Encap LLC v. Oldcastle Retail Inc.
| Decision Date | 18 May 2012 |
| Docket Number | Case No. 11-C-0808 |
| Court | U.S. District Court — Eastern District of Wisconsin |
| Parties | ENCAP LLC, Plaintiff, v. OLDCASTLE RETAIL INC. and OLDCASTLE LAWN & GARDEN, INC., Defendants. |
Plaintiff Encap LLC (Encap) is a Wisconsin company that develops, manufactures, and distributes soil improvement products for the consumer and commercial lawn and garden industry. On August 25, 2011, Encap filed this action for patent infringement, trade dress infringement, false designation of origin, and unfair competition against Defendants Oldcastle Retail, Inc., and Oldcastle Lawn & Garden, Inc. (collectively Oldcastle). Oldcastle, a Delaware corporation with its principal place of business in Atlanta, Georgia, sells building materials, fencing, patio pavers, and lawn and garden packaged materials. Encap's claims are based on Oldcastle's marketing and sales of its "Green 'n Grow" lime product and its "Jolly Gardener Fast Acting Lime," which compete with Encap's "Fast Acting" lime product. Encap alleges that Oldcastle's products infringe patents it holds on the technology underlying the products and that Oldcastle has been marketing its products using the registered trademarks and trade dress that Encap developed and uses in its salesof its own lime product. The case is before the Court on Encap's motion for a preliminary injunction to enjoin Oldcastle from continuing to manufacture, market and sell its fast acting lime products in violation of Encap's rights. The Court conducted a hearing on Encap's motion on April 5, 2012, and requested supplemental briefing thereafter. Based on the arguments presented and the affidavits and briefs on file, the Court hereby grants Encap's motion.
Encap, headquartered in Green Bay, Wisconsin, was formed by Michael Krysiak and Feeco International, Inc., in 1999. According to Krysiak, "Encap invents, manufactures and distributes environmentally friendly advance soil technology products for consumers and commercial markets." (Krysiak Decl., ECF 11 ¶ 4.) Encap's products are designed to improve environmental conditions such as soil pH, help establish grass and flower seeds, and help reduce soil erosion, using an environmentally based or "green" business model. (Id.) Using its Advanced Soil Technology (AST®), Encap developed a variety of products, including Lawn Kit®, Grass Repair Kit®, Lawn Starter Mulch, PAM 12®, and various "FAST ACTING" products. Encap claims that its AST® technology has been at the cutting edge of solutions to stabilize soil and improve soil conditions for healthy plant growth. (Id. ¶ 5.) This case involves the use of this technology in the application of lime.
Lime is applied to lawns and soil to reduce soil acidity (i.e., increase soil pH) by changing some of the hydrogen ions into water and carbon dioxide. (Krysiak Decl. ¶ 7.) Soil pH is considered a "master variable" because it controls many chemical processes that take place within the soil. (Id.) Lime products also help deliver calcium, an important nutrient. (Id.) Prior toEncap's entry into the marketplace, lime products were sold in two primary forms: pulverized lime or granulated lime (First Generation Products). (Id. ¶ 8.) These First Generation Products were considered commodity products, with low margins and high volumes. Moreover, these products presented practical concerns because the pulverized products were dusty and dirty for the user (and retailer) and the granulated lime product provided only limited coverage for the consumer (i.e., 30 pounds could cover approximately 1,000 square feet). (Id.) More importantly, the first generation products would wash away and the nutrients would be lost in run off during rain or watering.
Encap claims that it "transformed the lime product industry into a 'value added' industry through technology that enables the lime to more actively engage the soil." (Id. ¶ 9.) More specifically, Encap contends that it focused its research and development efforts on including a soil stabilizer in a lime granule to assist in holding calcium in the soil once the product was applied. According to Krysiak, Encap's research and development culminated in the creation of a delivery mechanism for water-soluble polyacrylamides (PAMs) and other water-soluble soil stabilizers. PAMs are synthetic water-soluble polymers made from monomers of acrylamide. Anionic (negatively charged) PAM particles bind soil particles together, thereby reducing erosion in the field and promoting coagulation and rapid settling in sedimentation basins. (Krysiak Decl. ¶ 20.) PAM increases aggregation of small particles to improve soil stability and prevent soil detachment, decreasing the settling time of particles that become suspended to aid in their deposition, thus improving runoff water quality. (Id. ¶ 20.) Encap's research demonstrated that PAM and other soil stabilizers can be applied to lime and other solid carriers at known rates to control the movement of nutrients/amendments in and through the soil. (Id. ¶ 22.)
Encap applied for and obtained patents on its new technology. At issue in this case are U.S. Patent Nos. 7,503,143 (the '143 Patent) and 7,874,101 (the '101 Patent). The '143 Patent, which has an application date of October 15, 2002, relates to "a method for applying PAM to soil wherein said PAM is intermixed, impregnated, and/or applied to solid carriers." ('143 Patent Abstract.) The '101 Patent is broader and concerns "a method for applying a water soluble soil stabilizer to soil wherein the soil stabilizer is added to a solid carrier." ('101 Patent Abstract.) The application for the '101 Patent was filed on March 4, 2010, but it was a continuation of an application filed on October 15, 2003, itself a continuation in part of the application for the '143 Patent filed a year earlier. Encap contends that the patents are but two of many it has obtained based on its research and development in the area of soil technology over the past decade. Encap has expended millions of dollars and thousands of hours to develop the technology at issue. The inventions claimed in the patents in suit, Encap contends, provide a foundation for new and improved methods for efficiently applying lime and other nutrients to plants and soil in an environmentally sound manner. This platform technology has been met with great demand to stabilize soil and improve soil conditions for healthy plant growth.
Encap practices the '143 and '101 patents in its own "Fast Acting Lime Plus AST(r)" product, which it first unveiled at the National Hardware Show in May 2006. The evidence suggests that Oldcastle learned of Encap's technology at the same show or shortly thereafter. Encap's Website Traffic Monitoring Report shows that Oldcastle personnel visited Encap's website on numerous occasions between 2006 and 2007, beginning in May 2006 with a search of "fast acting lime." (Krysiak Decl., Ex. 1, ECF 38-1 at 8.) Encap counted twelve visits from Oldcastle IP addresses to Encap's AST web-page in 2007. (Id. at 6-10.) Internal Oldcastle emails suggest thatOldcastle personnel performed a patent search in March 2007, using such search terms as "Encap," "AST®," "PAM," "anionic polymers," and "Fast-Acting® Super Lime." (ECF No. 44 Ex. H.) These search terms would have undoubtedly revealed the fact that Encap had an application for a patent on its technology pending. Further evidence suggests Oldcastle was frequently reviewing Encap's website, product literature, and packaging. (ECF No. 44 Ex. B, Bruce Dep. at 249.) Indeed, the evidence shows that Oldcastle had a detailed analysis done of Encap's product at an outside laboratory (Oldcastle has no research and development department of its own) so that it could reverse engineer the product to determine how much it would cost to produce.
Oldcastle came out with its own fast acting lime product, Green 'n Grow Fast Acting Lime, in the latter half of 2007. Not surprisingly, the evidence reveals that Oldcastle's product was essentially the same as Encap's. Oldcastle uses the same active ingredient, PAM, and lists the same quantity of active ingredient (1.5%) on its bag. Oldcastle packaged its product in bags containing essentially the same information and product description as Encap's packaging. Having copied its product and trade dress without having to incur research and development expenses of its own, Encap contends that Oldcastle is now able to offer its competing product at substantially lower prices. In 2011, Oldcastle secured a test market of its product at approximately 20 Lowes stores where its product was selling for more than four dollars less than Encap's. Encap's wholesale distributors have also seized upon the lower Oldcastle prices to demand lower prices from Encap. Absent preliminary relief protecting it from Oldcastle's sales of its infringing product, Encap contends it risks even greater price erosion that could endanger its very existence.
In deciding whether to grant a motion for a preliminary injunction, the Court must consider four factors: 1) likelihood of success on the merits; 2) irreparable harm if an injunction is not granted; 3) the balance of hardships; and 4) the impact on the public interest. Erickson v. Trinity Theatre, Inc., 13 F.3d 1061, 1067 (7th Cir. 1994). When applying this standard to requests for preliminary injunctive relief, the Seventh Circuit has adopted a "sliding-scale" approach, under which the stronger the case is on its merits, the less irreparable harm must be shown. Abbott Laboratories v. Mead Johnson & Co., 971 F.2d 6, 12 (7th Cir. 1992).
To establish a reasonable likelihood of success on the merits in a patent case, a plaintiff must show that in light of the presumptions and burdens that will inhere at trial on the merits (1) the plaintiff will likely prove that the defendant infringes the patent and (2) the plaintiff's infringement claim will...
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