Serby v. First Alert, Inc.

134 F. Supp. 3d 668, 2015 U.S. Dist. LEXIS 130427, 2015 WL 5693676
District Court, E.D. New York·Decided September 28, 2015·No. No. 09-CV-4229 (WFK)(VMS)·Published

Opinion

ORDER:

WILLIAM F. KUNTZ, II, District Judge.

Victor M. Serby (“Plaintiff’), brought this action in the Supreme Court of the State of New York, Kings County, against First Alert, Inc. (“First Alert”) and its subsidiary BRK Brands, Inc. (“BRK”) (collectively “Defendants”), which then removed the case to this Court. ' Plaintiff alleges Defendants manufacture, distribute, and sell various smoke detectors without payment of royalties to Plaintiff, in breach of a pre-existing settlement agreement from a prior, related, patent infringement litigation. Plaintiff seeks recovery on two causes of action: (1) breach of contract and (2) for an accounting to determine the precise amount of damages. Defendants counterclaimed on the following grounds: (1) for a declaration of patent unenforceability and (2) for a declaration of patent invalidity.

This Court conducted a bench trial in accordance with 28 U.S.C. § 1330(a) beginning on July 27, 2015 and ending on July 30, 2015. Having reviewed the testimony and exhibits, as well as the parties’ post-trial submissions, this Court, pursuant to

Rule 52 of the Federal Rules of Civil Procedure, issues the following Findings of Fact and Conclusions of Law. “To the extent that any of the findings of fact may be deemed conclusions of law, they also shall be considered conclusions. Likewise, to the extent that any of the conclusions of law may be deemed findings of fact, they shall be considered findings.” Giordano v. Thomson, No. 03-CV-5672, 2007 WL 1580081, at *1 (E.D.N.Y. May 29, 2007) (Seybert, J.) (citation omitted). For the reasons set forth below, this Court finds Defendants not liable on each of Plaintiffs causes of action. This Court further finds Plaintiffs patent is enforceable and valid.

ANALYSIS

I. Findings of Fact — Plaintiffs Claims

In 1995, Plaintiff commenced a lawsuit against Defendants claiming Defendants’ sale of its SA10YR model smoke alarm infringed Plaintiffs United States Patent Number 5,444,434 (“the '434 Patent”), entitled “Extended Life Smoke Detector.” Trial Transcript (“Tr.”) 157:9-10, 244:24-245:9; Ex. 11 (“'434 Patent”).

The SA10YR smoke detector model had batteries intended to last for ten years. Tr. at 245:22-24. It was constructed with a cover snapped to a base that was uno-penable without the use of tools and sealed to prevent the consumer from accessing or replacing parts inside the smoke alarm, including batteries. Id. at 246:11-247:4, 289:8-12.

In April 1997, Plaintiff and Defendants entered into a Settlement, License, and Mutual Release Agreement (the “Settlement Agreement”), whereby the parties agreed to settle the lawsuit. Ex. 2 (“Settlement Agreement”). Under the Settlement Agreement, the parties agreed:

[672] [Defendants] agree to pay [Plaintiff] a 5% royalty, semi-annually, based on the net sales of smoke detectors which incorporate a lithium battery, meet all other limitations of Claims 5 or 10 of [the '434 Patent] and which have a battery compartment that is unopenable as defined in Claims 5 or 10 of [the '434 Patent] and which are made, used or sold by [Defendants] in the United States for the time period during which Claims 5 or 10 of [the '434 Patent] remain valid and enforceable ... [Defendants] can make, have made, use, offer for sale, sell, import and export royalty free (i) lithium batteries for use in smoke detectors, and (ii) smoke detectors which have battery compartments that are openable and can be used "with lithium batteries.

Id. at ¶ 4.

Defendants paid Plaintiff royalties under the Settlement Agreement for all sales of the SA10YR smoke alarm model in the amount of about one million and five hundred thousand dollars ($1,500,000). Tr. 160:15-21, 161:1-14, 249:18-24, 253:7-9. Plaintiff admits all royalties were paid as required under the Settlement Agreement for the SA10YR smoke alarm model. Id. at 223:4-7. The '434 Patent was valid for seventeen years, and expired on August 22, 2012, after which no royalties would have been due under the Settlement Agreement on any sales or any smoke alarms by Defendants. Id. at 174:1-8, 176:2-7.

Defendants ceased the production and sale of the SA10YR smoke detector in response to changed industry standards and replaced the SA10YR model with the SA340 smoke detector model. Id. at 250:8-251:23, 298:3-6. Defendants did not pay Plaintiff royalties under the Settlement Agreement for sales of the SA340 model. Id. at 253:10-17. According to Defendants, Plaintiff was not entitled to any royalty payments under the Settlement Agreement for sales of the SA340 model because it had an openable battery compartment. Id.

II. Conclusions of Law — Plaintiffs Claims for Breach of Contract and Accounting

Plaintiff argues Defendants’ breached the Settlement Agreement because the SA340 smoke detector model falls within the terms of the settlement agreement thereby triggering the payment of royalties. Dkt. 97 (“P’s Post-Trial Br.”) at Conclusions of Law at ¶ 27. Specifically, Plaintiff claims royalty payments are due under the Settlement Agreement because the SA340 smoke detector model, like the SA10YR smoke detector model, is “unopenable within the meaning to the expectation of consumers and end users.” Id. at ¶ 24.- New York law governs the analysis for Plaintiffs causes of action. See Settlement Agreement at ¶ 12.

Under New York law, “to recover from a defendant for breach of contract, a plaintiff must prove, by a preponderance of the evidenced] (1) the existence of a contract between itself and that defendant; (2) performance of the plaintiffs obligations under the contract; (3) breach of the contract' by that defendant; and (4) damages to the plaintiff caused by that defendant’s breach.” Diesel Props S.r.l. v. Greystone Bus. Credit II LLC, 631 F.3d 42, 52 (2d Cir.2011) (citations omitted).

Here, Plaintiff has not met his burden of proof to establish a breach of contract by a preponderance of the evidence. Prior to the commencement of the bench trial in this action, this Court construed the term “unopenable” to mean:

For purposes of the [']434 Patent and Settlement Agreement, therefore, the Court finds that a smoke detector is ‘unopenable’ when the housing of the [673] smoke detector cannot be opened by a consumer without damaging the structure of the case, as necessary to deter physical access to the battery, ie., a smoke detector with a housing that, once assembled, will not come apart, so as to deter physical access to the battery.

Serby v. First Alert, Inc., 09-CV-4229, 2011 WL 4464494, at *6 (E.D.N.Y. Sept. 26, 2011) (Mauskopf, J.) (footnote omitted). In rejecting Defendants’ motion for summary judgment, however, the Court stated:

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Serby v. First Alert, Inc., 134 F. Supp. 3d 668, 2015 U.S. Dist. LEXIS 130427, 2015 WL 5693676 (E.D.N.Y. 2015).

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