Crye Precision LLC v. Duro Textiles, LLC
112 F. Supp. 3d 69
| S.D.N.Y. | 2015Background
- Crye Precision/Lineweight developed the MULTICAM camouflage design (protected by design patents and trademark) and licensed printers (including Duro) to print MULTICAM for Government and Commercial Sales; a 2012 Agreement restricted Duro from making products similar to MULTICAM and contained survival and equitable-relief provisions.
- The 2012 Agreement expired April 2014; Crye thereafter authorized broader licenses and Duro declined a new agreement. The U.S. Army adopted Scorpion W2 (allegedly very similar to MULTICAM) and Duro printed/sold Scorpion W2 for Government Sales.
- Crye sued Duro in state court (breach of contract, unjust enrichment, other contract claims), alleging Duro breached the 2012 Agreement by selling Scorpion W2; Crye sought injunctions and damages but avoided a patent claim because sales appeared to be Government Sales.
- Duro removed the case to federal court asserting patent-related counterclaims (declaratory judgments of noninfringement and invalidity of Crye’s design patents, inequitable conduct, and state-law tort claims) and argued Section 1498(a) bars Crye’s relief against government-contracted conduct.
- The court considered (1) whether Section 1498(a) eliminates jurisdiction over Crye’s claims; (2) whether Duro’s counterclaims for patent invalidity and inequitable conduct meet pleading standards; and (3) whether Crye’s infringement-notice letters to Duro’s customers support Duro’s state-law tort claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 28 U.S.C. §1498(a) bars Crye’s breach-of-contract claim arising from Duro’s Government Sales of Scorpion W2 | Crye: Claim is a state-law breach of contract seeking damages (not a patent infringement suit) and thus not displaced by §1498(a) | Duro: §1498(a) divests the court of jurisdiction because the dispute arises from use/manufacture of a patented design for the U.S. | Court: Breach claim seeking damages survives; §1498(a) governs patent-infringement remedies, not ordinary contract damages — denial as to damages, but injunction tied to patent rights would be barred |
| Whether Crye’s unjust enrichment claim is barred by §1498(a) | Crye: Unjust enrichment is an independent remedy for Duro’s unauthorized sales | Duro: The enrichment derives from alleged infringement/use of patent for the Government and thus falls within §1498(a) | Court: Dismissed unjust enrichment claim — would effectively circumvent §1498(a) |
| Whether Duro’s counterclaims alleging patent invalidity sufficiently plead facts under Twombly/Iqbal | Duro: Allegations of invalidity (citing statutory grounds) suffice as a counterclaim; Local Patent Rules will supply specifics later | Crye: Allegations are conclusory and lack identification of prior art or factual support | Court: Dismissed invalidity counterclaims for failure to plead factual matter making invalidity plausible |
| Whether Duro adequately pleaded inequitable conduct and state-law torts (bad-faith communications) | Duro: Inventors withheld material functional info during prosecution; Crye’s infringement letters to customers were objectively baseless and defamatory | Crye: Alleged withheld facts are cumulative of what PTO knew; infringement letters were permissible and not objectively baseless under Federal Circuit precedent | Court: Dismissed inequitable-conduct claim for lack of Rule 9(b) particularity; dismissed state-law tort claims for failure to plead requisite objective bad faith |
Key Cases Cited
- Zoltek Corp. v. United States, 672 F.3d 1309 (Fed. Cir. 2012) (explains §1498(a) applies when patented invention is used/manufactured for the United States and frames §1498 as addressing patent-infringement remedy against the Government)
- W.L. Gore & Assocs. v. Garlock, Inc., 842 F.2d 1275 (Fed. Cir. 1988) (characterizes §1498 as providing waiver of sovereign immunity to permit claims against the United States for what would be infringement by a private party)
- Cedars-Sinai Med. Ctr. v. Watkins, 11 F.3d 1573 (Fed. Cir. 1993) (patent issues relevant to a contract dispute do not convert the suit into one arising under patent law)
- Exergen Corp. v. Wal-Mart Stores, 575 F.3d 1312 (Fed. Cir. 2009) (inequitable-conduct allegations must meet Rule 9(b) particularity: identify who, what, when, where, and how and facts supporting intent to deceive)
- Dominant Semiconductors Sdn. Bhd. v. OSRAM GmbH, 524 F.3d 1254 (Fed. Cir. 2008) (state-law tort claims based on patent assertions are preempted absent allegation of objective and subjective bad faith; objectively baseless claims required)
- Virginia Panel Corp. v. MAC Panel Co., 133 F.3d 860 (Fed. Cir. 1997) (patentees may, in good faith, send infringement notices to contractors and suppliers even where §1498 may limit remedies against contractors)