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Cajun Services Unlimited LLC v. Benton Energy Service Co.

United States District Court, E.D. Louisiana

May 23, 2019

CAJUN SERVICES UNLIMITED, LLC, ET AL.
v.
BENTON ENERGY SERVICE COMPANY, ET AL.

         SECTION: M (2) Pertains to 18-5932

          ORDER & REASONS

          BARRY W. ASHE UNITED STATES DISTRICT JUDGE

         Before the Court is a motion to dismiss for failure to state a claim filed by plaintiffs Cajun Services Unlimited, LLC, d/b/a Spoked Manufacturing (“Cajun”), T2 Tools & Design, LLC, Shane Triche, and Heath Triche (collectively, “Plaintiffs”), [1] to which defendant Benton Energy Service Company, d/b/a Besco Tubular (“Besco”), responds in opposition, [2] and in further support of which Plaintiffs reply.[3] Having considered the parties' memoranda and the applicable law, the Court issues this Order & Reasons.

         I. BACKGROUND

         This action is one among three consolidated lawsuits over rights to an elevator roller insert system (“ERIS”), a technology used in drilling for oil. On January 20, 2017, Cajun filed suit against Besco (“Cajun I Lawsuit”), alleging violation of the Defend Trade Secrets Act (“DTSA”), 18 U.S.C. §§ 1831, et seq.; violation of the Louisiana Uniform Trade Secrets Act, La. R.S. 51:1431, et seq.; violation of the Louisiana Unfair Trade Practices and Consumer Protection Law, La. R.S. 51:1401, et seq.; bad faith breach of contract; fraud; and civil conspiracy.[4] Cajun also sought injunctive relief and a declaratory judgment that Cajun was the owner of all right, title, and interest to all improvements and modifications made to the ERIS, its practice, and any inventions, patent applications, or patents that relate to the ERIS.[5] Besco filed a motion for partial summary judgment to dismiss Cajun's claim under the DTSA on the ground that Cajun lacked standing because it did not own any trade secrets.[6] To streamline the litigation, Cajun agreed not to oppose dismissal on that ground.[7] The Court granted the motion for partial summary judgment, dismissed Cajun's DTSA claim without prejudice, and administratively closed the case in anticipation of Cajun's moving to amend its complaint to assert a patent-infringement claim.[8]

         On June 4, 2018, the day before Cajun's ERIS patent issued (Patent No. 9, 988, 862, “the '862 Patent”), Besco filed suit against Cajun (“Besco Lawsuit”), seeking a declaration that Cajun's patent was invalid, unenforceable, and/or not infringed by Besco.[9] On June 14, 2018, Cajun, its officers Shane Triche and Heath Triche, and a related entity, T2 Tools and Design, LLC, filed suit against Besco, re-alleging the same causes of action asserted in the Cajun I Lawsuit and adding a patent-infringement claim (“Cajun II Lawsuit”).[10] Besco answered asserting counterclaims that re-alleged the same causes of action it alleged in the Besco Lawsuit plus allegations of unfair and deceptive trade practices, fraudulent inducement, and breach or invalidity of contract.[11] The Court consolidated the Cajun I Lawsuit with the Besco Lawsuit and the Cajun II Lawsuit on August 15, 2018.[12] On April 3, 2019, the Court granted Cajun's motion to dismiss the Besco Lawsuit for lack of subject-matter jurisdiction; thus, remaining are the Cajun I and Cajun II Lawsuits.[13]

         At issue here are the counterclaims asserted by Besco in the Cajun II Lawsuit. On August 13, 2018, Besco answered Plaintiffs' claims and asserted seven counterclaims, including one counterclaim of invalidity “because the purported inventions [of the '862 Patent] fail to meet the conditions for patentability specified under one or more sections of Title 35 of the United States Code, including, but not limited to, 35 U.S.C. §§ 101, 102, 103, and/or 112.”[14] Plaintiffs advised Besco that they believed the counterclaim alleging invalidity of the '862 Patent (“Second Counterclaim”) lacked factual specificity to withstand a Rule 12(b)(6) motion and invited Besco to amend its claim.[15] On October 12, 2018, fourteen days before the October 26, 2018 deadline to amend counterclaims, [16] Besco filed its first amended and supplemental counterclaims.[17] Besco again asserted that the “claims of the '862 Patent are invalid because the purported inventions therein fail to meet the conditions for patentability specified under one or more sections of Title 35 of the United States Code, including, but not limited to 35 U.S.C. §§ 101, 102, 103, and/or 112.”[18] Besco further asserted that Jamie Lovell (“Lovell”), Besco's operations manager, is a co-inventor of the subject technology, detailing Lovell's conception of the ERIS prior to Cajun's alleged conception and Cajun's failure to disclose Lovell's inventorship in its patent application.[19]In the final paragraphs of the Second Counterclaim, Besco reserves its rights to assert additional grounds of invalidity after the period of discovery and seeks a declaratory judgment of the '862 Patent's invalidity “for failing to meet one or more conditions for patentability under one or more sections of Title 35 of the United States Code, including, but not limited to 35 U.S.C. §§ 101, 102, 103, and/or 112.”[20]

         II. PENDING MOTION

         Plaintiffs seek to dismiss Besco's Second Counterclaim in the Cajun II Lawsuit for failure to state a claim insofar as it asserts invalidity on any ground besides inventorship.[21] While Plaintiffs acknowledge that Besco pleaded facts to support its claim of invalidity based upon inventorship, Plaintiffs assert that the remaining grounds for invalidity fail to state plausible claims for relief under Iqbal because Besco merely lists statutory provisions without providing any supporting facts. Because Plaintiffs have already given Besco the opportunity to amend its pleadings, Plaintiffs say Besco's improperly pleaded claims should be dismissed with prejudice.[22]

         Besco responds that its allegations about Lovell gave Plaintiffs fair notice as to the nature and basis for all of its invalidity counterclaims. Further, Besco contends that it reserved its right to amend its pleadings after the period of discovery ends on June 7, 2019, whereupon it will set forth additional grounds of invalidity. Alternatively, Besco requests that if the Court is inclined to dismiss its claims, it do so without prejudice so that Besco can exercise its reservation of rights to “assert additional grounds of invalidity at a later date.”[23]

         In reply, Plaintiffs maintain that Besco's allegations about Lovell as inventor do not support any claim of invalidity due to anticipation, obviousness, indefiniteness, written description, enablement, or any other grounds for invalidity under 35 U.S.C. §§ 102, 103, or 112. Plaintiffs also argue that Besco's attempt to reserve its right to add new claims of invalidity after the close of discovery and beyond the deadline for filing amendments to counterclaims subverts the Court's scheduling order and normal course of litigation. Further, Plaintiffs contend no discovery is necessary for Besco to have asserted additional grounds of invalidity because Besco already had access to the relevant material that would support such claims. For instance, to formulate a claim for invalidity due to anticipation or obviousness, Besco would have needed to rely on prior art in the public domain. To formulate a claim for invalidity due to indefiniteness or for failure to satisfy the written description or enablement requirements under 25 U.S.C. § 112, Besco could have relied on the '862 Patent's specification in the public domain. Finally, Besco could also have used the publicly available prosecution history for the '862 Patent and its related applications.[24]

         III. LAW & ANALYSIS

         1. The Demise of Rule 84 and Form 18

         Prior to December 1, 2015, Rule 84 of the Federal Rules of Civil Procedure set the standard for sufficiency of patent-infringement claims as stated in Form 18 of the Appendix of Forms. When Form 18 conflicted with the standards articulated in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), Form 18 prevailed. However, Rule 84 was repealed as of December 1, 2015, thus making Twombly and Iqbal applicable to patent-infringement claims. Wright's Well Control Servs., LLC v. Oceaneering Int'l, Inc., 2017 WL 568781, at *2-3 (E.D. La. Feb. 13, 2017). Thus, the Court must first determine what standard governs the instant motion to dismiss in this patent-infringement suit.

         The Cajun I Lawsuit was filed on January 20, 2017, and the Cajun II Lawsuit was filed on June 14, 2018. Therefore, the revision effective for all patent-infringement suits filed after December 1, 2015, including the repeal of Rule 84, applies to these consolidated cases, and Twombly and Iqbal govern the instant motion to dismiss. See Lyda v. CBS Corp., 838 F.3d 1331, 1337 n.2 (Fed. Cir. 2016) (“the Supreme Court stated that the rule change ‘shall govern in all proceedings in civil cases thereafter commenced [after December 1, 2015], and, insofar as just and practicable, all proceedings then pending”) (citation omitted).

         2. The Rule ...


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