Court Declines to Find Spoliation in Destruction of Counterfeit Books

In an October 2, 2015 ruling, Magistrate Judge Gabriel W. Gorenstein declined to find spoliation by a defendant who destroyed certain counterfeit books before the start of copyright litigation. The defendant had previously settled a copyright infringement action by the same plaintiffs for the sale of counterfeit books. The settlement agreement in the prior litigation did not impose any preservation obligations if the defendant came to possess counterfeit books post-settlement. The defendant in fact did so, and destroyed some of the counterfeit books before the start of this current action. Judge Gorenstein rejected the argument that the previous lawsuit imposed an obligation on the defendant to preserve all counterfeit books in its possession. The Court reasoned:

Plaintiffs perhaps envision a regime under which any tortfeasor is required to preserve all evidence of their wrongdoing indefinitely. That is not the law that governs spoliation, however. Instead, a prerequisite to the duty to preserve is that there be an actual litigation or “reasonably foreseeable” litigation. . . . Given the circumstances that existed at the time the destruction of books occurred, we cannot find that litigation over the counterfeit books defendants found in their possession – not only the ones that had never been sold but even the relative few that had been returned from purchasers – was “reasonably foreseeable.”

Judge Gorenstein further found that the plaintiffs’ pre-litigation demand letter that the defendant preserve evidence did not trigger a preservation obligation because the letter “did not list any specific acts of infringement or even provide a list of titles that were at issue,” and that “to be effective in alerting a party to the potential institution of litigation, the letter must give some specifics as to the particular claim that will be made.”

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.