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

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.
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