264 F. Supp. 3d 421
E.D.N.Y2017Background
- Levitón sued P & S in 2012 for patent infringement relating to a GFCI (the 1596 model); the parties settled via a December 10, 2012 Settlement and License Agreement that included royalty terms and an agreed dismissal with the court retaining enforcement jurisdiction.
- In 2015 P & S began selling a purportedly different product (the 1597 model); Levitón sued for breach of the Settlement and License Agreement for failure to pay royalties, which requires deciding whether the 1597 falls within the licensed patents.
- P & S asserted multiple affirmative defenses in its answer, including patent misuse: (1) coercing licensees to pay royalties on invalid patents; and (2) using serial litigation to expand license scope and monopolize the GFCI market.
- Levitón moved for partial judgment on the pleadings to dismiss the patent-misuse defense, arguing (a) the Agreement’s release precludes the defense, (b) res judicata bars it, and (c) the defense fails on the merits.
- The court denied Levitón’s motion: the Agreement’s release language does not waive affirmative defenses like patent misuse; res judicata does not bar the defense (both because of Mercoid public-policy treatment of misuse and because the issue whether the 1596 and 1597 are essentially the same is unresolved); and the misuse defense is plausibly pleaded and not adjudicable on the face of the pleadings.
Issues
| Issue | Levitón's Argument | P & S's Argument | Held |
|---|---|---|---|
| Does the Settlement & License Agreement release preclude P & S from asserting patent misuse? | The Agreement’s §2.13 released any claims arising from the prior case, so misuse is barred. | The release covers claims, not affirmative defenses; §3.1 expressly preserves P & S’s right to assert defenses. | Release language does not bar affirmative defenses; patent misuse not released. |
| Does res judicata bar P & S from asserting patent misuse? | The dismissal of the prior action bars relitigation of issues arising from that case, including misuse. | Mercoid and doctrine prevent preclusion of patent-misuse defenses; whether products are essentially the same is unresolved. | Res judicata does not currently bar the defense (Mercoid; factual comparison of 1596 vs 1597 required). |
| Is P & S’s patent-misuse defense legally insufficient (failure to state a defense)? | The allegations rely chiefly on the Federal Circuit’s ITC decision (Fujian) and are inadequate as a matter of law. | The complaint-level allegations suffice to put Levitón on notice; discovery is needed to develop facts, and misuse can rest on more than a precedential invalidity ruling. | The defense is not subject to plausibility pleading standards for affirmative defenses here and survives; merits require factual development. |
| May the court resolve the misuse defense now on merits because related prior decisions (e.g., Fujian) negate it? | Yes — Fujian and differences in patents/claims show misuse theory fails as matter of law. | No — comparison of patents/claims and factual inquiry needed; misuse can arise even without prior invalidity ruling. | Court declines to resolve merits now; factual comparison and discovery required before summary judgment/trial. |
Key Cases Cited
- Mercoid Corp. v. Mid-Continent Inv. Co., 320 U.S. 661 (1944) (patent-misuse defense may not be precluded by prior litigation; public-policy exception to traditional res judicata treatment)
- Hallco Mfg. Co. v. Foster, 256 F.3d 1290 (Fed. Cir. 2001) (res judicata may bar validity challenges when the accused products are essentially the same across suits)
- Glitsch v. Koch Eng’g Co., Inc., 216 F.3d 1382 (Fed. Cir. 2000) (characterization of Mercoid and its application to successive infringement actions)
- Golden Pac. Bancorp v. F.D.I.C., 273 F.3d 509 (2d Cir. 2001) (release/contract interpretation principles; give effect to clear contractual language)
- Pampillonia v. RJR Nabisco, Inc., 138 F.3d 459 (2d Cir. 1998) (clear, voluntary releases are enforceable under New York law)
- Pani v. Empire Blue Cross Blue Shield, 152 F.3d 67 (2d Cir. 1998) (affirmative defenses generally not resolved on a motion to dismiss unless they appear on face of complaint)