Insultherm, Inc. v. Tank Insulation Intern., Inc.

• Decision Date: 30 November 1995
• Docket Number: G-95-348.,Civ. A. No. G-93-558
• Citation: 909 F. Supp. 465
• Parties: INSULTHERM, INC. v. TANK INSULATION INTERNATIONAL, INC. TANK INSULATION INTERNATIONAL, INC. v. INSULTHERM, INC., Thermacon, Inc., and Mark A. McBride.
• Court: U.S. District Court — Southern District of Texas

909 F. Supp. 465

INSULTHERM, INC. v. TANK INSULATION INTERNATIONAL, INC.

TANK INSULATION INTERNATIONAL, INC. v. INSULTHERM, INC., Thermacon, Inc., and Mark A. McBride.

Civ. A. Nos. G-93-558, G-95-348.

United States District Court, S.D. Texas, Galveston Division.

November 30, 1995.

Stephen D. Dellett, Arnold White & Durkee, Houston, TX, Sydney Leach, Baker & McKenzie, Dallas, TX, for Insultherm, Inc.

Robert P. Houston, Houston Marek & Griffin, Victoria, TX, William E. Johnson, Jr., Loren G. Helmreich, Browning Bushman Anderson & Brookhart, Houston, TX, for Tank Insulation International, Inc.

Sydney Leach Baker & McKenzie, Dallas, TX, for Mark A. McBride.

ORDER

KENT, District Judge.

Presently before the Court are Insultherm, Inc.'s Motion for Reconsideration; Mark McBride's and Insultherm's joint Motion to Dismiss, or Alternatively, for Summary Judgment; and Tank Insulation, Inc.'s Motion for Leave to File Counterclaim. As will be set forth in detail below, Tank Insulation's Motion is hereby DENIED, and Insultherm's Motion for Reconsideration and Insultherm's and McBride's Motion to Dismiss are hereby GRANTED.¹

I. BACKGROUND

On September 20, 1993, Insultherm, Inc. filed an action (the First Action) against Tank Insulation International, Inc. (TII), contending TII's insulation system for large storage tanks infringed on Insultherm's insulation system covered by U.S. Patent No. 4,545,490 (the '490 patent). Insultherm also sued TII for unfair competition under section 43(a) of the Lanham Act, 15 U.S.C. § 1125. In its answer to the First Action, TII counterclaimed, seeking a declaratory judgment that the '490 patent was invalid. TII contended that Insultherm and Defendant Mark McBride, a shareholder and officer of Insultherm, and inventor of the '490 patent, engaged in fraudulent or inequitable conduct before the United States Patent and Trademark Office (the PTO), rendering the '490 patent invalid or unenforceable.

At the trial of the First Action in April 1994, this Court concluded that McBride engaged in inequitable and fraudulent conduct before the PTO during the prosecution of the '490 patent. The Court declared the '490 patent unenforceable, and dismissed Insultherm's infringement and unfair competition claims against TII. However, the Court did not reach the question of the validity of the '490 patent, and dismissed TII's counterclaims against Insultherm. See Final Judgment, No. 93-CV-558, dated June 10, 1994. Insultherm appealed the decision of this Court in the First Action. On April 25, 1995, the United States Court of Appeals for the Federal Circuit vacated this Court's decision and remanded the First Action for retrial.

On January 26, 1995, before the Federal Circuit's decision in the First Action, TII filed a complaint against Insultherm, Thermacon, and McBride (the Second Action) in the United States District Court for the Southern District of Texas, Victoria Division. In the Second Action, TII contends Insultherm and Thermacon violated the Sherman Act by acting in concert to file the First Action against TII knowing that the '490 patent was unenforceable, without determining if TII was in fact infringing on the '490 patent, and without regard to outcome of the infringement action. On June 1, 1995, the Second Action was transferred to this Court, and, on June 29, 1995, this Court granted TII's Motion to Consolidate the First Action and the Second Action and its Motion for Leave to File Counterclaim. The Court directed that the claims raised by TII in the Second Action were to be treated as counterclaims to Insultherm's claims in the First Action.

Thermacon, a Defendant in the Second Action, is yet another player in the tank insulation game, and holds a patent for its particular insulation system. According to TII's complaint in the Second Action, Insultherm accused Thermacon of infringing on the '490 patent. In response, Thermacon claimed the '490 patent was invalid because it had been obtained through inequitable conduct. According to TII, Insultherm and Thermacon resolved the infringement dispute by entering into an agreement (the Licensing Agreement) whereby they agreed to cross-license the Thermacon patent and the '490 patent. The Licensing Agreement gives each party the right to use and sell both insulation systems within what the Licensing Agreement describes as the other party's "exclusive license area."² In addition, the Licensing Agreement contains provisions requiring Insultherm and Thermacon to notify the other of any suspected infringement of its patent and cooperate in any infringement suit. The cooperation contemplated under the Licensing Agreement includes having employees testify when requested by the other party, and making available any records or other information that may be needed. TII contends that Thermacon had "intimate knowledge" of the '490 patent and knew the '490 patent was invalid before it entered into the Licensing Agreement, and that Thermacon suggested Insultherm take actions against TII to enforce the '490 patent in spite of its knowledge that the '490 patent was unenforceable.

II. INSULTHERM'S MOTIONS

Insultherm has filed a Motion requesting this Court reconsider its June 29 Orders, and Insultherm and McBride have filed a Motion requesting this Court dismiss TII's Complaint in the Second Action, or, alternatively, grant summary judgment against TII's antitrust claims. The arguments in the Motion to Reconsider are essentially the same as those in the Motion to Dismiss; accordingly, these Motions will be considered together.

In support of their Motion to Dismiss, Insultherm and McBride primarily contend TII's antitrust counterclaims were compulsory counterclaims that TII should have raised in the First Action.³ They argue that to allow TII to pursue its antitrust counterclaims at this stage in the litigation, more than one year after the first trial, would be extremely costly and would unnecessarily and unfairly protract the litigation.

Under the Federal Rules of Civil Procedure, a compulsory counterclaim is one that "arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction." Fed.R.Civ.Pro.R. 13(a). Thus, under Rule 13, the inclusion of Thermacon and McBride, who were not parties to the First Action, prevents the antitrust claims from being characterized as compulsory counterclaims only if Thermacon and McBride are necessary parties to the antitrust claims, and this Court lacks personal jurisdiction over them. Fed.R.Civ.Pro. 13(a); see also Asset Allocation & Management Co. v. Western Employers Ins. Co., 892 F.2d 566, 574 (7th Cir.1989) (fact that counterclaim named additional parties does not prevent counterclaim from being characterized as compulsory if personal jurisdiction exists over the additional parties); Zurn Indus. v. Acton Constr. Co., 847 F.2d 234, 236 (5th Cir.1988) (if a party is added pursuant to a compulsory counterclaim, the court has ancillary jurisdiction over the claim or the party even in the absence of an independent basis for federal jurisdiction); Albright v. Gates, 362 F.2d 928, 929 (9th Cir.1966) (in case where defendant in slander action asserted counterclaims against plaintiff and additional parties, there was sufficient overlapping of factual background to characterize the counterclaims as compulsory as to the original plaintiff and new parties); Rohm & Haas Co. v. Brotech Corp., 770 F.Supp. 928, 934 (D.Dela.1991) (antitrust claims asserted by defendant in separate action were compulsory counterclaims despite fact that the claims were asserted against other parties in addition to the plaintiff in the original patent infringement suit); AMP Inc. v. Zacharias, No. 87-C-3244, 1987 WL 12676 at *2 (N.D.Ill. June 15, 1987) (fact that there is not complete identity of issues and parties does not prevent claim from being a compulsory counterclaim). McBride is a resident and citizen of Texas; thus, there is no question that this Court has jurisdiction over him. In addition, while Thermacon is a Delaware corporation with offices in New York, it is nonetheless subject to jurisdiction in Texas, at least as to TII's claims against it.

In federal court, personal jurisdiction over a non-resident defendant is proper if: (1) the defendant is amenable to service of process under the forum state's long-arm statute; and (2) the exercise of personal jurisdiction over the defendant is consistent with due process. Jones v. Petty-Ray Geophysical Geosource, Inc., 954 F.2d 1061 (5th Cir.), cert. denied, 506 U.S. 867, 113 S.Ct. 193, 121 L.Ed.2d 136 (1992).⁴ The Texas long-arm statute authorizes service of process on a nonresident defendant if the defendant "does business" in Texas. A nonresident does business in Texas if the nonresident, inter alia, "commits a tort in whole or in part in Texas." Tex.Civ.Prac. & Rem.Code Ann. § 17.042(2). According to TII, Thermacon conspired with Insultherm by bringing the First Action against TII in spite of its knowledge that the '490 patent was invalid. For purposes of this personal jurisdiction analysis, conspiracy to commit antitrust violations is in the nature of a tort. Black v. Acme Markets, Inc., 564 F.2d 681, 685 (5th Cir.1977) ("Delictual conduct violative of the anti-trust laws may be treated analogously to tortious conduct" for the purpose of a personal jurisdiction analysis). Thermacon's conduct was directed at and caused injury to TII in Texas. Therefore, by conspiring with Insultherm to wrongfully bring an infringement action based on an invalid patent, Thermacon committed a tort in Texas, and is amenable to service of process under the Texas long arm statute. Acme Markets, 564 F.2d at 685-86 (where conduct violating antitrust laws occurred outside Texas, defendant was subject to service under the Texas long arm statute because the...