Carrier Vibrating Equipment, Inc. v. General Kinematics Corporation
Filing
103
ENTER MEMORANDUM OPINION AND ORDER: the Court grants in part and denies in part Carrier's motion to dismiss 100 . Carrier's infringement claims are voluntarily dismissed with prejudice as to Kinematics' "SOSM" shakeout con veyors installed and operating at GM/Defiance. However, the Court denies the motion 100 as it pertains to dismissal of Kinematics' counterclaims. Status hearing set for 4/30/2014 at 09:00 AM. Signed by the Honorable Robert M. Dow, Jr on 4/7/2014. Mailed notice(tbk, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CARRIER VIBRATING
EQUIPMENT, INC.,
Plaintiff,
v.
GENERAL KINEMATICS
CORPORATION,
Defendant.
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Case No. 10-cv-5110
Judge Robert M. Dow, Jr.
MEMORANDUM OPINION AND ORDER
Plaintiff Carrier Vibrating Equipment (“Carrier”) sued Defendant General Kinematics
Corporation (“Kinematics”), alleging infringement of Carrier’s U.S. Patent 7,712,513 (“the ’513
patent”). Kinematics counter-claimed, first seeking a declaratory judgment that the ’513 patent
is invalid and unenforceable, and then, following summary judgment, also seeking a declaratory
judgment that Carrier’s U.S. Patent 8,096,406 (“the ’406 patent”) is invalid and unenforceable.1
Carrier has moved for Rule 41 dismissal of its infringement claims [100] and contends that this
dismissal also requires dismissing Kinematic’s declaratory judgment counterclaims due to the
lack of case or controversy between Carrier and Kinematics. For the reasons set forth below, the
Court concludes that, even with the dismissal of Carrier’s infringement claims, an actual
controversy exists. Therefore, in its discretion, the Court grants in part and denies in part
Carrier’s motion to dismiss [100]. Carrier’s infringement claims are voluntarily dismissed with
prejudice as to Kinematics’ “SOSM” shakeout conveyors installed and operating at
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The ‘406 patent did not issue until January 2012. It resulted from a continuation of the application that
resulted in the ‘513 patent and has similar claims to the ‘513 patent.
GM/Defiance. However, the Court denies the motion [100] as it pertains to dismissal of
Kinematics’ counterclaims.
I.
Background
The technology in this case involves a method for controlling the retention time of a
casting on a vibratory conveyor, typically used in an industrial environment such as a foundry or
other molding facility. When used in the foundry process, these vibratory conveyors, known as
“shakeouts,” are used to shake sand or other surrounding mold media used in the casting process
from the metal casting itself. The ’513 patent, entitled “System and Method for Controlling
Casting Shakeout Retention,” discloses a system and method for controlling the retention time –
the time that a casting is retained in its mold – of a casting being transported on a vibratory
conveyor.
This is accomplished first by imparting a vibratory force to the conveyor at a
predetermined angle to the conveying surface whereby the predetermined angle determines the
retention time, and then by modifying that angle. The ’513 patent was issued on May 11, 2010,
based upon a patent application filed on April 4, 2006.
Prior to August, 2010, Carrier discovered an advertisement for Kinematic’s V2 Shakeout
Conveyor system (“V2 Shakeout conveyor”) on Kinematic’s website. Kinematic’s website
characterized its V2 Shakeout conveyor having a “control system * * * utiliz[ing] vector based
measurement to monitor and maintain the proper shakeout angle for your casting type, as well as
the ability to adjust travel speed to optimize shakeout time for various casting sizes and shapes.”
Based on this advertisement, Carrier believed that actual use of a GK V2 Shakeout that
performed as advertised would violate the ‘513 Patent and therefore filed this infringement
action in August 2010. Kinematics filed an answer and counterclaim seeking a declaratory
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judgment that the ‘513 Patent is invalid and unenforceable. On September 13, 2013, Kinematics
amended its counterclaim to also declare the ‘406 Patent invalid and unenforceable.
After this lawsuit was filed, Kinematics successfully bid on a proposal to install vibratory
shakeout conveyors at GM/Defiance.
The bid specifications for the GM/Defiance project
required a shakeout conveyor that “allow[s] for a variable angle of attack and stroke adjustment
during the cycle.”
Since the V2 Shakeout was the only shakeout conveyor advertised by
Kinematics as having this capability, Carrier believed that Kinematics would install its V2
Shakeout at GM/Defiance, and when installed and operating at GM/Defiance in accordance with
the bid specifications, Carrier believed the V2 Shakeout would infringe at least claims 1, 27, 30,
31/32 and 33 of the ‘513 Patent.
Early in this case, the parties agreed to a “preemptive” litigation plan, whereby the Court
would first decide Kinematics’ counterclaims that: (i) claims 1-4, 27 and 30 of Carrier’s ‘513
Patent were invalid under 35 U.S.C. § 102(b) due to an offer of sale made by Carrier to Ross
Sand Castings of Orville Ohio; and (ii) claims 31 and 32 of the ‘513 Patent were invalid under 35
U.S.C. § 112 for lack of an adequate written description. During the pendency of the
“preemptive” phase of this case, the ‘406 Patent was issued to Carrier. The claims of the ‘406
Patent are similar to the claims of the ‘513 Patent but are not restricted to use of a shakeout
conveyor to control retention time.
On September 27, 2012, the Court issued its summary judgment opinions.
During
November 2012, Carrier received information that Kinematic’s V2 shakeout conveyors were not
installed at GM/Defiance. Carrier then requested permission to conduct focused discovery to
determine whether the shakeout conveyors actually installed at GM/Defiance infringed Carrier’s
‘513 and/or ‘406 Patents, which the Court granted. After physical inspection of the Kinematics
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shakeout conveyors actually installed at GM/Defiance, and after deposing Kinematics’ vice
president, Carrier confirmed that Kinematic did not install its V2 Shakeout conveyors at
GM/Defiance. Instead, Kinematics installed shakeout single mass (“SOSM”, sometimes called
“VF”) shakeout conveyors. Notably, Kinematics’ SOSM/VF shakeout conveyors do not have
the capability to change the angle of attack. Consequently, Carrier determined that Kinematics’
SOSM conveyors installed and used at GM/Defiance do not infringe the ‘513 Patent or the ‘406
Patent. Because Kinematics’ SOSM/VF shakeout conveyors, when used, would not infringe any
method claim of the ‘513 Patent, Carrier concluded that it has no infringement claim under the
‘513 Patent against Kinematic. Thus, Carrier dismissed its infringement claims with prejudice
against the Kinematics’ SOSM/VF Shakeout Conveyors built and installed at GM/Defiance, but
only those conveyors.
II.
Analysis
Carrier contends that dismissal of its infringement claims mandates dismissal of
Kinematics’ counterclaims seeking to declare Carrier’s patents invalid because there is no actual
infringement case or controversy between Carrier and Kinematics. More specifically, Carrier
contends that because there is no actual GK V2 Shakeout conveyor or GK V2 fluid bed
processor in existence in the United States, there is and can be no infringement of Carrier’s ‘513
Patent. Not surprisingly, Kinematics has no objection to Carrier’s dismissal of its infringement
claims with prejudice as to Kinematics’ “VF” shakeout conveyors installed and operating at
GM/Defiance and no objection to Carrier’s voluntary dismissal of its infringement complaint as
to Kinematics’ V2 conveyors. However, Kinematics objects to Carrier’s motion for dismissal of
the Kinematics’ amended counterclaims seeking declarations that the subject ‘513 and ‘406
patents asserted by Carrier are invalid and unenforceable.
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A.
Legal Standards
Kinematics’ counterclaims are brought pursuant to the Declaratory Judgment Act, 28
U.S.C. § 2201 et seq., which provides, in pertinent part, that “[i]n a case of actual controversy
within its jurisdiction * * * any court of the United States * * * may declare the rights and other
legal relations of any interested party seeking such declaration, whether or not further relief is or
could be sought.” 28 U.S.C. § 2201(a). A “case of actual controversy” for purposes of §
2201(a) means a case or controversy as those terms are employed in Article III of the
Constitution delimiting the scope of the federal judicial power. U.S. Const. art. III, § 2, cl. 1; see
also Cat Tech LLC v.TubeMaster, Inc., 528 F.3d 871, 879 (Fed. Cir. 2008); Teva Pharms. USA,
Inc. v. Novartis Pharms. Corp., 482 F.3d 1330, 1338 (Fed. Cir. 2007). A court has broad
discretion in deciding whether to exercise jurisdiction over claims for declaratory relief. “The
Declaratory Judgment Act provides that a court may declare the rights and other legal relations
of any interested party, not that it must do so.” MedImmune, Inc. v. Genentech, Inc., 549 U.S.
118, 136 (2007) (emphasis in original, internal quotations omitted). Thus, a court has “unique
and substantial discretion in deciding whether to declare the rights of litigants.” Wilton v. Seven
Falls Co., 515 U.S. 277, 286–88 (1995). “In the declaratory judgment context, the normal
principle that federal courts should adjudicate claims within their jurisdiction yields to
considerations of practicality and wise judicial administration.” Id.
In MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007), the Supreme Court
articulated a new standard of justiciability in patent cases seeking declaratory relief.
Before MedImmune, the Federal Circuit had applied a two-prong test in patent cases to determine
the existence of declaratory judgment jurisdiction. The first prong examined “whether conduct
by the patentee creates a reasonable apprehension on the part of the declaratory judgment
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plaintiff that it will face an infringement suit.” SanDisk Corp. v. STMicroelectronics, Inc., 480
F.3d 1372, 1379 (Fed. Cir. 2007).
The second prong examined “whether conduct by the
declaratory judgment plaintiff amounts to infringing activity or demonstrates concrete steps
taken with the intent to conduct such activity.” Id. In MedImmune, the Supreme Court rejected
the first prong of the Federal Circuit’s test as a strict requirement, and thus ostensibly relaxed the
test for declaratory judgment jurisdiction in patent cases. See MedImmune, 549 U.S. at 132 n.
11. The Supreme Court also restated its totality-of-the-circumstances test: the parties’ dispute
must be “definite and concrete, touching the legal relations of parties having adverse legal
interests,” “real and substantial,” and “admit of specific relief through a decree of a conclusive
character, as distinguished from an opinion advising what the law would be upon a hypothetical
state of facts.” Id.at 127. “Basically, the question in each case is whether the facts alleged,
under all the circumstances, show that there is a substantial controversy, between parties having
adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a
declaratory judgment.” Id.
Since MedImmune, the Federal Circuit has issued several opinions that help to define the
scope of declaratory judgment jurisdiction in patent cases. Although the Supreme Court rejected
the requirement that a patentee’s conduct create a “reasonable apprehension” of suit, the Federal
Circuit has reiterated that a party seeking declaratory relief generally must be able to point to
some affirmative acts by the patentee to assert rights under a patent. See SanDisk, 480 F.3d at
1380–81 (“In the context of conduct prior to the existence of a license, declaratory judgment
jurisdiction generally will not arise merely on the basis that a party learns of the existence of a
patent owned by another or even perceives such a patent to pose a risk of infringement, without
some affirmative act by the patentee.”). In addition, the second prong—“whether there has been
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meaningful
preparation
to conduct potentially infringing activity”—remains
an
important
element in the totality of the circumstances which must be considered in determining whether a
declaratory judgment is appropriate. Cat Tech LLC v. TubeMaster, Inc., 528 F.3d 871, 880 (Fed.
Cir. 2008) (noting that in every action for declaratory relief the analysis of whether an actual
controversy exists “must be calibrated to the particular facts of each case”).
In a post-MedImmune decision, the Federal Circuit explained, “Article III jurisdiction
may be met where the patentee takes a position that puts the declaratory judgment plaintiff in the
position of either pursuing arguably illegal behavior or abandoning that which he claims a right
to do.” SanDisk Corp., 480 F.3d at 1381; see also Patch Prods., Inc. v. L.B. Games, Inc., 2009
WL 1249981, at *4 (W.D. Wis. May 6, 2009); Tuthill Corp. v. ArvinMeritor, Inc., 2008 WL
4200888, at *3 (N.D. Ill. Sept. 5, 2008). Thus, “where a patentee asserts rights under a patent
based on certain identified ongoing or planned activity of another party, and where that party
contends that it has the right to engage in the accused activity without license, an Article III case
or controversy will arise and the party need not risk a suit for infringement by engaging in the
identified activity before seeking a declaration of its legal rights.” SanDisk, 480 F.3d at 1381.
B.
Application
As the party seeking declaratory relief, Kinematics bears the burden of establishing that
declaratory judgment jurisdiction exists. See Benitec Australia, Ltd. v. Nucleonics, Inc., 495
F.3d 1340, 1344 (Fed. Cir. 2007). Carrier argues that Kinematics has not met its burden because
Kinematics’ only V2 activity is advertising on its website, and those advertisements are devoid
of the structural details required to conduct a proper infringement analysis. Carrier points out
that all of the claims of the ‘513 and ‘406 Patents are “method claims,” which require that the V2
shakeout conveyors or fluid bed processors be used as set forth in the claims, not just built or in
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existence or even sold, in order for infringement to occur. In other words, Carrier contends that
because it is not asserting an infringement claim against the SOSM/VF conveyors installed at
GM/Defiance and it cannot assert an infringement claim against the allegedly “non-existent” V2
shakeout conveyor or “non-existent” V2 fluid bed processor at this time, there is no controversy
to support Kinematics’ counterclaims. See, e.g., Microchip Tech., Inc. v. Chamberlain Grp.,
Inc., 441 F.3d 936, 944 (Fed. Cir. 2006) (“Without an underlying legal cause of action, any
adverse economic interest that the declaratory plaintiff may have against the declaratory
defendant is not a legally cognizable interest sufficient to confer declaratory judgment
jurisdiction.”). At the same time, however, Carrier has been explicit that it intends to continue to
pursue infringement claims against Kinematics if Kinematics sells one of its V2 machines: “To
be sure, if there were an actual Kinematics’ V2 conveyor in actual operation, Carrier would
likely assert an infringement claim against such as actual device, if operating in an actual
infringing manner.”
The Federal Circuit has expressly stated that “a party need not have engaged in the actual
manufacture or sale of a potentially infringing product to obtain a declaratory judgment.” Cat
Tech, 528 F.3d at 881. Instead, there must be a showing of “meaningful preparation” for making
or using the product. Id. Here, Kinematics has established the design for its V2 control
technology, which has been described in detail for this court. See General Kinematics Corp. v
Carrier Vibrating Equipment, Inc., Case No. 08cv1264, Docket Entry 94 (Steffes Decl.).
Kinematics built and tested a V2-equipped shakeout conveyor.
Although the prototype has
since been dismantled (by removing the V2 associated devices from the trough), Kinematics
represents that the V2 control system remains in existence, has not been destroyed, and would
not require substantial modification from how it was set up on the prototype machine. Further,
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Carrier inspected and examined the V2-equipped prototype and represented to the Court that it
had a complete understanding of how the V2 technology works.
Kinematics represents that it began offering its V2 technology in late 2009, has continued
to advertise the V2 products on its website, and is ready and able to provide V2 conveyors to any
customer interested in the product. The record reflects that the machines at issue in this case are
heavy, expensive equipment, which are built to order and designed to fit within a factory line.
Kinematics’ vice president represents that it has on multiple occasions issued quotes for the V2
machines (both a shakeout and fluid bed conveyor) for potential customers within the United
States, including GM.2 According to Kinematics, it generally prepares quotes for a potential
customer outlining the design requirements to meet the customers’ specific needs and the cost for
installation of the product.
Engineered drawings are then prepared individually for each
installation. Once a quote is accepted, a vibratory conveyor typically takes three to six months to
build.
Kinematics represents that it has no intention or expectation that it will need to
significantly modify or alter the technology tested in the prototype in order to install products for
its customers, and that it is ready and able to ship the V2 technology on a normal delivery
schedule as soon as an order is received.
After being repeatedly accused of infringement, Kinematics is understandably hesitant to
proceed with the manufacture of large, expensive machinery before resolving the infringement
issues raised by Carrier. See MedImmune, 549 US at 133-34 (noting that a party need not “bet
the farm” or risk treble damages by taking actions that are accused of infringement before
seeking a declaratory judgment). Further, Carrier’s basis for alleging infringement was never the
actual sale of the V2 (as it filed suit prior to Kinematics’ sale to GM/Defiance), but rather
2
According to Kinematics, in order to shield GM from involvement in the present suit, Kinematics
proposed and delivered an alternate technology for the conveyors sold to GM.
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Kinematics’ offer to sell the V2. Kinematics’ is still offering to sell the V2 technology. Thus,
the Court concludes that the V2 technology is sufficiently immediate and real to satisfy
declaratory judgment jurisdiction. See also Cat Tech, 528 F.3d at 881 (finding declaratory
judgment jurisdiction where the accused infringer was prepared to produce devices upon
customer orders within a normal delivery schedule and did not expect to have to make significant
changes); cf. Revolution Eyewear v. Aspex Eyewear, Inc., 556 F.3d 1294, 1299 (Fed. Cir. 2009)
(reversing the district court’s dismissal of counterclaims and emphasizing that the parties were
already in infringement litigation initiated by the patentee, the infringer had stated its intention to
sell the accused products in the future, and that it was reasonable to assume that the patentee
would file suit again as soon as the sales began).3
IV.
Conclusion
For these reasons, the Court concludes that, even with the dismissal of Carrier’s
infringement claims, an actual controversy exists. Therefore, in its discretion, the Court grants in
part and denies in part Carrier’s motion to dismiss [100]. Carrier’s infringement claims are
voluntarily dismissed with prejudice as to Kinematics’ “SOSM” shakeout conveyors installed
and operating at GM/Defiance. However, the Court denies the motion [100] as it pertains to
dismissal of Kinematics’ counterclaims.
Dated: April 7, 2014
______________________________
Robert M. Dow, Jr.
United States District Judge
3
The situation in Revolution Eyewear differs from the present situation because the alleged infringer had
prior sales and stock in inventory. However, the product involved was eyeglasses rather than custom
foundry equipment, which admittedly is much less expensive to manufacture.
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