Decision Rendered in North vs. Sobstad court case

Sobstad Corp. announces that Friday evening (March 31) the federal court in Hartford, Connecticut, released an opinion and order finding that Windway Capital Corp., parent of North Sails Group, Inc., and North were infringing Sobstad's '639, '953, and '205 structural sail technology patents used in high-end racing sails. Windway owns a controlling interest (81%) in and substantially finances the operations of North. The court ordered that Windway/North must immediately discontinue all new production of North's infringing 3DL sails. These sails are used in America's Cup races, grand prix events, and yacht racing at all levels. These sails are now made at North's plant in Minden, Nevada.

"I am very pleased with this ruling", said inventor Peter Conrad, president of Sobstad. "It has been a long, arduous battle by our small company against the world's largest sailmaker, but this is a decisive result. It is important for the sailing world to understand, as the court found, that Sobstad pioneered the revolutionary structural sail technology used in high-tech racing sails. It is our technology; Windway and North had absolutely no right to use it. Sobstad has always believed that its patented structural sail technology is the finest in the world and is exclusive to Sobstad." Sobstad was represented by lead counsel J. Alan Galbraith and David C. Kiernan of Williams & Connolly LLP in its patent litigation against Windway, North and the individual defendants. Joshua Heinz and William Gilberti of Devorsetz, Stinziano, Gilberti, Heinz & Smith of Syracuse, New York represented Sobstad as business counsel.

In addition to ordering no further manufacture of infringing sails, the court also ordered that Windway/North pay Sobstad a 7% royalty and compounded interest due to past infringing sales. This includes all sales of North's extensively advertised 3DL sail. The Court found that the parties responsible for payment were not only Windway and North, but also Terry Kohler, CEO of Windway, as well as two of North's officers, Tom Whidden and Jay Hansen. Mr. Kohler belongs to the Wisconsin Kohler family; he resides in Sheboygan and in a well-known figure in the sailing world.

The Court is further requiring that Windway/North provide detailed information on infringing sails' revenues to determine the amount of royalty payment and interest. This information must be provided by April 28, 2000.

Sobstad sued Windway and North in July 1992. Sobstad contended that the 3DL sail had all elements contained in its pioneering "Airframe" patents. Windway/North denied that the 3DL sail had two elements required by the patents, panels and structural members. They asserted (as North advertises) that the 3DL sail was a one-piece sail, with no panels. The Court agreed with Sobstad that the sail was made from panels. As for the structural members, the Court noted that "the critical features of the patents at issue are the structural members following the load lines that go from corner to corner of the sail. Because this is the principal feature of the Conrad invention, almost all of the realizable profit made by North on its sales of 3DL sails is attributable to the patents at issue." Accordingly, the Court concluded that the 3DL sails literally infringe the Conrad patents.

Alan Galbraith, trial counsel for Sobstad, added that "I too am thrilled by the result. The consequences should be very severe when, as in the case, the dominant competitor has chosen to ignore pioneering patents." Mr.Galbraith further stated: "I respectfully disagree with the Court's conclusion that defendants did not willfully infringe the Conrad patents. This is a most important issue. In my opinion the evidence clearly showed that defendants knew that the 3DL sail had panels and also structural members exactly as called for in the patent claims. The patent appeals court in Washington, D.C.. is sometimes in the better position to assess that infringement was willful, and this would seem to be one of those cases." A federal court can award up to three times actual damages as well as attorney fees upon a willful infringement.

North Sails to Appeal Ruling in Sobstad Patent Suit

The United States District Court, District of Connecticut, issued a decision late Friday, March 31, in the Sobstad Corporation v. North Sails Group, Inc. patent case. It ruled that North Sails' 3DL™ product infringes existing Sobstad patents, often referred to as Airframe™ technology. The court has required North to pay Sobstad royalties for all sails sold to date and has provided Sobstad with injunctive relief.

North Sails is naturally disappointed by the decision. North strongly believes that the decision is an incorrect one and will continue to vigorously pursue its position through an appeal. 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.

It should be pointed out that North Sails and J. P. Baudet, another instrumental party in developing the 3DL process, were awarded a patent on aspects of the 3DL product and process. The court's decision is also inconsistent with two legal opinions procured by North early in development of the 3DL process to determine whether North infringed any existing patents.

No matter what the outcome, North remains dedicated to providing its customers with superior sailmaking technology and industry leading service. We remain committed to 3DL as a sailmaking process and will explore all options necessary to ensure its continued availability in the future.

The court's ruling has no affect on North's Racing or Cruising paneled sail production or service operations. North is currently the world's leading manufacturer of paneled sails, and is gearing up its paneled racing sail capacity to accommodate any interruption in the availability of 3DL sails.