Envtl. Mfg. Solutions, LLC v. Peach State Labs, Inc.

• Decision Date: 11 August 2017
• Docket Number: Case No: 6:09–cv–395–Orl–28DAB
• Citation: 274 F.Supp.3d 1298
• Parties: ENVIRONMENTAL MANUFACTURING SOLUTIONS, LLC, Plaintiff, v. PEACH STATE LABS, INC., Defendant.
• Court: U.S. District Court — Middle District of Florida

274 F.Supp.3d 1298

ENVIRONMENTAL MANUFACTURING SOLUTIONS, LLC, Plaintiff,
v.
PEACH STATE LABS, INC., Defendant.

Case No: 6:09–cv–395–Orl–28DAB

United States District Court, M.D. Florida, Orlando Division.

Signed August 11, 2017
Filed August 14, 2017

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Amber N. Davis, Jackson O. Brownlee, Robert Lewis Wolter, Beusse Wolter Sanks & Maire, PA, Orlando, FL, for Plaintiff.

Michael L. Gore, Shutts & Bowen, LLP, Orlando, FL, Shane G. Ramsey, D. Clay Holloway, Jennifer L. Blackburn, Mitchell G. Stockwell, Kilpatrick Townsend & Stockton, LLP, Atlanta, GA, for Defendant.

ORDER

JOHN ANTOON, II, United States District Judge

A jury returned a verdict finding that Environmental Manufacturing Solutions, LLC (EMS) infringed a patent owned by Peach State Labs, Inc. (Peach State). Based on that verdict, this Court entered a permanent injunction preventing EMS from further infringing the patent. Peach State also alleged that EMS engaged in litigation misconduct, and the Court, after holding an evidentiary hearing, agreed. But the Court withheld imposition of sanctions pending the United States Patent and Trademark Office's (USPTO) reconsideration of the validity of Peach State's patent. More than five years after the jury returned its verdict, the USPTO declared Peach State's patent invalid. The Court then entered judgment reflecting the USPTO's determination of invalidity and vacated Peach State's favorable jury verdict.

Peach State now submits Proposed Findings of Fact Regarding Litigation Misconduct, (Peach State Facts, Doc. 385),¹ and moves the Court to award attorneys' fees and costs it incurred during the litigation, (Mot. for Fees, Doc. 369). Peach State further requests the Court to impose a monetary contempt sanction against EMS for its misconduct. (Id. at 23–25). EMS filed objections to the proposed findings of fact, (Objs. to Facts, Doc. 392), and a memorandum in opposition to Peach State's request for attorneys' fees and costs, (Resp. to Mot. for Fees, Doc. 386). As set forth below, Peach State's motion is granted in part and denied in part.

I. Background²

On February 27, 2009, EMS sued Peach

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State in this Court,³ seeking a declaratory judgment that Patent No. 5,672,279 (the '279 Patent) —owned by Peach State—is invalid and not infringed by EMS. (Compl., Doc. 1, ¶¶ 18–23). Along with its answer, Peach State filed a counterclaim alleging that several of EMS's products infringed the '279 Patent, that EMS contributed to and induced infringement of the '279 Patent by others, and that EMS's infringement was willful. (Am. Answer & Countercl., Doc. 29, ¶¶ 20–24).

A. The '279 Patent

The '279 Patent is titled "Method for Using Urea Hydrochloride" and describes a method of solubilizing calcium carbonate using urea hydrochloride to remove unwanted calcium carbonate, which is often produced in industrial processes but is only slightly soluble in water.⁴ (Ex. A to Compl., Doc. 1 at 12). Calcium carbonate is a major cause of boiler scale in heating systems and raises the pH and solids content of industrial liquids, preventing their disposal in publicly owned treatment facilities. Peach State's patent provided a method using urea hydrochloride for removing that mineral buildup.

B. The Dispute

Peach State alleged that several of EMS's products (the Accused Products) contained urea hydrochloride and were used in a method claimed in the '279 Patent. (Doc. 29 ¶ 21). Specifically, Peach State contended that EMS, by selling the Accused Products to its customers with instructions on how to use it in a manner that infringes the '279 Patent, induced its customers to infringe the '279 Patent and contributed to the infringement, (Id. ¶¶ 21–22). Peach State sought damages, in part, in the form of a reasonable royalty based on all sales of the Accused Products from June 2008 through trial. (Peach State Trial Br., Doc. 138, at 11).

EMS stipulated that its Accused Products contained urea hydrochloride in the molar concentration set forth in the '279 Patent, (Trial Tr. Vol. II, Doc. 222, at 113), but nonetheless contended that the '279 Patent was invalid and that the Accused Products did not literally infringe the '279 Patent because the active ingredient in the Accused Products that converted unwanted calcium carbonate into water-soluble salt was not urea hydrochloride. With regard to the latter contention, EMS argued that its products contained so little urea hydrochloride that urea hydrochloride could not have been the driver behind the Accused Products' ability to convert calcium carbonate into water-soluble salt. (See EMS Mot. Summ. J., Doc. 126, at 21–31; Pretrial Statement, Doc. 143, at 7 ("As a result of the extremely low percentage of [urea hydrochloride] in the Accused Products (between 2% to 10%), EMS denies that Peach State can prove [urea hydrochloride] is actually solubilizing calcium carbonate insofar as the EMS Accused

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Products are concerned."); id. at 8 ("The most the evidence could possibly show is that the presence of [urea hydrochloride] in these Accused Product formulas tends to enhance the reaction rate.")). On the contrary, EMS contended that the driving force behind its products' ability to solubilize calcium carbonate was glycolic acid or phosphoric acid, both of which were present in much greater amounts in the Accused Products and were exclusively responsible for its products' effectiveness in converting unwanted calcium carbonate into water-soluble salt. (See Doc. 126 at 27 ("Dr. Grubbs provides scientific evidence that the solubilizing that is observed [in the Accused Products] occurs primarily because of the presence of phosphoric acid or glycolic acid." (internal quotation marks omitted)); id. ("[I]f urea hydrochloride were not present in [the Accused Products], they would still work." (footnote and quotation marks omitted))).

The parties further disagreed about whether the '279 Patent was valid; whether the inventors were accurately listed on the '279 Patent ; whether EMS induced its customers to use the product in the manner claimed in the '279 Patent ; whether EMS contributorily infringed the '279 Patent ; whether the infringement was willful; and the amount of damages. (See Doc. 143 at 20).

C. Discovery

During discovery, Peach State sought information from EMS about the Accused Products. In its requests for production, Peach State defined "Accused Products" to include Ready Mix Truck Wash and Wax, Basic CR, Barracuda, BlowOut, Eximo, Syn Tech pH, and SynTech I. (Peach State Am. Reqs. for Produc., Doc. 71–2, at 3).⁵ Peach State's list of Accused Products was based on deposition testimony of John MacDonald, EMS's owner and manager, who testified regarding which EMS products contained urea hydrochloride. (Doc. 385–11 at 4). Peach State served a broad request for production of documents concerning those products. (Doc. 71–2 at 7–10). In those requests, Peach State sought samples and a description of the chemical formulas composing each of the Accused Products. (Id. at 8, 10). After EMS did not produce the requested information, Peach State moved to compel production. (Mot. to Compel, Doc. 71). On October 18, 2010, Magistrate Judge Baker issued an order on Peach State's motion to compel, requiring EMS to produce unredacted formulas and samples of the Accused Products and a summary of its sales data. (Order on Mot. to Compel, Doc. 107, at 8–9).

EMS produced the formulas along with one-gallon samples of each Accused Product as required by the order. (See EMS Sworn Summ., Doc. 385–1 at 2–3). EMS also produced a "sworn summary" of its sales, (Id. at 4–5). Along with the documents, EMS submitted a sworn statement of Mr. MacDonald, who attested that the information was true and correct and was kept in the ordinary course of EMS's business. (Id. at 9).

EMS's formulary data confirmed EMS's position that urea hydrochloride was present in the Accused Products in low amounts—concentrations ranging from 0% to 10%. (Doc. 385–6 at 2–7; Doc. 385 ¶ 17).⁶ Moreover, the formulary data confirmed

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that many of the products contained 25%–40% of either glycolic or phosphoric acid. (Id. ).

D. Motions for Summary Judgment

After discovery, the parties filed cross motions for summary judgment on all issues—invalidity, infringement, and inventorship. (Docs. 125 & 126). With regard to the issue of infringement, EMS contended in part that Peach State could not establish that urea hydrochloride—as opposed to glycolic or phosphoric acid—was the driving force behind the Accused Products' mechanism of solubilizing calcium carbonate. (Doc. 126 at 21–31). In support, EMS introduced expert opinions that "the phosphoric and glycolic acids in the Accused Products solubilized calcium carbonate—not the urea hydrochloride." (Order on Mot. Summ. J., Doc. 169, at 31; see Doc. 126 at 26–27).

On March 31, 2011, this Court issued an order on the parties' cross motions for summary judgment, denying EMS's motion on the issue of infringement in part...