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NATIONAL DIAMOND SYNDICATE, INC. v. FLANDERS DIAMOND USA

March 31, 2003

NATIONAL DIAMOND SYNDICATE, INC., PLAINTIFF AND COUNTERCLAIM DEFENDANT,
v.
FLANDERS DIAMOND USA, INC., AND KUWAYAMA EUROPE, N.V., DEFENDANTS, COUNTERCLAIM PLAINTIFFS, AND THIRD-PARTY PLAINTIFFS, V. LEWY FRIEDRICH, N.V., COUNTERCLAIM DEFENDANT



The opinion of the court was delivered by: Amy J. St. Eve, United States District Court Judge

MEMORANDUM OPINION AND ORDER

National Diamond Syndicate and Lewy Friedrich, N.V. have moved for summary judgment on the issues of invalidity, infringement and inequitable conduct relating to design patent no. 338,851 ("the `851 patent"). Flanders Diamond USA and Kuwayama Europe, N.V. have moved to exclude and strike certain materials included with the motion for summary judgment. For the reasons discussed below, the motion for summary judgment and the motion to exclude and strike are both denied.

LEGAL STANDARD

Summary judgment is proper when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A genuine issue of triable fact exists only if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Pugh v. City of Attica, 259 F.3d 619, 625 (7th Cir. 2001) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986)).

The party seeking summary judgment has the burden of establishing the lack of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). The party that bears the burden of proof on a particular issue, however, may not rest on its pleadings but must affirmatively demonstrate that there is a genuine issue of material fact. Id. at 324, 106 S.Ct. at 2553. A mere scintilla of evidence in support of the non-movant's position is insufficient. See Anderson, 477 U.S. at 252, 106 S.Ct. at 2512. A party will be successful in opposing summary judgment only if it presents "definite, competent evidence to rebut the motion." EEOC v. Roebuck & Co., 233 F.3d 432, 437 (7th Cir. 2000).

The Court "considers the evidentiary record in the light most favorable to the non-moving party, and draws all reasonable inferences in his favor." Lesch v. Crown Cork & Seal Co., 282 F.3d 467, 471 (7th Cir. 2002). The Court accepts the non-moving party's version of any disputed facts but only if it is supported by relevant, admissible evidence. Bombard v. Fort Wayne Newspapers, Inc., 92 F.3d 560, 562 (7th Cir. 1996).

FACTUAL BACKGROUND

A. The Parties

Plaintiff and Counterclaim Defendant National Diamond Syndicate is an Illinois corporation. (See R. 47, Defs.' L.R. 56.1(b)(3) Resp., ¶ 1.) Counterclaim Defendant Lewy Friedrich, N.V. is a Belgian corporation. (Id. ¶ 2.) Collectively, National Diamond Syndicate and Lewy Friedrich are referred to herein as "Plaintiffs."

Defendant, Counterclaim Plaintiffs, and Third-Party Plaintiffs Flanders Diamond USA and Kuwayama Europe, N.V. are, respectively, a New York corporation and a Belgian corporation. (See R. 47, Defs.' L.R. 56.1(b)(3) Resp., ¶¶ 3-4.) Kuwayama Europe is the owner of the `851 patent, and Flanders Diamond USA is an authorized licensee of the `851 patent. (See R. 30-1, Pls.' Exs. re Mot. for Summary Judgment, Ex. 23 at p. 53; id., Ex. 6 at pp. 54-57.) Collectively, Flanders Diamond USA and Kuwayama Europe are referred to herein as "Defendants."

B. Diamond Cutting Terminology

Diamonds discovered in nature are commonly referred to as "rough diamonds" and must be cut and polished before they can be used in jewelry. (See R. 30-1, Pls.' Exs. re Mot. for Summary Judgment, Ex. 1 at pp. 7-13.)

A cut or polished diamond is made up of a number of individual facets and typically includes two main sections — the crown (the top of the diamond) and the pavilion (the bottom of the diamond). (See R. 30-1, Pls.' Exs. re Mot. for Summary Judgment, Ex. 1 at p. 6.) Generally, the top surface of the crown includes a single flat facet known as the table facet. (Id..) The crown and the pavilion are divided by a narrow row of additional facets called the girdle. (Id.) Viewed from the top, the girdle defines the shape of the diamond. In other words, a diamond with a round girdle is referred to as a round cut diamond, and a diamond with an octagonal girdle is referred to as an octagonal diamond. (Id.)

One popular gemstone design is the Round Brilliant Cut, which typically features a round girdle, an octagonal table facet, and a total of 58 facets on the crown and pavilion. (See R. 30-1, Pls.' Exs. re Mot. for Summary Judgment, Ex. 1 at p. 108.)

C. The `851 Patent and the Flanders Brilliant Cut

In 1986, Johan d'Haene and Hirmoi Inui started Nippon Marketing Partners ("NMP") to market diamonds to the Japanese market. (See R. 48-1, d'Haene Dec., ¶ 3; R. 44-1, Inui Dec., ¶ 3.) NMP purchased diamonds and then cut and polished them for the Japanese market. (See R. 48-1, d'Haene Dec., ¶ 3.)

In 1987, NMP's Japanese customers requested a new gemstone with a cut similar to the Round Brilliant Cut. (See R. 48-1, d'Haene Dec., ¶ 4; R. 44-1, Inui Dec., ¶ 6.) In response to this request, Mr. d'Haene worked on several potential new diamond designs, including one design for a square diamond referred to as the Flanders Brilliant Cut. (See R. 48-1, d'Haene Dec., ¶¶ 5-6.) According to Mr. d'Haene, he developed the Flanders Brilliant Cut when he conceived of using the faceting from the Round Brilliant Cut on the pavilion of a square diamond — a concept he referred to as "squaring" the Round Brilliant Cut. (Id. ¶¶ 6-7.) Because the Round Brilliant Cut facet design could not be imported exactly to a square diamond, Mr. d'Haene added four additional facets to the pavilion. (Id. ¶ 6.) Mr. d'Haene insists that he completed the design of the Flanders Brilliant Cut prior to March of 1988. (See R. 48-1, d'Haene Dec., ¶ 7. See also R. 44-1, Inui Dec., ¶¶ 6-7.)

On March 28, 1990, Mr. d'Haene filed a patent application for the Flanders Brilliant Cut with the United States Patent and Trademark Office ("the PTO"). (See R. 47, Defs.' L.R. 56.1(b)(3) Resp., ¶ 8.) Mr. d'Haene did not disclose any prior art to the PTO in connection with his patent application. (Id. ¶ 34.) On August 31, 1993, the PTO issued the `851 patent for the Flanders Brilliant Cut. (Id. ¶ 9.) Mr. d'Haene assigned the `851 patent to NMP, and Kuwayama Europe acquired the `851 patent when it bought NMP. (See R. 30-1, Pls.' Exs. re Mot. for Summary Judgment, Ex. 23 at p. 53; id., Ex. 6 at pp. 54-57.)*fn1

D. The `293 Patent and the Petar Cut

In 1983, Milan Tankosic, of Petar's Jewellery, Ltd. in St. Catharines, Ontario, Canada, developed a design for an octagonal gemstone referred to as the Petar Cut. (See R. 47-1, Defs.' LR. 56.1(b)(3) Resp., ¶ 11.) Mr. Tankosic filed a Canadian patent application for the Petar Cut design, and on September 16, 1986, the Canadian Patent Office issued Canadian patent no. 1, 211, 293 ("the `293 patent"). (Id. ¶ 12.)

In 1984, Mr. Tankosic filed a United States counterpart to his Canadian patent application, but the PTO rejected the application as unpatentable in view of existing prior art. (See R. 47-1, Defs.' L.R. 56.1(b)(3) Resp., ¶ 16.) Specifically, the patent examiner rejected Mr. Tankosic's United States patent application under 35 U.S.C. § 103 as obvious in light of several earlier gemstone designs. (See R. 30-2, Pls.' Exs. re Mot. for Summary Judgment, Tankosic Dec., Ex. D.) Further, the ...


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