Walman Optical Co. v. Quest Optical, Inc.

• Decision Date: 09 August 2012
• Docket Number: Case No. 11-CV-0096 (PJS/JJG)
• Parties: THE WALMAN OPTICAL COMPANY, a Minnesota corporation, Plaintiff, v. QUEST OPTICAL, INC., a Florida corporation, Defendant.
• Court: U.S. District Court — District of Minnesota

THE WALMAN OPTICAL COMPANY, a Minnesota corporation, Plaintiff,

v.QUEST OPTICAL, INC., a Florida corporation, Defendant.

Case No. 11-CV-0096 (PJS/JJG)

UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA

Dated: August 9, 2012

MEMORANDUM OPINIONAND ORDER

Darren B. Schwiebert and Grant D. Fairbairn, FREDRIKSON & BYRON, P.A., for plaintiff.

Nicholas S. Kuhlmann, LEFFERT JAY & POLGLAZE, PA, for defendant.

The Walman Optical Company ("Walman") and Quest Optical, Inc. ("Quest") compete in the market for scratch-resistant coating that is applied to the lenses of eyeglasses. In early 2011, Walman brought a patent-infringement action against Quest, alleging that two of Quest's coatings — sold under the names UVMP and UVRT — infringe several claims of U.S. Patent No. 6,100,313 (the "'313 patent"), which Walman owns by assignment. See Compl. ¶¶ 7-8 [Docket No. 1]; Am. Compl. ¶¶ 7-8 [Docket No. 19]. Quest counterclaimed to invalidate the '313 patent because of inequitable conduct by the inventor during patent prosecution. See Def. Answer and Countercl. [Docket No. 8]. Walman subsequently moved to dismiss Quest's inequitable-conduct counterclaim, see Pl. Mot. to Dismiss Countercl. [Docket No. 12], and for a preliminary injunction to prohibit Quest from "making, using, offering for sale, or selling the UVMP and UVRT products," Pl. Mot. for Prelim. Inj. [Docket No. 20].

After a lengthy hearing on Walman's motions — a hearing at which the Court expressed some skepticism about the validity of the '313 patent — the Court took the motions under advisement. About 10 days later, Walman and Quest agreed to settle their lawsuit. In a stipulation filed with the Court, Quest admitted that the '313 patent is valid and enforceable, and that its UVMP and UVRT coating solutions infringe the patent. See Stip. for Entry of J. and Perm. Inj. at ¶ 1 [Docket No. 87]. The parties also asked the Court to enter a permanent injunction enjoining Quest from manufacturing, selling, offering to sell, importing, and using UVMP and UVRT, and from otherwise inducing infringement. Id. at ¶ 2. The Court entered the parties' proposed injunction without modification on August 31, 2011. See Final J. and Perm. Inj. ("Perm. Inj.") [Docket No. 89].

Approximately two weeks later, Walman moved for an order to show cause why Quest should not be held in contempt and sanctioned for violating the injunction. See Pl. Mot. to Enforce J. [Docket No. 90]. Walman alleged that Quest sold, or at least was attempting to sell, 1000 bottles of UVMP to Eye Care Centers of America ("ECCA") in violation of the injunction.¹ Walman also alleged that Quest induced infringement by encouraging its customers to continue using UVMP and UVRT. Separately, on September 19, Walman commenced a new lawsuit against Quest and its president, Joaquin Edward de Rojas, alleging breach of the parties' settlement agreement and infringement of the '313 patent. See Docket No. 1 in The Walman Optical Company v. Quest Optical Inc. et al., Case No. 11-CV-2688.

The Court held a show-cause hearing on October 19, 2011. At the hearing, Quest informed the Court that it had shipped 1000 bottles of UVMP directly to ECCA's warehouse in Schertz, Texas on August 23, although 125 bottles were damaged in transit. Quest maintained that ECCA took delivery before the Court entered the injunction on August 31, and therefore the sale of the 1000 bottles of UVMP to ECCA did not violate the injunction. Quest also informed the Court that its communications to customers about UVMP and UVRT were meant to clear up confusion about the injunction — confusion that Quest said was caused by Walman's aggressive and misleading dissemination of information about the injunction. Because the factual record was incomplete — especially with respect to whether Quest had in fact sold the 1000 bottles of UVMP before the Court entered the injunction — the Court declined to hold Quest in contempt at that time. But the Court permitted the parties to take limited discovery on the question of whether Quest had sold, or offered to sell, UVMP and UVRT (or otherwise induced infringement) in violation of the injunction. See Order Oct. 20, 2011 [Docket No. 106].

This matter is before the Court on Walman's renewed motion to hold Quest in civil contempt. See Pl. Supplemental Mot. for Sanctions [Docket No. 126]. Walman alleges that Quest violated the injunction by selling 80 bottles of UVMP to ECCA on September 1, 2011, and by inducing infringement through its continued promotion of UVMP and UVRT. Walman seeks $24,000 in compensatory damages plus $223,788.20 in attorney's fees and costs.

The Court grants Walman's motion in part and denies it in part. For the reasons stated on the record at the February 27, 2012 hearing, the Court does not hold Quest in contempt for truthfully communicating with customers and potential customers about the status andconsequences of this litigation.² Those communications may have violated Quest's settlement agreement with Walman — that is a matter to be decided in the later-filed action — but those communications did not violate the August 31 injunction. The Court does, however, hold Quest in contempt for its sale of 80 bottles of UVMP to ECCA in September. But because Walman has not established that it suffered any harm due to the violation, the Court denies Walman's request for compensatory damages. Moreover, because the request for attorney's fees that Walman has submitted is grossly excessive, the Court awards only a small fraction of the fees and costs sought by Walman.

I. FINDINGS OF FACT

Walman and Quest agreed to settle their patent-infringement suit on August 23, 2011. On the same day, de Rojas (Quest's president) contacted Rick Lee (ECCA's Manager of Quality Operations) to inform him that Walman and Quest were preparing to settle their lawsuit and that, after the settlement, Quest would no longer be able to sell UVMP. Lee Dep. 14-15.³ De Rojas suggested that ECCA issue a blanket purchase order for most of Quest's remaining inventory of UVMP. Lee Dep. 15, 55. De Rojas told Lee that Quest would arrange to have an independent agent in San Antonio store the coating solution in a refrigerated storage facility, and that ECCAcould obtain the UVMP from the agent whenever it needed coating solution and then pay Quest accordingly. Lee Dep. 23-24.

Lee agreed to this arrangement and instructed Victor Roig, a supply supervisor at ECCA, to issue to Quest a blanket purchase order for 1000 bottles of UVMP at a cost of $300,000. See Lee Dep. 15, 56; see also Victor Roig Jan. 27, 2012 Decl. ¶¶ 2-3 ("Roig Decl.") [Docket No. 130]. Lee estimated that this was a six-month supply of coating solution for ECCA. Lee Dep. 16. Roig prepared and sent the blanket purchase order to Quest later that day. Roig Decl. Ex. 1. The blanket purchase order contained the following specifications: a description of the product (UVMP-Tintable UV Hard Coating "Maximum Protection"); a quantity (1000); a unit (4-ounce bottle); a unit price ($300); and a total price ($300,000). Roig Decl. Ex. 1.⁴ ECCA typically purchased only enough coating to last it one to two weeks. See Robert Niemiec Jan. 31, 2012 Decl. ¶¶ 9, 17 ("Niemiec Decl.") [Docket No. 131]; see also Roig Decl. ¶ 2. Neither Lee nor his boss, Robert Niemiec (Senior Vice President of Manufacturing), had the authority to purchase $300,000 worth of UVMP at one time. See Lee Dep. 17; Niemiec Decl. ¶ 9.

After receiving the blanket purchase order, Quest sent 1000 bottles of UVMP (packaged in 8 boxes of 125 bottles each) from its headquarters in Florida to ECCA's warehouse in Schertz, Texas (a suburb of San Antonio). See John Healy Feb. 15, 2012 Decl. ¶ 3. ("Healy Decl.") [Docket No. 144]. One of the eight boxes, however, was damaged in transit. Id.

On the morning of August 29, de Rojas emailed Roig to tell him that Quest had accidently shipped a box to ECCA that should have been shipped to his son (Jeff de Rojas) atCW Floors in San Antonio. See Roig Decl. ¶ 4, Ex. 2. Minutes later, de Rojas sent Roig another email in which he informed Roig that he had sent more than one box by mistake, and that those boxes contained "floor cleaning solution" for CW Floors. Roig Decl. Ex. 3. Later that afternoon, Federal Express delivered seven boxes to ECCA's warehouse. Based on de Rojas's emails, Roig believed that the boxes contained floor-cleaning solution intended for de Rojas's son. Roig. Decl. ¶ 5. Roig then emailed de Rojas to tell him that "the 7 boxes arrived." Roig Decl. Ex. 3. De Rojas responded: "OK, thanks Victor." Id.

De Rojas admits that he did not tell Roig that the seven boxes in fact contained 875 bottles of UVMP, but de Rojas alleges that he told Lee about the true contents of the boxes. Nicholas Kuhlmann Feb. 15, 2012 Decl. Ex. Q at 11 ("Kuhlmann Ex. Q") [Docket No. 138]. Lee denies that he knew that the boxes contained UVMP. Lee Dep. 29, 71-72. The seven boxes of UVMP were left unopened on ECCA's loading dock. Roig Decl. ¶ 6; Lee Dep. 28-29. Roig put several signs on the boxes, advising ECCA employees that the boxes did not belong to ECCA and that they should not be opened. Roig Decl. ¶ 6; Lee Dep. 28-29.

On September 1 — the day after the Court entered the injunction — Roig sent Quest three purchase orders for a total of 60 bottles of UVMP. See Roig Decl. ¶ 7. Each of the three purchase orders contained different shipping instructions: 20 bottles were designated for next-day air; 20 were for second-day air; and the last 20 were for ground delivery. See Roig Decl. Ex. 4. These three purchase orders made no reference to the earlier blanket purchase order. Upon receiving the purchase orders, John Healy, Quest's customer-service manager, arranged for 80 bottles of UVMP from Quest's remaining supply to be hand-delivered to ECCA. See Healy Decl. ¶ 4. Roig accepted delivery of the 80 bottles on September 2 and locked the bottles in hisoffice, which was ECCA's customary practice. Roig Decl. ¶ 8. Roig then...