Green Patent Blog

Greenline Industries (Greenline), based in Larkspur, California, designs processors that convert feedstocks such as seed oils and animal fats into biodiesel fuels.  Greenline’s proprietary technology provides waterless systems to clean the fuel, allowing producers to avoid the time and money associated with introducing water into the process and later separating it out.  Greenline also enjoys an exclusive worldwide license to continuous flow technology, which greatly increases its processors’ production capacity. 

In 2006, Greenline and Arkansas engineering firm Agri-Process Innovations (API) created a venture, now called AP Fabrications (APF), for the purpose of installing Greenline biodiesel plants.  In 2007, Greenline gave up its ownership rights in the venture, and API became the sole owner of APF.

Last month Greenline sued API and APF in federal court in Oakland, California for anticipatory breach of contract, misappropriation of trade secrets, false advertising and a declaratory judgment that Greenline owns the copyrights in its processor designs.  Greenline alleges that its vendor agreement with APF provided that Greenline would be exclusively responsible for the design of biodiesel processing units while APF’s role was limited to installation of the units.  Greenline also contends that the agreement allowed API to sell the processors but required that they be marketed as “Greenline Industries” plants.

The trigger for the lawsuit was a May 5, 2008 letter in which API and APF told Greenline they were terminating the vendor agreement and demanded compensation for (unspecified) intellectual property rights created by API and used by Greenline.  Greenline alleges this repudiation of the agreement constitutes anticipatory breach of contract.  

According to the complaint, API also claims rights to Greenline’s technology through statements on its web site that API designs the processing units.  These and other statements implying ownership of the processing techniques, as well as claims of responsibility for the design of specific processing plants, form the basis for Greenline’s claims of false advertising.

While the anticipatory breach and false advertising claims seem reasonably well-founded, it’s hard to see how API/APF’s actions constitute misappropriation of trade secrets, considering that the only allegations of theft of intellectual property in the complaint are the May 5 letter and the statements on API’s web site. 

The Uniform Trade Secrets Act (upon which many state trade secrets laws are modeled) defines misappropriation as acquisition of a trade secret by someone who knows or should know it was acquired by improper means or disclosure of a trade secret that was improperly acquired.  The facts of the complaint suggest that any acquisition or disclosure of Greenline’s proprietary information by API or APF occurred pursuant to the vendor agreement, which was in force until last month.  Simply making misrepresentions of ownership of a particular proprietary technology to third parties would not seem to rise to the level of misappropriation.

The other striking thing about this dispute is the extremely short time period between API/APF’s letter to Greenline terminating the agreement (May 5, 2008) and the date Greenline filed the lawsuit (the complaint is dated May 12, 2008).  This rapid turnaround suggests either that tensions were brewing for a while or the two sides made little attempt to resolve the dispute before resorting to litigation.

Back in January of 2006, Japanese LED manufacturer Nichia sued Seoul Semiconductor (Seoul) for infringement of four of Nichia’s design patents (design patents differ from ordinary patents in that they protect only the ornamental features or configuration of a device; a design patent generally contains only drawings and minimal written text). The asserted patents included D503,388, and the accused device was Seoul’s 902 series LED, which is used in liquid crystal display (LCD) back light units in consumer products such as cell phones. In November of last year, a jury found that the Seoul device infringed all four design patents and that the infringement was willful.

In the days immediately following the verdict, Seoul put out a series of press releases that stretched the bounds of spin. One was entitled “Seoul Semiconductor Has Substantially Prevailed at U.S. Design Case” and stated: “Seoul Semiconductor vindicated that, after almost two years of litigation, the sales of its side view LED 902 are actually non-infringing and that it has substantially prevailed in this litigation.” Two of the press releases were uploaded to the NEXIS online information service.

Last month Nichia sued Seoul for false advertising and unfair competition in connection with the press releases. The complaint, filed in Los Angeles, asks the court to stop dissemination of the press releases and any other false or misleading statements about the infringement suit or the infringing devices. Nichia also requested that the court order Seoul to put out a corrective press release admitting the prior statements were wrong and that its products are infringing. To prove false advertising, the plaintiff must show that the challenged statement is either literally false or, though literally true, is likely to mislead consumers. It’s hard to imagine the court won’t find Seoul’s statements at least misleading. 

There appears to be no end in sight to the bad blood between these two companies: Nichia has also sued Seoul for defamation in Korea for the false statements, Nichia has brought another patent suit against Seoul in Korea, alleging that Seoul’s Z-Power LED P9 Series white LED products infringe one of Nichia’s Korean patents; and Seoul has sued Nichia in the Eastern District of Texas for infringement of a patent covering a semiconductor layer.