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Methode Electronics, Inc. v. Delphi Automotive Systems LLC

July 16, 2009

METHODE ELECTRONICS, INC., PLAINTIFF/COUNTER-DEFENDANT
v.
DELPHI AUTOMOTIVE SYSTEMS LLC, DEFENDANT/COUNTER-PLAINTIFF, MARIAN, INC., DEFENDANT. DELPHI TECHNOLOGIES, INC., COUNTER-CLAIMANT.



The opinion of the court was delivered by: Honorable David H. Coar

CORRECTED MEMORANDUM OPINION AND ORDER*fn1

This case concerns Plaintiff Methode Electronic Inc.'s ("Methode") claimed patent for a weight-sensing pad, which is a critical component of a seat-occupant sensing technology sold by Defendant Delphi Automotive Systems LLC ("Delphi") and used in car airbag systems. Before the court is Delphi's motion to transfer this case to the United States District Court for the Eastern District of Michigan. See 28 U.S.C. § 1404(a). For the following reasons, the motion is GRANTED.

I. BACKGROUND

The crux of Methode's complaint is that, after years of purchasing weight-sensing pads exclusively from Methode, Delphi has found a new supplier in Defendant Marian, Inc., and in doing so both Delphi and Marian have violated Methode's patent for the pads. Methode is a Delaware corporation with its principal place of business in Chicago, Illinois; Delphi is a limited liability Delaware company with its principal place of business in Troy, Michigan; and Marian is an Indiana corporation with its principal place of business in Indianapolis, Indiana.

Methode and Delphi (and their predecessors) have had a long relationship. According to Methode's complaint, in 1997, Delphi's predecessor, Delco Electronics Corporation ("Delco"), approached Methode's predecessor, American Components, Inc. ("ACI"), and requested that ACI develop a weight-sensing pad suitable for use in a vehicle restraint system. (Compl. ¶7.) Methode says that ACI engaged Dr. Frank Speckhart, a professor at the University of Tennessee, to work with Scott Baker, Vice President of ACI, on the weight-sensing pad, and together they invented such a pad with hexagonal cells formed by spot welding. (Compl. ¶¶8,9.) As a result, on November 29, 1999, U.S. Patent No. 5,975,568, entitled "Sensor Pad for Controlling Airbag Deployment and Associated Support" ("the Speckhart Patent") was duly and legally issued, according to Methode. (Compl. ¶¶1,23.)

In its counterclaim, Delphi tells a different story: Delphi says that it was Delco employees who invented the pad design (which Delphi refers to as a "bladder") that is the subject of Methode's patent-in suit. (Counterclaim ¶10.) Delphi argues that, when their relationship began, Delco and ACI entered into a Non-Disclosure/Confidentiality Agreement, whereby Delco provided significant details of its inventions and development work so that Methode could produce manufacturing prototypes and tooling to mass-produce the pads. (Counterclaim ¶11.) During the course of this development, says Delphi, Duane Fortune, Morgan Murphy, among others at Delphi/Delco-but not Dr. Speckhart, Mr. Baker or anyone else at Methode/ACI-invented a PODS bladder with an array of circular cells formed by a hexagonal geometry. According to Delphi, its predecessor subsequently shared these concepts and designs with ACI. (Counterclaim ¶12.) Delphi notes that Delco filed a patent application on February 18, 1998, based on the bladder concept its employees invented, which led to U.S. Patent No. 6,101,436, a weight-sensing bladder used in Delphi's PODS systems. (Counterclaim ¶13.) Delphi claims that this prior art invalidates Methode's subsequently filed patent application. (Counterclaim ¶14.)

While responsibility for the pads' design is disputed, the companies' supply arrangement is not. Initially, Delco and ACI entered into a multi-year agreement whereby ACI was Delco's exclusive supplier of the pads. (Compl. ¶10.) That relationship continued in 2001, when Methode acquired the Speckhart Patent and other ACI assets related to the pads: the two companies reached a second successive multi-year supply agreement, this time with year-over-year price decreases. (Compl. ¶¶11,12.) (It's unclear precisely when Delphi succeeded Delco, but it's of no moment for purposes of this motion.)

It's also undisputed that Delphi and Methode's relationship soured in 2008, at the end of the second supply agreement. The parties still were able to reach and memorialize a new agreement-which Methode refers to as the "2008 supply agreement," without objection from Delphi-that included, significantly, a clause designating federal and state courts of Michigan as the venue for any legal actions arising out of, or in connection with, the contract. (R.32, MTT Ex. 6 at ¶26.1.) But the 2008 supply agreement was not reached without struggle. Methode claims that, based on economic factors, it had to increase the price of the pads, which caused Delphi to threaten to seek a new supplier and to request the tooling drawings for the pads. (Compl. ¶¶14,15.) When Methode refused to provide the drawings (on the ground that Delphi had not promised to respect the Speckhart patent) Delphi sued Methode in Michigan state court to obtain the drawings. (Compl. ¶15.) That action remains pending in the 6th Judicial Circuit of Michigan, Oakland County Circuit Court (captioned Delphi Automotive Sys., LLC v. Methode Electronics, Inc., No. 08-095518-CK).

In the meantime, Methode contends that Delphi has provided specimens and samples of the weight-sensing pads and other technical information to Marian, and that Marian has used this information to manufacture infringing pads for Delphi. (Compl. ¶¶17,18.) Methode also contends that Delphi is currently testing infringing weight-sensing pads manufactured by Marian, and that Marian will continue to manufacture and sell infringing pads to Delphi, who in turn will sell them to its customers. (Compl. ¶21.)

Both defendants have answered the complaint and filed counterclaims. Delphi now moves to transfer the case to the Eastern District of Michigan.

II. LEGAL STANDARD

For the convenience of parties and witnesses and in the interest of justice, a district court may transfer a case to any other district or division where it might have been brought. 28 U.S.C. § 1404(a). "[A]ny civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business." 28 U.S.C. § 1400(b). Transfer is appropriate if "(1) venue is proper in both the transferor and transferee court; (2) transfer is for the convenience of parties and witnesses; and (3) transfer is in the interests of justice." Illinois Blower, Inc. v. Deltak, LLC, No. 04-0341, 2004 WL 765187, at *3 (N.D. Ill. Apr. 7, 2004) (Coar, J.). It is the movant's burden to show that transfer is appropriate. Coffey v. Van Dorn Iron Works, 796 F.2d 217, 219-20 (7th Cir. 1986).

The propriety of transfer is a case-by-case assessment, and it is committed to the sound discretion of the trial judge. Id. at 219. The court considers convenience (or "private interest") factors, including: (1) the plaintiff's choice of forum, (2) the situs of material events, (3) the relative ease and access to sources of proof, (4) the convenience of the parties and (5) the convenience of the witnesses. Sitrick v. Dreamworks L.L.C., No. 02 C 8403, 2003 WL 21147898, at *5 (N.D. Ill. May 14, 2003), aff'd, 516 F.3d 993 (Fed. Cir. 2008); see 15 C. Wright & A. Miller, Federal Practice ยงยง3849-53 (1986). And the court considers the interests of justice (or "public interest factors"), which "relate to the court's familiarity with the applicable law, the speed at which the case will proceed to trial, and the desirability of resolving controversies in [a particular] locale." Sitrick, 2003 WL 21147898, at *5(quotation ...


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