Court Dismisses, With Leave to Replead, Copyright Infringement Complaint that Failed to Specify Time of Infringement

In a January 31, 2014 ruling, Judge Kimba M. Wood granted defendant The McGraw-Hill Companies’ motion to dismiss plaintiff David Young-Wolff’s copyright infringement claim under Rule 12(b)(6). Young-Wolff alleged that McGraw-Hill used his copyrighted photographs in text books that it published. Young-Wolff further alleged that it licensed certain photographs to McGraw-Hill for certain specified texts to be published in specified numbers. McGraw-Hill, according to Young-Wolff, “(1) published Plaintiff’s photographs without permission; (2) reused Plaintiff’s photographs in subsequent editions of titles without obtaining a valid license; (3) published Plaintiff’s photographs prior to obtaining a valid license; (4) exceeded limited license agreements. . .; and (5) refused to provide information to Plaintiff regarding the scope of its past, current, and ongoing use of Plaintiff’s photographs.”

The Court began its analysis by noting that a “‘properly plead copyright infringement claim must allege 1) which specific original works are the subject of the copyright claim, 2) that plaintiff owns the copyrights in those works, 3) that the copyrights have been registered in accordance with the statute, and 4) by what acts during what time the defendant infringed the copyright.’” McGraw-Hill asserted that Young-Wolff had failed to allege that the copyrights have been duly registered, and to specify the acts and times of infringement. Although Judge Wood rejected most of McGraw-Hill’s arguments, the Court did find that “Plaintiff has failed to adequately allege ‘during what time the defendant infringed the copyright.’”

Court Awards Ownership of Copyrights in Four Songs to Estate of Oscar Peterson

In a January 29, 2014 ruling, Judge Jed S. Rakoff, after a three day bench trial, awarded co-ownership of four song recordings by legendary jazz pianist Oscar Peterson to his estate and to Jayarvee, Inc., the owner and operator of the Birdland jazz club in New York City. The four recordings were duets, with Peterson on the piano, and jazz singer Hilary Kolodin, who is known professionally as Hilary Kole, as the singer. At the time of the recordings, Kole and the principal of Jayarvee, John Valenti, were in a relationship. After the relationship ended, Kole disputed ownership of the recordings.

The central issue in the case was the validity of an assignment of the recordings that was inarguably signed by Kole, although the assignee was not specifically identified. Valenti testified that the assignment, which was produced in the lawsuit from his possession, was intended to assign the recordings from Kole to Jayarvee. Kole testified that the assignment was meaningless, and that she filled it out and executed it merely to show another musician how to fill out such a form. Judge Rakoff, with some seeming dismay about Kole’s testimony, credited Valenti’s testimony and declined to credit Kole’s. The Court thus concluded that “any copyright interest Kole may have had in any of the Recordings was transferred to Jayarvee through the” assignment.

Judge Rakoff also found that “there is a threat of infringement of that ownership interest sufficient to support plaintiffs’ request for a permanent injunction” because Kole attempted to register her own copyrights in slightly modified recordings, and also caused one of the songs to be played on an Internet website. So the Court concluded that “plaintiffs are entitled both to a declaration that they are owners of the copyrights in all versions of the Recordings and to an injunction permanently barring Kole from any sale, distribution, or other public use of the recordings.” Judge Rakoff denied an award of fees, though, finding that in the circumstances of the case, “an award of fees would be excessive.”

Court Grants Summary Judgment of Nonobviousness, Orders Trial on Damages

In a January 29, 2014 ruling, Judge Colleen McMahon granted plaintiff Medien Patent Veraltung AG’s motion for summary judgment of nonobviousness of the patent-in-suit, and denied defendant Deluxe Entertainment Services Group, Inc.’s cross motion for summary judgment of invalidity. The Court had previously entered summary judgment of infringement, so the only remaining issue was Deluxe’s invalidity contention. The parties stipulated that obviousness was the only arguable ground for invalidity.

In considering the cross-motions, Judge McMahon first noted that summary judgment may be granted on the issue of nonobviousness, and that such “a motion does not require a court to find that a challenged patent claim is valid, but rather only that the claim in not invalid in view of the particular prior art references cited by the defendant.” The Court further wrote that obviousness “under 35 U.S.C. § 103 is an issue of law based on underlying issues of fact.” A determination of obviousness requires a “‘showing that a person of ordinary skill in the art at the time of the invention would have selected and combined [the] prior art elements in the normal course of research and development to yield the claimed invention.’”

Court Finds Infringements of Copyrights Other Than Copyrights-in-Suit Irrelevant for "Red Flag" Notice

In a January 29, 2014 ruling, Judge William H. Pauley III disposed of nineteen motions in limine in plaintiffs Capitol Records, Inc.’s and other music publishers’ long-running copyright infringement action against MP3tunes, Inc. The Court characterized some of the motions as seeking to “resurrect discovery disputes and legal determinations this Court decided previously. Others level an impressive array of claims and defenses, including perjury, fraud, and witness harassment. Many seek determinations on the merits rather [than] a ruling on the admissibility of evidence.”

Of note are some of the substantive rulings that Judge Pauley made while addressing the evidentiary issues. First, Capitol Records sought to introduce evidence of MP3Tunes’ alleged infringement of copyrights other than copyrights-in-suit as so-called “red flag” or “willful blindness” evidence that would strip the defendant of the safe harbor provisions (for internet service providers) under the Digital Millennium Copyright Act. Relying on the Second Circuit’s controlling decision in Viacom Int’l v. YouTube, Inc., 676 F.3d 19 (2d Cir. 2013), Judge Pauley ruled that “only ‘specific infringements’ that correspond to songs-in-suit are relevant to a determination of liability under a willful blindness or red flag knowledge theory.” The Court added that even “if the evidence were relevant, its probative value would be substantially outweighed by the danger of unfair prejudice to Defendants,” and concluded that “evidence of the infringement of copyrights not owned by Plaintiffs is excluded as to Defendants’ liability.” Judge Pauley further ruled, however, that because “evidence of general infringement is relevant to the issue of willfulness [for the assessment of statutory damages], but irrelevant to infringement liability, this Court will bifurcate liability from willfulness and damages at trial.”

Court Awards $15,000 in Statutory Damages for Trademark Infringement

In a January 29, 2014 ruling, Judge Robert W. Sweet entered judgment in favor of plaintiffs Debra Schatzki and BPP Wealth, Inc. in their trademark infringement action against defendant Weiser Capital Management, LLC and others after a bench trial. BPP owns the registered service mark “Building, Protecting and Preserving Wealth for Generations,” as well as other marks. The Court found that the “evidence establishes that [Weiser Capital] incorporated BPP’s service marks into its website and promotional materials during Schatzki’s tenure at [Weiser Capital] and continued to incorporate BPP’s service marks into its website and promotional materials for six weeks after Schatzki’s termination.” Judge Sweet wrote that given “the totality of the evidence, [Weiser Capital] did infringe on Plaintiff’s service marks.” Noting that the plaintiffs elected statutory damages, the Court ruled that “given the totality of the circumstances surrounding the use of the service marks by Defendants, including the circumstances of Schatzki’s termination by [Weiser Capital] and role at [Weiser Capital] prior to her termination and that the service marks were ultimately removed from the website and promotional materials” a $15,000 award is appropriate.

In a follow up February 18, 2014 ruling, Judge Sweet declined to award prejudgment interest on the statutory trademark damages award.  Judge Sweet acknowledged that prejudgment interest would be permissible, but is typically awarded for "willful conduct or bad faith and 'exceptional' circumstances."  The Court found that the plaintiffs had not show willful misconduct or bad faith at trial, and so were not entitled to an award of prejudgment interest.

Court Permits Email Sevice of Summons and Complaint

In a January 28, 2014 ruling, Judge Paul A. Engelmayer granted plaintiff Richard Noble’s motion for email service on the defendants, which consist of “a number of websites and individuals” that “are party of an intertwined, opaque online T-Shirt-selling enterprise that has sold T-Shirts bearing the ‘Bo Knows” photograph [of Bo Jackson], in violation of Noble’s rights” in the copyright of the photograph. Judge Engelmayer noted that alternative service was permitted under New York CPLR § 308(5) where traditional service is impractical, and ruled that “Noble has more than shown the impracticability of traditional service – he has shown that actual prior attempt, performed with due diligence, have been unsuccessful.” The Court also found that email service comports with Due Process because “Noble has served the defendants at email addresses that they listed on their websites and on confirmation emails sent to [Noble’s] lawyer, Edward Greenberg, after Greenberg purchased T-Shirts from defendants.” Judge Engelmayer was “persuaded that these emails are likely to reach the defendants. As a result, the email service comports with the requirements of due process.”

Court Issues Claim Construction Ruling Construing "Means-Plus-Function" Terms

In a January 28, 2014 ruling, Judge Shira A. Scheindlin issued a claim construction ruling in plaintiff Rates Technology Inc.’s patent infringement action against defendant Broadvox Holding Company, LLC and others. While construing 14 claim terms in two patents-in-suit, the Court decided three general threshold issues. First, Judge Scheindlin declined to strike Broadvox’s experts declaration as “conclusory and contradict[ed] by the intrinsic record,” noting that if “I find that a construction proposed by [the expert] contradicts the intrinsic evidence, I will simply discount it.” Second, the Court found that it was not strictly bound by prior rulings about the construction of some of the same terms in earlier litigation, the Court nevertheless found them “persuasive,” and largely followed the reasoning of those decisions. Third, without citing any cases, the plaintiff argued that it was not bound by statements made to the PTO Board of Appeals for purposes of claim construction. Judge Scheindlin rejected that argument, ruling that statements to the PTO Appeals Board “give rise to a prosecution disclaimer where they ‘unequivocally and unambiguously disavow[] a certain meaning . . .’”

Many of the disputed terms involved the “means plus function” language under 35 U.S.C. § 112(f). In arguing for a particular construction of one such term that used “means for,” Rates Technology argued that a person of ordinary skill in the art would understand certain language “as connoting sufficient structure” so that the term at issue was actually not a “means plus function” limitation. Judge Scheindlin ruled that it “‘is not enough for the patentee simply to state or later argue that persons of ordinary skill in the art would know what structures to use to accomplish the claimed function,’” and found it to be a “means plus function” term.

Court Rules That Willfulness Not Required to Prove Damages Under 15 U.S.C. § 1125(a)

In a January 20, 2014 ruling, Judge Donald E. Walter ruled that the willfulness requirement for the recovery of damages under 15 U.S.C. § 1117(a) does not apply to claims arising under 15 U.S.C. § 1125(a). Judge Walter wrote: “The issue of damages is controlled by the 1999 Amendment to 15 U.S.C. § 1117(a). The court can only presume that Congress knew what it was doing in drafting in the disjunctive the willfulness requirement of 15 U.S.C. § 1125(c).” Since the Court had already dismissed the claims under § 1125(c) and only the § 1125(a) claim remained, the Court concluded that “the willfulness requirement does not apply,” and so “no evidence of willfulness need to be proven.”

Court Declines to Dismiss Claim to Declare “Tiffany Setting” Generic for Rings

In a January 17, 2014 ruling, Judge Laura Taylor Swain denied Tiffany and Company’s motion to dismiss Costco Wholesale Corporation’s counterclaim to declare the term “Tiffany setting” to be generic for a ring “‘setting comprising multiple slender prongs extending upward from a base to hold a single gemstone.’” Costco advertised two rings it sold at one of its stores as having a “Tiffany setting,” and Tiffany sued for statutory and common law trademark infringement. Costco counterclaimed for declaratory relief to declare the term “Tiffany setting” generic as applied to rings, and Tiffany then moved for summary judgment or judgment on the pleadings.

The Court first noted that although the “Tiffany” mark had first been applied to jewelry in 1868 and the registered mark had long since become “incontestable,” “[e]ven an incontestable or famous mark can become generic and lose protection.” Judge Swain further wrote that a “court may partially cancel or limit a registered trademark if only one use of the trademarked term has become generic.”

In deciding the motion, the Court observed that only “‘in the rarest of cases may summary judgment be granted against a plaintiff who has not been afforded the opportunity to conduct discovery.’” Judge Swain also noted that the “question of whether a mark is, or has become, generic is generally one of fact.” Judge Swain then denied summary judgment, writing that in “support of its argument that ‘Tiffany’ has acquired a generic meaning when used to refer to a type or style of ring setting, Costco offers excerpts from dictionary definitions of ‘tiffany’ and ‘Tiffany setting,’ a preliminary report by a lexicographer, evidence of generic use of the term ‘Tiffany setting’ by jewelry manufacturers, retailers and consumers, and examples of the generic use of the term ‘tiffany setting’ in publications.” The Court cautioned that “none of this evidence is by any means conclusive of the proposition” of genericness “advanced by Costco,” but that it is sufficient at the “pre-discovery” phase to defeat summary judgment.

Magistrate Recommends Case Be Restored to Docket and Consent Injunction Entered

In a January 14, 2014 ruling, Magistrate Judge Henry Pitman issued a Report and Recommendation in which he recommended that plaintiff Time Square Foods Imports LLC’s motion to reopen the case and execute the consent judgment entered into with defendant Ursa Philbin in open court before Judge Pitman. In the action, Time Square foods asserted the right to use “My Skinny”-formative marks for human and pet foods under a license from a company called Eximp. Philbin, a purportedly minority shareholder in Eximp, asserted that the license was invalid. Upon a referral from Judge Engelmayer, Judge Pitman presided over a settlement conference. The parties reached a settlement, and placed its terms on the record in open court. A dispute then arose about Philbin’s right to use “Skinny” in connection with food, and Philbin refused to execute a settlement agreement.

Judge Pitman noted that the “parties’ dispute presents two issues for resolution: (1) was there a meeting of the minds on the existence of a settlement, and, if so (2) is the mark SKINNY with respect to food for humans or pets within the injunction to which the defendants agreed.” Writing that “the existence of a contract is determined by what a party says and does and not subjective beliefs,” and the Court found, based on the parties’ colloquy at the settlement conference, that “defendants unequivocally agreed to the entry of an injunction prohibiting them from ‘using the disputed marks and anything confusingly similar.’” Judge Pitman concluded that “there is a binding settlement and the only remaining issue is whether the mark SKINNY is confusingly similar to the marks MY SKINNY, MY SKINNY RICE, MY SKINNY PETS OR MY SKINNY PET TREATS for food products for human or animal consumption.”

The Court found that there “can be little question that SKINNY is confusingly similar to the marks MY SKINNY, MY SKINNY RICE, MY SKINNY PETS or MY SKINNY PET TREATES when used for food products.” Judge Pitman ruled that the “presence or absence of the single, one syllable word ‘my’ is insufficient to distinguish SKINNY from plaintiff’s marks when used in connection with similar goods.”

In a February 10, 2014 ruling, Judge Paul A. Engelmayer adopted Magistrate Judge Pitman’s Report in full. Judge Engelmayer wrote that the defendants’ objection to the Report “simply reiterates the arguments made in their original opposition – primarily, that Time Square Foods does not own an independent trademark in the word SKINNY.” The Court added that “[c]areful review of the Report reveals no clear error.”

Court Reaffirms Willfulness Requirement for Recovery of Lanham Act Monetary Damages

In a January 16, 2014 ruling, Judge Katherine B. Forrest denied defendant ContextMedia, Inc.’s motion for summary judgment on plaintiff Guthrie Healthcare System’s Lanham Act and related state law claims, but ruled that Guthrie was not entitled to its actual d
amages or lost profits, and so struck its jury trial demand. With regard to the damages claim, Judge Forrest wrote that in “order for a plaintiff to recover its damages or defendants’ profits as to these [Lanham Act] claims, a plaintiff must show actual consumer confusion, bad faith, or willful deception.” The Court then found that “plaintiff has failed to raise a triable issue of fact as to these elements,” and dismissed the damages claim. In reaching its conclusion, the Court noted the split in District decisions as to whether a 1999 amendment to the Lanham Act damages provisions altered the willfulness requirement for an award of damages (which was especially strong in the Second Circuit). Judge Forrest found “the rationale of those courts continuing to require willfulness as more persuasive.” and continued the willfulness requirement.

With regard to the conclusion of no willfulness, the Court found that: (1) the defendant commissioned a third party designer to design its allegedly infringing logo; (2) neither the defendant’s principal nor the designer were aware of the plaintiff’s mark at the time, and (3) the Trademark Office registered three of the defendant’s marks that allegedly infringed the plaintiff’s mark, negating any inference that the defendant should have known of the infringement. Judge Forrest rejected as insufficient as a matter of law plaintiff’s supposedly contrary evidence that the defendant failed to conduct a trademark search before adopting its mark and that the defendant continued to use the mark after being sued. So the Court rejected the plaintiff’s claim for its lost profits, but did hold that the defendant could be liable for nominal damages and costs if infringement is found.

Court Denies Summary Judgment in Copyright Infringement Claim Despite Conflicting Evidence About Authorship

In a January 16, 2014 ruling, Judge Alvin K. Hellerstein denied plaintiff Mayimba Music, Inc’s summary judgment motion against Sony Corporation and others in Mayimba’s copyright infringement action. Mayimba alleged that well-known Dominican Republican singer-songwriter El Cata, in collaboration with the performer Shakira, included an adapted version of Mayimba’s song Loca con su Tiguere in an album issued by Sony.

The Court wrote that to “successfully prove copyright infringement, plaintiff must show ownership of a valid copyright and unauthorized copying of constituent, original elements,” and that to “prove actual copying, plaintiff may present actual evidence of copying or indirect evidence that demonstrates proof of access.” Mayimba alleged that El Cata has access to the song because El Cata met with the song’s author “informally outside of a production studio where [the author] sang El Cata several of his songs.” El Cata then supposedly recorded the author singing Loca con su Tiguere. The song’s author later signed documents disclaiming authorship of the song and acknowledging El Cata’s ownership. Judge Hellerstein, however, found that although the evidence was questionable, “[b]arely, the issue is one for the jury to
decide,” and denied summary judgment.

Court Declines to Rescind Copyright Assignments, and Dismisses Infringement Claims

In a January 13, 2014 ruling, Judge William H. Pauley III granted summary judgment in favor of defendants Thomas v. Conigliaro and another defendant dismissing plaintiff Christian McDonald’s copyright infringement and other claims against them. Judge Pauley ruled that McDonald could not rescind his assignment of the copyrights at issue because Conigliaro was a bona fide purchaser, and that McDonald’s rescission claim was time-barred in any event.

McDonald claimed that an interim August 2006 assignment of the copyrights to Reiss had been fraudulently induced, and that the later assignment to Conigliaro was void because Conigliaro “had notice of the alleged fraud.” Judge Pauley noted that “[c]ontracts effecting the sale and license of copyrights are construed ‘according to state law principles of contract interpretation,’” and wrote that under “‘New York law, a recipient of property takes the property free of any equitable interest, such as would give rise to a constructive trust, when the recipient is a bona fide purchaser.’” After considering the evidence of Conigliaro’s knowledge of the alleged fraud urged by McDonald, the Court concluded that “no reasonable jury could find that Conigliaro was on notice of Reiss’s purported fraud,” and ruled that Conigliaro was a bona fide purchaser of the copyrights.

With regard to the statute of limitations issue, Judge Pauley wrote that “McDonald’s claim to the . . . copyrights rests on rescission of the 2006 assignments because Reiss allegedly fraudulently induced them.” The Court ruled that a “‘claim for rescission based on actual fraud is governed by the statute of limitations for claims based on fraud.’” Since McDonald filed the action more than six years after the supposed fraud giving rise to the rescission, the action was, according to the Court, time barred unless it was nevertheless filed within “’two years from the time the plaintiff . . . discovered the fraud, or could with reasonable diligence have discovered it.’” Judge Pauley found that McDonald was aware of the alleged fraud more than two years before filing suit, and held that the rescission claim was time barred.

Court Finds Personal Jurisdicition in Patent Infringement Action Based on Acts of Subsidiaries

In a January 6, 2014 ruling, Judge Shira A. Scheindlin declined to dismiss plaintiff Rates Technology Inc.’s patent infringement action against Broadvox Holding Company, LLC and others for lack of personal jurisdiction. In considering the jurisdictional issue, the Court applied Federal Circuit law which, like Second Circuit law, applies “the personal jurisdiction rules of the forum state.”

Noting that “Broadvox Holding, through its subsidiaries, operates a VoIP [voice over internet] network in New York, which is among its top ten retail markets,” Judge Scheindlin wrote that where “a defendant who has purposefully directed its activities at the forum state seeks to defeat jurisdiction, it must ‘present a compelling case that the presence of some other considerations would render jurisdiction unreasonable.’” The issue thus became whether the actions of Broadvox Holding’s subsidiaries in New York should be imputed to Broadvox Holding. The Court wrote that under “certain circumstances, a court may assert jurisdiction over a foreign parent corporation based of its subsidiaries in New York,” if the subsidiary is “either an ‘agent’ or a ‘mere department’ of a foreign parent.”

Judge Scheindlin concluded that Broadvox Holding’s subsidiaries carrying out business in New York are its agents under the applicable agency test. In particular, the Court found that “Broadvox Holding is more than just an ‘investment mechanism [that] diversif[ies] risk through corporate acquisitions.’ Instead, it is in the same business as its subsidiaries – providing IP-based communication services to customers.” So the Court ruled that “[g]iven the importance of its subsidiaries’ activities in New York – one of its ‘top ten retail markets’ – it is fair to say that Broadvox Holding would perform these functions if no agent were available.” Before finding personal jurisdiction, though, Judge Scheindlin considered whether the assertion of jurisdiction comports with due process. The Court noted that because “Broadvox Holding purposefully directed its business toward New York, it must make a ‘compelling case that the presence of some other considerations would rendered jurisdiction unreasonable,” and ruled that Broadvox Holding failed to do so. The Court thus found personal jurisdiction, and denied the motion to dismiss.

Court Finds Trademark and Trade Dress Infringement; Awards Treble Damages and Attorneys' Fees

In a January 6, 2014 ruling, Judge Harold Baer, Jr. entered judgment in favor of the plaintiffs after a four-day bench trial on the plaintiffs’ trademark and trade dress infringement claim over plaintiff Audemars Piguet Holding S.A.’s well-known octagonal watch design.  The plaintiffs contended that two models of the defendants’ watches infringed their trademarks and trade dress in their “Red Oak” line of watches.  In finding in favor of the plaintiffs, Judge Baer found that “the similarities between these watches remain striking.”

In considering the trade dress claim, the Court wrote that a “plaintiff asserting product design trade dress infringement must prove distinctiveness by showing that ‘“in the minds of the public, the primary significance of [the mark] is to identify the source of the product rather than the product itself” (what is known as ‘acquired distinctiveness’ or ‘secondary meaning’).’”  Judge Baer added that to “determine whether a secondary meaning has attached, the court considers six factors:  ‘(1) advertising expenditures, (2) consumer studies linking the mark to a source, (3) unsolicited media coverage of the product, (4) sales success, (5) attempts to plagiarize the mark, and (6) length and exclusivity of the mark’s use.’”  The Court considered each factor in turn, and found that all but one of them favored the plaintiffs.

Having found that the plaintiffs’ trade dress has secondary meaning, the Court conducted a similar analysis to determine whether there was a likelihood of confusion between the plaintiffs’ and the defendants’ watches, using the well-known eight factor Polaroid test.  Finding that four of the factors favored the plaintiffs, the Court concluded that the defendants’ “use of the allegedly infringing designs is likely to cause customer confusion.”

Court Converts Defendants’ Motion to Dismiss Copyright Infringement Claims into a Motion for Summary Judgment in Order to Consider Requisite Evidence Outside of the Pleadings.

In a January 6, 2014 ruling, Judge Colleen McMahon converted the defendants’ Penguin/Berkley Publishing US A and others’ Rule 12(b)(6) motion to dismiss plaintiff Charles Newton’s copyright infringement claims into a Rule 12(d) motion for summary judgment, based on defendants’ arguments which required the consideration of evidence not included in the pleadings.

Plaintiff, acting pro se, claimed that defendants infringed upon his copywrited material by defendants’ reprinting portions of plaintiff’s book in a book published by defendants covering the same subject matter. Defendants presented the following arguments in support of their motion to dismiss: (1) plaintiff failed to satisfy the copyright registration precondition to suit, see 17 U.S.C. § 411, (2) the copying of plaintiff’s work was de minimis, and (3) the copying of plaintiff’s work constituted “fair use.”

Court Denies Attorneys' Fees to Prevailing Copyright Infringement Defendant

In a December 20, 2013 ruling, Judge Donald C. Pogue, sitting by designation, declined to award attorneys’ fees under 17 U.S.C. § 505 to the prevailing defendant, Supap Kirtsaeng, in plaintiff John Wiley & Sons, Inc.’s copyright infringement action.  The Court ruled that because “Plaintiff’s claim was not unreasonable or frivolous, and because no other equitable consideration weighs in favor of Defendant’s request, . . . Defendant’s motion is denied.”  The case had been returned to the district court after the Supreme Court’s reversal of the Court’s previous ruling finding the defendant liable for copyright infringement.  The defendant imported lawfully obtained foreign editions of the plaintiff’s text books into the United States.  The Supreme Court ruled that that activity was protected by the “first sale doctrine.”

The Court began its discussion by noting that an award of fees is not mandatory under § 505, but should instead be guided by the Court’s “equitable discretion.”  Judge Pogue wrote that although there are a number of factors to consider in awarding fees, the most significant one under Second Circuit precedent is the “objective reasonableness” of the claim; “’a court should not award attorneys’ fees where the case is novel or close because such a litigation clarifies the boundaries of copyright law.’”

Judge Pogue found that fees were unwarranted because “neither the factual allegations nor the legal theory on which Wiley’s claim was based were objectively unreasonable.  Wiley’s claim – which persuaded this Court, the Court of Appeals, and three Justices of the Supreme Court – represented the legitimate attempt of a copyright holder to enforce its rights against the unauthorized importation to low-priced, foreign-made copies of its copyrighted works.”  The Court also noted that although attorneys’ fees can still be awarded where the plaintiff’s claim is objectively reasonable – such as where a claim is frivolous, brought for an improper purpose or where “considerations of compensation an deterrence” are furthered – none of these factors is present in this case.  Judge Pogue thus denied the defendant’s motion for fees.

Court Finds Patent Infringement Action Moot Upon Filing of Covenant Not to Sue

In a December 19, 2013 ruling, Judge Coleen McMahon dismissed with prejudice plaintiff Commercial Recovery Corporation’s patent infringement claim against Bilateral Credit Corp., LLC upon Commercial Recovery’s filing of a covenant not to sue, and dismissed as moot Bilateral’s counterclaims of non-infringement and invalidity.  The covenant not to sue filed by Commercial Recovery “is unconditional and irrevocable, and reaches beyond Bilateral to protect Bilateral’s suppliers, distributors, customers, and partners.”  Judge McMahon found it “’hard to imagine a scenario’ under which Bilateral could infringe the [patent-in-suit] and yet not fall under [Commercial Recovery’s] covenant.”

Bilateral argued that the covenant was ineffective because Commercial Recovery was in receivership and held title to the patent only for purposes of the suit against Bilateral, so Bilateral remained exposed to claims from successors-in-title.  Judge McMahon rejected this argument, ruling that under 35 U.S.C. § 281, the term “patentee” includes “’not only the patentee to whom the patent was issued but also the successors in title to the patentee,’” so any successor-in-title would be bound by the covenant.

Bilateral also argued that the covenant was not necessarily broad enough to cover Bilateral’s future activities.  The Court held, however, that given the breadth of the covenant not to sue, it was incumbent upon Bilateral to proffer evidence of sufficiently concrete plans to engage in conduct not covered by the covenant.  Judge McMahon found that Bilateral had failed to provide any such evidence.

The Court also rejected Bilateral’s request to condition Commercial Recovery’s request for a voluntary dismissal with prejudice on the payment of Bilateral’s attorneys’ fees.  Judge McMahon noted that courts frequently condition requests for dismissal without prejudice on the payment of fees because plaintiffs can, and frequently do, refile such cases leading to duplicative expenses for the defendants, but that fees are rarely awarded for a dismissal with prejudice because there is no risk of duplicative work.  The Court also rejected Bilateral’s request for fees under 35 U.S.C. § 285 and 28 U.S.C. § 1927, finding no evidence that Commercial Recovery had engaged in objectively baseless litigation in bad faith.

Court Enhances Damages But Declines to Award Fees in Patent Infringement Action

In a December 18, 2013 ruling, Judge Samuel Conti denied the defendants’ motion for a new trial or for judgment as a matter of law following a jury verdict of patent infringement against them, and granted in part the plaintiff’s motion for enhanced damages and attorneys’ fees (in light of the jury’s finding of willful infringement) and for a permanent injunction.

With respect to the new trial motion, Judge Conti rejected the two individual defendants’ challenge to a jury instruction that they contended improperly allowed the jury to impute infringement to them in their individual capacities.  Since the jury found that the individuals are general partners in a partnership that was also found liable for infringement, the individuals could be held liable under general partnership law, mooting the issue about the jury instruction.  The Court also rejected the defendants’ contention that the plaintiff’s expert’s use of demonstrative exhibits that were not disclosed as part of the expert report warranted a new trial, noting that the exhibits merely illustrated points that were included in the report, and the exhibits were not admitted into evidence. 

Judge Conti analyzed the request for enhanced damages under the nine factors set out in Read Corp. v. Portec, Inc., 970 F.2d 816, 826 (Fed. Cir. 1992).  The Court found that the first three factors – whether the infringer deliberately copied the ideas or design of another, whether the infringer acted with knowledge of the patent and formed a good faith belief of non-infringement or invalidity, and whether the infringer engaged in litigation misconduct – all strongly favored the enhancement of damages.  Judge Conti found that the remaining factors did not mitigate against enhancing damages, and accordingly trebled the jury’s $300,000 damages award.  The Court declined to award attorneys’ fees, though, finding that the defendants’ conduct was not egregious, and that “some of the positions advanced at trial by Defendants had merit.”  In a later January 8, 2014 ruling, Judge Conti awarded prejudgment interest at the prime rate (3.25%), rejecting the plaintiff's request to use the 9% rate specified in the New York CPLR.  The Court awarded prejudgment interest only on the $300,000 damages award, not on the enhanced. amount.

Court Denies Attorneys' Fees to Prevailing Defendants in Patent Infringement Action

In a December 17, 2013 ruling, Judge P. Kevin Castel denied attorneys' fees to defendants Facebook, Inc. and Google, Inc. after they successfully secured summary judgment dismissing plaintiff Wireless Ink Corporation's patent infringement action. Noting that a court may award attorneys' fees under 35 U.S.C. § 285 in an exceptional case, Judge Castel wrote that as "a threshold matter, a court must first determine whether the party seeking attorney fees has proved by clear and convincing evidence that the case is exceptional."

 Google and Facebook argued that the case is exceptional, and became objectively baseless and pursued in bad faith after the Court's claim construction ruling rendered it impossible for Wireless Ink to prevail on its infringement claims. Wireless Ink contended that it opposed summary judgment based on its expert's opinion of infringement that was rendered after the Court's claim construction. In rejecting the defendants' argument, Judge Castel first noted that a "loss on summary judgment does not . . . lead to a presumption that a claim was objectively baseless," and accepted Wireless Ink's contention that its reliance on its expert witness was reasonable. The Court concluded that because "Facebook and Google have not shown, by clear and convincing evidence, that [Wireless Ink's expert's] opinions were objectively baseless, a finding that Wireless Ink's positions on infringement were objectively baseless is not warranted.