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Transweb, LLC v. 3m Innovative Properties Company

June 1, 2011

TRANSWEB, LLC, PLAINTIFF,
v.
3M INNOVATIVE PROPERTIES COMPANY, ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: Shwartz, United States Magistrate Judge

NOT FOR PUBLICATION

OPINION

I. INTRODUCTION

This matter comes before the Court by way of Plaintiff TransWeb, LLC's ["TransWeb"] motion for leave to file a Second Amended Complaint, the motion of Defendants 3M Innovative Properties Company and 3M Company [collectively, "3M"] for leave to file an Amended Answer, and various motions to seal materials submitted in connection with those motions. For the reasons set forth herein.*fn1 the Court grants TransWeb leave to file a Second Amended Complaint, terminates as moot 3M's motion because it is required to file an Answer to the Second Amended Complaint under Fed. R. Civ. P. 12(a), and grants in part and denies in part the motions to seal.

II. BACKGROUND

A. Factual History

Because 3M opposes TransWeb's motion for leave to file the Proposed Second Amended Complaint based primarily on futility, the Court must accept as true the factual allegations in the Proposed Second Amended Complaint to determine if the motion should be granted. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1421 (3d Cir. 1997); see also Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009); Fowler v. UPMC Shadyside, 578 F.3d 203, 210--11 (3d Cir. 2009).

1. The Filtration Media Market

This case concerns patents on products that use "filtration media," which are materials that block contaminants from being inhaled or circulated in the air. (Proposed 2d Am. Compl. ¶ 10, Apr. 18, 2011, ECF No. 58.) Some filtration media, such as the ones at issue here, use fluorine to create an "electric attraction to filter [out] contaminants." (Id. ¶¶ 12, 20.) Nonfluorinated filtration media use multiple layers of material to achieve the same level of filtration as fluorinated media. (Id. ¶ 94.) One use of filtration media is particulate-filtering facepiece respirators. (Id. ¶ 81.)

The Occupational Safety and Health Administration ["OSHA"] has standards and requirements for facepiece respirators used in various environments and the National Institute for Occupational Safety and Health ["NIOSH"] has the responsibility to certify that a respirator meets minimum specified requirements. (Id. ¶¶ 85--87.) Environments containing oil (such as lubricants, cutting fluids, and glycerin) degrade respirator effectiveness and only two categories of respirators can be used in oil environments, namely the "P" series (oil proof) and "R" series (oil resistant). (Id. ¶¶ 88, 90.) Within these series, there are four classes of NIOSH-approved particulate filtering facepiece respirators: P100, P99, P95, and R95. (See id. ¶ 89.) The numbers correspond to a respirator's ability to remove contaminants from the air; the higher the number, the greater the percentage of airborne particles that are captured by the filter. (Id. ¶¶ 14, 89.)

According to the Proposed Second Amended Complaint, very few environments require P100 respirators, and P100, P99, and R95 respirators are "frequently interchangeable with the only significant difference being the durational use" of the product. (Id. ¶¶ 88, 92.) Makers of P99 respirators have allegedly been forced out of the market. (Id. ¶ 89.) Few manufacturers allegedly make P100, P95, or R95 respirators without using fluorinated filtration media. (Id.¶ 94.) Allegedly, only TransWeb and 3M manufacture the fluorinated filtration media used in P100, P95, and R95 respirators, and 3M has a dominant market share of P100, P95, and R95 respirators. (Id. ¶¶ 94--95.) Since TransWeb, no new competitors have entered the market for supplying filtration media for NIOSH-certified P100, P95, or R95 particulate respirators, and there are allegedly substantial barriers to entry, namely, substantial capital in research and development, facility construction costs, and cooperation with respirator manufacturers to complete the NIOSH certification process. (Id. ¶¶ 96--97.)

2. Development and Patent Procurement of Fluorinated Filtration Media

Before 1996, 3M manufactured an electrostatically charged filtration media by infusing or weaving fluorine into the fibers of the media. (Id. ¶ 20.) In 1996, TransWeb began developing an allegedly cheaper process by coating the filtration media with fluorine. (Am. Compl. ¶¶ 19, 21, Nov. 12, 2010, ECF No. 18; Proposed 2d Am. Compl. ¶¶ 19, 21.)

In December 1996 and May 1997, TransWeb met with Racal Filter Technologies, Inc.["Racal"], offered to sell them fluorine filtration media, and sent them samples. (Am. Compl. ¶¶ 27--28; Proposed 2d Am. Compl. ¶¶ 27--28.) On April 30, 1997, TransWeb filed a patent application with the Patent and Trademark Office ["PTO"] for its fluorine filtration media. (Am. Compl. ¶ 23; Proposed 2d Am. Compl. ¶ 23.) In May 1997, TransWeb notified Racal of its pending patent application. (Am. Compl. ¶ 29; Proposed 2d Am. Compl. ¶ 29.) The patent application was later rejected.*fn2 (Am. Compl. ¶ 26; Proposed 2d Am. Compl.¶ 26.)

Meanwhile, by March 31, 1998, 3M had purchased Racal and its assets, including the samples and records of the meetings wherein Racal learned of TransWeb's patent application and sales offers. (Am. Compl. ¶ 30; Proposed 2d Am. Compl. ¶ 30.)*fn3 On December 2, 1998, 3M's research laboratories issued a report detailing an analysis of the TransWeb samples. (Am. Compl. ¶ 32; Proposed 2d Am. Compl. ¶ 32.) In 1999, 3M expressed an interest in purchasing quantities of TransWeb's fluorinated filtration media. (Am. Compl. ¶ 33; Proposed 2d Am. Compl. ¶ 33.) From June to August 2000, TransWeb shipped non-commercial quantities of its fluorinated filtration media to 3M. (Am. Compl. ¶ 34; Proposed 2d Am. Compl. ¶ 34.) From April to July 2001 and May to September 2002, TransWeb shipped commercial quantities of its fluorinated filtration media to 3M. (Am. Compl. ¶ 35; Proposed 2d Am. Compl. ¶ 35.)

On January 6, 2000, 3M filed a patent application, later approved as U.S. Patent No. 6,397,458 ["the '458 patent"],*fn4 for a fluorine-coated filtration media. (Am. Compl. ¶¶ 36, 68; Proposed 2d Am. Compl. ¶¶ 36, 68.) In connection with this application, 3M disclosed to the PTO information regarding TransWeb's media. (Id. ¶¶ 45--65.) The disclosure indicated that samples sent to Racal were provided under the terms of a confidential disclosure agreement, 3M was aware of no public disclosures of TransWeb's samples, TransWeb's media "may have been . . . commercialized", and no patent applications had been filed by TransWeb. (Id.) Contrary to these representations, TransWeb alleges that the samples were sent before any non-disclosure agreement had been entered, 3M had received commercial shipments of TransWeb's media, and 3M knew from Racal's assets that TransWeb had filed a patent application for its fluorinated media. (Id. ¶¶ 48--49, 52--53, 56--57, 68, 64--65.) TransWeb further alleges that this information was material and that 3M withheld this anticipatory prior art from the PTO with deceptive intent. (Id. ¶¶ 36, 38--42, 45--46, 50--51, 54--55, 58--59, 62--63, 66--67, 69.) On June 4, 2002, the PTO approved 3M's patent application and issued the '458 patent. (Am. Compl. ¶¶ 36, 68; Proposed 2d Am. Compl. ¶¶ 36,68.)

On October 7, 2003, 3M filed another patent application.*fn5 (Am. Compl. ¶¶ 70, 75; Proposed 2d Am. Compl. ¶¶ 70, 75.) On January 7, 2004, 3M sent a supplemental disclosure to the PTO in support of this application that contained the identical representations set forth in its disclosure submitted in connection with the '458 patent application regarding TransWeb's fluorinated media, commercialization, and patent application. (See id. ¶ 74; see also Pl.'s Letter 1--2, May 23, 2011.) The patent was approved on October 26, 2004, as U.S. Patent No. 6,808,551 ["the '551 patent"]. (Am. Compl.¶ 75; Proposed 2d Am. Compl. ¶75.)

On two separate occasions during this period, 3M tried to purchase TransWeb. Sometime in 2000, 3M unsuccessfully sought to acquire TransWeb. (Proposed 2d Am. Compl. ¶¶ 107, 169.) In 2008, 3M employed a consultant to inquire whether TransWeb was for sale. (Id. ¶¶ 107, 169.)

3. The Minnesota Action

On May 21, 2010, 3M filed an action against TransWeb in the United States District Court for the District of Minnesota ["Minnesota Action"]. (Am. Compl. ¶ 77; Proposed 2d Am. Compl. ¶ 98; see also 3M Innovative Props. Co. v. TransWeb LLC, Civ. No. 10-2132 (D. Minn., May 21, 2010).) In the Minnesota Action, 3M alleged that TransWeb directly infringed the '458 and '551 patents. (Am. Compl. ¶ 78; Proposed 2d Am. Compl. ¶ 99.) On August 20, 2010, TransWeb filed a motion to dismiss the Minnesota Action for lack of personal jurisdiction. (Am. Compl. ¶ 80; Proposed 2d Am. Compl. ¶ 102.) On September 29, 2010, 3M voluntarily dismissed the Minnesota Action. (Am. Compl. ¶ 81; Proposed 2d Am. Compl. ¶ 103.)

B. Procedural History

While the motion to dismiss was pending in the Minnesota Action, specifically, on August 27, 2010, TransWeb filed a Complaint against 3M in the District of New Jersey seeking a judgment declaring that 3M's '458 and '551 patents are invalid and unenforceable and that TransWeb does not infringe these patents. (Compl., Aug. 27, 2010, ECF No. 1.) TransWeb alleged that 3M failed to properly disclose material information regarding TransWeb's product that would have affected its ability to receive the '458 and '551 patents. (Id. ¶¶10--13.)

In November 2010, 3M settled a separate action against the Safe Life Corporation and Triosyn Corporation [collectively "Safe Life"]. (Proposed 2d Am. Compl. ¶¶ 89, 109, 171.) Safe Life was a customer of TransWeb's fluorinated filtration media and the only manufacturer of P99 particulate facepiece respirators. (Id.) Safe Life stipulated to a permanent injunction that allegedly forced them out of the market for P99 respirators. (Id.)

On November 12, 2010, TransWeb filed an Amended Complaint adding causes of actions asserting that the '458 and '551 patents were unenforceable based upon laches and 3M's inequitable conduct. (Am. Compl., Nov. 12, 2010, ECF No. 18.) On November 29, 2010, 3M filed its Answer and Counterclaims against TransWeb for the infringement of the '458 and '551 patents. (Answer & Countercls., Nov. 29, 2010, ECF No. 22.) TransWeb filed a reply to these Counterclaims. (Answer to Countercls., Jan. 3, 2011, ECF No. 36.)

In December 2010, 3M's business director allegedly told TransWeb that "the respirator business is very profitable and that the 3M Defendants do not want any competition in it," that TransWeb could not afford to pay for its defense in this patent infringement litigation, and that it should exit the market. (Proposed 2d Am. Compl. ¶¶ 108,170.)

On December 6, 2010, the Court held a scheduling conference and thereafter issued a pretrial scheduling order setting deadlines, including April 18, 2011, as the deadline to amend pleadings and October 14, 2011, as the close of fact discovery. (Pretr. Sched. Order, Dec. 6, 2010, ECF No. 25.)

On March 3, 2011, the Court held a telephone conference and thereafter issued an Order directing the parties to submit a proposed extension of certain deadlines that would not impact the date of the final pretrial conference. (Order, Mar. 3, 2011, ECF No. 49.) At the joint request of the parties, the Court issued orders on March 8, 2011 and April 5, 2011, extending deadlines for disclosing infringement and invalidity contentions, claims construction, and fact, expert and Markman discovery. (Am. Pretr. Sched. Order, Mar. 8, 2011, ECF No. 51; Order, Apr. 5, 2011, ECF No. 53.)

On April 18, 2011, TransWeb filed the present Motion for Leave to File a Second Amended Complaint. (Mot. to Am., Apr. 18, 2011, ECF No. 56.) TransWeb seeks to add claims that 3M infringed the '871 patent and violated federal and state antitrust laws by attempting to monopolize the market for oil resistant, NIOSH-certified P100, P95, and R95 particulate respirators through Walker Process fraud and sham litigation. (Proposed 2d Am. Compl. ¶¶ 147--185.) TransWeb alleges that it suffered harm by: (1) being forced to expend substantial amounts of money, time, and resources defending 3M's patent infringement litigation; (2) being forced to sell itself to CLARCOR Inc. at a low price because of its inability to bear the costs and burdens of litigation; (3) lost business from its customer Safe Life because 3M forced Safe Life from the market; and (4) the likely loss of other customers because of 3M's deposition and document subpoenas. (Id. ¶¶ 114, 162, 178.)

On the same day, April 18, 2011, 3M filed a Motion for Leave to File an Amended Answer and Counterclaims. (Mot. to Am., Apr. 18, 2011, ECF No. 59.) On April 29, 2011, the parties filed motions to seal portions of their motions to amend the pleadings. (Pl.'s Mot. to Seal, Apr. 29, 2011, ECF No. 69; Def.'s Mot. to Seal, Apr. 29, 2011, ECF No. 70.) On May 2, 2011, the parties filed briefs in opposition to each other's motions to amend their pleadings. (Pl.'s Opp'n Br., May 2, 2011, ECF No. 71; Def.'s Opp'n Br., May 2, 2011, ECF No. 73.) On May 13, 2011 and May 17, 2011, the parties filed motions to seal portions of their opposition and reply submissions. (Def.'s Mot. to Seal, May 13, 2011, ECF No. 85; Pl.'s Mot. to Seal, May 13, 2011, ECF No. 86; Def.'s Mot. to Seal, May 17, 2011, ECF No. 87; Pl.'s Mot. to Seal, May 18, 2011, ECF No. 88.) On May 23, 2011, 3M filed a response to TransWeb's motion to seal certain materials in its Proposed Second Amended Complaint and its supporting brief (Defs.' Resp. to Pl.'s Mot. to Seal, May, 23, 2011, ECF No. 93), and on May 31, 2011, TransWeb filed a reply. (Pl.'s Reply to Defs.' Resp., May 31, 2011, ECF No. 98.)

On May 20, 2011, the Court granted the parties' request to extend certain claim construction deadlines. (Order, May 20, 2011, ECF No. 90.) On May 23, 2011, the Court issued an Order requiring TransWeb to identify certain information regarding its January 7, 2004 supplemental disclosure to the PTO (identified in the Order as "Exhibit C"). (Text Order, May 23, 2011, ECF No. 91.) TransWeb provided the requested information in a letter dated May 23, 2011. (Pl.'s Letter, May 23, 2011, ECF No. 92.)

On May 26, 2011, 3M filed a letter to supplement its opposition to the motion for leave to file a Second Amended Complaint and attached a recent opinion from the Court of Appeals for the Federal Circuit, namely, Therasense, Inc. v. Becton, Dickinson & Co., Civ. Nos. 08-1511, 08-1512, 08-1514, 08-1595, 2011 WL 2028255 (Fed. Cir. May, 25, 2011). (Defs.' Letter, May 26, 2011, ECF No. 95.) On the same day, TransWeb filed a letter indicating, in part, that it would be amenable to submit additional briefing concerning Therasense if requested. (Pl.'s Letter, May, 26, 2011, ECF No. 96.)

III. ARGUMENTS

A. Plaintiff

TransWeb argues that leave to file its Proposed Second Amended Complaint should be granted because: (1) the proposed pleading is sufficiently detailed to allege patent infringement and antitrust claims; (2) there has been no undue delay as the claims are based on newly discovered evidence; and (3) no prejudice exists as there are six months left in discovery and 3M seeks to add its own new claims. (Pl.'s Br. 1--2, 10, 12--13, Apr. 18, 2011, ECF No. 57.)

As for the sufficiency of the allegations, TransWeb contends that it has adequately alleged claims of infringement of its '871 patent as well as attempted monopolization claims under theories of Walker Process fraud and sham litigation. (Id. at 11--12.) Regarding Walker Process fraud, TransWeb asserts that 3M fraudulently obtained the '458 and '551 patents and knowingly attempted to enforce invalid and unenforceable patents to lessen or eliminate competition in the oil resistant respirators market. (Id. at 14--17.) TransWeb argues that 3M's improper enforcement actions constitute sham litigation. (Id. at 20--22.) TransWeb also contends that it has adequately pled all the necessary elements of an attempted monopolization claim, namely, that 3M engaged in predatory or anti-competitive conduct with the specific intent to monopolize and has a dangerous probability of achieving monopoly power. (Id. at 18--20.) Lastly, TransWeb asserts that its allegations satisfy parallel claims of attempted monopolization under the New Jersey antitrust laws. (Id. at 20--23.)

As for delay, TransWeb contends that: (1) the proposed amendments are timely under the pretrial scheduling order and based upon information discovered in the course of this litigation; (2) the patent infringement claim results from an analysis of 3M samples produced in January 2011; and (3) the antitrust claims result from the Safe Life consent judgment in November 2010, statements by a 3M representative in December 2010, and 3M's amended infringement contentions. (Id. at 1, 12, 23--24.) TransWeb also argues that the Discovery Confidentiality Order requires that these claims be brought now because it provides that material disclosed in this case may not be used in any subsequent litigation. (Id. at 24.)

As for prejudice, TransWeb argues that 3M cannot claim prejudice because: (1) discovery remains open for six more months; (2) 3M has been aware of the '871 patent since August 2002; (3) 3M agreed to April 18, 2011 as the deadline to amend pleadings; and (4) 3M cannot claim prejudice from an amendment to TransWeb's pleading ...


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