SOURCE: Sheppard Mullin Richter & Hampton LLP

April 18, 2008 08:00 ET

Brookwood Companies, Inc., a Subsidiary of Hallwood Group Inc., Is Sued by Nextec Applications for Infringement of Five of Its Patents; Nextec Represented by Sheppard Mullin

NEW YORK, NY--(Marketwire - April 18, 2008) - On August 2, 2007 Nextec Applications Inc. ("Nextec") filed suit in the United States District Court for the Southern District of NY, against Brookwood Companies, Inc. ("Brookwood"), a fully owned subsidiary of Hallwood Group, Inc. ("Hallwood") (AMEX: HWG), and, according to Hallwood's 2007 form 10-K, Hallwood "derives substantially all of its operating revenues from the textile activities of its Brookwood subsidiary." Nextec's legal action arises under the patent laws of the United States and alleges that Brookwood has and continues to, with prior notice and knowledge of Nextec's patent rights, intentionally and willfully infringed on numerous patents owned by Nextec. Nextec is represented by Sheppard Mullin Richter and Hampton LLP.

Nextec's claims in this action allege willful infringement by a number of fabrics produced by Brookwood, including those fabrics that make up two of the seven layers that make up the U.S. Army's Gen III ECWCS (Extended Cold Weather Clothing Systems) program. The Gen III ECWCS is the 3rd generation of the Army's ECWCS, and according to ADS, Inc. ("ADS"), the prime vendor for the Gen III ECWCS program, "If all options are exercised the total contract value could exceed $1.1 billion." Nextec is seeking full damages for infringement of each of the patents-in-suit, enhancement of damages for willful infringement for each of the patents in suit, a permanent injunction prohibiting further infringement, and other relief as may be determined by a jury or a court of competent jurisdiction. Willful infringement of U.S. patents carries with it the right for a plaintiff to seek treble damages.

Nextec is a technology-based fabric manufacturer and licensor of its technology. Nextec's patented technology relates to performance fabrics and products made therefrom, that are water resistant, have low absorption, are breathable and durable. Nextec's fabrics were the only fabrics fully field tested by the U.S. Army as part of the Army's research and development for the Gen III ECWCS layers 5 and 7, and were the only fabric for layers 5 and 7 highlighted by ADS in its press release announcing that it had been awarded the Gen III ECWCS contract.

Peter Santoro, Nextec's Co-CEO, stated, "Nextec, its owners at General Electric, and all our other partners, have invested over $70 million in R&D and in developing Nextec's technology based business. Nextec has worked closely with the U.S. Military in the development of the Gen III program, and view this as a significant business opportunity. As we have successfully done in all cases in the past, we will vigorously defend Nextec's patents and its business opportunities and will hold all parties, at all levels in a supply chain, accountable that infringe on Nextec's patents." Section 271(a) of the federal Patent Laws, 35 U.S.C. § 271(a), provides in pertinent part:

    [W]hoever without authority makes, uses, offers to sell or sells any
    patented invention, within the United States or imports into the United
    States any patented invention during the term of the patent therefor,
    infringes the patent.

Based on U.S. patent law, all parties that use an infringing fabric at any stage in a garment manufacturing process, including its ultimate sale, would also infringe a patent holder's patents and be liable. Mr. Santoro went on to say, "I am particularly encouraged by recent developments in our litigation and I am confident that justice will prevail. And, given the value of the Gen III contract, the price of that justice could be very significant."

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    Amar Thakur