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ArtSkills, Inc. v. Royal Consumer Products, LLC

United States District Court, D. Connecticut

December 3, 2018

ARTSKILLS, INC., Plaintiff,
v.
ROYAL CONSUMER PRODUCTS, LLC, Defendant.

          RULING AND ORDER ON MOTION FOR LEAVE TO AMEND

          Victor A. Bolden United States District Judge.

         On September 14, 2017, Artskills, Inc. (“Artskills”), filed a Complaint against Royal Consumer Products, LLC (“RCP”), claiming that RCP infringed on two of Artskills's patents. Complaint, dated Sept. 24, 2017 (“Compl.”), ECF No. 1. On January 30, 2018, RCP filed an Amended Answer with counterclaims, denying Artskills's claims and asserting, inter alia, that Artskills had engaged in false marking of its products and that the patents at issue were invalid. First Amended Answer, dated January 30, 2018 (“First Am. Ans.”), ECF No. 34.

         On February 13, 2018, Artskills moved to dismiss RCP's counterclaims alleging false marking. Motion to Dismiss, dated Feb. 13, 2018 (“Mot. to Dismiss”), ECF No. 40. The Court granted Artskills's motion to dismiss on July 20, 2018, but allowed RCP to file a motion for leave to amend its counterclaims by August 24, 2018, to the extent that the deficiencies identified in the ruling could be addressed. Ruling and Order on Mot. to Dismiss, dated July 20, 2018 (“Order”), ECF No. 58.

         On August 24, 2018, RCP moved for leave to amend its Answer and Counterclaims. Motion for Leave to Amend, dated Aug. 24, 2018 (“Mot. to Amend”), ECF No. 65.

         For the reasons explained below, RCP's motion is GRANTED.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         A. Factual Allegations

         Artskills, a Pennsylvania corporation, “develops and sells poster boards and poster board accessory products, ” including a “Trifold Display Board with Header.” Compl. ¶ 1. Artskills claims that its Trifold Display Board is “a patented display board of the type used to display information for presentation of any kind, such as presentations in classrooms, science fairs, offices, and household related displays, ” and that it is “uniquely designed to remain securely closed and undamaged until ready for use.” Id. ¶ 2.

         Artskills alleges that it introduced a number of poster board accessory products in 2005 “in an effort to create a niche industry for poster board accessory products.” Id. ¶¶ 11-12. Artskills alleges that its “poster board accessory products line was an original and entirely new development in the paper and stationary industry, ” and that it “now sells poster board accessory products to more than sixty thousand stores across the country, including large retailers such as Wal-Mart, Target, CVS, Walgreens, and Michaels.” Id. ¶ 12. Artskills alleges that because of its efforts at creating this niche market, “poster board accessory products became a new category within the stationary industry, and Artskills became the leader of that niche industry.” Id.

         Artskills alleges that RCP, a Delaware limited liability corporation headquartered in Norwalk, Connecticut, “is a supplier of office products and related accessories for the consumer and business markets, and sells a variety of products such as printing paper, poster boards, and poster board accessories, ” including “the Eco Brites Project Board with Header” (“RCP Board”). Id. ¶¶ 3-4. Artskills alleges that RCP, which has been in the paper business for many years, began to introduce poster board products in the later 2000's to compete with Artskills products. Id. ¶ 13. Artskills claims that “in the past [RCP] has introduced products that were deliberately designed to duplicate the appearance of Artskills products.” Id. ¶ 14. Artskills also alleges that “Artskills is RCP's chief competitor in this market, and RCP continues to monitor Artskills's products and competitive activity.” Id. ¶ 18.

         In 2012, Artskills allegedly began to sell its Trifold Display Board, “a multi-panel display board of the general type used [to] display information for presentations of any kind, such as presentations in classrooms, science fairs, offices, and household related displays.” Id. ¶ 19. Artskills claims that “[a] key advantage of the Artskills Trifold Display Board is that, in contrast to previous designs, the Artskills Board consists of a single sheet of material, including three display panels and a header panel, which is uniquely configured to stay securely closed and intact until used by the consumer.” Id.

         Artskills alleges that, in 2013, RCP “introduced a product called Royal Eco Brites Project Board with Header, ” which allegedly included “all the unique functional features of the Artskills Trifold Display Board, and, like the Artskills Board, is configured in the same manner to stay securely closed and intact until used by the consumer.” Id. ¶ 21. Artskills alleged that “RCP copied the appearance, design, and functional features of the Artskills Trifold Display Board in RCP's Project Board.” Id. ¶ 22. Specifically, Artskills alleged that the RCP Eco Brites Project Board infringed two of its patents: U.S. Patent No. 9, 495, 886 (the “‘886 Patent”), entitled “Multi-Panel Display Device, Blank, and Method of Forming the Device, ” and U.S. Patent No. 9, 076, 352 (the “‘352 Patent”), entitled “Multi-Panel Display Device, Blank, and Method of Forming the Device.” Id. ¶¶ 24, 40; see also ‘886 Patent, annexed as Ex. A to Complaint, ECF No. 1-1; ‘352 Patent, annexed as Ex. B to Complaint, ECF No. 1-2.

         B. Procedural History

         On September 14, 2017, Artskills sued RCP. Compl. RCP filed its Answer on January 11, 2018. Answer, dated Jan. 11, 2018, ECF No. 23. On January 30, 2018, RCP filed an Amended Answer with affirmative defenses and counterclaims. First Am. Ans. RCP denied Artskills's allegations of infringement, arguing that its Eco Brites Project Board does not directly infringe Artskills's patents, either literally or under the doctrine of equivalents, and does not contributorily infringe. Id. at 7. RCP also asserted additional affirmative defenses in its First Amended Answer including, inter alia, invalidity and prosecution history estoppel. Id.

         RCP also alleged counterclaims against Artskills of false marking of U.S. Patent No. D739, 467, D754, 253, and D706, 872 (the “‘467 Patent, ” “‘253 Patent, ” and “‘872 Patent, ” respectively). Id.at 9-18. RCP alleged that Artskills falsely affixed the ‘467 Patent, ‘253 Patent, and ‘872 Patent to the Trifold Display Board, and to advertising, marketing, and promotional materials for the Trifold Display Board, for the purposes of deceiving the public. Id. at 14, 17. RCP further asserted that Artskills's alleged false statements relating to the patents have discouraged and deterred parties from purchasing and/or using products from RCP, and are likely to continue to discourage and deter parties; as a result, RCP claims it has been damaged by Artskills's statements. Id. at 12, 15, 17.

         Specifically, RCP alleged in its three false marking counterclaims that the Trifold Display Board does not practice the ‘467 Patent, ‘253 Patent, and ‘872 Patent because: (1) the Trifold Display Board “features slots on the free end of the header panel, ” while the patents claim “a design with slots on the edge that is attached to another piece via a ‘preweakened area, '” id. at 9-10; 12-13; 15-16; (2) the Trifold Display Board “features a slot with a ridge, ” while the patents “claim a design featuring a slot that is straight, without any ridge, ” id. at 11, 13, 16; and (3) the Trifold Display Board “features a header panel mounted by adhesive directly on top of a side panel, ” while the patents “claim a design where the header panel is attached via a [preweakened] area along the side of a side panel, such that the device would lie flat and feature four panels (two side panels, a center panel, and the header panel), ” and “[t]here is no claim that would cover a design where the header panel lies directly on top of a side panel before it is removed, as practiced by the Trifold Display, ” id. at 11, 13-14, 16.

         On February 13, 2018, Artskills moved to dismiss RCP's counterclaims under Federal Rules of Civil Procedure 12(b)(6) and 9(b). Mot. to Dismiss. RCP opposed the motion. Objection to Mot. to Dismiss, dated Mar. 2, 2018, ECF No. 43.

         The Court heard argument on the motion on July 6, 2018. See Minute Entry, dated July 6, 2018, ECF No. 56. On July 20, 2018, the Court granted the motion, finding that RCP failed to plead all the elements of a false marking claim under 35 U.S.C. § 292 in accordance with Rule 9(b)'s heightened pleading standard. See Order at 16 (citing In re BP Lubricants USA Inc., 637 F.3d 1307, 1309 (Fed. Cir. 2011) (“This court holds that Rule 9(b)'s particularity requirement applies to false marking claims[.]”)). The Court, however, allowed RCP to file a motion for leave to amend its counterclaims by August 24, 2018, to the extent that the deficiencies identified in the ruling could be addressed. Id.

         On August 24, 2018, RCP moved for leave to amend its Answer and counterclaims under Federal Rule of Civil Procedure 15 and the Court's Order. Mot. to Amend. In addition to addressing the deficiencies identified in the Court's Order, RCP seeks leave to include a new counterclaim and affirmative defense alleging inequitable conduct. Proposed Second Amended Answer and Counterclaims, dated Aug. 24, 2018 (“Proposed Second Am. Ans.”), annexed as Ex. 1 to Mot. to Amend, ECF No. 64-1, at 9-12. RCP is adding this counterclaim and affirmative defense now, it says, because of recent discovery involving Stephen P. Dashe, the sole named inventor on the Artskills patents. See Mot. to Amend at 4-5 (“Artskills did not produce any documents from the inventor of the Asserted Patents, Stephen Dashe, until June 27, 2018. Additional facts relating to RCP's affirmative defense and counterclaim of inequitable conduct were ascertained during the deposition of Mr. Dashe, which did not take place until July 18, 2018.”) (citations omitted).

         RCP also seeks leave to amend its existing affirmative defense of invalidity by including additional information that it obtained during discovery-specifically, a list of prior art and claim charts served by RCP on Artskills on May 31, 2018, which RCP claims collectively support its affirmative defense of invalidity. See Proposed Second Am. Ans. at 7-8; Mot. to Amend at 4 (“RCP obtained additional information regarding invalidity during discovery and timely produced that information to ArtSkills, including through detailed claim charts submitted in response to an interrogatory relating to RCP's invalidity theories served on May 31, 2018.”).

         On September 14, 2018, Artskills opposed the motion, arguing that RCP should be precluded from amending its counterclaims because: (1) RCP's proposed amendment does not cure the deficiencies cited in the Court's dismissal order; and (2) RCP's motion vastly exceeds the limited scope of the Court's Order by adding a new counterclaim for inequitable conduct and a new affirmative defense alleging inequitable conduct, and by amending its third affirmative defense so as to incorporate by reference a list of fifty-five patents and thirty-five pages of claim charts. Plaintiff's Memorandum Opposing Mot. to Amend, dated Sep. 14, 2018 (“Pl.'s Mem.”), ECF No. 78, at 10.

         On September 27, 2018, RCP submitted a reply in support of its motion. Reply, dated Sept. 27, 2018, ECF No. 86.

         II. STANDARD OF REVIEW

         Federal Rule of Civil Procedure 15(a) provides that parties may either amend pleadings once as a matter of course within 21 days after serving the pleading or, after 21 days, move for leave to amend. Fed.R.Civ.P. 15(a). The “court should freely give leave when justice so requires.” Id. If the underlying facts or circumstances relied upon by a party may be a proper subject of relief, that party should be given the opportunity to test its claims on the merits. Foman v. Davis, 371 U.S. 178, 182 (1962). In the absence of any apparent or declared reason for denying leave, the leave sought should be “freely given.” Id.

         Thus, while the decision to grant leave to amend is within the discretion of the court, the court must give some “justifying reason” if it denies leave. Id. at 182. Reasons for denying leave to amend include “undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, or futility of amendment.” Id.; see also Lucente v. Int'l Bus. Machs. Corp., 310 F.3d 243, 258 (2d Cir. 2002) (noting leave to amend may be denied when amendment is “unlikely to be productive, ” such as when an amendment is “futile” and “could not withstand a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6).”) (internal citations omitted); Park B. Smith, Inc. v. CHF Indus. Inc., 811 F.Supp.2d 766, 779 (S.D.N.Y. 2011) (“While mere delay, absent a showing of bad faith or undue prejudice, is not enough for a district court to deny leave to amend, the longer the period of an unexplained delay, the less will be required of the nonmoving party in terms of a showing of prejudice.”) (internal quotation marks omitted).

         III. DISCUSSION

         A. False Marking Counterclaim

         “An amendment to a pleading is futile if the proposed claim could not withstand a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6).” Lucente v. IBM, 310 F.3d 243, 258 (2d Cir. 2002); see also Donovam v. Am. Akandia Life Assur. Corp., 217 F.R.D. 325 (S.D.N.Y. 2003) (“Where a proposed amended complaint cannot itself survive a motion to dismiss, leave to amend would be futile and may clearly be denied”), aff'd, 96 Fed.Appx. 779 (2d Cir. 2004). A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of a complaint; to survive such a motion, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Protegrity Corp. v. AJB Software Design, Inc., No. 3:13-cv-01484, 2015 WL 461041, at *1 (D. Conn. Feb. 2. 2015) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). While factual allegations are accepted as true, a complaint “must offer more than ‘labels and conclusions,' or ...


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