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Nalu Kai Inc. v. Haw. Airboards, LLC

United States District Court, D. Hawaii

December 4, 2014

NALU KAI INCORPORATION d/b/a NAISH SAILS HAWAII, Plaintiff,
v.
HAWAII AIRBOARDS, LLC, Defendant

For Nalu Kai Incorporated, doing business as Naish Sails Hawaii, Plaintiff: Duncan Palmatier, LEAD ATTORNEY, PRO HAC VICE, Moscow, ID; James J. Bickerton, Bickerton Lee Dang & Sullivan, Honolulu, HI.

For Hawaii Airboards, LLC, Defendant, Counter Claimant: Alan K. Lau, LEAD ATTORNEY, Tsugawa Biehl Lau & Muzzi, LLLC, Honolulu, HI; Jeffrey R. Moran, Joseph M. Vanek, LEAD ATTORNEYS, PRO HAC VICE, Vanek, Vickers & Masini P.C., Chicago, IL; Martin Goering, LEAD ATTORNEY, PRO HAC VICE, The Law Offices of Eugene M. Cummings, P.C., Chicago, IL; Tedson H. Koja, Moseley Biehl Tsugawa Lau & Muzzi, Honolulu, HI.

For Nalu Kai Incorporated, Counter Defendant: Duncan Palmatier, LEAD ATTORNEY, PRO HAC VICE, Moscow, ID; James J. Bickerton, Bickerton Lee Dang & Sullivan, Honolulu, HI.

ORDER GRANTING HAWAII AIRBOARDS, LLC'S MOTION FOR SUMMARY JUDGMENT THAT U.S. PATENT NO. 6, 066, 016 IS VALID; AND DENYING NALU KAI INCORPORATED'S MOTION FOR PARTIAL SUMMARY JUDGMENT OF PATENT INVALIDITY

Leslie E. Kobayashi, United States District Judge.

Before the Court are Defendant/Counter-Claimant Hawaii Airboards, LLC's (" HAB") Motion for Summary Judgment that U.S. Patent No. 6, 066, 016 Is Valid (" HAB Motion"), and Plaintiff/Counterclaim Defendant Nalu Kai Incorporated's (" Nalu Kai") Motion for Partial Summary Judgment of Patent Invalidity (" Nalu Kai Motion"), both filed on July 26, 2014 (collectively, " Motions"). [Dkt. nos. 36, 37.] The parties filed their memoranda in opposition on September 10, 2014, and their replies on October 13, 2014. [Dkt. nos. 46, 48, 50, 51.] These matters came on for hearing on October 27, 2014. After careful consideration of the Motions, supporting and opposing memoranda, and the arguments of counsel, HAB's Motion is HEREBY GRANTED and Nalu Kai's Motion is HEREBY DENIED for the reasons set forth below.

BACKGROUND

The relevant factual and procedural background of this case is set forth in this Court's August 29, 2014 Order Granting in Part and Denying in Part Counter-Claimant Hawaii Airboards, LLC's Motion to Strike Certain of Counter-Defendant's Affirmative Defenses Pursuant to Fed.R.Civ.P. 12(f) (" 8/29/14 Order"), [dkt. no. 45, [1] and this Court will only repeat the background that is relevant to the instant Motions.

This dispute centers on U.S. Patent No. 6, 066, 016 (" the '016 Patent"), which Robert Yonover applied for on November 9, 1998, and the United States Patent and Trademark Office (" the PTO") issued on May 23, 2000, for an " inflatable transportable water craft for survival or recreational applications." [Nalu Kai's Local Rule 56.1 Concise Statement of Undisputed Facts in Support of Fed.R.Civ.P. 56(a) Motion for Partial Summary Judgment of Patent Invalidity (" Nalu Kai CSOF"), filed 7/26/14 (dkt. no. 37-2), Decl. of Duncan Palmatier (" Palmatier Decl."), Exh. DP1 ('016 Patent).] Nalu Kai, which manufactures and sells Stand Up (" SUP") Paddleboards, began licensing the '016 Patent from HAB in 2011, but stopped paying royalties when a third-party challenged the patent's validity on September 14, 2012. After a protracted review process, on November 15, 2013, the PTO issued its Ex Parte Reexamination Certificate (9941st) (" the Reexamination Certificate"), which incorporated some old claims from the '016 Patent and some newly amended claims. [Palmatier Decl., DP2 (Reexamination Certificate).]

Nalu Kai, however, has continued to refuse to either pay royalties on the original license agreement or negotiate a new license. Instead, on March 5, 2014, it filed the instant lawsuit, alleging, alternatively, that the '016 Patent is invalid (" Count I"), it is unenforceable due to fraud on the PTO and patent misuse (" Counts II and IV"), and that Nalu Kai's SUP paddleboards do not infringe on any valid and enforceable claim from the '016 Patent (" Count III"). Nalu Kai seeks the following relief: declaratory judgments that the '016 Patent is invalid and unenforceable, that Nalu Kai's products do not infringe on any valid or enforceable claims from the '016 Patent, and that HAB misused, and is estopped from enforcing, the '016 Patent; damages for HAB's patent misuse; punitive damages; attorneys' fees and costs; and all other appropriate relief.[2] [Complaint, filed 3/5/14 (dkt. no. 1), at pgs. 13-14.]

While the parties' memoranda discuss HAB's purported fraud on the PTO, they have agreed that the only issue raised by the Motions is the validity of the '016 Patent. [Joint Rule 26(f) Report (" Rule 26(f) Report"), filed 6/2/14 (dkt. no. 25), at 5.] Thus, this Order addresses only on validity as well. Further, Nalu Kai limits its motion to invalidity based on obviousness, although the Complaint includes other bases for invalidity, including anticipation. The HAB Motion focuses on both obviousness and anticipation. The Court FINDS that the '016 Patent was not obvious in light of the prior art at the time Yonover applied for the patent, nor anticipated, for the reasons set forth below.

STANDARD

" To receive patent protection a claimed invention must, among other things, fall within one of the express categories of patentable subject matter, § 101, and be novel, § 102, and nonobvious, § 103." Microsoft Corp. v. i4i Ltd. P'ship, 131 S.Ct. 2238, 2242, 180 L.Ed.2d 131 (2011).

Regarding anticipation, prior to 2012, [3] 35 U.S.C. § 102(a)-(b) (2011), provided, in pertinent part:

A person shall be entitled to a patent unless --

(a) the invention was known or used by others in this country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent, or
(b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States . . . .

The Federal Circuit has described the standard for anticipation as follows:

" Anticipation requires the presence in a single prior art disclosure of all elements of a claimed invention arranged as in the claim." Connell v. Sears, Roebuck & Co., 722 F.2d 1542, 1548 (Fed. Cir. 1983). The requirement that the prior art elements themselves be " arranged as in the claim" means that claims cannot be " treated . . . as mere catalogs of separate parts, in disregard of the part-to-part relationships set forth in the claims and that give the claims their meaning." Lindemann Maschinenfabrik GMBH v. Am. Hoist & Derrick Co., 730 F.2d 1452, 1459 (Fed. Cir. 1984). " [U]nless a reference discloses within the four corners of the document not only all of the limitations claimed but also all of the limitations arranged or combined in the same way as recited in the claim, it cannot be said to prove prior invention of the thing claimed and, thus, cannot anticipate under 35 U.S.C. § 102." Net MoneyIN, Inc. v. VeriSign, Inc., 545 F.3d 1359, 1371 (Fed. Cir. 2008) (emphasis added).
. . . . For a claim to be anticipated, each claim element must be disclosed, either expressly or inherently, in a single prior art reference, and the claimed arrangement or combination of those elements must also be disclosed, either expressly or inherently, in that same prior art reference.

Therasense, Inc. v. Becton, Dickinson & Co., 593 F.3d 1325, 1332-33 (Fed. Cir. 2010) (some alterations in Theransense).

Regarding obviousness (and also prior to 2012), 35 § U.S.C. 103(a) (2011) provided:

A patent may not be obtained though the invention is not identically disclosed or described as set forth in section 102 of this title, if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains. Patentability shall not be negatived by the manner in which the invention was made.

The Federal Circuit has described the standard for obviousness as follows:

A party seeking to invalidate a patent based on obviousness must demonstrate " by clear and convincing evidence that a skilled artisan would have been motivated to combine the teachings of the prior art references to achieve the claimed invention, and that the skilled artisan would have had a reasonable expectation of success in doing so." Pfizer, Inc. v. Apotex, Inc., 480 F.3d 1348, 1361 (Fed. Cir. 2007). Clear and convincing evidence places in the fact finder " an abiding conviction that the truth of [the] factual contentions are highly probable." Colorado v. New Mexico, 467 U.S. 310, 316, 104 S.Ct. 2433, 81 L.Ed.2d 247 (1984) (quotation marks omitted).
The obviousness determination turns on underlying factual inquiries involving: (1) the scope and content of prior art, (2) differences between claims and prior art, (3) the level of ordinary skill in pertinent art, and (4) secondary considerations such as commercial success and satisfaction of a long-felt need. Graham v. John Deere Co., 383 U.S. 1, 17, 86 S.Ct. 684, 15 L.Ed.2d 545 (1966). The Supreme Court has explained that the Federal Circuit's " teaching, suggestion or motivation" test provides helpful insight into the obviousness question as long as it is not applied rigidly. KSR Int'l Co. v. Teleflex Inc., 550 U.S. 398, 127 S.Ct. 1727, 1741, 167 L.Ed.2d 705 (2007). Accordingly, under KSR, " it remains necessary to identify some reason that would have led a chemist to modify a known compound in a particular manner to establish prima facie obviousness of a new claimed compound." Takeda Chem. Indus., Ltd. v. Alphapharm Pty., Ltd., 492 F.3d 1350, 1357 (Fed. Cir. 2007).
If a patent challenger makes a prima facie showing of obviousness, the owner may rebut based on " unexpected results" by demonstrating " that the claimed invention exhibits some superior property or advantage that a person of ordinary skill in the relevant art would have found ...

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