Cellulose Material Solutions, LLC v. SC Marketing Group, Inc.

Background

Cellulose Material Solutions, LLC alleged that SC Marketing Group, Inc. infringed U.S. Patent No. 11,078,007, which concerns packaging insulation intended to keep contents such as meal-kit food items cool and fresh without refrigerant packs. The parties were competitors. Cellulose’s product was called InfinityCore, and SC Marketing’s product was called Renewliner.

SC Marketing alleged that the dispute arose from an earlier business relationship in which the parties collaborated. It alleged that SC Marketing employees conceived the idea for thermoplastic packaging insulation and that SC Marketing President Sal Cardinale should have been named as an inventor on the patent. SC Marketing asserted eight counterclaims, including conversion and unjust enrichment. The court had previously allowed SC Marketing to amend its answer to add those two counterclaims.

Statute-of-limitations issue

Cellulose moved under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal for failure to state a legally sufficient claim. Cellulose argued that the conversion and unjust-enrichment counterclaims were untimely under California’s three-year statute of limitations for conversion. Cellulose contended that the limitations period began when the patent was published on December 28, 2017. SC Marketing contended that it began when the patent issued on August 3, 2021.

The court explained that conversion involves wrongful control over another person’s property in a way that conflicts with that person’s rights. A conversion claim requires ownership or a right to possess the property, a wrongful act inconsistent with that right, and damages. The court also explained that an unjust-enrichment claim’s limitations period is based on the underlying wrong, which the parties agreed was the alleged conversion.

The court held that the relevant interference with SC Marketing’s alleged ownership or possessory rights occurred when Cellulose’s patent issued. Under federal patent law, the patent holder’s exclusive rights begin on the patent’s issuance date. Because SC Marketing filed the counterclaims less than three years after August 3, 2021, the court held that the counterclaims were timely.

Preemption briefing

In its reply brief, Cellulose separately argued that the counterclaims were preempted by federal patent law. Cellulose reasoned that SC Marketing had relied on the omission of Mr. Cardinale as a named inventor and that state-law claims based on inventorship can be preempted.

The court noted that Cellulose raised preemption for the first time in its reply. It therefore ordered SC Marketing to file a supplemental opposition by October 25, 2023, and allowed Cellulose to file a supplemental reply by November 2, 2023. The court reset the motion hearing for November 30, 2023, and stated that the hearing would address preemption only. The opinion does not state that the motion to dismiss was granted or denied in full.