A blog about patent, copyright and trademark law in the U.S. District Court
for the Southern District of New York

Court Rules That Patent Infringement Damages May Only Be Collected From The Date of Actual Notice of Patent; Imposes Sanctions For Spoliation of Evidence.

In a December 31, 2013 ruling, Judge Jed S. Rakoff denied the parties’ cross-motions regarding infringement, granted defendants’ Microscan Systems, Inc. and the Code Corporation’s motion for partial summary judgment, and ruled that plaintiffs Cognex Corporation and Cognex Technology & Investment LLC were not entitled to damages for patent infringement prior to providing actual notice of the alleged infringement to the defendants, and further sanctioned plaintiffs for spoliating evidence.

The plaintiffs plead in the complaint that damages should run from actual notice of the patent-in-suit, and later sought to add a constructive notice theory. In considering the date from which patent infringement damages may be awarded, the Court recognized that the patent statute requires that “when a patented article has been produced by a patentee or its licensee, the amount of damages the patentee can recover in an infringement suit is statutorily limited to those acts of infringement that occurred after the patentee gave the alleged infringer notice of infringement.” While the statute permits either “constructive notice, which is accomplished by marking the article with the patent number, or actual notice,” the court nevertheless held that “when a patent owner or licensee makes or sells a product that embodies at least one claim of a patent but does not mark that product as patented as required by 35 U.S.C. § 287(a), damages are limited to the period beginning when the patentee provides actual notice of infringement.” As the plaintiffs failed to plead compliance with the marking statute, the Court ruled that allowing the plaintiffs to amend the complaint in order to comply with the marking statute at the summary judgment stage would unduly prejudice the defendants because the defendants would have been entitled to discovery on the constructive notice theory which they did not pursue. Accordingly, the plaintiffs were permitted to collect infringement damages only for the period after the date on which the actual notice of the infringement was provided to the defendants.

Court Certifies Interlocutory Questions About DCMA Safe Harbor to Second Circuit

In a December 31, 2013 decision, Judge Ronnie Abrams considered the application of the “Safe Harbor” defense in the Digital Millennium Copyright Act to plaintiffs’ claims against Vimeo, LLC. Vimeo operates a service that allows users to upload videos that they have created. The plaintiff music publishers sued Vimeo “asserting claims for direct, contributory, vicarious, and common law copyright infringement, as well as for inducement to infringe copyright and unfair compliance.” In a prior decision, the Court ruled that certain videos on the Vimeo service met the Safe Harbor requirements, others did not, and that “the Safe Harbor did not extend to videos containing music recorded before February 15, 1972.” Vimeo sought reconsideration of the denial of Safe Harbor status as to some of the videos, and sought leave to file an interlocutory appeal about the pre-February 15, 1972 recordings.

Regarding the reconsideration motion, the Court noted that the “Safe Harbor limits the liability of service providers for copyright infringement that occurs ‘by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider,’ as long as the provider satisfies certain criteria.” Vimeo argued on reconsideration that the only evidence that Vimeo had viewed certain of the challenged videos was that its employees could review videos in the accounts of the users who had uploaded these videos, not that they had done so. Judge Abrams ruled that this evidence was too tenuous to permit the Court to conclude that Vimeo’s employees had in fact viewed the videos. The Court largely rejected, however, Vimeo’s argument on reconsideration that even if Vimeo had viewed the videos, they did not have “red flag” knowledge – i.e., it was not “obvious” that they infringed the plaintiffs’ copyrights – finding fact questions for the jury about that issue.

The Court also agreed to certify two questions for interlocutory review: (1) the issue about the pre-February 15, 1972 recordings, and (2) “whether . . . a service provider’s viewing of a user-generated video containing all or virtually all of a recognizable, copyrighted song may establish ‘facts or circumstances’ giving rise to ‘red flag’ knowledge of infringement.” As to the first issue, Judge Abrams ruled that it is a pure question of law, and “that there exists a substantial ground for difference of opinion on this issue.” As to the second issue, the Court noted that although the inquiry depends in part on the contents of each video, the defendants do not contest for purposes of the appeal that the videos “contain visual images set to copyrighted songs played essentially in their entirety.” The Court further found that determining whether a defendant has sufficient “knowledge of infringement [to void the Safe Harbor] is a difficult question that has important ramifications for service providers such as Vimeo,” and that there is a “substantial ground for difference of opinion” on the issue. Thus, the Court certified both issues for interlocutory review.

Court Finds Commodore Computer Marks Infringed

In a December 17, 2013 ruling, Judge Richard J. Sullivan entered judgment against defendant Asiarim Corporation after a bench trial in favor of plaintiff C=Holdings B.V. on its claim, among others, for trademark infringement of the "Commodore" marks for computers that were popular in the 1980's.  The principal dispute at trial was the ownership of C=Holdings, which had been a subsidiary of Asiarim until a claimed spin-off.  There was no dispute at trial that C=Holdings owned the registrations for the Commodore marks, and that another subsidiary of Asiarim had previously been licensed to use the marks.

Judge Sullivan began the analysis of the trademark infringement claim by noting that "when a plaintiff sues for infringement of its registered mark, the defendant bears the burden of production and persuasion to rebut the presumption of ownership" of the mark provided by the registration.  Judge Sullivan rejected defendant Asiarim's contention that it was the owner of the mark, in fact ruling that Asiarim's attempt to claim ownership was fraudulent.  Thus, the Court concluded "that C=Holdings owns the Commodore trademarks, and that any unsanctioned use by Asiarim would amount to an infringement."

Court Finds Trade Dress Generic and Dismisses Infringement Claim, Stay Infringement Claim and Denies Interlocutory Appeal

In a December 11, 2013 ruling, Judge Shira A. Scheindlin granted defendant Regent Baby Products Corp.'s summary judgment motion to dismiss plaintiff Luv N' Care, Ltd.'s trade dress infringement action over infant sippy cups.  In considering the motion, Judge Scheindlin noted that a "plaintiff asserting a trademark infringement claim must show first that its trade dress or trademark is a protectable interest under the Lanham Act, and second that there is a likelihood of confusion.  If a plaintiff offers no evidence of a protectable interest, a court need not consider likelihood of confusion."

Regent did not contest likelihood of confusion, but instead argued that Luv N' Care's cups are not entitled to trade dress protection because they are generic.  In support of its argument, Regent submitted "exhaustive evidence" of numerous designs similar to Luv N' Care's cups "that have been widely available on the market for over two decades, through submission of third party catalogs and websites of online retailers."  Judge Scheindlin accepted this evidence, and ruled:
There is no genuine issue of material fact as to whether these designs are generic.  [Luv N' Care's] trade dress descriptions refer to common shapes frequently used in the sippy cup industry -- a "generally cylindrical cup with a slightly wider upper portion" and a cap with a "bulb-like base and a slightly pointed top" or a "football-helmet shaped cap" with a "ring shaped base" -- that even when configured together would simply be too broad and too general to warrant trade dress protection. . . . [T]hese general shapes and configurations are ubiquitous in the sippy cup market and do not warrant Lanham Act protection.
The Court also rejected Luv N' Care's argument that its designs had acquired secondary meaning "as irrelevant for generic trade dress.  Second Circuit law is clear that 'even a showing of secondary meaning is insufficient to protect product designs that are overbroad or generic' and that '[g]eneric trade dress in never entitled to protection.'"  The Court thus dismissed the trade dress claims.

In a subsequent February 13, 2014 ruling, Judge Scheindlin stayed the remaining design patent infringement claims so as to avoid duplicative trials of the trade dress and design patent infringement claims should the trade dress claims proceed to trial first, and the design patents later survive reexamination.  The Court also declined to permit an interlocutory appeal, finding that the plaintiff's request did "not raise a controlling question of lwa, 'a new legal question or [a legal issue] of special consequence appropriate for interlocutory review."

Court Refuses to Return Christmas Song to Authors

In a December 16, 2013 ruling, Judge Shira A. Scheindlin rejected the plaintiffs' copyright termination notice to the song "Santa Claus Is Coming to Town," and left ownership of the copyright with defendant EMI Feist Catalog, Inc.  The parties cross-moved for summary judgment, and EMI moved to exclude the plaintiffs' "purported copyright law expert" under Daubert.  Judge Scheindlin granted EMI's motions.

With regard to the expert testimony, the Court noted that the expert "opines on one issue:  the meaning of Sections 304 and 203 of the Copyright Act."  Judge Scheindlin excluded the opinion, ruling that the "Second Circuit has held that the testimony of an expert on matters of domestic law is inadmissible for any purpose.  Courts have an obligation to exclude affidavits that purport to construe Copyright Law.  Alter's [the expert's] affidavit expresses legal conclusions on the meaning of the 1976 [Copyright] Act, with the sole exception of some brief historical background on the Act."

With regard to the merits, the Court noted that the "sole issue in this case is whether Plaintiffs have the right to terminate EMI's copyright ownership in the Song."  The Court concluded that the plaintiffs did not have the right to do so because they failed to record a 1981 notice that terminated a 1951 agreement regarding ownership.  The failure to record the 1981 termination notice leaves the 1951 agreement in place until 2029.  Judge Scheindlin also found that the failure to record the 1981 notice of termination rendered subsequent notices ineffective even though those notices were served and filed according to the correct procedures.  The Court thus granted summary judgment in favor of EMI.

Court Rejects Patent Infringement and Unfair Competition Claims

In a December 9, 2013 ruling, Judge Richard J. Sullivan granted the defendants' motion for summary judgment of non-infringement in plaintiff Enzo Biochem, Inc.'s patent infringement action.  Enzo entered into a distribution agreement with PerkinElmer to manufacture and distribute Enzo's patented biotechnology inventions.  PerkinElmer appointed defendants Molecular Probes, Inc. and Orchid Biosciences, Inc. as sub-distributors.  In dismissing the patent infringement claims against Molecular Probes and Orchid Biosciences, the Court noted that "[b]ecause the features of the accused product are not in dispute, the Court may construe Claim 1 and then compare it to the undisputed features" of the accused product. 

Judge Sullivan rejected the defendants' argument that Enzo's proposed construction was limited solely by statements made to the PTO during prosecution of the patent-in-suit, and instead looked both to the language of the claim, and to the prosecution history.  The Court wrote that as "it turns out, though, the language of Claim 1 aligns with Enzo's statements to the PTO," and concluded that "[b]ased on the record before the Court, Enzo's statements to the PTO have not been wrenched from their context or mischaracterized; rather, they clearly set forth a difference -- evident on the face of Claim 1 -- between the accused features" of the challenged product.

Court Sets Post-Judgment Patent Royalty Rate

In a December 11, 2013 ruling, Judge Jed S. Rakoff set the post-judgment patent royalty rate in Tomita Technologies USA, LLC's patent infringement action against Nintendo Co., Ltd.  The Court rejected Tomita's request for a flat dollar amount for each unit, finding that the "rapid pace of technological advancement -- and its effect on prices -- counsels the Court that it is highly likely that the price will drop with time.  If, as Tomita suggests, the ongoing royalty rate were expressed as a flat dollar amount per unit sold, Tomita would capture an increasingly large proportion of each sale as the price falls, even as the technology's reliance on the infringed patent remains constant."  Judge Rakoff also rejected Nintendo's argument to set the royalty rate as the same implied rate found by the jury as was subsequently halved by a remittitur, noting that "Tomita . . . argues with some force that courts routinely increase the implied royalty rate of a verdict after a finding of infringement because the status of the parties has changed, as would the result of the hypothetical negotiation between them."  The Court then set the royalty rate at two thirds the implied royalty rate found by the jury.

Court Finds Use Might Be Authorized By Agreement, Denies Summary Judgement of Patent Infringement

In a December 9, 2013 ruling, Judge Richard J. Sullivan denied plaintiff Roche Diagnostics GMBH's motion for summary judgment to dismiss, among other claims, defendant Enzo Biochem, Inc.'s patent infringement counterclaims.  Enzo alleged that Roche breached a distribution agreement authorizing "Roche to use Enzo's patented property."  The Court wrote that to "the extent that Roche can show that its use of the Products was permitted under the terms of the Distribution Agreement, Roche may well be insulated from liability for patent infringement."  Since Judge Sullivan found that he could not "conclude as a matter of law that Roche's activities fell within the Agreement's use authorization" and denied Roche's motion for summary judgment for breach of the distribution agreement finding that, the Court ruled that "Enzo's patent infringement claims remain viable."

Court Finds Order Bias in Claim Terms

In a December 2, 2013 ruling, Judge Jed S. Rakoff in construing 24 claim terms in ADREA, LLC's patent infringement action against Barnes & Noble, Inc. over its ebook reader, construed the terms "selecting a title from the transmitted list of titles," and " "supplying a selected electronic book corresponding to the selected title to be encrypted" to have an order bias.  Judge Rakoff wrote:  "Although it is true that '[u]nless the steps of a method actually recite an order, the steps are not ordinarily construed to require one,' . . . 'if, as a matter of logic or grammar, they must be performed in the order in which they are written,' an ordered construction is required."  The Court ruled that an ordered construction is required here because the supplied ebook must first be selected before it can be supplied.

Court Awards Reasonable Royalty of 50% of Gross Margin in Patent Infringement Action

In a December 3, 2013 ruling, Judge Denise L. Cote entered a damages award in the last of a long-running series of patent infringement actions brought by Astrazeneca against generic drug manufacturers over the active ingredient in Astrazeneca’s brand-name drug Prilosec for heartburn.  Apotex Corporation, the largest generic drug manufacturer in Canada, was the remaining defendant.  The Court had previously found Apotex liable for infringement, and the December 3 ruling concerns only the assessment of a reasonable royalty as damages.  After a lengthy analysis, Judge Cote concluded that “the hypothetical licensing fee to which [the parties] would have agreed would have been at least 50% of the Apotex gross margin from its sales” of the infringing products, and ruled that Astrazeneca “is entitled to damages in the amount of $76,021,994.50 plus pre-judgment interest.”

In reaching that decision, the Court considered three threshold issues.  First, Judge Cote analyzed whether the royalty should be applied to the full value of the infringing product, or merely to the supposedly “minimal” value of the infringing component.  The Court noted that “[w]here a product, typically an electronic product, is composed of many different components, royalties for infringement are awarded ‘based not on the entire product, but instead on the smallest salable patent-practicing unit.’”  The Court further wrote, though, that under the “entire market value” rule, “a patentee may assess damages based on the market value of the entire product ‘where the patented feature creates the basis for customer demand or substantially creates the value of the component parts.’”  The Court rejected the notion that a rule developed for complex electronic products should be applied to generic pharmaceutical products.  The Court further ruled that even applying the entire market value rule, the patented component of the infringing generic drug did substantially create the value for the finished products.  So Judge Cote concluded that the royalty rate should be applied to the value of the generic pills sold by Apotex.

Court Declines to Dismiss Lanham Act Claims for Mark on Supplemental Register

In a November 19, 2013 ruling, Judge Louis L. Stanton largely denied defendant American Tibetan Health Institute, Inc.'s motion to dismiss plaintiff C&L International Trading Inc.'s action asserting Lanham Act and related claims.  C&L had a design mark registered on the Trademark Office's supplemental register that incorporated the word mark "Tibetan Baicao Tea," and a registration for the word mark alone with New York State's Department of State.  American Tibetan claimed that it had its own registration for the identical word mark on the Trademark Office's principal register.  American Tibetan filed a trademark infringement action against C&L, and C&L started this separate trademark infringement action against American Tibetan, which did not mention American Tibetan's trademark registration.

American Tibetan moved to dismiss C&L's complaint, arguing that its superior rights arising from its registration on the principal register should prevail.  The Court noted that although American Tibetan's superior rights could provide a defense, C&L's complaint does not mention American Tibetan's registration and so cannot be considered on a motion to dismiss.  Judge Stanton also ruled that C&L's complaint adequately alleged that American Tibetan had abandoned any rights it might ever have had in the marks.

Invalidity Counterclaims Dismissed as Moot After Summary Judgment of Non-Infringement

In a November 25, 2013 ruling, Judge Shira A. Scheindlin dismissed as moot the patent invalidity counterclaims of TNS Media Research LLC and other defendants in plaintiff TRA Global, Inc.'s patent infringement action.  After granting summary judgment of non-infringement, the Court noted that the defendants "raised their patent invalidity contentions as affirmative defenses to TRA's patent infringement claims, and the only affirmative relief they seek is a declaratory judgment of non-infringement."  Thus, Judge Scheindlin ruled that the "motion for summary judgment of invalidity is moot."

Court Applies Fair Use Defense to Dismiss Copyright Infringement Claims Over Google Books

In a November 14, 2013 decision, Judge Denny Chin (continuing a case in which he presided before joining the Second Circuit) granted summary judgment in favor of Google, Inc in the long-running case by The Authors Guild, Inc. based on the fair use defense to copyright infringement.  As part of its Google Books program, Google "has scanned more than twenty million books," "has delivered digital copies to participating libraries, created an electronic database of books, and made text available for online searching through the use of 'snippets.'"  Since many of the scanned books are still under copyright, The Authors Guild, and three named plaintiffs brought a class action copyright infringement action.  The parties cross-moved for summary judgment on Google's fair use defense.

At the outset, Judge Chin assumed that the plaintiffs had made out a prima facie case of infringement, and that the sole issue for decision "is whether Google's use of the copyrighted works is 'fair use' under the copyright laws."  The defense, which the defendant has the burden of proving, is codified at 17 U.S.C. § 107, and requires the consideration of four non-exclusive factors:  "(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work."  The Court considered each of these factors in turn.

Court Denies Attorneys' Fees to Successful Defendant in Copyright Infringement Claim

In a November 12, 2013 ruling, Judge John G. Koetl denied the parties' cross-motions for attorneys' fees after the dismissal of plaintiff Overseas Direct Import Co.'s copyright infringement claim against defendant Family Dollar Stores Inc. and another.  Before the trial of the copyright infringement claim, Family Dollar Stores made an offer of judgment under Rule 68, which Overseas Direct rejected.  The jury, however, returned a verdict for Family Dollar Stores and Overseas Direct took nothing.  Family Dollar Stores moved for fees under the Copyright Act, 17 U.S.C. § 505 and Rule 68.  Overseas Direct cross-moved for its fees in defending the motion.

The Court explained that a plaintiff that recovers less than an offer of judgment can be liable for costs under Rule 68, and that those costs can include attorneys' fees where the underlying statute allows them, as the Copyright Act does here.  Family Dollar Stores argued that the verdict of $0 for Overseas Direct was less than the offer of judgment, so it is entitled to costs.  Judge Koetl ruled that "this argument is squarely foreclosed by the Supreme Court's holding in Delta Air Lines, Inc. v. August that the costs provision of Rule 68 is 'simply inapplicable' when the defendant has 'obtained the judgment.'"

Court Denies Belated Supplementation of Patent Invalidity Contentions

In a November 12, 2013 ruling, Judge Richard J. Sullivan denied plaintiff Roche Diagnostics GMBH's motion to supplement its invalidity contentions in its patent infringement action against Enzo Biochem, Inc.  The Court noted that the dates for the service of infringement and invalidity contentions were originally proposed by Roche because, as Roche urged, early contentions streamline discovery and simplify patent cases.  In denying the motion to supplement, Judge Sullivan noted that the Court had previously denied Enzo's motion to supplement its infringement contentions, and that although the parties jointly sought discovery extensions, they did not seek to extend either of the contention deadlines.  Thus, the Court concluded:  "If Roche needed more time to research or respond to Enzo's accusations, then it should have sought an extension before the may 17, 2013 deadline -- an interim deadline Roche emphatically advocated -- or at the very least before now, nearly half a year later."

Court Denies Indirect Profits in Copyright Infringement Action as Lacking Causal Link to Infringement

In a November 8, 2013 ruling, Judge Katherine B. Forrest granted defendant ABN Ambro Bank, N.V.'s motion in limine to preclude plaintiff Complex Systems, Inc. from offering evidence of indirect profits in its copyright infringement action.  Judge Forrest had previously granted summary judgment of liability in favor of Complex Systems on its claim that ABN Ambro infringed its copyright in a software program known as BankTrade 8.0, which is used by ABN Ambro "in its letter of credit and guarantee business."  ABN Ambro then moved to preclude evidence of Complex Systems' indirect profits as part of its damages.

Judge Forrest first described the way in which the BankTrade 8.0 software was used by ABN Ambro.  In particular, "BankTrade is one of four trade processing systems used by ABN to process letters of credit and guarantees; BankTrade is not used to process foreign exchange spreads, treasuring funding, loans, lines of credit, or overdrafts."  Based on this use, Complex Systems argued for a portion of ABN Ambro's profits under the following reasoning (as characterized by ABN Ambro):  "'(1) without BankTrade, ABN could not process letters of credit, (2) without letters of credit, [ABN] would not conduct other types of trade finance transactions, and (3) therefore, without BankTrade, ABN would not conduct other types of trade finance transactions.'"

The Court then examined the reports of Complex Systems' experts, Jarosz and Smith.  The Court concluded that "Jarosz has proffered reasonable estimates of revenues somehow connected to or touching BankTrade.  His extensive analysis supports this much. . . . [W]hat is missing is the necessary causation component" between the revenues and the use of BankTrade.  Judge Forrest further found that "Smith's reports and deposition provide significant support for ABN's (and not [Complex Systems']) position on this motion:  that a causal connection between BankTrade itself and specific trade finance revenues is lacking."

Court Denies Motion to Dismiss Patent Infringement Complaint, Citing Relaxed Pleading Standard

In a November 8, 2013 ruling, Judge Richard J. Sullivan declined to dismiss plaintiff Joao Control & Monitoring Systems, LLC's third amended patent infringement complaint against Digital Playground, Inc. and others.  First, the Court denied the defendants' motion to dismiss the direct infringement claim.  In doing so, Judge Sullivan wrote:
Direct infringement claims operate under a unique legal standard.  The Federal Circuit has held that any direct infringement claim mirroring Form 18 of the Federal Rules of Civil Procedure is sufficient to state a claim.  This is so even if the pleadings would otherwise not satisfy the plausibility-pleading standard that applies to all other claims.
(citation omitted)  The Court also applied the relaxed pleading standard to the allegations against all "Defendants" generally, noting that there is "no reason not to interpret every allegation that 'Defendants' did something as a stand in for an allegation that 'Defendant A, Defendant B, . .  .and Defendant Z' each did something."

Court Dismisses Third Party Claim Seeking to Shift Blame for Copyright Infringement

In a November 4, 2013 ruling, Judge Paul A. Engelmayer granted summary judgment dismissing with prejudice the third party complaint of defendant Monster Energy Company against a disk jockey known as "Z-Trip" arising from The Beastie Boys' copyright infringement and Lanham Act claims against Monster Energy over a remix made by Z-Trip that included four Beastie Boys songs and that Monster Energy used in a promotional video.  The Beastie Boys sued Monster Energy for copyright infringement and a Lanham Act violation, and Monster Energy asserted a third party claim against Z-Trip for breach of contract and fraud in falsely representing that Z-Trip and Monster Energy had permission to use the Beastie Boys songs.

The underlying facts, briefly, are as follows:  In connection with their promotion of an upcoming album, the Beastie Boys authorized Z-Trip to make a Megamix of their older music, and to post it on his website for free download.  Monster Energy later hired Z-Trip to DJ at an event sponsored by Monster Energy, and recorded the event for a promotional video.  There were some brief conversations and email exchanges between a Monster employee and Z-Trip about what music Monster Energy could use for the video.  Z-Trip suggested the Beastie Boy Megamix, which was available for free download, but there was no discussion about permission or clearance to use the music.  The Monster Energy employee assumed from the mention of the free download that the Megamix was available for use in Monster Energy's promotional video.

Court Invalidates Two Patents and Awards Summary Judge to Defendant

In an October 25, 2013 ruling, Judge John F. Keenan granted IBM's motion for summary judgment dismissing plaintiff Alexander Orenshteyn's long-running patent infringement action.  The plaintiff asserted two patents, the '569 patent and the '942 patent, against IBM in this action, which was then stayed pending the outcome of litigation on the same two patents against Citrix Systems, Inc. in the Southern District of Florida.  The Florida district court granted summary judgment of non-infringement, but the Federal Circuit overturned the decision for the '942 patent.  The parties lifted the stay in the action before Judge Keenan, and the Florida district court then almost immediately invalided the asserted claim, claim 1, of the '942 patent.  IBM then moved for summary judgment, arguing that the same reasoning used to invalidate claim 1 of the '942 patent applied equally to all the asserted claims in the '569 and '942 patent.

Judge Keenan first noted that under Federal Circuit law as applied in the district, "'collateral estoppel may apply to patent claims that were not previously adjudicated, because the "issues" litigated, not the specific claims around which the issues were framed" are determinative,'" and that "collateral estoppel 'forecloses patent claims that are "patentably indistinct" from rejected claims.'"  The plaintiff argued against the application of collateral estoppel by contending that his counsel's failure to fully oppose the summary judgment motion in the Florida district court amounted to a "default."  The Court rejected this argument, ruling that a "default" is narrowly defined under Fed. R. Civ. P. 55(a), and noting that in his appeal to the Federal Circuit of the Florida district court's decision, the plaintiff was represented by the same counsel as has appeared in this action.

Court Rejects Copyright Infringement Defenses, Grants Summary Judgment to Plaintiff

In an October 25, 2013 ruling, Judge Katherine B. Forrest granted summary judgment in favor of plaintiff Complex Systems, Inc. on its copyright infringement claims against defendant ABN Ambro Bank N.V. over a software application known as BankTrade 8.0.  Complex Systems holds the copyright registration for BankTrade 8.0, and alleged ABN Ambro's willful infringement arising from its continued use of the software.  ABN Ambro asserted as defenses that it had rights to use BankTrade 8.0 because of its subsidiary's prior licensed use, or joint authorship and ownership.  Judge Forrest had previously rejected ABN Ambro's argument that its subsidiary had assigned the license to BankTrade 8.0 before the subsidiary was divested.

The Court, plainly annoyed with ABN Ambro's shifting positions and theories throughout the litigation, first rejected ABN Ambro's contention that its former subsidiary could belatedly assert some ownership rights in the software, and transfer those rights to ABN Ambro.  Judge Forrest noted that the registration was first filed in 2008, and thus ruled that whether the subsidiary "could have once, long ago, asserted ownership rights to BankTrade 8.0 (by virtue of its position as an 'author' of some code), is now an irrelevant detour:  it did not."  

The Court further rejected on the merits the claim that ABN Ambro's former subsidiary was a joint author or co-owner of BankTrade 8.0.  Quoting the Copyright Act, Judge Forrest wrote that a "joint work of authorship is 'a work prepared by two or more authors with the intention that their contributions be merged into an inseparable or interdependent parts of a unitary whole.'"  Judge Forrest then found that, even if the facts established joint authorship, the former subsidiary had failed to timely assert those facts and to assert ownership as a result of that authorship.  The Court, applying a three year statute of limitations, noted that neither ABN Ambro nor its former subsidiary asserted any ownership right in BankTrade 8.0 in the limitations period.  Finally, Judge Forrest rejected ABN Ambro's standing to assert its former subsidiary's ownership rights, even if they existed, ruling that the "law is clear that a party accused of infringement cannot defeat that claim by pointing to rights that another may have to the work in question."

Court Denies Motion to Dismiss Copyright Infringment Action, But Suggests Summary Judgment Motion

In an October 23, 2013 ruling, Judge Katherine B. Forrest denied defendant Governance Risk Management Compliance, LLC's motion to dismiss plaintiff The Regulatory Fundamentals Group LLC's amended copyright infringement complaint.  The plaintiff alleged that the defendant "'had misappropriated, copied, distributed, created derivative works of, and publicly displayed on [the defendant's] website'" the plaintiff's works without permission.  The defendant moved to dismiss, contending that the plaintiff's claims sounded in contract law, not copyright.

Judge Forrest rejected the defendant's argument, ruling that a "review of the case law indicates that there is support for the proposition that, under certain circumstances, there is a cause of action under copyright law where a party has allegedly exceeded a license agreement so as to infringe upon a licensor's copyrighted works."  The Court denied the motion to dismiss, but noted "that a prompt Motion for Summary Judgment by Defendants will either dispose of this case entirely or at least will significantly narrow it."

Court Denies Reconsideration of Motion to Compel Settlement-Related Documents

In an October 11, 2013 ruling, Judge Denny Chin, sitting by designation, denied reconsideration of plaintiff the American Society of Media Photographers, Inc.'s motion to compel production of documents listed on defendant Google, Inc.'s privilege log.  Judge Chin rejected the argument that their inclusion on the log demonstrated their relevance, writing that "the inclusion of documents merely means that they are responsive to the request for the production of documents, not that they are relevant or are reasonably calculated to lead to admissible evidence."  The Court also noted that the plaintiff also failed to explain how documents relating to Google's settlement talks with another party are relevant, ruling that  if "defendant expressed its view as to its fair use defense in settlement discussions, those statements are not relevant or, even assuming some relevance, they are not admissible."

Court Grants Copyright Ownership to the Plaintiff and Awards Attorneys' Fees

In a September 30, 2013 ruling, Judge Richard J. Sullivan granted summary judgment and attorneys' fees to plaintiff 16 Casa Duse, LLC in its copyright declaratory judgment action against defendant Alex Merkin over the ownership of the copyright in the short film entitled "Heads Up."  The plaintiff purchased all rights to the screenplay for the film, and then assembled a cast and crew.  Every member of the cast and crew, except Merkin, the director, signed agreements specifically assigning all intellectual property rights to the plaintiff.  After a director's cut of the film had been completed, a dispute about copyright ownership developed between the plaintiff and Merkin.  When the parties' relationship completely broke down, Merkin obtained a copyright registration in the director's cut of the film, listing his authorship as "direction/director."  Plaintiff commenced this action, and its amended complaint asserted, among other claims, declaratory judgments that the plaintiff is not liable for copyright infringement and that Merkin has no ownership in any copyright to the film, and to invalidate Merkin's registration.  Merkin counterclaimed with various declaratory judgment claims relating to the copyright issues.  Both parties moved for summary judgment.

Judge Sullivan easily disposed of the plaintiff's claim of non-liability for copyright infringement, ruling that the plaintiff was -- at the very least -- a joint author of the work, so the plaintiff could not "be liable for copyright infringement because co-authors each own an undivided interest in the work." 

The Court next considered whether the plaintiff was the sole or co-author of the work under the Second Circuit's two-pronged test which looks at whether "'each of the putative co-authors (1) made independently copyrightable contributions to the work; and (2) fully intended to be co-authors.'"  Regarding the first prong, Judge Sullivan found that the plaintiff did "not contest that Merkin made independently copyrightable contributions to the Film."  Judge Sullivan, however, strongly found against Merkin on the second prong, finding that "the record uniformly establishes that Plaintiff, through its principal, . . . never intended to share authorship of the film with Merkin or anyone else." 

The Court concluded the plaintiff "is entitled to a declaratory judgment that Merkin holds no copyright ownership interest in the Film."  Judge Sullivan rejected Merkin's counterclaims based largely on the conclusion that Merkin has no copyright interest in the film, and likewise invalidated Merkin's registration in the director's cut to the film that Merkin had obtained.

Court Invalidates Patent Based on Patent Counsel's Inequitable Conduct

In a September 30, 2013 ruling, Judge Laura Taylor Swain invalidated plaintiff Worldwide Home Products, Inc.'s patent on the ground of inequitable conduct, and dismissed plaintiff's infringement action against Bed, Bath and Beyond, Inc. and Cohesion Products Inc.  The patent-in-suit relates to a clothing hanger having two configurations.  During the prosecution of the application that matured into the patent-in-suit, the plaintiff's patent lawyer submitted to the PTO pages from a website of another product that it deemed relevant to the claimed invention.  The website pages, however, only had low resolution images of the product, which made it difficult to distinguish particular product features.  The plaintiff's patent counsel made representations to the patent examiner about what the web pages showed about the product, and on the basis of those representations, the examiner allowed the application.  Unbeknownst to the PTO, however, the plaintiff's attorney had an actual sample of the product and high resolution photographs of the product that had been supplied by the defendants' counsel.  The actual product and the high resolution photographs showed that plaitniff's patent counsel's representations to the PTO were untrue.  Patent counsel claimed that he did  not supply the product or high resolution photographs to the PTO because they were undated, so he could not tell whether or not they were prior art.

A threshold issue for Judge Swain in determining the defendants' motion for summary judgment of invalidity based on inequitable conduct was the admissibility of the report and testimony of defendants' expert witness, William Poms, n former patent examiner, that that plaintiff's patent counsel had committed inequitable conduct.  The plaintiff argued that Poms' testimony was "not properly admissible under Federal Rule of Evidence 702 in that it inaccurately informs the Court of the law and usurps the court's and jury's roles in determining the law and facts of" the case.  The Court rejected the challenge, ruling that "Mr. Poms is qualified as an expert in the patent prosecution process, having served as both a PTO examiner and a prosecuting attorney.  He has based his opinions on the factual record before the Court, and has reliably applied his knowledge of the facts and the law."

Court Denies Cross-Motions for Summary Judgment in Copyright Infringement Claim and Dismisses Fair Use Defense

In a September 26, 2013 ruling, Judge Cathy Seibel denied the parties' cross-motions for summary judgment in Firesabre Consulting LLC's copyright infringement claim against educator Peggy Sheehy and the board of the Ramapo Central School District.  The "copyright case arises from a dispute over payment for computer programming and digital design services rendered in connection with the virtual world Second Life.  Second Life is an internet-based simulation in which users appear via digital characters called 'avatars' and interact with a computer-generated environment."  Sheehy and others in the school district created three "islands" in Second Life for educational use with her students.  After meeting the principal of Firesabre Consulting, Frederick Fuchs, at a conference, Sheey had him to do some development work on the islands.  Fuchs also later developed three additional islands for Sheey's Second Life project.  There was never any written contract between Firesabre Consulting and the school district, but the district did pay Firesabre Consulting $5,000 for some of the work.  After a falling out, Firesabre Consulting demanded that the school district stop using its work.  Also after that, the school district migrated its "islands" from the Second Lfe platform to SIMS, copying some of plaintiff's work in the process.

Firesabre Consulting sued for copyright infringement, alleging that the defendants' continued to use his work after the relationship soured (and thus ended any license to the work), and that the migration from Second Life to SIMS involved unauthorized copying.  Defendants defended by arguing that the plaintiff's work was ineligible for copyright protection because it was not "fixed," and that the plaintiff's copyright deposit was insufficient to bring defendants' copying within its scope.  Judge Seibel rejected both these defenses, ruling that "[d]igital images in a video game are 'fixed' within the meaning of the Act" when they are stored in memory, and that although plaintiff's deposit could have been more complete, the overall design of Firesabre Consulting's work was sufficiently visible in the deposit.  The Court denied plaintiff's motion for summary judgment, though, finding issues of disputed fact about whether the defendants' work was substantially similar to the copyrighted work, and about the scope of defendants' authority to use plaintiff's work.

Court Refuses to Dismiss Trademark Infringement Claims, But Notes They Are Close to Line of Improper Copyright Claims

In a September 23, 2013 ruling, Judge Andrew L. Carter denied plaintiff Expressway Music, Inc.'s motion to dismiss defendant Slep-Tone Entertainment Corp.'s trademark infringement and unfair competition counterclaims.  Slep-Tone alleged that Expressway "acquired or made unauthorized duplicates of Slep-Tone's karoke accompaniment tracks.  These unauthorized media- and format-shifted duplicates were marked with Slep-Tone's 'SoundChoice' trademark and distinctive trade dress."  The Court found that these allegations were sufficient to meet the Iqbal standard and state trademark and unfair competition claims.

Expressway argued that the real thrust of Slep-Tone's complaint was to challenge the copying of the media- and format-shifted recordings, which is in the nature of copyright infringement, not trademark infringement.  Judge Carter noted that the "case may toe the line between a trademark claim attempting an 'end run around the copyright laws' and a viable trademark claim," but that "regardless of the copyright status of these videos, Slep-Tone alleges facts about the misuse of its trademark on products it did not create, namely because Slep-Tone's registered trade dress and trademark appear on Expressway's media- and format-shifted tracks.  These are cognizable claims under the Lanham Act."

"Manufactured" Sale in District to Party's Counsel Insufficient for Personal Jurisdiction

In a September 20, 2013 ruling, Judge Robert W. Sweet granted defendant Roger Nunn's motion to dismiss plaintiff North Jersey Media Group, Inc.'s copyright infringement complaint against him for lack of personal jurisdiction.  North Jersey Media alleged that Nunn violated its copyright "of a photographic impage depicting firefighters raising an American flag at the site of the World Trade Center in the immediate aftermath of the events that took place in New York City on September 11, 2001 . . . by selling a copy of the WTC Photo over the internet." 

Judge Sweet wrote that in "order for a federal court sitting in New York to assert personal jurisdiction over Nunn, a California resident, NJ must satisfy the requirements of both New York's long-arm statute, N.Y. C.P.L.R. § 302 . . ., as well as the Due Process Clause."  The Court noted that in "general, an allegation of a defendant's infringing sales to residents in New York is sufficient to satisfy § 302," and found that the complaint did allege such a sale, thus complying with New York's long-arm statute.  Judge Sweet held, though, that Nunn's single sale in New York -- a "manufactured" sale to North Jersey Media's counsel -- failed to satisfy the Due Process Clause.  In particular, the Court ruled that North Jersey "has failed to establish that Nunn's conduct satisfies either the minimum contacts inquiry or the reasonableness inquiry; accordingly, Nunn's right to due process bars this Court's exercise of personal jurisdiction over him in the instant action."

Court Allows Expedited Discovery About Defendants' Identity in Trademark Action

In a September 11, 2013 ruling, Judge Lorna G. Schofield granted plaintiff Admarketplace, Inc.'s motion for expedited discovery before the parties' Rule 26(f) conference to identify the citizenship and location of defendant Tee Support, Inc.  Admarketplace asserted claims for defamation and trademark infringement against Tee Support, but was unable to learn sufficient details to effect service despite its diligence in trying to do so.  Judge Schofield ruled that Admarketplace had made a prima facie case of trademark infringement (and defamation) .  The Court concluded that "Plaintiff, who has a potentially meritorious claim and no ability to enforce it absent expedited discovery, has demonstrated good cause for expedited discovery upon the five parties identified in their motion."

Attorneys' Fees Awarded to Prevailing Defendant in Copyright Infringment Action

In a September 10, 2013 ruling, Judge Paul G. Gardephe granted defendant Hilton Worldwide, Inc.'s motion for attorneys' fees after it secured summary judgment against plaintiff Aqua Creations USA, Inc.'s copyright infringement claims.  Aqua Creations had sought copyright registrations on its lighting designs.  The Copyright Office denied registration, finding that the lighting designs were useful articles that did not contain any creative authorship separable from the articles themselves.  After the Copyright Office denied reconsideration, Aqua Creations started the action against Hilton, alleging copyright infringement of its unregistered lighting designs.  Hilton sought a pre-motion conference to dismiss the complaint because it failed "'to identify any separable, non-functional, artistic elements of the designs.'"  At the conference, the Court gave Aqua Creations leave to file another amended complaint.  That amended complaint, however, suffered from the same defect, and Judge Gardephe granted Hilton's motion to dismiss.  Aqua Creations appealed, and the Second Circuit affirmed, relying on the same cases and adopting the same reasoning as Judge Gardephe had in dismissing the amended complaint.

Hilton then sought attorneys' fees, for the cost of the appeal only, under the Copyright Act provision giving the Court discretion to award fees to the prevailing party, 17 U.S.C. § 505.  Judge Gardephe found that "[b]y the time Aqua filed its appeal, it had been alerted on at least five separate occasions that its copyright claims were defective, because it had not demonstrated that the designs in its light fixtures were separable from the utilitarian and functional aspects of these lamps" -- twice by the Copyright Office, once by Hilton in its letter asking for a pre-motion conference, and twice by the Court in considering the adequacy of Aqua Creations' complaints.  The Court thus ruled that "[u]nder these circumstances, this Court cannot find that Aqua's actions in prosecuting the appeal were objectively reasonable."  Judge Gardephe awarded fees, but in a reduced amount from that sought by Hilton.

Court Rules in Favor of Manufacturer Over Distributor in Lanham Act Dispute

In a September 10, 2013 ruling after a bench trial, Judge Marvin E. Aspen ruled in favor of plaintiff Excell Consumer Products Ltd. in its Lanham Act and state law claims over the the "Smartcandle" mark and related logos.  Defendants Structural Integrity Property Services, LLC and Smart Candle LLC had been Excell's distributor of battery-operated candles sold under the "Smartcandle" marks.  Excell had originally licensed the marks from a party referred to as SCK.  After the distribution arrangement between Excell and Structural ended, Structural asserted ownership of the marks, and sought to register them with the USPTO.  Excell asserted Lanham Act and state law unfair competition claims against Structural, which counterclaimed with like causes of action.

Judge Aspen found that since the parties essentially asserted mirror Lanham Act claims against each other, they had effectively conceded all the elements of the claims, so the dispute became one of ownership of the marks at issue. Excell argued three ways through which it had acquired the marks at issue:  (1) as a licensee from SCK; (2) as a purchaser from SCK under another agreement; and (3) as the acquirer of the marks after SCK abandoned them.  The Court rejected the first two grounds, but found in Excell's favor on the abandonment issue.

Judge Aspen noted that a mark is abandoned if the owner "'discontinues use with the intent not to resume such use in the foreseeable future,'" and that there is presumptive abandonment after three years of non-use.  Also according to the Court, "[o]nce abandoned, 'a mark returns to the public domain and may, in principle, be appropriated for use by other actors in the marketplace, in accordance with the basic rules of trademark priority.'"  Judge Aspen ruled that the marks had been abandoned because SCK was dissolved in 2007, "and there is no evidence that it ever resumed operations." 

Court Dismisses in Part Copyright Infringement Claim Over Sampled Music

In a September 10, 2013 ruling, Judge Alison J. Nathan granted in part defendants' motion to dismiss plaintiff TufAmerica, Inc.'s copyright infringement action.  TufAmerica, which is "the putative exclusive administrator and copyright licensee of a number of copyrights to the compositions and sound recordings of the musical group Trouble Funk," sued the individual members of the Beastie Boys and others, alleging that the group "unlawfully sampled a number of Trouble Funk's songs on the Beastie Boys' hit albums Licensed to Ill and Paul's Boutique."  TufAmerica's amended complaint asserted copyright infringment claims for six acts of unlawful sampling in Beastie Boys songs, and in particular that the samples "infringed both the musical composition and the sound recording of the sampled Trouble Funk songs." 

In analyzing whether the accused songs were substantially similar to the sampled songs for copyright infringement purposes, Judge Nathan applied the "fragmented literal similarity" test under which the Court examines whether there is "'localized' rather than 'global' similarity between the two pieces."  Applying this test, the Court noted that "'the question of substantial similarity is determined by an analysis of "whether the copying goes to trivial or substantial elements' of the original work.'"  Further, Judge Nathan wrote that the "real question" at the motion to dismiss "stage -- more so than the question of how to label the relevant test -- is whether (as to each sample) Plaintiff has plausibly alleged that the sample is quantitatively and qualitatively important to the original work such that the fragment similarity becomes sufficiently substantial for the use to become an infringement."

Court Finds Video Service to Be in Contempt of Injunction Against Copyright Infringement

In a September 10, 2013 ruling, Judge Naomi Reice Buchwald granted plaintiff CBS Broadcasting Inc.'s motion for civil contempt against Filmon.com, Inc., and ordered Filmon.com to comply with the permanent consent injunction to which it had previously agreed.  Judge Buchwald also ordered Filmon.com to complete a payment of $1,350,000, and awarded the costs of the enforcement motion. 

The action arose out of CBS's and other broadcasting networks' claims that Filmon.com's retransmission of their broadcast signals to its customers constituted copyright infringement.  After CBS filed a motion for a preliminary injunction, and the parties engaged in discovery, the parties reached a settlement that "was conditioned upon this Court's entry of a stipulated consent judgment and permanent injunction prohibiting FilmOn from further infringing plaintiffs' copyrights."  The Court entered the consent injunction in July 2012.

By January 2013, CBS and other plaintiffs began to allege various violations of the injunction, including the lack of a promised payment, Filmon.com's principal's continuing disparagement of CBS, and, most significantly, Filmon.com's launch of a new video on demand service that plaintiffs contend violate their copyrights.  After the parties were unable to resolve their differences, CBS sought an order of contempt.

Court Declines to Modify Permanent Injunction Against Infringement to Permit Defendant's Redesign

In an August 29, 2013 decision, Judge Robert W. Sweet denied defendant Green Project, Inc.'s Rule 60(b) motion to modify the consent permanent injunction obtained by plaintiff Canon, Inc. to allow Green Project to produce a product that it claimed designed around Canon's patent.  Judge Sweet denied relief, writing that as "in analogous cases where district courts have denied motions that 'would amount to an impermissible advisory opinion,' Green Project inappropriately seeks a pre-approval of its future behavior, namely, selling its redesign."  The Court also noted that "[e]ven if Rule 60(b) relief were appropriate, Green Project has not provided sufficient evidence to conclude that its redesign does not infringe any claims of" Canon's patents," particularly since its non-infringement contentions were based on attorney argument rather than expert testimony.  Judge Sweet concluded that Green Project's "motion is thus inadequate, and an inappropriate procedure, for determining issues of infringement."

Court Declines to Strike Patent Infringement Affirmative Defense of Prosecution History Estoppel as Inadequately Pled

In an August 30, 2013 ruling, Judge Alvin K. Hellerstein denied plaintiff Alcorn Communications, LLC's motion to strike defendant Marketwire, Inc.'s patent infringement affirmative defenses of prosecution history estoppel and/or prior art finding that "these allegations are too important, and too conclusory, to be answered, but no answer to an affirmative defense is required."  The Court, however, cautioned that "without greater specificity, no discovery will be allowed with respect to this defense, and the defense is likely to be stricken before trial."

Court Grants Summary Judgment of Patent Non-Infringement and Denies Invalidity Motion as Moot

In an August 29, 2013 ruling, Judge P. Kevin Castel granted the motion of Google, Inc. and Facebook, Inc. for summary judgment of non-infringement, and denied their motions for summary judgment of invalidity.  The patents-in-suit "disclose methods and systems which allow users without web programming skills to create mobile websites with personally-authored content for display on mobile devices."  The plaintiff, Wireless Ink Corporation, sued for patent infringement over the Google and Facebook websites, alleging literal infringement and infringement under the doctrine of equivalents. 

With regard to literal infringement, the Court noted that it "requires that every limitation recited in the asserted claim appear in the accused device or method. . . . Therefore, if even one limitation is not present in the accused product, there is no literal infringement."  Judge Castel then reviewed the evidence of infringement proffered by Wireless Ink in response to the summary judgment motions, and concluded that Wireless Ink had failed to come forward with evidence from which a reasonable fact-finder could find that all the claim limitations in the asserted claims in the patents-in-suit are present in the Google and Facebook websites.  In response to several of Wireless Ink's infringement arguments, the Court noted that Wireless Ink did not dispute the facts proffered by defendants but merely argued claim interpretation and ruled that where "'as here, the parties do not dispute any relevant facts regarding the accused product but disagree over which of two possible meanings of Claim 1 is the proper one, the question of literal infringement collapses to one of claim construction ans id thus amenable to summary judgment.'"  The Court adhered to its original claim construction ruling, and granted judgment in favor of Google and Facebook.  Judge Castel also dismissed Wireless Ink's claims under the doctrine of equivalents, writing that Wireless Ink conceded that it had "offered no evidence to support a theory of infringement under the doctrine of equivalents."

Court Denies Defendant's Motion for Reconsideation of Claim Construction Ruling

In an August 27, 2013 ruling, Judge Alison J. Nathan denied defendant T-Mobile USA, Inc.'s motion for reconsideration of the Court's earlier claim construction ruling.  Judge Nathan noted that "Defendant has failed to meet the motion for reconsideration standard," but the Court nevertheless considered T-Mobile's arguments and found them meritless.  One of T-Mobile's contentions, presented in the motion for reconsideration for the first time was that the preamble of the claim at issue "should be read to limit claim scope because the claim does not make sense without any preamble."  The Court rejected this argument, writing that "most claims would not make sense without any preamble, yet the Federal Circuit has instructed that 'generally' preambles do not limit claim scope."  Judge Nathan also concluded "that the claim is understandable without considering the preamble as a limitation, and that the claim body independently and fully describes a coherent device without any limitation imposed by the preamble."  The Court considered and rejected T-Mobile's remaining three arguments, and denied reconsideration.

Court Finds That Federal Circuit's Akamai Decision Did Not Change Law of Direct Patent Infringement

In an August 26, 2013 ruling, Judge Deborah A. Batts denied reconsideration of the Court's ruling dismissing plaintiff Edwin Lyda's patent infringement claim against Fremantlemedia North America, Inc.  Lyda argued that the Federal Circuit's decision in Akami Techs, Inc. v. Limelight Networks, Inc., 692 F.3d 1301 (Fed. Cir. 2012), which overruled in part BMC Resouces Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007) relied on in the Court's original ruling, warranted reconsideration.  Akamai and BMC, however, both deal with induced infringement, and Lyda's claim was based on direct infringement.  Judge Batts ruled that Akamai did not overrule the portion of BMC on which she relied in her earlier decision, and that the Akamai decision "consciously avoided ruling on direct infringement."  Thus, Judge Batts found that "Akamai did not change the law of direct infringement, and it is, therefore, not relevant to the Court's prior decisions."

Court Holds that Mere Registration of Domain Names Does Not Constitute "Use in Commerce" Under the Lanham Act

In an August 26, 2013 ruling, Judge Deborah A. Batts granted in part defendants' motion to dismiss Courtalert.com, Inc.'s complaint asserting. Courtalert.com and defendant e-law.com both supply alerts about court filing to lawyers and others users.  Courtalert.com alleged that e-law.com registered five domain names incorporating Courtalert.com's trademarks in full.  e-law.com cancelled the domain names following Courtalert.com's objection, but Courtalert.com sued anyway, asserting five Lanham Act claims (trademark infringement, unfair competition, false designation of origin, cybersquatting and dilution), and a state unjust enrichment claim.

The Court dismissed the trademark infringement claim, holding that Courtalert.com had failed to allege use of the infringing marks in commerce.  Judge Batts noted that there are circumstances under which a defendant's use of a mark can satisfy the "use in commerce" standard if it has an impact on the plaintiff's commercial activities, but found that Courtalert.com's complaint did not claim such use.  In particular, Judge Batts wrote:
The Complaint does not claim, for instance, that when typed into the address bar, any of the five domain names at issue directs visitors to Defendants' commercial website.  Nor does Plaintiff allege that the domains names, when typed in, lead users to information opposing Plaintiff's products or service.  In fact, Plaintiff does not allege that any message at all results when the domain names are typed in.  As such, a critical component of the "classically competitive" behavior is missing here, and Defendants' behavior seems to amount to nothing more than mere registration of a domain name.

Court Applies Injury Rule, Rather than Discovery Rule, to Accrual of Copyright Infringement Claim

In an August 21, 2013 ruling, Judge Loretta A. Preska granted in part and denied in part defendants' motion for summary judgment on statute of limitations grounds in plaintiff Muench Photography, Inc.'s copyright infringement claims.  The parties agreed "that the principal question of law at issue with respect to whether certain of plaintiff's claims are time-barred is when a copyright infringement claim accrues under the three-year statute of limitations in the Copyright Act, 17 U.S.C. § 507(b)."  The two accrual possibilities are when the injury occurred or when it was discovered.  According to the Court, prior Second Circuit law strongly indicated that the discovery rule applied, but the Supreme Court's decision in TRW v. Andrews, 534 U.S. 19 (2001) required reassessment that position.  Judge Preska surveyed the split of authority in the District on the issue, and joined "what is now the majority approach in this jurisdiction in adopting the injury rule for the purposes of evaluating whether copyright infringement claims are time barred."  Applying the injury rule, Judge Preska found some of Muench's claims time barred, and allowed others to proceed.

Dismissal of False Designation of Origin Claim Denied

In an August 19, 2013 ruling, Judge Thomas P. Griesa denied defendants' motion to dismiss plaintiff Pop Bar, LLC's complaint, including a Lanham Act unfair competition claim.  Pop Bar makes and sells customizable Italian gelato, sorbet and frozen yogurt on a stick under its Popbar and Popbar system marks, and licenses others to do the same.  The defendant, Hip Pops, LLC, approached Pop Bar about becoming a franchisee, and signed a confidentiality agreement before receiving Pop Bar's "recipes and formulas, specially designed equipment, systems and methods of making customized Popbar products, and ideas for Popbar food trucks."  Negotiations then broke down under circumstances that Pop Bar contended show that Hip Pop never intended to enter into a deal with Pop Bar, and merely acted as if it would do so to gain access to Pop Bar's confidential information.  Hip Pop subsequently introduced competing products under the HipPOP mark.  Pop Bar sued, asserting a variety of claims, including false designation of origin under the Lanham Act.

Court Dismisses in Part Lanham Act Claims for Lack of Standing, Permissible "Gray Goods"

In an August 15, 2013 ruling, Judge Ronnie Abrams granted the cross motions for partial judgment of plaintiff L'Oreal USA, Inc. and defendant Trend Beauty Corp. in L'Oreal's action alleging Lanham Act and state law claims against Trend Beauty.  Trend Beauty was an unauthorized wholesaler of L'Oreal's luxury fragrances.  L'Oreal claimed that "Trend Beauty's unauthorized sale of counterfeit and 'decoded' L'Oreal fragrances in the 'gray market' interfered with L'Oreal's ability to control the quality of its products," and that "the counterfeit and decoded products materially differed from L'Oreal's 'coded' products so as to constitute . . . trademark and trade dress infringement."  The "coding" refers to quality assurance, security and Universal Product Code codes that L'Oreal places on its products.  A "decoded" product is one for which one of the codes have been removed, such as the fragrance bottle has been removed from its outer box.  Trend Beauty admits that it sold decoded L'Oreal products, and further admitted that it sold about 200 units of counterfeit product, but disputes that it knew or should have know that the product was counterfeit.

As a threshold matter, Judge Abrams considered whether L'Oreal, as a licensee of the marks at issue, had standing to assert trademark infringement, and concluded that L'Oreal did not have standing.  The Court noted that "L'Oreal only has standing to bring its trademark infringement claims if it qualifies as a legal representative or assignee of the registrants."  The Court rejected the argument that L'Oreal was the assignee of the marks based on the factual record, and then considered whether L'Oreal is the "legal representative" of the owners of the marks.  Judge Abrams relied on recent a Second Circuit case addressing the issue as a matter of first impression, and ruled that the term requires "a party to show that it 'has the authority to appear on behalf of the registrant/owner with respect to the registrant/owner's legal interests and the registrant/owner is unable or incapable of representing itself and enforcing its own rights.'"  The Court applied this standard, and concluded that L'Oreal was not the registrant's legal representative.  Judge Abrams rejected L'Oreal's dilution claims under 15 U.S.C. § 1125(c) on the same ground.

Court Declines to Dismiss Copyright Infringement Claim Based on Covenant-Condition Doctrine

In an August 15, 2013 ruling, Judge Loretta A. Preska refused to dismiss plaintiff Muench Photography, Inc.'s copyright infringement claims against defendant The McGraw-Hill Companies, Inc.  Muench owns copyrights in various photographs that it licensed to McGraw-Hill (through a third party agency) for a limited, specified number of uses in McGraw-Hill publications.  Muench alleged that McGraw-Hill deliberately exceeded the number of permissible copies of the licensed photographs, breaching the terms of the license and infringing Muench's copyrights.  McGraw-Hill argued that under the terms of the license, it effectively had "'carte blanche permission to use [the Photographs] any way it chose and pay later.'"  Thus, according to McGraw-Hill, the plaintiff "is precluded under the covenant-condition doctrine from suing for copyright infringement."  The Court rejected that argument, noting that Muench .
sets forth in the [second amended complaint] that the relevant Photographs were licensed for up to a specific number of uses, and Plaintiff explicitly claims that Defendant, without authorization, used photographs with copyrights registered to Plaintiff beyond the licenses granted both in publications identified in the [second amended complaint] and in publications not yet identified.
Judge Preska held that the allegations are sufficient at the pleading stage to state a copyright infringement claim, and ruled that "Defendant's arguments with respect to the covenant-condition doctrine amount to a dispute between the parties about contract interpretation that is beyond the purview of the Court on a motion to dismiss."

Attorneys' Fees Denied in Trademark Infringement Action Despite Bad Faith

In an August 12, 2013 ruling, Judge Colleen McMahon denied defendant Conduit Limited's post-trial motions for judgment as a matter of law and plaintiff MyPlaycity, Inc.'s ("MPC") motion for attorneys' fees in what the Court characterized as a "long, tortuous" litigation.  Before trial, Judge McMahon had entered summary judgment of liability in favor of MPC on its Lanham Act claims, common law trademark infringement and unfair competition claims, and unjust enrichment claim.  The Court "also concluded that Conduit had acted in bad faith as a matter of law."  After a damages trial, the jury awarded $500,000 in disgorgement of Conduit's profits.  Despite the clear wording of 15 U.S.C. § 1117(a) that the plaintiff need only prove the defendant's sales in seeking an award of profits and the burden is on the defendant to prove any offsets, Conduit argued that "MPC bore the burden of distinguishing between Conduit's profits flowing from its infringing activity and from its non-infringing uses of MPC's trademark."  The defendant's argument was based principally on Burndy Corp. v. Teledyne Indus., Inc., 748 F.2d 767 (2d Cir. 1984).  Judge McMahon considered that case and the cases discussing it, and concluded that "Conduit is wrong to assert that Burndy (or any other of the cases it cites) required MPC to do more than demonstrate the gross amount of Conduit's . . . profits from activity related to" MPC's use of the mark.  It then became Conduit's burden under Section 35(a) of the Lanham Act to prove that this entire amount was to unjust enrichment."  The Court considered, and rejected, a variety of other attacks on the damages award, and ultimately upheld it in its entirety.

Amendment of Patent Infringement Contentions with Information Learned in Discovery Denied

In an August 12, 2013 ruling, Judge Laura Taylor Swain, applying the Northern District of California patent rules, denied plaintiff Richard A. Williamson's motion to amend its infringement contentions in its patent infringement action against AT&T Operations, Inc.  The plaintiff sought to amend his contentions supposedly in response to information learned from AT&T's Rule 30(b)(6) deposition and 1.8 million page document production.  AT&T contended, and the Court agreed, that the information that Williamson supposedly learned through discovery was publicly available before he filed his infringement contentions.  Williamson nevertheless contended "that publicly available information at the time he served his infringement contentions was less reliable than non-public information that became available during discovery."  Judge Swain rejected this argument, writing that "[a]llowing a Plaintiff to delay serving infringement contentions because publicly available information might not be as reputable as yet-undisclosed information would run contrary to the purpose of the" infringement contention disclosure rules of focusing discovery and the remainder of an infringement case.  The Court thus found that the plaintiff lacked diligence in seeking to amend his contentions, and denied the motion without having to reach whether AT&T was prejudiced by the delay.

Court Orders Remittitur of the Jury's Award for Patent Infringement

In an August 14, 2013 ruling, Judge Jed S. Rakoff ordered a remittitur of the $30 million judgement obtained by Tomita Technologies USA, LLC in its patent infringement action against Nintendo co., Ltd. over its Nintendo 3DS gaming console. Nintendo argued that the damages award was excessive because it used the "entire market value" of the 3DS consoles as the royalty base rather than the "'smallest salable patent-practicing unit.'"  Nintendo based its argument on "the rule that, in calculating damages for multi-component products accused of infringement, royalties must 'be based not on the entire product, but instead on the "smallest salable patent-practicing unit."'"  The Court reasoned that "[w]hether the entire market value rule is implicated thus turns on the question of whether the 3DS constitutes the 'smallest salable patent-practicing unit.'" 

Judge Rakoff adhered to his ruling, made in response to Nintendo's in limine motion, that Tomita's expert "properly looked to the 3DS itself as the 'smallest salable patent-practicing unit,'" and did not rely on the entire market value rule.  The Court thus declined to order a remittitur on that ground. 

Judge Rakoff nevertheless did find that "the jury's $30.2 million damages award is 'intrinsically excessive' and unsupported by the evidence presented at trial."  In particular, the Court found that although the reasonable royalty rate of 3% found by the jury is less than a comparable license to which Tomita is a party, "there are special circumstances relating to the 3DS that strongly suggest that such a royalty rate is excessive in this context."  Those factors, according to Judge Rakoff, are that the 3DS consoles are not profitable for Nintendo, and that the infringed patent-in-suit was used in only two functions of the consoles that were "in some sense ancillary to the core functionality of the 3DS as a gaming system."  Judge Rakoff thus gave Tomita a choice of accepting one-half of the damages awarded or facing a new trial.

Dilution and Unfair Competition Claims Dismissed on Motion for Judgment on the Pleadings

In an August 12, 2013 ruling, Judge Laura Taylor Swain granted defendants' motion for judgment on the pleadings dismissing plaintiff Allied Interstate LLC's complaint against them.  Allied Interstate provides debt collection, among other services.  The defendants, Kimmel & Silverman P.C., are a law firm specializing in Fair Debt Collection Practices Act cases, and operate a website, www.creditlaw.com, to promote their services.  Allied Interstate asserted federal and state unfair competition-related and dilution claims arising from the defendants' alleged use of "Allied Interstate" on their website, in the metadata for the site (which is not typically viewable by a user of the site), and in their purchase of the phrase as part of Google's AdWords program.  Without reaching the issue of whether "Allied Interstate" is a famous mark, Judge Swain dismissed the dilution claims finding:  (1) the claim is inapplicable where the defendant uses the mark to refer to the mark owner's goods or services as defendants used the mark here; (2) defendants' use of the mark was a fair use; and (3) to the extent that defendants used the mark to draw a distinction between Allied Interstate's services and their own, the use fell within the comparative advertising exception to a dilution claim under 15 U.S.C. §1125(c)(3)(A)(i).  Concerning the unfair competition and false designation of origin claims, the Court found the allegations to be implausible formulaic conclusions.  Focusing on defendants' actual use of the "Allied Interstate" mark, Judge Swain ruled:

Magistrate Recommends Statutory Trademark Damages and Permanent Injunction Against Counterfeiters

In an August 9, 2013 ruling, Magistrate Judge Frank Maas recommended a $9 million award of statutory trademark damages to Tiffany (NJ) LLC against a series of related defendants (all but one of whom is located in China) and their credit card processor and entered a permanent injunction, but declined to enter a turnover order of funds held in Chinese banks pending an appeal to the Second Circuit of a similar order in another action.  Tiffany filed its complaint against the defendants alleging that they, "through a series of companies and websites, unlawfully manufactured, marketed and sold counterfeit versions of trademarked Tiffany products over the internet, in violation of the Lanham Act."  Tiffany also sued the defendants' credit processor, 95epay, alleging contributory infringement.  All defendants defaulted, and an inquest was ordered.  None of the defendants appeared at the inquest, although three Chinese banks holding defendants' assets and that had previously been restrained appeared to contest a turnover order on, among other grounds, China's bank secrecy laws.

Heightened Pleading Standard Applies to Patent Invalidity Counterclaims

In an August 7, 2013 ruling, Judge Paul A. Engelmayer granted-in-part the motion to strike certain affirmative defenses and to dismiss counterclaims of non-infringement and invalidity in plaintiff Orientview Technologies LLC's patent infringement action against Seven for All Mankind, LLC ("7FAM").  Most notably, the Court ruled that an invalidity counterclaim must meet the heightened pleading standards under Twombly  and Iqbal.  In dismissing the invalidity counterclaim under Fed. R. Civ. P. 12(b)(6), Judge Engelmayer noted the split in the cases about whether the relaxed pleading standard for patent infringement cases or the more rigorous Twombly and Iqbal standards applied, and held that "in the absence of any directive that claims of invalidity, like claims of direct infringement, should be measured under a different standard than almost all other claims in this Circuit are, the Court declines to do so." 

Regarding the affirmative defenses, while the motion was pending the parties agreed that two of the defenses at issue, concerning indirect infringement which was not alleged by plaintiff and injunctive relief which plaintiff had not sought, are not relevant to the case, and the Court struck them as "immaterial" under Fed. R. Civ. P. 12(f).  Plaintiff challenged a third affirmative defense, that the scope of the patent-in-suit was not broad enough to encompass the defendant's conduct, on the ground that it was duplicative of another defense that the defendant has not infringed any claim.  In denying the motion, Judge Engelmayer noted that courts have broad discretion in deciding motions to strike and that such motions are generally disfavored.  The Court found that to "the extent Overview argues that the defense is redundant, its retention poses no risk of prejudice to Overview which is already obligated to defend itself against" the supposedly duplicative defense and the non-infringement counterclaim.

Prevailing Defendant Denied Award of Attorneys' Fees in Lanham Act Claim

In an August 7, 2013 ruling, Judge Jed S. Rakoff denied the motion of defendants House of Cheatham Inc. and Robert Bell for attorneys' fees under the Lanham Act after the defendants prevailed on the trademark infringement, false designation of origin, unfair competition and state dilution claims brought by the plaintiff, Akiro LLC.  The Court first noted that Second Circuit case law "'allows recovery of a reasonable attorney's fee only on evidence of fraud or bad faith,'"  although some cases have allowed fees where the suit was a "'competitive ploy'" or where the suit is initiated with "'ulterior business motives.'"  In support of their motion, "defendants largely focus[ed] on such matters of the timing of Akiro's decision to commence this action, particular tactical decisions, and the expense of defendants' defense."  The Court, however, ruled that "the proper inquiry centers on whether or not Akiro 'had a credible, good faith basis on which to rest its Lanham Act claims."  After considering the (albeit limited) evidence presented at trial, Judge Rakoff held that "the Court cannot conclude that Akiro lacked a good-faith basis for its claims," and denied an award of fees.
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