Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Manufacturer charged with attempting to silence competition in the firearm suppressor market, (Jun 21, 2016)

By Edward L. Puzzo, J.D.

A firearms manufacturer used proprietary design information it had obtained from a firearms marketer under a non-disclosure agreement in its own design patent application, with the intention of monopolizing the market for externally-tooled firearm suppressors, according to a complaint filed in the federal district court in St. Paul, Minnesota (Federal Cartridge Company v. DaVinci Arms, LLC, June 20, 2016).

Plaintiff Vista Outdoor Operations manufactures and markets various outdoor, sporting, and hunting products, including ammunition and firearms. Federal Cartridge Company and Bushnell Holdings are wholly owned subsidiaries of Vista. Defendant DaVinci Arms is a start-up firearms manufacturer.

The complaint alleges that in 2015, Bob Meinert, one of Vista's senior marketing managers, developed the concept for a unique and proprietary design for a firearm suppressor, also known as a silencer. The suppressor design included ornamental interlocked hexagonal shapes meant to match the design of certain Vista rifle stock products. The complaint further alleges that Meinert's suppressor design was conveyed to Fred Sparks, an industrial designer bound by a non-disclosure agreement (NDA), who rendered several potential designs incorporating Meinert's hexagonal concept. Vista then sought a manufacturer for its design.

Vista entered into an NDA with manufacturer DaVinci Arms that required DaVinci to maintain the confidentiality of Vista's proprietary information and ideas relating to the design of the firearm suppressor. Vista, through its subsidiary Federal Cartridge, also paid DaVinci $20,000 to begin producing prototypes of the suppressor design, under a purchase order (PO) that protected Vista's intellectual property.

Subsequently, Vista decided that it would not use DaVinci to manufacture the hexagonal suppressor because DaVinci was not able to meet expense requirements that would make the product commercially viable. Vista notified DaVinci of its determination on March 1, 2016. Ten days later, the complaint charges, DaVinci clandestinely used Vista’s design and information to file a design patent utilizing Vista’s design without naming Vista as a co-inventor. DaVinci further demanded $100,000 from Vista for patent infringement, claiming it owned the hexagonal suppressor design because it had been "first to file" the design patent application.

Attempted monopolization. Vista brought claims under Section 2 of the Sherman Act and Sections 4 and 16 of the Clayton Act. Vista alleged that DaVinci engaged in predatory and anticompetitive conduct by (1) fraudulently using Vista's competitive information and design in its own design patent application in an attempt to obtain a legal monopoly over the market for externally-tooled suppressors; and (2) threatening to eliminate competition from Vista's anticipated competing suppressor product by alleging that it violated DaVinci's design patent. Vista alleged that DaVinci's efforts to obtain and assert the design patent were for the purpose of eliminating Vista and other industry participants as competitors and achieving monopoly power. The complaint seeks treble damages, actual damages, costs, fees equitable relief and a declaration that DaVinci's assertion of the patent violates antitrust law.

Trade secret misappropriation. Vista also brought a claim under the Defend Trade Secrets Act of 2016, alleging that DaVinci wrongful misappropriated its intellectual property by applying for a design patent that embodied Vista's confidential design, was a close derivative of the design, or was of a design that used Vista's trade secret to conceive of and develop, all without the express or implied consent of Vista. The complaint seeks damages products for DaVinci’s efforts to seek a design patent, an injunction on DaVinci’s competing products, return of its trade secret information from DaVinci, and other equitable and monetary relief. The complaint also seeks declaratory judgments ruling that Vista invented and owns the design asserted in DaVinci's pending patent application.

The case is Civil Action No. 0:16-cv-02011-SRN-SER.

Attorneys: Douglas J. Christensen (Christensen Fonder PA) for Federal Cartridge Company, Vista Outdoor Operations, LLC and Bushnell Holdings, Inc.

Companies: Federal Cartridge Company; Vista Outdoor Operations, LLC; Bushnell Holdings, Inc.; DaVinci Arms, LLC

News: Antitrust MinnesotaNews