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

Court Dismissed Patent and Trademark Infringement Claims on Exhaustion and First Sale Grounds

In an April 23, 2014 ruling, Judge Paul A. Engelmayer dismissed the plaintiff’s patent infringement claims on the grounds of exhaustion and dismissed the trademark infringement claims because the goods at issue were genuine even if they had been sold in unauthorized markets. With regard to patent exhaustion, there was no dispute that the patented goods had been purchased from the patent owner exhausting the patent protection, although the plaintiff contended that they had been sold in violation of contractual restrictions. Relying on the Supreme Court’s decision in Quanta Computer, Inc. v. LG Elecs., Inc., 553 U.S. 617 (2008), Judge Engelmayer ruled that the patent protection was exhausted despite the contractual breach, writing that “Quanta precludes the argument that any failure by a party to abide by any contractual condition in an agreement involving a patented device will revive an otherwise exhausted patent so as to permit the patentholder to sue for infringement, as opposed to, e.g., breach of contract.”

The Court dismissed the plaintiff’s trademark-related claims on analogous grounds of the “first sale doctrine.” Judge Engelmayer wrote that there can be no trademark infringement if genuine goods are at issue even if those goods are sold in violation of contractual restrictions.

In a follow up May 7, 2014 ruling, Judge Engelmayer declined to exercise supplemental jurisdiction over the remaining state law claims, and dismissed the entire action.

Court Dismisses Copyright Declaratory Judgment Action Finding No “Actual Controversy”

In an April 21, 2014 ruling, Judge Valerie Caproni dismissed the plaintiff’s declaratory judgment action seeking ownership of the copyright in certain computer code, finding that there is no “‘case or controversy’ for the purposes of Article III of the United States Constitution.” The Court first found that there is subject matter jurisdiction because the “Complaint appears to reflect a dispute between the parties over whether and, if so, how the ‘work for hire’ doctrine applies.” Judge Caproni nevertheless dismissed the case because there was no “actual controversy” between the parties, finding that regardless “of this lawsuit, [the plaintiff] can exercise ownership rights unencumbered by [the defendant] and without fear of legal action for anything other than delivery of allegedly non-conforming goods – a suit that has already been filed in New York state court.” The Court also denied an award of attorneys’ fees to the defendant, finding that “both parties bear the blame” for litigating the case.

Court Awards Statutory Copyright Infringement Damages after a Default

In an April 11, 2014 ruling, Magistrate Judge James L. Cott recommended an award of $9,000 in statutory damages after an inquest in the plaintiff’s copyright infringement action for the unauthorized use of a celebrity photograph. The plaintiff sought the $9,000 as three times its lost licensing fee of $3,000. Judge Cott found that “trebling the licensing fee . . . is in line with the general approach taken by courts.”

The Court also awarded attorneys’ fees and costs. While approving the hourly rate of a partner with 20 years copyright experience of $525, Judge Cott reduced the requested associate’s rate from $400 to $300, writing that there was “no detail” about the lawyer’s specialization or experience in copyright litigation.

Court Declines to Dismiss Trademark Infringement Declaratory Judgment Action on Subject Matter Jurisdiction Grounds

In an April 15, 2014 ruling, Judge P. Kevin Castel denied defendant Eveready Battery’s motion to dismiss Gelmart Industries’ declaratory judgment action over the trademark “Skintimate” based on lack of subject matter jurisdiction. Judge Castel imported the Rule 12(b)(6) standard under which a complaint must state a claim that is plausible on its face. Noting that even though Gelmart was not yet in the market with its product, Eveready had sent two cease and desist letters, and opposed Gelmart’s application to register “Skintimate,” the Court wrote:
Here, the Complaint and its annexed exhibits allege the existence of adverse legal interest between the parties, with sufficient immediacy to allege a case of actual controversy under the Declaratory Judgment Act. First, Eveready’s own statements in its cease-and-desist letter and its public filing with the USPTO establish ‘adverse legal interests’ under the Declaratory Judgment Act. . . . While stopping short of using the words “infringement” and “dilution,” Eveready has, in sum and substance, asserted that the proposed Gelmart mark is infringing and dilutive. . . .
Judge Castel rejected Eveready’s contention that the action was not ripe because Gelmart was not yet in the market, finding it “sufficient that Gelmart has alleged that it solicited retailers, designed branding materials, is capable of commencing manufacture of products within weeks, and was ‘poised’ to commence a product launch before Eveready asserted infringement.

Court Declines to Stay Enforcement of Patent Infringement Judgment Pending Patent Office Reexamination

In an April 11, 2014 ruling, Judge Samuel Conti denied the defendants' motion to stay execution of damages pending reexamination in the Patent Office of the patent-in-suit in this infringement action. Following a jury verdict, including for willful infringement, the Court entered judgment against the defendants for $953,424.66. Shortly before the trial, the defendants filed an request for reexamination, and after the trial and the jury’s verdict, the Patent Examiner issued a non-final office action invalidating the single claim at issue. The defendants then moved for the stay.

Noting that courts have discretion stay proceedings during Patent Office proceedings, Judge Conti found that all three factors that usually inform the stay decision weigh in favor of denying the stay, particularly given the lateness of the request and the advanced state of the lawsuit. Although Judge Conti recognized that there is some risk the judgment could become final and the patent-in-suit would later be invalidated (which does not permit reopening the judgment), he found the concerns premature, and wrote that “the Court would be willing to reconsider its decision to stay” if the Patent Office renders a final decision on validity while the appeal is still pending.

The Court also treated the defendants’ motion in the alternative as a request for a stay pending appeal without the posting of a supersedeas bond. Judge Conti again ruled that the pertinent factors weigh against entry of such a stay, and denied the motion.

Court Remands Action Where Complaint Does Not Expressly Mention Copyright Violation

In an April 8, 2014 ruling, Judge Paul A. Crotty remanded the action to the New York State Supreme Court despite the defendant’s contention that the plaintiff’s claims sounded in copyright infringement. The Court wrote:
Here, Plaintiff neither explicitly nor necessarily relies on federal law. Instead, the Summons merely alleges “wrongful conversion” of “intellectual property.” . . . While the action may arise under the Copyright Act, the Summons does not provide the facts necessary to draw that conclusion.

Court Denies Summary Judgment of Invalidity Based on Indefiniteness after Having Denied Summary Judgment on Non-Infringement

In an April 7, 2014 ruling, Judge Jed S. Rakoff denied the defendants’ motion to invalidate two claims in the patent-in-suit in the plaintiffs’ infringement action. Judge Rakoff had earlier denied the defendants’ motion for summary judgment of non-infringement. The defendants argued in the current motion that because the Court had construed the pertinent claim terms but had been unable to reach a conclusion as to non-infringement, the claims are indefinite as lacking a “‘discernible boundary.’” Judge Rakoff rejected this argument, writing:
it would be unusual if a claim that can be construed definitely could suddenly become indefinite because an accused product came close to infringing but left the possibility of its noninfringement. A party should not be able to invalidate another’s patent solely by coming close enough to infringing that a Court cannot determine infringement, a question of fact, as a matter of law on a motion for summary judgment.

Court Rules That Only a Single Award of Statutory Damages Is Allowed to Separate Owners of Musical Composition and Sound Recording

In an April 7, 2014 ruling, Judge William H. Pauley III explained his trial ruling “that where two different owners hold respective copyrights in the musical composition and sound recording of the infringed work, they must share a single award of statutory damages.” The Court reasoned that when the defendants “infringed the copyright covering a sound recording and musical composition for the same song, they infringed only one work because the infringement was directed at the sound recording and the musical composition was not exploited.” The Court noted that had the separate owners sued separately, “they may of course collect separately ‘as long as the infringer’s liability on these statutory damages does not exceed the amount provided in Section 504(c)’” of the Copyright Act.

Court Permits Withdrawal of Deemed Admitted Responses to Requests for Admission

 In an April 4, 2014 ruling, Judge Denise Cote granted the defendants’ motion to withdraw and amend their deemed admissions under Rule 36 in the plaintiffs’ trademark and copyright infringement action. The defendants did not respond to the plaintiffs’ RFA’s until more than a month after the responses were due, and offered only “inadvertence” as an excuse. The Court ruled:
Here, there is no question that permitting withdrawal and amendment of the deemed admissions would “promote the presentation of the merits of the action,” Fed. R. Civ. P. 36(b), as the deemed admissions go to the “ultimate issues” in this litigation and may well be dispositive of the action. . . . In particular, defendants are deemed to have admitted that the Accused Products are “counterfeit” and infringe plaintiffs’ trademarks and copyright, that defendants knew of this when selling them, and that any of defendants’ rights with respect to its Isis Cross Design were abandoned. No meaningful “presentation of the merits” of this action concerning infringement of intellectual property rights would be possible unless these admission are withdrawn and amended by the [deemed admitted responses].
Judge Cote rejected the plaintiffs’ claims of prejudice, noting that “plaintiffs requested so many admissions of ultimate liability in this case, despite knowing defendants had denied these requested admissions in their answers, underscores that plaintiffs’ RFAs were largely made “in the hope that [defendants] w[ould] simply concede essential elements” or would miss the 30-day deadline to respond.”

Court Enters Default Judgment and Awards Maximum Statutory Damages in Copyright Infringement Action

In an April 3, 2014 ruling, Judge J. Paul Oetken granted the plaintiff’s motion for a default judgment in a copyright infringement action over the “Frankie and Johnnie” chair, awarded $150,000 in statutory damages, and directed the plaintiff to submit a fee application. The Court “reviewed the filings in this case and conclude[d] that Plaintiff has satisfied the prerequisites to entry of default judgment on its copyright infringement claim.” Judge Oetken further found that the defendant “acted willfully because it is reasonable to assume that as a furniture company, [the defendant] ‘should have known’ that its conduct was infringing based upon its experience with copyright matters.” The Court awarded the maximum $150,000 statutory amount in “light of the compensatory and deterrent purposes of the Copyright Act, the burden of bringing an action, and [the defendant’s] failure to appear.”

Court Adopts Magistrate’s Report and Recommendation of Statutory Damages and Attorneys’ Fees after Default in Trademark Infringement Action

In an April 3, 2014 ruling, Judge George B. Daniels adopted Magistrate Judge Peck’s Report and Recommendation after an inquest awarding $1 million in statutory damages and approximately $10,000 in attorneys’ fees against the defendants who defaulted in the plaintiff’s trademark infringement action. Judge Daniels approved Judge Peck’s conclusion deeming the infringement willful in light of the default. Since the maximum statutory damages award under the Lanham Act is $2 million, the Court adopted Judge Peck’s conclusion that “an award of $1 million – half of the statutory maximum – is sufficient and appropriate in this case.” With regard to attorneys’ fees, Judge Daniels adopted Judge Peck’s conclusion that “the allegations in the complaint, along with Defendants’ default, are sufficient to justify the award of attorneys’ fees to Plaintiff,” and approved the reduction of 15% that Judge Peck made to the amount of fees the plaintiff sought.

Court Grants Stay of Patent Infringement Action Pending Covered Business Method Review in the USPTO

In an April 1, 2014 ruling, Judge Katherine B. Forrest stayed a patent infringement action pending the USPTO’s decision on the defendant’s petition for a Covered Business Method review, and the outcome of the review. The Court was “persuaded by the undisputed evidence presented by [the defendant] of the high likelihood that both the Patent Trial and Appeal Board will grant the Covered Business Method review, and that such CBM review will result in the cancellation or amendment of at least one claim of” the patent-in-suit. Judge Forrest noted that it “is not this Court’s typical practice or inclination to grant stays,” but found that the four factors for granting a stay set out in the America Invents Act weigh in favor of a stay in light of the likelihood that the CBM review will result in amendment of the patent and the early stage of the proceeding.
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