Multi-Tech Systems v. Hayes Microcomputer Products
| Citation | 800 F. Supp. 825 |
| Decision Date | 21 August 1992 |
| Docket Number | 4-90-948.,Civ. No. 4-88-1106 |
| Parties | MULTI-TECH SYSTEMS, INC., Plaintiff, v. HAYES MICROCOMPUTER PRODUCTS, INC., Defendant. MULTI-TECH SYSTEMS, INC., Plaintiff, v. HAYES MICROCOMPUTER PRODUCTS, INC. and Dennis Hayes, Defendants. |
| Court | U.S. District Court — District of Minnesota |
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Robert J. Sheran, Lindquist & Vennum, Earl D. Reiland, Wendy M. McDonald, Philip Peter Caspers, Paul E. Lacy, Randall A. Hillson, Merchant Gould Smith Edell Welter & Schmidt, P.A., Minneapolis, Minn., for Multi-Tech Systems.
Wendy J. Wildung, Felicia Jurgens Boyd, Faegre & Benson, Carol Eller Kirby, Paul J. Murphy, William Dennis McKinnie, Jerry B. Blackstock, James W. Hawkins, William M. Ragland, Jr., Dennis McKinnie, Robyn Henry, Powell Goldstein Frazer & Murphy, Atlanta, Ga., for Hayes Microcomputer and Dennis Hayes.
Earl D. Reiland, Wendy M. McDonald, Philip Peter Caspers, Paul E. Lacy, Merchant Gould Smith Edell, Welter & Schmidt, Minneapolis, Minn., for Raghu Sharma.
This matter is before the court on:
1. Plaintiff Multi-Tech Systems, Inc.'s ("Multi-Tech") motion for summary judgment in the patent case;
2. Defendant Hayes Microcomputer Products, Inc.'s ("Hayes Inc.") motion for summary judgment in the patent case;
3. Hayes Inc.'s motion for a preliminary injunction in the patent case;
4. Hayes Inc.'s motion for summary judgment in the false advertising and unfair competition case;
5. Defendant Dennis C. Hayes's ("Hayes") motion for summary judgment in the false advertising and unfair competition case;
6. Multi-Tech's appeal of Magistrate Judge Floyd E. Boline's order dated September 10, 1991, in the false advertising and unfair competition case; and
7. Defendants Hayes Inc. and Hayes's appeal of Magistrate Judge Floyd E. Boline's order dated March 19, 1992, in the false advertising and unfair competition case.
Based on the file, record and proceedings herein, Multi-Tech's motion for summary judgment in the patent case will be denied; Hayes Inc.'s motion for summary judgment in the patent case will be granted in part and denied in part; Hayes Inc.'s motion for a preliminary injunction in the patent case will be denied; Hayes Inc.'s motion for summary judgment in the false advertising and unfair competition case will be denied; Hayes's motion for summary judgment in the false advertising and unfair competition case will be denied; Multi-Tech's appeal of Magistrate Judge Floyd E. Boline's order dated September 10, 1991, is granted in part and denied in part; and Hayes Inc. and Hayes's appeal of Magistrate Judge Floyd E. Boline's order dated March 19, 1992, is denied.
This case arises out of a dispute over the validity of U.S. Patent No. 4,549,302, entitled "MODEM WITH IMPROVED ESCAPE SEQUENCE MECHANISM TO PREVENT ESCAPE IN RESPONSE TO RANDOM OCCURRENCE OF ESCAPE CHARACTER IN TRANSMITTED DATA" ("'302 patent"), issued to Dale Heatherington on October 22, 1985.1 The 2 modems. The safeguard is accomplished by using a pause in the transmission of data before and after a predetermined sequence of data.
Other modem manufacturers, including Multi-Tech, began using similar methods of switching between the transparent and command modes. That prompted Hayes Inc. to send a letter to modem manufactures requesting that they take a license under the '302 patent if they wanted to continue to use Hayes Inc.'s patented technology.3 Some modem manufacturers complied with Hayes Inc.'s request. Other modem manufacturers, however, refused to take a license and filed suit against Hayes Inc. in the Federal District Court of the Northern District of California, seeking a declaration of patent invalidity, unenforceability and non-infringement ("California litigation").4 On January 21, 1991, the jury in the California litigation returned a verdict for Hayes Inc. The jury found the '302 patent valid, enforceable and willfully infringed by Everex, Ven-Tel and Omnitel.5
Multi-Tech chose not to join in the California litigation. Instead, on December 29, 1988, prior to the California court's disposition in the California litigation, Multi-Tech filed this suit against Hayes Inc. seeking a declaratory judgment of patent invalidity, unenforceability and non-infringement. In response, Hayes Inc. filed a counterclaim seeking both a declaration of patent validity and a ruling that Multi-Tech is infringing on its '302 patent.6
Approximately two years later, Multi-Tech filed a second suit against Hayes Inc. and Dennis Hayes (together "Hayes Inc.")7 alleging that Hayes Inc.'s advertising and marketing activities are unfair.8 Specifically, Multi-Tech contends that the Hayes Inc. disseminated a series of false and misleading statements regarding the capabilities and quality of Multi-Tech's products. Multi-Tech also contends that Hayes Inc. disseminated false and misleading statements regarding the capabilities and quality of its own modems containing the escape sequence described in the '302 patent and its V-Series Smartmodem 9600 ("V-Series modem") and the significance of the technological advances embodied in those products. Multi-Tech asserts that Hayes Inc.'s unlawful activities have damaged both the reputation of its products and its position in the market while bolstering Hayes Inc.'s position in the market. Multi-Tech contends that those facts support a cause of action under (1) Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); (2) common law injurious falsehood and unfair competition; (3) the Minnesota Deceptive Trade Practices Act, Minn.Stat. § 325D.43 et seq.; and (4) the Minnesota Unlawful Trade Practices Act, Minn.Stat. § 325D.09 et seq. Multi-Tech seeks both an award of money damages and an injunction prohibiting Hayes Inc. from conducting its false advertising and unfair marketing activities.
Both Multi-Tech and Hayes Inc. now move for summary judgment in the patent case. Multi-Tech alleges that the '302 patent is invalid because (1) the invention described in the '302 patent is anticipated by prior art, which is prohibited under 35 U.S.C. § 102(a); (2) Hayes Inc. began selling the modem containing the invention described in the '302 patent more than one year prior to the filing of the application for the '302 patent, which is prohibited under 35 U.S.C. § 102(b); (3) the invention described in the '302 patent is obvious, which is prohibited under 35 U.S.C. § 103; and (4) the '302 patent does not contain a sufficient written description of the invention as required by 35 U.S.C. § 112. In the alternative, Multi-Tech argues if the patent is valid, the modems it sells do not infringe on the invention described in the '302 patent.
Hayes Inc. moves for summary judgment in the patent case contending that Multi-Tech should be collaterally estopped from pursuing its claims because of Multi-Tech's role in the California litigation. In the alternative, Hayes Inc. maintains that even if Multi-Tech is not collaterally estopped from arguing that the '302 patent is invalid, its '302 patent is valid and that Multi-Tech is infringing on its rights under the '302 patent. Specifically, Hayes Inc. seeks a declaration that the patent is valid under 35 U.S.C. §§ 101, 102, 103 and 112, that the '302 patent is enforceable, that it has not misused the '302 patent, that Multi-Tech has infringed the '302 patent, that a reasonable royalty for the '302 patent is at least 1.75% of Multi-Tech's net sales of its modem products and that Hayes Inc. has complied with its marking obligations for the '302 patent pursuant to 35 U.S.C. § 287. Hayes Inc. also seeks a preliminary injunction prohibiting Multi-Tech from selling modems that utilize the invention specified in the '302 patent unless Multi-Tech takes a license under the '302 patent.
Hayes Inc. also moves for summary judgment on each of the four causes of action in the false advertising and unfair competition case. Hayes Inc. proffers three alternative theories in support of that motion. First, Hayes Inc. contends that it is entitled to summary judgment because Multi-Tech has submitted no evidence that its activities have caused Multi-Tech damage. Second, Hayes Inc. contends that it is entitled to summary judgment because Multi-Tech has provided no evidence supporting its assertion that the representations it made are not truthful. Finally, Hayes Inc. contends that Multi-Tech has submitted no evidence that its patent or trademark are invalid and therefore, it has the right to promote products bearing its trademark or incorporating its patent. Dennis Hayes, in his individual capacity, contends that the court should dismiss Multi-Tech's false advertising and unfair competition claims against him for the same reasons it should dismiss them against his corporation. In addition, Hayes contends that the court should dismiss Multi-Tech's false advertising and unfair competition claims against him because Multi-Tech has not established that he controlled Hayes Inc.'s advertising and marketing activities.
Multi-Tech also appeals two rulings from an order entered by Magistrate Judge Floyd E. Boline on September 10, 1991. First, Multi-Tech appeals from the magistrate judge's ruling that Hayes Inc. can have access to Multi-Tech's customer list and customers while Multi-Tech does not have reciprocal rights to Hayes Inc.'s customer list and customers. Multi-Tech also objects to the magistrate judge's decision to downgrade the...
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