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SECURITY PEOPLE v. MEDECO SECURITY LOCKS

July 8, 1999

SECURITY PEOPLE, INC., PLAINTIFF,
v.
MEDECO SECURITY LOCKS, INC., DEFENDANT.



The opinion of the court was delivered by: Legge, District Judge.

ORDER ON MOTION FOR SUMMARY JUDGMENT

Plaintiff Security People, Inc. ("SPI") and defendant Medeco Security Locks, Inc. ("Medeco") are in the high security lock industry. They design, develop, manufacture and sell security related mechanisms, software and systems. They are competitors.

In this action, SPI contends that Medeco's products infringe one of SPI's patents, and were developed from confidential information that SPI provided to Medeco under a confidentiality and non-disclosure agreement in 1989. The causes of action alleged in the complaint are: (1) misappropriation of trade secrets; (2) breach of

  contract, the 1989 agreement; (3) unfair competition under the California Business and Professions Code; and (4) infringement of SPI's 043 patent. Medeco denies the allegations, and filed a counter claim which is not at issue in the pending motion.

I.

Medeco has brought a motion for summary judgment on all four causes of action. Medeco contends that SPI's state law claims (causes of action 1, 2, and 3) are barred by a 1995 settlement agreement between the parties. Medeco also contends that the fourth cause of action, patent infringement, is barred by collateral estoppel, because the same issues were litigated and determined in Medeco's favor in a prior lawsuit between the parties; Gokcebay v. Medeco Security Locks, C-93-0627-EFL, in this court.

SPI opposes the motion. It was briefed, argued, and submitted for decision. The court has reviewed the moving and opposing papers, the record of the case, the arguments of the parties, and the applicable authorities. The court concludes that there are no genuine issues of material fact which preclude summary judgment under Rule 56 of the Federal Rules of Civil Procedure, and that Medeco's motion should be granted.

II.

In the first action, SPI sued Medeco for misappropriation of trade secrets, breach of contract, unfair competition, and patent infringement. The state law claims were based upon the alleged breach of the 1989 confidentiality agreement.

Medeco moved for a summary judgment that its so-called VLS product did not infringe plaintiffs patents. The court granted Medeco's motion. In a sixteen page order, the court construed SPI's patent claims, and then found that Medeco's VLS device did not infringe those claims.

The parties then settled the suit in 1995, including the patent claim and the state law claims. As a part of the settlement, Medeco paid SPI a sum of money, and SPI gave Medeco a release of all claims and a covenant not to sue for patent infringement. The parties also stipulated to request vacation of the summary judgment order, but the settlement agreement specifically stated that it was not contingent upon vacation of that order. The order was not vacated by the court.

The present action is quite similar to the first. The state law claims for misappropriation of trade secrets, breach of contract, and unfair competition are again based upon the 1989 agreement. Both the present and the prior patent infringement claims concern SPI's 043 patent. And both infringement cases involve the same product of Medeco. The first suit involved defendant's VLS, while the present suit alleges infringement by defendant's PMLS product. However, at oral argument the parties agreed that the VLS and PMLS are the same for purposes of patent infringement analysis.

III.

As stated, Medeco's motion for summary judgment on the state law claims (causes of action 1, 2, and 3) is on the ground that they are barred by the 1995 settlement agreement. The settlement agreement contained a release clause, which provided in relevant part as follows:

  In consideration of the settlement amount and other
  consideration described in this agreement, and the
  mutual promises and covenants contained herein, SPI
  and its predecessors . . . release and forever
  discharge Medeco of and from any and all claims,
  damages, actions which were or could have been alleged
  by SPI in the suit, including any claims of actual
  damages, enhanced damages, attorneys' fees, injunctive
  relief, expenses and costs . . . (emphasis added).

Medeco contends that the release bars the state law claims because they have the same genesis as the state law claims in the first action; that is, a breach

  of the 1989 confidentiality agreement. SPI contends that the release only covered claims involving the products at issue in the prior suit, and that this action is for acts of defendant subsequent to the release. Therefore the issue is whether the release was limited to the products then at issue, or whether the release bars all claims and causes of action based upon the confidentiality agreement that was at issue between the parties in the first case.

A.

The settlement agreement appears to refer to settling claims and causes of action, and not to settling disputes with ...


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