Dror v. Kenu, Inc.

Background

Idan Dror, using the IDStore brand, sold a cellphone-holder mount for cars through Amazon. Kenu told Amazon that the product infringed Kenu’s U.S. Patent Nos. 9,080,714 and 9,718,412. Amazon removed the product listings and said it would not relist them without a retraction from Kenu. After Dror’s attorneys sent Kenu letters asserting that the product did not infringe the 9,718,412 patent, Kenu responded that it continued to believe the product infringed its intellectual-property rights and would seek judicial relief if Dror pressed the matter further. Amazon did not reinstate the listings.

Dror filed this declaratory-judgment action seeking declarations that his product did not infringe four Kenu patents—the 9,080,714, 9,718,412, 9,956,923, and 10,315,585 patents—that the patents were invalid, and that the patents were unenforceable because of alleged inequitable conduct. Inequitable conduct is alleged dishonest or misleading conduct in obtaining or prosecuting a patent. Dror also asserted a claim under California’s Unfair Competition Law.

Kenu moved to dismiss for lack of subject-matter jurisdiction and for failure to adequately plead the invalidity, inequitable-conduct, and unfair-competition claims.

Subject-Matter Jurisdiction

The court denied Kenu’s request to dismiss for lack of subject-matter jurisdiction. It held that Kenu’s accusation that Dror’s specific product infringed the 9,080,714 and 9,718,412 patents, together with Kenu’s statement that it would seek judicial relief if Dror pressed the issue, created a sufficiently real and immediate dispute for declaratory-judgment jurisdiction. The court rejected Kenu’s argument that the absence of a filed infringement lawsuit defeated jurisdiction.

The court also held that the dispute could include the related 9,956,923 and 10,315,585 patents. Those patents were continuations of, and related to, the 9,080,714 and 9,718,412 patents. The court concluded that Kenu’s conduct concerning the related patents could support jurisdiction even though Kenu had not expressly identified those two patents in its communications about Dror’s product.

The court further rejected Kenu’s argument that a favorable judgment would not redress Dror’s injury because Amazon was not a party and might still refuse to relist the product. The court reasoned that a judgment could remove Kenu’s infringement accusation as at least one obstacle to selling the product, including through Amazon.

Patent-Invalidity Claims

The court denied Kenu’s motion to dismiss Dror’s invalidity claims. Dror cited several provisions of the federal patent laws, identified obviousness as a specific theory, and identified five pieces of prior art that he alleged made the patents obvious. The court held that these allegations gave Kenu sufficient notice of the invalidity theory at the pleading stage. The court also noted that the district’s patent rules would later require Dror to provide more detailed invalidity contentions identifying and charting the prior art for each asserted claim.

Inequitable-Conduct Claims

The court granted Kenu’s motion to dismiss the inequitable-conduct claims. Federal Rule of Civil Procedure 9(b) requires fraud-based allegations to be pleaded with particularity, including the specific who, what, when, where, and how of the alleged misconduct.

Dror alleged that David E. Yao’s declaration to the U.S. Patent and Trademark Office was false because other inventors contributed to an earlier patent application and Kenneth Y. Minn was a co-inventor of the later patent application. The court held that Dror did not identify which portions were allegedly contributed by other inventors or which portions Minn contributed. The allegations therefore did not rule out the possibility that Yao alone invented the particular features described in his declaration.

Dror also alleged that Kenu improperly omitted John Duran as a co-inventor of an earlier patent to prevent Duran’s employer, CamelBak Products, LLC, from obtaining an ownership interest. The court held that Dror supplied no details showing who Duran or CamelBak were, their relationship to Kenu or the patent, why Duran should have been listed, or what Kenu did to exclude him. Alleging facts on information and belief did not excuse the lack of specific facts supporting a strong inference of fraud.

California Unfair-Competition Claim

The court granted Kenu’s motion to dismiss Dror’s California Unfair Competition Law claim. The court held that Dror had not adequately alleged an unlawful practice because the alleged patent-prosecution misconduct was itself inadequately pleaded. He also had not alleged an unfair practice that violated antitrust law or significantly threatened or harmed competition. Finally, he had not alleged with the required particularity that Kenu made false or fraudulent statements on which Dror relied.

Disposition

The court granted in part and denied in part Kenu’s motion to dismiss. It granted the motion as to Dror’s inequitable-conduct and California unfair-competition claims and gave Dror leave to amend those claims. It otherwise denied the motion, leaving the declaratory-judgment and patent-invalidity claims in the case. The order permitted Dror to file an amended complaint within 21 days of the order.