Gleason Works v. Oerlikon Geartec, Ag

141 F.Supp.2d 334

THE GLEASON WORKS, Plaintiff, v. OERLIKON GEARTEC, AG and Liebherr-America, Inc., Defendants.

No. 98-CV-6275L.

United States District Court, W.D. New York.

March 30, 2001.

DECISION AND ORDER

LARIMER, Chief Judge.

PROCEDURAL BACKGROUND

Plaintiff The Gleason Works ("Gleason") brought this patent infringement action against defendants Klingelnberg-Oerlikon Geartec Vertriebs-GmbH ("Klingelnberg")¹, Oerlikon Geartec, AG ("Cerlikon") and Liebherr-America, Inc. ("Liebherr"). Gleason alleges that it is the holder of United States Patent No. 4,981,402 ("the 402 patent"), which was issued on January 1, 1991 and is entitled, "Multi-Axis Bevel and Hypoid Gear Generating Machine." Gleason's complaint alleges that Klingelnberg, a German corporation, and Oerlikon, a Swiss corporation, manufacture gear-making machines that infringe the 402 patent, and that Liebherr, a Virginia corporation, sells the infringing products on behalf of Klingelnberg and Oerlikon in the United States. Gleason seeks damages, injunctive relief, declaratory relief, attorneys' fees and costs.

In their answers to the complaint, Oerlikon and Liebherr ("defendants") each denied infringing on the 402 patent, and asserted counterclaims alleging interference with business relations ("Count III"), unfair competition under the Lanham Act, 15 U.S.C. § 1125(a) ("Count IV"), and common law unfair competition ("Count V").²

Gleason now moves for partial summary judgment on defendants' counterclaims contained within Counts III, IV, and V.

FACTUAL BACKGROUND

The relevant facts are largely undisputed. Oerlikon manufactures the allegedly infringing gear-cutting machine, which is known as Model C-28. In the United States, all of Oerlikon's machines are sold exclusively through Liebherr, an independent distributor.

One particular machine led to this litigation. In October 1997, Oerlikon sent a C-28 machine to Liebherr, which accepted it on consignment for sale. The arrangement between Oerlikon and Liebherr was that if the machine were sold, Liebherr would purchase it from Oerlikon and then sell it to the customer. Liebherr displayed the machine at a trade show in Michigan in October 1997. Representatives of Oerlikon attended the show to operate the machine and answer questions.

After the show ended, the machine was placed at Liebherr's facilities in Saline, Michigan, where it was used as a demonstration machine for customers. In December 1997, Liebherr received a request to place the machine in a Buffalo, New York facility of American Axle & Manufacturing, Inc. ("AAM") for demonstration and testing. The machine was sent there in March 1998, and remained there for at least several months, during which time AAM compared it against a Gleason machine that had been sent by Gleason to AAM, also for testing purposes. The next significant event occurred on June 23, 1998, when Gary Kimmet, Gleason's vice-president of regional operations for the Americas wrote a letter to Robert Greene ("Greene"), the manufacturing engineering supervisor at AAM's Plant 1 in Detroit, advising him of the commencement of this patent action against Oerlikon. He stated that Gleason's machine "is being unfairly attacked by a competitor." Ex. 9, Dkt. # 59. The letter continued:

... we have taken steps to protect our investment in multi-axis machines by filing a patent infringement suit in the United States against Klingelnberg-Oerlikon Geartec Vertriebs-GmbH, Oerlikon Geartec, AG, and Liebherr-America, Inc.... [W]e have requested the court to hold that the Oerlikon C22 and C28 machines infringe our patent on multi-axis bevel gear cutting machines, and to grant us a permanent injunction against the sale and use of the Oerlikon C22 and C 28, or similar machines, in the United States.

Included with the letter was a Gleason press release announcing the commencement of the instant action.

Oerlikon's president, U. Koller, and vice-president of engineering and technology, A. Rutschke, responded in a letter dated July 1, 1998 to AAM's executive vice-president of manufacturing, Joel Robinson ("Robinson"). Koller told Robinson that he considered the charges brought against Oerlikon's products to be "completely unfounded" and that he regarded the 402 patent as invalid.

DISCUSSION

I. General Standards

Summary judgment is appropriate where "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). However, the burden of demonstrating the absence of any genuine issue of material fact rests on the moving party, Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986), and, in ruling on a motion for summary judgment, the Court "must view the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in its favor." McKelvie v. Cooper, 190 F.3d 58, 61 (2d Cir.1999).

To defeat summary judgment, the non-moving party must go beyond the pleadings and designate "specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A genuine issue of material fact exists only if the record, taken as a whole, could lead a reasonable trier of fact to find in favor of the non-movant. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). On a motion for summary judgment, "a court's responsibility is to assess whether there are any factual issues to be tried." Coach Leatherware Co. v. AnnTaylor, Inc., 933 F.2d 162, 167 (2d Cir.1991), citing, Knight v. United States Fire Ins. Co., 804 F.2d 9, 11 (2d Cir.1986), cert. denied, 480 U.S. 932, 107 S.Ct. 1570, 94 L.Ed.2d 762 (1987).

II. The Unfair Competition Counterclaims

Defendants assert unfair competition under section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), in Count IV of their counterclaims, and common-law unfair competition in Count V of their counterclaims. Gleason moves for summary judgment both on Count IV and on Count V. Section 43(a) of the Lanham Act subjects to civil liability

[a]ny person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which —

(1) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or

(2) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities ....

15 U.S.C. § 1125(a). The common-law tort of unfair competition is similar to an unfair competition claim under the Lanham Act. Laser Diode Array, Inc. v. Paradigm Lasers, Inc., 964 F.Supp. 90, 95 (W.D.N.Y.1997). "The essence of an unfair competition claim under New York law is that the defendant has misappropriated the labors and expenditures of another." Saratoga Vichy Spring Co. v. Lehman, 625 F.2d 1037, 1044 (2d Cir.1980).

In the patent context, while it is not clearly established, there is at least some authority to support a claim of unfair competition against a patentee who commences a patent infringement action in bad faith. See Spotless Enterprises, Inc. v. Carlisle Plastics, Inc., 56 F.Supp.2d 274 (E.D.N.Y.1999); Carroll Touch, Inc. v. Electro Mechanical Systems, Inc., 15 F.3d 1573 (Fed.Cir.1993) (affirming summary judgment dismissing claim of unfair competition under state law asserted against patentee because patentee's infringement suit was not objectively baseless, but not finding such remedy was never available); but see Pro-Mold & Tool Co. v. Great Lakes Plastics, Inc., 75 F.3d 1568 (Fed. Cir.1996) (finding no remedy under Lanham Act for claim that patent infringement suit was based on procurement of patent through inequitable conduct). There is also authority to support a claim of unfair competition based upon a patentee's marketplace assertions of infringement and inability to design around a patent. Zenith Electronics Corp. v. Exzec, Inc., 182 F.3d 1340 (Fed.Cir.1999). Similar claims have been made against Gleason in this action.

A. The Counterclaims as They Pertain to the Commencement of this Action

Defendants contend that Gleason engaged in unfair competition by filing this action without probable cause. In response, Gleason has submitted a number of affidavits and other documents suggesting that it had probable cause to bring the action. In further support of its motion, Gleason asserts that it also has probable cause to expect a favorable outcome on its infringement claims, and that as a result, its action is not objectively baseless. Moreover, Gleason invokes the presumption that a patentee brings his case in good faith, and argues that it is entitled to additional deference because defendants have the burden, by clear and convincing evidence, to show that Gleason's suit was brought without probable cause.

In opposition, defendants' principal argument is that the motion is premature because it would be more productive and less wasteful to consider the unfair competition counts after the primary issues of infringement and validity have been addressed, and that a number of fact issues remain.³ I agree.

Delving into the issues raised by this aspect of Gleason's motion, i.e., determining whether Gleason objectively had a basis to bring the lawsuit, in my view, requires an in depth examination and understanding of the 402 patent and the two machines in question, and perhaps even a resolution of the patent issues here. At this juncture, before the numerous...