United States District Court, D. Colorado
DAVID L. HILDEBRAND, an individual, Plaintiff,
WILMAR CORPORATION, a Washington corporation, Defendant.
REPORT AND RECOMMENDATION ON DEFENDANT'S MOTION
TO DISMISS (DKT. #20)
Reid Neureiter, United States Magistrate Judge
matter comes before the Court on Defendant's Motion to
Dismiss. (Dkt. #20.) Plaintiff filed a response. (Dkt. #22).
Defendant filed a reply. (Dkt. #24). Judge Moore referred the
Motion to me on March 18, 2019. (Dkt. #29). I heard argument
from the Parties on April 12, 2019. Having reviewed the
briefs, relevant caselaw, and considered the arguments of the
Parties, I recommend that the Motion to Dismiss be
a lawsuit brought by a patent holder, David L. Hildebrand,
against an alleged patent infringer/licensee, Wilmar
Corporation (“Wilmar”), for unpaid royalties and
for an accounting.
2009, Mr. Hildebrand filed suit in this District against this
same defendant, Wilmar, for infringement of U.S. Patent No.
5, 737, 981 (the “‘981 Patent”). See
Hildebrand v. BJ's Tools, et al., No.
09-cv-00349-REB-MEH (D. Colo. Feb. 19, 2009). The ‘981
Patent covers special reverse-threaded sockets intended to
assist in extracting hard to remove (think
“stripped”) nuts. Wilmar allegedly sold the
products using the patented technology as an “Emergency
Lug Nut Remover Socket Set.”
Hildebrand's 2009 lawsuit was settled via a Settlement
Agreement dated March 2, 2009 (the “Settlement
Agreement”), signed by Mr. Hildebrand, as Patent Owner,
and Nevil Hermer, as President of Wilmar Corporation. (Dkt.
#2.) The Settlement Agreement was attached, under
restriction, to the Complaint in this case. (Id.)
terms of the Settlement Agreement included the following:
(1) Wilmar agreed to pay Hildebrand a lump sum of $25, 000
“for past and current infringing acts.”
(2) Hildebrand agreed to grant Wilmar a non-exclusive license
“to any future and-or continued sale of Products
covered” under the ‘981 Patent.
(3) In consideration for the license, Wilmar agreed to pay an
“ongoing royalty in the amount of 15% of the Gross
Selling Price of Products sold and covered” by the
‘981 Patent. (Id. at 2.) Importantly, Wilmar
also agreed to continue to pay Hildebrand “an
ongoing reduced royalty/fee of 5% following the expiration of
the [‘981] Patent, under the terms of”
the Agreement. (Id. at 4) (emphasis added).
(4) The royalties were to be paid quarterly, and “be
accompanied by a report of the gross sales of Products sold
during the quarter being reported.” (Id.)
(5) The Agreement was to terminate thirty days after
Wilmar's certification that it had decided to stop
selling products embodying the ‘981 Patent.
(Id. at 5.)
Hildebrand alleges that the post-expiration payments were
intentional, and designed to make up for taking a lower
royalty during the patent's pendency. As alleged in the
Complaint, Mr. Hildebrand “accepted significantly less
for lost profits during the term of the patent in exchange
for payments to be paid after the expiration of the
patent.” (Dkt. #3 at ¶ 7.)
2017, Mr. Hildebrand, pro se, filed a second suit against
Wilmar, Hildebrand v. Wilmar Corporation, No.
17-cv-02821-PAB-SKC (D. Colo. Nov. 22, 2017), purportedly
seeking damages for patent infringement. In truth, the claims
in that case were very similar to the claims being asserted
in this case with the Settlement Agreement being
mentioned, and Mr. Hildebrand asserting that he had
“not received proper compensation” or
“accounting reports as agreed upon.” See
Compl., No. 17-cv-02821-PAB-SKC (Dkt. #1 at 3). But that case
was treated by this Court as a patent infringement case,
rather than a breach of contract case, and was eventually