Court Denies Preliminary Injunction in Trademark Infringement Action

In a June 17, 2016 ruling, Judge Coleen McMahon denied the plaintiff's motion for a preliminary injunction against trademark infringement, and ordered the plaintiff to show cause why the entire action should not be dismissed.  Despite two registration's for the plaintiff's mark with the PTO, the Court found that the mark was essentially a copy of the flag of the former Kingdom of Laos.  Judge McMahon ruled that "[i]t is axiomatic that a design comprising a flag cannot be trademarked."  The Court rejected the plaintiff's argument that the former Kingdom had abandoned the flag in 1975, similarly finding that under the PTO's Trademark Manual of Examining Procedures, "'former flags of existing countries, states or municipalities are refused.'"  Without a protectible mark, Judge McMahon noted that none of the plaintiff's claims appeared to state a claim for relief, and issued the order to show cause as to why they should not be dismissed.

Court Finds Computer Program to Be a Work-for-Hire

In a February 3, 2016 ruling, Judge Colleen McMahon declined to dismiss the plaintiff’s copyright infringement claim, finding that the defendant’s computing programming services under a written agreement constituted a “work-for-hire” under the Copyright Act. Judge McMahon found that the defendant’s work was specially commissioned pursuant to a written agreement designating the work as a “work-for-hire.” On the issue of whether the work fit into one of the nine statutory categories for which the work-for-hire doctrine applies, the Court found that the computer programs written by the defendant were either compilations or contributions to collective works. Specifically, the Court wrote:

Here, [the defendant] created and combined a number of different computer programs to create [the plaintiff’s] new software system. This new system was comprised of various elements including an open source framework, compression software, a multi-protocol library written by [the defendant’s associate], a "referral" program, anti-fraud software, routing algorithms, and code for an entirely new . . . website. . . .The system as a whole is properly deemed a compilation of computer programs. Alternatively, the source code for each program can be deemed a contribution to the "collective work" that is [the plaintiff’s] system. Thus, [the defendant’s] work falls into one of the nine categories enumerated in [17 U.S.C.] § 101(2).

Court Finds "Clever" Invention Claims Patent-Ineligible Subject Matter

In a November 18, 2015 ruling, Judge Colleen McMahon found the plaintiff's patent for routing a long distance call invalid as merely claiming an abstract idea.  Judge McMahon described the claimed invention as:

For example, suppose I am the end user. My service provider assigns me the number 555- 222-1234; I tell the service provider that, when I dial those digits, I want to be connected to my best friend (the recipient), who lives in Ohio, and whose telephone number is 614-555-1213. When I dial the assigned incoming telephone number (555-222-1234) from my personal telephone number (987-654-3210)- which number is recognized via some unclaimed but well known device like Caller ID - the call is forwarded directly to my best friend's home telephone number (614-555-1213). I need not input any additional information in order to get the call routed to its intended recipient.

The Court then noted that:

 The claim is directed to a well-known activity that is almost as old as telephony itself making a long distance telephone call. What plaintiff did was figure out a way to make such a call more cheaply, by dialing a ten digit local number and nothing more. He combined two activities that have long been performed, by humans and by machines -- caller ID and call forwarding- such that the recipient of a local call (area code plus seven digit number) uses some type of caller ID to recognize who the incoming caller is, and then forwards the incoming call to its intended recipient by associating the assigned incoming telephone number with a particular recipient's telephone number. Neither caller ID nor the method by which the call actually gets forwarded to its intended recipient (over what telephone network, using what switching facilities) is claimed. No physical aspect of this process is claimed. What is claimed is the idea of dialing only ten digits, at which point some unspecified intermediary will identify both the caller and the intended recipient of the call and connect them.

Judge McMahon then found that:

 Defendant argues that the claims of the '156 patent are directed to the patent ineligible abstract idea. I agree. Defendant, in an effort to shoehorn this case into as many of the above fact-patterns as it possibly can, says that the abstract idea is "a call routing system that employs a two-dimensional lookup table such that calls are routed to intended recipients based on the call-in number being dialed and the identity of the caller." I think it is simpler to say that the claims in suit are directed to the idea of "connecting two people via long distance telephony using caller ID and call forwarding." However you put it, it is clear, on the basis of the precedents discussed above, that this patent is directed to an abstract idea.

Although the Court characterized the invention as both "clever" and "an elegant solution," Judge McMahon nevertheless concluded that the claimed invention lacked any inventive concept, and merely claimed patent-ineligible subject matter.

Court Dismisses Patent Infringement Action for Lack of Standing

In an April 28, 2015 ruling, Judge Colleen McMahon found that the plaintiff in a patent infringement action lacked standing because of a defect in the patent’s chain of title. The plaintiff’s title to the patent depended upon a transfer from the plaintiff’s wholly-owned subsidiary to the plaintiff. The Court found that not such transfer had taken place. Judge McMahon wrote that there had not been an express assignment, and that the plaintiff had not acquired the patent automatically upon the plaintiff’s filing of a certificate of dissolution for the subsidiary. According to the Court, the mere filing of the certificate does not cause the transfer, which happens only upon the filing of a plan of dissolution within three years of the filing of the initial certificate.

Court Denies Summary Judgment Because of Factual Dispute Between Experts

In a January 14, 2015 ruling, Judge Coleen McMahon denied summary judgment in this patent infringement action because of the parties’ experts’ conflicting testimony. The Court wrote:

In sum, the two sides’ experts differ on two critical points: whether [the prior art] and the [patent-in-suit] disclose the same elements and limitations, and whether one acknowledged difference between them (the plurality of numbers) would have been “obvious” to one skilled in the art. Each side has presented testimony from a purported expert to support its point of view. The experts do not agree. That precludes summary judgment.

In commenting on the experts’ disagreement about the qualifications for a person skilled in the art concerning the patent-in-suit, Judge McMahon wrote:

Two more disparate descriptions of what constitutes a “person having ordinary skill in the art” I cannot imagine. . . . The Court has no idea who is correct, or for that matter how to resolve the issue; this is the first case I can recall in which the parties did not agree on the qualifications of the hypothetical “person having ordinary skill in the art.” . . . If the parties cannot agree on who qualifies as a person skilled in the art, then there is a question of fact to be resolved. This precludes summary judgment as well.

Court Denies Stay of Patent Infringement Damages Trial During Interlocutory Appeal

In a March 21, 2014 ruling, Judge Colleen McMahon declined to stay proceedings during a defendant’s interlocutory appeal of the of the Court’s liability rulings in this patent infringement action. In considering the request, the Court wrote that the “decision whether to stay a damages trial pending an interlocutory appeal pursuant to 28 U.S.C. § 1292(c)(2) rests in the sound discretion of the district court,” balancing “‘the harm that a stay might cause to the party who has obtained judgment’” against “‘the harm that denial of a stay would cause the losing party.’” The moving defendant premised its motion “on its assumption that the Federal Circuit is going to reverse this Court’s rulings on claim construction, infringement and/or validity.”

Judge McMahon first found that the moving defendant “has not offered me any reason to doubt the correctness of my previous rulings – at least one of which I described as ‘not even close.’” The Court then considered the remaining factors concerning a stay, i.e., whether: (1) the non-moving party will suffer any prejudice from a stay; (2) the party moving for the stay will be unduly burdened by the denial of a stay; (3) the interests of the Court in an expeditious resolution of the case will be served by a stay; (4) the interests of non-parties will be affected by a stay; and (5) there is any public interest in the grant or denial of a stay. Judge McMahon concluded that as “far as this Court is concerned, [the moving defendant] has failed to identify any basis for concluding that it has a ‘substantial possibility’ of prevailing on its interlocutory appeal, and the other relevant factors either weigh in favor of denying [the] motion or are neutral.”

Court Dismissed Defendants’ Counterclaims Asserting Anti-Trust and Unfair Competition Claims Alleging Misuse of Copyright-Protected Jewelry

In a February 19, 2014 ruling, Judge Colleen McMahon dismissed defendants’ A.O.D. Jewelry Company and David Aghbashoff’s three counterclaims against plaintiff IDI Design Inc. for (i) violation of the antitrust laws through misuse of its copyright registration; (ii) copyright misuse constituting unfair competition in violation of the Lanham Act, 15 U.S.C. § 1125(a); and (iii) unfair competition in violation of the New York General Business Law § 360.

First, defendants alleged that plaintiff had violated antitrust laws by misusing its copyright registration, basing its claim on the belief that plaintiff was “engaged in interfering in commerce by expanding the scope of its Copyright Registration beyond a reasonable scope to intimidate and inhibit commerce in the jewelry business.” The Court held that the defendants plead no facts to support its allegation of a violation of the antitrust laws, and failed to state which antitrust law had allegedly been violated. In order to state an antitrust claim, “[P]laintiff must allege a relevant product market in which the anti-competitive effects of the challenged activity can be assessed.” The defined market must be supported in the complaint by a “theoretically rational explanation” for why the boundaries of the market are defined as they are. Finding that the “jewelry business,” in which plaintiff was purportedly trying to intimidate and inhibit commerce,” was not a bounded market, the court dismissed defendants’ first counterclaim.

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 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 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.

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.

Declaratory Judgment Action of Patent Non-Infringment Transferred After Finding of Forum Shopping

In an August 2, 2013 ruling, Judge Colleen McMahon sua sponte transferred a declaratory judgment action of patent non-infringement to the Eastern District of Texas to be consolidated with already pending litigation in that District.  After Blue Calypso, Inc. started an infringement action against Foursquare Labs, Inc. in the Eastern District of Texas, it was advised by the USPTO that additional related patents would issue.  Blue Calypso asked Foursquare to consent to an amended complaint adding the new patents.  Foursquare then started the declaratory judgment action in this District to declare its non-infringement of the newly issued patents.  Judge McMahon ruled that the "filing of this complaint is plainly an effort to forum shop by Foursquare," and transferred the action to the Eastern District of Texas.