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G:\Civil\05 Cases\05 C 6869\Civix.Amend.Answer.Wpd Case: 1:05-cv-06869 Document #: 580 Filed: 02/01/10 Page 1 of 22 PageID #:<pageID> IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION CIVIX-DDI, LLC, ) ) Plaintiff, ) ) v. ) No. 05 C 6869 ) HOTELS.COM, L.P., HOTELS.COM GP LLC, ) and YAHOO! INC., ) ) Defendants. ) MEMORANDUM OPINION AND ORDER AMY J. ST. EVE, District Court Judge: Defendants Hotels.com, L.P., Hotels.com GP, LLC (collectively “Hotels.com”), and Yahoo! Inc. (“Yahoo”) move the Court for leave to file Second Amended Answers and Counterclaims pursuant to Federal Rule of Civil Procedure 15(a). In response, Plaintiff CIVIX- DLI, LLC’s (“Civix”) filed a motion for judgment on the pleadings regarding Defendants’ inequitable conduct claims pursuant to Rule 12(c). The Court presumes familiarity with its previous orders in this litigation and the related Expedia litigation. See Civix-DDI, LLC v. Cellco P’ship, 387 F.Supp.2d 869 (N.D. Ill. 2005). For the following reasons, the Court, in its discretion, grants Defendants’ motions. The Court denies Civix’s motion for judgment on the pleadings. BACKGROUND On August 24, 2006, Civix filed a Second Amended Complaint in this matter alleging that Defendants infringed U.S. Patent Nos. 6,385,622 (the “‘622 patent”), 6,408,307 (the “‘307 patent”), 6,415,291 (the “‘291 patent”), and 6,473,692 (the “‘692 patent”). On September 17, 2007, the Court stayed the present litigation pending the Patent and Trademark Office’s (“PTO”) Case: 1:05-cv-06869 Document #: 580 Filed: 02/01/10 Page 2 of 22 PageID #:<pageID> ex parte reexamination of these four patents. On September 25, 2009, Civix advised the Court that – as a result of the re-examination proceedings – it would pursue its infringement allegations only as to the ‘622 patent and the ‘291 patent. In its motion for leave to amend, Hotels.com seeks to (1) add an affirmative defense of patent exhaustion based on the Federal Circuit’s recent decision in TransCore, L.P. v. Electronic Transaction Consultants Corp., 563 F.3d 1271 (Fed. Cir. 2009) and (2) update its existing counterclaim for a declaratory judgment of unenforceability to account for Civix’s alleged inequitable conduct during the recently concluded reexamination proceedings. In its motion to amend, Yahoo also seeks to (1) add an affirmative defense of patent exhaustion based on the Federal Circuit’s recent decision in TransCore and (2) update its existing inequitable conduct defense and related counterclaim to reflect Civix’s alleged misconduct during the reexamination proceedings. In response to Defendants’ motions for leave to amend, Civix solely objects to the claims of inequitable conduct maintaining that Defendants’ new inequitable conduct allegations based on the PTO’s reexamination fall short of the pleading standard articulated in Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009). In its motion for judgment on the pleadings, Civix also argues that previously alleged inequitable conduct defenses and counterclaims based on Civix’s conduct during the prosecution of the original patent applications similarly fail under the Exergen standard. LEGAL STANDARDS Although this is a patent case, the law of the Seventh Circuit controls procedural issues that are not unique to patent law. See Exergen , 575 F.3d at 1318 (“a motion to amend a 2 Case: 1:05-cv-06869 Document #: 580 Filed: 02/01/10 Page 3 of 22 PageID #:<pageID> pleading under Rule 15(a) is a procedural matter governed by the regional circuit”); see also Imation Corp. v. Koninklijke Philips Elec. N.V., 586 F.3d 980, 984 (Fed. Cir. 2009) (“In reviewing a grant of judgment on the pleadings, this court applies the procedural law of the regional circuit.”). Defendants’ motions for leave to file amended answers and counterclaims are governed by Federal Rule of Civil Procedure 15(a)(2), which states that after a responsive pleading is filed, “a party may amend its pleading only with the opposing party’s written consent or the court’s leave. The court should freely give leave when justice so requires.” Fed.R.Civ.P. 15(a)(2). “Although Federal Rule of Civil Procedure 15(a) instructs that leave to amend shall be freely given ‘when justice so requires,’ a district court may deny a plaintiff leave to amend if ‘there is undue delay, bad faith[,] or dilatory motive.’” Sound of Music Co. v. Minnesota Mining & Mfg. Co., 477 F.3d 910, 922 (7th Cir. 2007) (citations omitted). The Court may also deny a plaintiff’s motion for leave to amend if either “undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of amendment” would occur. Id. at 922-23 (citations omitted); see also Arreola v. Godinez, 546 F.3d 788, 796 (7th Cir. 2008). An amendment is “futile if it sets forth facts or legal theories that are redundant, immaterial, or unresponsive to the allegations in the complaint.” Campania Mgmt. Co., Inc. v. Rooks, Pitts & Poust, 290 F.3d 843, 850 (7th Cir. 2002). “[T]he district court’s decision to grant or deny a motion for leave to file an amended pleading is ‘a matter purely within the sound discretion of the district court.’” Guise v. BWM Mortgage, LLC, 377 F.3d 795, 801 (7th Cir. 2004) (citation omitted); see also Schor v. City of Chicago, 576 F.3d 775, 780 (7th Cir. 2009). 3 Case: 1:05-cv-06869 Document #: 580 Filed: 02/01/10 Page 4 of 22 PageID #:<pageID> Rule 12(c) motions for judgment on the pleadings differ from Rule 12(b) motions to dismiss because they are brought after the pleadings are closed. See Fed. R. Civ. P. 12(c); Buchanan-Moore v. County of Milwaukee, 570 F.3d 824, 827 (7th Cir. 2009). Despite the difference in timing, the Court reviews Rule 12(c) motions under the same standards that apply to motions to dismiss under Rule 12(b)(6). See Buchanan-Moore, 570 F.3d at 827; Pisciotta v. Old Nat’l Bancorp, 499 F.3d 629, 633 (7th Cir. 2007). Under Rule 12(c), the Court accepts all well-pleaded allegations in the complaint as true and draws all reasonable inferences in favor of the plaintiff. See Buchanan-Moore, 570 F.3d at 827; Pisciotta, 499 F.3d at 633. A motion for judgment on the pleadings should be granted “only if it appears beyond doubt that the plaintiff cannot prove any facts that would support his claim for relief.” Buchanan-Moore, 570 F.3d at 827 (citation omitted). ANALYSIS The present motions concern Yahoo’s and Hotels.com’s allegations that the patents-in- suit are unenforceable due to Civix’s inequitable conduct in prosecuting these patents. To clarify, “[e]ach individual associated with the filing and prosecution of a patent application has a duty of candor and good faith in dealing with the [PTO], which includes a duty to disclose to the [PTO] all information known to that individual to be material to patentability....” 37 C.F.R. § 1.56(a). The elements of inequitable conduct in breach of this duty can be shown if a patent applicant: (1) made an affirmative misrepresentation of material fact, submitted false material information, or failed to disclose material information; and (2) intended to deceive the PTO. See Rentrop v. Spectranetics Corp., 550 F.3d 1112, 1119 (Fed. Cir. 2008); Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306, 1314 (Fed. Cir. 2008). 4 Case: 1:05-cv-06869 Document #: 580 Filed: 02/01/10 Page 5 of 22 PageID #:<pageID> In its present motion, Civix argues that the Court should deny Defendants’ motions to amend their answers and counterclaims because any amendment would be futile and that the Court should grant judgment on the pleadings in its favor as to Defendants’ inequitable conduct claims and defenses. In particular, Civix maintains that the newly alleged inequitable conduct counterclaims and affirmative defenses, as well as the earlier inequitable conduct counterclaims and affirmative defenses, do not meet Rule 9(b)’s heightened pleading requirements. See Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009). Thus, at issue is whether Defendants have alleged their inequitable conduct counterclaims and defenses with sufficient particularity under Rule 9(b). See id. at 1318 (“Whether inequitable conduct has been pleaded with particularity under Rule 9(b) is a question governed by Federal Circuit law”); Central Admixture Pharm. Servs., Inc. v. Advanced Cardiac Solutions, P.C., 482 F.3d 1347, 1356 (Fed. Cir. 2007) (same). Federal Rule of Civil Procedure 9(b) requires that a plaintiff plead “the circumstances constituting fraud” with “particularity,” although “[m]alice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Fed.R.Civ.P. 9(b). Although inequitable conduct is a “broader concept than fraud,” the Federal Circuit has long held that a party must plead inequitable conduct with particularity. See Central Admixture, 482 F.3d at 1356-57; Ferguson Beauregard/Logic Controls, Div. of Dover Res., Inc. v. Mega Sys., LLC, 350 F.3d 1327, 1344 (Fed. Cir. 2003). In Exergen, the Federal Circuit reiterated the requirements of Rule 9(b) – a “pleading that simply avers the substantive elements of inequitable conduct, without setting forth the particularized factual bases for the allegation, does not satisfy Rule 9(b).” Id. at 1326-27. The Federal Circuit further explains, as “the Seventh Circuit has held, the 5 Case: 1:05-cv-06869 Document #: 580 Filed: 02/01/10 Page 6 of 22 PageID #:<pageID> ‘circumstances’ in Rule 9(b) must be set forth with ‘particularity,’ i.e., they ‘must be pleaded in detail’ – ‘[t]his means the who, what, when, where, and how’ of the alleged fraud.” Id.
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