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Schwendimann v. Arkwright Advanced Coating, Inc.

United States District Court, D. Minnesota

December 12, 2016

JODI A. SCHWENDIMANN, Plaintiff,
v.
ARKWRIGHT ADVANCED COATING, INC., Defendant. ARKWRIGHT ADVANCED COATING, INC., Counter Claimant,
v.
JODI A. SCHWENDIMANN, and COOLER CONCEPTS, INC., Counter Defendants.

          Devan V. Padmanabhan, David A. Davenport, and Justice Ericson Lindell, WINTHROP & WEINSTINE, PA, 225 South Sixth Street, Suite 3500, Minneapolis, MN 55402, for Jodi A. Schwendimann and Cooler Concepts, Inc.

          Kurt J. Niederluecke and Laura L. Myers, FREDRIKSON & BYRON, PA, 200 South Sixth Street, Suite 4000, Minneapolis, MN 55402, for Arkwright Advanced Coating, Inc.

          MEMORANDUM OPINION AND ORDER ON MOTIONS FOR SUMMARY JUDGMENT

          JOHN R. TUNHEIM, Chief Judge

         Plaintiff Jodi A. Schwendimann brought this patent infringement action against Defendant Arkwright Advanced Coating, Inc., (“AACI”), and AACI counterclaimed for patent infringement against Schwendimann and one of her businesses, Cooler Concepts, Inc., (“Cooler Concepts”). Both parties' patents involve image-transfer sheets, and both parties now move for partial summary judgment.

         The Court will grant in part and deny in part each party's motion. Because the expert evidence presented establishes that Schwendimann's product meets the only disputed claim limitation for AACI's U.S. Patent No. 6, 667, 093 (“ ‘093 patent”), the Court will grant AACI's motion and deny Schwendimann's motion with regard to Schwendimann's infringement of that claim. However, the Court finds that competing expert testimony establishes a fact issue over whether Schwendimann's product meets the disputed claim limitation for AACI's U.S. Patent No. 7, 943, 214 (“ ‘214 patent”) and will deny AACI's motion with regard to infringement of that claim. The Court will also deny AACI's motion with regard to Schwendimann's affirmative defenses because AACI failed to meet its burden as the moving party and the issues are not sufficiently presented to the Court.

         The Court will grant Schwendimann's motion with regard to AACI's anticipation defense to infringement of Schwendimann's patents because the earlier patents presented either do not contain all of the elements present in Schwendimann's patents or do not suggest combining those elements. However, the Court will deny Schwendimann's motion with regard to AACI's obviousness defense because questions of fact remain over whether it would have been obvious to a person skilled in the art to combine the elements found in several prior patents in the manner claimed by Schwendimann. The Court will also deny AACI's motion with regard to its infringement of Schwendimann's patents because competing expert testimony establishes a question of material fact, and with regard to willfulness because Schwendimann has presented some evidence of subjective intent and questions of material fact remain. Finally, because the Court finds factual issues remain over whether Schwendimann is entitled to lost profit damages based on her businesses, NuCoat, Inc., (“NuCoat”) and Cooler Concepts, the Court will deny both parties' motions on that issue.

         BACKGROUND

         I. THE PATENTS

         All of the patents at issue involve image-transfer sheets that can be used, for example, to transfer images onto a dark-colored T-shirt by applying heat. The following portions of AACI's and Schwendimann's patents are relevant to the present motions for partial summary judgment.

         AACI's ‘093 patent claims an image-transfer sheet including, in pertinent part, “a hot-melt second layer comprising a thermoplastic polymer having a melting point in the range of 60˚ to 180˚ C.” (Decl. of Justice Ericson Lindell (“Lindell Decl.”), Ex. D at 199, Mar. 11, 2016, Docket No. 397.)

         The relevant portion of AACI's ‘214 patent is found in Claim 18, which contemplates “a white background layer being applied on the adhesive layer consisting of elastic plastics which are non-fusible at temperatures up to 220 degrees Celsius and which are filled with white inorganic pigments.” (Decl. of Kurt J. Niederluecke (“Niederluecke Decl.”), Ex. H, Ex. 3 at 14-15, Mar. 11, 2016, Docket No. 394.)

         Schwendimann's patents “describ[e] a method or article for transferring printed images onto dark colored cloth or other material using heat.” (Mem. Op. & Order (“Claim Construction Order”) at 2, Dec. 2, 2015, Docket No. 354.) All of Schwendimann's patent claims include a “white layer” limitation, which the Court construed as “a layer comprising a concentration or configuration of pigment providing a white background for received indicia and which further comprises a polymer that melts and mixes with another layer or layers during application.” (Id. at 17.)

         II. THE PRODUCTS

         Schwendimann operates two businesses, NuCoat and Cooler Concepts, which “manufactur[e] and sell[] specialty paper products, including inkjet image transfer paper or sheets.” (Am. Compl. ¶¶ 2-3, May 21, 2015, Docket No. 264.) Schwendimann's accused products, the “PermaTrans Dark” products, are “comprised of a silicone-coated based paper, onto which an ethylene acrylic acid (EAA) resin layer is applied, followed by an opaque layer comprising titanium dioxide and polyurethanes, on top of which is applied an inkjet layer including polyurethane and organic polymeric particles.” (Niederluecke Decl., Ex. H ¶¶ 10, 22.)

         AACI is also “engaged in the business of producing coating film and paper, including photo papers, self-adhesive papers, inkjet films, and inkjet image transfer papers or sheets.” (Am. Compl. ¶¶ 4-8, 29.) AACI's accused products are referred to as the 888 and 889 products. (See, e.g., Niederluecke Decl., Ex. E ¶¶ 32-37.) The AACI 888 product has three layers, (1) “a silicone-coated base paper, ” which is removed prior to application, (2) “an Eclipse Hot Melt (FL-4387) polymer layer, ” which includes EAA and “melts and binds to the T-shirt, ” and (3) “a Solvent T-Shirt Inkjet Coating Layer (FL-5158).” (Id. ¶¶ 32-33.) The AACI 889 product has four total layers: it has the same silicone-coated base paper and Eclipse Hot Melt polymer layer (with EAA) as the AACI 888 product, but rather than a single top layer, the AACI 889 product has two layers - the “Eclipse White Layer D (FL-3158) . . . and an Eclipse Inkjet Topcoat (FL-5085).” (Id. ¶ 35.) The additional layer “provid[es] a white background for an image.” (Id.)

         The parties dispute, and provide expert report evidence regarding, the following aspects of the accused products.

         A. Second Layer Melting Point For Schwendimann's Products

         AACI's expert, Chris Macosko conducted tests to determine the melting point of the Schwendimann products in light of the ‘093 patent's requirement of “a hot-melt second layer comprising a thermoplastic polymer having a melting point in the range of 60˚ to 180˚ C.” (Lindell Decl., Ex. C ¶¶ 2-3, Ex. D at 199.) Macosko conducted “Differential Scanning Calorimetry” (“DSC”) testing on Schwendimann's products. (See Niederluecke Decl., Ex. E ¶ 19 & Ex. 5; id, Ex. H ¶¶ 14-15 & Ex. 5.) DSC “is a fundamental tool in thermal analysis, ” (id., Ex. J at 2), and “a standard tool for measuring the melting and freezing points of polymers and other solids, (id., Ex. K at 2).[1]

         According to Macosko, “the first heat cycle is the right one to use” to determine the melting point of the EAA second layer in Schwendimann's products. (Id., Ex. M at 168:6-9.) Macosko interprets these results as showing “a transition with a peak at about 50 degrees centigrade, and then . . . another broader transition peak at around 80 degrees centigrade, which may be composed of two, so there could be as many as three melting transitions or one narrower and one broader melting transition.” (Id., Ex. M at 155:17-22.) He further noted that EAA “polymers can have several melting transitions” because “they're co-polymers, ” and that in this case “there are several melting points for EAA, . . . there are melting points at . . . approximately 50 and 80.” (Id. at 156:8-157:1.) In determining that this range - 50 degrees Celsius to around 80 degrees Celsius - was the EAA polymer rather than something else, Macosko relied on his expertise and the process of elimination, stating, “I know what EAA should melt at, . . . I know what the ink-receiving layer should melt at, knowing the components, and I observed both of those, and I don't observe anything else.” (Id. at 161:6-18.)

         Schwendimann's expert, Scott A. Williams, states that Macosko's analysis on this issue is unreliable, in part, because Macosko did not use any controls and “the thermal behaviors of polymers may well change when they are combined with other polymers or additives.” (Id., Ex. L at 14-17.) Williams, however, did not personally conduct any tests to determine the melting point of the EAA in Schwendimann's products. (Id., Ex. I at 38:20-39:6.)

         B. White Layer Melting Point For Schwendimann's Products

         For the ‘214 patent, each party's expert opines on whether the “white background layer” in Schwendimann's products is “non-fusible at temperatures up to 220 degrees Celsius.” (Id., Ex. H, Ex. 3 at 15.) Macosko asserted that Schwendimann's products satisfied this element because DSC tests did not show any unaccounted for melting point prior to 220 degrees Celsius, and thus, Macosko opined that the white layer could not have a melting point below 220 degrees Celsius. (Id., Ex. M at 161:6-18.) Macosko also relied on scanning electron microscopy (“SEM”) images of Schwendimann's products before and after application. (Id., Ex. H ¶ 16 & Ex. 6.) Macosko contends that the images also suggest that the white layer does not fuse, mix, or melt into the other layers or the T-shirt. (Id., Ex. M at 176:1-182:7.)

         Williams disagrees with Macosko's conclusions and states that, based on his testing, the white layer of Schwendimann's accused product melts before 220 degrees Celsius. (Id., Ex. L at 17-21.) During testing, Williams applied Schwendimann's image-transfer sheets by iron heated to less than 220 degrees Celsius and observed, using a microscope, “that black fibers from the t-shirt upon which the samples were applied [were] visibly protruding through the samples.” (Id. at 18.) Williams concludes visible protrusion “could not occur without melting of the white layer polymers.” (Id.) Williams also questions Macosko's interpretation of the SEM images. (See Id. at 20-21.)

         C. Mixing or Melting of Aaci's Products

         Williams conducted a series of tests to determine the melting and mixing of AACI's 888 and 889 products after applying them using a hand iron with various amounts of heat, lengths of time, and amounts of pressure. (Decl. of Justice Ericson Lindell (“Second Lindell Decl.”), Ex. A at 19-35, Apr. 8, 2016, Docket No. 417.) In one test, Williams examined the transfer with a microscope to determine whether T-shirt fibers mixed and rose to the surface. (Id. at 22-23.) Williams stated that, if the fibers mixed and rose to the surface, the white layer melted and mixed as required under the Court's construction of the Schwendimann patent. (Id.) Williams found that even applying the iron for less time and using less heat than suggested in AACI's instructions, the T-shirt fibers rose to the top, which Williams interpreted to mean that all layers of the image-transfer sheet melted. (Id. at 34-35.)

         Williams also tested the transfer characteristics of AACI's 888 and 889 products by stretching the applied products by hand to determine their adhesion. (Id. at 35-49.) Williams found that the “products were able to be stretched by hand without releasing from the T-shirt and without the layers releasing from each other.” (Id. at 38.) Williams concluded “[t]his adhesion shows that the hot melt layer melted and mixed with the T- shirt fibers . . . [and] that the polymers of all layers of the 888 and 889 products melted and mixed with those of adjacent layers.” (Id. at 39.) Williams came to the same conclusion after looking at cross-sectional views of the product after application, finding that “the layers [were] no longer distinctly uniform and separate as some portions of the layers flow and mix into or among portions of adjacent layers.” (Id. at 43-44.)

         Finally, Williams performed a test with fluorescent ink, finding the ink invisible on one side prior to ironing, but visible after, suggesting “there ha[d] been a change in the layer structure, ” and that “the polymer layers melted and mixed to the extent that portions of the fluorescent marking on the polymer layer closest to the T-shirt moved closer to the uppermost surface.” (Id. at 46-48.)

         Based on these tests, Williams stated “that the polymers of the coatings (for 889 the ink-receptive layer, white layer, and hot melt layer, and for 888 the ink-receptive layers and hot melt layer) are thermoplastic polymers that melt and mix with adjacent layers during application at normal hand iron temperatures, times and pressures.” (Id. at 48.)

         AACI argues that Williams' opinions are irrelevant because Williams failed to follow AACI's instructions. Williams admitted to relying on multiple sets of instructions while running his tests. (Id., Ex. B at 43:1-3, 47:5-8.) But, Williams stated that the tests were “guided by” the instructions and that he “follow[ed] the actual instructions” except for “the size/time parameter . . . [b]ecause those are guidelines under the instruction sheet.” (Id. at 49:23-50:15, 57:17-58:21, 60:19-22.) Williams “relied on the instructions that came with each of the products, and [his] experience” to craft his testing procedures. (Id. at 188:16-23). Williams also opined that a consumer would get the same results, and that even when as part of the progression less heat, time, and pressure were applied than the instructions suggested, melting continued to occur. (Id. at 146:3-22.) Williams also disputed that the tests showed “degrading” of the samples, stating that in some settings, the mixing of the fibers with transfer sheet would be positive because it would provide “more of a long-term product life.” (Id. at 143:17-144:14.)

         Macosko also performed tests on the AACI products to rebut Williams' conclusions. (Niederluecke Decl., Ex. E.) Macosko performed DSC tests on the 888 and 889 products and found melting points consistent with the EAA and Orgasol (part of the ink-receiving layer), but no melting point for the white layer. (Id. ¶¶ 19-20, 44-46 & Ex. 5.) Macosko examined samples using microscopy. (Id. ¶¶ 27-28.) According to Macosko, none of the images suggested mixing or melting, but rather, the images indicated a clear demarcation between the layers, including the white layer. (Id. ¶¶ 48-57.)

         III. PROCEDURAL HISTORY

         Schwendimann initially brought this action on April 1, 2011, alleging that AACI infringed several of Schwendimann's patents. (Compl., Apr. 1, 2011, Docket No. 1.) AACI responded by bringing counterclaims, alleging that Schwendimann infringed several of AACI's patents. (See Answer & Countercl., Apr. 11, 2011, Docket No. 5.) The Court issued a claim construction order on December 2, 2015, construing claim terms from both parties' patents. (See Claim Construction Order at 8-43.)

         Both Schwendimann and AACI now move for partial summary judgment. (Mot. for Partial Summ. J., Mar. 11, 2016, Docket No. 381; Mot for Partial Summ. J., Mar. 11, 2016, Docket No. 384.) Both parties seek summary judgment over whether Schwendimann infringed AACI's ‘093 patent, AACI seeks summary judgment that Schwendimann infringed its ‘214 patent, and AACI seeks summary judgment on Schwendimann's affirmative defenses. With regard to Schwendimann's patents, AACI seeks summary judgment on non-infringement, and Schwendimann seeks summary judgment on AACI's invalidity defenses based on anticipation and obviousness. Finally, both parties seek summary judgment with regard to Schwendimann's ability to seek damages based on NuCoat's and Cooler Concepts' lost profits. Due to the overlapping issues presented by the two motions, the Court will consider the parties' arguments by issue rather than by motion.

         ANALYSIS

         I. STANDARD OF REVIEW

         Summary judgment is appropriate where there “is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A fact is material if it “might affect the outcome of the suit, ” and a dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for” either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A court considering a motion for summary judgment must view the facts in the light most favorable to the non-moving party and give that party the benefit of all reasonable inferences to be drawn from those facts. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986). Summary judgment is appropriate if the nonmoving party “fails to make a ...


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