November 20, 2014
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November 18, 2014
Northern District of Georgia Finds Insufficiencies in Both a Covenant Not to Sue and in a Motion for Summary Judgment of Patent Obviousness
In an order entered on February 6, 2013, the Northern District of Georgia denied both a plaintiff’s motion to dismiss its own patent infringement claim and a defendant’s motion for summary judgment on its counterclaim for a declaratory judgment of patent invalidity (obviousness). In denying the plaintiff’s motion, the court held that the plaintiff’s covenant not to sue did not remove the case or controversy concerning the patent. In denying the defendant’s summary judgment motion, the court found insufficient evidence on which to make a finding of the level of ordinary skill in the art, an obviousness factor.
Plaintiff’s Motion for Partial Voluntary Dismissal
In Hitachi Koki Co., Ltd. v. Techtronic Indus. Co., Ltd., the plaintiff, Hitachi Koki Co., Ltd. (“Hitachi”) sought to voluntarily dismiss one of the counts in its own complaint, namely, Count I, which alleged infringement of U.S. Patent No. 7,521,892 (“the ’892 Patent”). Hitachi predicated its motion on two Federal Rules of Civil Procedure: (1) Rule 41(a)(2), providing for motions to voluntarily dismiss one’s own action; and (2) Rule 12(b)(1), which allows a party to seek dismissal of any claim for lack of subject matter jurisdiction.
“Rule 41(a)(2) contemplates dismissal of the action by the plaintiff at a latter stage of the proceedings without agreement from all parties involved. Such a dismissal is permitted only ‘on terms the court considers proper.’ . . . Rule 41(a)(2) is properly reserved for those cases in which the parties have not formally entered into an agreement regarding dismissal.” In Hitachi Koki, the Northern District of Georgia found that Rule 41(a)(2) was an improper vehicle with which to seek voluntary dismissal of less than all claims: “Courts uniformly have held that Rule 41(a) does not permit the dismissal of individual claims from a multi-claim action but only authorizes the dismissal of anentire action.” Thus, the court rejected this basis for Hitachi’s motion, commenting that “the proper way for a plaintiff to remove a single claim is to move to amend the complaint under Rule 15.”
The court next dealt with Hitachi’s Rule 12(b)(1) ground. In that ground, Hitachi asserted that it provided defendants with a covenant not to sue for infringement of the ’892 Patent. That covenant, set forth in the text of the brief filed in support of Hitachi’s motion, read as follows:
Hitachi Koki Co., Ltd. covenants not to sue Techtronic Industries Co. Ltd., Techtronic Industries North America, Inc., One World Technologies Inc., OWT Industries, Inc., Milwaukee Electric Tool Corporation, RYOBI Technologies, Inc. and any currently owned subsidiary of Techtronic Industries Co. Ltd. (collectively “TTI”) for infringement of U.S. Patent No. 7,521,892 (“the ‘892 patent”) based on TTI’s manufacture, importation, use, sale, and/or offer for sale, of products on or before March 13, 2012. Hitachi Koki Co., Ltd. covenants not to sue TTI for infringement of the ‘892 patent based on TTI’s future manufacture, importation, use, sale, and/or offer for sale, of any and all products being offered for sale by TTI on March 13, 2012 as well as any products that are the same as or substantially identical to a product being offered for sale by TTI on March 13, 2012. Hitachi Koki covenants not to sue or otherwise seek to hold TTi’s [sic] customers liable based upon the importation, distribution, use sale and offering for sale of the products that are subject to this covenant not sue for the infringement of the ‘892 patent.
Notably, there was no indication that Hitachi’s covenant was given any time prior to the filing of Hitachi’s brief in support of its dismissal motion, and Defendants contended they were unaware of the covenant prior to receiving that brief. This prompted the court to remark:
If the covenant was not formally executed and delivered to Defendants, the Court finds that a covenant was not issued in this case and thus there exists a case or controversy regarding validity of the ‘892 patent. On this ground alone, [Hitachi]’s motion to dismiss would be required to be denied.
Though the court could have stopped there, it proceeded to evaluate the substance of Hitachi’s covenant. To understand that analysis, the following discussion of a recent Supreme Court case and relevant principles concerning covenants not to sue may be helpful.
“Subject matter jurisdiction in a declaratory judgment suit depends upon the existence of ‘a substantial controversy, between the parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment,’ and the [declaratory judgment] plaintiff [or counterclaimant] bears the burden of proving the existence of such a controversy throughout the litigation.” However, if a covenant not to sue issues and the party issuing the covenant (such as a patent or trademark owner) asserts there is no longer a controversy because of it, that party has the burden of proving that assertion. As recently stated by the Supreme Court inAlready, LLC v. Nike, Inc., the party issuing the covenant has the burden “to show that it ‘could not be reasonably expected to resume its enforcement efforts against [the declaratory judgment plaintiff or counterclaimant].’” The Supreme Court characterized that burden as “formidable.” Added Justice Kennedy in a separate concurring opinion: “Courts should proceed with caution before ruling that [covenants not to sue] can be used to terminate litigation.”
“Whether a covenant not to sue will divest the trial court of jurisdiction depends on what is covered by the covenant.” In Already, LLC v. Nike, Inc., Nike met its burden by producing a broad covenant not to sue that, for instance, immunized Already, LLC from trademark claims by Nike for current footwear designs, or “any colorable imitations thereof” that were produced “on or after the Effective Date of this Covenant.”
The Northern District of Georgia demonstrated just how “formidable” Hitachi’s burden was. Despite covenant text indicating that it applied to products made, imported, used, sold or offered for sale on or before March 13, 2012 and to products “substantially identical” to them, the court found that it did not go far enough, observing: “[T]he covenant does not apply to specific potentially-infringing products that Defendants have introduced or will introduce after March 12, 2012.” Thus, the court rejected the Rule 12(b)(1) basis for Hitachi’s motion, resulting in its denial. The court, however, left open the possibility that Hitachi could frame a more comprehensive covenant to “remove the threat of litigation against Defendants for infringement of the ‘892 patent,” but that the covenant Hitachi presented in its motion was not such a covenant.
Thus, the validity of the ‘892 Patent remained a “live” issue such that the court could substantively address the defendants’ motion for summary judgment of invalidity for obviousness. However, that motion met with the same result as plaintiff’s motion.
Defendants’ Motion for Summary Judgment of Obviousness
Quoting the relevant invalidity statute, the court recognized: “A patent is invalid ‘if the differences between the [claimed] subject matter . . . and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains.’” It then discussed precedent requiring courts to make findings on the following factors when assessing obviousness challenges: “(1) the scope and content of the prior art, (2) the level of ordinary skill in the art, (3) the differences between the claimed invention and the prior art, and (4) secondary considerations of obviousness.”
Regarding obviousness factor (2), courts have recognized the following nonexhaustive list of factors to consider as a guide in determining level of ordinary skill in the art: “‘(1) the educational level of the inventor; (2) type of problems encountered in the art; (3) prior art solutions to those problems; (4) rapidity with which innovations are made; (5) sophistication of the technology; and (6) educational level of active workers in the field.’”
The court found that the defendants did not submit evidence bearing on the level of ordinary skill. “Defendants contend[ed] that evidence of the level of ordinary skill in the art is not necessary here because ‘the ‘892 patent and the two prior art references are all indisputably in the same field of art.’” Without such evidence, however, “the Court cannot make the requiredGraham finding of the level of ordinary skill and cannot evaluate Defendants’ obviousness claim ‘from the perspective of one of ordinary skill in the art.’” As a result, the court denied defendants’ motion for summary judgment of invalidity for obviousness.
The decision is Hitachi Koki Co., Ltd. v. Techtronic Indus. Co., Ltd., No. 1:09-cv-3308-WSD (N.D. Ga. Feb. 6, 2013), written by U.S. District Judge William S. Duffey, Jr.
 Garber v. Chicago Mercantile Exchange, 570 F.3d 1361, 1365 (Fed. Cir. 2009) (citation omitted)
 Hitachi Koki Co., Ltd. v. Techtronic Indus. Co., Ltd., No. 1:09-cv-3308-WSD, slip op. at 7 (N.D. Ga. Feb. 6, 2013).
 Id., slip op. at 8 & n.2 (emphasis added).
 Id. at 10.
 Id. at 10 n.3.
 Dow Jones & Co., Inc. v. Ablaise Ltd., 606 F.3d 1338, 1345 (Fed. Cir. 2010) (quoting MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (U.S. 2007)).
 ___ U.S. ___, 2013 U.S. LEXIS 602, at **13 (Jan. 9, 2013).
 Id., 2013 U.S. LEXIS 602, at **14.
 Id. at **34 (Kennedy, J., concurring).
 Revolution Eyewear v. Aspex Eyewear, Inc., 556 F.3d 1294, 1297 (Fed. Cir. 2009).
 Already, LLC v. Nike, Inc., 2013 U.S. LEXIS 602, at **14 (italics added).
 Hitachi Koki, supra, slip op. at 12.
 Id. at 12 n.4.
 Id. at 15 (quoting 35 U.S.C. § 103(a) (2006)).
 Id. at 15-16 (citing, inter alia, Graham v. John Deere Co., 383 U.S. 1, 17-18 (1966)).
 Daiichi Sankyo Co., Ltd. v. Apotex, Inc., 501 F.3d 1254, 1256 (Fed. Cir. 2007) (citations omitted).
 Hitachi Koki, supra, slip op. at 16.
 Id. at 17 (quoting defendants’ brief).
 Id. (citations omitted).
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