Polyclad v. MacDermid

2001 DNH 027

Opinion

Polyclad v. MacDermid CV-99-162-M 02/13/01 UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

Polvclad Laminates, Inc., and Fry Metals, Inc., d/b/a PC Fab Division of Alpha Metals, Inc., Plaintiffs

v. Civil No. 99-162-M Opinion No. 2001 DNH 027 MacDermid, Inc., Defendant

O R D E R

Polyclad Laminates, Inc. ("Polyclad") and Fry Metals, Inc.,

doing business as PC Fab Division of Alpha Metals, Inc.

("Alpha"), bring this patent infringement action against

MacDermid, Inc. See 35 U.S.C. § 271, et seg. Polyclad is the

exclusive licensee of United States Patent No. 5,800,859 (the

"'859 patent"). According to plaintiffs. Alpha is the only

organization licensed by Polyclad to manufacture and sell the

chemicals used in carrying out the patented processes. It also

possesses the right, exercisable in its sole discretion, to

sublicense third parties to practice the patented processes. See

Amended complaint at para. 6. The '859 patent teaches a process for copper coating circuit

boards, the first step in creating a printed circuit board. Part

of that coating process involves the use of a surface active

agent, or "surfactant." A substantial dispute in this case

relates to the type of surfactant actually claimed in the patent

and whether, as MacDermid asserts, plaintiffs knew, but failed to

disclose to the United States Patent and Trademark Office (the

"PTO"): (1) that only a process utilizing cationic (i.e.,

negatively charged) surfactants was novel over prior art; and/or

(2) that the processes taught by the '859 patent actually reguire

a cationic surfactant in order to function as claimed.

Plaintiffs say that MacDermid is infringing one or more

claims of the '859 patent and is actively inducing others to

infringe that patent. MacDermid denies that its conduct

infringes the patent. Alternatively, it asserts that the '859

patent is invalid and unenforceable. MacDermid also raises two

counterclaims. First, it seeks a judicial declaration that the

'859 patent is invalid and unenforceable due to plaintiffs'

alleged "ineguitable conduct" before the PTO. Next, it brings a

2 claim for tortious interference with prospective and existing

customers, based on plaintiffs' having informed MacDermid's

customers of the alleged patent infringement.

Plaintiffs move for partial summary judgment with regard to

MacDermid's counterclaims (as well as its third affirmative

defense which, like its first counterclaim, relies upon

plaintiffs' alleged ineguitable conduct before the PTO).

MacDermid objects and, in turn, moves for judgment of non­

infringement as a matter of law. MacDermid also moves to dismiss

Alpha as a party plaintiff, asserting that as a "non-exclusive

licensee" of the '859 patent. Alpha lacks standing to sue for

alleged infringement of that patent. See Fed. R. Civ. P.

12 (b) (1) .

Standard of Review

I. Motion to Dismiss.

"When faced with a motion to dismiss for lack of subject

matter jurisdiction. Rule 12(b)(1), Fed. R. Civ. P., the party

asserting jurisdiction has the burden to establish by competent

3 proof that jurisdiction exists." Stone v. Dartmouth College, 682

F. Supp. 106, 107 (D.N.H. 1988) (citing O'Toole v. Arlington

Trust C o ., 681 F.2d 94, 98 (1st Cir. 1982); C. Wright & A.

Miller, 5 Federal Practice and Procedure § 1350, at 555 (1969 &

Supp. 1987)). Furthermore, the court "may consider pleadings,

affidavits, and other evidentiary materials without converting

the motion to dismiss to a motion for summary judgment." Lex

Computer & Management Corp. v. Eslinqer & Pelton, P.O., 676 F.

Supp. 399, 402 (D.N.H. 1987); see also Richmond, F & P R. Co. v.

United States, 945 F.2d 765, 768 (4th Cir. 1991); Lawrence v.

Dunbar, 919 F.2d 1525, 1529 (11th Cir. 1990). But, the court

"should apply the standard applicable to a motion for summary

judgment, under which the nonmoving party must set forth specific

facts beyond the pleadings to show that a genuine issue of

material fact exists." Richmond, 945 F.2d at 768 (citing Celotex

Corp. v. Catrett, 477 U.S. 317, 323-24 (1986)). "The moving

party should prevail only if the material jurisdictional facts

are not in dispute and the moving party is entitled to prevail as

a matter of law." Id. (citing Trentacosta v. Frontier Pacific

Aircraft Indus., Inc., 813 F.2d 1553, 1558(9th Cir. 1987)).

4 II. Summary Judgment.

When ruling upon a party's motion for summary judgment, the

court must "view the entire record in the light most hospitable

to the party opposing summary judgment, indulging all reasonable

inferences in that party's favor." Griqqs-Ryan v. Smith, 904

F.2d 112, 115 (1st Cir. 1990). Summary judgment is appropriate

when the record reveals "no genuine issue as to any material fact

and . . . the moving party is entitled to a judgment as a matter

of law." Fed. R. Civ. P. 56(c). In this context, "a fact is

'material' if it potentially affects the outcome of the suit and

a dispute over it is 'genuine' if the parties' positions on the

issue are supported by conflicting evidence." Intern'1 Ass'n of

Machinists and Aerospace Workers v. Winship Green Nursing Center,

103 F.3d 196, 199-200 (1st Cir. 1996) (citations omitted).

Discussion

I. MacDermid's Motion to Dismiss Alpha.

According to the amended complaint. Polyclad is the

exclusive licensee of the '859 patent and is vested with the

right to enforce that patent and sue for all past infringements.

5 See Amended complaint, at para. 5. Alpha, in turn, is alleged to

be:

a licensee of the '859 patent from Polyclad and has the right and license in the United States of America, its territories and dependencies, to manufacture, use, import and sell materials and processes relating to the claimed subject matter of the '859 Patent and the right, at its sole discretion, to sublicense rights under the '859 Patent.

Amended complaint, at para. 6. Based upon those allegations and

the record evidence, MacDermid claims that Alpha is merely a

"bare licensee" of the '859 patent, without the right to sue for

past infringement and, therefore, without standing to appear as a

plaintiff in this litigation. See, e.g.. Textile Productions,

Inc. v. Mead Corp., 134 F.3d 1481, 1484 (Fed. Cir. 1998) ("abare

licensee has no standing at all."); Ortho Pharmaceutical Corp. v.

Genetics Institute, Inc., 52 F.3d 1026, 1034 (Fed. Cir. 1995)

(holding that a "bare" or nonexclusive licensee has no standing

to bring or join a suit for infringement).

The Patent Act of 1952 provides that "a patentee shall have

remedy by civil action for infringement of his patent." 35

6 U.S.C. § 281. Generally speaking, therefore, a party suing for

patent infringement must have held legal title to the patent at

the time of the alleged infringement. See Rite-Hite Corp. v.

Kelley C o ., Inc., 56 F.3d 1538, 1551 (Fed. Cir. 1995); Ortho

Pharmaceutical Corp, 52 F.3d at 1030. As this court has

observed, however, "[a] party need not . . . hold all proprietary

rights to a patent in order to have standing to sue for

infringement as a co-plaintiff with the patentee." Ricoh C o .,

Ltd. v. Nashua Corp., 947 F. Supp. 21, 23 (D.N.H. 1996) (emphasis

in original).

For instance, under certain circumstances, a licensee may possess sufficient interest in the patent to have standing to sue as a co-plaintiff with the patentee. Such a licensee is usually an "exclusive licensee." In contrast, a non-exclusive licensee does not have standing to sue for infringement, even as a co­ plaintiff .

To be an exclusive licensee for standing purposes, a party must have received, not only the right to practice the invention . . ., but also the patentee's express or implied promise that others shall be excluded from practicing the invention. It is the licensee's beneficial ownership of a right to prevent others from making, using or selling the patented technology that provides the foundation for co­ plaintiff standing, not simply that the word "exclusive" may or may not appear in the license. Therefore, if a party has not received a promise of

7 exclusivity under the patent, it cannot have co­ plaintiff standing in an infringement action. It is important to stress, however, that the exclusive license need not be express; it may be implied.

Id., at 23-24 (citations and internal guotation marks omitted)

(emphasis in original).

Here, plaintiffs assert that the allegations set forth in

the amended complaint, taken together with the record evidence,

establish that Alpha has been granted sufficient rights to the

'859 patent to vest it with standing to proceed as a co-plaintiff

in this litigation. The court agrees. Among other things, the

amended complaint alleges that Alpha has the right, exercisable

in its sole discretion, to sublicense rights under the '859

patent. Thus, Alpha plainly possesses, at a minimum, the

patentee's implicit promise that others will be prevented from

practicing the patented technology, absent Alpha's consent. See,

e.g., Rite-Hite, 56 F.3d at 1552 ("To be an exclusive licensee

for standing purposes, a party must have received, not only the

right to practice the invention within a given territory, but

also the patentee's express or implied promise that others shall be excluded from practicing the invention within that territory

as well."). See also Textile Productions, 134 F.3d at 1484.

Additional support for Alpha's assertion that it has

standing as an "exclusive licensee" can be found in the record,

including evidence of its intimate relationship with Polyclad and

Cookson Group, PLC, the parent corporation of both companies.

See, e.g.. Affidavit of Mark Dingley, Exhibit 3 to plaintiffs'

memorandum; Affidavit of Richard Mahoney, Exhibit 4 to

plaintiffs' memorandum. See generally Ricoh, 947 F. Supp. at 24;

Kalman v. Bervln Corp., 914 F.2d 1473, 1482 (Fed. Cir. 1990).

That evidence strongly supports plaintiffs' claim that, at a

minimum. Alpha Fry, Ltd. (the assignee of the '859 patent).

Polyclad (the exclusive licensee of the '859 patent), and Cookson

Group, PLC (the parent corporation of all those entities)

intended to vest Alpha with the right to practice the processes

taught by the '859 patent and the right to preclude others from

doing so (at least within the United States and its territories). Alpha has, therefore, pled sufficient facts (and pointed to

sufficient evidence in the record) to satisfy its burden under

Rule 12(b)(1) and demonstrate that it has standing, as a co­

plaintiff, to sue for alleged infringement of the '859 patent.

Conseguently, MacDermid's motion to dismiss is denied.

II. MacDermid Counterclaims.

A. First Counterclaim - Inequitable Conduct.

Applicants for patents and their agents are reguired to

prosecute patent applications "with candor, good faith, and

honesty." Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178 (Fed.

Cir. 1995). See also 37 C.F.R. § 1.56 ("Rule 56") ("Each

individual associated with the filing and prosecution of a patent

application has a duty of candor and good faith in dealing with

the Office, which includes a duty to disclose to the Office all

information known to that individual to be material to

patentability as defined in this section."). "Ineguitable

conduct includes affirmative misrepresentation of a material

fact, failure to disclose material information, or submission of

false material information, coupled with an intent to deceive."

10 Molins, 48 F.3d at 1178. Rule 56 defines "material information,"

subject to the disclosure requirement, as follows:

Under this section, information is material to patentability when it is not cumulative to information already of record or being made of record in the application, and

(1) It establishes, by itself or in combination with other information, a prima facie case of unpatentability of a claim; or

(2) It refutes, or is inconsistent with, a position the applicant takes in:

(i) Opposing an argument of unpatentability relied on by the Office; or

(ii) Asserting an argument of patentability.

37 C.F.R. § 1.56.

Claim 1 of the '859 patent teaches "a process for treating a

metal surface to promote adhesion thereto" and specifies the use

of a surfactant to form "a microroughened conversion-coated

surface." Claim 8, which is dependent upon claim 1, teaches a

process "according to claim 1 in which the surfactant is a

cationic surfactant." Although the patent describes the use of a

11 cationic surfactant as the "preferred embodiment" of the process

described in the patent, claim 1 plainly teaches a process that

utilizes surfactants that need not necessarily be cationic. That

is to say, claim 1 teaches a process in which, at least

theoretically, one might employ an anionic surfactant (i.e., one

having a positive charge) or a nonionic surfactant (i.e., one

carrying no charge).

The core of MacDermid's ineguitable conduct claim is its

assertion that, during the course of prosecuting their patent

applications in Europe, plaintiffs (or, more accurately, their

predecessors in interest) learned that: (1) use of a non­

specified surfactant was taught by prior art; and, perhaps more

importantly, (2) the processes taught in the '859 patent only

worked when a cationic surfactant was used. In support of that

argument, MacDermid points out that, in attempting to distinguish

prior art, plaintiffs reported to the European Patent Office:

In accordance with the process of the present invention a metal surface is treated in order to micro-roughen it and it is submitted that is exactly the opposite of the polishing step taught in the prior art Document. The micro-roughening treatment is obtained by incorporating

12 into the adhesion promoting compositions as an essential ingredient a cationic surfactant. . . . [A] person skilled in the art would consider that if other surfactants were substituted for the surfactants taught in Document D1 a brilliant chemically polished surface would be obtained. Accordingly, it is submitted that Document D1 teaches exactly the opposite of the result reguired to be obtained by the process invention.

Letter to EPO dated November 27, 1996, Exhibit C to defendant's

memorandum (emphasis supplied). And, in an effort to distinguish

other prior art before the EPO, plaintiffs reported:

Although the solutions of document D2 contain a corrosion inhibitor they do not contain a cationic surfactant and in the absence of a cationic surfactant/corrosion inhibitor combination the copper surface is not coated.

Letter to EPO dated May 15, 1998, Exhibit F to defendant's

memorandum (emphasis supplied).

Ultimately, says MacDermid, plaintiffs were forced to limit

the European patent's claims to cover only a coating process that

employed a cationic surfactant. And, although MacDermid seems to

acknowledge that plaintiffs brought all relevant prior art to the

attention of the United States Patent Office, it says plaintiffs

13 were required (but failed) to disclose the results of testing

that revealed that the process taught in claim 1 of the '859

patent would not work in the absence of a cationic surfactant.

At this stage of the litigation, (which, parenthetically, is

prior to a Markman hearing and any determination of the scope of

the '859 patent), the court is unable to definitively conclude,

as a matter of law, that plaintiffs honored their obligations of

full and candid disclosure to the PTO. If, as MacDermid asserts,

plaintiffs knew that the process taught in the '859 patent could

not be accomplished unless a cationic surfactant was used, and if

plaintiffs failed to disclose to the PTO the results of their own

testing revealing that fact, plaintiffs might well have violated

their obligation of good faith and candor. Consequently,

plaintiffs' motion for judgment as a matter of law as to

MacDermid's first counterclaim (and its third affirmative

defense) is necessarily denied, without prejudice.

14 B. Second Counterclaim - Tortious Interference.

MacDermid says that it "developed and owns a chemical

composition particularly useful in the production of multilayer

printed circuits, covered by U.S. Patent No. 5,869,130 and

marketed under the tradename MultiBond." MacDermid's Answer and

Counterclaim (document no. 29), at 7. According to MacDermid,

"MultiBond has no surfactant. Nor is a surfactant recommended.

MacDermid is not aware of any customer using a surfactant in its

MultiBond product." MacDermid's memorandum at 5.

MacDermid also asserts that plaintiffs "misrepresented to

prospective and existing MultiBond customers that MacDermid's

marketing of MultiBond was a violation of the Plaintiffs' patent

applications and the '859 patent." Id. Additionally, it claims

that plaintiffs knew that the '859 patent was necessarily

"limited to an adhesion promotion process incorporating a

cationic surfactant and did not cover processes utilizing other

types of surfactants or no surfactant at all." Id. Thus, says

MacDermid, plaintiffs tortiously interfered with their business

relationships with customers and that unlawful conduct is

15 intimately intertwined with plaintiffs' inequitable conduct

before the PTO (i.e., conduct that resulted in its allegedly

wrongful receipt of an overly broad patent).

In response, plaintiffs rely on their denial of inequitable

conduct before the PTO and, therefore, assert that MacDermid has

failed to support an essential element of its tortious

interference claim: that the patent holder was guilty of bad

faith or fraudulent conduct before the PTO. See generally Zenith

Electronics Corp. v. Exzec, Inc., 182 F.3d 1340, 1355 (Fed. Cir.

1999) ("bad faith is a prerequisite to [plaintiff's] state-law

tortious interference claim; without it, the claim is preempted

by patent law."). See also Polvclad Laminates, Inc. v.

MacDermid, No 99-162-M, slip op. at 1 (D.N.H. July 22, 1999). As

noted above, however, the record is not sufficiently developed at

this point to permit any conclusion, as a matter of law, as to

whether plaintiffs did or did not engage in inequitable conduct

before the PTO. Consequently, the court cannot conclude that

MacDermid's second counterclaim fails to state a viable claim.

That is to say, the record evidence does not establish that, as a

16 matter of law, MacDermid's second counterclaim is preempted by

federal law.

III. MacDermid's Motion for Summary Judgment.

Finally, MacDermid moves the court to hold that, as a matter

of law, it does not infringe the '859 patent "because its accused

product, MultiBond, does not contain the 'surfactant' element

required by all the claims of the '859 patent." MacDermid's

motion for summary judgment (document no. 107) at 1. In

response, plaintiffs point out that, in order to resolve

MacDermid's motion, the court must first determine: (1) precisely

what is meant by the term "surfactant," as used in the '859

patent; and, then, (2) whether MacDermid's allegedly infringing

product actually employs a surfactant.

As noted above, the scope of the '859 patent has yet to be

determined (the parties having only recently requested a Markman

hearing). Because MacDermid's motion for summary judgment is

essentially one for claim construction, it must necessarily be

denied, without prejudice, pending the Markman hearing and the

17 court's legal construction of the scope of the '859 patent, and

the meaning of the term "surfactant," as used in that patent.

Conclusion

For the foregoing reasons, plaintiffs' motion for partial

summary judgment (document no. 33) is denied, without prejudice.

Defendant's motion for summary judgment (document no. 107) is

likewise denied, without prejudice, as is defendant's motion to

dismiss (document no. 101) .

Finally, the following motions are denied as moot:

plaintiff's motion to defer responding to defendant's motion for

summary judgment (document no. Ill); plaintiff's motion to extend

time to respond to defendant's motion for summary judgment

(document no. 114); and plaintiff's motion for leave to file a

surreply to defendant's motion to dismiss (document no. 116).

SO ORDERED.

Steven J. McAuliffe United States District Judge

February 13, 2001

18 cc: Howard J. Susser, Esq. Garry R. Lane, Esq. John M. Delehanty, Esq. James K. Robertson, Esq. Steven M. Gordon, Esq. Steven M. Bauer, Esq.