Criminal IP

October 13, 2014

Indiana Teen Indicted for Theft of Intellectual Property Valued More Than $100 Million

District of Delaware – Four members of an international computer hacking ring were

indicted for stealing gaming technology and Apache helicopter training software. Two have already pled guilty.

Four members of an international computer hacking ring have been charged with breaking into computer networks of prominent technology companies and the U.S. Army and stealing more than $100 million in intellectual property and other proprietary data. Two of the charged members have already pleaded guilty. The alleged cyber theft included software and data related to the Xbox One gaming console and the Xbox Live online gaming system; popular games such as “Call of Duty: Modern Warfare 3” and “Gears of War 3”; and proprietary software used to train military helicopter pilots.

July 30, 2014

Indiana Trade Secret Law: Removing Allegation of Theft of Trade Secrets Results in Defendants’ Release from “Lockdown”

By Overhauser Law Offices, LLC

Indianapolis, Indiana – In 2013, a federal indictment including counts of theft of trade secrets belonging to Eli Lilly and Company (“Lilly”) was presented to the Southern District of Indiana. On the basis of this indictment, the court ordered Defendants Guoqing Cao and Shuyu Li, formerly employed by Eli Lilly and Company, to be detained at housing provided by Volunteers of America – Indiana (“VOA”), pending their criminal trial. When the 2013 indictment was superseded by a second indictment that did not include counts for the theft of trade secrets, the court granted Defendants’ request to be released to home detention.

On August 14, 2013, Defendants Cao and Li, two doctoral-level scientists formerly employed by Lilly, were charged with multiple counts of theft. At issue was intellectual property belonging to Lilly valued at $55 million. Counts one through three of the indictment, as well as counts five through ten, were listed as theft of trade secrets and aiding and abetting. Count four alleged conspiracy to commit theft of trade secrets.

In the initial proceedings, the United States maintained that the Defendants were traitors who had conveyed “American trade secrets” – specifically, “crown jewels” in the form of many millions worth of intellectual property belonging to Lilly – to Jiangsu Hengrui Medicine Co., Ltd., a company located in Shanghai, China. These arguments strongly impacted the court’s decision to order “lockdown” detention at the VOA.

A second indictment was later filed by the United States. Under the new indictment, the Defendants faced no charges of trade-secret theft. Instead, they were charged with one count each of wire fraud, aiding and abetting, and conspiracy to commit wire fraud. Based on the absence of allegations relating to trade-secret theft in the subsequent indictment, the Defendants asked the court to modify the terms of their detention.

The court was persuaded that such a change was warranted. It noted that there was “a difference between allegations of ‘theft of trade secrets’ and disclosure of ‘Lilly Property.'” It further stated that the earlier allegation – that Lilly’s “crown jewel” secrets had been stolen and provided to China – had been a critical factor in justifying the Defendants’ incarceration.

When the allegations of trade secret misappropriation were removed, the court found that those justifications were no longer applicable: “No longer are the Defendants accused of stealing ‘trade secrets’–those words are found nowhere in the superseding indictment” and released the Defendants from lockdown to the less-restrictive conditions of home detention.

Practice Tip #1: Nine Lilly trade secrets pertaining to pharmaceuticals under development for cardiovascular disease, diabetes and cancer were at issue in this Indiana criminal prosecution for theft of intellectual property.

Practice Tip #2: Defendants’ home detention restricts individuals to their residence at all times except for employment; education; religious services; medical, substance abuse, or mental health treatment; attorney visits; court appearances; court-ordered obligations; or other activities approved in advance by the pretrial services office or supervising officer. Defendants were also ordered not to access or use any internet-enabled device with the exception of utilizing email to communicate with counsel.

July 25, 2014

Indiana Passes New Statute Criminalizing Offenses Against Intellectual Property

By Overhauser Law Offices, LLC

Indianapolis, Indiana – Indiana Code § 35-43-1-7 has been made effective as of July 1, 2014.

This new criminal statute, enacted by P.L.158-2013, SEC. 458, covers certain computer-related offenses against intellectual property. It takes the place of 35‐43‐1‐4, which was repealed.

Indiana Code § 35-43-1-7 reads, in full:

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 23, 2014

Indiana Copyright Law: Three Default Judgments of $2,500 Ordered for Copyright Infringement

By Overhauser Law Offices, LLC

Indianapolis, Indiana – In Bell v. Glacier International, District Judge Tanya Walton Pratt (pictured) of the Southern District of Indiana granted default judgments against three defendants, DiamondIndyLimo.com, Lon Dunn and Glacier International. In the three nearly identical opinions, the three defendants were each ordered to pay statutory damages of $2,500 for infringing a copyrighted photograph.

In January 2013, Indiana copyright attorney and professional photographer Richard N. Bell, acting as his own copyright lawyer, sued alleging copyright infringement under the Copyright Act and conversion under Indiana statutory law as a result of the allegedly unauthorized use of a photograph he had taken. This photograph had been registered with the United States Copyright Office.

In this lawsuit, Bell sued forty-eight Defendants: Jerry Gordon; Demand Media, Inc.; Bryce Welker; Royal Corniche Travel Ltd.; VRBO.com, Inc.; Experience Credit Unions, LLC; Jaclothing.com; Glacier International; ABNHotels.com; 1&1 Internet, Inc.; Conde Nast Digital; Flixter, Inc.; Financing-USA.com; SodaHead, Inc.; NuMedia Marketing, Inc.; Jynell Berkshire; Tzvetelin Petrov; Los Pentecostales del Area de la Bahia; 10Best, Inc.; Keyes Outdoor Advertising; Zoom Communications Inc.; Christine Nevogt; Zarzar, Inc.; Hydro-Gear; Tam T. Dang; Lon Dunn; William McLaws, Trustee; Natl-electronic Residential Payment History Recording Agency; CVI; Constant Contact, Inc.; Charles Lantz; Schumacher Cargo Logistics; Eventbrite, Inc.; Celebrity Entertainment Corp.; Association of Equipment Manufacturers; Yardi Systems Inc.; DiamondIndyLimo.com; Marcelo Santos; National Rural Recruitment & Retention Network; Anbritt Stengele; Pinnacle Sports Equipment, Inc.; Marygrove College; RunAnyCity.com; Buzzle.com, Inc.; Charles Onuska; University of Indianapolis; and PersephoneMagazine.com.

Bell alleged that each Defendant, independent of each other Defendant, “created a website to promote and advertise its own business” and placed Bell’s copyrighted photo on each of the Defendants’ respective websites. In addition to asserting copyright infringement, Bell also alleged criminal misconduct under Indiana statutory law. Bell requested an injunction and a declaratory judgment. He also asked the court for damages for copyright infringement under the Copyright Act as well as treble damages under an Indiana criminal statute prohibiting conversion.

In September 2013, the court entered default judgments against each of the three Defendants. Last week, the court issued three new opinions addressing the damages to be assessed against those Defendants.

The court first discussed the issue of damages for copyright infringement. Under 17 U.S.C. § 504(c)(1), statutory damages, in lieu of actual damages and profits, may be awarded “in a sum not less than $750 or more than $30,000” for each finding of infringement. A determination of willful copyright infringement permits the court in its discretion to increase the award of statutory damages up to $150,000 per infringement.

In determining the appropriate measure of statutory damages, the court considers factors including: (1) the infringer’s state of mind; (2) the expenses saved, and profits earned, by the infringer; (3) the revenue lost by the copyright holder; (4) the deterrent effect on the infringer and third parties; (5) the infringer’s cooperation in providing evidence concerning the value of the infringing material; and (6) the conduct and attitude of the parties.

The court declined to find the copyright infringement to be willful, in part because Bell requested statutory damages well under $30,000.00 per instance of infringement. Instead, the court found that $2,500 per Defendant was an appropriate measure of damages. An injunction was also granted, as it would serve the public interest by protecting copyrighted material and encouraging compliance with federal law. The injunction will be lifted upon payment of the award of statutory damages.

A claim of conversion under Indiana state law, and treble damages awarded pursuant to such a claim, was denied as preempted by the Copyright Act. Indiana code § 35-43-4-3(a) provides that a “person who knowingly or intentionally exerts unauthorized control over property of another person commits criminal conversion.” However, section 310 of the Copyright Act preempts “all legal or equitable rights that are the equivalent to any of the exclusive rights within the general scope of copyright” and that “no person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State.” The court held that the photograph in question was clearly under the scope of the Copyright Act and that Bell had not sufficiently alleged a right apart from the Act. Thus, no damages were available under Bell’s state law conversion claim.

Practice Tip:

Deciding to simply ignore a complaint, as these defendants apparently did, can be a costly error. Failing to present the defendants’ versions of the facts and arguments results in the court considering only the plaintiff’s side of the story. Here, because the defendants 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. 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, Richard Bell asked the court for no less than $5,000. In some cases, courts in determining damages in cases of default judgment have granted the entire amount. In this case, the court took the additional step of considering the cost to purchase Plaintiff Bell’s picture – $200 – and incorporated that into its determination of the proper amount of damages to be awarded.

May 23, 2014

Indiana Copyright Law: Court Orders Severance of Misjoined Copyright Infringement Complaint

By Overhauser Law Offices, LLC

Indianapolis, Indiana – Magistrate Judge Denise K. LaRue, writing for the Southern District of Indiana, directed the Clerk of the Court to sever all but one defendant from the copyright infringement complaint of Richard Bell, an Indiana copyright attorney. Bell was also ordered by the court to pay separate filing fees for each new cause of action.

Bell is a copyright lawyer and a professional photographer. He contends that he is the owner of two copyrighted photographs of Indianapolis taken in March 2000. The photos have been registered with the U.S. Copyright Office.

In April, Bell filed another copyright infringement lawsuit in the Southern District of Indiana alleging copyright infringement of his photos by numerous Defendants. The Defendants were: Diversified Vehicle Services of Marion County, Indiana; Cameron Taylor and Taylor Computer Solutions of Indianapolis, Indiana; Rhonda Williams of Indianapolis, Indiana; Forensic Solutions, Inc. of Waterford, New York; Heath Garrett of Nashville, Tennessee; CREstacom, Inc. of Fishers, Indiana; American Traveler Service Corp LLC, location unknown; Mike Cowper of Martinsville, Indiana; Kimberly Hinds of Indianapolis, Indiana; Rensselaer Polytechnic Institute of Troy, New York; EasyStreet Realty of Indianapolis, Indiana; Drohan Management of Reston, Virginia; Metal Markets of Indianapolis, Indiana; Mattison Corporation of Indianapolis, Indiana; Industrial Heating Equipment Association of Taylor Mill, Kentucky; Junk Dawgs of Indianapolis, Indiana and WRTV of Indianapolis, Indiana. Bell is both the copyright lawyer and Plaintiff in this lawsuit.

In this earlier complaint, Bell alleged that each Defendant, independent of each other Defendant, “created their individual website to promote and market their business” and placed the Plaintiff’s copyrighted photo on each of the Defendants’ respective websites. Claiming copyright infringement, unfair competition and theft, Bell asked the court for, inter alia, the maximum allowable statutory damages for each copyright violation.

The court ordered Bell to show cause why all defendants but one should not be severed for misjoinder. Bell argued that the rules regarding joinder should be given a broad scope so that multiple lawsuits could be avoided.

The court was not persuaded. In addressing Bell’s contention that joinder of the unrelated Defendants was proper, it was Bell’s own language, and the factual underpinnings of that language, to which the court pointed in denying joinder. The court noted that Bell’s “complaint alleges that ‘[e]ach defendant, independently of each other, created or had created a website to promote and advertise the business of each Defendant,’ and that Plaintiff discovered that ‘the website [of] each of these Defendants contained [one of the photographs].'” The court also noted that “[e]xcept for defendants Cameron Taylor and Taylor Computer Solutions, the Complaint contains no allegation that any defendant acted in concert with another defendant in appropriating Plaintiff’s photographs and it does not allege any transaction, occurrence, or series of transactions or occurrences in which two or more defendants participated.” (Citations omitted.)

The court then reviewed the requirements of Federal Rule of Civil Procedure 20(a)(2)(A) that a Plaintiff’s claims against defendants joined in the same action must respect or arise out of the same occurrence or the same series of occurrences. While Bell had alleged copyright infringement of the same copyrighted material against all Defendants, the court held this to be insufficient. Similarly, while the same types of questions of fact would arise against each Defendant – “e.g., how did the defendant find Plaintiff’s photograph, what did the defendant know about the photograph’s copyright status, did the defendant make commercial use of the photograph, and did the defendant pay for the use of the photograph” – those similar questions of fact provided no logical relationship among the Defendants that would support joinder.

Instead, the court found that each Defendant was accused of independently committing separate and distinct acts of copyright infringement that happened to involve the same photograph.

The court then directed the Clerk of the Court to sever all defendants other than Diversified Vehicle Services from the complaint as it had been filed and to open separate causes for each of the severed defendants, with the exception of defendants Cameron Taylor and Taylor Computer Solutions, which the court directed to be joined in one cause. WRTV was dropped, as Bell indicated that it had been included as a defendant inadvertently.

The court also ordered Bell to pay the $400 filing fee for each of the 15 severed causes of action no later than June 2, 2014.

Practice Tip #1: There has been a growing trend of attempting to monetize copyright infringement. In this particular case, the docket for the initial complaint showed Bell’s demand to be $5,000,000 for the alleged infringing activities. In ruling that “unrelated claims against unrelated defendants belong in different suits, in part to ensure that plaintiffs pay the required filing fees” and subsequently ordering the Plaintiff to pay a separate filing fee for each of the Defendants, Magistrate Judge LaRue has employed one approach that may be useful in combatting such copyright trolling.

Practice Tip #2: 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 per infringed work.

Practice Tip #3: The claims of this case appear calculated to trigger the “advertising injury” clause of many general business liability insurance policies. If a defendant has applicable business insurance, this may allow Bell to negotiate quicker settlements. Overhauser Law Offices, publisher of this Site, counsels clients on insurance coverage for insurance claims.

Practice Tip #4: These latest causes of actions represent the most recent of three ongoing cases filed by Bell asserting infringement of his photos. We have blogged about his copyright infringement litigation before. See here. The Indiana Lawyer also wrote recently about Bell’s copyright litigation. That article includes an interview with Paul B. Overhauser, Managing Partner of Overhauser Law Offices.

April 9, 2014

Indiana Copyright Litigation: Richard Bell Files Another Copyright Infringement Lawsuit

By Overhauser Law Offices, LLC

Indianapolis, Indiana – Richard Bell, an Indiana copyright attorney, filed a lawsuit in the Southern District of Indiana alleging copyright infringement by numerous Defendants. The Defendants are: Diversified Vehicle Services of Marion County, Indiana; Cameron Taylor and Taylor Computer Solutions of Indianapolis, Indiana; Rhonda Williams of Indianapolis, Indiana; Forensic Solutions, Inc. of Waterford, New York; Heath Garrett of Nashville, Tennessee; CREstacom, Inc. of Fishers, Indiana; American Traveler Service Corp LLC, location unknown;
Mike Cowper of Martinsville, Indiana; Kimberly Hinds of Indianapolis, Indiana; Rensselaer Polytechnic Institute of Troy, New York; EasyStreet Realty of Indianapolis, Indiana; Drohan Management of Reston, Virginia; Metal Markets of Indianapolis, Indiana; Mattison Corporation of Indianapolis, Indiana; Industrial Heating Equipment Association of Taylor Mill, Kentucky; Junk Dawgs of Indianapolis, Indiana and WRTV of Indianapolis, Indiana. Mr. Bell is both the copyright lawyer and Plaintiff in this lawsuit.

Bell is a copyright attorney and a professional photographer. He contends that he is the owner of two copyrighted photographs of Indianapolis taken in March 2000. The photos have been registered with the U.S. Copyright Office.

Bell alleges that each Defendant, independent of each other Defendant, “created their individual website to promote and market their business” and placed the Plaintiff’s copyrighted photo on each of the Defendants’ respective websites. It is alleged that no Defendant had obtained the right to publish either photo but that each falsely represented otherwise to the world. Bell asserts that, as a result, Defendants have “realized and continue to realize profits and other benefits rightfully belonging to Plaintiff.” Each Defendant is accused of “willfully and deliberately” engaging in copyright infringement “with oppression, fraud, and malice.”

In his complaint, Bell lists the following claims:

• Count I: Copyright Infringement and Unfair Competition
• Count II: Theft

Bell asserts that he has already suffered, and is continuing to suffer, irreparable injury as a result of the alleged infringement of his copyrighted photos. Bell asks the court to declare that the Defendants’ conduct in using his photos violates his rights under Indiana law and the Copyright Act and asks the court to enjoin further infringing uses of his photos. Among other remedies, he seeks treble damages under Indiana statutory authority. He also asks for an accounting of all gains, profits and advantages derived by Defendants as a result of the alleged infringement and for the maximum allowable statutory and/or actual damages for each violation. Plaintiff also seeks reimbursement of costs and reasonable attorneys’ fees.

Practice Tip #1: The claims of this case appear calculated to trigger the “advertising injury” clause of many general business liability insurance policies. If a defendant has applicable business insurance, this may allow Mr. Bell to negotiate quicker settlements. Overhauser Law Offices, publisher of this Site, counsels clients on insurance coverage for insurance claims.

Practice Tip #2: This newest complaint initiates the latest of three ongoing cases filed by Mr. Bell asserting infringement of his photos. We have blogged about his copyright infringement litigation before. See here. The Indiana Lawyer also wrote today about Mr. Bell’s copyright infringement lawsuits. See here. The Indiana Business Journal ran a similar piece. Those articles include an interview with Paul Overhauser, Managing Partner of Overhauser Law Offices.

March 31, 2014

Indiana Trademark Litigation: Agler Sues Westheimer Over Use of Stratotone Mark

By Overhauser Law Offices, LLC

Fort Wayne, Indiana – Indiana trademark attorneys for Darryl Agler, doing business as The Stratotone Guitar Company of Fort Wayne, Indiana, filed a lawsuit in the Northern District of Indiana alleging that Westheimer Corporation of Northbrook, Illinois infringed the trademark “STRATOTONE” (the “Stratotone mark”), Trademark Registration No. 3,986,754 which has been issued by the U.S. Patent and Trademark Office (“USPTO”). Counterfeiting, unfair competition, and false designation of origin arising under the Lanham Act, 15 U.S.C. § 1051 et seq., and the statutes and common law of the State of Indiana have also been alleged.

Agler custom manufactures guitars and sells them across the United States. Each of Agler’s guitars is hand crafted from the wood of a customer’s choosing and features vintage hardware. Agler currently accepts orders for his guitars on his website at www.stratotoneguitar.com. He also displays and sells his guitars, which sell at retail for $1,250 or more, at vintage guitar shows across the nation. Angler asserts that, since at least as early as January of 2007, his marketing and promotions in connection with his guitars have included the Stratotone Mark.

Agler claims a right to exclude others’ use of the “Stratotone” mark in connection with guitars based on, inter alia, ownership of trademark rights to the mark “Stratotone” conferred by U.S. Reg. No. 3,986,754 (“‘754 Registration”). The ‘754 Registration was issued by the USPTO in 2011 as a result of a 2006 application for the Stratotone mark in association with “musical instruments, namely, guitars.”

According to the complaint, at the National Association of Music Merchants (“NAMM”) show in 2010, Westheimer offered and sold cheaper guitars using the Stratatone mark. Agler states that he spoke to Westheimer personnel twice at this show, notifying them that Westheimer’s products were infringing the Stratotone mark. Agler alleges that he was unable to sell any of his guitars at the NAMM show that year.

Agler indicates that, since the 2010 NAMM show, Westheimer has flooded the market with lower quality, cheaper guitars that bear the Stratotone mark. These guitars retail between $199.00 and $399.00. Agler contends that Westheimer’s “Stratotone” guitars have destroyed the market for Agler’s more expensive Stratotone guitars.

On April 25, 2013, Westheimer filed a petition to cancel the ‘754 Registration (the “Cancellation Petition”) with the Trademark Trial and Appeal Board. The Cancellation Petition is currently pending.

In the complaint, filed by Indiana intellectual property lawyers for Agler, the following counts are alleged:

• Count I: Federal Unfair Competition and False Designation of Origin
• Count II: Federal Trademark Infringement
• Count III: Federal Trademark Counterfeiting
• Count IV: Common Law Unfair Competition and Trademark Infringement
• Count V: Unjust Enrichment
• Count VI: Conversion
• Count VII: Deception
• Count VIII: Indiana Crime Victim’s Relief Act

Agler asks the court for injunctive relief; an accounting of damages; the surrender by Westheimer of items featuring the Stratotone mark; damages, including treble damages; and attorney’s fees.

Practice Tip: Indiana Code §§ 35-43-4-3 and 35-43-5-3(a)(6) are criminal statutes, claimed in the complaint in conjunction with an attempt to parlay the accusation into an award for damages, costs and attorneys’ fees. The Indiana Court of Appeals has discussed “theft” and “conversion” as they pertain to takings of intellectual property in several recent cases (see, for example, here and here) and has made it clear that criminal statutes often apply differently to an unlawful taking of intellectual property.

February 12, 2014

Sprint Weighs in with Civil Suit Against Defendants in Criminal Phone-Trafficking Scheme

By Overhauser Law Offices, LLC

Indianapolis, Indiana – In a 42-page complaint for damages and injunctive relief, trademark attorneys for Sprint Solutions, Inc. of Reston, Virginia; Sprint Communications Company L.P. and Boost Worldwide, Inc., the latter two of Overland Park, Kansas (collectively, “Sprint”), sued in the Southern District of Indiana alleging that Reginald Aldridge and Arrice Aldridge, both of Park Forest, Illinois, and Damion Transou of Humboldt, Tennessee infringed certain Sprint trademarks. These trademarks include the following Sprint marks: Registration Nos. 1,104,943, 1,573,863, 1,712,259, 1,839,302, 2,833,134, 2,836,616, and 3,046,207. They have been registered with the U.S. Trademark Office.

Sprint sells wireless handsets (“Phones”) under the brands Sprint, Boost Mobile, Virgin Mobile, payLo and Assurance Wireless for use on Sprint’s wireless network at prices significantly below the wholesale prices of the Phones so that they will be more widely accessible to consumers. Sprint states that it subsidizes the cost of the new Phones for the benefit of its “legitimate” customers. Sprint asserts that it spent more than $6.6 billion on handset subsidies in 2012.

Defendants, along with their alleged co-conspirators are accused of perpetrating an unlawful scheme of bulk handset theft and trafficking to profit from the illegal acquisition and resale of new Phones for their own profit and to the detriment of Sprint. As part of this purportedly fraudulent scheme, Sprint Phones are purchased and resold multiple times. During that process, the Phones are “unlocked” so that they may be used with any service provider, including non-Sprint providers. Sprint contends that, ultimately, these Phones end up in the hands of someone other than the Sprint customer whom Sprint intended to benefit. Sprint contends that the Phones often are sold overseas, where it does not provide service. As a result, Sprint states, Defendants are profiting from this scheme by appropriating the subsidies that Sprint provides to its customers.

Defendants are also accused of unlawfully accessing Sprint’s protected computer systems and wireless network, trafficking in Sprint’s protected and confidential computer passwords, and/or stealing legitimate customer upgrades. It is asserted that Defendants fraudulently placed at least 65 orders on more than 17 corporate accounts to which they had no legal right of access for the purpose of ordering more than 288 items valued at over $100,000.

Finally, Sprint contends that Defendants’ behavior violates the Terms and Conditions to which the sales of Phones are subject as well as willfully infringes Sprint’s trademark rights.

Defendants Arrice Aldridge and Damion Transou were indicted, in part for the activities described in the complaint.

In the complaint, filed by an Indiana trademark lawyer, in conjunction with trademark attorneys from Florida and Georgia, the following counts are asserted:

• Count I: Unfair Competition
• Count II: Tortious Interference with Business Relationships and Prospective Advantage
• Count III: Civil Conspiracy
• Count IV: Unjust Enrichment
• Count V: Conspiracy to Induce Breach of Contract
• Count VI: Common Law Fraud
• Count VII: Fraudulent Misrepresentation
• Count VIII: Trafficking in Computer Passwords – 18 U.S.C. §1030(a)(6)
• Count IX: Unauthorized Access – 18 U.S.C. §1030(a)(5)(C)
• Count X: Unauthorized Access with Intent to Defraud – 18 U.S.C. §1030(a)(4)
• Count XI: Federal Trademark Infringement – 15 U.S.C. §1114
• Count XII: Federal Common Law Trademark Infringement and False Advertising – 15 U.S.C. §1125(a)(1)(A)
• Count XIII: Contributory Trademark Infringement
• Count XIV: Conversion

Plaintiffs ask the court for damages, including exemplary damages; attorneys’ fees and costs; a permanent injunction prohibiting the practices described in the complaint; and the delivery to Plaintiffs of the Defendants’ inventory of accused Phones.

Practice Tip: Cases of cellular phone trafficking such as these, and there are more than a few of them, are an unusual combination of contract law, trademark law and criminal law. In at least one case similar to this one, 16 defendants were also convicted of terrorism charges when it was found that the proceeds from their phone trafficking and other illegal conduct was being funneled to the terrorist organization Hezbollah.

February 10, 2014

Swag Merchandising and Musical Group Devo Sue for Trademark Infringement

By Overhauser Law Offices, LLC

Indianapolis, Indiana – An Indiana trademark attorney for Swag Merchandising, Inc. and Devo Inc., both of California, sued in Hamilton Superior Court alleging that Your Fantasy Warehouse, Inc. d/b/a T.V. Store Online and Fred Hajjar, both of Commerce Township, Michigan, infringed Devo’s Trademarks, Registration Nos. 3161662 and 3167516, which have been registered by the U.S. Trademark Office. The case has been removed from Indiana state court to the Southern District of Indiana.

Swag claims that it owns the exclusive right to license the various trademarks, copyrights and individual and collective rights of publicity of the musical group Devo. The group is best known for the song “Whip It,” which hit number 14 on the Billboard chart in 1980. Swag indicates that it licenses the Devo intellectual property to third parties around the globe.

T.V. Store Online is in the business of manufacturing, marketing and distributing apparel and memorabilia featuring classic and current television programming, movies and/or music. T.V. Store Online and Hajjar have been accused of manufacturing, producing, marketing, advertising and/or retailing a product known as “Energy Dome Hats.” Plaintiffs assert that these Energy Dome Hats are commonly associated with Devo but have not been licensed by Plaintiffs to Defendants. Plaintiffs further claim that consumers coming into contact with Defendants’ product would “immediately recognize the same as being associated with, sponsored by and/or endorsed by” the ’80s group.

In the complaint, filed by an Indiana trademark attorney, Plaintiffs assert the following:

• I: Violation of 15 U.S.C. §1125(a) of the Lanham Act
• II: Trademark Infringement – 15 U.S.C. §1114 and Common Law
• III: Counterfeiting
• IV: Dilution – 15 U.S.C. §1125(c) and New York General Business Law §360-1
• V: Common Law Unfair Competition
• VI: Statutory Right of Publicity [NB: under Indiana law]
• VII: Right of Publicity Infringement Under California Civil Code §3344
• VIII: Common Law Right of Publicity
• IX: Conversion [NB: under Indiana law]
• X: Deception [NB: under Indiana law]
• XI: Indiana Crime Victims Act

Plaintiffs ask for an injunction; the surrender of infringing materials; damages, including treble damages; costs and fees. An Indiana intellectual property lawyer for Defendants removed the case to federal court, although he noted that the removal was not a concession that the Southern District of Indiana was the proper venue for the California Plaintiffs or the Michigan Defendants.

Practice Tip:

This is at least the third case filed by Theodore Minch about which we have blogged. In at least two prior cases, LeeWay Media Group, LLC v. Laurence Joachim et al. and Leon Isaac Kennedy v. GoDaddy et al., Mr. Minch has filed in an Indiana court despite none of the parties having any connection to Indiana.

It can be surmised that perhaps the choice of Indiana as a forum might have been driven by an attempt to increase damages. I.C. §§ 35-43-4-3 and 35-43-5-3(a)(6) are criminal statutes, claimed in the complaint in conjunction with an attempt to parlay the accusation into an award for damages, costs and attorneys’ fees. The Indiana Court of Appeals has discussed “theft” and “conversion” as they pertain to takings of intellectual property in several recent cases (see, for example, here and here) and has made it clear that criminal statutes often apply differently to an unlawful taking of intellectual property.