Court Denies Withdrawal of Counsel on Eve of Trial

In two separate March 18, 2014 rulings (here and here), Judge Marvin E. Aspen denied counsel’s request to withdraw from their representation of defendants A.V.E.L.A., Inc. and Leo Valencia in Bruce Lee Enterprises, LLC’s trademark infringement action, and addressed the parties’ in limine motions in advance of the scheduled April 11, 2014 trial. With regard to withdrawal, counsel advised the Court that his clients had terminated the representation in December 2013, but he did not inform the Court or seek to withdraw until March 17, 2014 to permit California counsel (not admitted in New York) time to try to settle the matter. Judge Aspen began his analysis noting that Local Rule 1.4 governing withdrawals gives courts “considerable discretion,” and that courts should consider two factors, ““the reasons for withdrawal and the impact of the withdrawal on the timing of the proceeding.’”

As to whether there is a satisfactory reason for withdrawal, counsel argued that his withdrawal was required because he had been discharged by his clients. Judge Aspen wrote that in the cases on which counsel relied for this argument, there had been irreconcilable or material differences between the lawyers and clients, and that counsel here did not contend there were any such differences. The Court ruled that such differences are not required in every case, but merely “examples of why it is often prudent to grant withdrawal unless there are compelling circumstances” not to do so. Judge Aspen found that the potential disruption to the trial from the belated withdrawal weighed conclusively in favor of denying the motion. Judge Aspen noted that the “case has a lengthy history of litigation, the complaint having been filed nearly five years ago,” and that the “trial date has already been postponed on two occasions.”

Court Transfers Copyright and Trademark Infringement Action to Kentucky

 In a March 12, 2014 ruling, Judge Alison J. Nathan transferred an action alleging copyright and trademark infringement to the Western District of Kentucky under 28 U.S.C. § 1404(a). The plaintiffs, The McGraw-Hill Companies Inc. and other publishing companies, alleged that the defendants operated a “chop shop” in which they altered textbooks intended for use and sale outside the United States so that they could be sold and used in the U.S. This conduct allegedly occurred in Kentucky, but many of the infringing books were sold in New York. The defendants moved to transfer under § 1404, and Judge Nathan undertook the well-established multi-factor test for considering such motions. The Court noted that a “primary factor” is the “locus of operative facts” for the action. Judge Nathan wrote that “in cases of copyright infringement, the operative facts typically relate to the design, development, and production of an infringing product, suggesting the locus of operative facts in the Western District of Kentucky,” but that “in trademark infringement cases courts often hold that the locus of operative facts is the initially chosen forum if acts of infringement, dilution, or unfair competition have occurred in that forum.”

Ultimately, the Court concluded that the locus of operative facts is the Western District of Kentucky. Judge Nathan considered that the “scheme was executed in Kentucky,” whereas “the only alleged event that gives rise to the claims in this litigation that connect it to the Southern District of New York is the sale of some unspecified number of the infringing textbooks here.” The Court furthered discounted the sale of textbooks in New York because there were also sales nationwide.

Judge Nathan considered the remaining factors for considering a transfer, and giving due emphasis to the locus of operative facts, transferred the action to the Western District of Kentucky.

Defendant Who Wins Dismissal on Personal Jurisdiction Grounds Is Not a Prevailing Party Under the Lanham Act

In a March 17, 2014 ruling, Judge Paul G. Gardephe adopted Magistrate Judge Gorenstein’s Report and Recommendation denying attorneys’ fees to defendants who secured dismissal of a trademark infringement action on personal jurisdiction grounds. After the Court dismissed the action on jurisdictional grounds, the defendants “moved for an award of attorneys’ fees under Section 35(a) of the Lanham Act” and under the Court’s inherent authority. Judge Gardephe adopted Judge Gorenstein’s reasoning that the defendants were not “prevailing parties” under the Lanham Act, and thus not entitled to fees. The Court approved of Judge Gorenstein’s application of the “closely analogous” decision of the Second Circuit in Dattner v. Conagra Foods, Inc., 458 F.3d 98 (2d Cir. 2006) which found that a defendant who secures a dismissal on forum non conveniens grounds is likewise not a “prevailing party” entitled to fees.

Judge Gardephe disagreed with the Report and Recommendation’s conclusion that the defendants had waived their argument for fees under the Court inherent authority “because their briefs were ‘devoid of any citations to relevant case law’ and did not ‘advance any reasoned argument supporting such an award.’” Instead, the Court noted that the defendants “included their ‘inherent authority’ argument in the headings of their opening brief and addressed this claim in several paragraphs in their reply.” Judge Gardephe concluded that the defendants’ “moving papers are ‘devoid of any relevant citations’ or ‘reasoned argument’ on this point” but did “not hold that these deficiencies result in a waiver of the argument.” On the merits, though, the Court found that fees were not warranted under its inherent authority because “it cannot be said that Plaintiffs engaged in bad faith or vexatious conduct amounting to an abuse of the judicial proves.”

Court Dismisses Patent Infringement Action on the Ground of Laches

In a March 14, 2014 ruling, Judge Shira Scheindlin dismissed Medinol, Ltd.’s patent infringement action against Cordis Corporation and Johnson & Johnson on the ground of laches following a five day bench trial on that issue. Medinol had two suites of patents for arterial stents, the so-called “Pinchasik patents” and the so-called “Israel patents” which issued from continuation-in-part applications from the Pinchasik patents. In 2000, Medinol sued Cordis over the Israel patents. That series of lawsuits was ultimately unsuccessful, and ended in 2004. The parties thereafter entered into a distribution relationship, which included a tolling provision for any unspecified claims that the parties might have against each other. Sometime in 2005, Medinol explored an infringement action against Cordis on the Pinchasik patents, but did not file that action (or in any way inform Cordis that it was contemplating such an action) until 2013. The parties’ distribution relationship ended early by mutual agreement in 2012. There were some ultimately unfruitful negotiations to renew the relationship, and when those collapsed, Medinol sued on the Pinchasik patents.

Judge Scheindlin noted that to “‘prevail on a defense of laches, a defendant must establish that (1) the plaintiff’s delay in filing a suit was “unreasonable and inexcusable,” and (2) the defendant suffered “material prejudice attributable to the delay.”’” The Court further wrote that in a patent case, the time period for laches does not begin to run until after the patent issues, and that a “delay of more than six years before bringing suit raises a presumption that such a delay was both unreasonable and prejudicial to the defendant.” The presumption shifts the burden to the plaintiff to submit evidence reasonably putting into dispute the reasonableness of the delay and the lack of any prejudice.

Court Awards Summary Judgment of Copyright Infringement Over Publication of E-Book

In a March 14, 2014 ruling, Judge Naomi Reice Buchwald granted summary judgment to plaintiff HarperCollins Publishers LLC in its copyright infringement action against Open Road Integrated Media, LLP over the children’s book Julie of the Wolves. The book was first published in 1972, and Open Road published an e-book version in 2011. The central issue in dispute was whether the original 1971 contract between HarperCollins and the author conveyed the rights to publish e-books.

Judge Rice began the analysis by noting that to “maintain an action for copyright infringement, plaintiff must establish two elements: ‘(1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are in the original.’” The Court further wrote that in this case “the parties dispute only the first element – that is, whether HarperCollins’ uncontested publication rights to Julie of the Wolves encompass the exclusive right to publish and license e-book versions of this work,” and concluded that copyright “infringement actions such as this ‘involving only the scope of the alleged infringer’s license present the court with a question that essentially is one of contract: whether the parties’ license agreement encompasses the [relevant] activities.’”

Judge Rice then engaged in a lengthy analysis of the contract between HarperCollins and the author under New York contract principles, and held that “by its language, the contract grants to HarperCollins the exclusive right to license electronic publications, a right which was infringed by Open Road in its unlicensed e-book publication of Julie of the Wolves.” The Court cautioned, however, that the case turned on “antiquated” language in a forty year old contract, so the holding in this case might have limited applicability.

Court Denies Motion to Dismiss Inequitable Conduct Counterclaim and to Strike Affirmative Defenses

In a March 6, 2014 ruling, Judge Denise Cote denied plaintiff Keystone Global LLC’s motion to dismiss defendants’ counterclaim of inequitable conduct and certain patent-related affirmative defenses. The inequitable conduct counterclaim was based on the defendant’s assertion that it had invented the claimed invention more than a year before the plaintiff applied for the patents-in-suit, that the plaintiff bought one of the defendant’s devices using a pseudonym, and that the plaintiff failed to disclose the defendant’s device or its purchase of the plaintiff’s product during prosecution of the patents-in-suit. In considering the motion to dismiss the counterclaim, Judge Cote applied the Iqbal/Twombly plausibility standard, and further noted that the “Federal Circuit has . . . required a party alleging inequitable conduct on the basis that an applicant failed to disclose prior art to ‘identify the specific prior art that was allegedly know to the applicant and not disclosed.’” Since the counterclaim identified “the piece of prior art the applicants are alleged to have failed to disclose to the PTO and, in alleging that one of the applicants purchased the prior art using a pseudonym, suggests that the failure to disclose was willful,” the Court found the allegations sufficient, and denied the motion to dismiss.

As to the motion to strike, Judge Cote wrote that such motions are “‘not favored and will not be granted unless it appears to a certainty that plaintiffs would succeed despite any state of the facts which could be proved in support of the defense.’” The Court ruled that the defendant’s “affirmative defenses, while not artfully pled, raise core issues in the patent litigation,’” and denied the motion.

Court Granted, In Part, And Denied In Part, Third Party Defendants’ Motion To Preclude Defendant From Offering Certain Documents and Witnesses.

In a March 7, 2014 Opinion and Order, Magistrate Judge Henry Pitman granted, in part, and denied in part, third party defendant Bambams, LLC’s motion to preclude defendant Sherwood Group, Inc. from offering certain documents and witnesses. Plaintiff Max Impact, LLC commenced this lawsuit against defendant Sherwood Group, Inc. asserting patent and copyright infringement claims in connection with Sherwood's sale of a banner product called "Expand-A-Banner". Sherwood filed its answer and asserted counterclaims against third party defendant BamBams, LLC alleging that the counterclaim-defendants, including BamBams, made false statements in advertisements regarding Expand-A-Banner and had tortiously interfered with plaintiff's business relationships.

BamBams moved to preclude Sherwood from offering: (1) Bank of America deposit slips and cancelled checks for 2006; (2) the balance sheet and P&L statements Sherwood obtained from its accountant; (3) the QuickBooks summaries and reports as evidence of gross profits and/or costs of banners sold and (4) testimony from either Sherwood's accountant or bookkeeper. BamBams sought this relief pursuant Federal Rule of Civil Procedure 37(c) and argued that it was appropriate because Sherwood had (1) failed to provide adequate damages computations and documentary support for its damages claims as required by Fed.R.Civ.P. 26(a)(1)(A)(iii), (2) failed to comply with the fact discovery deadline set forth in my Order, dated July 25, 2013 and (3) failed to disclose its accountant and bookkeeper as potential witnesses in its initial disclosures.

Court Denied in Part, and Granted in Part, Defendant Monster Energy Company’s Motion To Preclude Plaintiff Beastie Boys’ Expert Witness Concerning Music Licensing.

In a March 6, 2014 Opinion and Order, the Honorable Paul A. Engelmayer denied defendant Monster Energy Company’s motion to preclude plaintiff Beastie Boys’ expert witness. The plaintiff intended to offer expert testimony from Lisa Thomas concerning the fair market value of (1) a license to use the musical composition and sound recordings included in the allegedly infringing video and (2) the implied endorsement allegedly created by defendant’s use of plaintiffs’ names and trademarks in the video. The defendant moved to preclude Thomas’s testimony from trial.

“Federal Rule of Evidence 702 grants an expert witness testimonial latitude unavailable to other witnesses, provided that (1) ‘the testimony is based on sufficient facts or data,’ (2) ‘the testimony is the product of reliable principles and methods,’ and (3) ‘the expert has reliably applied the principles and methods to the facts of the case.’” “The proponent of expert testimony has the burden of establishing by a preponderance of the evidence that the admissibility requirements of Rule 702 are satisfied.” The Court’s task “is to make certain that an expert, whether basing testimony upon professional studies or personal experience, employs in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field.” “A trial judge should exclude expert testimony if it is speculative or conjectural or based on assumptions that are so unrealistic and contradictory as to suggest bad faith.” Additionally, “an expert opinion requires some explanation as to how the expert came to his conclusion and what methodologies or evidence substantiate that conclusion.” Pursuant to Rule 403, the Court may also exclude evidence if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.

Important here, “[a] minor flaw in an expert’s reasoning or a slight modification of an otherwise reliable method will not render an expert’s opinion per se inadmissible.” “The judge should only exclude the evidence if the flaw is large enough that the expert lacks good grounds for his or her conclusions.” “This limitation on when evidence should be excluded accords with the liberal admissibility standards of the federal rules and recognizes that our adversary system provides the necessary tools for challenging reliable, albeit debatable, expert testimony.”

The defendant did not dispute Thomas’ expertise in music licensing, nor did it take issue with the five factors that Thomas stated, in her experience, usually affect the negotiated value of a music license. Instead, the defendant disputed her application of those factors to the facts at hand.

In the main, the Court found defendant’s objections were without merit, or went to the credibility of Thomas’s testimony, which were to be tested not by preclusion but by “[v]igorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof,” which “are the traditional and appropriate means of attacking shaky but admissible evidence.”

The defendant did have one trenchant objection to Thomas’s report and testimony. Thomas estimated the fair market value of an appropriate license based on a perpetual term of use. But the measure of damages must be based on “the use the infringer made,” not unrealized risks created by the infringer’s use. Thomas’s decision to value the license and implied endorsement based on a perpetual term of use, when the law requires her to use a five-week term of use, was not a “minor flaw.” Rather, “the flaw is large enough” that, while it remained a basis for her report, the report “lacks good grounds for [its] conclusions.” This flaw, however, was eminently correctable, the court ruled. Thomas was allowed to render a prompt, revised opinion, that valued the license based on a factually defensible assumption as to the term of use.

In a subsequent May 7, 2014 ruling,  Judge Engelmayer again refused to prohibit Thomas from testifying.  The defendant argued that Thomas's estimate of damages was so vague as to be illusory.  The Court wrote that Thomas "is not fairly to be faulted for acknowledging that inherent uncertainty in estimating the value of a unique, intangible good.  In acknowledging that uncertainty, Thomas, in fact, keeps company with the Second Circuit, which, when it first approved the method of measuring a copyright holder's actual damages through the fair market value of a hypothetical license fee, recognized the difficulty of that exercise."  The Court did, however, did preclude Thomas from testifying about the settlement of a widely-publicized dispute between the Beastie Boys and toymaker GoldieBlox under Federal Rule of Evidence 403.  Judge Engelmayer wrote that "the confusion and delay occasioned by introduction of evidence as to the GoldieBlox Settlement would substantially outweigh -- indeed, it would overwhelm -- the limited probative value of the GoldieBlox testimony."

Court Appoints Forensic Investigator After Defendant Failed to Issue Litigation Hold

In a March 4, 2014 ruling, Magistrate Judge Michael H. Dolinger ordered that plaintiff Klipsch Group, Inc. could appoint a forensic investigator to examine defendant Big Box Store Ltd.’s “computer systems for the purpose of determining, if possible the likelihood of document destruction . . ., the likely nature and volume of any such destroyed documents, whether some or all of those documents may be recovered, the status of the sales information in the defendants’ system of computers, whether any pertinent sales data has been destroyed or simply not produced, the recoverability of any destroyed sales data, and what any recovered sales data pertaining to infringing goods indicates as to volume, revenue and profits.” Klipsch had accused Big Box Stores of a variety of discovery abuses in its trademark infringement action, including failure to issue a written litigation hold and issuing an oral litigation hold seven months after the start of the litigation, and further argued that that failure permitted documents to be destroyed, especially documents relating to sales of the goods infringing its trademark. Big Box Stores admitted some trademark infringement, but only as to a small number of units.

Judge Dolinger concluded that Big Box Stores had fallen short in its discovery obligations, including making misleading statements about the documents that it had. The Court found, however, that despite the fact that documents had been destroyed, there was no evidence that any documents relating to the amount of sales had been destroyed, nor was there any evidence that the defendant’s infringing sales were any greater than the small number of sales to which Big Box Stores admitted. In these circumstances, Judge Dolinger rejected a number of harsher penalties, such as termination in Klipsch’s favor, preclusion of evidence about the amount of infringing sales, and a mandatory or permissive adverse jury instruction, in favor of the forensic investigation. The Court ordered the plaintiff to bear the cost of the investigation in the first instance with leave for the plaintiff to apply for a shifting of the costs “in light of actual problems in obtaining discovery from defendants.”

Court Recommended Preliminary Injunction and Declaratory Judgment Be Granted, In Part, And Denied Monetary Damages and Attorneys’ Fees Be Denied, For Copyright Infringement Of Documentary Film.

In a March 3, 2014 Report and Recommendation to the Honorable Ronnie Abrams, Magistrate Judge Ronald L. Ellis recommended that declaratory judgment for the plaintiff be granted in part; that the plaintiff’s request for a permanent injunction be granted; and that the plaintiff’s requests for monetary damages and attorneys’ and costs be denied.

Plaintiff Tanya Steele commenced this action against defendants Richard Bell and Josh Milani Gallery, Pty. Ltd. for declaratory judgment, copyright infringement, fraud on the U.S. Copyright Office, breach of contract, and other claims concerning the ownership of the film, Blackfella’s Guide to New York City. Plaintiff sought declaratory and injunctive relief, damages, and attorney's fees and costs, pursuant to the Copyright Act. On May 16, 2013, the Honorable Ronnie Abrams entered default judgment against defendants and referred the case for an inquest on damages.

Plaintiff sought a declaration that she is the "sole author of the Film because she singlehandedly generated the concept for the Film and supervised the Film's creation from start to finish." The Supreme Court has stated that "[t]he sine qua non of copyright is originality." "Original, as the term is used in copyright, means only that the work was independently created by the author (as opposed to copied from other works), and that it possesses at least some minimal degree of creativity." As the plaintiff developed the concept, content, and overall aesthetic for the film, created the title to the film, executed the film, prepared production schedules, shot and reviewed footage, and wrote the script, the court recommended that plaintiff's request for a declaration that she is the sole author of the film be granted.

Court Dismisses Trademark Infringement Claims on Summary Judgment, Finding No Likelihood of Confusion as Matter of Law

In a March 3, 2014 ruling, Magistrate Judge Andrew J. Peck granted summary judgment to defendant New Balance Athletic Shoe, Inc. against plaintiff defendant Denimafia Inc. Denimafia asserted trademark infringement, counterfeiting and unfair competition claims (and related state law claims) against New Balance over the mark <=> on footwear. Denimafia has used the marks on “men’s t-shirts, woven shirts, jackets, chinos jeans, and casual suits, as well as women’s dresses and skirts.” New Balance used the marks on its “Minimus collection of three athletic shoe models,” as well as “‘performance running apparel, sandals, socks, other outdoor products, water shoes, multisport training shoes, and kids’ shoes.’” Although Denimafia had somewhat substantial sales of the trademarked goods before 2008, since then, its sales have been insignificant.

The Court first noted that Denimafia did not submit any survey evidence, and rejected Denimafia’s anecdotal evidence of actual confusion, consisting of five communications from individuals with whom Denimafia’s principal had previous relationships. Judge Peck found that none of this evidence showed actual confusion, but merely documented speculation that Denimafia’s principal might be collaborating with New Balance. By contrast, New Balance commissioned a survey that failed to document any evidence of actual confusion.

Court Awarded Treble Damages For The Intentional Use In Commerce Of A Mark Known To Be Counterfeit, Pre and Post Judgment Interest, Attorneys Fees and Costs.

In a February 28, 2014 Report and Recommendation to the Honorable Lorna G. Schofield, Magistrate Judge Sarah Netburn conducted an inquest on damages following an entry of default against defendants Fastmac Performance Upgrades, Inc. and TruePower, Inc. Because Leviton Manufacturing Company provided the Court with a sufficient basis on which to award damages, the Court recommended an award of $6,054,720 plus pre-judgment and post-judgment interest and reasonable attorneys’ fees and costs. In a June 13, 2014 ruling, Judge Lorna G. Schofield adopted the Report and Recommendation in its entirety.

Courts evaluating damages in a default context first look to the complaint to determine whether the plaintiff has established a prima facie case for recovery. Plaintiff filed federal claims for trademark infringement, false designation of origins, and dilution under the Lanham Act and New York state law causes of action. “To succeed on . . . Lanham Act claims for federal trademark infringement in violation of 15 U.S.C. § 1114(1), [the plaintiff] must show that it has a valid mark that is entitled to protection under the Lanham Act and that [the defendant’s] actions are likely to cause confusion with [the plaintiff’s] mark.” The court recommended that the allegations in the complaint established a valid claim of infringement. Indeed, Judge Schofield had already granted plaintiff an injunction against the defendants on this claim for the following reasons.

Court Awards Damages and Attorneys' Fees for Wrongful Seizure in Couterfeiting Case

In a February 28, 2014 ruling, Magistrate Judge Frank Maas issued a Report and Recommendation recommending that the Court award defendant Top Quality Food Market, LLC and the other defendants $22,535 in attorneys’ fees and damages for the wrongful ex parte seizure of allegedly counterfeit goods. Plaintiff Prince of Peace Enterprises, Inc. obtained the seizure order, which Judge Howell later vacated. The defendants then asserted a counterclaim seeking damages for the wrongful seizure. After the plaintiff defaulted in responding to the defendants’ motion to dismiss, Judge Howell granted the motion and ordered that the defendants’ counterclaim be decided in their favor. The Court then referred the matter to Judge Maas for an inquest on damages arising from the unwarranted seizure.

Judge Maas began his analysis by noting that because the plaintiff never answered the counterclaim, “the well-pleaded factual allegations therein must be accepted as true,” but the plaintiffs “nevertheless still must submit proof sufficient to enable this Court to determine their losses since a default ‘is not an admission of damages.’” Judge Maas also wrote that the amount of damages recoverable is governed by 15 U.S.C. § 1116(d)(11), which provides that a victim of a wrongful seizure is entitled to recover “lost profits, cost of materials, loss of good will, and punitive damages in instances where the seizure was sought in bad faith, and unless the court finds extenuating circumstances, to recover a reasonable attorneys’ fee.”

The plaintiffs sought $192 for seized goods that were never returned, $2,000 for goods that spoiled while the seizure was in effect, $2,064 in wages, $4,577.60 in lost profits and $29,721.95 in attorneys’ fees. Judge Maas awarded the $192 for the seized goods even though they were inadequately documented because the amount is de minimis. The Court examined the documentation with regard to the other non-attorneys’ fees items of damages, and concluded that the defendants had not carried their burden of showing them with reasonable certainty.

Court Denied Defendant’s Motion To Dismiss For Lack of Personal Jurisdiction Where A Hong Kong Based Website Shipped A Single Allegedly Counterfeit Good Into New York.

In a February 18, 2014 ruling, Judge Richard J. Sullivan ruled that New York’s Long Arm statute conferred personal jurisdiction over Defendant Dress Market Ltd., a Hong Kong based dress distributor which sells its dresses through its interactive website, when it shipped a single, allegedly counterfeit product into New York in response to an order from plaintiff’s counsel. The defendant did not challenge whether it been properly served with process. Rather, the defendant argued that it did not have “sufficient contacts” with New York for the court to exercise personal jurisdiction.

Pursuant to Federal Rule of Civil Procedure 4(k)(1)(A), a federal court has jurisdiction over a defendant that has been properly served if the defendant "is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located." Fed. R. Civ. P. 4(k)(1)(A). Absent personal service within the state, New York state courts may exercise personal jurisdiction over a non-domiciliary only as permitted by New York's long-arm statute. N.Y. C.P.L.R. § 302. In addition, even if New York law allows for jurisdiction, personal jurisdiction in the case must "comport with the Due Process Clause of the United States Constitution" – i.e., there must be minimum contacts with the forum jurisdiction.

The Court deemed it unnecessary to engage in a detailed “minimum contacts” analysis because it found that the facts in this matter were legally indistinguishable from the facts of the Second Circuit’s controlling decision in Abc v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158, 161 (2d Cir. 2010). In Queen Bee, the Second Circuit found that New York's long-arm statute and the "minimal contacts" inquiry of Due Process were satisfied when the defendant (l) shipped a single, allegedly counterfeit product into New York; (2) "operated a highly interactive website offering such [products] for sale to New York customers"; and (3) "engaged in fifty-two other transactions where merchandise was shipped to New York." Here, defendant shipped at least one dress into New York that allegedly infringes Plaintiffs' Sherri Hill’s copyrights, albeit in response to an order from plaintiffs' attorneys.

The only distinction between the fact pattern in this matter and Queen Bee was that plaintiff had not shown evidence of fifty-two other transactions in New York. The Court found, however, that this difference was irrelevant. Queen Bee emphasized that the crux of the long-arm statute and the Due Process Clause was whether the defendant had "purposefully availed himself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws." That requirement was met, the court ruled, where the defendant has "developed and served a market for its products" within New York, and "might well be" satisfied by the shipping of a single product alone. Accordingly, the Court determined that personal jurisdiction was appropriate under New York’s long-arm statute and the Due Process “minimal contacts” inquiry.

The Court denied the defendant’s motion to dismiss.

Court Dismisses Most of Copyright Licensee's Infringement Claims on Standing Grounds

In a February 21, 2014 ruling, Judge Katherine Polk Failla denied in part and granted in part the parties’ cross motions for summary judgment. Plaintiff John Wiley & Sons, Inc. started a declaratory judgment action against DRK Photo for a declaration that Wiley had not infringed DRK’s copyrights in certain stock photographs that DRK had previously licensed to Wiley as the representative for the photographers that originally took the photographs. DRK then counterclaimed for copyright infringement. After the completion of discovery, the parties cross-moved for summary judgment.

A threshold issue for DRK’s motion was its standing to assert copyright infringement claims. Judge Failla wrote that under 17 U.S.C. § 501(b), only legal or beneficial owners of a copyright have standing to sue, and that “the Second Circuit enforces Section 501(b) by holding that ‘[t]he Copyright Act authorizes only two types of claimants to sue for copyright infringement: [i] owners of copyrights, and [ii] persons who have been granted exclusive licenses by owners of copyrights.’” After analyzing the Representation Agreements under which DRK acquired the right to license the photographs at issue to Wiley, the Court concluded that the “record provides uncontroverted proof that the Representation Agreements are nonexclusive licenses.” Judge Failla premised her conclusion in part on the fact that “DRK admitted that the Representation Agreements are nonexclusive licenses.” Judge Failla also rejected DRK’s argument that was a beneficial owner of the copyrights at issue because it was entitled to one-half of the licensing revenue, noting that “the cases on which DRK relies in support do not prove otherwise.”

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 Dismisses Copyright Declaratory Judgment Action for Failing to Plead Plausible Claim

In a February 6, 2014 ruling, Judge P. Kevin Castel dismissed plaintiff Newlight Eyewear, LLC’s action seeking a declaration that it does not infringe defendant Art-Optic, Ltd.’s copyrights and asserting claims for Art-Optic’s interference with Newlight’s contractual relations with its customers. Both parties currently sell hand-painted eyeglass frames. Newlight had previously distributed Art-Optics’ frames. After the relationship ended, Art-Optics sued Newlight for copyright infringement, but discontinued the action after it was assured that Newlight’s sales were merely disposing of left over inventory from the distributorship relationship. In its complaint, Newlight alleges that Art-Optics is nevertheless still informing Newlight’s customers that Newlight’s products infringe its copyrights and that they should not do business with Newlight.

Judge Castel dismissed the claim to declare non-infringement of Art-Optics’ copyrights, writing that the “Complaint does not describe [Newlight’s] product line, or the differences and similarities between [Newlight’s] eyeglass frames and the” Art-Optics frames. The Court added that the Complaint “is silent as to the design of the [Newlight] product line and how the design and how the design elements compare with those of” Art-Optics, and that “Newlight has offered no examples of its products and does not allege that it has registered copyrights for any of its designs.” Judge Castel concluded that the Complaint “is so lacking in detail as to which of Newlight’s products are at issue and the design elements of those products as to fail to state a claim for relief.” The Court also dismissed Newlight’s claim to declare Art-Optics’ copyright registrations invalid, finding that Newlight did not make any “allegations that plausibly contend that defendant’s copyrights for the [Art-Optics] frames are somehow invalid and/or unenforceable.” And having dismissed the federal claims, Judge Castel declined to exercise supplemental jurisdiction over Newlight’s common law claims, and dismissed the entire action.

Court Finds No Personal Jurisdiction Over Defendant in Trademark Infringment Action; Transfers It to Proper Court

In a February 5, 2014 ruling, Judge Ronnie Abrams granted defendant Positive Impact, Inc.’s motion to dismiss the trademark infringement claims against it for lack of personal jurisdiction, and transferred the action to the Northern District of Georgia. Having concluded that the Court lacks personal jurisdiction, Judge Abrams declined to reach Positive Impact’s motion to dismiss certain claims.

After the Atlanta-based Positive Impact sent New York-based plaintiff DH Services, LLC a cease and desist letter over DH Services use of the “Mister” mark for its online dating services and made a follow up telephone call to Positive Impact, Positive Impact started this action as a declaratory judgment of non-infringement. It later amended the complaint to add statutory and common law claims of unfair competition and deceptive practices.

Because Positive Impact is located outside New York, and the Lanham Act “‘does not specifically provide for national service of process,’” Judge Abrams applied the law of the forum state, New York’s Long Arm statute. It was undisputed that there was no general jurisdiction over Positive Impact in New York. So DH Services alleged jurisdiction based on Positive Impact’s transaction of business in New York, its alleged commission of a tort here, and its alleged commission of a tort outside New York that had a foreseeable impact in New York.

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.