Free Redacted Document - District Court of Delaware - Delaware

Case 1:07-cv-00226-JJF

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EXHIBIT 1

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE ) ) ) ) Plaintiff, ) ) v. ) ) JOHNSONFOILS, INC., ) a Delaware Corporation, ) ) Defendant. ) _______________________________________) VOITH PAPER GMBH & CO. KG, a Company organized and existing under the laws of Germany,

C.A. No. 07-0226-JJF

DECLARATION 1. I, Karl-Josef Böck, am currently employed by Voith Paper GmbH & Co. KG

("Voith"), and have been so employed since July 1, 1991. My present job title is Senior Vice President of Technology. I understand that as part of the above captioned litigation (the "Infringement Litigation"), Voith has asserted that JohnsonFoils, Inc. ("JohnsonFoils") infringes Voith's United States Patent Nos. 5,972,168 and 5,718,805 (the "Patents-in-suit"). I also understand that JohnsonFoils has requested that the Infringement Litigation be stayed and that such a stay would likely delay the adjudication of the Infringement Litigation for years and beyond the expiration of the Patents-in-suit. Moreover, I understand that such a stay would permit JohnsonFoils to continue its accused infringement of the Patents-in-suit. For the reasons more fully stated and explained below, such a stay would result in continuing losses to Voith that I am informed may not be compensated by a subsequent award of monetary damages. These losses include at least the lost opportunity to provide highly lucrative paper making machine

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products and services subsequent to and in addition to the rebuilds at issue in this Infringement Litigation. 2. In the course of my employment with Voith, I have become familiar with the

structure of the paper manufacturing business including, paper making machines, paper making machine rebuilds, and related services and accessories. Although the subject matter of the Patents-in-suit relates to the forming section, called a Twin Wire Former, of a paper making machine, supplying or rebuilding a forming section of a paper making machine for a paper manufacturer customarily results in sales of other paper machine parts, services, and accessories to that manufacturer. Voith is a supplier of paper making machines, as well as parts and services for all sections of paper making machines, including the forming, pressing, and drying sections. 3. I estimate that, in 2007, the worldwide market for all paper making machine

products and services exceeds $13,050,000,000 (9,000,000,000). The US market is approximately twenty percent (20%) of the world market, and is estimated to exceed $2,610,000,000 (1,800,000,000). I estimate that there are approximately 180 formers in existence worldwide which may be suitable for a rebuild that incorporates the technology disclosed in the Patents-in-suit. 4. Voith performed its first rebuild of a paper former to incorporate resiliently

mounted counterblades to a forming section of an operating paper making machine for Haindl Paper GmbH at its Augsburg PM1 installation in 1992. By 1993, the technology disclosed in the Patents-in-suit, including resiliently mounted counterblades, became standard equipment on Voith's new paper making machines. 5. Although the technology of the Patents-in-suit had become standard equipment in

Voith's gap former paper making machines by 1993, the demand for rebuilding existing forming

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sections to incorporate this technology did not develop until recently. Because of the ten to fifteen year rebuild cycle for forming sections, the market for rebuilding existing forming sections to incorporate the new technology did not accelerate until around the year 2000. 6. There are still approximately 180 paper making machines in operation worldwide

for which a gap former rebuild to include resiliently mounted counterblades as disclosed in the Patents-in-suit is suitable, namely about sixty (60) so-called roll blade gap formers and about 120 blade gap formers of which about 110 were originally built by Beloit and marketed under the trade name BelBaie. Based on past market behavior and the number of currently operating paper making machines, I estimate that the world market for paper former rebuilds will continue at a rate of approximately ten (10) to fifteen (15) per year. 7. JohnsonFoils, and its parent company AstenJohnson, Inc. ("AstenJohnson"), are

direct competitors of Voith in the market for forming section rebuilds and forming section fabrics. Specifically, from publicly available information and information provided by paper manufacturers, I am aware that JohnsonFoils has made competing bids on "wet end" paper former rebuilds which are accused in this Infringement Litigation of infringing the Patents-in-suit ("Infringing Rebuilds"). JohnsonFoils is a United States company that manufactures its components in the United States and performs such Infringing Rebuilds at paper making machine installations worldwide, including installations in the United States. 8. JohnsonFoils' parent company, AstenJohnson, a U. S. company with

approximately 1800 employees, competes directly with Voith in the market for paper forming fabrics. AstenJohnson formed in 1999 from a merger of Asten, Inc., a fabrics supplier, and JWI Group, which included JohnsonFoils, Inc. On its website, AstenJohnson characterizes itself as a company with "total machine clothing [, i.e., fabric, including forming fabrics,] and equipment

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capabilities." I understand that paper forming fabrics are described in the Patents-in-suit as "wires" or wire belts, and are used to form the paper web in the wet-end of a paper forming machine. The current world market for such fabrics is approximately $2,320,000,000 (1,600,000,000). Voith's market share is approximately seventeen percent (17%) or $435,000,000 (300,000,000) per year. From publicly available information, I estimate AstenJohnson's market share to be approximately eleven percent (11%) or $255,200,000 (176,000,000) per year. 9. JohnsonFoils' Infringing Rebuilds and their pricing structure have blocked Voith

from obtaining a single contract for performing rebuilds within the United States blade gap former market. As a result, Voith has also lost opportunities to market other parts, services, and accessories, such as forming fabrics. 10. The impact of JohnsonFoils' Infringing Rebuilds on Voith's market share is

significant. Of the 210 gap forming sections of paper making machines worldwide, specifically so called gap formers and gap-roll-formers, rebuilds have been performed on thirty six (36). Voith has performed twelve (12) of these rebuilds (33%) and JohnsonFoils has performed eight (8) (22%). However, in the United States, despite Voith's substantial marketing efforts, JohnsonFoils' Infringing Rebuilds have prevented Voith from obtaining any blade gap former rebuild contracts. Because of the large market potential in the United States, where many paper making machines are expected to be quoted for a rebuild within the next two years, JohnsonFoils' Infringing Rebuilds, if permitted to continue unabated, are expected to impact Voith's ability to market such rebuilds as well as the parts, services, and accessories which are often sold to a customer subsequent to a successful rebuild.

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11. Upon information and belief, including communications with paper

manufacturers and publicly available information, Voith's loss of opportunities to perform paper former Rebuilds is directly attributable to JohnsonFoils' lower prices. I estimate that JohnsonFoils prices the Infringing Rebuilds at fifty percent (50%) less than Voith and other market competitors such as Metso Paper, Inc. ("Metso"). For example, Voith is aware, from communications with Paper Korea, a paper manufacturer, that JohnsonFoils has used its low pricing strategy to win contracts for performing the Infringing Rebuilds. After becoming dissatisfied with JohnsonFoils' work, Paper Korea approached Voith to perform an analysis for a rebuild of the forming section on its Kunsan PM2 paper making machine. Paper Korea expressly told Voith that Paper Korea would prefer to award the rebuild work to Voith rather than JohnsonFoils, and even offered to pay Voith 30 percent more than JohnsonFoils' bid price to perform the rebuild. Paper Korea ultimately awarded the project to JohnsonFoils, however, because of JohnsonFoils' low price. 12. Prior to its recent entry into the paper former rebuild business, JohnsonFoils was

known as a supplier of paper machine components, such as, for example, suction boxes, foil boxes, ceramic covers, and blades. In fact, JohnsonFoils supplied components to Voith for many years, starting in 1993 and continuing through the period preceding this Infringement Litigation, reaching a peak level of about $1,300,000 during 2000 and 2001. 13. Upon information and belief, JohnsonFoils' ability to offer reduced prices is

related to its pattern of copying paper forming technology from companies, primarily Voith, who must incorporate the significant costs of research and product development into their pricing structure. Instead of bearing the expense of developing the considerable technological knowhow needed to perform such rebuilds, JohnsonFoils has instead relied on copying Voith's

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published innovations, including the technology disclosed in the Patents-in-suit, and hiring individuals who have obtained technological know-how from Voith and other companies. For example, JohnsonFoils hired James A. Ronning, the former group leader responsible for formers in the design department of Voith's U.S. subsidiary, Voith Paper, Inc. 14. Based on my experience in the paper manufacturing industry, the loss to Voith

resulting from JohnsonFoils' continued infringement of the Patents-in-suit far exceeds the revenues directly relating to the Infringing Rebuilds. In the paper manufacturing industry, it is understood that successfully performing a rebuild often leads to subsequent sales of paper making machinery, parts, supplies, and services unrelated to the original rebuild. For example, subsequent sales often include spare ceramic covers, ceramic blades, optimization services, rebuilds on other machine sections, and fabrics. These additional items may be considered unrelated to the subject matter of the Patents-in-suit. 15. Sales of paper forming fabrics, also supplied by Voith, are a particularly

profitable follow-on business expected to result from performing a successful rebuild. Based on my experience, successfully performing a paper forming rebuild is likely to result in subsequent sales of such fabrics. These fabrics are replaced approximately every six to eight weeks at a cost of approximately $797,500 (550,000) per year. Apart from the follow-on sales of other parts, accessories, and services, revenue from the follow-on sale of fabrics would add revenue of $7,975,000 (5,500,000) every ten years. However, because performing a successful rebuild may result in the opportunity to supply fabrics for a customer's other paper forming machines, the actual revenue from additional fabric sales could be much greater. Adding to the significance of this sum, the profit margin for the sale of fabrics is typically very high in comparison with the profit margin for rebuilds and other parts.

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16. As explained above, the market for fabrics alone is estimated to be approximately

$2,320,000,000 (1,600,000,000). The global market for services relating to paper making machines is greater than $1,450,000,000 (1,000,000,000). Of this, Voith currently has at least an estimated twenty two percent (22%) share of the services market or $319,000,000 (220,000,000). 17. For example, in October 2005, Voith rebuilt the forming section at a paper

making machine installation known as Norske Skog Golbey PM2 (France). Although the cost of the core rebuild was only $2,382,350 (1,643,000), Voith was also asked to supply several additional services, including construction, training and optimization ($449,500 (310,000)), a wire stretcher unit, including construction, optimization and training ($506,050 (349,000)), modification of the suction couch roll ($33,205 (22,900)), and spare parts ($556,075 (383,500)). Thus, in addition to the $2,382,350 (1,643,000) cost of the core rebuild, this contract provided Voith with revenues of $1,544,830 (1,065,400), for a total of $3,927,180 (2,708,400). In addition, performing this rebuild successfully resulted in fabric sales amounting to $783,000 ( 540,000) per year for the past 2.5 years. The follow-on fabric sales alone are expected to provide Voith with $7,830,000 (5,400,000) over each successive ten year period. In this example, without considering other opportunities to perform subsequent rebuilds, or to replace the paper machine itself at the end of its useful life, the original revenue from the core rebuild ($2,382,350) is only about twenty percent of the total expected revenue stream ($11,757,180). 18. An additional illustration is provided by the rebuild performed by Voith at UPM's

Steyrermühl PM4 installation in August, 2007. This rebuild was performed on a DuoFormer CV, a paper making machine originally manufactured by Voith. This rebuild is very similar to

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the type of rebuild suitable for the BelBaie formers that are likely to require such rebuilds in the United States. Although the cost of the core rebuild was only $1,001,805 (690,900), Voith was also asked to supply several additional services, including cleanliness equipment for the forming section ($919,155 (633,900)), construction, optimization and training ($829,835(572,300)), and spare parts ($205,610 (141,800)). In addition, UPM also asked Voith to perform unrelated rebuilds on the press section and dryer section of the UPM Steyremühl PM4. In the press section, UPM ordered a change of web run geometry at a cost of ($1,618,635 (1,116,300)), together with other modifications totaling approximately $246,500 (170,000), and construction, training, maintenance and optimization services ($779,230 (537,400)). In the dryer section, stabilizers were purchased for an additional $1,402,295 (967,100) together with a dryer fabric cleaning device ($217,065 (149,700)) and construction, training, start-up and optimization totaling $956,710 (659,800). In addition, parts for a Calender (a device consisting of rolls that improves the smoothness, thickness, and evenness of the paper) ($334,950 (231,000)) and other parts options ($1,284,917.50 (886,150)) were provided. Thus, in addition to the $1,001,805 (690,900) for the core rebuild, this contract provided Voith with further revenues of $8,794,902.50 (6,065,450), for a total of $9,796,707.50 (6,756,350). In addition, UPM has made fabric purchases which are expected to provide Voith with estimated annual revenues of $859,850 (593,000) for forming fabrics and $333,500 (230,000) for drying fabrics. The forming fabric sales alone are expected to provide up to $8,598,500 (5,930,000) in additional revenue for each subsequent ten year period. In this example, without considering other opportunities to perform subsequent rebuilds, or to replace the paper machine itself at the end of its useful life, and limiting the fabric sales to ten years, the original revenue from the forming

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section rebuild ($1,001,805) is only about 5.5% of the total expected revenue stream ($18,395,207.50). 19. A further typical illustration of other sales resulting from providing forming

section rebuilds is provided by the rebuild performed by Voith at Norske Skog's Jeonju PM7 Mill, located in Korea. Although Norske Skog was primarily interested in a rebuild of its forming section, Norske Skog ultimately ordered a new headbox and parts for its drier section as well. Thus, in addition to revenue from the sale of a forming section and rebuild parts of $3,899,050 (2,689,000), further revenue was obtained from the sale of the headbox ($4,400,750 (3,035,000)) and drier section parts ($658,300 (454,000). Additional parts and services from this rebuild, such as construction, controls, spare parts, and process engineering services, ultimately provided further revenues of $3,819,010 (2,633,800). Thus, obtaining the contract for the forming section rebuild for Norske Skog resulted in additional sales revenue of $8,878,060 (6,122,800). Considering these additional revenues, and without regard to future opportunities to sell other rebuilds, fabrics, spare parts, and other accessories to Norske Skog, revenue from the forming section rebuild that drove this deal amounted to only forty four percent (44%) of the total revenue from this transaction. 20. Yet another example is provided by the previously mentioned Augsberg PM1

rebuild performed by Voith for Haindl Paper GmbH in 1992. In that instance, Voith's successful performance of a rebuild on PM1 resulted in the subsequent sale of a completely new paper machine, namely Haindl's PM2 machine. In my experience, it is typical that successfully performing a rebuild results in subsequent sales which may be functionally unrelated to the original rebuild.

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21. In view of the preceding examples, and based upon my experience in the paper

manufacturing industry, JohnsonFoils' continuing infringement of the Patents-in-suit causes damages to Voith far in excess of those that could be measured by looking at the charges directly related to the infringing rebuilds at issue in this Infringement Litigation. The operating life of a paper machine is potentially unlimited if regular maintenance, including possible rebuilds in accordance with the rebuild cycle, is performed. Because these damages are difficult to quantify in advance and may not be compensable under United States law, Voith's damages are irreparable. The only effective means of avoiding further irreparable harm is to obtain an injunction preventing further Infringing Rebuilds following a speedy adjudication of this Infringement Litigation. 22. I declare under penalty of perjury under the laws of the United States of America

that the foregoing is true and correct.

Executed on February 13, 2008

_________________________________ Karl-Josef Böck

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