Civil Procedure

November 19, 2014

Indiana Copyright Law: Seventh Circuit Holds that Subsequent Copyrighted Works Do Not Extend Copyright Period for Earlier Works

Chicago, Illinois – California attorney Leslie S. Klinger, co-editor of multiple collections of annotated works based on Arthur Conan Doyle‘s Sherlock Holmes fiction sued Conan Doyle Estate, Ltd. under the Declaratory Judgment Act in the Northern District of Illinois seeking a declaratory judgment that he may freely use material from those Sherlock Holmes works for which copyright protection has expired. The district court held that Klinger’s use of material that was no longer subject to copyright was permissible. The Seventh Circuit affirmed.

Arthur Conan Doyle published 56 stories and 4 novels featuring the fictional character Sherlock Holmes. Of these stories, only the final 10, published between 1923 and 1927, are still protected by copyright.

Leslie Klinger, Plaintiff-Appellee, co-edited an anthology called A Study in Sherlock: Stories Inspired by the Sherlock Holmes Canon. Klinger had not sought a license from Doyle’s estate, presuming that one was not necessary, as the copyrights on most of the works in the “canon” had expired. The estate disagreed and demanded that Random House, which had agreed to publish Klinger’s book, pay $5,000 for a copyright license. Random House acquiesced and, in 2011, the anthology was published.

The trouble began when Klinger and his co-editor decided to create a sequel, “In the Company of Sherlock Holmes” and entered into negotiations with Pegasus Books, a publisher. The Doyle estate again demanded a fee for a copyright license and threatened to interfere with distribution of the book if that copyright license fee was not paid, telling Pegasus, “If you proceed instead to bring out Study in Sherlock II [the original title of “In the Company of Sherlock Holmes”] unlicensed, do not expect to see it offered for sale by Amazon, Barnes & Noble, and similar retailers. We work with those compan[ies] routinely to weed out unlicensed uses of Sherlock Holmes from their offerings, and will not hesitate to do so with your book as well.” No threat of a lawsuit for copyright infringement was explicitly made. Pegasus subsequently refused to publish the book unless and until Klinger obtained a copyright license from the Doyle estate.

Instead of purchasing a license, Klinger sued the estate seeking a declaratory judgment that he could freely use any material from the Sherlock Holmes works for which the period of copyright protection had expired.

The district court held in Klinger’s favor. The estate appealed to the Seventh Circuit on two alternative grounds. The estate first contended that the district court lacked subject matter jurisdiction under the Declaratory Judgment Act because there was no “actual case or controversy.” Second, it asserted that a copyright on a “complex” character, whose full complexity is not revealed until a later story, remains protected under copyright law until the later story falls into the public domain.

Circuit Judge Posner, writing for the court, rejected both arguments. The “case or controversy,” necessary for federal jurisdiction was demonstrated by the estate’s “twin threats” of blocking the distribution of the book and the implied threat of a copyright lawsuit against the publisher, Klinger and the book’s co-editor for copyright infringement if the book were published without a license. That such a case or controversy existed was also demonstrated by the fact that Klinger could have sued on a claim of tortious interference with advantageous business relations as a result of the estate’s intimidation of his publisher.

The court then considered the question of “whether copyright protection of a fictional character can be extended beyond the expiration of the copyright on it because the author altered the character in a subsequent work.” The estate urged the court to grant additional copyright protection in its case, arguing that characters such as Sherlock Holmes were “round” and/or “complex” and thus deserving of greater shelter under copyright law than fictional characters that were “flat” and/or “simple.”

The court could find no basis in statute or case law to support the extension of a copyright beyond its expiration. Thus, it affirmed the uncontested matter of copyright protection for the later works – namely, a right to recover for copyright infringement still existed for some portions of the Sherlock Holmes works for which the copyrights had not yet expired. However, that protection was limited to only those elements of the later Sherlock Holmes works that included “incremental additions of originality.” The remainder, the court opined, had passed into the public domain, regardless of the dimensions of the characters portrayed.

Practice Tip: The court was also unpersuaded by the Doyle estate’s argument to extend copyright law on the grounds that failure to do so would diminish authors’ incentives to create. After noting that Arthur Conan Doyle had died 84 years prior, thus rendering the argument inapplicable in the current litigation, the court noted that “extending copyright protection is a two-edged sword from the standpoint of inducing creativity, as it would reduce the incentive of subsequent authors to create derivative works (such as new versions of popular fictional characters like Holmes and Watson) by shrinking the public domain.”

November 14, 2014

Indiana Trade Secret Law: Court Rules on Enforceability of Trade Secret Agreements

By Overhauser Law Offices, LLC

Indianapolis, Indiana – Pennsylvania trade secret attorneys, in conjunction with Indiana co-counsel, for Distributor Service, Incorporated (“DSI”) of Pennsylvania sued in the Southern District of Indiana alleging that Rusty J. Stevenson (“Stevenson”) of Indiana and Rugby IPD Corp. d/b/a Rugby Architectural Building Products (“Rugby”) of New Hampshire violated an agreement containing non-competition, non-solicitation, and non-disclosure provisions. In the instant order, the court ruled on motions for summary judgment filed by DSI and Stevenson.

Plaintiff DSI is a seller and distributor of wholesale specialty building products to businesses in the Middle Atlantic and Midwest regions of the country. It has eight locations in Indiana, Pennsylvania, Ohio, Kentucky, and Michigan. Defendant Rugby is also in the business of selling and distributing wholesale specialty building products. It does so throughout the United States, including in Indiana, and is a direct competitor of DSI. Stevenson, formerly an employee of DSI, is currently employed by Rugby.

DSI hired Stevenson in October 1999 to be a salesman. When he started, Stevenson had no sales experience in the specialty-building-products industry or any related industry. DSI indicated that it had invested significant time and resources to provide specialized training to Stevenson. In April 2005, DSI promoted Stevenson to the position of sales manager. Later, as part of his employment, Stevenson signed a Confidentiality and Non-Competition Agreement with DSI. This agreement contained provisions for Non-Competition/Non-Solicitation and Non-Disclosure of Confidential Information.

During his employment with DSI, Stevenson had access to information that DSI considered to be protectable as intellectual property assets. This information included all of DSI’s “Customer Lists,” “Customer Product Preferences,” “Competitive Pricing,” and “Competitive Cost Structure” for DSI’s Indianapolis branch. DSI asserted that this information was “the cornerstone of DSI’s ability to compete effectively in the specialty building products industry in Indiana,” and that the information “derives economic value from not being generally known to other persons who can obtain economic value from its disclosure or use.”

In August 2013, Mr. Stevenson resigned from DSI to take a position as the general manager of Rugby’s Indianapolis branch. Shortly thereafter, DSI sued Rugby and Stevenson seeking, inter alia, damages and injunctive relief. DSI asserted claims for: (1) breach of the Non-Compete Provision; (2) breach of the Non-Solicitation Provision; (3) breach of the Non-Disclosure Provision; (4) recovery of attorneys’ fees and expenses under the Agreement; (5) misappropriation of trade secrets; (6) breach of duty of loyalty, and (7) tortious interference.

In this opinion, District Judge Jane Magnus-Stinson reviewed cross-motions for summary judgment filed by DSI and Stevenson. DSI’s motion was denied in its entirety. Stevenson’s motion for summary judgment was granted as to Count 1, breach of the Non-Compete Provision, and Count 2, breach of the Non-Solicitation Provision. Stevenson’s motion for summary judgment on Count 3, breach of the Non-Disclosure Provision, was denied.

The court began by discussing the standard for upholding the provisions at issue. It is a longstanding principle in Indiana that covenants that restrict a person’s employment opportunities are strongly disfavored as a restraint of trade. To be enforceable, such restraints, such as a noncompetition agreement, must be reasonable. The court noted that it, while in many other contexts reasonableness was a question of fact, the reasonableness of a noncompetition agreement was a question of law and, thus, was capable of evaluation in response to the parties’ motions for summary judgment.

The first hurdle for DSI was to show that the agreement protected a legitimate interest, defined as “an advantage possessed by an employer, the use of which by the employee after the end of the employment relationship would make it unfair to allow the employee to compete with the former employer.” Indiana law provides that goodwill, including “secret or confidential information such as the names and addresses of customers and the advantage acquired through representative contact,” is a legitimate protectable interest. DSI argued that it had a legitimate interest in protecting the customer relationships that Stevenson had developed during his years working for DSI as well as the information embodied in DSI’s Customer Lists, Customer Product Preferences, Competitive Pricing, and Competitive Cost Structure, to which Stevenson had been permitted access. The court agreed that this was a protectable interest.

DSI next had to establish that Non-Compete Provision of the agreement was “reasonable in scope as to the time, activity, and geographic area restricted.” DSI argued that the provision was limited merely to restricting Stevenson from engaging in competitive business activity. The court was not convinced. Instead, it noted that, as drafted, the “competitive business activity” restriction applied to the activities of Stevenson’s new employer, not to Stevenson himself. Thus, because Rugby engaged in business activities that were competitive to DSI, the agreement would de facto prohibit Stevenson from working for Rugby in any capacity, despite that no “in-any-capacity” language was explicitly applied to Stevenson in the agreement. “For example,” the court explained, “[under DSI’s agreement,] Mr. Stevenson could not serve lunch in Rugby’s cafeteria or change light bulbs in Rugby’s offices because Rugby competes with DSI.” The court concluded that, as a result, the Non-Compete Provision was overly broad and unreasonable.

Regarding this provision, DSI also contended that alleging and proving that the employee had been provided with trade secrets could render an otherwise unenforceable non-competition clause enforceable. The court rejected this argument.

The court also granted summary judgment for Stevenson on the Non-Solicitation Provision. This provision attempted to restrict Stevenson’s ability to solicit “any customer or prospective customer of [DSI] with which [Stevenson] communicated while employed by [DSI].” The court found this restriction to be vague as to “prospective customer” as well as overbroad and unreasonable in scope.

Finally, the court declined to rule on the Non-Disclosure Provision on summary judgment. It held that, to evaluate whether this provision had been violated, it would need to determine whether “customer lists” and “the identities of key personnel and the requirements of the customers of [DSI]” were confidential. As the evidence submitted regarding confidentiality was “vague, generalized, and conflicting,” the court found that a genuine issue of material fact existed with regard to the Non-Disclosure Provision and, consequently, partial summary judgment in favor of either party was inappropriate on the record before it.

Practice Tip #1: Summary judgment in federal court is guided by Rule 56 of the Federal Rules of Civil Procedure. A motion for summary judgment asks the court to find that a trial on a particular issue or issues is unnecessary because there is no genuine dispute as to any material fact and, instead, the movant is entitled to judgment as a matter of law. The moving party is entitled to summary judgment only if no reasonable fact-finder could return a verdict for the non-moving party.

Practice Tip 2: In a similar case, decided earlier this year, the Indiana Court of Appeals affirmed the trial court’s ruling that the noncompetition agreement binding an ex-employee of the plaintiff was overly broad and, thus, unenforceable.

October 20, 2014

Indiana Cyberpiracy Litigation: Burns Rent-Alls Sues Aays Rent-All and Michael Sharp

By Overhauser Law Offices, LLC

South Bend, Indiana – An Indiana intellectual property attorney for Burns Rent-Alls, Inc. of Mishawaka, Indiana filed a cyberpiracy lawsuit in the Northern District of Indiana alleging that Michael Sharpe and Aays Rent-All Co., Inc., also of Mishawaka, Indiana, had wrongfully registered and used domain names that would result in confusion with the “BURNS RENT-ALLS” common-law trademark.

Burns Rent-Alls is a fifth-generation family-owned firm that has been in business for over 100 years. It offers goods and services throughout northern Indiana and southwest Michigan under the BURNS RENT-ALLS brand including equipment rentals, convention services, event rentals, portable toilet rentals, costume rentals, and tent and canopy rentals.

Aays Rent-All is, according to Plaintiff, in a similar business and provides rentals throughout northern Indiana and southwest Michigan, including equipment rentals, convention services, event rentals, and tent and canopy rentals.

Burns Rent-Alls claims that, by virtue of its “longstanding and continuous use” of the BURNS RENT-ALLS mark, it owns common law trademark rights to that mark for use in connection with Burns Rent-Alls’ goods and services.

Aays Rent-All and Sharpe are accused of registering and using domain names that are confusingly similar to Burns Rent-Alls’ Mark, with a bad-faith intent to profit from their use and registration of those domain names. At issue are: (i) burnspartyrentall.com; (ii) burnspartyrental.com; and (iii) burnsrentall.com. Plaintiff contends that Defendants are using these names to redirect Internet traffic intended for the Burns Rent-Alls’ website to Aays Rent-All’s website. This use, Plaintiff asserts, is likely to cause confusion or mistake, or to deceive consumers into believing that there is an association between Aays Rent-All and Burns Rent-Alls.

Plaintiff also states that it agreed to pay, and did pay, $100 to purchase the burnsrentall.com domain name but that Defendants did not transfer the domain name as allegedly agreed.

In its complaint, Indiana intellectual property counsel for Burns Rent-Alls alleges the following:

Count I: Unfair Competition
Count II: Cyberpiracy
Count III: Breach of Contract

Burns Rent-Alls requests injunctive relief, including the transfer of the domain names at issue; damages, including treble damages; and costs and attorneys’ fees.

Practice Tip:

Plaintiff indicates that it attempted to obtain an agreement from Defendants regarding at least one of the domain names at issue prior to filing this lawsuit. Plaintiff contends that, despite this effort, Defendants continued to use the allegedly infringing website names. This lawsuit for unfair competition, cyberpiracy and breach of contract followed.

Another approach available to a plaintiff in such a situation is to seek a transfer of the domain names under the Uniform Domain-Name Dispute-Resolution Policy (“UDRP”). This policy was established to resolve “The Trademark Dilemma” inherent in the largely unpoliced sales of domain names — the registration of a trademark without the consent of the trademark owner.

As part of the process of registering a domain name, registrants must, among other things, 1) “represent and warrant” that registering the name “will not infringe upon or otherwise violate the rights of any third party” and 2) agree to have the matter heard as an UDRP proceeding if any third party asserts that the domain name violates its trademark rights.

The UDRP is an administrative procedure. A UDRP limits itself to matters concerning abusive registrations and will not intervene in genuine disputes over trademark rights. To prevail in a UDRP proceeding, for each domain name, the complainant must establish three elements:

The domain name is identical or confusingly similar to a trademark or service mark in which the complainant has rights;
The registrant does not have any rights or legitimate interests in the domain name; and
The registrant registered the domain name and is using it in “bad faith.”

October 3, 2014

If You Have Been Sued for Patent Infringement

By Overhauser Law Offices, LLC

How does a patent infringement lawsuit begin?

A patent lawsuit begins with the filing of a complaint alleging patent infringement by the patent

holder. If a lawsuit is filed against you, the patent owner must serve two documents on you: (1) a document called a “complaint,” which explains the accusations made against you; and (2) a document called a “summons.” The patent owner may first send a “demand” letter that states that you are potentially infringing the claims of a patent and requests that you pay for a license to use the patented invention, or it may go straight to court.

September 10, 2014

Indiana Patent Law: Strong Showing Required to Plead and Prove Inequitable Conduct

By Overhauser Law Offices, LLC

Fort Wayne, Indiana – Judge Theresa L. Springmann of the Northern District of Indiana held

that a patent infringement defendant’s claim of inequitable conduct by the patentee had been insufficiently pled. The defendant’s counterclaim was dismissed and its affirmative defense struck.

In 2013, an Indiana patent attorney for Unverferth Manufacturing Co., Inc. of Kalida, Ohio sued Par-Kan Company of Silver Lake, Indiana alleging infringement of Patent No. 8,221,047, Seed Carrier With Pivoting Conveyor, which had been registered with the United States Patent and Trademark Office (“USPTO”).

Unverferth alleged that Par-Kan had engaged in both the “unauthorized, infringing manufacture, use, importation, sale and/or offer for sale” of the product and inducing others to infringe patented seed tender products, including its “Seed Weigh” product. Unverferth further alleged that the infringing behavior continued after Par-Kan was notified of the infringement and, as such, some or all of the infringement was willful.

In its complaint, filed by an Indiana patent lawyer, Unverferth asked for preliminary and permanent injunctions, for lost profits in an amount no less than a reasonable royalty, and that such damages be trebled. It also asked the court for a judgment that the case was “exceptional,” and that, consequently, it was entitled to all costs and expenses of the action, including reasonable attorneys’ fees.

Par-Kan interposed a claim of inequitable conduct against Unverferth, stating that two declarations of Unverferth’s Vice President of Sales and Marketing, which had been submitted to the USPTO, failed to mention all relevant facts. Par-Kan also asserted that certain statements in the declarations, such as “I am unaware of any other factors contributing to the success of the product,” were false.

Unverferth asked the court to dismiss Par-Kan’s counterclaim of inequitable conduct for failure to state a claim. Additionally, Unverferth asked the court to strike Par-Kan’s amended affirmative defense of inequitable conduct.

The court agreed that Par-Kan’s claim of inequitable conduct was not properly before the court. Inequitable conduct “renders an entire patent (or even a patent family) unenforceable,” stated the court. Thus, as a general rule, the application of a defense or counterclaim of inequitable conduct will be limited to instances where the patentee’s misconduct resulted in the unfair benefit of receiving an unwarranted claim.

Consequently, the accused infringer must meet the heavy burden of proving, by clear and convincing evidence, that the patent applicant (1) made an affirmative misrepresentation of material fact, failed to disclose material information, or submitted false material information, and (2) intended to deceive the USPTO.

The “materiality” element of the test requires a showing of “but-for” materiality – would the USPTO have allowed the claim if it had been aware of the undisclosed information? To allow the court to evaluate materiality, the alleged infringer’s pleading must include the “who, what, when, where, why and how” of the material misrepresentation or omission that it claims was made to the USPTO.

More specifically, the pleadings must identify the “who” – the specific individual associated with the filing or prosecution of the patent, who both knew of the material information and deliberately withheld or misrepresented it. They must also identify the “what” – which claims, and which limitations in those claims, the withheld references are relevant to – and the “where” – where in those references the material information is found. These assertions allow the alleged infringer to explain, and the court to infer, both “why” the withheld information is material and “how” an examiner would have used this information in assessing the patentability of the claims.

The court held that Par-Kan’s pleadings properly included the “who” and “when” components, but that they failed to meet requirements regarding the “what, where, how, and why” regarding the materiality of the alleged omissions and misstatements. Instead, the court noted that the USPTO had explicitly stated that the declarations in question were insufficient to overcome the rejections. Thus, the court held, but-for materiality had not been sufficiently pled.

The court then turned to the requirement that specific intent to deceive be shown. Deceptive intent may not be assumed from the materiality of a deception and a mere allegation of an omission is insufficient. Instead, to satisfy the inequitable conduct standard, “deceptive intent must be the most reasonable inference drawn from the evidence.” The court held that Par-Kan had failed to show that Unverferth had demonstrated deceptive intent, as other interpretations of the declarant’s intent were reasonable, including that the declarant had believed his sworn statements to be true.

The court dismissed Par-Kan’s counterclaim asserting, and struck its affirmative defense of, inequitable conduct. It stated, however, that were Par-Kan to file a motion to amend its pleadings, the court would consider whether such an amendment would be permitted.

Practice Tip: An exception to the requirement for “but-for” materiality exists where there is egregious affirmative misconduct. However, this exception contemplates extraordinary circumstances like “deliberately planned and executed schemes.” Alleged misconduct such as the failure to mention prior art references in an affidavit is insufficient to constitute such “egregious affirmative misconduct.”

August 20, 2014

United States Patent Law: Supreme Court Holds Prevailing Defendants in “Unreasonable” Patent Lawsuit Can Be Awarded Legal Fees; Federal Circuit Review Curtailed

By Overhauser Law Offices, LLC

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Washington, D.C. – In two related rulings, the United States Supreme Court addressed the standards for granting and reviewing awards of legal fees in patent infringement lawsuits.

In the first matter, Octane Fitness, LLC was sued by Icon Health & Fitness, Inc. At issue was Icon’s contention that the use of a particular component in elliptical fitness machines constituted patent infringement. After Octane prevailed, it sought $1.8 million in attorneys’ fees. The district court denied these fees and an appeal was taken on the issue.

In its review, the Federal Circuit applied the rule from Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc. In Brooks Furniture, the Federal Circuit had defined an “exceptional case,” which would warrant an award of legal fees, as one that either involves “material inappropriate conduct” or is both “objectively baseless” and “brought in subjective bad faith.” It then rejected Octane’s assertion – that attorneys’ fees were appropriate because Icon had asserted an unreasonable claim construction – as not falling within the Brooks Furniture definition and declined to overrule the district court’s denial of attorney’s fees.

In Octane Fitness v. Icon Health & Fitness, Case No. 12-1184, the Supreme Court reversed and remanded. Justice Sotomayor, writing for a unanimous court, said that the Federal Circuit’s interpretation of 35 U.S.C. §285 was overly rigid and “superimposes an inflexible framework onto statutory text that is inherently flexible.” Instead, the Court held that “an ‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.

The Court also revised the standard of proof that had been required by the Federal Circuit. In Brooks Furniture, the Federal Circuit had held that §285 requires that parties establish the “exceptional” nature of a case by “clear and convincing evidence.” The Supreme Court opined that such a high standard was not supported by the statute. Instead, as patent infringement litigation is generally governed by a preponderance-of-the-evidence standard, that standard was also appropriate for the award of attorneys’ fees.

The second patent infringement litigation decided by the Supreme Court pertained to a patent infringement lawsuit filed by Allcare Health management Systems. After Allcare lost in the district court, the district judge awarded $5 million in attorneys’ fees to Highmark. The Federal Circuit reviewed the district court’s judgment de novo and reversed the award.

In Highmark v. Allcare Health Management Systems, Case No. 12-1163, the Supreme Court reversed the Federal Circuit’s reversal, holding that, in light of the traditional framework of review, the Federal Circuit should be more deferential to the trial court on the issue of the award of fees. The Supreme Court stated, “Traditionally, decisions on ‘questions of law’ are ‘reviewable de novo,’ decisions on ‘questions of fact’ are ‘reviewable for clear error,’ and decisions on ‘matters of discretion’ are ‘reviewable for abuse of discretion.'” The determination of whether a case should be considered to be “exceptional” for the purposes of awarding attorneys’ fees is a matter of discretion. As such, it is properly reviewed not de novo but instead for abuse of discretion.

Practice Tip: Under U.S. patent law, a trial court may award attorneys’ fees in case of patent infringement litigation that it deems “exceptional.” These Supreme Court rulings revisiting how “exceptional” is defined may benefit Google, Apple and other large technology companies, which are often targets of questionable patent infringement lawsuits, as trial judges will now have greater latitude to award attorneys’ fees in those cases in which they determine that the conduct of the losing party “stands out from others.”

June 26, 2014

Indiana Patent Law: Magistrate Declines to Grant Crime-Fraud Exception to Attorney-Client Privilege

By Overhauser Law Offices, LLC

Evansville, Indiana – In the matter of Berry Plastics Corp. v. Intertape Polymer Corp., Indiana patent attorneys for Berry Plastics Corporation (“Berry”) invoked the crime-fraud exception to the attorney-client privilege, asking the court to compel Intertape Polymer Corporation (“Intertape”) to produce documents and testimony it had withheld as privileged. Magistrate Judge William G. Hussmann, Jr. of the Southern District of Indiana denied the request.

This Indiana patent lawsuit was filed in January 2010 and seeks a declaratory judgment. Plaintiff Berry of Evansville, Indiana requested a judgment that Patent No. 7,476,416, titled Process for Preparing Adhesive Using Planetary Extruder, was invalid and unenforceable due to inequitable conduct before the U.S. Patent and Trademark Office (“USPTO”) by Intertape, a company located in Bradenton, Florida.

In this current order, Magistrate Judge Hussmann addresses Berry’s request to compel Intertape to produce documents and testimony that had been withheld as subject to attorney-client privilege. Indiana patent lawyers for Berry argued that this was proper because Intertape had engaged in inequitable conduct or defrauded the USPTO.

The Magistrate first emphasized that this ruling pertained only to discovery, as the question of whether Intertape had perpetrated a fraud upon the USPTO was one of the ultimate issues in the litigation. As such, that question of fact would be decided at trial by Chief Judge Richard L. Young.

The general rule in discovery is that a party to litigation is entitled to discover from his adversary “any nonprivileged matter that is relevant to any party’s claim or defense.” An exception to the attorney-client privilege is made when the communication between the attorney and the client is made in furtherance of a crime or fraud. To successfully invoke this exception, Berry must offer evidence demonstrating that:

1) Intertape made a false representation as to a material fact;
2) Intertape made its false representation with intent to deceive;
3) the USPTO justifiably relied upon Intertape’s false representation; and
4) the USPTO suffered an injury as a consequence of its reliance on Intertape’s false representation.

In an attempt to prove that the elements of the crime-fraud exception applied, Berry offered “numerous allegations and … extensive evidence suggesting Intertape engaged in inequitable conduct or defrauded” the USPTO. Intertape responded to each allegation with “numerous defenses and extensive evidence suggesting its dealings with the USPTO were lawful and forthright.”

The Magistrate held for Intertape. Citing Federal Circuit precedent, which governs the application of the crime-fraud exception to privilege in patent cases, the court called the piercing of the attorney-client privilege an “extreme remedy.” The rule in such cases is that, if the court were to find Intertape’s explanation satisfactory, it must leave the privilege intact. After an analysis of the defenses proffered by Intertape, the court found that Intertape’s explanation for each of the allegations of fraud sufficient to avoid a piercing of the privilege.

Practice Tip: Magistrate judges are adjuncts to Article III district judges. They often dispose of pretrial matters such as motions, evidentiary hearings and pretrial conferences. However, their authority, and thus their role, in federal litigation is constrained by constitutional and statutory limits. Because the factual issue of whether Intertape committed fraud against the USPTO was one of the ultimate issues in the litigation, Magistrate Hussman expressly limited his ruling in this opinion to the discovery dispute before him. At trial, Chief Judge Young, in his role as the ultimate finder of fact, may determine that Intertape did, indeed, commit fraud.

June 25, 2014

Indiana Trademark Law: Personal Jurisdiction Cannot be Based on Alter-Ego Theory

By Overhauser Law Offices, LLC

Indianapolis, Indiana – In the matter of American Petroleum Institute v. Bullseye Automotive Products, et al., Indiana trademark litigators Paul B. Overhauser and John M. Bradshaw of Overhauser Law Offices, attorneys for Carlos Silva, petitioned the court to dismiss Silva for lack of personal jurisdiction. District Judge Tanya Walton Pratt granted the motion to dismiss.

In July 2013, Indiana trademark attorneys for American Petroleum Institute (“API”) of Washington, D.C. sued in the Southern District of Indiana alleging that Bullseye Automotive Products Inc. and Bullseye Lubricants Inc., both of Chicago, Illinois (collectively, “Bullseye”), and Carlos Silva of Chicago Ridge, Illinois infringed registered API “Starburst” and “Donut” trademarks, Registration Nos. 1864428, 1868779, and 1872999.

The Bullseye entities are Illinois corporations that bottle and sell motor oil. Defendant Silva is the sole incorporator and shareholder of the Bullseye entities. Plaintiff API is a trade association for the petroleum and natural-gas industry.

API brought various claims against Bullseye and Silva as an individual, including trademark infringement and trademark dilution. It claimed that Bullseye’s labeling infringed on its “Starburst” and “Donut” certification marks. While Bullseye did not contest jurisdiction in Indiana, trademark lawyers for Silva asked the court to dismiss the claims against him for lack of personal jurisdiction.

API countered that the exercise of personal jurisdiction over Silva in Indiana was proper, contending that Silva personally directed the allegedly infringing activities, that he exercised complete control over Bullseye and that he and Bullseye were essentially the same entity for jurisdictional purposes. API made no argument that Silva personally had sufficient contacts with Indiana to permit an Indiana court to exercise personal jurisdiction.

The court rejected API’s “alter-ego” theory of personal jurisdiction, stating that this argument pertained to liability, not jurisdiction. Even if the court determined that Silva were the alter ego of Bullseye, a finding that the court explicitly declined to make, such potential for liability for corporate acts was held to be irrelevant to the question of personal jurisdiction. In so ruling, the court stated that it was refusing to disregard the corporate form and bypass the protections it offers, citing the longstanding rule that a “corporation exists separately from its shareholders, officers, directors and related corporations….”

The court then analyzed whether it would be appropriate to exercise personal jurisdiction over Silva based on his personal contacts with the state of Indiana. It concluded that Silva as an individual had not purposefully availed himself of the privilege of conducting activities within Indiana such that he would reasonably anticipate being haled into an Indiana court. Finding that the minimum contacts necessary had not been established, the court held that exercising personal jurisdiction over Silva would offend due process and the “traditional notions of fair play and substantial justice” and dismissed Silva from the lawsuit.

Practice Tip: Many of the arguments API made – for example, that Silva personally selected the text and design for Bullseye’s labels, that he personally negotiated with suppliers and that he oversaw production – do not support an “alter ego” theory. Activities such as these must necessarily be carried out by the sole shareholder of a small corporation. To find that a small corporation is the alter ego of a sole shareholder merely because that shareholder acts on behalf of the company would violate the basic principles of corporation law.

Paul B. Overhauser, Managing Partner of Overhauser Law Offices, also recently prevailed on the issue of personal jurisdiction in the Seventh Circuit in another lawsuit alleging trademark infringement.

June 16, 2014

Appeals Court Disallows Mass Joinder in Copyright Infringement Litigation

By Overhauser Law Offices, LLC

Washington, D.C. – The United States Court of Appeals for the District of Columbia handed copyright trolls a major defeat recently by removing one of their most powerful tactics: the ability to sue large groups of John Doe defendants together with minimal evidence.

The case, AF Holdings v. Does 1-1058, is one of the few mass copyright cases to reach an appellate court, and the first to look into fundamental procedural problems that have tilted the playing field firmly against the Doe Defendants. With this decision on the books, it appears likely that even more federal trial courts will disallow cookie-cutter lawsuits seeking cash payouts from dozens or even hundreds of Internet subscribers.

The appeal was brought by several internet service providers (Verizon, Comcast, AT&T and affiliates) with amicus support from copyright attorneys for the Electronic Frontier Foundation (“EFF”), the ACLU, the ACLU of the Nation’s Capital, Public Citizen, and Public Knowledge.

May 28, 2014

Indiana Patent Law: Anchor Fails to Meet its Burden to Support Transfer of Indiana Patent Infringement Litigation

By Overhauser Law Offices, LLC

Fort Wayne, Indiana – Magistrate Judge Roger Cosbey of the Northern District of Indiana denied the motion for transfer filed by patent attorneys for Anchor Packaging, Inc. of St. Louis, Missouri (“Anchor”). Anchor sought a transfer of the declaratory judgment action filed by Mullinix Packages, Inc. of Fort Wayne, Indiana (“Mullinix”) to the Eastern District of Missouri where Anchor has a related, but later-filed infringement suit pending against Mullinix. Both patent infringement lawsuits pertain to the alleged infringement by Mullinix of Patent Nos. D679,587; D675,919 and D570,681, which were issued by the U.S. Patent Office.

Anchor and Mullinix are competitors in the commercial packaging industry. Prior to 2010, Anchor had been the primary supplier of mashed potato containers to Bob Evans Farms, Inc., a position now assumed by Mullinix. According to Mullinix, mashed potato container sales peak dramatically during the fourth quarter of the year and Mullinix’s ability to meet Bob Evans’s demand for containers during this period is critical to maintaining a successful relationship. It was around this time that patent lawyers for Anchor demanded that Mullinix cease and desist selling a tray that Anchor asserted was of a substantially similar design as trays claimed in three of Anchor’s patents.

While the cease-and-desist letter sent by Anchor’s patent counsel indicated that Anchor’s “interest is a resolution of this matter and not litigation,” Mullinix filed a complaint for declaratory judgment in the Northern District of Indiana shortly thereafter. Several weeks later, Anchor responded by filing a complaint for patent infringement in the Eastern District of Missouri.

In this opinion, Magistrate Judge Roger Cosbey, writing for the Northern District of Indiana, addresses Anchor’s motion to transfer Mullinix’s Indiana complaint for declaratory judgment for patent non-infringement to Missouri.

Anchor argued that the case should be transferred because (1) Mullinix filed its declaratory judgment action in anticipation of Anchor’s infringement suit, (2) a critical non-party witness is outside this Court’s subpoena power, but within the range of the Eastern District of Missouri, and (3) the Eastern District of Missouri is a more convenient forum.

The court evaluated Anchor’s request for transfer under § 1404(a) under precedent set by the Seventh Circuit. Under § 1404(a), a court may transfer a case if the moving party shows that: (1) venue was proper in the transferor district, (2) venue and jurisdiction would be proper in the transferee district, and (3) the transfer will serve in the convenience of the parties and the witnesses as well as the interests of justice.

As neither party disputed that both the Indiana and Missouri courts have jurisdiction and are proper venues, the court focused its analysis on the third factor. As the party requesting transfer, Anchor has the burden to show that the Eastern District of Missouri would be “clearly more convenient” than the Northern District of Indiana. In evaluating convenience, the factors to consider are: “(1) the plaintiff’s choice of forum, (2) the situs of the material events, (3) the relative ease of access to sources of proof, (4) the convenience of the parties, and (5) the convenience of the witnesses.”

The first factor, the plaintiff’s choice of forum, was held to be neutral. In general, a plaintiff’s choice of forum is entitled to substantial deference, particularly where the chosen forum is the plaintiff’s home forum. However, the court found that this factor did not weigh in either direction. In this case, there are two plaintiffs in two different fora. As a result, one of them will necessarily be disturbed.

The evaluation of the situs of the material events weighed against transfer. In patent infringement actions “the situs of the injury is the location, or locations, at which the infringing activity directly impacts on the interests of the patentee.” Mullinix is headquartered in Fort Wayne, Indiana, which is in the Northern District of Indiana, and keeps its documents pertaining to the accused infringing products in Fort Wayne. Additionally, two of the individuals who worked on the accused infringing products work and reside within the district.

For similar reasons, the court held the third factor, relative ease of access to sources of proof, to weigh against transfer.

The court briefly addressed the fourth factor, the convenience of the parties, noting that there was no way to avoid inconveniencing either one party or the other. In such a circumstance, the court held that “when the inconvenience of the alternative venues is comparable there is no[] basis for a change of venue; the tie is awarded to the plaintiff[.]”

Finally, the court addressed the fifth factor, the convenience of non-party witnesses, noting that this element was “often considered the most important factor in the transfer analysis.” The court noted with some displeasure that the parties had perhaps been disingenuous in arguing this factor. After a discussion of the evidence that had been submitted, it concluded that the parties had failed to provide it with much enlightenment on the subject and, as a result, the court was largely left to speculate about the convenience of non-party witnesses. The court thus held that this analysis-of-transfer factor was neutral.

In sum, it was found that the convenience factors did not support transfer.

The court also evaluated the interests-of-justice inquiry. On the whole, these factors – the speed to trial, familiarity with the applicable law, desirability of resolving controversies and relation of each community to the controversy – also weighed against transfer.

Finally, the court addressed the first-filed analysis under Federal Circuit precedent, which governs declaratory judgment actions in patent cases. Given that no “sound reason” for transfer had been found in the earlier analysis, court dismissed the first-filed analysis as “ancillary” and largely non-dispositive.

Practice Tip #1: The first-to-file rule is a doctrine of federal comity that generally favors pursuing only the first-filed action when multiple lawsuits involving the same claims are filed in different jurisdictions. It was designed to avoid conflicting decisions and promote judicial efficiency. Finding an exception to the first-to-file rule requires a “sound reason that would make it unjust or inefficient to continue the first-filed action.”

Practice Tip #2: A court may also consider the extent to which a declaratory judgment action is anticipatory and motivated by forum shopping. However, the Federal Circuit has repeatedly held that a finding that a filing was anticipatory does not in itself constitute sufficient legal reason to transfer or dismiss the first-filed case.