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The Chamberlain Group, Inc. and Johnson Controls Interiors L.L.C v. Lear Corporation

December 9, 2010

THE CHAMBERLAIN GROUP, INC. AND JOHNSON CONTROLS INTERIORS L.L.C.,
PLAINTIFFS,
v.
LEAR CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Hon. Amy J. St. Eve

MEMORANDUM OPINION AND ORDER

AMY J. ST. EVE, District Court Judge:

Patentee The Chamberlain Group, Inc. ("Chamberlain"), and its exclusive licensee Johnson Controls Interiors, L.L.C. ("JCI"), filed suit against Lear Corporation in 2005, alleging that Lear's Car2U® product infringed U.S. Patent Nos. 6,154,544 and 6,810,123. (R. 1.) On August 19, 2008, Plaintiffs filed their second amended complaint, alleging infringement of U.S. Patent No. 7,412,056, in addition to the '544 and '123 patents. (R. 270.) On July 7, 2009, Lear filed a petition for bankruptcy, which led the Court to stay the case. (R. 358; R. 359.) The Court lifted the stay on November 19, 2009. (R. 366.) On September 10, 2010, Lear filed a motion for partial summary judgment on the accrual date of Plaintiff's alleged damages. (R. 655.) Lear contends that all of Plaintiffs' claims arise out of conduct that occurred prior to its bankruptcy filing. (R. 656.) Even though it concedes that many sales occurred post-reorganization, Lear argues that, as a matter of law, damages accrue from the first act of alleged infringement, which indisputably preceded the bankruptcy petition. (Id.; R. 757.)

Although it is true that damages accrue from the first act of infringement, Plaintiffs are correct that distinct acts of infringement give rise to distinct rights to damages. Lear entered into a variety of pre-bankruptcy-petition agreements ("the supply agreements") with General Motors ("GM") and Ford Motor Company ("Ford"). Plaintiffs allege that these agreements constitute infringing offers to sell. (R. 715 at 10, 14; R. 720 at 4.) There is no dispute, however, that certain of the actual sales made pursuant to these agreements took place post-bankruptcy. Even if they constituted infringing offers for sale, the supply agreements did not subsume all later acts of alleged infringement that occurred when Lear later sold its Car2U® product to GM and Ford. The law does not support Lear's contention that an initial act of infringement encapsulates all further infringing behavior, such that any and all damages that result from later acts are deemed to flow from the first instance of infringement. For that reason and others explained below, the Court denies Defendant's motion.

BACKGROUND

The Court assumes familiarity with the case, including its recent Memorandum Opinion and Order of November 24, 2010. (R. 810.)

On September 10, 2010, Lear filed a motion for partial summary judgment on the accrual date of Plaintiff's alleged damages. (R. 655.) Defendant points to its bankruptcy filing of July 7, 2009, contending that all of the claims that Plaintiffs bring against it arise from conduct that preceded that date. Lear thus argues that all acts of infringement leveled against it are subject to the plan of reorganization approved by the bankruptcy court. (R. 656 at 4.) Lear focuses on what it alternately refers to as "pre-petition" and "life of the program" contracts that it entered into with GM and Ford. (Id.) Plaintiffs dispute the characterization of these agreements as "contracts," and observe that Lear has failed to cite documents in support of its motion for partial summary judgment that establish the terms and conditions of those agreements. (R. 720 at 3-6.) Nevertheless, Plaintiffs do not dispute that GM and Lear entered into a variety of supply agreements (however one might legally characterize them) on dates ranging from November 3, 2005, to before April 2007, and that those agreements predate the date of Lear's bankruptcy petition. (R. 720 at 3-4.) Nor do the parties dispute, however, that certain of those agreements entail program dates that extend beyond July 7, 2009-the date of the bankruptcy petition. (Id.)

The parties similarly agree that Lear and Ford entered into a number of supply agreements between April 14, 2009, and May 20, 2009, all of which preceded the filing of the bankruptcy petition. (R. 720 at 5-6.) There is no dispute that these agreements involve program dates extending from June 30, 2012, to January 31, 2013. (Id.)

Lear's 10-K filing for 2009 characterized such supply agreements as "purchase orders," which the company receives from its customers on an annual basis. (R. 758 at 4, 12.) Such orders "provide[] the annual terms, including pricing, related to a particular vehicle model," but they "do not specify quantities." (Id.) That filing also provides that Lear recognizes "revenue based on the pricing terms included in [its] annual purchasers orders as [its] products are shipped to [its] customers." (Id.) Furthermore, those supply agreements "generally may be terminated by our customers at any time." (Id.)

On the basis of these undisputed facts, "Lear seeks partial summary judgment as a matter of law that the alleged patent infringement damages in this case accrued from the dates that GM and Ford awarded Lear the Pre-Petition Contracts to sell the allegedly infringing product." (R. 656 at 4-5.) For reasons explained below, the Court denies the motion.

SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate when "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c)(2). A genuine issue of material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In determining summary judgment motions, courts must review "facts . . . in the light most favorable to the nonmoving party only if there is a 'genuine' dispute as to those facts." Scott v. Harris, 550 U.S. 372, 380 (2007). 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, 323 (1986). After "a properly supported motion for summary judgment is made, the adverse party 'must set forth specific facts showing that there is a genuine issue for trial.'" Anderson, 477 U.S. at 255 (quotation omitted); see also Fed. R. Civ. P. 56(e).

ANALYSIS

I. Although Damages Do Accrue from the First Act of Infringement, Distinct Acts of Infringement Give Rise to Distinct Claims for Damages Lear observes that its supply agreements with GM and Ford "constitute . . . offer[s] for sale under traditional contract law" and points out that those offers predate Lear's filing for bankruptcy on July 7, 2009. (R. 656 at 9-10.) Plaintiffs agree with this characterization. (R. 715 at 14 ("The issue here, however, is not whether Lear's first act of infringement occurred prior to the date it filed for bankruptcy. It clearly did.").) Defendant argues that these undisputed facts demonstrate that any patent-infringement damages for which it is allegedly liable necessarily accrue from the date of the supply contracts, which precedes the bankruptcy filing. (R. 656 at 4-5.) To prevail in this argument, Lear must demonstrate that the ...


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