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Business Observer Friday, Oct. 10, 2014 4 years ago

Won't back down

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A Tampa attorney went on the offensive in a rare way for a client. The result is a vindication of the firm's ethics and standards — and a potential for more than $15 million in legal judgments.
by: Mark Gordon Managing Editor

Italian-born chemical engineer Aldo Laghi, who runs a multimillion-dollar medical equipment manufacturing firm, isn't a back-down kind of entrepreneur.

This is, after all, someone who once jumped out of planes for the Italian Army when he was a second lieutenant in the parachute regiment in the 1970s.

Yet even Laghi's resolve has been tested in a decade-long legal fight against a competitor in the niche industry of making liners used in prosthetics for amputees. The battle centers on a series of eight lawsuits and countersuits, all involving patent infringement allegations between Mount Sterling, Ohio-based Ohio WillowWood and Laghi's company, St. Petersburg-based Alps South.

The saga could soon shift in Alps and Laghi's favor, if a federal judge upholds a $15.5 million judgment handed down in March against Ohio WillowWood in one of the cases. That's in addition to around $2 million in legal fees Alps has incurred over the last decade. Alps has won several other cases, which could lead to more financial judgments, though appeals are pending in most instances.

“We knew we had properly respected other companies' patents,” Laghi says in a statement. “Our philosophy was to plant our feet in the right place and stand firm.”

The fight began like simple patent infringement law. Ohio WillowWood, with annual sales that dwarf Alps's, accused Alps of manufacturing prosthetic liners — a gel suspension and cushioning between a prosthesis and the residual limb — that were too close to Ohio WillowWood's patented products. Ohio WillowWood filed the case in federal court in 2004 in Ohio.

Then things got complicated.

Alps officials denied the patent infringement allegations. Executives say the main reason is obvious: Multiple manufacturers, they say, made these liners for years prior to the patent Ohio WillowWood received for the product in 1996. So WillowWood's patents, argued Alps, wouldn't apply to this case.

Past that, Alps's attorney, Ron Christaldi with the Tampa office of Shumaker, Loop & Kendrick, worried this wasn't really a patent infringement case at all.

Christaldi instead believed Ohio WillowWood wanted to squash Alps by any means necessary — even if that meant the Ohio company fudged some facts in its patent infringement accusation. Ohio WillowWood brought similar patent infringement cases against several other competitors, in addition to Alps. That only fueled Christaldi's anxiety.

The gist of Christaldi's theory was Ohio WillowWood omitted certain pertinent facts in its patent application, including the biggest fact of all: That these products were already invented.

Ohio WillowWood, says Christaldi, sought to use its undeserved patent like a hammer to pound away at its competitors. Christaldi, co-chair of the health care practice group at Shumaker and an attorney for nearly 20 years, says this case was one of the most complex and important ones of his career.

“The life of Alps was on the line,” says Christaldi. “This was really a David versus Goliath thing. Most (other companies) didn't have the will or resolve to fight.”

Adds Christaldi: “My client really stood on principle. He wasn't going to be extorted.”

Ohio WillowWood officials, through their attorneys and in court documents, deny any wrongdoing. Ryan Arbogast, president of the family-run business founded in 1907, declined to comment. He referred questions to the firm's attorneys.

“Ohio WillowWood absolutely denies the allegations,” says Joshua Lorentz, an intellectual property attorney with Cincinnati-based Dinsmore who represents the firm. “It believes it has complied with all the rules from the patent department. I think it's safe to say OWW is disappointed by the recent decisions.”

'Crossed the line'
Christaldi, with an easy-going demeanor and soft-spoken style that belies his relentless stick-to-itiveness, approached the Ohio WillowWood suits with a rarely used and difficult-to-prove legal theory. It's a defense called inequitable conduct, an attempt to show a plaintiff in a patent infringement case fraudulently obtained the patents it's suing over. A court in a patent infringement case can choose to not enforce the patent and award damages if a plaintiff is found to have earned the patent under inequitable conduct.

“Part of our strategy was to go on the offensive,” Christaldi says. “We were being chased and hunted and we had to level the playing field.”

But inequitable conduct cases are tricky. For one, the U.S. Patent and Trademark office, in general, has wide latitude in granting patents. More daunting is legal standards for proving the theory in court were recently changed, with more emphasis placed on the defense.

Christaldi, with the support of Laghi and top Alps executives, plowed ahead. Laghi and Alps marketing executive Kevin McCloone met with Christaldi and his legal team every Wednesday for years for case updates and to hash out strategy. McLoone and Laghi declined interview requests for this story, deferring questions to Christaldi.

“My teammates here advised me against” pursing an inequitable conduct defense, Christaldi says. “But my instinct was something happened here that wasn't right. My gut told me they crossed the line.”

That gut was confirmed late last year, when a three-judge federal appeals court issued a ruling that stated, in part, “there are genuine issues of material fact regarding whether OWW's counsel committed inequitable conduct.” That decision, handed down Nov. 15, overruled a decision from U.S. District Court Judge Gregory Frost that found no inequitable conduct. That case is a separate suit from the one with the $15.5 million decision in Alps' favor.

“If OWW had simply withheld a single piece of information or made a simple misrepresentation, this would be a different case,” the federal appeals court wrote in November. “However, OWW withheld various pieces of material information and had no reasonable explanation for the several misrepresentations it made to the (Patent and Trademark Office).”

Company reboot
Due to appeals and pending trials and hearings, Alps has yet to receive money for damages.

Even so, Alps has forged ahead on its business. Laghi founded Alps, which stands for advanced liquid polymer systems, in 1988 in central New York state. He moved the business to St. Petersburg in 1994, where it now has 120 employees and two manufacturing facilities. It also has warehouses and sales offices in Italy, Canada, the Czech Republic, China and Ukraine. It does business in nearly 50 countries.

Alps operates divisions in prosthetics orthotics, silicone and patient care, all with gel-based products. Those products, the firm says, have also been used for a variety of unusual purposes, including WintersGel, the liner used to help the famous injured dolphin Winter swim with a prosthetic tail; an oxygen-injected engine that dramatically increases a car's horsepower; improved sleep apnea masks; and a silicone mask that helps patients recover more quickly after facial surgery.

The company showed off its products and innovation in May at a ceremony attended by U.S. Rep. David Jolly, R-Indian Shores, and State Rep. Kathleen Peters, R-St. Petersburg. A press release called the presentation a kick-start to the firm's research and development efforts after the $15.5 million decision went in its favor. The reboot, the company says, includes 20 new employees.

Technology has long been the heart of Alps's business model: Laghi himself holds 50 patents and the firm's work includes developing innovative electrical interfaces that pick up neural signals that allow amputees to more intuitively manipulate their prostheses. The company also does a lot of its work in-house, from knitting fabrics to mixing polymers to machining metal.

Laghi's pride in the firm's employees and products was evident to Christaldi when he first met the executive. Christaldi grew to share that appreciation over the 10 years of the case against Ohio WillowWood. That made it more personal to Christaldi, and he says the more he learned about the case, the more determined he became to battle Ohio WillowWood to a decisive victory.

“They wanted to muscle everyone else out of the market,” says Christaldi. “But they misread Alps's ability to stay in the fight.”

Going places
Shumaker, Loop & Kendrick attorney Ron Christaldi, in the hours he spends outside work for clients, has become a go-to business leader for the Tampa region.

Recent non-legal accomplishments include:

Elected chair of the board for the Tampa Club earlier this year. The Tampa Club is a private business, social and dining hub for area business leaders and officials;

Chair-elect of the Greater Tampa Chamber of Commerce, where he's also on the executive committee;

Was part of a small delegation of Tampa chamber officials who met with U.S. Vice President Joe Biden in 2013, pictured above. They talked about transportation issues, military affairs and trade with Cuba.

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