Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-03447/USCOURTS-cand-3_05-cv-03447-8/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 28:2201 Declaratory Judgement (Insurance)

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

PB FARRADYNE, INC.,

Plaintiff /Counterdefendant,

 v.

THOMAS D. PETERSON, et al.,

Defendants/Counterclaimants. /

No. C 05-3447 SI

ORDER GRANTING IN PART AND

DENYING IN PART PLAINTIFF’S

MOTION TO FILE FOURTH AMENDED

COMPLAINT; GRANTING IN PART AND

DEFERRING IN PART DEFENDANT’S

MOTION FOR PARTIAL SUMMARY

JUDGMENT

On September 1, 2006, the Court heard oral argument on plaintiff’s motion for leave to file a

fourth amended complaint, and defendant’s motion for partial summary judgment. After careful

consideration of the parties’ papers and the arguments of counsel, the Court hereby GRANTS in part

and DENIES in part plaintiff’s motion to amend the complaint, and GRANTS in part and DEFERS in

part defendant’s motion for partial summary judgment.

BACKGROUND

On August 25, 2005, plaintiff PB Farradyne, Inc. (“Farradyne”) filed this patent action against

defendants Thomas Peterson, an individual, and Traffic Assist, a California company. Farradyne seeks

declaratory judgment of non-infringement, invalidity and unenforceability of two patents owned by

Peterson, U.S. Patent Nos. 5,523,950 (“‘950 patent”) and RE38,724 (“‘724 patent”). The ‘950 patent

is titled “Method and Apparatus for Providing Shortest Elapsed Time Route Information to Users,” and

was filed on May 8, 1995 and issued on June 4, 1996. See TAC, Ex. A. The ‘724 patent is titled

“Method and Apparatus for Providing Shortest Elapsed Time Route and Tracing Information to Users,”

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 The ‘724 patent is a reissue of U.S. Patent No. 5,845,227, with the same title, which was filed

on February 9, 1996 and issued on December 1, 1998. The ‘227 patent, in turn, is a continuation-in-part

of the ‘950 patent.

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and was filed on November 21, 2000, and reissued on April 12, 2005. Id. at Ex. B.1 The operative

complaint, the Third Amended Complaint (“TAC”), is alleged against defendant Peterson individually

and in his capacity doing business as Traffic Assist.

LEGAL STANDARD

1. Amending the Complaint 

Federal Rule of Civil Procedure 15 governs the amendment of complaints. It states that if a

responsive pleading has already been filed, the party seeking amendment “may amend the party's

pleading only by leave of court or by written consent of the adverse party; and leave shall be freely

given when justice so requires.” Fed. R. Civ. P. 15(a). This rule reflects an underlying policy that

disputes should be determined on their merits, and not on the technicalities of pleading rules. See

Foman v. Davis, 371 U.S. 178, 181-82 (1962). Accordingly, the Court must be very liberal in granting

leave to amend a complaint. See Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th

Cir. 1990) (leave to amend granted with “extreme liberality”); Ascon Properties, Inc. v. Mobil Oil Co.,

866 F.2d 1149, 1160 (9th Cir. 1989); Genentech, Inc. v. Abbott Laboratories, 127 F.R.D. 529, 530 (N.D.

Cal. 1989) (citing DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987)). 

Once a plaintiff has given a legitimate reason for amending the complaint, the burden shifts to

the defendant to demonstrate why leave to amend should not be granted. See Genentech, 127 F.R.D.

at 530-31 (citing Senze-Gel Corp. v. Sieffhart, 803 F.2d 661, 666 (Fed. Cir. 1986)); William W.

Schwarzer et al., Federal Civil Procedure Before Trial, § 8:415, at 8-75. There are several accepted

reasons why leave to amend should not be granted, including the presence of bad faith on the part of the

plaintiff, undue delay, prejudice to the defendant, futility of amendment, and that the plaintiff has

previously amended the complaint. See Ascon Properties, 866 F.2d at 1160; McGlinchy v. Shell

Chemical Co., 845 F.2d 802, 809 (9th Cir. 1988). The Court has the discretion to determine whether

the presence of any of these elements justifies refusal of a request to amend the complaint; this

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discretion is particularly broad where plaintiff has previously amended the complaint. See Ascon

Properties, 866 F.2d at 1160.

2. Summary Judgment 

Summary adjudication is proper when “the pleadings, depositions, answers to interrogatories,

and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment as a matter of law.” Fed. R. Civ. P.

56(c). In a motion for summary judgment, “[if] the moving party for summary judgment meets its initial

burden of identifying for the court those portions of the materials on file that it believes demonstrate the

absence of any genuine issues of material fact, the burden of production then shifts so that the nonmoving party must set forth, by affidavit or as otherwise provided in Rule 56, specific facts showing that

there is a genuine issue for trial.” See T.W. Elec. Service, Inc., v. Pac. Elec. Contractors Ass’n, 809 F.2d

626, 630 (9th Cir. 1987) (citing Celotex Corp. v. Catrett, 477 U.S. 317 (1986)). 

In judging evidence at the summary judgment stage, the Court does not make credibility

determinations or weigh conflicting evidence, and draws all inferences in the light most favorable to the

non-moving party. See T.W. Electric, 809 F.2d at 630-31 (citing Matsushita Elec. Indus. Co., Ltd. v.

Zenith Radio Corp., 475 U.S. 574 (1986)); Ting v. United States, 927 F.2d 1504, 1509 (9th Cir. 1991).

The evidence presented by the parties must be admissible. See Fed. R. Civ. P. 56(e). Conclusory,

speculative testimony in affidavits and moving papers is insufficient to raise genuine issues of fact and

defeat summary judgment. See Thornhill Publ’g Co., Inc. v. GTE Corp., 594 F.2d 730, 738 (9th Cir.

1979). 

DISCUSSION

1. Plaintiff’s Motion to File Fourth Amended Complaint

Plaintiff seeks to amend the complaint for a fourth time to add the following two new sets of

allegations regarding inequitable conduct in connection with the ‘724 reissue patent: (1) Peterson’s

failure to disclose to the PTO the existence of Peterson v. Microsoft, C 99-1718 VRW (“Microsoft

litigation”), which alleged infringement of the same ‘950 patent that Peterson is asserting in this action,

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 Defendant agrees that plaintiff should be allowed to add the inequitable conduct claim

regarding failure to disclose additional material prior art provided to Peterson by On-Time Systems, as

plaintiff only learned of this information in a recent document production.

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 As defendant noted during the oral argument, plaintiff’s allegations of inequitable conduct are

described in much greater specificity in plaintiff’s reply brief than in the proposed fourth amended

complaint. 

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see Proposed Fourth Amended Complaint ¶¶ 26-31; and (2) Peterson’s failure to disclose additional

material prior art provided to him by On-Time Systems, see id. ¶¶ 32-35, Ex. P & Q. In addition,

although not addressed in plaintiff’s motion for leave to amend, the proposed amended complaint

includes a new statutory “failure to mark” defense. See id. ¶ 53. Defendant opposes the proposed

amendment regarding the disclosure of the Microsoft litigation, as well as the inclusion of the “failure

to mark” defense.2

 

A. Microsoft litigation

Defendant contends that Farradyne should not be permitted to add allegations of inequitable

conduct regarding the failure to disclose the Microsoft litigation because Farradyne delayed in seeking

the proposed amendment, defendant will suffer prejudice, the claims are non-specific in violation of

pleading rules, and because the claims are futile. Although the Court believes that plaintiff could have

alleged these inequitable conduct allegations earlier, the Court will allow the proposed amendments in

light of the liberal policy favoring amendment and the circumstances of this case. Defendant has not

demonstrated any material prejudice that would flow as a result of the proposed amendment, and the

litigation has not proceeded to such an advanced phase that the amendments will result in any delay.

Further, contrary to defendant’s assertions, the claim does not fail as a matter of law and may have

merit. 

The Court agrees with defendant, however, that some of the proposed allegations are too general.

As the Court has repeatedly instructed plaintiff in connection with defendant’s previous motions to

dismiss, allegations of inequitable conduct must be pled with specificity. Thus, allegations that Peterson

and/or his representatives were obligated to bring “material information arising from” the Microsoft

litigation to the attention of the PTO are inadequate.3

 Plaintiff’s fourth amended complaint shall

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 Similarly, although defendant conditionally moved for summary judgment on this issue in the

event the Court was inclined to allow plaintiff leave to amend to include failure to mark allegations,

plaintiff’s summary judgment opposition explicitly does not address this issue.

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specifically plead materiality and intent to deceive, the time, place and content of any alleged

misrepresentations, and the identifies of the parties to the misrepresentations. See Ferguson

Beauregard/Logic Controls v. Mega Systems, LLC, 350 F.3d 1327, 1344 (Fed. Cir. 2003); America, Inc.

v. Genus, Inc., 2002 WL 24444, *2 (N.D. Cal. Jan. 9, 2002) (“Allegations of inequitable conduct involve

fraud and are subject to the heightened pleading requirements of Federal Rule of Civil Procedure 9(b).”).

B. New § 287 Allegations

The second amended complaint did not include any allegations regarding defendant’s alleged

failure to comply with the marking and/or notice provisions of 35 U.S.C. § 287. By order filed June 6,

2006, the Court granted defendant’s motion to dismiss and granted plaintiff limited leave to amend to

assert an invalidity defense based on § 102(f). Plaintiff’s third amended complaint and the proposed

fourth amended complaint include new allegations regarding the failure to comply with § 287. The

proposed fourth amended complaint alleges, 

Peterson’s claims for relief are limited in whole or in part by failure to comply with the

marking and/or notice provisions of 35 U.S.C. § 287. Peterson’s claim for relief and

prayer for damages are limited by 35 U.S.C. §§ 286 and 287. Peterson’s recovery of

costs is limited under 35 U.S.C. § 288.

Proposed FAC ¶ 53; see also Third Amended Complaint ¶ 53 (same). 

Defendant correctly contends that the allegations regarding failure to mark are outside the scope

of the leave to amend granted in the June 6, 2006 order. Inexplicably, despite the fact that defendant

alerted plaintiff’s counsel to this fact in a letter dated June 15, 2006 (regarding the third amended

complaint), see Sovocool Decl. Ex. D, and in defendant’s opposition to the instant motion to amend,

neither plaintiff’s motion nor reply papers discuss this amendment.4

 Further, plaintiff did not address

this issue at the hearing. Accordingly, the Court STRIKES paragraph 53 from the Third Amended

Complaint, and DENIES plaintiff’s motion for leave to amend the complaint to include these

allegations. The fourth amended complaint shall not include any failure to mark allegations.

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 The Court notes that plaintiff’s defenses based on Section 273 and Section 102(f) were the

subject of prior defense motions to dismiss, which plaintiff opposed. Plaintiff’s complete abandonment

of these claims, without any explanation, leads the Court to question the manner in which plaintiff has

litigated this case. At a minimum, plaintiff’s efforts to preserve these defenses has resulted in the

needless expenditure of time and resources for both the Court and defendant. 

6

 The systems or projects at issue are: CACS (Japan) - chart 3-4; Autoguide (UK) - chart 9-10;

ALI-Scout (Germany) - chart 13-14; AMTICS (Japan) - chart 27-28; SOCRATES (UK) - chart 29-30;

Route-Tel (UK) - chart 37-38; TravElGuide (Canada) - chart 51-52; Q-Route (Canada) - chart 53-54;

and LISB (Germany) - chart 59-60.

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2. Defendant’s Motion for Partial Summary Judgment

 Defendant has moved for summary judgment on the following defenses asserted by Farradyne:

(1) Section 273 (earlier inventor rights); (2) Section 102(f) (derivation); (3) Section 102 (foreign

systems only). Defendant conditionally moves for summary judgment – if plaintiff is allowed to file

the proposed fourth amended complaint – on two additional defenses: (4) inequitable conduct from

failure to cite the Microsoft litigation during the ‘724 reissue proceedings; and (5) Section 278

(marking/notice).

Plaintiff’s opposition only addresses Section 102 (foreign systems only) and inequitable conduct

from failure to cite the Microsoft litigation. See Plaintiff’s Cross-Motion and Opposition at 1 n.1

(stating, without explanation, that the “Opposition does not address Sections I, II and V of Peterson’s

Motion.”).5

 Accordingly, the Court GRANTS defendant’s motion for summary judgment with respect

to plaintiff’s defenses based on Section 273 (earlier inventor rights) and Section 102(f) (derivation).

Defendant’s motion for summary judgment with respect to Section 278 (marking/notice) is moot in light

of the Court’s disposition of plaintiff’s motion for leave to amend the complaint. The Court discusses

the remaining issues below.

A. § 102/Foreign Systems

Farradyne’s Patent Local Rule 3-3 Invalidity Contentions attached “charts” showing 30 different

articles or prior systems that Farradyne contends qualify as prior art under Sections 102 and 103. See

Hoffman Decl., Ex. 5.6

 Defendant moves for partial summary judgment on the ground that nine articles

or prior systems identified by Farradyne cannot, as a matter of law, qualify as prior art under 35 U.S.C.

§ 102 because they are products installed or operated outside the United States. Plaintiff responds that

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 Each chart is titled, “Invalidity of U.S. Patent No. RE38,724 in view of [product].”

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it is asserting invalidity based upon printed publications describing the nine products at issue, and based

on public knowledge in the United States of the foreign products. 

Under Section 102, a prior patent or publication anywhere will negate novelty and render a

patent invalid. In contrast, prior knowledge, use or invention will constitute an anticipation only if it

occurs “in this country.” 35 U.S.C. §§ 102(a), (e), (g); 1 Donald A. Chisum, Chisum on Patents §§

3.01; 3:05[5] (2006). Thus, defendant is correct that to the extent plaintiff’s charts assert invalidity on

the basis of products or systems known, used or invented outside the United States, those claims fail as

a matter of law and defendant is entitled to summary judgment on that limited basis. As defendant

notes, notwithstanding plaintiff’s characterization of the claims in its opposition papers, the charts for

the nine foreign products at issue all generally state, 

PB Farradyne asserts this product as prior art under 35 U.S.C. § 102. Despite the fact

that references are applied for these products, PB Farradyne maintains that the fact that

the products were in use prior to the earliest possible date of invention of the asserted

patents means that the multiple relevant references are relevant under 35 U.S.C. § 102. . . . 

See, e.g., Hoffman Decl., Ex. 5 at Chart 3 (emphasis added).7

 This language is ambiguous at best, and

certainly open to the interpretation that defendant suggests.

However, to the extent plaintiff asserts that the patents in suit are invalid based on printed

publications describing the products, whether published in the United States or elsewhere, plaintiff can

pursue those claims. See 35 U.S.C. § 102(b); see also Bruckelmyer v. Ground Heaters, Inc., 445 F.3d

1374 (Fed. Cir. 2006). If plaintiff contends that the publications listed in each of the charts at issue

constitute prior art (and these publications are not so identified in other charts not subject to the instant

motion), plaintiff may file supplemental charts specifically asserting as much. However, plaintiff is

cautioned that “invalidity by anticipation requires that the four corners of a single, prior art document

describe every element of the claimed invention, either expressly or inherently, such that a person of

ordinary skill in the art could practice the invention without undue experimentation,” Advanced Display

Systems Inc. v. Kent State University, 212 F.3d 1272, 1282 (Fed. Cir. 2000), cert. denied, 532 U.S. 901

(2001), and plaintiff’s ability to rely on “extra references and extrinsic evidence” is limited. See

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generally 1 Chisum, Chisum on Patents § 3.02[1][d]-[e]. 

In addition, to the extent plaintiff contends that the patents at issue are invalid based upon

“knowledge in this country” of the nine products, plaintiff can also pursue those claims. See, e.g.,

Ecolochem, Inc. v. Southern Cal. Edison Co., 227 F.3d 1361, 1369 (Fed. Cir. 2000), cert. denied, 532

U.S. 974 (2001) (“A presentation indicative of the state of knowledge and use in this country therefore

qualifies as prior art for anticipation purposes under § 102.”).

B. Microsoft litigation 

Defendant has moved for summary judgment on this proposed claim in the event the Court

allows plaintiff to so amend the complaint. Plaintiff’s opposition is also styled as a cross-motion, and

moves on a number of inequitable conduct allegations, including the failure to disclose the Microsoft

litigation. Plaintiff’s cross-motion has not been fully briefed, and is set for argument on October 6,

2006. The Court finds it prudent to consider this aspect of defendant’s motion for partial summary

judgment in conjunction with plaintiff’s cross-motion, and accordingly DEFERS ruling on this issue.

CONCLUSION

For the foregoing reasons and for good cause shown, the Court hereby GRANTS in part and

DENIES in part plaintiff’s motion for leave to file a fourth amended complaint. (Docket No. 61).

Plaintiff shall file the fourth amended complaint by September 8, 2006. The Court hereby GRANTS

in part defendant’s motion for partial summary judgment, and DEFERS ruling on the motion to the

extent it seeks summary judgment on plaintiff’s inequitable conduct claim. (Docket No. 82). 

IT IS SO ORDERED.

Dated: September 5, 2006 

SUSAN ILLSTON

United States District Judge

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