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O H & S | Concrete

March 15, 2005

Firms involved in patent lawsuit

Pressure Pipe vs. Pure Technologies

Pressure Pipe Inspection Co. (PPIC) Ltd. and Pure Technologies Ltd. are engaged in what Pure’s chairman describes as “an obscure U.S. patent lawsuit,” but that could shape up to be the legal equivalent of a chicken or the egg dilemma.

Among other services, the two Canadian companies provide an electromagnetic inspection system of Prestressed Concrete Cylinder Pipe (PCCP).

Pure alleges that PPIC is infringing on its patents for its P-Wave technology. PPIC countered by filing suit to possibly have Pure’s patents nullified. Both suits were filed in Dallas, Texas, and affect only the U.S. patents, not operations in Canada.

PPIC, a private company based in Mississauga, was created in 1997. Its patent for the Remote Field Eddy Current/Transformer Coupling (RFEC/TC) inspection system was filed “somewhere in 1997,” says its president, Brian Mergelas. “Since 1998, ‘99, we’ve been offering that service commercially in North America and around the world.”

Brian Mergelas

Calgary-based Pure Technologies was created in 1994 and went public on Dec. 31, 1996. Yellowbird Products Ltd., a private holding company, is a shareholder.

Pure filed its patents in August and September of 2004. It sued PPIC for patent infringement in January of this year.

“What they have said is that the technology that we have been using commercially, since 1998, is covered under the patent that they have issued in 2004, which doesn’t make a lot of sense,” says Mergelas.

“Our lawsuit,” says Pure’s chairman, Jamie Paulson, “alleges that they infringe our patent and have infringed it through their (commercial) practices in the United States.”

When asked to be specific, Paulson said: “Let me think about that for a minute. I think you can get to it yourself, and I’m not trying to be enigmatic, it’s just that, our lawsuit alleges that they perform their electromagnetics in a way that infringes our patents.”

“What we have argued,” says Mergelas, “is that since we were using this commercially prior to any invention date that they have claimed, that we’re either not infringing because it’s different somehow from what they have a patent, or if we are infringing, that their patent is null and void and should not have been issued, since we were doing this prior to them inventing it.”

Paulson says that Pure launched legal action after it had “been sending correspondence to PPIC through our legal representatives since August.

“And we took legal advice and followed the course recommended by our patent attorneys in the United States and Canada.”

In a further twist to the tale, Pure made a conditional offer in November to purchase the shares from one of PPIC’s shareholders for $2.2 million.

“We entered into a conditional agreement to purchase the shares belonging to one of the shareholders in PPIC, and at the same time made a similar offer to the other shareholders,” Paulson says.

“Three of the four shareholders declined the offer, so we withdrew our offer.”

Mergelas was non-plussed by Pure’s takeover attempt.

“We took it as a compliment.”

He also played down their legal skirmishes.

“I wouldn’t characterize it as an ongoing battle. We feel that we are the market leaders.

“And as such, we’re not surprised that a company that is able to raise money would be interested in acquiring our technology A, or our company, B.”

“We introduced the technology ... a second company came along and said: ‘Isn’t this grand .... Why don’t we try to replicate it, and by the way, why don’t we try to find some way to protect what we’re doing?’”

Neither executive would estimate how long the issue might be in court.

The ramifications for PPIC if it loses are: “If we are found to be infringing on their technology, it would be a question of us modifying our approach to do what we do in the marketplace,” says Mergelas.

If Pure loses, the ramifications are: “For us, none. Or relatively minor,” says Paulson. “It’s a U.S. lawsuit and the electromagnetics represent a very small part of our business.”

If PPIC is successful and Pure’s patents in the United States are invalidated, “that wouldn’t affect our ability to do work in the U.S.”

Mergelas says he is not surprised by Pure’s suit.

“They were clearly trying to access the technology by trying to purchase the company directly and when that didn’t work, they’re trying to create some sort of sensation in the marketplace.”

Mergelas is, however, “perhaps a little bit disappointed that they felt that that was the approach that they wanted to take, but really we have a very strong case and we feel very confident that we will prevail.”

Paulson characterizes the legal action as a way to get a response from PPIC.

“I think that it’s safe to say that we’ve been requesting information and clarification from PPIC since August.

“It has not been forthcoming. And I look forward to gaining more information ... and I think the legal process will provide that.”

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