Ferox, LLC v. ConSeal Int'l, Inc.

• Decision Date: 30 March 2016
• Docket Number: Case No. 14-60048-CIV-GAYLES
• Citation: 175 F.Supp.3d 1363
• Parties: Ferox, LLC, Plaintiff, v. ConSeal International, Inc.; Earth Eco Research, LLC; Genesis Pure, Inc. ; and Green Foot Global, LLC, Defendants. ConSeal International, Inc., Counter-Plaintiff, v. Ferox, LLC, Counter-Defendant.
• Court: U.S. District Court — Southern District of Florida

175 F.Supp.3d 1363

Ferox, LLC, Plaintiff,

v.ConSeal International, Inc.; Earth Eco Research, LLC; Genesis Pure, Inc. ; and Green Foot Global, LLC, Defendants.

ConSeal International, Inc., Counter-Plaintiff,

v.Ferox, LLC, Counter-Defendant.

Case No. 14-60048-CIV-GAYLES

United States District Court, S.D. Florida.

Signed March 30, 2016

Charles L. Roberts, Wasatch-IP, a Professional Corporation, Salt Lake City, UT, Jeffrey T. Kuntz, Kevin Patrick Crosby, GrayRobinson, P.A., Fort Lauderdale, FL, Kirk R. Harris, Maschoff Brennan, Park City, UT, for Plaintiff/Counter-Defendant.

Joshua David Martin, Johnson & Martin, P.A., Fort Lauderdale, FL, for Defendants/Counter-Plaintiff.

ORDER

DARRIN P. GAYLES

, UNITED STATES DISTRICT JUDGE

THIS CAUSE comes before the Court on two Motions for Summary Judgment: one filed by Defendant/Counter-Plaintiff ConSeal International, Inc. (“ConSeal”), and Defendants Earth Eco Research, LLC (“Earth Eco”); Genesis Pure, Inc. (“Genesis”); and Green Foot Global, LLC (“Green Foot”) (collectively, the “Defendants”) [ECF No. 42], and one filed by Plaintiff/Counter-Defendant Ferox, LLC (“Ferox”) [ECF No. 45].

Ferox and ConSeal are both manufacturers of ferrocene-based fuel additive products that require registration with the Environmental Protection Agency (“EPA”). Ferox brought this action against ConSeal and the other Defendants (ConSeal's distributors) alleging infringement of U.S. Patent No. 7,959,693 (the “'693 Patent”)

, relating to certain fuel additive products containing a combination of ferrocene and biphenyl. Ferox accuses ConSeal of manufacturing and selling products with the same chemical composition as a product of Ferox's that is covered by the '693 Patent (the “Accused Products”). In their Answer, the Defendants state that a 2009 agreement between ConSeal and Ferox regarding access to EPA-required health and safety testing data (Defs.' Mot. Ex. 18, hereinafter the “Agreement”¹ ) contained a license to ConSeal to manufacture its own products of this specific chemical composition, which acts as a complete defense to Ferox's claim of patent infringement. ConSeal separately advanced a counterclaim for fraudulent inducement against Ferox, alleging that Ferox made false representations of fact to induce ConSeal to enter into the Agreement.

The Court has considered the briefs, the exhibits attached thereto, and the applicable law. For the reasons that follow, the Defendants' motion shall be granted as to the license issue and Ferox's motion shall be granted as to the fraudulent inducement counterclaim. The motions shall otherwise be denied.

I. BACKGROUND²

Ferox (and its predecessors) and ConSeal have both been manufacturing and selling fuel additive products for several decades. More than a decade ago, W. Wesley Parish, a managing member of Ferox between 2008 and 2014, developed a particular fuel additive product that combines a fuel-soluble ferrocene (iron) compound with biphenyl, an inert carrier. Ferox filed a patent application on this invention in 2005, and on June 14, 2011, the U.S. Patent and Trademark Office issued the '693 Patent

to Parish and Michael D. Thompson. Ferox, LLC, is listed as the assignee of the Patent.

Ferrocene-based fuel additive products require EPA registrations before they can be manufactured and sold for gas and diesel on-road use. To obtain those registrations, applicants seeking to register an additive must provide specific health and safety effects data—referred to as “Tier 1 data”—under 40 C.F.R. Part 79. Obtaining sufficient data for fuel additive products is a lengthy and expensive process—lasting up to two years and costing somewhere between two million and five million dollars. That said, an applicant seeking a fuel additive registration is permitted to rely on another party's Tier 1 data if that applicant meets certain requirements under 40 C.F.R. Part 79.

Econalytic Systems, Inc. (“Econalytic”), a third party, already possessed sufficient Tier 1 data. Prior to 2007, Ferox relied on Econalytic's Tier 1 data to obtain EPA registrations for its fuel additive products. In or around 2007, Econalytic stopped selling ferrocene to Ferox, and Ferox was no longer entitled to rely on Econalytic's Tier 1 data to obtain EPA registrations for its fuel additive products. Ferox submitted a demand for arbitration in 2008, seeking a decision that would require Econalytic to either sell Ferox ferrocene or allow Ferox to rely on Econalytic's Tier 1 data in exchange for appropriate reimbursement. In the interim, Ferox decided that obtaining its own Tier 1 data was not a good option due to the aforementioned cost and time requirements.

In Spring 2008, ConSeal's principal, Steve Perry, began communicating with Parish. Ferox was aware that ConSeal was a manufacturer of ferrocene-based fuel additive products and was selling those additives to distributors. The two entities spoke about Econalytic's Tier 1 data. During this time, Ferox developed the idea of purchasing permanent access to Econalytic's Tier 1 data and began to communicate with Econlaytic regarding same.

ConSeal also needed access to Tier 1 data in order to sell fuel additive products. In an email from Parish to Perry, dated November 15, 2008, with the subject “Cost sharing,” Parish, in discussing the potential costs of accessing Econalytic's Tier 1 data, wrote, “By the time we pay Econalytic Systems the $200,000 to access their Tier 1 submission, their Tier 2 data and test results for gasoline and diesel, this deal will have cost us more than $250,000. Please confirm that you are willing to split these costs.” Defs.' Mot. Ex. 8. He further wrote, “The proposed payment schedule [between Ferox and Econalytic] is $25,000 upon execution of the agreement, $25,000 in 90 days, $50,000 at 12 months, $25,000 at 18 months, $50,000 at 24 months and $25,000 at 30 months for a total of $200,000.” Id. Two days later, Perry replied, “Our 50% is no problem so let me know when what and where.” Id. (all errors [sic] ).

John Hill, a Ferox principal, testified that ConSeal knew Ferox was entering into an agreement with Econalytic regarding access to the Tier 1 data. On December 9, 2008, Hill wrote an email to Perry, stating, “The way the agreement [between Ferox and Econalytic] is worded right now, if we were late on a payment [Jack Kracklauer, a principal of Econalytic] can cancel the agreement and notify the EPA and cancel our registration. I don't think we would ever be late on a payment, but that is a lot to hold over our head, which is why I am hesitant unless I know that the money is there upfront.” Defs.' Mot. Ex. 10; see also Defs.' Mot. Ex. 7 (Hill Dep.) 19:14-20:11, 16:20-17:1. Perry responded: “Hey, I am on with Wes. Please don't be concerned about the $. It's not just words John. We've gone over what Jack wants, and I am in agreement with Wes.” Defs.' Mot. Ex. 10.

As early as December 22, 2008, Ferox knew that it would need to pay only $185,000 to Econalytic in satisfaction of their agreement. No one from Ferox informed anyone from ConSeal that Parish's initial estimate of $250,000 was different than the amount Ferox would ultimately pay to Econalytic.

Following several rounds of revisions, ConSeal and Ferox executed the final version of the Agreement on February 12, 2009. Section 4.1 of the Agreement provides:

Ferox hereby grants to ConSeal a perpetual, non-exclusive, irrevocable right to select, use and rely upon Ferox's present and any future fuel additives based on Tier 1 Data for Ferox's EPA-registered Iron Atypical Diesel Fuel Additives and Iron Atypical Gasoline Fuel Additives for private label manufacture, sale and distribution by ConSeal as “relabeled additives” under the relabeling provisions of 40 CFR part 79.

Agreement § 4.1. Section 4.2 provides:

The terms and conditions related to the supply to ConSeal of any Iron Atypical Diesel Fuel Additives or Iron Atypical Gasoline Fuel Additives manufactured by Ferox will be specified in separate agreements to be negotiated between the Parties from time to time.

Id. § 4.2. Section 5 of the Agreement, regarding payment, provides:

In exchange for the rights granted in Section 4, ConSeal will pay to Ferox a Use Fee in the total amount of $125,000.

Id. § 5. The Agreement also contains an integration clause under Section 11.3, which reads:

Entire Agreement; Amendment. This Agreement constitutes the entire understanding and agreement among the Parties with reference to the subject matter hereto and they supersede all other provisions, communications, proposals, representations and agreements, whether oral or written, relating to the subject matter of this Agreement. This Agreement may be amended only by a written amendment to the Agreement executed by all of the Parties.

Id. § 11.3. Finally, Section 11.9 of the Agreement provides:

Construction. The Parties have had the benefit of personal counsel and fully understand the terms of this Agreement. Every covenant, term and provision of this Agreement shall be construed simply according to its fair meaning and not strictly for or against any Party hereto. This Agreement shall not be construed against either Party by virtue of a Party being deemed the Agreement's drafter....

Id. § 11.9. The parties executed the Agreement. Thereafter, ConSeal paid $125,000 to Ferox.

As planned, Ferox also entered into a “Confidential Data Rights Agreement” with Econalytic to purchase access to Econalytic's Tier 1 data (the “Ferox–Econalytic Agreement”). This agreement was partially executed on February 12, 2009, and became effective the next day. In satisfaction of this agreement, Ferox paid $185,000—the amount agreed upon by Ferox and Econalytic—to Econalytic.

After the Ferox–Econalytic Agreement was executed, Ferox obtained several registrations for various Ferox fuel additive products based on and referencing Econalytic's Tier 1 data. One of those EPA registrations was for Ferox Powder 100, a blend of biphenyl and ferrocene.³ After Ferox received these new...