A.K. STAMPING CO. v. INSTRUMENT SPECIALTIES CO

GREENAWAY, JR., District Judge

On April 11, 2000, this Court issued an Opinion and Order (the "April Opinion") in this matter, denying in part ISC's motion seeking summary judgment and granting AKS's request for a preliminary injunction. ISC has now moved, pursuant to Fed.R.Civ.P. 52(b) and 59(e), for amended findings and reconsideration of the grant of preliminary injunctive relief. For the reasons discussed below, ISC's request for reconsideration is denied and its request for amended findings is granted in part and denied in part.

The standard for obtaining relief under Fed.R.Civ.P. 59(e) is a high one. A motion to alter or amend a judgment may only be granted if: (1) an intervening change in the controlling law has occurred, (2) evidence not previously available has become available, or (3) it is necessary to correct a clear error of law or to prevent manifest injustice. North River Ins. Co. v. Cigna Reinsurance Co., 52 F.3d 1194, 1218 (3d Cir. 1995);Bermingham v. Sony Corp. of America. Inc., 820 F. Supp. 834, 856-57 (D.N.J. 1992), aff'd, 37 F.3d 1485 (3d Cir. 1994). The "extraordinary remedy" of reconsideration, pursuant to Rule 59 (e) or Local Civil Rule 7.1, is "to be granted sparingly." NL Indus., Inc. v. Commercial Union Ins. Co., 935 F. Supp. 513, 516 (D.N.J. 1996) (citations omitted).

Motions for reconsideration must "set forth concisely the matters or controlling decisions which counsel believes the Judge has overlooked." L. Civ. R. 7.1(g). "The word `overlooked' is the operative term in the Rule." Lentz v. Mason, 32 F. Supp.2d 733, 751 (D.N.J. 1999) (citation omitted). "Only dispositive factual matters and controlling decisions of law" that were raised but not considered by the Court on the initial motion "may be the subject of a motion for reconsideration." Id.

I. Standards Governing ISC's Invalidity Challenges

ISC complains that the April Opinion is internally inconsistent and that this Court applied an incorrect standard in considering one of ISC's validity challenges to the `632 patent, raised in opposition to AKS's preliminary injunction motion. ISC has pieced together disparate excerpts from the April Opinion regarding the on-sale bar to patentability to suggest that the Court found that the evidence of a commercial offer for sale was "in equipoise." Had the Court so found, ISC would have raised a "substantial question" concerning the patent's validity, which would have precluded the issuance of a preliminary injunction. ISC's description of the legal standard governing the grant of preliminary injunctive relief is correct; its interpretation of the Court's findings, however, is mistaken.

An alleged infringer raising validity challenges is held to a different burden of proof depending on the setting in which the challenge is raised. When seeking summary judgment on invalidity grounds, as ISC did here, the alleged infringer must offer clear and convincing evidence of invalidity. See Oney v. Ratliff, 182 F.3d 893, 895 (Fed. Cir. 1999). By contrast, when defending against a patentee's request for preliminary injunctive relief — which ISC also did in this action — the alleged infringer need only "raise a substantial question concerning validity; i.e., assert an invalidity defense that the patentee cannot prove `lacks substantial merit.'" Helifix Ltd. v. Blok- Lok. Ltd., 208 F.3d 1339, 1351 (Fed. Cir. 2000) (citingGenentech. Inc. v. Novo Nordisk, 108 F.3d 1361, 1364 (Fed. Cir. 1997)).

In addressing ISC's summary judgment motion, this Court described the "clear and convincing" evidence standard noted above. Quoting Oney, 182 F.3d at 895, the Court noted, "[s]ummary judgment on invalidity grounds is `inappropriate if a trier of fact applying the clear and convincing standard could find for either party.'" April Opinion at 16-17. Thereafter, in finding that ISC had not established clear and convincing evidence that the Shield was on sale before the critical date, the Court returned to Oney's explanation of the clear and convincing standard. See April Opinion at 21 (citing Oney 182 F.3d at 895). The Court's conclusion, through the window of the clear and convincing standard, was that ISC had failed to satisfy its burden. The reiteration of the language from Oney that a factfinder "could find for either party" was simply another way to state that the clear and convincing burden had not been met — it did not constitute a finding that the evidence was in equipoise.

Following resolution of ISC's summary judgment motion, the Court turned to AKS's request for preliminary injunctive relief and scrutinized the evidence under the preliminary injunction standard. This Court determined that AKS had refuted the validity challenges by showing that ISC had failed to raise a substantial question as to whether the part depicted in either the October sketch or November drawing was offered for commercial sale prior to the critical date, which would invalidate the patent. The Court found that ISC had not raised a substantial question as to any of its validity challenges. Insofar as the Court''s earlier finding under the clear and convincing standard could be perceived as inconsistent with its subsequent finding that ISC did not raise a substantial question about validity, that sentence, which appears at the conclusion of Part I(B)(1)(a) of the April Opinion, is stricken and the Court offers the following clarification: Since ISC failed to establish clear and convincing evidence that the Shield was offered for commercial sale prior to the critical date, its motion for summary judgment on that ground must be denied.

II. On-Sale Bar to Patentability

As noted above, in the April Opinion, this Court found that ISC failed to raise a substantial question as to whether the Shield was offered for commercial sale prior to the critical date. In moving for reconsideration, ISC points to a recent Federal Circuit case, Helifix Ltd. v. Blok-Lok. Ltd., 208 F.3d 1339 (Fed. Cir. 2000), handed down four days before the Court issued the April Opinion. ISC appears to suggest that Helifix necessitates reconsideration as it is an overlooked or intervening change in the law governing the on-sale bar to patentability. It is not.Helifix simply discusses the well established legal standards and burdens governing motions for preliminary injunctions and for summary judgment and considers the applicability of the on-sale bar to the facts in that case. Helifix's analysis is guided by the Supreme Court's discussion in Pfaff v. Wells Electronics. Inc., 525 U.S. 55 (1998), which likewise guided this Court's analysis of the on-sale bar in the April Opinion.

ISC argues that the ultimate outcome in Helifix, which considered facts wholly distinct from those before this Court, requires reconsideration and denial of AKS's motion. Specifically, ISC contends that the evidence of a commercial offer at work in Helifix warrants reconsideration here. In Helifix prior to the critical date, the patent holder displayed and distributed a brochure for the patented product at a trade show. The brochure expressly taught nine of the patent's twelve elements, and strongly indicated that product testing and experimentation were complete and that it was ready for sale. See id. at 1349. The brochure also contained a "warranty" governing the terms and conditions of sales of goods under "this agreement." Id. at 1344. In light of those indicia of a commercial offer, the appellate court found that "the evidence on this point can fairly be said to be very much in equipoise." Id. at 1351. As such, the court held that the district court had not abused its discretion in denying the patentee's request for an injunction.

In the April Opinion, this Court considered the entirety of the evidence and found that ISC had failed to make a substantial showing that AKS had offered the Shield for commercial sale prior to the critical date. This Court did not hold that absent a formal written offer for sale, the on-sale bar does not apply. Rather, it rejected ISC's contention — raised only at oral argument — that industry practice, as opposed to standard commercial indicators, provides the proper framework for analyzing whether a product was on-sale. See April Opinion at 21 n. 18. In Pfaff the Supreme Court focused on standard commercial indicia, an emphasis that the Federal Circuit has recently reaffirmed. See Rotec Indus., Inc. v. Mitsubishi Corp., ___ F.3d ___ 2000 WL 760361 at *8 (Fed. Cir. June 13, 2000) ("InPfaff, the Supreme Court noted that the norms of traditional contract law should be the basis for the on-sale determinations under § 102(b)."). Helifix and Rotec make clear that this Court applied the proper legal standard. ISC's disagreement with this Court's application of that standard is a matter for appeal, not reconsideration.

III. New Evidence and Arguments

In addition to reasserting arguments and evidence put forth in the initial cross-motions, ISC also urges the Court to evaluate newly submitted evidence of prior art that allegedly invalidates the `632 patent, and to consider a new invalidity challenge to the patent. As noted above, a motion for reargument or reconsideration does not offer losing litigants a second bite at the apple; rather, it is an extraordinary avenue available when the Court has overlooked controlling precedent, new evidence has become available, or to prevent manifest injustice or to correct a clear error of law or fact. ISC's submissions do not meet this criteria.

A. IBM Evidence

ISC has submitted the affidavit of Kevin R. Qualters, an employee of IBM, concerning the shielding devices IBM has used for the past ten years. Presumably, ISC offers this as "evidence not previously available that has become available" that would impact this Court's determination. This evidence, however, was expressly referenced on the initial motion. In opposition to AKS's preliminary injunction motion, ISC argued that IBM had used tooling that raised a question about the novelty of the Shield but introduced no evidence of such prior art — describing it through hearsay and an unattributed sketch in its brief — and expressed its reluctance to issue a subpoena to its customer, IBM, to obtain the evidence. The failure to introduce anything beyond hearsay embedded in attorney argument precluded the Court from considering the defense. See April Opinion at 38-39, 39 n. 35.

Now, having gambled in the first instance and lost, ISC seeks to introduce competent evidence of this prior art. That is not the purpose of a motion for reconsideration. See Harsco Corp. v. Zlotnicki. 779 F.2d 906, 909 (3d Cir. 1985) ("Where evidence is not newly discovered, a party may not submit that evidence in support of a motion for reconsideration."). Unquestionably, evidence that was argued in ISC's briefs was "available" at the time the original motion was submitted. ISC was not unable to obtain this evidence in time to oppose AKS's motion for a preliminary injunction, it was simply unwilling to do so.

Courts routinely exclude evidence raised for the first time on a reconsideration motion absent an adequate explanation as to why the proffering party did not exercise due diligence to obtain the evidence for the initial motion. See. e.g. Pavlik v. Lane Ltd./Tobacco Exporters Int'l, 135 F.3d 876, 882 n. 2 (3d Cir. 1998) (refusing to consider previously available affidavit on motion for reconsideration); Harsco, 779 F.2d at 909 (affirming district court's refusal to consider affidavit containing evidence available prior to initial motion on motion for reconsideration); Lentz v. Mason, 32 F. Supp.2d 733, 751 (D.N.J. 1999) (refusing to consider evidence on reconsideration absent adequate explanation for failure to disclose earlier). Indeed, the Lentz court noted that it was generally "bound not to consider such new materials, lest the strictures of our reconsideration rule erode entirely." Lentz, 32 F. Supp.2d at 751 (citation omitted). Refusing to consider the IBM evidence is even more appropriate here, where the proffering party was fully aware of the existence of the evidence, but made a clear strategic choice — acknowledged in its submissions — not to obtain and present it.

This Court recognizes that newly submitted evidence should be considered in exceptional cases where its consideration is necessary to correct a clear error of law or fact or to prevent manifest injustice. See Max's Seafood Café by Lou-Ann, Inc. v. Ouinteros, 176 F.3d 669, 677 (3d Cir. 1999) (citing North River Ins. Co. v. CIGNA Reinsurance Co., 52 F.3d 1194, 1218 (3d Cir. 1995)). In Max's Seafood, the district court had found the defendants in contempt of a consent decree in connection with remarks made by a third-party who had been the business partner of one of the defendants. See id. at 672-73. In moving for reconsideration, one defendant, Jack-Mack Seafood, LLC, ("Jack-Mack"), sought to introduce its certificate of incorporation — not offered as a defense in the original contempt proceeding — to demonstrate that Jack-Mack did not come into existence until six months after the contumacious statements were uttered. See id. at 677. The Third Circuit recognized the fundamental nature of Jack-Mack's subsequent incorporation defense and noted reasons why Jack-Mack would not have raised the defense initially — namely that no evidence was introduced to support contempt liability. See id. As Jack-Mack's liability should have been a legal and factual impossibility, the Max's Seafood court found that reconsideration in light of that evidence was necessary to prevent a manifest error of fact or law. See id. at 678.

The concerns of the Max's Seafood court are not present here. If the IBM evidence were of fundamental importance, ISC would not have risked its exclusion by offering only a hearsay account of it in the initial motion. On its motion for reconsideration, ISC has made no showing that exclusion of this evidence will result in manifest injustice or a clear error of law or fact. Thus, it shall not be considered.

In addition, because this Court shall not consider the IBM evidence at this late stage ISC's request for additional findings in connection with that evidence, pursuant to Rule 52(b), is denied.

B. 35 U.S.C. § 103

In connection with the IBM evidence, ISC raises a new validity challenge to the `632 patent. ISC for the first time argues that the `632 patent violates the patent statute's nonobviousness requirement, set forth at 35 U.S.C. § 103. ISC now contends that the Court must determine whether the differences between the October sketch and the `632 patent would be obvious to a person of ordinary skill in the art. As ISC never raised this challenge in opposing AKS's preliminary injunction request, it is clear that the Court did not "overlook" this never-before-argued ground for invalidity in granting preliminary injunctive relief. ISC has not shown that the failure to consider it will result in manifest injustice or a clear error of law and fact. Undoubtedly, were that the case, ISC would have raised the challenge in the first instance. It thus does not justify reconsideration.

For all of the foregoing reasons, ISC's motion for reconsideration is denied and its motion for amended findings is granted in part and denied in part.

This matter having come before the Court on the motion of defendant Instrument Specialties Co., Inc. ("ISC") for reconsideration of this Court's previous Opinion in this matter (the "April Opinion"), pursuant to Fed.R.Civ.P. 59(e), and for additional or amended findings, pursuant to Fed.R.Civ.P. 52(b); and the Court having considered the parties' submissions; and good cause appearing,

IT IS on this 19th day of July, 2000

ORDERED that ISC's motion for reconsideration is denied;

IT IS FURTHER ORDERED that ISC's motion for additional or amended findings is granted in part and denied in part;

IT IS FURTHER ORDERED that the final sentence of Part I(B)(1)(a) of the April Opinion, which begins "Since a reasonable trier of fact . . .", is stricken and replaced with the following sentence: "Since ISC failed to establish clear and convincing evidence that the Shield was offered for commercial sale prior to the critical date, its motion for summary judgment on that ground must be denied."; and

IT IS FURTHER ORDERED that a copy of this Order be served on all parties within seven (7) days of the date of this Order.