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Balivi Chemical Corp. v. JMC Ventilation Refrigeration

June 29, 2010

BALIVI CHEMICAL CORPORATION, AN IDAHO CORPORATION, PLAINTIFF,
v.
JMC VENTILATION REFRIGERATION, LLC, A WASHINGTON LIMITED LIABILITY COMPANY, JMC ENTERPRISES, INC., A WASHINGTON CORPORATION, JMC LEASING, LLC, A WASHINGTON LIMITED LIABILITY COMPANY AND JOEL MICKA, AN INDIVIDUAL, DEFENDANTS.



The opinion of the court was delivered by: Judge Dee Benson

MEMORANDUM OPINION AND ORDER

This matter is before the court on defendants and counterclaimants JMC Enterprises, Inc., JMC Leasing LLC, JMC Ventilation Refrigeration, LLC, and Joel Micka's (collectively "JMC") motion for summary judgment (Dkt. No. 121) and plaintiff and counterdefendant Balivi Chemical Corporation's motion for partial summary judgment (Dkt. No. 131). Hearings on the motions were held on October 15, 2009 and February 19, 2010. At the hearings, Balivi was represented by William L. Mauk and Edgar R. Cataxinos. JMC was represented by Richard C. Boardman, Jerry A. Riedinger, and Ryan J. McBrayer. After taking the motions under advisement, the court has further considered the law and facts relating to the motions. The court has also considered supplemental memoranda and supporting materials submitted by the parties on May 5, 2010. Being fully advised, the court issues the following Memorandum Opinion and Order.

BACKGROUND

This case centers on a patent developed in Idaho, which fittingly deals with potatoes. Potatoes are frequently stored following harvest in the fall for a number of months until spring or, often times, the following summer. Stored potatoes are living organisms, growing sprouts and giving off heat, both of which can cause the potatoes to deteriorate and lose commercial value. Typically, the potatoes are stored in large piles within potato storage facilities. To prevent the potatoes from overheating, the storage facilities have sophisticated ventilation systems to keep the potatoes cool. To prevent the potatoes from sprouting, the potatoes are sprayed with sprout inhibiting chemicals. For years, these sprout inhibiting chemicals, including Isopropyl MChlorocarbanilate ("CIPC"), have been applied as a fog circulated within the facility's ventilation system. In this process, the chemical fog moves through ventilation pipes, out through vent holes, and filters up through the pile of potatoes, depositing the chemical on the potatoes.However, there is a big problem with this process because the powerful air flows within the ventilation system cause the chemical fog to agglomerate on the ventilation equipment, wasting a significant amount of chemical and creating a coating that is difficult to remove and capable of shutting down the ventilation system. Here, the patentee had the idea that he could avoid agglomeration by reducing airflow and turbulence in the potato storage facility during an application. A typical storage facility's air ventilation system operates between 10 and 30 standard cubic feet per minute ("SCFM"), per ton of potatoes in storage. The patentee discovered he could use a frequency generator to temporarily reduce the turbulence and air flow below 5 SCFM.

The patentee filed an application for what became U.S. Patent 4,887,525 (the `525 patent) on December 9, 1988. Originally, he sought a patent on a method and apparatus that only reduced airflow in the potato storage facility. The Patent and Trademark Office ("PTO") rejected the application a number of times on obviousness grounds. Eventually, the patentee amended his application to claim an apparatus that reduced both airflow and turbulence in the storage facility. The PTO allowed the amendment and granted the `525 patent on December 19, 1989. The `525 patent includes independent claim 1 and dependent claim 2. Claim 1 is in means-plus-function form and recites:

In a potato storage facility having an air supply plenum, a fan and a fan motor, an apparatus for applying a sprout inhibiting chemical to the stored potatoes which comprises:

(a) means for reducing turbulence and the air flow in the air supply plenum below 5 standard cubic feet per minute per ton of potatoes stored therein;

(b) means for atomizing a sprout inhibiting chemical;

(c) means for introducing the atomized chemical into the air supply plenum of the potato storage facility.

`525 patent, col. 6, lines 22--31. Claim 2 reads: "The apparatus of claim No. 1 wherein the means for reducing the air flow in the air supply plenum is a frequency generator serially connected between the power supply for the fan motor and the fan motor." Id. at col. 6, lines 32--35. The `525 patent expired on May 12, 2008. During the life of the `525 patent, it experienced great commercial success in the potato storage industry. Balivi, by assignment, owns the patent.

JMC Enterprises was formed in 1997 by Joel Micka and his wife to apply sprout inhibiting chemicals to agricultural products, including potatoes, in the Columbia Basin. The Mickas also own and operate JMC Ventilation, a ventilation parts supplier, and JMC Leasing, a chemical reseller. Until November 2004, JMC Enterprises had a non-exclusive applicator's license from Balivi to use the `525 patent. The court is unfamiliar with the specific facts that lead to the termination of the license. From the time JMC Enterprises ceased to have permission to practice the `525 patent, JMC claims it has used Xeda's ELECTROFOG EWH10000 (the "Xeda thermal fogger") to apply sprout inhibiting chemicals to stored potatoes.*fn1 As shown, the Xeda thermal fogger includes a high-pressure fan, heating resistance (heater), adjustable-rate volumetric pump, vaporization pipe with aerosol product injector, and electrical panel.

The electrical panel includes controls, warning lights, and digital thermostats that indicate the fog temperature on the vaporization pipe outlet and the resistance output temperature.

In a typical application, JMC Enterprises creates a wall or barrier of plywood or visquine between where the fogger's electrical panel, heater, and blower are located and where the storage air circulates. JMC Enterprises extends the fogger's vaporization pipe through a hole in the plywood or visquine, sealed tightly with duct tape, and discharges atomizing or atomized CIPC into the air supply system. JMC Enterprises uses a frequency generator to lower the speed of fans and air flow through the potato storage facility during application of CIPC to the stored potatoes.

In August 2007, Balivi filed an infringement action on the `525 patent against JMC. In May 2008, a Markman hearing was held, and the court interpreted the `525 patent. In JMC's proposed claim construction, JMC attempted to construe the claims in several different ways to avoid infringement. First, JMC argued that the corresponding structure in the first means element included (1) an outlet for electrical power supplied from within the storage facility, and (2) the temporary connection (with jumper cables) of the frequency generator to the fan motor. Second, JMC argued that the same structure must actually be used to reduce airflow and not just be capable of such use. Third, JMC argued that the definition of "sprout inhibiting chemical" in the second means element is limited to "pure or substantially pure CIPC." Fourth, JMC argued that the corresponding structure in the third means element must release the atomized chemical into the air at a point downstream from the fan. These arguments were rejected by the court and claim 1 was construed as follows:

Means Function Structure

Means for reducing (1) To reduce turbulence; A frequency generator. turbulence and the air flow in (2) To reduce air flow below the air supply plenum below 5 5 SCFM.

SCFPM per ton of potatoes stored.

Means for atomizing a sprout To convert the solid form of Thermal fogger. inhibiting chemical. sprout inhibiting chemical to an aerosol.

Means for introducing the To transport the atomized Tube, duct or pipe. atomized chemical into the chemical from the thermal air supply plenum of the fogger to the storage facility. potato storage facility.

The court's construction of the third means element makes it clear that the discharge location of the "tube, duct, or pipe" inside the storage facility is irrelevant. The court also construed claim 2 to track all of the court's construction of claim 1, except the structure corresponding to the first means element is a frequency generator serially connected between the power supply for the fan motor and the fan motor.

In December 2008, Balivi moved for partial summary judgment and JMC moved for summary judgment.*fn2 The arguments on both sides can be divided into three groups: (1) those addressing the issue of infringement; (2) those addressing the validity of the `525 patent; and (3) those addressing the enforceability of the `525 patent.

With regard to the infringement claims, Balivi moved for summary judgment, claiming as a matter of law that JMC directly infringes the `525 patent. Conversely, JMC claims the court can decide as a matter of law that JMC does not directly infringe the `525 patent. JMC also argues that the court can decide that Joel Micka is not personally liable for any direct infringement by JMC. Lastly, JMC asserts that the court can decide as a matter of law that JMC is not liable for indirect infringement.

With regard to the validity of the `525 patent, Balivi claims the court can decide as a matter of law that the `525 patent meets the enablement and written description requirements of 35 U.S.C. § 112, ¶ 1. Balivi also claims that as a matter of law the `525 patent is non-obvious. On the other hand, JMC claims the court can decide as a matter of law that the `525 patent is invalid on obviousness grounds.

With regard to the enforceability of the `525 patent, Balivi claims that as a matter of law the court can determine that Balivi has not misused the `525 patent.

SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c)(2). The court must construe all facts and reasonable inferences therefrom in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). But, summary judgment should be granted "against a party who fails to make a showing sufficient to establish the existence of an element essential to the party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). "The mere existence of a scintilla of evidence in support of plaintiff's position will be insufficient [to overcome a motion for summary judgment]; there must be evidence upon which the jury could reasonably find for the plaintiff." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).

DISCUSSION

At its core, patent law is simple and intuitive. Patents give a patentee the right to exclude others from using his or her invention. In exchange, the patentee provides a public disclosure of the invention.

The court's analysis will first address infringement, then validity, then enforceability of the `525 patent.

A. Infringement

The parties' motions for summary judgment include both direct and indirect infringement claims.

1. Direct Infringement

For direct infringement, Balivi and JMC both claim that the court can determine as a matter of law that JMC does or does not literally infringe the `525 patent. JMC alone contends that the court can also determine that JMC does not directly infringe under the doctrine of equivalents. Lastly, JMC claims that the court can determine as a matter of law that no direct infringement liability exists for Joel Micka.

A determination of direct infringement consists of two steps: (1) the court must first interpret the claim, and (2) then it must compare the properly construed claims to the allegedly infringing device. Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1454 (Fed. Cir. 1998). "Summary judgment on the issue of [direct] infringement is proper when no reasonable jury could find that every limitation recited in a properly construed claim either is or is not found in the accused device either literally or under the doctrine of equivalents." PC Connector Solutions LLC v. SmartDisk Corp., 406 F.3d 1359, 1364 (Fed. Cir. 2005).

(a) Literal Infringement

In order to prove literal infringement, the patentee must show "that the relevant structure in the accused device perform[s] the identical function recited in the claim and [is] identical or equivalent to the corresponding structure in the specification." Lockheed Martin Corp. v. Space Sys./Loral, Inc., 324 F.3d 1308, 1320 (Fed. Cir. 2003). Literal infringement always requires functional identity, i.e., that is the accused device must perform the identical function recited in the claim. See Omega Engineering, Inc. v. Raytek Corp., 334 F.3d 1314, 1328 (Fed. Cir. 2003).

Relying mainly on the court's claim construction and the preferred embodiment disclosed in the patent, JMC now argues that there is no literal infringement because JMC Enterprises does not use the claimed "tube, duct, or pipe" limitation. JMC claims there is no functional or structural identity between the claimed "tube, duct, or pipe" and Xeda's vaporization pipe because the `525 patent requires a "thermal fogger" to atomize the sprout inhibiting chemical and a separate "tube, duct, or pipe" to transport the atomized chemical from the "thermal fogger" to the potato storage facility. According to JMC and its expert, Dr. Stock, the vaporization pipe in JMC Enterprises' accused device takes in vapor from the thermal fogger and atomizes the chemical in a diffuser section of the pipe or inside the facility. Basically, JMC's argument is that literal infringement cannot exist because the structural and functional design of Xeda's vaporization pipe is to make the "atomized chemical," not to transport it. At one point, JMC claimed the vaporization pipe cannot satisfy both the "thermal fogger" and "tube, duct, or pipe" elements because combining the two structures into one violates the "all elements" rule by eliminating the separate "tube, duct, or pipe" element.

In response, Balivi argues that the vaporization pipe performs the identical function and is the same as or equivalent structure to the claimed "tube, duct, or pipe." According to Balivi, the function of the third means element is very simple. The "tube, duct, or pipe" transports the atomized chemical from where the chemical is atomized to the open end of the pipe and from there into the potato storage facility. Balivi and its expert, Dr. Hyde, Dr. Hyde claim that atomization occurs in the Xeda fogger, within the meaning of the patent, where the liquid chemical is injected and hit with super-heated air, approximately two-inches upstream of the vaporization pipe. Balivi argues there is functional identity between the vaporization pipe and the "tube, duct, or pipe" because atomized chemical is blown from Xeda's fogger unit, outside the area where potatoes are stored, through Xeda's vaporization pipe into the potato storage facility. Balivi also argues the vaporization pipe is the same or equivalent structure because a person of ordinary skill in the art would understand the "tube, duct, or pipe" structure is "any" enclosed conduit capable of "transport[ing] the atomized chemical from the thermal fogger to the storage facility." Finally, Balivi argues that even ...


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