Nova Design Technologies, Ltd. v. Walters

875 F. Supp. 2d 458, 2012 WL 2469974
CourtDistrict Court, E.D. Pennsylvania
DecidedJune 28, 2012
DocketCivil Action No. 10-7618
StatusPublished
Cited by4 cases

This text of 875 F. Supp. 2d 458 (Nova Design Technologies, Ltd. v. Walters) is published on Counsel Stack Legal Research, covering District Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nova Design Technologies, Ltd. v. Walters, 875 F. Supp. 2d 458, 2012 WL 2469974 (E.D. Pa. 2012).

Opinion

MEMORANDUM

McLAUGHLIN, District Judge.

This case arises from an ownership dispute over the technology embodied in United States Patent Number 6,878,157 (the “'157 Patent”), which relates to technology used in heat packs. The plaintiff, Nova Design Technologies, Ltd. (“Nova”), asserts that its founder Andrew Milligan and researcher Jaime Schlorff invented and developed a sandpaper-based trigger for heat packs. Nova asserts that Matthew Walters, Brian Guerra, and Dale Walters (the “individual defendants”) stole the idea from them and used it to apply for and receive the '157 Patent, which they later sold to the defendants Children’s Medical Ventures, LLC (“CMV”), Respi[461]*461ronics, Inc., and Respironics Novametrix, LLC (the “corporate defendants”).1

The Court bifurcated proceedings in an order dated May 23, 2011, in which the Counts I-VI of the complaint would be subject to discovery and dispositive motions separately from Counts VTI-XI. The Court dismissed Count I, which was brought only against Matthew Walters, in an order dated July 7, 2011. The individual defendants have moved for summary judgment on Counts II-VI, and the corporate defendants have moved separately for summary judgment on Counts III-V. The Court will grant the individual defendants’ motion in part and the corporate defendants’ motions in full.

I. Background

Nova filed this action on December 30, 2010 and filed an amended complaint on February 15, 2011. It alleges that Schlorff and Milligan invented an aluminum oxide sandpaper “trigger” for use in therapeutic heat packs in or around 1994. Heat pack triggers of this kind are apparently manipulated by the user to release particulate matter into a supercooled solution and cause a phase change, activating the heat pack and releasing warmth.

Nova alleges that in 1998 it agreed to provide samples of its sandpaper trigger to Omni Therm (“Omni”), a manufacturer of heat packs that was founded by Dale Walters and owned by Matthew Walters.2 Nova and Omni executed an agreement covering “confidential information” of Nova’s and prohibiting use of that information for anything other than its evaluation for use in manufacturing. Negotiations between Omni and Nova continued for several years but no ongoing business relationship was established. In 2001, Matthew Walters filed two patent applications relating to a sandpaper trigger for use in a heat pack, ultimately resulting in the issuance of the '157 Patent in 2005. In 2006, Omni sold the '157 Patent, along with most of its assets, to CMV, a manufacturer and seller of healthcare products affiliated with Respironics Novametrix and Respironics, Inc. As part of that sale CMV hired Brian Guerra, an employee of Omni.

The amended complaint asserted causes of action for Breach of Contract (Count I) against Matthew Walters; Fraudulent or Negligent Misrepresentation (Count II) against Matthew and Dale Walters and Brian Guerra; and the following causes of action against all defendants: Fraudulent Concealment or Nondisclosure (Count III); Conversion (Count IV); Trade Secret Misappropriation (Count V); Correction of Inventorship and Ownership (Count VI); Patent Infringement (Count VII); Unjust Enrichment (Count VIII); and for violations of the Sherman Act (Counts IX-XI). Only Counts II-VI are at issue in the instant motions, because of the bifurcation order and the Court’s earlier dismissal of Count I as discharged in Matthew Walters’s bankruptcy proceedings.

The individual defendants filed a motion for summary judgment as to all claims against them in this phase of the proceedings (Docket No. 93) (“Ind. Defs.’ Mot.”). The corporate defendants separately filed motions as to the conversion claim (Docket No. 94) (“Corp. Defs.’ Conversion Mot.”), fraudulent concealment claim (Docket No. 96) (“Corp. Defs.’ Concealment Mot.”), and trade secret misappropriation claim (Docket No. 98) (“Corp. Defs.’ Trade Secret [462]*462Mot.”). Opposition and reply briefs were filed as to all motions, and the Court held oral argument on May 9, 2012.

II. Summary Judgment Record

The defendants filed separate motions for summary judgment, each presenting separate statements of undisputed facts. The plaintiff did not address the defendants’ statements of facts as provided for in Federal Rule of Civil Procedure 56, but instead filed its own statement of facts.

The corporate defendants objected to portions of the plaintiffs Statement of Material Facts on a variety of grounds, including that (a) many asserted facts were never referred to by the plaintiff in opposing the motions; (b) some facts were not supported by citation to the record; and (c) others were inadmissible because they lacked foundation, were hearsay or speculation, or constituted inappropriate lay opinion testimony. The individual defendants joined in those objections.

The defendants largely took issue with portions of declarations submitted by Andrew Milligan and Jaime Schlorff, Plaintiffs Exhibits A and E. These declarations include statements regarding CMV heel warmer sales volumes, beliefs as to Omni shipments of sandpaper trigger products, practices of competitors and “persons in the medical industry” generally, and opinions as to the meaning of claims in the '157 Patent. Milligan Decl. ¶¶ 11, 16-17, 19; Schlorff Decl. ¶¶ 7, 9, 10, 21, 22, 24, 25, 27. These statements were not relied on by the Court in resolving the instant motions because they are inadmissible as not based on personal knowledge; the conclusions regarding the '157 Patent are also legal in nature and are thus not facts. The corporate defendants argued that even considering the statements to which they objected, no genuine issue for trial remained.

The enumeration of facts below is limited to those that were relied1 upon in the parties’ briefing, supported by reference to the record, and material to the Court’s resolution of the instant motions.3

A. Omni Therm and Nova Design

Omni Therm, Inc. was a Missouri corporation founded by Dale Walters in 1987 that developed and sold medical supplies, including infant heel warmer heat packs. Companies manufacturing heat packs used a variety of methods to drop particulate matter into solution, triggering a “phase change” reaction and generating heat. For example, a company named Baxter used a “bag-in-a-bag” trigger that triggered a reaction when the internal bag was punctured. Dep. of Jason Maxwell on behalf of Cardinal Health, Inc., Nov. 10, 2011 at 15:1-3, PL’s Ex. G. Starting in around 1993, Omni sold an infant heel warmer using a “pinch and rub” trigger design patented by Dale Walters, consisting of a bag containing a supercooled sodium acetate solution and a metal disc trigger with prongs that punctured the bag to activate the warmer. D. Walters Dep. 20-22, Ind. Defs.’ Ex. F; Patent No. 5,305,733 (“ '733 Patent”), PL’s Ex. O at GHG0303.

Dale and Janet Walters resigned as officers and directors of Omni on August 22, 1995. On December 30, 1999, they turned over all of the shares they owned to Mat[463]*463thew Walters, leaving Matthew as the sole shareholder, director, and officer of Omni Therm. M. Walters Dep. Nov. 1, 2011 at 10:23-25, 11:1-4, Ind. Defs.’ Mot. Ex. A; Ind. Defs.’ Mot. Ex. B at WALTERS000033-41.

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Bluebook (online)
875 F. Supp. 2d 458, 2012 WL 2469974, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nova-design-technologies-ltd-v-walters-paed-2012.