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A patent infringement trial over automated key duplication machines has kicked off at the Sam B. Hall Jr. Federal Building and United States Courthouse in Marshall, with US District Chief Judge Rodney Gilstrap presiding. The case is Hy-Ko Products v. The Hillman Group.

A patent infringement trial over automated key duplication machines has kicked off at the Sam B. Hall Jr. Federal Building and United States Courthouse in Marshall, with US District Chief Judge Rodney Gilstrap presiding. The case is Hy-Ko Products v. The Hillman Group.

The Hillman Group, one of the nation’s top three automated key duplication vendors, is in Marshall’s federal court this week battling patent infringement claims filed by competitor Hy-Ko Products.

Hy-Ko is seeking $115 million in the case, which kicked off Monday with U.S. District Chief Judge Rodney Gilstrap presiding.

In the case, Hy-Ko is accusing Hillman’s key duplication machines, KeyKrafter and PKOR, of infringing Hy-Ko’s patented technology.

“On information and belief, Hillman introduced the KeyKrafter and PKOR (the ‘accused products’) into interstate commerce and has marketed these accused products to various retailers throughout the United States and this District, including but not limited to Walmart, The Home Depot, Lowe’s, and ACE,” the lawsuit states.

“Hy-Ko, a family-owned business since 1949, suddenly had a downturn when Hillman was competing with its infringing products,” Hy-Ko’s attorney, Joseph A Meckes, of San Francisco, California-based Squire Patton Boggs LLP, said in opening statements.

Hillman’s lead attorney Sam Baxter, of McKool Smith PC, in Marshall, contended that Hillman does not infringe.

“We’ll have these machines in the courtroom and [we] will show you how they work,” Baxter told the jury, adding they might even get to try their hand at cutting a key.

Meckes told jurors that due to Hy-Ko’s declining sales, the plaintiff was ultimately forced by its banks to sell its business. As a result, it was acquired by another family owned company, Midwest Fastener, owned by the DeVries family. He noted that members of the DeVries family were present for this week’s trial.

Meckes said witnesses testifying for Hy-Ko in the case will include William “Bill” Much, a co-inventor of the patented technology in suit; Michael Bass, CEO and president of Hy-Ko; and Steven DeVries of the DeVries family.

Meckes said Kevin Becker, a former Hy-Ko engineer who applied for a job at Hillman after being laid off, will also testify via deposition regarding alleged inquiries Hillman made to him concerning Hy-Ko’s patented technology.

Regarding Bass’ testimony, Meckes said in the early 2000s Bass recognized an issue with cutting keys, and worked on a solution to remedy the mis-cuts.

“Mr. Bass said I want to be able to insert the key and still identify the blade,” said Meckes. “I want to have a machine that will cut that key.”

“Most of us never thought about how many keys there are — long ones, short ones, fat ones,” said Meckes.

“The device Hy-Ko patented had a blade-only identification. That’s what made that special,” said Meckes.

Meckes said in May 2005, after investing thousands of hours crafting the invention, Hy-Ko presented the idea to retailer Walmart, who was very interested.

According to the lawsuit, retail customers grew frustrated with Hillman’s aging Axxess key duplication system, and therefore turned to Hy-Ko for a more modern system.

“At the time of Hy-Ko’s inventions, there was a long-felt need for an accurate and versatile automatic key duplication system suitable for use in the retail environment. Hillman had failed to achieve such an invention,” the lawsuit states.

Walmart, in particular, asked for Hy-Ko’s assistance with modernizing its key business.

“Hy-Ko embarked on a long and very expensive and intensive research and development effort over a period of years. The effort culminated in what became known as HyKo’s Key Identification and Duplication or KID system (hereafter “KID System”), which has been awarded 20 issued and active U.S. Patents,” the lawsuit states.

In 2007, Hy-Ko gave the patented KID machine to Walmart. In April 2009, the company rolled out more.

Meckes said Hillman ultimately sent representatives to retail stores to snap photos of Hy-Co’s patented KID machine. Meckes said, as sales dropped, Hy-Ko became pressured by the bank to sell its assets. Wanting to save jobs, Bass sent a second correspondence to Hillman, offering the company’s patents.

“Hillman said nothing,” said Meckes.

“Andrew Carter will testify Hy-Ko lost $170 million from sales to the big four — ACE, Home Depot, Lowe’s and Walmart,” Meckes said of the top four retailers that sells Hillman’s alleged infringing products.

Making opening statements for the defendant, Sam Baxter noted that the Hillman Group was founded in 1964 by Max Hillman Sr. The company boasts 150 patents with products in 26,000 hardware stores.

He described Hillman as the “go-to” key duplication retailer in the nation. And while the company is no longer a family-owned business, Baxter said a relative of the Hillman family, Brett Hillman, will serve as a witness in this case.

Giving a history of the accused products in suit, Baxter noted in 2005, Hillman launched its PKOR machine. Hy-Ko launched its KID machine in 2007. Making a comparison of the value of the products, he noted that in a decade’s time, between 2005 and 2015, Hillman installed thousands of its PKOR machines at customer locations while Hy-Ko installed, “at most,” 381 between 2007 (the launch date) and 2015.

“If these patented inventions were so good, why weren’t they out performing us?” Baxter contended.

He said it’s because the inventions aren’t relevant.

“Nobody cares,” Baxter told the jury. “It’s not what they wanted.”

Baxter told jurors it doesn’t make sense for Hy-Ko to seek $115 million in damages for a period they only sold 381 machines. Baxter said Hillman’s products are just better.

“Our machine is better; we have better support staff,” said Baxter. “It’s got to do with who is the best company, who has the best machine; and the market spoke.”

“We installed 5,800 KeyKrafters between 2016 (Hy-Ko’s KeyKrafter launch date) to 2020,” he added. “At the same time, Hy-Co installed 279 KID machines. I don’t know how louder the market can speak.”

“Those are numbers you just can’t run away from, and it doesn’t have anything to do with the two patents in this case,” Baxter said.

Baxter said in 2017, the two competitors discussed a potential merger, but didn’t proceed.

“Hy-Ko walked away because Mr. Bass wanted to be CEO over both companies,” he said. “They went out to 130 companies saying would you like to bid on the Hy-Ko company. Two people were interested. The other 128 said no thanks. One of those (interested) was us. We said, ‘OK.’”

Nevertheless, in 2020, Hy-Ko walked away, again, from Hillman’s then $10 million offer, Baxter said.

“In 2021, they sued us,” said Baxter. “We have better customer service, more support staff, better products and we’re financially stable.”

Comparing Hillman’s machines to Hy-Ko’s, Baxter said Hillman’s doesn’t have a “key positioned” component that grabs the keys and pulls it into the machine. He said Hillman’s product calls for a technician to manually push the key into the machine.

Baxter said Hy-Ko’s patented technology also requires two systems — the camera and the cutter — to interact and share information while Hillman’s machine doesn’t.

“Our machine, we have one controller and the camera and cutter never talk to each other,” he said. “In the (Hy-Ko) patents they’re talking. In ours, they’re deaf mute.

“Our machines do not work like the KID machine. It does not pull a key in there, and there’s no infringement,” said Baxter.

The case continues today in Marshall’s Sam B. Hall Jr. Federal Building and United States Courthouse.

Robin Y. Richardson is an award winning print journalist, serving as the county government and courts reporter. She earned her journalism degree from TSU and master's from LSUS. She is the proud mother of one daughter.

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