Court Refuses to Remand Complaint Finding Likelihood of Copyright Preemption

In a February 16, 2017 ruling, Judge Katherine B. Forrest declined to remand a complaint alleging claims for unjust enrichment, conversion and restitution, and an accounting arising from the defendant's exploitation of a taped ice skating performance by the plaintiff, finding that the Copyright Act likely preempted the claims.  First, the Court found that the taped performance was subject to copyright protection on either of two grounds, "that the motion picture recording of [the plaintiff's] performance is a work entitled to copyright protection," and that the plaintiff's ice skating performance is "akin to a choreographed dance" which is entitled to protection.  Judge Forrest further found that the plaintiff's claims, which are based on the defendant's use and exploitation of the recorded performance, essentially allege that the defendant violated the plaintiff's reproduction and distribution rights "that are encompassed within the bundle of rights afforded to copyright owners,"  Lastly, the Court concluded that the plaintiff's claim "does not contain an extra element in addition to reproduction or distribution," which would avoid copyright preemption.

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

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

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

Court Denies Extraterritorial Application of Lanham Act

In a February 1, 2016 ruling, Judge Jed S. Rakoff issued a decision explaining his reasoning for the dismissal of the plaintiff’s trademark action seeking to find that the holder of a presumptively valid foreign trademark had abandoned the mark. The plaintiff and defendant had originally been commonly owned. After a corporate reorganization, the plaintiff became an exclusive licensee of the defendant’s trademarks outside the United States. The plaintiff began this action contending that the defendant had abandoned the foreign marks under the Lanham Act by failing to exercise any control, including quality control, over the marks. Judge Rakoff ruled that

as a matter of law, . . . the Lanham Act may not be applied extraterritorially to adjudicate the validity or ownership status of foreign trademarks. This is because it is firmly settled that “[a] trademark has separate legal existence under each country’s laws, and trademark rights exist in each country solely according to that nation’s laws.” . . . Consistent with that principle, courts in this Circuit have repeatedly held that determination of the validity of foreign trademarks in their foreign applications is not just a matter of choice of law but that, rather, United States courts are simply not in the business of adjudicating foreign trademark rights in such circumstances.

Court Permits Discovery of Foreign Sales of Infringing Goods Made in the United States

In a November 25, 2015 ruling, Judge Laura Taylor Swain permitted the plaintiff in this patent infringement action to seek discovery of the amount of the defendant's foreign sales of allegedly infringing goods manufactured in the United States.  The Court wrote that "[l]ong-established Federal Circuit precedent recognizes that, when an allegedly infringing product is produced in the United States and subsequently sold by the manufacturer to foreign buyers, the foreign sales are relevant to the determination of damages suffered as a result of the domestic act of infringement." Judge Swain rejected the defendant's argument that the Federal Circuit's recent tightening of the extra-territoriality of patent rights prevented the discovery sought, finding that none of the defendant's "cited authorities demonstrates that discovery of foreign sales information – which is relevant to [the plaintiff's] claim for damages for allegedly infringing activities in the United States since it has, at a minimum, implications for the valuation of the invention – is precluded by the presumption against extraterritoriality."

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

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

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

The Court then noted that:

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

Judge McMahon then found that:

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

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

Court Finds Lack of Subject Matter Jurisdiction Over Invalidity Claim After Plaintiff Dismissed its Infringement Claim

In a November 10, 2015 ruling, Judge Jed S. Rakoff dismissed the defendant's declaratory judgment counterclaim of invalidity for lack of subject matter jurisdiction when the plaintiff dismissed its infringement claim after an adverse Markman construction.  The plaintiff also offered a covenant not to sue that was effective as to future claims against the defendant unless the adverse claim construction was reversed.  Judge Rakoff found that the covenant not to sue eliminated subject matter jurisdiction over the invalidity counterclaim, writing:

In light of the parties' joint stipulation of non-infringement and plaintiff's covenant not to sue on the [patent-in-suit] barring a change in the law of the case, there is no live controversy between the parties as to infringement and defendants have no immediate interest in the validity of defendants' . . . Patent as long as that remains so. While defendants might gain such an interest if plaintiff both appeals the Court's Markman Order and persuades the Federal Circuit of what it could not persuade this Court, there is no certainty that plaintiff will even take an appeal. Plaintiff has not committed to doing so and defendants themselves recognize that plaintiff very well may choose not to, asserting that plaintiff is posturing in threatening to appeal. . . . A controversy this speculative simply cannot be considered to have the "sufficient immediacy" needed to invoke the Declaratory Judgment Act. As such, this Court does not have jurisdiction to entertain the invalidity claim.

Judge Rakoff also ruled that even if the Court had jurisdiction, the Court would decline in its discretion to exercise it given the lack of any immediate controversy.  Judge Rakoff found that "that it would be imprudent and a potential waste of both the parties' and judicial resources for the Court to proceed to determine the validity of the [patent-in-suit], when plaintiff has categorically dropped its infringement allegations barring a reversal of the Court's construction of the term" at issue.

Court Finds Unjust Enrichment Claim Raises Federal Question Under Patent Act

In an October 29, 2015 ruling,Judge Jesse M. Furman found federal question jurisdiction over the plaintiff's unjust enrichment claim which depended on the defendant's infringement of the plaintiff's patent.  The plaintiff administers a number of patent license pools, and the defendant took a license under one of the pools.  After the defendant stopped paying royalties, the plaintiff sued in state court for breach of contract and unjust enrichment.  The defendant removed to this Court, and the plaintiff moved to remand.  Plaintiff's unjust enrichment theory was that the defendant "'benefited by acting as if it had a patent pool license . . ., i.e., that it was "under the umbrella of the protection of the [relevant] Contract"'" and 'it [did] so at the expense of [the plaintiff] which had nonetheless provided this umbrella of protection but was not adequately compensated for doing so.'"  Judge Furman found that "to prevail on that claim, [the plaintiff] must necessarily prove infringement of one or more of the patent in the patent pool," "[t]hat is, the only way [the plaintiff] can prove that [the defendant] benefited at its expense is by showing that it used (and therefore infringed) a patent in the pool."  The Court noted that that "fact distinguishes [the plaintiff's] claim from breach of contract cases found not to raise federal patent questions because the claims turned on interpretation or application of a term in the contract, and infringement or non-infringement was not the determining factor," and denied the plaintiff's motion to remand.

Court Finds Pre-Suit Product Testing Covered by Work Product Privilege

In an October 22, 2015 ruling, Judge Jed S. Rakoff found that the work product privilege applies "to documents regarding plaintiffs' testing of defendant's accused products" before the plaintiffs filed this patent infringement action.  The defendant argued that the test results comprised mere data that could not be protected as work product.  The Court rejected this argument, finding that "'[b]oth facts and opinions are protected by the work product privilege.'"

Judge Rakoff also ordered the plaintiffs to produce a privilege log despite their argument "that doing so 'would disclose counsel's pre-filing investigation, mental processes, and work-product, and would identify potential non-testifying expert consultants in violation of Rule 26.'"  Judge Rakoff wrote:

Thus, plaintiffs' novel argument is that the privilege log itself would be privileged.  This borders on the frivolous.  Rule 26(b)(5) does not end with the caveat, "if the party feels like it."  It is in no way optional.  Nor does it matter that plaintiffs feel the creation of a privilege loge would be "burdensome and wasteful."

Court Denies Emotional Distress Damages for Copyright Infringement

In an October 19, 2015 ruling, Judge Paul A. Englemayer ruled that emotional distress damages are not recoverable for copyright infringement.  The pro se plaintiff had asserted a separate claim for "mental anguish," contending that "he has 'suffered from feelings of distress, anxiety and depression, which interferes with his creative ability, hinders his inspiration to write and consequently stagnates his income'" because of the defendants' infringement of his song.  Judge Engelmayer construed "this allegation, although presented as a claim for liability, to describe a category of alleged damages," and ruled that "such damages fall outside the remedies statutorily authorized for copyright infringement."

Court Declines to Find Spoliation in Destruction of Counterfeit Books

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

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

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

Court Declines to Find Abandonment of Registered Mark

In an October 1, 2015 ruling, Judge Valerie Caproni found that the use of the federally-registered “Highline” mark for certain financial services in the phrases “Highland Capital Management” and “Highline Capital Management, LLC” was sufficient use of the mark in commerce to prevent abandonment. In dismissing the defendant’s counterclaim to invalidate the mark, the Court ruled that because the plaintiff “is an investment management firm that manages capital, the addition of the words ‘Capital’ or ‘Capital Management, LLC’ is ‘purely descriptive’ and ‘does not affect the origin-indicating function of the mark.’ The addition of ‘Capital’ and ‘Management’, instead, simply flesh out exactly what financial services are offered by” the plaintiff.

Court Rules Question of Copyright Infringement Statutory Damages Is for the Jury

In a September 28, 2015 ruling, Judge Gregory H. Woods held, after granting summary judgment of copyright infringement, that the amount of statutory damages was a question for the jury. Given the particular facts of this case, Judge Woods noted the open legal question of whether statutory damages are recoverable for infringement of both a musical composition and of a sound recording of that composition. The Court discussed a split in the District on that question, but suggested that it would adopt the view that a sound recording is a derivative work of a musical composition, precluding the separate recovery of statutory damages. Judge Woods also noted the legal uncertainty about whether a copyright holder can recover actual damages of a copyrighted “work,” and then recover statutory damages for the same “work” (albeit of a derivative work). Because of factual issues as to both of these legal questions, Judge Woods did not need to reach a definitive conclusion about them.

Court Refuses to Preliminarily Enjoin Defendants' Participation in IPR

In a September 16, 2015 ruling, Judge Vernon S. Broderick denied the plaintiffs’ motion for a preliminary injunction to enjoin the defendants from participating in a Patent Office Inter Partes Review proceeding because the participation supposedly violated a forum selection clause in the contract between the plaintiffs and the defendants. In denying the injunction, Judge Broderick ruled that the plaintiffs would not be irreparably harmed by being forced to proceed with the IPR because the cost of the proceeding, although costing in the hundreds of thousands of dollars, was nevertheless not an unquantifiable amount constituting irreparable injury. The Court further ruled that the plaintiffs had failed to show a likelihood of success on the merits because the IPR proceeding did not arise out of or relate to the parties’ contract containing the forum selection clause, and thus was not covered by the forum selection clause. Judge Broderick reasoned that the issues in the IPR – the validity of the patents-in-suit – were unrelated to the parties’ contract, and in fact could have been raised essentially by any third party not at all involved in the contract.

The plaintiffs had also contended that the defendants were equitably estopped from challenging the validity of the patents because the defendants had previously assigned the patents at issue. The Court disposed of this contention by noting that the Patent Trial and Appeal Board “has held that the defense of assignor estoppel does not apply in IPR proceedings” so “if the IPR is initiated, [the plaintiffs] will be unable to raise assignor estoppel unless and until the outcome of the IPR is appealed to the Federal Circuit.”

Court Denies Summary Judgment on Trademark Infringement Claim Because of Dispute about Genuineness of Goods

In a September 11, 2015 ruling, Judge Vernon S. Broderick denied the parties’ cross motions for summary judgment on the plaintiffs’ trademark-related claims, finding issues of disputed fact about the genuineness of the goods at issue, and thus whether the sale of such goods could constitute trademark infringement. Judge Broderick noted that courts “in this district have characterized this principle – that the unauthorized resale of genuine goods, by itself, is not actionable under the trademark laws – as the ‘exhaustion doctrine’ or, by analogy to copyright law, the ‘first sale doctrine.’” The Court further noted that both he and the parties “have not identified any controlling Second Circuit authority that allocates the burden of proof on this issue,” but ruled that the burden was irrelevant to the parties’ motion because regardless of which party had the burden, the presence of disputed issues of fact about the genuineness of the goods at issue would defeat summary judgment.

Court Denies Application for Attorneys’ Fees after Voluntary Dismissal of Copyright Action

In an August 17, 2015 ruling, Judge John F. Keenan denied attorneys’ fees to the defendant after the plaintiff voluntarily dismissed a copyright infringement action without prejudice. Judge Duffy, acting in Judge Keenan’s absence, had previously denied the plaintiff’s motion for a preliminary injunction. Since the defendant had moved to dismiss, but had not answered, the plaintiff retained the right to unilaterally discontinue the action, and did so. The Court ruled that the defendant was not the prevailing party, and thus not entitled to a fee award, because the plaintiff’s unilateral voluntary dismissal without prejudice “is not ‘judicially sanctioned’ since no court action is required.” Judge Keenan also found that “a dismissal without prejudice is not a change in the legal relationship between the parties because plaintiff can still bring the claim again.” Without reaching the merits of the defendant’s application for fees, the Court did note, though, that the application was untimely, and could have been denied on that ground as well.

Court Finds Sampling of Sound Recording Can Infringe Underlying Musical Composition

In an August 7, 2015 ruling, Judge Ronnie Abrams found that the “sampling” of a sound recording can constitute copyright infringement of the underlying musical composition. As Judge Abrams wrote, “‘[s]ampling’ is a ‘technique whereby a portion of an already existing sound recording is incorporated into a new work.’” In seeking summary judgment on the issue of sampling, the defendants argued that, even if it had sampled, it could not be liable for copyright infringement “because Plaintiff owns only the musical composition copyright, not the sound recording copyright, of” the allegedly infringed work. The Court rejected this argument, finding that while “sampling involves the direct copying of a sound recording, this mode of copying does not somehow shield a defendant from also infringing the underlying musical composition.” Judge Abrams concluded that “if Plaintiff is able to present evidence showing that Defendants did in fact sample the . . . drum part [in the allegedly infringed work], such evidence would constitute proof that Defendants actually copied Plaintiff’s musical composition.”

Court Finds Inventor Acted as Own Lexicographer

In an August 6, 2015 ruling, Judge Richard J. Sullivan found that the inventor of the family of patents-in-suit acted as his own lexicographer by submitting unsolicited “remarks” during the prosecution of one of the later patents in the family (the ‘010 patent). The Court wrote:

There is no dispute that the “remarks” Joao [the inventor] to the USPTO are part of the prosecution history for the ‘010 Patent, and although Defendants question his motives – noting that the constructions contained in the “remarks” simply echoed the constructions proposed in the claim construction brief of an unrelated case – for purposes of claim construction, the “remarks” appear sufficiently clear, deliberate, and precise.

Judge Sullivan then considered whether the “remarks” were pertinent to one of the earlier patents in the same family that had an identical specification, and used “the ‘remarks’ as extrinsic evidence for purposes of construing the terms of” that patent “to the extent those remarks do not directly contradict the plain meaning of those terms and such terms cannot be construed without the aid of extrinsic evidence.”

Court Grants Fees in Copyright Infringement Action after Finding Plaintiff’s Claims Untimely

In a July 17, 2015 ruling, Judge Lorna G. Schofield granted attorneys’ fees to the prevailing plaintiff in a copyright infringement action. The Court had previously granted summary judgment dismissing the plaintiff’s claims as untimely. In granting fees, Judge Schofield wrote that “Plaintiff’s claims under the Copyright Act were plainly time barred and therefore objectively unreasonable. Claims brought after the statute of limitations has run may be considered objectively unreasonable.”

Court Denies Attorneys’ Fees to Prevailing Patent Infringement Defendants

In a July 17, 2015 ruling, Judge P. Kevin Castel declined to award attorneys’ fees to the prevailing defendants in a patent infringement case, finding that the case was not exceptional. Judge Castel noted that his summary judgment ruling in defendants’ favor turned largely on claim construction issues and a determination that one of the patents-in-suit was not entitled to an early priority date, and did not require a detailed examination of the accused products. Thus, the Court reasoned, a more thorough pre-suit investigation by the plaintiff would not have exposed the action as lacking merit. Judge Castel also rejected defendants’ contention that the plaintiff’s lack of expert testimony on the doctrine of equivalents made the case exceptional, writing that the testimony on the plaintiff’s director of product innovation was sufficient.

Court Remands Removed Action as Not Involving a Substantial Federal Question

In a July 7, 2015 ruling, Judge John G. Koeltl ruled that the Court lacked subject matter jurisdiction over a removed action in which the plaintiff alleged that the defendant submitted false affidavits in an earlier copyright infringement action about a third party’s (named Sorenson) ownership of the copyrights at issue. The plaintiff prevailed in the earlier action, but claimed that the defendant’s false declarations prolonged it. Judge Koeltl found that although the present action raised a federal question (authorship in the copyright context), it was not a “substantial” question. The Court wrote:

In this case, [the plaintiff] agrees with this Court’s conclusion that Sorenson did not have a valid copyright. His argument is that this Court would have reached that decision earlier on a motion for summary judgment, or that Sorenson would not have brought the prior lawsuit, had it not been for [the defendant’s] allegedly fraudulent affidavits. That is not a substantial copyright question because it will not change the result of the prior litigation with respect to the invalidity of Sorenson’s copyright, and indeed [the plaintiff] does not argue that it should change the result.