IPS Corp. v. WCM Indus., Inc.

• Decision Date: 29 March 2013
• Docket Number: No. 2:12-cv-02694-JPM-tmp,2:12-cv-02694-JPM-tmp
• Parties: IPS CORPORATION, Plaintiff, v. WCM INDUSTRIES, INC., Defendant.
• Court: U.S. District Court — Western District of Tennessee

IPS CORPORATION, Plaintiff,

v.WCM INDUSTRIES, INC., Defendant.

No. 2:12-cv-02694-JPM-tmp

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TENNESSEE WESTERN DIVISION

Dated: March 29, 2013

ORDER DENYING DEFENDANT'S MOTION TO DISMISS OR TRANSFER

Before the Court is Defendant's "Motion to Dismiss for Lack of Declaratory Judgment Jurisdiction, Improper Venue Pursuant to FRCP 12(b)(3), or in the Alternative, to Transfer Action to the District of Colorado," which was filed on December 28, 2012. (ECF No. 7.) Plaintiff responded in opposition on January 28, 2013. (ECF No. 19.) Defendant replied in support on February 11, 2013. (ECF No. 20.) With leave of the Court (ECF No. 26), Plaintiff again responded in opposition on March 15, 2013 (ECF No. 22-1).

On February 25, 2013, the Court held a telephonic hearing on Defendant's Motion. (ECF No. 25.) The following attorneys attended that hearing telephonically: Bruce J. Rose, Scott Benjamin Pleune, Stephen R. Lareau, and Bruce S. Kramer representing Plaintiff; and Glen G. Reid, Jr., Ian R. Walsworth, and Matthew F. Jones representing Defendant. (Id.)

For the reasons stated below, Defendant's "Motion to Dismiss for Lack of Declaratory Judgment Jurisdiction, Improper Venue Pursuant to FRCP 12(b)(3), or in the Alternative, to Transfer Action to the District of Colorado" (ECF No. 7) is DENIED.

I. BACKGROUND

In this action, Plaintiff IPS Corporation ("IPS" or "Plaintiff") requests a declaration that the flange cover, or press-in trim kit, that it developed in 2012 (the "2012 Product") does not infringe a patent held by WCM Industries, Inc. ("WCM" or "Defendant"), U.S. Patent No. 7,503,083 ("WCM's Patent" or "Patent '083").

"In August 2010, IPS acquired American Brass & Aluminum Foundry Company [("American Brass")] and became involved in ongoing litigation between WCM and [American Brass] regarding whether [American Brass's] 'Press-In' trim kits [(the "2010 American Brass Product")] infringed [WCM's Patent]." (Pl.'s Resp., ECF No. 19, at 2.)

In October 2010, WCM entered into a settlement agreement (the "Settlement Agreement") with American Brass. (See ECF No. 20-2 at PageID 178.)¹ The following provisions are contained in the Settlement Agreement:

• a choice-of-law clause stating that "[t]his Settlement Agreement shall be governed by and construed in accordance with the laws of the State of Colorado" (id. at PageID 177);

• a forum-selection clause stating that "[t]he United States District Court for the District of Colorado [(the "Colorado District Court")] will have exclusive jurisdiction over any dispute arising from this Settlement Agreement" (id.);

• a clause stating that "[American Brass] shall . . . refrain in the Unites States from making, selling, offering for sale, using, and/or importing Accused Products" (id. at PageID 175);

• a clause stating that "'Accused Products' as used in this Agreement is understood to mean the [2010 American Brass Product] and all colorable imitations thereof" (id.);

• a clause stating that "[e]ach of the Parties expressly warrants that they have authority to enter into this Settlement Agreement and to bind themselves and each of their respective . . . successors . . . and assigns to the terms hereof" (id. at PageID 176);• a clause stating that "[a]s part of a full and complete settlement, the Parties are entering into a Stipulated Consent Judgment and Permanent Injunction . . . which is the subject of a separate document which is incorporated herein by this reference" (id. at PageID 175); and

• a clause stating that "[t]his Settlement Agreement, along with the [Stipulated Consent Judgment and Permanent Injunction], constitute the entire agreement of the Parties with regard to the specific subject matter herein" (id. at PageID 176).

On November 9, 2010, the Colorado District Court entered an Order on Stipulated Consent Judgment (the "Stipulated Consent Judgment") (ECF No. 7-3 at PageID 106-08) that is, in relevant part, identical to the parties' Stipulated Consent Judgment and Permanent Injunction that the parties entered into on October 26, 2010 (see id. at PageID 102-04). The following provisions are contained in the Stipulated Consent Judgment:

• a statement that "[the Colorado District Court] retains jurisdiction over this Stipulated Consent Judgment and Permanent Injunction and any applications with regard to enforcement thereof" (id. at PageID 106);

• a statement that "[the Colorado District Court] permanently enjoins [American Brass and its successors and assigns] from directly or indirectly infringing [WCM's Patent] . . .by making, using, selling, offering for sale, and importing press in trim kits . . . of the type specifically shown in Exhibit B of the Complaint [the 2010 American Brass Product] and colorable imitations thereof" (id. at PageID 107); and

• a liquidated damages provision that is triggered if "[American Brass] violates any term of this Stipulated Consent Judgment and fails to cure such violation within thirty (30) days after receipt of written notice of the violation" and stating that, if the liquidated provision is triggered, "[American Brass] shall be liable for liquidated damages in the amount equal to 50% of the gross revenues collected by [American Brass] for Accused Products sold during the period of time [American Brass] was in violation of any material term of this Stipulated Consent Judgment" and reasonable attorneys' fees if WCM proves such a violation in court (seeid. at PageID 107-08).

On May 13, 2011, WCM sent a letter to IPS stating that a flange cover, or press-in trim kit, that IPS developed in 2011 (the "2011 Product") "is in violation of a Consent Judgment entered into on October 26, 2010" and "fails to avoid infringement of [WCM's Patent]." (ECF No. 4-1 at PageID 26-27.) IPS responded by email, stating that IPS would withdraw the 2011 Product from the market: "IPS has decided in an effort toresolve this matter amicably to withdraw its current product from the market and will take steps to do so immediately. IPS may or may not introduce a product later with further design modifications." (ECF No. 4-2 at PageID 32.)

On May 25, 2012, IPS sent a letter to WCM stating that "IPS has recently designed another product that it believes does not infringe [WCM's Patent] and also does not violate the [Stipulated Consent Judgment] for the reasons set forth herein, and it intends to sell and distribute this new product." (ECF No. 4-3 at PageID 34.)

From May 25, 2012, to July 20, 2012, IPS and WCM engaged in a correspondence regarding whether the 2012 Product infringed on WCM's Patent and whether the 2012 Product violates the Stipulated Consent Judgment. (See ECF Nos. 4-3 to 4-6 at PageID 34-63.)

On June 19, 2012, WCM sent a letter to IPS, stating that WCM had made the following determinations: "We believe that the [2012 Product] infringes at least claims 1 and 5 of [WCM's Patent]. Moreover, the manufacture and sale by IPS of this product would be in violation of the [Stipulated Consent Judgment]." (ECF No. 4-4 at PageID 47.) In making this determination, WCM indicated that it had evaluated a sample of the 2012 Product: "We appreciate you sending to us the actual physical embodiment of the [2012 Product]. When assembled inits functional state, it looks like the below image: . . . ." (Id.)

On July 18, 2012, IPS responded by letter to WCM's letter of June 19, 2012. (See ECF No. 4-5 at PageID 51.) IPS's letter is divided into two main parts with headings reading "IPS's [2012 Product] Does Not Infringe [WCM's Patent]" and "IPS's [2012 Product] Does Not Violate the [Stipulated] Consent Judgment." (Id. at PageID 51, 55.) The letter also states that "IPS is proceeding to make and sell [the 2012 Product]." (Id. at PageID 58.)

On July 20, 2012, WCM responded by letter to IPS's letter of July 18, 2012. (See ECF No. 4-6 at PageID 60.) WCM's letter begins by stating that:

In response to your last letter, you seem to focus on our previous claim construction directed to IPS' prior infringing device, in comparison with our present construction of the claims as it relates to IPS' redesigned device. As you can appreciate, because the two infringing products are different, our analysis is obviously directed to the distinctions of the respective features.

(Id.) WCM further stated that "we conclude that [the 2012 Product] infringes [WCM's Patent] and its sale would certainly violate the [Stipulated] Consent Judgment" (id. at PageID 62); that "[s]ome competitors, such as IPS, have apparently decided that it is easier to try to copy WCM's accomplishments and take the risk that WCM will take legal action to enforce its hard-fought for rights, rather than invest in their own R&D and patenting efforts" (id); and that: "WCM intends to and will aggressively pursue those companies that make and sell any devices that adopt WCM's unique patented combinations. To date, IPS has failed in its efforts to avoid infringement of WCM's Patents" (id. at PageID 63).

On August 9, 2012, IPS filed a Complaint for Declaratory Relief (the "Complaint") in this Court. (See ECF No. 1.) In the Complaint, IPS alleges that:

On or about May 25, 2012, counsel for IPS wrote to counsel for WCM advising WCM that "IPS has recently redesigned another product that it believes does not infringe [WCM's Patent] and also does not violate the [Stipulated Consent Judgment] . . ." IPS also advised WCM that "it intends to sell and distribute this new product."

(Id. ¶ 13 (third alteration in original).) IPS further alleges that "IPS provided WCM's counsel with a sample of [the 2012 Product], on or about June 19, 2012" (id. ¶ 14), and that:

[In a letter from WCM,] dated July 20, 2012 . . . . WCM's counsel continued to assert that [the 2012 Product] infringes [WCM's Patent]. WCM's counsel further suggested that IPS has "decided . . . [to] take the risk that WCM will take legal action . . ." Further, WCM's counsel asserted that "WCM intends to and will aggressively pursue those companies

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