Feud over Christmas light technology ends with sanctions

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A patent case over Christmas lights has ended with severe sanctions for the Chinese company accused of violating two U.S. patents.

U.S. District Judge Mitchell S. Goldberg of the Eastern District of Pennsylvania entered final judgment in favor of Fiber Optic Designs, the Bucks County-based patent holder, after months of delay, discovery disputes and bad-faith conduct, including omissions and perjury, from loser Bortex Industry Co. Ltd.

"Bortex has caused significant delays, requiring the court to micromanage the discovery process, and ultimately resulting in a delay of more than six months in the preliminary injunction hearing," Judge Goldberg said, detailing three discovery orders that Bortex violated.

"Bortex continually offered assurances that it has complied or would comply with its discovery obligations, but repeatedly failed to do so, even in the face of the court's warnings that sanctions would be imposed," he said.

Wary of the U.S. Court of Appeals for the Third Circuit's preference for final judgment of a case to be a sanction of last resort, Judge Goldberg said that no other sanction would be suitable.

Since Bortex is a Chinese company without assets in the United States, monetary sanctions wouldn't be able to be enforced and, he said, "While Bortex's counsel's conduct greatly contributed to the discovery violations at issue, sanctioning counsel would take the focus off of the bad faith exhibited by Bortex and Sean Shao."

Mr. Shao is the chairman of Bortex who claims to have developed the patented technology for outdoor LED string lights in 1999. His company brought this suit in July 2012 asking the court for a declaratory judgment that the two Fiber Optic Designs' patents are invalid and unenforceable and that its products don't infringe, according to the opinion.

Fiber Optic Designs, called FOD for short, responded with its own counterclaim and sought a preliminary injunction that would keep Bortex from exporting the allegedly infringing lights to the United States.

To support its claim, FOD pointed to proceedings in the U.S. Patent and Trademark Office that ended in its favor. Further, it argued that Bortex's participation in those proceedings would bar it from this kind of civil action.

Mr. Shao testified that he didn't know about those proceedings.

"Stated as plainly as possible, our review of Sean Shao's deposition and the documentary evidence of record, including emails from Bortex employees, reflects that Sean Shao committed perjury at his deposition," Judge Goldberg said.

Emails on which Mr. Shao had been copied and emails that he had written clearly show that he knew about the various cases, Judge Goldberg said, dismissing Bortex's argument that poor communication kept him in the dark.

"What seems to have gotten lost in the unending discovery squabbles is that FOD has come to this court seeking immediate injunctive relief, believing its patent has been, and continues to be, infringed," Judge Goldberg said.

The judge decided to impose only the attorney fees associated with bringing the motion for sanctions against Bortex. Bortex was represented by Richard Weinblatt and Stamatios Stamoulis of the Wilmington, Del., law firm of Stamoulis & Weinblatt.

"Bortex respectfully disagrees" with the court's opinion, Mr. Stamoulis said. He and his client are considering their options, including appeal, he said.

David Scott Taylor of Berenato & White in Bethesda, Md., represented FOD.

Saranac Hale Spencer: sspencer@alm.com at 215-557-2449. Read more articles like this at www.thelegalintelligencer.com.

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