Capella Photonics, Inc. v. Cisco Systems, Inc.

77 F. Supp. 3d 850, 2014 U.S. Dist. LEXIS 177382, 2014 WL 8097683
CourtDistrict Court, N.D. California
DecidedDecember 23, 2014
DocketNo. C-14-3348 EMC, CONSOLIDATED CASES C-14-3349 EMC, C-14-3350 EMC, C-14-3351 EMC; Docket Nos. 115, 116
StatusPublished
Cited by60 cases

This text of 77 F. Supp. 3d 850 (Capella Photonics, Inc. v. Cisco Systems, Inc.) is published on Counsel Stack Legal Research, covering District Court, N.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Capella Photonics, Inc. v. Cisco Systems, Inc., 77 F. Supp. 3d 850, 2014 U.S. Dist. LEXIS 177382, 2014 WL 8097683 (N.D. Cal. 2014).

Opinion

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION TO STRIKE AND GRANTING PLAINTIFF’S MOTION TO DISMISS

EDWARD M. CHEN, District Judge

Plaintiff Capella Photonics filed suit against Cisco Systems, Fujitsu Network Communications (collectively “Defendants”), and two other parties alleging infringement of U.S. Patent Nos. RE42,368 (the '368 patent) and RE 42,678 (the '678 patent). See, e.g., Docket No. 30 (First Amended Complaint Against Cisco). Both Cisco and Fujitsu answered Capella’s complaint, and both assert inequitable conduct as an affirmative defense. Docket No. 108 (Cisco’s Amended Answer and Counterclaims) (hereafter CAAC); No. 14-ev-3349, Docket No. 23 (Fujitsu’s Answer) (hereafter FA).1 Cisco also brought a counterclaim against Capella for alleged violation of California’s Unfair Competition Law (UCL) related to the filing of this lawsuit. CAAC at 22; Cal. Bus. and Prof. Code § 17200 et seq.

Capella now moves to strike Defendants’ largely identical inequitable conduct defenses, and to dismiss Cisco’s UCL counterclaim. Docket Nos. 115, 116. For the reasons discussed below, the Court grants Capella’s motions to strike in part and denies them in part. Capella’s motion to dismiss is granted because Cisco has not pleaded a necessary element of the “fraudulent” prong under the UCL, namely that members of the public were likely to be deceived by the challenged practice.

[854]*854I. BACKGROUND

A. Procedural Background

Capella filed this patent infringement action on February 12, 2014, in the Southern District of Florida. • See Docket No. 1. Capella considers itself “'a pioneer of optical switching technologies for use in optical transmissions networks,” and the patents-in-suit are directed towards methods of optical switching in such communications networks. ■ See Docket No. 30 at ¶¶ 7, 12-20, 26.

Cisco answered Capella’s complaint on April 4, 2014. Docket No. 17. Fujitsu answered on April 15. FA at 25. Both answers pleaded substantially identical inequitable conduct defenses. Compare Docket No. 17 with FA. Cisco’s answer also contained a counterclaim for violation of the UCL, predicated on Capella’s alleged “bad faith” assertion of patent rights against Cisco that Capella “knew to be overbroad and invalid in light of prior art, and that [ ] Capella obtained through fraud on the Patent Office.” Docket No. 17 at 25-26. After Capella filed an amended complaint, and Cisco filed an amended answer, Capella moved to strike Cisco’s inequitable conduct defenses and dismiss Cisco’s UCL counterclaim. 'Docket Nos. 46, 47 (Motions to Strike and Dismiss). Capella did not move to strike Fujitsu’s inequitable conduct defenses.

On July 14, 2014, Judge Seitz granted Capella’s motion to strike in a one-line order. Docket No. 74. Judge Seitz explained at oral argument that he felt Cisco should “cure” certain unspecified “defects” in its pleading, and granted Cisco leave to amend its inequitable conduct defenses.2 Docket No. 125-4 at 8-9. The Court specifically declined to rule on Capella’s motion to dismiss Cisco’s UCL counterclaim. Id. at 9. This case was transferred to the Northern District of California on July 24.3 Docket No. 77.

Cisco filed its amended and operative answer on September 15, 2014. CAAC at 25. On September 25, Capella once again filed a motion to strike Cisco’s inequitable conduct defenses pursuant to Federal Rule of Civil Procedure 12(f), and to dismiss Cisco’s UCL counterclaim pursuant to Federal Rule of Civil Procedure 12(b). Docket No. 114.4 Capella also filed a motion to dismiss Fujitsu’s inequitable conduct defenses. Docket No. 115. This motion was filed 163 days after Fujitsu filed its answer. See FA at 22.

B. Cisco’s and Fujitsu’s Inequitable Conduct Defenses

In their respective answers, both Defendants plead substantially similar affirmative defenses of inequitable conduct with respect to the patents-in-suit. See CAAC at 6-20; FA at 6-20. Specifically, they claim that during the re-issue prosecutions of the patents-in-suit, Capella intentionally withheld or mischaracterized three differ[855]*855ent known pieces of invalidating prior art. As will be discussed in greater detail below, however, at oral argument counsel for both Cisco and Fujitsu explicitly disavowed any independent reliance on two of the three pieces of allegedly invalidating art pleaded in their answers, and thus Cisco’s and Fujitsu’s inequitable conduct defenses based on these references are stricken with prejudice.

1. Prosecution of the Patents-irir-Suit

The two patents-in-suit are reissue patents. See Docket Nos. 127-4, 127-5 (Patents-In-Suit). In order to obtain a reissue patent, an inventor must “specifically identify [to the Patent Office] at least one error” in the original patent “and state that the applicant believes the original patent to be wholly or partly inoperative or invalid” due to that error. 37 C.F.R. § 1.175(a). Sometime around June 10, 2010, Capella sought reissue of what would become the patents-in-suit. FA at 13; CAAC at 13.

In seeking re-issue of the patents-in-suit, Capella allegedly represented to the Patent Office that its originally issued patents were invalid because they claimed more than Capella had a right to claim. Specifically, Capella allegedly told the Patent Office in May 2011 that its original patents “fail[ed] to include limitations regarding the spatial array of beam deflecting elements being individually and continuously controllable in two dimensions to control the power of the spectral channels.” FA at 13; CAAC at 13. Put differently, Capella allegedly admitted that its patents were invalid because their claims did not require two-dimensional (2-D) mi-cromirrors for power control. FA at 13-14; CAAC at 13-14.' Consequently, Capella sought re-issue of its patents with narrower claims that added limitations calling for 2-D mirrors for power control. FA at 14; CAAC at 14. The PTO eventually granted the amended claims as part of the reissue patents-in-suit, apparently concluding that “the prior art of record does not teach or suggest using” 2-D mirrors for power control. FA at 14; CAAC at 14. Defendants claim that Capella admitted that “the only allegedly novel aspects of’ the reissue patents-in-suit over the prior art were 2-D mirrors and power control. FA at 14; CAAC at 13 (emphasis added).

2. The “First 'Instance” of Inequitable Conduct

Defendants allege that the “first instance” of inequitable conduct occurred where Capella, and specifically Capella CEO Larry Schwerin, patent prosecutor Barry Young, and former CEO and current Emeritus Board Member Joseph Davis (collectively “the Applicants”), knowingly failed to cite U.S. Patent No. 6,798,-941 (the Smith patent) to the PTO during the reissue prosecution of the patents-in-suit that took place in 2010 and 2011. See FA at 7-8; CAAC at 7.

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77 F. Supp. 3d 850, 2014 U.S. Dist. LEXIS 177382, 2014 WL 8097683, Counsel Stack Legal Research, https://law.counselstack.com/opinion/capella-photonics-inc-v-cisco-systems-inc-cand-2014.