Crystal Lagoons US Corp v. Cloward H2o

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: Crystal Lagoons U.S. Corp. (Delaware/Florida) and Crystal Lagoons Technologies Inc. (Delaware)
  • Defendant: Cloward H2O LLC (Delaware/Utah)
  • Plaintiff’s Counsel: Traskbritt, P.C.; Merchant & Gould P.C.
• Case Identification: 2:19-cv-00796, D. Utah, 11/16/2020
• Venue Allegations: Venue is alleged to be proper in the District of Utah as Defendant Cloward H2O resides in the district and maintains its principal place of business there.
• Core Dispute: Plaintiff alleges that Defendant’s design and construction of the Hard Rock Lagoon in Hollywood, Florida infringes three patents related to the structure, water maintenance processes, and localized disinfection systems for large-scale, artificial recreational water bodies.
• Technical Context: The technology at issue facilitates the construction and operation of very large, man-made lagoons with high water clarity, aiming to replicate the aesthetics of tropical seas at a significantly lower cost than conventional swimming pool technologies.
• Key Procedural History: The filing is a Third Amended Complaint. The complaint alleges that Defendant admitted to infringing the '514 Patent in a meeting on October 1, 2019. It also references Defendant's prior, unsuccessful motions to dismiss and for summary judgment, suggesting previous disputes over the meaning of key patent terms.

Case Timeline

Date	Event
2006-11-21	Earliest Priority Date for ’514 and ’822 Patents
2011-11-22	U.S. Patent No. 8,062,514 Issues
2012-12-19	Earliest Priority Date for ’520 Patent
2014-06-17	U.S. Patent No. 8,753,520 Issues
2017-07-18	U.S. Patent No. 9,708,822 Issues
2019-10-01	Meeting where Defendant allegedly admitted infringement
2020-11-16	Third Amended Complaint Filed

II. Technology and Patent(s)-in-Suit Analysis

U.S. Patent No. 8,062,514 - "Structure to contain a large water body of at least 15,000 m³," Issued November 22, 2011

The Invention Explained

• Problem Addressed: The patent addresses the prohibitive cost and technical difficulty of building and maintaining massive recreational water bodies using conventional swimming pool construction techniques, which rely on large concrete shells and high-volume, energy-intensive filtration systems (Compl. ¶¶ 35-38; ’514 Patent, col. 3:56-62).
• The Patented Solution: The invention proposes a novel structure for large lagoons that replaces a costly concrete shell with a more economical low-permeability base (e.g., clay) covered by a non-porous plastic liner. This structural approach is combined with a unique water-clearing system where surface impurities are removed by skimmers and sunken impurities are removed by a mobile suction device, a combination that obviates the need for traditional filtration ('514 Patent, Abstract & col. 9:27-43).
• Technical Importance: This technology created a new, economically viable method for developing large-scale, artificial lagoons with high aesthetic quality, enabling a new category of real estate and recreational amenity (Compl. ¶¶ 39, 41).

Key Claims at a Glance

• The complaint asserts independent claim 1 ('514 Patent, col. 10:20-44; Compl. ¶ 21).
• The essential elements of Claim 1 are:
  • A structure to contain a water body larger than 15,000 m³ for recreational use.
  • The structure includes a bottom and walls covered with a plastic liner made of a non-porous, cleanable material.
  • The structure’s depth is about 0.5 meters or higher.
  • The structure includes a system of skimmers for removing surface impurities and oils.
  • The structure includes a fresh water feeding pipe system that displaces surface water toward the skimmers.
  • The structure includes a pumping system connected to a moveable suction device for cleaning the plastic liner.

U.S. Patent No. 9,708,822 - "Process to maintain large clean recreational bodies of water," Issued July 18, 2017

The Invention Explained

• Problem Addressed: The patent confronts the challenge of maintaining excellent water quality (low turbidity, high clarity) in very large, open-air water bodies without relying on expensive, full-volume filtration systems typical of smaller swimming pools ('822 Patent, col. 1:36-50, col. 2:50-59).
• The Patented Solution: The invention claims a multi-step water treatment process that replaces traditional filtration. The process involves controlling the water's pH and oxidation-reduction potential (ORP), periodically adding a flocculant to cause suspended particles to sink, and then physically removing the settled sediment from the bottom with a movable suction device ('822 Patent, Abstract & col. 7:3-22). A key feature is that this is done without traditional filtration.
• Technical Importance: This process offers a low-energy and low-chemical method for maintaining water quality in massive lagoons, which is critical for their economic and operational viability (Compl. ¶ 40).

Key Claims at a Glance

• The complaint asserts independent claim 1 ('822 Patent, col. 20:41-50; Compl. ¶ 30).
• The essential elements of Claim 1 are:
  • A process to maintain a water body (>15,000 m³) in a structure with a bottom, walls, and skimmers.
  • Maintaining the water's pH between 5 and 9.
  • Adding an oxidizing agent to maintain an ORP of at least 600 mV for at least 4 hours within a 48-hour cycle.
  • Adding a flocculating agent (0.02-1.0 ppm) at least once every 6 days to precipitate impurities.
  • Removing the precipitated impurities from the bottom with a movable suction device.
  • Feeding inlet water to displace surface water toward the skimmers.
  • A negative limitation: the process is performed without traditional filtration, which is defined as filtering the entire volume of water once or more in 24 hours.

Multi-Patent Capsule: U.S. Patent No. 8,753,520 - "Localized disinfection system for large water bodies," Issued June 17, 2014

• Technology Synopsis: This patent describes a method for ensuring microbiological safety in specific, high-use zones of a large water body without having to treat the entire volume. The method involves identifying a recreational portion of water, defining specific zones within it, and then dispensing chemical agents to maintain a minimum ORP for a minimum period of time, where the required ORP level and duration are calculated based on the water's specific salinity and temperature ('520 Patent, Abstract; col. 8:51-64).
• Asserted Claims: The complaint asserts independent claim 1 (Compl. ¶ 32).
• Accused Features: The complaint alleges infringement through the method of operating the Hard Rock Lagoon, specifically by identifying distinct zones for different recreational purposes (e.g., swimming vs. water sports) and using chemical agents to maintain water quality in those zones (Compl. ¶¶ 32.1-32.3). The complaint references Defendant's preliminary design plans, which depict separate "Swimming Bay" and "Water Sport Lake" areas, as evidence of this infringing identification step (Compl. ¶ 32.1, citing Figure 29).

III. The Accused Instrumentality

Product Identification

• The accused instrumentalities are the Cloward Hard Rock Lagoon structure located in Hollywood, Florida, and the methods used by Defendant to design, construct, and maintain it (Compl. ¶¶ 17, 21.1, 30.1).

Functionality and Market Context

• The accused instrumentality is described as a "2.3-acre recreation lake" designed for activities such as paddle-boarding and kayaking (Compl. ¶ 51). The complaint alleges that its key functional characteristics mirror the patented technology, including construction with a plastic liner on its bottom and walls, a system of skimmers, fresh water feeding pipes, and the use of a mobile suction device for cleaning (Compl. ¶¶ 21.3-21.7). The complaint further alleges that the lagoon is maintained using a process of adding oxidizing and flocculating agents in a system that operates without effective traditional filtration (Compl. ¶¶ 30.3, 30.4, 30.7).
• The lagoon is a central feature of the Hard Rock Hollywood Expansion project (Compl. ¶ 50). The complaint alleges that Defendant Cloward H2O acted as the engineer of record, providing the designs and construction oversight that resulted in the allegedly infringing structure and its operation (Compl. ¶¶ 49-50, 56).

IV. Analysis of Infringement Allegations

’514 Patent Infringement Allegations

Claim Element (from Independent Claim 1)	Alleged Infringing Functionality	Complaint Citation	Patent Citation
A structure to contain a large water body, including a water body larger than 15,000 m³, for recreational use...	The Cloward Hard Rock Lagoon is a large recreational water body alleged to exceed the claimed size threshold.	¶21.1	col. 10:20-25
...wherein the structure includes a bottom and walls covered with a plastic liner made of a non-porous material able to be thoroughly cleaned...	The accused lagoon was allegedly constructed with a plastic liner covering the flat bottom, sloped walls, and vertical walls. Figure 13 in the complaint is provided as photographic evidence showing the liner on these surfaces.	¶21.3, ¶22.5	col. 10:28-31
...wherein the depth of the structure to the bottom is about 0.5 meters or higher...	The complaint asserts the depth is more than 0.5 meters, providing a photograph of a person in the water as evidence.	¶21.4	col. 10:31-33
...wherein the structure includes a system of skimmers for the removal of impurities and surface oils...	The accused lagoon allegedly includes skimmers for surface cleaning. Figure 16 is provided as photographic evidence.	¶21.5, ¶24.1	col. 10:33-35
...a fresh water feeding pipe system that allows entrance of fresh water and results in water removal by displacement of surface water through the skimmer system...	The accused lagoon allegedly includes pipes for feeding fresh water, which displaces surface water toward the skimmers. Figure 6 is provided as photographic evidence.	¶21.6	col. 10:35-39
...and a pumping system including a coupling means connected to a moveable suction device for cleaning the plastic liner.	The accused lagoon allegedly uses a pumping system connected to a movable suction device to clean the liner. Figure 15 shows a diver allegedly using such a device.	¶21.7, ¶25.1	col. 10:39-43

• Identified Points of Contention:
  • Scope Question: The complaint's detailed discussion of "walls" (Compl. ¶¶ 22.2-22.3) suggests a likely dispute. The question for the court will be whether the term "walls" in the context of the patent can be construed to include the large, sloped, earthen embankments of the lagoon, as the plaintiff argues, or if it is limited to more conventional, vertical structures.
  • Technical Question: A further dispute may arise from the allegation that some liner-covered walls were subsequently coated with a layer of shotcrete (Compl. ¶ 22.5). This raises the question of whether a surface with a liner underneath another material still meets the claim limitation of "walls covered with a plastic liner ... able to be thoroughly cleaned."

’822 Patent Infringement Allegations

Claim Element (from Independent Claim 1)	Alleged Infringing Functionality	Complaint Citation	Patent Citation
A process to maintain a water body... in a structure having a bottom and walls and provided with skimmers...	The allegations concern the process used at the Cloward Hard Rock Lagoon, which is described as a structure meeting these requirements.	¶30.1	col. 20:41-45
...maintaining pH of water in the water body at pH 5 to 9...	The process used at the accused lagoon allegedly maintains the pH within this range.	¶30.2	col. 20:45-46
...adding an oxidizing agent to the water to maintain an oxidation-reduction potential (ORP) of at least 600 mV for at least 4 hours within a 48 hour cycle...	The complaint alleges that calcium hypochlorite is used as an oxidizing agent, citing photographic evidence of pallets of the chemical on-site (Figure 28).	¶30.3	col. 20:46-49
...adding a flocculating agent... at a concentration of 0.02 to 1.0 ppm at a frequency of at least once every 6 days...	The process at the accused lagoon allegedly involves the addition of a flocculating agent to precipitate impurities.	¶30.4	col. 19:60-65
...removing precipitated impurities from the bottom with a movable suction device...	The accused process allegedly uses a movable suction device to clean the bottom of the lagoon, as described in the '514 patent analysis.	¶30.5	col. 19:66-67
...wherein the process is performed without traditional filtration, wherein traditional filtration comprises filtering the volume of water once or more in 24 hours.	The complaint alleges that while Defendant's plans showed numerous inlets for traditional filtration (Figure 29), the as-built lagoon lacks these features and its system operates inefficiently, necessitating supplemental filtration and thus meeting the "without traditional filtration" requirement.	¶30.7, ¶31	col. 20:48-50

• Identified Points of Contention:
  • Technical Question: The central dispute appears to be factual and technical, centered on the negative limitation "without traditional filtration." The complaint sets up a narrative that the defendant designed the lagoon to appear to use traditional filtration to evade infringement but built and operates it differently. The key question will be whether the accused system, as it actually operates, constitutes "traditional filtration" as defined by the patent. Evidence of the as-built condition versus the design plans will be critical.

V. Key Claim Terms for Construction

Term 1 (’514 Patent, Claim 1): "walls"

• Context and Importance: The infringement reading of the '514 patent depends heavily on whether the large, sloped, liner-covered embankments of the lagoon qualify as "walls." The complaint alleges these sloped surfaces are the "most important walls" for holding back water pressure (Compl. ¶ 22.2). Practitioners may focus on this term because its construction could determine whether the primary water-containment surfaces of the accused lagoon are covered by the claim.
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation: The complaint advances a dictionary definition of "wall" as a structure holding back pressure, which would include sloped earthworks (Compl. ¶ 22.2). The patent specification refers to "bottoms and walls built with low permeability materials such as clay and bentonite," which could be read to contemplate non-concrete, earthen structures ('514 Patent, col. 9:15-17).
  • Evidence for a Narrower Interpretation: A party could argue that within the patent's context, "walls" should be given a more constrained meaning, distinct from the "bottom" and implying substantially vertical, constructed elements. The patent does not provide an explicit definition to resolve this ambiguity.

Term 2 (’822 Patent, Claim 1): "without traditional filtration"

• Context and Importance: This negative limitation is the lynchpin of the infringement allegation for the '822 patent. The case may turn on whether the defendant's water treatment system, as actually operated, falls outside the patent's definition of "traditional filtration." Practitioners may focus on this term because proving the absence of a feature is a distinct evidentiary challenge, and the complaint dedicates extensive argument to this point (Compl. ¶¶ 31-35).
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation (of what is excluded): The patent provides its own definition: "wherein traditional filtration comprises filtering the volume of water once or more in 24 hours" ('822 Patent, col. 20:48-50). A plaintiff could argue that any system failing to meet this performance metric (e.g., a system that clogs or is otherwise insufficient, as alleged in Compl. ¶ 31.11) is, by definition, not "traditional filtration," meaning the process is performed "without" it.
  • Evidence for a Narrower Interpretation (of what is excluded): A defendant could argue that "traditional filtration" refers to the type of system installed, not its operational efficiency. They might argue that if their system is designed with pumps, pipes, and filter media intended for filtration, it is a "traditional filtration" system, even if it performs poorly, and therefore the negative limitation is not met. The defendant would likely point to its own design plans showing numerous inlets as evidence of this intent (Compl. ¶ 31.1).

VI. Other Allegations

• Indirect Infringement: The complaint alleges that Defendant Cloward H2O induced infringement by acting as the engineer of record. It is accused of creating and providing the technical plans and specifications for the infringing lagoon structure and water treatment systems to the project owner and contractors, with the knowledge and intent that they would build and operate the lagoon in an infringing manner (Compl. ¶¶ 62-64, 72-73, 80-81). The complaint points to Cloward's plans, which allegedly contain instructions for contractors to follow (Compl. ¶ 67).
• Willful Infringement: Willfulness is alleged based on both pre-suit and post-suit knowledge. The complaint makes the specific factual claim that Cloward representatives "acknowledged that Cloward infringed Crystal Lagoon's patents" in a meeting on October 1, 2019, well before the amended complaint was filed (Compl. ¶ 18). It further alleges that Cloward knew of the patents when it undertook its role as engineer (Compl. ¶¶ 65, 74, 82) and was put on formal notice by the filing of the lawsuit (Compl. ¶¶ 86-87).

VII. Analyst’s Conclusion: Key Questions for the Case

• A core issue will be one of definitional scope: can the claim term "walls covered with a plastic liner" in the '514 patent be construed to read on the accused lagoon's structure, which allegedly consists of large, sloped earthworks where the liner is, in some portions, covered by a secondary material like shotcrete?
• A key evidentiary question will be one of operational reality vs. design intent: for the '822 patent, does the evidence show that the accused lagoon operates "without traditional filtration" as required by the claim, or does its water treatment system, regardless of its alleged inefficiency, constitute "traditional filtration" in a manner that avoids infringement?
• The case presents a significant question of intent and willfulness: can the plaintiff substantiate its allegation of a direct, pre-suit admission of infringement, and if so, how will that affect the court's view of the defendant's conduct and potential liability for enhanced damages?