Tip Systems, LLC v. Sbc Operations, Inc.

Decision Date10 January 2008
Docket NumberCivil Action No. H-06-0253.
Citation536 F.Supp.2d 745
PartiesTIP SYSTEMS, LLC and Tip Systems Holding Co., Inc., Plaintiffs, v. SBC OPERATIONS, INC., et al Defendants.
CourtU.S. District Court — Southern District of Texas

Gary M. Samms, Matthew A. Kelly, III, Nicholas Poduslenko, Obermayer Rebmann Maxwell & Hippel LLP, Jeffrey S. Batoff, Obermayer Rebmann et al, Philadelphia, PA, William A. Worthington, Natalie Jerae Carlson, Strasburger & Price LLP, Houston, TX, for Plaintiffs.

Aubrey Pittman, Attorney at Law, Jeffrey S. Lowenstein, Neal James Suit, Bell Nunnally and Martin, Brian Charles McCormack, Nathan Allen Engels, Baker McKenzie, Dallas, TX, for Defendants.


LEE H. ROSENTHAL, District Judge.

TIP Systems, Inc. and TIP Systems Holding Co. ("TIP Systems") sued SBC Operations, Inc., Securus Technologies, Inc., Conversant Technologies, Inc., AT & T Corporation, TCG Public Communications, Inc., and John D. Profanchik, alleging patent infringement. TIP Systems holds United States Patent No. 6,009, 169 (the "`169 patent") and United States Patent No. 6, 152, 828 (the "`828 patent"). The '169 patent covers an "inmate phone" supplied to correctional facilities for prisoners' use, The`828 patent is a continuation-in-part of the`169 patent. TIP Systems alleges that the defendants' inmate telephones infringe one or both of these patents.

This court granted a joint motion to dismiss with prejudice SBC Operations, Inc., AT & T Corporation, and TCG Public Communications, Inc. (Docket Entry No. 45). Securus Technologies, Inc. ("Securus") has moved for summary judgment. (Docket Entry No. 63). TIP Systems has responded, opposing the motion and renewing its motion to stay pending the outcome of the appeal from a judgment of noninfringement in a related case. (Docket Entry No. 60). Securus has replied, (Docket Entry No. 64), and has also moved to strike summary judgment evidence submitted by TIP Systems in its response, (Docket Entry No. 66). TIP Systems has responded to the motion to strike. (Docket Entry No. 67).

Conversant Technologies, Inc. ("Conversant") and Profanchik have moved for sanctions against TIP Systems. (Docket Entry No. 58). TIP Systems has responded. (Docket Entry No. 59).

Based on a careful review of the motions, responses, and replies; the parties' submissions; the record; and the applicable law, this court denies TIP System's renewed motion to stay, denies Securus's motion to strike, grants Securus's motion for summary judgment, and denies Conversant's motion for sanctions. The reasons for these holdings are set out below.

I. Background

TIP Systems manufactures and sells a cord-free telephone for prisoners to use in correctional facilities. Because the telephone is cord-free, inmates cannot "hang themselves with the handset cord" or "break the handset cord off and use the telephone handset as a weapon." (Docket Entry No. 63, Ex. A-1). The`169 patent discloses a telephone in which a conventional telephone handset is housed within a compartment and mounted behind the front wall of that compartment. The earpiece and mouthpiece of the handset extend through the front wall. A push-button dialing pad on the outside of the wall allows the user to dial a number. The`828 patent discloses a telephone in which a separate, unconnected mouthpiece and earpiece are mounted on the front wall of a housing compartment by an annular seal. No handset or handle connects the mouthpiece and earpiece, as in the`169 patent. The mouthpiece`and earpiece extend through the front compartment wall to provide a relief surface on the outside of the compartment wall for the user's car and Mouth. The mouthpiece and carpiece are electrically connected to an electronic circuit board housed inside the compartment. The circuit board is electronically connected to the push-button dialing pad, a phone line, and an activation switch that allows the user to initiate a call. The activation switch is electronically connected to the circuit board and the phone line. A push-button dialing pad on the front of the housing allows the user to dial a number.

Securus is the parent corporation of Evercom, Inc., Evercom Systems, Inc., Evercom Holdings, Inc., T-NETIX, Inc., TNETIX Telecommunications Service, Inc., and TX Holdings, Inc. ("Evercom" and TNETIX"). Evercom purchases inmate telephones from Independent Technologies, Inc. and sells the phones to correctional facilities. Two of these phones include the 7090CFSS (cord-free, stainless steel) model and the 7090SPSS (speaker phone, stainless steel) model. The 7090CFSS model has a separate mouthpiece and earpiece mounted to the inner surface of the front wall. The mouthpiece and earpiece extend through the wall. The 7090SPSS model also has a separate mouthpiece and earpiece secured to the inner surface of the front wall, but the mouthpiece and earpiece do not, extend through the front wall. Instead, the components are even with the front wall of the housing. Neither model uses a handle to connect the earpiece and mouthpiece. Both models have electric wires that connect the activation switch and the electronic circuit cord, but these wires do not connect to the phone line.

TIP Systems alleges that both the 7090CFSS model and the 7090SPSS model infringe the '169 and '828 patents. On September 24, 2004, TIP Systems sued Phillips & Brooks/Gladwin, Inc., Phillips & Brooks/Gladwin; Inc. to PBG, Inc., PBG, Inc; Acoustics Development Corporation, Acoustics Development Corporation t/a PBG, Inc., Independent Technologies, Inc, and Independent Technologies, Inc. t/a Wintel, alleging infringement of the '169 and '828 patents. TIP Systems, LLC and TIP Systems Holding Co., Inc. v. Philips & Brooks/Gladwin, Inc., et No. H-04-3718, is referred to as the "related case." On May 10, 2005, Evercom and several related entities were added as defendants in the related case. On December 21, 2005, TIP Systems filed a motion for leave to amend to add Securus, Conversant; and Profanchik as defendants in the related case. The motion was denied on January 10, 2006.1

TIP Systems sued Securus, Conversant, and Profanchik separately in this court January 23, 2006. (Docket. Entry No. 1). On February 28, 2007, the court in the related action granted Evercom's summary judgment motion and entered final judgment against TIP Systems. TIP. Systems has appealed`to the Federal Circuit. The appeal is pending.

In this suit, Securus moves for summary judgment. Securus asserts that as a holding company that does not provide or operate inmate telephones, it is not a proper party in this suit. Securus argues that under res judicata, the judgment in the related suit precludes this suit against Securus. Securus also argues the 7090CFSS and 7090SPSS phones do not infringe the '169 and '828 patents literally or under the doctrine of equivalents. Securus asserts that the '169 and '828 patents are invalid for reasons that include anticipation and obviousness. Finally, Securus contends that summary judgment is appropriate because of TIP Systems's inequitable conduct in failing to disclose prior art to the United States Patent and Trademark Office ("USPTO").

TIP Systems responds by, asserting that Securus is a proper defendant because it profits "from the business of selling telecommunications services" and is "involved in every aspect of the inmate phone business of its subsidiaries." (Docket Entry No. 60 at 1-2). TIP Systems notes that the related case is currently on appeal and renews its motion to stay the current case until the appeal is resolved. TIP Systems contends that res judicata does not preclude this suit because Securus "has argued that it is not an identical party ... or party in privity" .to Evercom and cannot assert preclusion from the judgment, in the related action against Evercom. (Docket Entry No. 60 at 8). Finally, TIP Systems argues that summary judgment based on alleged inequitable conduct is inappropriate because there was no prior art to disclose.

The arguments are analyzed below.

II. The Summary Judgment Standard

Summary judgment is appropriate if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. See FED. R. CIV. P. 56(c). "The movant bears the burden of identifying those portions of the record it believes demonstrate the absence of a genuine issue of material fact." Lincoln General Ins. Co. v. Reyna, 401 F.3d 347 (5th Cir.2005) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)).

If the burden of proof at trial lies with the nonmoving party, the movant may either (1) submit evidentiary documents that negate the existence of some material element of the opponent's claim or defense, or (2) if the crucial issue is one on which the opponent will bear the ultimate burden of proof at trial, demonstrate that the evidence in the record insufficiently supports an essential element or claim. Celotex, 477 U.S. at 330, 106 S.Ct. 2548. The party moving for summary judgment must demonstrate the absence of a genuine issue of material fact, but need not negate the elements of the nonmovant's case. Boudreaux v. Swift Transp. Co., Inc., 402 F.3d 536, 540 (5th Cir.2005). "An issue is material if its resolution could affect the outcome of the action." DIRECTV, Inc. v. Robson, 420 F.3d 532, 535 (5th Cir.2005) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). If the moving party fails to meet its initial burden, the motion for summary judgment must be denied, regardless of the nonmovant's response. Baton Rouge Oil & Chem. Workers Union v. ExxonMobil Corp., 289 F.3d 373, 375 (5th Cir.2002).

When the moving party has met its Rule 56(c) burden, the nonmoving party cannot survive a motion for summary judgment by resting on the mere allegations of its pleadings. The nonmovant...

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