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Innovasystems, Inc. v. Proveris Scientific Corporation

United States District Court, Third Circuit

October 7, 2013

INNOVASYSTEMS, INC., Plaintiff,
v.
PROVERIS SCIENTIFIC CORPORATION, Defendant.

FOX ROTHSCHILD LLP Samuel H. Israel, Esq. Melissa J. Dolin, Esq., Philadelphia, PA, Counsel for Plaintiff.

GREENBERG TRAURIG LLP Alan J. Brody, Esq., Florham Park, NJ, Counsel for Defendant.

OPINION

JOSEPH E. IRENAS, Senior District Judge.

This unfair trade dispute comes before the Court on Defendant Proveris Scientific Corporation's ("Proveris") motions to withdraw this suit's reference to the Bankruptcy Court (Dkt. No. 1) and file a declaration in support thereof under seal (Dkt. No. 9). For the reasons given below, the motions are granted.

I.

Both parties manfucature laboratory equipment for the niche market of aerosol drug delivery testing, and this suit is the latest episode in their long standing relationship.

In December 2005, Proveris sued Innovasystems, Inc. ("Innvoa") in the District of Massachusetts for infringing United States Patent No. 6, 785, 400 (the "'400 patent"). On May 11, 2007, the court entered a permanent injunction against Innova, prohibiting it from infringing the 400 patent.[1]

On March 3, 2010, Proveris sought and obtained an order of contempt against Innova for continued infringement in violation of the injunction. On the Friday before the sanctions trial was to begin, September 2, 2011, Innova filed a chapter 11 petition. Proveris filed an unliquidated claim in the Bankruptcy Court for more than $2, 000, 000 in anticipated sanctions.

Effective February 28, 2012, Proveris obtained relief from the Bankruptcy Court's automatic stay to determine Innova's sanctions. Following a trial, the Massachusetts court held on September 25, 2012 that Innova willfully infringed the 400 patent in violation of the injunction and ordered Innova to pay a total sanction of $1, 120, 281.18. Both Proveris and Innova appealed the judgment, and their appeals are currently pending.[2]

With its bankruptcy proceedings ongoing, Innova was made aware of reports that Proveris was making false statements about Innova and its principal, John Waters. To investigate, Innova served Proveris with discovery requests "relating to any contacts between Proveris and any other party discussing Innova, during the period of September 2010 through May 2012." (See 11-36228 (JHW), Dkt. No. 170.) Over Proveris's objection, the Bankruptcy Court permitted the discovery and, after the Court entered a Stipulation and Protective Order (11-36228 (JHW), Dkt. No. 291), Proveris provided the requested material.

Based on the documents produced, Innova filed a complaint against Proveris in the Bankruptcy Court on April 18, 2013. (13-ap-01410 (JHW); Dkt. No. 1.) In response to a motion to dismiss filed by Proveris, Innova filed an Amended Complaint under seal containing excerpts of the discovered material. The Amended Complaint alleges that Proveris engaged in a "scheme designed to drive Innova out of business" by contacting Innova customers and prospective customers "and making blatantly false statements designed to convince [them] not to do business with Innova." (Am. Compl. ¶ 3.) The Amended Complaint further alleges that as a "result of the smear campaign, Innova [] sustained substantial injury to its reputation and goodwill, has lost sales, and has had several companies refuse to do business with it." (Id. ¶ 4.)

Innova asserts eight causes of action: (a) unfair competition and false advertising in violation Section 43(a) of the Lanham Act; (b) false advertising and unfair competition in violation of the New Jersey Fair Trade Act (N.J.S.A. § 56:4-1); (c) false advertising and unfair competition in violation of New Jersey common law; (d) libel under New Jersey common law; (e) slander under New Jersey common law; (f) trade libel and disparagement under New Jersey common law; (g) tortious interference with prospective economic advantage under New Jersey common law; and (h) tortious interference with contractual relations under New Jersey common law. (Am. Compl. ¶¶ 38-120.) Innova also claim Proveris violated the automatic stay pursuant to 11 U.S.C. § 362(a)(3). (Id. ¶¶ 121-138.)

Proveris moved to withdraw the reference August 26, 2013, and the Bankruptcy Court stayed the parties' adversary proceeding pending resolution of the motion. (13-ap-01401 (JHW), Dkt. No. 29.) In support of its motion to withdraw, Proveris submitted under seal the Declaration of Alan J. Brody ...


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