only the specific patent claim or claims found to be anticipated
or obvious, while a finding of inequitable conduct renders the
entire patent unenforceable. See Weatherchem Corp. v. J.L.
Clark, Inc., 163 F.3d 1326, 1335 (Fed.Cir. 1998).
The issue of inequitable conduct was not actually litigated on
the merits in the Virginia Action. R H & M sought at trial to
amend its pleadings to add an inequitable conduct claim and to
pursue questioning of the inventor relating thereto. The court,
however, denied R H & M leave to amend, foreclosed certain lines
of questioning concerning the claim, and precluded submission of
the claim to the jury because R H & M had only raised the claim
for the first time at trial. See Spancrete Machinery Corp. v. R
H & M Machine Co., Civ. Action No. 92-773-A, Transcript at 27-40
(December 2, 1992). There was not, therefore, an "actual and
adversarial litigation" of the inequitable conduct claim.
Regions Hosp. v. Shalala, 522 U.S. 448, 118 S.Ct. 909, 918, 139
L.Ed.2d 895 (1998). Therefore, the doctrine of collateral
estoppel does not bar R H & M's proposed claims.
B. Claim Preclusion
R H & M still faces the possibility, however, that its
newly-asserted claims are precluded under principles of claim
preclusion, also known as res judicata. Claim preclusion provides
generally that a final judgment in an action precludes the
parties from litigating issues that "could have been raised in
that action", but were not. Interoceanica Corp. v. Sound Pilots,
Inc., 107 F.3d 86, 90 (2d Cir. 1997) (internal quotation marks
and citation omitted). In assessing whether claim preclusion
applies, "[i]t must first be determined that the second suit
involves the same `claim' — or `nucleus of operative fact' — as
the first suit." Interoceanica, 107 F.3d at 90 (quoting
Apparel Art Int'l, Inc. v. Amertex Enters. Ltd., 48 F.3d 576,
583 (1st Cir. 1995)). This determination, in turn, involves
consideration of "whether the underlying facts are `related in
time, space, origin, or motivation, whether they form a
convenient trial unit, and whether their treatment as a unit
conforms to the parties' expectations or business understanding
or usage.'" Id. at 90-91 (quoting Restatement (Second) of
Judgments § 24(b)).
R H & M asserted before Judge Ellis that res judicata does not
bar assertion of the counterclaim and defense in this action
because plaintiff's claim for infringement concerns different
products than those involved in the Virginia Action. Judge Ellis
rejected this argument, finding that the "existence of different
products is not relevant". Report at 6.
Judge Ellis's finding was in error. The United States Court of
Appeals for the Second Circuit, whose precedents are binding
regarding this particular issue, see Foster v. Hallco Mfg. Co.,
Inc., 947 F.2d 469, 477 n. 7 (Fed.Cir. 1991), has narrowly read
the scope of a "claim" for purposes of applying claim preclusion.
See Interoceanica, 107 F.3d at 90-92. In Interoceanica, for
example, the Second Circuit held that claim preclusion did not
bar a shipping line from seeking to invalidate a New York state
piloting ordinance on grounds that it violated the Commerce
Clause, even though the shipper could have raised the defense in
previous litigation with the opponent group of ship pilots. Id.
at 90-91. Crucial to the Court's reasoning was the fact that the
subsequent litigation involved distinct voyages by the shipper.
Id. at 91. Thus, while the underlying facts of the two cases
were similar and the shipper's alleged wrongful conduct was
premised upon the same statutory provision in both proceedings,
the Court found claim preclusion did not apply because the
separate relevant voyages by the shipper "give rise to separate
statutory wrongs — just as a party who breaches a contract twice
in the same way has committed two separate breaches." Id.
The Second Circuit's view of res judicata accords with that of
the United States Court of Appeals for the Federal Circuit.
In Foster v. Hallco Manufacturing Company, Incorporated,
947 F.2d 469 (Fed.Cir. 1991), the Federal Circuit held in a case
similar to the one at bar that failure to raise challenges to the
validity of a patent in prior litigation does not preclude
assertion of those defenses in subsequent litigation involving
the same patent, where different products are at issue. Id. at
478-79. That Court reasoned that the relevant inquiry in applying
res judicata principles is whether the claim of infringement is
identical, not whether the alleged basis for the claim (i.e.,
the patent) is the same. Id. Thus, according to the Court,
"[i]t follows that for claim preclusion to apply [where the same
patent underlies both lawsuits], the devices in the two suits
must be essentially the same." Id. at 479-80.
The alleged infringement by R H & M at issue in the instant
case constitutes a separate putative violation of plaintiff's
patent involving separate products than the one involved in the
Virginia Action. To the extent plaintiff asserts to the contrary
(and assuming arguendo this Court were to treat plaintiff's
opposition to R H & M's motion to amend as one for summary
judgment), plaintiff has failed to fulfill its burden of
eliminating any genuine issue of material fact in that respect.
At the very least, plaintiff's choice to bring a separate cause
of action before this Court instead of seeking a contempt order
from the Virginia court can be reasonably construed as a
concession that the claim at issue here is separate and distinct
from that involved in the Virginia Action. See Foster, 947 F.2d
at 480 (mere "[c]olorable changes in an infringing device . . .
would not present a new cause of action" but would be subject to
contempt proceedings on prior judgment of infringement). Given
these considerations, the Court finds the claims raised by
plaintiff in this action to be distinct from those in the
Virginia Action. Accordingly, principles of res judicata do not
preclude R H & M from asserting its inequitable conduct claims in
C. Sufficiency of the Evidence
The final basis on which Judge Ellis recommends denial of
defendant R H & M's motion for leave to amend was that R H & M
had failed to submit clear and convincing evidence that the
patent inventor engaged in inequitable conduct. That finding also
Generally, consideration of the evidentiary basis for a
proposed claim is inappropriate. "On a motion for leave to amend,
the court need not finally determine the merits of a proposed
claim or defense, but [must] merely satisfy itself that it is
colorable and not frivolous." T & N plc v. Fred S. James & Co.
of New York, No. 89 Civ. 7688, 1991 WL 190581, at *2 (S.D.N Y
Sept. 16, 1991) (quoting Sumitomo Elec. Research Triangle, Inc.
v. Corning Glass Works, 109 F.R.D. 627, 628 (S.D.N.Y. 1986));
see also Hall v. Prendergast, No. 91 Civ. 3829, 1992 WL 88143,
at *4-5 (S.D.N.Y. Apr. 22, 1992). That inquiry generally proceeds
according to the standard applicable under Rule 12(b)(6) of the
Federal Rules of Civil Procedure, i.e., whether the
allegations, assumed to be true, fail to state a claim for which
relief can be granted. See Arbitron, 1993 WL 138965, at *3
(listing cases). Thus, typically, "defendants need not, at this
point in the litigation, `prove' inequitable conduct or
materiality. They merely need to set forth allegations sufficient
to state a cause of action under the applicable statute."
Stryker Corp. v. Intermedics Orthopedics Inc., No. 90 Civ.
3006, 1992 WL 465722, at *1 (E.D.N.Y. Dec. 17, 1992); see also T
& N plc, 1991 WL 190581, at *2.
Analysis of defendant R H & M's motion for leave to amend is
somewhat complicated, however, by the fact that R H & M submitted
documentary materials and affirmations purporting to support its
proposed allegations. In some situations where evidentiary
materials have been submitted, application of summary judgment
principles to a motion to amend the pleadings may be appropriate.
Corporation Limited v. Amster & Company, 844 F. Supp. 929
(S.D.N.Y. 1994), for example, Judge Patterson denied a plaintiff
leave to amend a complaint where the evidence submitted to the
court on a contemporaneous motion for summary judgment indicated
that "the factual foundations of [plaintiff's] new allegations
are insufficient, as a matter of law, to withstand defendants'
motion for summary judgment." Id. at 939. The Second Circuit
affirmed this finding. See Azurite Corp. Ltd. v. Amster & Co.,
52 F.3d 15, 19 (2d Cir. 1995).
The Court is of the view, however, that that possible approach
to deciding a motion for leave to amend could not have been
employed here. In Azurite, Judge Patterson had before him full
briefing of a summary judgment motion when he determined the
futility of the proposed amendments. See Azurite, 844 F. Supp.
at 939. By contrast, no such briefing was before Judge Ellis. In
addition, Judge Ellis did not inform the parties of the court's
intention to review the motion according to a standard other than
the normally applicable Rule 12(b)(6) standard. Such notice is
necessary so that the parties understand which standard of
decision will apply and are made aware of the need to garner all
relevant evidence. That fairness dictates such a procedure is
confirmed by Rule 12(b), which provides that a court converting a
motion to dismiss to one for summary judgment shall provide "all
parties . . . [with] reasonabl[e] opportunity to present all
material made pertinent to such a motion by Rule 56."
Fed.R.Civ.P. 12(b); see also B.F. Goodrich v. Betkoski,
99 F.3d 505, 522 (2d Cir. 1996).
Finally, even if the parties had been given notice that the
motion for leave to amend would be reviewed under a summary
judgment standard, the Court nonetheless rejects Judge Ellis's
findings because a summary judgment standard of review was not
ultimately applied to the evidence. The Report makes clear that
the evidence is analyzed applying the burden applicable at trial
without resolving all ambiguities in the evidence and drawing all
justifiable inferences therefrom in favor of R H & M. See
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct.
2505, 91 L.Ed.2d 202 (1986); see also Holt, 95 F.3d at 129.
Having viewed the evidence in the appropriate light, this Court
finds the evidence raises genuine issues of material fact as to
whether the patent inventor publicly used the invention prior to
May 15, 1983.
Accordingly, defendant R H & M's motion for leave to amend
would not be futile and, thus, grant of leave to amend is
III. Treatment of Defendant Edgell's Answer
The final component of Judge Ellis's Report to be addressed is
the Report's treatment of defendant Edgell. As noted previously,
defendant Edgell was added as a defendant in plaintiff's Second
Amended Complaint. Thus, Edgell's answer to that complaint was
his first responsive pleading and no leave of court was required
for Edgell to assert any of the defenses and counterclaims
In the course of considering defendant R H & M's motion for
leave to amend, however, Judge Ellis noted that defendant Edgell
was precluded from raising the counterclaim and defense R H & M
sought to add to its answer because Edgell is "in privy to R H &
M". Report at 4 n. 2. Neither R H & M nor plaintiff had raised
this issue before Judge Ellis. Defendant Edgell was not,
moreover, even a party to that particular dispute and did not
submit any pleadings relating thereto, since the motion before
Judge Ellis concerned only defendant R H & M's answer. Thus, it
would appear that the Report recommends grant of summary judgment
sua sponte on the privity issue.
Such a finding would be in error. At the very least, it is
well-established that it is inappropriate to grant summary
judgment sua sponte on an issue without first giving adequate
notice to the parties and
"an opportunity to present materials in opposition." See B.F.
Goodrich, 99 F.3d at 522 (internal quotation marks and citation
omitted). No such notice or opportunity was given to defendant
Edgell. In any case, even assuming, without deciding, that
defendant Edgell is in privity with defendant R H & M, this Court
has rejected the reasons stated in the Report for denying
defendant R H & M's motion for leave to amend. Accordingly,
judgment against defendant Edgell on those claims would also be
For the reasons stated in this Opinion and Order, the Report
and Recommendation of Judge Ellis is hereby rejected and
defendant R H & M's motion for leave to amend its answer is
hereby GRANTED. In addition, the Clerk of the Court is hereby
directed to strike from the record defendant R H & M's "Second
Amended Answer", filed on August 21, 1997. Defendant R H & M
shall file an amended answer to the Second Amended Complaint by
February 1, 1999, consistent with this Opinion and Order.