HexcelPack, LLC v. Pregis LLC

CourtDistrict Court, N.D. Illinois
DecidedApril 29, 2024
Docket1:23-cv-15282
StatusUnknown

This text of HexcelPack, LLC v. Pregis LLC (HexcelPack, LLC v. Pregis LLC) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
HexcelPack, LLC v. Pregis LLC, (N.D. Ill. 2024).

Opinion

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

HEXCELPACK, LLC, ) ) Plaintiff, ) ) No. 23 C 15282 v. ) ) Judge Rebecca R. Pallmeyer PREGIS LLC, ) ) Defendant. )

MEMORANDUM OPINION AND ORDER

Plaintiff HexcelPack, LLC holds several patents related to its paper packaging products and a manual dispenser for these products. In 2021, Defendant Pregis LLC acquired HexcelPack’s former supplier Danco and—HexcelPack alleges—copied the leftover inventory of finished product and raw materials in Danco’s possession to make and sell competing products. HexcelPack now sues Pregis for infringing four of its patents and for inducing its customers to do the same. Pregis has moved to dismiss HexcelPack’s suit under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. For the reasons stated below, the motion is denied. BACKGROUND The facts alleged in Plaintiff’s complaint are accepted as true for purposes of this motion. Plaintiff is an Arizona-based company that sells paper products for use in wrapping items during transportation and shipping, including its trademarked HexcelWrap™ product. (Compl. [1] ¶¶ 1, 25, 28.) HexcelWrap™ is a roll of flat paper that is cut with regularly spaced slits; when placed under tension, these slits expand into three-dimensional cells that provide cushioning for packaged materials. (Id. ¶¶ 26–28.) Plaintiff’s website describes its product as “an updated version of a 30-year-old technology” that offers a more environmentally sustainable, biodegradable alternative to bubble wrap. Why HexcelPack, HexcelPack, https://www.hexcelpack.com/why-hexcelpack/company-history (last visited Apr. 29, 2024). Plaintiff is the owner by assignment of the four patents at issue in this case: U.S. Patent Nos. 11,760,548 (the “’548 patent”), 11,479,009 (the “’009 patent”), 11,383,906 (the “’906 patent”), and 10,669,086 (the “’086 patent”). (Id. ¶¶ 8–12.) All four were issued between 2020 and 2023 to inventor David Goodrich and are currently in effect. (Id.) The ’086 patent, of which the ’548 and ’906 Patents are continuations, is “generally directed to expanded slit sheet paper that is employed in packaging applications and the like.” (Id. ¶¶ 23; see Compl. Exs. A, C, D.) The key innovation that the ’086 patent and its continuations claim over the prior art is not the “expandable” slit-sheet format itself, but the use of a special form of paper with stretchable qualities, known as “extensible paper,” in combination with this format. (See Compl. Ex. D at 10.) The ’548, ’906, and ’086 patents together contain more than a hundred independent and dependent claims for various embodiments of this extensible slit-sheet paper product, as well as for methods of using this product to wrap objects for shipment. (Compl. ¶¶ 13, 19, 22.) The remaining patent (the ’009 patent) describes a separate dispensing device from which a user can unwind large rolls of expandable, extensible slit-sheet paper for wrapping and packaging goods. (Id. ¶ 17.) The dispenser includes a “tensioning device” that creates resistance as the user unwinds the roll, so that the paper can be expanded as it is pulled outward. (Compl. Ex. B at 2.) The ’009 patent contains two independent claims and forty-two dependent claims. (Compl. ¶ 16.) In 2017, Plaintiff entered into an agreement with Danco Packaging Supply Co. (“Danco”) to “explore opportunities” for Danco to manufacture and supply HexcelWrap™ paper produced pursuant to Plaintiff’s patents. (Id. ¶ 25.) The agreement contained a confidentiality provision, as well as a noncompete provision preventing Danco from “[c]ompet[ing] with Hexcel[Pack] by making, or selling Hexcel[Pack]’s currently patent pending and/or patented products, to Hexcel[Pack]’s customers”; both provisions were effective for a one-year term after cessation of the agreement. (Id. ¶ 32.) That same year, Plaintiff and Danco moved forward with their deal by executing a separate supply contract, pursuant to which Danco would produce and supply Plaintiff with HexcelWrap™ paper. (Id. ¶ 26.) Danco acquired specially designed die-cutting equipment under the terms of this contract in order to manufacture the slit paper in accordance with Plaintiff’s specifications. (Id. ¶ 27.) In the summer of 2021, while both of these agreements were still in effect, the owners of Danco finalized an agreement with Defendant Pregis—a global packaging company headquartered in Illinois—for Pregis to acquire Danco. (Id. ¶¶ 2–4, 29, 38.) Plaintiff was not apprised of this deal in advance and the complaint does not say when Plaintiff learned of it, but in August 2021, HexcelPack issued a purchase order to Danco to buy the equipment Danco had used to manufacture the HexcelWrap™, plus any outstanding inventory of finished product and raw materials. (Id. ¶¶ 29, 30.) Plaintiff also signed the “cessation section” of its confidentiality and noncompete agreement with Danco (presumably, a clause to end the agreement early), and waived the one-year extension of the confidentiality provision after cessation.1 (Id. ¶ 31.) It is not fully apparent whether Danco could have refused Plaintiff’s purchase order (the exact terms of its agreements with Plaintiff are not in the record), but it appears in any event that Danco accepted it through partial performance by delivering the special die-cutting equipment used to manufacture Plaintiff’s patented products. (Id. ¶ 33.) Plaintiff alleges, however, that Danco “doctored” the purchase order to make it appear that Plaintiff had also waived the one-year noncompete provision after cessation, and that Danco withheld delivery of the finished slit paper and raw materials. (Id. ¶ 32–33.) Plaintiff alleges that Danco’s new owner Pregis subsequently drew on these withheld materials to manufacture its own expandable paper packaging product branded as Easypack® GeoTerra™—a copy of Plaintiff’s HexcelWrap™ product in direct infringement of Plaintiff’s patents. (Id. ¶¶ 33, 36.) Evidence of copying, HexcelPack alleges, includes the facts that Pregis not only sold the withheld inventory of HexcelWrap™ directly to its own customers, but advertised

1 Precisely why Plaintiff broke off its relationship with Danco in light of the sale to Pregis is not specified in the complaint. its Easypack® GeoTerra™ product on its website using photos of the HexcelWrap™. (Id. ¶¶ 34– 36.) Plaintiff further claims that Pregis copied its patented design for a manual dispenser to be used in conjunction with the expandable paper products. (Id. ¶ 50.) Plaintiff filed this action in October 2023, asserting four counts of infringement under 35 U.S.C. § 271 for the ’548, ’009, ’906, and ’086 patents. (Id. ¶¶ 78–111.) It sought a declaration of infringement from this court, an injunction against further infringing activity, and damages plus reasonable attorneys’ fees and costs. (Id. at pp. 23–24.) Defendant’s motion to dismiss [17] (“Def.’s Mot.”) is now before the court. LEGAL STANDARD On a motion to dismiss a patent infringement case, Federal Circuit law governs the substantive elements of Plaintiff’s patent claims, but the law of this Circuit controls the procedural standards otherwise applicable to the motion. Michigan Motor Techs., LLC v. Bayerische Motoren Werke AG, No. 22 CV 3804, 2023 WL 4683428, at *2 (N.D. Ill. July 21, 2023). A motion to dismiss under Rule 12(b)(6) “tests the sufficiency of the complaint, not the merits of the case.” Berkeley*IEOR v. Teradata Operations, Inc., 448 F. Supp. 3d 864, 869 (N.D. Ill. 2020) (quoting McReynolds v. Merrill Lynch & Co., 694 F.3d 873, 878 (7th Cir. 2012)).

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HexcelPack, LLC v. Pregis LLC, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hexcelpack-llc-v-pregis-llc-ilnd-2024.