United States District Court, D. Kansas
NEONATAL PRODUCT GROUP, INC., Plaintiff/Counterclaim Defendant,
JANICE M. SHIELDS, PAUL W. SHIELDS, and ANGELE INNOVATIONS, LLC, Defendants/Counterclaimants,
CRECHE INNOVATIONS, LLC, MILLENNIUM MARKETING GROUP, LTD., and SCOTT A. NORMAN, Counterclaim Defendants.
MEMORANDUM AND ORDER
D. Crabtree United States District Judge
matter comes before the court on cross motions for summary
judgment filed by each party to this patent infringement
dispute. Plaintiff Neonatal Product Group, Inc.
(“Neonatal”), doing business as Creche
Innovations, LLC (“Creche”), initiated this
lawsuit against Janice M. Shields and Paul W. Shields,
individually and as trustees of the Shields Family Trust, and
Angele Innovations, LLC (collectively, “the
Shields”), by filing a Complaint asserting two claims:
(1) a declaratory judgment that Neonatal has not infringed
U.S. Patent No. 6, 417, 498 (“the '498
Patent”); and (2) a declaratory judgment that the
Asserted Claims of the '498 Patent are invalid. Doc. 49
(Amended Complaint ¶¶ 36-41); Doc. 143 at 19
(Pretrial Order ¶ 4.a.).
Shields responded to the lawsuit by filing an Answer and
Counterclaim (Doc. 30). It asserted eight counterclaims
against four counterclaim defendants: Neonatal, Creche,
Millennium Marketing Group, Ltd., and Scott Norman
(collectively, “the Counterclaim Defendants”).
The eight counterclaims asserted against the Counterclaim
Defendants include: (1) patent infringement; (2) inducement
of patent infringement; (3) breach of an Exclusive License
Agreement; (4) breach of a Patent Marketing Agreement; (5)
tortious interference with contract; (6) breach of fiduciary
duty; (7) intentionally causing or assisting an agent to
violate the duty of loyalty; and (8) unjust enrichment. Doc.
143 at 20 (Pretrial Order ¶ 4.c.).
August 24, 2017, the court granted Neonatal and the
Counterclaim Defendants'Motion for Partial Summary
Judgment. Doc. 180. In its Memorandum and Order, the court
granted summary judgment for Neonatal on its declaratory
judgment claim and entered a declaratory judgment that
Neonatal has not infringed the '498 Patent. Id.
at 27-34, 45. Naturally, the court also granted summary
judgment against the Shields' counterclaims for patent
infringement (Count I) and inducement of patent infringement
(Count II). And the court granted summary judgment against
the Shields' counterclaims for breach of an Exclusive
License Agreement (Count III), tortious interference with
contract (Count V), and unjust enrichment (Count VIII).
Id. at 45-46.
the Shields now have filed a Motion for Partial Summary
Judgment (Doc. 188) requesting two things that directly
contradict the rulings in the earlier Order on summary
judgment. First, the Shields seek summary judgment
against Neonatal's declaratory judgment claim
seeking a declaration that Neonatal did not infringe the
'498 Patent. And second, they seek summary judgment
in their favor on their counterclaim for patent
infringement (Count I). Id. The Shields seek summary
judgment on these claims even though the court already has
ruled, as a matter of law, in Neonatal's favor on both
claims. See generally Doc. 180.
also has filed a summary judgment motion. It is a Motion for
Summary Judgment on the Remaining Counterclaims (Doc. 185).
It seeks summary judgment against all of the Shields'
undecided counterclaims, i.e., (1) breach of a
Patent Marketing Agreement (Count IV); (2) breach of
fiduciary duty (Count VI); and (3) intentionally causing or
assisting an agent to violate the duty of loyalty (Count
reasons explained below, the court denies the Shields'
Motion for Partial Summary Judgment (Doc. 188). And the court
grants Neonatal's Motion for Summary Judgment on the
Remaining Counterclaims (Doc. 185) in part and denies it in
following facts are either stipulated facts taken from the
Pretrial Order (Doc. 143), uncontroverted, or, where
controverted, stated in the light most favorable to the
parties opposing summary judgment. Scott v. Harris,
550 U.S. 372, 378 (2007).
Defendants Janice M. Shields and Paul W. Shields are the
named inventors of the '498 Patent that issued on July 9,
2002. The device disclosed in the '498 Patent is called
the “Neonatal Substrate Warmer.” The device
automatically warms and vibrates baby bottles containing
frozen or refrigerated breast milk so that the milk thaws,
warms, and mixes quickly and efficiently. The Shields owned
the '498 Patent until August 2010, when they transferred
the patent's ownership to the Shields Family Trust dated
August 19, 2010 (“Shields Family Trust”). Mr. and
Ms. Shields serve as trustees of the Shields Family Trust.
Shields Contract to Commercialize the '498
2004, Counterclaim Defendant Millennium Marketing Group, Ltd.
(“MMG”) contacted the Shields to assist them with
commercializing the '498 Patent. MMG was a patent
marketing company familiar with patents and intellectual
property license agreements. Through this communication, the
Shields first became acquainted with Counterclaim Defendant
Scott Norman-an owner and President of MMG. In 2006, Mr.
Norman created another company- plaintiff Neonatal-who sought
to license the '498 Patent. Mr. Norman is Neonatal's
Chief Executive Officer. When Mr. Norman introduced the
Shields to Neonatal, through his patent marketing company
MMG, he owned both companies.
April 27, 2004, Mr. and Ms. Shields entered into a Patent
Marketing Agreement with MMG. MMG and the Shields twice
amended the Patent Marketing Agreement. The parties first
amended the Patent Marketing Agreement on October 13,
2005-extending its term to October 13, 2006. The parties
amended the Patent Marketing Agreement again on June 9, 2006.
1, 2006, Mr. and Ms. Shields-together with MMG-entered an
Exclusive License Agreement with Neonatal. The Exclusive
License Agreement granted an exclusive license to Neonatal to
manufacture and sell products covered by the '498 Patent.
The Shields, as individuals, entered the Exclusive License
Agreement with Neonatal.
Patent Marketing Agreement
Patent Marketing Agreement defines Mr. and Ms. Shields as the
“Client” and the '498 Patent as the
“Product.” The Patent Marketing Agreement imposed
several obligations on MMG during its term. At least 14 of
these obligations appear in Section 3 of the Patent Market
Agreement. Section 3's obligations include:
(a) Promote the “Client” and the
“Product” and to develop a proprietary database
of qualified Licensees that are commensurate with the
potential for the “Product”.
(b) Communicate with potential Licensees and negotiate the
most favorable license terms for the “Product”
and with all Licensees. “Client” shall have final
approval of all terms agreed to with Licensees.
(c) Abide by the “Client's” policies as
communicated to “MMG” at any time during the
(d) “MMG” shall act as an independent contractor
and be solely responsible for and bear all expenses incurred
as a result of “MMG's” office facilities and
business activities generally.
(e) Keep “Client” informed on progress of the
marketing efforts and provide a written report of this
progress on a quarterly basis (minimum of four written
(f) Not make any written or oral promises to any Licensee or
potential Licensee without the prior knowledge and approval
of the “Client”.
(g) Notify “Client” of any products that appear
to infringe on the patent or trademark protection of the
(h) Prepare a comprehensive Product Prospectus that is
written exclusively for the “Product” and obtain
“Client's” written approval prior to
submission to potential Licensees.
(i) Prepare a financial Pro Forma; including costs to
manufacture, sales projections and other balance sheet items
that match the licensees and Obtain
“Client's” written approval prior to
submission to potential Licensees.
(j) Produce a media kit designed exclusively for the
“Product” containing the above Product Prospectus
and financial Pro Forma to be used in presentations with each
potential Licensee and obtain “Client's”
written approval prior to submission to potential Licensees.
(k) Develop a web page for the “Product” and
provide World Wide Internet presence during the term of this
(1) During the term of this agreement “MMG” shall
represent the “Product” at a minimum of two (2)
applicable trade shows.
Doc. 24-1 at 1-3 (Patent Marketing Agreement). Ms. Shields
testified that the purpose of MMG's obligations in
paragraphs 3(a) through 3(1) was to secure a license for the
'498 Patent. Ms. Shields also testified that she was not
sure if these obligations applied to MMG after the parties
executed the Exclusive License Agreement because she thought
the Exclusive License Agreement effectively
“replaced” the obligations listed in sections
3(a) through 3(1) of the Patent Marketing Agreement.
Patent Marketing Agreement imposed two more obligations on
MMG in sections 3(m) and 3(n):
(m) After a licensing agreement has been executed
“MMG” shall provide account management with each
Licensee and act as “Client[']s” liaison for
the entire term of the license agreements.
(n) “MMG” shall be responsible for collection and
distribution to “Client” of all royalties due.
“MMG” shall distribute “Client's”
portion of these royalties within three (3) business days of
receipt from Licensee.
Doc. 24-1 at 3 (Patent Marketing Agreement).
paragraph 3(m), Ms. Shields testified that that MMG acted as
a liaison-"more or less”-between the Shields and
Neonatal during the term of the Exclusive License Agreement.
Doc. 186-4 at 5 (Janice M. Shields Dep. 120:24-121:1). In
reference to paragraph 3(n), Ms. Shields testified that MMG
collected and distributed royalties from Neonatal, passing
those royalties on to Ms. Shields.
parties also agreed in the Patent Marketing Agreement that
MMG would receive 50% of all royalties paid to the Shields
for the first five years of any license agreement the parties
entered during the Patent Marketing Agreement's term.
Hires Drake Koch to Design a Milk Warmer Based on the
2006, MMG hired a product developer named Drake Koch to
design a milk warmer based on the '498 Patent. Mr. Koch
ultimately designed for MMG what became known as the
PENGUIN® Single Well Warmer and the PENGUIN® Four
Well Warmer. Mr. Koch also is responsible for the commercial
design of THERMA-LINER™ bags.
Mr. Koch was designing the PENGUIN® warmers, Ms. Shields
talked extensively with him to make sure that he
“didn't mess it up.” Doc. 186-4 at 3 (Janice
M. Shields Dep. 74:9-16). Ms. Shields also testified that she
worked with Mr. Koch “a lot” and made a long list
of things for him to do and not do as he ...