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Atlantic Inertial Systems Inc. v. Condor Pacific Industries of California, Inc.

United States District Court, C.D. California

August 18, 2014

ATLANTIC INERTIAL SYSTEMS INC.,
v.
CONDOR PACIFIC INDUSTRIES OF CALIFORNIA, INC. ET AL

Elizabeth Treckler, George Newhouse, Jr., Attorneys Present for Plaintiff.

Susan Leader, Edward Woods, Attorneys Present for Defendants.

CIVIL MINUTES - GENERAL

CHRISTINA A. SNYDER, District Judge.

Proceedings: ORDER RE: DEFENDANTS' MOTION TO STRIKE INSTRUMENT TECH AGREEMENT AND EXCLUDE ANY EVIDENCE BASED THEREON

I. INTRODUCTION AND BACKGROUND[1]

A. The Original Action

In the 1960s, defendant Sidney Meltzner founded Condor Pacific Industries, Inc. ("Condor I") to manufacture gyroscopes. Condor I produced these gyroscopes for the military, which integrated them into aircraft as navigational devices. In 2002, Meltzner sold Condor I, including all of its intellectual property, to BAE Systems Inertial Products ("BAE"). Plaintiff Atlantic Inertial Systems Inc. ("AIS") acquired BAE in 2007.

After expiration of the sale agreement's non-compete provision, Meltzner founded a new gyroscope-manufacturing corporation with the name Condor Pacific Industries of California, Inc. ("Condor II"). Condor II hired Condor I's former employees, and began operating out of Condor I's old plant in Westlake Village, California.

On May 6, 2008, AIS filed suit against Meltzner and Condor II, alleging that Condor II had misappropriated intellectual property that BAE owned by virtue of Meltzner's sale of Condor I. AIS accused Meltzner of resurrecting Condor I, and using Condor I blueprints to manufacture gyroscope designs that Meltzner had previously sold to BAE. The operative First Amended Complaint ("FAC") asserted claims for (1) false designation of origin, (2) infringement of a common law mark, (3) common law unfair competition, (4) misappropriation of trade secrets relating to pricing information, (5) misappropriation of trade secrets related to drawing packages, (6) state law unfair competition and (7) interference with prospective economic advantage. Dkt. 37.

After substantial discovery litigation, Judge Nguyen imposed terminating sanctions against defendants with respect to AIS's third claim (common law unfair competition) and fifth claim (misappropriation of trade secrets related to drawing packages). The case subsequently proceeded to a jury trial on, among other issues, the monetary damages portion of AIS's third and fifth claims.

On March 4, 2011, the jury returned a defense verdict. Dkt. 300. Subsequent to the verdict, plaintiff filed a motion requesting, among other things, that Judge Nguyen award a reasonable royalty pursuant to Cal. Civ. Code ยง 3426.3(b). Dkt. 306. On August 25, 2011, Judge Nguyen denied plaintiff's motion. Dkt. 345. Thereafter, plaintiff appealed. On October 30, 2013, the Ninth Circuit issued a memorandum disposition reversing Judge Nguyen's order declining to award plaintiff a reasonable royalty. The Ninth Circuit remanded to this Court "to determine whether a royalty award is warranted and, if so, in what amount." Dkt. 372 at 3.

B. Proceedings on Remand

On March 19, 2014, plaintiff and defendants filed Opening Briefs with this Court regarding further proceedings on remand. Dkt. 384, 386. Plaintiff replied on May 16, 2014, dkt. 401, and defendants responded on May, 19, 2014, dkt. 404. On June 23, 2014, the Court requested additional briefing regarding the standard to be employed in determining whether or not to grant a royalty. Dkt. 407. The parties submitted the relevant briefing to the Court on July 7, 2014. Dkt. 409, 411.

The parties disagree as to both the standard to be employed in determining whether or not to grant a royalty, as well as the method by which to calculate the royalty rate should the Court determine that a royalty is warranted. Plaintiff has proposed a royalty of $1.55 million, relying largely on the expert analysis of Neil J. Beaton. Dkt. 384. In turn, Beaton's analysis relies on a gyroscope licensing agreement between AIS and Instrument Tech ("the Agreement"). On July 7, 2014, defendants filed a Motion to Strike the Instrument Tech Agreement and to exclude any ...


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