Alien dispute could affect N.D. money, jobs
Steven Wagner, The Forum
Published Friday, December 15, 2006
Dueling lawsuits between two technology companies could leave North Dakota’s stake in Alien Technology Corp. unclear if a federal judge rules it can’t sue in the state.
For California-based Alien, which manufactures microchips in Fargo and received millions of dollars in help to locate here, the stakes may affect investors, future expansion and jobs.
The legal dispute, outlined in lawsuits filed in Fargo and Delaware, centers on whether Alien infringed on patents owned and controlled by Intermec IP Corp. and two closely related companies. Alien claims its patents don’t infringe on those held by Intermec IP.
On Thursday, attorneys argued whether U.S. Senior District Judge Rodney Webb has jurisdiction to decide the initial lawsuit filed by Alien, which claims an Intermec official threatened to sue Alien during a May 8 earnings call with investors and analysts.
Alien officials said they sued Intermec to resolve the issue quickly and the decision should be made in North Dakota because the outcome affects people and businesses in the state.
Ron McLean, a Fargo attorney, and Carson Veach, a Chicago lawyer, said Intermec IP can’t be sued in North Dakota for several reasons, including because it has never sold radio frequency identification, or RFID, products. They said two other companies, Intermec Inc. and Intermec Technologies Corp., are distinct and separate companies that sell RFID products nationwide.
Less than 1 percent of the companies’ sales revenues come from North Dakota.
Intermec’s patent-holding company filed its suit June 29 in Delaware, four weeks after Alien filed one in Fargo, claiming 10 patent infringements.
Sarah Herman, a Fargo attorney for Alien, said the company doesn’t believe there is a patent infringement and sued Intermec to clear up the issue.
The threat of a lawsuit by Intermec could be dangerous to Alien, which operates its manufacturing plant in the North Dakota State University Research and Technology Park, in its goal to be successful in the RFID industry, she said.
“This case is about North Dakota,” Herman said. “It (Alien) is the golden deal for our research park.”
Gregory Stone, a Los Angeles attorney for Alien, said the three Intermec companies are connected because they operate as one entity, hold licenses to do business in the state, share many of the same officers and combined for more than $2 million in North Dakota sales in the past five years. He argued the connections give Webb the jurisdiction to decide the case.
In Intermec’s earnings call, an analyst asked Steve Winter, a high-ranking official for Intermec Inc. and Intermec Technologies Corp., when it planned to enforce a licensing program for its RFID products.
“We have consistently stated we will be pursuing infringers,” Winter responded. “We are putting together cases … preparations are under way with respect to unlicensed suppliers like Alien and others.”
The response prompted Alien to ask a judge June 1 to review its patents and rule that they don’t infringe on Intermec’s patents. Six weeks later, Alien withdrew initial plans for selling stock to the public.
There is no direct link between the lawsuits and Alien withdrawing its stock offering, but the outcome could affect the company’s future success, said Linda Prosser, Alien’s vice president for corporate marketing.
If Intermec ultimately wins against Alien, Prosser said Alien’s profitability, jobs and expansion could be at risk. “The outcome of this case could affect Alien’s future success, which would affect Alien investors,” she said.
Judge Webb, who quizzed lawyers during Thursday’s hearing, said the earnings call sounds like a threat. He also said it was “absurd” to consider the three Intermec companies as separate entities.
“Just think of the spin that has been put on this case that doesn’t get to the heart of the matter,” Webb said. “Is there patent infringement or not?”
In 2003, a group of banks and economic development agencies in North Dakota put together a $36 million financing package – a combination of low-interest loans, government training programs and private funds – to lure Alien to Fargo.
The Bank of North Dakota lent nearly $3 million to California-based Alien. The Fargo City Commission gave the company a 10-year property tax exemption on its 48,000-square-foot manufacturing plant, where Alien plans to produce 500 million microchips each year.
At its Fargo plant’s grand opening in October, Alien announced multiyear deals to supply “smart tags” to six companies. The company has yet to turn a profit.
Readers can reach Forum reporter Steven P. Wagner at (701) 241-5542
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