Soilworks LLC v Midwest Industrial Supply Inc

Filing 79

MEMORANDUM in Support re 78 MOTION for Summary Judgment by Soilworks LLC, Soilworks LLC. (Attachments: # 1 Supplement Statement of Facts in Support of Plaintiff's Motion for Summary Judgment, # 2 Exhibit Exhibits 1-7 to SOF in Support of Motion for Summary Judgment, # 3 Exhibit Exhibits 7-14 to SOF in Support of Motion for Summary Judgment)(Dosek, E) Modified on 5/12/2008 (SAT). INCORRECT EVENT SELECTED. THIS ENTRY HAS BEEN MODIFIED FROM "MOTION" TO "MEMORANDUM IN SUPPORT OF". DOCKET TEXT MODIFIED TO CORRECT DOCUMENT LINKAGE.

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E. SCOTT DOSEK #012114 JOHN P. PASSARELLI #16018 (NE) KUTAK ROCK LLP Suite 300 8601 North Scottsdale Road Scottsdale, AZ 85253-2742 [phone] Facsimile: [phone] Attorneys for Plaintiff SOILWORKS, LLC, an Arizona corporation UNITED STATES DISTRICT COURT IN AND FOR THE DISTRICT OF ARIZONA

SOILWORKS, LLC, an Arizona corporation, Plaintiff / Counterdefendant / Counterclaimant, v. MIDWEST INDUSTRIAL SUPPLY, INC., an Ohio corporation authorized to do business in Arizona, Defendant / Counterclaimant / Counterdefendant.

NO.: 2:06-CV-2141-DGC PLAINTIFF'S STATEMENT OF FACTS IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT

Pursuant to LRCiv 56.1 Plaintiff Soilworks submits its Statement of Facts in support of its Motion for Summary Judgment as follow: 1. Soilworks distributes (among other products) a dust control product named

Durasoil. (See Volumes I and II of Deposition Transcripts of Chad Falkenberg ("CF depo") filed under seal as Exhibit 1 at 302:17-22). 2. Midwest distributes dust control products as well, some of which embody two

United States Patents, Nos. 7,081,270 (the "'270 Patent") and 7,074,266 (the "'266 Patent") (collectively, hereinafter referred to as the "Midwest Patents") (See Exhibits 2 and 3). 3. It is undisputed that Soilworks and Midwest are competitors. See Midwest

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30 (b)(6) deposition transcript filed under seal as Exhibit 4 at 35:14-36:4. 4. On June 8, 2006, prior to the date of issuance of the Midwest Patents, Midwest's outside counsel sent a letter to counsel for Soilworks (June 8th Letter) asserting, among other things, that Midwest "fe[lt] that at least some of the claims in [our] two patent applications cited above could potentially affect your client's ability to make, use and sell Durasoil in the future . . . While no legal actions are contemplated by Midwest at this time, we ask you to kindly review the claims in the Applications, which are enclosed herewith . . ." See Exhibit 5. 5. Midwest admits that it had not performed any tests to determine whether the Durasoil product infringed the Midwest Patents prior to its June 8th Letter. See Exhibit 4 at 37:10-25-38:1-3. 6. Midwest admits it drew no conclusions from its testing of the Durasoil

Product. See Exhibit 4 at 38:14-21. 7. On July 27, 2006, just two days after the latter issuance of the Midwest

Patents, Midwest sent a letter to Soilworks' client, Polar Supply Company, Inc. ("Polar Supply") ("July 27th Letter"). See Exhibit 6. 8. Again, at the time it sent the July 27th Letter, Midwest had not performed any

infringement analysis which compared Durasoil to the Midwest Patents, and drew no conclusions from its general analysis of the product. See Exhibit 4 at 37:10-38:3. 9. Midwest informed Polar Supply that "[t]he granting of the U.S. patent now

allows Midwest to pursue those who make, use, sell, offer for sale, and / or import knock-off or imitators of EK35 or Envirokleen." (Id.) (Emphasis in original). See Exhibit 6. 10. conduct: We have appraised (sic) Soilworks LLC, 681 N Monterey Street, Gilbert, AZ 85233 of this patent and to date have not received a substantive response. As you may or may not be aware, U.S. patent law requires that a response be received by the patent owner when someone has been accused of infringement. See Exhibit 6. Then, Midwest specifically referred to Soilworks' allegedly infringing

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11.

In addition to these direct threats, Midwest made general claims to the trade of

Soilworks' infringement. ("Marketing Materials"). See Exhibit 7. 12. In its Marketing Materials, Midwest provided product literature entitled

"Compare Midwest and Envirokleen to the Competition." (Id.) 13. products. Again, Midwest specifically addressed Soilworks as an imitator of its "Soilworks, LLC is an imitator of synthetic organic dust suppressant

technology." (Id.) 14. In its promotional materials, Midwest further states that competitors, like

Soilworks, are either not supplying synthetic organic dust control product or they are infringing: Others claiming to offer products similar to EnviroKleen [and] EK35 are either not supplying Synthetic Organic Dust Control or are infringing on Midwest Industrial Supply's patents. The granting of the U.S. Patent now allows Midwest to pursue those who make, use, sell, offer for sale and/or import knock-off or imitators infringing Midwest's technology. See Exhibit 8. 15. Soilworks manufactures Durasoil at its facility in Gilbert, Arizona, blending

and mixing ingredients to meet the specific needs of its customers. See Exhibit 1 at 165:116; 173:17-18; 235:5-11 16. As a result, the Durasoil product can contain varying levels of viscosities and

mixture ratios. Id. at 165:17-166:6. 17. The Material Safety Data Sheet ("MSDS") for Durasoil describes the

ingredients as a "complex mixture of severely hydrotreated, branched alkanes and alkylated saturated ring compounds" and "proprietary ingredients." See Exhibit 9. 18. The proprietary ingredients include any one or combination of the following:

(i) white mineral oil, (ii) hydrotreated light paraffinic petroleum distillates, and/or (iii) hydrotreated middle petroleum distillates. See Exhibit 10 filed under sealed (i.e.

September 18, 2007 "CONFIDENTIAL" ingredients). 19. Midwest is the owner of two United States Patents, Nos. 7,081,270 (the "'270
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Patent") and 7,074,266 (the "'266 Patent") (See Exhibits 2 and 3). 20. Essentially, the `266 Patent references a compound and the `270 Patent

references a method of process for application of the compound described in the `266 Patent. (Id.) 21. Pursuant to their claims, both Midwest Patents must consist of or refer to

essentially of the following substances: (a) a binder consisting essentially of a carboxylic acid, an ester, or a thermoplastic polyolefin; and, (b) a synthetic isoalkane. (Id.). 22. In Count III of its Counterclaim, Midwest seeks Declaratory Judgment that the

Midwest Patents are valid and infringed by Soilworks' Durasoil product. (See Midwest's Answer and Counterclaim already e-filed with the Court on March 26, 2007; see also Exhibit 4 at 42:2-3). 23. In its pleadings, Midwest identifies the "marks" at issue in this case. Those "marks" are: Soil-Sement®, Envirokleen®, EK35®, Road Oyl®, Road ProNT®, Haul Road Dust Control®, Dustfyghter®, and Diamond Dr®, Arena Rx®, Base-Bldr®, and ROADBLDR®. (See Midwest's Answer and Counterclaim at p. 6, ¶ 7.) 24. In addition to its claim of patent infringement of the Midwest Patents, Midwest

asserts that Soilworks has infringed upon the Midwest Marks by (i) "embark[ing] on a scheme to trade upon and injure the substantial goodwill and reputation" of Midwest and (ii) us[ing] Midwest's Marks in commerce to divert sales and goodwill from Midwest." (See Midwest's Answer and Counterclaim at p.7, ¶ 13) 25. Instead, as best can be gleaned from the record, Midwest's Lanham Act claims

arise from the following five (5) statements: Soilworks, LLC is the innovator and manufacturer of Soiltac soil stabilizer and dust control agent; See Exhibit 4_at 68:6-10. Soilworks, LLC is the innovator and manufacturer of Gorilla-Snot soil stabilizer and dust control agent; Id. Soilworks, LLC is the innovator and manufacturer of Durasoil dust control agent." Id.

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 32. 26.

Durasoil is an "ultra-pure, synthetic organic fluid [] formulated to meet the highest standards of environmental efficacy" (See Exhibit 4 at 73:1-18) Durasoil is "Oil-Sheen Free (No Rainbow Effect)" (See Exhibit 4 at 76:9-23) (collectively, the "Alleged False Statements") Midwest has failed to produce any evidence that Soilworks has used in

commerce any of the Midwest Marks. See Exhibit 4 at 64:7-67:8. 27. In fact, it concedes that none of the Midwest Marks have been infringed. See

Exhibit 4 at 64:10-13. 28. 29. Indeed, it admits no confusion exists. See Exhibit 4 at 66:10-23. Central to Midwest's false advertising claim is Soilworks statement that it is a

"manufacturer" of the Durasoil, Soiltac and Gorilla-Snot products. See Exhibit 11 30. Midwest's claim of falsity is based upon Midwest's conclusory statement that

because of Midwest's "location and knowledge of [Soilworks] by [Midwest's] representatives" Soilworks manufactures "no product whatsoever." See Exhibit 12 Midwest Responses to Second Set of Interrogs. at 8.
31.

In fact, the record demonstrates that Soilworks is, indeed a manufacturer of

Durasoil (See Exhibit 1 at 165:1-16;173:17-24, 234:20-23, 235:5-11; 238:4-8, 302:17-22;). Q. Is Soilworks a manufacturer of Durasoil? A. I believe us to be. Q. And we have gone over that, you believe you are a manufacturer because at times you blend Durasoil, correct? A. I think that's the primary reason. Furthermore, by Midwest's own definition of "manufacture", Soilworks manufactures the Durasoil, Surtac, Soiltac and Gorilla-Snot products. Midwest agrees that when a company blends, forms or creates a formula and mixes the components together, it is a "manufacturer." See Exhibit 4 at 115:4-8. 33. Indeed, Midwest believes the term "blender" and "manufacturer" can be used
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interchangeably. See Exhibit 4. at 115:9-11. 34. In addition, Midwest states that when a company provides a product

specification to a supplier and the supplier meets the product specification, that company that provides that specification should also be considered a manufacturer. See Exhibit 4 at 69:20-25-70:1-5. 35. In essence, Midwest considers a company to be a "manufacturer" so long as

the company is not purchasing an "off-the-shelf product . . . that is now just being relabeled." Id. at 69:4-18. 36. Soilworks mixes and blends the Durasoil, Surtac, Soiltac and Gorilla-Snot

products. [See Deposition Transcript of Dorian Falkenberg filed under seal as Exhibit 13 at 31:1-5. 37. Also, Soilworks provides product specifications for the Soiltac, Durasoil and

Gorilla-Snot products to certain suppliers, who meet those product specifications. Id. at 31:1-11. 38. 39. Midwest admits no deception has occurred. See Exhibit 4 at 66:10-23. Instead, Midwest makes only conclusory and unsupported allegations that it

has lost business from the Alaska Department of Transportation, the US Military, and a "project in Hawaii" as a result of "Soilworks' conduct." See 30(b)(6) Depo.. See Exhibit 4 at 61:4-18. 40. In addition, Midwest alleges that Petro-Canada terminated a supply agreement

with Midwest based upon Petro-Canada's "general displeasure" with the "volume of product that [Midwest] has bought from them." See Exhibit 4 at 62:10-25-63:1-16. 41. However, Petro-Canada continues to be a "large supplier" of products to

Midwest. See Exhibit 4 at 75:16-18. 42. Midwest admits that Petro-Canada terminated its supply agreement with

Midwest because Midwest "ha[s]n't purchased the volumes that [it] had projected." See Exhibit 4 at 63:5-13. 43.
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Midwest claims this is the result of Soilworks' conduct "if they infringe the
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patent or if they are falsely advertising and diverting and/or winning business that they otherwise would not be able to get, then that has caused us harm." See Exhibit 4 at 63:1723. 44. As already stated, Midwest has not presented any evidence of a likelihood of

confusion. Furthermore, Midwest makes no claim of ownership to the terms "oil-sheen free" and "ultra-pure." See Exhibit 4 at 73:1-18. 45. The Midwest Patents' Claims require the presence of organic acids (i.e.

carboxylic and fatty acids). See Exhibit 14. 46. The paraffinic components of the Durasoil product are non-acidic, that is, it

does not contain an organic acid. Id. 47. 48. 49. 50. 51. a binder. Id. 52. The Durasoil product does not utilize any polymeric materials or a binder. Id.. The Midwest Patents' Claims require the presence of an emulsifier. Id. Soilworks' Durasoil product does not contain an emulsifier. Id. The Midwest Patents' claims require the presence of a synthetic iso-alkane. Durasoil does not contain any synthetic iso-alkanes. Id. The Midwest Patents' Claims require the presence of a polyolefin to be used as

See Exhibit 1 at 162:5-9, 173:25-174:1-5, 207:9-11); see also Exhibit 14 53. Soilworks' Durasoil product does not contain any substances substantially

similar to a synthetic isoalkane, a binder, carboxylic acid or a thermoplastic polyolefin as taught in the claims of the Midwest Patents. Id.

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Dated this 9th day of May, 2008. KUTAK ROCK LLP

By

/s E. Scott Dosek E. Scott Dosek John P. Passarelli (Pro Hac Vice) Suite 300 8601 North Scottsdale road Scottsdale, AZ 85253-2742 Attorneys for Plaintiff

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CERTIFICATE OF SERVICE I hereby certify that on May 9, 2008, the foregoing Plaintiff's Statement of Facts in Support of its Motion for Summary Judgment by Soilworks, LLC was filed electronically. Notice of this filing will be sent to all parties by operations of the Court's electronic filing system. Parties may access this filing through the Court's system.

/s Amy S. Fletcher

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