Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_06-cv-02204/USCOURTS-azd-2_06-cv-02204-0/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 35:183 Patent Infringement

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Larry Lack,

Plaintiff, 

vs.

Joseph M. Rustick,

Defendant. 

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No. CV 06-2204-PHX-MHM

ORDER

Currently before the Court is Plaintiff Larry Lack’s motion for entry of default

judgment pursuant to Rule 55(a) of the Federal Rule of Civil Procedure (“FRCP”) (Dkt.

#13) and Defendant Joseph Rustick’s motion to dismiss Plaintiff’s complaint pursuant to

FRCP 12(b)(6). (Dkt. #11). After reviewing the pleadings and determining that oral

argument is unnecessary, the Court issues the following order.

I. Background 

On September 15, 2006, Plaintiff filed a complaint asserting the following claims

against Defendant: (1) correction of inventorship of U.S. Patent No. 5,831,202 (the “‘202

patent”) pursuant to 35 U.S.C. § 256; (2) conversion; (3) unfair competition; (4) unjust

enrichment; (5) punitive damages; and (6) breach of contract. Specifically, Plaintiff

alleges that he invented a new muzzle for an automatic weapon that uses a gas expansion

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chamber to feed the weapon’s gas drive mechanism; that he licensed his invention to

Defendant but later terminated that license because Defendant failed to use his best

efforts to manufacture and market the invention; and that thereafter, unbeknownst to

Plaintiff, Defendant wrongfully patented Plaintiff’s invention and began to manufacture

and market the invention.

A summons was issued as to Defendant, and on October 13, 2006, Defendant

waived service of the summons. And in his waiver, Defendant stated that the parties had

agreed – in order to allow for time to consider settlement – that Defendant would have an

open-ended period of time in which to file his answer to Plaintiff’s complaint.

No further action was taken until March 12, 2007, when U.S. District Judge James

Teilborg held a hearing as to why the Court shouldn’t dismiss the case for failure to

prosecute. After the hearing, Judge Teilborg issued an order stating that the Court would

dismiss the case without prejudice on April 17, 2007, unless “there [was] activity in the

case indicating an attempt to prosecute.”

On April 17, 2007, Plaintiff filed a notice that stated that “Plaintiff hereby gives

notice of his intent to prosecute the action.” The notice also stated that Defendant’s open

extension to file his answer was withdrawn, and that Defendant’s answer was due no later

than April 26, 2007.

Around that time, Judge Teilborg recused himself and the case was reassigned to

the undersigned. In his recusal order, Judge Teilborg noted that although Plaintiff’s April

17, 2007 notice seemed to state otherwise, the Court had not approved any extension of

time for Defendant to answer Plaintiff’s complaint.

Then, on April 26, 2007, Defendant filed a motion to dismiss Plaintiff’s complaint

pursuant to FRCP 12(b)(6). And on May 1, 2007, Plaintiff filed a motion for entry of

default pursuant to FRCP 55(a).

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II. Motion for Entry of Default

Default judgment is generally disfavored, and a court should, whenever possible,

decide a case on the merits. E.g., Schwab v. Bullock’s, Inc., 508 F.2d 353, 355 (9th Cir.

1974); Cmty. Dental Serv. v. Tani, 282 F.3d 1164 (9th Cir. 2002) (stating that judgment

by default is an extreme measure). To obtain default judgment under FRCP 55, a party

must follow a sequential two-step process – (1) obtain entry of default from the Clerk of

the Court pursuant to Rule 55(a); and then (2) move the Court for default judgment

pursuant to Rule 55(b). See Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986)

(discussing the two-step process). Specifically, Rule 55(a) states that “[w]hen a party

against whom a judgment for affirmative relief is sought has failed to plead or otherwise

defend . . . the clerk must enter the party’s default.”

Plaintiff filed his motion for entry of default after Defendant filed his motion to

dismiss. Thus, Defendant did not fail to plead, and Plaintiff’s subsequent motion for

entry of default is moot. However, Plaintiff argues that Defendant’s motion to dismiss is

untimely and thus the Court should recharacterize Defendant’s motion to dismiss as a

motion to set aside an entry of default under Rule 55(c), a motion to set aside entry of

default is appropriate only after default has been entered under Rule 55(a). But default

has not been entered in this case, and thus there is no basis on which to recharacterize

Defendant’s motion to dismiss.

Moreover, Plaintiff did not comply with the procedural requirements of FRCP 55 –

Plaintiff did not seek entry of default from the Clerk of the Court pursuant to Rule 55(a)

before moving the Court for default judgment pursuant to Rule 55(b)(2). Instead,

Plaintiff asks the Court to direct the Clerk to enter default against Defendant pursuant to

Rule 55(a). But that’s not what Rule 55(a) provides for; and the Court will not

circumvent the two-step process specified in FRCP 55. Default judgment under these

circumstances would be an extreme and inappropriate measure. Thus, the Court denies

Plaintiff’s motion for entry of default and the case will proceed on the merits.

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III. Motion to Dismiss

"The motion to dismiss for failure to state a claim is viewed with disfavor and is

rarely granted." Gilligan v. Jamco Development Corp., 108 F.3d 246, 249 (9th Cir.

1997). The Court will not dismiss a complaint unless it appears beyond a doubt that the

plaintiff can prove no set of facts that would entitle him to relief. Morley v. Walker, 175

F.3d 756, 759 (9th Cir. 1999).

In determining whether a complaint states a claim, all allegations of material fact

are taken as true and construed in the light most favorable to the nonmoving party. Wyler

Summit Partnership v. Turner Broad. Sys. Inc., 135 F.3d 658, 661 (9th Cir. 1998). 

However, the Court is not required to accept as true allegations that contradict matters

properly subject to judicial notice; and that are merely conclusory, unwarranted

deductions of fact, or unreasonable inferences. See Sprewell v. Golden State Warriors,

266 F.3d 979, 988 (9th Cir. 2001). 

An inquiry into the adequacy of the evidence is improper when deciding whether

to dismiss a complaint for failure to state a claim. Enesco Corp. v. Price/Costco, Inc., 146

F.3d 1083, 1085 (9th Cir. 1998). And as a general rule, “a district court may not consider

any material beyond the pleadings in ruling on a Rule 12(b)(6) motion.” Lee v. City of

Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001) (citation omitted). However, a district

court may consider material that is properly submitted as part of the complaint, as well as

documents that are not physically attached to the complaint as long as their authenticity is

not contested and the plaintiff’s complaint necessarily relies on them. Id. In addition, the

Court may take judicial notice of “matters of public record outside the pleadings.” Id. at

689 (citing MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986)). But the

Court may not take judicial notice of a fact that is “subject to reasonable dispute.” 

Fed.R.Evid. 201(b).

Defendant asks that the Court dismiss Plaintiff’s complaint for the following

reasons: (1) Plaintiff failed to prosecute the case and/or comply with Judge Teilborg’s

March 12, 2007 order; (2) Plaintiff’s correction of inventorship claim under 35 U.S.C.

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§256 is barred by the application of the doctrines of laches and equitable estoppel; (3)

Plaintiff’s state law claims are barred by the relevant statutes of limitation; (4) Plaintiff

failed to state a claim on which relief may be granted under 35 U.S.C. §256; and (5)

Plaintiff failed to plead with particularity under FRCP 9(b).

A. Failure to Prosecute

Defendant asks that the Court dismiss Plaintiff’s complaint because Plaintiff’s

April 17, 2007 notice allegedly did not comply with Judge Teilborg’s March 12, 2007

order stating that the case would be dismissed on April 17, 2007, unless there was activity

in the case that indicated an attempt to prosecute. In addition, Defendant’s motion to

dismiss belittles Plaintiff’s April 17, 2007 notice both for attempting to withdraw

Defendant’s open extension to file his answer and for attempting to unilaterally set the

due date for Defendant’s answer.

The Court notes that Plaintiff filed his motion for entry of default in response to

Defendant’s request that the case be dismissed for failure to prosecute. Plaintiff’s motion

states that the open extension for Defendant to answer the complaint was given as a

courtesy, and that if Defendant now is going to argue that the extension was invalid for

lack of prosecution, then the Court indeed should find that the extension was invalid. But

Plaintiff also argues that the Court should then go on to find that Defendant’s motion to

dismiss is untimely pursuant to Rule 12(a) and thus Plaintiff is entitled to entry of default

under Rule 55(a).

This contentious procedural bickering between the parties must stop now. The

facts are clear. Defendant timely waived service of his summons under Rule 4(d). And

in his waiver, Defendant stated that the parties had agreed to an open-ended period of

time for Defendant to file his answer in hopes that the parties might reach a settlement. 

However, the Federal Rules of Civil Procedure were not placed on hold by the parties’

hopes of settlement. In order to extend the defendant’s time to file his answer, the

defendant must move the Court for an extension; and Defendant did not do so in this case. 

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Thus, under Rule 12(a)(1)(B), Defendant had 60 days after the request for waiver was

sent to respond to Plaintiff’s complaint. Defendant did not file an answer within that

time; and thus three months later Judge Teilborg held a hearing as to why the Court

shouldn’t dismiss the case for failure to prosecute since Plaintiff hadn’t sought default

judgment against Defendant based on Defendant’s failure to answer the complaint.

Based on the March 12, 2007 hearing, Judge Teilborg issued an order stating that

the Court would dismiss the case on April 17, 2007, unless there was activity in the case

that indicated an attempt to prosecute the case. And on April 17, 2007, Plaintiff filed a

notice with the Court that he intended to prosecute the case. Plaintiff’s notice stated that

Defendant’s open extension to file his answer was withdrawn and that Defendant’s

answer was due by April 26, 2007. As previously discussed, there is no such thing as an

“open extension to file an answer” under the FRCP; and a party does not have the

authority to grant or withdraw such an extension. Further, a party does not have the

power to unilaterally set a due date for another party’s pleadings. Nonetheless, it was the

parties’ manifest intention to allow Defendant an extended time period to file his answer;

and viewed in that light, the Court finds that Plaintiff’s April 17, 2007 notice was a

reasonable interpretation of Judge Teilborg’s March 12, 2007 order. Thus, the Court

denies Defendant’s motion to dismiss for failure to prosecute and/or comply with Judge

Teilborg’s March 12, 2007 order; and the Court will now address the substantive parts of

the motion to dismiss.

B. Laches & Equitable Estoppel

The doctrines of laches and equitable estoppel are affirmative defenses that may be

asserted against a claim of joint ownership under 35 U.S.C. §256. See MCV, Inc. v.

King-Seeley Thermos Co., 870 F.2d 1568 (Fed. Cir. 1989); see also Advanced

Cardiovascular Sys., Inc. v. Scimed Life Sys., Inc., 988 F.2d 1157 (Fed. Cir. 1993). 

Laches and equitable estoppel are equitable defenses that are committed to the sound

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discretion of the Court. A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020,

1028 (Fed. Cir. 1992) (en banc).

1. Judicial Notice

As an initial matter, Mr. Rustic asks that the Court take judicial notice of U.S.

Patent No. 5,831,202 (the “‘202 patent”); the parties’ April 28, 1992 “Business and

License, Royalty Agreement”; and Plaintiff’s January 27, 1997 letter purporting to

terminate that agreement. The Court takes judicial notice of these documents because

Plaintiff’s complaint relies on them and the parties do not dispute their validity; and also

the ‘202 patent is a matter of public record.

Mr. Rustic also asks that the Court take judicial notice of copies of various pages

from two magazines that purportedly feature the invention embodied in the ‘202 patent. 

However, the Court is wary of taking judicial notice of copies of various pages from

different magazines when the entire articles referenced, let alone the entire magazines, are

not presented to the Court. And regardless, the Court can only take judicial notice of the

fact that the pages were published; the Court can not take judicial notice of the contents of

the article. As such, the Court will take judicial notice only of the fact that the pages that

were submitted to the Court were published.

2. Laches

Laches applies when a defendant establishes the following by a preponderance of

the evidence: (1) the plaintiff delayed filing suit for an unreasonable and inexcusable

length of time after the plaintiff knew or reasonably should have known of his claim(s)

against the defendant; and (2) that delay prejudiced or injured the defendant. Aukerman,

960 F.2d at 1028; Intertool, Ltd. v. Texar Corp., 369 F.3d 1289, 1297 (Fed. Cir. 2004). 

The period of delay is measured from when the plaintiff had actual or constructive

knowledge of the claim. Advanced Cardiovascular, 988 F.2d at 1163. “Absent actual

knowledge, the facts must support a duty of inquiry”; and constructive knowledge

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imposes a duty of reasonable diligence on the plaintiff. Id. at 1162. To determine

whether the plaintiff had constructive knowledge of the claim, the plaintiff is charged

with “such knowledge as he might have obtained upon inquiry, provided the facts already

known by him were such as to put upon a man of ordinary intelligence the duty of

inquiry.” Johnston v. Standard Min. Co., 148 U.S. 360, 370 (1893). As such, the plaintiff

“who is negligently or willfully oblivious to sales, marketing, publication, public use, or

other conspicuous activities of potential infringement cannot later claim his lack of

knowledge as justification for escaping the application of laches.” Wanlass v. Gen.

Electric Co., 148 F.3d 1334, 1338-39 (Fed. Cir. 1998).

A presumption of unreasonable delay arises if the plaintiff delays filing suit for six

years after the plaintiff had actual or constructive knowledge of his claim(s) against the

defendant. Leinoff v. Louis Milona & Sons, 726 F.2d 734 (Fed. Cir. 1984). However,

even when that presumption applies, the defendant still bears the burden of persuasion to

prove laches; that burden does not shift. Aukerman, 960 F.2d at 1038. And even if the

defendant establishes undue delay and prejudice, laches remains an equitable judgment

for the Court to make. Id.

In this case, the application for the ‘202 patent was filed on March 21, 1997, and

the patent was issued on November 3, 1998. However, Plaintiff did not file his complaint

until September 15, 2006; and his explanation for the delay is that he had neither actual

nor constructive knowledge of the ‘202 patent and his claims against Defendant until

February 2005. (Decl. Larry Lack ¶1). Defendant, on the other hand, contends that (1)

Plaintiff had constructive knowledge of the ‘202 patent because it was issued and became

a matter of public record on November 3, 1998; and (2) in the alternative, Plaintiff had

constructive knowledge of the ‘202 patent since at least January 2002 because the

products embodied in the ‘202 patent have been marketed and promoted since that time.

First, the date of issuance of a patent does not establish the plaintiff’s constructive

knowledge of the patent. Advanced Cardiovascular, 988 F.2d at 1168 (“[T]he district

court erred, as a matter of law, in measuring [the plaintiff’s] delay from the date of

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issuance of the patent, in the absence of proof that [the plaintiff] knew or should have

known that the patent had issued.”). Thus, the mere fact that the ‘202 patent was issued

on November 3, 1998, does not establish that Plaintiff had constructive knowledge of the

patent since that time.

Second, Defendant contends that Plaintiff had constructive knowledge of the ‘202

patent and his claims against Defendant since January 2002 because that’s when the

magazine pages that were submitted for judicial notice were published. But as previously

mentioned, the Court takes judicial notice only of the fact that the submitted pages were

published. And from that fact Defendant asks that the Court draw the following

inferences: (1) the product discussed in the magazine pages is the product embodied in

the ‘202 patent; and (2) the product in the ‘202 patent has been vigorously marketed in

magazines with national circulation. However, the Court declines to draw such

inferences at this time. Defendant has not supplied the Court with any basis on which to

infer either that the products discussed in the magazine pages are the same as the product

embodied in the ‘202 patent or that the two magazines are nationally circulated

magazines. Further, even if the Court were to draw such inferences, Defendant does not

cite the Court to any cases in support of his contention that the mere publication of two

articles in two nationally-circulated magazines is enough to impute constructive

knowledge of the ‘202 patent to Plaintiff. Thus, the Court finds that Defendant has not

established that Plaintiff had actual or constructive knowledge of the ‘202 patent or his

claims against Defendant prior to February 2005. As such, the Court finds that Defendant

has not established undue delay under the doctrine of laches. 

3. Equitable Estoppel

Equitable estoppel applies when a defendant establishes the following by a

preponderance of the evidence: (1) the plaintiff, through misleading conduct, led the

defendant to reasonably infer that the plaintiff did not intend to bring a claim against the

defendant; (2) the defendant relied on that conduct; and (3) due to his reliance, the

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defendant will be materially prejudiced if the plaintiff is allowed to proceed with his

claim(s). Aukerman, 960 F.2d at 1041. “Misleading conduct” may include specific

statements, action, inaction, or silence where there is a duty to speak. Id. at 1042. 

However, when misleading conduct is based on inaction, the “ inaction must be combined

with other facts respecting the relationship or contacts between the parties to give rise to

the necessary inference that the claim against the defendant is abandoned.” Id.

Defendant asks that the Court estop Plaintiff from asserting his claims against

Defendant based on the following facts: (1) the parties entered into a license agreement in

1992; (2) the ‘202 patent was issued to Defendant in 1998; (3) the product embodied in

the ‘202 patent was vigorously and nationally marketed ; and (4) Plaintiff didn’t bring his

claims against Defendant until 2005. Defendant basically contends that he reasonably

inferred that Plaintiff didn’t intend to assert a claim against him because of the parties’

previous relationship and the fact that Plaintiff didn’t file his complaint until well after

Defendant obtained the ‘202 patent and allegedly marketed the product embodied in the

‘202 patent. Thus, Defendant contends that Plaintiff’s inaction constitutes misleading

conduct. But as discussed in the previous section, when the alleged misleading conduct is

based on inaction, that inaction must be coupled with facts regarding the relationship or

contact between the parties that necessarily give rise to an inference that the plaintiff

abandoned his claim(s) against the defendant.

But aside from the 1992 license agreement that was purportedly terminated in

1997, prior to the issuance of the ‘202 patent, Defendant alleges no other relationship or

contact with Plaintiff. The issuance of the ‘202 patent and the marketing of the product

embodied in the ‘202 patent do not constitute contacts with Plaintiff; and because

Defendant has not established that Plaintiff was actually or constructively aware of the

‘202 patent or the marketing of the product embodied in the ‘202 patent, those facts have

no bearing on the Court’s estoppel analysis. Plaintiff’s alleged inaction after the ‘202

patent was issued in 1998 is coupled with no relationship or contact with Defendant. 

Thus, there is no basis on which Defendant could have reasonably inferred that Plaintiff

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did not intend to assert a claim against him; and as such, the Court finds that Defendant

has not established that Plaintiff engaged in misleading conduct as required under the

doctrine of equitable estoppel.

C. State Law Claims

Federal courts sitting in diversity are required to apply state statutory and common

law. Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938). If an action is barred by the

applicable state statutes of limitation, dismissal pursuant to Rule 12(b)(6) is appropriate. 

Morales v. City of Los Angeles, 214 F.3d 1151, 1153 (9th Cir. 2000). 

Defendant contends that Plaintiff’s state law claims are barred by the following

Arizona statutes of limitation: (1) tort actions must be brought “within two years after the

cause of action accrues,” A.R.S. §12-542 (2007); (2) “[a]ctions other than for recovery of

real property for which no limitation is otherwise prescribed shall be brought within four

years after the cause of action accrues,” A.R.S. §12-550 (2007); and (3) breach of

contract actions must be “commenced and prosecuted within six years after the cause of

actions accrues.” A.R.S. §12-548 (2007).

However, Arizona courts apply the discovery rule to determine when statutes of

limitation begin to run. Sato v. Van Denburgh, 123 Ariz. 225, 227 (1979) (applying the

discovery rule to a tort cause of action); Gust, Rosenfeld & Henderson v. Prudential Ins.

Co. of America, 182 Ariz. 586 (1995) (extending the discovery rule to contract causes of

action). Under the discovery rule, “a plaintiff’s cause of action does not accrue until the

plaintiff knows or, in the exercise of reasonable diligence, should know of the facts

underlying the cause [of action].” Gust, Rosenfeld & Henderson, 182 Ariz. at 588. In

other words, under Arizona law, a cause of action accrues when the plaintiff has actual or

constructive knowledge of the facts underlying his cause of action.

As discussed in Section III(B)(2), Defendant has not established that Plaintiff had

actual or constructive knowledge of the ‘202 patent or the facts underlying his claims

against Defendant prior to February 2005. Thus, taking Plaintiff’s allegation – that

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Plaintiff discovered the ‘202 patent and the facts underlying his claims against Defendant

in February 2005 – as true for purposes of this motion, the Court finds that Plaintiff’s

causes of action accrued in February 2005. And since Plaintiff filed his complaint in

September 2006, well within any of the aforementioned statutes of limitation, Plaintiff’s

causes of action are not barred. Accordingly, the Court denies Defendant’s motion to

dismiss Counts II through VI.

D. Failure to State a Claim under 35 U.S.C. § 256

Defendant contends that Plaintiff’s complaint fails to state a claim for correction of

inventorship under 35 U.S.C. §256. Section 256 authorizes the Court to correct two

errors in inventorship, misjoinder and nonjoinder. Stark v. Advanced Magnetics, Inc.,

119 F.3d 1551, 1553 (9th Cir. 1997). Misjoinder occurs when a patent erroneously lists a

person who is not an inventor; and nonjoinder occurs when a patent fails to list a person

who is an inventor. Id. Specifically, misjoinder occurs “[w]henever through error a

person is named in an issued patent as the inventor”; and nonjoinder occurs whenever

“through error an inventor is not named in an issued patent and such error arose without

any deceptive intention on his part.” 35 U.S.C. §256. Further, in cases of nonjoinder,

“the error cannot involve any deceptive intention by the nonjoined inventor.” Stark, 119

F.3d at 1553.

Section 256 also states that “[t]he error of omitting inventors or naming persons

who are not inventors shall not invalidate the patent in which such error occurred if it can

be corrected.” Indeed, “section 256 allows deletion of a misjoined inventor whether that

error occurred by deception or by innocent mistake. As well, the section allows addition

of an unnamed actual inventor, but this error of nonjoinder cannot betray any deceptive

intent by that inventor.” Stark, 119 F.3d at 1555.

In this case, Plaintiff’s complaint alleges both misjoinder and nonjoinder, that

Defendant erroneously named himself as the inventor of the product embodied in the ‘202

patent and that Plaintiff is the true inventor of that product. But Defendant contends that

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Plaintiff’s section 256 claim must fail because Plaintiff also alleges that Defendant

engaged in inequitable conduct in obtaining the ‘202 patent. However, Plaintiff does not

seek to invalidate the ‘202 patent based on Defendant’s alleged inequitable conduct. 

Plaintiff only seeks to correct the ownership of the ‘202 patent under 35 U.S.C. §256; and

as discussed in the previous paragraph, section 256 and Ninth Circuit precedent clearly

establish that a plaintiff may seek correction of inventorship based on both nonjoinder

and misjoinder while also alleging that the misjoinder occurred as a result of the

defendant’s misrepresentation(s). The only caveat is that a plaintiff may not seek

correction of inventorship through nonjoinder if the plaintiff himself engaged in

inequitable conduct. But Defendant does not allege that. And thus the Court finds that

Plaintiff did not fail to state a claim under 35 U.S.C. §256.

E. Failure to Properly Plead Under Rules 8 and 9(b)

Defendant contends that Plaintiff failed to sufficiently plead under Rule 8. Rule

8(a)(2) requires that a pleading contain “a short and plain statement of the claim showing

that the pleader is entitled to relief.” The main purpose of the complaint is to put the

defendant on notice of the nature of the plaintiff’s claims; and as such, the plaintiff must

set forth enough details so as to provide the defendant and the Court with a fair idea of the

basis of the complaint and the legal grounds for recovery. Self Directed Placement Corp.

v. Control Data Corp., 908 F.2d 462 (9th Cir. 1990). However, the “[p]laintiff is not

required to plead facts supporting each and every element of his prima facie case.” 

Greenier v. Pace, Local No. 1188, 201 F.Supp. 2d 172, 176 (D.Me. 2002).

 In his complaint, Plaintiff alleges that he is the true inventor of the product

embodied in the ‘202 patent; and that Defendant stole and patented his invention. All of

Plaintiff’s claims arise out of these allegations. Thus, Plaintiff’s complaint sufficiently

puts Defendant on notice of Plaintiff’s claims, and the Court denies Defendant’s motion

to dismiss Plaintiff’s complaint for failure to sufficiently plead under Rule 8.

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However, Defendant also contends that Plaintiff failed to plead with the

particularity required under Rule 9(b). Rule 9(b) requires that “[i]n all averments of fraud

or mistake, the circumstances constituting fraud or mistake shall be stated with

particularity.” Mere conclusory allegations of fraud are insufficient under Rule 9(b). 

Moore v. Kayport Package Express, Inc., 885 F.2d 531, 540 (9th Cir. 1989). Instead,

Rule 9(b) requires that defendants have sufficient notice of the specific misconduct that is

allegedly fraudulent "so that they can defend against the charge and not just deny that

they have done anything wrong." Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir.

2001).

Although Defendant contends that Plaintiff’s complaint is grounded in fraud and

thus contains insufficient conclusory allegations under Rule 9(b), Plaintiff does not

merely allege that Defendant engaged in some unspecified fraudulent behavior and thus

Plaintiff is entitled to relief. Instead, Plaintiff specifically alleges that (1) he invented the

product embodied in the ‘202 patent; (2) he and Defendant entered into a license

agreement in 1992 that covered the product embodied in the ‘202 patent; (3) Plaintiff

purportedly terminated that license agreement in 1997; (4) thereafter, unbeknownst to

Plaintiff, Defendant applied for and received the ‘202 patent by falsely claiming that he

invented the product embodied in the ‘202 patent; and (5) Defendant subsequently

manufactured and marketed the product embodied in the ‘202 patent outside of the 1992

license agreement. All of Plaintiff’s claims arise out of these allegations, and the

allegations are clearly sufficient to place Defendant on notice of the specific misconduct

that is allegedly fraudulent so that Defendant can defend against the charge and not just

deny that he has done anything wrong. Thus, Plaintiff’s complaint satisfies the

particularity requirement under Rule 9(b), and the Court denies Defendant’s motion to

dismiss Plaintiff’s complaint for failure to plead with particularity under Rule 9(b).

Accordingly,

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IT IS HEREBY ORDERED that Plaintiff’s motion for entry of default is

DENIED. (Dkt. #13).

IT IS FURTHER ORDERED that Defendant’s motion to dismiss is DENIED. 

(Dkt. #11).

IT IS FURTHER ORDERED that Defendant must file an answer within 14 days

pursuant to Rule 12(a)(4).

IT IS FURTHER ORDERED that Oral Argument set for February 25, 2008, is

VACATED.

DATED this 28th day January, 2008.

Case 2:06-cv-02204-JWS Document 22 Filed 01/29/08 Page 15 of 15