Safe-Strap Co., Inc. v. Koala Corp.

• Decision Date: 03 July 2003
• Docket Number: No. 02 Civ. 7057(WK).,02 Civ. 7057(WK).
• Citation: 270 F.Supp.2d 407
• Parties: SAFE-STRAP COMPANY, INC., Plaintiff, v. KOALA CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of New York

270 F.Supp.2d 407

SAFE-STRAP COMPANY, INC., Plaintiff, v. KOALA CORPORATION, Defendant.

No. 02 Civ. 7057(WK).

United States District Court, S.D. New York.

July 3, 2003.

Louis C. Dujmich, Alfred R. Fabricant, Douglas Q. Hahn, Ostrolenk, Faber, Gerb & Soffen, LLP, New York City, for Plaintiff.

Bill Vaslas, Todd C. Vitolo, Vaslas, Lepowsky, Hauss & Danke, LLP, Staten Island, NY, Robert R. Brunelli, Benjamin B Lieb, Sheridan Ross P.C., Denver, CO, for Defendant.

OPINION AND ORDER

WHITMAN KNAPP, Senior District Judge.

In this patent infringement action, Plaintiff Safe-Strap Company, Inc. ("Plaintiff or "Safe-Strap") alleges that Defendant Koala Corporation ("Defendant" or "Koala") violated the Patent Act, 35 U.S.C. § 101 et seq. Koala, however, contends that Safe-Strap's lawsuit is frivolous and argues that the allegations in Safe-Strap's Complaint lack evidentiary support. Accordingly, Koala now moves this Court to sanction Safe-Strap and its attorneys pursuant to Rule 11 of the Federal Rules of Civil Procedure.

BACKGROUND

Safe-Strap manufactures child restraint systems which are sold throughout the United States. (Compl. 117.) Among such products, Safe-Strap manufactures and markets, inter alia, child seatbelts which are used to secure and to protect children while they are riding in shopping carts commonly used by grocery stores. (Id.)

On August 15, 2000, the United States Patent and Trademark Office issued U.S. Patent No. 6,101,687 ("'687 Patent"), entitled "Child Seatbelt Assembly," to Paul F. Giampavolo ("Giampavolo")¹ and John S. Pontaoe (collectively the "patentees"). (See Compl. ¶8; see also Compl., Ex. 1.) The entire right, title, and interest to the '687 Patent was assigned to Safe-Strap. (Compl. ¶ 8; see also Compl, Ex. 1 (listing Safe-Strap as the assignee).) To date, Safe-Strap continues to manufacture and to distribute the Child Seatbelt Assembly under the '687 Patent. (Compl. ¶9.)

Safe-Strap contends that Koala infringed and continues to infringe the '687 Patent "by making, using, selling and offering to sell a Child Seatbelt Assembly that infringes the '687 Patent." (Compl.¶ 10.) In 1998, Koala apparently acquired the assets of Smart Products Corporation. (Giampavolo Decl. ¶3.) Among those assets were safety belts sold under the name "SmartStrap^TM." (See Giampavolo Decl. ¶¶1, 3; see also Giampavolo Decl., Ex. 1.) Thereafter, the Defendant continued to sell and to distribute safety belts "of the same design" as that product. (Giampavolo Decl. ¶3.) In 2000, Koala purportedly altered the manufacturing process by which it made the SmartStrap^TM safety belts in such a manner that the modified belts infringed Safe-Strap's '687 Patent. (See Giampavolo Decl. ¶¶9, 11.) According to Safe-Strap, Koala now sells these "infringing" SmartStrap^TM belts through its "Smart Products" division. (See Compl. ¶¶ 11-12.) Koala allegedly maintains a "vast stockpile" of such infringing products, has offered to sell them to Safe-Strap, and intends to sell them to Safe-Strap's current and future customers. (Compl. ¶13.)

As a consequence, Safe-Strap initiated this patent infringement action on September 5, 2002. The Plaintiff contends that Koala "infringed, contributorily infringed and/or induced others to infringe" the '687 Patent in violation of 35 U.S.C. §§ 271(a), (b), and (c). (Compl. ¶17.) As such, Safe-Strap seeks declaratory and injunctive relief as well as damages.

Koala was served with the Summons and Complaint on September 12, 2002. (See Docket No. 3.) Three weeks later, Koala's counsel wrote a letter to Safe-Strap's attorneys in which he explained that the Defendant's safety belts could not have infringed the '687 Patent because the SmartStrap^TM was "in the prior art" and "one [could not] infringe a patent by practicing the prior art." (Def.'s Mot. for Sanctions, Ex. 2 at 1.) Koala's counsel also opined that "if the claims of the '687 Patent [were] interpreted so broadly as to encompass Koala's Smart Strap product, the '687 Patent would be fully anticipated by at least" one prior patent (namely U.S. Patent No. 5,940,944, U.S. Patent No. 5,920,968, or U.S. Patent No. 5,781,970 (collectively the "Anscher Patents")) and that "the '687 patent would be obvious and not patentable under 35 U.S.C. § 103 in light of any number of combinations of the Anscher Patents and other prior art. (Id. at 2.) Koala therefore called upon Safe-Strap to withdraw the Complaint and enclosed a motion for sanctions which Koala intended to file with the Court if Safe-Strap chose not to do so. (See id. at 2-3.)

Safe-Strap's attorneys disagreed with the contentions enumerated in the foregoing letter. They sent Koala's counsel a response in which they explained that Safe-Strap had "a meritorious claim." (Def.'s Mot. for Sanctions, Ex. 3.) They also argued that Koala's counsel had misunderstood the "'687 claimed invention" and suggested that he should further "review the claims and file history of the '687 Patent-in-suit." (Id.) Safe-Strap's attorneys therefore informed Koala's counsel that Safe-Strap would not withdraw the Complaint. (Id.)

Koala's counsel took advantage of their suggestion and re-examined "the claims and file history of the '687 Patent." (Def.'s Mot. for Sanctions, Ex. 4.) However, this new evaluation only reinforced his previous views about Safe-Strap's case. (See id.) As such, on October 8, 2002, Koala's counsel sent Safe-Strap's attorneys a second letter in which he informed them that Koala would move for sanctions if Safe-Strap did not withdraw its Complaint within 21 days. (Id.) He also enclosed an amended motion for sanctions with his correspondence. (See id.) Safe-Strap chose not to withdraw its Complaint and, on November 5, 2002, Koala moved the Court for sanctions.

DISCUSSION

I. Standards For Rule 11 Sanctions

Koala moves the Court to sanction the Plaintiff and its attorneys pursuant to Rule 11 of the Federal Rules of Civil Procedure. Koala contends that they have engaged in conduct which violates Rule 11. As a consequence, Koala seeks "(1) [the] dismissal of this action; and (2)[an] award of attorneys' fees for being needlessly put to the defense of Safe-Strap Company, Inc's objectively frivolous infringement charge." (Def.'s Reply in supp. of Sanctions ("Def.'s Reply Br.") at 1; see also Def.'s Notice of Mot. at 1 (moving "for an Order, (1) imposing sanctions against Safe-Strap and its attorneys in violation of Fed.R.Civ.P.ll, (2) requiring payment of Koala's reasonable attorney's fees and other expenses incurred as a direct result of said violation, (3) dismissing this frivolous action against Koala..."); Def.'s Reply Br. at 10 ("The Complaint should be dismissed as frivolous and Koala awarded fees.").)

"Rule 11 requires an attorney to sign every pleading or other paper filed with the court." Storey v. Cello Holdings, L.L.C. (S.D.N.Y.2002) 182 F.Supp.2d 355, 364; see also Fed.R.Civ.P. 11(a). When he signs a pleading, the attorney certifies

that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances,—

(1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation (2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;

(3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and

(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief.

Fed.R.Civ.P. 11(b); see also Storey, 182 F.Supp.2d at 364-365 (quoting Business Guides, Inc. v. Chromatic Communications Enterprises, Inc. (1991) 498 U.S. 533, 542, 111 S.Ct. 922, 112 L.Ed.2d 1140) ("The signature `certifies to the court that the signer has read the document, has conducted a reasonable inquiry into the facts and the law and is satisfied that the document is well grounded in both, and is acting without any improper motive.'").

Accordingly, "[a] pleading, motion or paper violates Rule 11 if it is frivolous, legally unreasonable, or factually without foundation, even though not signed in subjective bad faith." Wechsler v. Hunt Health Systems, Ltd. (S.D.N.Y.2002) 216 F.Supp.2d 347, 356. "If, after notice and a reasonable opportunity to respond, the court determines that subdivision (b) has been violated, the court may...impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the violation." Fed.R.Civ.P. 11(c); see also Simon DeBartolo Group, L.P. v. Richard E. Jacobs Group, Inc. (2d Cir.1999) 186 F.3d 157, 166 (citation omitted) ("Once a court determines that Rule 11(b) has been violated, it may in its discretion impose sanctions limited to what is `sufficient to deter repetition of such conduct.'"); Freeman v. Bianco (S.D.N.Y. Jan. 24, 2003) No. 02 Civ. 7525(GEL), 2003 WL 179777, at *5 ("Rule 11(c) permits the Court to impose sanctions for violations of Rule 11(b)."). "The decision as to whether to award sanctions pursuant to Rule 11 is subject to the Court's discretion." Ulla-Maija, Inc. v. Kivimaki (S.D.N.Y. Jan. 23, 2003) No. 02 Civ. 3640(AGS), 2003 WL 169777, at *8; see also Morley v. Ciba-Geigy Corp. (2d Cir.1995) 66 F.3d 21, 24 (quoting Sanko Steamship Co., Ltd. v. Galin (2d Cir.1987) 835 F.2d 51, 53) ("`[District courts generally have wide discretion in deciding when sanctions are appropriate.'").

Here, Koala argues that Safe-Strap and its attorneys violated Rule 11(b)(2) when they advanced claims and contentions that were not warranted either by existing law or by a nonfrivolous argument for...