X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Sandel Avionics was flying high in the spring of 2002. Founded in 1997, the small Vista, Calif.-based company had previously made a few products related to advanced displays for aircraft cockpits. But it had recently developed a new product for a warning system that lets airplane pilots know if they are flying toward a mountain or other terrain they may not see. Tied to a Federal Aviation Administration mandate, the device would potentially bring hundreds of millions of dollars to the avionics company — a windfall, considering that Sandel’s annual revenue was estimated at $4 million by Hoover’s Inc. Unfortunately, there was no device that allowed Sandel to see patent litigation on the horizon. Just two weeks after the company announced that the FAA had certified its product, Sandel was sued by Honeywell International, a giant in the aviation industry. For Sandel, litigation would mean amassing legal bills faster than the company could pay them. “Small companies generally have limited choices in such cases,” says Howard Pollack, a partner in Fish & Richardson’s Palo Alto, Calif., office, who represented Sandel. “They tend to either pay for a license or get out of the business.” Sandel did neither. Instead, thanks to some clever — and frugal — lawyering on Fish & Richardson’s part, the company beat Honeywell twice in court. Sandel’s two co-defendants weren’t as successful: Goodrich Corp. quickly took a license, and Universal Avionics wound up with a $5.5 million loss. Against an industry giant, it helps to have counsel from a powerhouse like Fish & Richardson. But paying for that power isn’t easy. Sandel’s chief executive, Gerry Block, was so confident that his company could play David to Honeywell’s Goliath that he laid off half of Sandel’s 50 employees to help pay litigation costs. Pollack and Fish partner Frank Scherkenbach, who works in the firm’s Boston office, agreed to let Sandel spread out the payment of its legal fees, according to the company’s cash flow. “We felt it was unfair and wrong that a company should get squeezed out because it can’t afford high-quality lawyers,” Pollack says. The Honeywell litigation goes back to 2000, when the FAA mandated that by 2005 most planes must have a warning system — officially termed a Terrain Awareness and Warning System (TAWS). When drafting such mandates, the government agency often seeks input from the industry, and in this case Honeywell helped the FAA write the specifications. But Honeywell neglected to tell the FAA — and it was under no legal obligation to do so — that it already had patents issued and pending that would fit the standards. Unaware of this, Sandel, Universal Avionics, and Goodrich saw opportunity in the new mandate: An estimated 30,000 aircraft would need the new systems, which cost $15,000 to $75,000 each. The companies set out to develop devices. Block claims that by 2001 Honeywell knew that Sandel had a device in development. However, the company didn’t file suit until May 2002. Honeywell, represented by Steve McCormick at Kirkland & Ellis, sued for infringement on five patents in Delaware federal court. “There was no phone call — no warning,” Pollack says. “The suit was timed to hurt us at the point where we had the fewest resources — at the end of our development program,” Block says. It was also an effort to intimidate customers by planting doubts about Sandel’s products just as the market was heating up, he says. Once the suit was filed, Block contacted Fish & Richardson at the recommendation of a Sandel board member. A spokesperson for Honeywell says that the lawsuit had been in the works for a long time, and was triggered when Honeywell’s legal staff recognized that competing avionics makers were selling infringing products. The decision to litigate, Honeywell says, was made only after consultations with a wide range of people inside the company. Honeywell could easily afford to outspend Sandel, so the key to Fish’s litigation strategy was efficiency. That meant not engaging in discovery battles or any other extraneous conflicts. They would focus strictly on the claims in the suit and attempt to win on summary judgment. The Sandel team started researching prior art, and to their surprise, many in the industry, including former FAA employees, offered help. The team discovered two important pieces of prior art: One consisted of several published articles that had actually been written by Honeywell’s expert witness. Block learned about another piece of prior art, for a somewhat obscure terrain display system produced by another company, through the system’s inventor. The prior art paid off. In October 2003 Judge Mary Patrick Thynge ruled summarily that two of Honeywell’s patents were invalid and that Sandel did not infringe the other three. She based her ruling on Sandel’s prior art discoveries. Honeywell has appealed. “A decision should have been made by a jury — not the court,” says Kirkland’s McCormick. After Judge Thynge’s decision, the battle continued with two trials, and Sandel lost one. Sandel and co-defendant Universal Avionics had brought antitrust, unfair competition, and invalidity counterclaims against Honeywell. After a bench trial, Thynge tossed the case. The companies then headed to a jury trial over a sixth patent. Thynge had denied Honeywell’s request to add the patent — which was related to TAWS, but was directed to older technology — to its first suit. At trial, Pollack says, “we focused on why our product was innovative and showed what we’d done to advance the art.” Pollack says it helped that Sandel held several patents of its own. While these weren’t related to the case, they did show that the company was an innovator and not a copycat, he says. Sandel’s expert witness also made a big difference. Robert “Hoot” Gibson, a retired NASA astronaut who commanded seven shuttle missions and is now a pilot for a commercial airline, testified at the summary judgment hearing and in the jury trial. Pollack says that Gibson’s down-to-earth demeanor made him the “antiprofessor,” countering testimony from Honeywell’s expert, a professor from the Massachusetts Institute of Technology. He was even unflappable and charming on cross, Pollack says, noting that Gibson never lost his cool, continued to be pleasant, and always addressed Honeywell’s attorney with a polite “sir.” After five days of testimony, the jury found that Sandel had not infringed, concluding that there were differences between Honeywell’s patent and Sandel’s device. Universal Avionics was less fortunate; the jury ordered it to pay $5.5 million in damages. “We were extremely surprised and disappointed with the verdict,” McCormick says. “We think the evidence against Sandel was strong.” Sandel, meanwhile, has matured. It now has Fish attorneys advising it on how to best exploit and protect its eight existing patents and ensure that it files for patents on any new technology. Sales had stalled because customers were wary of the litigation, but they are once again climbing “at a very good clip,” Block says. Block has started hiring again, and Sandel now has more than 30 employees. “We basically stood still for two years, but if we hadn’t done this, we would not have been able to stay in business,” Block says. “I just wouldn’t want to have to do this too many times.”

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.