Trial Cancelled. Sanctions Looming.

On Friday, March 26, with trial set to begin the following Monday, Judge Alan D Albright held a hearing on a motion for “death penalty” sanctions—to strike the defendant’s pleadings and enter a judgment of infringement—in the case of Performance Chemical Company v. True Chemical Solutions, LLC WDTX-6-21-cv-00222. The Court did not rule on the motion at the hearing, but did cancel the trial, which it said it did not do lightly in view of its busy docket.

As background, Performance Chemical Company (PCC) sued its competitor True Chemical Solutions, LLC (True Chem) alleging infringement of its patented Automated Water Treatment Trailers (frac trailers). True Chem asserted as its key noninfringement position that it simply does not have the piece of automation equipment on its trailers. With lots of circumstantial evidence guiding its request, PCC spent the last two years sending written discovery and deposing True Chem’s employees to inquire about the automation equipment, but True Chem and its attorneys repeatedly insisted that it did not exist. Through a third party, PCC learned just a few weeks ago that True Chem had in fact installed the automation equipment on at least one trailer. After subpoenaing and deposing this third party, PCC confronted True Chem with invoices for the installation of the automation equipment. With just one week left before trial, True Chem finally produced the missing equipment to PCC, sparking this motion for death penalty sanctions for a finding of infringement and lost profits.

One of Judge Albright’s first comments set the tone for this hearing. Regarding a side issue on True Chem’s late motion to strike PCC’s damages expert, Judge Albright emphasized that this is “probably the worst failure I’ve ever seen to comply with any deadlines by this court,” and that he was not going to put up with such conduct any longer. Judge Albright denied the motion to strike. And because PCC had already successfully challenged True Chem’s damages expert, PCC’s expert will be the only damages expert to testify at trial.

Judge Albright then asked PCC why death penalty sanctions would be justified, pointing out that a public policy reason—to weed out bad patents—exists for letting True Chem put on its invalidity defense. Judge Albright also suggested they could have a trial on only the damages, with PCC’s expert as the only witness given that True Chem’s expert had already been struck. PCC argued that these harsh sanctions of striking its invalidity grounds and accepting PCC’s evidence on damages were necessary to punish and deter egregious discovery misconduct.

PCC went through a timeline listing more than a dozen instances it claimed True Chem wrongfully withheld information. Three examples stood out. First, PCC argued that True Chem refused to allow inspection of the accused trailers until the Court ordered it. When PCC arrived on site the very next day after the court order, the very piece of automation equipment at issue was conspicuously missing, especially considering the configuration of the trailer and an empty space with bolt holes where one would expect this equipment to be. Second, True Chem made these same misrepresentations before the Federal Circuit in an attempt to change the venue. And third, Judge Manske ordered True Chem to supplement its interrogatory responses, but in its supplement, True Chem doubled down on supposedly inaccurate statements its employees made during depositions.

True Chem offered two explanations. First, it argued that only one trailer was automated during an unsuccessful experiment and was never used in the field. Second, it argued that because True Chem’s employees thought this piece of equipment did not infringe the claims, the employees believed they did not need to disclose it during depositions.

Judge Albright responded by saying: “There are only two conclusions I can draw. Either you intentionally withheld this, or this is a level of gross incompetence that is stunning. Stunning.” He noted that every discovery rule aimed at preventing this type of misconduct was thwarted by this conduct. He ordered a preliminary injunction and canceled the trial, a decision not taken lightly due to his busy trial docket. While he did not rule on the motion for sanctions, he did remind the parties of his general rule that if someone moves for sanctions, either the moving party or the responding party is very likely going to be sanctioned. He indicated the parties could expect a decision this week.