Aero Indust. v. John Donovan Enterprises-Florida

• Decision Date: 22 November 1999
• Docket Number: No. IP 99-0671 C-M/S.,IP 99-0671 C-M/S.
• Citation: 80 F.Supp.2d 963
• Parties: AERO INDUSTRIES, INC. Plaintiff/Counterclaim Defendant, v. JOHN DONOVAN ENTERPRISES-FLORIDA, INC., Defendant/Counterclaim Plaintiff.
• Court: U.S. District Court — Southern District of Indiana

80 F.Supp.2d 963

AERO INDUSTRIES, INC. Plaintiff/Counterclaim Defendant, v. JOHN DONOVAN ENTERPRISES-FLORIDA, INC., Defendant/Counterclaim Plaintiff.

No. IP 99-0671 C-M/S.

United States District Court, S.D. Indiana, Indianapolis Division.

November 22, 1999.

COPYRIGHT MATERIAL OMITTED

John F. Anderson, Richards McGettigan Reilly & West, Alexandria, VA, Christopher Smith, Hagemier Allen & Smith, Indianapolis, IN, Nancy G. Tinsley, Baker & Daniels, Indianapolis, IN, for plaintiff.

Steven P. Schad, Banner & witcoff, Washington, DC, Charles W. Shifley, Banner & Witcoff, Chicago, IL, Lynn C. Tyler, Barnes & Thornburg, Indianapolis, IN, for defendant.

ORDER ON MOTION FOR PRELIMINARY INJUNCTION

McKINNEY, District Judge.

This matter is before the Court on the verified motion filed by defendant/counterclaim plaintiff John Donovan Enterprises-Florida, Inc. ("Donovan"), on August 31, 1999, seeking preliminary injunctive relief against Aero Industries, Inc. ("Aero") under Fed.R.Civ.P. 65. It is based on 35 U.S.C. § 283, which authorizes courts to grant injunctive relief "to prevent the violation of any right secured by patent, on such terms as the court deems reasonable." 35 U.S.C. § 283. This Court held a hearing on October 19 and 20, 1999, during which the parties offered both live and deposition testimony, introduced their physical and documentary evidence, and presented arguments with respect to the issues raised by the pending motion. Having thoroughly reviewed the evidence and considered the arguments, the Court has decided to GRANT the motion for a preliminary injunction against Aero, as further explained below.

I. FACTUAL AND PROCEDURAL BACKGROUND¹

The parties in this patent infringement dispute are direct competitors in a tight market in which changes in technology occur frequently. Aero, an Indianapolis-based company engaged in the manufacture and sale of products for the trucking industry, makes and sells air return bulkheads. Donovan, a Florida-based company, does the same. An air return bulkhead is used in refrigerated truck trailers to facilitate the circulation of air from the trailer into a refrigeration unit mounted on the front wall of the trailer. Hrg. Tr. at 182, Henning Cross-Exam.; Def's Ex. 4, Declaration of Greg Onken ("Onken Decl."), ¶ 1. It does this primarily by creating a vertical space between the front wall of the trailer and the bulkhead face, against which cargo can be loaded. Id. Refrigeration units are usually positioned near the top of the front wall, with an outlet for the cooled air at the top of the unit and the intake for return air at the bottom. Such bulkheads also protect both the refrigeration unit and the front wall of the trailer from damage caused by forklifts or by shifting cargo loads. Aero's Proposed Findings of Fact and Conclusions of Law ("Aero's Find.") ¶ 4; Def. Donovan's Post-Hrg. Proposed Findings of Fact and Conclusions of Law ("Donovan's Find.") ¶ 24.

The patent in dispute, issued to Greg Onken on September 15, 1998, is for a one-piece "Air Return Bulkhead," that can be cut to fit around differently-sized refrigeration units. Def.'s Ex. 1, United States Patent 5,807,046 (the "'046 Patent" or "Onken Patent"); Onken Decl. ¶ 2. The invention claimed in the Onken Patent is directed at solving several problems identified in the prior art. First, it is intended to eliminate the problem of "short cycling" that occurs with the open lattice-work style of bulkheads. Short cycling is when cooled air from the refrigeration unit output is pulled down through the bulkhead to the refrigerator's intake opening, and the thermostat gets a false temperature reading causing the refrigerator to shut down prematurely. '046 Patent, Col. 3, ll. 62-67, Col. 4, l. 1. Although the prior art falsewall type of bulkheads reduced the incidence of short cycling, they did not allow air to flow against and cool the adjacent cargo, which caused an inefficient distribution of the cooled air. Id., Col. 4, ll. 1-6. The claimed invention comprises a false wall that allows air to flow against cargo resting adjacent to it without causing short cycling. Id., Col. 7, ll. 52-54.

Another disadvantage of the prior art bulkheads was the amount of time needed to install or replace them, leading to economic losses while the trailer was unavailable for use. Id., Col. 4, ll. 10-13. The claimed invention is a lightweight, one-piece plastic bulkhead that can be installed quickly and easily, alleviating this problem. Id., Col. 7, ll. 50-52; Hrg. Tr. at 36. Other problems with the prior art bulkheads included their awkward size and the necessity of stocking different sizes to fit various trailers and refrigeration units, which made it difficult or expensive to ship, store or display them. Id., Col. 4, ll. 22-47. In addition, they would bend, crack or splinter during use, causing sharp edges that could catch on or damage cargo, and were susceptible to clogging when loose shipping materials caught in the air inlets. Id., Col. 4, ll. 48-62. Finally, the prior art bulkheads were easily damaged by shifting cargo loads or forklift collisions, and were heavy, expensive to manufacture, constructed of materials that did not meet the U.S. Department of Agriculture ("USDA") standards for contact with foodstuffs, and would rust, mildew or rot. Id., Col. 4, ll. 63-67, Col. 5, ll. 1-9.

In contrast, the Onken Patent claimed an air return bulkhead constructed of a lightweight plastic material that resists rust, mildew and rot, withstands collisions with forklifts, and supports the weight of the cargo adjacent to it. Id., Col. 7, ll. 55-62, Col. 8, ll. 1-10. Moreover, it is designed to decrease manufacturing costs because "a single bulkhead is capable of fitting any size of trailer and refrigerator." Id., Col. 7, ll. 45-47. It can be installed in less than fifteen minutes, is lightweight and can be stacked in "interfitting relation for easy storage and display." Id., Col. 7, ll. 50-65. Finally, the Onken invention can be made of high molecular weight polyethylene, or similar materials that can be approved by the USDA for contact with foodstuffs. '046 Patent, Col. 8, ll. 4-9.

Onken first introduced a one-piece air return bulkhead in 1995, calling it the AirHead Flex System and selling it through his recently incorporated distribution company, Air Flo Products, Inc. Onken Decl. ¶¶ 16, 22. He advertised the AirHead in the November 1995 buyer's edition of a trade magazine called Refrigerated Transporter. Id. ¶ 22; Def's Ex. 13. At about the same time, Aero introduced an improved solid-style bulkhead, the AerGuard, which was a partially preassembled bulkhead using heavy-duty extruded aluminum Z-posts covered by fiberglass reinforced plywood panels. Hrg. Tr. at 31-32. The AerGuard was advertised in the same issue of Refrigerated Transporter. Def's Ex. 13. Although partially pre-assembled, the AerGuard bulkheads contained multiple pieces to be installed, and customers found them to be heavy, bulky, and difficult to store and display. Def's Ex. 9, Decl. of John Dietrick ("Dietrick Decl."), ¶ 8.

In March of 1996, Onken exhibited his new one-piece plastic bulkhead at the Mid-America trucking show in Louisville, Kentucky. Onken Decl. ¶ 22. His company, Air Flo Products, was the only distributor at that show displaying such a bulkhead. Id. After the show, sales of the one-piece AirHead bulkheads "took off," and Air Flo Products was able to capture market share from larger, more established competitors, such as Aero and Donovan. Id. ¶ 23. Onken had filed a patent application for his one-piece air return bulkhead on February 26, 1996, just before the March trucking show. Id. ¶ 2.

Aero's president, James Tuerk ("Tuerk"), testified that he first learned about the one-piece AirHead bulkhead product in late 1995 or early 1996, but he does not recall seeing it at the March 1996 truck show in Louisville. Hrg. Tr. at 150, 200-01. Because he was not sure how successful this product would be, Tuerk decided to "just kind of [sit] on it." Id. at 201. However, sometime between the trucking show and June 29, 1996, Tuerk decided to have his research and development department design a one-piece plastic bulkhead for Aero. Id. at 148, 150. Aero sales people had been complaining to Tuerk that they were losing sales of Aero's solid bulkheads to the AirHead one-piece product. Hrg. Tr. at 151. The AirHead was selling well because it was cheaper and easier to install. Id. at 152-53. Before he decided to develop a one-piece product, Tuerk had viewed an installation video and sales literature for the AirHead, both of which were shown to the Aero designers developing Aero's one-piece bulkhead. Id. at 172-74. In fact, Steven Henning ("Henning"), an Aero designer involved in developing the one-piece plastic bulkhead, stated that Aero's decision to make its own one-piece bulkhead, and the designing of models for the prototype, occurred after Henning had seen the AirHead installation video. Hrg. Tr. at 175-76.

Tuerk communicated with his patent attorney, Lawrence Laubscher ("Laubscher"), about applying for a patent for Aero's one-piece bulkhead currently in development. Def's Ex. 7, Letter dated June 29, 1996. An initial application was filed on August 21, 1996, but it was subsequently abandoned. Def's Ex. 6, United States Patent No. 5,769,704 ("'704 Patent") at 1. Another application was filed on February 18, 1997, with Henning listed as the inventor. Id. There is no dispute that the patent issuing from this application on June 23, 1998, the '704 Patent, covers the AerGuard II and III bulkheads by Aero. Hrg. Tr. at 94-95; Aero's Find. ¶ 10; Aero's Ex. 27, Tuerk Decl. ¶ 10. Onken's Patent was not issued until nearly three months later, September 15, 1998. Def's Ex. 1, '046 Patent at 1.

After Aero displayed its one-piece bulkhead at the 1997 Mid-America trucking show in Louisville, its president, Tuerk, received a letter from Onken's counsel informing him of...