Case: 1:12-cv-00501-MRB Doc #: 109 Filed: 03/17/20 Page: 1 of 9 PAGEID #: 2008

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION

Red Carpet Studios,

Plaintiff, Case No. 1:12cv501

v. Judge Michael R. Barrett

Midwest Trading Group, Inc., et al.,

Defendants.

OPINION & ORDER

This matter is before the Court upon Defendant Midwest Trading Group’s Motion

in Limine. (Doc. 102). Plaintiff Red Carpet Studios has filed a Response (Doc. 107) and

Defendant filed a Reply (Doc.108).

I. BACKGROUND

This case arises out of a design patent, U.S. Design Patent No. D487,034 (“the

‘034 Patent”), which is entitled “Kinetic Sculpture” and claims “[t]he ornamental design for

a kinetic sculpture.” (Doc. 1-1, PAGEID# 7). Plaintiff Red Carpet Studios (“Red Carpet”)

claims that Defendant Midwest Trading Group Inc. (“MTG”), along with Defendants

Walgreen Company and CVS Pharmacy Inc. (collectively “the Retail Defendants”), sold

or offered to sell products which infringe the ‘034 Patent.

This case has a prolonged procedural history which will not be repeated here.

Remarkably, at this stage of the proceedings the parties still disagree on what remains to

be tried in this case. This Court has ruled that the Solar Spinner sold by the Retail

Defendants infringes the ‘034 Patent. (Doc. 100). In its Motion in LImine, Defendant
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Midwest Trading Group (“MTW”) maintains that before this matter can proceed to trial,

this Court must decide: (1) whether Plaintiffs' claimed invention is invalid for obviousness;

and (2) the amount of gross profits that must be allocated to the "article of manufacture,"

pursuant to 35 U.S.C. § 289.

Plaintiff Red Carpet Studios (“Red Carpet”) argues that MTG failed to plead

invalidity in its Answer and should not be permitted to amend its Answer to include

invalidity at this late stage. As to MTG's arguments regarding 35 U.S.C. § 289, Red

Carpet maintains that those arguments are premature.

II. ANALYSIS

A. Invalidity defense

The Patent Act states that the "following shall be defenses in any action involving

the validity or infringement of a patent and shall be pleaded: . . . (2) Invalidity of the patent

or any claim in suit on any ground specified in part II as a condition for patentability." 35

U.S.C. § 282(b)(2). “Invalidity is an affirmative defense that ‘can preclude enforcement

of a patent against otherwise infringing conduct.’” Commil USA, LLC v. Cisco Sys., Inc.,

575 U.S. 632, 135 S. Ct. 1920, 1929, 191 L. Ed. 2d 883 (2015) (quoting 6A Chisum on

Patents § 19.01, at 19–5 (2015)).

Under the Federal Rules of Civil Procedure, the allegations in any pleading “must

be simple, concise, and direct.” Fed.R.Civ.P. 8(d)(1). With respect to responses, a party

is required to do two things: 1) “state in short and plain terms its defenses to each claim

asserted against it,” and 2) “admit or deny the allegations asserted against it by an

opposing party.” Fed.R.Civ.P. 8(b)(1)(A) and (B). This Court is split on the question of

whether the heightened pleading standard set forth in the Supreme Court cases of Bell
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Atlantic Corp. v. Twombly, 550 U.S. 544, 555–56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)

and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) applies to

affirmative defenses. Ohio ex rel. Dewine v. Globe Motors, Inc., No. 3:18-CV-142, 2019

WL 3318354, at *3 (S.D. Ohio July 23, 2019) (collecting cases). Likewise, federal district

courts have reached different conclusions when considering how Twombly and Iqbal

apply to patent invalidity counterclaims and affirmative defenses. Palmetto Pharm. LLC

v. AstraZeneca Pharm. LP, No. 2:11-CV-00807-SB-JDA, 2012 WL 6025756, at *5 (D.S.C.

Nov. 6, 2012), adopted, No. 2:11-CV-00807, 2012 WL 6041642 (D.S.C. Dec. 4, 2012)

(collecting cases); but see GEOMC Co. v. Calmare Therapeutics Inc., 918 F.3d 92, 98

(2d Cir. 2019) (recently concluding in a case involving a contract dispute “that the

plausibility standard of Twombly applies to determining the sufficiency of all pleadings,

including the pleading of an affirmative defense, but with recognition that, as the Supreme

Court explained in Iqbal, applying the plausibility standard to any pleading is a ‘context-

specific’ task.”).

In its Answer, MTG plead: "[t]he patents at issue in the complaint were improperly

issued, are unenforceable and are void." (Doc. 45). MTG argues that this pleading is

sufficient because obviousness is one of the ways in which a patent may be improperly

issued or “void.” Red Carpet points out that MTG did not expressly plead “invalidity,” or

any statutory provision on which an invalidity defense could be based.

The Court concludes that MTG’s invalidity affirmative defense fails to meet the

minimal requirements of notice pleading under Federal Rule of Civil Procedure 8. In

Proctor & Gamble Co. v. Team Technologies, Inc., 2012 WL 6001753, *2 (S.D. Ohio

2012) this Court granted a motion to strike a § 101 invalidity affirmative defense because
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the accused infringer failed to plead any facts to support the defense. In its answer, the

defendant plead: “Team Tech asserts that each of the patents-in-suit 'is not directed to

patentable subject matter as the disclosed subject matter is non-statutory and as such

does not qualify as patentable subject matter under 35 U.S.C. § 101 and are [sic]

therefore invalid.” Id. at *1. This Court explained: “Conclusory allegations that simply

invoke a statutory provision are insufficient to state an affirmative defense under Section

101.” Id. at *2 (citing Iconfind, Inc. v. Google, Inc., No. 2:11–cv–00319, 2011 WL

4505779, at *1 (E.D.Cal. Aug. 2, 2011)). In addition, this Court stated: “[R]eference to

statutory provisions ... is insufficient notice of the basis for the relief the pleader seeks.”

Id. This Court then concluded:

Bearing in mind the expansive scope of Section 101, Team Tech has
nevertheless provided absolutely no factual basis for alleging that the
patents-in-suit refer to laws of nature, physical phenomena, or abstract
ideas, which are the only three exceptions to patentability. Team Tech's
affirmative defense simply makes the bare allegation that the subject matter
of the patents-in-suit is non-statutory. Despite Team Tech's assertion that
“Plaintiff is on notice,” in truth, Plaintiff has no notice whatsoever of the
factual basis for Team Tech's allegation that the patents-in-suit do not
concern patent-eligible subject matter. This affirmative defense is therefore
insufficiently pled and hereby stricken from the Answer.

Id. at *2.

This Court is not alone in finding that accused infringers who merely list code

sections and fail to provide any facts to support their affirmative defense of invalidity are

not sufficient to give plaintiffs notice of the counterclaims and defenses. See, e.g., Aspex

Eyewear, Inc. v. Clariti Eyewear, Inc., 531 F. Supp. 2d 620, 623 (S.D.N.Y. 2008) (“Mere

conclusory assertions are not sufficient to give plaintiffs notice of the counterclaims and

defenses and, thus, do not meet Rule 8(a)'s pleading standards.”); Groupon Inc. v.

MobGob LLC, 2011 WL 2111986, *1-5 (N.D. Ill. 2011) (merely identifying statutory
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sections of invalidity from the Patent Act is not sufficient to give notice of an invalidity

affirmative defense); Quality Edge, Inc. v. Rollex Corporation, 2017 WL 4082755, *5-6

(Fed. Cir. 2017) (“Rollex's invalidity counterclaim merely recites various sections of the

patent statute with no supporting facts, and its defenses are similarly boilerplate without

factual support.”); but see Wireless Ink Corp. v. Facebook, Inc., 787 F. Supp. 2d 298, 313

(S.D.N.Y. 2011) (invalidity affirmative defense which states that “[e]ach of the claims of

the ′983 patent is invalid, unenforceable, and/or void for failing to comply with one or more

of the requirements for patentability under the Patent Laws of the United States, including

but not limited to, 35 U.S.C. §§ 101, 102, 103, 112 et seq” satisfies Fed.R.Civ.P. 8, which

requires a pleader to “state” an affirmative defense).

Here, not only does MTG fail to use the term “invalidity,” but MTG does not cite to

the applicable provision governing obviousness. See 35 U.S.C. § 103(a) (“A patent is

invalid due to obviousness “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.”). MTG’s conclusory statements do not satisfy the

pleading requirements under Federal Rule of Civil Procedure 8.

The Court also notes that MTG did nothing to pursue defense until this very late

hour in the litigation. While the Court has certainly been complicit in the delay, at no time

did MTG put Red Carpet on notice that it intended to pursue an invalidity defense based

on obviousness. 1

1MTG points to two references to invalidity in the record: The Rule 30(b)(6) witness designated by

Defendant CVS testified that MTG believed the ‘034 patent was invalid; and Robert Lach, the inventor of
the '034 patent, was questioned by MTG during his deposition on the issue of obviousness. This does
not constitute notice that MTG intended to pursue an affirmative defense based on invalidity.
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At this stage of the litigation, the Court finds that MTG should not be permitted to

amend its Answer. Leave to amend should not be granted where there is “undue delay

in filing, lack of notice to opposing party, bad faith by the moving party, undue prejudice

to the opposing party, and futility of the amendment.” Seals v. Gen. Motors Corp., 546

F.3d 766, 770 (6th Cir. 2008) (citing Wade v. Knoxville Utils. Bd., 259 F.3d 452, 459 (6th

Cir. 2001)). Undue prejudice results when allowing a party to amend the pleadings would

“require the opponent to expend significant additional resources to conduct discovery and

prepare for trial” or cause considerable delay in resolving the dispute. Phelps v.

McClennan, 30 F.3d 658, 662–63 (6th Cir.1994); see also Wade v. Knoxville Utils. Bd.,

259 F.3d 452, 459 (6th Cir. 2001) (“When amendment is sought at a late stage in the

litigation, there is an increased burden to show justification for failing to move earlier.”).

Based on the record before it, the Court finds that there has been undue delay on the part

of MTG; and allowing MTG to amend its Answer at this time would cause undue prejudice

to Red Carpet because it would cause additional considerable delay in resolving the

dispute.

Accordingly, this Court finds it unnecessary to reach the issue regarding whether

Plaintiffs' claimed invention is invalid for obviousness.

B. 35 U.S.C. § 289

“Section 289 of the Patent Act provides a damages remedy specific to design

patent infringement.” Samsung Elecs. Co. v. Apple Inc., 137 S. Ct. 429, 432, 196 L. Ed.

2d 363 (2016). Section 289 provides that:

Whoever during the term of a patent for a design, without license of the
owner, (1) applies the patented design, or any colorable imitation thereof,
to any article of manufacture for the purpose of sale, or (2) sells or exposes
for sale any article of manufacture to which such design or colorable
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imitation has been applied shall be liable to the owner to the extent of his
total profit, but not less than $250, recoverable in any United States district
court having jurisdiction of the parties.

35 U.S.C. § 289.

The Supreme Court has explained that determining a damages award under § 289

“involves two steps. First, identify the ‘article of manufacture’ to which the infringed design

has been applied. Second, calculate the infringer’s total profit made on that article of

manufacture.” Samsung Elecs. Co. v. Apple Inc., 137 S.Ct. at 434.

The parties agree this Court should decide the first step of the analysis under 35

U.S.C. § 289, but they do not agree as to whether the second step of the analysis is to

be decided by a jury. Red Carpet maintains that there is no need for a jury trial in this

case. Red Carpet explains that Defendants did not make a jury demand in their Answers,

and even though Red Carpet initially made a jury demand, it has decided to forego that

demand.

MTG seems to ignore the lack of an operative jury demand in this case. Instead,

MTG forges ahead with its argument that this Court should determine that the “article of

manufacture” is the outer structural component of Defendants' solar spinner product, and

rule that any award of profits on sales should be limited to that article of manufacture.

However, the Court finds that those issues are not properly before the Court at this time.

Courts have developed a four factor test for purposes of determining the article of

manufacture: “(1) the scope of the design claimed in the patent, including the drawing

and written description; (2) the relative prominence of the design within the product as a

whole; (3) whether the design is conceptually distinct from the product as a whole; and

(4) the physical relationship between the patented design and the rest of the product.”
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Nordock, Inc. v. Sys., Inc., No. 11-CV-118, 2017 WL 5633114, at *4 (E.D. Wis. Nov. 21,

2017); Apple Inc. v. Samsung Elecs. Co., No. 11-CV-01846, 2017 WL 4776443, at *11

(N.D. Cal. Oct. 22, 2017)

In applying this test, this Court adopts the following analysis:

The plaintiff normally bears the burden of persuasion on all issues, including
damages. See Schaffer v. Weast, 546 U.S. 49, 56 (2005); Lucent Techs.,
Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009); Smithkline
Diagnostics, Inc. v. Helena Labs. Corp., 926 F.2d 1161, 1164 (Fed. Cir.
1991). The identification of the article of manufacture is part and parcel to
damages under § 289. Thus, the court concludes that the plaintiff bears the
burden of persuasion with respect to identifying the article of manufacture
and proving the defendant’s total profit from that article of manufacture.
Apple, 2017 U.S. Dist. LEXIS 177199, at *90.

However, once the plaintiff meets its initial burden of production with respect
to the article of manufacture and the defendant’s total profit on that article,
if the defendant contends that the article of manufacture is something else,
the defendant has the burden to produce evidence as to this alternative
article of manufacture. The defendant also has the burden to produce
evidence as to any deductions it believes are appropriate from the total
profit identified by the plaintiff. Apple, 2017 U.S. Dist. LEXIS 177199, at
*96–97 (citing Henry Hanger & Display Fixture Corp. of Am. v. Sel–O–Rak
Corp., 270 F.2d 635, 643 (5th Cir. 1959); Rocket Jewelry Box, Inc. v. Quality
Int'l Packaging, Ltd., 250 F. Supp. 2d 333, 341 (S.D.N.Y. 2003) vacated in
part on other grounds, 90 Fed.Appx. 543 (Fed. Cir. 2004) (unpublished);
Bergstrom v. Sears, Roebuck & Co., 496 F. Supp. 476, 497 (D. Minn. 1980).

Nordock, Inc. v. Sys., Inc., No. 11-CV-118, 2017 WL 5633114, at *3 (E.D. Wis. Nov. 21,

2017).

Red Carpet explains that it intends to present a brief on the issue of the article of

manufacture and proving Defendants’ total profit from that article of manufacture. The

Court finds it necessary to confer with the parties to determine a schedule for properly

presenting these issues to the Court.

III. CONCLUSION

Based on the foregoing, it is hereby ORDERED that:

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1. Defendant Midwest Trading Group’s Motion in Limine (Doc. 102) is DENIED; and

2. This matter is set for a status conference on March 24, 2020 at 2:00 pm.

IT IS SO ORDERED.

/s/ Michael R. Barrett

JUDGE MICHAEL R. BARRETT