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BARNETT v. STROM

June 5, 2003

TERRY BARNETT, ET AL., PLAINTIFFS,
v.
WILLARD STROM, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Milton Shadur, Senior District Judge

MEMORANDUM OPINION AND ORDER

This patent action involves an unusual scenario: It asserts that an inventor, original patentee Willard Strom ("Strom"), together with his wife Victoria and their corporation C & S Manufacturing Co. ("C & S"), are illegally infringing Strom's own intellectual brainchild. Terry Barnett ("Barnett"), who is now the owner of the patent in suit (Patent No. 5,819,474 — the "`474 Patent"), and Strom Closures, Inc. ("Strom Closures")*fn1 have sued Strom, his wife and C & S charging such infringement. Now at issue is what plaintiffs' counsel has inaccurately characterized as "Plaintiffs' Motion for Summary Judgment That Defendants Are Estopped To Deny Infringement of U.S. Patent No. 5,819,474."*fn2

Background

Despite the inappropriateness of the summary judgment label for the current motion (see n. 2), it has accomplished a constructive purpose in facilitating the present ruling. Because plaintiffs' attachment of that label has caused counsel for both litigants to comply with the procedural requirements of this District Court's LR 56.1 (which has been adopted to implement Rule 56), the factual matrix for dealing with the current motion has been provided to this Court. And that factual matrix discloses that there are indeed no genuine issues of material (that is, outcome-determinative) fact that bear upon the motion.

As stated earlier, Strom was the original inventor and patentee of the `474 Patent, which covers a particular type of temporary shelter and a method for making it. Having then formed Strom Closures in 1995, Strom granted that corporation an exclusive license under the then-pending patent application. Defendants' position is that the 1995 license agreement just referred to was superseded by a September 6, 1996 License Agreement ("Agreement") among Strom, Barnett and David Barnett as licensors and Strom Closures as licensee,*fn3 under which Strom Closures was again granted an exclusive license under the patent when issued "to manufacture, package, market and sell the Product throughout the world."*fn4 After some disagreements among the principals led to Strom's departure from ownership and officership in Strom Closures in November 1998, he began to do business as C & S, which he then incorporated in August 2000. Although he clearly had no right at all to do so in light of the previously-granted exclusive license running to Strom Closures, on August 29, 2000 Strom executed a purported License Agreement with C & S under which Strom assertedly granted a license to C & S under the `474 Patent.

Strom then fell on hard times that led to his instituting voluntary bankruptcy proceedings in the Bankruptcy Court for this District on January 9, 2001. Just where he or his lawyer got the idea is unclear, but Strom's Schedule B in the bankruptcy case listed his purported ownership of 50% of Strom Closures' common stock and his 100% ownership of the `474 Patent. In all events the end result of Strom's claims in that respect produced two documents that are relevant for current purposes:

1. One document captioned "Assignment of Patent" and dated as of December 18, 2001 ran between Strom as assignor, through his Chapter 7 Trustee in bankruptcy, and Barnett as assignee. That document (a) confirmed the recognition earlier that month of the transfer of all of Strom's "right, title and interest" in and to the `474 Patent to the bankruptcy estate and (b) authorized the Trustee to transfer, sell or assign the `474 Patent to Barnett as assignee. Its operative provisions did just that.
(a) all of the Seller's rights, title and interest in and to all of the shares of common stock and any other equity interest in Strom Closures, Inc. (the "Strom Stock"); and
(b) all of the Seller's rights, title and interest in and to United States Letters Patent No. 5,819,474, issued on October 13, 1998 entitled "Temporary Shelter and Method of Making Same" (the "Patent").

Heedless of everything that had taken place, as described above, that plainly divested him of any interest in both the `474 Patent and Strom Closures, Strom has not only continued through C & S to produce and sell products in competition with Strom Closures (the C & S product is marketed as "THE ZIPPER"), but he has also, despite his having orally terminated his invalid August 29, 2000 License Agreement running to C & S:

1. prepared an instruction sheet for THE ZIPPER product — a document used by C & S to instruct purchasers how to use that product — that expressly referred to the `474 Patent, a reference that Strom's deposition confirmed had as its purpose the warning away of other potential competitors from duplicating THE ZIPPER product, thus obtaining a commercial advantage for C & S;
2. prepared other instruction sheets for C & S that also included references to the `474 Patent for the same purpose;
3. participated in the preparation of C & S' notification to its customers to inform them about THE ZIPPER product, a notification that referred to the product as being ...

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