Free Answer to Amended Complaint - District Court of Arizona - Arizona

1 Terry E. Fenzl (#002485) C. Mark Kittredge (#013907) 2 PERKINS COIE BROWN & BAIN P.A. 3 2901 North Central Avenue Post Office Box 400 4 Phoenix, Arizona 85001-0400 (602) 351-8000 5 [email protected] 6 [email protected] 7 Attorneys for Defendants 8 9 10 11 Richard G. Krauth, an individual, and R.M. 12 Wade & Co., an Oregon corporation, 13 14 15 16 Phelps Dodge Corporation, a New York corporation, Phelps Dodge Bagdad, Inc., a 17 Delaware corporation, Phelps Dodge Chino, Inc., a Delaware corporation, Phelps Dodge 18 Morenci, Inc., a Delaware corporation, Phelps 19 Dodge Sierrita, Inc., a Delaware corporation, Phelps Dodge Tyrone, Inc., a Delaware 20 corporation, and Phelps Dodge Miami, Inc., a Delaware corporation, 21 22 23 24 25 26 27 28
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UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA No. CV 04-0544 PHX PGR

Plaintiffs, vs.

DEFENDANTS' ANSWER TO FIRST AMENDED COMPLAINT AND COUNTERCLAIM - AND DEMAND FOR JURY TRIAL

Defendants.

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Phelps Dodge Corporation, a New York corporation, Phelps Dodge Bagdad, Inc., a Delaware corporation, Phelps Dodge Chino, Inc., a Delaware corporation, Phelps Dodge Morenci, Inc., a Delaware corporation, Phelps Dodge Sierrita, Inc., a Delaware corporation, Phelps Dodge Tyrone, Inc., a Delaware corporation, and Phelps Dodge Miami, Inc., a Delaware corporation, Counterclaim Plaintiffs, vs. Richard G. Krauth, an individual, and R.M. Wade & Co., an Oregon corporation, Counterclaim Defendants.

Defendants Phelps Dodge Corporation, Phelps Dodge Bagdad, Inc., Phelps Dodge Chino, Inc., Phelps Dodge Morenci, Inc., Phelps Dodge Sierrita, Inc., Phelps Dodge Tyrone, Inc. and Phelps Dodge Miami, Inc. answer the Complaint filed by plaintiffs Richard G. Krauth ("Krauth") and R.M. Wade & Co. ("Wade") as follows: ANSWER 1. Defendants lack knowledge or information sufficient to form a belief as to

the allegations set forth in paragraph 1 of the Complaint and, on that basis, deny those allegations. 2. Defendants lack knowledge or information sufficient to form a belief as to

the allegations set forth in paragraph 2 of the Complaint and, on that basis, deny those allegations. 3. Defendants admit that Phelps Dodge Corporation is a New York

corporation and that its principal place of business is in Phoenix, Arizona. Defendants admit that Phelps Dodge Bagdad, Inc., Phelps Dodge Chino, Inc., Phelps Dodge Morenci, Inc., Phelps Dodge Sierrita, Inc., Phelps Dodge Tyrone, Inc. and Phelps Dodge Miami,
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Inc. are subsidiaries of Phelps Dodge Corporation. allegations of paragraph 3. 4. 5. 6.

Defendants deny the remaining

Defendants admit the allegations contained in paragraph 4. Defendants admit the allegations contained in paragraph 5. Defendants admit that Phelps Dodge Morenci, Inc. is a Delaware

corporation. Defendants deny the remaining allegations contained in paragraph 6. 7. 8. 9. 10. Defendants admit the allegations contained in paragraph 7. Defendants admit the allegations contained in paragraph 8. Defendants admit the allegations contained in paragraph 9. Defendants admit that this Court has jurisdiction. The remainder of

paragraph 10 states legal conclusions to which no response is required. 11. Defendants admit that venue is proper in this district. Defendants deny the Defendants admit that U.S. Patent No. 5,005,806 ("the `806 patent")

remaining allegations contained in paragraph 11. 12.

indicates on its face that it issued on April 9, 1991 and that U.S. Patent No. 5,030,279 ("the `279 patent") indicates on its face that it issued on July 9, 1991. Defendants deny that Krauth conceived and reduced to practice the inventions disclosed in the `806 Patent and the `279 Patent. Defendants lack knowledge or information sufficient to form a belief as to the truth of the remaining allegations in paragraph 12 and, on that basis, deny those allegations. 13. Defendants lack knowledge or information sufficient to form a belief as to

the truth of the allegations in paragraph 13 and, on that basis, deny those allegations. 14. Defendants lack knowledge or information sufficient to form a belief as to

the truth of the allegations in paragraph 14 and, on that basis, deny those allegations. 15. Defendants admit that the Court stayed this action on August 16, 2004

pending reexamination, that plaintiffs presented certain prior art uncovered by defendants to the United States Patent and Trademark Office, and that the United States Patent and Trademark Office issued Office Actions dated October 5, 2005. Defendants respectfully
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refer to those Office Actions with respect to the nature of any statements contained therein, and deny any allegations in paragraph 15 inconsistent with those Office Actions. Defendants deny all allegations contained in paragraph 15 not expressly admitted herein. 16. 17. 18. 19. 20. 21. 22. 23. 24. Defendants deny the allegations contained in paragraph 16. Defendants deny the allegations contained in paragraph 17. Defendants deny the allegations contained in paragraph 18. Defendants deny the allegations contained in paragraph 19. Defendants deny the allegations contained in paragraph 20. Defendants deny the allegations contained in paragraph 21. Defendants deny the allegations contained in paragraph 22. Defendants deny the allegations contained in paragraph 23. Defendants admit that in May 2003, personnel from Wade and Phelps Defendants deny the remaining allegations contained in

Dodge Corporation met. paragraph 24. 25. above.

Defendants deny all allegations in the complaint not expressly admitted

AFFIRMATIVE DEFENSES General Allegations 26. "heap leach mining" operation at its Coeur-Rochester mine in northern Nevada. 27. Sometime in 1986, a company called Coeur d' Alene Mines established a

In heap leach mining, a leaching solution is applied to the top of a pile of

metal-bearing ore (the "heap"), the solution percolates down through the heap dissolving metals out of the ore and into solution, and the solution is collected at the bottom of the heap such that it can be further processed to recover the dissolved metals. 28. The Coeur-Rochester heap leach mine initially used a sprinkler system to

spray the leaching solution over the heaps. 29. In or about November 1986, Coeur-Rochester began to experience icing

problems with the leaching solution sprayed over the heaps.
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30.

In or about November or December 1986, engineers at the Coeur-Rochester

mine determined that the icing problem could be solved by switching from sprinklers to a drip irrigation system to apply leaching solution to the heaps. The Coeur-Rochester engineers recognized that spraying of leaching solution through sprinklers resulted in significant energy loss, which promoted the freezing problem, and that such energy losses would be eliminated by the use of drip irrigation in place of sprinklers. The CoeurRochester engineers also recognized that a drip irrigation system would allow the leaching solution to percolate into the heap more quickly and without the icing that resulted from spraying through sprinklers. The Coeur-Rochester engineers also

recognized that it would be possible to bury a drip irrigation system, thus further preventing the icing that results from spraying the leaching solution over the heaps through sprinklers. 31. Subsequently in or about December 1986, the engineers at Coeur-Rochester

contacted an agriculture drip irrigation company named Irridelco to purchase a drip irrigation system for application of leaching solution to the Coeur-Rochester heaps (the "Coeur-Rochester drip irrigation process"). 32. Irridelco sold Coeur-Rochester a standard agriculture drip irrigation system

according to the specifications provided by the Coeur-Rochester engineers. 33. Krauth was an employee of Irridelco working at the facility that provided

the drip irrigation system purchased by Coeur-Rochester and through that employment became aware of the Coeur-Rochester drip irrigation process. 34. The engineers at Coeur-Rochester believed that the use of drip irrigation for

the application of leaching solution in heap leach mining was an obvious use of existing technology and never considered applying for a patent on the same. 35. On or about November 3, 1987, Krauth (now employed by Wade) and Wade secretly filed a patent application (the "patent application") in the United States Patent Office, falsely naming Krauth as the inventor of the Coeur-Rochester drip irrigation process. In connection with the patent application, Krauth executed a
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declaration, pursuant to 18 U.S.C. § 1001, in which he falsely swore that he was the sole inventor of the subject matter for which a patent was sought. That patent application eventually lead to the two patents at issue in this suit, the `806 and `279 patents. 36. To support their arguments of patentability, Krauth and Wade relied on and

submitted to the United States Patent and Trademark Office work performed and data developed at Coeur-Rochester by Coeur-Rochester engineers. 37. Krauth and Wade did not disclose to Coeur-Rochester or its engineers that

they intended to file or had filed the secret patent application. 38. Krauth and Wade did not disclose to Coeur-Rochester or its engineers that

they were relying on work performed at Coeur-Rochester to support their arguments for patentability made to the United States Patent and Trademark Office. 39. Krauth deliberately misrepresented to the Patent and Trademark Office that

he was the sole inventor of the Coeur-Rochester drip irrigation process. Wade knew or should have known that Krauth was not the sole inventor of the Coeur-Rochester drip irrigation process. 40. issuance of two patents to Krauth in 1991, the `806 and `279 patents. 41. The original patent application filed in Krauth's name resulted in the Because of Krauth's intentional misrepresentations to the Patent and

Trademark Office, Krauth knew the `806 and `279 Patents were invalid for improper inventorship. 42.

Even if Krauth is deemed to be an inventor of the Coeur-Rochester drip

irrigation process, the engineers of Coeur-Rochester who conceived the idea of using drip irrigation in heap leach mining are co-inventors. On information and belief, Krauth deliberately misrepresented to the Patent and Trademark Office that he was the sole inventor of the heap leach mining process. 43. Even if Krauth is deemed to be an inventor of the Coeur-Rochester drip

irrigation process, he deliberately failed to disclose to the Patent and Trademark Office the contributions and efforts by the Coeur-Rochester engineers in the conception and
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development of the Coeur-Rochester drip irrigation process so that he would be identified as the sole inventor. 44. The contributions by the Coeur-Rochester engineers were material to a

determination of inventorship. 45. Wade assisted Krauth, and was materially involved, in prosecution of the patent applications that led to the issuance of the `806 and `279 patents. First Defense 46. for failure to comply with the requirements of 35 U.S.C. §§ 102, 103, 111, 112 and 116. Second Defense 47. Krauth and Wade violated their duty of candor to the Patent and Trademark The claims of the `806 and `279 patents are invalid and/or unenforceable

Office by not disclosing the contributions of the Coeur-Rochester engineers. 48. Krauth and Wade acted intentionally, and with intent to deceive the Patent

and Trademark Office, when they knowingly failed to disclose to the Patent and Trademark Office the contributions of the Coeur-Rochester engineers. 49. Krauth and Wade committed inequitable conduct when they did not

disclose the contributions of the Coeur-Rochester engineers to the Patent and Trademark Office. In light of this inequitable conduct, the `806 and `279 patents are unenforceable. Moreover, this case is therefore "exceptional," as that word is used in 35 U.S.C. § 285. Third Defense 50. application, Serial No. 116,465 (the `465 application), filed on November 3, 1987. The The `806 and `279 patents claim priority from a related United States patent

Patent Office issued a final rejection of the claims asserted in the `465 application in January 1989, which Krauth appealed. The Board of Patent Appeals and Interferences affirmed that final rejection in May 1990. Krauth requested reconsideration of that decision in July 1990. That same month, Krauth filed the continuation application that eventually issued as the `806 patent.

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51.

the examiner who had been responsible for the `465 application. 52.

The `806 patent application was assigned to a new examiner, different than Notwithstanding the fact that the examiner responsible for the `806 patent

application had not been involved in examination of the `465 application, Krauth did not disclose the fact that he had received a final rejection of the `465 application, that he had appealed that rejection, and that the Board of Patent Appeals and Interferences had affirmed that final rejection. 53. Krauth filed the patent application that eventually issued as the `279 patent

in January 1991. 54. The Board of Patent Appeals and Interferences issued its decision on Krauth's request for reconsideration in the `465 application on April 15, 1991, again affirming the final rejection of the `465 application. The `279 patent did not issue until July 9, 1991. 55. Board of Patent Appeals and Interferences' affirmance of that rejection in May 1990 and again in April 1991 were material to the patentability of the claims of the `806 and `279 patents. 56. patent applications that ultimately issued as the `806 and `279 patents were being examined by a different examiner than had been responsible for examination of the `465 application. 57. On information and belief, Krauth had actual knowledge that the patent applications that ultimately issued as the `806 and `279 patents were being examined by a different examiner than had been responsible for examination of the `465 application. 58. Krauth's patent attorney, Paul Lempio, had actual knowledge that the The final rejection of the claims asserted in the `465 application and the

Neither Krauth nor Lempio disclosed the final rejection of the claims

asserted in the `465 application, the appeal of that rejection, the Board's affirmance of that rejection in May 1990, and the Board's second affirmance of that rejection in April 1991, to the examiner responsible for the `806 and `279 patent applications.
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59.

Krauth and Lempio each violated their duty of candor by not disclosing

such information. 60. Krauth and Lempio each committed inequitable conduct when they did not disclose the final rejection of the claims asserted in the `465 application, the appeal of that rejection, or either of the Board's affirmances of that final rejection to the examiner responsible for the `806 and `279 patent applications. 61.

unenforceable. Moreover, this case is therefore "exceptional," as that word is used in 35 U.S.C. § 285.

In light of this inequitable conduct, the `806 and `279 patents are

Fourth Defense 62. Plaintiffs' assertion of infringement of the `806 and `279 patents is barred

by virtue of the equitable doctrines of laches, estoppel and acquiescence. Fifth Defense 63. The parties have reached a settlement, which resolved this lawsuit in its

entirety and, pursuant to that settlement, all claims purported to be set forth in the Complaint have been released. Sixth Defense 64. inventor of the `806 and `279 patents, Phelps Dodge is licensed under such patents. In the event an employee of Coeur d' Alene Mines is found to be a co-

Phelps Dodge Corporation reserves the right to amend and supplement its responses and affirmative defenses after further discovery. COUNTERCLAIM For their counterclaim against Krauth and Wade, defendants/counterclaim plaintiffs incorporate paragraphs 1-64 above and allege further as follows: 65. Defendant and counterclaim plaintiff Phelps Dodge Corporation is a New

York corporation doing business in the State of Arizona. Defendant and counterclaim plaintiff Phelps Dodge Bagdad, Inc. is a Delaware corporation doing business in the State of Arizona. Defendant and counterclaim plaintiff Phelps Dodge Chino, Inc. is a
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Delaware corporation doing business in the State of New Mexico.

Defendant and

counterclaim plaintiff Phelps Dodge Morenci, Inc. is a Delaware corporation doing business in the State of Arizona. Defendant and counterclaim plaintiff Phelps Dodge Sierrita, Inc. is a Delaware corporation doing business in the State of Arizona. Defendant and counterclaim plaintiff Phelps Dodge Tyrone, Inc. is a Delaware corporation doing business in the State of New Mexico. Defendant and counterclaim plaintiff Phelps Dodge Miami, Inc. is a Delaware corporation doing business in the State of Arizona. 66. Krauth and Wade caused events to occur in the District of Arizona out of

which this counterclaim arises. Count 1 Declaratory Judgment of Invalidity 67. 1-66. 68. requirements of 35 U.S.C. §§ 102, 103, 111, 112 and 116. The claims of the `806 and `279 patents are invalid for failure to satisfy the Defendants and counterclaim plaintiffs incorporate and reallege paragraphs

Count 2 Declaratory Judgment of Non-Infringement 69. 1-68. 70. Defendants and counterclaim plaintiffs have not and are not infringing any valid and enforceable claim of the `806 patent, either literally, under the doctrine of equivalence, contributorily or by inducement. 71. Defendants have not and are not infringing any valid and enforceable claim of the `279 patent, either literally, under the doctrine of equivalence, contributorily or by inducement. Defendants and counterclaim plaintiffs incorporate and reallege paragraphs

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Relief Requested WHEREFORE, defendants and counterclaim plaintiffs respectfully pray for:
A. B.

Dismissal of plaintiffs' Complaint with prejudice;

A judicial determination and declaration that the `806 and `279 patents are A judicial determination and declaration that the `806 and `279 patents are

invalid;
C.

unenforceable;
D.

Damages sufficient to compensate defendants, together with prejudgment

interests and costs;
E. F. G.

Punitive damages; An award of attorney's fees and costs; and Such other and further relief as the Court may deem just and proper.

Dated: January 17, 2006. PERKINS COIE BROWN & BAIN P.A.

By s/ C. Mark Kittredge Terry E. Fenzl C. Mark Kittredge 2901 North Central Avenue Post Office Box 400 Phoenix, Arizona 85001-0400 Attorneys for Defendants and Counterclaim Plaintiffs

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DEMAND FOR JURY TRIAL Defendants and Counterclaim Plaintiffs request a trial by jury of all issues triable by jury. Dated: January 17, 2006. PERKINS COIE BROWN & BAIN P.A.

By s/ C. Mark Kittredge Terry E. Fenzl C. Mark Kittredge 2901 North Central Avenue Post Office Box 400 Phoenix, Arizona 85001-0400 Attorneys for Defendants and Counterclaim Plaintiffs

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CERTIFICATE OF SERVICE I hereby certify that on January 17, 2006, I electronically transmitted the attached documents to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Daniel R. Malinski [email protected] BURCH & CRACCHIOLO, P.A. 702 East Osborn, Suite 200 Phoenix, Arizona 85014 Attorneys for Plaintiffs and Counterclaim Defendants Peter E. Heuser [email protected] Kolisch Hartwell, P.C. 200 Pacific Building 520 S.W. Yamhill Street Portland, Oregon 97204 Attorneys for Plaintiffs and Counterclaim Defendants I hereby certify that on January 17, 2006, I served the attached document by first class mail to: The Honorable Paul G. Rosenblatt United States District Court Sandra Day O'Connor U.S. Courthouse, Suite 621 401 West Washington Street, SPC 56 Phoenix, AZ 85003-2156 s/ Janet Roe

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