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Advanced Steel Recovery, LLC v. X-Body Equipment, Inc.

United States District Court, E.D. California

August 8, 2016

ADVANCED STEEL RECOVERY, LLC, Plaintiff
v.
X-BODY EQUIPMENT, INC., JEWELL ATTACHMENTS, LLC, J.D.M.L., INC., dba STANDARD INDUSTRIES, and ALLSTATE PAPER & METAL RECYCLING CO., INC., Defendants.

          ORDER

         The matter is before the court on a motion to dismiss and for sanctions brought by defendants X-Body Equipment (X-Body) and Jewell Attachments, LLC (Jewell). Mot., ECF No. 13. Plaintiff Advanced Steel Recovery, LLC (Advanced Steel) opposes, Opp’n, ECF No. 28, and defendants have replied. Reply, ECF No. 36-1. As explained below, the court GRANTS defendants’ motion to dismiss with leave to amend and DENIES the motion for sanctions.

         I. BACKGROUND

         A. Factual Allegations

         Plaintiff owns United States Patent 9, 056, 731 (the ‘731 Patent) by virtue of an assignment, which is the patent at issue here. Compl. ¶ 14, ECF No. 1. The ‘731 Patent, titled “Container Packer System and Method, ” was issued on June 16, 2015. Id. ¶ 15. It is a continuation-in-part (CIP) application of United States Patent 8, 061, 950 (the ‘950 Patent), which itself was a CIP application of United States Patent 7, 744, 330 (the ‘330 Patent). The ‘330 Patent and the ‘950 Patent previously were litigated in another case in this district that was later appealed to the Federal Circuit (Prior Litigation). See Case No. 12-1004-GEB-DAD; Advanced Steel Recovery, LLC v. X-Body Equip., Inc., 808 F.3d 1313 (Fed. Cir. 2015). On appeal, the Federal Circuit affirmed the district court’s decision that the Acculoader device, the same device at issue here, did not infringe the asserted claims of the ‘950 Patent literally or under the doctrine of equivalents.[1] See generally id.

         The ‘731 Patent describes a system and method for packing overseas containers with materials. Compl. ¶ 16. The system described includes a transfer base and a container packer. Id. The transfer base contains control systems, among other things, to operate the system and receive the container. Id. Defendants make, use, offer to sell, and/or sell a product known as the Acculoader that infringes at least one claim of the ‘731 Patent. Id. Specifically, defendant Jewell manufactures the Acculoader and sells it to defendant X-Body. Id. ¶ 18. X-Body then resells the Acculoader to users, including defendants Standard Industries and Allstate Paper & Metal Recycling Co., Inc., who have purchased or otherwise make arrangements to use the Acculoader for loading various materials into transport containers. Id. Plaintiff provided a written notice to defendants of the ‘731 Patent on July 16, 2015. Id. ¶ 17.

         Plaintiff has not licensed or authorized defendants, or its dealers, customers, or affiliates, to sell or use a system within the scope of the claims in the ‘731 Patent. Id. ¶ 20. Defendants have known about the ‘731 Patent since July 16, 2015 and the Prior Litigation, in which the complaint was filed by plaintiff on April 16, 2012, but have not altered their conduct with respect to the Acculoader. Id. ¶ 22; Compl., Advanced Steel Recovery, LLC v. X-Body Equipment, Inc., No. 12-1004 (E.D. Cal. Apr. 16, 2012), ECF No. 1.

         B. Procedural History

         On January 25, 2016, plaintiff filed the complaint in this action for monetary damages, alleging defendants infringed the ‘731 Patent within the meaning of 35 U.S.C § 284, from at least July 16, 2015, when defendants were notified of the existence of the ‘731 Patent, if not as early as June 16, 2015, the issue date of the ‘731 Patent. Compl. ¶ 23. Plaintiff also seeks a permanent injunction to prevent defendants’ further violation of the ‘731 Patent, and attorneys’ fees and costs. Id. On March 22, 2016, defendants filed the pending motion, supported by declarations and exhibits.

         II. RULE 12(b)(6) MOTION TO DISMISS OR RULE 56 SUMMARY JUDGMENT MOTION

         A. Parties’ Arguments

         The threshold issue here is whether defendants can move to dismiss on the basis that defendants’ alleged violation of the patent predated the patent’s priority date. Plaintiff argues defendant’s motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) should be denied, because defendants’ argument is a factual issue that cannot be resolved at the motion to dismiss stage. Opp’n at 6. Plaintiff further argues the Rule 12(b)(6) motion to dismiss should not be converted to a Rule 56 motion for summary judgment, despite defendant’s submission of materials outside the complaint, because claim construction and expert discovery are required to resolve the issue of priority date, and even if not, a substantial continuance should be provided for plaintiff to respond to the motion if so converted. Opp’n at 9-10. Defendant agrees the motion need not be converted. Reply at 8. Defendant argues plaintiff’s claims are not plausible based on the complaint, its attachments, and matters properly subject of judicial notice. Id. Finally, both plaintiff and defendants also address the determination of a priority claim, which the court will not address at this point for reasons explained below.

         B. Legal Standards in Patent Cases

         A complaint need contain only a “short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), not “detailed factual allegations, ” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). But this rule demands more than unadorned accusations; “sufficient factual matter” must make the claim at least plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A party may thus move to dismiss for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). The motion may be granted only if the complaint lacks a “cognizable legal theory” or if its factual allegations do not support a cognizable legal theory. Hartmann v. Cal. Dep’t of Corr. & Rehab., 707 F.3d 1114, 1122 (9th Cir. 2013). In making this context-specific evaluation, this court “must presume all factual allegations of the complaint to be true and draw all reasonable inferences in favor of the nonmoving party.” Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). This rule does not apply to “‘a legal conclusion couched as a factual allegation, ’” Papasan v. Allain, 478 U.S. 265, 286 (1986) quoted in Twombly, 550 U.S. at 555, nor to “allegations that contradict matters properly subject to judicial notice” or to material attached to or incorporated by reference into the complaint. Sprewell v. Golden State Warriors, 266 F.3d 979, 988-89 (9th Cir. 2001).

         In deciding a motion to dismiss, “courts generally consider only the allegations contained in the complaint, exhibits attached to the complaint and matters of public record” when reviewing a motion to dismiss. Outdoor Media Group, Inc. v. City of Beaumont, 506 F.3d 895, 899-900 (9th Cir. 2007) (citing Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007)). Rule 12(d) addresses the use of materials which are outside the pleadings in motions to dismiss under Rule 12(b)(6). Fed.R.Civ.P. 12(d); see also Olsen v. Idaho State Bd. of Medicine, 363 F.3d 916, 922 (9th Cir. 2004). When such materials are presented, the motion is treated as one for summary judgment. Olsen, 363 F.3d at 922. However, certain additional materials may be considered without converting the motion to dismiss into a motion for summary judgment. While a court is generally limited to the four corners of the complaint, the court may consider exhibits attached to the complaint, see Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n.19 (9th Cir. 1989), and documents incorporated by reference into the complaint. See Van Buskirk v. Cable News Network, Inc., 284 F.3d 977, 980 (9th Cir. 2002). Documents upon whose contents the complaint necessarily relies-even if the complaint does not explicitly allege their contents-and whose authenticity and relevance are uncontested, are considered incorporated by reference. See Coto Settlement v. Eisenberg, 593 F.3d 1031, 1038 (9th Cir. 2010); Knievel v. ESPN, 393 F.3d 1068, 1076-77 (9th Cir. 2005). The court may, in addition, take into ...


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