By E. Darius Sturmer, J.D.
A group boycott claim brought in 2014 by the developer of a table saw safety technology against power tool manufacturers who had allegedly colluded to exclude the developer’s proprietary "active injury mitigation technology" (AIMT) from the market more than a decade earlier was properly barred by a federal district court as untimely, the U.S. Court of Appeals in Richmond has ruled. Because the developer was on actual notice of its claim by, at latest, 2003 and fraudulent concealment did not apply, the statute of limitations expired no later than 2007, the appellate court explained. Therefore, summary judgment in favor of the defending manufacturers was affirmed (SD3 II LLC v. Black & Decker [US] Inc., April 19, 2018, Agee, G.).
Background. Shortly after patent lawyer Dr. Stephen Gass invented AIMT, a technology designed to significantly reduce the risks of table saw accidents, he and a partner founded plaintiff SD3 II LLC and its subsidiary SawStop, LLC, to market the technology to the industry. SawStop debuted AIMT in August 2000 and began licensing discussions with each of the manufacturers or their predecessors shortly thereafter. However, the plaintiff alleged, the relationship soon became adversarial, as some of the manufacturers stated concerns that adoption of the SawStop technology would subject them to greater product liability in the future. According to Dr. Gass, one manufacturer’s official warned him that the industry would "get together and squish" SawStop if it sought government-mandated inclusion of the technology on all table saws, and he avowedly observed representatives from each of the manufacturers "[getting] up and [going] in the other room to collude" while he was demonstrating the AIMT technology at a trade show later that year.
Although by January 2002, SawStop and Ryobi had entered into a preliminary licensing agreement and several other similar pacts were in process, negotiations with each of the manufacturers collapsed by June. After June 2002, SawStop ceased any attempts to license its technology and began to sell its own AIMT-equipped table saws.
In February 2014, SawStop brought suit against the tool manufacturers, alleging that they conspired to boycott the developer’s product safety technology for table saws. In July 2014, the court granted the manufacturers’ motion to dismiss. On appeal, the Fourth Circuit concluded that the district court partially erred in dismissing SawStop’s antitrust claims because it did not directly address SawStop’s allegations of competitive harm with respect to the group boycott claim. The dismissal order was therefore vacated and remanded regarding the boycott claim.
Statute of limitations ruling. On remand, the federal district court in Alexandria, Virginia, then determined that SawStop’s group boycott claim was barred by the four-year statute of limitations. SawStop claimed that it was injured by the alleged boycott by June 2002 and, at that time, it already knew the material facts alleged in its complaint, the court explained. In newspaper articles and product liability litigation expert testimony reports, SawStop’s founders stated that the saw manufacturers had failed to implement its AIMT technology and linked their alleged collusion to a desire to avoid product liability claims.
Noting that by June 2002 licensing negotiations with the defendant manufacturers had collapsed "without sufficient explanation," the court concluded there could be no genuine dispute that SawStop believed it had suffered economic injury at that point. Further, SawStop co-founder David Fanning admitted that SawStop sought legal counsel in 2006 about a possible antitrust claim against trade organization members, including the defendant tool manufacturers, based on its suspicions of collusion over its SawStop technology. Despite this knowledge, SawStop did not investigate or bring a claim until 2014, the court observed.
Appellate opinion. The appellate court took note of this evidence and of further hostility or alleged collusion toward AIMT thereafter, including a ‘clear communication’ by a Black & Decker representative in early 2001 that the industry should boycott AIMT. That communication, the appellate court pointed out, presaged a more formal industry-wide agreement to work against AIMT, which culminated in the public announcement in December 2003 of a joint venture to create a competing technology "for power saw blade contact injury avoidance, including skin sensing systems, blade braking systems, and/or blade guarding systems." In view of this evidence, the lower court made no error in concluding that the claim was time-barred by the statute of the limitations, the appellate court said.
There was no dispute that the group boycott claim had accrued in 2002, the appellate court noted, and the doctrine of fraudulent concealment did not apply to toll the limitations period beyond 2006. The court rejected an argument by the plaintiffs that they first learned of the boycott in 2010 through testimony given by a Ryobi engineer during the trial of a litigation between many of the same parties on related issues. "SawStop was on both actual and inquiry notice of its claim well before" that testimony was delivered, the appellate court explained, "[a]nd, once on notice of its claim, SawStop failed to act with reasonable diligence.
Fraudulent concealment could not save the claim because the company’s principals were on actual notice of the alleged boycott by, at latest, December 2003. Given the evidence that SawStop knew its injurers and the extent of its economic injury in the form of lost sales and royalties, as well as the "type" of its injury, by June 2002, it was on actual knowledge of its group boycott claim by that point. However, even if it could be assumed that SawStop lacked the facts to identify both its injury and injurer as of June 2002, they had both of those upon the December 2003 Federal Register publication of the joint venture, the appellate court decided. The announcement provided clear notice of the similar nature of the product to be developed and divulged information concerning the members of the joint venture and their intent. It also placed in context the significance of the manufacturers’ abruptly concluded licensing negotiations for AIMT. Thus, it established a point at which SawStop’s principals knew the decision to end licensing negotiations was an anticompetitive one and that they had evidence of it.
Even if SawStop lacked actual notice of its antitrust claim, the appellate court added, it was on inquiry notice of that claim and yet had failed to investigate it with the necessary diligence, not even taking the "most basic investigative step" of contacting the DOJ or FTC with its concerns about collusion.
The case is No. 16-2317.
Attorneys: Jonathan Gordon Cooper (Quinn Emanuel Urquhart & Sullivan, LLP) and Joel Davidow (Cuneo, Gilbert & LaDuca, LLP) for SD3 II LLC, SawStop LLC and SD3, LLC. John Matthew Tanski (Axinn, Veltrop & Harkrider LLP) and David Marion Foster (Norton Rose Fulbright [US] LLP) for Black & Decker [US] Inc. and Black & Decker Corp. Laura A. Brenner (Reinhart Boerner Van Deuren SC) and Paul Christopher Cuomo (Baker Botts LLP) for Milwaukee Electric Tool Corp.
Companies: SD3 II LLC; SawStop LLC; SD3, LLC; Black & Decker [US] Inc.; Black & Decker Corp.; Milwaukee Electric Tool Corp.
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