Tuesday, November 29, 2011

Dear Trademark Owners, Don't Wait 4 Years to Assert Your Unfair Competition Claims

Franchisor Western Sizzlin had a franchisee in Kissimmee from 1995 through 2004.  The location was taken over by Pinnacle Business Partners ("PBP").  While PBP did make royalty payments to Western Sizzlin in 2005, the parties were unable to come to an agreement, and PBP declined to sign a franchise agreement.  Western Sizzlin demanded PBP remove its "Sizzlin Grill" signs at that time due to their similarity to Western Sizzlin's "Western Sizzlin" trademarks.  

Four years later, in November 2009, Western Sizzlin visited the Kissimmee location and saw the signs and decor were the same.  Western Sizzlin demanded royalties and that PBP cease its usage.  Western Sizzlin then sued for trademark infringement as well as unfair competition, unjust enrichment, and violation of the Florida Deceptive and Unfair Trade Practices Act.  PBP sought summary judgment of the unfair competition, unjust enrichment, and FDUTPA claims as time barred.  Specifically, each of those claims has a four-year statute of limitations, and Western Sizzlin did not sue until 2010 -- five years after it knew of the alleged violations.  Western Sizzlin responded by arguing that there was a dispute as to how much knowledge Western Sizzlin had as to PBP's alleged violations in 2006.  But Western Sizzlin did not offer evidence to support this argument.

As its second argument, Western Sizzlin explained that a PBP representative previously assured Western Sizzlin that PBP would change the signage, but Western Sizzlin did not discover until November 2009 that PBP hadn't.  Thus, PBP should be equitably estopped from asserting the statute of limitations.  The Court did not agree:
Under Florida law, equitable estoppel arises when one party lulls another party into a disadvantageous legal position.  Major League Baseball v. Morsani, 790 So. 2d 1071, 1076 (Fla.2001).  “Equitable estoppel presupposes a legal shortcoming in a party’s case that is directly attributable to the opposing party’s misconduct. The doctrine bars the wrongdoer from asserting that shortcoming and profiting from his or her own misconduct. Equitable estoppel thus functions as a shield, not a sword, and operates against the wrongdoer, not the victim.”  Id.

In this case, the “shortcoming” is that the Plaintiff waited more than four years after learning of the alleged violations before filing suit.  A simple assurance that the sign would be changed could in theory “lull” a party into delaying the filing of suit for the length of time needed to change – or at least remove – the sign, perhaps a few weeks in this scenario.  It would not be enough to lull a party into delaying for more than forty-eight months.  And there is no suggestion that the Defendant somehow prevented the Plaintiff from visiting the restaurant, or even just driving by it, to see if the sign had been changed.  WSC has failed to establish any grounds for the application of equitable estoppel here.
Motion for Summary Judgment granted.
Western Sizzlin Corp. v. Pinnacle Business Partners, LLC, slip op., Case No. 6:10-cv-1452 (M.D. Fla. Nov. 23, 2011) (J. Presnell)

Monday, November 28, 2011

Groupon's daily deals offer only a single price, and thus do not infringe a "plurality of customized price schedules" claim

I've written previously about the eWinWin v. Groupon patent infringement case pending in the Middle District. Essentially, eWinWin's patents (3 of them have been asserted) relate to volume pricing systems and methods in which the price of an item decreases as demand increases.  In other words, as the quantity of an item purchased increases, the price offered to all who have agreed to buy it decreases.  Exemplary of this system is Claim 1 from one of eWinWin's asserted patents (U.S. Patent No. 7,181,419):
A business transaction method, comprising:
     maintaining buyer profiles in a data storage device;
     deriving a plurality of customized price schedules for a product based on at least one buyer profile, each of the plurality of customized price schedules varying in accordance with a quantity of the product ordered from a plurality of deal rooms;
     electronically offering the product for sale in at least one of the plurality of deal rooms, the product being offered in each deal room in accordance with at least one of the plurality of price schedules; and
     displaying a listing of at least one of the plurality of deal rooms in which the product is offered when at least a subset of criteria indicated for a product search matches criteria describing the product.
The Court previously construed the underlined language to mean: 
creating two or more price schedules for a product based on information contained in at least one buyer's profile, each price schedule consisting of a list of two or more prices for the product that vary based on a quantity of the product ordered from two or more deal rooms.
Thus, to survive summary judgment, eWinWin had to offer evidence that Groupon's system created two or more price schedules for a product, and each price schedule had at least two prices.  

eWinWin looked to combine Groupon's daily deal with its Groupon Bucks to satisfy this limitation.  Groupon's daily deal provides a single discounted price for an item if a sufficient number of users sign up for the deal.  Groupon's Groupon Bucks provide users an incentive for referring new users to the Groupon system.  For instance, if you refer a user to Groupon, and that new user buys a Groupon deal, you may get 10 Groupon Bucks.  You could then use those Groupon Bucks to purchase a Groupon deal (including, perhaps, the same deal you referred your friend to).  eWinWin argued that this created 2 prices for the deal: the price your friend paid, and the price you paid (including the discount of your Groupon Bucks).  The Court was not convinced.  The price of the deal never changed -- only the method of payment did.  Furthermore, to the extent there was any price difference (which the Court concludes there was not), the difference was not related to an increase in the quantity of goods sold.  Had your friend purchased the deal without being referred by you, the same quantity of goods would have been sold, and you would have been charged the same amount as your friend.

Summary Judgment granted to Groupon on its non-infringement positions.  Only 1 claim remains -- Groupon's counterclaim that eWinWin infringes one of Groupon's patents.

eWinWin v. Groupon, slip op., Case No. 8:10-cv-2678 (M.D. Fla. Nov. 23, 2011) (J. Bucklew)

Tuesday, November 22, 2011

Noerr-Pennington Immunity and Trademark Registrations

PODS sued ABF Freight Systems on a number of trademark infringement theories.  PODS owns trademark registrations for the term "PODS", the PODS logo, and "PODS PORTABLE ON DEMAND."  In advertising its competing storage solutions, ABF uses the term "pods" throughout its website.  Additionally, ABF has purchased the "pods" keyword for advertising purposes with Google and other search engines.  In defense, ABF filed a number of counterclaims and affirmative defenses.   At issue here are some of ABF's counterclaims, and one affirmative defense.

Common Law Unfair Competition

ABF asserted as a counterclaim that PODS' lawsuit was unfair competition because PODS "has no objective or subjective basis for believing ... that consumers are likely to be confused by ABF's use of the term 'pod' or 'pods.'"  ABF relied on Ohio law for the proposition that "lawsuits implemented with the design to gain an unfair advantage over a competing business are a basis for a common law suit for unfair competition."  Problem is, as the Court recognized, Florida law requires an unfair competition claim to include two elements:
(1) deceptive or fraudulent conduct of a competitor; and
(2) likelihood of consumer confusion

ABF's reliance on Ohio law didn't cut it, so the Court dismissed this counterclaim (without prejudice, should ABF be able to assert the elements of a Florida common law unfair competition claim).

Sherman Act Violation & Noerr-Pennington Immunity

Next, ABF accused PODS of attempted monopolization in violation of the Sherman Act by registering trademarks for the "generic term" "pods" and asserting those trademarks against competitors.  PODS responded by relying on Noerr-Pennington immunity.

Generally, the First Amendment immunizes a party from liability for petitioning the governement for redress from an injury.  ThisNoerr-Pennington immunity (named after the two cases from which it derives) extends to litigation: "Engaging in litigation to seek an anticompetitive outcome from a court is First Amendment activity that is immune from antitrust liability."  Like most things in the law, there is an exception.  Namely, a sham pleading.  You are immune from liability if you file a lawsuit, except if that lawsuit is a sham pleading.  The test for whether the lawsuit is a sham pleading considers: (1) whether the pleading is objectively baseless; and (2) whether the plaintiff brought the lawsuit did so with a subjective motivation to interfere directly with the business relations of a competitor.

ABF's argument under the sham exception is generally that PODS should know the 'pods' mark is generic, and thus it shouldn't assert its registrations.  The law, however, does not see things that way.  The 'pods' trademark registrations themselves are evidence that the marks are not generic.  ABF may be able to come forward evidence that they have become generic, but until they, they are presumed otherwise.  Indeed, ABF is seeking to cancel PODS's registrations.  Until then, the lawsuit and cease-and-desist letters are not shams.  So Noerr-Pennington immunity applies, and the counterclaim must be dismissed.

Unclean Hands Affirmative Defense

PODS also asked the Court to strike ABF's affirmative defense of unclean hands.  The Court's reasoning for doing so:
In trademark infringement suits, the doctrine of unclean hands requires allegations "specifically related to the trademark which is at issue and not collateral to the trademark itself."  Immuno Vital, Inc. v. Golden Sun, Inc., 49 F. Supp. 2d 1344, 1361 (S.D. Fla. 1997); see also Coca-Cola Co. v. Howard Johnson Co., 386 F. Supp. 330, 335 (N.D. Ga. 1974) (a court in equity may "deny the enforcement of a trademark to one who has used the trademark, itself, as the vehicle of unlawful antitrust activities").  "Merely because a plaintiff has violated the antitrust laws ... does not result in 'unclean hands' on plaintiff's part."  Coca-Cola, 386 F. Supp. at 337
Taken as a whole, ABF's allegations in support of its affirmative defense of unclean hands are intertwined with the allegations in its counterclaims -- that PODS engaged in trademark misuse and violated unfair competition and antitrust laws by sending cease-and-desist letters and filing suit.  Because those activities are not specifically related to the trademark itself, ABF has not properly asserted an unclean hands defense.
Additionally, Noerr-Pennington immunity protected PODS against this affirmative defense.

Motion to dismiss counterclaims and strike affirmative defense granted.

PODS Enterprises, Inc. v. ABF Freight Systems, Inc., Case No. 8:11-cv-84 (M.D. Fla. Oct. 17, 2011) (J. Covington)

Monday, November 21, 2011

Vague Trade Dress Allegations Don't Survive Motion to Dismiss

Best of Everything of Southwest Florida ("BOE") claims Simply the Best ("STB") is knocking off its retail stores.  As one of its eight claims of violations of the Lanham Act, BOE accuses STB of violating BOE's trade dress.  STB sought dismissal of this count, arguing that BOE didn't adequately disclose what trade dress was being knocked off.  Plaintiff described its trade dress as follows:
Plaintiff's Trade Dress includes, but is not limited to the commercial impression, and overall look and feel of Plaintiff's stores, the unique and highly distinctive combination of separate aspects of the same, the presentation of Plaintiff's goods and the placement of its trade dress in such a a manner which creates a remarkably memorable and commercially pleasing shopping experience for Plaintiff's customers, its prospective customers and the consuming public.
The Court agreed with Defendant, finding this allegation "long on vague descriptions and short on facts."   This count was dismissed without prejudice.  Plaintiff has since filed an amended complaint with more details on the trade dress as reproduced below:
Plaintiff’s Trade Dress includes various combinations of the following features and  is presented so as to be a designation of origin and source identifier unique to  Plaintiff; specialized customer shopping boxes at a specially placed location in the store which are also displayed in such a way as to create a further visual effect; a ceiling to floor design and configuration which incorporates and is consistent with the other visual elements of the proprietary store; a certain musical arrangement collection and/or pattern played from a layout of sources that are proprietary; distinctively colored and patterned carpeting; strategically placed and shaped tables situated throughout the store in a proprietary pattern which takes into account Plaintiff’s innovative consumer purchasing data and Plaintiff’s proprietary collection of said data; textile table covers of a certain nonfunctional pattern and texture which are also used in an innovative relationship to the goods so displayed; the arrangement and layout of the goods; the unique contrast of fabric textures and colors used to cast display backgrounds through the store; a unique pattern of mirror displays and shapes; a specific and nonfunctional use of botantical presentations combined into various goods displays;  sign color, sign shapes, and location of signs and designations throughout and on the store, as well as in advertising and related displays; various color schemes; a color scheme of certain blue pantones throughout the store and in signage and advertising; and sales and inventory techniques which are believed by Plaintiff to be unique and which combine with the visual features as a part of the overall customer experience and impression. 
Defendant has answered that amended complaint.

Defendant also sought dismissal of the claim against an individually named defendant.  That allegation was based in part on a facebook posting which stated:
Simply the Best is modeled after a store called The Best of Everything where Weinzimmer and the Slottjes had spent time shopping while vacationing in Florida.  Upon returning to New York, they decided to open a similar store, even though Weinzimmer admits "we really didn't know much about the jewelry business," she says.
Recognizing that "an individual may be held liable for Lanham Act violations if she has actively caused the infringement as a moving, conscious force," the Court refused to dismiss this claim, as the discovery process would reveal whether or not she was a moving, conscious force behind the alleged infringement.

Motion to dismiss, granted in part.
Best of Everything of Southwest Florida, Inc. v. Simply the Best, LLC, Case No. 8:11-cv-1090 (Oct. 6, 2011) (J. Bucklew)

Friday, September 30, 2011

Court won't perform claim construction at motion to dismiss stage

Ecolab sued International Chemical Corp. for infringement of U.S. Patent No. 7,741,257.  Ecolab argues that ICC directly infringes the '257 patent, induces third parties to infringe the '257 patent, and contributes to other's infringement of the '257 patent.  ICC asked the court to dismiss the vicarious theories of liability because Ecolab did not sufficiently plead these claims.

First, the Court acknowledged a difference in the districts as to whether or not an indirect infringement claim needs more allegations than those listed in the Form 18 model for direct infringement claims.  Some courts hold that this level of pleading is enough, while others require the plaintiff to satisfy Twombly and Iqbal's plausibility requirements.  The Court did not pick a side, finding that Ecolab had met the mark either way.

Inducement of Infringement

To plead an induced infringement claim, the plaintiff must show: (1) there has been a direct infringement; and (2) the defendant knowingly induced infringement and specifically intended to encourage another's infringement.  ICC argued that Ecolab hadn't satisfied the latter, and pointed to Ecolab's instruction's (which were attached to the complaint).  According to ICC, these instructions "do not teach how to practice any of the claims of the patents-in-suit."  But ICC disregarded Ecolab's complaint, which alleged that ICC had instructed its customers in the manner specified by the '257 patent.  As such, for pleading purposes, the claim survived.

ICC also argue that, in order to infringe, one needed to use a particular type of nozzle.  ICC supported this argument by citing to the file history of the '257 Patent.  The Court refused to indulge in claim construction issues, noting that doing so would be premature.

Contributory Infringement

To plead a contributory infringement claim, the plaintiff must show: (1) there has been a direct infringement; (2) defendant knew the combination for which its components were especially made was both patented and infringing; and (3) defendant's components have no substantial non-infringing uses.   ICC argued that Ecolab's complaint didn't have enough facts.  The Court disagreed, noting that detailed factual allegations are not necessary to plausibly allege a claim for contributory infringement.  Even without detailed factual allegations, the complaint supported a reasonable inference for liability.

Motion to dismiss denied.

Ecolab, Inc. v. International Chemical Corp., slip op., Case No. 6:10-cv-1208 (Sept. 27, 2011) (J. Conway)

Thursday, September 15, 2011

Simple knowledge of a prior art reference not disclosed to the PTO is not sufficient to plead inequitable conduct

Graphic Packaging International sued C.W. Zumbiel Co. for patent infringement related to a number of cardboard carton packages.  As part of its defense,  CW argued that one of the patents, U.S. Pat. No. 7,134,551, was not enforceable due to GPI's inequitable conduct in prosecuting the '551 Patent with the Patent and Trademark Office.  Specifically, GPI's counsel was aware of certain prior art references, but did not tell the PTO about them.

CW's counterclaim included relatively detailed allegations, including a claim chart, listing how 2 of the 3 the withheld references impacted the patentability of the '551 Patent.  GPI responded by asking the Court to dismiss the counterclaim (and strike certain allegations).

Inequitable conduct pleading requirements

While a claim for relief must only contain a "short and plain statement of the claim showing that the pleader is entitled to relief," inequitable conduct claims must satisfy Rule 9(b)'s heightened pleading requirement.  The Court explained the law:
In [Exergen v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009)], the U.S. Court of Appeals for the Federal Circuit directed  that,  “in  pleading  inequitable conduct  in  patent cases, [Federal  Rule  of Civil Procedure] 9(b) requires identification of the specific who, what, when, where, and how of the material misrepresentation or omission committed before the PTO.”  575 F.3d at 1327. In addition, the Exergen Court identified the pleading requirements for the “conditions of mind” relevant to an inequitable conduct claim, i.e., “(1) knowledge of the withheld material information  or  of the falsity  of the material misrepresentation, and (2)  specific intent to deceive the PTO.”  Id. While knowledge and intent may be averred generally, according to the Federal Circuit, pleadings must allege sufficient underlying facts from which a court may reasonably infer that a party acted with the requisite state of mind.  Id
CW's allegations of inequitable conduct related to 3 prior art references not disclosed to the PTO during prosecution.  CW's claim chart only discussed 2 of those references.  As to the third, the Court found that CW had not sufficiently plead which claim limitations the withheld reference concerned, where in the withheld reference the material information was located, and why the withheld reference was material. 

As to the other 2 references, which included a relatively detailed claim chart, the Court still found the allegations fell short because they did not give rise to a reasonable inference of scienter.
The Federal Circuit makes clear in Exergen that a reasonable inference of scienter arises only when there are factual allegations which particularly point out an individual who owed a duty of disclosure to the PTO, who knew the specific information in the reference that is alleged to be material, and who did not disclose the specific information to the PTO. 575 F.3d at 1330.  Defendant’s allegations do point to three individuals who listed the ’671 Publication and the ’991 Patent on various IDSs submitted to the PTO. (Doc. No. 55, ¶¶ 64-66, 68, 72, 74-75, 76.)  These allegations suggest that these three individuals were aware of the ’671 Publication  and the  ’991 Patent.  That is  not enough,  however.  It  is  not knowledge of a reference but rather knowledge of the material information in the reference that must be averred.  Because a “reference many be many pages long, and its various teachings may be relevant to different applications for different reasons,” the Court “cannot assume that an individual, who generally knew that a reference existed, also knew of the specific material information contained in that reference.” 575 F.3d at 1330 (emphasis in original).  Further, the “mere fact that an applicant disclosed a reference during prosecution of one application, but did not disclose it  during  prosecution of a  related  application, is insufficient to meet the threshold level of deceptive intent required to support an allegation of inequitable conduct.”  Id. at 1331.
(underlined emphasis supplied by the Court, bold emphasis supplied by me).  The closest CW came was the allegation that one of the prosecuting patent attorneys discussed one of the withheld references in response to an office action.  But this still didn't cut it:
One can draw more inferences from this allegation than from a bare recitation of omission from an  IDS,  but not many  more.  Specific  allegations  identifying  the material  information contained in a reference is needed, and none are averred here. Defendant does not identify the specific information from the ’991 Patent that was  “discussed.”  Thus, Defendant’s allegations are missing a key pleading requirement for deceptive intent.
Counterclaim dismissed.

Striking allegations from the counterclaim

GPI also asked the court to strike: (1) all allegations related to one of the withheld references because it was not actually prior art; and (2) certain affirmative defenses for failing to satisfy heightened pleading.  The Court dispensed with these quickly.

As to the first argument, the Court punted, stating that determining the reference date for an international application (the withheld reference) was "a tricky thing" and needn't be handled now.  As to the second, the Eleventh Circuit has not determined whether or not heightened pleading applied to affirmative defenses and there was split in this circuit.  Regardless, the allegations throughout the counterclaim made up for whatever shortcoming GPI complained of.  

Motion to strike denied.
Thanks Docket Navigator for bringing this case to my attention.

Graphic Packaging International, Inc. v. C.W. Zumbiel Co., slip op., Case No. 3:10-cv-891 (M.D. Fla. Sept. 12, 2011)(J. Dalton, Jr.)

Tuesday, September 13, 2011

jpg's "last modified" date is sufficient corroborating evidence to survive summary judgment on prior inventorship issue

Hurricane Shooters has sued a number of entities for infringing its plural chamber drinking cup patents.  One defendant, EMI Yoshi, claims someone else invented the cup first.  Plaintiff asked for summary judgment on this issue, arguing that Plaintiff invented first, and Defendant didn't offer enough evidence to the contrary.

To establish prior inventorship, the challenger must offer corroborating evidence.  Here, Defendant's evidence was that another person (Ted Skala) designed what appears to be the same cup patented by Plaintiff arguably before Plaintiff.  Defendants evidence consisted of Skala's testimony, and a computer forensic expert's testimony.  Plaintiff attacked the credibility of each of these pieces of evidence, but that didn't work.  Such credibility determinations are better left to the jury.

Plaintiff also attacked the reliability of the computer expert's report because the expert had simply relied on the information he had been provided by Skala.  The Court was not persuaded, and found other record evidence which sufficiently corroborated the prior inventorship theory:

Plaintiff argues that the expert report of forensic computer analyst Sharp is insufficient corroborating evidence because Sharp’s report states, in part, that he had no reason to doubt Skala’s files showing his cup design was created in October 2004.  Plaintiff contends that “[h]aving no reason to doubt Mr. Skala does not constitute corroboration of his claim.”  (Dkt. 99).  The Court disagrees with this strict interpretation.  Moreover, Sharp’s report also states that Sharp was able to locate at least two copies of the referenced image, titled “bombcup.jpg” and that both images indicate that they were last modified on October 22, 2004, which is around the same time that Skala claimed he designed the invention.   This is sufficient corroborating evidence.
So the prior inventorship issue will go to the jury.

Defendant had also asserted a lack of utility defense.  Plaintiff's request for summary judgment on that issue was also denied, as there was record evidence sufficient to send the issue to the jury.

Plaintiff's Amended Motion for Partial Summary Judgment Denied.

Hurricane Shooters, LLC v. EMI Yoshi, Inc., slip op., Case No. 8:10-cv-00762 (M.D. Fla. Sept. 8, 2011)(J. Moody)

Monday, September 12, 2011

Court declines to serve as declaratory judgment plaintiff's private counsel

United Marine Marketing Group, LLC distributes floating docks and accessories.   Jet Dock Systems and Ocean Innovations ("Defendants") manufacture and sell a number of patented dock products.  UMMG was concerned that it might infringe Defendants' "drive-on" docks.  Problem was, Defendants hadn't made such threats against UMMG (although they had sued other entities), and UMMG didn't really identify any products it was concerned it wasn't able to sell.  Rather, UMMG was asking for a declaration the components it was selling (which, potentially, could be assembled into an infringing configuration) did not themselves infringe the patents.  This does not suffice to establish subject matter jurisdiction, as this is not an actual case or controversy:
... UMMG has failed to adequately plead a “case or controversy.”  Although UMMG contends that they are involved in an “actual dispute” with Defendants concerning whether or not they can produce, and/or sell certain floating docks, UMMG fails to identify even a single dock product which they wish to produce, and/or sell.  As a result, there is nothing for a case or controversy to be about.
* * *
While UMMG identifies certain dock components which it intends to assemble into finished docks, these dock components are not at issue in this case.  Indeed, UMMG is free to sell these individual components to whoever they choose without risk of infringing Defendants’ five patents.  On the contrary, the relevant patents in the instant case relate to finished dock products, or specific configurations of components which meet the various claims contained in Defendants’ patents. 
(It's not clear here if the Court is ruling out contributory or induced theories of patent infringement, but perhaps that's a discussion for another day.)  The Court then refused to render an advisory opinion:
Plaintiff UMMG appears to be asking this Court to serve as its private counsel, asking the Court for its advice on how to design a non-infringing dock product given the particular components at UMMG’s disposal.  As federal courts only possess the authority to decide disputes which are “definite” and “concrete,” this Court must accordingly decline to dispense such advice.  Cat Tech LLC,  528 F.3d at 881; (a plaintiff cannot “obtain a declaratory judgment merely because it would like an advisory opinion on whether it would be liable for patent infringement if it were to initiate some merely contemplated activity.” (quoting Arrowhead Indus. Water, Inc. V. Ecolochem, Inc., 846 F.2d 731, 736 (Fed.Cir.1988))).   
Finally, the Court dismissed UMMG's unfair competition claims because: (1) they improperly utilize "shotgun pleading," and (2) they boil down to allegations that Defendants' asserting their patents was unfair, which was not actionable so long as the patents were valid.

Complaint dismissed.  Plaintiff allowed 20 days to replead.

United Marine Marketing Group, LLC v. Jet Dock Systems, Inc., slip op., Case No. 8:10-cv-02653 (M.D. Fla. Sept. 6, 2011) (J. Moody)

Friday, September 9, 2011

Defendant not liable for trademark infringement where plaintiff has no enforceable rights in the mark

Knights Armament Company and Optical Systems Technology, Inc. worked together for a period of time to sell night vision scopes to the U.S. government.  OSTI had the manufacturing capabilities, but needed Knights' marketing skills.  The harmonious relationship lasted for some time, but a dispute arose as to who owned the technology behind the scopes.  Knights filed an intent-to-use federal trademark application for the marks "Universal Night Sight" and "UNS."  OSTI sought cancellation and its own registrations for those same marks (which Knights opposed).  Those proceedings were stayed at the U.S. Patent and Trademark Office while the parties litigated the issues in federal court.

OSTI accused Knights of misappropriating its trade secrets and infringing its trademarks.  OSTI lost both of these issues at the trial level, and asked the Eleventh Circuit for review.

Trade Secret Statute of Limitations

The statute of limitations to bring a claim for misappropriation of a trade secret is 3 years under Florida's law.  See Fla. Stat. § 688.007.  OSTI filed its counterclaim asserting such misappropriation on December 21, 2007.  Thus, OSTI needed to learn of the misappropriation no earlier than December 21, 2004 -- otherwise the claim is time barred.  Problem is, OSTI offered the following in response to an interrogatory:
OSTI first became aware of [Knights'] intent to misappropriate OSTI's confidential information and trade secrets when [Knights] stated in a meeting that [Knights] and OSTI shared the UNS™ technology and [Maxin] stated that Knight was incorrect and that OSTI alone owned the technology.  OSTI learned through the April 21, 2003 letter from [the government] to [Knights], a copy of which . . . was emailed to OSTI on May 28, 2003[,] that [Knights] had attempted to misappropriate OSTI’s UNS™ drawings.
Further record evidence showed that OSTI had enough information that it should have been concerned, but didn't press the issue far enough.  Here is how the Court described the situation:

During 2003 and 2004, Maxin testified that OSTI had heard rumors in the marketplace (and even received anonymous tips) that [Knights] was developing a competing night vision device.  Yet OSTI or Maxin did nothing.  They did not do their due diligence.  It is incredible that, through discovery, they damningly admit, on the record, that they knew or suspected [Knights'] alleged misappropriation as early as March 2003.  In so doing, they lose on this issue.

OSTI's trade secret claim was therefore time barred, and the district court was correct to grant summary judgment to Knights on this issue.

Trademark Protection for the mark "Universal Night Sight"

Two issues needed to be addressed to resolve this issue.  First, the parties disputed ownership of the mark.  Second, Knights denied infringement.  OSTI won the battle here, but lost the war.

Ownership of a trademark goes to the senior user.  So whoever used the mark first will be considered the owner.   But prior to delving into the timing of usage, distinctiveness needed to be addressed.  Trademark protection is available to distinctive marks, which serve the purpose of identifying the source of goods or services.  The four categories of distinctiveness, in descending order of strength, are: (1) fanciful or arbitrary (i.e. Exxon for gas); (2) suggestive (i.e. drizzler for rain jackets); (3) descriptive (i.e. Tomapple for tomato-apple juice); and (4) generic (i.e. restaurant for a restaurant).  Generic marks do not get trademark protection, and descriptive marks are not protectable without establishing secondary meaning.

Here, OSTI was found to be the senior user (and thus the owner), but the mark was determined to be descriptive.  So OSTI needed to rely on secondary meaning -- the Court laid out the standard:
“A name has acquired secondary meaning when the primary significance of the term in the minds of the [consuming] public is not the product but the producer.”    Welding Servs., Inc., 509 F.3d at 1358.  The determination of whether a mark has acquired secondary meaning depends on “the length and nature of the name’s use, the nature and extent of advertising and promotion of the name, the efforts of the proprietor to promote a conscious connection between the name and the business, and the degree of actual recognition by the public that the name designates the proprietor’s product or service.”  Id.  The existence of a secondary meaning is a question of fact.  See Coach House Rest., Inc., 934 F.2d at 1560. 
OSTI first used the marks in 1999 and 2000.  Knights first used the marks in 2003.  But in the interim, 1999-2003, the products weren't clearly marked to indicate that OSTI was the producer.  In other words, consumers had no reason to associate the "Universal Night Sight" mark with OSTI's product.  Thus, it was impossible for the mark to have acquired secondary meaning in this time.  So, when Knights used the mark in 2003, it was simply using a descriptive mark that was not entitled to protection.

Decision affirmed.

Knights Armament Co. v. Optical Systems Technology, Inc., Case No. 09-14480 (11th Cir. Sept. 2, 2011)

Thursday, September 8, 2011

Personal jurisdiction for patent infringement on an out-of-state subsidiary with its own operational control? Nope.

Digitech Information Systems sued Ally Financial and Capital Auto Receivables, Inc. ("CARI") for infringement of U.S. Patent No. 7,739,180.  The '180 Patent relates to a method of selecting leases to optimize an investment portfolio.  Ally leases new and used vehicles from GM and non-GM franchised dealers.  CARI, a wholly-owned subsidiary of Ally, acts as a depositor and initial certificate holder for various asset-backed securities.  CARI is not registered in Florida, and does not do business here.  On this basis, CARI moved for dismissal for lack of personal jurisdiction.

Digitech opposed that motion, arguing that Ally's actions should be imputed to CARI for purposes of establishing personal jurisdiction.  The Court was not convinced.

General Jurisdiction

Digitech argued the Court could exercise general jurisdiction over CARI because "it is reasonable to assume that the creation and operation of CARI is a mere corporate formality."  This wasn't enough -- just being a subsidiary of a company subjected to personal jurisdiction in Florida does not necessarily extend personal jurisdiction to the sub:

“It is well settled in Florida that the mere presence of a subsidiary in Florida, without more, does not subject a non-Florida corporate parent to long-arm jurisdiction.”  Enic, PLC v. F.F. South & Co., 870 So. 2d 888, 891 (Fla. 5th DCA 2004) (citations omitted); Meier v. Sun Int’l Hotels, Ltd., 288 F.3d 1264, 1272 (11th Cir. 2002) (“Generally, a foreign parent corporation is not subject to the jurisdiction of a forum state merely because a subsidiary is doing business there.”).  However, a corporation that engages in substantial activity in Florida through a subsidiary may be subject to personal jurisdiction in FloridaUniversal Caribbean Establishment v. Bard, 543 So. 2d 447, 448 (Fla. 4th DCA 1989).  In order “[t]o determine whether a foreign corporation is liable based on a subsidiary’s substantial activity, [courts] consider the ownership of the subsidiary, the business activities of the subsidiary, and the financial relationship between the corporation and the subsidiary.” Abramson v. Walt Disney Co., 132 F. App’x 273, 275-76 (11th Cir. 2005) (citing Meier, 288 F.3d at1272-73).  
What is required for jurisdiction based on the relationship between a parent corporation and a subsidiary “is not some control but ‘operational control’ by the parent over the subsidiary.”  Gen. Cigar Holdings, Inc. v. Altadis, S.A., 205 F. Supp. 2d 1335, 1344 (S.D. Fla. 2002) (quoting State v. Am. Tobacco Co., 707 So. 2d 851, 856 (Fla. 4th DCA 1998); see also Dev. Corp. of Palm Beach v. WBC Constr., L.L.C., 925 So. 2d 1156, 1161-62 (Fla. 4th DCA 2006) (“The amount of control exercised by the parent must be high and very significant.”). 

Here, Digitech did not establish operational control by Ally over CARI.  Thus, no personal jurisdiction.

The Court next rejected Digitech's argument that CARI should be subjected to specific jurisdiction because there was not sufficient evidence to support such jurisdiction.

Motion to dismiss granted.

Digitech Information Systems, Inc. v. Ally Financial, Inc., slip op., Case No. 6:10-cv-1398 (M.D. Fla. Sept. 1, 2011)(J. Antoon)

[Note.  GrayRobinson, PA. was involved in the above-captioned matter]

Monday, July 25, 2011

Super Sack'ing Plaintiff's covenant not to sue doesn't need to include suppliers to divest court of jurisdiction

American Technology Inc. sued Volocity Micro, Inc. for patent infringement related to computer heat sinks. Defendant counterclaimed for declarations that the patent was invalid, not infringed, and not enforceable. Plaintiff responded with a covenant not to sue:
neither ATI no any successor in interest to ATI will sue Velocity Micro, Inc. ("VM") or AmericanFuture Technologies Corp. ("AFTC"), or any customer of AFTC or VM, for infringement of U.S. Patent No. 6,411,512 now or in the future (including for any possible past damages) for any products that VM or AFTC makes, has made for its business, uses, sells, offers for sale or imports into the United States now or in the future.
In light of the covenant, Plaintiff asked the court to dismiss its patent infringement claim with prejudice. Plaintiff also argued, pursuant to Super Sack Mfg. Corp. v. Chase Packaging Corp., that the Court no longer had subject matter jurisdiction to hear Defendant's counterclaims for declarations of invalidity, noninfringement, and unenforceability. Defendant opposed, arguing that the covenant not to sue did not cover its suppliers. (So, Plaintiff retains the right to assert its patent against the rest of the supply chain). Defendant further argued that by limiting the covenant to only a handful of small retainers (including Defendant), suppliers will not manufacture the heat sinks because there would only be a limited market for them.

In essence, Defendant's argument was that because Plaintiff reserved the right to sue Defendant's supply chain, this reservation served as a "restraint on [Defendant's] 'free exploitation of non-infringing goods.'" While Defendant did cite a district court that had followed this proposition, the Court here found the circumstances distinguishable:
However, in Sunshine Kids [Juvenile Prods., LLC v. Ind. Mills & Mfg., Inc., No. C10-5697BHS, 2011 WL 862038, at *5 (W.D. Wash. Mar. 9, 2011)] the court determined that the facts alleged indicated a "pattern of conduct on the part of the the declaratory judgment defendant which if established as true could cause a reasonable man to fear that he or his customers' face an infringement suit."2011 WL 862038, at *5 (quoting Grafon Corp. v. Hausermann, 602 F.2d 781, 783-84 (7th Cir. 1979)) In contrast, Defendant neither alleges facts nor otherwise demonstrates that a threat of suit against its suppliers is objectively real and immediate, as opposed to speculative.
(citing Prasco, LLC v. Medicis Pharm. Corp, 537 F.3d 1329, 1338-39 (Fed. Cir. 2008))

Plaintiff's motion to dismiss granted. Counterclaims dismissed without prejudice. Case closed.

American Technology Inc. v. Velocity Micro, Inc., slip op., Case No. 6:11-cv-109 (M.D. Fla. June 28, 2011) (J. Conway)

Friday, June 24, 2011

Want to fight over deposition dates in front of Magistrate Judge Wilson? Be warned.

Got this order via Docket Navigator this morning. I've written previously about the Advanced Cartridge v. Lexmark litigation. It appears the parties couldn't agree on when to take a deposition. So they brought that dispute in front of Magistrate Wilson. He offered a solution:
When parties cannot agree on the scheduling of a deposition, it is my practice to select a date arbitrarily, without regard to the convenience of the parties. Therefore, unless the parties can agree otherwise, the parties are directed to schedule Carter's deposition for the time period between July 1 and July 5, 2011. Further, if the parties cannot agree on a date during this five-day window, the parties are directed to conduct Carter's deposition on Tuesday, July 5, 2011, at 9 a.m. However, as I indicated, the parties are permitted, and encouraged, to select another date if they can agree on a mutually convenient day.
That's one way to spend the July 4th weekend.

The Court then rejected defendant's argument that it needed to conduct the deposition in advance of the pre-trial conference so that it could bring discovery issues to the Court's attention at the pre-trial conference:
[T]here will be no discovery issues arising from Carter's deposition addressed at the pre-trial conference, as the discovery-related motions deadline passed long ago.
Nuff said.

Advanced Cartridge Technologies, LLC v. Lexmark Internatinoal, Inc., slip op., Case No. 8:10-cv-0486 (M.D. Fla. June 22, 2011) (Mag. Wilson)

Thursday, June 23, 2011

Heard of the band Expose? 11th Circuit addresses "joint endeavors"

What does that video have to do with trademark law? It will help explain "joint endeavors," of course.

Trademark rights are generally established through use of a mark in commerce. Who, then, owns a trademark for a band? The band members? The record company who promotes the band? Expose will help answer that question.

A dispute arose between band members and various entertainment companies. One of the entertainment companies had sued the band members concerning their use of the Expose mark. Nobody had a federal registration. The Court had to determine who actually owned the mark.

The entertainment company argued that it owned the mark because its predecessor had adopted it. The Court explained the law:
Common-law trademark rights are “‘appropriated only through actual prior use in commerce.’” Planetary Motion, Inc. v. Techsplosion, Inc., 261 F.3d 1188, 1193–94 (11th Cir. 2001) (quoting Tally-Ho, Inc. v. Coast Cmty. Coll. Dist., 889 F.2d 1018, 1022 (11th Cir. 1989)). “[T]he use of a mark in commerce . . . must be sufficient to establish ownership rights for a plaintiff to recover against subsequent users under section 43(a).” Id. at 1195. Crystal bore the burden of proving its prior use.

We have applied a two-part test to determine whether a party has proved “prior use” of a mark sufficient to establish ownership: “‘[E]vidence showing, first, adoption, and, second, use in a way sufficiently public to identify or distinguish the marked goods in an appropriate segment of the public mind as those of the adopter of the mark.’” Id. (alteration in original) (footnotes omitted) (quoting New Eng. Duplicating Co. v. Mendes, 190 F.2d 415, 418 (1st Cir. 1951)). The district court was required to inquire into the “totality of the circumstances” surrounding the prior use of the mark “to determine whether such an association or notice [was] present.” Id. (internal quotation marks omitted). We have determined that a company proved prior use of a mark sufficient to establish ownership when, among other things, “the distribution” of the mark was “widespread” because the mark was accessible to anyone with access to the Internet, id. at 1196; the evidence established that “members of the targeted public actually associated the mark . . . with the [product] to which it was affixed,” id.; “the mark served to identify the source of the [product],” id. at 1197; and “other potential users of the mark had notice that the mark was in use in connection with [the product],” id.
So, who gets the rights? Band or entertainment company? It depends on who controls the quality of goods/services. If the entertainment company is controlling the quality of the recordings, then it could have rights. Here, that wasn't the case. So the entertainment company had no prior rights to the mark.

Since the entertainment company couldn't prove it had first adopted the mark, the Court needed to address the "joint endeavor" issue:
Because Crystal failed to prove that it first appropriated the Exposé mark, the district court was required to determine the owner of the mark “where prior ownership by one of several claimants cannot be established.” Bell, 640 F. Supp. at 580. The Bell court aptly described this controversy as a “case of joint endeavors.” Id. We have yet to address a trademark dispute of this type, but other courts have consistently resolved such disputes by awarding trademark rights to the claimant who controls the nature and quality of the services performed under the mark. See Robi v. Reed, 173 F.3d 736, 740 (9th Cir. 1999); Polar Music, 714 F.2d at 1571; Ligotti v. Garafolo, 562 F. Supp. 2d 204, 227 (D.N.H. 2008); Bell, 640 F. Supp. at 580; Rick v. Buchansky, 609 F. Supp. 1522, 1537–38 (S.D.N.Y. 1985).

The Bell court applied a two-step approach in this circumstance: “[T]o determine ownership in a case of this kind, a court must first identify that quality or characteristic for which the group is known by the public. It then may proceed to the second step of the ownership inquiry, namely, who controls that quality or characteristic.” Bell, 640 F. Supp. at 581 (footnotes omitted). See also Ligotti, 562 F. Supp. 2d at 217–27; 2 McCarthy, supra, § 16:45, pp. 16-85 to -86 (“Whether the service mark or name [of a performing group] identifies and distinguishes that particular performer combination or just style and quality [is] an issue of fact. . . . The issue to be resolved is whether the mark signifies personalities, or style and quality regardless of personalities.”). In Bell, the members of the band “New Edition” and the companies that had produced, recorded, and marketed their first album disputed the rights to the name of the band. The Bell court ruled that the band members owned the mark because they had first appropriated it, and alternatively they owned the mark under the “joint endeavors” test. 640 F. Supp. at 580–82. The court explained that “the quality which the mark New Edition identified was first and foremost the [band members] with their distinctive personalities and style as performers.” Id. at 582.
Here, the district court properly applied the "joint endeavors" test. The entertainment company hadn't exercised control over the band members, and hadn't taken an active role in scheduling any of the group's performances. The band members controlled the band's image, and thus they were entitled to ownership of the rights at common law.

I can't say that I listened to this band. The Court did sprinkle a number of references to the band's songs as a means of dividing up the opinion. (i.e. "'Seasons Change,' see Expose, Seasons Change, on Exposure (Arista Records 1987), but the law in this Circuit about the requirements for ownership of a trademark or service mark at common law has remained relatively constant.") So, we'll get to thank this 80s band for helping us understand the trademark concept of "joint endeavors." Thanks, Expose.

Wednesday, June 22, 2011

Leave to amend answer to assert inequitable defense is ok in the early stages

Mitsubishi Heavy Industries and General Electric are engaged in various patent infringement litigations related to "modern-day wind turbines." In defending itself, GE claims that Mitsubishi cannot enforce at least one of the patents-in-suit because of inequitable conduct Mitsubishi committed on the Patent Office. Problem is, GE claims it could not properly assert its inequitable conduct counterclaim prior to the Court's deadline for amending pleadings.

The basis of the alleged inequitable conduct stems from a failure by Mitsubishi to cite certain prior art to the Patent Office during prosecution of the subject patent. Three Japanese prior art references were cited in a Japanese patent application (from which the subject patent claims priority). These references were not cited to the U.S. Patent Office. In one of the other litigations between the parties, GE asked for copies of the Japanese patent application and the cited references, but was not provided any English translations. GE did not receive English translations until after the deadline had passed to amend its answer (and assert its inequitable conduct claim).

For a Court to grant leave, good cause must be shown. GE argued that such good cause existed because it could not satisfy heightened pleading requirements of Rule 9 and its obligations under Rule 11 without having English translations of the prior art references. And it didn't have those translations until after the deadline to amend.

Mitsubishi objected that if leave were granted, it would be "greatly prejudiced." The Court was not persuaded:
Although Defendant does not provide specific dates showing when it received the English translation of the '312 patent application and associated prior art references, or when exactly Defendant obtained the necessary facts to enable it to plead with particularity inequitable conduct, it seems that Defendant obtained this information after the October 19, 2010 deadline to amend pleadings. In appreciation of the requirements and consequences of Rule 11, Defendant waited until it had the necessary factual predicate to move to add the affirmative defenses and counterclaim based upon inequitable conduct. Accordingly, the Court finds the Defendant has demonstrated good cause to amend its pleading after the deadline.
Leave to amend granted.

Mitsubishi Heavy Industries, Ltd. v. General Electric, Co., slip op., Case No. 6:10-cv-00812, (M.D. Fla. June 14, 2011) (Mag. Kelly)

Tuesday, June 14, 2011

The Court may consider Patent and Trademark Office records in deciding a motion to dismiss

Savtira Corp. (a Delaware company) sued Savtira Corp. (a Florida company) for trademark infringement, unfair competition, and deceptive trade practices.

Plaintiff's first count is for "Trademark Infringement." But plaintiff did not indicate if its claim was based on state or federal law, or whether the claim was a statutory claim or a claim based in common law. On this basis, defendant asked the Court to dismiss the claim. The Court obliged (granting leave to amend the complaint):
The Court concludes that Defendants’ motion to dismiss is due to be granted as to this claim. Plaintiff failed to identify the legal basis for its trademark infringement claim, and therefore it is not sufficient to give Defendants fair notice of what the claim is and the grounds upon which it rests. Twombly, 550 U.S. at 555. Nevertheless, Savtira Delaware’s trademark infringement claim shall be dismissed without prejudice, and Savtira Delaware shall have leave to amend this claim.
Count Two asserts a claim of unfair competition. Defendant moved to dismiss this count because defendant argued it had priority in the mark since plaintiff filed its intent-to-use trademark application after defendant was incorporated. To support this argument, defendant attached a copy of plaintiff's intent-to-use trademark application for the mark. Plaintiff responded by arguing that the Court should not consider the intent-to-use application record, as it was outside the four corners of the complaint. The Court did not agree:
[T]he Eleventh Circuit has adopted the “incorporation by reference” doctrine, under which the district court may take judicial notice of certain facts without converting the motion to dismiss into one for summary judgment, if the attached document is (1) central to the plaintiff’s claim and (2) undisputed. Horsley v. Feldt, 304 F.3d 1125, 1134 (11th Cir. 2002); see also Universal Express, 177 Fed. Appx. at 53 (citing Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1278 (11th Cir. 1999)). Public records, including administrative agency records, are documents that may be incorporated by reference. Universal Express, 177 Fed. Appx. at 53 (citing Bryant, 187 F.3d at 1278). Because records from the United States Patent and Trademark Office are (1) central to Plaintiff’s claims of trademark infringement and unfair competition and (2) a public record that Plaintiff has not disputed, the Court may consider the records in resolving a motion to dismiss. See Horsley, 304 F.3d at 1134 (11th Cir. 2002).
Plaintiff's backup argument was that it had adequately pleaded the elements of an unfair competition claim under 15 U.S.C. 1525(a). The Court agreed:
To state a claim under 15 U.S.C. § 1125(a), a plaintiff must plead facts that demonstrate (1) that it had prior rights to its mark or name and (2) that the other party had adopted a mark or name that was the same, or confusingly similar to its mark, such that consumers were likely to confuse the two. Lone Star Steakhouse & Saloon, Inc. v. Longhorn Steaks, Inc., 106 F.3d 355, 358 (11th Cir. 1997). To satisfy the first element of trademark infringement under Section 43 of the Lanham Act, proof of a valid trademark, a plaintiff need not have a registered mark. Tana v. Dantanna’s, 611 F.3d 767, 773 (11th Cir. 2010). Ownership of a mark under the Lanham Act is determined by use, and registration does not necessarily create ownership. Compton v. Fifth Ave. Ass’n, Inc., 7 F. Supp. 2d 1328, 1331 (M.D. Fla. 1998); see also In re Wrubleski, 380 B.R. 635, 639 (Bankr. S.D. Fla. 2008) (“The party that first uses a mark, develops common law trademark rights that are, or may be, superior to the rights acquired by a later registrant of the mark.” (quoting Goldberg v. Cuzcatlan Bevs., Inc., 260 B.R. 48, 53 (Bankr. S.D. Fla. 2001))).
Plaintiff adequately pleaded this count because it pleaded: (1) it commenced business first; and (2) defendant's use of the mark would harm plaintiff.

Motion to dismiss granted in part, otherwise denied.
Savtira Corp. v. Hillier, slip op., Case No. 8:11-cv-0719 (M.D. Fla. June 7, 2011) (J. Bucklew)

Monday, June 13, 2011

Are you excited about Apple's iCloud announcement? Someone isn't

A week ago today, Apple announced its new iCloud service. The people I've spoken with are generally extremely excited about this. An Arizona company, however, is not thrilled. iCloud Communications has sued Apple for infringing its iCloud trademarks. This is, of course, not the first time Apple has been sued for trademark infringement. Indeed, the Plaintiff lays out its parade of horribles for "Apple's Pattern of Willful Trademark Infringement":
  • The Beatles record label Apple Corp sued Apple.
  • McIntosh Labs, a stereo-maker, sued Apple for its Macintosh computers
  • Terrytoon sued for Apple's adoption of the "Mighty Mouse" name.
  • Cisco sued for the iPhone.
  • (On information and belief), Apple didn't get Fujutsu's permission before using the iPad mark.
  • Innovative Media Group sued for Apple's use of the iAds mark.
Interestingly (at least for me anyway), one running theme with each of these "horribles" (aside from Mighty Mouse) is that Apple is still using the challenged mark.

The Plaintiff also points out a tactic Apple is using to keep secret its new product announcements while at the same time establishing trademark rights in them. Apple files a trademark application abroad prior to its product announcement, and then files a U.S. trademark application claiming priority to the foreign application around the same time Apple makes its product announcement.

The Plaintiff also alleges that Apple bought from a Swedish consulting company a U.S. trademark registration for the mark "iCloud." The Plaintiff claims this acquisition is invalid, however.

Potentially interesting case to watch.

Thursday, June 9, 2011

Want to invalidate a patent in litigation? You still need to prove invalidity with clear and convincing evidence - Microsoft v. i4i

Justice Sotomayor said it succintly:
Under §282 of the Patent Act of 1952, “[a] patent shall be presumed valid” and “[t]he burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.” 35 U. S. C. §282. We consider whether §282 requires an invalidity defense to be proved by clear and convincing evidence. We hold that it does.
Defendants seeking to invalidate a patent must do so with clear and convincing evidence. Microsoft lost a large judgment to i4i for its custom XML feature of Word. Read more details here, if you like. Microsoft eventually asked the Supreme Court to lower this standard. At the least, Microsoft asked the Court to craft a standard that kept a clear and convincing burden if a defendant wanted to invalidate a patent with prior art the Patent Office had previously considered. But, for new prior art that had never been before the Patent Office, Microsoft asked the Court to lower the burden. The Court didn't adopt such a standard, but did give Microsoft something:

Simply put, if the PTO did not have all material facts before it, its considered judgment may lose significant force. Cf. KSR, 550 U. S., at 427. And, concomitantly, the challenger’s burden to persuade the jury of its invalidity defense by clear and convincing evidence may be easier to sustain. In this respect, although we have no occasion to endorse any particular formulation, we note that a jury instruction on the effect of new evidence can, and when requested, most often should be given. When warranted, the jury may be instructed to consider that it has heard evidence that the PTO had no opportunity to evaluate before granting the patent. When it is disputed whether the evidence presented to the jury differs from that evalu- ated by the PTO, the jury may be instructed to consider that question. In either case, the jury may be instructed to evaluate whether the evidence before it is materially new, and if so, to consider that fact when determining whether an invalidity defense has been proved by clear and convincing evidence.

The Court then concluded:

Congress specified the applicable standard of proof in 1952 when it codified the common-law presumption of patent validity. Since then, it has allowed the Federal Circuit’s correct interpretation of §282 to stand. Any recalibration of the standard of proof remains in its hands

Justice Breyer's concurrence (joined by Justices Scalia and Alito)

These three Justices joined the opinion of the Court, but wrote separately to make clear the distinction between standards of proof as applied to facts (i.e. when a product was first sold) and as applied to the law (i.e. do the given facts show that the product in question was previously in public use). As to the latter -- issues of law -- the Court's opinion on the clear and convincing standard has no bearing.

Justice Thomas's concurrence

Justice Thomas concurred in the judgement of the Court, but did not agree that Congress had codified a standard by utilizing the expression "presumed valid." Rather, because the statute is silent on the standard of proof, it simply did not change the common law, which included the heightened standard. Same result, different reason.


Monday, May 23, 2011

Rule 11 sanctions motion directed to original complaint denied where plaintiff filed an amended complaint

eWinWin has sued Groupon for patent infringement relating to a number of patents here in the Middle District. Groupon responded with a number of counterclaims, and sent a Rule 11 safe harbor letter. eWinWin responded by offering to amend its complaint to remove some of the asserted patents from the litigation, narrow some of the asserted claims, and assert another patent that issued after the case had begun. Groupon would not consent. After the Rule 11 safe harbor period elapsed, Groupon filed its motion for sanctions. eWinWin then asked for leave to file its amended complaint. Judge Bucklew granted that leave. Today, she also denied Groupon's motion for sanctions:
In the instant motion for Rule 11 sanctions, Groupon alleges that the four counts asserted in eWinWin’s original complaint are frivolous and unsupportable. However, the amended complaint is substantially different from the original complaint in that eWinWin withdrew the infringement claims of two previously asserted patents, narrowed the infringement claims in another previously asserted patent, and added claims of infringement of a newly issued patent to the action. Because eWinWin’s amended complaint is substantially different from the original complaint and because Groupon’s motion for Rule 11 sanctions is based on the original complaint, the Court denies Groupon’s Rule 11 motion for sanctions without prejudice.
eWinWin v. Groupon, slip op., Case No. 8:10-cv-02678 (M.D. Fla. May 23, 2011) (J. Bucklew)

Monday, April 25, 2011

Possibility of repeal of false marking statute is not a basis to stay litigation

Last week, I wrote about Judge Merryday's denial of a motion for leave to add an equitable estoppel defense to a false marking claim in the Advanced Cartridge Technologies v. LexMark International dispute. Another interesting order has come out. The defendant had filed an inter partes reexamination request, and asked the court to stay the litigation while the reexamination runs its course. The court refused that first motion.

The defendant filed a second motion to stay, this time arguing not only that the reexamination would simplify the litigation, but also that "Congress will likely repeal the false patent marking statute, and that the Federal Circuit will likely hold the statute unconstitutional." The Court was not convinced:
Although either the re-examination or a change to the false patent marking statute promises to simplify the issues, neither the re-examination, nor the legislative effort to modify the false patent marking statute, nor the constitutional challenge before the Federal Circuit demonstrably will conclude before this litigation. The occurrence and content of each prospect is speculative and offers no sound basis to frustrate a litigant’s access to the court.
Second Motion to Stay denied.

Advanced Cartridge Technologies, LLC v. Lexmark International, Inc., slip op. Case No. 8:10-cv-0486 (M.D. Fla. Apr. 21, 2011) (J. Merryday)

Friday, April 22, 2011

The budget and the patent office

Director Kappos's blog entry (reproduced below) explains it all.

An Update on the USPTO's FY 2011 Budget:

As you may know, the FY 2011 budget was enacted on April 15, 2011 and contains the USPTO’s appropriation through the end of this fiscal year, September 30, 2011. With the enactment of the Full-Year Continuing Appropriations Act, 2011, our total spending authority for FY 2011 has been limited to $2.09 billion.

Given this level of spending authority, USPTO will have to make significant reductions for the current fiscal year.

We have not come by these decisions lightly; I recognize that these measures will create new challenges for our ability to carry out our agency’s mission, but we will continue seeking innovative ways to do more with less.

Effective immediately and until further notice:

  • Track One of the Three-Track program, which offers expedited patent examination and was scheduled to go into effect on May 4, 2011, is postponed;
  • The opening of the planned Nationwide Workforce satellite office in Detroit, as well as consideration of other possible satellite office locations, is postponed;
  • Hiring—both for new positions and backfills—is frozen;
  • IT projects will be scaled back;
  • Funding for Patent Cooperation Treaty (PCT) outsourcing will be substantially reduced;
  • Employee training will be reduced;
  • All overtime is suspended.

In addition, business units will be required to reduce all other non-compensation-related expenses, including travel, conferences and contracts.

Trademarks is unaffected and will maintain normal operations.

I would like to thank our entire team for their continuing cooperation and patience, and for their dedication and service during this challenging time.

Patently-O and IP Watchdog have additional details.

Wednesday, April 20, 2011

"Equitable estoppel" as a defense to false marking? Nah

Advanced Cartridge Technologies has sued Lexmark here in Tampa for infringement of a handful of patents and false marking. Regarding the false marking allegations, ACT claims that Lexmark lists a bunch of patents on various products, and there are various issues with those patents. ACT also argues that each product is not covered by each patent, and thus it is false marking to include all of them on the packaging. Lexmark responds that it is not subject to false marking liability in part because it includes a disclaimer stating that the product is covered by one or more of the listed patents. Thus, because each product is covered by at least one of the listed patents, Lexmark argues it should not be subject to false marking liability because of its disclaimer. ACT disagrees that the disclaimer shields Lexmark.

In discovery, Lexmark learned that ACT marked a waste bin product with some toner patents. Lexmark asked for leave to file an amended answer so that it could assert the affirmative defenses of unclean hands and equitable estoppel "in light of [plaintiff's] interpretation of the false marking statute."

The Court took a paragraph to deny Lexmark's motion:
The plaintiff asserts a false patent marking claim. Alleging that the plaintiff also engages in false patent marking, the defendant moves (Doc. 105) for leave to file an amended answer asserting “the affirmative defenses of unclean hands and judicial estoppel.” However, the proposed defenses, perhaps legally and factually dubious in this instance, are untimely raised and probably productive of unwarranted delay and unnecessary expense.* The defendant's motion (Doc. 105) to file an amended answer is DENIED.

* The defense of "equitable estoppel" appears meritless in the present circumstances. The defense of "unclean hands," if available, requires a distinct showing of inequitable and pertinent conduct. Interestingly, the defendant identifies no case in which the equitable defense of "unclean hands" has barred a statutory false patent marketing claim.

Advanced Cartridge Technologies, LLC v. Lexmark International, Inc., slip op. Case No. 8:10-cv-0486 (M.D. Fla. Apr. 14, 2011) (J. Merryday)

Saturday, April 9, 2011

Want your patent application processed in 12 months? First 10,000 can pay $4,000 to participate

Want to jump to the front of the line and get your patent application processed in 12 months? The PTO's press release will be of interest to you.

Press Release, 11-24

USPTO Announces Launch Date for Fast-Track Patent Processing

USPTO to begin accepting requests for prioritized examination of patent applications on May 4, 2011

Washington – The United States Patent and Trademark Office (USPTO) announced today plans for the agency to begin accepting requests for prioritized examination of patent applications – allowing inventors and businesses to have their patents processed within 12 months. It currently takes nearly three years to process the average patent. The program, called Track One, launches May 4, 2011, and is part of a new Three-Track system, which will provide applicants with greater control over when their applications are examined and promote greater efficiency in the patent examination process.

“Track One provides a comprehensive, flexible patent application processing model to our nation’s innovators, offering different processing options that are more responsive to the real-world needs of our applicants,” said Under Secretary of Commerce for Intellectual Property and Director of the USPTO David Kappos. “The Three-Track program will bring the most important new products and services to market more quickly, helping to build businesses and create new jobs in America.”

Requests for prioritized examination will initially be limited to a maximum of 10,000 applications starting May 4, 2011 through the remainder of fiscal year 2011, ending September 30. The USPTO will revisit this limit at the end of the fiscal year to evaluate whether adjustments are needed for future years.

Filing a request for prioritized examination through Track One will include a fee under 37 CFR 1.102(e) of $4,000, in addition to filing fees for the application. For smaller entities, the USPTO is working to offer a 50 percent discount on any filing fee associated with the program, as it does with many other standard processing fees.

Under the Three-Track program, patent applicants may request prioritized examination through Track One, traditional examination under the current procedures through Track Two, and for non-continuing applications first filed with the USPTO, an applicant-controlled delay for up to 30 months prior to docketing for examination under Track Three. Track Three is expected to be available to applicants by September 30, 2011.

The Federal Register notice announcing the implementation of Track One is now available for review here. For additional background on the Three-Track program which USPTO plans to launch before the end of the fiscal year, see the initial program announcement here.

Wednesday, March 16, 2011

False marking claims must satisfy heightened pleading standard

There's been some back and forth on this issue. To plead a claim for false marking, a plaintiff must allege that the defendant marked something as patented with an "intent to deceive the public." Does a plaintiff asserting a false making claim need to satisfy the heightened pleading requirements of Rule 9? The Federal Circuit provided an answer yesterday:
This court holds that Rule 9(b)'s particularity requirement applies to false marking claims and that a complaint alleging false marking is insufficient when it only asserts conclusory allegations that a defendant is a "sophisticated company" and "knew or should have known" that the patent expired.
Here, BP Lubricants was sued for its CASTROL brand motor oil. It had a design patent which protected the ornamental design of the bottle. BP marked the bottles with this patent number. According to the complaint, BP continued to mark the bottles after the patent expired and, on the plaintiff's information and belief: (1) BP knew or should have known the patent was expired; (2) BP is a sophisticated company; and (3) BP marked the products for the purpose of deceiving the public.

At the trial level, the Court held that this pleading did satisfy Rule 9(b). Applying Federal Circuit law (Exergen), the trial Court held that this pleading provided the specific who, what, when, where, and how required to state a claim. Specifically, BP (who) had deliberately and falsely marked (how) at least one line of motor oil (what) with an expired patent, and continues to do so (when) throughout the US (where) with an intent to deceive.

But the Federal Circuit said this wasn't enough. To plead a claim:
a complaint must in the 292 context provide some objective indication to reasonably infer that the defendant was aware that the patent expired.
So, just saying the Defendant is a sophisticated player who "should have known better," isn't enough. A plaintiff must allege some objective indication that the defendant did know better. Without that, the pleading falls short of Rule 9(b), and is ripe for dismissal.

This case is also interesting from a procedural standpoint. BP lost its motion to dismiss at the trial level. Typically, you can't appeal that decision because it is not final. Instead, BP petitioned the Federal Circuit for a writ of mandamus -- an extraordinary remedy. An appellate court can issue a writ -- ordering someone (here, the trial court) to do something -- only when there has been a "clear abuse of discretion or 'usurpation of judicial power.'"

The Court found such extraordinary circumstances here. It had not yet decided the issue of whether Rule 9(b) applied to false marking cases. And this issue has been causing quite a bit of attention and disagreement lately. So, by granting the writ, the Federal Circuit is able to decide an "issue important to 'proper judicial administration.'"

And a last saving point for plaintiffs -- the Federal Circuit reminded trial courts that they should freely grant leave to plaintiffs to amend their complaints.

Petition for a writ of mandamus, directing the district judge to grant defendant's motion to dismiss granted in part.

Thursday, March 10, 2011

Summary Judgment granted where plaintiff did not rebut defendant's expert's opinion on obviousness

Judge Fawsett previously held in the Voter Verified v. Election Systems dispute that you can not infringe a surrendered patent. She's now had a chance to address defendant's further summary judgment motion, asking the Court to find one of the claims of the patent invalid for being obvious in view of the prior art.

First, plaintiff objected to the prior art defendant relied on. The court considered some of the art prior art, but found that other references did not qualify because they were not reasonably accessible to the public interested in the art. The reference that didn't make it was purportedly presented at the Fifth International Computer Virus and Security Conference. Defendant asked the court to find this article prior art on the basis that: (1) defendant's expert stated that the paper was presented at the conference; (2) the paper had a legend in the bottom corner of each page stating the conference name. But this wasn't enough. Specifically, there was no evidence in the record concerning the manner in which the paper was published, and how it was made available to persons of interest in the art. Thus, it didn't qualify as prior art for purposes of summary judgment consideration.

That small win, though, didn't carry the day for plaintiff, because the defendant had other art that was considered prior art. The summary judgment dispute turned on whether the claimed invention was obvious in light of the prior art. To resolve this, the court went through the Graham factors and found the subject claim obvious. Defendant's expert opined on each of the factors ((1) the scope and content of the prior art; (2) differences between the claims and the prior art; (3) the level of ordinary skill in the pertinent art; and (4) secondary considerations such as commercial success and satisfaction of a long felt need). Plaintiff disagreed with the expert's conclusions, but does not have appeared to offer any evidence to the contrary. As such, summary judgment was appropriate.

Summary judgment granted. Claim held invalid for being obvious.

Voter Verified v. Election Systems & Software, Inc., Case No. 6:09-CV-01969 (M.D. Fla. Jan. 25, 2011) (J. Fawsett)

Wednesday, March 9, 2011

Do false marking complaints need to satisfy heightened pleading requirements? Court won't answer that question if the complaint falls short of Rule 8

Another false marking post this week. This one comes from the Ft. Myers division. Herengracht sued American Tombow for false marking. The Court ignored the various "shotgun" allegations in the complaint. Tombow asked for dismissal for failure to state a claim, arguing that the plaintiff must plead the heightened requirements of Rule 9(b) because the claim is based on fraud.

First, the Court laid out the elements necessary to survive a motion to dismiss:
(1) that a word or number indicating an article is patented (2) was marked upon, affixed to, or used in advertising in connection with (3) an article which was in fact not covered by the patent, (4) for the purpose of (the intent of) deceiving the public.
* * *
An article whose patent is expired is "unpatented."
Digesting the complaint, the Court found that plaintiff had pleaded that a Tombow product has been marked with U.S. Patent No. 4,851,076. The '075 Patent is currently expired. And Tombow is a sophisticated company. The Court didn't need to delve into whether or not heightened fraud pleading was required here, because these allegations didn't even satisfy Rule 8's notice pleading:
Because the instant Complaint does not even comply with the ordinary pleading rules of Rule 8, there is simply no need to address [the issue of whether heightened pleading requirements should apply.]
The complaint did not allege that Tombow marked its products with an expired patent number after the patent had expired.

Motion to dismiss granted, without prejudice. Plaintiff was given the ability to file an amended complaint. But Plaintiff did not, so the court closed this matter.

Herengracht Group LLC v. American Tombow, Inc., Case No. 2:10-cv-362 (M.D. Fla. Dec. 30, 2010) (J. Steele)

Tuesday, March 8, 2011

Willful infringement alone does not get you enhanced damages

Harris sued FedEx for infringing a number of patents relating to systems for gathering flight performance data from aircraft for analysis. Generally, the technology provided for aircrafts to wirelessly transmit certain flight performance data to an airport based receiver. In prior systems, the data needed to be manually removed from the aircraft and delivered to the centralized storage area, or through some direct line-of-sight infrared link or fiber optic cable. Harris' patents protected a system for this data gathering which utilized wireless transmission of the flight data via a radio frequency link.

FedEx developed a system for gathering flight statistics on its B727 aircraft. This system wirelessly transmitted flight data from parked airplanes to one of FedEx's servers in Tennessee. This system was found to infringe Harris' patents. And the infringement was found to be willful. Harris sought enhanced damages, attorneys' fees, and an injunction.

Enhanced Damages

35 U.S.C. 284 allows a court to increase a patent infringement damage award by up to three times. A plaintiff must establish that the defendant's infringement was willful. Damages are enhanced in order to penalize an infringer for their increased culpability. A court should consider consider the following factors in deciding whether or not to enhance damages:
  1. whether the infringer deliberately copied the ideas or design of another
  2. whether the infringer, when he knew of the other's patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed
  3. the infringer's behavior as a party to the litigation
  4. the defendant's size and financial condition
  5. the closeness of the case
  6. the duration of the defendant's misconduct
  7. remedial action taken by the defendant
  8. the defendant's motivation to harm; and
  9. whether the defendant attempted to conceal its misconduct
The court analyzed each of these factors, finding 1, 3, 6, 8, and 9 weighed against enhancing damages, while 2 and 5 supported (the others were neutral). FedEx's defenses, even though they didn't succeed, weren't frivolous. FedEx had made a good faith effort to defend itself. In sum, FedEx's conduct was not to egregious as to warrant an award of enhanced damages.

Attorneys' Fees

In patent cases, the prevailing party may be awarded its attorneys' fees if the case is an "exceptional case." If a defendant is found to be a willful infringer, the case is presumed to be an exceptional case, and the court must explain why a case is not exceptional if the court is going to refuse an award of attorneys' fees. Here, the Court did not need to provide that explanation, because it found the case was exceptional and awarded Harris its reasonable attorneys' fees.

Permanent Injunction

It used to be (until 2006) that if you prevailed as a plaintiff in a patent infringement case, you were presumably entitled to an injunction. (That presumption could be rebutted, but the defendant had to do the rebutting). The Supreme Court changed this landscape with its eBay decision, throwing patent law back into the category of other harms -- if you wanted an injunction, you have to prove you're entitled to it. To prove that, a plaintiff must show:
  1. it suffered irreparable harm
  2. the remedies at law (i.e. money damages) are inadequate to compensate for that harm
  3. the balance of hardships in granting an injunction favor the plaintiff; and
  4. the public interest would not be disserved by entering an injunction
The court addressed each of these elements. Concerning irreparable harm, the court noted that a finding of past infringement, alone, does not show irreparable harm. But it does tend to suggest such harm. Here, FedEx argued in part that Harris also licensed its patents. Because of this, FedEx argued, Harris didn't suffer irreparable harm because it has shown that it is willing to license (i.e. accept money) the use of its technology. The court was not convinced by this argument. FedEx's use of its infringing system interfered with Harris' licensing opportunities. This interference was irreparable.

Regarding the second factor, FedEx's interference with Harris' licensing opportunities was not curable by money. As such, Harris was entitled to equitable relief. The final two factors also favored an injunction. So the Court ordered one be entered. The parties now have to submitted a proposed injunction for the Court to issue.


Just because a defendant is found to have willfully infringed a patent does not mean the plaintiff will necessarily get enhanced damages. Nor does it mean the plaintiff will get its attorneys fees (although the defendant has to convince the court to explain why attorneys's fees wouldn't be warranted against the willful infringer). And the right to an injunction depends on the existence of irreparable harm (and the other elements).

Harris v. FedEx, Case No. 6:07-cv-1819, slip op. (M.D. Fla. Feb. 28, 2011) (J. Antoon)

Monday, March 7, 2011

False marking statute held unconstitutional

Regular readers of my blog are familiar with recent developments in false patent marking litigation. The Northern District of Ohio has added another development -- the statute has been found unconsitutional. (I've embedded the order below.) Procedurally, this is somewhat interesting to me. The defendant initially moved to dismiss for a number of reasons. The court held a telephone conference with the parties and, on its own perhaps, asked the parties to file briefs explaining the constitutionality of 35 U.S.C. 292(b) (the qui tam provision of the false marking statute). The court also required notice be provided to the U.S. Department of Justice so that the department (who is charged with enforcing the law) could express its views on the constitutionality of the false marking statute. Apparently, the DOJ did not file any brief.

After the invitation from the Court, the defendant filed a motion to dismiss, arguing that the qui tam provision of the statute violated the Appointments and Take Care Clauses of the U.S. Constitution. Specifically, the defendant argued that the qui tam provision didn't give the executive branch sufficient involvement in false marking litigation.

The Constitution's Take Care Clause provides that the President "shall take care that the Laws be faithfully executed." The Appointments Clause provides that the President "shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the Supreme Court, and all other Officers of the United States." The Court found the false marking statute violated the Take Care Clause (the Court did not address the Appointments Clause, but suggested it would not apply to this situation).
The false marking statute lacks any of the statutory controls necessary to pass Article II Take Care muster. The False Marking statute essentially represents a wholesale delegation of criminal law enforcement power to private entities with no control exercised by the Department of Justice
The Court granted defendant's motion to dismiss (with prejudice).

Notably (as recognized by the Court), the FLFMC, LLC v. Wham-O, Inc. case -- another false marking case -- is still pending before the Federal Court. One of the issues that has been preserved in that appeal is the constitutionality of the False Marking statute under the Take Care clause.