North Sails preparing appeal following patent ruling

MINDEN - North Sails Group, whose Minden plant manufactures high-tech sails for racing yachts including most America's Cup competitors, will appeal an unfavorable ruling in a federal patent infringement case.

A hearing will be held Friday on North Sail's request for a stay on an injunction that would otherwise shut the plant down at the end of April, idling 119 employees.

A rival sail maker, Sobstad Corp of Greensboro, Ga., filed the patent infringement suit in July 1992, claiming North Sails' popular 3DL models infringed on three of Sobstad's patents.

U.S. District Judge Dominic J. Squatrito of Hartford, Conn., agreed. On Friday, he ordered North Sails to discontinue all new production of the 3DL sails and to pay Sobstad a 7 percent royalty plus compounded interest on all sales of that design since the suit was filed.

The 3DL line had about $15 million in sales in 1998 and about $22 million last year.

"North Sails is naturally disappointed by the decision. North feels that the decision is an incorrect one and will continue to pursue vigorously it position through an appeal," Tom Whidden, president of North Sails Group, said Tuesday.

"It will also immediately seek a stay of injunction in order to honor its contractual commitments to its many customers during the busiest period of the sailing business year."

Whidden said North Sails and J.P. Baudet were awarded a patent on aspects of the 3DL product and process and that the judge's ruling was inconsistent with two legal opinions the firm had received during the development of the process to determine whether it infringed on any patents.

North Sails has about 90 percent of the sail market for Grand Prix racing, involving sailing craft 40 feet or longer that compete at the highest levels, such as America's Cup yachts.

Peter Isler of San Diego, a sailing expert who was navigator for Dennis Connor's Stars and Stripes on the 1988 and 1989 America's Cup teams and for a 2000 America's Cup finalist, told the Nevada Appeal on Tuesday that the judge had a difficult job sorting out the technical issues involved in the patent infringement allegations.

"Even being a sailor and knowing a lot about sail making, I would really have hated to be the judge on this particular case," Isler said.

He said such issues as whether North Sails' one-piece products are actually made up of panels and whether the reinforcing yarns could be considered structural members were difficult allegations to interpret.

"It's all a matter of etymology," Isler said.

"It's very good news in the short term for North Sails' competitors, who have been having trouble competing at the Grand Prix levels," Isler said. "But the design the 3DL sails are supposed to have infringed on isn't in Sobstad's current line. That was the Airframe. Sobstad's current sail product is the Genesis."

Jay Hanson, North Sail executive vice president, said from the company's Milford, Conn., office that Sobstad's Airframe was a traditional type of sail, to which Sobstad added ribbons or strips of conventional sail cloth as reinforcement. He said Sobstad abandoned the design in 1989, possibly because Sobstad president Peter Conrad was developing the Genesis sail.

"There's two basic areas where the ruling stretched the definitions. It says a yarn is the same as a ribbon or a strip and the judge says our yarns reinforce a sail," Hanson said.

"It's our position that the Mylar part of our product is not a sail in itself - without the yarn it would blow right out. The yarns are part of what the sail is made of, not a reinforcement to the sail. The ruling also does not address that our yarns are continuous, which is novel, nor that these yards are laid on a three-dimensional surface, in the same shape the sail would fly in, which is also novel."

Hanson said Friday's hearing before Judge Squatrito should result in a stay that would allow North Sail to complete sails already ordered and paid for. If the judge declines to stay the injunction, though, North Sail can seek a stay from the federal court of appeals, he said.

There is also precedent in such cases to allow North Sail to continue making the 3DL sails, Hanson said. If North Sails eventually loses its appeal, Sobstad would receive more royalties from the additional sails produced, he said.

If North Sales is prevented from making the 3DL sails, Hanson said, the company would go back to making its conventional panel sales, which are being produced in six North Sail plants in North America and brought the company about $11 million in sales last year.

"We might be a smaller and different company, but we would not go away," Hanson said. "As far as the Minden plant, we are looking at other items to utilize that facility and some of the people in it."

He also pointed out that the disputed patents expire Dec. 13, 2004. Even if North Sails is unsuccessful with its appeal, the company would resume production of the 3DL design then, Hanson said.