Carotek, Inc. v. Kobayashi Ventures, LLC (875 F. Supp. 2d 313, 2012)

MEMORANDUM AND ORDER

NAOMI REICE BUCHWALD, District Judge.

Plaintiffs Carotek, Inc. (“Carotek”) and Event Capturing Systems, Inc. (“ECS”) filed separate actions, now consolidated, seeking, inter alia, a declaratory judgment that three patents owned by defendant Kobayashi Ventures, LLC (“Kobayashi”) are invalid and unenforceable, and monetary relief based on unfair trade practices, interference with prospective advantage, fraud, and defamation. Kobayashi has asserted counterclaims for patent infringement and breach of a license agreement. Presently before us are the parties’ cross-motions for summary judgment on these claims and related affirmative defenses.

For the reasons stated herein, we grant plaintiffs’ motion to invalidate the independent claims of the patents containing the claim term “control means” but deny it as to the claim term “extract.” We also grant plaintiffs’ motion to invalidate one of Kobayashi’s patents as anticipated, until September 14, 2010, when a certificate of correction was issued. Additionally, we deny plaintiffs’ motion as to a finding of non-infringement.

Moreover, we grant defendants’ motion as to the return of licensing fees to Carotek. Although we cannot find that federal patent law preempts plaintiffs’ state claims, we nevertheless grant defendants’ motions on those claims because plaintiffs have not demonstrated that Kobayashi’s actions caused them damages. Finally, we grant defendants’ motions with respect to plaintiffs individual claims against James Dechman.

BACKGROUND

I. The Patents

Kobayashi currently holds the three patents that are at issue in this litigation: U.S. patent numbers 5,717,456 (the “'456 Patent”), 5,821,990 (the “'990 Patent”), and 6,211,905 (the “'905 Patent”) (collectively, the “Patents”). The Patents belong to a family of patents and contain materially identical disclosures. They relate to a system for monitoring a continuous manufacturing process (for instance, the process by which paper is manufactured) and detecting flaws or deviations in the product or process. The system includes some means of monitoring production — such as multiple video cameras positioned along the process — and recording video, which is then converted into digitized data and digitally stored. A control device, such as a computer, interfaces with the digital storage devices, extracts video clips reflecting any detected deviations, and displays them for viewing, presumably so the problem can be identified and remedied.

The prosecution history of the Patents is convoluted. Kobayashi filed application number 08/399,235 (the “'235 Application”) on March 6, 1995, from which the '456 Patent issued on February 10, 1998. While the '235 Application was pending, Kobayashi filed a patent application with a similar specification in South Africa; that application was published and issued as a patent on August 28, 1996 (the “South African Patent”).

On September 3, 1997, still prior to the issuance of the '456 Patent, Kobayashi filed application number 08/929,231 (the “'231 Application”) as a division of the '235 Application. The '990 Patent, claiming priority to the '235 Application and the '456 Patent, issued from the '231 Application on October 13,1998. Prior to the '990 Patent’s issuance, Kobayashi disclaimed the portion of its patent term extending beyond that of the '456 Patent. The two patents thus expire on the same date.

Before the '990 Patent issued, on July 30, 1998, Kobayashi filed a continuing prosecution application (“CPA”) of the '231 Application. Kobayashi, however, had filed the CPA in error, and on April 5, 1999 it petitioned pursuant to 87 C.F.R. § 1.183 to modify the CPA to become a division of the '231 Application. (Decl. of Deanna L. Peters in Supp. of Kobayashi Ventures LLC’s Opp’n to Carotek’s and ECS’ Mot. for Summ. J. (“Peters Decl.”), Ex. 11, Petition Under 37 CFR § 1.183 Suspension of Rules (the “Petition”).) The Petition was granted on September 29, 1999, and the resulting application was assigned number 09/398,528 (the “'528 Application”). In September of the following year, Kobayashi disclaimed the portion of the term of the patent to issue from the '528 Application that exceeded the patent term of the '990 Patent. At the same time, upon request from the United States Patent and Trademark Office (the “PTO”), Kobayashi submitted a new inventors’ declaration for the '528 Application, which

declaration claimed the benefit of the '235 Application and '456 Patent.

On April 3, 2001, the '905 Patent issued from the '528 Application, claiming priority only to the '231 Application and '990 Patent. On August 12, 2010, after the priority of the '905 Patent became an issue in this litigation, Kobayashi requested from the PTO a certificate of correction pursuant to 35 U.S.C. §§ 254 and 255 to change the patent’s claim of priority to the '235 Application and '456 Patent. Kobayashi paid the PTO’s fee for the change (Oral Arg. Tr. 41:2-5), and the request was granted on September 14, 2010 (Peters Decl., Ex. 17, Certificate of Correction (the “Certificate”)).

The relevant information pertaining to the various applications and patents is summarized in the table below.

II. Plaintiffs’Business

Carotek, among other pursuits, used to market and sell an event-capturing system for monitoring industrial processes, particularly packaging and paper-making. Carotek sold its monitoring-systems business to ECS on December 31, 2007, and ECS has continued to develop the product. Together, plaintiffs have developed a number of versions of the monitoring system, and Kobayashi accuses, in particular, ECS View versions 4 through 11, Modular RetroSpek, RetroSpek II, and RetroSpek IV of infringing the Patents. ECS View version 11 — the most recent version of Carotek and ECS’s system — was completed in July of 2009, and ECS began selling that version around September 2009.

III. Licensing Agreements

Effective December 8, 1998, Carotek entered into a licensing agreement with Kobayashi for the technology that Kobayashi was in the process of patenting. (Peters Deck, Ex. 1, License Agreement (the “Agreement”).) That agreement provides a system for calculating royalty payments to be made to the holder of the Patents, including a minimum of $25,000 to be paid each year. (Id. ¶ 3.4); see also Carotek II, 2010 WL 1640190, at *7-8, 2010 U.S. Dist. LEXIS 37800, at *23-24. Between 1999 and 2005, Carotek paid $123,421.79 to Kobayashi, and it ceased making royalty payments entirely no later than June 2005.

The Agreement also contains a “most favored licensee” provision, obligating Kobayashi to notify Carotek if Kobayashi enters into any licenses for the Patents with third parties on terms more favorable than Carotek’s. (Agreement ¶ 12.1); see also Carotek I, 2009 WL 2850760, at *2-3, 2009 U.S. Dist. LEXIS 79812, at *6-9.

Kobayashi had entered into a similar licensing agreement with Papertech, Inc. (“Papertech”) on November 12, 1998. See id. at *1, 2009 U.S. Dist. LEXIS 79812, at *4. Papertech stopped making payments under that agreement as early as September 27, 2000. See id. Kobayashi and its predecessors did not sue for these payments until years later. See id. at *2-3, 2009 U.S. Dist. LEXIS 79812, at *8-9.

At some point during International Paper’s time as owner of the Patents, Equaphor also acquired a license to use the patented technology. Eventually Equaphor, like Papertech, ceased paying its royalties, which were not pursued for a period of at least two years. (Deck of Michael Autuoro in Supp. of Carotek, Inc. and Event Capturing Systems, Inc.’s Responses to Mot. for Partial Summ. J. Filed by Kobayashi Ventures, LLC and James Dechman, Ex. 1A, Tr. of Equaphor Bankr. Hr’g, No. 10-20490-SSM, at 102:20-103:2 (Bankr.E.D.Va. May 2, 2011).)

IV. The Letters

On April 24, 2008 — as discussed in more detail below, after Kobayashi had already filed its counterclaims against Carotek— Kobayashi’s counsel, Jeffrey M. Schwaber, Esq., sent letters (the “Letters”) on behalf of Kobayashi to ten companies — Sappi Fine Paper (“Sappi”), Procter & Gamble (“P & G”), NewPage Corp. (“NewPage”), Kimberly-Clark Corp. (“Kimberly-Clark”), J.D. Irving, Ltd. (“JDI”), Georgia-Pacific Corp. (“Georgia-Pacific”), Domtar Corp. (“Domtar”), AbitibiBowater Inc. (“AbitibiBowater”), Sonoco, and Quebecor World (“Quebecor”) (collectively, the “Customers,” and each a “Customer”) — that had purchased event-monitoring systems from Carotek or ECS.

The Letters are the same in all material respects and informed the Customers of the pending litigation between Carotek and Kobayashi. In most relevant part, they state that Kobayashi “has sued Carotek for Patent Infringement and Breach of License Agreement” and “suspects [the Customers] unwittingly may be using unlicensed Products, either acquired directly from Carotek, from a distributor, or from a third party,” which “would expose [the Customers] to potential liability.” The Letters further state that Carotek “is no longer in the business of selling or servicing the Products on which it once paid royalties under the License Agreement,” which may put the Customers “in the unfortunate position of ultimately being held legally and financially responsible for Patent Infringement.” The Letters conclude by - requesting “a list of all Products ... acquired from Carotek after December 8, 1998” — the effective date of the licensing agreement between Carotek and Kobayashi — and noting that Kobayashi “has no desire to disrupt the operations at [the Customers’] facilities.”

V. Relevant Procedural History

Carotek initiated this lawsuit on December 11, 2007. On February 11, 2008, Kobayashi filed its answer and counterclaims. ECS filed its own suit against Kobayashi on June 24, 2008, and the Court consolidated the two cases on July 18, 2008. Kobayashi subsequently answered ECS’s complaint and filed counterclaims against ECS on September 2, 2008.

The Court issued its first opinion in the consolidated matter on August 31, 2009, addressing most relevantly whether Kobayashi had violated the most favored licensee provision of the Agreement. See Carotek I, 2009 WL 2850760, 2009 U.S. Dist. LEXIS 79812. On April 12, 2010, the Court issued its second pertinent decision, discussing, inter alia, whether Carotek owed minimum fees under the Agreement. See Carotek II, 2010 WL 1640190, 2010 U.S. Dist. LEXIS 37800. Following resolution of these matters, the Court issued its Markman decision construing various claim terms on September 8, 2011. See Carotek III, 2011 WL 4056746, 2011 U.S. Dist. LEXIS 102014.

In light of the Court’s claim-construction ruling, the parties cross-moved for summary judgment on various issues on December 19, 2011. Briefing was completed on January 24, 2012, and oral argument was held on May 24, 2012.

DISCUSSION

I. Legal Standards

A motion for summary judgment is appropriately granted when “there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). In this context, “[a] fact is ‘material’ when it might affect the outcome of the suit under governing law,” and “[a]n issue of fact is ‘genuine’ if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 202 (2d Cir.2007) (internal quotation marks omitted). When making this determination, “we are required to resolve all ambiguities and draw all permissible factual inferences in favor of the party against whom summary judgment is sought.” Gorzynski v. JetBlue Airways Corp., 596 F.3d 93, 101 (2d Cir.2010) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).

On a motion for summary judgment, “[t]he moving party bears the initial burden of demonstrating ‘the absence of a genuine issue of material fact.’ ” FDIC v. Great Am. Ins. Co., 607 F.3d 288, 292 (2d Cir.2010) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). Where that burden is carried, the nonmoving party “must come forward with specific evidence demonstrating the existence of a genuine dispute of material fact.” Id. (citing Anderson, 477 U.S. at 249, 106 S.Ct. 2505). The non-moving party “must do more than simply show that there is some metaphysical doubt as to the material facts and may not rely on conclusory allegations or unsubstantiated speculation.” Brown v. Eli Lilly & Co., 654 F.3d 347, 358 (2d Cir.2011) (internal quotation marks and citation omitted).

II. Sufficiency of the Patents

A. Requirements Under 35 U.S.C. § 112

1. Requirements Under Paragraph 1

A patent’s specification must describe the invention “in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains ... to make and use the same.” 35 U.S.C. § 112, ¶ 1. This written description requirement mandates that the specification “describe the invention sufficiently to convey to a person of skill in the art that the patentee had possession of the claimed invention at the time of the application.” LizardTech, Inc. v. Earth Res. Mapping, Inc., 424 F.3d 1336, 1345 (Fed.Cir.2005).

The specification must thus demonstrate that “the inventor actually invented the invention claimed.” Ariad Pharm., Inc. v. Eli Lilly & Co., 598 F.3d 1336, 1351 (Fed.Cir.2010). Whether “a skilled person ‘could’ identify” or “envision” the invention is irrelevant; the question is “whether the application necessarily discloses that particular device.” Goeddel v. Sugano, 617 F.3d 1350,1355-56 (Fed.Cir.2010) (internal quotation marks omitted). However, “the amount of detail that must be included in the specification depends on the subject matter that is described and its role in the invention as a whole, in view of the existing knowledge in the field of the invention.” Typhoon Touch Techs., Inc. v. Dell, Inc., 659 F.3d 1376, 1385 (Fed.Cir.2011). With respect to software, “it is generally sufficient if the functions of the software are disclosed, it usually being the case that creation of the specific source code is within the skill of the art.” Robotic Vision Sys., Inc. v. View Eng’g, Inc., 112 F.3d 1163, 1166 (Fed.Cir.1997).

It is a question of fact whether a patent satisfies the written description requirement of paragraph 1 of Section 112. See Ariad Pharm., 598 F.3d at 1355 (citing Ralston Purina Co. v. Far-Mar-Co, Inc., 772 F.2d 1570, 1575 (Fed.Cir.1985)). Any claim not supported by adequate description in the specification is invalid. See id. at 1358.

2. Requirements Under Paragraphs 2 and 6

All claims in a patent must “particularly point[] out and distinctly elaim[] the subject matter which the applicant regards as his invention.” 35 U.S.C. § 112, ¶ 2. This definiteness requirement provides “notice to the public of the extent of the legal protection afforded by the patent.” All Dental Prodx, LLC v. Advantage Dental Prods., Inc., 309 F.3d 774, 779-80 (Fed.Cir.2002); see also Datamize, LLC v. Plumtree Software, Inc., 417 F.3d 1342, 1347 (Fed.Cir.2005) (“[T]he purpose of the definiteness requirement is to ensure that the claims delineate the scope of the invention using language that adequately notifies the public of the patentee’s right to exclude.”).

The claims in the Patents are of a variety known as “means plus function.” For any “means or step for performing a specified function” in those claims, there must be some “corresponding structure, material, or acts described in the specification and equivalents thereof.” 35 U.S.C. § 112, ¶ 6. In other words, “a generic means expression for a claim limitation” is acceptable in means-plus-function claims, “provided that the specification indicates what structure(s) constitute(s) the means.” Atmel Corp. v. Info. Storage Devices, Inc., 198 F.3d 1374, 1381 (Fed.Cir.1999) (emphasis omitted). If the specification fails to provide a structure — here, some computer-based algorithm — corresponding to any limitation in a means-plus-function claim, “the claim will be found invalid as indefinite” under paragraph 2 of Section 112. Biomedino, LLC v. Waters Techs. Corp., 490 F.3d 946, 950 (Fed.Cir.2007); see also Aristocrat Techs. Austl. Pty Ltd. v. Int’l Game Tech, 521 F.3d 1328, 1338 (Fed.Cir.2008).

Patents issued by the PTO are presumed to be valid, but that presumption may be overcome by a showing of clear and convincing evidence that those skilled in the art would not understand the limitations in a claim. See Young v. Lumenis, Inc., 492 F.3d 1336, 1345-46 (Fed.Cir.2007). A claim may be invalidated upon such a showing, the sufficiency of which is a question of law. See Aero Prods. Int’l, Inc. v. Intex Recreation Corp., 466 F.3d 1000, 1015-16 (Fed.Cir.2006). The appeal to the understanding of a person skilled in art, however, “ ‘has no application’” when “the specification discloses no algorithm.” Noah Sys., Inc. v. Intuit, Inc., 675 F.3d 1302, 1313 (Fed.Cir.2012) (quoting Aristocrat, 521 F.3d at 1337). When no algorithm is disclosed, the claim must be found invalid as indefinite. See id.; Aristocrat, 521 F.3d at 1337.

B. Claims Containing the Term “Control Means”

Every independent claim in the '456 and '990 Patents and independent claims 1 and 16 of the '905 Patent contain the term “control means.” The Court has already determined that the specification does not adequately identify an associated structure for this claim term. See Carotek III, 2011 WL 4056746, at *9-10, 2011 U.S. Dist. LEXIS 102014, at *29-33. We found, in fact, that the language in the specification purportedly disclosing the algorithm “simply describes the function to be performed, not the corresponding structure” and that the specification “does not even purport to describe a structure” for many of the Patents’ claimed functions. Id. at *9, 10, 2011 U.S. Dist. LEXIS 102014, at *30, 33. Accordingly, the independent claims of the '456 and '990 Patents and claims 1 and 16 of the '905 Patent are invalid under paragraphs 2 and 6 of Section 112.

Kobayashi, recognizing the implications of Carotek III’s holding, asks us to reconsider our construction of “control means” in light of Typhoon Touch, 659 F.3d 1376, and Ronald A. Katz Technology Licensing LP v. American Airlines, Inc. (In re Katz Interactive Call Processing Patent Litigation), 639 F.3d 1303 (Fed.Cir.2011). While reconsideration is procedurally improper, we also reject it on substantive grounds.

In Typhoon Touch, the Federal Circuit evaluated a specification’s elaboration of the means-plus-function term “means for cross-referencing.” 659 F.3d at 1383-86. The court there found the steps of the algorithm — “data entry, then storage of data in memory, then the search in a library of responses, then the determination if a match exists, and then reporting action if a match is found,” id. at 1386 — to consist of “known computer-implement operations,” which “are readily implemented by persons of skill in computer programming,” id.

The same cannot be said of the steps of the algorithm purportedly described in the Patents. Kobayashi contends that its expert, Dr. Robert L. Stevenson, has identified similar steps in the Patents’ specifications. Specifically, Dr. Stevenson suggested that the specifications disclose steps including, among others, (i) scanning all digitized storage means, (ii) selecting clips from all means containing data collected at the appropriate times, (iii) scanning each clip to identify the deviation event, (iv) identifying the monitoring means most proximate to the location of the deviation event, and (v) selecting a clip from the digitized storage means for the monitoring means. (Peters Deel., Ex. 19, Decl. of Robert Stevenson (“Stevenson Deck”) ¶¶ 25-26.)

Putting to the side for the moment the question of whether these steps are even to be found in the specification, this algorithm is not akin to that under discussion in Typhoon Touch. While both contain the concepts of searching or scanning, which may be “carried out by known computer-implement operations,” Typhoon Touch, 659 F.3d at 1386, Kobayashi’s purported algorithm also contains identification and selection steps that hinge crucially on unspecified criteria. The record contains no meaningful evidence that these steps may be “readily implemented by persons of skill in computer programming,” id., and the claims and specification describe these functions in nearly identical language, which is a far cry from the Typhoon Touch specification’s elaboration on the meaning of “cross-reference.”

Nor does Typhoon Touch alter our third independent reason for finding that “control means” did not have an adequately identified structure: “the Patents do not disclose a structure that corresponds to each of the identified functions.” Carotek III, 2011 WL 4056746, at *10, 2011 U.S. Dist. LEXIS 102014, at *32-33. In this respect, Katz is more on point, but it also does not change our analysis. The Federal Circuit there made clear that when a patent “has not claimed a specific function performed by a special purpose computer, but has simply recited ... funetions [that] can be achieved by any general purpose computer without special programming,” the specification need not disclose a structure corresponding to those functions. 639 F.3d at 1316. The court identified “processing,” “receiving,” and “storing” as functions that did not require elaboration. Id. The record here contains no evidence that the functions identified in Katz are comparable to many of the functions the Patents claim the control means performs but for which no corresponding structure is disclosed, such as, for instance, “controlling the monitoring system,” “forming an extracted clip,” “identifying a video camera proximate to the deviation detector,” “gradient edge enhancement,” “image sharpening,” and “interpolation,” Carotek III, 2011 WL 4056746, at *8, 2011 U.S. Dist. LEXIS 102014, at *26-27.

Typhoon Touch and Katz thus do not change our assessment of the definiteness, and therefore the validity, of claims in the Patents containing the term “control means.” They are invalid.

C. Claims Containing the Term “Extract”

The remaining independent claims of the '905 Patent — claims 21, 38, and 43— claim a computer “configured to extract a deviation digitized video signal” or “data.” The parties disagree over whether the claim term “extract” is sufficiently explicated in the specification to satisfy the written description requirement of paragraph 1 of Section 112.

Although we previously defined “extract,” see Carotek III, 2011 WL 4056746, at *11-13, 2011 U.S. Dist. LEXIS 102014, at *36-39, we did not reach the precise issue of whether the specification includes enough detail with respect to the term in order to disclose the claimed system. Our discussion in Carotek III is nevertheless useful for present purposes. The construction we gave to “extract” — “to remove” — was intended to encapsulate the notion that extracted data is preserved rather than overwritten, to prevent the equation of “extract” and “identify,” and to admit the possibility that extraction may occur through means other than moving and copying data. See id. The construction, drawing from the specifications and claims from all of the Patents, evinces a meaningful understanding of how the '905 Patent uses the term “extract.”

Kobayashi points to several segments of the '905 Patent’s specification as explaining the meaning of the term along the lines of the Court’s construction. It highlights, in particular, the following three passages:

[T]his invention relates to ... a [monitoring] system in which process data relating to a predetermined characteristic of the process is collected and stored in digital format and extracted based upon a pre-determined criterion for display.

'905 Patent, col. 1,11.11-14.

Preferably, the clips are also stored such that clips can be readily identified by time and date, and can be extracted or copied from the segment. A further requirement of the digital memory storage 1 means 18 is that it can be controlled by a control means 20 such that specific clips can be extracted from the digital data storage means 18 as desired and as will be described hereinbelow in more detail. In the operations of the digital data storage means 18, the segment is maintained at or about the predetermined length during the operations of the system such that as new digitized real time data is added to digital data storage means 18, the oldest or most prior data is erased, deleted or otherwise removed from storage means 18 maintaining said segment at or about some pre-determined length. The advantages of this storage means 10 becomes [sic] readily apparent in that stored digital data showing normal operations to produce the product having the pre-determined characteristic is constantly removed from storage means 18 such that upon storage of deviating digitized data of a deviation from the predetermined characteristic, as for example a break event, such deviating data can be more easily isolated from the relatively small amount of data comprising the segment.

Id., col. 6,11.11-33.

On receipt of the deviation event signal, control means 20 is capable of identifying the clip most likely to have digitized data relating to the deviation event, and extracting such clip and displaying the extracted clip with display means 26. For example, control means 20 can perform this function by coordinating the time at which deviation event detector 38 detected the deviation event with the clip or clips corresponding in time. This coordination can be done in any suitable manner. For example, control 20 can scan all digitized data storage means 18, select clips from all means 18 containing data collected at the appropriate time and can then scan each clip to identify the deviation event and display same. Alternatively, control means 20 can identify the monitoring means 10 most proximate to the location of the deviation event, select a clip or clips from the digitized data storage means 18 for such monitoring means 10 and display such clip. In order to insure that all suitable data is displayed in the fastest possible time, preferably control means 20 will also extract digitized data clips immediately preceding and following the clip or clips most likely containing data for the deviation event and will splice the deviation event clip and the following and preceding clips into a display clip for display.

Id., col. 7,1. 54 to col. 8,1.10.

These passages teach, inter alia, that extraction of data and clips occurs based on pre-determined criteria, that copying is a method of extraction, that extracted data is removed and isolated from other data in order to ensure its preservation, that identification and extraction are separate processes performed by the control means, and that extraction may encompass data or clips beyond just those containing the deviation event.

Carotek argues that this disclosure is insufficient, comparing it to the specification at issue in In re Kaslow, 707 F.2d 1366 (Fed.Cir.1983). In that case, the claimed invention — a system of gathering data from UPC codes — “emphasize[d]” the transmittal of collected data “to a central computer in order to provide an audit.” Id. at 1371. The specification described what the claim meant by the ability “to provide an audit” by noting that the invention “simplified] auditing and redemption procedures” and enabled “a check [to be] made on the overall volume of coupon traffic.” Id. at 1375 (emphasis omitted). The Federal Circuit found that the specification “[did] not describe any particular auditing or checking procedure to be carried out as part of the invention” even though the claim language “implie[d] that there is some mechanism or step which is a part of the invention and which performs an audit on the data transmitted to the central computer.” Id. The claim was therefore invalid.

The description in the '905 Patent’s specification of “extract” does not resemble the description of “audit” under discussion in Kaslow. Rather, this case more closely resembles Ven-Tel, Inc. v. Hayes Microcomputer Products, Inc. (In re Hayes Microcomputer Products, Inc. Patent Litigation), 982 F.2d 1527, 1533-34 (Fed.Cir.1992), where the Federal Circuit found that “one of ordinary skill in the art would understand how to implement” a relatively minimal 'description of a component of a means-plus-function ' patent. Holding that “the adequacy of the description of an invention depends on its content in relation to the particular invention,” the court noted that “an inventor is not required to describe every detail of his invention” so long as “[o]ne skilled in the art would know how to program ... the necessary steps described in the specification.” Id. at 1534 (emphasis omitted).

As discussed above, the '905 Patent does describe a method of extraction, inasmuch as it identifies a specific process by which extraction may occur and provides certain criteria by which to determine whether data has been extracted or, rather, simply deleted. Cf. Robotic Vision, 112 F.3d at 1166 (a software specification is sufficient “if the functions of the software are disclosed”). Given this description in the specification, Dr. Stevenson’s earlier testimony, and the role extraction plays in the larger claimed invention, we are unable to conclude that there is no genuine issue of material fact with respect to whether the remaining claims in the '905 Patent are adequately supported by the written description in the specification. We therefore do not invalidate independent claims 21, 38, and 43 of the '905 Patent.

III. Anticipation

A. Relevant Patent Procedures

A patent is anticipated by another, and therefore invalid, if it was “patented or described in a printed publication in this or a foreign country ... more than one year prior to the date of the application for patent in the United States.” 35 U.S.C. § 102(b); see also Cordance Corp. v. Amazon.com, Inc., 658 F.3d 1330, 1337 (Fed.Cir.2011). A foreign patent may serve to invalidate a later-filed domestic one, even if the rights granted by the foreign government are not “coextensive with the exclusive rights granted under U.S. law, so long as the foreign rights are both substantial and exclusive in nature.” In re Carlson, 983 F.2d 1032, 1036 (Fed.Cir.1992). While anticipation is a question of fact, like other fact-dependent issues, “it may be decided on summary judgment if the record reveals no genuine dispute of material fact.” Leggett & Platt, Inc. v. VUTEk, Inc., 537 F.3d 1349, 1352 (Fed.Cir.2008) (internal quotation marks omitted).

A patent will not be anticipated and thereby invalidated by another if the later patent can properly claim priority to one filed before, or within one year of, the earlier of the other two. See, e.g., Encyclopaedia Britannica, Inc. v. Alpine Elecs, of Am., Inc., 609 F.3d 1345, 1347 (Fed.Cir.2010) (“[I]f the patents in suit are entitled to a priority date not later than one year after [the publication date of the foreign patent], the foreign publication would not anticipate.”). An application claiming priority to an earlier application “shall have the same effect ... as though filed on the date of the prior application, [1] if filed before the patenting or abandonment of or termination of proceedings on the first application or on an application similarly entitled to the benefit of the filing date of the first application and [2] if it contains or is amended to contain a specific reference to the earlier filed application.” 35 U.S.C. § 120; see also Encyclopaedia Britannica, 609 F.3d at 1349-50 (discussing the requirements of Section 120). The “specific reference” to a prior application required by Section 120 should be included in an application data sheet or in the first sentence of the specification. See 37 C.F.R. § 1.78(a)(2)(iii).

If a patent is issued and contains a mistake, such as failing to claim priority to an appropriate earlier-filed patent, regardless of whose fault the mistake is, it may be corrected by petitioning the PTO for a certificate of correction. See 35 U.S.C. §§ 254 (certificate of correction when mistake is fault of the PTO), 255 (certificate of correction when mistake is not fault of the PTO). When the error lies with the PTO, the correction shall be issued “without charge”; otherwise it will be issued only “upon payment of the required fee.” Id.

B. The Patents’ Chain of Priority

Kobayashi filed a patent application in South Africa on November 13, 1995, and the patent was published and issued on August 28, 1996. It is undisputed that the South African Patent contained a specification substantially similar to that of the '905 Patent, and that patent rights under South African law are sufficient to invalidate domestic patents subsequently filed. It is similarly undisputed that the '235 Application, from which the '456 Patent issued, was filed on March 6, 1995, prior to the South African Patent’s publication, while the '231 Application, from which issued the '990 Patent, was not filed until September 3, 1997, more than one year after the South African Patent was published. What the parties do dispute is when, if ever, the '905 Patent properly claimed priority to the '235 Application and '456 Patent.

1. Whether the '905 Patent Properly Claimed Priority When It Was Issued

The first sentence of the '528 Application notes that the application is a division of the '231 Application and '990 Patent. When it issued from the '528 Application, the '905 Patent contained the same reference to the '231 Application and '990 Patent on its cover page. Neither the '528 Application nor the '905 Patent references either the '235 Application or the '456 Patent. Despite the '990 Patent’s reference to the earlier application and patent, the '905 Patent is facially unable to claim the same priority. See Sampson v. Ampex Corp., 463 F.2d 1042, 1044-45 (2d Cir.1972) (“[Section] 120 has been interpreted ... to require that for a subsequent application to have the benefit of the filing date of an earlier application, it must contain the ‘specific reference’ to the application the filing date of which the applicant seeks to have the benefit.”).

Kobayashi contends that this failure to claim priority to the first patent in the chain is due to error on the part of the PTO. It argues that the '528 Application was originally a CPA of the '281 Application and the CPA automatically received the benefit of the '235 Application and '456 Patent. See 37 C.F.R. § 1.78(a)(2)(i) (requiring any nonprovisional application, “[ejxcept for a continued prosecution application,” to contain a reference to any earlier-filed application of which it claims the benefit), (iv) (“The request for a continued prosecution application under § 1.53(d) is the specific reference required by 35 U.S.C. 120 to the prior-filed application.”). Kobayashi further contends that when the PTO converted the CPA to a division pursuant to the Petition under 37 C.F.R. § 1.183, the PTO should have carried forward the priority date of the '235 Application and failed to do so. (Peters Decl., Ex. 13 (reflecting the Examiner’s handwritten note on the CPA that the converted application would be a division of the '231 Application and '990 Patent).) It concludes by arguing that the mistake must be taken as legally insignificant clerical error for which it may suffer no adverse consequences.

We disagree with Kobayashi that the '528 Application’s failure to include a reference to the '235 Application and '456 Patent was the fault of the PTO and that it may not be held accountable for any such error. It is beyond dispute that the initial error was Kobayashi’s: Kobayashi erroneously filed a CPA rather than a division, not the PTO. (Petition 1 (“This application was inadvertently filed as a CPA ....”).) Moreover, the PTO did nothing more than grant the request put to it by Kobayashi. The Petition clearly requested that the CPA be “modified] ... to a Divisional application of [the '231 Application] now issued [ as the '990 Patent].” (Id.) It nowhere requested that the newly issued application be given priority to the '235 Application and '456 Patent.

Nor is it apparent that the PTO should have assumed that Kobayashi desired that the '528 Application have that priority. Kobayashi explicitly disclaimed its intent to have ever filed a CPA, noting in the Petition that “[i]t was not the Applicants’ intention to file a CPA with the abandonment of Parent.” (Id.) It therefore would seem unlikely that an application that was intended to be a division, not a CPA, but did not include a reference to the first application in the patent family was nevertheless intended to claim the benefit of that first application.

Moreover, it is not even clear that a CPA automatically receives the benefit of all patents in the chain. While “[t]he request for a continued prosecution application ... is the specific reference ... to the prior-filed application,” 37 C.F.R. § 1.78(a)(2)(iv), the “prior-filed application” referred to is likely the one abandoned as a result of the CPA. See id. § 1.53(d) (using the term “prior application” to refer to the application to be abandoned); MPEP § 201.11 (“A request for a CPA filed under 37 CFR 1.53(d) is itself the specific reference required by 35 U.S.C. 120 and 37 CFR 1.78(a)(2) to every application assigned the same application number identified in the request.”). A reference to an intermediate patent in a chain is not sufficient to receive priority to the earliest patent in the chain. See Sampson, 463 F.2d at 1044-45.

Because the CPA was intended to have been filed as a division and did not claim priority to the '235 Application and '456 Patent, and because Kobayashi never expressed an intention that the '528 Application should claim that priority, there was no error on the part of the PTO; the gap in the chain of priority was, rather, Kobayashi’s fault. As a result of Kobayashi’s error, the '905 Patent did not claim priority to the '235 Application and '456 Patent. The '528 Application referenced only the '231 Application and '990 Patent, and that is all the issuing patent could claim the benefit of.

Kobayashi argues that the '528 Application did contain the requisite reference, inasmuch as the original inventors’ declaration filed with it was identical to the inventors’ declaration that had been filed with the '235 Application (and the '231 Application) and the second inventors’ declaration affirmatively claimed the benefit of the '235 Application and '456 Patent. These declarations, however, do not satisfy the “specific reference” requirement. The language of the regulation is unequivocal: to claim the benefit of an earlier patent, “the specification must contain or be amended to contain such reference in the first sentence(s) following the title.” 37 C.F.R. § 1.78(a)(2)(iii); see also Encyclopaedia Britannica, 609 F.3d at 1350 (“There is nothing in the language or legislative history of § 120 to suggest that an application is entitled to an earlier priority date even if it fails to make a specific reference to an earlier application.”). While there may be some leeway given if the reference is obvious even if not included in the specification, see Broad Innovation, L.L.C. v. Charter Commc’ns, Inc., 420 F.3d 1364, 1367 (Fed.Cir.2005) (noting that the relevant statute and regulation “require some reference to earlier filed applications (i.e., in the specification or on the cover page) to qualify for priority based on ... earlier filings”), Kobayashi has pointed us to no authority supportive of the sufficiency of the declarations.

The '905 Patent was thus anticipated by the South African Patent when it was issued. The patent is therefore invalid, unless the Certificate effectively enabled it to claim priority to the '235 Application and '456 Patent.

2. Whether the Certificate of Correction Gives the '905 Patent Priority to the '156 Patent

On August 12, 2010, Kobayashi— recognizing that the '905 Patent as it stood did not properly claim the benefit of the '456 Patent — -requested a certificate of correction “noting the correct priority date” “in the above-captioned patent.” (Peters Deck, Ex. 14, Request to Issue a Certificate of Correction 1.) Although Kobayashi included a proposed certificate of correction with its request, it nowhere specified whether the correction should be made to the cover page of the patent or to the specification. When the Certificate issued on September 14, 2010, it noted only the error on item 62 of the title page, which was corrected to reference each of the prior applications and patents.

Plaintiffs contend that, under the relevant statutory and regulatory language, the correction should be deemed ineffective for the purpose of granting earlier priority to the '905 Patent. Section 120 requires that, in order to claim priority, “[a]n application” must “contain[] or [be] amended to contain a specific reference to the earlier filed application,” yet the correction issued only to the patent itself, not the application, and Kobayashi did not request a correction to the application. Moreover, the “specific reference” must be included in the first sentence of the specification, see 87 C.F.R. § 1.78(a)(2)(iii), yet that sentence was not corrected and therefore still contains a reference only to the '231 Application and '990 Patent. Plaintiffs argue that these failings are fatal to the '905 Patent’s claim of priority.

We do not agree. The purpose of the “specific reference” requirement is clearly to ensure that someone examining a patent claiming the benefit of one earlier filed is readily able to assess the patent’s priority date. Cf. Sampson, 463 F.2d at 1045 (“The information required to be disclosed [by Section 120] is information that would enable a person searching the records of the [PTO] to determine with a minimum of effort the exact filing date upon which a patent applicant is relying to support the validity of his application or the validity of a patent issued on the basis of one of a series of applications.”). Including the reference to the '235 Application and '456 Patent on the cover page of the '905 Patent does exactly that; the notice function is served as well as, if not better than, if the reference had been placed in the specification. See Broad. Innovation, 420 F.3d at 1367; MPEP § 201.11 (“If the specific reference is only contained in the application data sheet, then the benefit claim information will be included on the front page of any patent or patent application publication, but will not be included in the first sentence(s) of the specification.”); cf. E.I. du Pont de Nemours & Co. v. MacDermid Printing Solutions, L.L.C., 525 F.3d 1353, 1361-62 (Fed. Cir.2008) (treating a corrected patent title page as sufficient to claim priority).

The Federal Circuit has, moreover, suggested that some lenity in this arena may be appropriate when a failure is only technical in nature and the public has received sufficient notice of a patent claim. See Superior Fireplace Co. v. Majestic Prods. Co., 270 F.3d 1358, 1371-72 (Fed.Cir.2001) (emphasizing “the public notice function of patent claims” and permitting Section 255 to be used for “broadening correction[s]”). If the correction were not effective for its intended purpose, we could discern no other reason the PTO would have granted the Certificate.

In light of these considerations and simple notions of fairness, cf. Biotec Biologische Naturverpackungen GmbH & Co. KG v. Biocorp, Inc., 249 F.3d 1341, 1348 (Fed.Cir.2001) (noting that, if it would be “apparent to the interested reader that an error was made, such that it would be unfair to enforce the error,” errors in the prosecution record should be forgiven), we find the '905 Patent to have effectively claimed priority to the '235 Application and '456 Patent as of the issuance of the certificate of correction. Thus, though invalid upon issuance, the '905 Patent became valid as of September 14, 2010.

IV. Infringement

Certificates of correction, however, are effective only prospectively, not retrospectively. See 35 U.S.C. §§ 254, 255 (a certificate of correction has “the same effect and operation in law on the trial of actions for causes thereafter arising” as if the patent had originally been issued in the corrected form); see also, e.g., Sw. Software, Inc. v. Harlequin Inc., 226 F.3d 1280, 1295 (Fed.Cir.2000) (“[F]or causes arising before its issuance, the certificate of correction is not effective.”); Novo Indus., L.P. v. Micro Molds Corp., 350 F.3d 1348, 1356 (Fed.Cir.2003). The '905 Patent, therefore, gets the benefit of its claim to the priority of the '235 Application and '456 Patent only as of September 14, 2010, the date the Certificate was issued. As a result, Kobayashi cannot recover for acts of infringement occurring prior to that point. Cf. E.I. du Pont de Nemours, 525 F.3d at 1362 (because “each act of infringement gives rise to a separate cause of action,” infringement occurring after the issuance of a correction is properly the subject of suit).

A. Whether the ECS Software Infringes the Patents

Plaintiffs contend that the only version of their software that could possibly be at issue is ECS View version 11, which was completed and offered for sale in 2009. ECS has provided an uncontradicted declaration from its principal software engineer Eddy Tam, who avers that it is “ECS’s ordinary business practice not to sell older versions of software when newer versions are available” and that ECS has not sold any version older than version 11 since September 14, 2010. (Decl. of Eddy Tam (“Tam Decl.”) ¶¶ 11-12.) We therefore need determine only whether version 11 infringes the '905 Patent.

1. Whether Dr. Stevenson’s Report Is Conclusory with Respect to Version 11 of the Software

Kobayashi’s expert Dr. Stevenson has offered his opinion that all accused versions of the ECS software infringe the '905 Patent. (Peters Decl., Ex. 7, Expert R. of Dr. Robert L. Stevenson Regarding Infringement of U.S. Patent No. 6,211,905 (“Stevenson R.”) ¶ 105.) He asserts that, in coming to this conclusion, he “ha[s] analyzed the Carotek ECS system versions 4 through 11, Modular RetroSpek, RetroSpek II and Retrospek IV,” as well as numerous versions of the file that he claims contains most of the functionality related to the '905 Patent. (Id. ¶¶ 97, 104.) Nevertheless, his actual analysis rests predominantly on ECS version 9, which Dr. Stevenson claims is “representative of the entire Carotek line.” (Id. ¶ 105.) Plaintiffs argue that Dr. Stevenson’s analysis with respect to versions other than version 9 is speculative, conclusory, or otherwise without factual basis and must therefore be excluded. See Major League Baseball Props., Inc. v. Salvino, Inc., 542 F.3d 290, 311 (2d Cir.2008); see also Fed.R.Evid. 702(b)-(e) (admitting experts reports only if they are “based on sufficient facts or data” and “the product of reliable principles and methods”); Fed R. Civ. P. 26(a)(2)(B)®, (ii) (requiring expert reports to provide “a complete statement of all opinions the witness will express and the basis and reasons for them” and “the facts or data considered by the witness in forming them”).

Dr. Stevenson’s report is far from conclusory. It examines each of the claims of the '905 Patent that is allegedly infringed and notes how the Carotek/ECS system is encompassed by the claims. (Stevenson R., Ex. C.) Although the report largely speaks in terms of ECS View version 9, Dr. Stevenson explicitly provided that “[a]ny important difference [between version 9 and any other version] that is relevant to the infringement analysis will be specifically cited.” (Id. ¶ 105.) Indeed, Dr. Stevenson noted on several occasions that differences existed between the versions. (See, e.g., id., Ex. C, at 4 (noting that the number of video clips stored in the system has varied between versions), 11 (noting that a certain version of the system began to support digital cameras); see also Peters Deck, Ex. 9, Supplemental Deck of Dr. Robert L. Stevenson Regarding Infringement of U.S. Patent No. 6,211,905 (“Stevenson Suppl. Deck”) ¶¶ 10, 12 (discussing the use of a particular command throughout versions of the software).) The only reasonable inference is that, if no difference was noted, Dr. Stevenson is of the opinion that no material difference exists between version 9 and the other versions of the software. The report is thus functionally a report on every version of the software, including version 11, not just version 9.

An expert opinion is inadmissible as conclusory if it “cannot reasonably be assessed for reliability.” Comm. Note to Fed.R.Evid. 702 (2000). However, if the report “makes clear the evidence [the expert] is relying on to form his conclusions,” then “[i]t is clearly possible to test those conclusions objectively” and the report should not be excluded. Lesser ex rel. Lesser v. Camp Wildwood, 282 F.Supp.2d 139, 144 (S.D.N.Y.2003). Dr. Stevenson’s report painstakingly lays out the basis for his conclusions, and plaintiffs are fully able to attempt to debunk them (and, indeed, have tried to do so (Tam Deck ¶¶ 32-37)). Because the report “cannot be deemed to be substantially incomplete,” Tokio Marine & Nichido Fire Ins. Co. v. Calabrese, No. 07 Civ. 2514, 2011 WL 5976076, at *11, 2011 U.S. Dist. LEXIS 135987, at *34 (E.D.N.Y. Nov. 28, 2011), we cannot preclude our consideration of it on this motion.

2. Whether Version 11 Infringes the '905 Patent

In order to prove infringement, “every element and limitation of a claim of the patent must be found in the accused device, literally or in accordance with the doctrine of equivalents.” Gen. Elec. Co. v. ITC, 670 F.3d 1206, 1214 (Fed.Cir.2012). Conversely, the absence of any limitation or its equivalent precludes a finding of infringement. See Research Plastics, Inc. v. Fed. Packaging Corp., 421 F.3d 1290, 1297 (Fed.Cir.2005); Key Mfg. Grp., Inc. v. Microdot, Inc., 925 F.2d 1444, 1449 (Fed.Cir.1991). Plaintiffs argue that ECS View version 11 does not infringe the '905 Patent because it does not “extract” clips as provided in that patent.

Plaintiffs substantiate this claim with two related arguments. First, they argue that Dr. Stevenson’s infringement analysis depends on the use of the standard Windows system routine MoveFileEx() (Stevenson R., Ex. C, at 7 (noting that clips to be extracted are moved to new locations using MoveFileEx())), which, though used in version 9 of the software, is not used in version ll. Second, they contend that version 11 does not extract files at all; it leaves event clips in the same folder and physical storage location as where they were originally recorded, until they are deleted, when they can no longer be displayed. (Tam Decl. ¶¶ 30-37.) This process, they contend, does not constitute “removing” the files, and therefore is not extracting them either. See Carotek III, 2011 WL 4056746, at *12-13, 2011 U.S. Dist. LEXIS 102014, at *39 (defining “extract” as “remove”).

These arguments are insufficient to carry the day. We do not read Dr. Stevenson’s analysis as hinging in any way on the use of the MoveFileEx() routine; he has simply mentioned it in his discussion of extraction for the sake of specificity. His broader point — that the software extracts clips, regardless of what commands it utilizes to do so — is well taken. The '905 Patent is not limited to use of the MoveFileEx() routine, and we have not read and will not read that limitation into the patent.

With respect to plaintiffs’ second argument, Dr. Stevenson disagrees with Tam about whether version 11 extracts clips. He contends that the software continues to remove event video “from the ring buffer after the receipt of a deviation signal,” and the video is thereby protected from being deleted. (Stevenson Suppl. Decl. ¶¶ 12-13.) This is precisely what the extraction limitation of the '905 Patent requires. Plaintiffs have misread our discussion of the meaning of “extract” — removal does not necessitate physical movement. The patent’s limitation is that deviation digitized video signals or data must be removed from the surrounding digitized video signals or data, simply meaning that they need to be isolated for display purposes and not overwritten by subsequently digitized data. See Carotek III, 2011 WL 4056746, at *12-13, 2011 U.S. Dist. LEXIS 102014, at *37-39 (noting that the construction of “extract” “reflects the concept of data preservation” and “avoids the hazard of limiting the claim term to two ways of extraction — moving and copying — when the Patents contain no such limitation”).

On this record, we cannot grant plaintiffs summary judgment on the issue of whether ECS View version 11 infringes the '905 Patent. Cf. Gucci Am., Inc. v. Guess?, Inc., 843 F.Supp.2d 412, 418 (S.D.N.Y.2012) (“In cases where credible expert reports conflict the case for summary judgment on the disputed issue is very weak.” (citing New Orleans Emps.’ Ret. Sys. v. Omnicom Grp., Inc. (In re Omnicom Grp., Inc. Sec. Litig.), 597 F.3d 501, 512 (2d Cir.2010))).

B. Whether Carotek May Be Liable for Infringement

Carotek sold its event-capturing business to ECS on December 31, 2007. It argues that it has, since then, sold no accused products and is therefore entitled to summary judgment on Kobayashi’s claims of infringement.

Kobayashi contends that Carotek continued to invoice customers for accused products after the sale, but-even assuming the evidence reflected purchases by customers following the December 31, 2007 sale of the event-capture business to ECS — the most recent relevant document contains a settlement date of February 17, 2009 (Peters Deck, Ex. 22), prior to the effective date of the Certificate. James Addison Bell, the Chief Executive Officer of Carotek, also testified that Carotek has neither sold any event-capturing systems since the end of 2007 nor serviced any system it had previously sold. (Deck of Michael Autuoro (“Autuoro Deck”), Ex. 13, Dep. of James Addison Bell (May 12, 2008) (“2008 Bell Dep.”) 18:4-16, 21:11-16.)

However, on June 4, 2008, ECS provided a product quotation to P & G for Version 10.x of ECS’s software. (Peters Deck, Ex. 23.) That quotation represents that “Carotek phone support is available at no charge during the system life span” and that “[f]ull service contact by local Carotek service technician” may be purchased. Although the quotation expired on June 30, 2009, the “system life span” may very well extend for years. (2008 Bell Dep. 21:5-10 (noting that, as of December 31, 2007, customers were still using “systems going back to the origins of the product”).)

While we acknowledge that the evidence Kobayashi has presented is not definitive proof that Carotek continued its involvement with the event-capturing system business after 2007, on this motion we must construe the evidence and disputed issues of fact in the light most favorable to Kobayashi. See Gorzynski, 596 F.3d at 101. Doing so, we cannot conclude that no reasonable jury could find Carotek liable for infringement or aiding and abetting ECS’s alleged infringement.

C. Patent Misuse Affirmative Defense

In their answers to the counterclaims, plaintiffs asserted as an affirmative defense to infringement that Kobayashi had misused its patents. (Docket no. 77, Answer to Am. Countercl. ¶ 101(h).) As we have previously discussed, see Carotek II, 2010 WL 1640190, at *5-6, 2010 U.S. Dist. LEXIS 37800, at *18-19, we do not believe that Kobayashi’s actions, analyzed more extensively infra, rise to the level of anti-competitive conduct recognized as constituting misuse for the purposes of this defense. See also VA Panel Corp. v. MAC Panel Co., 133 F.3d 860, 869 (Fed.Cir.1997) (a patentee contacting an infringer’s customers and threatening suit did not constitute patent misuse). Our beliefs on the issue, however, are no longer relevant, as plaintiffs have withdrawn their reliance on the defense. (Oral Arg. Tr. 55:12-18.)

V. Amounts Owed Under the License Agreement

Carotek seeks in its suit, among other things, monetary relief in the form of a return of the royalties it paid to Kobayashi (or Kobayashi’s predecessors) pursuant to the Agreement. It asserts in support of this position both that the technology licensed under the Agreement was not covered by any of the Patents and that Kobayashi violated the terms of the Agreement by failing to extend to Carotek favorable royalty terms extended to another licensee. Kobayashi has moved for summary judgment on the issue.

A. Minimum Annual Fees

It is undisputed that the Agreement provides that Carotek must pay “minimum guaranteed annual fees of TWENTY-FIVE THOUSAND DOLLARS ($25,000.00) per calendar year.” (Agreement ¶3.4.) We have already determined that the provision is prima facie valid. See Carotek II, 2010 WL 1640190, at *7-8, 2010 U.S. Dist. LEXIS 37800, at *23-24. Carotek’s argument that the Patents do not cover the licensed technology—the merits of that argument entirely apart—is thus irrelevant. Carotek was obligated to pay Kobayashi $25,000 per year regardless of what technology the Agreement covered, whether the Patents were valid, or whether Carotek even used the technology it had licensed.

It is further undisputed that between 1999 and 2004—the first full year that the Agreement was in effect and the last year for which Carotek paid royalties, respectively—Carotek paid $123,421.79 to Kobayashi, during which time it would have owed $125,000.00 under the Agreement. Carotek did not remit even the minimum it owed; it therefore cannot seek the return of what it did pay unless the minimum-fee provision is void or otherwise unenforceable.

B. “Most Favored Licensee” Clause

Carotek argues that a violation of the “most favored licensee” clause of the Agreement suffices to excuse it of its obligations under the minimum-fee provision. That clause provides, in relevant part, that if Kobayashi

grants a license to a third party ... to practice all of the subject matter licensed under this Agreement and subject to more favorable royalty terms than those set forth in ARTICLE III of this Agreement, [Kobayashi] shall promptly notify [Carotek] in writing of said more favorable royalty terms. Upon written request given by [Carotek] ... within sixty (60) days after receipt of such notice, [Carotek] shall be entitled to the benefit of such more favorable terms ....

(Agreement ¶ 12.1.) Carotek has previously contended that Kobayashi’s failure to pursue legal action against Papertech when Papertech breached its licensing agreement by not paying the royalties it owed constituted favored treatment toward Papertech. As Carotek acknowledges, the Court has rejected that argument, holding that the breach did not “constitute[ ] an implied zero royalty license” and that Kobayashi’s failure to notify Carotek of the breach did not “constitutef ] the granting of a more favored license to Papertech.” Carotek I, 2009 WL 2850760, at *2-3, 2009 U.S. Dist. LEXIS 79812, at *8-9.

The revelation that Equaphor also breached its licensing agreement and was not pressed for the money it owed for a period of at least two years does not alter our analysis. Breach of an agreement that is not met with legal action does not constitute favored terms.

Carotek has thus failed to “come forward with specific evidence demonstrating the existence of a genuine dispute of material fact.” FDIC, 607 F.3d at 292. Carotek’s claims seeking the return of royalties paid are accordingly dismissed.

VI. Plaintiffs’ State Tort Claims

Plaintiffs have also asserted a variety of state and common law claims against Kobayashi arising from the Letters, including interference with prospective business advantage, libel and defamation, fraud, and unfair trade practices under North Carolina General Statute § 75-1.1. As a threshold matter, “federal patent law preempts state-law tort liability for a patentho