Opinion
No. CV 05-1795 FMC (MCX).
July 21, 2005
A. Stephens Clay, Geoffrey K. Gavin, Mitchell G. Stockwell, R. Charles Henn, Jr., Susan A. Cahoon, Kilpatrick Stockton, Atlanta, GA, Chad S. Hummel, Manatt Phelps Phillips, Los Angeles, CA, James J. Hefferan, Jr., Tonya Deem, Kilpatrick Stockton LLP, Winston-Salem, NC, Noel Scott Cohen, Manatt Phelps Phillips, Los Angeles, CA, for Plaintiffs.
Heidi L. Keefe, Mark R. Weinstein, Samuel C. O'Rourke, William Sloan Coats, White and Case, Palo Alto, CA, for Defendants.
Craig W. Clark, White and Case, Palo Alto, CA, for Claimant.
ORDER DENYING MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION
This matter is before the Court on the Motion to Dismiss for Lack of Subject Matter Jurisdiction (docket no. 45), filed June 7, 2005. The Court, having read and considered the moving, opposition and reply documents submitted in connection with this motion, hereby DENIES the motion for the reasons and in the manner set forth below. The Court deems this matter appropriate for decision without oral argument. See Fed.R.Civ.P. 78; Local Rule 7-15. Accordingly, the hearing set for July 25, 2005 is removed from the Court's calendar.
I. Background
This patent infringement action relates to a method for converting two-dimensional films into three-dimensional media. On March 11, 2005, Plaintiffs IMAX Corporation ("IMAX") and Three-Dimensional Media Group, Ltd. ("3DMG") brought suit against Defendant In-Three, Inc. ("In-Three") for allegedly infringing U.S. Patent No. 4,925,294 (" `294 Patent"). In this motion, In-Three contends that Plaintiffs lack standing to sue on the `294 Patent and that the owner of the patent, an indispensable party, has not been joined.
On January 28, 2005, the inventor of the `294 Patent, David Geshwind, assigned to 3DMG, of which he is president, all of his "right title and interest," including "all right he may have to sue and recover for damages and other remedies in respect of any infringement of the Patents Rights which may have occurred before the date of this assignment." See Weinstein Decl. at Ex. E. His co-inventor, Anthony Handal, also conveyed his "right, title and interest" in the `294 Patent to 3DMG, including any right to sue to recover damages. Id. The copy of the January 28, 2005 assignment from Geshwind ("Geshwind Assignment") to 3DMG that has been produced to In-Three is heavily redacted. All language has been redacted except the following: (1) a recitation of consideration; (2) a warranty that Geshwind is the owner of the patent; (3) a warranty that the `294 Patent is valid and enforceable; (4) the language quoted above; and (5) a warranty that Geshwind will not interfere with the rights granted under the Patent.
On February 3, 2005, 3DMG granted to IMAX "the worldwide, exclusive right and license under the claims of the Licensed Patents [including the `294 Patent] and Licensed Know How to make, have made use, lease, offer to sell, sell, import, and practice the Licensed Technology in the Field of Use. 3DMG further [granted] to IMAX the exclusive right and license to sublicense their rights to the License Patents [including the `294 Patent] and the Licensed Know How in the Field of Use." Weistein Decl. at Ex. B.
On March 9, 2005, Geshwind and Handal signed a "Confirmatory Assignment of Patent," in which they confirmed the "transfer, conveyance, and assignment" of the `294 Patent to 3DMG. The document reiterated that Geshwind and Handal assigned the `294 Patent and the right to sue to 3DMG. The confirmatory assignment was signed nunc pro tunc, effective January 28, 2005, the date of the original assignment. Geshwind explained the purpose of the confirmatory assignment: "As of January 28, 2005, I believed that I no longer had any right, title, or interest in and to the `294 Patent, all such rights then belonging to 3DMG, but in the Confirmatory Assignment I included operative language assigning any remaining title in the `294 Patent, that I might be deemed to have still had, to 3DMG." Geshwind Decl. at ¶ 6.
In-Three requested from Plaintiffs on numerous occasions an un-redacted copy of the original Geshwind Assignment, but Plaintiffs refused to produce such a copy. Plaintiffs represented to In-Three that the redacted portions pertained to the personal finances of Geshwind, which he wished to keep confidential. Weinstein Decl. at Ex. J. Although In-Three argued that such information was not privileged, it did not bring a motion to compel the production of the unredacted copy. Instead, In-Three brought the instant motion pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(7), arguing that the original assignment is an essential link in the chain of title giving Plaintiffs the right to sue. Without an unredacted copy, In-Three argues, Plaintiffs are unable to establish that they have standing.
The Court does not consider the declarations of Geshwind and Chad S. Hummel for the proposition that the redacted portions of the assignment pertain to Geshwind's personal finances. Fed.R.Evid. 1002 requires that "[t]o prove the content of a writing . . . the original writing . . . is required."
II. Discussion
"A party may bring an action for patent infringement only if it is the `patentee,' ie., if it owns the patent, either by issuance or assignment." Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245 (Fed. Cir. 2000); 35 U.S.C. §§ 100, 261, 281. To show that it is the patentee, a plaintiff to whom the patent was not originally issued must produce a "written instrument documenting the transfer of proprietary rights in the patents." Speedplay, 211 F.3d at 1250. Courts look to the substance of that writing to determine whether it has the effect of assigning the patent rights and accordingly satisfying the statutory requirement that the "patentee" must sue. Ortho Pharmaceutical Corp. v. Genetics Institute, Inc., 52 F.3d 1026, 1030 (Fed. Cir. 1995). The transfer of substantially all the patent rights may constitute an assignment. Id. (citing Vaupel Textilmas-chinen KG v. Meccanica Euro Italia S.P.A., 944 F.2d 870, 875 (Fed. Cir. 1991)). The plaintiff has the burden of establishing its standing to sue, and therefore, of establishing that an assignment has been made. Ortho, 52 F.3d at 1032-33.
Contrary to IMAX's assertion, the Court need not convert this motion into one for summary judgment to consider the writing or other evidence extrinsic to the complaint. When a motion brought under Fed.R.Civ.P. 12(b)(1) simply challenges the plaintiff's standing based on the sufficiency of the pleadings, the plaintiff may meet its burden by resting on the allegations in its complaint. The court takes the allegations in the complaint as true and construes them in the light most favorable to the plaintiff. Cedars-Sinai Medical Center v. Watkins, 11 F.3d 1573, 1583 (Fed. Cir. 1993). However, if the Rule 12(b)(1) motion controverts the pleader's allegations of jurisdiction, the allegations in the complaint are not controlling. Id. The Court may review extrinsic evidence. Id. at 1584. Under such a scenario, the plaintiff must produce evidence "sufficient to support its contention regarding the Court's jurisdiction." Id. Here, In-Three challenges the factual basis for the Court's jurisdiction, not the mere sufficiency of IMAX's pleadings. Accordingly, the Court may consider extrinsic evidence.
While an assignee may bring suit, "[a] bare licensee, who has no right to exclude others from making, using, or selling the licensed products, has no legally recognized interest that entitles it to bring or join an infringement action." Abbott Laboratories v. Diamedix Corp., 47 F.3d 1128 (Fed. Cir. 1995). However, an exclusive licensee "may obtain sufficient rights in the patent to be entitled to seek relief from infringement." Id. To do so, "it ordinarily must join the patent owner." Id. This is because "[t]he presence of the owner of the patent as a party is indispensable not only to give jurisdiction under the patent laws, . . . but also, in most cases, to enable the alleged infringer to respond in one action to all claims of infringement for his act, and thus either to defeat all claims in one action, or by satisfying one adverse decree to bar all subsequent actions." Id. (quoting Independent Wireless Tel. Co. v. Radio Corp. of Am., 269 U.S. 459, 468, 46 S.Ct. 166, 70 L.Ed. 357 (1926)).
Accordingly, if someone other than the patentee attempts to bring suit, it has two effects. First, the court does not have subject matter jurisdiction over the claim. See Ortho, 52 F.3d at 1033 (discussing statutory standing in terms of subject matter jurisdiction). Second, an indispensable party-the actual patentee-is absent from the litigation. See Abbott Laboratories, 47 F.3d at 1131.
Plaintiffs have produced sufficient evidence to demonstrate that they have standing. As to 3DMG, the Geshwind Assignment, although heavily redacted, grants substantially all the patent rights to 3DMG. Specifically, it grants " all right, title and interest" to 3DMG including "all rights . . . to sue." Such language has the "effect of conveying full legal title in the patents" to 3DMG. State Contracting Eng. v. Condotte America, 346 F.3d 1057, 1062 (Fed. Cir. 2003). The January 28, 2005 Handal assignment establishes 3DMG as the sole owner of the `294 Patent. It uses language identical to the Geshwind Assignment. The March 9, 2005 confirmatory assignment confirms the January 28, 2005 assignments and reiterates the intent of the parties to transfer all rights.
In-Three, however, argues that because the Geshwind Assignment is heavily redacted, it cannot be determined whether a full grant of rights was made. In-Three speculates, despite Plaintiffs' express representations to the contrary, that certain rights may have been reserved or the grant may have come with conditions. Given this lack of certainty, In-Three argues that Plaintiffs have failed to show an assignment was made. In-Three also argues that because the confirmatory assignment does not purport to supersede the Geshwind Assignment, if the Geshwind Assignment is infirm, the confirmatory assignment is likewise insufficient to establish standing. However, the Court considers it highly unlikely that such conditions or reservations exist. Conditions or reservations (In-Three does not suggest what they might be) would be plainly inconsistent with the portions of the Geshwind Assignment granting " all" Geshwind's right, title and interest. It is not reasonable to assume that a document is internally inconsistent.
Because there is no reason to believe conditions or reservations have been redacted, In-Three's argument for all intents and purposes asks the Court to invoke a presumption against a valid assignment. As In-Three puts it, Plaintiffs must "prove that the blacked-out portions in the [Geshwind Assignment] do not affect the issue of standing." In other words, In-Three contends that not only must Plaintiffs prove the existence of an affirmative assignment, they must disprove the existence of conditions or reservations. Plaintiffs' burden in establishing standing is not so high. It is not necessary that Plaintiffs demonstrate to an absolute certainty that an assignment was made. They only need produce a written instrument documenting the transfer of substantially all the patent rights. This is precisely what the Geshwind Assignment and subsequent March 9, 2005 confirmatory assignment do. See also Agilent Technologies, Inc. v. Micromuse, Inc., No. 04 Civ. 3090(RWS), 2004 WL 2346152 (S.D.N.Y. Oct. 19, 2004) (denying Rule 12(b)(7) motion based on absence of alleged co-owner of patent despite redactions in agreement).
It also asks the Court to impute to Plaintiffs a deliberate fraud on the Court.
Accordingly, it is not necessary for the Court to perform an in camera review of the entire Geshwind Assignment.
In-Three argues that it is entitled to the admission of the full January 28, 2005 assignment based on Fed.R.Evid. 106. Rule 106 provides, "When a writing or recorded instrument or part thereof is introduced by a party, an adverse party may require the introduction at that time of any other part or any other writing or recorded statement which ought in fairness to be considered contemporaneously with it." The policy behind Rule 106 is not applicable here. Rule 106 is intended to protect against portions of documents being introduced out of context. Fed.R.Evid. 106 Advisory Committee Notes. Here, there is no reason to conclude that the assignment language in the January 28, 2005 assignment has been taken out of context. In-Three is merely speculating.
Because Geshwind and Handal made valid assignments to 3DMG, 3DMG's grant of an exclusive license to IMAX is likewise valid. In-Three challenges the exclusive license only on the basis that the January 28, 2005 assignment was invalid. Therefore, both 3DMG and IMAX have standing.
In-Three does not challenge the January 28, 2005 Handal assignment.
Because the Court concludes that the January 28, 2005 assignments issued by Geshwind and Handal and the subsequently executed exclusive license are sufficient to confer standing on the Plaintiffs, the Court need not consider whether the Handal assignment would be sufficient by itself or whether Geshwind granted 3DMG an implied exclusive license.
III. Conclusion
In-Three's Motion to Dismiss for Lack of Subject Matter Jurisdiction is DENIED. In-Three's request for attorney's fees is DENIED.ORDER DENYING DEFENDANT'S MOTION TO STAY PROCEEDINGS PENDING COMPLETION OF THE REEXAMINATION OF THE U.S. PATENT NO. 4,925,294
This matter is before the Court on Defendant In-Three, Inc.'s Motion to Stay Proceedings Pending Completion of Reexamination of U.S. Patent. No. 4,925,294 (docket no. 54), filed June 10, 2005. The Court, having read and considered the moving, opposition and reply documents submitted in connection with this motion, hereby DENIES the motion for the reasons and in the manner set forth below.I. Background
This patent infringement action concerns a method and apparatus for converting two-dimensional films into three-dimensional media. On March 11, 2005, Plaintiffs IMAX Corporation ("IMAX") and Three-Dimensional Media Group, Ltd. ("3DMG") brought suit against Defendant In-Three, Inc. ("In-Three") for allegedly infringing U.S. Patent No. 4,925,294 ("294 Patent"). On July 21, 2005, In-Three amended its answer to assert counter-claims that IMAX is infringing three of its patents. In addition to these counter-claims, In-Three asserts affirmative defenses of (1) non-infringement; (2) invalidity of the 294 Patent on nine grounds, including prior art, failure to provide an adequate specification, failure to set forth the best mode contemplated by the alleged inventor, failure to conclude with one or more claims distinctly claiming the subject matter which the patentee regards as his invention; (3) misuse; (4) laches; (5) estoppel; (6) inequitable conduct; and counterclaims for (7) declaratory relief of non-infringement; (8) invalidity/unenforceability; (9) violation of California Business and Professions Code §§ 17200 and 17500, (10) False Designation of Origin under the Lanham Act, 15 U.S.C. § 1125(a)(1); (11) breach of contract; (12) intentional interference with prospective economic advantage; and (13) common law unfair competition.
On June 9, 2005, In-Three filed an ex parte request for reexamination of the 294 Patent with the United States Patent and Trademark Office ("PTO"). The request for reexamination cited approximately ten alleged prior art references that were not previously considered by the PTO. According to In-Three, the prior art rendered the claims of the 294 Patent obvious and therefore invalid.
The next day, In-Three filed the instant motion to stay these proceedings pending the reexamination by the PTO. In-Three claims that this case is at an early stage, that a stay will not cause prejudice to Plaintiffs, and that a stay will simplify the issues. Plaintiffs point to statistics to show that 91% of requests for reexaminations are granted, and of those 91%, 74% result in some change to the claims of the patent at issue, whether claims are cancelled or simply altered. Keefe Decl. at Ex. B. However, the reexamination process takes a long time. Martens Decl. at ¶ 27. The average pendency of reexaminations is 21.5 months. Id. at ¶ 28, Ex. B. The 294 Patent will expire on May 15, 2007. Id. at ¶ 31.
II. Discussion
District courts have the power to stay proceedings pending the outcome of reexamination proceedings in the PTO. Ethicon v. Quigg, 849 F.2d 1422, 1426 (Fed. Cir. 1988). Courts consider several factors in deciding whether to stay an action: (1) whether a stay will simplify the issues in the litigation; (2) whether discovery is completed and whether a trial date is set; (3) and whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-moving party. Guthy-Renker Fitness L.L.C. v. Icon Health and Fitness, Inc., 48 U.S.P.Q.2d 1058 (C.D.Cal. 1998). "The suppliant for a stay must make out a clear case of hardship or inequity in being required to go forward, if there is even a fair possibility that the stay for which he prays will work damage to someone else." Unidisco v. Schattner, 210 U.S.P.Q. 622, 629 (D.Md. 1981) (citing Landis v. North Am. Co., 299 U.S. 248, 255, 57 S.Ct. 163, 81 L.Ed. 153 (1936)).
A stay will always simplify the issues in the litigation to some extent. In Guthy-Renker, the court noted that absent a stay, the parties
may end up conducting a significantly wider scope of discovery than necessary, and the court may waste time examining the validity of claims which are modified or eliminated altogether during reexamination. Moreover, since the Court will need to interpret the pertinent claims of the patent at some point during this case, waiting until after the reexamination will provide this Court with the expertise of the PTO.Guthy-Renker, 1998 WL 670240, 48 U.S.P.Q. at 1058 (citation omitted). These risks of wasted effort are inherent when more than one tribunal considers the same questions, and in every case, the expertise of the PTO would be helpful. However, these inherent risks and benefits do not necessarily mean that in every case a stay will simplify the issues. As some courts have noted, when reexamination potentially will eliminate only one issue out of many, a stay is not warranted. In Cognex Corp. v. Nat'l Instruments Corp., No. Civ. A. 00-442-JJF, 2001 WL 34368283 (D. Del. June 29, 2001), for example, the court concluded that a stay would not simplify the issues because the complaint alleged "a variety of claims which are not linked to the patent infringement claim." Id. at *2. Similarly, in Gladish v. Tyco Toys Inc., 1993 WL 625509, 29 U.S.P.Q.2d 1718, 1720 (E.D.Cal. 1993), the court noted that "[t]he reexamination proceeding will not finally resolve all the issues in the litigation." In that case, invalidity was asserted on more grounds than prior publications and patents, the only grounds the PTO considers during reexamination. The court concluded that it was "the only forum for complete consideration of . . . evidence of invalidity." Id. Because even after the reexamination, invalidity would continue to be an issue (unless all claims were cancelled), a stay would not preserve many resources. Id.; see also Enprotech Corp. v. Autotech Corp., 1990 WL 37217, 15 U.S.P.Q.2d 1319, 1320 (N.D.Ill. 1990) (denying motion to stay in part because PTO would not resolve claims of inequitable conduct).
In this case, should the PTO eliminate or alter claims in the 294 Patent, obviously any effort devoted to prior art arguments duplicative of those raised before the PTO will be wasted, and obviously the PTO's guidance on these issues would be useful. However, the Court concludes that the myriad issues in this case that will remain unresolved and unaddressed pending the (potentially) two-year examination justify allowing this case to go forward. Even if the PTO eliminates all the claims of the 294 Patent, which is statistically unlikely, the court must still address In-Three's counterclaims, some of which are completely unrelated to patent infringement. The issues in this case would not be sufficiently simplified to justify a stay.
Only 12% of requests for reexamination from third parties result in claims being eliminated. See Martens Decl. at Ex. B.
The Court declines In-Three's generous offer to stay only IMAX's claims and allow its claims of infringement to go forward. As the parties' motions for preliminary injunctions showed, the issues are far too intertwined to make this a workable solution.
Next, the Court considers whether this litigation is at an early stage-whether discovery is complete or a trial date set. A trial date has not been set, and discovery is not complete, but much discovery has been conducted. The parties have already submitted volumes of evidence for this Court to consider in connection with their motions for preliminary injunctions. Much of that evidence related directly to the issues In-Three raised before the PTO. For example, both parties submitted expert reports concerning the prior art cited in In-Three's request for reexamination and its effect on the validity of the 294 Patent. So much effort has already been devoted to In-Three's claims of invalidity that it is unlikely much effort by any party or the Court will be saved by allowing the PTO to resolve the invalidity issues.
Finally, the Court considers whether Plaintiffs will be prejudiced by a stay. Each party, in its respective motion for a preliminary injunction, claimed that absent immediate action from this Court, it would be irreparably damaged. Each has claimed that the market for conversion from 2D to 3D motion pictures is at a critical juncture, and that it is the party destined to be the leader of the market. Granting a stay only has the potential to further delay these proceedings. Although some issues in the proceedings might be limited, many issues, inevitably, would remain following the PTO reexamination. Because the Court has denied both motions for preliminary injunction, under each party's theory of irreparable harm, each party has the potential to be damaged by further delays. A swift resolution of the issues, according to both parties, is in the best interest of all involved. The Court accepts both parties' representations that they will be prejudiced by further delays.