Cellulose Material Solutions, LLC v. SC Marketing Group, Inc.

• Court: District Court, N.D. California
• Decided: February 28, 2024
• Docket: 3:22-cv-03141
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 NORTHERN DISTRICT OF CALIFORNIA 10 San Francisco Division 11 CELLULOSE MATERIAL SOLUTIONS, LLC, Case No. 22-cv-03141-LB

12 Plaintiff, ORDER REGARDING THE 13 v. DEFENDANT’S SUMMARY- JUDGMENT MOTION 14 SC MARKETING GROUP, INC., Re: ECF No. 141 15 Defendant. 16 17 INTRODUCTION 18 Plaintiff Cellulose Material Solutions claims that defendant SC Marketing Group (also known 19 as Thermal Shipping Solutions) infringes a patent for packaging insulation that keeps the package 20 contents — for example, meal kits with food items — cool and fresh without the need for 21 refrigerant packs. The patent is U.S. Patent No. 11,078,007 (the ’007 patent). The parties are 22 competitors.1 Cellulose’s insulation product is called InfinityCore, and Thermal Shipping’s product 23 is called Renewliner.2 Thermal Shipping moved for summary judgment of invalidity on two 24 grounds: that an offer by Cellulose to Thermal Shipping to sell a prototype of the invention, before 25

26 1 Compl. – ECF No. 1 at 1–2 (¶ 1), 4 (¶ 16), 6 (¶ 30); U.S. Patent No. 11,078,007 (filed June 27, 2016) 27 – ECF No. 1-1. Citations refer to material in the Electronic Case File (ECF); pinpoint citations are to the ECF-generated page numbers at the top of documents. 1 the patent’s filing date, triggered the on-sale bar of 35 U.S.C. § 102; and that the Renewliner is 2 anticipating prior art under § 102. The court denies the motion on the first ground but orders further 3 briefing on the second. 4 STATEMENT 5 Salvatore Cardinale, Thermal Shipping’s owner, President, and Chief Executive Officer, 6 declares that he “developed the idea of using a polyethylene terephthalate (‘PET’) batt with PET 7 liners on both sides for packaging perishables, but [he] required a manufacturing partner to create a 8 refined finalized product.” He thus entered into an “informal partnership” with Cellulose to 9 manufacture “a recyclable thermal box liner. Eventually, the relationship ended in late 2015.” After 10 this, Thermal Shipping began working with various other manufacturers to sell the Renewliner, 11 starting “at least as early as February 23, 2016.”3 The ’007 patent was filed on June 27, 2016.4 12 Cellulose’s president Matthew Henderson testified that starting in May 2015, Cellulose began 13 developing a product with “100 percent PET with PET film on both sides.”5 14 On June 19, 2015, Cellulose employee Christopher Benner, who is one of the named inventors 15 of the ’007 patent, sent an email to Mr. Cardinale offering “to produce a proprietary, insulative 16 material just for [Thermal Shipping].” The email discussed pricing, claimed that “this new 17 material is highly compressible (similar to urethane foam),” and solicited a discussion of “this 18 exciting material option.”6 Mr. Henderson testified that “the product [Cellulose was] offering to 19 sell Thermal Shipping” in the email “was the InfinityCore product that practices the claims of the 20 [’007] patent.”7 He declares that he “view[s] that email as no more than an ‘offer’ of the potential 21 product to [Thermal Shipping] in the sense that [Cellulose was] seeking to [gauge] possible 22 interest and invite further discussion.” Cellulose “does not make commercial offers that lack 23 specifics as to at least price, quantity, payment terms, delivery terms, and the specific product 24

25 3 Cardinale Decl. – ECF No. 141-2 at 3 (¶¶ 3–5). 26 4 U.S. Patent No. 11,078,007 – ECF No. 1-1. 5 Henderson Dep. – ECF No. 149-4 at 11–13 (pp. 41:13–42:25, 50:15–21). 27 6 E-mail from Chris Benner – ECF No. 141-3 at 2. 1 being manufactured.” Ultimately, according to Mr. Henderson, the discussions resulted in a sale 2 by Cellulose to Thermal Shipping of the product, to be labeled by Thermal Shipping as the 3 Renewliner. Cellulose received the purchase order for that sale on February 23, 2016.8 4 All parties consented to magistrate-judge jurisdiction.9 5 6 STANDARD OF REVIEW 7 The court must grant summary judgment where there is no genuine dispute as to any material 8 fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); 9 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986). Material facts are those that may 10 affect the outcome of the case. Anderson, 477 U.S. at 248. A dispute about a material fact is 11 genuine if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving 12 party. Id. at 248–49. 13 The party moving for summary judgment has the initial burden of informing the court of the 14 basis for the motion and identifying portions of the pleadings, depositions, answers to 15 interrogatories, admissions, or affidavits that demonstrate the absence of a triable issue of material 16 fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986). To meet its burden, “the moving 17 party must either produce evidence negating an essential element of the nonmoving party’s claim 18 or defense or show that the nonmoving party does not have enough evidence of an essential 19 element to carry its ultimate burden of persuasion at trial.” Nissan Fire & Marine Ins. Co. v. Fritz 20 Cos., 210 F.3d 1099, 1102 (9th Cir. 2000); see Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir. 21 2001) (“When the nonmoving party has the burden of proof at trial, the moving party need only 22 point out ‘that there is an absence of evidence to support the nonmoving party’s case.’”) (quoting 23 Celotex, 477 U.S. at 325). “Where the moving party will have the burden of proof on an issue at 24 trial, the movant must affirmatively demonstrate that no reasonable trier of fact could find other 25 than for the moving party.” Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007). 26

27 8 Henderson Decl. – ECF No. 149-2 at 3–4 (¶¶ 5–8). 1 If the moving party meets its initial burden, then the burden shifts to the nonmoving party to 2 produce evidence supporting its claims or defenses. Nissan Fire & Marine Ins. Co., 210 F.3d at 3 1103. “Once the moving party carries its initial burden, the adverse party may not rest upon the 4 mere allegations or denials of the adverse party’s pleading, but must provide affidavits or other 5 sources of evidence that set forth specific facts showing that there is a genuine issue for 6 trial.” Devereaux, 263 F.3d at 1076 (cleaned up). If the non-moving party does not produce 7 evidence to show a genuine issue of material fact, then the moving party is entitled to summary 8 judgment. Celotex, 477 U.S. at 322–23. 9 In ruling on a motion for summary judgment, the court does not make credibility 10 determinations or weigh conflicting evidence. Instead, it views the evidence in the light most 11 favorable to the non-moving party and draws all factual inferences in the non-moving party’s 12 favor. E.g., Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587–88 (1986); Ting 13 v. United States, 927 F.2d 1504, 1509 (9th Cir. 1991). 14 15 ANALYSIS 16 Thermal Shipping first contends that the ’007 patent is invalid because the claimed invention 17 was on sale before the patent’s June 27, 2016 filing date, given the email from Mr. Benner to Mr. 18 Cardinale in June 2015. Cellulose responds that the email did not amount to a commercial offer 19 for sale. 20 Under 35 U.S.C. § 102(a)(1), a patent is invalid if “the claimed invention was patented, 21 described in a printed publication, or in public use, on sale, or otherwise available to the public 22 before the effective filing date of the claimed invention.” But such a disclosure does not result in 23 invalidity if it was made one year or less before the effective filing date and it “was made by the 24 inventor or joint inventor or by another who obtained the subject matter disclosed directly or 25 indirectly from the inventor or a joint inventor.” Id. § 102(b)(1)(A). Thus, an offer to sell by the 26 inventor that was within one year of the filing date does not invalidate the patent. (Here, that 27 means that the June 19, 2015 email from Mr. Benner to Mr. Cardinale is key.) 1 “Whether the on-sale bar applies is a question of law based on underlying factual findings.” 2 Medicines Co. v. Hospira, Inc., 827 F.3d 1363, 1371 (Fed. Cir. 2016). “[A]n accused infringer 3 challenging the validity of a patent under the on-sale bar must demonstrate by clear and convincing 4 evidence” that the requirements are met. Elan Corp., PLC v. Andrx Pharms., Inc., 366 F.3d 1336, 5 1340 (Fed. Cir. 2004). Those requirements are that “the claimed invention (1) was the subject of a 6 commercial offer for sale[] and (2) was ready for patenting.” Medicines Co., 827 F.3d at 1372. 7 Regarding the first requirement, “[o]nly an offer which rises to the level of a commercial offer 8 for sale, one which the other party could make into a binding contract by simple acceptance 9 (assuming consideration), constitutes an offer for sale under [§ 102].” Merck & Cie v. Watson 10 Lab’ys, Inc., 822 F.3d 1347, 1351 (Fed. Cir. 2016) (cleaned up). This analysis is one of 11 “traditional contract law principles.” Id. (cleaned up). “An offer for sale does not have to be 12 accepted to implicate the on sale bar.” Scaltech, Inc. v. Retec/Tetra, LLC, 269 F.3d 1321, 1328 13 (Fed. Cir. 2001). But it must be “sufficiently definite.” Id. The Uniform Commercial Code (UCC) 14 and the Restatement of Contracts are “useful, though not authoritative, source[s].” Grp. One, Ltd. 15 v. Hallmark Cards, Inc., 254 F.3d 1041, 1047–48 (Fed. Cir. 2001). 16 “[M]ere preparations for commercial sales are not themselves ‘commercial sales’ or 17 ‘commercial offers for sale’ under the on-sale bar.” Medicines Co., 827 F.3d at 1377. “Language 18 suggesting a legal offer, such as ‘I offer’ or ‘I promise’ can be contrasted with language 19 suggesting more preliminary negotiations, such as ‘I quote’ or ‘are you interested.’” Grp. One, 20 254 F.3d at 1048. But ultimately, there is no “binding guidance” for determining whether a 21 commercial offer occurred, and “what constitutes a definite offer[] requires looking closely at the 22 language of the proposal itself.” Id. 23 “[T]he ‘ready for patenting’ requirement can be met in at least two ways: (1) proof of a 24 reduction to practice; or (2) drawings or other descriptions sufficiently specific to enable a person 25 of ordinary skill to practice the invention.” Medicines Co., 827 F.3d at 1373. 26 Here, the June 19, 2015 email did not meet the first on-sale-bar requirement because it was a 27 preparation for a sale rather than a definite offer. It invited a further discussion regarding a general 1 it discussed pricing, it was per-unit pricing in the nature of a “quotation of price,” that is, “a 2 statement of price per unit of quantity.” Restatement (Second) of Contracts § 26, cmt. c (a 3 quotation “may omit the quantity to be sold, time and place of delivery, terms of payment, and 4 other terms” and “is commonly understood as inviting an offer rather than as making one”). The 5 court thus denies the motion on this ground. 6 Thermal Shipping contends that Mr. Henderson’s saying in his deposition that the June 19, 7 2015 email was an “offer” is dispositive. Under the relevant standards, though, the court is to 8 evaluate the email itself and its terms. Thermal Shipping also contends (in its reply brief) that even 9 if the email did not amount to a commercial offer, it made the claimed invention “otherwise 10 publicly available” under § 102. But that would defeat the purpose of the requirement that a sales 11 communication rise to the level of an offer. 12 The next issue is whether Thermal Shipping’s selling the Renewliner starting in February 2016 13 made the Renewliner anticipating prior art under § 102, given that Cellulose alleges that the 14 Renewliner practices the claimed invention. Cellulose counters that it supplied the product 15 Thermal Shipping labeled as the Renewliner. 35 U.S.C. § 102(b)(1)(A) (a disclosure does not 16 result in invalidity if it was made one year or less before the effective filing date and it “was made 17 by the inventor or joint inventor or by another who obtained the subject matter disclosed directly 18 or indirectly from the inventor or a joint inventor”). In reply, Thermal Shipping argues that 19 Cellulose “has not met its burden of proof that the Renewliner product originated from 20 [Cellulose’s] claimed invention or that there was a qualifying disclosure under the exceptions 21 outlined in 35 U.S.C. § 102(b)(1).” 22 “For a claim to be anticipated, each claim element must be disclosed, either expressly or 23 inherently, in a single prior art reference, and the claimed arrangement or combination of those 24 elements must also be disclosed, either expressly or inherently, in that same prior art reference.” 25 Therasense, Inc. v. Becton, Dickinson & Co., 593 F.3d 1325, 1332–33 (Fed. Cir. 2010). 26 “Anticipation, though a question of fact, may be resolved on summary judgment if no genuine 27 issue of material fact exists.” OSRAM Sylvania, Inc. v. Am. Induction Techs., Inc., 701 F.3d 698, 1 “When an alleged infringer attacks the validity of an issued patent,” the law “places the burden 2 of persuasion on the attacker to prove invalidity by clear and convincing evidence.” Tech. Licensing 3 Corp. v. Videotek, Inc., 545 F.3d 1316, 1327 (Fed. Cir. 2008) (“[T]he risk of decisional uncertainty 4 stays on the proponent of the proposition.”). “A quite different burden is that of going forward with 5 evidence,” which is “a shifting burden” that “mean[s] both producing additional evidence and 6 presenting persuasive argument based on new evidence or evidence already of record, as the case 7 may require.” Id. Thermal Shipping, “having the ultimate burden of proving its defense of invalidity 8 based on anticipating prior art, . . . has the burden of going forward with evidence that there is such 9 anticipating prior art.” Id. Cellulose then “has the burden of going forward with evidence” in 10 rebuttal, such as evidence “that the prior art does not actually anticipate.” Id. 11 Here, Thermal Shipping met its initial burden with evidence that its February 2016 Renewliner 12 sale was anticipating prior art: Cellulose alleges that the Renewliner satisfies all claims of the ’007 13 patent. CreAgri, Inc. v. Pinnaclife, Inc., No. 11-cv-6635-LHK, 2013 WL 6673676, at *4 (N.D. 14 Cal. Dec. 18, 2013) (“[T]hat which infringes, if later, would anticipate, if earlier.”) (cleaned up). 15 But if that “prior art” was received from the inventor within one year before the patent’s filing 16 date, § 102 dictates that it doesn’t invalidate the patent. 35 U.S.C. § 102(b)(1)(A). Cellulose 17 therefore responds with evidence that the initial Renewliner product was received from the ’007 18 patent’s named inventors. Specifically, the February 23, 2016 purchase order was for Cellulose to 19 ship the product directly to Thermal Shipping’s end customer Dinner Thyme.10 Given that the 20 named inventors worked at Cellulose, that is at least evidence. 21 In its reply brief, though, Thermal Shipping points to an April 2016 sale of the Renewliner that 22 was fulfilled for Thermal Shipping by its vendor Turner Fiberfill rather than Cellulose. Thermal 23 Shipping contends that Cellulose “has not come forward with any evidence showing that the 24 Renewliner product Turner sold in April 2016 originated from [Cellulose] (thus foreclosing it as prior 25 art).” In its opposition, Cellulose pointed out that Thermal Shipping and Turner didn’t complete their 26 manufacturing agreement until July 2016 (after the patent’s filing date) and Turner didn’t ship any 27 ] Renewliner product until after then. Cellulose also made the point that a disclosure made one year | 2 || less before the patent filing date “shall not be prior art to the claimed invention” if “the subject mat 3 disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or 4 || another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint 5 inventor.” 35 U.S.C. § 102(b)(1)(B). (Cellulose’s February 2016 disclosure would be the one 6 || preceding the April 2016 Turner disclosure.) In reply, Thermal Shipping argues that there were 7 || differences between the February 2016 Renewliner and the April 2016 Renewliner: “[flor example 8 || Mr. Henderson stated that the only process [Cellulose] uses to manufacture the patented product is 9 || air laid process,” whereas Turner “instead used a carding machine and a lapper.” 10 The dispositive issue is whether the April 2016 purchase order is itself a prior-art reference that 11 sufficiently discloses the invention (expressly or inherently) and isn’t preempted by the February 12 || 2016 purchase order (as a result of being the same). Regarding whether the two prior-art references 13 must be the same, Thermal Shipping cited only a USPTO manual, which states that even “trivial ot 14 || obvious variations” mean the latter reference isn’t preempted. “This controversial interpretation we 3 15 criticized as being very narrow with respect to third-party disclosures, causing an uproar in the a 16 || patent community.” Jordan S. Joachim, Js the AIA the End of Grace? Examining the Effect of the 2 17 || America Invents Act on the Patent Grace Period, 90 N.Y.U. L. Rev. 1293, 1306 (2015). Z 18 Overall, the court could benefit from further briefing and thus orders one further brief from 19 || each party, each due on March 7, 2024 and limited to ten pages. 20 21 CONCLUSION 22 This resolves ECF No. 141. 23 IT IS SO ORDERED. 24 Dated: February 29, 2024 £ 5 LAUREL BEELER 25 United States Magistrate Judge 26 27 28