrib., Inc. v. Hornell Brewing Co., 340 F.3d 345, 354-55 (6th Cir. 2003).
In any event, in view of the Second Circuit's "preference that litigation disputes be resolved on the merits, not by default,"Marfia v. T.C. Ziraat Bankasi, New York Branch, 100 F.3d 243, 249 (2d Cir. 1996) (citations omitted), and in light of defendants' willingness to appear, the Court, even had plaintiff made the necessary showing of effective service, would have excused defendants' lateness in responding to the complaint.
3.
Defendants' motion to interpose an answer is granted. The proposed answer (including the counterclaim described above) annexed as Exhibit E to Mr. Turcotte's declaration of August 24, 2005, is deemed served on plaintiff as of the date hereof.
4.
In order to obtain a preliminary injunction in a patent case, the moving party must show:
(1) a reasonable likelihood of success on the merits;
(2) irreparable harm absent an injunction;
(3) that the balance of hardships tips in its favor; and
(4) that the public interest favors an injunction.
Individually, no factor is dispositive; the district court must weigh the factors against each other and against the form and magnitude of requested relief.Tate Access Floors, Inc. v. Interface Architectural Resources, Inc., 279 F.3d 1357, 1364-65 (Fed. Cir. 2002) (citations omitted). However, the Federal Circuit's "case law and logic both require that a movant cannot be granted a preliminary injunction unless it establishes both of the first two factors, i.e., likelihood of success on the merits and irreparable harm."Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1350 (Fed. Cir. 2001) (citation omitted).
"Irreparable harm is presumed when a clear showing of patent validity and infringement has been made." Id. (citation omitted).
"In order to demonstrate likely success on the merits, [defendants] must show that, in light of the presumptions and burdens applicable at trial, [they] will likely prove that [plaintiff] infringes [one or more of] the asserted claims of the ['437 or the '774] patent and that the ['774] patent will likely withstand [plaintiff's] challenges to its validity." Tate, 279 F.3d at 1365 (citations omitted). "The presumption of the patent's validity created by 35 U.S.C. § 282 (1994 Supp. III 1997) 'does not relieve a patentee who moves for a preliminary injunction from carrying the normal burden of demonstrating that it will likely succeed on all disputed liability issues at trial, even when the issue concerns the patent's validity.'" Helifix Ltd. v. Blok-Lok, Ltd., 208 F.3d 1339, 1351 (Fed. Cir. 2000) (quoting New England Braiding Co. v. A.W. Chesterton Co., 970 F.2d 878, 882 (Fed. Cir. 1992)).
Under Amazon.com:
Of course, whether performed at the preliminary injunction stage or at some later stage in the course of a particular case, infringement and validity analysis must be performed on a claim-by-claim basis. . . . It is well settled that an infringement analysis involves two steps: the claim scope is first determined, and then the properly construed claim is compared with the accused device to determine whether all of the claim limitations are present either literally or by a substantial equivalent. Conceptually, the first step of an invalidity analysis based on anticipation and/or obviousness in view of prior art references is no different from that of an infringement analysis. . . . Only when a claim is properly understood can a determination be made whether the claim "reads on" an accused device or method, or whether the prior art anticipates and/or renders obvious the claimed invention.239 F.3d at 1351 (citations omitted).
Har-El is one of the inventors of both the '437 patent and the '774 patent, and Argo is the assignee of both patents. As described by defendants, the '437 patent has "claims directed to a process for preparing a multi-layer, self-rollable plastic sheet, in conjunction with protecting the interior of a motor vehicle," while the '774 patent "is utilized, inter alia, for its production and sale of advertising banners comprised of a plastic-based compound that can be rolled and unrolled while retaining it shape." (Def. Mem. at 2.) Plaintiff describes itself as "a developer, manufacturer and seller of plastics that [possess] the ability to self roll" and an "initial exclusive licensee of the '774 patent," and says that, "[i]n due course," it "effected a more cost effective method of manufacturing the self-rolling plastics with the added benefit of improved durability and a thinner resulting product." (Pl. Mem. at 4-5.) "Plaintiff [it further says] is engaged in the manufacture, import, export and sale of hand held advertising and sports banners on a plastic like compound that can be rolled and unrolled while retaining its shape." (Id. at 4.) Plaintiff claims that it has been threatened with an infringement suit and that its prospective business relations have been interfered with by Har-El and Argo.
The quoted statement does not, in the Court's view, amount to an admission by plaintiff that its product infringes either of the patents at issue. (Cf. Def. Mem. at 3.)
Defendants have submitted two affidavits of Har-El, the first stating, among other things, that he is the Chief Executive Officer of Argo, to whom the '774 patent has been assigned, that plaintiff has never been authorized to use the '774 patent, and that he has examined plaintiff's product, the "characteristics and specifications [of which] are identical to the self-rolling banner that I patented with the U.S. Patent and Trademark Office," adding that plaintiff "employs the exact same manufacturing process to produce the banner." (Har-El Aff., Aug. 18, 2005, ¶ 10.)
The August 18, 2005 Har-El affidavit gives further detail regarding how it is claimed plaintiff's product infringes the '774 patent. It does not mention the '437 patent. The second Har-El affidavit, of September 16, 2005, submitted in response to plaintiff's obviousness argument (see below), mentions the '437 patent once, but states that "this earlier patent relates in no way, shape or form to the process of heat-resistant, self-rolling laminates that is the bedrock of the '774 patent." (Har-El Aff., Sept. 16, 2005, ¶ 11.)
Plaintiff's principal argument is that the '774 patent is invalid for obviousness, i.e., because
Plaintiff's argument that defendants are estopped from seeking a preliminary injunction because of their willful default fails because they did not default, nor are defendants estopped by silence because plaintiff has not demonstrated that they came under a duty to speak. Whether or not Silverway is a proper party need not be decided now, since it is clear that Har-El and Argo are proper parties.
the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains.35 U.S.C. § 103(a).
Under § 103, the scope and content of the prior art are to be determined; differences between the prior art and the claims at issue are to be ascertained; and the level of ordinary skill in the pertinent art resolved. Against this background, the obviousness or non-obviousness of the subject matter is determined. Such secondary considerations as commercial success, long felt but unsolved needs, failure of others, etc., might be utilized to give light to the circumstances surrounding the origin of the subject matter sought to be patented. Graham v. John Deere Co., 383 U.S. 1, 17-18 (1966). The secondary considerations must be considered when present. Ruiz v. A.B. Chance Co., 234 F.3d 654, 667 (Fed. Cir. 2000).
In support of its Section 103 position, plaintiff cites eight patents: U.S. Patents Nos. 2,256,159 (1941); 2,429,177 (1947), 3,503,842 (1970), 3,899,807 (1975), 4,188,248 (1980), 3,698,761 (1972), 3,620,896 (1971), and 4,500,607 (1985). (See Pl. Reply Mem. at 38.) Defendants have submitted an affidavit of Mr. Har-El analyzing the six patents copies of which were submitted by plaintiff, concluding that, "[i]n short, the '774 patent is novel and distinguishable from earlier patents insofar as it enables the patentee to stretch a non-elastic material." (Har-El Aff., Sept. 16, 2005, ¶ 5.)
Plaintiff has submitted copies of the first six of the cited patents.
* * *
The record on the present motions, as far as the parties' respective patent-related claims go, is sparse. Defendants have not identified specifically which of the claims of the '437 and '774 patents they assert are being infringed. The Court has neither a sample of the accused product nor, more importantly, a detailed description of the process of its manufacture. The parties' briefs do not meaningfully engage in claim construction. There is no description of how, in defendants' view, the actual language of any specific claim of either of the patents in question reads on the accused product. Nor is plaintiff's argument for invalidity by reason of obviousness clear, perhaps because there is no reasoned description of the hypothetical person of ordinary skill in the art the Court must construct. The Court has before it the testimony of only Mr. Har-El which, if helpful, is nevertheless not that of an independent expert; neither side has presented independent expert testimony.
The presentation by plaintiff of a curriculum vitae of Todd Fjield, with the suggestion that Mr. Fjield is responsible in part for the preparation of that part of plaintiff's reply memorandum that deals with plaintiff's obviousness argument, does not mean that that part of the memorandum is expert testimony.
What follows is, of necessity, affected by the sparseness of the record.
* * *
Defendants have not shown, as they must in moving for a preliminary injunction, that it is likely to succeed on the merits of plaintiff's claim that the '774 patent is invalid for obviousness under 35 U.S.C. § 103(a). See Tate, 279 F.3d at 1365; Helifix, 208 F.3d at 1351.
That the '774 patent can be distinguished from the prior art patents cited by plaintiff does not answer the issue "whether there is a reason, suggestion or motivation in the prior art or elsewhere that would have led one of ordinary skill in the art to combine the references." Ruiz, 234 F.3d at 664-65 (citations omitted). Without negating that possibility — which requires for a start a determination of "the ordinary level of skill in the art," id. at 666 (quoting Custom Accessories Inc. v. Jeffrey-Allan Indus., Inc., 807 F.2d 955, 962 (Fed. Cir. 1986)) — defendants cannot show likelihood of success on the merits, and the inquiry on the preliminary injunction level need go no further.
It should be clear from the above that the Court is not saying that plaintiff has established obviousness.
While the Court need not at this time pass on the question whether, if the '774 patent survives the 35 U.S.C. § 103(a) challenge, defendants have demonstrated infringement, the Court must note that the present record raises questions. For example, Mr. Har-El states that "the '774 Patent utilizes the substance polyester therastalate." (Har-El Aff., Sept. 16, 2005, ¶ 5.) The significance of that statement is unclear, because the claims of the '774 patent do not mention that substance.
5.
It is probable that many of the shortcomings of the present record are attributable to the fact that the parties have not engaged in discovery. Defendants' application for expedited discovery is fully appropriate, and can lead to an early trial.Accordingly, the parties are directed to proceed to an expedited course of discovery which will allow all discovery (including expert discovery) to be completed by January 31, 2006 (or such other date to which the parties may agree in writing or which the Magistrate Judge to whom this case will be referred for pretrial [including discovery] supervision may set in his or her discretion). Such Magistrate Judge may fix any procedures and schedules that will expedite the completion of discovery. The parties will submit a proposed joint pretrial order within 21 days of the completion of discovery.
SO ORDERED.