Sanctions Result in Summary Judgment of No Invalidity; No Liability for Letters Sent to Defendants' Customers
A year ago, West Chester, OH-based Contech Stormwater Solutions sued Mount Airy, MD-based BaySaver Technologies, Inc. and AccuBid Excavation, Inc., for allegedly infringing its U.S. Patents Nos. 5,707,527 and 6,027,639 (see related post here). After finding in favor of defendants on the question of liability, the U.S. District Court for the District of Maryland considered defendants’ business tort, and patent invalidity and unenforceability counterclaims in connection with the parties’ summary judgment motions.
Rule 37(c)(1) Sanctions
At the outset, the court limited defendants’ use of certain evidence as a sanction under Rule 37(c)(1), “because [defendants] failed timely to disclose prior art or the underlying basis for their invalidity claims, and because they failed to demonstrate causation and damages on their business tort claims.” In particular, the court found that,
Without evidence to support the counterclaims, the court granted plaintiff’s summary judgment motion."[Defendants] did not provide a claim chart or any reasoned analysis showing where in the prior art each element of each allegedly invalid claim is located. Defendants merely attached alleged prior art references to their Opposition without any explanation of why any claim of the asserted patents is invalid over the referenced prior art. Without more, [defendants] have quite simply failed to produce specific facts showing that there is a genuine issue for trial, especially under a clear and convincing standard."
Inequitable Conduct
The sole basis of defendants’ inequitable conduct counterclaim, the court found, was a "brief segment of testimony taken from a deposition that, as offered by the defendants, allegedly raised a disclosure issue concerning U.S. Patent No. 4,643,836 (“the ‘836 patent’”)," which was never disclosed to the PTO. The testimony, the court concluded, “revealed nothing about the materiality of the ‘836 patent and fails to raise even an inference of an intent to deceive or relevance or mislead the USPTO.” The court found that the ‘836 patent had in fact been indirectly disclosed on a brochure cited to the PTO. Moreover, the court found that defendants “made no showing that the ‘836 patent was even material to the prosecution of the ‘527 and ‘639 patents.” Accordingly, Plaintiff’s summary judgment motion on the inequitable conduct counterclaim was granted.
Letters to Defendants’ Customers and Regulators
Defendants’ state law counterclaims, which included allegations of defamation, were based on a letter sent by Contech in February 2007 to a select group of potential customers and regulators notifying them of Contech’s infringement claim against the accused BaySaver product. The court noted that Defendants’ allegations were based on a belief that “the letter was not intended to be informative, but rather was filed for the sole purpose of harassing the defendants and disrupting their business dealings.” In its memorandum, the court wrote,
"[F]ollowing discovery, there is some evidence that Contech sent its letters in a targeted manner to BaySaver’s prospective clients with the intent of disrupting potential business dealings. While some of this conduct may cross the line between fair competition and subjective bad faith, Contech is still entitled to summary judgment on the tort counterclaims for two reasons: (1) [Defendants] have failed to provide evidence that Contech’s underlying suit was objectively baseless, and (2) [Defendants] failed to provide sufficient evidence of causation and damages, at least until well after the close of discovery."
The court found that the underlying content of Contech’s February letter did not appear to be untruthful or as inflammatory or threatening as other infringement notice letters held to be protected under federal law. “Communication of accurate information about patent rights, whether by direct notice to potential infringers or by publicity release, does not support a finding of bad faith,” the court found (citing cases).
Comments/Notes:
- Citation: Contech Stormwater Solutions, Inc. v. BaySaver Technologies, Inc. and AccuBid Excavation, Inc., No. 07 Civ. 358 (D. Md. Jan. 15. 2008)
- It is not clear if the outcome of this case would have been different had the late evidence offered by defendants not been excluded by the Judge as a sanction. Unfortunately for defendants, a decision to exclude is within the discretion of the court, and will be overturned only if there is a finding of an abuse of discretion.
