Bushnell, Inc. v. Brunton Co., Civil Action No. 09-cv-2009 KHV/JPO.

• Decision Date: 25 November 2009
• Docket Number: Civil Action No. 09-cv-2009 KHV/JPO.
• Citation: 673 F.Supp.2d 1241
• Parties: BUSHNELL, INC., et al., Plaintiffs, v. The BRUNTON COMPANY, et al., Defendants.
• Court: U.S. District Court — District of Kansas

673 F.Supp.2d 1241

BUSHNELL, INC., et al., Plaintiffs, v. The BRUNTON COMPANY, et al., Defendants.

Civil Action No. 09-cv-2009 KHV/JPO.

United States District Court, D. Kansas.

November 25, 2009.

COPYRIGHT MATERIAL OMITTED

Jennifer C. Bailey, Matthew B. Walters, Scott R. Brown, Hovey Williams LLP, Overland Park, KS, for Plaintiffs.

Deborah J. Swedlow, J. Michael Huget, Butzel Long, PC, Ann Arbor, MI, Samuel P. Logan, Scott C. Nehrbass, Overland Park, KS, for Defendants.

MEMORANDUM AND ORDER

KATHRYN H. VRATIL, District Judge.

Under 35 U.S.C. § 101 et seq., Bushnell, Inc. and Laser Technology, Inc. ("LTI") bring suit against The Brunton Company, Lanshuo Photoelectric Science and Technology Co. Ltd. and LS Global LLC d/b/a I-On Optics. Under 35 U.S.C. §§ 283-285, plaintiffs allege infringement of five U.S. patents: LTI patent Nos. 5,612,779, 5,652,651, 6,057,910 and 6,226,077 and Bushnell patent No. 5,926,259. On November 24, 2009, the Court sustained plaintiffs' Renewed Motion For A Preliminary Injunction (Doc. #95) filed September 11, 2009. See Doc. # 118. Specifically, the Court entered a preliminary injunction, effective November 25, 2009, enjoining Brunton and Lanshuo from importing and selling Brunton Echo 440 laser rangefinders and Lanshuo models LS010B, LS011, LS011A, LS012, LS013 and LS013D. This memorandum and order sets forth the basis for the Court's ruling.

Procedural Background

Plaintiffs' original complaint, filed January 7, 2009, alleged that Bushnell owned patent No. 5,926,259 (the "'259 patent") and that LTI and non-party Kama-Tech owned the four LTI patents. On April 6, 2009, plaintiffs filed a motion for a preliminary injunction to enjoin Brunton and Lanshuo from importing and selling rangefinders which allegedly infringe the LTI patent No. 5,612,779 (the "'779 patent") and the '259 patent. The Court scheduled a hearing for April 29, 2009. Two days before the hearing, defendants filed a motion to dismiss for lack of subject matter jurisdiction and failure to join a required party under Rule 19, Fed.R.Civ.P. See Doc. # 33, filed April 27, 2009; see also Memorandum In Support Of Defendants' Motion To Dismiss Plaintiffs' Complaint (Doc. # 38) filed April 29, 2009 (asserting, inter alia, that plaintiffs lacked standing to bring suit). On April 29-30 and June 8, 2009, the Court conducted a hearing on the preliminary injunction motion. Each side presented expert testimony and other evidence.

On August 31, 2009, the Court sustained defendants' motion to dismiss. See Docs. # 88, 89. The Court found that plaintiffs lacked prudential standing because Kama-Tech was not a party to the suit and a Bushnell subsidiary, not Bushnell, owned the '259 patent at the time when plaintiffs filed suit.¹ See Memorandum And Order (Doc. # 89) filed September 3, 2009, 659 F.Supp.2d 1150 (D.Kan.2009).² The Court also granted Bushnell leave to amend the complaint to allege that it acquired the '259 patent after it filed suit, and thus obtained constitutional standing from the date of the amended complaint. Id. at 20 n.19.

On September 8, 2009, Kama-Tech assigned its entire interest in the LTI patents to LTI, and LTI is now the sole owner of the LTI patents. Plaintiffs then sought leave to amend their complaint to identify LTI as the sole owner of the LTI patents. On September 9, 2009, 2009 WL 2914209, the Court sustained plaintiffs' motion to amend. That same day, plaintiffs filed a second amendment complaint. See Doc. # 94. On September 11, 2009, they filed Plaintiffs' Renewed Motion For A Preliminary Injunction (Doc. #95).³

Factual Background

For many years, LTI and others have manufactured rangefinders for professional sport and hunting uses. The rangefinders emit laser light in pulses and measure the amount of time it takes for the pulses to travel to a target and return. The rangefinders then convert the time measurement into a distance to the target. In the mid-1990's, such rangefinders sold for thousands of dollars at retail. In 1994, Bushnell asked LTI to design a laser rangefinder that could retail for $500 or less. LTI agreed to research and develop the rangefinder, and Bushnell agreed to pay for its research and to develop a market for consumer rangefinders.

LTI identified significant technical hurdles to developing a consumer rangefinder: it had to be much lighter and smaller and use less expensive electronics than professional rangefinders.⁴ Each of the changes made it more difficult for the rangefinder to detect reflected signals because the signals were weaker. Weak reflected signals create problems because random signals— called noise—also exist in the environment. If the reflected signal is not significantly stronger than the noise, the device must distinguish between noise and true reflected signals. The nature of hunting and golfing contributes to the noise problem. Targets (such as deer or trees) are not highly reflective, and brush or rain may partially obscure the return signals and cause false reflections. Therefore, to spot a target such as deer, the laser detector must be sensitized to pick up weaker signals. When the laser detector is sensitized to pick up weak return signals, it also becomes sensitized to weak background noise which is created electronically in the laser rangefinder, to ambient light and to unwanted atmospheric or object reflections. Thus, a key problem is compensating for the noise in the system.

LTI's Chief Technology Officer, Jeremy Dunne, coordinated the process which led to the developments claimed in the '779 and '259 patents. The '779 patent, entitled "Automatic Noise Threshold Determining Circuit and Method for a Laser Range Finder," overcomes the noise issues with two separate techniques. First, the automatic noise threshold circuit automatically adjusts so that the laser pulse receiver sensitivity is increased or decreased based on the level of noise which it detects. Second, if a certain number of pulses give the same distance result, the unit determines that the result is the measured range, attributes the other pulse ranges to noise and disregards them. The '259 patent, entitled "Laser rangefinder with target quality display," issued in the name of Jeremy Dunne and Stephen Bamberger, is assigned to Bushnell. The '259 patent discloses a method of displaying the reflective quality of a target as a bar graph, and claims a feature which allows the user to select different sensitivity modes for the rangefinder.

Over the last fifteen years, Bushnell has invested more than $2.2 million in research and development for new rangefinders. Bushnell has paid LTI more than $14.6 million in royalties for sale of rangefinders. Bushnell reinvests approximately five per cent of its laser rangefinder revenue in developing and maintaining its market position for laser rangefinders. Bushnell has invested more than 20 million dollars in developing a market for laser rangefinders. Gyori Dec. ¶ 17.

Bushnell has sold two million laser rangefinder units covered by the '779 and '259 patents, for gross revenue of $395,000,000. Gyori Dec. ¶ 7. In 2008, Bushnell generated approximately $53,000,000 in laser rangefinder sales in the United States, including $11.7 million in sales of the Sport 450. Many large retail chains sell Bushnell laser rangefinders, including Academy, Bass Pro Shops, Cabela's, Dick's Sporting Goods, Gander Mountain, Sportsman Warehouse and Wal-Mart. Smaller golf and hunting specialty stores also sell Bushnell laser rangefinders.

LTI and Bushnell have a field limited exclusive agreement for sports optics products below a certain retail price. Within this field, LTI only develops consumer laser rangefinder products for Bushnell, and Bushnell only sells products developed by LTI. Bushnell pays LTI to design new products, and pays royalties for the use of LTI patented technology in laser rangefinders. To preserve the revenue generated by plaintiffs' laser rangefinders, Bushnell and LTI have agreed not to license the patents to new entrants in the marketplace.

Lanshuo manufactures and, in the United States, Brunton sells a recently introduced laser rangefinder called the Echo 440. By February of 2008, Bushnell had learned of Brunton's Echo 440. Plaintiffs were concerned about patent infringement by Brunton, but Brunton did not seem like a serious threat. At the time, Brunton was selling the Echo 440 on the internet for $180. Bushnell's low price unit, the Sport 450, was retailing for $149. Given its reputation and relationships in the market, Bushnell did not think that the Echo 440 could compete effectively with its low price unit. Bushnell therefore raised patent infringement concerns with Brunton, but did not begin legal proceedings.

In November of 2008, Bushnell learned that Bass Pro Shop was advertising Brunton's Echo 440 unit at a retail price of $99—about $50 below Bushnell's lowest price unit.⁵ Gyori Dec. ¶¶ 10-11. Before 2008, Bass Pro had sold Bushnell's Sport 450 as its holiday season "opening price point" unit (its lowest price laser rangefinder). Id. Typically, Bass Pro gives premium advertising placement and shelf space to the opening price point unit. Id. During the holiday season in 2008, Brunton's Echo 440 unit dominated the opening price point position. As a result, Bushnell lost up to $1 million in gross revenue.⁶ On January 7, 2009, immediately after the holiday season ended, plaintiffs filed this lawsuit. Bushnell then contacted Brunton to discuss the possibility of settlement. By the beginning of March of 2009, Bushnell had determined that Brunton was not willing to discuss stopping sales of the Echo 440. On April 13, 2009, plaintiffs filed their first motion for a preliminary injunction. At the preliminary injunction hearing (and by affidavit), Phil Gyori, Bushnell's executive vice president of marketing, testified how the Echo 440 had affected Bushnell's business.

Bass Pro has told Bushnell that if it does not lower its price in...