Hertz v TDS Rental (patent, antitrust)

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The PTO issued a Notice of Allowance in October of 2006.UNITED STATES DISTRICT COURTDISTRICT OF MASSACHUSETTSCIVIL ACTION NO. 07-11793-RGSTHE HERTZ CORPORATIONandTSD RENTAL, LLCv.ENTERPRISE RENT-A-CAR COMPANYandTHE CRAWFORD GROUP, INC.MEMORANDUM AND ORDER ONDEFENDANTS’ MOTIONS TO DISMISSJune 2, 2008STEARNS, D.J.BACKGROUNDOn February 19, 2007, plaintiffs The Hertz Corporation (Hertz) and TSD Rental LLC(TSD) filed a Complaint against competitors Enterprise Rent-a-Car Company (Enterprise)and The Crawford Group, Inc. (Crawford), asserting violations of Section 2 of the ShermanAntitrust Act (the Antitrust Complaint). The Antitrust Complaint took aim at a patentapplication filed by defendants in the United States Patent and Trademark Office (PTO)in August of 2000.

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Defendants countered with a motion to dismiss for lack of subjectmatter jurisdiction and failure to state a claim. The court held a hearing on September 7,

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The Patent Complaint was initially docketed by the Clerk’s Office as having beenfiled on September 24, 2007. Plaintiffs filed a motion to correct the docket to reflect thefact that the case was not filed until the stroke of midnight on September 25, 2007. Thecourt allowed the motion.

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In amending the Antitrust Complaint, plaintiffs abandoned their previously assertedclaims of violations of the Massachusetts Antitrust Act.22007, and rendered a preliminary opinion that plaintiffs had failed to raise a justiciablecase or controversy.Plaintiffs were then given leave to amend the Complaint. Less than one monthlater, on September 25, 2007, the PTO issued to Crawford as assignee United StatesPatent No. 7,275,038 (the ‘038 Patent), entitled “Web Enabled Business to BusinessOperating System For Rental Car Services.” The same day, plaintiffs filed a separateaction against defendants, seeking a declaratory judgment of invalidity, unenforceability,and non-infringement (the Patent Complaint).

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On October 9, 2007, plaintiffs filed a “FirstAmended and Supplemental Complaint” seeking to cure the defects identified by the courtin the original Antitrust Complaint. The court thereafter consolidated the two actions. Nowbefore the court are defendants’ motions to dismiss both Complaints in their entirety. Ahearing on the motions was held on May 5, 2008.1. The Antitrust ComplaintThe Antitrust Complaint asserts statutory and common-law claims for violations ofthe Sherman Act, 15 U.S.C. §2 (Count I); unfair trade practices in contravention of theMassachusetts Consumer Protection Act, Gen. Laws Chapter 93A (Count II); and tortiousinterference with advantageous business relationships (Count III).

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The fight is overEDiCAR, a software program licensed by Hertz from TSD, its creator. The EDiCAR

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An invention is not patentable if it was “in public use or on sale in this country,more than one year prior to the date of the application for patent in the United States.” 35U.S.C. § 102(b). The Supreme Court instructs that the on-sale bar applies when theinvention, more than a year prior to the application date, is: (1) the subject of a commercialoffer for sale; and (2) ready for patenting. Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 67(1998). The second element may be satisfied “by proof of reduction to practice before thecritical date; or by proof that prior to the critical date the inventor had prepared drawingsor other descriptions of the invention that were sufficiently specific to enable a personskilled in the art to practice the invention.” Id. at 67-68.3program offers a method of tracking communications between rental car companies andinsurers whose clients are provided replacement vehicles while their cars are beingrepaired. Enterprise has a patented software program of its own, the Automated RentalManagement System (ARMS), that performs a similar task. Crawford is the owner ofARMS by virtue of its ownership of the ‘038 Patent. Although Enterprise formally licensesthe right to use ARMS from Crawford, in reality the interests of the two defendants appearto be aligned.The Antitrust Complaint alleges that defendants made false and misleadingstatements to the PTO in a (successful) effort to secure the ‘038 Patent and with it amonopoly over a choice and lucrative slice of the rental car market. More specifically,plaintiffs allege that Timothy Weinstock and William Tingle, Crawford employees who arealso named inventors on the ‘038 Patent, signed false and misleading declarations to thePTO in an effort to evade the on-sale bar.

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According to plaintiffs, on January 11, 2006,Weinstock signed a false declaration purporting to explain why several documentssubmitted by defendants to the PTO contained inconsistent dates. For example, apromotional document entitled “CIO Magazine 2002 Enterprise Value Awards Application”touted the fact that “ARMS/Web . . . was piloted to the first users in July of 1999.” This