Donnelly Sues JCI Over Patent Issues

May 13, 2002
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HOLLAND — Donnelly Corp. is asking a federal court to settle a patent dispute involving its largest shareholder, Johnson Controls Inc.

Donnelly has sued Johnson Controls in federal court, asking a judge to declare invalid and unenforceable six patents issued between 1985 and 1999 that Johnson Controls holds for digital compasses integrated into interior rearview mirrors that are made by a Donnelly competitor.

The company, in a pre-emptive strike that comes amid a belief it was about to be sued for patent infringement, also is asking the court to rule that it has not violated, either directly or indirectly, Johnson Controls’ patents, some of which it acquired when it bought the former Prince Corp. in 1996. Prince developed the digital compass technology in the 1980s and Johnson Controls now licenses it to mirror-maker Gentex Corp., an archrival of Donnelly’s in the production of auto-dimming rearview mirrors.

In court papers, Donnelly based its request for a declaratory judgment on past meetings and correspondence in which Johnson Controls asserted that Donnelly’s digital compasses violate its patents.

“Defendants have created on the part of Donnelly a reasonable apprehension that defendants will initiate an infringement suit against Donnelly charging that Donnelly’s compass products infringe on JCI patents,” states the lawsuit, filed April 25 in U.S. District Court for the Western District of Michigan in Grand Rapids.

A Donnelly spokesperson, Beverly Snyder, declined comment on the litigation. A Johnson Controls spokesman did not return phone calls seeking comment.

Johnson Controls has until May 16 to file its initial response to the lawsuit.

The filing of the lawsuit came just two weeks before Johnson Controls filed papers with the U.S. Securities and Exchange Commission indicating that it was exploring the possible sale of some or all of its 15 percent stake in Donnelly. The SEC filing also indicated that Johnson Controls had no firm plans for its Donnelly stock, and retained the right to acquire additional shares.

Johnson Controls bought 1.54 million shares of Donnelly stock from Heartland Advisers Inc. in October 2000. The Milwaukee-based company has repeatedly said the acquisition was only “for investment purposes,” although Donnelly executives in conference calls with brokerage analysts during 2001 touted several joint product development programs that stemmed from Johnson Controls’ stock purchase.           

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