In this post, we take a look at a royalty agreement breach between Plastronics H-Pin, LTD and HiCon Co. LTD.
Royalty Agreement Breach Between Plastronics H-Pin, LTD and HiCon Co. LTD
PLASTRONICS SOCKET PARTNERS, LTD, (Plastronics) is an American organization that provides burn-in socket solutions for the semiconductor industry. On October 2004, Mr. Dong Weon Hwang, the inventor of more than 20 patents, joined Plastronics. Hwang and Plastronics executed a royalty agreement on September 24, 2005, under which, Plastronics agreed to pay for the development of the invention disclosed in the Korean Application No. 10-2004-0079649 (the “H-Pin Project”) and also to be assigned the patent in all worldwide areas, jointly with Hwang, except for Korea. Further, the royalty agreement stated neither Plastronics nor Hwang could grant a license for the H-Pin project, without an approval from the other party.
U.S. Patent No. 7,025,602 was issued on April 11, 2006, Hwang and Plastronics were listed as the assignees of the patent. On October 2006, Plastronics began manufacturing and selling the H-Pin, while Hwang was working as an employee. On April 30, 2008, Hwang left Plastronics and founded HiCon Co. LTD (HiCon), in Korea to manufacture and sell H-pin competing products as Hi-contact, Hr-contact, and Hs-contact pin. On December 31, 2012, Plastronics was divided into Plastronics H-Pin through a divisive merger and all the rights of U.S. 7,025,602 patent was assigned to the firm along with Hwang.
In August 2017, without providing notice to Plastronic, HiCon licensed the invention disclosed and covered in the claims of the ’602 patent to HighRel. On September 20, 2017, Plastronic sent a letter to Hwang and HiCon, informing them about the breach of the royalty agreement. Hwang sent a response on November 11, 2017 and admitted to the exclusive distributorship agreement entered into with HighRel.
On January 19, 2018, Plastronic filed a patent infringement and breach of agreement suit (2:18-cv-00014) against Hwang and HiCon in the United States District Court for the Eastern District of Texas for infringement of claim 1 of ‘602 patent. On May 1, 2018, Hwang filed a Motion to Dismiss the Complaint for lack of jurisdiction and improper venue under the Federal Rule of Civil Procedure 12(b) (2), as Hicon did not sell any of their products directly in Texas. After hearing each parties briefing, the Court denied the motion as HiCon engaged HighRel as their distributor to sell their products in the United States, which includes Texas.
On July 8, 2019, before Judge Rodney Gilstrap a four day jury trial was conducted, to examine the arguments and proofs submitted by both the parties. On July 12, 2019, the jury returned its unanimous verdict finding that HiCon, did not infringe the ‘602 patent, but that both the parties Plastronics H-Pin and Hwang involved in breach of the royalty agreement. On July 16, 2019, Judge Rodney Gilstrap rendered a final judgment ruling that, Plastronics H-Pin proved that Mr. Hwang breached the Royalty Agreement and awarded $622,606 to Plastronic as a damage amount. Additionally Mr. Hwang was awarded a recovery compensatory damage of $1,361,860 for breach of the Royalty Agreement by Plastronics H-Pin, LTD.