Inside Dirt

The North Response

Yesterday we broke the story about Genesis suing Quantum over potential patent infringement, see If Ya Can't Beat Em', Sue 'Em below. North Sails has of course been through this once with Genesis, and one of our sources grabbed this North Sails inside memo about the current legal situation. Interesting - Enjoy.

Ladies and Gentlemen,

Last Friday, July 9th, Genesis International (Elvstrom/Sobstad ) filed a
patent infringement lawsuit, with reference to the "Genesis (080) patent, in
the Federal Court of Maryland, USA against both Quantum Sail Design Group
LLC and all of its partners (Larry Leonard, Farley Fontenot, Ed Reynolds,
Glen Peck, Per Andersson, Doug Stewart, Tom Kinney and Robert Pistay).

Genesis has submitted three "counts". One is that the defendants willfully
infringed 080 with their Fusion M product. Two is that the defendants
knowingly designed, used, sold or offered for sail these infringing
products. And three, the defendants have knowingly induced their agents,
dealers and salesmen to sell or offer for sale the infringing product(s).

Genesis asks for a permanent injunction, meaning Q would not be able to
produce or sell Fusion M. (If you remember during our lawsuit with Sobstad,
we were ordered by the judge to cease and desist to produce 3DL sails, until
we received a stay to allow us to continue producing 3DL during the appeal
process). In addition, they are asking for damages (which have to be
demonstrated, but which are tripled if Genesis can prove "willful"
infringement), legal fees and judgements against each of the partners
(defendants). Lastly, they have requested a jury trial.

So, what does this mean? I believe we can somewhat answer this question as
we have been through it.

1) The Q partners will be preoccupied. It's no fun to be named in a lawsuit
(as were, Terry, Tom and others in our suit with Sobstad). It's a sobering
experience to see your own name in print as a defendant!

2) Regardless of how right and wrong you believe you are, you either need to
settle or defend. Both could cost a significant amount of money. Just to go
through the suit will incur a significant legal bill.

3) As to who might win, the answer can only be it's at best 50/50 for Q.
However, there are two potentially significant facts working against Q,
both, ironically caused by us. The first is that, years ago, we had the 080
patent reexamined to be thrown out. We were turned down (that's another long
story, but suffice to say we were shocked). However, as a result, any patent
that passes that test is automatically stronger. The second is that a judge
decided that we infringed the "639 Sobstad patent (Air Frame). True, it's a
different patent and true Sobstad agreed that we did not infringe 080.
However, what our case proved is that it's how the words of a patent are
interpreted that makes the difference. And the 080 patent states that if you
use yarns within a panel that follow principal lines of stress (exact words
shown below in the first claim), you have infringed 080.

4) D/P with their newly acquired D-4 product purchased a license from E/S to
avoid a lawsuit. Since it can be argued that D-4 and Fusion M are very
similar sails, this puts Q in a bad light.

5) It's likely Q will have two defenses. One is to stall. But that costs
lots of money. The second is to argue that their yarns don't follow the
"principal yarns of stress", as they argue in their marketing. (This
"innovation" is a direct copy of our 3DLX patented idea. The only reason we
could not sue is that our patent states the yarns must emanate from all
three corners and in the Fusion M sails, they emanate from only two). This
sounds like a neat and convenient argument, except for the fact that the
definition of what principal lines of stress means is unclear and could be
whatever one says it is. Furthermore, this sort of nuance is seldom
understood by judges, let alone juries. (Believe me, we know)! Secondly,
since the yarns intersect in the Fusion M, it's difficult to argue that the
threads are not "force bearing threads".

In short, we have been through and came out the other end (just fine, I
might add) of the hell that Quantum is now just entering. They are
vulnerable in business and vulnerable re this suit, regardless of the
outcome.