Court Orders Remittitur of the Jury's Award for Patent Infringement

In an August 14, 2013 ruling, Judge Jed S. Rakoff ordered a remittitur of the $30 million judgement obtained by Tomita Technologies USA, LLC in its patent infringement action against Nintendo co., Ltd. over its Nintendo 3DS gaming console. Nintendo argued that the damages award was excessive because it used the "entire market value" of the 3DS consoles as the royalty base rather than the "'smallest salable patent-practicing unit.'"  Nintendo based its argument on "the rule that, in calculating damages for multi-component products accused of infringement, royalties must 'be based not on the entire product, but instead on the "smallest salable patent-practicing unit."'"  The Court reasoned that "[w]hether the entire market value rule is implicated thus turns on the question of whether the 3DS constitutes the 'smallest salable patent-practicing unit.'" 

Judge Rakoff adhered to his ruling, made in response to Nintendo's in limine motion, that Tomita's expert "properly looked to the 3DS itself as the 'smallest salable patent-practicing unit,'" and did not rely on the entire market value rule.  The Court thus declined to order a remittitur on that ground. 

Judge Rakoff nevertheless did find that "the jury's $30.2 million damages award is 'intrinsically excessive' and unsupported by the evidence presented at trial."  In particular, the Court found that although the reasonable royalty rate of 3% found by the jury is less than a comparable license to which Tomita is a party, "there are special circumstances relating to the 3DS that strongly suggest that such a royalty rate is excessive in this context."  Those factors, according to Judge Rakoff, are that the 3DS consoles are not profitable for Nintendo, and that the infringed patent-in-suit was used in only two functions of the consoles that were "in some sense ancillary to the core functionality of the 3DS as a gaming system."  Judge Rakoff thus gave Tomita a choice of accepting one-half of the damages awarded or facing a new trial.

Dilution and Unfair Competition Claims Dismissed on Motion for Judgment on the Pleadings

In an August 12, 2013 ruling, Judge Laura Taylor Swain granted defendants' motion for judgment on the pleadings dismissing plaintiff Allied Interstate LLC's complaint against them.  Allied Interstate provides debt collection, among other services.  The defendants, Kimmel & Silverman P.C., are a law firm specializing in Fair Debt Collection Practices Act cases, and operate a website, www.creditlaw.com, to promote their services.  Allied Interstate asserted federal and state unfair competition-related and dilution claims arising from the defendants' alleged use of "Allied Interstate" on their website, in the metadata for the site (which is not typically viewable by a user of the site), and in their purchase of the phrase as part of Google's AdWords program.  Without reaching the issue of whether "Allied Interstate" is a famous mark, Judge Swain dismissed the dilution claims finding:  (1) the claim is inapplicable where the defendant uses the mark to refer to the mark owner's goods or services as defendants used the mark here; (2) defendants' use of the mark was a fair use; and (3) to the extent that defendants used the mark to draw a distinction between Allied Interstate's services and their own, the use fell within the comparative advertising exception to a dilution claim under 15 U.S.C. §1125(c)(3)(A)(i).  Concerning the unfair competition and false designation of origin claims, the Court found the allegations to be implausible formulaic conclusions.  Focusing on defendants' actual use of the "Allied Interstate" mark, Judge Swain ruled:

Magistrate Recommends Statutory Trademark Damages and Permanent Injunction Against Counterfeiters

In an August 9, 2013 ruling, Magistrate Judge Frank Maas recommended a $9 million award of statutory trademark damages to Tiffany (NJ) LLC against a series of related defendants (all but one of whom is located in China) and their credit card processor and entered a permanent injunction, but declined to enter a turnover order of funds held in Chinese banks pending an appeal to the Second Circuit of a similar order in another action.  Tiffany filed its complaint against the defendants alleging that they, "through a series of companies and websites, unlawfully manufactured, marketed and sold counterfeit versions of trademarked Tiffany products over the internet, in violation of the Lanham Act."  Tiffany also sued the defendants' credit processor, 95epay, alleging contributory infringement.  All defendants defaulted, and an inquest was ordered.  None of the defendants appeared at the inquest, although three Chinese banks holding defendants' assets and that had previously been restrained appeared to contest a turnover order on, among other grounds, China's bank secrecy laws.

Heightened Pleading Standard Applies to Patent Invalidity Counterclaims

In an August 7, 2013 ruling, Judge Paul A. Engelmayer granted-in-part the motion to strike certain affirmative defenses and to dismiss counterclaims of non-infringement and invalidity in plaintiff Orientview Technologies LLC's patent infringement action against Seven for All Mankind, LLC ("7FAM").  Most notably, the Court ruled that an invalidity counterclaim must meet the heightened pleading standards under Twombly  and Iqbal.  In dismissing the invalidity counterclaim under Fed. R. Civ. P. 12(b)(6), Judge Engelmayer noted the split in the cases about whether the relaxed pleading standard for patent infringement cases or the more rigorous Twombly and Iqbal standards applied, and held that "in the absence of any directive that claims of invalidity, like claims of direct infringement, should be measured under a different standard than almost all other claims in this Circuit are, the Court declines to do so." 

Regarding the affirmative defenses, while the motion was pending the parties agreed that two of the defenses at issue, concerning indirect infringement which was not alleged by plaintiff and injunctive relief which plaintiff had not sought, are not relevant to the case, and the Court struck them as "immaterial" under Fed. R. Civ. P. 12(f).  Plaintiff challenged a third affirmative defense, that the scope of the patent-in-suit was not broad enough to encompass the defendant's conduct, on the ground that it was duplicative of another defense that the defendant has not infringed any claim.  In denying the motion, Judge Engelmayer noted that courts have broad discretion in deciding motions to strike and that such motions are generally disfavored.  The Court found that to "the extent Overview argues that the defense is redundant, its retention poses no risk of prejudice to Overview which is already obligated to defend itself against" the supposedly duplicative defense and the non-infringement counterclaim.

Prevailing Defendant Denied Award of Attorneys' Fees in Lanham Act Claim

In an August 7, 2013 ruling, Judge Jed S. Rakoff denied the motion of defendants House of Cheatham Inc. and Robert Bell for attorneys' fees under the Lanham Act after the defendants prevailed on the trademark infringement, false designation of origin, unfair competition and state dilution claims brought by the plaintiff, Akiro LLC.  The Court first noted that Second Circuit case law "'allows recovery of a reasonable attorney's fee only on evidence of fraud or bad faith,'"  although some cases have allowed fees where the suit was a "'competitive ploy'" or where the suit is initiated with "'ulterior business motives.'"  In support of their motion, "defendants largely focus[ed] on such matters of the timing of Akiro's decision to commence this action, particular tactical decisions, and the expense of defendants' defense."  The Court, however, ruled that "the proper inquiry centers on whether or not Akiro 'had a credible, good faith basis on which to rest its Lanham Act claims."  After considering the (albeit limited) evidence presented at trial, Judge Rakoff held that "the Court cannot conclude that Akiro lacked a good-faith basis for its claims," and denied an award of fees.

Copyright Claims Over Alleged Misuse of Plaintiff's Photographs Dismissed

In an August 6, 2013 ruling, Judge Loretta A. Preska dismissed the copyright infringement claims that Muench Photography, Inc. had asserted against John Wiley & Sons, Inc.  Muench had a contract with Corbis Corporation for the licensing of Muench's photographs to third parties.  Corbis licensed certain of plaintiff's photographs to Wiley that "contained express limitations on Defendant's use of" them.  Plaintiff's First Amended Complaint, which asserted copyright infringement and breach of contract claims, alleged that Wiley's use of their photographs exceeded the scope of the license in a number of ways, and that Wiley entered into the license knowing that its use would exceed the scope.  Wiley moved to dismiss the copyright claims arguing that Muench was collaterally estopped by a ruling in another litigation because the "claims rely upon copyright registrations that this Court has already held to be insufficient to bring the instant suit."  Muench argued that collateral estoppel was inappropriate because the earlier ruling was not yet final.  Judge Preska avoided the estoppel issue, and simply adhered to her reasoning in the earlier decision that the copyrights were "invalid as to Muench's individual works . . . because Muench was not listed as an author," as required by the Copyright Act.  The Court allowed limited breach of contract claims to proceed.

Damages Claim Goes Forward in Prilosec Patent Infringement Litigation

In an August 5, 2013 ruling, Judge Denise Cote denied defendant Andrx Pharmaceuticals, Inc.'s summary judgment motion in plaintiff Astra Aktiebolag's long-running patent infringement action over a generic version of Prilosec.  The action began with Andrx filing of an ANDA, before it had actually made any of the allegedly infringing drug.  During the course of the lengthy litigation, Andrx manufactured $41 million worth of "validation batches" of the drug.  After the Court found infringement, Astra supplemented its complaint to allege damages arising from this manufacture.  Andrx moved for summary judgment, contending it never sold any infringing goods, and its mere manufacture of goods without sale could not constitute "commercial manufacture" that could give rise to money damages under the Hatch-Waxman Act.  Judge Cote rejected the argument, ruling that "commercial manufacture" did not mean "commercial marketing" as Andrx asserted, and that if Congress had meant "commercial marketing," it would have used that term.  The Court also rejected Andrx's argument that the earlier entry of a final injunction prohibiting sale of the goods precluded an award of damages for the manufacture of those goods.  Judge Cote ruled that the fact that Andrx was "enjoined from infringing patents going forward does not render any damages award for past infringement 'double recovery,'" and allowed the damages claim to proceed.

Court Transfers Infringement Case to Tennessee

In an August 2, 2013 ruling, Judge Alison J. Nathan transferred an action alleging patent infringement, trade dress infringement, unfair competition and dilution to the Middle District of Tennessee.  A defendant in the New York action, R&L Merchandising, LLC, had brought a declaratory judgment action of non-infringement against the plaintiff, Alex and Ani, LLC, in the Middle District of Tennessee.  Alex and Ani then started the infringement action against R&L and others in the Southern District.  Judge Nathan granted the defendants' motion to change venue under 28 U.S.C. § 1404(a).  Although noting that the plaintiff's choice of the forum is typically entitled to considerable weight, the Court stated that "that is not the case if the chosen forum has a limited connection with the locus of operative facts."  For the trade dress infringement, dilution and unfair competition claims, the Court held that "the locus of operative facts is where the infringement, dilution, and unfair competition occurred."  Since those operative facts took place nationwide, Judge Nathan found that New York's "connection to the operative facts is not unique."  For the patent infringement claim, the Court held that the locus "is generally where the patented invention was developed or where the allegedly infringing product was designed, developed, and produced," which in this case was outside New York.  Judge Nathan thus transferred the case to the Middle District of Tennessee.

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.

No Collateral Estoppel from General Jury Verdict in Patent Infringement Action

In an August 1, 2013 ruling, Judge George B. Daniels denied reconsideration of his earlier decision declining to give collateral estoppel effect to a general jury verdict from the Eastern District of Texas finding non-infringement of two patents asserted by Alcatel-Lucent USA, Inc.  After the Eastern District of Texas jury verdict was rendered finding that Overstock and Newegg did not infringe the Alcatel-Lucent patents, Barnes & Noble, Inc. moved before Judge Daniels seeking to collaterally estop the assertion of those same patents against it.  The Court denied the motion, and Barnes & Noble sought reconsideration, arguing that the Court "'misapprehended or overlooked . . . how to interpret the general verdicts of non-infringement in the Texas case.'"  Judge Daniels rejected the argument, stating:  "To find non-infringement, the jury only had to find that the accused Newegg and Overstock systems did not include each and every requirement or limitation of the claims. . . . Given the general jury verdict, there is no way of knowing which requirement recited in the asserted patent claims the jury found were not met.  Consequently, there is also no way of knowing if the requirement the jury found not met is identical to a limitation in the different claims at issue in this case."

Copyright Infrigement and Unfair Competition Claims Go Forward in Litigation Over "Hangman" Books

In an August 1, 2013 ruling, Judge Paul A. Crotty dismissed the trade dress infringement claim of plaintiff Michael Ward d/b/a Brainteaser Publications, and declined to dismiss the copyright and unfair competition claims against Andrews McMeel Publishing, LLC.  The plaintiff had been publishing "Scratch & Solve Hangman" books, incorporating variations on the "Hangman" word game, for nearly twenty years, including since 2005 in the U.S.  The defendant introduced its own "Hangman"-based books in 2008, and Ward sued, alleging that the defendant's books "'incorporate the entire concept, feel, and design" of the plaintiff's books.  The Court rejected parts of the plaintiff's copyright claim because the supposedly copied material lacked sufficient originality to be copyrightable, but found that the drawings of certain stick figures used in the "Hangman" game could support a copyright claim.  Judge Crotty held that "[w]hether the illustrations or total concept and overall feel of the [defendant's books] are substantially similar to those of the [plaintiff's books] presents a close factual question.  Accordingly, it will be left for a jury to determine." 

Statutory Damages Awareded and Attorneys' Fees Denied in Copyright Action

In a July 30, 2013 ruling, Judge Paul G. Gardephe adopted in full the Report and Recommendation of Magistrate Judge Freeman awarding plaintiff Rami Shamir $5,000 in statutory copyright damages and denying plaintiff's attorneys' fees.  Shamir had sued a number of related defendants alleging that they had infringed the copyright in his novel "Train to Pokipse" by selling "advanced reading copies" of the book.  The defendants defaulted and largely refused to participate in the proceedings in any meaningful way.  Judge Freeman held an inquest, and in response to Shamir's request for $150,000 in statutory damages, awarded $5,000, noting that the case "'presents a situation of willful infringement, with modes profits to the infringers, at best, and no demonstrable, actual loss to Plaintiff.'"  Judge Freeman declined to award attorneys' fees because ""Plaintiff's unsworn, unauthenticated submission, and non-contemporaneous records, do not substantiate Plaintiff's requested award."  Judge Gardephe, applying a "clear error" standard, ruled that the $5,000 statutory damages award was proper, particularly in light of the defendants' profit of at most $1,200 for the infringing copies.  The Court likewise found the request for attorneys' fees to be insufficiently substantiated.

Federal Circuit Affirms-in-Part and Reverses-in-Part Patent Infringment Ruling

In a July 26, 2013 decision, the Federal Circuit affirmed-in-part and reversed-in-part a ruling by Judge Barbara S. Jones finding infringement of Teva Pharmaceuticals' patents for Copaxone, which is used to treat multiple sclerosis.  The patent claims at issue in the consolidated cases against Sandoz, Inc. and Mylan Pharmaceuticals Inc. had been placed in two groups, Groups I and II, for purposes of the infringement action.  The claims in both groups used the term "molecular weight" without reference specifically to which of the multiple definitions of "molecular weight" was intended.  The defendants argued before Judge Jones that all the claims in Groups I and II were indefinite for failing to specify which "molecular weight" of the active ingredient was referenced.  Judge Jones rejected the indefiniteness argument (and other invalidity arguments), and found all the claims valid and infringed.  The Federal Circuit reversed as to the Group I claims, finding them indefinite and therefore invalid, and affirmed the validity and infringement holding as to the Group II claims.

Patent Infringement Claims Based on ANDA Filing Dismissed as Moot

In a July 18, 2013 ruling, Judge Sidney H. Stein dismissed the patent infringement claims of Purdue Pharma, L.P. against Mylan Pharmaceuticals Inc. and Impax Laboratories over their Abbreviated New Drug Application filings for generic versions of the original formulation of OxyContin.  After the actions were filed, the Food and Drug Administration determined "that original OxyContin had been withdrawn from sale for reasons of safety or effectiveness," eliminating the ability to file an ANDA to market the drug.  Judge Stein then ordered the defendants to show cause why the suits should not be dismissed as moot, and, after considering their perfunctory responses, ruled that there "can be no doubt that Purdue's infringement actions and defendants non-infringement counterclaims are moot."  The Court also considered whether to dismiss the defendants' invalidity claims, noting that the Court "has discretion to decline to exercise jurisdiction over" a declaratory judgment action, "even though the Court has constitutional jurisdiction over that action."  Since Purdue Pharma had already filed separate suits involving the same patents against the defendants over their ANDA's for a reformulated OxyContin, Judge Stein concluded that the defendants would have the opportunity to litigate the invalidity defenses in those actions.  The Court therefore dismissed the infringement counterclaims and declined to exercise jurisdiction over the invalidity claims.

Addition to Infringement Contentions Denied

In a July 17, 2013 ruling, Judge Richard J. Sullivan denied plaintiff Princeton Digital Image Corporations request to add infringement contentions against defendant Hewlett-Packard, Co.  Judge Sullivan cited the standard applied by other Courts in the District -- that "infringement contentions may only be amended to add claims '(1) on stipulation of the parties; (2) upon showing of excusable subsequent discovery of new information; or (3) upon a showing of clearly excusable neglect'" -- and ruled that "Plaintiff has provided no explanation, much less a sufficient one -- for its delayed request." 

Discovery of Doe Defendant's Identity Allowed from ISP in Copyright Infringement Action

In a July 16, 2013 ruling, Judge Edgardo Ramos refused to dismiss copyright infringement claims against a John Doe defendant or to quash a subpoena seeking his identity from an ISP based on his Internet Protocol address.  The plaintiff, Malibu Media, LLC, started an action against 11 John Doe defendants alleging copyright infringement arising from their downloading of Malibu Media's movie, "Leila Last Night," using the BitTorrent protocol. Malibu Media claimed that its forensic expert was able to identify the IP address of eleven computers involved in the BitTorrent download of "Leila Last Night," and moved for expedited discovery and for "leave to file third-party subpoenas on the ISPs of these defendants in order to obtain identifying information."  Judge Ramos severed and dismissed the claims against Does 2 through 11, and granted the motion with regard to Doe 1.  That defendant then moved to dismiss the copyright infringement claim under Rule 12(b)(6), and to quash the subpoena on its ISP.  

Patent Infringement Claims Dismissed on Rule 12(b)(6) Motion to Dismiss

In a July 16, 2013 ruling, Judge Katherine B. Forrest dismissed two patent infringement cases brought by Teva Pharmaceuticals USA, Inc. against Sandoz Inc. and Mylan Pharmaceuticals Inc. under Rule 12(6).  The four patents-in-suit relate to methods of characterizing the active pharmaceutical ingredient in a drug for treating relapsing-remitting multiple sclerosis.  Half of Teva's claims in each complaint related to the defendants' alleged infringement of the patents-in-suit while generating information for their Abbreviated New Drug Applications to make generic forms of the drug, and the other half of the claims were declaratory judgment claims that the defendants would infringe the patents-in-suit in their future production of the drug. 

Judge Gardephe Denies Attorneys' Fees Award

In a July 11, 2013 ruling, Judge Paul G. Gardephe denied the defendant The Bon-Ton Stores, Inc.'s motion for attorneys' fees after its successful motion to dismiss plaintiff Klauber Brothers, Inc.'s breach of contract, and copyright and trademark infringement claims. For the breach of contract claim, Judge Gardephe ruled that an attorneys' fee award is available under the Court's inherent powers where a party has "'acted in bad faith, vexatiously, wantonly, or for oppressive reasons.'"  Finding that Klauber's conduct did not meet that standard, the Court declined to award fees on the breach of contract claim.  Judge Gardephe denied the fee claim under the Copyright Act, holding that "[w]here, as here, a copyright claim is not frivolous or objectively unreasonable, the goals of 'compensation and deterrence' . . . are not furthered in granting an award of attorneys' fees."  Lastly, regarding the trademark infringement claim, the Court noted that attorneys' fees are only available in an exceptional case, and held that while Klauber's theory of standing to assert a trademark infringement claim "was incorrect, there is no evidence that Klauber's Lanham Act claim was brought in bad faith, or as a 'competitive ploy.'"  Judge Gardephe accordingly denied the motion for fees in its entirety.

Summary Judgment Denied on Trademark Infringement and Unfair Competition Claims

In an August 15, 2013 ruling, Judge Paul A. Crotty denied Gogo Sports, Inc.'s motion to dismiss Lifeguard Licensing Corp.'s complaint, including the trademark, unfair competition and false designation of origin Lanham Act claims.  Lifeguard Licensing owns the "Life guard" and "Lifeguard" marks for swim trunks, men's underwear, bags, clothing and accessories.  Lifeguard Licensing does not manufacture goods itself, but licenses others to use its marks.  Defendant Gogo started selling its own "Life Guard San Francisco"-branded goods in 2009.  Lifeguard Licensing engaged in settlement discussions with Gogo, but ultimately did not pursue the matter.  In June 2010, Gogo obtained registration of its marks with the USPTO, and Lifeguard Licensing then started this action in December 2010.

Gogo moved for summary judgment on the trademark claim, contending that there had been an improper assignment in gross of Lifeguard Licensing's marks earlier in the chain of title, that Lifeguard Licensing engaged in naked licensing without adequate quality controls. and that the "Life guard" and "Lifeguard" marks had become generic.  The Court rejected these arguments.  With regard to the assignment in gross, Judge Crotty traced the chain of title of the marks and concluded that each assignment had been accompanied by a transfer of the corresponding goodwill, and the marks were thus not assigned in gross.  The Court also rejected the naked licensing argument, finding that "Gogo fails to present any evidence of Lifeguard's inadequate license supervision," and that, on the contrary, "the record is replete with compelling evidence of Lifeguard's supervision of its marks."  Judge Crotty wrote that in "light of Lifeguard's quality control efforts, the Court finds that it has not abandoned the Lifeguard Marks through naked licensing."

Reliance on Advice of Counsel Need Not be Plead as Affirmative Defense in Trademark Infringement Action

In a July 9, 2013 ruling, Judge George B. Daniels held that "there is no explicit rule that advice of counsel is an affirmative defense that must be pled in one's answer pursuant to Fed. R. Cir. P. 8(c) in a trademark case."  The plaintiff, Bath & Body Works Brand Management, Inc., had started a declaratory judgment against defendant Summit Entertainment, LLC, the producer and distributor of the popular Twilight movies, for a declaration that Bath & Body's "Twilight Woods" and "Twilight Crush" marks did not infringe Summit's "Twilight" marks.  Summit counterclaimed for infringement, and Bath & Body asserted, among other defenses, that its "actions were innocent and non-willful."  In answering Summit's third amended complaint, Bath & Body also asserted as an affirmative defense that Summit's "'counterclaims are barred in whole or in part by the doctrine of advice of counsel.'"