Vending machine trademark leads to federal suit

KEARNEYSVILLE -- A Jefferson County business has filed a patent infringement and tortious interference with business lawsuit in federal court.

Automated Merchandising Systems, Inc., a Delaware corporation with its corporate headquarters in Kearneysville, has filed a federal suit against Crane Co. and Seaga Manufacturing, Inc., following the manufacturing and sale of two different lines of vending machines. The suit was filed in United States District Court for the Northern District of West Virginia.

Automated Merchandising Systems, Inc., holds four patents, filed from 2002 to 2008, regarding vending machines and the use of an optical product detection system.

In September 2002, Automated Merchandising Systems, Inc., sued Automatic Products International, Ltd., and its sister corporation Gross-Given Manufacturing Company for infringement of its 2002 patent regarding the use of an optical detection system within a vending machine. Automatic Products International, Ltd., and Gross-Given Manufacturing Company settled out of court, and eventually, Automated Merchandising Systems, Inc., granted a license to its patent as long as they agreed to pay a unit royalty and provide quarterly sales reports.

On Dec. 29, 2003, Automated Merchandising Systems, Inc., filed a federal lawsuit against Crane Co. for infringement on its 2002 patent. On Sept. 21, 2004, Automated Merchandising Systems, Inc., filed a second federal lawsuit against Crane Co. for infringement on its 2004 patent, which is a patent for an optical vend-sensing system for control of a vending machine. The court stayed both actions until the patents could be reexamined.

In 2004, Seaga Manufacturing, Inc., approached Automated Merchandising Systems, Inc., seeking a license for optical vend detector equipped, glass-front, snack vending machines it planned to commercialize. Seaga Manufacturing, Inc., obtained the license in August 2004 with a similar agreement to pay a unit royalty and provide quarterly sales reports.

In June 2006, Crane Co. aquired Automatic Products International, Ltd., as well as the right to do business under the Automatic Products International, Ltd., name, including the manufacturing, marketing, and sale of vending machines that use the patent licensed by Automated Merchandising Systems, Inc.

Filed by Charles Printz Jr. of the Martinsburg office of Bowles Rice McDavid Graff & Love on June 6, 2008, the suit states that Crane Co. has encouraged other licensees to stop paying royalties. Automatic Products International, Ltd., has stopped sending quarterly sales reports or paying unit royalties as of November 2006. In that same year, Seaga Manufacturing, Inc., began selling its new line of vending machines.

According to the suit, the president of Crane Co., Brad Ellis, advised the owner of Seaga Manufacturing, Inc., Steven Chesney, that the claims made by Automated Merchandising Systems, Inc., had been invalidated by the United States Patent and Trademark Office, and that neither company should continue paying royalties to Automated Merchandising Systems, Inc.

As proven in its 2002 case against Automatic Products International, Ltd., the patents are still valid.

Ellis also stated that Crane Co. would provide a legal defense for Seaga Manufacturing, Inc., if Automated Merchandising Systems, Inc., sued it for patent infringement. Crane Co. and Seaga Manufacturing, Inc., have continued to sell products that utilize the patents of Automated Merchandising Systems, Inc., without providing quarterly sales reports or unit royalties.

Automated Merchandising Systems, Inc., is seeking a trial by jury to award injunctions against Crane Co. and Seaga Manufacturing, Inc., to prevent it from continuing to infringe on all four patents, compensatory damages for royalties increased up to three times for willful infringement, attorneys' fees, and interest.