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Court Reverses Decision Dismissing Claim That Reebok Was Liable for Avia’s Infringement

April 25, 2001

Decision icon Decision

Last Month at the Federal Circuit - May 2001

Judges: Mayer, Gajarsa, and Dyk (per curiam)

In Hockerson-Halberstadt, Inc. v. Reebok International, Ltd., No. 00-1367 (Fed. Cir. Apr. 25, 2001) (nonprecedential decision), the Federal Circuit reversed a district court judgment dismissing Hockerson-Halberstadt, Inc.’s (“HHI”) claim that Reebok International, Ltd. (“Reebok”) was liable under an alter-ego theory for Avia Group International’s (“Avia”) infringement of U.S. Patent No. 4,259,792 (“the ‘792 patent”) directed to an article of outer footwear.

In 1995, HHI sued Avia, the wholly owned subsidiary of Reebok for infringement of the ‘792 patent. The action was stayed pending reexamination of the ‘792 patent. During the stay, Avia and Reebok entered into an asset purchase agreement with American Sporting Goods Corporation (“ASG”) in which ASG purchased from Reebok certain assets and assumed liabilities relating to shoes then manufactured by Avia. Following the sale, a portion of the proceeds was transferred from Avia to Reebok in partial payment of an intercompany loan.

In 1998, HHI brought the present suit against Reebok, claiming that Reebok is liable for acts of infringement of the ‘792 patent by Avia. Reebok counterclaimed that HHI had violated the terms of a settlement agreement (“the Agreement”) that the parties had entered into to resolve a prior suit brought by HHI against Reebok and several other shoe manufacturers. Ultimately, the district court construed the claims of the ‘792 patent, and HHI’s infringement claim was dismissed with prejudice in a stipulated order designed to permit the immediate appeal of the claim construction issue.

The Federal Circuit ruled that because the Agreement between HHI and Reebok had carved out infringement by Avia from release of liability, and the suit against Avia had already been filed when the Agreement was reached, HHI did not intend to bargain away its claims against Avia. At the time the motion to dismiss was granted, the district court had improperly interpreted the claim for alter-ego liability as a claim for patent infringement against Reebok.