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Sram, LLC v. Hayes Bicycle Group, Inc.

United States District Court, Seventh Circuit

December 10, 2013

SRAM, LLC, Plaintiff,
v.
HAYES BICYCLE GROUP, INC., Defendant.

MEMORANDUM OPINION AND ORDER

MARY M. ROWLAND, Magistrate Judge.

Plaintiff SRAM, LLC moves the Court to compel Defendant Hayes Bicycle Group, Inc. to produce certain sales and financial information. For the reasons stated below, the Motion is granted.

I. BACKGROUND

SRAM seeks to recover damages stemming from Hayes's purported infringement of one of SRAM's patents, numbered 6, 217, 049 B1 (049 Patent). (Second Am. Compl.). The '049 Patent claims the invention of a lockout mechanism for a bicycle suspension fork having particular features. (Compl. ¶ 9).[1]

On May 12, 2003, SRAM filed a lawsuit against Answer Products, Inc., to which Hayes is successor in interest, for infringement of the '049 Patent. (Compl. ¶ 10). SRAM and Answer entered into a Settlement and License Agreement (Settlement Agreement) ( id. Ex. B), pursuant to which SRAM granted Hayes a license to make, have made, use, sell, offer for sale, and import bicycle front suspension forks that infringe any claim of the '049 Patent in exchange for royalty payments ( id. ¶¶ 11-14). The Settlement Agreement also forbade Answer from challenging the validity of the '049 Patent. (Settlement Agreement ¶ 7.5). Thereafter, the assets of Answer were transferred to HB Bicycle Components, LLC, which later changed its name to HB Suspension Products. LLC. (Dkt. 171 at 3). HB later transferred all of its assets to Hayes, HB's sole member. ( Id. ).

In May 2012, SRAM filed this action against HB, alleging breach of the 2003 Settlement Agreement. (Dkt. 10). In the current complaint, SRAM alleges that Hayes has not paid royalties on these products since 2007, in violation of the Settlement Agreement (Count I) and has sold products that infringe the '049 Patent (Count II). (Compl. ¶¶ 32-49).[2]

On December 20, 2012, SRAM filed a motion for summary judgment on the issue of whether Hayes is bound by the terms of the Settlement Agreement. (Dkt. 63). The District Judge granted SRAM's motion finding that Answer's rights and obligations associated with the Settlement Agreement were validly assigned to Hayes. (Dkt. 171 at 17). Moreover, the Court found that because Hayes is bound by the terms of the Settlement Agreement, including its no-challenge provision, "Hayes cannot challenge the validity of the '049 Patent, even as a defense to the present lawsuit." ( Id. at 18).

Based on the Court's ruling, Hayes filed a motion to dismiss arguing that it is entitled to judgment on the pleadings as to Count II because the District Court had concluded that it has a license to make, use, and sell the alleged inventions of the 049 Patent. (Dkt. 182 at 1). Therefore, Hayes argued, it cannot be infringing and Count II must be dismissed pursuant to Rule 12(c). ( Id. ). In addition, Hayes argued that if Count II is dismissed, the Court lacks subject matter jurisdiction over Count I, the breach of contract claim. ( Id. ).

In an October 9, 2013 hearing on the motion, the District Court expressed skepticism with Hayes's arguments:

[The patent infringement claim can be dismissed only] if Hayes now concedes and agrees that the license agreement binds Hayes, because otherwise, the infringement claim is just as live as it was before I ruled.
That is not final, right? There hasn't been an appeal, not even final judgment entered in this case. So to say that Hayes is entitled to judgment on the pleadings, that makes no sense, where there is still in the alternative this infringement claim.
Now, if you were to file a concession of some sort, or maybe you file your answer, for example, and you say, we admit that the settlement agreement binds Hayes, then I can see how at that point, because there is now a binding admission, that there is no longer a live patent infringement claim, but there is still one at this moment.

(Dkt. 209 at 6). After further briefing the District Court denied Hayes's motion on November 14, 2013. (Dkt. 214).

On December 2, 2013, Hayes filed its answer to the second amended complaint. (Dkt. 218). In its answer, Hayes denied any obligations under the ...


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