Chep v. Alliance Automation LLC

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: CHEP Ltd (New York/Delaware/Georgia) and CHEP Technology Pty Limited (Australia)
  • Defendant: Alliance Automation, LLC (Ohio)
  • Plaintiff's Counsel: Perilla Knox & Hildebrandt LLP
• Case Identification: 6:25-cv-00752, M.D. Fla., 10/14/2025
• Venue Allegations: Plaintiff alleges venue is proper based on a forum selection clause in a "Participation Agreement" between the parties designating state and federal courts in Orange County, Florida, as the exclusive venue. Venue is also alleged based on Defendant's business transactions and alleged harm caused within the district.
• Core Dispute: Plaintiffs allege that Defendant's "PalletAI" automated pallet inspection system infringes three patents related to automated pallet inspection, analysis, and repair technology.
• Technical Context: The technology at issue involves the use of machine vision, robotics, and software to automate the inspection and processing of wooden shipping pallets, a crucial function in the global logistics and supply chain industry.
• Key Procedural History: The complaint describes a long-standing business relationship where Defendant was a preferred supplier for Plaintiff, integrating Plaintiff's own patented "ADI" technology. The complaint alleges that after Plaintiff sent a notice letter in 2022 regarding a prior product ("iPallet"), Defendant acknowledged infringement of one of the patents-in-suit and agreed to stop selling it, only to later partner with a third party (IVISYS) to market the currently accused "PalletAI" system.

Case Timeline

Date	Event
2002-12-10	'668 and '976 Patents Priority Date
2003-12-19	'360 Patent Priority Date
2008	Defendant Alliance Automation, LLC formed
2010-08-03	'668 Patent Issued
2013	Confidentiality agreement executed between CHEP and Alliance
2014-11-11	'360 Patent Issued
2014-12-30	'976 Patent Issued
2019-12-31	Master Services Agreement between parties' affiliates executed
2022-12-20	CHEP sends notice letter to Alliance regarding "iPallet" system
2023-02-20	Alliance CEO allegedly acknowledges infringement of '976 Patent by "iPallet"
2023-12-01	Alliance announces partnership with IVISYS to sell PalletAI system
2024-03-01	Article published regarding PalletAI installation at Niagara Pallet
2024-03-23	IVISYS press release on PalletAI order from iGPS in Orlando, FL
2024-07-25	Participation Agreement between CHEP and Alliance executed
2025-10-14	First Amended Complaint Filed

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

U.S. Patent No. 7,765,668 - "Automated Pallet Inspection and Repair" (Issued Aug. 3, 2010)

The Invention Explained

• Problem Addressed: The patent's background describes traditional pallet repair as a manual process requiring human handling and inspection, which is inefficient and inconsistent '668 Patent, col. 1:30-36 Plaintiffs echo this in the complaint, highlighting that manual processes are time-consuming, costly, error-prone, and raise safety concerns Compl. ¶¶21-22
• The Patented Solution: The invention is an automated robotic work cell for inspecting and repairing pallets '668 Patent, col. 2:28-32 A robot arm transports a pallet through an inspection device that creates a three-dimensional data map of the pallet's surface '668 Patent, col. 5:1-10 A processor analyzes this data to generate a "recipe of repair tasks," which is then used to control automated repair stations, such as a board removal saw or a board replacement machine '668 Patent, col. 6:4-8 '668 Patent, col. 2:41-51
• Technical Importance: The invention sought to increase the speed, consistency, and safety of pallet refurbishment, a high-volume activity critical to the logistics industry Compl. ¶¶29-30

Key Claims at a Glance

• The complaint asserts at least independent method Claim 3 Compl. ¶76
• The essential elements of Claim 3 include:
  • using a scanning device to create a three-dimensional data map of a pallet for detecting gaps and protrusions in the pallet;
  • filtering the three-dimensional data map into a two-dimensional image of on/off values by using a dynamically created height value, corresponding to a reference plane or set threshold offset above a board surface of the pallet;
  • creating a recipe of repair operations from the three-dimensional data map; and
  • transporting the pallet to at least one repair station in accordance with the recipe.
• The complaint alleges infringement of "one or more claims" of the patent Compl. ¶75

U.S. Patent No. 8,881,360 - "Software and Methods for Automated Pallet Inspection and Repair" (Issued Nov. 11, 2014)

The Invention Explained

• Problem Addressed: The patent identifies a need for a more sophisticated automated process that moves beyond a simple "repair or discard" decision. The goal is to automatically generate a specific list of required repairs that can then be executed by an automated repair station, improving on the inconsistency of human repairers '360 Patent, col. 2:5-15
• The Patented Solution: The patent describes a software-driven method where an inspection station uses a laser and camera to generate a stream of three-dimensional points representing the pallet's surface '360 Patent, col. 4:21-24 An analysis system processes this data by filtering it, identifying individual pallet elements (like boards and bearers), determining the pallet's overall design, and comparing each element against criteria from a database to generate a specific "list of repairs" '360 Patent, abstract '360 Patent, col. 3:61-67
• Technical Importance: This invention provides the analytical framework to translate raw 3D scan data into a specific, actionable repair plan, enabling a more intelligent and fully automated repair cycle Compl. ¶¶23-25

Key Claims at a Glance

• The complaint asserts at least independent method Claim 9 Compl. ¶117
• The essential elements of Claim 9 include:
  • operating at least one laser to direct light toward a pallet;
  • operating at least one camera to collect the reflected light and generate three-dimensional points with x, y, and z coordinates;
  • analyzing the reflected light by performing a series of steps:
    • (i) filtering the points to obtain a top surface geometry by discarding points below a z-coordinate threshold;
    • (ii) identifying the type and number of each element based on the topography;
    • (iii) determining a pallet design from the type and number of each element; and
    • (iv) comparing each element of the pallet to a database to generate a list of repairs.
• The complaint alleges infringement of "one or more claims" of the patent Compl. ¶116

U.S. Patent No. 8,918,976 - "Automated Digital Inspection and Associated Methods" (Issued Dec. 30, 2014)

Technology Synopsis

This patent describes an automated pallet inspection station comprising a frame, a transport system (e.g., a conveyor), and at least one "pallet feature sensing head" '976 Patent, abstract The invention specifically discloses both a downward-looking sensing head to inspect the pallet's top surface and an upward-looking sensing head to inspect its bottom surface, allowing for a more comprehensive inspection '976 Patent, abstract The system filters the generated 3D data into a 2D image for analysis '976 Patent, col. 5:1-10

Asserted Claims

At least independent apparatus Claim 1 Compl. ¶174

Accused Features

The complaint alleges that the PalletAI system, with its physical frame, conveyor belt transport system, and camera-and-laser sensing heads, embodies the claimed inspection station Compl. ¶¶181-199

III. The Accused Instrumentality

Product Identification

The "PalletAI" pallet inspection system, which Defendant Alliance Automation allegedly markets, sells, and installs in North America through an exclusive partnership with IVISYS AB Compl. ¶53 Compl. ¶59

Functionality and Market Context

The complaint alleges that PalletAI is an automated system that uses a combination of cameras, lasers, and tailored illumination to scan and inspect pallets Compl. ¶57 It is marketed as being capable of detecting attributes such as dimensions, component alignment, cracks, protruding nails, and material loss Compl. ¶57 The system includes a graphical user interface (GUI) that displays 2D images of the scanned pallet and identified defects Compl. ¶58 The complaint alleges that Defendant sells and integrates this system for pallet refurbishment companies, including Niagara Pallet and iGPS, positioning it as a direct competitor to Plaintiffs' technology Compl. ¶61 Compl. ¶63 A marketing image from Defendant's website shows the PalletAI system as a central inspection unit with attached conveyor rollers Compl. ¶83

IV. Analysis of Infringement Allegations

'668 Patent Infringement Allegations

Claim Element (from Independent Claim 3)	Alleged Infringing Functionality	Complaint Citation	Patent Citation
using a scanning device to create a three-dimensional data map of a pallet for detecting gaps and protrusions in the pallet	The PalletAI system allegedly uses a machine vision system with cameras and lasers to collect 3D data and detect dimensional accuracy, gaps, and protrusions Compl. ¶¶85-88 An image from the IVISYS website shows a 3D point-cloud representation of a pallet, which the complaint alleges is generated by the accused system Compl. ¶95	¶¶85-95	col. 4:60-67
filtering the three-dimensional data map into a two-dimensional image of on/off values by using a dynamically created height value, corresponding to a reference plane or set threshold offset above a board surface of the pallet	The complaint alleges that the PalletAI system transforms the collected 3D data into a 2D image for display on a GUI, which constitutes the claimed filtering Compl. ¶¶97-103 A video provided by the defendant allegedly shows this GUI in operation Compl. ¶101	¶¶97-103	col. 5:1-5
creating a recipe of repair operations from the three-dimensional data map	The PalletAI system is alleged to be capable of identifying specific repair requirements and generating reports that list defects, which Plaintiffs contend is equivalent to creating a "recipe of repair operations" Compl. ¶¶105-107	¶¶105-107	col. 6:6-8
transporting the pallet to at least one repair station in accordance with the recipe	The complaint alleges that the PalletAI system is advertised as part of a "sort and repair system" that includes conveyors to transport pallets to different stations based on the inspection results Compl. ¶¶109-111	¶¶109-111	col. 2:41-51

• Identified Points of Contention:
  • Scope Questions: A central dispute may be whether the accused system, marketed for "inspection, rejection and sorting" Compl. ¶81, performs a "method of automated pallet repair" as required by the claim's preamble. The definition of "creating a recipe of repair operations" will be critical; the court will have to determine if identifying and sorting defects is sufficient to meet this limitation, or if it requires generating a more detailed set of machine-executable instructions for specific repair tools.
  • Technical Questions: The complaint alleges the PalletAI system can be "fully integrated into your existing sort and repair lines" Compl. ¶107 A factual question will be what level of integration and instruction the PalletAI system actually provides to downstream equipment and whether this functionality meets the "recipe" and "transporting...in accordance with the recipe" limitations.

'360 Patent Infringement Allegations

Claim Element (from Independent Claim 9)	Alleged Infringing Functionality	Complaint Citation	Patent Citation
operating at least one laser to direct light toward a pallet... [and] operating at least one camera to collect the light reflected from the pallet, and generating three-dimensional points... with each point having an x-, a y-, and a z-coordinate	The PalletAI system is alleged to use a combination of lasers and cameras to inspect pallets and generate 3D data, detecting "dimensional accuracy" in length, width, and height, which implies the generation of points with x, y, and z coordinates (Compl. ¶¶125-141).	¶¶126-141	col. 4:21-24
analyzing the reflected light based on... (i) filtering the three-dimensional points to obtain a top surface geometry and topography by discarding points having a z-coordinate below a threshold	The complaint alleges the PalletAI system analyzes the top surface of pallets and transforms the 3D data map by discarding points with a z-coordinate below a threshold to obtain the top surface geometry (Compl. ¶147; Compl. ¶148; Compl. ¶149; Compl. ¶150; Compl. ¶151; Compl. ¶152; Compl. ¶153; Compl. ¶154; Compl. ¶155).	¶¶147-151	col. 4:35-39
(ii) identifying a type and number of each element based on the top surface geometry and topography	The PalletAI system allegedly analyzes individual boards and other elements on the pallet's top surface, as shown in marketing materials listing inspection areas like "Length and width individual board" Compl. ¶¶156-159 Compl. ¶149	¶¶156-159	col. 2:58-61
(iii) determining a pallet design from the type and number of each element	The complaint alleges the system can "identify pallet size, color, condition" and detects the pallet type in real time on its GUI, which Plaintiffs map to the claimed step of "determining a pallet design" Compl. ¶¶160-163	¶¶160-163	col. 3:63-64
(iv) comparing each element of the pallet to a database to generate a list of repairs	The accused system allegedly compares inspected elements against a set of parameters or thresholds to determine if repairs are needed and can generate a report listing defects, which is alleged to be the claimed comparison to a database Compl. ¶¶164-168	¶¶164-168	col. 3:64-67

• Identified Points of Contention:
  • Scope Questions: The term "analyzing... based on the following" introduces a specific, multi-step sequence. A key question will be whether the accused system's use of "Artificial Intelligence" and "26 Neural Networks" Compl. ¶93 performs this exact sequence of filtering, identifying, determining design, and comparing, or if it uses a different, holistic analytical method not contemplated by the claim.
  • Technical Questions: The court will need to examine the actual software architecture of the PalletAI system. Does it perform a granular, element-by-element comparison against a structured "database" of parameters, as the claim requires, or does its AI model make a classification decision (e.g., "damaged board") through a "black box" process that does not map onto the claimed steps?

V. Key Claim Terms for Construction

For the '668 Patent:

• The Term: "recipe of repair operations" (Claim 3)
• Context and Importance: This term is central to whether the accused system, which primarily inspects and sorts, can be found to practice a method of "automated pallet repair." The infringement case for the '668 patent may succeed or fail on the construction of this term. Practitioners may focus on this term because the accused product is primarily an inspection/sorting system, and its ability to generate instructions for a separate repair system will be highly scrutinized.
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation: The specification states that after analysis, "the system generates a recipe of repair tasks for machine control within the repair cell" '668 Patent, col. 6:6-8 This could be read broadly to mean any set of data that informs downstream machine control, such as a simple list of defects and their locations.
  • Evidence for a Narrower Interpretation: The detailed description describes specific repair stations, such as a "board removal saw" and a "board replacement machine" ('668 Patent, col. 2:44-51). This context may suggest that a "recipe" must contain specific, executable instructions tailored for such automated tools, rather than just a list of identified flaws.

For the '360 Patent:

• The Term: "comparing each element of the pallet to a database" (Claim 9)
• Context and Importance: The complaint alleges the accused system uses AI and neural networks. This claim term's construction will determine if that AI-based analysis is equivalent to the more structured, procedural method recited in the claim. The viability of the infringement allegation for the '360 patent depends on whether an AI's function can be characterized as this specific step.
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation: The patent's overall purpose is to automate the decision-making process '360 Patent, col. 3:1-12 One could argue that any automated system that takes element data as input and produces a repair decision as output is functionally "comparing" that data to an underlying set of rules, which constitutes a "database" regardless of its software implementation.
  • Evidence for a Narrower Interpretation: The specification outlines a very structured, sequential analysis in Table 1, including steps like "Board arrays are checked for completeness" and "Pallet quality criteria are loaded from the database" '360 Patent, col. 5:30-65, Table 1 This procedural description may support a narrower construction requiring a literal, explicit comparison of data for each discrete element against a formal database, a process potentially different from a neural network's pattern recognition.

VI. Other Allegations

• Indirect Infringement: While no separate count for indirect infringement is pleaded, the complaint seeks to enjoin Defendant from "inducing others to directly infringe" Compl. p. 58, ¶E The factual basis for this is found in allegations that Alliance "sells," "installs," and "supports" the PalletAI system for customers like Niagara Pallet and iGPS, who then operate the system, thereby directly infringing the asserted method claims Compl. ¶59 Compl. ¶61-62 Compl. ¶64
• Willful Infringement: The complaint alleges willful infringement for all three patents Compl. ¶114 Compl. ¶171 Compl. ¶210 The allegations are based on the parties' "over 15 years" business relationship, during which Alliance had knowledge of and worked with CHEP's ADI technology Compl. ¶41 More specifically, the complaint alleges that CHEP sent Alliance a notice letter in December 2022 regarding the '976 patent and a similar product, and that Alliance's CEO responded in February 2023, allegedly acknowledging that the prior system "does seem to infringe" and stating it would no longer be offered for sale Compl. ¶¶50-52 The subsequent marketing of the PalletAI system is alleged to be deliberate and willful conduct in light of this history.

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

• A core issue will be one of definitional scope: Does the accused PalletAI system, an inspection and sorting device, perform a "method of automated pallet repair" as required by the '668 patent? This will turn on whether generating a list of defects and sorting pallets accordingly can be construed as "creating a recipe of repair operations" and "transporting the pallet...in accordance with the recipe."
• A key question will be one of methodological equivalence: Does the accused system's use of artificial intelligence and neural networks perform the specific, sequential analytical method claimed in the '360 patent-namely, filtering points, identifying elements, determining a design, and then "comparing each element of the pallet to a database"-or does the AI-driven approach represent a fundamentally different, non-infringing technical pathway?
• A significant factual dispute will concern willfulness and intent: Given the parties' extensive prior relationship, Defendant's alleged access to Plaintiffs' technology, and the alleged admission of infringement regarding a prior, similar system, the court will have to weigh whether Defendant's subsequent marketing of the PalletAI system constitutes objective recklessness sufficient to support a finding of willful infringement.