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Allied Machine & Engineering Corp. v. Competitive Carbide, Inc.

United States District Court, N.D. Ohio, Eastern Division

February 15, 2018

ALLIED MACHINE & ENGINEERING CORPORATION, Plaintiff,
v.
COMPETITIVE CARBIDE, INC., Defendant.

          OPINION AND ORDER

          CHRISTOPHER A. BOYKO UNITED STATES DISTRICT JUDGE

         This matter comes before the Court upon the Motion (ECF DKT #81) of Plaintiff Allied Machine & Engineering Corporation (“Allied”) for Voluntary Dismissal and the Motion (ECF DKT #82) of Defendant Competitive Carbide, Inc. (“Competitive”) to Vacate Stay Pending Reexamination of the ‘616 Patent and for Leave to Proceed with its Counterclaim. For the following reasons, the Plaintiff's Motion to Dismiss the above-captioned action with prejudice is granted and Defendant's Motion to Vacate the Stay and Proceed with the Counterclaim is denied.

         I. BACKGROUND

         On December 14, 2011, Allied filed its Complaint for Patent Infringement. Allied alleges it is the owner by assignment of U.S. Patent No. 7, 942, 616 (‘616 Patent), issued on May 17, 2011, to the inventors, Joseph P. Nuzzi and Rolf H. Kraemer, and entitled Drilling Tool and Method for Producing Port Seals. Further, Allied alleges Competitive made, used, sold, offered for sale, and/or imported into the United States drill tools, under the name “Helmet Head, ” that infringe upon one or more claims of the ‘616 patent. Specifically, Allied asserts Claims 1, 2, 4, 7, 9, and 11 through 20 of the ‘616 patent. On January 27, 2012, Competitive filed its Answer and Counterclaim for Declaratory Judgment of Invalidity and Unenforceability of the ‘616 patent. Specifically, Competitive's Counterclaim alleges:

44. The Defendant further asserts that the claims of invention as set forth in the ‘616 patent are invalid by reason of inequitable conduct before the United States Patent and Trademark Office by Plaintiff . . . in violation of 37 CFR (at) Section 1.56 of the United States Patent Rules.
45. As a result of the foregoing conduct, facts, and events, the Defendants [sic] seek declaratory judgment by this Court that the subject United States Patent 7, 942, 616 is invalid and unenforceable under 35 USC 102(b) and 35 CFR 1.56.

         On September 15, 2012, a third party filed a request with the Patent Office for ex parte reexamination of the ‘616 patent. On December 3, 2012, the Patent Office granted the request and initiated reexamination. On May 7, 2013, Allied moved to stay the litigation pending the outcome of the reexamination. (ECF DKT #65). On October 8, 2013, the Court granted Allied's Motion and stayed the litigation pending the completion of the reexamination. (ECF DKT #69).

         In the reexamination, the Patent Office determined that all of the claims of the ‘616 patent were unpatentable over the newly discovered prior art. Allied appealed that decision to the Patent Trial and Appeal Board (“PTAB”), which affirmed the decision of the Patent Office. (ECF DKT #81, Ex. 1). Allied sought rehearing by the PTAB, which was finally denied on September 2, 2016. On November 9, 2016, Allied filed its notice of appeal to the U.S. Court of Appeals for the Federal Circuit. (ECF DKT #81, Ex. 2). On February 16, 2017, Allied filed an unopposed motion for voluntary dismissal of its appeal. (ECF DKT #81, Ex. 3). On February 16, 2017, the Federal Circuit dismissed Allied's appeal, making final the Patent Office's decision that all of the claims of the ‘616 patent are unpatentable. (ECF DKT #81, Ex. 4).

         On February 16, 2017, Allied filed the instant Motion for Voluntary Dismissal; and on February 23, 2017, Competitive filed its Motion to Vacate Stay and Proceed. Competitive asks the Court to find inequitable conduct by Allied before the Patent Office and to determine Competitive's reasonable damages and compensation.

         In order to clarify the parties' positions and the applicable law, the Court ordered cross-briefs focused on the viability of the Inequitable Conduct Counterclaims under 37 CFR § 1.56 and on whether any remedy is available in light of the final Patent Office decision that all of the claims of the ‘616 patent are unpatentable and therefore, unenforceable. (ECF DKT #86).

         II. LAW AND ANALYSIS

         37 CFR § 1.56 - Duty to disclose information material to patentability

         37 CFR § 1.56 reads in pertinent part: “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 . . .[N]o patent will be granted on an application in connection with which fraud on the Office was practiced or attempted or the duty of disclosure was violated through bad faith or intentional misconduct.”

          “Inequitable conduct is an equitable defense to a patent infringement case that, if proved, bars enforcement of a patent.” Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1285 (Fed.Cir. 2011). The remedy for inequitable conduct is the “unenforceability of the entire patent.” Id. at 1287. (Emphasis added). “The concept of inequitable conduct in a patent procurement derives from the equitable doctrine of unclean hands: that a person who obtains a patent by intentionally misleading the PTO cannot enforce the patent.” Gen. Electro Musical Corp. v. Samick Music Corp., 19 F.3d 1405, 1408 (Fed.Cir. 1994). “Perhaps most importantly, the remedy for inequitable conduct is the ...


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