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Total Rebuild Inc. v. PHC Fluid Power L.L.C.

United States District Court, W.D. Louisiana

March 18, 2019

TOTAL REBUILD, INC.
v.
PHC FLUID POWER, L.L.C.

          RULING AND ORDER

          JUDGE BRIAN A. JACKSON UNITED STATES DISTRICT COURT

         Before the Court is Total Rebuild, Inc.'s Motion for Partial Summary Judgment (Doc. 170) against PHC Fluid Power, L.L.C. Total Rebuild seeks dismissal of PHC Fluid Power's counterclaim for a declaratory judgment invalidating one of Total Rebuild's patents due to the inequitable conduct of Total Rebuild's founder and director, Terry Lavergne. For the reasons that follow, Total Rebuild's Motion (Doc. 170) is DENIED.

         I. BACKGROUND

         This dispute arises from PHC Fluid Power's sale of a device that Total Rebuild contends infringes one of its patents. At issue is whether PHC Fluid Power can offer facts to support a finding, by clear and convincing evidence, that Lavergne intentionally withheld prior art from the United States Patent and Trademark Office (PTO). The Court holds that it can.

         Total Rebuild sells "safety system[s] for testing high-pressure devices." (Doc. 22 at ¶ 7). Lavergne claims to have invented one such system. (Id.). He applied for a patent in August 2008 and obtained one in April 2012. (Doc. 1-4 at 1). The patent is United States Patent No. 8, 146, 428; its critical date is August 7, 2007. (Id. at 7).

         Lavergne assigned the patent to Total Rebuild.[1] (Doc. 148 at 2). Armed with the assignment, Total Rebuild sued PHC Fluid Power for infringing the patent and engaging in unfair and deceptive trade practices. (Docs. 1, 22). PHC Fluid Power responded by counterclaiming against Total Rebuild for a declaration that the patent is invalid due to Lavergne's inequitable conduct. (Doc. 75 at ¶¶ 264-285). In its counterclaim, PHC Fluid Power alleges that Lavergne failed to disclose material prior art that, if disclosed, would have prevented him from obtaining the patent. (Id.). The material prior art includes sales of a "millennium system" for testing high-pressure devices. (Id.).

         Total Rebuild moves for partial summary judgment on PHC Fluid Power's inequitable-conduct counterclaim.[2] (Doc. 170). PHC Fluid Power opposes. (Doc. 251).

         II. LEGAL STANDARD

         The Court will grant partial summary judgment if Total Rebuild shows that there is no genuine dispute as to any material fact and that it is entitled to judgment as a matter of law. See FED. R. Civ. P. 56(a). In deciding if Total Rebuild has made that showing, the Court views facts and draws reasonable inferences in PHC Fluid Power's favor. See Midwest Feeders v. Bank of Franklin, 886 F.3d 507, 513 (5th Cir. 2018).

         III. DISCUSSION

         Inequitable conduct is a "defense to patent infringement that, if proved, bars enforcement of a patent." Therasense, Inc. v. Becton, Dickinson and Co., 649 F.3d 1276, 1285 (Fed. Cir. 2011) (en banc). It "has two separate requirements: materiality and intent." Regeneron Pharm., Inc. v. Merus N.V., 864 F.3d 1343, 1350 (Fed. Cir. 2017). Only intent is at issue.[3]

         To establish intent, PHC Fluid Power must show that Lavergne acted with the specific intent to deceive the PTO. See Therasense, 649 F.3d at 1290. It need not point to direct evidence; the Court may infer from circumstantial evidence that Lavergne intended to deceive the PTO. See Regeneron, 864 F.3d at 1350. Still, Lavergne's intent to deceive must be the "single most reasonable inference able to be drawn from the evidence." Network Signatures, Inc. v. State Farm Mut. Auto. Ins. Co., 731 F.3d 1239, 1242 (Fed. Cir. 2013) (citation omitted).[4] An inference is "reasonable" if it is "plausible . . . and flows logically from the facts alleged[.]"Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1329 n.5 (Fed. Cir. 2009).

         Total Rebuild argues that PHC Fluid Power cannot prove that Lavergne acted with deceptive intent.[5] (Doc. 170-1). But it offers scant support for the argument: it points to Lavergne's testimony that he did not intend to deceive the PTO and invites the Court to find, based on that testimony alone, that PHC Fluid Power cannot prove inequitable conduct. (Id. at 11-12). The Court declines the invitation.

         As Total Rebuild notes, Lavergne testified that he did not intentionally fail to disclose the millennium system to the PTO. (Doc. 170-8 at 2). He testified that "[w]e disclosed what we thought we w[ere] supposed to disclose." (Doc. 170-10 at 2). He explained that his office manager, Tara Benoit, was supposed to provide the disclosures to his patent-prosecution attorney but failed to do so. (Id. at 3).[6] In short, he delegated to his office manager responsibility for making disclosures that bear directly on the validity of a lucrative patent. (Id.; Doc. 170-1 at 12). And he now blames that office manager for disobeying his order to disclose. (Doc. ...


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