The opinion of the court was delivered by: ORRICK
In this action, plaintiff DH Technology, Inc. ("DHT") sues defendant Synergystex International, Inc. ("Synergystex") for patent infringement. The parties have both moved for summary judgment on the issue of whether United States Patent 5,115,493 (the "'493 patent") is unenforceable because of DHT's inequitable conduct in fraudulently paying a small entity issue fee. For the reasons hereinafter set forth, the Court grants summary judgment for Synergystex without reaching the inequitable conduct issue because, even if DHT's payment of an improper small entity issue fee was an error in good faith, it is now too late to correct the error. The Court denies summary judgment for DHT, and dismisses the action with prejudice.
On October 18, 1991, the Patent and Trademark Office ("PTO") mailed a Notice of Allowance and Issue Fee Due ("Notice") for the '493 patent, entitled "Continuous Laser Printing for Printing Over Page Boundaries," to applicant Ivan M. Jeanblanc ("Jeanblanc"). (Synergystex's Mem. of P. & A. in Supp. of Renewed Mot. for Summ. J. that the '493 Patent is Unenforceable Because of Inequitable Conduct ("Renewed Motion"), Ex. 5.) The Notice stated:
HOW TO RESPOND TO THIS NOTICE:
I. Review the SMALL ENTITY Status shown above.
If the SMALL ENTITY is shown as YES, verify your current SMALL ENTITY status:
A. If the Status is changed, pay twice the amount of the FEE DUE shown above and notify the Patent and Trademark Office of the change in status, or
B. If the Status is the same, pay the FEE DUE shown above.
(Id. (emphasis added).) The Notice provided that the issue fee was due on January 21, 1992.
In September 1990, the inventors of what would later issue as the '493 patent assigned their rights in the invention to The Identification Business, Inc. ("IBI"). (Renewed Motion, Ex. 3.) On November 2, 1990, DHT executed an agreement for the purchase of the business and assets of IBI, including all intellectual property rights, and specifically including the application that would later mature into the '493 patent. (Id., Ex. 4.)
On May 19, 1992, the United States Patent Office issued the '493 patent, which claims certain improvements to a "continuous form" laser printer, to Ivan Jeanblanc et. al. (Elson Decl., Ex. 1.)
On August 18, 1992, DHT filed this action against Synergystex for infringement of the '493 patent. Synergystex denies infringement, and asserts various defenses, including its contention that the patent is invalid and unenforceable because DHT intentionally deceived the PTO by paying a small entity issue fee when DHT did not qualify as a small entity. Synergystex first raised its small entity fee defense in a case management conference statement, filed with the Court on October 19, 1994.
On February 16, 1995, Synergystex moved for summary judgment on various grounds, including its inequitable conduct defense based on DHT's allegedly improper payment of a small entity issue fee. On November 28, 1995, the Court denied summary judgment on that issue, and left the issue for trial.
On September 27, 1995, while the summary judgment motion was pending, DHT paid a small entity maintenance fee for the '493 patent. (Renewed Motion, Ex. 14.).
In January, 1996, Synergystex requested leave to take additional discovery into DHT's entitlement to claim small entity status. The Court granted the motion at a hearing on February 29, and filed its Order on March 5, 1996. On April 8, the Court granted Synergystex's motion to compel discovery of the documents necessary to determine DHT's entitlement to claim small entity status. DHT produced a partial set of those documents by April 26, but did not provide any explanation why the remaining documents were not produced.
On May 7, the Court vacated the May 20 trial date to allow Synergystex's renewed motion for summary judgment on inequitable conduct re: fraudulent small entity fee to be heard. The Court also issued an Order to Show Cause why the case should not be dismissed due to DHT's failure to fully comply with the Court's Orders of February 29, March 5, and April 8, 1996, compelling discovery of documents sufficient to show DHT's entitlement to claim small entity status.
After reviewing the voluminous briefing on the Order to Show Cause, it appears that compliance with the Order compelling production was substantially more difficult than anticipated by the Court. The Court is convinced that DHT expended great effort to comply with the Order and did produce all documents that it was able to locate after a reasonable search. The Court hereby discharges the Order to Show Cause.
The Order to Show Cause and the briefing in response to it, however, would not have been necessary if DHT had explained, at the time it produced the documents in April, why several months of the most important payroll records were missing. DHT shall pay Synergystex the attorneys' fees and costs Synergystex expended in briefing the Order to Show Cause, as a sanction for failure to fully comply with the Order compelling production, pursuant to Rule 37(b)(2) of the Federal Rules of Civil Procedure.
Rule 56(c) of the Federal Rules of Civil Procedure provides that a court may grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the 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." The Supreme Court's 1986 "trilogy" of Celotex Corp. v. Catrett, 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986), Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986), and Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986), requires that a party seeking summary judgment show the absence of a genuine issue of material fact. Once the moving party has made this showing, the nonmoving party must "designate 'specific facts showing that there is a genuine issue for trial.'" Celotex, 477 U.S. at 324 (quoting Fed. R. Civ. P. 56(c)). "When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586. "If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Liberty Lobby, 477 U.S. at 249-50 (citations omitted). When determining whether there is a genuine issue for trial, "inferences to be drawn from the underlying facts . . . must be viewed in the light most favorable to the party opposing the motion." Matsushita, 475 U.S. at 587 (citation omitted). "Summary judgment is as available in patent cases as in other areas of litigation." Continental Can Co. USA v. Monsanto Co., 948 F.2d 1264, 1265 (Fed. Cir. 1991) (citation omitted).
The fees charged for issuance of a patent are reduced by fifty percent if the applicant is a small business concern.
See 35 U.S.C. § 41(a)(2) and (h)(1). A small business concern is defined as a company with fewer than 500 employees, including employees of affiliates. 37 C.F.R. § 1.9(d). The Manual of Patent Examining Procedure ("MPEP") provides that:
The number of employees of a business concern is determined by counting the number of persons of the concern and its affiliates employed on a full-time, part-time, or temporary basis during the previous fiscal year of the concern and of its affiliates. The number of employees is the average over the fiscal ...