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Nortek Air Solutions, LLC v. Energy Labs, Inc.

United States District Court, N.D. California, San Jose Division

August 4, 2016

NORTEK AIR SOLUTIONS, LLC, Plaintiff and Counterclaim-Defendant,
v.
ENERGY LABS INC., DMG CORPORATION, and DMG NORTH, INC. Defendants and Counterclaim-Plaintiffs.

          JARED BOBROW, AARON HUANG, STEVEN RUSHING, PRIYANKA R. DEV, WEIL, GOTSHAL & MANGES LLP, GARLAND T. STEPHENS, WEIL, GOTSHAL & MANGES LLP Attorneys for Plaintiff and Counterclaim-Defendant NORTEK AIR SOLUTIONS, LLC

          ADAM R. ALPER, BRANDON BROWN, JAMES BEARD, KIRKLAND & ELLIS LLP, MICHAEL W. DE VRIES, KIRKLAND & ELLIS LLP, Attorneys for Defendants ENERGY LABS, INC., DMG CORPORATION, AND DMG NORTH, INC.

          [PROPOSED] JOINT PRETRIAL STATEMENT AND ORDER

          BETH LABSON FREEMAN United States District Judge

         I. STATEMENT OF NATURE OF ACTION AND JURSIDICTION

         A. The Parties

         Plaintiff Nortek Air Solutions, LLC, formerly known as CES Group, LLC (“Plaintiff or “Nortek”) and Defendants Energy Labs Inc., DMG Corporation, and DMG North, Inc. (“Defendants”) are the parties who will appear at trial.

         B. Substance of the Action

         This is an action for patent infringement. Nortek alleges that Defendants have infringed and are infringing the following U.S. patents, directly and/or indirectly, pursuant to 35 U.S.C. § 271(a), (b), and/or (c):

. U.S. Patent No. 7,922,442 (the “’442 patent”),
. U.S. Patent No. 8,414,251 (the “’251 patent”),
. U.S. Patent No. 8,398,365 (the “’365 patent”),
. U.S. Patent No. 8,562,283 (the “’283 patent”),
. U.S. Patent No. 8,694,175 (the “’175 patent”),
. U.S. Patent No. 8,734,086 (the “’086 patent”).

         Collectively, these patents are referred to hereinafter as “the Nortek Patents.”

         Nortek’s allegations of direct and indirect infringement appear in Nortek’s First Amended Complaint (Dkt. No. 48), and were further identified or described during discovery and pretrial proceedings, including in Nortek’s infringement contentions, expert reports, and summary judgment papers. The elements of each of Nortek’s infringement claims are more fully set forth in the parties’ proposed jury instructions, which will be jointly submitted to the Court on June 29, 2016.

         The asserted claims of the Nortek Patents are as follows: claims 16 and 26 of the ’442 patent, claim 8 of the ’251 patent, claim 15 of the ’365 patent, claim 29 of the ’283 patent, claims 1 and 8 of the ’175 patent, and claim 40 of the ’086 patent. Nortek contends that Defendants directly and indirectly infringe these claims based on their manufacture, use, importation, sale, offer for sale, and other conduct relating to certain air handling units that include an Optiline fan array. The table below summarizes the asserted claims and projects identified as including air-handling units (“AHUs”) accused of infringement:

Claim

Projects with Accused AHUs (by EL Job Number)

442 Patent. Claim 16

EL Job Nos. 6711, 6163, 7335. 6183. 6646

442 Patent, Claim 26

EL Job Nos. 6711, 6163, 7335, 6646

251 Patent, Claim 8

EL Job Nos. 7335, 6611, 7261, 7007, 7536, 7457, 7024, 7204, 6576, 6809, 7209, 7375, 7139, 7532, 6478. 7678

365 Patent, Claim 15

EL Job Nos. 7335, 7261, 6611, 7007, 7536. 7457, 7204. 6809. 7375. 7139. 7532. 6478

283 Patent, Claim 29

EL Job Nos. 7335, 8037, 7261, 6611, 7536, 7457, 7204, 6809, 6967, 7577, 7375, 7139, 7532, 8124, 8333. 8797. 8609. 8209. 8734. 7839

175 Patent, Claim 1

EL Job Nos. 7335, 8037, 7536, 7457, 7577, 7375, 7532, 8124, 8333, 8797, 8609, 8209, 8734, 8224, 7839.

175 Patent, Claim 8

EL Job Nos. 7335, 7536, 7457, 7577, 7375, 7532, 8124. 8333. 8797. 8609. 8209. 8734. 7839

086 Patent, Claim 40

EL Job Nos. 7335. 7536. 7457, 7375, 7532. 7678

(collectively, the "Accused AHUs"). Nortek further alleges that Defendants have willfully infringed the Nortek patents.

         Defendants contend that any allegations regarding AHUs not presented in Nortek's infringement contentions or expert reports on infringement are not properly before this Court and should not be presented to the jury. Defendants further dispute that any of the Accused AHUs infringe any of the asserted claims of the Nortek Patents. Defendants seek declarations of non-infringement and invalidity of each of the Nortek Patents, and assert additional equitable defenses against Plaintiffs claims of infringement. (Dkt. No. 56). Defendants allege that the Nortek Patents are anticipated by the folio wing printed publications and ah" handling systems in public use pursuant to 35 U.S.C. § 102(a)-(g) and/or rendered obvious when combined with the skill of a person of ordinary skill in the art pursuant to 35 U.S.C. § 103:

• AAON (asserted against the '442 Patent, Claims 16 and 26; '251 Patent, Claim 8; '365 Patent, Claim 15; '283 Patent, Claim 29; '175 Patent, Claims 1 and 8; and '086 Patent, Claim 40)
• Govemair Carolinas Medical Center Installation (asserted against the '442 Patent. Claims 16 and 26; '251 Patent, Claim 8; '365 Patent, Claim 15: '175 Patent, Claims 1 and 8; and '086 Patent. Claim 40)
• Governair Computer Associates Installation (asserted against the ’442 Patent, Claims 16 and 26; ’251 Patent, Claim 8; ’365 Patent, Claim 15; ’175 Patent, Claims 1 and 8; and ’086 Patent, Claim 40)
• Temtrol DHS Computer Room Installation (asserted against the ’442 Patent, Claims 16 and 26; ’251 Patent, Claim 8; ’365 Patent, Claim 15; ’283 Patent, Claim 29; ’175 Patent, Claims 1 and 8; and ’086 Patent, Claim 40)
• Cleanpak (asserted against the ’442 Patent, Claims 16 and 26; ’251 Patent, Claim 8; ’365 Patent, Claim 15; ’283 Patent, Claim 29; ’175 Patent, Claims 1 and 8; and ’086 Patent, Claim 40)
• PACE (asserted against the ’442 Patent, Claims 16 and 26; ’251 Patent, Claim 8; ’365 Patent, Claim 15; ’283 Patent, Claim 29; ’175 Patent, Claims 1 and 8; and ’086 Patent, Claim 40)
• Huntair HP Corvallis Installation (asserted against the ’175 Patent, Claims 1 and 8)
• Energy Labs, Inc. Installations (asserted against the ’251 Patent, Claim 8; ’365 Patent, Claim 15; ’283 Patent, Claim 29; ’175 Patent, Claims 1 and 8; and ’086 Patent, Claim 40)

         Defendants further allege that the Nortek Patents are rendered obvious by the following combinations of printed publications and air handling systems in public use pursuant to 35 U.S.C. § 103, either alone or when combined with the skill of a person of ordinary skill in the art:

• Collective Governair Installations (asserted against the ’442 Patent, Claims 16 and 26; ’251 Patent, Claim 8; ’365 Patent, Claim 15; ’283 Patent, Claim 29; ’175 Patent, Claims 1 and 8; and ’086 Patent, Claim 40)
• Either AAON, Governair Carolinas Medical Center Installation, Governair Computer Associates Installation, Temtrol DHS Computer Room Installation, or Cleanpak in combination with Greenheck’s Sound Trap Housing (asserted against the ’442 Patent, Claim 26; ’251 Patent, Claim 8; and ’365 Patent, Claim 15)
• Either AAON, Governair Carolinas Medical Center Installation, Governair Computer Associates Installation, Temtrol DHS Computer Room Installation, or Cleanpak in combination with U.S. Patent No. 4,508,486 issued to Charles Tinker in April 1986 (“the ’486 Patent”) (asserted against the ’442 Patent, Claim 26; ’251 Patent, Claim 8; and ’365 Patent, Claim 15)
• Energy Labs, Inc. Installations in combination with either Greenheck’s Sound Trap Housing or the ’486 Patent (asserted against the ’251 Patent, Claim 8; and ’365 Patent, Claim 15)
• AAON in combination with Cleanpak (asserted against the ’175 Patent, Claims 1 and 8)
• AAON in combination with Temtrol DHS Computer Room Installation (asserted against the ’283 Patent, Claim 29)
• Governair Carolinas Medical Center Installation in combination with Cleanpak (asserted against the ’442 Patent, Claim 26; ’365 Patent, Claim 15; ’283 Patent, Claim 29; and ’175 Patent, Claim 8)
• Governair Carolinas Medical Center Installation in combination with PACE (asserted against the ’365 Patent, Claim 16; ’283 Patent, Claim 29; and ’175 Patent, Claim 8)
• Temtrol DHS Computer Room Installation in combination with Cleanpak (asserted against the ’442 Patent, Claim 26; and ’175 Patent, Claims 1 and 8)
• Governair Computer Associates Installation in combination with the ’486 Patent (asserted against the ’365 Patent, Claim 15; and ’283 Patent, Claim 29)

(collectively the “Asserted Invalidity References”). Nortek disputes each of Defendants’ counterclaims and denies that the claims of the Nortek Patents are anticipated or obvious. (Dkt. No. 57). Nortek also disputes that Defendants can rely upon all of the Asserted Invalidity References. Finally, Defendants assert equitable defenses to Nortek’s claims of infringement, including:

Laches: Defendants assert that Plaintiff’s recovery of damages for any alleged infringement is barred under the doctrine of laches, as Plaintiff delayed bringing suit, the delay was unreasonable and inexcusable, and Plaintiff’s unreasonable delay caused Defendants material prejudice.
Waiver: Defendants additionally assert that Plaintiff’s conduct amounted to a knowing relinquishment of its patent rights, or was otherwise so inconsistent with an intent to enforce its rights, so as to induce Defendants to reasonably believe that Plaintiff had relinquished any potential right to exclude Defendants from use of any subject matter claimed by the Nortek Patents.
Equitable Estoppel: Finally, Defendants assert that Plaintiff’s conduct was misleading, that this misleading conduct led Defendants to a reasonable belief that Plaintiff did not intend to and would not assert any patent rights, and that Defendants relied upon Plaintiff’s conduct to their material prejudice.
Nortek disputes these defenses.

         C. Relief Sought

         As set forth in Nortek’s First Amended Complaint and Nortek’s Rule 26(a)(1) disclosures, Nortek is seeking monetary and equitable relief. Nortek’s damages expert has calculated both price erosion and reasonable royalty damages arising from Defendants’ alleged infringement of Nortek’s patents. Nortek also is seeking an accounting of past damages along with pre-judgment and post-judgment interest. Nortek also is seeking permanent injunctive relief to stop any future infringement. To the extent that injunctive relief is not available, Nortek is seeking an ongoing royalty for such future infringement. Nortek’s First Amended Complaint identifies the following points of relief:

. entry of judgment that Defendants have infringed, induced others to infringe, and/or contributorily infringed the Nortek Patents,
. a permanent injunction to stop Defendants and their officers, agents, servants, employees, and attorneys, and others who are in active concert with any of the foregoing, from further infringement of the Nortek Patents,
. an award of damages pursuant to 35 U.S.C. § 284,
. an accounting of damages from Defendants’ ...

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