Mercury Cable Provides Update on Litigation with Composite Technology Corporation

Mercury Cable & Energy, Inc. (“Mercury Cable”), the leading developer of High Voltage Composite Reinforced Conductors (“HVCRC”) for electrical transmission lines, is pleased to announce the U.S. District Court has denied Composite Technology Corporation’s (OTCBB:CPTC) EX PARTE application for (1) limited partial relief from stay for purposes of amending complaint and (2) issuance of order to show cause re preliminary injunction against false reports concerning status of patent reexamination.

In its findings, the Court stated: “On June 16, 2009, Mercury filed petitions for ex parte reexamination of the Patents-in-Suit with the U.S. Patent and Trademark Office (‘PTO’). In seeking reexamination, Mercury contends that the Patents-in-Suit are invalid because the claims in the patents are rendered obvious by prior art. Mercury specifically alleges that the Patents-in-Suit are rendered obvious by a combination of the references in U.S. Patent No. 6,015,953 (the ‘953 Patent) directed to a ‘Tension Clamp’ and U.S. Patent No. 5,093,162 (the First ‘162 Patent) directed to a ‘Large Tip Composite Golf Shaft.’ Mercury contends that the ‘953 Patent discloses a power transmission cable with a composite carbon core and that the majority of the limitations in the Patents-in-Suit can be found in the ‘953 Patent. Mercury further alleges that the remaining limitations in the Patents-in-Suit that are not addressed by the ‘953 Patent are limitations dealing with the existence or various properties of a glass fiber outer core. Mercury contends that these remaining limitations are supplied by the First ‘162 Patent and avers that one skilled in the art would be motivated to combine these two previous patents, thus rendering the Patents-in-Suit obvious.”

In its discussion of the trade libel claim, the Court stated: “CTC fails to substantiate the urgency in filing and prosecuting its contemplated trade libel claim. Indeed, the factors compelling a stay of the present litigation are still relevant. CTC argues that the Court’s prior Order concluded that no serious prejudice would result to CTC from a stay and that Mercury’s recent press release demonstrates otherwise. However, CTC fails to connect the stay in this action with Mercury’s press release. First, even if the Court had not stayed this action, the PTO process would have continued, and Mercury would have been issued its press release. Second, to the extent that the stay precludes CTC from filing and pursuing a trade libel claim, its state law action provides sufficient recourse.”

The Court then went on to state: “A party seeking preliminary injunctive relief, including a Temporary Restraining Order (TRO), must show either (1) a combination of probable success on the merits and the possibility of irreparable harm; or (2) that serious questions going to the merits are raised and the of hardships tips sharply in the moving party’s favor. [Citations Omitted]. These two formulations represent two points on a sliding scale in which the required degree of irreparable harm increases as the probability of success decreases. [Citations Omitted]. Furthermore, the moving party must show that the threatened irreparable harm is imminent. [Citations Omitted].”

Based on the analysis above, the Court concluded that: “None of these factors support the issuance of an injunction. First, CTC only protests the title of Mercury’s press release regarding the PTO’s first office findings; the body of the article does not mislead or misrepresent the facts or the law. Moreover, the press release conveys no legal significance to the term ‘invalidity.’ To the extent that CTC is concerned with investors’ reactions to the press release, the Court sees no reason that the investors would have reacted differently if the press release had not used the term ‘invalid.’ Second, CTC’s claim that the press release resulted in the drop of its stock price is unavailing. Mere correlation between the issuance of the press release and the drop in CTC’s stock price does not signal a causal relationship. It is more likely that the PTO’s first office findings motivated investors’ decisions with respect to CTC. Third, CTC has already issued its own press release construing the PTO’s findings, and its stock price has since recovered.”

For the foregoing reasons, the Court DENIES the CTC’s ex parte Application for (1) Limited Partial Relief from Stay for Purposes of Amending Complaint and (2) Issuance of Order to Show Cause re Preliminary Injunction Against False Reports Concerning Status of Patent Reexamination. A complete copy of the Court's order may be viewed at our website at www.mercurycable.com.

In other news involving CTC litigation, in the matter of FKI PLC et al v. Composite Technology Corporation et al (Federal Court CASE #: 2:09-cv-05975-FMC-E), in a Court order dated December 8, 2009, the Court in that matter stated: “The Court has read and considered all papers filed in connection with ‘Petitioners’ Motion for Sanctions’ (“the motion”), filed October 9, 2009, including the papers filed subsequent to the Court’s November 6, 2009 Order. The Court heard oral argument on October 30, 2009 and November 6, 2009. The Court’s November 6, 2009 Order mandated, inter alia: ‘On or before November 18, 2009, Respondents [CTC et al.] belatedly shall comply fully with the Court’s August 28, 2009 Order.’ Respondents [CTC et al.] failed to do so. See Paragraphs 5 through 8 of Declaration of David Christopher Baker, filed November 18, 2009 (admitting that, as of November 18, 2009, Respondents [CTC et al.] still had not complied fully with the Court’s August 28, 2009 Order). In fact, Respondents [CTC et al.] have been in continuing violation of the Court’s August 28, 2009 Order at all times from September 4, 2009 through (and reportedly beyond) November 18, 2009. Respondents’ [CTC et al.] continuing violation has been unreasonable, willful, and in bad faith. The acts and omissions of Respondents [CTC et al.] that necessitated the motion lacked substantial justification. There are no circumstances in this case that would make the imposition of sanctions unjust.”

The Court then held as follows “Pursuant to Rule 37 of the Federal Rules of Civil Procedure, and the Court’s inherent power to enforce its own orders, it is ordered that: (1) on or before December 31, 2009, Respondents [CTC et al.] shall pay to Petitioners [FKI] the sum of $51,440; (2) on December 31, 2009, Respondents [CTC et al.] shall pay to Petitioners an additional sum of $1,000 for every day from November 19, 2009 through December 30, 2009 during which Respondents [CTC et al.] continued to be in violation of the Court’s August 28, 2009 Order; and (3) beginning January 1, 2010, and each day thereafter, Respondents shall pay to Petitioners an additional sum of $1,000 for each day (December 31, 2009 forward) that Respondents continue to be in violation of the Court’s August 28, 2009 Order.”

To view the complete Court order please visit the PACER system for accessing Federal Court documents at www.pacer.gov.

Mercury Cable & Energy is a privately-held developer of High Voltage Composite Reinforced Conductors (HVCRC), Smart Conductors for the Smart Grid. The patented HVCRC Smart Conductor is superior to existing conductors in a number of key performance areas including:

• Up to double the current carrying capacity of ACSR
• Substantially reduces high-temperature sag
• Requires fewer structures for new line construction
• Increases capacity of existing rights‐of‐way and structures through retrofitting
• Eliminates bi-metallic corrosion
• Significantly reduces line losses compared to same-diameter conventional and composite conductors at equal operating temperatures