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Se-Kure Controls, Inc. v. Vanguard Products Group

January 17, 2008

SE-KURE CONTROLS, INC., PLAINTIFF,
v.
VANGUARD PRODUCTS GROUP, INC., AND TELEFONIX, INC., DEFENDANTS.



The opinion of the court was delivered by: Susan E. Cox, Magistrate Judge

Judge Wayne R. Andersen

MEMORANDUM OPINION AND ORDER

The matter before the Court is a motion to disqualify defendants' patent expert, brought by Plaintiff Se-Kure Controls, Inc. ("Se-Kure"). Specifically, Se-Kure moves the Court to disqualify George Gerstman, the patent expert for both Defendants Vanguard Products Group ("Vanguard") and Telefonix Inc. ("Telefonix") (collectively referred to as "Defendants"). Defendants retained Mr. Gerstman as the patent law expert to opine on patent procedure and the question of inequitable conduct. Se-Kure argues Mr. Gerstman's expert report lacks specialized knowledge or training on the fact questions at issue and should, thus, be stricken and Mr. Gerstman barred from testifying. The motion is denied, with noted limitations by the Court on the scope of Mr. Gerstman's testimony [dkt 214].

I. The Patent-In-Suit

The '590 Patent is a "reissue" of U.S. Patent No. 5,552,771 ("the '771 Patent"), which originally issued in 1996. The '590 Patent is for a retractable sensor assembly for use with an alarm system to prevent theft of products while, at the same time, eliminating the problem of entangled cords. These alarm systems are typical in most retail stores to allow consumers to pick-up and view hand-held electronic devices, such as cameras and cell phones, while preventing the theft of those devices. The system involves an alarm box that plugs into the wall and a splitter box that plugs into the alarm box. A retractable cable plugs into the splitter box and the opposite end has a sensor that is attached to a product. If the sensor is removed, an alarm is activated. The retractable cable is on a retraction mechanism, also called a "recoiler" or "retractor." The recoiler allows the cable to be withdrawn as the customer handles the product and retracts the cable back into the recoiler when the customer is done.

II. Background

In 2002 Se-Kure filed this lawsuit against multiple defendants alleging infringement of U.S. Patent No. RE 37590 ("the '590 Patent"). All but two of the original defendants have settled with Se-Kure. The remaining two Defendants, Telefonix and Vanguard, are related. Telefonix manufactures and supplies to Vanguard the sensor-bearing "electrical retractor" component of the product at issue. Telefonix's President, Paul Burke, is also a co-owner of Vanguard. Telefonix and Vanguard, thus, share the same counsel and defenses in the case. Both Defendants claim the '590 Patent is unenforceable because of alleged inequitable conduct before the United States Patent and Trademark Office ("PTO") by Se-Kure.

In late 1996, after the '771 Patent issued, Se-Kure claims it learned that Defendant Telefonix was supplying another company with power cord retractors that had been converted to retail-security assemblies for integration into a merchandiser's alarm system. Se-Kure also asserts Telefonix was marking those products with its own telephone handset patent numbers. The telephone handset, or telephone retractor devices, are patented by Telefonix and identified as Burke, U.S. Patent No. 5,094,396 and Burke, U.S. Patent No. 4,989,805 (collectively referred to as "the Burke Patents"). Se-Kure contends it knew of these telephone retractor devices (and the Burke Patents) back in May 1996, but had dismissed them as irrelevant because they were not related to sensors, alarm systems, or retail security.

With this knew knowledge of the security assemblies, however, Se-Kure took action and discussed the Burke Patents with its patent counsel. It was at this time Se-Kure claims it realized that Claim 11 of the '771 Patent, already issued, could be deemed relevant to the Burke Patents. Accordingly, in February 1997 Se-Kure surrended the '771 Patent to the PTO for reissue. In the reissue declaration, Se-Kure described the events of the prior months, noting that while they had been aware of the Burke Patents (i.e., the prior art cord reels for telephone handsets), they had not considered those prior art references until they saw what they deemed "several infringers" place notice of the Burke Patents on certain alarm assemblies.

The reissue declaration to the PTO explains that Se-Kure's error was use of imprecise language when describing the continuous electrical path and a failure on the part of the inventors to recognize how the previous language might be read. The reissue declaration further provides that Se-Kure believes the '771 Patent is partly inoperative or invalid by reason of claiming both more and less than they had a right to claim. All specified errors in the reissue declaration Se-Kure claims arose without any deceptive invention on their part.

III. Discussion

Se-Kure argues that according to his expert report, Mr. Gerstman intends to render opinions on patent law, the Court's exclusive province, and fact questions that should be left to the trier of fact. Specifically, Mr. Gerstman's report describes the United States Patent System, procedure within the PTO, and how Se-Kure allegedly intentionally withheld material prior art, thereby rendering the '771 the '590 Patents unenforeable.

A. Inequitable Conduct

The Federal Circuit Court of Appeals defines inequitable conduct as an "affirmative misrepresentation of a material fact, failure to disclose material information, or submission of false material information, coupled with an intent to deceive."*fn1 There is a "duty of candor and good faith" on the part of an applicant that includes the "duty to disclose to the Patent Office all information known ... to be material to patentability."*fn2 Thus, to be guilty of inequitable conduct due to a "failure to disclose" a party must offer clear and convincing proof of: (1) prior art or information that is material; (2) knowledge of that prior art and its materiality chargeable to the applicant; (3) the applicant's intent to mislead the PTO by failing to disclose the prior art or information.*fn3 For information to be material there must a "substantial likelihood that a reasonable examiner would have considered the ...


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