DSM Desotech, Inc. v. 3D Sys. Corp.
| Decision Date | 18 January 2013 |
| Docket Number | No. 08 cv 1531,08 cv 1531 |
| Parties | DSM DESOTECH, INC., Plaintiff, v. 3D SYSTEMS CORPORATION, and 3D SYSTEMS, INC., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Memorandum Opinion and Order
Coming before the Court is defendants 3D Systems Corporation and 3D Systems, Inc.'s (collectively "3D") motion for summary judgment on Count VIII of DSM Desotech Inc.'s ("Desotech") Third Amended Complaint alleging tortious interference with contractual relations. Having considered all the submissions of the parties and heard oral argument on the motion, this Court denies in part and grants in part 3D's motion for summary judgment for the reasons stated below.
This being the third Memorandum Opinion and Order this Court has issued on summary judgment motions in this case, many of the background facts describing the parties and their relationship have been addressed elsewhere and will not be reiterated here. Count VIII of Desotech's Third Amended Complaint alleges that 3D tortiously interfered with Desotech's contractual relations with four customers: Laser Reproductions, Dynacept Corporation ("Dynacept"), FineLine Prototyping ("FineLine"), and Moeller Design & Development ("Moeller Design").
In August 2005, Laser Reproductions began negotiations to purchase the Viper Pro. 3D sent Laser Reproductions a "proposal and agreement that had a proposal date of December 13, 2005. Paul Border, President of Laser Reproductions, testified that he believed the first resin they used was Accura 50, but they switched it out for the Accura 25. In an email to 3D dated January 20, 2009, Laser Reproductions wrote: "We are very happy with the Accura 25 and plan to switch 100% [of our resin to Accura 25.]" Bordner also testified that if he could use Somos Next he would. Laser Reproductions entered into a volume purchase agreement ("VPA") for resin with Desotech on July 27, 2006. 3D knew Laser Reproductions bought resin from Desotech and got a discount. No one at Desotech ever specifically informed Mr. Bordner or Laser Reproductions that, because Laser Reproductions does not use a Somos resin in its iPro machine, it is in breach of its contract with Desotech.
On May 31, 2006, Mark Primavera, President of Dynacept authorized Dynacept's purchase of the Viper Pro. The proposal and agreement included a "Full-Size Vat Fill of 3D Material - Material type to be determined at the time of order." The Viper Pro was delivered with Desotech's Somos 14120. On May 24, 2007, Dynacept entered into a resin VPA with Desotech by which Dynacept "agreed to use any current or future DSM-Somos resin in all three [of Dynacept's] machines exclusively for a period of two years."
On May 31, 2007, Desotech noted in an internal email to James Reitz (business director for DSM Somos) and Charlie Kaufmann (Desotech salesperson who called on Dynacept), that it was "obligated to inform [its] customers" that it "may no longer be the case" that "DSM Somos has a cross license for the RFID technology to supply resins for Viper Pro."
In September 2007, 3D took Dynacept's Viper Pro machine, purchased in May 2006, and replaced it with a new one because the first one did not work. 3D agreed to provide the new Viper Pro with 490 kg of the Accura resin of Dynacept's choice. As part of the agreement, Dynacept had to "make available the existing Viper Pro when the new unit arrived," "to keep the arrangement confidential," and "to run only licensed material in the new Viper Pro." (Primavera Tr. at 113:17-21.) 3D gave Dynacept the option to use Somos 14120 in the new Viper Pro, but they decided on Accura 55 instead. Desotech presents email evidence that 3D was aware in March 2007 that Dynacept was a customer of Desotech and Desotech would need to be compensated if 3D took them over as a customer. (PX-135.)
FineLine bought its Viper Pro in December 2005. Sometime after March 29, 2007, the day Desotech introduced its new resin, DMX-SL 100, Rob Connelly, FineLine's President, expressed interest in using that Somos resin in FineLine's Viper Pro. Mr. Connelly testified: "I told [3D] that I would do the dual vat [upgrade on the Viper Pro] at a certain price if we could put DMX[-SL 100] in it and [3D] agreed that we could do that." (Connelly Tr. at 16:24-25, 120:5-20.) In an email exchange on April 23-24, 2007, FineLine discussed with 3D the use of Somos DMX-SL 100 resin in one of FineLine's Viper Pro machines. Lee Dockstader, currently 3D's VP of Business Development, wrote: "DSM has not made their new resin commercially available on the market and as a result it is not licensed to run in the Viper Pro." In a subsequent email, Mr. Connelly wrote that he had "no idea what license provision [3D] was talking about," to which Abe Reichental, 3D's CEO, responded, "our license arrangement with DSM is under review and as such new and non commercial materials are outside the scope." (Connelly Ex. 15.)
On April 26, 2007, Mr. Connelly wrote to Mr. Reichental (of 3D) and Mr. Reitz (ofDesotech), "I seem to be unable to put DSM's new DMX-100 in one of my Viper Pros." On May 3, 2007, Desotech sent Mr. Connelly a proposed VPA that provided, "DSM Somos will provide 480 kg of Somos DMX-SL 100 to fill a single vat 3D Systems Viper Pro stereolithography machine... at $36.00/kg." (Connelly Ex.16, 6) On May 9, 2007, FineLine contracted with Desotech "to use any current or future DSM-Somos resin in all five currently owned Vipers and the Viper Pro and new Viper referenced [in the contract] exclusively for a period of two years, except that periodic usage of 3D Systems SI-60 is permitted in the existing Vipers." (Connelly Ex.6)
On May 4, 2007, Mr. Reichental, wrote to FineLine, "3D Systems is willing to grant FineLine Prototyping a special license to use new DSM experimental DMX material [Desotech resin] for research and development purposes." FineLine declined. FineLine was asked to remove the resin, and Mr. Connelly testified that he did so voluntarily to maintain good relations with 3D. 3D compensated FineLine for the Desotech resin that it removed from its Viper Pro. The parties dispute whether 3D was aware of the contractual relationship between FineLine and Desotech entered on May 9, 2007.
Prior to 2006, Moeller Design financed the purchase of at least three stereolithography systems from 3D. Moeller Design purchased a Viper Pro in March 2006 as part of a settlement agreement ending litigation between Moeller Design and 3D Systems. Mr. Moeller wrote to Charlie Kaufmann at Desotech on March 29, 2006, and asked to be released from their resin purchase agreement from February 17, 2006. 3D does not dispute that it knew that Moeller had an agreement with Desotech to exclusively purchase its resin from Desotech. As part of its settlement agreement with 3D, Moeller entered a volume purchase agreement with 3D, wherein3D would supply four Somos resins to Moeller. No 3D resin was included in the VPA. The agreement contained a provision that allowed Moeller to purchase a competitor's resin if the material supplied by 3D did not have the properties necessary for a specific application and Moeller would prefer to use another product. This provision was contingent on Moeller giving 3D sixty days to supply a resin that meets the performance criteria from 3D manufactured and marketed resin. Mr. Moeller testified that Moeller Design did not purchase all of its resin from 3D.
Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). When considering a summary judgment motion, the Court construes the facts and all reasonable inferences in the light most favorable to the non-moving party. Abdullahi v. City of Madison, 423 F. 3d 763, 773 (7th Cir. 2005). A genuine issue of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Serednyj v. Beverly Healthcare, LLC, 656 F.3d 540, 547 (7th Cir. 2011).
Desotech alleges that it is continually trying to expand its business and customer base with valid business relationships and enforceable agreements with purchasers of resins for stereolithography machines, including Moeller Design & Development, Laser Reproductions, Dynacept, and Fine Line, and 3D has knowingly and intentionally interfered with them, causing Desotech's customers to breach their agreements with Desotech.
Under Illinois law a plaintiff claiming tortious interference with contractual relationsmust prove: "(1) the existence of a valid and enforceable contract between the plaintiff and another; (2) the defendant's awareness of this contractual relation; (3) the defendant's intentional and unjustified inducement of a breach of the contract; (4) a subsequent breach by the other, caused by the defendant's wrongful conduct; and (5) damages." HPI Health Care Services, Inc. v. Mt. Vernon Hospital, Inc., 131 Ill. 2d 145, 154-155 (1989). R.E. Davis Chemical Corp. v. Diasonics, Inc., 826 F.2d 678, 686 (7th Cir. 1987) (). Put another way, "[e]stablishing inducement, in the context of a claim for...
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