May 1, 2013
NANO-SECOND TECHNOLOGY CO., LTD., a Taiwanese Corporation, Plaintiff,
DYNAFLEX INTERNATIONAL, a California Corporation., and GFORCE Corp. d/b/a DFX SPORTS & FITNESS, a Nevada Corporation, Defendants.
ORDER Re: Defendants' Motion for Partial Summary Judgment of Tort Claims, § 292(A) False Marking Claim, and To Limit Patent Damages Period 
RONALD S.W. LEW, Senior District Judge.
On April 30, 2013, Defendants Dynaflex International and GForce Corporation's ("Defendants") Motion for Partial Summary Judgment of Tort Claims, § 292(A) False Marking Claim, and To Limit Patent Damages Period  came on for regular calendar before the Court. The Court having reviewed all papers submitted pertaining to this Motion and having considered all arguments presented to the Court, NOW FINDS AND RULES AS FOLLOWS:
The Court hereby GRANTS in Part and DENIES in Part Defendants' Motion for Partial Summary Judgment.
This Motion stems from a patent infringement case. Plaintiff Nano-Second Technology Co. ("Plaintiff") alleges that Defendant Dynaflex International and Defendant GForce Corporation d/b/a DFX Sports & Fitness ("Defendants") have sold and continue to sell products that infringe on Plaintiff's patent, which is United States Patent No. 5, 800, 311 ("311 Patent"). In addition to the patent infringement claim, Plaintiff has alleged claims for (1) False Marking Against Dynaflex; (2) Unfair Competition Against All Defendants; (3) Intentional Interference with Prospective Economic Advantage Against Dynaflex; (4) Negligent Interference with Prospective Economic Advantage Against Dynaflex; and (5) Breach of Contract Against Dynaflex.
Plaintiff alleges that Defendants have infringed upon its 311 Patent by selling, importing, making, offering, or using wrist exercisers ("Accused Products") that fall within the scope of the claims of the 311 Patent. First Amended Complaint ("FAC") § 12. Further, Plaintiff alleges that these unpatented Accused Products and their packaging are marked with the patent number of the 311 Patent without Plaintiff's consent. Id . §§ 21, 41. Plaintiff claims that in addition to falsely marking their Accused Products and infringing Plaintiff's patent, Defendants have contacted Plaintiff's potential and existing customers misrepresenting that they own the 311 Patent. Id . § 25.
II. LEGAL STANDARD
Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. A genuine issue is one in which the evidence is such that a reasonable fact-finder could return a verdict for the non-moving party. Anderson v. Liberty Lobby , 477 U.S. 242, 248 (1986).
A party seeking summary judgment always bears the initial burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 322 (1986). "Where the moving party will have the burden of proof on an issue at trial, the movant must affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party." Soremekun v. Thrifty Payless, Inc. , 509 F.3d 978, 984 (2007).
Once the moving party makes this showing, the non-moving party must set forth facts showing that a genuine issue of disputed material fact remains. Celotex , 477 U.S. at 322. The non-moving party is required by Federal Rule of Civil Procedure 56(e) to go beyond the pleadings and designate specific facts showing a genuine issue for trial exists. Id. at 324.
Defendants seek partial summary judgment as to Plaintiff's (1) second cause of action, false marking under 35 U.S.C. § 292(a); (2) third cause of action, unfair competition; and (3) fourth and fifth causes of action, intentional and negligent interference with prospective economic advantage. Defendants also assert that the Court should find that Plaintiff is limited to claiming damages for patent infringement occurring after September 10, 2010.
1. Plaintiff's False Marking Claims -
GRANT IN PART AND DENY IN PART
In Plaintiff's second cause of action, Plaintiff asserts that Defendants marked its goods with the number of the 311 Patent without permission, and thus is liable under 35 U.S.C. § 292. Plaintiff's FAC seeks an order fining Dynaflex in an amount of $500 per falsely marked article according to 35 U.S.C. § 292(a)-(b) or "an alternative amount the Court deems equitable and just."
The False Marking Statute as amended in September 2011, by the Leahy-Smith America Invents Act ("AIA"), provides in relevant part that:
(a) Whoever, without the consent of the patentee, marks upon, or affixes to, or uses in advertising in connection with anything made, used, offered for sale, or sold by such person within the United States, or imported by the person into the United States, the name or any imitation of the name of the patentee, the patent number, or the words "patent, " "patentee, " or the like, with the intent of counterfeiting or imitating the mark of the patentee, or of deceiving the public and inducing them to believe that the thing was made, offered for sale, sold, or imported into the United States by or with the consent of the patentee; or
Whoever marks upon, or affixes to, or uses in advertising in connection with any unpatented article, the word "patent" or any word or number importing that the same is patented, for the purpose of deceiving the public... [s]hall be fined not more than $500 for every such offense. Only the United States may sue for the penalty authorized by this subsection. (b) A person who has suffered a competitive injury as a result of a violation of this section may file a civil action in a district court of the United States for recovery of damages adequate to compensate for the injury.
35 U.S.C. § 292 (emphasis added). Congress made the amendments to Section 292 retroactive on pending cases. Leahy-Smith America Invents Act, Pub.L. No. 112-29, § 16(b)(4), 125 Stat. 329 (2011); Cyclone USA, Inc. v. Sei Kim, 461 F.Appx. 638, 639 (9th Cir. 2011).
The Court GRANTS Defendants' Motion as to Plaintiff's request for remedies under Section 292(a), because the remedy in Section 292(a) is reserved exclusively for the United States.
However, the Court DENIES the remainder of the Motion addressing Plaintiff's false marking claim, which also seeks remedies under Section 292(b). It appears that Plaintiff's FAC was filed before the amendments to Section 292 took effect, and thus requested the $500 per offense penalty that it now cannot recover. However, it is clear from the FAC that Plaintiff is seeking whatever remedies are available to it under 35 U.S.C. § 292. The FAC also fairly alleges the requirements of false marking and competitive injury: Plaintiff alleges that Defendants marked their unpatented goods with the 311 Patent with the intent to deceive and mislead the public. FAC §§ 41, 43. Based on this activity, Plaintiff suffered competitive injury under Section 292(b) because Defendants impeded competition in the market and unjustly gained a substantial share of the wrist exerciser market, in which Plaintiff competes, as a result of their false marking activities. Id . § 42. Defendants did not move for summary judgment as to Plaintiff's claims under Section 292(b). Thus their request to dismiss Plaintiff's entire false marking claim is DENIED.
2. Plaintiff's Intentional and Negligent Interference with Prospective Economic Disadvantage Claims - DENY
Defendants argue that Plaintiff's claims for intentional and negligent interference with prospective economic disadvantage are barred by the statute of limitations.
The statute of limitations for tortious interference with prospective economic advantage is two years. Knoell v. Petrovich , 76 Cal.App.4th 164, 168 (1999) (referring to Cal. Code Civ. Proc. § 339(1)). The statute of limitations is an affirmative defense, and Defendants bear the burden of proving that the statute of limitations applies. Ladd v. Warner Bros. Entm't, Inc. , 184 Cal.App.4th 1298, 1309 (2010). A cause of action accrues at "the time when the cause of action is complete with all of its elements." Norgart v. Upjohn Co. , 21 Cal.4th 383, 397 (1999). An important exception to this rule of accrual, however, is the "discovery rule, " which postpones accrual until the plaintiff discovers, or has reason to discover, the facts underlying the cause of action. Id.
This Action was filed on November 30, 2010 . Thus, the relevant date for the statute of limitations analysis is November 30, 2008. Here, the Court finds that there is a genuine dispute as to when Plaintiff discovered the facts underlying the tortious interference claims. Of particular note is an undated cease and desist letter from Tom Smith, President of Dynaflex, sent to Louis J. Stack of Fitter International, claiming that Dynaflex International has an "exclusive" license over the 311 Patent covering the lighted and counter mechanisms disclosed in the Patent. See Docket 19, Decl. of Pei Sung Chuang, Ex. B. Neither party has offered any evidence as to the date of this letter or when Plaintiff became aware of this letter. Therefore, the Court DENIES Defendants' Motion as to this issue.
The Court observes that Plaintiff's Opposition appears to be asserting that Defendants' tortious actions are continuing. Although not clearly articulated in its Opposition, Plaintiff appears to be invoking the theory of continuous accrual, which if applicable would toll the statute of limitations. However, the theory of continuous accrual does not toll the statute of limitations for tortious interference claims, and should not be invoked in this Action. See DC Comics v. Pacific Pictures Corp., 2013 WL 1389969, at *7 (C.D. Cal. April 4, 2013).
3. Plaintiff's Unfair Competition Claim - GRANT IN PART, DENY IN PART
Plaintiff's unfair competition claim is based on Dynaflex's alleged acts of patent infringement, false marking, and misrepresenting the ownership of the 311 Patent. Defendants seek to dismiss Plaintiff's unfair competition claim, arguing that it is just a recasting of Plaintiff's other claims, which are either already covered by federal law or barred by the statute of limitations.
California's unfair competition law prohibits "any unlawful, unfair or fraudulent business act or practice." Cel-Tech Commc'ns, Inc. v. Los Angeles Cellular Tel. Co. , 20 Cal.4th 163, 180 (1999). "By proscribing any unlawful' business practice, section 17200 borrows' violations of other laws and treats them as unlawful practices that the unfair competition law makes independently actionable." Id . (citation omitted); Farmers Ins. Exch. v. Superior Court , 2 Cal.4th 377, 383 (1992).
"Federal patent law limits the states' ability to regulate unfair competition.... [A] state law is preempted when it enters a field of regulation which the patent laws have reserved to Congress...." Summit Mach. Tool Mfg. Corp. v. Victor CNC Sys., Inc. , 7 F.3d 1434, 1439 (9th Cir. 1993). In a preemption analysis, a court must analyze whether the state law claim contains an element not shared by the federal law that changes the nature of the action "so that it is qualitatively different from [a patent] claim." Id. at 1439-40 (citing Balboa Ins. Co. v. Trans Global Equities , 218 Cal.App.3d 1327, 1340 (1990); Del Madera Props. v. Rhodes & Gardner, Inc. , 820 F.2d 973, 977 (9th Cir. 1987)). "[P]reemption law... requires analysis of each theory [of unfair competition] to determine whether it contains the necessary qualitatively different extra element distinguishing it from [patent] protection." Id.
First, the Court rejects Defendants' contention that Plaintiff's unfair competition claim should be dismissed because allegedly the statute of limitations applicable to Plaintiff's tortious interference claims also bars Plaintiff's unfair competition claim. As discussed above, Defendants argue that Plaintiff cannot bring its tortious interference claims because they are barred by the statute of limitations. According to Defendants, because the same facts used to support Plaintiff's tortious interference claims are also proof of Plaintiff's unfair competition claims, Plaintiff's unfair competition is also barred. Defendants cite to no authority supporting this contention. Defendants rely upon Cel-Tech Commc'ns, Inc. v. Los Angeles Cellular Telephone , 20 Cal.4th 163 (1999), but the case does not hold that the statue of limitations of a claim covering the same facts as the unfair competition claim also applies to the unfair competition claim. Rather, the case stands for the proposition that if another statute permits certain conduct, thus limiting the judiciary's power to declare that conduct unfair, a plaintiff cannot assert an unfair competition action based on that conduct. 20 Cal.4th at 182. Even if the Court assumed that Defendants' theory is correct, there is a genuine dispute of fact with respect to whether the tortious interference claims are even time-barred, as discussed above.
The statute of limitations for an unfair competition claim is four years. Cal. Bus. & Prof. Code § 17208. The California Supreme Court has held that a plaintiff's unfair competition cause of action is governed by the four-year statute of limitations, even though the unfair competition claim is based on similar facts as another statutory violation with a shorter statute of limitations. Cortez v. Purolator Air Filtration Prods. Co. , 23 Cal.4th 163, 179 (2000). "That is because Business and Professions Code section 17208 states that any action to enforce any cause of action under the [unfair competition law] chapter shall be commenced within four years after the cause of action accrued." In re Vaccine Cases , 134 Cal.App.4th 438, 458 (2005). Thus, Plaintiff's unfair competition claim based on Defendants' conduct of misrepresenting the ownership of the 311 Patent remains, and Defendants' Motion is DENIED as to this issue.
Second, the Court finds that the unfair competition claim is preempted where it is based on the same conduct that gives rise to a Section 292 false marking claim or patent infringement claim. Plaintiff has not alleged or shown that there is an additional element that distinguishes the unfair competition claim from its patent claims. See, e.g., Champion Labs., Inc. v. Parker-Hannifin Corp., No. 1:10-CV 02371 OWW-DLB , 2011 WL 1883832, at *12 (E.D. Cal. May 17, 2011)(finding preemption where allegation of unfair competition is based entirely on the allegation of false marking). The Court GRANTS Defendants' Motion on this issue.
For the foregoing reasons, the Court GRANTS IN PART AND DENY IN PART Defendants' Motion as to the unfair competition claim.
4. The Period of Damages Available To Plaintiff For Its Patent Infringement Claims - GRANT
Defendants assert that Plaintiff cannot seek damages for patent infringement that occurred before September 10, 2010, because Plaintiff did not have legal title to the 311 Patent before that date. The Court agrees.
"The general rule is that one seeking to recover money damages for infringement of a United States patent... must have held the legal title to the patent during the time of the infringement." Arachnid, Inc. v. Merit Indus., Inc. , 939 F.2d 1574, 1579 (Fed. Cir. 1991). A party may sue for infringement occurring before it obtained legal title if a written assignment expressly grants the party a right to do so. Id. at 1579 n.7. (citing, inter alia, Moore v. Marsh , 74 U.S. (7 Wall.) 515 (1868) ("It is a great mistake to suppose that the assignment of a patent carries with it a transfer of the right to damages for an infringement committed before such assignment.") (emphasis added); see also Abraxis Bioscience, Inc. v. Navinta LLC , 625 F.3d 1359, 1367 (Fed. Cir. 2010).
To create an assignment, a contract must transfer: (1) the entire exclusive patent right, (2) an undivided interest in the patent right, or (3) the entire exclusive right within any geographical region of the Minco, Inc. v. Combustion Engineering, Inc. , 95 F.3d 1109, 1117 (Fed. Cir. 1996). In construing patent assignments, courts apply ordinary principles of state contract law. Id.
On September 10, 2010, Pei-Sung Chuang ("Chuang"), the inventor of the 311 Patent, assigned the 311 Patent to Plaintiff. The assignment states, in relevant part,
[Chuang has] sold, assigned, transferred, and... unto [Nano-Second Technology Co., Ltd.], its successors or assigns, the entire right, title and interest for all countries in and to all inventions and improvements disclosed in the [311 Patent]....
[Chuang] will testify in all legal proceedings and generally do all things which may be necessary or desirable more effectually to secure to and vest in [Plaintiff] the entire right, title and interest in and to the improvements, inventions, applications... hereby sold.
Schwartz Decl. Ex. 8 (emphasis added). The assignment is unambiguous and clearly transfers all interest in the 311 Patent to Plaintiff. However, the assignment is completely silent as to whether Plaintiff acquired a right to sue for infringement that occurred prior to the date of the assignment, in this case September 10, 2010. Absent any explicit language conveying such right, the Court finds that Plaintiff lacks standing to sue for infringement of the 311 Patent occurring before September 10, 2010.
Although Plaintiff claims that Chuang subjectively intended to convey rights to Plaintiff to sue for past infringement, Plaintiff points to no language in the contract supporting such intent. Under California law, the goal of contract interpretation is "to give effect to the mutual intent of the parties." In re Imperial Credit Indus., Inc. , 527 F.3d 959, 966 (9th Cir. 2008). This standard, however, is an objective one and does not depend on the parties' subjective intents. Cedars-Sinai Med. Ctr. v. Shewry , 137 Cal.App.4th 964, 980 (2006) ("California recognizes the objective theory of contracts, under which it is the objective intent, as evidenced by the words of the contract, rather than the subjective intent of one of the parties, that controls interpretation.") (internal quotations and citations omitted).
Plaintiff further contends that because Chuang agreed to testify in all legal proceedings in the assignment, he must have intended to allow Plaintiff to sue for past infringement. However, the contractual language makes clear that the basic purpose for his agreeing to testify is to effectuate the rights granted in the assignment, which are not retroactive. The language cannot be reasonably interpreted in the manner that Plaintiff suggests.
Therefore, the Court GRANTS Defendants' Motion to limit the period of damages available to Plaintiff.
For the foregoing reasons, the Court
- DENIES the Motion as to the tortious interference claims;
- GRANTS IN PART AND DENIES IN PART the Motion as to the Unfair Competition Claim;
- GRANTS IN PART AND DENIES IN PART the Motion as to the Section 292(b) claim; and,
- GRANTS as to limiting the damages period for the patent infringement claim.
IT IS SO ORDERED.