Utilx, Flowmole Sue Each Other

KENT

UTILX Corp. and FlowMole Partners filed suit against each other yesterday, in a multimillion dollar dispute over royalties.

FlowMole filed a $10 million suit against UTILX in King County Superior Court yesterday afternoon. The research and development limited partnership claims UTILX refuses to pay royalties on the Vector I system, used to drill holes and install underground utilities.

Knowing FlowMole was filing the suit, UTILX yesterday morning filed its own counter suit in the same court.

UTILX, based here, wants the court to rule that the company does not have to pay FlowMole a 6 percent royalty on the Vector I drilling system. UTILX has been paying FlowMole about $2.5 million-a-year in royalties on technology that FlowMole originally developed.

UTILX does not dispute the continued payment of those royalties, but claims that Vector I uses technology developed exclusively by UTILX.

FlowMole says UTILX had offered a $6.8 million buyout of all future royalties on FlowMole technology, but FlowMole declined the offer.

The two sides were also unable to settle the Vector I royalty issue, so UTILX says it decided to sue.

"We suggested we resolve our dispute with binding arbitration or mediation, but haven't received much cooperation," says Charles Reilly, UTILX's chief financial officer. "Our only alternative is to litigate."

James O'Connor, treasurer of Kent-based Flow Industries, FlowMole's general partner, says, "We understand that UTILX management is under pressure to improve earnings, but it cannot be accomplished by breaking agreements with our partners."