U.S.

DL:: ;,

i)lSTFiiCT ,. l L L

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF VERMONT

SONNAX INDUSTRIES, INC., Plaintiff,
) ) ) ) ) ) ) ) ) ) ) ) )

v.
VBX-VALVEBODYXPRESS, INC. and SCOTT RAGLAND, Defendants.

Case No.

5: If. cv- 3

COMPLAINT

Plaintiff Sonnax Industries, Inc. ("Plaintiff' or "Sonnax"), for its Complaint against Defendants, alleges as follows:

1.

This is an action for infringement of U.S. Patent No. 6,832,632 ("the '632

Patent"), breach of contract, misappropriation of trade secrets, tortious interference with contract, common law unfair competition, and civil conspiracy, and arises out of: (1) Defendant VBXValveBodyXpress, Inc.'s ("VBX") offering for sale of a product covered by the '632 Patent, (2) Defendants' unauthorized and unlawful accessing and misappropriation of Plaintiffs trade secrets and confidential information; (3) Defendant VBX's unauthorized use of information obtained from its involvement with the Technical Automotive Specialties Committee; and (4) Defendant Scott Ragland's ("Ragland") breach ofhis employment agreement with Plaintiff, along with Defendant VBX's interference with that agreement. Defendants' conduct as summarized above, and set forth in more detail below, has caused actual harm to Plaintiff and DOWNS RACHLIN MARTINPLLC

continues to do so. Plaintiff seeks permanent injunctive relief against future infringement; monetary damages for past infringement, breach of contract, and misappropriation; and other relief. JURISDICTION AND VENUE 2. This is an action arising under United States patent law, 35 U.S.C. 171,271,

and 281-85, and under the laws of the State ofVermont. This Court has jurisdiction pursuant to 28 U.S.C. 1331, 1332, 1338, and 1367. 3. This Court has personal jurisdiction over Defendants in this action, and venue is

proper in this judicial district under 28 U.S.C. 1391 (b)-(c) and 1400(b), because (a) on information and belief, Defendants have engaged in business within this forum amounting to sufficient minimum contacts; (b) Defendants have performed acts within or directed toward this forum that have caused and continue to cause Plaintiff the harms alleged herein; (c) a substantial part of the conduct giving rise to the asserted claims has occurred or has had effects in this judicial district; and (d) a substantial part of the property that is the subject of this action is situated in this judicial district. THE PARTIES 4. Plaintiff Sonnax is a Vermont corporation with a principal office and facilities in

Bellows Falls, Vermont. 5. On information and belief, Defendant VBX is a New Jersey Corporation having a

registered address at 150 Mid-Atlantic Parkway, Paulsboro, New Jersey 08066. Defendant VBX is doing business in this judicial district and elsewhere.

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6.

On information and belief, Defendant Ragland is an individual residing at 76 Dell

St., Charlestown, NH. Defendant Ragland is a former employee of Sonnax. FACTS 7. In or about September 2000, Defendant Ragland began working as a

buyer/planner in the Purchasing Group for Plaintiff at its office in Vermont. 8. In or about January 2005, Defendant Ragland was promoted to the position of

Account Executive for Plaintiff. 9. Sometime after January 2005, Defendant Ragland was promoted to the position

of Project Line Manager. His responsibilities included the development, design, and marketing, of product lines for Plaintiff, including, but not limited to, product lines directed to the Aisin Warner 55-50 (the "AW 55-50 SW products") transmission and the Toyota U-140 transmission (the "Toyota products"). 10. On or about July 30, 2002, Defendant Ragland entered into an "Employee

Proprietary Information and Inventions Agreement" (hereafter, "Employment Agreement") with Plaintiff. 11. By entering into the Employment Agreement, Defendant Ragland agreed that

during his employment with Plaintiff and at all times thereafter, he would maintain in confidence all of Plaintiffs proprietary and/or confidential information, which included any trade, business, or technical information regarding Plaintiff or its products or services. 12. Defendant Ragland further agreed under the Employment Agreement that, during

his employment with Plaintiff and at all times thereafter, he would not disclose or use proprietary or confidential information except in the course of Plaintiffs business and for Plaintiffs benefit.

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13.

Defendant Ragland further agreed under the Employment Agreement that, during

his employment with Plaintiff and at all times thereafter, he would not directly or indirectly participate as a director, officer, manager, employee, agent or consultant of any corporation, firm or person engaged in a business competitive, directly or indirectly, with the business of the Plaintiff anywhere in the world for 18 months after the termination of employment with Plaintiff. 14. While employed by Plaintiff, Defendant Ragland became knowledgeable about

Plaintiff's trade secrets and confidential information, including, but not limited to, manufacturing processes, design specifications and tolerances, material suppliers, vendors, marketing strategies, cost of materials and fabrication, information relating to Plaintiffs customers (including customer lists and the identity of prospective customers), sales strategies, product pricing policies, cost information relating to both products and services, internal fmancial information, information relating to the development or introduction of Plaintiff's new products, technical and research data, research techniques, and other proprietary information. 15. While employed by Plaintiff, Defendant Ragland obtained substantial knowledge

regarding Plaintiffs AW 55-50 SW products and Toyota products, including trade secret information, confidential information, and related patents, including the '632 patent, which had issued on December 21, 2004. 16. Under the Employment Agreement, all materials and information Defendant

Ragland collected, compiled, summarized, synthesized, or prepared regarding the A W 55-50 SW products and the Toyota products were the sole property of Plaintiff. 17. On or about January 16,2009, Defendant Ragland left the employ of Plaintiff.

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18.

On or about March 16,2009, Defendant Ragland became an employee of

Defendant VBX. 19. Defendant VBX is primarily in the business of transmission valve body

remanufacturing. 20. While employed with Defendant VBX, Defendant Ragland disclosed Plaintiff's

trade secrets and other confidential information to Defendant VBX. 21. 22. Defendant VBX knew of the Employee Agreement and the restrictions therein. On or about August 6, 2002, Defendant VBX became a member of the Technical

Automotive Specialties Committee (the "TASC Force"), which is a group ofbusinesses involved in the automobile transmission industry that collaborate to identify problems with transmissions. 23. In joining the TASC Force, Defendant VBX executed a Non-Disclosure

Agreement. As stated in the Non-Disclosure Agreement, the purpose of the TASC Force was to provide a forum for the discussion of problems, causes, corrections and ways to supplement improvements related to automotive, industrial and high-performance transmission (including torque converter) components and peripheral areas. The discussion involved tooling and maintenance materials associated with the disassembly, assembly, and operation of all transmissions. 24. Under the Non-Disclosure Agreement, another stated purpose of the TASC Force

was to discuss creative solutions to problems associated with transmissions and torque converters and to develop component fixes as a result of these solutions to improve performance, availability, costs or quality of the existing product for the purpose of capitalizing on a new component (product) offering.

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25.

Parties to the Non-Disclosure Agreement were encouraged to disclose

confidential information in exchange for the restrictions on use of that confidential information. 26. Under the Non-Disclosure Agreement, Defendant VBX was restricted from

disclosing confidential information obtained from members of the TASC Force to any person outside of the other parties to the Non-Disclosure Agreement and to restrict disclosure to its employees or agents to only those with a need-to-know. 27. Under the Non-Disclosure Agreement, Defendant VBX was required to use such

confidential information only for the purposes set forth in the Non-Disclosure Agreement and not to use or exploit such confidential information for its own behalf or for the benefit of another without the prior written consent of the party disclosing the confidential information. 28. While participating in the TASC Force, Defendant VBX acquired confidential

information from Plaintiff relating to manufacture, design, processes, and techniques, as well as other proprietary and confidential information related to valve body component manufacture and design. 29. In November and December 2011, Plaintifflearned from an industry source that

Defendant VBX was developing products to compete with Plaintiffs AW 55-50 SW products and Toyota products. Because the technology behind the AW 55-50 SW products and the Toyota products was developed by Plaintiff over a substantial period of time and with significant engineering resources, the only way Defendant VBX could have developed its products in the relevant time period was to use trade secrets, other confidential information, and knowledge obtained from Defendant Hagland and/or to use trade secrets, other confidential information, and knowledge ofPlaintiffs obtained via the TASC Force.

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30.

In November and December 2011, Plaintifflearned from an industry source that

Defendant VBX had recently contacted him to offer a product replacing Plaintiff's part number 84754-30K, which is a boost valve assembly specifically designed for a General Motors 4T65E transmission. According to the industry source, in the offer from Defendant VBX, Defendant VBX compared only the cost differential between its part and Plaintiffs patented part without indicating there would be any difference in construction. 31. Patent. 32. patent. 33. Plaintiff has made and sells patented boost valve assemblies, including part Plaintiff's website states that part number 84754-30K is covered by the '632 Plaintiff's part number 84754-30K is covered by at least one claim of the '632

number 84754-30K, throughout this judicial district and the United States. COUNT I PATENT INFRINGEMENT 34. Plaintiffhereby realleges and reincorporates paragraphs 1 through 33 of this

Complaint as if fully set forth herein. 35. Plaintiff is the sole owner by assignment of the '632 Patent, which is entitled

"Boost Valve Assembly." A copy of the '632 Patent is attached to this Complaint as Exhibit A. 36. The inventor of the patent is Benjamin A. Wallace. The inventor has assigned all

of his rights in the '632 Patent to Plaintiff. 37. Pursuant to 35 U.S.C. 282, the '632 Patent is presumed valid.

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38.

Defendants VBX and Hagland have actual knowledge of the '632 Patent at least

by virtue of Defendant Ragland's prior employment by Plaintiff and Plaintiffs website stating that part number 84754-30K is covered by the '632 Patent. 39. Defendant VBX has directly and indirectly infringed and is still infringing the

'632 Patent by making and offering to sell a boost valve assembly, in this judicial district and elsewhere, that embodies the patented invention. 40. Defendant VBX has offered for sale a product that would be a direct replacement

for Plaintiffs 84754-30K with the specific intent to infringe the '632 Patent. 41. Defendant VBX's product, offered as a direct replacement for Plaintiffs 84754-

30K, is specifically adapted for use as a boost valve assembly within the valve body of a General Motors 4T65E transmission and thus has no substantial non-infringing use. 42. Defendant VBX has no license for use of the patent, and, on information and

belief, has knowledge of the '632 Patent. Accordingly, Defendant VBX's infringement of the '632 Patent has been and continues to be willful, wanton, deliberate, and without license. 43. Plaintiff has been and continues to be damaged as a direct and proximate result of

these actions by Defendant VBX. COUNT II BREACH OF CONTRACT 44. Plaintiff repeats and realleges each of the allegations contained in paragraphs 1

through 43, above, as if fully set forth herein. 45. The Employee Agreement referenced in this Complaint is a valid contract that

existed and continues to exist between Plaintiff and Defendant Hagland.

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46.

The Non-Disclosure Agreement referenced in this Complaint is a valid contract

that existed and continues to exist between Plaintiff and Defendant VBX. 4 7. By his actions as set forth in this Complaint, Defendant Ragland has breached the

Employee Agreement. 48. By its actions as set forth in this Complaint, Defendant VBX has breached the

Non-Disclosure Agreement. 49. Plaintiff has been and continues to be damaged as a direct and proximate result of

these actions by Defendants. COUNT III VIOLATION OF VERMONT TRADE SECRETS ACT (9 V.S.A. 4601 ET SEQ.) 50. Plaintiff repeats and realleges each of the allegations contained in paragraphs 1

through 49, above, as if fully set forth herein. 51. Plaintiff's valve manufacturing processes, materials of construction, product

specifications, information relating to Plaintiffs customers (including customer lists and the identity of prospective customers), sales strategies, product pricing policies, cost information relating to both products and services, internal financial information, information relating to the development or introduction of Plaintiff's new products, technical and research data, and research techniques are "trade secrets" within the meaning of9 V.S.A. 4601(3). 52. Defendant VBX misappropriated Plaintiff's trade secrets by accessing and using

information obtained by Defendant Ragland after his work relationship with Plaintiff had ended without express or implied consent from Plaintiff. Defendant VBX further misappropriated Plaintiff's trade secrets by using trade secret information obtained through the TASC Force.

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53.

At the time Defendant VBX unlawfully used Plaintiffs trade secrets, Defendant

VBX knew or had reason to know that its knowledge of the trade secrets and possession thereof were originally acquired under circumstances giving rise to a duty to maintain their secrecy and limit their use. 54. Defendant VBX has used Plaintiffs trade secret information to accelerate the

production of products that would compete with Plaintiffs. The use of the trade secret information has allowed Defendant VBX to avoid considerable research and development costs and to bring a product to market faster than would have been possible without the trade secret information. 55. Defendant Ragland, acting both individually and as the agent for Defendant

VBX, further misappropriated Plaintiffs confidential information by unlawfully disclosing Plaintiffs trade secrets related to Plaintiffs manufacturing processes, design specifications and tolerances, material suppliers, vendors, marketing strategies, cost of materials and fabrication, information relating to Plaintiffs customers (including customer lists and the identity of prospective customers), sales strategies, product pricing policies, cost information relating to both products and services, internal financial information, information relating to the development or introduction of Plaintiffs new products, technical and research data, research techniques, and other proprietary information to Defendant VBX. 56. At the time he unlawfully disclosed Plaintiffs trade secrets, Defendant Ragland

knew or had reason to know that he had a duty to maintain the secrecy of this information and to limit its use.

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57.

Upon information and belief, Defendant Hagland has assisted Defendant VBX in

developing products to compete with Plaintiff's AW55-50 SW products and Toyota products. Such assistance would require the use of trade secrets, other confidential information, and knowledge Defendant Hagland obtained while working for Plaintiff. 58. Plaintiff has been and continues to be damaged as a direct and proximate result of

these actions by Defendants. COUNT IV TORTIOUS INTERFERENCE WITH CONTRACT 59. Plaintiff repeats and realleges each of the allegations contained in paragraphs 1

through 58, above, as if fully set forth herein. 60. Defendant VBX was and is aware that Defendant Hagland has a contract with

Plaintiff (i.e., the Employee Agreement) and a continuing duty not to disclose Plaintiff's confidential information. 61. Defendant VBX intentionally and improperly induced Defendant Hagland to

breach the Employment Agreement or, alternatively, knew that such interference would be substantially certain to occur as a result of its actions. 62. Plaintiff has been and continues to be damaged as a direct and proximate result of

these actions by Defendant VBX. COUNTY COMMON LAW UNFAIR COMPETITION 63. Plaintiff repeats and realleges each of the allegations contained in paragraphs 1

through 62, above, as if fully set forth herein.

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64.

As alleged herein, Defendants unlawfully misappropriated confidential Plaintiff

information, which information was the exclusive property of Plaintiff. 65. Defendants' misappropriation of Plaintiffs exclusive property constitutes unfair

competition under Vermont law. 66. Plaintiff has been and continues to be damaged as a direct and proximate result of

these actions by Defendants. COUNT VI CIVIL CONSPIRACY 67. Plaintiff repeats and realleges each of the allegations contained in paragraphs 1

through 66, above, as if fully set forth herein. 68. Defendants have acted in concert with the unlawful objectives of(a)

misappropriating Plaintiffs trade secrets and confidential information and (b) unfairly competing with Plaintiff. 69. conspiracy. 70. Plaintiff has been and continues to be damaged as a direct and proximate result of As alleged herein, Defendants have performed unlawful acts in furtherance of the

these actions by Defendants. RELIEF REQUESTED WHEREFORE, Plaintiff prays that this Court: a. Award Plaintiff damages resulting from Defendant VBX' s patent infringement,

breach of contract, violations of the Vermont Trade Secrets Act, tortious interference with contract, unfair competition, and civil conspiracy;

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b.

Award Plaintiff damages resulting from Defendant Ragland's breach of contract,

violations of the Vermont Trade Secrets Act, unfair competition, and civil conspiracy; c. Award Plaintiff injunctive relief on account of Defendants' unlawful conduct as

set forth herein; d. Award costs and attorneys' fees to Plaintiff, as provided in the "Employee

Confidentiality and Inventions Agreement" between Plaintiff and Defendant Hagland; e. f. Award interest and costs; and Award such other and further relief as is just and equitable.
JURY DEMAND

Plaintiff demands trial by jury on all issues so triable.

Dated at Burlington, Vermont this 6th day of January, 2012.

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By: __~------------~-- Lawrence H. Meier Matthew S. Borick

199 Main Street P.O. Box 190 Burlington, VT 05402 Ph.: 802-863-2375 Fax:802-862-7512 lmeier@drm.com mborick@drm.com ATTORNEYS FOR PLAINTIFF SONNAX INDUSTRIES, INC.

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