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U.S. Water Services, Inc. v. ChemTreat, Inc.

United States Court of Appeals, Eighth Circuit

July 24, 2015

U.S. Water Services, Inc., Plaintiff - Appellant,
v.
ChemTreat, Inc., Defendant - Appellee Global Process Technologies, Inc.; Roy Johnson, Counter Defendants - Appellants

Submitted May 13, 2015.

Page 967

Appeal from United States District Court for the District of Minnesota - Minneapolis.

For U.S. Water Services, Inc., Plaintiff - Appellant: Bruce Howard Little, Carrie Ryan Gallia, Christopher R. Sullivan, Lindquist & Vennum, Minneapolis, MN.

For Global Process Technologies, Inc., Roy Johnson, Counter Defendants - Appellants: Bruce Howard Little, Carrie Ryan Gallia, Christopher R. Sullivan, Lindquist & Vennum, Minneapolis, MN.

For ChemTreat, Inc., Defendant - Appellee: Jan Marie Conlin, Ciresi & Conlin, Minneapolis, MN; Christopher Kenneth Larus, Robins & Kaplan, Minneapolis, MN; David G. Mangum, Brandon J. Mark, Michael Raymond McCarthy II, Parsons & Behle, Salt Lake City, UT; Heather M. McElroy, Institute For Justice, Arlington, VA.

Before RILEY, Chief Judge, MURPHY and MELLOY, Circuit Judges.

OPINION

Page 968

RILEY, Chief Judge.

In April 2011, while its patent application was pending with the United States Patent and Trademark Office (USPTO), U.S. Water Services, Inc. sued its competitor, ChemTreat, Inc. for misappropriation of trade secrets. On October 18, 2011, the USPTO issued U.S. Patent No. 8,039,244 ('244 patent). Three days before U.S. Water and ChemTreat settled the misappropriation claim, ChemTreat filed counterclaims against U.S. Water, Global Process Technologies, Inc. and Roy Johnson (collectively, counterclaim defendants) requesting declaratory judgments of noninfringement and invalidity of the '244 patent.[1] The counterclaim defendants moved

Page 969

to dismiss the counterclaims for lack of subject matter jurisdiction, and ChemTreat moved for summary judgment of noninfringement. The district court[2] denied the counterclaim defendants' motion to dismiss and later granted ChemTreat's subsequent motion for summary judgment as to the noninfringement counterclaim and dismissed the invalidity counterclaim. The counterclaim defendants appeal. We affirm the district court's well-reasoned judgment.

I. BACKGROUND

A. Facts

In its second amended complaint (complaint), U.S. Water stated it " sell[s] water treatment and purification equipment, materials, and services," especially " to ethanol process technologies." U.S. Water claimed it " developed a method to reduce the formation of insoluble scale deposits during the production of ethanol" using an enzyme, phytase, in its " pHytOUT® system." U.S. Water alleged, among other things, ChemTreat persuaded one of U.S. Water's business acquaintances to breach a non-disclosure agreement and disclose U.S. Water's " pHytOUT® Trade Secrets" such that ChemTreat was able to begin selling its own phytase product, PE1000, modeled on U.S. Water's product, to U.S. Water's ethanol industry customers.

At the time U.S. Water filed the complaint, the application for what would become the '244 patent was pending with the USPTO. U.S. Water attached the application to the complaint and described its scientific claims in some detail. The complaint explained, " U.S. Water adopted the brand 'pHytOUT® ' to use in connection with the sale and offer for sale to its customers and the trade of the system described in the pHytOUT® [patent] Application." The complaint alleged ChemTreat " misappropriat[ed] the pHytOUT® Trade Secrets," which, together with " the pHytOUT® invention" disclosed in the patent application, form " the pHytOUT[TM] system." [3]

In April 2011, Johnson, Chief Innovation Officer at U.S. Water, sent an email to a customer who had also been approached by ChemTreat, remarking,

I need to speak with you later today about the ChemTreat 'offering' and what has happened. They are on very thin ice & are putting people at risk. While [U.S. Water's European Patent Office] patent application has been allowed, the USPTO patent prosecution remains painfully slow in an underfunded agency. The consequences gets [sic] too many attorneys involved.

A week later, U.S. Water sent an email to its phytase supplier, who was also supplying phytase to ChemTreat, declaring,

We have been granted an EU patent and anticipate the USPTO patent soon. . . . Now we have a competitor going around our patent application buying your . . . product in violation of our supply agreement and what would appear to be a much lower price. . . . This is a very serious issue to us and we are not seeing much openness or response from you . . . . We have filed a lawsuit against this competitor regarding misappropriation of trade secrets, and misrepresenting our product. We are filing additional actions against them today.[4]

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After receiving the email, the phytase supplier told U.S. Water it would " walk[] away from ChemTreat" and told ChemTreat it " will not be able to supply [ChemTreat] with phytase" because " doing so would lead to possible infringements in [U.S. Water's] patented propositions to the market place."

In a deposition, one of ChemTreat's customers testified that a particular person at U.S. Water had told him about the '244 patent application at an industry trade workshop. The customer responded it was " probably fair" to say " the only reason" his employer stopped a trial run of ChemTreat's phytase product, PE1000, was because U.S. Water told the customer ...


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