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American Fireglass v. Moderustic Inc.

United States District Court, S.D. California

July 25, 2016

AMERICAN FIREGLASS, Plaintiff,
v.
MODERUSTIC INC., Defendant.

          ORDER: (1) GRANTING PLAINTIFF’S REQUEST FOR JUDICIAL NOTICE, AND (2) DENYING DEFENDANT’S MOTION TO DISMISS (ECF No. 10)

          Janis L. Sammartino United States District Judge.

         Presently before the Court is Defendant Moderustic Inc.’s Motion to Dismiss for Lack of Subject Matter Jurisdiction Pursuant to Rule 12(b)(1). (ECF No. 10.) Also before the Court are Plaintiff American Fireglass’s Opposition to (ECF Nos. 12, 13[1]) and the Defendant’s Reply in Support of (ECF No. 14) the MTD, as well as Plaintiff’s Request for Judicial Notice (RJN, ECF No. 12-15). The Court vacated the hearing and took this matter under submission without oral argument pursuant to Civil Local Rule 7.1(d)(1). (ECF No. 16.) Having considered the parties’ arguments and the law, the Court GRANTS Plaintiff’s RJN (ECF No. 12-15) and DENIES Defendant’s MTD (ECF No. 10).

         BACKGROUND

         Since 2005, Plaintiff has manufactured and sold pieces of broken tempered glass for use in fireplaces and fire pits. (Compl. ¶¶ 1, 9, ECF No. 1; see also Decl. of Matt Doll (Doll Decl.) ¶ 2, ECF No. 12-1.) Defendant is Plaintiff’s competitor and also sells fireplace and fire pit glass. (Compl. ¶ 1, ECF No. 1; see also Doll Decl. ¶ 4, ECF No. 12-1.)

         Defendant’s founder, Ed Jaunzemis, filed a patent application seeking to patent a process related to tumbled, polished, vibrated broken tempered glass pieces in 2005. (Compl. ¶ 10, ECF No. 1; see also Decl. of Charles F. Reidelbach (Reidelbach Decl.) ¶ 2, ECF No. 13-1.) In 2011, the U.S. Patent and Trademark Office (PTO) issued U.S. Patent No. 7, 976, 360 (the ’360 Patent). (Id.) After the ’360 Patent issued, Plaintiff filed an inter partes review petition with the PTO. (Id.) In 2011, the PTO rejected all of the claims of the ’360 Patent as obvious in light of prior art. (Id.) Defendant has appealed that ruling to the Federal Circuit. (Id.) Defendant has also filed other, related patent applications, one of which has been rejected and abandoned, and two of which are pending and awaiting reexamination. (Id.)

         On July 11, 2011, while the ’360 Patent was pending, Defendant filed another patent application which was granted, resulting in the issuance of U.S. Patent No. 8, 419, 505 (the ’505 Patent) on April 16, 2013. (Id. at ¶ 11; see also MTD 3, [2] ECF No. 10; Reidelbach Decl. ¶ 3, ECF No. 13-1.) Defendant failed to disclose to the PTO during prosecution of the ’505 Patent that the ’360 Patent had been rejected based on prior art. (Reidelbach Decl. ¶ 3, ECF No. 13-1.) Plaintiff’s counsel, Charles F. Reidelbach, even sent several letters to Defendant’s attorney of record advising him and his client of their duty of candor and good faith in dealing with the PTO. (Reidelbach Decl. ¶ 4, ECF No. 13-1.)

         The PTO issued an ex parte reexamination certificate of the ’505 Patent on November 26, 2014, which narrowed the claims to include a method for creating smooth, tempered glass pieces by placing the pieces into a tumbling apparatus and tumbling the fragments for a pre-determined period of time such that the surfaces of the glass fragments are smoother than prior to tumbling and have a substantially rounded, bead-like shape. (Compl. ¶ 11, ECF No. 1; see also MTD 3, ECF No. 10; Reidelbach Decl. ¶ 4, ECF No. 13-1.)

         On behalf of Defendant, Mr. Jaunzemis sent a series of emails to Plaintiff’s dealers in February 2015, attaching a copy of the ’505 Patent and threatening to file a complaint for patent infringement against Plaintiff’s dealers. (Compl. ¶ 13(a), ECF No. 1; see also Doll Decl. Ex. A, ECF No. 12-2; Doll Decl. Ex. B, ECF No. 12-3.) One email, for example, noted “we [Defendant] are and have started enforcing our patent rights. You will or may be notified by our legal team. Good luck with that. Let me know how that works out for you.” (Doll Decl. Ex. B at 7, ECF No. 12-3 at 3.) Plaintiff’s dealers forwarded the emails to Plaintiff. (See Doll Decl. Ex. A, ECF No. 12-2; Doll Decl. Ex. B, ECF No. 12-3.) Mr. Jaunzemis claims that he was unaware that these companies were dealers of Plaintiff at the time. (Reply Declaration of Edgar Jaunzemis (Jaunzemis Reply Decl.) ¶ 6), ECF No. 14-1.)

         In July 2015, Defendant filed a complaint for infringement of the ’505 Patent against various sellers of fireplace glass. (Compl. ¶ 13, ECF No. 1; see also Decl. of Edgar Edward Jaunzemis (Jaunzemis Decl.) ¶ 4(b), ECF No. 10-1.) Since filing that initial lawsuit, Defendant also has threatened repeatedly to sue Plaintiff and its dealers for infringement of the ’505 Patent. (Compl. ¶¶ 1, 13, ECF No. 1.)

         In September 2015, for example, Plaintiff’s CEO Matt Doll attended a convention in Chicago, at which representatives from other companies informed him that Defendant had sued or had threatened to sue their companies for patent infringement. (Doll Decl. ¶ 6, ECF No. 12-1.)

         In October 2015, Mr. Jaunzemis was interviewed for a newspaper article, which reported that Mr. Jaunzemis intended to hire dozens of attorneys nationwide to sue a multitude of companies for infringement of the ’505 Patent. (Id. at ¶ 13(b); see also Doll Decl. Ex. C, ECF No. 12-4.) Mr. Jaunzemis claims that he was not given the opportunity to edit what was printed and contests the accuracy of the statements attributed to him. (Jaunzemis Decl. ¶ 4, ECF No. 10-1.) Nevertheless, Defendant posted a copy of the article on its website and circulated a link to the article to Plaintiff’s dealers. (Doll. Decl. ¶ 7, ECF No. 12-1; see also Doll Decl. Ex. D, ECF No. 12-5; Doll Decl. Exs. E-H, ECF Nos. 12-6-9.)

         Also in October 2015, Mr. Jaunzemis sent a letter to Mr. Doll and his wife on behalf of Defendant, threatening to sue Plaintiff’s dealers. (Compl. ¶ 13(c), ECF No. 1; see also Jaunzemis Decl. Ex. A, ECF No. 10-2; Doll Decl. ¶ 8, ECF No. 12-1; Doll Decl. Ex. I, ECF No. 12-10.) The letter warned:

Now for a reality check, most likely you will never be in court with your opponent. In a strategy session, I learned to divide and conquer from within. How many dealers do you have? How many dealers are in harm’s way? What if 10 of your dealers get sued in 10 different states? . . . What if they lose? They will be looking for indemnification from you, can you afford that? . . . OK, now that the first ten get wiped out, then the onslaught of another 20? 30? 40? When will you get the message? How many suits can you afford? . . . At what cost will you concede? When you have won and have nothing left, what then?”

(Jaunzemis Decl. Ex. A, ECF No. 10-2 at 2; Doll Decl. Ex. I at 27, ECF No. 12-10 at 2; see also Compl. ¶ 13(c), ECF No. 1; Doll Decl. ¶ 8, ECF No. 12-1.) Mr. Jaunzemis disputes that this letter may be attributed to him. (Jaunzemis Decl. ¶ 5, ECF No. 10-1.) Although the envelope shows a return address of 3050 Painfield [sic] Road, Kettering, OH 45432, the letter was postmarked in Los Angeles area on October 1, 2015. (Jaunzemis Decl. Ex. A, ECF No. 10-2 at 3; Doll Decl. Ex. I at 28, ECF No. 12-10 at 3.) Defendant is a California corporation. (Compl. ¶ 4, ECF No. 1.) Another seller of fireglass products, Hearth Products Controls Company, is located at 3050 Plainfield Road, Kettering, OH, but representatives of that company have assured Mr. Doll that their company did not send the letter. (Doll Decl. ¶ 8 & n.1, ECF No. 12-1.)

         Finally, Mr. Jaunzemis sent a package to Plaintiff on behalf of Defendant in December 2015, which enclosed copies of the ’360 and ’505 Patents and stated that Plaintiff should consider the accompanying letter notice of Defendant’s patent rights. (Compl. ¶ 13(d), ECF No. 1; see ...


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