Free Memorandum in Opposition - District Court of Delaware - Delaware

Case 1:08-cv-00561-UNA

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

ANSELL HEALTHCARE PRODUCTS LLC, and ANSELL PROTECTIVE PRODUCTS INC., Counterclaimants, C.A. 1:08-CV-585-RMC v. TILLOTSON CORPORATION, Counterclaim Defendant.

ANSELL'S MEMORANDUM IN OPPOSITION TO TILLOTSON'S MOTION TO STAY PROCEEDINGS

I.

INTRODUCTION

This Counterclaim was filed in the United States International Trade Commission ("ITC") by counterclaimants Ansell Healthcare Products LLC and Ansell Protective Products Inc. (collectively "Ansell") on April 3, 2008. The Counterclaim was removed to this Court pursuant to 19 U.S.C. § 1337(c) and 19 C.F.R. § 210.14(e) on April 4, 2008. Counterclaim defendant Tillotson Corporation ("Tillotson") has now filed three dilatory motions in the hopes of deferring an adjudication of the claims asserted by Ansell while it continues to enter into agreements with customers and potential customers of Ansell, whereby those customers and potential customers agree not to purchase nitrile gloves from distributors such as Ansell for the lifetime of Tillotson's U.S. Patent No. Re. 35,616 ("the '616 patent").

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On April 23, 2008, Tillotson first filed a frivolous and disfavored motion for a more definitive statement. Notwithstanding the provisions of Fed. R. Civ. P. 8(a)(1), Tillotson claimed that Ansell was obliged to allege facts from which Tillotson could ascertain the choice of law. Rather than contribute to the delay that responding to the motion would cause, Ansell simply filed and served an Amended Counterclaim and mooted Tillotson's motion. Even though not entitled to make a second Rule 12 motion this time now attacking venue, see Fed. R. Civ. P. 12(g)(2), Tillotson did so on May 15, 2008. That motion has since been denied. Tillotson has now, on July 29, 2008, almost four months after this Counterclaim was filed, moved to stay this case until a final decision in the ITC, which is expected by November 24, 2008. [See Tillotson Mem. at 2]. There is no good cause for a stay; there will be no hardship or unfairness to Tillotson if a stay is denied; and Ansell would be prejudiced if the stay is granted. Tillotson's motion for a stay should be denied.

II.

ARGUMENT

A.

The Equities Do Not Favor The Stay Requested By Tillotson

As noted by Tillotson citing Fairview Hospital v. Leavitt, C.A. No. 05-1065 (RWR), 2007 WL 1521233 at *1-3 (D.D.C. May 22, 2007), the "Court should consider several factors in weighing the equities of a stay, including the stay's: (1) impact on the efficient resolution of this case; (2) effect on the use of judicial resources; (3) ability to avoid inconsistent judgments; and (4) potential to threaten undue prejudice to Ansell." [Tillotson Mem. at 3]. An analysis of these four factors does not favor the stay requested by Tillotson.

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1.

A stay will disrupt the efficient resolution of this case.

The first item of relief set forth in Ansell's Counterclaim is the request for "[a] permanent injunction prohibiting Tillotson from asserting or threatening to assert infringement of the Reissue '616 patent against the Ansell counterclaimants, their related corporations, their suppliers, their customers and their potential customers." [Counterclaim at p. 6]. The '616 patent expires on May 11, 2010, so time is of the essence in order for the requested injunctive relief to be meaningful. Since most of the discovery on the issues of patent invalidity and unenforceability has been completed in the ITC proceeding from which this Counterclaim was removed, only a short fact discovery period is needed. The parties met and agreed on the following schedule which was submitted to the Court on July 11, 2008:

Rule 26(a) Initial Disclosures Deadline for Joinder of Parties

July 25, 2008 [Ansell position] August 8, 2008 [Tillotson position] 45 days from service and filing of Answer

Deadline for Amendment of Pleadings Close of Fact Discovery Opening Expert Reports on Issues on Which Party Bears Burden of Proof at Trial Responsive Expert Reports Completion of Expert Depositions

30 days from service and filing of Answer October 24, 2008 November 21, 2008

December 19, 2008 January 30, 2009

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Last Day to File Dispositive Motions Oppositions to Dispositive Motions Due Reply Briefs in Support of Dispositive Motions Pretrial Conference Trial Begins

March 2, 2009 March 23, 2009

April 6, 2009

Hopefully, this will permit a trial during the summer of 2009. Staying the case would clearly disrupt this agreed-upon schedule and the efficient and just resolution of this case. It is no mere bromide that justice delayed is justice denied. Indeed, it is a fundamental precept that the Federal Rules of Civil Procedure should be "administered to secure the just, speedy and inexpensive determination of every action and proceeding." Fed. R. Civ. P. 1. This factor militates against a stay. 2. A stay will not conserve judicial resources.

Tillotson argues in conclusory fashion that "[s]taying the present action would prevent the waste of judicial time and money that would result from re-litigating the same issues that the ITC will decide in less than four months." [Tillotson Mem. at 6]. Tillotson does not explain how judicial resources would be conserved by a stay, because it can not. First, whatever the ITC decides, it is established law that "the ITC's determinations regarding patent issues should be given no res judicata or collateral estoppel effect." Texas Instruments Inc. v. United States Int'l Trade Comm'n, 851 F.2d 342, 344 (Fed. Cir. 1988); see also Texas Instruments Inc. v. Cypress Semiconductor Corp., 90 F.3d 1558, 1568-70 (Fed. Cir. 1996). Only by ignoring

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this controlling precedent can Tillotson argue that a stay will narrow the issues.1/ Moreover, after the filing of the motion for stay, Tillotson's counsel was asked whether Tillotson would agree to be bound by the ITC's decision, and Tillotson declined to do so. [See Declaration of Thomas B. Kenworthy ("Kenworthy Decl.") at ¶ 2]. This is a jury trial, so any findings of fact by the ITC will have no impact on the resolution of the fact issues that will be decided by the jury in this case.2/ To the extent Tillotson is arguing that this Court would be benefited by having the analyses of the ALJ and the ITC on certain issues of law that may also arise in this case, a stay is not needed to confer

1/

Given this controlling Federal Circuit precedent, the unexplained conclusion by the Court in Iljin USA v. NTN Corp., No. 06-10145, 2006 WL 568351 *2 (E.D. Mich. 2006 Mar. 7, 2006), that a stay of the District Court proceeding pending a final determination in the ITC would "narrow the issues" does not appear to be well-grounded. More importantly, the Iljin case did not involve staying a case where such a stay would clearly prejudice the party resisting the stay and provide a strategic advantage to the party seeking the stay. Similarly, aside from the differences in the grounds that supported a stay in Flexsys Americas, LP v. Kumbo Tire, U.S.A., Inc., No. 5:05cv156, 2005 WL 1126750 (N.D. Ohio Apr. 29, 2005), the Flexsys Court found that the party opposing the stay would "not be prejudiced by a stay of th[e] case" while the denial of a stay "would create an undue burden on defendants." Id. at *3. Tillotson also argues at pages 4 and 5 of its Memorandum that a hypothetical finding in its favor by the ITC would undercut the "objectively baseless" element that Tillotson apparently believes is required to sustain Ansell's counterclaims. This is a complete red herring. While the decision of the ITC as to the validity or enforceability of the '616 patent may provide evidence favorable to one side or the other insofar as whether Tillotson's pursuit of infringement claims are "objectively baseless," Ansell's counterclaims do not require that Tillotson's pursuit of its infringement claims be objectively baseless. Ansell's claims are also predicated on the independent ground that Tillotson is using a fraudulently obtained patent in an anti-competitive manner. The "objectively baseless" prong of the twopart test applicable to sham litigation claims is not applicable to the independent theory of liability based on the enforcement of a patent obtained by fraud. See Nobelpharma AB v. Implant Innovations, Inc., 129 F.3d 1463, 1472 (Fed. Cir. 1997). Thus, even if the ITC were to decide that the '616 patent was neither invalid nor unenforceable, it would not eliminate Ansell's claims against Tillotson, as Tillotson suggests. -5-

2/

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that benefit. As Tillotson recognizes, the ALJ's decision is due "no later than August 25, 2008" and "[t]he ITC then has until November 24, 2008 to adopt or reject the ALJ's decision." [Tillotson Mem. at 2]. This Court thus will not be called upon to decide any of the patentrelated issues that are implicated in both this case and the ITC proceedings until after both the ALJ and the ITC have issued their rulings. A stay is totally unnecessary to provide this Court with the benefit of having those rulings and analyses available to it when it is called upon to address those issues. The second factor thus does not weigh in favor of a stay. 3. There is no concern about decisions of a District Court and the ITC being inconsistent.

Tillotson argues that "[w]ith the ITC action still pending, the Court cannot determine how the ITC will address the '616 patent's validity and enforceability. A stay would minimize the risk of inconsistent rulings on these issues." [Tillotson Mem. at 6]. First, as discussed above and in the section of this memorandum relating to the doctrine of primary jurisdiction, infra, there is no legislative or judicial policy that the decisions of District Courts should be consistent with the decisions of the ITC. Moreover, it should be reiterated that a stay will have no impact on the risk of inconsistent rulings in this case, because even without a stay, the patent issues will have already been decided by the ITC before this Court will be obliged to decide them. The third factor does not favor a stay.

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4.

Tillotson has not made out a clear case of hardship or inequity in being required to go forward when, as here, there is a fair possibility that the stay it seeks will work damage to Ansell.

Although a trial court has broad discretion to stay proceedings in an action pending resolution of independent proceedings elsewhere, the Supreme Court has noted that "the suppliant for a stay must make out a clear case of hardship or inequity in being required to go forward, if there is even a fair possibility that the stay for which he prays will work damage to someone else." Landis v. North American Co., 299 U.S. 248, 255 (1936); see also GFL Advantage Fund, Ltd. v. Colkitt, 216 F.R.D. 189, 193 (D.D.C. 2003) ("The party requesting such a stay must make out a clear case of hardship or inequity to prevail."). Here, in the face of this Counterclaim, Tillotson is continuing the very tortious activity that gave rise to this suit, and it has refused to agree that it will refrain from doing so during the pendency of any stay that may be entered. [Kenworthy Decl., ¶ 2]. By pursuing or threatening extremely expensive litigation regarding the alleged infringement of the '616 patent that is both invalid and unenforceable, Tillotson has coerced a number of entities, including a former customer of Ansell, to enter into agreements which have the effect of precluding them from purchasing Ansell's nitrile gloves that compete against Tillotson's licensees. [See, e.g., Kenworthy Declaration, ¶¶ 3-5 and Ex. A]. Once customers are lost to a competitor it is difficult to gain them back, and Tillotson will no doubt argue that a claim for future losses of sales even after the '616 patent expires in May of 2010, are not recoverable. In the face of the demonstrable possibility of damage to Ansell, Tillotson has not even purported to make out a clear case of hardship or inequity in being required to go forward with this case over the next three months. Indeed, had Tillotson made a claim of -7-

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hardship or inequity, it would have been belied by Tillotson's delay in even moving for a stay until four months into the case, and after Tillotson's initial disclosures and responses to Ansell's interrogatories and document requests were due. The fourth factor not only fails to support the issuance of a stay, it mandates that Tillotson's motion be denied.

B.

The Doctrine Of Primary Jurisdiction Provides No Support For A Stay In This Case

Tillotson argues that the doctrine of primary jurisdiction favors a stay of this case. [Tillotson Mem. at 7-10]. The doctrine of primary jurisdiction, however, has no applicability here and in no way favors a stay of this litigation. The determination of the validity and enforceability of patents has not been placed within the special competence of the ITC. Indeed, the Federal Circuit has noted this on several occasions. In Tandon Corp. v. U.S. International Trade Commission, 831 F.3d 1017, 1019 (Fed. Cir. 1987), the Federal Circuit observed that the ITC's "responsibility is to administer the trade laws, not the patent laws." (Emphasis added). The Federal Circuit quoted from the Senate Report accompanying the Trade Act of 1974:

[I]n patent-based cases the Commission considers, for its own purposes under section 337, the status of imports with respect to the claims of U.S. Patents. The Commission's findings neither purport to be, nor can they be, regarded as binding interpretations of the U.S. patent laws in particular factual contexts.

S. Rep. No. 1298, 93d Cong., 2d Sess. 196, reprinted in 1974 U.S. Code Cong. & Admin. News 7186, 7329. Tandon, 831 F.2d at 1019. More recently, the Federal Circuit aptly again quoted

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from the same Senate Report in Bio-Technology General Corp. v. Genentech, Inc., 80 F.3d 1553, 1564 (Fed. Cir. 1996):

The Commission is not, of course, empowered under existing law to set aside a patent as being invalid or to render it unenforceable, and the extent of the Commission's authority under this bill is to take into consideration such defenses and to make findings thereon for the purposes of determining whether section 337 is being violated.

Establishing that a patent is invalid or unenforceable is a form of relief that "may only be provided by the United States District Courts, which have original and exclusive jurisdiction over patent infringement cases." Id. (Emphasis added). Tillotson cites Meditech Int'l Co. v. Minigrip, Inc., 648 F. Supp. 1488, 1496 (N.D. Ill. 1986), for the proposition that the test to determination whether the doctrine of primary jurisdiction applies is "whether some parts of the case are within the exclusive jurisdiction of the agency."3/ [Tillotson Mem. at 7-8]. However, as shown above, no parts of this case are within the exclusive jurisdiction of the ITC. Tillotson's reliance on the doctrine of primary jurisdiction is completely misplaced, and that doctrine provides no basis for a stay of this action.

3/

Ansell has no dispute with this statement of the law vis-à-vis the doctrine of primary jurisdiction, but notes that the factual circumstances of the Meditech case are materially different from those in this case. In Meditech, the plaintiff's claim was predicated on the contention that the defendant had "unlawfully influenced the Commission to issue overbroad exclusion orders." 648 F. Supp. at 1493. The Meditech Court noted that the ITC had inherent power to correct its own errors, especially where those errors are caused by fraud, as was alleged by Meditech. Id. at 1496. The Court accordingly found that Meditech's arguments as to the asserted overbreadth of an ITC Order and the cause of that overbreadth must first be tendered to the ITC. Id. Ansell is by no means attempting to collaterally attack any Order of the ITC in this action. -9-

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C.

Tillotson's Request, In The Alternative, That Discovery Be Stayed Pending The Outcome Of Its Motion To Dismiss Is Moot

The Court, having denied Tillotson's motion to dismiss, the request, in the alternative, that discovery be stayed pending the outcome of that motion has been mooted.

III.

CONCLUSION

For all the foregoing reasons, Ansell respectfully submits that Tillotson's Motion to Stay Proceedings should be denied. Respectfully submitted,

DATED: August 12, 2008

/s/ David M. Morris (D.C. Bar No. 432593) MORGAN, LEWIS & BOCKIUS LLP 1111 Pennsylvania Avenue, N.W. Washington, DC 20004 Telephone: (202) 739-5882 Facsimile: (202) 739-3001 [email protected] and Thomas B. Kenworthy (Admitted Pro Hac Vice) MORGAN, LEWIS & BOCKIUS LLP 1701 Market Street Philadelphia, Pennsylvania 19103-2921 Telephone: (215) 963-5702 Facsimile: (215) 963-5001 [email protected] Counsel for Counterclaimants Ansell Healthcare Products LLC and Ansell Protective Products Inc.

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CERTIFICATE OF SERVICE

I, DAVID M. MORRIS, do hereby certify that on this date, I caused copies of the foregoing Ansell's Memorandum In Opposition To Tillotson's Motion To Stay Proceedings to be served upon the following individuals by Electronic and First Class Mail:

Brian Meiners, Esquire KING & SPALDING LLP 1700 Pennsylvania Avenue, N.W. Suite 200 Washington, DC 20006-2706 Russell Wofford, Jr., Esquire KING & SPALDING LLP 1180 Peachtree Street, N.E. Atlanta, Georgia 30309 Counsel for Counterclaim Defendant Tillotson Corporation

DATED:

August 12, 2008

/s/ DAVID M. MORRIS

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

ANSELL HEALTHCARE PRODUCTS LLC, and ANSELL PROTECTIVE PRODUCTS INC., Counterclaimants, C.A. 1:08-CV-585-RMC v. TILLOTSON CORPORATION, Counterclaim Defendant.

ORDER

AND NOW, this _____________ day of __________________, 2008, upon consideration of Tillotson's Motion To Stay Proceedings and Counterclaimants' opposition thereto, and Tillotson having failed to make out a clear case of inequity or hardship in being required to go forward, the motion is DENIED.

BY THE COURT:

__________________________________ United States District Judge