Civil Procedure

December 27, 2013

Federal Circuit Rejects Broad Right of Public Access to Patent Trials

Washington, D.C. – The United States Court of Appeals for the Federal Circuit held that a showing of good cause was sufficient to support parties’ requests to file documents under seal. The case was heard by Circuit Judges Sharon Prost, William C. Bryson and Kathleen O’Malley.

Courts have traditionally acknowledged a right of free access to patent information. Lately, however, judges have increasingly restricted the general public’s access to patent litigation. The Federal Circuit spoke to this in the matter of Apple Inc. v. Samsung Electronics Co., Ltd., which recently resulted in a new verdict for Apple, this time for $290 million. picture of the court.jpg

In the patent litigation that led to that verdict, the parties had agreed that certain documents were to be filed under seal. Judge Lucy H. Koh had rejected this agreement and instead had required that the parties provide “compelling reasons” for sealing documents. The parties appealed this ruling.

The Federal Circuit discussed the public-policy implications of shielding patent infringement trials from the public eye. It rejected the notion that general public interest in a trial involving patent litigation is sufficient to require that the briefs and evidence be made available to the public. Instead, the Federal Circuit held that the public’s interest must be more than mere curiosity where the information at issue was not central to the court’s decision on the merits of the case. It also held that the interests of the parties in maintaining the confidentiality of their information must be considered. The court wrote, “[w]hile protecting the public’s interest in access to the courts, we must remain mindful of the parties’ right to access those same courts upon terms which will not unduly harm their competitive interest.”

The Federal Circuit reversed the district court, holding that a showing of “compelling reasons” was not the correct standard to apply when determining if parties should be allowed to file documents under seal. Instead, under the law, only a showing of “good cause” is required.

Practice Tip: This case is unusual in that it reached the appeals court. Typically, when patent attorneys for the parties agree to keep information secret, most district court judges are willing to allow evidence and briefs to be filed under seal. It is perhaps due to the considerable public interest in this case that Judge Koh declared before the trial that “the whole trial is going to be open.”

November 18, 2013

Preliminary Injunction Improper for Overly Broad Non-Compete Agreement

By Overhauser Law Offices, LLC

Indianapolis, Indiana – Indiana Court of Appeals Judges Elaine Brown, Edward Najam and Paul Mathias reversed a trial court’s entry of preliminary injunction, holding that the non-compete agreement at issue was overly broad and, thus, unreasonable as a matter of law.

Glacier Group (“Glacier”) provides employee recruiting and placement services in the field of information technology. It primarily places salespeople, pre-sales engineers, systems engineers and people in leadership positions such as directors, vice presidents, chief financial officers and chief executive officers. Daniel Buffkin began working as a sales recruiter for Glacier in August 2008. Buffkin’s work with Glacier was subject to an “Independent Contractor Agreement” (the “Agreement”).

In June 2011, Glacier terminated the Agreement with Buffkin. In November 2012, it sued Buffkin alleging that he was in breach of the non-competition portion of the Agreement and requesting damages and injunctive relief.

In March 2013, the trial court determined that “during the almost three (3) year business relationship between [Glacier] and [Buffkin], [Buffkin] came into contact with a vast number of prospects and candidates, as well as clients of [Glacier], including their names and at the very least, their e-mail addresses, together with the requirements of [Glacier’s] customers for prospects and candidates to fill employment positions” and that “[t]his therefore created a legitimate protectable business interest by [Glacier].”

The trial court also stated that “[Buffkin] has admitted to directly competing against [Glacier] after being terminated from working for [Glacier]” and that Buffkin had been either unable or unwilling to supply a list of “where and when [Buffkin] has obtained the contacts he has made that he has used to make placements in the field in which [Glacier] works and operates.”

The trial court concluded that Glacier had a reasonable likelihood of success on the merits of its case and granted a preliminary injunction prohibiting Buffkin from competing with Glacier in employee placement in the areas of “data storage, cloud, virtualization, big data, managed hosting, managed services, data communication, and telecommunication.”

From this ruling, Buffkin brought an interlocutory appeal to the Indiana Court of Appeals. He argued that the non-compete clause of the Agreement was unreasonable and therefore unenforceable. He first asserted that the non-compete clause was overly broad because it did not have any restrictions regarding which industry it covered. He contended that, as written, the Agreement purported to prohibit him from doing executive recruiting in any industry. He also argued that the Agreement did not protect a legitimate interest of Glacier and that the restrictions on geographic scope were overly broad. Buffkin asked the Court of Appeals to hold that the trial court had abused its discretion in granting the preliminary injunction.

Glacier countered that it had provided Buffkin with insider knowledge and that Buffkin could not have had the success that he had after leaving Glacier without having used the proprietary information which he had acquired during his time with Glacier. It maintained that it had a protectable interest as a result of Buffkin’s purported use of insider knowledge acquired at Glacier and that Buffkin’s use of that information to Glacier’s detriment should be enjoined.

The appellate court first considered whether Glacier had an interest to be protected. It held that, while Buffkin may have acquired training, knowledge and skills while working at Glacier, such general skills would not be sufficient to rise to the level of a protectable interest unless their use would result in irreparable injury to Glacier. No such irreparable injury was proven. Glacier also failed to prove that, during his time with the company, Buffkin had access to proprietary information which gave him an improper advantage at Glacier’s expense. The court concluded that the interest to be protected by the non-competition provision of the Agreement, if any, was minimal.

The reasonableness of the restrictions was then addressed. Two provisions in particular were at issue: the geographic restriction and the activities restricted. The Agreement had attempted to restrict Buffkin from performing recruiting or placement services for employers “with offices in the continental United States.” The court held that Glacier had not met its burden of proof to demonstrate that it had a legitimate interest to be protected by such a broad restriction and held the geographic restriction to be unreasonable.

The court next held that the broadly worded text restricting Buffkin from being “connected in any way with any business that competes” with Glacier, and which made no distinction between past, current, or potential future customers of Glacier was excessive and, thus, unenforceable. It held that the trial court’s ruling had been clearly erroneous and that it had abused its discretion by granting the preliminary injunction.

Practice Tip #1: The Indiana Supreme Court has held that, to be enforceable, a non-compete agreement must be reasonable and that “[u]nlike reasonableness in many other contexts, the reasonableness of a noncompetition agreement is a question of law.” Such agreements in employment contracts are strongly disfavored under Indiana law as restraints of trade. They are scrutinized more closely than most other types of contracts and are strictly construed against the employer. Identifying a party to the contract as an independent contractor rather than as an employee does not change the analysis.

Practice Tip #2: A preliminary injunction should not be granted except in rare instances in which the law and facts are clearly within the moving party’s favor. To obtain a preliminary injunction, the moving party has the burden of showing by a preponderance of the evidence the following: (1) a reasonable likelihood of success at trial; (2) the remedies at law are inadequate; (3) the threatened injury to the movant outweighs the potential harm to the nonmoving party from the granting of an injunction; and (4) the public interest would not be disserved by granting the requested injunction. If the party seeking the preliminary injunction fails to prove any of these requirements, the trial court’s grant of an injunction will be considered an abuse of discretion.

November 13, 2013

Endotach’s Patent Infringement Lawsuit Against Cook Medical Dismissed for Lack of Standing

By Overhauser Law Offices, LLC

Indianapolis, Indiana – Endotach LLC of Plano, Texas sued Cook Medical Inc. of Bloomington, Indiana alleging infringement of Endovascular Bypass Graft, U.S. Patent No. 5,122,154 (the “‘154 patent”) and Endovascular Stent with Secure Mounting Means, U.S. Patent No. 5,593,417 (the “‘417 patent”; collectively, the “Rhodes patents”) issued by the U.S. Patent Office. Endotach filed its complaint in the Northern District of Florida. The case was transferred to the Southern District of Indiana upon Cook’s request.

The patents at issue, both of which were issued in the 1990s, were granted to Dr. Valentine Rhodes, an award-winning surgeon who practiced in the field of vascular medicine for over 30 years. The patents are directed to intraluminal and endovascular grafts for placement within a blood vessel, duct or lumen to hold it open. As it pertains to this lawsuit, the patents-in-suit are used for revascularization of aneurysms or stenosis occurring in blood vessels which includes anchoring projections to aid in securing the graft in place within the blood vessel.

Upon the death of Dr. Rhodes, the patents-in-suit passed as part of his estate. Dr. Rhodes’ Will bequeathed all “tangible personal property” to his wife, Brenda Rhodes (“Mrs. Rhodes”). However, there was no specific bequest of the Rhodes patents or mention of any intangible property. The Will’s residuary clause bequeathed “all the residue of [Dr. Rhodes’] estate, real and personal” to a Trust (the “Rhodes Trust”). Upon Dr. Rhodes’ death, his two daughters and Mrs. Rhodes became Co-Trustees of the Trust.

In November 2009, Mrs. Rhodes executed a document entitled “Exclusive License Agreement,” listing herself as the “patent owner.” The agreement purported to transfer an exclusive license on the ‘417 patent to Acacia Patent Acquisition LLC. That license was later assigned to Endotach and amended to include the ‘154 patent.

Endotach sued Cook in July 2012 asserting infringement of one or more claims in each of the patents-in-suit. In that complaint, it asserted that Mrs. Rhodes owned the patents-in-suit and that, as a result of the exclusive license Mrs. Rhodes had granted, Endotach had the right to enforce the patents against all infringers.

Cook moved to dismiss the lawsuit for lack of subject matter jurisdiction arguing that Endotach did not have standing to bring suit. On July 12, 2013, presumably in response to the motion, an “amendment” to the exclusive licensing agreement transferred an exclusive license on the Rhodes patents to Endotach from the Rhodes Trust. It was signed by Mrs. Rhodes and the other Co-Trustees.

In this opinion, Senior Judge Larry J. McKinney addressed Cook’s contention that Endotach did not have standing to sue. The court concluded that Endotach did lack standing as Mrs. Rhodes did not have any individual property interest in the Rhodes patents at the time that she purported to convey an exclusive license. The court dismissed Endotach’s lawsuit without prejudice.

Practice Tip #1: The principle of standing that is important in this case is whether or not Endotach had any legal rights and interests to the Rhodes patents at the time it filed suit. While there are some exceptions, in general, a plaintiff may not sue to assert rights held by third parties.

Practice Tip #2: Apparently realizing that the earlier effort to convey the license might be successfully challenged (as it was) and the case dismissed as a result (as it was), an additional complaint was filed on July 16, 2013, shortly after a new attempt was made to convey to Endotach an exclusive license to the patents-in-suit, this time by the Rhodes Trust. See here.

October 30, 2013

Second-Filed Litigation Stayed Pending Venue Ruling in First-Filed Litigation

By Overhauser Law Offices, LLC

Indianapolis, Indiana – Nexans, Inc. of New Holland, Pennsylvania sued Belden, Inc. of Richmond, Indiana in the District of Delaware. At issue were allegations of infringement of Patent Nos. 6,074,503, Making enhanced data cable with cross-twist cabled core profile; 7,135,641, Data cable with cross-twist cabled core profile; 7,977,575, High performance data cable; 5,796,046, Communication cable having a striated cable jacket; and 7,663,061, High performance data cable, which have been issued by the U.S. Patent Office. Two days after Nexans’ complaint was filed, Belden sued Nexans regarding the same patent infringement claims in the Southern District of Indiana. The Indiana court has stayed the litigation filed by Belden pending a ruling by the Delaware court.

On November 19, 2012, Nexans filed a complaint for declaratory action in the District of
Delaware against Belden seeking a declaration of non-infringement and invalidity of U.S. Patent Nos. 6,074,503 (the “‘503 Patent”), 7,135,641 (the “‘641 Patent”), and 7,977,575 (the “‘575 Patent”), as well as a judgment that Belden has infringed U.S. Patent No. 5,796,046 (the “‘046 Patent”).

On November 21, 2012, Belden sued Nexans in Indiana, alleging infringement of the ‘503, ‘575, and ‘064 Patents. It also alleged infringement of U.S. Patent No. 7,663,061 (the “‘061 Patent”). On December 3, 2012, Nexans filed an amended complaint in the Delaware action, seeking an additional declaratory judgment of non-infringement and invalidity of Belden’s ‘061 Patent.

In this opinion, Magistrate Judge Mark J. Dinsmore ruled on Nexans’ motion to stay the patent infringement lawsuit filed by Belden in Indiana. Nexans argued that a stay should be issued until the Delaware Court, as the first-filed court, had decided the issue of venue.

Judge Dinsmore first discussed the analysis appropriate to a determination of whether to stay litigation. Specifically, the following factors must be considered in deciding whether to stay an action: (i) whether a stay will unduly prejudice or tactically disadvantage the non-moving party, (ii) whether a stay will simplify the issues in question and streamline the trial, and (iii) whether a stay will reduce the burden of litigation on the parties and on the court.

In the case of duplicative patent actions, the general rule is that the first-filed action is preferred, even if it is declaratory, unless consideration of judicial and litigant economy, and the just and effective disposition of disputes, requires otherwise. Belden argued that two circumstances warranted departing from the general first-filed rule: 1) the convenience factors under 28 U.S.C. § 1404, which it argued would favor proceeding in Indiana, and 2) that Nexans’ suit in Delaware constituted forum shopping, which would allow the Indiana court to bypass the first-filed rule.

The court was not persuaded by this reasoning. Instead, it noted that, while the Seventh Circuit has approved of second-filed courts doing this analysis, and proceeding when it is in the interests of justice to do so, the Federal Circuit’s rulings control this issue in patent infringement cases. In turn, the Federal Circuit has expressly declined to apply the departure test to patent infringement cases, and has held that it prefers the first-filed rule.

The court next addressed the issue of whether the second-filed court may decide the applicability of the first-filed rule. It observed that the Federal Circuit has not yet expressly addressed whether the second-filed court may decide the applicability of the first-filed rule. While commenting that district courts have come to differing conclusions on the issue, the court was most convinced by the reasoning in those cases that have reserved the application of the first-filed rule for the first-filed court.

In concluding, the court found that it “would be at odds with the promotion of judicial and litigant economy for the court to proceed with the analysis of the exceptions to the first-filed rule.” It held that the “first-to-file rule has generally been interpreted to dictate not only which forum is appropriate, but also which forum should decide which forum is appropriate” and stayed the Indiana litigation, pending a ruling on venue from the Delaware court.

Practice Tip: The present action was stayed pending the Delaware court’s resolution of the pending motions to enjoin and dismiss. The parties in this case have been instructed to notify the Indiana court of the Delaware district court’s rulings on these motions as soon as they are issued.

August 28, 2013

Another BitTorrent Defendant Ordered to Pay $20,000 in Default Judgment

By Overhauser Law Offices, LLC

Indianapolis, Indiana – The United States District Court for the Southern District of Indiana has granted a motion by Malibu Media of Los Angeles, California for default judgment against Kenny Griffith for infringement of the copyrighted work “Slow Motion” which has been registered by the U.S. Copyright Office.

In its complaint, Malibu Media alleged that Griffith and others directly and contributorily infringed its copyrighted work when they downloaded and disseminated without authorization, all or a portion of a movie owned by Malibu Media titled “Slow Motion” using BitTorrent, a peer-to-peer file sharing protocol. The initial complaint was served upon eight defendants but was later severed. Discussed in this opinion are the allegations, findings and judgments against Griffith only.

Malibu Media served Griffith with a summons and complaint on January 5, 2013. He did not respond. On April 1, 2013, default was entered as to Griffith by Southern District of Indiana Judge William T. Lawrence. By virtue of this entry of default, it was established as a factual matter that Griffith had uploaded and downloaded all or a portion of the copyrighted work without authorization, and had also enabled countless unknown others to obtain the work in the process.

In the current default-judgment opinion, the court addressed requests by copyright attorneys for Malibu Media for two separate injunctions, for damages, for attorney’s fees and for costs.

The first injunction sought injunctive relief pursuant to 17 U.S.C. §§ 502 and 503. The court noted that, under § 503(b), a court may order the destruction of all copies made or used in violation of the copyright owner’s exclusive rights. Given the nature of the infringement that occurred in this case — participating in a “swarm” and downloading and uploading copyrighted work — the court found that this injunction was particularly appropriate.

The second injunction sought asked the court to prohibit Griffith “from directly, contributorily or indirectly infringing [Malibu Media’s] rights under federal or state law in the Work, including, without limitation, by using the internet, BitTorrent or any other online media distribution system to reproduce (e.g., download) or distribute the Works, or to make the Work available for distribution to the public, except pursuant to a lawful license or with the express authority of [Malibu Media].” The court held that such an injunction was simply a mandate that Griffith follow copyright laws and that the injunction was therefore unnecessary.

The court also denied Malibu Media’s request for attorney’s fees and costs, noting that the fees submitted seemed to reflect legal work done not only in the furtherance of the lawsuit against Griffith, but also seemed to pertain to other related lawsuits involving the previously joined defendants. As a result of these ambiguities, the court denied Malibu Media’s request for costs and attorney’s fees but indicated that it would be willing to entertain such motions — for attorney’s fees incurred as to Griffith only — upon the entry of final judgments as to all defendants in related cases.

Finally, Malibu Media sought statutory damages in the amount of $20,000. The court cited “Congress’s recognition of the ‘disturbing trend’ of internet piracy” and found that amount to be just under the circumstances.

Practice Tip:

Deciding to simply ignore a complaint, as Kenny Griffith apparently did, can be a costly error. Failing to present the defendant’s version of the facts and arguments results in the court considering only the plaintiff’s side of the story. Here, because the defendant chose to leave the complaint unanswered, the well-pled allegations of the plaintiff relating to liability were taken as true.

After the entry of default judgment, the court then conducted an inquiry to ascertain the amount of damages with “reasonable certainty.” Again, in such circumstances, it serves a defendant well to plead his case — to present the court with reasons that the plaintiff should not get 100% of what he requests.

Under 17 U.S.C. § 504(c)(1), a copyright owner may elect actual or statutory damages. Statutory damages range from a sum of not less than $750 to not more than $30,000. The determination of the exact amount is left to the discretion of the court. In this case, Malibu Media asked the court for $20,000 and the court, having no arguments from the defendant to suggest that this was excessive, granted the entire amount.

Overhauser Law Offices, the publisher of this website, has represented several hundred persons and businesses regarding copyright infringement and similar matters.

August 16, 2013

Default Judgment of $20,000 Granted in Copyright Infringement Case Involving BitTorrent

By Overhauser Law Offices, LLC

Indianapolis, Indiana —The Southern District of Indiana has granted a default judgment to Malibu Media, LLC of Los Angeles, California in its lawsuit against Robert Johnson of Indianapolis, Indiana for copyright infringement of the work “Pretty Back Door Baby.”

In its complaint, Malibu Media alleged that Johnson and others directly and contributorily infringed its copyrighted work when they downloaded and disseminated without authorization, all or a portion of a movie owned by Malibu Media entitled “Pretty Back Door Baby” using BitTorrent, a peer-to-peer file sharing protocol. The initial complaint was served upon eleven defendants but was later severed. Discussed in this opinion are the allegations, findings and judgments against Johnson only.

Malibu Media served Johnson with a summons and complaint on March 8, 2013. Johnson did not respond. On April 12, 2013, default was entered as to Johnson by Southern District of Indiana Judge William T. Lawrence. By virtue of this entry of default, it was established as a factual matter that Johnson had uploaded and downloaded all or a portion of the copyrighted work without authorization, and had also enabled countless unknown others to obtain the work in the process.

In the current default-judgment opinion, the court addressed requests by Malibu Media for an injunction, for damages, for attorney’s fees and for costs.

The injunction sought asked the court to prohibit Johnson “from directly, contributorily or indirectly infringing [Malibu Media’s] rights under federal or state law in the Work, including, without limitation, by using the internet, BitTorrent or any other online media distribution system to reproduce (e.g., download) or distribute the Works, or to make the Work available for distribution to the public, except pursuant to a lawful license or with the express authority of [Malibu Media].” The court held that such an injunction was simply a mandate that Johnson follow copyright laws and that the injunction was therefore unnecessary.

The court also denied Malibu Media’s request for attorneys’ fees and costs, noting that the fees submitted seemed to reflect legal work done not only in the furtherance of the lawsuit against Johnson, but also seemed to pertain to other related lawsuits involving the previously joined defendants. As a result of these ambiguities, the court denied Malibu Media’s request for costs and attorney’s fees but indicated that it would be willing to entertain such motions upon the entry of final judgment as to all defendants in related cases.

Finally, Malibu Media sought statutory damages in the amount of $20,000. The court cited “Congress’s recognition of the ‘disturbing trend’ of internet piracy” and found that amount to be just under the circumstances.

Practice Tip:

Deciding to simply ignore a complaint, as Robert Johnson apparently did, can be a costly error. Failing to present the defendant’s version of the facts and arguments results in the court considering only the plaintiff’s side of the story. Here, because the defendant chose to leave the complaint unanswered, the well-pled allegations of the plaintiff relating to liability were taken as true.

After the entry of default judgment, the court then conducted an inquiry to ascertain the amount of damages with “reasonable certainty.” Again, in such circumstances, it serves a defendant well to plead his case — to present the court with reasons that the plaintiff should not get 100% of what he requests.

Under 17 U.S.C. § 504(c)(1), a copyright owner may elect actual or statutory damages. Statutory damages range from a sum not less than $750 to not more than $30,000. The determination of the exact amount is left to the discretion of the court. In this case, Malibu Media asked the court for $20,000 and the court, having no arguments from the defendant to suggest that this was excessive, granted the entire amount.

Overhauser Law Offices, the publisher of this website, has represented several hundred persons and businesses regarding copyright infringement and similar matters.

August 1, 2013

Endotach Sues Cook Medical for Infringement of Patented Endovascular Technology

By Overhauser Law Offices, LLC

Indianapolis, Indiana — Endotach, LLC (“Endotach”) of Plano, Texas sued alleging that Cook Medical Incorporated (“Cook Medical”) of Bloomington, Indiana infringed two patents: Endovascular Bypass Graft, Patent No. 5,122,154, and Endovascular Stent with Secure Mounting Means, Patent No. 5,593,417, which have been issued by the U.S. Patent Office.

The patents, both of which were issued in the 1990s, were granted to Dr. Valentine Rhodes, an award-winning surgeon who practiced in the field of vascular medicine for over 30 years. The patents are directed to intraluminal and endovascular grafts for placement within a blood vessel, duct or lumen to hold it open. As it pertains to this lawsuit, the patents-in-suit are used for revascularization of aneurysms or stenosis occurring in blood vessels which includes anchoring projections to aid in securing the graft in place within the blood vessel.

Upon the death of Dr. Rhodes, the patents-in-suit passed as part of his estate to his wife, Brenda Rhodes. While Mrs. Rhodes remains the owner of the patents, Endotach asserts that it is the exclusive licensee and has the right to enforce the patents against all infringers.

In its complaint, patent attorneys for Endotach asserted infringement of one or more claims in each of the patents-in-suit. It seeks a judgment that the patents-in-suit have been infringed, either literally and/or under the doctrine of equivalents; damages, including treble damages; costs; interest; attorneys’ fees and an injunction.

Practice Tip:

This complaint was filed to err on the side of caution. A previous matter, Endotach LLC v. Cook Medical Incorporated, Civil Action No. 1:12-cv-01630-LJM-DKL, which was initiated by a complaint making similar allegations, is currently pending before the same court. However, in that matter, Cook Medical has challenged the sufficiency of the transfer of the exclusive license to Endotach and, thus, Endotach’s standing to bring that prior lawsuit. Pursuant to that allegation, Cook Medical asserted that the matter should be dismissed. That motion is still pending.

Endotach entered into a subsequent agreement that purports to remedy any deficiencies related to standing. It then filed this current complaint. It has indicated its intention to consolidate this later-filed action with the matter currently before the court.

July 8, 2013

Southern District of Indiana Dismisses Wine & Canvas’ Suit for Lack of Personal Jurisdiction

By Overhauser Law Offices, LLC

Indianapolis, Indiana — The Southern District of Indiana denied a motion by Wine & Canvas Development, LLC for default judgment and instead dismissed claims against Rachael Roberts and all defendants for lack of personal jurisdiction. The suit alleged that Rachael Roberts, Avraham Levi, and Las Vegas Bungee, Inc. d/b/a Design & Wine of Las Vegas, Nevada, infringed Wine & Canvas’ trademark, Registration No. 4,185,017, which has been registered with the U.S. Trademark Office.

Wine & Canvas Development, LLC (“Wine & Canvas”), filed this action in Indiana state court alleging that defendants Rachel Roberts, Avraham Levi, and Las Vegas Bungee, Inc., d/b/a Design and Wine (“Design and Wine”) (collectively, the “defendants”) violated the Lanham Act by infringing on Wine & Canvas’ trademark through the use of the Design & Wine Las Vegas website. Roberts unilaterally removed the action to federal court in November 2012.

Wine & Canvas moved for default judgment January 16, 2013, after defendants failed to respond to its complaint. Two days later, Roberts moved to dismiss for lack of personal jurisdiction. Roberts attested that she is married to Levi, that they are the sole owners of Design and Wine, that they have one store, that it is located in Las Vegas and that they have never done business in Indiana. She further attested that they have never contacted a business in Indiana, have never offered or sold any franchises in Indiana, have no bank accounts in Indiana, have no employees in Indiana, have no affiliates in Indiana, have not sold any services or gift certificates in Indiana and have never purposefully targeted any residents of Indiana.

In response to Roberts’ motion, Wine & Canvas moved to strike her affidavit. It argued that her affidavit was insufficient because she had not attested to her personal knowledge or her competence. It also claimed that Roberts’ earlier removal of the case to federal court prevented her from claiming a lack of personal jurisdiction. Finally, it argued that her motions were filed only on her own behalf, and not also on behalf of the other two defendants.

The court was not persuaded by Wine & Canvas’ arguments. It held that Roberts’ affidavit was sufficient, because, as a corporate officer of Design and Wine, she was presumed to have personal knowledge of the acts of that business. It next held that Roberts’ earlier motion to remove the case to federal court did not prevent her from successfully arguing a lack of personal jurisdiction. Finally, although Roberts filed her motion on her own behalf, not on behalf of the other two defendants, the motion challenged the court’s personal jurisdiction and contains common attestations regarding the defendants’ business activities. The court decided sua sponte to raise the issue of personal jurisdiction regarding the non-moving defendants and held that it lacked such jurisdiction. The court dismissed the matter without prejudice.

Practice Tip #1: While all defendants typically must consent to removal under 28 U.S.C. § 1441, failure to do so is a procedural defect that must be raised (here, by Wine & Canvas) within thirty days. Wine & Canvas did not object to Roberts’ unilateral removal and, hence, the issue was waived.

Practice Tip #2: Courts have held that the mere existence of nationally accessible websites is a poor foundation on which to base personal jurisdiction. Here, a holding that accepted Wine & Canvas’ argument would result in personal jurisdiction in Internet-related cases in every forum in the country. That, in turn, would go against the grain of the Supreme Court’s jurisprudence which has stressed that, although technological advances may alter the analysis of personal jurisdiction, those advances may not eviscerate the constitutional limits on a state’s power to exercise jurisdiction over nonresident defendants.

December 31, 2012

Northern District of Indiana Amends Local Rules Effective January 1, 2013

By Overhauser Law Offices, LLC

Local Rules for the Northern District of Indiana have been revised and are effective January 1, 2013. The rules which have been amended are L.R. 1-1, L.R. 5-3, L.R. 6-1, L.R. 16-1, L.R. 83-6.7, L.Cr.R. 47-2, L.Cr.R. 47-3 and Local Patent Rules LPR 1-1 through 6-1.

A complete copy of the newly adopted Local Rules can be viewed by following the link provided below.

December 10, 2012

Indiana Court Denies Motions to Sever and Quash in Bittorrent Porn Copyright Infringement Suit

By Overhauser Law Offices, LLC

Fort Wayne, IN – Copyright attorney Paul Nicoletti filed a lawsuit on behalf of Malibu Media in the Northern District of Indiana alleging copyright infringement of the pornographic movie “Romantic Memories.” It alleges the infringement occurred by downloading it using the Internet file sharing “bittorrent” protocol. The suit was against 14 as-yet-unnamed Indiana Defendants, John Does 1-14. “Romantic Memories” had been coded with a “Unique Hash Number,” and upon investigation, 14 Internet Protocol (“IP”) addresses were identified. Upon receiving permission from the court, Plaintiff served third party subpoenas on two Internet Service Providers (“ISPs”) to discover the names and other contact information of each Defendant.

Defendant John Doe No. 12, acting pro se, filed a Motion to Dismiss or Sever for Misjoinder and to Quash Plaintiff’s Subpoena. The court rejected the Motion to Dismiss on a technicality, noting that under local rules motions must be filed separately, and denied the Motions for Severance and to Quash.

Doe No. 12’s Motion to Quash under Fed. R. Civ. P. 45(a) argued that there was no evidence that any improper use of his IP address would be sufficient to support an assertion that he was responsible for such misuse. The Court acknowledged that Doe No. 12 had standing to object to the subpoena on the grounds that it would implicate his privacy interest. However, it went on to reject his argument as a mere denial of liability and not relevant to a Motion to Quash. Doe No. 12 further asserted that the subpoena should be quashed as a burden on his ISP. The court found that argument unpersuasive as 1) the subpoena would not burden Doe No. 12 personally and 2) Rule 45 only requires a court to quash a subpoena when it subjects a person to an undue burden. Fed. R. Civ. P. 45(c)(3)(A)(iv). Further, the court held that no exception for privilege was applicable, as courts have consistently held that “there is no expectation of privacy in Internet subscriber information because it has already been exposed to a third party, the Internet Service Provider.”

Doe No.12’s Motion to Sever under either Federal Rule of Civil Procedure 20 or 21 argued, that there was no single transaction or series of transactions as is required for permissive joinder. Courts across the country are split regarding whether joining anonymous defendants alleged to have participated in a single BitTorrent “swarm” in a single suit is appropriate. The court here allowed joinder as the Plaintiff alleged a set of facts sufficient to support a finding that the separate actions were part of the same series of transactions, noting that the file sharing protocol required each participant to send and receive portions of the work in order to download and view the entire work. The second requirement for joinder under Rule 20, a “common question of law or fact,” was sufficiently pled by the Plaintiff’s assertion, without exception, of the same counts of copyright infringement against all Defendants. Discretionary severance under Rule 21 was also denied as unnecessarily cumbersome at this stage of the litigation.

Finally, the court issued a warning to plaintiffs in situations such as these, stating that “the litigation strategy Plaintiff has employed in this case has a history of becoming abusive and potentially giving rise to sanctions under Rule 11.” The court further cautioned plaintiffs against improperly leveraging a defendant’s reluctance to have his identity revealed to coerce a settlement.