sonnax industries v. vbx-valvebodyxpress et. al

8/3/2019 Sonnax Industries v. VBX-ValveBodyXpress et. al.

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UNITED STATES DISTRICT COURTFOR THE

DISTRICT OF VERMONT

SONNAX INDUSTRIES, INC.,Plaintiff,

U.S. DL:: ;,i)lSTFiiCT,,. l L L

v.

)))))))))))))

Case No. 5: If.c -3VBX-VALVEBODYXPRESS, INC.andSCOTT RAGLAND,

Defendants.

COMPLAINT

Plaintiff Sonnax Industries, Inc. ("Plaintiff' or "Sonnax"), for its Complaint againstDefendants, alleges as follows:

1. This is an action for infringement ofU.S. Patent No. 6,832,632 ("the '632Patent"), breach of contract, misappropriation of trade secrets, tortious interference with contract,common law unfair competition, and civil conspiracy, and arises out of: (1) Defendant VBX-ValveBodyXpress, Inc.'s ("VBX") offering for sale of a product covered by the '632 Patent, (2)Defendants' unauthorized and unlawful accessing and misappropriation ofPlaintiffs tradesecrets and confidential information; (3) Defendant VBX's unauthorized use of informationobtained from its involvement with the Technical Automotive Specialties Committee; and (4)Defendant Scott Ragland's ("Ragland") breach ofhis employment agreement with Plaintiff,along with Defendant VBX's interference with that agreement. Defendants' conduct assummarized above, and set forth in more detail below, has caused actual harm to Plaintiff and

DOWNSRACHLINMARTINPLLC


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continues to do so. Plaintiff seeks permanent injunctive relief against future infringement;monetary damages for past infringement, breach ofcontract, and misappropriation; and other

relief.JURISDICTION AND VENUE

2. This is an action arising under United States patent law, 35 U.S.C. 171,271,and 281-85, and under the laws of the State ofVermont . This Court has jurisdiction pursuant to28 U.S.C. 1331, 1332, 1338, and 1367.

3. This Court has personal jurisdiction over Defendants in this action, and venue isproper in this judicial district under 28 U.S.C. 1391 (b)-(c) and 1400(b), because (a) oninformation and belief, Defendants have engaged in business within this forum amounting tosufficient minimum contacts; (b) Defendants have performed acts within or directed toward thisforum that have caused and continue to cause Plaintiff the harms alleged herein; (c) a substantialpart of he conduct giving rise to the asserted claims has occurred or has had effects in this

judicial district; and (d) a substantial part of the property that is the subject of his action issituated in this judicial district.

THE PARTIES4. Plaintiff Sonnax is a Vermont corporation with a principal office and facilities in

Bellows Falls, Vermont.5. On information and belief, Defendant VBX is a New Jersey Corporation having a

registered address at 150 Mid-Atlantic Parkway, Paulsboro, New Jersey 08066. Defendant VBXis doing business in this judicial district and elsewhere.

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6. On information and belief, Defendant Ragland is an individual residing at 76 DellSt., Charlestown, NH. Defendant Ragland is a former employee ofSonnax.

FACTS7. In or about September 2000, Defendant Ragland began working as a

buyer/planner in the Purchasing Group for Plaintiff at its office in Vermont.8. In or about January 2005, Defendant Ragland was promoted to the position of

Account Executive for Plaintiff.9. Sometime after January 2005, Defendant Ragland was promoted to the position

ofProject Line Manager. His responsibilities included the development, design, and marketing,ofproduct lines for Plaintiff, including, but not limited to, product lines directed to the AisinWarner 55-50 (the "AW 55-50 SW products") transmission and the Toyota U-140 transmission(the "Toyota products").

10. On or about July 30, 2002, Defendant Ragland entered into an "Employee

Proprietary Information and Inventions Agreement" (hereafter, "Employment Agreement") withPlaintiff.

11. By entering into the Employment Agreement, Defendant Ragland agreed thatduring his employment with Plaintiff and at all times thereafter, he would maintain in confidenceall ofPlaint iffs proprietary and/or confidential information, which included any trade, business,or technical information regarding Plaintiffor its products or services.

12. Defendant Ragland further agreed under the Employment Agreement that, duringhis employment with Plaintiff and at all times thereafter, he would not disclose or use proprietaryor confidential information except in the course ofPlaint iffs business and for Plaintiffs benefit.



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13. Defendant Ragland further agreed under the Employment Agreement that, duringhis employment with Plaintiff and at all times thereafter, he would not directly or indirectlyparticipate as a director, officer, manager, employee, agent or consultant of any corporation, firmor person engaged in a business competitive, directly or indirectly, with the business of hePlaintiff anywhere in the world for 18 months after the termination of employment with Plaintiff.

14. While employed by Plaintiff, Defendant Ragland became knowledgeable aboutPlaintiff's trade secrets and confidential information, including, but not limited to, manufacturingprocesses, design specifications and tolerances, material suppliers, vendors, marketing strategies,cost ofmaterials and fabrication, information relating to Plaintiffs customers (includingcustomer lists and the identity ofprospective customers), sales strategies, product pricingpolicies, cost information relating to both products and services, internal fmancial information,information relating to the development or introduction ofPlaintiff's new products, technical andresearch data, research techniques, and other proprietary information.

15. While employed by Plaintiff, Defendant Ragland obtained substantial knowledgeregarding Plaintiffs AW 55-50 SW products and Toyota products, including trade secretinformation, confidential information, and related patents, including the '632 patent, which hadissued on December 21, 2004.

16. Under the Employment Agreement, all materials and information DefendantRagland collected, compiled, summarized, synthesized, or prepared regarding the A W 55-50 SWproducts and the Toyota products were the sole property ofPlaintiff.


17. On or about January 16,2009, Defendant Ragland left the employ ofPlaintiff.

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18. On or about March 16,2009, Defendant Ragland became an employee ofDefendant VBX.

19. Defendant VBX is primarily in the business of transmission valve bodyremanufacturing.

20. While employed with Defendant VBX, Defendant Ragland disclosed Plaintiff'strade secrets and other confidential information to Defendant VBX.

21. Defendant VBX knew of he Employee Agreement and the restrictions therein.22. On or about August 6, 2002, Defendant VBX became a member of he Technical

Automotive Specialties Committee (the "TASC Force"), which is a group ofbusinesses involvedin the automobile transmission industry that collaborate to identify problems with transmissions.

23. In joining the TASC Force, Defendant VBX executed a Non-DisclosureAgreement. As stated in the Non-Disclosure Agreement, the purpose of he TASC Force was toprovide a forum for the discussion of problems, causes, corrections and ways to supplement

improvements related to automotive, industrial and high-performance transmission (includingtorque converter) components and peripheral areas. The discussion involved tooling andmaintenance materials associated with the disassembly, assembly, and operation of alltransmissions.

24. Under the Non-Disclosure Agreement, another stated purpose of the TASC Forcewas to discuss creative solutions to problems associated with transmissions and torque convertersand to develop component fixes as a result of these solutions to improve performance,availability, costs or quality of the existing product for the purpose of capitalizing on a newcomponent (product) offering.



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25. Parties to the Non-Disclosure Agreement were encouraged to discloseconfidential information in exchange for the restrictions on use of hat confidential information.

26. Under the Non-Disclosure Agreement, Defendant VBX was restricted fromdisclosing confidential information obtained from members of the TASC Force to any personoutside of the other parties to the Non-Disclosure Agreement and to restrict disclosure to itsemployees or agents to only those with a need-to-know.

27. Under the Non-Disclosure Agreement, Defendant VBX was required to use suchconfidential information only for the purposes set forth in the Non-Disclosure Agreement andnot to use or exploit such confidential information for its own behalf or for the benefit of anotherwithout the prior written consent of he party disclosing the confidential information.

28. While participating in the TASC Force, Defendant VBX acquired confidentialinformation from Plaintiff relating to manufacture, design, processes, and techniques, as well asother proprietary and confidential information related to valve body component manufacture and

design.29. In November and December 2011, Plaintifflearned from an industry source that

Defendant VBX was developing products to compete with Plaintiffs AW 55-50 SW productsand Toyota products. Because the technology behind the A W 55-50 SW products and theToyota products was developed by Plaintiff over a substantial period of ime and with significantengineering resources, the only way Defendant VBX could have developed its products in therelevant time period was to use trade secrets, other confidential information, and knowledgeobtained from Defendant Hagland and/or to use trade secrets, other confidential information, andknowledge ofPlaintiffs obtained via the TASC Force.



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30. In November and December 2011, Plaintifflearned from an industry source thatDefendant VBX had recently contacted him to offer a product replacing Plaintiff's part number

84754-30K, which is a boost valve assembly specifically designed for a General Motors 4T65Etransmission. According to the industry source, in the offer from Defendant VBX, DefendantVBX compared only the cost differential between its part and Plaintiffs patented part withoutindicating there would be any difference in construction.

31. Plaintiff's part number 84754-30K is covered by at least one claim of the '632Patent.

32. Plaintiff's website states that part number 84754-30K is covered by the '632patent.

33. Plaintif f has made and sells patented boost valve assemblies, including partnumber 84754-30K, throughout this judicial district and the United States.

COUNT I

PATENT INFRINGEMENT34. Plaintiffhereby realleges and reincorporates paragraphs 1 through 33 of this

Complaint as if fully set forth herein.35. Plaintiff is the sole owner by assignment of the '632 Patent, which is entitled

"Boost Valve Assembly." A copy of the '632 Patent is attached to this Complaint as Exhibit A.36. The inventor of the patent is Benjamin A. Wallace. The inventor has assigned all

ofhis rights in the '632 Patent to Plaintiff.


37. Pursuant to 35 U.S.C. 282, the '632 Patent is presumed valid.

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38. Defendants VBX and Hagland have actual knowledge of the '632 Patent at leastby virtue ofDefendant Ragland's prior employment by Plaintiff and Plainti ffs website stating

that part number 84754-30K is covered by the '632 Patent.39. Defendant VBX has directly and indirectly infringed and is still infringing the

'632 Patent by making and offering to sell a boost valve assembly, in this judicial district andelsewhere, that embodies the patented invention.

40. Defendant VBX has offered for sale a product that would be a direct replacementfor Plaint iffs 84754-30K with the specific intent to infringe the '632 Patent.

41. Defendant VBX's product, offered as a direct replacement for Plaintiffs 84754-30K, is specifically adapted for use as a boost valve assembly within the valve body of a GeneralMotors 4T65E transmission and thus has no substantial non-infringing use.

42. Defendant VBX has no license for use of the patent, and, on information andbelief, has knowledge of the '632 Patent. Accordingly, Defendant VBX's infringement of

the '632 Patent has been and continues to be willful, wanton, deliberate, and without license.43. Plaintiff has been and continues to be damaged as a direct and proximate result of

these actions by Defendant VBX.COUNT II

BREACH OF CONTRACT44. Plaintiff repeats and realleges each of the allegations contained in paragraphs 1

through 43, above, as if fully set forth herein.45. The Employee Agreement referenced in this Complaint is a valid contract that

existed and continues to exist between Plaintiff and Defendant Hagland.



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46. The Non-Disclosure Agreement referenced in this Complaint is a valid contractthat existed and continues to exist between Plaintiff and Defendant VBX.

47. By his actions as set forth in this Complaint, Defendant Ragland has breached theEmployee Agreement.

48. By its actions as set forth in this Complaint, Defendant VBX has breached theNon-Disclosure Agreement.

49. Plaintiff has been and continues to be damaged as a direct and proximate result ofthese actions by Defendants.

COUNT IIIVIOLATION OF VERMONT TRADE SECRETS ACT (9 V.S.A. 4601 ETSEQ.)

50. Plaintiff repeats and realleges each of the allegations contained in paragraphs 1through 49, above, as if fully set forth herein.

51. Plaintiff's valve manufacturing processes, materials of construction, product

specifications, information relating to Plaintiffs customers (including customer lists and theidentity of prospective customers), sales strategies, product pricing policies, cost informationrelating to both products and services, internal financial information, information relating to thedevelopment or introduction ofPlaintiff's new products, technical and research data, andresearch techniques are "trade secrets" within the meaning of9 V.S.A. 4601(3).

52. Defendant VBX misappropriated Plaintiff's trade secrets by accessing and usinginformation obtained by Defendant Ragland after his work relationship with Plaintiff had endedwithout express or implied consent from Plaintiff. Defendant VBX further misappropriatedPlaintiff's trade secrets by using trade secret information obtained through the TASC Force.



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53. At the time Defendant VBX unlawfully used Plaint iffs trade secrets, DefendantVBX knew or had reason to know that its knowledge of the trade secrets and possession thereof

were originally acquired under circumstances giving rise to a duty to maintain their secrecy andlimit their use.

54. Defendant VBX has used Plaintiffs trade secret information to accelerate theproduction ofproducts that would compete with Plaintiffs. The use of he trade secretinformation has allowed Defendant VBX to avoid considerable research and development costsand to bring a product to market faster than would have been possible without the trade secretinformation.

55. Defendant Ragland, acting both individually and as the agent for DefendantVBX, further misappropriated Plaintiffs confidential information by unlawfully disclosingPlaintiffs trade secrets related to Plaintiffs manufacturing processes, design specifications andtolerances, material suppliers, vendors, marketing strategies, cost ofmaterials and fabrication,

information relating to Plainti ffs customers (including customer lists and the identity ofprospective customers), sales strategies, product pricing policies, cost information relating toboth products and services, internal financial information, information relating to thedevelopment or introduction ofPlaint iffs new products, technical and research data, researchtechniques, and other proprietary information to Defendant VBX.

56. At the time he unlawfully disclosed Plaint iffs trade secrets, Defendant Raglandknew or had reason to know that he had a duty to maintain the secrecy of this information and tolimit its use.



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57. Upon information and belief, Defendant Hagland has assisted Defendant VBX indeveloping products to compete with Plaintiff's AW55-50 SW products and Toyota products.

Such assistance would require the use of trade secrets, other confidential information, andknowledge Defendant Hagland obtained while working for Plaintiff.


COUNT IVTORTIOUS INTERFERENCE WITH CONTRACT


60. Defendant VBX was and is aware that Defendant Hagland has a contract withPlaintiff (i.e., the Employee Agreement) and a continuing duty not to disclose Plaintiff 'sconfidential information.

61. Defendant VBX intentionally and improperly induced Defendant Hagland tobreach the Employment Agreement or, alternatively, knew that such interference would besubstantially certain to occur as a result of its actions.

62. Plaintiff has been and continues to be damaged as a direct and proximate result ofthese actions by Defendant VBX.

COUNTYCOMMON LAW UNFAIR COMPETITION




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64. As alleged herein, Defendants unlawfully misappropriated confidential Plaintiffinformation, which information was the exclusive property ofPlaintiff.

65. Defendants' misappropriation ofPlaintiffs exclusive property constitutes unfaircompetition under Vermont law.


COUNT VICIVIL CONSPIRACY


68. Defendants have acted in concert with the unlawful objectives of(a)misappropriating Plaintiffs trade secrets and confidential information and (b) unfairly competingwith Plaintiff.

69. As alleged herein, Defendants have performed unlawful acts in furtherance of heconspiracy.


RELIEF REQUESTEDWHEREFORE, Plaintiff prays that this Court:a. A ward Plaintiff damages resulting from Defendant VBX' s patent infringement,

breach of contract, violations of he Vermont Trade Secrets Act, tortious interference withcontract, unfair competition, and civil conspiracy;



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b. Award Plaintiff damages resulting from Defendant Ragland's breach of contract,violations of the Vermont Trade Secrets Act, unfair competition, and civil conspiracy;

c. A ward Plaintiff injunctive relief on account ofDefendants' unlawful conduct asset forth herein;

d. Award costs and attorneys' fees to Plaintiff, as provided in the "EmployeeConfidentiality and Inventions Agreement" between Plaintiff and Defendant Hagland;


e. A ward interest and costs; andf. Award such other and further relief as is just and equitable.

JURY DEMANDPlaintiff demands trial by jury on all issues so triable.

Dated at Burlington, Vermont this 6th day of January, 2012.

DOWNS RACHLIN MARTIN PLLC

By: __ ~ - - - - - - - - - - - - ~ - - Lawrence H. MeierMatthew S. Borick

199 Main StreetP.O. Box 190Burlington, VT 05402Ph.: 802-863-2375Fax:[email protected]@drm.comATTORNEYS FOR PLAINTIFFSONNAX INDUSTRIES, INC.

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sonnax industries v. vbx-valvebodyxpress et. al

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