IP Law Daily Inequitable conduct, misuse counterclaims tossed in mining equipment dispute
Wednesday, January 27, 2016

Inequitable conduct, misuse counterclaims tossed in mining equipment dispute

By Greg Hammond, J.D.

Allegations that a manufacturer of engineered metal wearparts engaged in inequitable conduct during the prosecution of five patents and engaged in patent misuse were insufficient, the federal district court in Reno has concluded. In dismissing the counterclaims, the court determined that the defendants failed to plead the inequitable conduct counterclaim with the requisite particularity and the patent misuse counterclaim was not supported by the pleaded facts (ESCO Corp. v. Cashman Equipment Co., January 26, 2016, Jones, R.).

ESCO Corp.—the holder of six patents related to wear members used on excavating and mining equipment—filed a patent infringement suit against Cashman Equipment Co., Caterpillar, Inc., and Caterpillar Global Mining, LLC. Conversely, the defendants filed counterclaims for inequitable conduct, patent misuse, and antitrust violations. The case was before the court on ESCO’s motion to dismiss the counterclaims.

Inequitable conduct. The defendants claimed that ESCO engaged in inequitable conduct during the prosecution of five patents by failing to disclose certain other patents. All of the claims, however, suffered from the same deficiencies—a failure to plead with the requisite particularity the where, what, why, and how, as outlined in Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009). In particular, the defendants failed to identify particular claims in the patents to which the material references were relevant, or where in the references the material information was found. In addition, the court determined that the defendants failed to identify which particular claim limitations are absent from the record or how the examiner would have used them.

Patent misuse. The defendants also alleged that ESCO engaged in patent misuse when it: (1) sent a letter to Caterpillar discussing potential infringement and misrepresenting that ESCO Corp. rather than ESCO Canada was the owner of the ’684 patent; (2) prosecuted and obtained the ’472 patent by means of inequitable conduct before the PTO; and (3) asserted that the ’765 patent expired in 2011 despite knowing it could not prevail on a claim of infringement due to laches and/or estoppel, which the defendants claim is an attempt to impermissibly expand the temporal scope of the ’765 patent.

The court rejected these arguments, first finding that simply referring to all the patents discussed in the letter as “ESCO” patents was neither misleading nor dishonest because there was no indication that ESCO Corp. and ESCO Canada are so unrelated that simply informing Caterpillar that an “ESCO” patent is potentially being violated is untrue. Second, the patent misuse claim based on inequitable conduct was rejected because the pleadings concerning inequitable conduct were already deemed insufficient. Lastly, the patent misuse claim concerning the ’765 patent was dismissed because the defendants failed to demonstrate that ESCO’s assertion of the patent was made in bad faith.

Antitrust counterclaims. The Walker Process fraud and sham litigation counterclaims were also dismissed. In particular, the court found that the Walker Process fraud claim mirrored the inequitable conduct claim, which was already found inadequate. In addition, the allegations concerning sham litigation did not support an inference that the patent infringement litigation is “objectively baseless” such that ESCO could not realistically expect success on the merits.

The case is No. 2:12-cv-01545-RCJ-CWH.

Attorneys: Eric J. Hamp (Banner & Witcoff), Michael D. Rounds (Brownstein Hyatt Farber Schreck, LLC) and Randolph C. Foster (Stoel Rives LLP) for ESCO Corp. and ESCO Canada, Ltd. Gregory J. Commins, Jr. (Baker & Hostetler LLP) and Robert W. Hernquist (Howard & Howard Attorneys PLLC) for Cashman Equipment Co., Caterpillar Global Mining, LLC and Caterpillar, Inc.

Companies: ESCO Corp.; ESCO Canada, Ltd.; Cashman Equipment Co.; Caterpillar Global Mining, LLC; Caterpillar, Inc.

MainStory: TopStory Patent NevadaNews

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