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Baxley Equipment Co., LLC v. Hogue Industries, LLC

United States District Court, W.D. Arkansas, Hot Springs Division

June 12, 2018

BAXLEY EQUIPMENT COMPANY, LLC; PRICE LOGPRO, LLC; and TIMBER AUTOMATION, LLC PLAINTIFFS
v.
HOGUE INDUSTRIES, LLC d/b/a HOGUE INDUSTRIES DEFENDANT

          MEMORANDUM OPINION AND ORDER

          Susan O. Hickey United States District Judge.

         Before the Court is a Motion to Dismiss Pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) filed by Defendant Hogue Industries, LLC (“Hogue Industries”). ECF No. 37. Plaintiffs Baxley Equipment Company, LLC; Price LogPro, LLC; and Timber Automation, LLC, (collectively “Baxley”) have filed a response in opposition to the motion.[1] ECF No. 42. The Court finds this matter ripe for its consideration. For the reasons explained below, Hogue Industries’ motion is granted.

         I. BACKGROUND

         A. Factual Background

         This is a declaratory judgment action in which Baxley seeks a declaration that it did not infringe two patents held by Hogue Industries and that the patents are invalid. Baxley and Hogue Industries are in the business of selling, marketing, engineering, and manufacturing lumber stacking machinery. ECF No. 1, ¶ 9. Hogue Industries produces a High Speed Dual Fork Stacking Mechanical and Control System, which it claims is represented by United States Patent Numbers 7,201,554 and 7,651,314 (collectively “the patents”). Id. at ¶ 10. Baxley designed a dual stacking machine (“Baxley Stacker”), which it alleges is unlike Hogue Industries’ dual stacking machine. Id. at ¶ 11. On or about May 30, 2014, Baxley sold the Baxley Stacker to Georgia-Pacific for use in its Gurdon, Arkansas facility. ECF No. 1, ¶ 15.

         At some point, Hogue Industries became aware of Baxley’s intent to build and install the Baxley Stacker for Georgia-Pacific. On July 27, 2015, Gary Hogue of Hogue Industries emailed Baxley regarding the Baxley Stacker, stating that he “believe[d] the machine [was] in violation of our US Patents.” ECF No. 31-1. Mr. Hogue’s email further requested that Baxley cease shipment of the Baxley Stacker until the infringement issue was resolved and asked Baxley to “divulge any other Dual Fork Machines that you may have sold so that we all have a total picture of the violation.” Id.

         The parties exchanged numerous emails over the following weeks regarding whether the Baxley Stacker violated Hogue Industries’ patents. Although Georgia-Pacific did not allow Mr. Hogue to physically inspect the Baxley Stacker at its facility, Baxley supplied photographs of the stacker, as well as a description of how it worked. ECF No. 36-1, pp. 107-03, 127. Based on this information, Mr. Hogue concluded that the Baxley Stacker infringed the patents. Specifically, Hogue Industries maintained that the Baxley Stacker violated the patents because it utilized encoders which could be used to control the speed, acceleration, and ramping of the stacker’s arms. Conversely, Baxley took the position that its stacker did not violate the patents because its control system only knows the start/stop positions of the stacker’s arms and does not control the speed and acceleration of the arms.

         On September 1, 2015, Hogue Industries sent a letter detailing its position that the Baxley Stacker was in direct violation of the patents. ECF No. 31-12. The letter further requested that Baxley take a license or refrain from manufacturing and selling the Baxley Stacker. Id. In response, Baxley insisted that its stacker did not infringe on the patents and refused to take a license or refrain from selling the Baxley Stacker to Georgia-Pacific. ECF No. 31-21. Mr. Hogue subsequently contacted Georgia-Pacific and initiated discussions to license the Baxley Stacker. Georgia-Pacific eventually agreed to pay a licensing fee to Hogue Industries in order to operate the Baxley Stacker under Hogue Industries’ patents.

         B. Procedural Background

         Baxley commenced this action by filing a three-count complaint on May 19, 2017, seeking declaratory judgment relief, pursuant to 28 U.S.C. § 2201, with respect to United States Patent Numbers 7,201,554 and 7,651,314. ECF No. 1. Baxley specifically requests declarations of noninfringement and invalidity of the patents. In addition, Baxley asserts a state law claim of tortious interference with contractual relationship and business expectancy.

         On June 9, 2017, Hogue Industries filed its Answer and asserted a counterclaim of willful patent infringement against Baxley. ECF No. 10. On October 31, 2017, Hogue Industries moved to dismiss its patent infringement counterclaims against Baxley. ECF No. 20. In its motion, Hogue Industries stated that “Hogue Industries and Georgia Pacific entered a Patent License Agreement through which the Baxley stacker installed at Georgia Pacific’s Gurdon, Arkansas facility became fully licensed under [Hogue Industries’] asserted” patents. The Court granted Hogue’s motion to dismiss its counterclaims with prejudice on November 6, 2017. ECF No. 21.

         A Rule 16 Scheduling Conference was held on November 9, 2017, in which Hogue Industries challenged the Court’s subject-matter jurisdiction in this case. The Court subsequently directed the parties to submit briefs addressing whether the Court lacks subject-matter jurisdiction in this action. ECF No. 24. Baxley submitted its brief asserting its standing to pursue this action on January 8, 2018. ECF No. 31.

         On February 19, 2018, Hogue Industries executed a covenant not to sue with respect to “the specific design components and features that are identified in Baxley’s Complaint and supplemental evidence as being included in their proposed stackers.” ECF No. 38, p. 2. Baxley was served with the covenant not to sue on February 21, 2018. On the same day, Hogue Industries filed its motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), arguing, in part, that its proffered covenant not to sue eliminates any controversy between the parties regarding the Baxley stacker, thereby divesting the Court of subject-matter jurisdiction. ECF No. 37.

         II. ...


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