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

June 4, 2010

SE-KURE CONTROLS, INC. PLAINTIFF,
v.
VANGUARD PRODUCTS GROUP, INC., ET AL, DEFENDANTS.



The opinion of the court was delivered by: Wayne R. Andersen District Judge

MEMORANDUM OPINION AND ORDER

This case is before the court on the assertion made by the remaining defendants, Vanguard Products Group, Inc. ("Vanguard") and Telefonix, Inc. ("Telefonix", collectively, "Defendants"), that plaintiff Se-Kure Controls, Inc. ("Plaintiff" or "Se-Kure") engaged in inequitable conduct in the prosecution of U.S. Patent 5,552,771 ("the '771 Patent") and U.S. Patent RE 37,590 ("the '590 Patent"). For the reasons set forth below, Defendants failed to persuade this court that Plaintiff engaged in inequitable conduct. Judgment is entered for Plaintiff on Defendants' counterclaim of inequitable conduct.

BACKGROUND

I. Procedural Background

This case involves a patent for an anti-theft device. Se-Kure filed this lawsuit alleging that Defendants willfully infringed the '590 Patent, by manufacturing, having made, using, selling or offering for sale retail merchandise security systems employing retractable sensors, and/or by selling components of those systems. Defendants' Second Amended Counterclaim alleged non-infringement, invalidity, inequitable conduct, and an antitrust violation.

Se-Kure asserted the '590 Patent against other defendants in other cases in the Northern District of Illinois, namely Civil Action No. 06 C 4857 entitled Se-Kure Controls, Inc. v. Diam USA, Inc., et al. (the "Diam case") and Civil Action No. 08 C 6075 entitled Se-Kure Controls, Inc. v. Sennco Solutions Inc., et al. (the "Sennco case"). Telefonix is a defendant in both this case and the Diam case.

On January 29, 2007, Defendants filed a motion for summary judgment on the issue of inequitable conduct, arguing that the inventors of the '590 Patent (1) knowingly failed to disclose the most material prior art to the United States Patent and Trademark Office ("PTO") during the patent application process, and (2) subsequently filed knowingly false declarations concerning the prior art. (Dkt. No. 284). On September 27, 2007, this court denied the motion for summary judgment, concluding that material facts were disputed, including: "(1) whether Se-Kure's agents knew or should have known that certain prior art discovered by Se-Kure during the patent application process was material to that pending patent application; and (2) whether Se-Kure and its agents had the intent to mislead the USPTO during the patent application process." (Dkt. No. 372).

On September 18, 2009, Judge Guzman entered a Memorandum Opinion and Order in the Diam case, holding the '590 Patent invalid as obvious in view of certain prior art. Se-Kure appealed Judge Guzman's decision in the Diam case to the United States Court of Appeals for the Federal Circuit. In light of the pending appeal, this court granted a stay for all proceedings in this case, with the exception of Defendants' counterclaim of inequitable conduct. (Dkt. No. 438).

An inequitable conduct hearing was held on April 28, 2010, and continued to May 10, 2010. Between these hearings, the Federal Circuit heard oral arguments in the Diam case, and on May 5, 2010, that court entered an order affirming Judge Guzman's decision, holding the '590 Patent invalid as obvious in view of certain prior art. Nevertheless, this court resumed the hearing on inequitable conduct, as the issues of patent validity and inequitable conduct are distinct issues requiring separate analyses. See Afga Corp. v. Creo Products Inc., et al., 451 F.3d 1366, 1372 (Fed. Cir. 2006); Gardco Mfg., Inc. v. Herst Lighting Co., 820 F.2d 1209, 1213 (Fed. Cir. 1987).

II. Factual Background

Based on the documents submitted by the parties and the testimony provided at the inequitable conduct hearing, we summarize the relevant facts as follows. Inventors Roger J. Leyden ("Leyden") and Terrance Surma ("Surma"), both employed by Se-Kure, filed a patent application June 10, 1994, which subsequently issued as the '771 Patent on September 3, 1996. ('771 Patent, Defs.' Ex. 13). In May 1996, while the '771 Patent application was still pending, one of Se-Kure's customers contacted Se-Kure expressing interest in a recoiler produced by Telefonix. (Defs.' Ex. 7). On May 13, 1996, Peter Passuntino, Vice President of Operations of Se-Kure, contacted Paul Burke ("Burke"), president of Telefonix, and discussed the customer's interest in the Telefonix recoiler. (Id.) Also on May 13, 1996, Surma conducted a patent search of any existing patents held by Burke. (Defs.' Ex. 28). Two of the patents revealed in that search were U.S. Patent 4,989,805 ("the '805 Patent") and U.S. Patent 5,094,396 ("the '396 Patent"), both of which were described as "Retractable Reel Assembly For Telephone Extension Cord," and both of which had abstracts explicitly stating that the devices were to be used "in proximity to a telephone or telephone jack for utilization with either wall mounted or table telephones." (Defs.' Ex. 28). Neither Leyden nor Surma revealed these patents to the PTO in connection with the pending application for the '771 Patent.

On February 19, 1997, Se-Kure filed a reissue application of the '771 Patent, which issued as the '590 Patent on March 19, 2002. (Defs.' Ex. 17). In the reissue declaration, Leyden and Surma stated, "[W]e believe that the '771 patent is partly inoperative or invalid by reason of claiming both more than we had a right to claim in the patent and less than we had a right to claim in the patent." (Defs.' Ex. 19, ¶ 8). The reissue declaration then revealed the existence of "prior art," including the '805 and '396 Patents, and U.S. Patent 5,535,960 ("the '960 Patent"). (Id. at ¶ 9b). In explaining the inventors' failure to disclose the prior art in connection with the original application for the '771 Patent, Leyden and Surma stated,

Upon information and belief, this error arose due to a failure of the undersigned to appreciate and communicate certain prior art to the assignee's prosecuting attorney. Specifically, the undersigned were at the time of their invention aware of cable retraction devices used in connection with telephones. Such devices were different from the undersigned's invention because they did not in any way relate to security systems or alarms and had no sensor for detecting whether a product is connected to the cable. (Id. at ¶ 11a). The inventors indicated that they discovered the '960 Patent after investigating a possible infringement of the '771 Patent, at which point they brought the matter to the attention of their attorney, who subsequently obtained copies of the '805 and '396 Patents. (Id. at ¶ 11b).

LEGAL STANDARD

"To successfully prove inequitable conduct, the accused infringer must present evidence that the applicant (1) made an affirmative misrepresentation of material fact, failed to disclose material information, or submitted false material information, and (2) intended to receive the [PTO]." Star Scientific, Inc. v. R.J. ...


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