Case 5:14-cv-00162-DAE Document 1 Filed 02/24/14 Page 1 of 11 UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS San Antonio Division ) LWRC INTERNATIONAL, INC., ) ) Plaintiff, ) ) v. ) No. 5:14-cv-162 ) F&D DEFENSE LLC and CORBY HALL, ) JURY TRIAL DEMANDED ) Defendants. ) ) COMPLAINT Plaintiff, LWRC International, Inc. (“LWRCI”), by counsel, files this complaint against defendants, F&D Defense LLC (“F&D”) and Corby Hall (“Hall”) (collectively referred to as “defendants”), and alleges as follows: PARTIES 1. Plaintiff LWRCI is a Maryland corporation with its principal place of business in Cambridge, Maryland. 2. Defendant F&D is a Texas limited liability company with its principal place of business in New Braunfels, Texas. 3. Defendant Hall is a citizen of Texas. JURISDICTION AND VENUE 4. The Court has subject matter jurisdiction over the underlying action pursuant to 28 U.S.C. §§ 1331, 1338, 1367, and 15 U.S.C. § 1121(a) because the action is a violation of the Lanham Act, 15 U.S.C. § 1051 et seq., and the common law. LWRCI also seeks a declaratory judgment pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, et seq., and the patent laws of the United States, 35 U.S.C. § 100, et seq. Case 5:14-cv-00162-DAE Document 1 Filed 02/24/14 Page 2 of 11 5. Subject matter jurisdiction exists pursuant to 28 U.S.C. § 1332 in that LWRCI and defendants are citizens of different states and the matter in dispute exceeds the sum or value of $75,000, exclusive of interests and costs. 6. This Court has supplemental jurisdiction over the claims pursuant to 28 U.S.C. § 1367 because these claims are related to the underlying Lanham Act and the state law claims in this action and form part of the same case or controversy under Article III of the United States Constitution. 7. Personal jurisdiction over the defendants is proper in this District. The defendants are citizens of Texas and are doing business in this state. 8. Venue exists in this District pursuant to 28 U.S.C. § 1391. FACTS A. LWRCI 9. LWRCI is headquartered in Cambridge, Maryland, utilizing three facilities totaling over 250,000 square feet. Its manufacturing capability includes over 50 state-of-the-art CNC machine centers, laser cutting machines, screw machines, robotic welding, and mil-spec painting. LWRCI is registered with Lloyd’s Quality Registrar for ISO-9001 International Standards compliance for Configuration Management. LWRCI’s management team is a group of proven executives who collectively have more than 100 years experience in managing high performance defense companies. Its engineering team consists of dedicated professionals who have been nationally recognized in both the firearms and defense communities for the development of LWRCI’s patented self-regulating short-stroke, gas-piston system. 10. Among other products that LWRCI manufactures and sells is the Rapid Engagement Precision Rifle (“R.E.P.R.”), a full spectrum weapon system designed to put 7.62mm NATO rounds on target in a variety of roles. The R.E.P.R. rifle allows a marksman to -2- Case 5:14-cv-00162-DAE Document 1 Filed 02/24/14 Page 3 of 11 perform assaulter duty with the 16” barreled upper installed, and quickly switch to a sniper role simply by changing to the 20” barreled upper. The extra upper receiver assembly can be carried in a backpack and takes up less room and weighs less than carrying a separate rifle. The R.E.P.R. rifle utilizes LWRCI’ patented self-regulating, short-stroke gas-piston operating system, ensuring unparalleled reliability in the harshest theaters of operation. A side-mounted charging handle allows the shooter to perform reloads without removing their eyes from the target, and prevents any gas blowback to the face when using a suppressor. The ARM-R rails are easily removable and reinstalled with a hex key and provide a 100% return to zero for optics and lasers. A review in Shotgun News stated that “[t]hese Maryland-made rifles have established an excellent reputation for quality….” 11. LWRCI sells its products, including the R.E.P.R., in interstate and foreign commerce. 12. LWRCI is the owner by assignment of several U.S. patents, including the following:`` (a) U.S. Patent No. 8,342,075, entitled “Receiver For An Autoloading Firearm”, with the named inventor being Jesus S. Gomez, issued on January 1, 2013 (“the ‘075 patent”) (a true and correct copy of which is annexed as Exhibit 1); (b) U.S. Patent No. D641,451, entitled “Bolt Carrier”, with the named inventors being Jesus S. Gomez, Jason Lee Miller, Robert S. Schilling, Michael R. Llewellyn, issued on July 12, 2011; (c) U.S. Patent No. 8,375,616, entitled “Automatic Rifle Bolt Carrier With Fluted Boss”, with the named inventors being Jesus S. Gomez and Jason Miller, issued on February 19, 2013; and -3- Case 5:14-cv-00162-DAE Document 1 Filed 02/24/14 Page 4 of 11 (d) U.S. Patent No. 8,387,513, entitled “Self Loading Firearm Bolt Carrier With Integral Carrier Key And Angled Strike Face”, with the named inventors being Jesus S. Gomez, Jason Lee Miller, Robert S. Schilling, and Michael R. Llewellyn, issued on March 5, 2013. 13. LWRCI’s patents, which correctly list the actual inventors, are a valuable asset of the company and any attempt to disparage those assets would injure LWRCI. B. F&D and Hall 14. F&D manufactures and sells tactical rifles for intermediate to advanced shooters in interstate commerce. F&D appears to be a company with a single employee, Hall. 15. Hall is the sole member of F&D and owns and controls the company. 16. As part of its business, F&D advertises, markets, and provides information to its customers, potential customers, and the market regarding its products and the products of its purported competitor, LWRCI, including through use of a website, http://www.fd-defense.com. 17. F&D purports to be a competitor of LWRCI. See, e.g., http://fd- defense.com/index.php/design/fd-separation. 18. On or about July 17, 2013, Hall filed an action in the District Court for the 20th Judicial District of Comal County, captioned Corby Hall v. LWRC International, LLC, Cause No. 2013-0902B (“State Court Action”). Hall’s Original Petition included a cause of action for defamation against LWRCI allegedly based on blog posts in which certain individuals commented that Hall did not design the R.E.P.R. rifle. LWRCI’s answer denied the substance of Hall’s allegations. Hall has since filed two amended petitions. LWRCI’s motion for summary judgment in the State Court Action is pending. -4- Case 5:14-cv-00162-DAE Document 1 Filed 02/24/14 Page 5 of 11 C. False and Misleading Statements 19. On or about February 18, 2014, defendants posted the following statement and advertising material on F&D’s website: F&D Forces the Hand of LWRCI Ownership: Feb 18, 2014 F&D has provided a convenient time for the owners and shareholders of LWRCI to move on and out of the industry. LWRCI has moved to sale ownership of its company on the heels of revelations that F&D is the actual inventor of its flagship Intellectual Property/Patent. Additionally, Defamation and Business Disparagement claims filed by F&D hit critical mass for LWRCI’s defense strategy and market-place integrity. F&D has asserted a liability owed to it by LWRCI in the amount of $12.4 million. See Court filings below. (Developing...) (Exhibit 2). 20. The February 18 post was made to advertise and market F&D and is materially false and misleading. There have been no “revelations” that Hall or F&D is the actual inventor of any LWRCI intellectual property or patents. No such evidence exists. Hall is not an inventor of any patents assigned to LWRCI. The records of the U.S. Patent and Trademark Office do not list Hall as an inventor on any patent, let alone any LWRCI patents. Also, the statement that LWRCI is attempting to sell the company based on the allegations that Hall may have made in the State Court Action is false and lacks any factual basis. 21. Defendants’ post indicates that their allegations are intended to “hit critical mass” and adversely affect LWRCI’s “defense strategy and market-place integrity.” This evidences not only defendants’ negligence and reckless disregard for the truth, but also actual malice intended to cause harm and injury to LWRCI. 22. On February 21, 2014, LWRCI’s counsel wrote a letter to F&D and Hall. The letter stated, among other things, that Hall and F&D have made defamatory and disparaging false statement of facts concerning LWRCI and its IP portfolio to third persons. LWRCI demanded -5- Case 5:14-cv-00162-DAE Document 1 Filed 02/24/14 Page 6 of 11 that both Hall and F&D immediately remove the defaming and disparaging post and to cease and desist in making false statements about LWRCI and its intellectual property rights. (Exhibit 2). 23. Later that day, Hall responded to the letter in an email to LWRCI’s counsel, which stated, in pertinent part: Bwaaaahahaha! Go pound sand (isn’t that the way opposing lawyers talk to each other?) There will not be any ceasing or desisting of my or F&D’s actions or statements. (Exhibit 3). The email confirms that defendants’ statements were willfully false, defaming and disparaging and were made with the intent to injure LWRCI. 24. On or about February 23, 2014, defendants caused to be posted on the F&D website a slightly revised statement and advertising, which read: F&D has provided a convenient time for the owners and shareholders of LWRCI to move on and out of the industry. LWRCI has moved to sale ownership of its company on the heels of revelations that F&D is the actual inventor of its flagship Intellectual Property which is incorporated into its M6-IC, M6-IC- SPR, M6A2, M6A2 SPR, M6-SL, PSD, M6.8-A2, M6.8-SPR, M6.8-UCIW, and REPR rifles, enabling its piston system to function properly. Additionally, Defamation and Business Disparagement claims filed by F&D have hit critical mass for LWRCI’s defense strategy and market-place integrity. F&D has asserted a liability owed to it by LWRCI in the amount of $12.4 million. (Exhibit 4). This revised statement republished the willfully false, defamatory and disparaging statements about LWRCI. 25. On February 23, 2014, Hall sent an email to counsel for LWRCI in which, among other things, he disputed the inventorship of LWRCI’s ‘075 patent and indicated that he would be instituting an action to “correct” the inventorship of that patent. Hall’s email also stated that he would attempt to inject himself into effort by LWRCI to sell the company. -6- Case 5:14-cv-00162-DAE Document 1 Filed 02/24/14 Page 7 of 11 D. Results of Defendants’ Wrongful Conduct 26. Defendants’ public statements have disparaged and diminished the business of LWRCI and caused confusion in the market in the United States. 27. LWRCI has received and had to respond to inquiries from customers and others about defendants’ false and misleading statements. 28. The false and misleading statements adversely affected the ability of LWRCI to compete and detracted from their reputation or goodwill in a fashion that improperly benefitted defendants. 29. Defendants’ deceptions were material and likely to influence purchasing decisions. Defendants certainly made their statements to the market for the purpose of influencing purchasing decisions and injuring the reputation of LWRCI and its products. Defendants’ statements are confusing to LWRCI’s customers and potential customers and discourage them from purchasing products from LWRCI. The amount of such lost sales and opportunities will be an amount to be proven at trial. 30. The documents referred to herein are incorporated by reference. COUNT I (Lanham Act § 43(a)) 31. The foregoing allegations of this complaint are incorporated by reference. 32. F&D’s products are used, sold, and/or offered for sale in interstate and foreign commerce. 33. In connection with its goods or services, defendants used one or more words, terms, names, symbols, or devices, alone or in combination, as well as false designations of origin, false or misleading descriptions or representations of fact, which are in commercial advertising or promotion (including without limitation its website), defendants misrepresent the -7- Case 5:14-cv-00162-DAE Document 1 Filed 02/24/14 Page 8 of 11 nature, characteristics, qualities, or geographic origin of its or LWRCI’s goods, services, or commercial activities. 34. Defendants knowingly and willfully misrepresented to the public, inter alia, the facts alleged above. 35. Defendants’ commercial messages and statements are either literally false or literally true but ambiguous and have the tendency to deceive the market, the public, consumers, potential consumers and competitors of LWRCI. Moreover, defendants’ advertising claims were unsubstantiated and false. 36. Defendants’ misrepresentations were material and made in bad faith for the purpose of deceiving the market, the public, consumers, potential consumers and competitors of LWRCI and harming its competition, including LWRCI. 37. The misrepresentations deceive or are likely to deceive the market, the public, consumers, potential consumers and competitors of LWRCI’s and defendants’ products. Further, the misrepresentations are likely to influence the purchasing decisions of others and have caused injury or are likely to do so. 38. By reason of their statements and conduct, defendants have willfully violated section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and LWRCI has suffered, and will continue to suffer damage to its business, reputation, and good will and have lost sales and profits that LWRCI would have made but for defendants’ acts. 39. LWRCI has been irreparably harmed by defendants’ acts in violation of the Lanham Act and have suffered damages in an amount to be determined at trial. COUNT II (Business Disparagement) 40. The foregoing allegations of this complaint are incorporated by reference. -8- Case 5:14-cv-00162-DAE Document 1 Filed 02/24/14 Page 9 of 11 41. Defendants have knowingly made multiple and continuing false and misleading statements and has omitted statements of material fact to the public. 42. Such statements have been made and are continuing to be made in the State of Texas and elsewhere. 43. Defendants’ misrepresentations were made in bad faith for the purpose of deceiving the market, the public, consumers, potential consumers and competitors and harming LWRCI as their competition. 44. Defendants have disparaged the business and intangible personal property (e.g., patents) of LWRCI. 45. As a direct and proximate result of defendants’ conduct, LWRCI has suffered, and will continue to suffer, damage to their business, reputation, and goodwill, in an amount to be proven at trial in excess of $75,000. Further, defendants should be preliminarily and permanently enjoined from making further disparaging statements. COUNT III (Defamation) 46. The foregoing allegations of this complaint are incorporated by reference. 47. Defendants have knowingly published multiple and continuing false and misleading statements about LWRCI and were so understood by those reading the defamatory statements. The defamatory statements are not true. 48. Such statements have been made and are continuing to be made to the public in the State of Texas and elsewhere. 49. The defamatory statements were made and published by defendants negligently, with reckless disregard for the truth, and/or with actual malice. The defamatory statements were -9- Case 5:14-cv-00162-DAE Document 1 Filed 02/24/14 Page 10 of 11 excessive, intemperate, unreasonable and abusive. They were made with the desire to injure the business and reputation of LWRCI and its officers and employees. 50. As a direct and proximate result of defendants’ conduct, LWRCI has suffered, and will continue to suffer, damage to their business, reputation, and goodwill, in an amount to be proven at trial in excess of $75,000. Further, defendants should be preliminarily and permanently enjoined from making further defamatory statements. In the event that defendants are found to have made such statements with malice, LWRCI is entitled to an award of punitive damages in an amount to be determined at trial. COUNT IV (Declaration of Inventorship) 51. The foregoing allegations of this complaint are incorporated by reference. 52. There is an actual and justiciable case or controversy between LWRCI and defendants as to the inventorship of the ‘075 patent. Hall has claimed that he is the inventor of that patent and will institute an action to allegedly “correct” inventorship. LWRCI seeks a declaration of its rights. 53. Hall is not an inventor of the ‘075 patent or any other patent owned by LWRCI. LWRCI is entitled to a declaratory judgment to that effect. REQUEST FOR RELIEF Plaintiffs respectfully request that this Court enter judgment against defendants and that the following relief be granted: a. judgment that defendants have violated the Lanham Act section 43(a); b. treble damages and statutory damages; c. a preliminary and permanent injunction against continued violation of the Lanham Act, including enjoining further false and misleading statements and corrective disclosures; - 10 - Case 5:14-cv-00162-DAE Document 1 Filed 02/24/14 Page 11 of 11 d. damages for business disparagement and libel; e. punitive damages allowed by law; f. declaratory judgment that Hall is not an inventor of any LWRCI patent, including the ‘075 patent. g. attorneys’ fees as allowed by law, including without limitation, 15 U.S.C. § 1117(a); h. costs pursuant to Fed. R. Civ. P. 54(d) or otherwise provided by law; and i. such other relief as the Court deems just and appropriate under the circumstances. JURY DEMAND LWRCI hereby demands a jury trial on all issues so triable. Respectfully submitted, /s/ Caroline Cook Maxwell OF COUNSEL: Caroline Cook Maxwell State Bar No. 24055341 Richard J. Oparil PATTON BOGGS LLP Kevin M. Bell 2000 McKinney Avenue PATTON BOGGS LLP Suite 1700 2550 M Street, NW Dallas, TX 75201 Washington, DC 20037 (214) 758-1500 (202) 457-6000 Richard G. Garza Dated: February 24, 2014 State Bar No. 07737200 Melodee L. Gruber State Bar No. 24004680 JACKSON WALKER L.L.P. 112 E. Pecan, Suite 2400 San Antonio, TX 78205 (210) 978-7734 Attorneys for Plaintiff LWRC International, Inc. - 11 - 4829-6662-9400.