Case: 1:16-cv-08897 Document #: 26 Filed: 01/04/17 Page 1 of 4 PageID #:91
`
`UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
`
`No. 15 C 08913
`
`
`Judge Edmond E. Chang
`
`
`
`No. 16 C 08897
`
`
`Judge Edmond E. Chang
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`ORDER
`
`
`NALCO COMPANY LLC,
`
`
`
`
`
`
`
`Plaintiff,
`
`
`
`
`
`
`
`
`v.
`
`
`
`
`
`
`
`SOLENIS LLC,
`
`
`
`
`
`
`
`
`Defendant.
`
`
`
`
`NALCO COMPANY LLC and
`ECOLAB USA, INC.,
`
`
`
`
`
`
`
`
`Plaintiffs,
`
`
`
`
`
`
`
`
`v.
`
`
`
`
`
`
`
`SOLENIS LLC,
`
`
`
`
`
`
`
`
`Defendant.
`
`
`
`
`
`This Order is being entered in both 15 C 8913 and 16 C 8897. Both cases
`assert that Solenis LLC has infringed patents 8,465,623 and 8,088,250, which
`generally claim certain chemical processes that allegedly improve the quality of
`paper. Solenis is sued in both cases, but in 15 C 8913, only Nalco Company is the
`plaintiff, whereas in 16 C 8897, there are two plaintiffs, Nalco and Ecolab USA, Inc.
`The difference in plaintiffs is what prompts this Order.
`
`
`
`Specifically, as the record now demonstrates, Nalco did not have standing to
`bring the 15 C 8913 suit at the time that the suit was filed in October 2015. As it
`turns out, Nalco had assigned all of its assets, including its intellectual property, to
`
`

`

`Case: 1:16-cv-08897 Document #: 26 Filed: 01/04/17 Page 2 of 4 PageID #:92
`
`Ecolab on December 31, 2014. The Contribution Agreement that effectuated the
`transfer was both broad in assigning “all” of Nalco’s “properties, assets, claims,
`rights, and interests of every kind, nature, character, or description, whether
`tangible or intangible,” and specific in declaring that the assets included all rights
`in “all patents.” Case No. 15 C 8913, R. 89-1, Contribution Agr. §§ 1.2 (defining
`Transferred Assets), § 1.2(c) (specifying “patents” as a form of transferred asset).
`After this all-asset transfer, Ecolab did license back the intellectual property
`(including the patents-in-suit) but the license was not exclusive. So, at the time of
`the 2015 suit’s filing, Nalco has no right to bring the case.
`
`Eventually this lack of standing came to light, and eventually Nalco filed
`another case, 16 C 8897, with Ecolab as the co-Plaintiff. Nalco is, as of August 15,
`2016, the exclusive licensee of the patents-in-suit. But the license agreement does
`not grant Nalco any rights to the patents—including past damages for alleged
`infringement—prior to that date. Those rights still belong to Ecolab, and thus
`Ecolab is the co-Plaintiff in 16 C 8897 for purposes of asserting pre-August 15, 2016
`infringement.
`
`
`
`
`
`With these two cases on the docket, Solenis argues that not only should 15 C
`8913 be dismissed for lack of standing, but it should be dismissed with prejudice,
`thus in effect preventing Nalco from pursuing the 16 C 8897 action for post-August
`15 damages. On review of the record, although Nalco made several unreasonable
`mistakes that warrant sanctions, the ultimate sanction of dismissal with prejudice
`is too harsh here. To start, it does not appear that Nalco acted in outright bad faith
`when it filed the 2015 lawsuit. There is no stratagem that would motivate Nalco to
`intentionally misstate its standing to sue. Nalco would have risked the unwinding of
`any victory if it were later discovered (as it was) that it had no standing to sue, and
`also would have (as it does now) faced sanctions for pursuing the litigation in the
`first place.
`
`
`
`It is true that, after the 2015 suit’s filing, it is suspicious that Nalco did not
`bring the assignment to the Court’s attention immediately after Nalco’s counsel
`learned of it on July 12, 2016. The parties were in the midst of briefing Solenis’s
`motion to stay pending inter partes review, and Nalco filed a response to that
`motion on August 1, 2016. Case No. 15 C 8913, R. 67. Yet Nalco did not mention the
`assignment to Ecolab. This is suspicious because acknowledging the assignment
`would have, quite obviously, strengthened the merits of the stay motion because
`Nalco did not even have standing to sue at that time, let alone resist a stay. But the
`Court will give Nalco the benefit of the doubt when Nalco explains that it was
`2
`
`
`
`

`

`Case: 1:16-cv-08897 Document #: 26 Filed: 01/04/17 Page 3 of 4 PageID #:93
`
`investigating how to remedy the standing problem, instead of pursuing a bad faith
`strategy.
`
`Absolving Nalco of a bad-faith finding hardly lets it off the hook. Nalco acted
`negligently in filing the lawsuit without standing to do so. None of Nalco’s
`explanations are reasonable, especially because the 2014 Contribution Agreement
`covered all of Nalco’s assets. It is not as if there was a long, complicated schedule of
`assets that Nalco had to pick through. And, as noted earlier, the Contribution
`Agreement specifically stated that all patents were included in the transfer. Yes,
`Nalco, Ecolab, and their related corporate entities are part of an extensive corporate
`structure, but of course they chose that structure and that is not a reasonable
`excuse for the mistaken filing.
`
`
`
`
`
`What is worse is (moving beyond the initial filing of the case) the gross
`negligence displayed by Nalco after learning, on July 12, 2016, of the assignment.
`Resolving that problem, and bringing it to the Courts attention, should have been
`one of Nalco’s top business priorities and one of counsel’s top litigation priorities.
`Instead, Nalco left it to Solenis to raise the issue with the Court on September 9,
`2016, R. 83, nearly two months after the problem was flagged. Indeed, filing the
`response to the stay motion (on August 1) without alerting the Court to the
`Contribution Agreement was, if not in bad faith (as the Court has refrained from
`finding), extremely negligent.
`
`
`
`Nalco’s negligence justifies sanctions (though not dismissal with prejudice)
`for causing Solenis to litigate unnecessarily in 15 C 8913. Solenis is entitled to
`attorney’s fees and costs for preparing and filing (a) R. 13 (the answer and the
`counterclaim); (b) R. 55 (the answer to the amended complaint and the
`counterclaim); (c) R. 58, 59 (the stay motion and the brief in support); (d) R. 75 (the
`reply on the stay motion); (e) R. 84, 86 (the motion to dismiss and the brief in
`support); and (f) R. 99 (the reply on the motion to dismiss). The parties shall use
`Local Rule 54.3 as the mechanism (with today’s date as the start date for the
`process as if the Order were the judgment) for figuring out the fees and costs,
`although hopefully the process will end with an agreement on the amount.
`
`
`
`The Clerk’s Office shall terminate 15 C 8913, because 16 C 8897 completely
`subsumes 15 C 8913. All further filings shall be made in 16 C 8897, except for any
`filings needed on the attorney’s fees and costs shifting that is ordered in 15 C 8913.
`Nalco shall answer the complaint in 16 C 8897, and assert counterclaims, by
`January 25, 2017.
`
`
`
`3
`
`

`

`Case: 1:16-cv-08897 Document #: 26 Filed: 01/04/17 Page 4 of 4 PageID #:94
`
`
`
`Also on January 25, 2017, the parties shall file a joint report on the status of
`the inter partes review application and proceeding. The Court was going to enter a
`stay pending inter partes review in 15 C 8913, and does so in this case (except for
`the answer deadline and the status report requirement). There had been some
`discovery in 15 C 8913, but the case was still in a relatively early stage, especially
`because the ’250 patent was not added to the case until April 14, 2016. Plus, Nalco
`initially alleged infringement of only one claim (Claim 19) in the ’623 patent,
`whereas on April 1, 2016, the Initial Infringement Contentions asserted 17 claims
`had been infringed (that is the combined total from both patents). Solenis filed the
`inter partes review applications on July 5, 2016. So despite the 2015 filing date of
`the lawsuit, the litigation really was just getting going in earnest when the IPRs
`were filed.
`
`
`
`Nalco argues that waiting is not worth it because, based on as-of June 30,
`2016 statistics, nearly half (1,621) of IPR petitions did not result in instituted trials.
`But of those 1,621 petitions, 583 petitions resulted in a settlement before the
`institution decision was even made. Those 583 settlements presumably resolved at
`least some, and perhaps all, of the disputes between the parties. Adding those 583
`petitions to the 1,674 petitions that did result in instituted trials means that
`around 68.5% of the total petitions had a direct impact on the disputes between the
`parties. The stay is justified (though, again, the parties must file a report on the
`status of IPR petitions by January 25, 2017).
`
`
`
`
`
`In summary, in 15 C 8913, the motion to stay [58] is denied as unnecessary
`and the motion to dismiss [84] is granted in part. That case is dismissed for lack of
`standing. But the Court retains jurisdiction to implement the attorney’s fees and
`costs shifting as explained in this Order. In 16 C 8897, Solenis shall answer and
`counterclaim by January 25, 2017; the parties shall file the IPR status report by
`January 25, 2017; and the case is otherwise stayed. The status hearing of January
`5, 2017, is reset to January 31, 2017, at 9:45 a.m., in both cases.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`ENTERED:
`
`
`
`
`
`
`
`
`
`
`
`
`DATE: January 4, 2017
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`s/Edmond E. Chang
`
`Honorable Edmond E. Chang
`United States District Judge
`
`
`
`
`
`4
`
`