Case 1:11-cv-00680-SEB-DML Document 53 Filed 03/05/12 Page 1 of 9 PageID #: 430

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION

KNAUF INSULATION LIMITED and KNAUF INSULATION GMBH, Plaintiffs, vs. CERTAINTEED CORPORATION, Defendant.

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1:11-cv-689-SEB-DML 0

ORDER DENYING MOTION TO DISMISS

This is a patent infringement lawsuit. Before the Court is Defendant Certainteed Corporations (Certainteed) Motion to Dismiss, filed pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(3). The motion alleges that the Plaintiffs, Knauf Insulation Limited (KI- Limited) and Knauf Insulation GmbH (KI- G), lack standing to bring the action because they do not own rights in the patent at issue and also that a first-filed action brought by Certainteed in the District of Columbia duplicates and overlaps the instant action, and that case is the appropriate one for a final resolution of the dispute. We find no merit in Certainteeds arguments and therefore deny the motion.

Factual and Procedural Background

In January of 2007, three employees of KI-Limited, a British company, filed a patent application for a formaldehyde-free mineral fibre insulation product, which ultimately resulted in United States Patent and Trademark Office (USPTO) issuing a

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patent (the 980 patent) to KI-Limited in December 2010. Between the time the application was filed and the patent was issued, two assignments of rights were executed. First, on October 1, 2009, KI-Limited assigned its rights in numerous patents and patent applications, including the 980 patent application, to Knauf Insulation SPRL (KI-BE), a related Belgian company. The three inventing employees of KI-Limited also assigned their rights in the 980 patent application to KI-Limited, each of them individually executing that assignment within a few weeks following KI-Limiteds mass patent assignment to KI-BE. KI-Limited then filed notice of the assignment it had received from its employees with the USPTO, prompting the USPTO to issue the 980 patent to KILimited.

In February 2011, KI-Limited filed a patent infringement lawsuit against Certainteed in this district, which suit was assigned to our colleague, Judge Tanya Walton Pratt. Certainteed believed that KI-BE was the rightful holder of any rights in the 980 patent, based on its understanding that the law of the United Kingdom gave to KI-Limited any patent rights to inventions by its employees and that KI-Limited had transferred those rights by way of the mass assignment of patent and application rights from KI-Limited to KI-BE. Certainteed attached no significance to the employees assignment of rights to KI-Limited or to the fact that the employees had filed the patent application or that the USPTO had issued the patent to KI-Limited. Consequently, Certainteed filed a declaratory judgment action in the district court for the District of Columbia, naming KI-

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BE as the defendant and seeking a declaration that Certainteed had not infringed upon the 980 patent. In addition to filing that declaratory judgment action, Certainteed also filed a motion to dismiss KI-Limiteds infringement action then pending before Judge Pratt. In response to Certainteeds filings, KI-Limited promptly sought confirmation from KI-BE that KI-BE was asserting no rights in the 980 patent, which confirmation was provided in the form of a Quitclaim and Assignment executed by KI-BE in favor of KI-Limited.

In April 2011, KI-G, a German Knauf affiliate which received an exclusive license to use the 980 patent from KI-Limited, was added as a plaintiff in an Amended Complaint filed in the action pending before Judge Pratt. According to the Knauf entities, this should have assured Certainteed that all who could claim through the patent were then parties to the litigation in the Southern District of Indiana. However, Certainteed continued to maintain, through its dismissal motion in the case pending before Judge Pratt, that the Quitclaim and Assignment from KI-BE was executed too late to allow for KI-Limited to have standing as a plaintiff, because in a patent infringement lawsuit a plaintiff is required to possess the rights it seeks to enforce at the time the infringement lawsuit is filed. Paradise Creations, Inc. v. UV Sales, Inc., 315 F.3d 1304, 1308 (Fed.Cir. 2003). KI-Limited and KI-G filed the case before us on May 19, 2011, one week after the voluntary dismissal of the action before Judge Pratt.

Certainteed responded to the Complaint in our case by filing a Motion to Dismiss, which we address in this entry. In its supporting brief, Certainteed contends that the
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lawsuit should be dismissed because the Quitclaim and Assignment did not actually accomplish its intended goal. Despite the documents acknowledgment of KI-Limiteds ownership of the 980 patent resulting from the assignment from the inventors and the documents recitation that it was the intent of KI-BE to quitclaim and release all residual and/or equitable rights KI-BE may have nevertheless maintained by virtue of the October 1, 2009 assignment, Certainteed points to the final provision of the document, which provides: NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are acknowledged, KI-BE hereby releases and quitclaims and assigns to KI-BE any right, title, interest, claim, or demand whatsoever that KI-BE may have or acquired and/or retained in the US Application and the 980 patent. (emphasis added) According to Certainteed, the above-quoted language does not effectively transfer any rights. Certainteed further contends that the dispute between the parties should be resolved via the lawsuit pending in the District of Columbia, which was filed prior to the one before us, which overlaps and duplicates the issues raised in this case.

After Certainteed filed its motion to dismiss, KI-BE executed a confirmation of its prior Quitclaim and Assignment. The confirmation explains that the quoted excerpt from the Quitclaim and Assignment incorporates a typographical error, inadvertently made and escaping detection, which has confused the otherwise clear intent of KI-BE to transfer any and all of its rights in the 980 patent to KI-Limited. KI-BE has also filed a motion to dismiss Certainteeds declaratory judgment action in the District of Columbia,

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maintaining that there is no jurisdiction in that court due to a lack of justiciable controversy between it and Certainteed. In that motion, KI-BE affirms that it claims no rights under the 980 patent.

Discussion

The Quitclaim and Assignment executed by KI-BE clearly contains what is referred to in common parlance as a typo. No jurisdiction whose laws encourage an interpretation of contractual language to comport with the intention of the parties allows a typo to negate the otherwise clear intent of those who entered into the agreement. In our view, it would clearly be nonsensical to interpret the provision to provide that KI-BE intended to transfer any patent rights it may have had to itself. Certainteed does not challenge Plaintiffs contention that Belgian law applies to the interpretation of the Quitclaim and Assignment, because the document was executed in Belgium by KI-BE, a Belgian company. Nor does Certainteed rebut Plaintiffs assertion that Belgian law encourages courts not to accord to words their literal meaning, if the common intent of the parties is obvious and requires otherwise. See Belgian art. 1156 CC, cited in The Commission on European Contract Law, Principles of European Contract Law ch. 3, at 287-290 & n.2 (2000). When read in its entirety, it is beyond dispute that KI-BE intended to quitclaim and/or transfer any remaining rights in the 980 patent to KI-Limited through the Quitclaim and Assignment executed on April 20, 2011. The subsequent confirmation by KI-BE affirms that clear intent.
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Because Belgian law (and the law in most jurisdictions) recognizes the intent of the parties and would interpret the Quitclaim and Assignment to transfer the interests of KI-BE to KI-Limited, KI-Limited and its licensee, KI-G, had the required standing to bring this lawsuit in this forum in May 2011.

We move next to Certainteeds alternative argument for dismissal, that the firstfiled rule applies, and requires the parties to litigate this dispute in the district court for the District of Columbia. According to Certainteed, KI-Limiteds voluntary dismissal of its first complaint in response to Certainteeds motion to dismiss for lack of standing was a tacit admission that KI-BE, not KI-Limited, owned the 980 patent rights when that action was initially filed. Therefore, argues Certainteed, the declaratory judgment action which it filed in the District of Columbia was in truth the first-filed action and has priority in terms of where the dispute should be litigated. Plaintiffs response is three-fold: (1) the USPTO has recognized from the outset that KI-Limited owned the rights to the 980 patent; (2) no justiciable controversy has ever existed between KI-BE and Certainteed to support a declaratory judgment action, since KI-BE has never informed Certainteed that it was seeking to assert its rights in and to the 980 patent, and has in fact affirmatively disclaimed those rights; and (3) KI-Limited and KI-G are without doubt the current parties claiming interests in the 980 patent and they are not parties in the lawsuit in the District of Columbia.

We regard each of Plaintiffs three reasons for not deferring to the litigation in the
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District of Columbia as meritorious, but would add another reason to reject Certainteeds first-filed argument. The Seventh Circuit has observed that while obvious clarity and efficiencies would flow from the adoption in federal courts of a first-filed rule, the down side of such a rule would be the encouragement it would provide for unmanageable and unseemly races to the courthouse. Research Automation, Inc. v. Schrader-Bridgeport Intern., Inc., 626 F.3d 973, 981 (7th Cir. 2010). Better says the Court of Appeals that the first-filed analysis be limited to the category of helpful guidance leaving the trial court free to exercise its own discretion in making the final decision as to venue. Id. In Research Automation, our circuit court acknowledged that the Federal Circuit, as evidenced by its holding in Genentech, Inc. v. Lilly and Co., 998 F.2d 931 (Fed. Cir. 1993), applies the first-filed rule more strictly in the context of patent infringement actions. Nevertheless, there has been a partial abrogation of the Genentech holding by the Supreme Court when it decided that an abuse of discretion standard applies to a district courts decision on whether to exercise jurisdiction over any declaratory judgment action. See Wilton v. Seven Falls Company, 515 U.S. 277, 289-90 (1995).

The District Court for the District of Columbia has not yet determined whether to exercise jurisdiction over Certainteeds declaratory judgment action. It is clear that the parties in interest relating to the 980 patent are currently before this Court and that we have jurisdiction over the controversy. We shall leave the decision on Knauf-BEs pending motion to dismiss in the District of Columbia litigation to that court, as we must.

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As for our case, regardless of which Knauf entity owned the 980 patent rights at the time the declaratory judgment action was filed, it is clear that KI-Limited owned them when this case was filed. We find no compelling reason to apply the first-filed rule here, and, as a result, dismissal of the Complaint is DENIED.

Conclusion

For the reasons explicated in this entry, Defendants Motion to Dismiss (Dkt. #28) is DENIED.

IT IS SO ORDERED.

Date: 03/01/2012
_______________________________ SARAH EVANS BARKER, JUDGE United States District Court Southern District of Indiana

Copies to: Jeff M. Barron BARNES & THORNBURG LLP jeff.barron@btlaw.com Felicia J. Boyd BARNES & THORNBURG LLP felicia.boyd@btlaw.com Thomas J. Costakis KRIEG DEVAULT, LLP tcostakis@kdlegal.com

Thomas J. Fisher OBLON SPIVAK MCCLELLAND MAIER & NEUSTADT, LLP

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tfisher@oblon.com Barry J. Herman OBLON SPIVAK McCLELLAND MAIER & NEUSTADT P.C. bherman@oblon.com Lindsay J. Kile OBLON SPIVAK MCCLELLAND MAIER & NEUSTADT, LLP lkile@oblon.com Deborah Pollack-Milgate BARNES & THORNBURG dmilgate@btlaw.com Aaron M. Staser BARNES & THORNBURG LLP aaron.staser@btlaw.com Bryan S Strawbridge KRIEG DEVAULT LLP bstrawbridge@kdlegal.com