Sobstad's long-running patent litigation with North Sails

by Tom Leweck, Scuttlebutt on 13 Oct 2000 Sobstad Corporation is pleased to announce that on September 27, 2000 the United States District Court in Hartford, Connecticut entered final judgment in Sobstad's long-running patent litigation with North Sails and its owners: Windway Capital Corporation, Thomas A. Whidden, Jay Hansen, and Terry Kohler over their unlawful use of Sobstad's pioneer patented structural sail technology. The judgment is in the amount of $5,427.836, representing a 7% royalty for Sobstad on all 3DL sails since the defendants' literally infringing 3DL sail appeared in the marketplace in 1992, and prior to April 1, 2000, along with the prejudgment interest at the prime rate through September 20, 2000. The 7% royalty rate was the highest the Court could have selected from among the royalty agreements introduced at trial.

In addition, the Court entered a final injunction enjoining North Sails and its owners from making, using or selling the 3DL sail. This injunction remains stayed pending the outcome of the appeal of North Sails and its owners of the judgment. The appeal will be heard by the Court of Appeals for the Federal Circuit in Washington, D.C., and should be concluded within about one year. As a condition for allowing North Sails to continue to make, use and sell the 3DL sail during the appeal period, the Court has required that North Sails and Windway Capital Corporation post a letter of credit equal to its free cash flow earning (in accounting jargon, "EBITDA") attributable to sales of 3DL sails during the appeal period. If Sobstad prevails on appeal, then Sobstad will be allowed to collect this amount out of the letter of credit.
While Sobstad does not have the exact information on the additional amount that could be due under the letter of credit, it is fair to infer from the testimony of the Court's independent accountant in open court on September 27 that the additional amount will be in excess of $2 million and could rise to as much as $4 million or more by the end of the appeal period. Sobstad estimates that damages on 3DL sales through March 30, 2000 (included in the judgment) and EBITDA earnings from April 1, 2000 through September 30, 2000 are about $7 million.

Also, if Sobstad prevails on appeal, North Sails will be enjoined from making 3DL not just through the expiration of the Conrad/Sobstad pioneer structural sail patents in December 2004 but for an extended period that will last through at least 2005 and very likely through most of 2006.

North Sails and Windway Capital Corporation, Whidden, Hansen and Kohler informed the District Court that they planned to appeal the Court's ruling of March 31, 2000, in which the Court found that the 3DL sails literally infringed no fewer than four claims in three different Conrad/Sobstad pioneer structural sail technology patents. Sobstad has every confidence that the straightforward analysis of the District Court in its decision of March 31, 2000, will be upheld on appeal. - Peter Conrad, President, Sobstad Corporation