Petition for Writ of Certiorari — Stutz Motor Car of America, Inc. v. Reebok International Ltd.

Supreme Court brief1997

Ask Donna

What actually matters in this document.

Text

(1) Supreme Court, U.S.

| me

97.119 JUN 2 5 1997

OFFICE OF THE CLERK

No.

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1997

STUTZ MOTOR CAR OF AMERICA, INC. - Petitioner

VS.

REEBOK INTERNATIONAL LTD. - Respondent

ON PETITION FOR A WRIT OF CERTIORARI TO

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

PETITION FOR WRIT OF CERTIORARI

Stephen Lewis Dunne, Attorney for Petitioner

- 6363 Sunset Boulevard, Suite 900

Los Angeles, CA. 90028

(213) 464-1100

QUESTIONS PRESENTED

HAVING BROUGHT TO THE LOWER COURTS,

SUBSTANTIAL CREDIBLE EVIDENCE AND

RENOWNED EXPERT WITNESS TESTIMONY,

SHOULDN'T WE BE GIVEN OUR CONSTITUTIONAL

RIGHT TO A JURY TRIAL?

IF THE DECISIONS MADE BY THE LOWER COURT

JUDGES, WERE CLOUDED AND PREJUDICED BY

DIVERSIONARY ISSUES AND BLATANT FALSITIES,

SHOULDN'T THEIR DECISIONS BE OVERTURNED

AND THE ISSUES PUT FORTH TO A JURY?

IT]

DID THE STATE, IN THE FORM OF THESE LOWER

COURT JUDGES, UNCONSTITUTIONALLY DEPRIVE

STUTZ MOTOR CAR OF AMERICA OF ITS PROPERTY?

LIST OF PARTIES

All parties appear in the caption of the case on the cover

page.

TABLE OF CONTENTS

TUPI GIs MII sfc tisdeinsicduthendsbente.thuoleciune oes. l

Pe FIIs peiersiivcsivcsntincienaca ead on ee 2

CONSTITUTIONAL PROVISIONS INVOLVED .............. 3

STATEMENT OF THE CASE. .000...0......ccccccccccsssscsscccocecosess. 5

INDEX TO APPENDICES

APPENDIX A

United States Court of Appeals For The Federal Circuit

Decision - May 16, 1997

APPENDIX B

United States District Court, Central District of California

Judgement Ordered - August 29, 1995

APPENDIX C

Letters from Reebok to Stutz Motor Car of America, Inc.

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1997

PETITION FOR WRIT OF CERTIORARI

Petitioner respectfully prays that a writ of certiorari issue to

review the judgement below.

OPINIONS BELOW

The opinion of the United States Court of Appeals appears at

Appendix A to the petition and has been designated for

publication but is not yet reported.

STATEMENT OF JURISDICTION

The date on which the United States Court of Appeals

decided the case was May 16, 1997.

No petition for rehearing was filed in the case.

The jurisdiction of this Court is invoked under

28 U.S.C. 1254(1).

;

CONSTITUTIONAL PROVISIONS INVOLVED

THE SEVENTH AMENDMENT

IN SUITS AT COMMON LAW, WHERE THE VALUE IN

CONTROVERSY SHALL EXCEED TWENTY DOLLARS,

THE RIGHT OF TRIAL BY JURY SHALL B&

PRESERVED, AND NO FACT TRIED BY A JURY,

SHALL BE OTHERWISE REEXAMINED IN ANY COURT

OF THE UNITED STATES, THAN ACCORDING TO THE

RULES OF THE COMMON LAW.

THE FOURTEENTH AMENDMENT

ALL PERSONS BORN OR NATURALIZED IN THE

UNITED STATES, AND SUBJECT TO THE

JURISDICTION THEREOF, ARE CITIZENS OF THE

UNITED STATES AND OF THE STATE WHEREIN THEY

RESIDE. NO STATE SHALL MAKE OR ENFORCE ANY

LAW WHICH SHALL ABRIDGE THE PRIVILEGES OR

IMMUNITIES OF CITIZENS OF THE UNITED STATES;

NOR SHALL ANY STATE DEPRIVE ANY PERSON OF

LIFE, LIBERTY, OR PROPERTY, WITHOUT DUE

PROCESS OF LAW; NOR DENY TO ANY PERSON

WITHIN ITS JURISDICTION THE EQUAL PROTECTION

OF THE LAWS.

STATEMENT OF CASE AND BRIEF OF MERITS

We are appealing the decision of the United States

Court of Appeal for the Federal Circuit, Judges Archer,

Skelton, and Michel. Their decision affirming the United

States District Court, Central District of California under

Judge Lourdes J. Baird grant of Reebok's Motion for

Summary Judgement for Noninfringement and on other

grounds on all claims asserted by Stutz in that court is in

error and extremely unfair to Stutz Motor Car of America's

right to a jury trial.

The subject matter of the dispute arises from our

belief, which is supported by documents, correspondence,

meetings, witnesses, and expert opinion , that Reebok

infringed Stutz's patent and misappropriated trade secrets in

its manufacture and distribution of shoes incorporating an

internal air bladder known as "The Pump". The patent

disputes in this matter arise from claimed infringement of

United States patent No. 4,610,099 issued on September 9,

1986, owned by Stutz by assignment. The trade secret claims

arise from information alleged to have been disclosed to

Reebok by Stutz involving the same general design but not

covered by the patent.

This is a big case with enormous implications

regarding the fairness of doing business in the United States

of America. Stutz Motor Car of America is a prestigious,

elegant, world famous maker of fine automobiles. It is

renowned for its integrity, both in its designs and in its

business practices. Since the beginning of this century in

America, it has been at the forefront of automotive design

and technological breakthroughs that other car manufacturers

emulated. Stutz was the first to lower the center of gravity in

the automobile, which allowed for the creation of almost all

modern cars in America. Stutz was the first to have safety

glass in automobiles, which prevented casualties and serious

injuries due to accidents. Though Stutz was a small company

with limited resources and almost no sales for extended

periods of time, in the mid-80's it developed a carbon fiber

composite for use in commercially produced cars before any

Y eiied? enh bert “s

major company. This same, virtually indestructible material

was used in the Space Shuttle, satellites, and the B-2

Bomber. It was only natural that it would pursue to develop

technologies in other areas to further enhance its business;

i.e. high-tech sports shoes.

As a result of Reebok's predatory, larcenous,

prevaricatious practices, the Stutz company has suffered a

devastating loss of business opportunity and standing. While

Reebok, through its theft, has had its revenue go from $919

million in 1986 to $2.7 billion by 1991. In 1991, Reebok's

chairman, awarded himself $124 million dollars for his

efforts that were a direct result of his and his company's

nefarious scheme to rip off Stutz's idea, it's patent, and it's

right to benefit therefrom. Reebok became a success story

while Stutz languished, suffered through a recession, and has

all but been relegated to a shell of the great company it once

was.

Stutz approached Reebok in May 1986, in good faith

and with confidence that their two companies would be able

to work together. Stutz had a revolutionary shoe design,

Reebok had the marketing and manufacturing capabilities. In

a series of letters between June 5, 1986 and July 21, 1986,

Reebok first told Stutz they were interested in the ideas, and

then ultimately told Stutz they were not interested in Stutz's

pump shoe and accompanying trade secrets because they,

Reebok, had no air bladder project underway and didn't have

the time or energy to develop it.

By 1989, Reebok had completed it's air bladder

project and released the "Pump" shoe to the market. Due to

circumstances including a change of ownership and

executives at Stutz, the international travel of its chief

executive, the recession in the auto industry, and the general

business of Stutz during the early 1990's, Stutz did not realize

its victimization by Reebok till sometime in 1991. Upon its

realization, Stutz made its best effort to protect its mghts and

was able to file suit by February of 1993. Stutz wished to

have its day in court in front of a jury. We believe that we

have that right in this country.

Reebok, desperate to protect its misappropriation of

Stutz's ideas, hired a team of lawyers to defend its "cash

cow" and put Stutz out of business through legal

machinations and offensive tactics. There were attacks on the

jurisdiction of the court where we filed, the timeliness of our

filing, expiration of the statute of limitations, our standing to

file suit, the extinguishing of our rights to trade secret due to

patents filed, culminating in their filing a motion to dismiss

the case without any discovery having taken place. Reebok

wished to deny Stutz its right to a fair trial on the facts before

a jury. They were fearful of the facts coming out in a trial

and being judged by everyday people.

Stutz survived this barrage of legal tactics and overtly

disingenous attempts to distract it and the court from the

core issue of the theft of Stutz's ideas, its patents, and its

rights. Even with the limited funds available to it, Stutz was

somehow able to weather this unnecessary storm of

manufactured issues to stop it from proceeding and receiving

its consitutional right to a jury trial.

Upon the beginning of discovery, we were to

experience the depth of Reebok's lies and evasive antics.

Reebok executive, Mr. Douglas, whose signature is on a

letter to Stutz , stated that he had never heard of Stutz and

appeared to be flushed and lying. Reebok Chairman Paul

Fireman contradicted himself in statements during a

deposition when we compared it to published interviews on

the subject of the development of the air bladder technology.

Fireman's contention that they got the technology when they

purchased Ellesse was contradicted by former Senior Vice

President in charge of "high tech footwear" Mark Goldston's

testimony and evidenced by the lack of interest and

dissappearance of an Ellesse protoype that didn't even work.

Finally, documents on the development of the air bladder and

files from another lawsuit related to the air bladder

controversy were destroyed by Reebok. These actions were

taken to cover their tracks, burn the paper trail, and to

eliminate clear evidence of Reebok's. theft and

misappropriation of Stutz's ideas and patents.

All these issues of credibility and questionable

activities on the part of Reebok should have been decided at

trial. A jury should be the ones to decide who is credible and

who is not. A jury should look at the actions of both parties

and decide who has integrity and who has none.

The trial court judge took Reebok's side summarily

and the Court of Appeals took the judge's side without regard

for the injustice that had taken place. This is not right and it

is not fair.

Stutz had a renowned patent expert look at the

Reebok patents and shoes. His work uncovered similarities

and issues that are supposed to be presented to a jury. Stutz's

expert, Ron Reagin, contended under the doctrine of

equivalents in which an insubstantial difference may be

found when an element of the accused product performs

substantially the same function, in substantially the same

way, to achieve substantially the same result as a

corresponding element or limitation in a patent, that Reebok

had infringed two (2) Claims of the Stutz patent. These are

that the patented invention consisted of a shock-absorbing

shoe sole which provides adjustably inflated pneumatic

support and a graduated reduction of shock-absorbing from

the inflated support region. Reebok cunningly and cleverly,

to hide their theft and usurpation of Stutz’s genuine and

desireable scientific soci, moved the air bladder from the

lower portion of the shoe to the tongue, in order to obscure

the most apparent literal infringement of Stutz's patented

technology. There is though, a blunt and pronounced

violation of our invention. Stutz's expert, Reagin, showed

that the glue lines in Reebok's shoe, which retain the air

bladder between the sole and the layer of foam, constitute

side and inner walls and define a pocket, and that the foam

found in Reebok's shoe reveal closed cells and are the same

as the pockets required by the patent. This comparison, under

the doctrine of equivalents, falls well within legal and

scientific parameters that are appropriate for discussion and

presentation in court trial for a jury to decide. The judges

don't know about, nor are they experts in shoe technology

patents. Why they are making decisions on scientific facts,

instead of allowing a jury to receive full and complete

ate

evidence, properly presented with both sides explaining their

positions, is both disturbing and mysterious.

What more do we have to bring to the court other

than an expert witness to get it before a jury?

There appears to be some attempt by Reebok to

prejudice the process and obfuscate the basic elements of this

patent infringement and trade secret misappropriation case.

During their fifteen(15) minute presentation in front of the

U.S. Court of Appeals Judges, Reebok's attorney repeatedly

and with derision, spoke the name of Stutz's chief executive,

Mr. Liu. Mr. Liu this, Mr. Liu that, Mr. Liu said..., Mr. Liu

did... They were constantly reminding and coloring the

proceedings with the information that Mr. Liu is Chinese. He

is in fact an American citizen. He should have the same

rights as any other citizen, no more no less. It appears that

Reebok's attorney was playing on Mr. Liu's ethnic

background to try to influence the court.

Whether or not Reebok succeeded in clouding the

issues so thoroughly that the truth may never come out;

Whether or not Stutz was underserved by counsel due to lack

of funding or missteps; Whether or not this laborious process

of trying to get to the essence of a case is unfair to the

smaller company; the most basic of issues is the Seventh

Amendment right which states:

IN SUITS AT COMMON LAW, WHERE THE

VALUE IN CONTROVERSY SHALL EXCEED TWENTY

DOLLARS, THE RIGHT OF TRIAL BY JURY SHALL BE

PRESERVED, AND NO FACT TRIED BY A JURY,

SHALL BE OTHERWISE REEXAMINED IN ANY COURT

OF THE UNITED STATES, THAN ACCORDING TO THE

RULES OF THE COMMON LAW.

The trial court and the court of appeal acted as jury

and judge in this instance. This case is not a small matter.

The very existence of Reebok to this date is founded on their

stealing from Stutz. Is the United States a country where you

can meet with people, present your ideas, have discussions,

get ripped off, try to seek justice in a court of law, and then

be denied by someone other than a jury? We find this

impossible to accept nor understand. All we want is to go *

trial. In China, the ancestral homeland of our chief

executive Mr. Liu, where there has been no respect for

intellectual rights, patent owners have little or no recourse to

receive justice. Gradually, they will learn from America, and

the Supreme Court of the United States has the forum to be

an example to the world. This decision, robbing us of the

right to go to trial on this blatant infringement, is a step

backward rather than an example of due process.

Without having gone to trial, it is clear that Stutz has

been deprived of its property by the state. The Fourteenth

Amendment clearly states:

ALL PERSONS BORN OR NATURALIZED IN

THE UNITED STATES, AND SUBJECT TO THE

JURISDICTION THEREOF, ARE CITIZENS OF THE

UNITED STATES AND OF THE STATE WHEREIN THEY

RESIDE. NO STATE SHALL MAKE OR ENFORCE ANY

LAW WHICH SHALL ABRIDGE THE PRIVILEGES OR

IMMUNITIES OF CITIZENS OF THE UNITED STATES;

NOR SHALL ANY STATE DEPRIVE ANY PERSON OF

LIFE, LIBERTY, OR PROPERTY, WITHOUT DUE

PROCESS OF LAW; NOR DENY TO ANY PERSON

WITHIN ITS JURISDICTION THE EQUAL PROTECTION

OF THE LAWS.

With all our respect to the Supreme Court of the

United States, a judge or a group of judges is not a jury.

When the merits of our case, including the credibility

of witnesses, patent infringement doctrines, the integrity of

the acts of the corporate parties, documentation evidence,

and actions of principal individuals, is decided by a judge

rather than a jury; the state has taken our property and

deprived us of the Seventh and Fourteenth Amendment

rights.

We request that the Supreme Court of the United

States provide the fairness that is required in this most

important right of being a citizen of the United States and

doing business in a country founded on the principles of an

individual's rights, entrepreneurship, integrity and freedom.

We should have a jury trial, as promised in the

Seventh Amendment, to decide the facts and provide an

equitable solution to our honorable pursuit.

Stephen Lewis Dunne

Attorney for Petitioner

6363 Sunset Boulevard, Suite 900

Los Angeles, CA. 90028

(213) 464-1100

APPENDIX A

UNITED STATES COURT OF APPEALS FOR THE

FEDERAL CIRCUIT

DECISION - MAY 16, 1997

TEXT OF

UNITED STATES COURT OF APPEALS FOR THE

FEDERAL CIRCUIT

DECISION: MAY 16, 1997

NOTE: Pursuant to Fed. Cir. R. 47.6, this disposition is not

citable as precedent. It is a public record. The disposition

will appear in tables published periodically.

UNITED STATES COURT OF APPEALS FOR THE

FEDERAL CIRCUIT

96-1062, - 1083

STUTZ MOTOR CAR OF AMERICA, INC.,

Plaintiff-Appellant,

REEBOK INTERNATIONAL LTD.,

Defendant/Cross-Appellant.

DECIDED: May 16, 1997

Before ARCHER, Chief Judge, SKELTON, Senior Circuit

Judge, and MICHEL, Circuit Judge.

SKELTON, Senior Circuit Judge.

DECISION

The plaintiff, Stutz Motor Car of America (Stutz),

appeals a decision of the United States District Court for the

Central District of California, in Case No. CV-93-04433-LGP

(EE), entered September 1, 1995, in which the court granted

motions for summary judgment of defendant, Reebok

International Ltd. (Reebok), holding that Reebok had not

infringed Stutz's United States Patent No. 4,610,099 (‘099

patent), issued on September 9, 1986, which claimed an

invention of an inflatable shock-absorbing shoe, by

marketing a line of athletic shoes under the trademark "THE

PUMP" that contained air bladder devices that when inflated

provided the wearer with cushioned support; denying Stutz's

claim of misappropriation of trade secret in the design of the

PUMP line of shoes; denying Stutz's state law, trade secret

related claims, and denying Reebok's motion for attorney

fees from which Reebok cross appeals. We affirm the trial

court in both the appeal and the cross appeal.

DISCUSSION

Stutz is the owner, by assignment from the inventor,

Antonio Signori, of ‘099 patent. The invention claimed in the

patent "contemplates a shock-absorbing shoe sole which

provides adjustably inflated pneumatic support at the rear

half of the sole, and a graduated reduction of shock-

absorbing from the inflated support region, to a forefoot-

support region of minimum compliant yieldability." The

patent consists of eighteen claims, four of which (1, 11, 12,

and 18) are independent.

Reebok is a well known manufacturer of athletic

shoes and clothing, and markets a line of shoes under the

trademark "THE PUMP". Reebok's PUMP shoes feature

internal air bladder devices which, when inflated, provide the

wearer with cushioning, support, and an individualized fit.

In this action Stutz alleges that Reebok

misappropriated Stutz's trade secret in May 1986, in the

design of the PUMP line of shoes, and also violated certain

state trade secret protections, thus adversely affecting Stutz,

and that some of its shoes infringed the '099 patent.

Stutz filed this suit on February 10, 1993, originally

as a State action in the Superior Court of Los Angeles

County, California. Reebok removed it to federal court on

July 27, 1993, on the basis of diversity of citizenship, as the

patent infringement claims had not yet been joined because

Stutz did not acquire title to the patent until April 7, 1994,

over eight months after the removal to the federal court.

Stutz filed two operative complaints as follows: (1)

first amended complaint, filed September 13, 1993, in which

it states its trade secret claims, and (2) a first supplemental

complaint, filed August 22, 1994, in which Stutz states its

claims for patent infringement for the first time, over a year

after removal to the federal court. Reebok filed motions for

summary judgment on both of Stutz's operative complaints,

which were granted by the court for reasons discussed below.

(1) STATE LAW (TRADE SECRET) CLAIMS

Stutz's first amended complaint alleged causes of

action for: (1) fraud; (2) misappropriation and conversion of

trade secret; (3) unfair competition under California Business

& Professions Code 17200 et_seq.; (4) tortious interference

with prospective economic advantage; and (5) an accounting.

The court determined by an order dated December 6, 1993,

that each of these claims is "dependent upon the existence of

a trade secret” owned by Stutz.

Reebok attacked these trade secret claims, arguing-

that (1) the issuance of the ‘099 patent extinguished Stutz's

trade secret and (2) that these claims are time barred.

(2) PUBLIC DISCLOSURE OF STUTZ'S AIR BLADDER

TRADE SECRET

Under California law, to which this court must look

with respect to these state law claims, a trade secret is

defined as:

(I)nformation, including a formula,

pattern, compilation, program, device,

method, technique, or process, that:

(1) Derives independent economic

value, actual or potential, from not being

generally known to the public or to other

persons who can obtain economic value

from its disclosure and use; and

(2) Is the subject of efforts that are

reasonable under the circumstances to

maintain its secrecy.

Cal. Civ. Code 3426.1(d) (West Supp. 1995).

The trial court correctly held that the unprotected

disclosure of a trade secret by the holder terminates the

existence of the trade secret. See Vacco Indus., Inc. v. Van

Den Berg, 6 Cal.-Rptr. 2d 602, 611 (1992; Sinclair v.

Aquarius Elecs., Inc., 116 Cal. Rptr. 654, 659 (1974). Also,

the disclosure of a trade secret in a patent places the

information comprising the trade secret into the public

domain, and it is no longer secret, and the trade secret is

extinguished. Rototron Corp. v. Lake Shore Burial Vault Co.,

712 F.2d 1214, 220 USPQ 169, 170 (7th Cir. 1983).

Stutz’s 30(b) (6) designee, Warren Liu, testified under

oath that the trade secret in issue here was the air bladder and

only the air bladder. Stutz admitted that its air bladder design

and concept (the trade secret) were disclosed in the ‘099

patent which was issued on September 9, 1986. Since Stutz's

trade secret was extinguished on the date the patent was

issued, Reebok could only be liable on Stutz's trade secret

claims for products incorporating the trade secret that were

sold by Reebok before the date the patent was issued. See

Timely Prods. Corp. v. Arron, 523 F.2d 288, 304 (2d Cir.

1975). In this case it is uncontradicted that Reebok did not

work with air bladders until 1988 and did not manufacture,

market, or sell any of its PUMP shoes until 1989, which was

long after Stutz's trade secret had been extinguished by the

issuance of the patent.

It is our view that the court properly granted Reebok's

motion for summary judgment, because Reebok did not use

Stutz's trade secret before it was disclosed and placed in the

public domain by the issuance of the patent.

(3) STUTZ'S FIRST, SECOND, FOURTH AND FIFTH

STATE LAW CLAIMS ARE BARRED BY

STATUES OF LIMITATIONS

Reebok also moved for summary judgment on the

state law claims on the ground that they were barred by the

California statutes of limitations. See Cal. Civ. Proc. Code

338(d) (West Supp. 1995) (providing that fraud claim must

be brought within three years of discovery of facts

constituting fraud); Cal. Civ. Code 3426.6 (West Supp. 1995)

(providing that misappropriation and conversion of trade

secret claim must be brought within three years of when

conduct should have been discovered); Cal. Civ. Proc. Code

eel re

339(1) (West Supp. 1995) (providing that claim based on

obligation not founded on instrument of writing, such as

interference with prospective advantage, must be brought

with two years). A three year statute of limitations also

applies to the accounting claim because it involves the suit

on the trade secret. See Estate of Peebles, 103 Cal. Rptr. 560,

562 (1972). As shown by the statutes, these laws provide

generally that claims like those alleged are barred by

limitations either after two years (on an unwritten

obligation), or after three years (on the other claims) from the

date the claimant had actual or constructive knowledge of the

basis of the claim, or ain three years from the date the basis

for the claim should have been discovered.

Reebok contends that Stutz had constructive

knowledge of Reebok's PUMP shoes, as early as February

1989, when Reebok displayed them at the Sporting Goods

Manufacturer's Association trade show in Atlanta, Georgia,

which was attended by Stutz's agent, Cohen. Also, the PUMP

shoes were described on February 14, 1989, by the New York

Times, and on February 13, 1989, by Footwear News.

Se)

Reebok says that, even if Stutz did not know about

the PUMP in February, it certainly should have discovered

the PUMP by November 1989. It is uncontroverted that

Reebok launched an advertising blitz for the PUMP in

September 1989, with print ads or articles appearing in The

Los Angeles Times, The New York Times, The New York

Daily News, The Boston Globe, The Miami Herald, The

Chicago Sun-Times, The San Francisco Examiner, The

Atlanta Constitution, The Houston Chronicle, USA Today,

The Wall Street Journal, Newsweek, and Footwear News.

Additionally, as of November 1989, hundreds of retail stores

throughout the country carried Reebok's PUMP shoes.

Testimony of Stutz employees Warren Liu, Stutz's

designee, Richard Curotto, and Nettie Singer show that they

discussed Reebok's PUMP shoes in November 1989, and

whether legal claims existed against Reebok. This evidence

shows that Stutz had actual knowledge of the PUMP shoes

and alleged use of the trade secret by Reebok in 1989.

Furthermore, the facts show that 52 articles were published

by major media enterprises across the country that discussed

the PUMP line cf shoes from September through December

1989. Also, 150 stores in New York stocked these shoes,

beginning in November 1989.

Based on the foregoing evidence, the trial court found

that Stutz had actual and constructive knowledge of the

accused Reebok PUMP shoes and the use by Reebok of

Stutz's trade secret by February 1989, or at the very least by

the end of 1989, and that the applicable statues of limitations

began to run at that time, citing United Klans of Am. v.

McGovern, 621 F.2d 152, 154 (Sth Cir. 1980), and General

Bedding Corp. v. Echevarria, 947 F.2d 1395, 1397 (9th Cir.

1991). The trial court concluded that since Stutz filed its

complaint on February 10, 1993, which was more than three

years after the last day of 1989, its first, second, fourth, and

fifth state law claims are barred by limitations.

Stutz contended that it had no actual knowledge

before the end of 1989 that Reebok had misappropriated

Stutz's trade secret in its design of the PUMP line of shoes.

The court rejected this argument because it was contrary to

the sworn testimony of Stutz's employees and agents, Liu,

Curotto, and Singer, who had actual knowledge of the PUMP

shoes and the alleged use of the trade secret by 1989.

Stutz also argued that the widespread publicity and

advertisements about the PUMP line of shoes was

insufficient to impute constructive knowledge to it of the

basis for its claim. The court rejected this argument and

found that because of the advertising, media reporting, and

the distribution of the PUMP line of shoes, sufficient

widespread publicity occurred for Stutz to be charged with

constructive knowledge of the PUMP line of shoes and the

use by Reebok of Stutz's trade secrets in 1989. The court also

granted summary judgment in favor of Reebok on these

claims because they were barred by limitations. We find no

error in the action of the court, and its summary judgment is

affirmed on this basis as well.

(4) PLAINTIFF'S THIRD CLAIM

Stutz's third state law claim alleges that Reebok is

guilty of unfair competition in misappropriating and using

Stutz’s trade secret. Reebok says the claim is barred by the

California Business and Professional Code 17208, which

provides that "any action to enforce any cause of action (for

unfair competition) shall commence within four years after

the cause of action accrued". Thus, the unfair competition

claim is different from the claims discussed above with

regard to limitations, because the period of limitations begins

to run on the claim when the cause of action accrues

regardless of whether Stutz had actual or constructive

knowledge of its accrual. See Rosack v. Volvo of Am. Corp.,

131 Cal. App. 3rd 741, 751 (1982); Dayco Corp. v. Firestone

Tire & Rubber Co., 386 F. Supp. 546, 549 (N.D. Ohio 1974),

aff'd, 523 F. 2d 389 (6th Cir. 1975).

Stutz alleged that Reebok misappropriated and began

the use of Stutz’s trade secret in May 1986, when Stutz's

agent, William Cohen, contacted Reebok "for purposes of

exploring Reebok's interest in manufacturing and/or

marketing athletic footwear utilizing Stutz's air bladder

secret". Stutz claims that Reebok obtained Stutz's trade secret

in this interview and used it in the design and development of

its PUMP shoe line, thereby misappropriating and wrongfully

using Stutz's trade secret. Thus, Reebok's misappropriation

and use of Stutz's secret occurred in May 1986. The period of

limitations on this claim ran in May 1990. Stutz's complaint

was filed on February 10, 1993, almost three years after the

period of limitations had expired. Therefore, the court also

properly granted the summary judgment on Stutz's third

claim because it was barred by limitations.

Stutz attempted to escape the bar of limitations on all

of the foregoing claims by alleging that the statutes of

limitations should be equitably tolled because Reebok

fraudulently concealed its use of the trade secrets. However,

it failed in this effort because it did not produce any evidence

of affirmative acts of concealment by Reebok, which was

necessary to prevail on this theory. Volk v. D.A. Davidson &

Co., 816 F.2d 1406, 1415 (9th Cir. 1987); Gibson v. United

States, 781 F.2d 1334, 1345 (9th Cir. 1986). The court was

not persuaded by Stutz's argument, and it was properly

rejected.

(5) PATENT INFRINGEMENT CLAIMS

As stated above, Stutz is the owner by assignment of

the invention on April 7, 1994, of the ‘099 patent, that

consists of eighteen claims, four of which are independent (1,

11,12 and 18). It contends that only Claims 12 and 18 have

been infringed by shoes made and sold by Reebok. These two

claims provide as follows:

CLAIM 12

A shoe having a sole characterized by a first or

forefoot region of relatively low compliant yieldability,

a second or heel region of relatively great compliant

yieldability, and a transitional intermediate region

between said first and second regions; said heel region

comprising a single pocket defined (1) by flexible

upper and lower panels extending for substantially the

rear half of the sole and (2) by peripheral sidewalls

including an internal wall at juncture with said

intermediate region, a single inflatable bladder retained

within said pocket and peripherally conforming

generally to adjacent surfaces of said walls and panels,

said bladder having an inflation device including a

check valve projecting for external access through one

of said sidewalls, said inflation device being the only

means of pressurizing-gas delivery to and retention

within said bladder; said forefoot region comprising

stiffly flexible and relatively void-free material; and

said intermediate region comprising a distributed

cluster of sealed pockets.

CLAIM 18

A shoe having a sole characterized by a first or

forefoot region of relatively low compliant yieldability,

a second or heel region of relatively great compliant

yieldability, and a transitional intermediate region

between said first and second regions; said heel region

comprising a single pocket defined (1) by flexible

upper and lower panels extending for substantially the

rear half of the sole and (2) by peripheral sidewalls

including an internal wall at juncture with said

intermediate region, a single inflatable bladder retained

within said pocket and peripherally conforming

generally to adjacent surfaces of said walls and panels,

said bladder having an inflation device including a

check valve projecting for external access through one

of said sidewalls, said inflation device being the only

means of pressurizing-gas delivery to and retention

within said bladder; said forefoot region comprising

stiffly flexible and relatively void-free material; and

said intermediate region being characterized by a

distributed plurality of sealed pockets providing

transitional compliant action between the first or

forefoot region and the second or heel region.

These claims show that the patented invention

consisted of a shock-absorbing shoe sole which provides

adjustably inflated pneumatic support at the rear half of the

sole, and a graduated reduction of shock-absorbing from the

inflated support region, to a forefront-support region of

minimum compliant yieldability.

Reebok manufactured and sold a line of shoes under

the trademark "THE PUMP". These shoes contained internal

air bladder devices that when inflated provided the wearer

with cushioning, support, and personalized fit.

Claims 12 and 18 provide for an air bladder that is

contained in a pocket in the heel of the shoe, which is

defined by flexible upper and lower panels and peripheral

sidewalls. The bladder is retained within this pocket and is

required to conform to these sidewalls and upper and lower

panels. This pocket is further described as “a single large

upwardly open pocket, ...defined by a thin bottom panel, ...by

sidewalls, ....rising therefrom, and by the general central

internal wall."

—-

There are numerous differences between the Reebok

shoe and the shee claimed in the ‘099 patent. For instance,

the large, upwardly opening bladder-containing pocket, as

recited in the patent, is absent from the Reebok accused

product. The Reebok shoe employs a bladder that overlays

the conventional sole structure, and the bladder is glued on

its underside to the sole, and on its topside to a thin piece of

foam. The bladder is not in the heel as required by the patent.

there is no upwardly opening pocket in Reebok's shoe. The

bladder is not retained by peripheral sidewalls to which the

bladder conforms, and there is no internal wall at the

juncture of the pocket and the intermediate region of the

sole. The Reebok product does have an intermediate region

of the sole as required by the patent.

Stutz's expert (Reagin) contended that the glue lines

in Reebok's shoe, which retain the air bladder between the

sole and the layer of foam, constituted side and inner walls

and thus define a pocket. The court rejected this argument

and held that the glue lines do not define a pocket as required

the patent, and the glued junction is not a wall as required by

the patent.

The patent recites that the sole of the shoe has three

definable sections or regions, namely, the forefoot region of

stiff low compliant yieldability; the heel region with "mushy"

compliant yieldability; and a transitional intermediate region

between the forefoot and heel comprising a distributed

cluster of sealed pockets. These pockets are defined as "a

cluster of upwardly open generally rectangular pockets. . . of

progressively increasing vertical extent."

The sole of the Reebok show shoes that it has a single

region which is a uniform foam midsole extending along the

entire length of the shoe. It does not have a cluster of sealed,

generally rectangular pockets, or a cluster of any kind. Stutz's

expert Reagin contends that these structures can be found in

the accused shoe when examined under a microscope, and

that the foam found in the accused shoe reveals closed cells.

He says that these tiny bubbles in the foam are the same as

the rectangular pockets required by the patent. The court

eT ee

rejected these arguments and held that the bubbles in the

foam did not meet the limitations of the patent.

Also, the patent claims require "an inflation device

including a check valve projecting for external access

through one of" the pocket sidewalls. We have shown above

that the Reebok shoe does not have pocket sidewalls as

required by the patent, and even if it did, there is no inflation

device for external access projecting through such a sidewall

in the Reebok shoe. Reagin has conceded that if the patent is

construed to mean that the valve must extend through the

sidewall, then the Reebok shoe does not literally infringe the

patent.

Finally, it appears from the foregoing facts that there

are at least three categories (pocket, clusters and valve) of

multiple limitations required by the patent that are absent

from the Reebok shoe.

Stutz claimed that Reebok was guilty of literal

infringement of the '099 patent, and that it was also guilty of

infringement under the doctrine of equivalents. Reebok filed

a motion for summary judgment.

A two-step procedure is required to determine

whether patent claims have been infringed. In the first step,

the claims in the patent are construed to determine their

scope and meaning, which is a question of law for decision

by the court. Markman v. Westview Instruments, Inc., 52

F.3d 967, 34 USPQ2d 1321, 1329 (Fed. Cir. 1995) in banc,

affd €£US.___; 1168S. Ct. 1384. In the second step, the

construed patent claims are compared to the accused device.

A claim covers an accused device if the device embodies

every limitation of the claim, either literally or by an

equivalent. Carroll Touch, Inc. v. Electro Mechanical Sys..

Inc., 15 F.3d 1573, 27 USPQ2d 1836, 1839 (Fed. Cir. 1993);

Johnston v. IVAC Corp., 885 F.2d 1574, 1577, 12 USPQ2d

1382, 1384 (Fed. Cir. 1989); and Corning Glass Works v.

Sumitomo Elec. U.S.A., Inc., 868 F.2d 1251, 1259, 9

USPQ2d 1962, 1967 (Fed. Cir. 1989). Obviously, the absence

of a single limitation in a patent from an accused product

would require a judgment of no literal infringement. But in

the instant case there are three sets of limitations of the ‘099

patent (pocket, clusters and valve) that are absent from

Reebok's products, and therefore, the court correctly granted

Reebok's motion for summary judgment on the ground that

there was no literal infringement of the patent. Stutz has not

appealed the no literal infringement ruling.

Stutz also claims that Reebok's shoes infringed the

'099 patent under the doctrine of equivalents. Even if there is

no literal infringement of a patent, infringement may be

proved under the doctrine of equivalents if the differences

between the patented invention and the accused product are

insubstantial, according to an objective standard. Hilton

Davis Chem. Co. v. Warner-Jenkinson Co., 62 F.3d at 1512,

1521, 35 USPQ2d 1641, 1648. (Fed. Cir. 1995) (in Banc),

cert. granted, reversed on other grounds by , US.

—___ (1997), WL 84999 (U.S.). An insubstantial difference

may be found when an element of the accused product

performs substantially the same function, in substantially the

same way, to achieve substantially the same result as a

corresponding element or limitation in a patent.

The court found in the instant case that it is clear

from a comparison of the accused product with the claims of

the '099 patent that numerous elements of the Reebok shoes

do change quite substantially the way in which the

corresponding limitations of the claimed invention are

performed. In this regard the court found that

"(T)he use of an air bladder on top of the

sole is a substantial change from a bladder

within a pocket in the heel of the shoe; the

use of a sole of uniform density is a

substantial change from a sole with three

regions of varying compliant yieldability;

the absence of a plurality of rectangular

clusters is a substantial change from a shoe

containing such a feature; and the absence

of a valve protruding through the sidewall

is a substantial change from the use of such

a valve."

Based on these findings, the court held that

infringement under the doctrine of equivalents cannot be

found here as a matter of law, and granted Reebok's motion

for summary judgment holding that its shoes did not infringe

the claims of Stutz's invention under the doctrine. This is the

only patent infringement ruling that Stutz has appealed in this

case. We affirm.

(6) ATTORNEY FEES

Reebok filed a cross-appeal from the denial of its

motion asking the court to declare this case to be exceptional

under 35 U.S.C. 285, and to award it attorney fees under the

provisions of that statute. Section 285 provides:

The court in exceptional cases may award

reasonable attorney fees to the prevailing

party.

We held in Haynes Int'l., Inc. v. Jessop Steel Co., 8

F.3d 1573, 1579 (Fed. Cir. 1993); 28 USPQ2d 1652, 1657,

that in certain instances a frivolous case can be exceptional

for purposes of 285. There we said that a frvolous

infringement suit is one in which the patentee knew, or

should have known, on reasonable investigation, that his case

was baseless. Also, the patentee must prove the exceptional

nature of the case by clear and convincing evidence. Carroll

Touch, Inc. v. Electro Mechanical Sys., Inc., 15 F.3d at

1584, 27 USPQ2d at 1845. (Fed. Cir. 1993). Since Reebok is

not the prevailing party, it contends that Stutz’s suit is

baseless and frivolous. It also says that Stutz failed to make a

reasonable investigation as to whether his claims were

substantiated before it filed suit, and that it was unreasonable

and acted in bad faith in alleging infringement, and that its

conduct was reckless during the trial of the case and caused

Reebok to spend unnecessary time and money. Reebok

contends that it has proved by clear and convincing evidence

that under these facts the case is exceptional within the

meaning of the statute. It petitions this court to find that the

case is exceptional and asks that it be remanded to the

district court for a determination of whether an award of

attorney fees is proper.

26 -

The district court stated that is was inclined to agree

with Reebok that the performance of the plaintiff and its

counsel was “less than sterling," but that it could not take the

further step and hold that the suit was baseless to a clear and

convincing standard. The court stated further that Stutz's

expert Reagin presented a good faith theory of infringement

although it was erroneous, and that the bumbling of counsel

does not indicate clearly and convincingly that the action was

wholly without merit. Accordingly, the court failed to find

the case exceptional and the court therefore denied Reebok's

motion under 35 U.S.C. 285.

We cannot say that the finding of nonexceptionality

was clearly erroneous and that in refusing fees the district

court abused its discretion, and we affirm its decision.

Each party shall bear its own costs for this appeal.

APPENDIX B

UNITED STATES DISTRICT COURT, CENTRAL

DISTRICT OF CALIFORNIA

MEMORANDUM AND ORDER ON MOTIONS FOR

SUMMARY JUDGEMENT

ORDERED - AUGUST 29, 1995

TEXT OF

UNITED STATES DISTRICT JUDGE

LOURDES G. BAIRD ORDER FOR JUDGMENT

DATED: AUGUST 29, 1995

FILED IN: U.S. DISTRICT COURT, CENTRAL

DISTRICT OF CALIFORNIA ON SEPTEMBER 1, 1995

ENTERED IN: U.S. DISTRICT COURT, CENTRAL

DISTRICT OF CALIFORNIA ON SEPTEMBER 5, 1995

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

STUTZ MOTOR CAR OF AMERICA, INC.,

Plaintiff,

| REEBOK INTERNATIONAL LTD.,

t Defendant.

CV 93-4433 LGB (RNBx)

JUDGMENT

The Court hereby ORDERS, ADJUDGES, and

DECREES that judgment be and hereby is entered in favor of

defendant, REEBOK INTERNATIONAL LTD., and against

plaintiff, STUTZ MOTOR CAR OF AMERICA, INC., on all

of plaintiffs claims asserted herein and that plaintiff take

nothing of defendant by way of those claims.

SO ORDERED.

Dated: 8/29/95 Signed: Lourdes Baird

LOURDES G. BAIRD

United States District Judge

TEXT OF UNITED STATES DISTRICT JUDGE

LOURDES G. BAIRD MEMORANDUM AND ORDER ON

MOTIONS FOR SUMMARY JUDGMENT AND ON

MOTION FOR AWARD OF ATTORNEYS' FEES

DATED: AUGUST 29, 1995

FILED IN: U.S. DISTRICT COURT, CENTRAL

DISTRICT OF CALIFORNIA ON SEPTEMBER 1, 1995

ENTERED IN: U.S. DISTRICT COURT, CENTRAL

DISTRICT OF CALIFORNIA ON SEPTEMBER 5, 1995

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

GIO AAPDELDIT TPIT Ee or

STUTZ MOTOR CAR OF AMERICA, INC.,

Plaintiff,

REEBOK INTERNATIONAL LTD.,

Defendant.

CV 93-4433 LGB (RNBx)

MEMORANDUM AND ORDER ON MOTIONS FOR

SUMMARY JUDGMENT AND ON MOTION FOR

AWARD OF ATTORNEYS' FEES

I, INTRODUCTION

Defendant has moved this Court for summary

judgment on all claims asserted against it by plaintiff. Having

reviewed all pertinent papers on file herein, including all

supplemental papers filed by the parties, and having

considered the argument of counsel, the Court hereby

ORDERS, for the reasons set forth below, that defendant's

motions for summary judgment are hereby GRANTED.

Plaintiff's complaints are therefore ORDERED DISMISSED

and judgment is ORDERED ENTERED accordingly.

Sai alk ene

PRIS as Ten) FN oF, Grate opfhe

Defendant has also moved this Court for an award of

attorneys’ fees under 35 U.S.C. 285. For the reasons set forth

below, this motion is hereby DENIED.

Il. FACTUAL BACKGROUND

The following facts, and any others so indicated

below, are uncontroverted. Plaintiff Stutz Motor Car of

America, Inc. is the owner, by assignment from Antonio

Signori, of United States Patent No. 4,610,099 ('099 Patent),

which was issued on September 9, 1986. The invention

disclosed in the patent "contemplates a shock-absorbing shoe

sole which provides adjustably inflated pneumatic support at

the rear half of the sole, and a graduated reduction of shock-

absorbing from the inflated support region, to a forefoot-

support region of minimum compliant yieldability.” ('099

Patent, Abstract.) The patent consists of eighteen claims, four

of which (1, 11, 12, and 18) are independent.

Defendant Reebok International, Ltd., a well known

manufacturer of athletic shoes and clothing, markets a line of

shoes under the trademark "The Pump." Broadly speaking,

Reebok's Pump shoes feature internal air bladder devices

that, when inflated, provide the wearer with cushioning,

support, and an individualized fit.

Stutz brings this action alleging that Reebok

misappropriated Stutz's trade secret in the design of The

Pump line of shoes and, further that certain of these shoes

infringe the ‘099 Patent.

Ii]. © PROCEDURAL HISTORY

-On July 27, 1993, defendant removed this action from

the Los Angeles County Superior Court. Federal jurisdiction

was predicated on diversity of citizenship since the patent

infringement claims had not yet been joined. The subsequent

tortured procedural history(Footnote 1) of this case has

Footnote |:

Over the course of the litigation, the Court has sanctioned

plaintiff's counsel in excess of $14,000 for, inter alia, a pattern of filing

inadequate pleadings.

resulted in two operative complaints: (1) plaintiffs first

amended complaint, filed September 13, 1993, wherein

plaintiff states its trade secret claims, and (2) a first

supplemental complaint, filed August 22, 1994, wherein

plaintiff states its claims for patent infringement. (See

Stipulation and Order Re: Operative Pleadings filed Sept. 14,

1994.) Reebok has answered both of these complaints.

Reebok moved for summary judgment on both of

plaintiff's operative complaints. In response, plaintiff filed a

motion for a continuance of the hearing on this motion

pursuant to Federal Rule of Civil Procedure 56(f). The Court

granted plaintiffs motion, in part because plaintiff had

substituted counsel shortly before its opposition papers to

defendant's motions were due to be filed(Footnote 2).

Following the discovery conducted after plaintiff's

Rule 56(f) request, oral argument was heard on the summary

Footnote 2:

Inexplicably, Stutz's former lawyer, Stephen L. Dunne, was

substituted back in for plaintiff after the Court acquiesced to the Rule

56(f) request. At the later hearing on Reebok's summary judgment motion,

Dunne argued Stutz's opposition without assistance from the "new"

lawyer, Adam D. Miller. Further, all supplemental filings following the

summary judgment hearing have been made by Dunne. The natural

inference to be drawn from the conduct of plaintiff's counsel is disturbing

to the Court. If it was clearer that the referenced substitution was done as

@ Tuse to convince the Court to grant the Rule 56(f) request, substantial

sanctions would be assessed.

judgment motions (Footnote 3). At this hearing, the Court first

learned that plaintiffs motion to compel production of

documents from defendant was pending before the

magistrate judge. As a grant of summary judgment while a

motion to compel discovery responses was pending would

have likely violated Rule 56(f), see Garrett v. City of San

Francisco, 818 F.2d 1515, 1518 (9th Cir. 1987); Hancock v.

Montgomery Ward Long Term Disability Trust, 787 F.2d

1302, 1306 n.1 (9th Cir. 1986), the Court held the summary

judgment motions in abeyance pending resolution of the

discovery dispute. Thereafter, United States Magistrate Judge

Robert Block granted plaintiff's discovery motion and

ordered Reebok to produce all deposition transcripts from the

so-called Design Continuum/Spalding action. In light of

Judge Block's ruling, this Court granted plaintiff leave to file

supplemental opposition to defendant's summary judgment

motions for the limited purpose of bringing to the Court's

Footnote 3:

The Court's tentative written order on defendant's motions was in

favor of Reebok on all claims asserted by plaintiff.

attention any evidence that raised a triable issue of fact

discovered from the Design Continuum/Spalding transcripts.

In response to Judge Block's order, Reebok forwarded

to plaintiff's counsel twelve deposition transcripts from the

referenced action. After reviewing this material, plaintiff

filed supplemental opposition papers. Therein, plaintiff

argues two points, which are discussed in turn.

First, plaintiff suggests that it should be allowed to

depose Design Continuum employee Harvey Koselka, who is

apparently identified in the transcripts produced by Reebok.

Plaintiff contends that Koselka might have information on

the disclosure of Stutz's purported trade secret to Reebok.

Plaintiff further contends that this deposition should be

allowed since no past discovery responses “revealed that

Koselka was the individual responsible for working on the

Stutz air bladder concept." (P1.'s Supp. Opp'n at 2.) Plaintiff's

contention is frivolous. As set forth in Reebok's supplemental

response, Koselka was identified in discovery responses as

early as July 1994. As this Court has afforded plaintiff every

reasonable opportunity to conduct discovery, and then some,

and as plaintiff has failed to advise the Court how this further

deposition could possibly avert the unfa .i-vle result

discussed below, the request for additional discovery is

hereby DENIED.

Second, plaintiff argues that Reebok failed to produce

all deposition transcripts for the Design Continuum/Spalding

action. Specifically, plaintiff claims that no transcripts from

the Design Continuum case were included in the material

forwarded by Reebok's counsel. This argument is also

frivolous. As is clear from the declarations of counsel

involved in the Design Continuum and Spalding Cases, it

was agreed by the parties to those actions that depositions

from the Spalding case were to be used in both the Spalding

and Design Continuum cases. The parties entered into this

stipulation since the issues presented in both cases

overlapped. Furthermore, these declarations also make it

clear that transcripts for all deponents of which anyone has

record have in fact been produced. Stutz makes only wild

allegations that certain unidentified transcripts might exist

somewhere, although the names of deponents and other

similarly important matters are not mentioned.

As plaintiff has identified no relevant facts in its

supplemental filing, it perforce has identified no genuine

factual dispute that would cause this Court to change its

position from that reflected in its tentative order on summary

judgment.

FV. ANALYSIS

A. STANDARD FOR SUMMARY JUDGMENT

Summary judgment must be entered against a party

who, after adequate time for discovery and upon motion,

fails to make a showing sufficient to establish an element

essential to that party's case, and on which that party would

bear the burden of proof at trial. Fed. R. Civ. P. 56(c);

Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A party

moving for summary judgment may carry its initial burden

by pointing out to the district court that there is an absence of

a genuine issue of material fact. Id. at 323. However, when

the moving party bears the burden of persuasion on the issue

at trial--for example, a defendant moving for summary

judgment on the basis of an affirmative defense—"that party

must support its motion with credible evidence...that would

entitle it to a directed verdict if not controverted at trial." Id.

at 331 (Brennan, J., dissenting); Houghton v. South, 965 F.

2d 1532, 1536-37 (9th Cir. 1992).

To avoid a summary judgment, the non-movant must

set forth specific facts showing that there remains a genuine

issue of material fact for trial. Id. at 324. A factual dispute is

genuine if a reasonable jury could return a verdict for the

non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S.

242, 248 (1986). The evidence of the non-movant is to be

believed, and all justifiable inferences are to be drawn in the

non-movant's favor. Id. at 255. If the non-moving party's

evidence is merely colorable or is not significantly probative,

then summary judgment may be granted. Id. at 249-50.

Although older cases may suggest or even state the

contrary, recent decisions of the federal circuit have

"repeatedly emphasized that summary judgment is as

appropriate in a patent case as in any other." Avia Group

Int'l, Inc. v. L.A. Gear Cal., 853 F.2d 1557, 1561 (Fed. Cir.

1988) (internal quotation marks omitted); Markman v.

Westview Instruments, Inc., 52 F.3d 967,979 (Fed. Cir. 1995)

petition for cert. filed, 64 U.S.L.W. 3086 (U.S. July 3, 1995)

(No.95-26). And, as with any other case, summary judgment

is appropriate in patent litigation when there is no genuine

dispute as to any material fact. Avia Group, 853 F.2d at

1561; Winner Int'l Corp. v. Wolo Mfg Corp., 905 F.2d

375,376 (Fed. Cir. 1990). “Thus, the motion of an accused

infringer for judgment on the ground of non-infringement of

a patent may be granted where the patentee's proof is

deficient in meeting an essential part of the legal standard for

infringement." Johnston v. VAC Corp., 885 F.2d 1574, 1577

(Fed. Cir. 1989).

B. INITIAL MATTERS

Two matters should be addressed before delving into

the merits of this case. Plaintiff suggests that defendant's

motion should be denied for violation of Local Rule 3.10,

which requires that memoranda of points and authorities

shall not exceed thirty-five pages in length unless permitted

by order of the district judge. Plaintiff argues that defendant

has violated this rule by filing two briefs (one addressing the

trade secret claims and the other addressing the patent

claims), which combined exceed the thirty-five page

limitation.

As plaintiffs past stumblings have resulted in two

operative complaints, as this is a relatively complex patent

dispute, and as defendant's papers are not cumulative or

prolix, the Court FINDS that Local Rule 3.10 may not be

used as a basis for denying the instant motions.

Plaintiff also suggests that the motions should be

denied since Reebok has failed to fully respond to discovery.

This argument is specious. This action has been pending in

the district court since July of 1993 and, from the record

before the Court, it appears that plaintiff propounded little or

no discovery until defendant filed the instant motions for

summary judgment in November 1994. Additionally, the

Court, in granting relief under Rule 56 (f) bent over

backward to accommodate plaintiff's alleged need for more

time for discovery(Footnote 4).

Thus, the Court FINDS that plaintiff's request to deny

the instant motions based on inadequate discovery responses,

to the extent that such an argument is made, must be

summarily rejected.

Footnote 4:

Note also that the Court on at least three occasions (telephone

conference, ex parte motion, and inter partes motion) denied defendant's

requests to limit the scope of discovery available to plaintiff. Stutz has

thus been afforded ample opportunity to both propound and secure

responses to discovery.

Cc. STATE LAW (TRADE SECRET) CLAIMS

Plaintiff's first amended complaint alleges causes of

action for: (1) fraud; (2) misappropriation and conversion of

trade secret; (3) unfair competition under California Business

& Professions Code 17200 et seq.; (4) tortious interference

with prospective economic advantage; and (5) an accounting.

The Court has previously determined that each of these

claims is "dependent upon existence of a ‘trade secret’ owned

by plaintiff." (Order of Dec. 6, 1988 at 4 & n.1)

Defendant attacks these trade secret claims, arguing

that (1) the issuance of the '099 Patent extinguished plaintiff's

trade secret and (2) that these claims are time barred.

1. PUBLIC DISCLOSURE OF TRADE SECRET

Under California law, to which this Court must look

with respect to these state law claims, a trade secret is

defined as

information, including a formula, pattern,

compilation, program, device, method,

technique, or process, that:

(1) Derives independent economic

value, actual or potential, from not being

generally known to the public or to other

persons who can obtain economic value

from its disclosure and use; and

(2) Is the subject of efforts that are

reasonable under the circumstances to

maintain its secrecy.

Cal. Civ. Code 3426.1(d) (West Supp. 1995). In light of this

requirement of secrecy, it is clear that an unprotected

disclosure of the holder's secret terminates the existence of

the trade secret. E.g., Vacco Indus., Inc. v. Van Den Berg. 5

Cal. App. 4th 34, 50 (1992), review denied; Sinclair v.

Aquarius Elecs., Inc., 42 Cal. App. 3d 216, 223-34 (1974).

It is well established that disclosure of a trade secret

in a patent places the information comprising the secret into

the public domain.(Footnote 5) Rototron Corp. v. Lake Shore

Burial Vault Co., 712 F.2d 1214, 1215 (7th Cir. 1983). Once

the information is in the public domain and the element of

secrecy is gone, the trade secret is extinguished and "the

patentee’s only protection is that afforded under the patent

law." Id. This black-letter rule is rooted in principles of the

supremacy of federal law. Id. ("These provisions of federal

patent law prevail over any inconsistent State remedies.").

Here, plaintiff contends that its agent, William

Cohen, contacted Reebok in May 1986 "for the purpose of

exploring Reebok's interest in manufacturing and/or

marketing athletic footwear utilizing plaintiff's air bladder

trade secret." (First Am. Compl. 12.) The gravamen of

plaintiff's state law claims is thus that Reebok used plaintiff's

Footnote 5:

The United States patent laws require that a patent specification

contain "a written description of the invention" to be patented. 35 U.S.C.

112

trade secret in the development of The Pump shoe line.

Plaintiff Stutz's Rule 30(b)(6) designee, Warren Liu,

has stated in deposition testimony that the trade secret in

issue here is the air bladder, and only the air bladder.(Footnote

6) (Bigman Decl., Ex. 8 at 105.) Plaintiff has, however,

admitted that its "air bladder concept and design" (the trade

secret) were disclosed in the '099 Patent, which issued on

September 9, 1986. (First Am. Compl. 10.) Additionally, this

Court has previously determined that "the information

disclosed to Reebok in May of 1986 was contained in the

(‘099 Patent)." (Order of Dec. 6, 1993.) Thus, as plaintiff's

trade secret was extinguished in September 1986 with the

issuance of the '099 Patent, Reebok

Footnote 6:

When asked in deposition, "What is the trade secret that Stutz

contends that Reebok misappropriated?” Liu responded “Air bladder."

(Bigman Decl., Ex. 8 at 105.) Liu further responded "Yes," without

qualification, when asked “Is that all there is to the trade secret?" (Id.)

LNA et Pars ee Vay ™ .

ee Fgh POL -

could only be liable on plaintiffs trade secret claims for

products incorporating the trade secret that were sold by

defendant prior to the issuance date of the patent. See Timely

Prods. Corp. v. Arron, 523 F.2d 288, 304 (2d Cir. 1975)

(holding that plaintiff could recover only damages sustained

"as a result of the sale of (the accused product) by

(defendant) prior to the (issuance) date"); Trenton Indus. v.

A.E. Peterson Mfg. Co., 165 F. Supp. 523, 533 (D. Cal.

1958) (holding that plaintiff could recover royalties only for

products manufactured by defendant after disclosure of

secret but before issuance of patent).

Here, it is undisputed that Reebok did not begin

working with air bladders until 1988 and did not

manufacture, market, or sell any of its Pump shoes until

1989. (Litchfield Decl. 9-11.) It would thus appear, since

Reebok did not use plaintiff's trade secret, if at all, until well

after issuance of the patent, that plaintiffs remedies must be

confined to those afforded under the patent laws.

Plaintiff offers little in the way of opposition on this

ground, arguing only that “other” secrets (besides the air

bladder) were disclosed to Reebok. In support of this

assertion, Stutz states only that Cohen, former agent of Stutz,

showed Reebok a working model of a pump and that Jim

O'Donnell, former president of Stutz, gave Reebok an idea

for putting a pump “on board” the shoe. (Opp'n at 4-5 (citing

Cohen Dep. at 14, 18; O'Donnell Dep. at 119-121).)

Significantly, plaintiff has neither alleged, nor offered any

evidence to even suggest, that Reebok used these “other”

secrets in the design or manufacture of its Pump line of

shoes.

Additionally, and perhaps more importantly, the

Court finds that plaintiff must be judicially estopped from

arguing now, in a desperate attempt to avert summary

judgment, that these “different” trade secrets are really the

subject of its claims. See Morris v. California, 966 F.2d 448,

452 (9th Cir.) ("As a general principle, the doctrine of

judicial estoppel bars a party from taking inconsistent

positions in the same litigation." (citing Milgard Tempering,

Inc. v. Seclas Corp. of Am., 902 F.2d 703,716 (9th Cir.

1990); Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990);

In re Corey, 892 F.2d 829,836 (9th Cir. 1989), cert. denied,

498 U.S. 815 (1990); Stevens Tech. Servs. v. SS Brooklyn,

885 F.2d 584, 588 (9th Cir. 1989)), cert. denied, 113 S. Ct.

96 (1992). The Court has relied on plaintiffs previous

assertions, and in fact has found in a written order that only

the one purported secret has been raised in this lawsuit. See

Morris, 966 F.2d at 452 (stating that judicial estoppel may

apply where court adopts statement made earlier in

litigation). Further, as this is the only secret identified by

Reebok's 30(b)\(6) designee, as it is the only secret espoused

since the filing of the amended complaint in September

1993, (see First Am. Compl. 10, 12), and since Reebok has

confined its defense in this action to that secret, it would be

inequitable in the extreme to allow plaintiff to play fast and

loose with its legal theories and, thereby, threaten or actually

derogate the integrity of the judicial process.

Additionally, and based on the foregoing, the Court

testimony of Liu are sham, as they have been made solely in

hopes of creating and issue of fact. See Kennedy v. Allied

Mutual Ins. Co., 952 F.2d 262, 266-67 (9th Cir. 1991)

(stating that, upon finding subsequent contradictory affidavit

is "sham," district court may reject affidavit on summary

ip. Corp., 520 F.2d

540, 544 (9th Cir. 1975) (holding that subsequent affidavit

issue of fact), McCray v. Casual Corner, Inc., $12 F. Supp.

1046, 1048 (C.D. Cal. 1992) (same).

Based on the evidence submitted by Reebok on this

issue, no reasonable jury could return a verdict at trial in

favor of plaintiff. Thus, for the foregoing reasons, summary

judgment is hereby GRANTED in favor of defendant Reebok

on the ground that Reebok did not make use of plaintiff's

trade secret, if at all, before the secret was placed in the

public domain upon issuance of the ‘099 Patent.

2. STATUTE OF LIMITATIONS

Separately and alternatively, Reebok moves for

summary judgment on the state law complaint on the theory

a. FIRST, SECOND, FOURTH, AND FIFTH CLAIMS

The longest period of limitations provided for under

plaintiffs first, second, fourth, and fifth(Footnote 7) claims is

three years. See Cal. Civ. Proc. Code 338(d) (West Supp.

1995) (providing that fraud claim must be brought within

three years of discovery of facts constituting fraud); Cal. Civ.

Code 34266 (West Supp. 1995) (providing

Footnote 7:

Plaintiffs fifth cause of action, for an accounting, is an action in

equity, and therefore depends o: the “mature of the right being sued

upon” for its period of limitation. istate of Peebles, 27 Cal. App. 3d 163,

166 (1972) As the nature of the right being sued on here is the trade

secret, (see Order of Dec 6, 19%8 at 4 & n.1), the three year period of

tmutanons apphcabie thereto woul also apply to the accounting claim

that misappropriation and conversion of trade secret claim

must be brought within three years of when conduct should

have been discovered); Cal. Civ. Proc. Code 339(1) (West

Supp. 1995) (providing that claim based on obligation not

founded on instrument of writing, such as interference with

prospective advantage, must be brought within two years).

Reebok contends that the clock on plaintiff's claims

began to tick in February 1989 when Reebok displayed its

Pump shoes at the Sporting Goods Manufacturers’

Association trade show in Atlanta, which is asserted to be the

largest trade show in the footwear industry. Media articles

describing the introduction of the Pump appeared in the New

York Times on February 14, 1989 and in Footwear Newson

February 13, 1989. (Bigman Decl., Exs. 5-6.) Additionally,

plaintiff's agent Cohen admits to being present at the Atlanta

show and testified in deposition that he would have seen the

Pump if it was displayed. (id., Ex. 11 at 176.)

Reebok alternatively contends that, even if Stutz did

not know about the Pump in February, it certainly should

have discovered the Pump by November 1989. It is

uncontroverted that Reebok launched an advertising blitz for

the Pump in September 1989, with print ads or articles

appearing in The Los Angeles Times, The New York Times,

USA Today, The Wall Street Journal, Newsweek, and

Footwear News. (Rice Decl., Exs. 1-20.) Additionally, as of

November 1989, hundreds of retail stores throughout the

country carried Reebok's Pump shoes. (Trembath Decl. 4-6.)

With respect to actual knowledge, the testimony of

Stutz's own employees indicates that plaintiff knew of

Reebok's product by November 1989. To wit, Warren Liu,

plaintiffs designee, has testified by declaration that Stutz’s

New York offices closed in 1989. (Liu Decl. 7.) Stutz

in deposition that they discussed with Liu, prior to the offices

being closed, Reebok's Pump shoes and possible legal claims

against Reebok. (Bigman Decl., Ex. | at 44-47: Ex. 2 at 62-

68.) Additionally, Singer confirms that she read of the Pump,

probably in The Wall Street Journal, while still employed in

the New York offices. (Id., Ex. 2 at 62-68.)

In opposition, plaintiff contends that it did not have

actual knowledge of the Pump at the times asserted by

defendant and that defendant's showing is insufficient to

establish that the advertisement and sale of the shoes

imputed constructive knowledge to Stutz. Plaintiff apparently

bases its actual knowledge argument on the declaration of

Liu, in which he states that he did not know of “prior

dealings on the patent” until April 1991. (Liu Decl. 10.) First,

having no “prior dealings on the patent” is not the same as

lacking knowledge of Reebok's design; thus, Liu's statement

on its face does not contradict Reebok's assertion of actual

knowledge. Further, this argument obviously overlooks the

sworn testimony of the Stutz employees who were on notice

of the alleged misappropriation before the end of 1989. Liu's

statements are also inexplicably contrary to the statements of

discussions with Liu prior to the close of the New York

offices in 1989. The Court FINDS, therefore, that Stutz’'s

employees and agents had actual knowledge of the Pump

shoes and alleged use of the trade secret in 1989.

Stutz also argues that Reebok's advertising efforts

were insufficient to establish Stutz's constructive knowledge

(Footnote 8), assuming for the sake of argument that Stutz did

lack actual knowledge. Reebok relies primarily on United

Klans of America v. McGovern, 621 F.2d 152, 154 (Sth Cir.

1980), wherein the court held that constructive knowledge of

the facts giving rise to a claim were imputed to plaintiff's in

light of “widespread publicity" of those facts. Although

plaintiff correctly notes that the United Klans plaintiffs could

Footnote 8:

Plaintiff's contention that California's limitations period for fraud

actions begins to run only with "actual notice” is clearly incorrect. See

General Bedding Corp. v. Echevarria, 947 F.2d 1395, 1397 (9th Cir.

1991) (stating that “statute of limitations begins to run, when (plaintiff)

has actual or constructive notice of its claims").

also be charged with actual knowledge, that fact does not

vitiate the court's clear determination that widespread

publicity alone is sufficient for constructive knowledge.

Based on the advertising, media reporting, and distribution of

the Pump line of shoes described above, the Court does

FIND that sufficient widespread publicity existed for plaintiff

to be charged with constructive knowledge of the Reebok

products and potential use of Stutz's trade secrets. (See Rice

Decl. passim;(Footnote 9)

Footnote 9:

Elizabeth Rice, the director of consumer promotions for Reebok,

identifies 52 articles from major media sources across the country

discussing the Pump line of shoes. (Rice Decl. 1-22, 25-26.) These articles

all appeared September through December 1989. (Id.) Rice also identifies

two national advertisements for the Pump shoes, appearing in Sports

December 1989. (id)

— —_— = — : —

Trembath Decl. 5.(Footnote 10)

As it is clear from the foregoing that Stutz had actual

and constructive knowledge of the accused Reebok product

and the use of plaintiff's purported secret by February 1989,

or at the very latest by the end of 1989, the Court FINDS that

the applicable statutes of limitations began to run at that

time. And, since plaintiff's complaint was filed on February

10,-1993, in excess of three years after the last day of 1989,

plaintiffs first, second, fourth, and fifth claims are time

barred, thus rendering summary judgment for defendant

appropriate. See Von Brimer v. Whirlpool Corp., 536 F.2d

838, 848 (9th Cir. 1976) (whether plaintiff knew or

reasonably should have known of its claim can be decided as

matter of law where facts are undisputed).

Footnote 10:

Justin Trembath, a certified information systems auditor for

Reebok, indicates that 150 stores in New York were stocked with Pump

shoes, beginning in November 1989. (Trembath Dec! 5)

In a last-ditch effort to avert this unfavorable result,

plaintiff argues that the statue of limitations should be

equitably tolled since Reebok fraudulently concealed its use

of the purported trade secrets. This is the first appearance in

the litigation of this theory.

In some cases, the conduct of a

defendant will toll the statute of limitations

under the doctrine of fraudulent

concealment. The doctrine is properly

invoked only if a plaintiff establishes

“affirmative conduct on the part of the

defendant which would, under the

circumstances of the case, lead a

reasonable person to believe that he did not

have a claim for relief."

Volk v. D.A. Davidson & Co., $16 F.2d 1406, 1415 (9th Cir.

1987)(quoting Gibson v. United States, 781 F.2d 1334, 1345

(9th Cir. 1986), cert. denied, 479 U.S. 1054 (1987)).

Additonally, plaintiff "must demonstrate that (it) had neither

actual nor constructive notice of the facts constituting (its)

claims for relief." Id.

Here, plaintiff merely states that it has "affirmatively

alleged that defendant fraudulently and intentionally entered

into efforts to conceal (its) activities from plaintiff which

would have advised plaintiff and put plaintiff on notice of

defendant's conversion of plaintiffs trade secrets." (Opp'n at

16.) In an oversight that is fatal to its argument, plaintiff has

cited no evidence whatsoever of affirmative conduct on the

part of defendant. As "(b)ald allegations of conspiracy and

concealment are not sufficient to make out a case of

fraudulent concealment" so as to toll the statute of

limitations, King & King Enters. v. Chaplin Petroleum Co.,

446 F. Supp. 906, 911 (E.D. Okla. 1978); see also Volk, 816

F.2d at 1415-16 (stating that plaintiff must plead facts with

particularity), plaintiffs argument is ultimately futile.

Additionally, based on the discussion above, plaintiff would

be unable to demonstrate that it had neither actual nor

constructive notice of the facts giving rise to its claim, which

is a requisite element of the asserted theory. Lastly, plaintiff

has not even attempted to show, nor does it appear that

plaintiff could show, that it exercised due diligence to

discover the facts supporting its claims, as this tolling

doctrine clearly requires.

Based of the evidence submitted by Reebok on this

issue, no reasonable jury could return a verdict at trial in

favor of plaintiff. Thus, for the foregoing reasons, defendant's

motion for summary judgment on plaintiffs first, second,

fourth, and fifth causes of action is hereby GRANTED on the

separate and alternative ground of the bar imposed by the

statutes of limitation.(Footnote 11)

Footnote 11:

Defendant also contends that the statutes in issue were not tolled

upon the filing of the complaint since, at that time, plaintiff was not

authorized to do business in California. Based on the analysis herein, the

Court need not reach this issue.

b. THIRD CLAIM

The statue of limitations for plaintiffs unfair

competition claim is set forth in California Business &

Professions Code section 17208. This section provides that

"(any action to enforce any cause of action (for unfair

competition) shall be commenced with four years after the

cause of action accrued." Cal. Bus. & Prof. Code 17208

(West 1987).

"Significantly, the “discovery rule” applicable to the

Claims discussed above is inapplicable on this count; thus,

the statute begins to run when cause of action accrues,

irrespective of whether plaintiff knew of its accrual, unless

plaintiff can successfully invoke the equitable tolling

doctrine. See Rosack v. Volvo of Am. Corp., 131 Cal. App.

3d 741, 751 (1982) (stating that cases interpreting federal

Sherman and Clayton Acts are applicable to California's

Cartwright Act), cert. denied, 460 U.S. 1012 (1983);

Pennsylvania v. Lake Asphalt & Petroleum Co., 610 F. Supp.

885, 890 (M.D. Pa. 1985) (holding that statute of limitations

for antitrust claim begins to run at time of accrual,

notwithstanding plaintiffs ignorance of facts giving rise to

claim); Dayco Corp. v. Firestone Tire & Rubber Co., 386 F.

Supp. 546, 549 (N.D. Ohio 1974) (finding that plaintiff's

ignorance of claim was insufficient to overcome limitations

defense), aff'd, 523 F.2d 289 (6th Cir. 1975).

Here, plaintiff has consistently maintained that

defendant Reebok misappropriated and began application

and use of plaintiff's secret on or about May 1986. (First Am.

Compl. 20, 38.) Since this act clearly would have injured

plaintiffs business, plaintiffs cause of action would have

accrued at that time. Additionally, based on plaintiff's

allegations Reebok's alleged wrong (misappropriation of the

air bladder) was a single, irrevocable wrong as opposed to a

series of multiple wrongs. Thus, the period of limitations on

this claim would have run in May 1990. As plaintiff's

complaint was filed on February 10, 1993, it appears that the

limitations period expired almost three years earlier. As

discussed above, plaintiffs invocation of equitable tolling

based on fraudulent concealment offers no comfort.

Based on the evidence submitted by Reebok on this

issue, no reasonable jury could return a verdict at trial in

favor of plaintiff. Thus, for the foregoing reasons, summary

judgment must be GRANTED in favor of defendant on

plaintiff's third claim for relief on the separate and alternative

ground afforded by the statute of limitations.

D. PATENT INFRINGEMENT CLAIMS

Defendant: also moves for summary judgment on

plaintiffs claim for patent infringement. (Footnote 12) As a

preview, it appears to the Court that plaintiff's infringement

claim is capably summarized by one of its own consultants,

who in comparing Reebok's shoes to the patent stated that

"(a)lthough it is true that both use an inflatable bladder (so

does an auto tire) that is where the functional similarity

ends."

Footnote 12:

For present purposes only, Reebok assumes that the disclosed

invention was patentable.

The law is well established that determining whether

patent claims have been infringed requires a two-step |

analysis. Markman, 52 F.3d at 976; Carroll Touch, Inc. v.

Electro Mechanical Sys., Inc., 15 F.3d 1573, 1576 (Fed. Cir.

1993). In the first step, the patent claims are construed to

determine their scope and meaning; this step is a question of

law for the court. Markman, 976 F.3d at 976, 979; Carroll

Touch, 15 F.3d at 1576-77. In the second step, the patent

claims , as properly construed, are compared to the accused

device or process. Markman, 52 F.3d at 976; Carroll Touch,

15 F. 3d at 1576. "A claim covers an accused device if the

device embodies every limitation of the claim, either literally

or by an equivalent." Id. (emphasis added); see also Johnston,

885 F.2d at 1577 & n.3; Corning Glass Works v. Sumitomo

Elec. U.S.A., Inc. 868 F.2d 1251, 1259 (Fed. Cir. 1989)

(same). The burden is on the patent owner to prove

infringement by a preponderance of the evidence. Carroll

Touch, 15 F.3d at 1578.

Until shortly before the hearing on defendant's

motions, plaintiff had failed to even identify which claims of

the ‘099 Patent were allegedly infringed by defendant's

products and which of the shoes within defendant's Pump

line were believed to be infringing. It is now clear, however,

that plaintiff contends that only two of the '099 Patent's

independent claims(12 (Footnote 13)

Footnote 13:

In Claim 12, the inventor claimed:

A shoe having a sole characterized by a first or forefoot region of

relatively low compliant yieldability, a second or heel region of relatively

great compliant yieldability, and a transitional intermediate region between

said first and second regions; said heel region comprising a single pocket

defined (1) by flexible upper and lower panels extending for substantially

the rear half of the sole and (2) by peripheral sidewalls including an

internal wall at juncture with said intermediate region, a single inflatable

bladder retained within said pocket and peripherally conforming generally

to adjacent surfaces of said walls and panels, said bladder having an

inflation device including a check valve projecting for external access

through one of said sidewalls, said inflation device being the only means of

pressurizing-gas delivery to and retention within said bladder. said

and 18 (Footnote 14)

forefoot region comprising stiffly flexible and relatively void-free material;

and said intermediate region comprising a distributed cluster of sealed

pockets. (‘099 Patent, col. 8, lines 32-50.)

Footnote 14:

Claim 18 claims: