Seb, S.A. v. Montgomery Ward & Co., Inc.

Citation412 F.Supp.2d 336
Decision Date09 January 2006
Docket NumberNo. 99 Civ. 9284(SCR).,99 Civ. 9284(SCR).
PartiesSEB, S.A., Plaintiff, v. MONTGOMERY WARD & CO., INC., Global-Tech Appliances, Inc., and Pentalpha Enterprises, Ltd., Defendants.
CourtU.S. District Court — Southern District of New York

John P. White, Cooper & Dunham LLP, New York, NY, for SEB, S.A.

William Irvin Dunnegan, Perkins & Dunnegan, New York, NY, for Montgomery Ward & Co., Incorporated.

William Irvin Dunnegan, Perkins & Dunnegan, New York, NY, for Global-Tech Appliances, Inc., Pentalpha Enterprises Ltd.

MEMORANDUM DECISION AND ORDER

ROBINSON, District Judge.

SEB, S.A. ("SEB" or "Plaintiff") claims that Pentalpha Enterprises and Global-Tech Appliances1 ("Defendants") copied SEB's deep fryer and sold it to Montgomery Ward.2 After discovery was completed, Defendants brought this motion for summary judgment. For the reasons set forth below, Defendants' motion is denied.

During oral argument on the summary judgment motion, SEB asked this Court to order Defendants to turn over documents from one of Defendants' attorneys. For the reasons set forth below, Defendants are ordered to turn over materials concerning opinions rendered by Thomas L. Adams, Esq.

I. Background

This case was originally before Judge Barrington D. Parker. SEB filed two preliminary injunction motions and he granted both of them. In granting the first preliminary injunction motion, Judge Parker held that Defendants'"use and sale [of the original fryer] in the United States" infringed SEB's patent. 77 F.Supp.2d 399, 403 (S.D.N.Y.1999). On appeal, the Federal Circuit affirmed the preliminary injunction. 243 F.3d 566, 2000 WL 1673667 (Fed.Cir. Nov.6, 2000) (unpublished). Defendants then modified their deep fryer. SEB filed a second preliminary injunction motion, and, in granting the second motion, Judge Parker held that the modified fryer also infringed SEB's patent. 137 F.Supp.2d 285, 289 (S.D.N.Y.2001).

The case was reassigned to Judge Richard C. Casey after Judge Parker was elevated to the Second Circuit. On October 1, 2002, Judge Casey denied Global-Tech's motion to dismiss and denied SEB's motion to amend the complaint to add three defendants. 2002 WL 31175244 (S.D.N.Y. Oct.1, 2002) (unpublished).

After Defendants filed their motion for summary judgment, the case was assigned to this Court.

There is a related case in the U.S. District Court for the Southern District of Florida ("Florida Action"). SEB brought a patent infringement case against Defendants and Sunbeam, one of Defendants' several customers that bought deep fryers, in the U.S. District Court for the District of New Jersey. Several months later, Sunbeam brought an indemnity claim against Defendants. Pentalpha then brought a counterclaim against Sunbeam for a breach of their product supply agreement, which involved the manufacture and sale of the deep fryers. The court dismissed SEB's claim against Defendants for lack of personal jurisdiction, but Sunbeam settled with SEB for $2 million. The case was subsequently transferred to the Southern District of Florida. The final judgment, which was based on the jury verdict, ultimately awarded $3,202,216 to Pentalpha. Pentalpha's judgment against Sunbeam was affirmed by the 11th Circuit. SEB S.A. v. Sunbeam Corp., 2005 WL 1926418 (11th Cir. Aug.12, 2005).

This Court signed an Order of Attachment for the amount of the judgment in the Florida Action—$3,202,216—and any additional prejudgment interest. Defendants filed a motion to modify the Order of Attachment, but this Court denied Defendants' motion and affirmed its Order.

II. Discussion

A. Summary Judgment Motion

Defendants make three arguments in their motion for summary judgment. First, Global-Tech argues that it is entitled to summary judgment because Pentalpha's allegedly infringing conduct is not attributable to Global-Tech. Second, Pentalpa argues that it is entitled to summary judgment because it did not directly infringe on SEB's patent nor did it induce infringement of SEB's patent. Finally, Defendants argue that this Court should dismiss SEB's damage claim for lost profits because SEB did not sell any deep fryers and, therefore, does not have any lost profits to reclaim.

1. Standard of Review

Summary judgment is appropriate only if "there is no genuine issue as to any material fact[.]" Fed.R.Civ.P. 56(c). Summary judgment may not be granted unless "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Id.

The initial burden falls on the moving party who is required to "demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the moving party meets its burden, the burden shifts to the party opposing summary judgment to set forth "specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). The non-moving party "may not rely simply on conclusory allegations or speculation to avoid summary judgment, but instead must offer evidence to show that `its version of the events is not wholly fanciful.'" Morris v. Lindau, 196 F.3d 102, 109 (2d Cir.1999) (quoting D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir.1998)).

2. Relationship Between Global— Tech and Pentalpha

Global—Tech, the parent company of Pentalpha, argues that it is entitled to summary judgment because Pentalpha's conduct is not attributable to Global-Tech. Specifically, Global-Tech asserts that SEB has not shown any evidence of fraud, lack of corporate formality, or agency that would allow a jury to find Global-Tech liable for Pentalpha's conduct.

In response, SEB argues that summary judgment should be denied because the jury in the Florida Action found that "`Pentalpha and Global-Tech [wede alteregos of each other.'" SEB S.A. v. Sunbeam Corp., 148 Fed.Appx. 774 (11th Cir. August 12, 2005) (quoting the jury verdict). The 11th Circuit affirmed the jury's verdict, concluding that the District Court properly refused to grant a judgment as a matter of law for Defendants on this issue.3 Id. SEB further argues that it has presented evidence creating a genuine issue of material fact about whether there are no corporate formalities between Global-Tech and its subsidiaries and whether its subsidiaries have acted as its agent.

While Federal Circuit precedents are not entirely clear about when to find a parent liable for a patent infringement by its subsidiary, this Court has previously observed that "the clearest statement from these cases suggests that the standard for piercing the corporate veil must be met before a parent may be held liable for the acts of its subsidiary ...." Aspex Eyewear, Inc. v. Altair Eyewear, Inc., 361 F.Supp.2d 210, 217 (S.D.N.Y.2005) (Robinson, J.) (discussing Tegal Corp. v. Tokyo Electron Co., 248 F.3d 1376, 1380 (Fed.Cir. 2001) and A. Stucki Co. v. Worthington Industries, Inc., 849 F.2d 593, 596-97 (Fed.Cir.1988)). Accordingly, "[t]he corporate entity deserves respect and legal recognition unless specific, unusual circumstances justify disregarding the corporate structure. The most common reason for disregarding the corporate structure is that the `corporation was merely the alter ego of its officers.'" Al-Site Corp. v. VSI Intern., Inc., 174 F.3d 1308, 1331 (Fed.Cir. 1999) (quoting Manville Sales Corp., 917 F.2d at 552); see also Insituform Technologies, Inc., 385 F.3d at 1371 ("[A] corporate entity may be disregarded if doing so will prevent fraud, illegality, injustice, a contravention of public policy, or prevent the corporation from shielding someone from criminal liability.").

Global-Tech is not entitled to summary judgment on this issue. The jury in the Florida Action found that " Tentalpha and Global—Tech [wer]e alter-egos of each other." SEB S.A. v. Sunbeam Corp., 148 Fed.Appx. 774 (11th Cir. August 12, 2005) (quoting the jury verdict). Further, the Eleventh Circuit found that there was evidence "that Global—Tech engaged in improper conduct through its organization or use of Pentalpha." Id. Because a reasonable jury in Florida found that Global— Tech and Pentalpha were the alter-egos of each other, a reasonable jury in New York could reach the same conclusion and therefore find that Global—Tech is liable for Pentalpha's alleged infringement of SEB's patent.

3. Patent Infringement

Defendants next argue that it is entitled to summary judgment because it did not directly infringe SEB's patent nor did it induce any infringement of SEB's patent. SEB argues, however, that Defendants both directly infringed on its patent and induced infringement of its patent. This Court finds that there are genuine issues of material fact that preclude summary judgment on this issue.

a. 271(a)

Pentalpha argues that it did not directly infringe SEB's patent because it manufactured the deep fryers in Hong Kong and sold them "FOB China."4 Defendants' argue that because Pentalpha sold the deep fryers FOB China, it did not "make, use, sell or offer to sell any allegedly infringing deep fryers in the United States or import them into the United States." (Def. Memo at 4.)

Under 35 U.S.C. § 271(a), "whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention . . . infringes the patent." 35 U.S.C. § 271(a) (2000). As a result, "`[t]he right conferred by a patent under our law is confined to the United States and its territories, and infringement of this right cannot be predicated of acts wholly done in a foreign country.'" Rotec Industries, Inc. v. Mitsubishi Corp., 215 F.3d 1246, 1251 (Fed. Cir.2000) (quoting Dowagiac Mfg. Co. v. Minnesota Moline Plow Co., 235 U.S. 641, 650, 35 S.Ct. 221, 59 L.Ed. 398 (1915)); see also MEMC Electronic Materials, Inc. v. Mitsubishi...

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