Procongps, Inc. v. Star Sensor Technology, LLC., et al.,

Filing 225

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT 182 195 222 (Illston, Susan) (Filed on 6/18/2013)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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PROCONGPS, INC.,

United States District Court
For the Northern District of California

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No. C 11-3975 SI

Plaintiff,

ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’
MOTION FOR SUMMARY JUDGMENT

v.

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SKYPATROL, LLC, et al.,

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Defendants.

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Defendants Jim Schumacher and Jim Schumacher LLC have filed a motion for summary

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judgment, and the motion is scheduled for a hearing on June 21, 2013. Pursuant to Civil Local Rule 7-

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1(b), the Court determines that this matter is appropriate for resolution without oral argument, and

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VACATES the hearing. For the reasons set forth below, the motion is GRANTED IN PART and

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DENIED IN PART.

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BACKGROUND

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On August 15, 2011, plaintiff Spireon (formerly ProconGPS, Inc.) filed this lawsuit against Star

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Sensor LLC, Jim Schumacher LLC, Jim Schumacher, Tony Rangel, and Skypatrol, LLC. Plaintiff

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alleges that defendants are infringing two patents owned by plaintiff that generally involve using GPS

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technology to secure collateral for a loan.

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The complaint alleges that defendant Jim Schumacher is a former sales representative and a

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reseller of plaintiff’s products and services and that he is an experienced sales representative in the GPS

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tracking industry. Compl. ¶ 17. The complaint alleges that Schumacher organized Jim Schumacher

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LLC and does business as GPS Vehicle Finder which “sells and offers for sale GPS tracking products

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which infringe the [patents-in-suit].” Id. ¶ 18. The complaint alleges that the Schumacher defendants

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infringe by offering to sell and selling “products such as the ES101 GPS/GPRS module and the LCS-1

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GPS tracking device,” and “other GPS tracking solutions programs, which implement one or more

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methods of securing collateral that are covered” by at least claim 1 of each of the ‘774 and ‘217 patents.

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Compl. ¶¶ 22, 32.
When this lawsuit was filed, Schumacher was a sales agent who sold GPS vehicle products on

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behalf of defendant Star Sensor LLC. Sheffield Decl. Ex. 1 at 92:16-18, 222:18-223:6 (Schumacher

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deposition). Schumacher states that in July 2011 he bought 5,000 units in Star Sensor and became one

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United States District Court
For the Northern District of California

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of three members of that limited liability corporation. Schumacher resigned from his position as a Star

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Sensor sales agent in January 2013. Id. at 222:18-223:6.1

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In January 2013, Schumacher became a sales agent for defendant Skypatrol.

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LEGAL STANDARD

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Summary judgment is proper “if the movant shows that there is no genuine dispute as to any

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material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The

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moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact.

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See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The moving party, however, has no burden to

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negate or disprove matters on which the non-moving party will have the burden of proof at trial. The

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moving party need only demonstrate to the Court that there is an absence of evidence to support the non-

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moving party’s case. See id. at 325.

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The burden then shifts to the non-moving party to “designate specific facts showing that there

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is a genuine issue for trial.” Id. at 324. To carry this burden, the non-moving party must “do more than

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simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus.

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Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). “The mere existence of a scintilla of

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evidence . . . will be insufficient; there must be evidence on which the jury could reasonably find for

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Schumacher also sold GPS products for plaintiff from November 2005 to March 2011.
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the [non-moving party].” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).
In deciding a summary judgment motion, the evidence is viewed in the light most favorable to

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the non-moving party, and all justifiable inferences are to be drawn in its favor. Id. at 255. “Credibility

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determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts

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are jury functions, not those of a judge [when she] is ruling on a motion for summary judgment.” Id.

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Conclusory, speculative testimony in affidavits and moving papers is insufficient to raise genuine issues

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of fact and defeat summary judgment. Thornhill Publ’g Co., Inc. v. GTE Corp., 594 F.2d 730, 738 (9th

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Cir.1979); see also Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054, 1061 (9th Cir. 2002) (observing

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that there is no genuine issue of fact “where the only evidence presented is ‘uncorroborated and

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United States District Court
For the Northern District of California

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self-serving’ testimony” (quoting Kennedy v. Applause, Inc., 90 F.3d 1477, 1481 (9th Cir. 1996))). The

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evidence presented by the parties must be admissible. Fed. R. Civ. P. 56(c). Hearsay statements found

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in affidavits are inadmissible. Fong v. Am. Airlines, Inc., 626 F.2d 759, 762-63 (9th Cir. 1980).

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DISCUSSION
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Schumacher defendants’ liability based on sales of Star Sensor products

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Defendants move for summary judgment on plaintiff’s claims to the extent they are based on

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defendants’ reselling of Star Sensor products. Defendants argue that plaintiff’s claims against the

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Schumacher defendants were released in a March 2013 settlement between plaintiff and Star Sensor,

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releasing all claims against “present . . . members” of Star Sensor “related to infringement of the Patent-

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in-Suit solely with respect to the Star Sensor Products,” because Jim Schumacher LLC was a member

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of Star Sensor when the settlement was executed. Sheffield Decl. Ex. 5. Defendants have submitted

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into evidence the Star Sensor/Spireon settlement agreement; Schumacher’s April 4, 2013 deposition

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testimony in which he states that he is a member of Star Sensor LLC by virtue of purchasing 5,000 units,

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or 5%, of the LLC; and a copy of the consultant agreement between Star Sensor and Jim Schumacher

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LLC, which includes a “Form of Exercise Notice” stating that on July 27, 2011, Jim Schumacher LLC

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elected to purchase 5,000 units of Star Sensor LLC, as well as copy of a check from Jim Schumacher

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LLC to Star Sensor for $5,000 for “Purchase of 5,000 units of Star Sensor Technology LLC.” See

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Sheffield Decl. Ex. 1 at 435:14-436:14 (deposition testimony); Ex. 5 (settlement agreement); Caine
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Decl. Ex. 1 at 138:15-20 (deposition testimony); Ex. 5 at SCHU0006518 & SCHU000526 (option

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agreement and check). Defendants have also cited authority, which is not disputed by plaintiff, for the

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proposition that “members” of an LLC are defined as those who own a membership interest. See Cal.

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Corp. Code § 17001(t)(x), (z); 9 Bernard E. Witkin, Summary of California Law, Partnerships, § 136,

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at 697 (10th ed. 2005); see also C. Hugh Friedman & James F. Fotenos, California Practice Guide:

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Corporations, ¶ 2.36.1 (2013).
Plaintiff argues that defendants2 have not met their burden to show that Schumacher was a

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member of Star Sensor at the time of the March 2013 agreement because defendants have not submitted

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any evidence showing that the units were actually issued. Plaintiff notes that the Star Sensor option

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United States District Court
For the Northern District of California

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agreement states, “Until the issuance (as evidenced by the appropriate entry on the books of the

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Company or of a duly authorized transfer agent of the Company) of the Units, no right to vote or receive

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dividends or any other rights as a member shall exist with respect to the Exercised Units,

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notwithstanding the exercise of the Option.” Caine Decl. Ex. 5 at Ex. 5 at SCHU00065124. However,

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as defendants note, Schumacher testified under oath in April 2013 that he was a member of Star Sensor,

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that he purchased units of Star Sensor in 2011, and that he still owned those units. Plaintiff has not

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submitted any evidence to contradict this sworn testimony, and in the absence of any such evidence, the

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record before the Court is undisputed that Schumacher was a member of Star Sensor at the time of the

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March 2013 settlement.

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The Court concludes that defendants have met their burden to show that they are entitled to

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summary judgment on plaintiff’s claims to the extent those claims are based on defendants’ sales of Star

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Sensor products, and thus Court GRANTS this aspect of defendants’ motion.

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II.

Schumacher defendants’ liability based on sales of Skypatrol products

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The Schumacher defendants contend that they are entitled to summary judgment because, at the

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time that defendants filed the instant motion for summary judgment, plaintiff’s infringement contentions

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did not allege that the Schumacher defendants infringed based upon the sale of Skypatrol products.

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The parties do not distinguish between Jim Schumacher and Jim Schumacher LLC when
analyzing whether “Schumacher” is covered by the Star Sensor/Spireon settlement agreement’s release.
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Defendants argue that after this Court granted plaintiff leave to file amended infringement contentions

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in April 2013, plaintiff impermissibly amended the contentions to assert for the first time that the

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Schumacher defendants infringed based upon the sale of Skypatrol products.
In response, plaintiff asserts, inter alia, that the complaint broadly alleges that the Schumacher

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defendants infringe the patents-in-suit based on the sale of GPS tracking products and services, and that

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nothing in the complaint limits the infringement allegations against the Schumacher defendants to the

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sale of Star Sensor products. Plaintiff also asserts that it did not know that Schumacher became a

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Skypatrol sales agent in January 2013, and that plaintiff has been diligent throughout the discovery

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process in trying to discover the nature and extent of the Schumacher defendants’ sale of GPS tracking

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United States District Court
For the Northern District of California

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solutions. For example, plaintiff notes that in February 2013, plaintiff served an interrogatory on

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Schumacher requesting the identity of the manufacturers of the GPS products that Schumacher sold, and

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that it was not until April 2013 that Schumacher responded identifying Skypatrol GPS solutions as

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among those that he sold. Plaintiff’s counsel also emailed Schumacher’s counsel in February and March

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2013 asking whether Schumacher now sold Skypatrol products (because the “word on the street” was

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that Schumacher was working for Skypatrol), and defense counsel never responded to those emails.

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Plaintiff also notes that on March 8, 2013, plaintiff responded to Schumacher’s interrogatories and stated

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that Schumacher induced and contributed to infringement by selling, inter alia, Skypatrol products.

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Caine Decl. Ex. 8 at 3. Further, plaintiff states that the amended infringement contentions that plaintiff

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filed in response to this Court’s April 2013 order were identical to the contentions that were the subject

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of the motion to amend, and that the only difference was that plaintiff updated its discovery responses

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to reflect the fact that Schumacher was now a Skypatrol sales agent.

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The Court finds that the allegations of the complaint are broadly framed and embrace allegations

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that the Schumacher defendants infringe based on the sale of Skypatrol products. Further, the record

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before the Court shows that plaintiff has been diligent in attempting to discover the Schumacher

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defendants’ relationship with Skypatrol, and that as early as March 8, 2013, plaintiff informed

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defendants through discovery responses that plaintiff alleged that the Schumacher defendants infringed

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based upon the sale of Skypatrol products. The Court further finds that there are disputes of fact

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regarding the Schumacher defendants’ infringement, and accordingly DENIES this aspect of defendants’
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motion.

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CONCLUSION
For the foregoing reasons, defendants’ motion for summary judgment is GRANTED IN PART
and DENIED IN PART. Docket No. 182.

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IT IS SO ORDERED.

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Dated: June 18, 2013
SUSAN ILLSTON
United States District Judge

United States District Court
For the Northern District of California

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