Court Refuses to Dismiss Trademark Infringement Claims, But Notes They Are Close to Line of Improper Copyright Claims

In a September 23, 2013 ruling, Judge Andrew L. Carter denied plaintiff Expressway Music, Inc.'s motion to dismiss defendant Slep-Tone Entertainment Corp.'s trademark infringement and unfair competition counterclaims.  Slep-Tone alleged that Expressway "acquired or made unauthorized duplicates of Slep-Tone's karoke accompaniment tracks.  These unauthorized media- and format-shifted duplicates were marked with Slep-Tone's 'SoundChoice' trademark and distinctive trade dress."  The Court found that these allegations were sufficient to meet the Iqbal standard and state trademark and unfair competition claims.

Expressway argued that the real thrust of Slep-Tone's complaint was to challenge the copying of the media- and format-shifted recordings, which is in the nature of copyright infringement, not trademark infringement.  Judge Carter noted that the "case may toe the line between a trademark claim attempting an 'end run around the copyright laws' and a viable trademark claim," but that "regardless of the copyright status of these videos, Slep-Tone alleges facts about the misuse of its trademark on products it did not create, namely because Slep-Tone's registered trade dress and trademark appear on Expressway's media- and format-shifted tracks.  These are cognizable claims under the Lanham Act."

"Manufactured" Sale in District to Party's Counsel Insufficient for Personal Jurisdiction

In a September 20, 2013 ruling, Judge Robert W. Sweet granted defendant Roger Nunn's motion to dismiss plaintiff North Jersey Media Group, Inc.'s copyright infringement complaint against him for lack of personal jurisdiction.  North Jersey Media alleged that Nunn violated its copyright "of a photographic impage depicting firefighters raising an American flag at the site of the World Trade Center in the immediate aftermath of the events that took place in New York City on September 11, 2001 . . . by selling a copy of the WTC Photo over the internet." 

Judge Sweet wrote that in "order for a federal court sitting in New York to assert personal jurisdiction over Nunn, a California resident, NJ must satisfy the requirements of both New York's long-arm statute, N.Y. C.P.L.R. § 302 . . ., as well as the Due Process Clause."  The Court noted that in "general, an allegation of a defendant's infringing sales to residents in New York is sufficient to satisfy § 302," and found that the complaint did allege such a sale, thus complying with New York's long-arm statute.  Judge Sweet held, though, that Nunn's single sale in New York -- a "manufactured" sale to North Jersey Media's counsel -- failed to satisfy the Due Process Clause.  In particular, the Court ruled that North Jersey "has failed to establish that Nunn's conduct satisfies either the minimum contacts inquiry or the reasonableness inquiry; accordingly, Nunn's right to due process bars this Court's exercise of personal jurisdiction over him in the instant action."

Court Allows Expedited Discovery About Defendants' Identity in Trademark Action

In a September 11, 2013 ruling, Judge Lorna G. Schofield granted plaintiff Admarketplace, Inc.'s motion for expedited discovery before the parties' Rule 26(f) conference to identify the citizenship and location of defendant Tee Support, Inc.  Admarketplace asserted claims for defamation and trademark infringement against Tee Support, but was unable to learn sufficient details to effect service despite its diligence in trying to do so.  Judge Schofield ruled that Admarketplace had made a prima facie case of trademark infringement (and defamation) .  The Court concluded that "Plaintiff, who has a potentially meritorious claim and no ability to enforce it absent expedited discovery, has demonstrated good cause for expedited discovery upon the five parties identified in their motion."

Attorneys' Fees Awarded to Prevailing Defendant in Copyright Infringment Action

In a September 10, 2013 ruling, Judge Paul G. Gardephe granted defendant Hilton Worldwide, Inc.'s motion for attorneys' fees after it secured summary judgment against plaintiff Aqua Creations USA, Inc.'s copyright infringement claims.  Aqua Creations had sought copyright registrations on its lighting designs.  The Copyright Office denied registration, finding that the lighting designs were useful articles that did not contain any creative authorship separable from the articles themselves.  After the Copyright Office denied reconsideration, Aqua Creations started the action against Hilton, alleging copyright infringement of its unregistered lighting designs.  Hilton sought a pre-motion conference to dismiss the complaint because it failed "'to identify any separable, non-functional, artistic elements of the designs.'"  At the conference, the Court gave Aqua Creations leave to file another amended complaint.  That amended complaint, however, suffered from the same defect, and Judge Gardephe granted Hilton's motion to dismiss.  Aqua Creations appealed, and the Second Circuit affirmed, relying on the same cases and adopting the same reasoning as Judge Gardephe had in dismissing the amended complaint.

Hilton then sought attorneys' fees, for the cost of the appeal only, under the Copyright Act provision giving the Court discretion to award fees to the prevailing party, 17 U.S.C. § 505.  Judge Gardephe found that "[b]y the time Aqua filed its appeal, it had been alerted on at least five separate occasions that its copyright claims were defective, because it had not demonstrated that the designs in its light fixtures were separable from the utilitarian and functional aspects of these lamps" -- twice by the Copyright Office, once by Hilton in its letter asking for a pre-motion conference, and twice by the Court in considering the adequacy of Aqua Creations' complaints.  The Court thus ruled that "[u]nder these circumstances, this Court cannot find that Aqua's actions in prosecuting the appeal were objectively reasonable."  Judge Gardephe awarded fees, but in a reduced amount from that sought by Hilton.

Court Rules in Favor of Manufacturer Over Distributor in Lanham Act Dispute

In a September 10, 2013 ruling after a bench trial, Judge Marvin E. Aspen ruled in favor of plaintiff Excell Consumer Products Ltd. in its Lanham Act and state law claims over the the "Smartcandle" mark and related logos.  Defendants Structural Integrity Property Services, LLC and Smart Candle LLC had been Excell's distributor of battery-operated candles sold under the "Smartcandle" marks.  Excell had originally licensed the marks from a party referred to as SCK.  After the distribution arrangement between Excell and Structural ended, Structural asserted ownership of the marks, and sought to register them with the USPTO.  Excell asserted Lanham Act and state law unfair competition claims against Structural, which counterclaimed with like causes of action.

Judge Aspen found that since the parties essentially asserted mirror Lanham Act claims against each other, they had effectively conceded all the elements of the claims, so the dispute became one of ownership of the marks at issue. Excell argued three ways through which it had acquired the marks at issue:  (1) as a licensee from SCK; (2) as a purchaser from SCK under another agreement; and (3) as the acquirer of the marks after SCK abandoned them.  The Court rejected the first two grounds, but found in Excell's favor on the abandonment issue.

Judge Aspen noted that a mark is abandoned if the owner "'discontinues use with the intent not to resume such use in the foreseeable future,'" and that there is presumptive abandonment after three years of non-use.  Also according to the Court, "[o]nce abandoned, 'a mark returns to the public domain and may, in principle, be appropriated for use by other actors in the marketplace, in accordance with the basic rules of trademark priority.'"  Judge Aspen ruled that the marks had been abandoned because SCK was dissolved in 2007, "and there is no evidence that it ever resumed operations." 

Court Dismisses in Part Copyright Infringement Claim Over Sampled Music

In a September 10, 2013 ruling, Judge Alison J. Nathan granted in part defendants' motion to dismiss plaintiff TufAmerica, Inc.'s copyright infringement action.  TufAmerica, which is "the putative exclusive administrator and copyright licensee of a number of copyrights to the compositions and sound recordings of the musical group Trouble Funk," sued the individual members of the Beastie Boys and others, alleging that the group "unlawfully sampled a number of Trouble Funk's songs on the Beastie Boys' hit albums Licensed to Ill and Paul's Boutique."  TufAmerica's amended complaint asserted copyright infringment claims for six acts of unlawful sampling in Beastie Boys songs, and in particular that the samples "infringed both the musical composition and the sound recording of the sampled Trouble Funk songs." 

In analyzing whether the accused songs were substantially similar to the sampled songs for copyright infringement purposes, Judge Nathan applied the "fragmented literal similarity" test under which the Court examines whether there is "'localized' rather than 'global' similarity between the two pieces."  Applying this test, the Court noted that "'the question of substantial similarity is determined by an analysis of "whether the copying goes to trivial or substantial elements' of the original work.'"  Further, Judge Nathan wrote that the "real question" at the motion to dismiss "stage -- more so than the question of how to label the relevant test -- is whether (as to each sample) Plaintiff has plausibly alleged that the sample is quantitatively and qualitatively important to the original work such that the fragment similarity becomes sufficiently substantial for the use to become an infringement."

Court Finds Video Service to Be in Contempt of Injunction Against Copyright Infringement

In a September 10, 2013 ruling, Judge Naomi Reice Buchwald granted plaintiff CBS Broadcasting Inc.'s motion for civil contempt against Filmon.com, Inc., and ordered Filmon.com to comply with the permanent consent injunction to which it had previously agreed.  Judge Buchwald also ordered Filmon.com to complete a payment of $1,350,000, and awarded the costs of the enforcement motion. 

The action arose out of CBS's and other broadcasting networks' claims that Filmon.com's retransmission of their broadcast signals to its customers constituted copyright infringement.  After CBS filed a motion for a preliminary injunction, and the parties engaged in discovery, the parties reached a settlement that "was conditioned upon this Court's entry of a stipulated consent judgment and permanent injunction prohibiting FilmOn from further infringing plaintiffs' copyrights."  The Court entered the consent injunction in July 2012.

By January 2013, CBS and other plaintiffs began to allege various violations of the injunction, including the lack of a promised payment, Filmon.com's principal's continuing disparagement of CBS, and, most significantly, Filmon.com's launch of a new video on demand service that plaintiffs contend violate their copyrights.  After the parties were unable to resolve their differences, CBS sought an order of contempt.

Court Declines to Modify Permanent Injunction Against Infringement to Permit Defendant's Redesign

In an August 29, 2013 decision, Judge Robert W. Sweet denied defendant Green Project, Inc.'s Rule 60(b) motion to modify the consent permanent injunction obtained by plaintiff Canon, Inc. to allow Green Project to produce a product that it claimed designed around Canon's patent.  Judge Sweet denied relief, writing that as "in analogous cases where district courts have denied motions that 'would amount to an impermissible advisory opinion,' Green Project inappropriately seeks a pre-approval of its future behavior, namely, selling its redesign."  The Court also noted that "[e]ven if Rule 60(b) relief were appropriate, Green Project has not provided sufficient evidence to conclude that its redesign does not infringe any claims of" Canon's patents," particularly since its non-infringement contentions were based on attorney argument rather than expert testimony.  Judge Sweet concluded that Green Project's "motion is thus inadequate, and an inappropriate procedure, for determining issues of infringement."

Court Declines to Strike Patent Infringement Affirmative Defense of Prosecution History Estoppel as Inadequately Pled

In an August 30, 2013 ruling, Judge Alvin K. Hellerstein denied plaintiff Alcorn Communications, LLC's motion to strike defendant Marketwire, Inc.'s patent infringement affirmative defenses of prosecution history estoppel and/or prior art finding that "these allegations are too important, and too conclusory, to be answered, but no answer to an affirmative defense is required."  The Court, however, cautioned that "without greater specificity, no discovery will be allowed with respect to this defense, and the defense is likely to be stricken before trial."

Court Grants Summary Judgment of Patent Non-Infringement and Denies Invalidity Motion as Moot

In an August 29, 2013 ruling, Judge P. Kevin Castel granted the motion of Google, Inc. and Facebook, Inc. for summary judgment of non-infringement, and denied their motions for summary judgment of invalidity.  The patents-in-suit "disclose methods and systems which allow users without web programming skills to create mobile websites with personally-authored content for display on mobile devices."  The plaintiff, Wireless Ink Corporation, sued for patent infringement over the Google and Facebook websites, alleging literal infringement and infringement under the doctrine of equivalents. 

With regard to literal infringement, the Court noted that it "requires that every limitation recited in the asserted claim appear in the accused device or method. . . . Therefore, if even one limitation is not present in the accused product, there is no literal infringement."  Judge Castel then reviewed the evidence of infringement proffered by Wireless Ink in response to the summary judgment motions, and concluded that Wireless Ink had failed to come forward with evidence from which a reasonable fact-finder could find that all the claim limitations in the asserted claims in the patents-in-suit are present in the Google and Facebook websites.  In response to several of Wireless Ink's infringement arguments, the Court noted that Wireless Ink did not dispute the facts proffered by defendants but merely argued claim interpretation and ruled that where "'as here, the parties do not dispute any relevant facts regarding the accused product but disagree over which of two possible meanings of Claim 1 is the proper one, the question of literal infringement collapses to one of claim construction ans id thus amenable to summary judgment.'"  The Court adhered to its original claim construction ruling, and granted judgment in favor of Google and Facebook.  Judge Castel also dismissed Wireless Ink's claims under the doctrine of equivalents, writing that Wireless Ink conceded that it had "offered no evidence to support a theory of infringement under the doctrine of equivalents."

Court Denies Defendant's Motion for Reconsideation of Claim Construction Ruling

In an August 27, 2013 ruling, Judge Alison J. Nathan denied defendant T-Mobile USA, Inc.'s motion for reconsideration of the Court's earlier claim construction ruling.  Judge Nathan noted that "Defendant has failed to meet the motion for reconsideration standard," but the Court nevertheless considered T-Mobile's arguments and found them meritless.  One of T-Mobile's contentions, presented in the motion for reconsideration for the first time was that the preamble of the claim at issue "should be read to limit claim scope because the claim does not make sense without any preamble."  The Court rejected this argument, writing that "most claims would not make sense without any preamble, yet the Federal Circuit has instructed that 'generally' preambles do not limit claim scope."  Judge Nathan also concluded "that the claim is understandable without considering the preamble as a limitation, and that the claim body independently and fully describes a coherent device without any limitation imposed by the preamble."  The Court considered and rejected T-Mobile's remaining three arguments, and denied reconsideration.

Court Finds That Federal Circuit's Akamai Decision Did Not Change Law of Direct Patent Infringement

In an August 26, 2013 ruling, Judge Deborah A. Batts denied reconsideration of the Court's ruling dismissing plaintiff Edwin Lyda's patent infringement claim against Fremantlemedia North America, Inc.  Lyda argued that the Federal Circuit's decision in Akami Techs, Inc. v. Limelight Networks, Inc., 692 F.3d 1301 (Fed. Cir. 2012), which overruled in part BMC Resouces Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007) relied on in the Court's original ruling, warranted reconsideration.  Akamai and BMC, however, both deal with induced infringement, and Lyda's claim was based on direct infringement.  Judge Batts ruled that Akamai did not overrule the portion of BMC on which she relied in her earlier decision, and that the Akamai decision "consciously avoided ruling on direct infringement."  Thus, Judge Batts found that "Akamai did not change the law of direct infringement, and it is, therefore, not relevant to the Court's prior decisions."

Court Holds that Mere Registration of Domain Names Does Not Constitute "Use in Commerce" Under the Lanham Act

In an August 26, 2013 ruling, Judge Deborah A. Batts granted in part defendants' motion to dismiss Courtalert.com, Inc.'s complaint asserting. Courtalert.com and defendant e-law.com both supply alerts about court filing to lawyers and others users.  Courtalert.com alleged that e-law.com registered five domain names incorporating Courtalert.com's trademarks in full.  e-law.com cancelled the domain names following Courtalert.com's objection, but Courtalert.com sued anyway, asserting five Lanham Act claims (trademark infringement, unfair competition, false designation of origin, cybersquatting and dilution), and a state unjust enrichment claim.

The Court dismissed the trademark infringement claim, holding that Courtalert.com had failed to allege use of the infringing marks in commerce.  Judge Batts noted that there are circumstances under which a defendant's use of a mark can satisfy the "use in commerce" standard if it has an impact on the plaintiff's commercial activities, but found that Courtalert.com's complaint did not claim such use.  In particular, Judge Batts wrote:

The Complaint does not claim, for instance, that when typed into the address bar, any of the five domain names at issue directs visitors to Defendants' commercial website.  Nor does Plaintiff allege that the domains names, when typed in, lead users to information opposing Plaintiff's products or service.  In fact, Plaintiff does not allege that any message at all results when the domain names are typed in.  As such, a critical component of the "classically competitive" behavior is missing here, and Defendants' behavior seems to amount to nothing more than mere registration of a domain name.

Court Applies Injury Rule, Rather than Discovery Rule, to Accrual of Copyright Infringement Claim

In an August 21, 2013 ruling, Judge Loretta A. Preska granted in part and denied in part defendants' motion for summary judgment on statute of limitations grounds in plaintiff Muench Photography, Inc.'s copyright infringement claims.  The parties agreed "that the principal question of law at issue with respect to whether certain of plaintiff's claims are time-barred is when a copyright infringement claim accrues under the three-year statute of limitations in the Copyright Act, 17 U.S.C. § 507(b)."  The two accrual possibilities are when the injury occurred or when it was discovered.  According to the Court, prior Second Circuit law strongly indicated that the discovery rule applied, but the Supreme Court's decision in TRW v. Andrews, 534 U.S. 19 (2001) required reassessment that position.  Judge Preska surveyed the split of authority in the District on the issue, and joined "what is now the majority approach in this jurisdiction in adopting the injury rule for the purposes of evaluating whether copyright infringement claims are time barred."  Applying the injury rule, Judge Preska found some of Muench's claims time barred, and allowed others to proceed.

Dismissal of False Designation of Origin Claim Denied

In an August 19, 2013 ruling, Judge Thomas P. Griesa denied defendants' motion to dismiss plaintiff Pop Bar, LLC's complaint, including a Lanham Act unfair competition claim.  Pop Bar makes and sells customizable Italian gelato, sorbet and frozen yogurt on a stick under its Popbar and Popbar system marks, and licenses others to do the same.  The defendant, Hip Pops, LLC, approached Pop Bar about becoming a franchisee, and signed a confidentiality agreement before receiving Pop Bar's "recipes and formulas, specially designed equipment, systems and methods of making customized Popbar products, and ideas for Popbar food trucks."  Negotiations then broke down under circumstances that Pop Bar contended show that Hip Pop never intended to enter into a deal with Pop Bar, and merely acted as if it would do so to gain access to Pop Bar's confidential information.  Hip Pop subsequently introduced competing products under the HipPOP mark.  Pop Bar sued, asserting a variety of claims, including false designation of origin under the Lanham Act.

Court Dismisses in Part Lanham Act Claims for Lack of Standing, Permissible "Gray Goods"

In an August 15, 2013 ruling, Judge Ronnie Abrams granted the cross motions for partial judgment of plaintiff L'Oreal USA, Inc. and defendant Trend Beauty Corp. in L'Oreal's action alleging Lanham Act and state law claims against Trend Beauty.  Trend Beauty was an unauthorized wholesaler of L'Oreal's luxury fragrances.  L'Oreal claimed that "Trend Beauty's unauthorized sale of counterfeit and 'decoded' L'Oreal fragrances in the 'gray market' interfered with L'Oreal's ability to control the quality of its products," and that "the counterfeit and decoded products materially differed from L'Oreal's 'coded' products so as to constitute . . . trademark and trade dress infringement."  The "coding" refers to quality assurance, security and Universal Product Code codes that L'Oreal places on its products.  A "decoded" product is one for which one of the codes have been removed, such as the fragrance bottle has been removed from its outer box.  Trend Beauty admits that it sold decoded L'Oreal products, and further admitted that it sold about 200 units of counterfeit product, but disputes that it knew or should have know that the product was counterfeit.

As a threshold matter, Judge Abrams considered whether L'Oreal, as a licensee of the marks at issue, had standing to assert trademark infringement, and concluded that L'Oreal did not have standing.  The Court noted that "L'Oreal only has standing to bring its trademark infringement claims if it qualifies as a legal representative or assignee of the registrants."  The Court rejected the argument that L'Oreal was the assignee of the marks based on the factual record, and then considered whether L'Oreal is the "legal representative" of the owners of the marks.  Judge Abrams relied on recent a Second Circuit case addressing the issue as a matter of first impression, and ruled that the term requires "a party to show that it 'has the authority to appear on behalf of the registrant/owner with respect to the registrant/owner's legal interests and the registrant/owner is unable or incapable of representing itself and enforcing its own rights.'"  The Court applied this standard, and concluded that L'Oreal was not the registrant's legal representative.  Judge Abrams rejected L'Oreal's dilution claims under 15 U.S.C. § 1125(c) on the same ground.

Court Declines to Dismiss Copyright Infringement Claim Based on Covenant-Condition Doctrine

In an August 15, 2013 ruling, Judge Loretta A. Preska refused to dismiss plaintiff Muench Photography, Inc.'s copyright infringement claims against defendant The McGraw-Hill Companies, Inc.  Muench owns copyrights in various photographs that it licensed to McGraw-Hill (through a third party agency) for a limited, specified number of uses in McGraw-Hill publications.  Muench alleged that McGraw-Hill deliberately exceeded the number of permissible copies of the licensed photographs, breaching the terms of the license and infringing Muench's copyrights.  McGraw-Hill argued that under the terms of the license, it effectively had "'carte blanche permission to use [the Photographs] any way it chose and pay later.'"  Thus, according to McGraw-Hill, the plaintiff "is precluded under the covenant-condition doctrine from suing for copyright infringement."  The Court rejected that argument, noting that Muench .

sets forth in the [second amended complaint] that the relevant Photographs were licensed for up to a specific number of uses, and Plaintiff explicitly claims that Defendant, without authorization, used photographs with copyrights registered to Plaintiff beyond the licenses granted both in publications identified in the [second amended complaint] and in publications not yet identified.

Judge Preska held that the allegations are sufficient at the pleading stage to state a copyright infringement claim, and ruled that "Defendant's arguments with respect to the covenant-condition doctrine amount to a dispute between the parties about contract interpretation that is beyond the purview of the Court on a motion to dismiss."

Attorneys' Fees Denied in Trademark Infringement Action Despite Bad Faith

In an August 12, 2013 ruling, Judge Colleen McMahon denied defendant Conduit Limited's post-trial motions for judgment as a matter of law and plaintiff MyPlaycity, Inc.'s ("MPC") motion for attorneys' fees in what the Court characterized as a "long, tortuous" litigation.  Before trial, Judge McMahon had entered summary judgment of liability in favor of MPC on its Lanham Act claims, common law trademark infringement and unfair competition claims, and unjust enrichment claim.  The Court "also concluded that Conduit had acted in bad faith as a matter of law."  After a damages trial, the jury awarded $500,000 in disgorgement of Conduit's profits.  Despite the clear wording of 15 U.S.C. § 1117(a) that the plaintiff need only prove the defendant's sales in seeking an award of profits and the burden is on the defendant to prove any offsets, Conduit argued that "MPC bore the burden of distinguishing between Conduit's profits flowing from its infringing activity and from its non-infringing uses of MPC's trademark."  The defendant's argument was based principally on Burndy Corp. v. Teledyne Indus., Inc., 748 F.2d 767 (2d Cir. 1984).  Judge McMahon considered that case and the cases discussing it, and concluded that "Conduit is wrong to assert that Burndy (or any other of the cases it cites) required MPC to do more than demonstrate the gross amount of Conduit's . . . profits from activity related to" MPC's use of the mark.  It then became Conduit's burden under Section 35(a) of the Lanham Act to prove that this entire amount was to unjust enrichment."  The Court considered, and rejected, a variety of other attacks on the damages award, and ultimately upheld it in its entirety.

Amendment of Patent Infringement Contentions with Information Learned in Discovery Denied

In an August 12, 2013 ruling, Judge Laura Taylor Swain, applying the Northern District of California patent rules, denied plaintiff Richard A. Williamson's motion to amend its infringement contentions in its patent infringement action against AT&T Operations, Inc.  The plaintiff sought to amend his contentions supposedly in response to information learned from AT&T's Rule 30(b)(6) deposition and 1.8 million page document production.  AT&T contended, and the Court agreed, that the information that Williamson supposedly learned through discovery was publicly available before he filed his infringement contentions.  Williamson nevertheless contended "that publicly available information at the time he served his infringement contentions was less reliable than non-public information that became available during discovery."  Judge Swain rejected this argument, writing that "[a]llowing a Plaintiff to delay serving infringement contentions because publicly available information might not be as reputable as yet-undisclosed information would run contrary to the purpose of the" infringement contention disclosure rules of focusing discovery and the remainder of an infringement case.  The Court thus found that the plaintiff lacked diligence in seeking to amend his contentions, and denied the motion without having to reach whether AT&T was prejudiced by the delay.

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.