It’s not of the magnitude of the Destiny USA fiasco or as meat and potatoes as Bain v. Vertex Architects, but a recent case out of United States District Court for the Central District of California suggests that the growing market for green building products and LEED certification is also greasing the wheels for commercial disputes between industry stakeholders.
In Kinetics Noise Control, Inc. v. ECORE International, Inc., 2010 WL 4449118 (C.D. Cal.), an Ohio-based supplier of flooring products, including rubber acoustical underlayment products, brought a series of antitrust and false advertising claims against ECORE, a Pennsylvania-based manufacturer and supplier of underlayment products, and the holder of the patent giving rise to the dispute. According to Kinetics’ allegations in the complaint, ECORE fraudulently procured the patent, wrongfully enforced it, and “almost exclusively enjoyed [the] increased demand for rubber acoustical underlayment, at the expense of Kinetics, its competitors, and the consumers in the industry.”
In its complaint, Kinetics specifically identifies the growth of the green building industry as fueling that increased demand, and points to the proliferation of LEED in state- and local-level legislation as a major factor in creating this new market. Complaint ¶ 21. Kinetics was thus likely motivated to file the suit in order to defend – and hopefully capture more market share in an industry that its complaint describes as “recession-proof.”
The “Industry Background” section of Kinetics’ complaint is helpful in understanding exactly how acoustical underlayment functions, its role in earning project teams credits towards LEED certification, and how the plaintiff perceived the green building industry’s growth as contributing to the overall market effect of ECORE’s allegedly anti-competitive conduct:
16. Acoustical underlayment is a flat, resilient substrate used under floor finishes to dampen sound. Underlayment products are made using a variety of materials including cork, foam, rubber and a combination thereof.
17. Rubber acoustical underlayment is made from recycled automobile, bus and truck tires that are turned into crumb rubber and recombined into a log that is sliced into rolled underlayment.
18. Compared to underlayment made from other materials, rubber acoustical underlayment provides the greatest sound dampening characteristics and points for Leadership in Energy and Environmental Design (“LEED”) certification. Rubber acoustical underlayment also is known for durability and compatibility with all floor finishes including hard surface flooring often used in high rise buildings and condominiums.
19. In the past decade, there has been significant movement in the building industry to build or renovate commercial construction and high rise buildings with sustainable materials that comply with “green” building standards, which include acoustical underlayment described herein.
20. In the United States and in a number of other countries around the world, LEED certification has become the recognized standard for measuring environmentally sustainable construction.
21. In addition to environmental benefits, obtaining LEED certification allows participants to take advantage of unprecedented levels of government initiatives available for green projects and to market buildings as premier projects with increased potential for profitability. These factors, as well as heightened awareness and demand for green construction and improvements in sustainable materials have contributed to rapid growth of the green build market.
22. According to the United States Green Building Council, since its inception in 1998, LEED certified projects have grown to encompass more than 14,000 projects in the United States and 30 countries covering 1.062 billion square feet of development area.
23. Also, according to the United States Green Building Council, the overall green building market is likely to more than double from today’s $36-49 billion to $96-140 billion by 2013.
. . .
25. By its wrongful enforcement of the fraudulently procured [patent], ECORE has almost exclusively enjoyed this increased demand for rubber acoustical underlayment, at the expense of Kinetics, its competitors, and the consumers in the industry.
Although the Central District of California dismissed the case earlier this year on the basis that it lacked personal jurisdiction over ECORE, and it also denied Kinetics’ motion for reconsideration of that decision last month, I think that the lawsuit is still important to note from the perspective of the massive market that green building practices – including the demand for LEED certification – have created for green building materials and technologies.
Indeed, Kinetics’ complaint specifically states that “as a result of the significant demand for sustainable construction, the market for acoustical flooring underlayment made of recycled materials such as recycled tired has rapidly expanded despite the overall decline in the U.S. and world markets and has been called ‘recession proof.’” Complaint, ¶ 24.
While it is not traditional “LEEDigation” or the same factual posture as in Vertex Architects (as we prognosticated late last year), Kinetics suggests that the potential commercial causes of action arising out of a green building dispute could be limitless. If the green building market comes close to meeting USGBC’s ambitious projections for the next decade, the likelihood that other plaintiffs will emerge in an effort to defend – or obtain – market share in similar fashions will also increase.