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Red Rhino Leak Detection, Inc. v. Anderson Manufacturing Co., Inc.

United States District Court, D. Minnesota

September 16, 2019

Red Rhino Leak Detection, Inc., Plaintiff and Counterclaim Defendant,
v.
Anderson Manufacturing Company, Inc., Defendant and Counterclaimant.

          Kelly G. Swartz and Mark F. Warzecha, Widerman Malek, PL, Melbourne, FL, and Jack E. Pierce, Bernick Lifson, Minneapolis MN, for Plaintiff and Counterclaim Defendant Red Rhino Leak Detection, Inc.

          Devan V. Padmanabhan and Erin O. Dugan, Padmanabhan & Dawson, PLLC, Minneapolis, MN for Defendant and Counterclaimant Anderson Manufacturing Company, Inc.

          OPINION AND ORDER

          Eric C. Tostrud United States District Judge

         This case is the second of two patent-infringement cases pending in this District between Plaintiff Red Rhino Leak Detection, Inc. and Defendant Anderson Manufacturing Company, Inc. In the earlier-filed action, Red Rhino alleged that a product Anderson sold for detecting leaks in swimming pools violated U.S. Patent No. 9, 464, 959 ("the '959 Patent"). In this case, Red Rhino alleges that two of Anderson's products, the Light Tester and the LeakTrac Light Cover Version 2 (the "Light Cover" and, with the Light Tester, the "Accused Products") infringe Red Rhino's U.S. Patent No. 10, 088, 383 (the '383 Patent"), of which the '959 Patent is a parent patent. Am. Compl. ¶ 9, Counts I-III [ECF No. 16]; id. Ex. B at 1 (the '"383 Patent") (identifying parent parents) [ECF No. 16-2 at 2]. Anderson did not move to dismiss Red Rhino's First Amended Complaint in this action; instead, on January 2, 2019, it answered and counterclaimed, seeking declaratory judgments of non-infringement, invalidity, and unenforceability. Countercl. Counts I-III [ECF No. 19]. Two months later, on March 1, 2019, Anderson moved for Rule 11 sanctions against Red Rhino and its counsel, in the form of an order "awarding Anderson Manufacturing its attorney's fees incurred in defending Red Rhino's baseless claims, and dismissing this action with prejudice." ECF No. 27. The Court held a single hearing on Anderson's sanctions motion in this action and on claim construction, cross-motions for summary judgment, and a motion to exclude expert testimony in the first-filed Red Rhino case. See ECF Nos. 48, 50. The motions in the first-filed case have been resolved by a separate order. See generally Red Rhino Leak Detection, Inc. v. Anderson Mfg. Co., Inc., No. 17-cv-2189 (ECT/DTS), 2019 WL 4039972 (D.Minn. Aug. 27, 2019) ("Red Rhino 7"). For the reasons that follow, Anderson's motion for sanctions in this action will be denied.

         Under the relevant portions of Rule 11(b), an attorney filing a complaint "certifies that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances: ... (2) the claims ... are warranted by existing law . . .; [and] (3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery[.]" Fed.R.Civ.P. 11(b). "Rule 11 requires that an attorney conduct a reasonable inquiry of the factual and legal basis for a claim before filing."[1]Coonts v. Potts, 316 F.3d 745, 753 (8th Cir. 2003). A reasonable inquiry requires that "the prefiling investigation must uncover a factual basis for the plaintiffs allegations, as well as a legal basis." Id. In resolving a Rule 11 motion, the district court inquires "whether a reasonable and competent attorney would believe in the merit of an argument." Miller v. Bittner, 985 F.2d 935, 939 (8th Cir. 1993) (quotation omitted).

         In the context of the pre-suit investigation of a patent claim, Rule 11 requires, "at a minimum . . . that an attorney interpret the asserted patent claims and compare the accused device with those claims before filing a claim alleging infringement." Q-Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 1295, 1300-01 (Fed. Cir. 2004). In doing so, an attorney may not simply rely on the claim construction of his or her client, "but instead [must] perform an independent claim analysis." Antonious v. Spalding & Evenflo Companies, 275 F.3d 1066, 1072 (Fed. Cir. 2002). A plaintiff claiming infringement "must be prepared to demonstrate to both the court and the alleged infringer exactly why it believed before filing the claim that it had a reasonable chance of proving infringement." View Eng 'g, Inc. v. Robotic Vision Sys., Inc., 208 F.3d 981, 986 (Fed. Cir. 2000).

         Red Rhino's First Amended Complaint accuses Anderson of direct infringement, induced infringement, and contributory infringement of multiple claims of the '383 Patent. See Am. Compl. at Counts I-III. For purposes of this motion, the Parties focus all but exclusively on claim 1, which is the only independent claim Red Rhino asserts, and furthermore focus on the direct-infringement claim, because without a showing of direct infringement, an induced-infringement or contributory-infringement claim cannot succeed. See Hi Ltd. P'ship v. Microsoft Corp., 598 F.3d 831, 851 (Fed. Cir. 2010) ("To prove inducement, the patentee must show direct infringement, and that the alleged infringer knowingly induced infringement and possessed specific intent to encourage another's infringement." (quotation omitted)); Refac Int'l, Ltd. v. IBM, 798 F.2d 459, 460 (Fed. Cir. 1986) ("Proving direct infringement is essential to proving contributory infringement."). Accordingly, the question presented by Anderson's Rule 11 motion is whether Red Rhino conducted a reasonable inquiry, and discovered a reasonable legal and factual basis, for its claim that the Light Tester and the Light Cover directly infringe claim 1 of the '383 Patent, which basis a reasonable and competent attorney would believe to be meritorious. Coonts, 316 F.3d at 753; Miller, 985 F.2d at 939.

         Claim 1 of the '383 Patent claims, in relevant part:

A leak detecting device for a swimming pool light in a water filled swimming pool comprising:
a housing having a continuous perimeter edge sized to extend around a swimming pool light forming a hollow interior having a threaded rod extending through an aperture in said housing;
an anchoring attachment secured to an end of the threaded rod for immovably anchoring the housing to an underwater swimming pool light;
an annular resilient seal secured to said perimeter edge . . .;
an inlet forming an opening through said housing and extending into the opening providing accessible [sic] from an exterior to selectively deliver a dye solution for leak detection purposes into the interior of said housing;
whereby the flow of the dye inserted in the interior is observable by a user of the device for determining leakage underwater within the defined perimeter relative to the defined ...

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