We are gratified that the court agreed with our assessment that TransCore's case was without merit
Dallas (Vocus) June 1, 2008
Haynes and Boone, LLP lawyers have obtained summary judgment in a patent-infringement case that could have cost client Electronic Transaction Consultants Corporation (ETC) more than $60 million and had the potential to jeopardize a system that currently collects about 80 percent of all electronic tolls in the United States.
The lawsuit (Northern District of Texas, Dallas division, Civil Action No. 3:05-CV-2316-K) was brought against ETC by TransCore, a unit of Roper Industries (NYSE:ROP). The lawsuit alleged ETC infringed four different TransCore patents that relate to the automatic electronic collection of tolls. TransCore sought more than $20 million in damages, which it sought to treble to $60 million.
The dispute arose from a request for bids to upgrade the toll-collection facilities for a major toll authority. Part of the project included providing the toll authority with enhanced open-road-tolling capability using automatic vehicle identification ("AVI") equipment manufactured by Mark IV Industries, a Canadian company, and sold to the toll authority by its domestic sister company, Mark IV IVHS. Open-road tolling allows a toll authority to collect tolls electronically from cars traveling at highway speeds.
Both TransCore and ETC bid on the project. ETC won and TransCore then sued ETC for patent infringement. TransCore claimed that the Mark IV equipment infringed its patents, and thus that ETC's "use" of the Mark IV equipment by installing and testing it during the project also infringed its patents.
U.S. District Court Judge Ed Kinkeade of the Northern District of Texas, Dallas Division, dismissed the lawsuit with prejudice. Judge Kinkeade held that, in settling an earlier patent-infringement suit against Mark IV (United States District Court for the Southern District of California, Case No. 99 CV 0902-L), TransCore had licensed Mark IV under its patents, and that Mark IV's sales of the allegedly infringing equipment exhausted TransCore's rights in the equipment.
A TransCore victory could have directly impacted the electronic toll-collection systems used by the E-ZPass Interagency Group ("IAG") of 24 toll agencies in 13 states with more than 10 million account holders. The IAG collects approximately 80 percent of all electronically collected tolls in the United States, and Mark IV supplies IAG-member toll authorities with electronic toll-collection equipment. Any toll authority (including those belonging to the IAG) or equipment installer using the Mark IV equipment in question potentially could have faced legal action by TransCore or been forced to pay license fees had TransCore won the lawsuit.
"We are gratified that the court agreed with our assessment that TransCore's case was without merit," said Russell Emerson, the Haynes and Boone partner who led the defense effort. "Now ETC, other equipment installers, and toll authorities can install, test, maintain, and operate the accused Mark IV AVI equipment without fear of reprisal from TransCore. Toll road users and operators across the country will benefit."
Added partner Phillip Philbin: "The technology that was at risk in this challenge has made a dramatic improvement in the lives of American drivers. We are proud to have successfully defended ETC in this important case."
Tim Gallagher, Chairman and Managing Director of ETC, stated, "When TransCore filed the suit against us, we immediately understood it held significant implications for our industry. While ETC was no doubt the first test case for TransCore, the dismissal of the lawsuit was an important victory for our industry as a whole."
At the heart of the court's judgment is the legal concept of patent exhaustion which, in this case, stems from the earlier TransCore-Mark IV settlement. As a part of this settlement, Mark IV had effectively purchased a license from TransCore to manufacture and sell the products in question. When Mark IV then sold the allegedly infringing equipment to the toll authority, it did so under TransCore's authority, exhausting TransCore's rights (if any) in the equipment. The following excerpts from the court's opinion discuss patent exhaustion and the protection it provides:
"The law is well settled that an authorized sale of a patented product places that product beyond the reach of the patent. … The patent owner's rights with respect to the product end with its sale. … Further, the purchaser of such licensed products is also free to use and/or resell the products, and such further use of those products is beyond the reach of the patent statutes. … An authorized sale of a patented product exhausts the patent monopoly as to that product. …(T)he settlement between TransCore and Mark IV would be meaningless if TransCore could still prevent Mark IV from manufacturing and selling the toll products by suing Mark IV's customers. … TransCore's argument that it can now sue Mark IV's customers is disingenuous, as it would render the rights granted to Mark IV … commercially worthless."
A copy of the full judgment is available from Haynes and Boone here.
About Haynes and Boone:
Haynes and Boone, LLP is an international corporate law firm with offices in Texas, New York, Washington, D.C., Mexico City and Moscow, providing a full spectrum of legal services. With almost 500 attorneys, Haynes and Boone is ranked among the largest law firms in the nation by The National Law Journal. The firm has been recognized as one of the "Best Corporate Law Firms in America" (Corporate Board Member Magazine, 2001-2007), and as a Top 100 law firm for both diversity (MultiCultural Law Magazine, 2008) and women (Women 3.0, 2008).
Recognized for its innovation in the toll industry, ETC is a full-service provider of toll solutions, including systems integration, maintenance, operations and other services. Among its industry-leading accomplishments, ETC successfully delivered the system design and integration for the first all-electronic, open road toll facility in the U.S.; has designed and implemented technically complex 4+ express ORT lanes, and created advanced solutions for HOT (high occupancy toll) lanes. ETC's systems provide interoperability between geographically dispersed toll facilities, airports, parking, and commercial transportation operations. ETC's team introduced the industry's first Web-based toll solution suite, the RITE® Solution, which includes modules for Customer Service Center operations, Violation Processing Center, Audit & Reconciliation Host, Interoperability, Facility Server, and Lane Controller. ETC Corporation is a privately held company headquartered in Richardson, Texas. In December 2007, Autostrade International U.S. Holdings, Inc., an indirectly wholly owned subsidiary of Atlantia S.p.A., (Autostrade), one of the world's leading toll operators, took an investment position in ETC, creating the foundation for a long-term relationship between the two companies and positioning ETC for additional growth in the U.S. and international toll marketplace. More information on the company can be found at http://www.etcc.com.
Haynes and Boone, LLP
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