Declaratory Judgments

July 31, 2013

Riders Choice Sues Golden West Saddle Blankets for Declaratory Relief

Terre Haute, Indiana — Copyright lawyers for Riders Choice, LLC d/b/a Show and Tell Saddle Blankets (“Riders Choice”) and Loni Rhodes (“Rhodes”; collectively,”Plaintiffs”) of Center Point, Indiana sued for declaratory relief over allegations of copyright infringement made by Lori Heckaman (“Heckaman”) d/b/a Golden West Saddle Blankets (“Golden West” or “Defendant”) of Gainesville, Texas.

Riders Choice, sometimes operating as “Show and Tell Saddle Blankets,” makes and sells products related to horseback riding, including hand-woven saddle blankets with colorful geometric designs. Rhodes owns Riders Choice. Heckaman, doing business as Golden West Saddle Blankets, also makes and sells products related to horseback riding, including blankets with colorful geometric designs.

Intellectual property counsel for Heckaman sent two cease-and-desist letters to Rhodes and Riders Choice, the first on June 14, 2013 and the second on July 2, 2013. The first cease-and-desist letter asserted that the designs on Heckaman’s blankets were copyrighted and alleged against Rhodes and Riders Choice claims for copyright infringement based on Rhodes’s and/or Riders Choice’s manufacture, marketing and sale of its own blankets. The second cease-and-desist letter made similar allegations. Claims were also made against Rhodes and Riders Choice for business interference, unfair competition and misappropriation of trade secrets based on Rhodes’s and/or Riders Choice’s marketing of Riders Choice’s blankets and alleged copying of Golden West’s weaving and design methods.

Both cease-and-desist letters threatened Rhodes and/or Riders Choice with imminent litigation if Rhodes and/or Riders Choice did not comply with Defendant’s demands, the first by writing “we will have no choice but to advise our client to protect her interests by instituting a suit in a court of competent jurisdiction,” and the second by writing that although “Golden West prefers to resolve this matter without the necessity of court intervention, all necessary action will be taken if a voluntary agreement cannot be reached.” Both cease-and-desist letters demanded that Rhodes and/or Riders Choice stop marketing, selling and producing its blankets. Further, a July 3, 2013 e-mail threatened Rhodes and Riders Choice with imminent litigation by writing that if Rhodes and/or Riders Choice did not “refrain from promoting, marketing, producing, and selling saddle blankets,” Heckaman would have “no choice but to seek available remedies.”

In response, copyright lawyers for Riders Choice filed a complaint under the Declaratory Judgment Act. In the complaint, Plaintiffs assert that blankets with similar designs are widely produced and sold by third parties, that they did not believe that Heckaman had registered any of her designs with the U.S. copyright office, that the blankets Riders Choice sells are original works designed by Rhodes and that every blanket Riders Choice sells is unique in that no two blankets are sold with an identical pattern. They further asserted that Rhodes learned these methods from books and other publicly available materials unaffiliated with Heckaman and that Rhodes had never copied Defendant’s designs.

In the complaint, Plaintiffs ask for judgments of:

· Count I — No Copyright Infringement

· Count II — No Business Interference

· Count III — No Unfair Competition

· Count IV — No Misappropriation of Trade Secrets

Plaintiffs request that the court: (a) declare that Rhodes’s and Riders Choice’s blankets did not in the past and do not now infringe any of Defendant’s valid copyrights; (b) declare that Rhodes and Riders Choice did not commit in the past and are not now engaged in business interference against Defendant based on the sale, marketing or production of blankets; (c) declare that Rhodes and Riders Choice did not commit in the past and are not now engaged in unfair competition against Defendant based on the sale, marketing or production of blankets; (d) declare that Rhodes and Riders Choice did not commit in the past and are not now engaged in the misappropriation of trade secrets from Defendant based on the sale, marketing or production of blankets; (e) award to Plaintiffs their costs and attorneys’ fees.

Practice Tip:

As with a patentee who believes that his or her patent is being infringed, holders of copyrighted materials often will send a “cease-and-desist letter” — a letter demanding that the purported infringer cease infringing. To aid in convincing the accused infringer to meet its demands, the holder of the intellectual property may be tempted to use language such as plans of “instituting a suit” and seeking “court intervention,” as Defendant did here.

As this case demonstrates, this strategy may backfire. By using such language, the Defendant can create an “actual controversy” for purposes of the Declaratory Judgment Act. Thus, the party alleging infringement (the natural plaintiff in an infringement suit) may instead find itself being sued by the alleged infringer (the natural defendant), often in a jurisdiction that would not have been the first choice of the owner of the intellectual property.

One approach that may have yielded better results for Golden West might have been to approach the accused infringer with an offer to license the purportedly protected intellectual property. With carefully crafted language, such a proposal might have served to put Riders Choice on notice of Golden West’s belief that infringement was occurring without going so far as to create an “actual controversy” sufficient to support a lawsuit under the Declaratory Judgment Act.

June 6, 2013

Southern District of Indiana Dismisses Declaratory Judgment Suit

By Overhauser Law Offices, LLC

Indianapolis, Ind. — The Southern District of Indiana has dismissed a declaratory judgment suit filed by ZPS America, LLC of Marion County, Ind. (“ZPS”) holding that it was an impermissible attempt to secure its preferred forum in anticipation of litigation that Hammond Enterprises, Inc. of Pittsburg, Calif. (“Hammond”) had promised to initiate imminently.

ZPS manufactures the Mori-Say TMZ 642 CNC machine (“TMZ machine”), a high-precision lathe that can be configured to manufacture various precision parts. In early 2009, after discussing its requirements, Hammond purchased two TMZ machines from ZPS. Accounts vary regarding whether the TMZ machines ever performed as had been promised. Attempts were made by the parties and their attorneys to resolve the issues with the machines but settlement discussions broke down in June 2012.

On June 4, 2012, Hammond’s lawyer sent ZPS a letter stating that the machines had been misrepresented and that Hammond was only interested in “hearing back from you…that ZPS is prepared to make arrangements to accept the return of both machines. If we do not hear from you by Friday, June 15 [2012], that you are prepared to accept their return, we have been authorized to file a lawsuit against ZPS and will proceed to do so.”

On June 14, 2012, one day before the deadline in Hammond’s letter, ZPS filed suit against Hammond in Marion Circuit Court, an Indiana state court. Its complaint was for damages and declaratory judgment. It asked that the court declare that Hammond had accepted the machines and was not entitled to revoke that acceptance; its damages claim arose from nonpayment by Hammond of amounts due for filter systems that had been purchased for the TMZ machines. Notice of that suit was served on June 26, 2012.

On July 10, 2012, Hammond filed a lawsuit against ZPS in the Northern District of California, seeking damages based on claims for negligent misrepresentation, revocation of acceptance, breach of contract, breach of express warranty, and breach of implied warranty. On July 12, 2012, Hammond served ZPS with a summons and complaint. On that same day, Hammond removed the action filed by ZPS in state court to the Southern District of Indiana, asserting diversity jurisdiction.

Hammond argued to the Indiana federal court that it should exercise its discretion to dismiss the complaint on the grounds that ZPS “raced to the courthouse” to deprive Hammond, the “natural plaintiff,” of the forum of its choosing.

The Indiana federal court held that ZPS’ declaratory judgment action was impermissible, as it had been filed in anticipation of litigation, beating Hammond to the courthouse by filing the day before the deadline to settle that had been set by Hammond. The court further held that the additional state-law claim for breach of contract that ZPS had asserted did not secure a place for it in the Indiana court.

The court cited three reasons for its decision: (1) the fact that a plaintiff filed a declaratory judgment action first does not give it a right to choose the forum; (2) the plaintiff’s additional claims for affirmative or coercive relief may be filed as counterclaims in the second-filed action; and (3) the plaintiff should not be rewarded for filing a declaratory judgment action as a pre-emptive strike. The court declined to exercise jurisdiction over the matter and dismissed the case without prejudice.

Practice Tip:

Declaratory judgment actions are frequently filed in intellectual-property matters, especially patent litigation. Such a suit allows the potential defendant not only to choose its own forum, to the extent that the forum is consistent with jurisdictional restrictions, but also to remove an ever-present cloud of potential litigation and potential damages for patent infringement that may be continuing to accrue.

The Declaratory Judgment Act provides that “any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” A federal district court may, in its discretion, decline to hear a case brought under the Act, even if the court has subject matter jurisdiction.

In general, if two actions are pending in two different courts that concern the same general claims, the case filed first takes priority. However, the Seventh Circuit has never adhered to a rigid first-to-file rule. In addition, courts generally give priority to the coercive action (such as an action for damages or an injunction) over the declaratory judgment action, regardless of which case was filed first.

Courts also depart from the first-to-file rule if, as was true in this case, the declaratory judgment action is filed in anticipation of litigation by the other party. Here, rather than responding to Hammond regarding its letter, which contained a plain declaration of intent to file suit with a deadline for a response, ZPS filed suit. Only after securing a favorable forum did ZPS offer to negotiate a settlement. It was this conduct that the court held justified a dismissal of the declaratory judgment action as an improper anticipatory filing.

March 25, 2013

Novelty Sues Margaret Rothschild for Declaratory Judgment of Non-Infringement and Unenforceability of “Mohawk Monkey”

By Overhauser Law Offices, LLC

Indianapolis, Ind. – Patent attorneys for Novelty, Inc. of Greenfield, Ind. filed a declaratory judgment suit against Margaret Rothschild of Sherman Oaks, Calif. seeking a judgment that Novelty’s “Mohawk Monkey” does not infringe Rothschild’s Design Patent No. D501,897 (the “‘897 Patent”) which has been issued by the U.S. Patent Office.

Novelty specializes in the distribution and sale of toys and novelty items. One of its products is a plush toy sold under the name “Mohawk Monkey.” Rothschild, via a patent attorney, contacted Novelty in March 2013 and asserted that the Mohawk Monkey infringed her patent. She insisted that Novelty cease all sales of its Mohawk Monkey and demanded payment for damages caused by the alleged infringement. Rothschild indicated that a refusal to comply would be met with vigorous litigation.

In its declaratory judgment action, filed in the Southern District of Indiana, Novelty asserts that its Mohawk Monkey is significantly different from the design claimed in Rothschild’s ‘897 Patent and that an ordinary observer would not be deceived. Novelty asks for a declaration that its Mohawk Monkey does not infringe the ‘897 Patent, a declaration that the Patent is unenforceable and/or invalid, a finding that the case is exceptional and, pursuant to that finding, an award to Novelty of its reasonable attorneys’ fees.

Practice Tip: Design-patent litigation seems to be increasingly “fashionable.” The expected players, such as technology innovators, are seeking protection for their goods under design-patent protection as they traditionally have. (See, e.g., Apple Inc. v. Samsung Electronics Co., Ltd.) However, other less-traditional users of design patents are also beginning to see the value of a design patent in protecting their intellectual property. For example, the fashion industry has historically found little use for design patents, as the time needed to obtain such a patent usually exceeds the relatively short lifespan of various fashions, which typically change season to season. However, that is changing. (See, for example, the dispute between Spanx and Yummie Tummie.) In addition, as a result of the recent America Invents Act, individuals with grievances are no longer limited to filing suit; they can now also ask the Patent Office whether patents in dispute are valid. The central provisions of the Act went into effect on March 16, 2013.

March 8, 2013

Biomet Sues Bonutti Skeletal Innovations Seeking Declaratory Judgment of Non-Infringement and Invalidity of Patents

By Overhauser Law Offices, LLC

South Bend, IN – Biomet, Inc. of Warsaw, Indiana has filed a declaratory judgment suit against Bonutti Skeletal Innovations LLC of Frisco, Texas in the Northern District of Indiana, asking the court to enter a judgment of non-infringement and invalidity of fifteen Bonutti patents.

Biomet is a privately held company that designs, manufactures and markets products used primarily by musculoskeletal medical specialists in surgical and non-surgical therapy. Dr. Peter Bonutti is an orthopedic surgeon listed as an inventor or co-inventor on over 150 U.S. patents, including the patents-in-suit. Biomet entered into a licensing agreement with Dr. Bonutti, via his research and/or patent-holding company MarcTec, LLC, in 2006.

Since September 2012, Bonutti Skeletal has initiated a series of patent-infringement lawsuits against medical-device manufacturers, including Depuy, Inc.; Zimmer, Inc.; Smith & Nephew, Inc.; Wright Medical Group, Inc.; ConforMIS, Inc.; Arthrex, Inc.; Linvatec Corporation and ConMed Corporation. In each of these suits, Bonutti Skeletal has asserted infringement of Bonutti patents against products similar to those produced by Biomet.

In January 2013, Bonutti informed Biomet that it believed that Biomet was infringing upon Bonutti patents; it demanded a settlement to license these patents shortly thereafter. On that basis, Biomet seeks a judgment under the Declaratory Judgment Act, stating that an actual and justiciable controversy exists.

Patent attorneys for Biomet listed fifteen Bonutti patents in their complaint. Biomet asks for declarations that there was no infringement by Biomet of any of the fifteen Bonutti patents and of invalidity of all of the patents, a finding that the case is exceptional and an award of attorneys’ fees and costs pursuant to that finding.

The patents-in-suit, all issued by the U.S. Patent and Trademark Office are:

• 5,921,986: “Bone suture”

• 6,638,279: “Method of positioning body tissue relative to a bone”

• 8,147,514: “Apparatus and method for securing a portion of a body”

• 7,087,073: “Method of securing body tissue”

• 6,702,821: “Instrumentation for minimally invasive joint replacement and methods for using same”

• 7,806,896: “Knee arthroplasty method”

• 7,708,740: “Method for total knee arthroplasty and resecting bone in situ”

• 7,806,897: “Knee arthroplasty and preservation of the quadriceps mechanism”

• 8,133,229: “Knee arthroplasty method”

• 7,828,852: “Inlaid articular implant”

• 7,931,690: “Method of resurfacing an articular surface of a bone”

• 7,070,557: “Tissue graft material and method of making”

• 6,423,063: “Changing relationship between bones”

• 6,099,531: “Changing relationship between bones”

• 7,104,996: “Method of performing surgery”

Practice Tip #1: It is common for those who consider themselves likely to become defendants in patent-infringement litigation to proactively seek a declaratory judgment of non-infringement. Such a suit allows the potential defendant not only to choose their own forum, to the extent that it is consistent with jurisdictional restrictions, but also to remove an ever-present cloud of potential litigation and potential damages that may be continuing to accrue.

Practice Tip #2: The standard for an actual controversy under the Declaratory Judgment Act was most recently addressed by the Supreme Court in MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007). We blogged recently about another action for declaratory judgment involving Genentech here.

March 8, 2013

Mid-West Metal Products Sues Yuntek International for Declaratory Judgment of Patent Noninfringement and Intervening Rights

By Overhauser Law Offices, LLC

Indianapolis, IN – Patent lawyers for Mid-West Metal Products Company, Inc. d/b/a Midwest Homes for Pets of Muncie, IN sued Yuntek International, Inc. of Hayward, CA seeking a declaratory judgment of noninfringement and intervening rights regarding Yuntek’s “Pet Tent,” Patent No. 6,715,446, issued by the U.S. Patent and Trademark Office.

Defendant Yuntek alleged that Midwest had infringed its patented Pet Tent and had sent multiple “cease and desist” letters to Midwest. In its complaint, Midwest asserts that there exists an actual and continuing justiciable controversy between the parties, as contemplated under the Declaratory Judgment Act 28 U.S.C. §§2201 et seq., and has brought the matter to the Southern District of Indiana for resolution.

The patent for the Pet Tent, issued in 2004, was reexamined by the U.S. Patent and Trademark Office (“USPTO”). In this reexamination, certain claims were canceled and others were substantively amended. New claims were also added.

At issue is the alleged infringement of the patent-in-suit prior to the issuance by the USPTO of the Ex Parte Reexamination Certificate as well as the Inter Partes Reexamination Certificate. Midwest asks the court to declare that it does not infringe and did not infringe any valid claim of the patent prior to the issuance of the Ex Parte Reexamination Certificate, at least on the basis of intervening rights. It claims similar noninfringement prior to the issuance of the Inter Partes Reexamination Certificate.

Midwest also asks the court for a judgment that it is entitled to absolute and equitable intervening rights under each of the Reexamination Certificates pursuant to 35 U.S.C. §252. Finally, Midwest asks the court to enjoin Yuntek from pursuing or threatening litigation related to the Pet Tent patent for the time period prior to the issuance of the two Reexamination Certificates, for a declaration that the case is exceptional and for attorneys’ fees pursuant to that declaration.

Practice Tip: The Federal Circuit recently considered whether intervening rights apply where claims were neither amended nor added during reexamination. (See, Marine Polymer Technologies, Inc. v. HemCon, Inc.) It held that the doctrine of intervening rights applied only where claims had been amended or added.

March 7, 2013

DirecTV Sues Roger York, Dianna York and Marty’s Pub for Use of Residential Satellite Service in a Commercial Establishment

By Overhauser Law Offices, LLC

Indianapolis, IN – Intellectual property lawyers for DirecTV, LLC sued Roger York, Dianna York and D.L.Y., Inc. d/b/a Marty’s Pub of Converse, IN alleging the commercial use of satellite programming sold at the residential rate.

This suit was brought under the Cable Communications Policy Act of 1984, 47 U.S.C. §521, et seq., and 47 U.S.C. §605. It alleges that Roger York and Dianna York, in their capacity as owners, and individuals with close control over internal operating procedures, of Marty’s Pub willfully and unlawfully used a residential subscription to DirecTV in a commercial establishment.

The three-count complaint cites three causes of action. Count One: Damages for Violations of Cable Communications Policy Act under 47 U.S.C. §605(e)(3)(c); Count Two: Damages for Violations of 18 U.S.C. §2511; and Count Three: Civil Conversion.

DirecTV asks for the following: a declaration that the defendants’ use of DirecTV was a violation of §2511, that such violations were willful and for the purpose of commercial advantage; an injunction against further violations; statutory damages under 18 U.S.C. §2511; statutory damages under 47 U.S.C. §605; punitive damages and costs and interest.

Practice Tip: As part of its complaint, DirecTV claims that its goodwill and reputation have been usurped. It will be interesting to see what evidence it offers as proof that, as a result of allegedly receiving a lower monthly fee for the programming provided to the defendants – a circumstance presumably known to few other than the Yorks – its goodwill or reputation have been impacted.

February 28, 2013

Eli Lilly Sues Accord Healthcare Again for Infringement of Patented ALIMTA

By Overhauser Law Offices, LLC

Indianapolis, IN – Eli Lilly and Company of Indianapolis, Indiana filed an additional patent infringement suit in the Southern District of Indiana alleging that Accord Healthcare, Inc., USA of Durham, North Carolina will infringe U.S. Patent No. 7,772,209 (the “‘209 patent”) which has been issued by the U.S. Patent Office if relief is not afforded by the court.

In a complaint that was almost identical to a previous complaint filed in January 2012, patent attorneys for Eli Lilly and Company (“Lilly”) initiated an additional lawsuit against Accord Healthcare, Inc., USA (“Accord”) for attempting to gain FDA approval to manufacture and sell a generic version of Lilly’s ALIMTA, a drug that is used in the treatment in certain types of lung cancer. ALIMTA is protected by the ‘209 patent.

This is the second suit by Lilly against Accord involving the ‘209 patent. This suit was initiated after Accord filed an Abbreviated New Drug Application (“ANDA”) with the FDA for a product that competes with Lilly’s ALIMTA, which is an “Antifolate Combination Therapies” product. The complaint from 2012 alleged intent to infringe by, among other activities, the production and sale of Accord’s “Pemetrexed Disodium for Injection,” a generic version of ALIMTA, in 100 mg/vial and 500 mg/vial products. The current complaint alleged intent to infringe with a “Pemetrexed Disodium for Injection” product in a 1000 mg/vial strength. As part of its ANDA filing, Accord alleged that the claims of the ‘209 patent are invalid and/or not infringed by Accord’s product.

Eli Lilly has sued alleging infringement of the patented ALIMTA before:

· Eli Lilly Sues Apotex Inc. for Patent Infringement of ALIMTA

· Eli Lilly and Company Sues Accord Healthcare for Patent Infringement of Lung Cancer Drug ALIMTA

· Lilly Wins Patent Infringement Suit Regarding Chemotherapy Drug

· Eli Lilly Company Sues APP Pharmaceuticals LLC for Patent Infringement of Chemotherapy Drug

Lilly seeks a judgment that Accord has infringed and/or will infringe, actively induce infringement of, and/or contribute to infringement by others of the ‘209 patent; a judgment ordering that Accord delay virtually all activities pertaining to its ANDA product until after the ‘209 patent has expired; a preliminary and permanent injunction against activity that infringes upon the ‘209 patent; a declaratory judgment of infringement; a declaration that the case is exceptional and an award of attorneys’ fees pursuant to such a declaration; and Lilly’s costs and expenses.

Practice Tip #1: The FDA’s ANDA process for generic drugs has been abbreviated such that, in general, the generic drug seeking approval does not require pre-clinical (animal and in vitro) testing. Instead, the process focuses on establishing that the product is bioequivalent to the “innovator” drug that has already undergone the full approval process. The statute that created the abbreviated process, however, had also created some interesting jurisdictional issues with respect to declaratory judgments. For an interesting look at some of the issues, see here.

February 28, 2013

Lilly Sues Genentech to Invalidate Cabilly Patents

By Overhauser Law Offices, LLC

San Jose, CA – Lilly of Indianapolis, Indiana filed a declaratory judgment suit against Genentech asking the U.S. District Court, Northern District of California to invalidate Genentech’s recombinant-antibody patents.

This suit, filed by patent attorneys for Eli Lilly & Company (“Lilly”) and its subsidiary ImClone Systems LLC, of Delaware, included as defendants both Genentech, Inc. (“Genentech”) and City of Hope National Medical Center (“City of Hope”).

Genentech, also known as “Genetic Engineering Technology, Inc.” is a wholly owned subsidiary of F. Hoffmann-La Roche Holding AG engaged in biotechnology research.

It has won numerous awards as an employer and corporate citizen, including earning the number-one spot on Fortune Magazine’s “100 Best Companies To Work For” in 2006.

City of Hope is a private, not-for-profit clinical research center, hospital and graduate medical school located in Duarte, California.

The suit involves two patents held by Genentech: 6,331,415: “Methods of producing immunoglobulins, vectors and transformed host cells for use therein” (“Cabilly II”) and 7,923,221: “Methods of making antibody heavy and light chains having specificity for a desired antigen,” (“Cabilly III”), together known as the “Cabilly patents” after one of the inventors. They have been issued by the U.S. Patent Office.

At issue is the drug Erbitux (cetuximab), made by Lilly’s ImClone unit. Genentech claims that the drug, approved in the U.S. to treat colon cancer and tumors of the head and neck, infringes the Cabilly patents through the unlicensed use of a patented process and various patented starting materials.

Despite that Lilly already has a non-exclusive license to the Cabilly patents, it filed a declaratory judgment action. It asserts that it has no obligation to pay royalties on the sale of Erbitux, arguing that the Cabilly patents are invalid and unenforceable, and, further, not infringed by Lilly. It alleges that Cabilly patents are invalid for, among other reasons, lack of inventorship, inequitable conduct and violation of 35 U.S.C. § 135(c) (which relates to the filing of settlement agreements with the PTO in interference actions). Lilly also alleges that Genentech deceived the U.S. Patent Office into issuing the Cabilly patents.

Lilly seeks a declaratory judgment that the Cabilly patents are invalid and unenforceable, and are not implicated in the manufacture of Erbitux.

Practice Tip: The Cabilly patents have a potentially broad scope and could confront any manufacturer of recombinant antibodies. Genentech has been quoted as stating that the patents broadly cover the co-expression of immunoglobulin heavy and light genes in a single host cell, and are not limited by the type of antibody or host cell. Genentech has also been quoted as stating that the Cabilly II patent is “the backbone of recombinant antibody production in the biotech industry.” Given Genentech’s history of actively litigating this family of patents (see, e.g., MedImmune, Inc. v. Genentech, Inc, et al., which was litigated to the U.S. Supreme Court), and the purported broad scope of the Cabilly patents, it seems that litigation regarding these patents may continue for quite some time.

February 15, 2013

Southern District of Indiana Grants in Part Plaintiff’s Daubert Motion to Preclude Expert Testimony Regarding Damages

By Overhauser Law Offices, LLC

Indianapolis, IN – Boston Scientific Corporation (“Boston Scientific”) of Natik, Massachusetts, was granted three of its four requests to exclude Defendant’s expert testimony in its declaratory judgment suit against Mirowski Family Ventures, LLC (“Mirowski”) of Bethesda, Maryland.

The litigation surrounding the Boston Scientific/Guidant Corp. (“Guidant”) / Mirowski / St. Jude Medical, Inc. (“St. Jude”) matter began in the Southern District of Indiana (and also in Delaware) as a patent infringement suit regarding an implantable cardioverter defibrillator. It was appealed to the Federal Circuit, reversed and returned to the Southern District of Indiana. It was later appealed again to the Federal Circuit. The second ruling of the Federal Circuit was then appealed to the U.S. Supreme Court, which declined to hear the case. The matter was finally settled and the case dismissed but a subsequent dispute regarding the settlement resulted in the commencement of the current litigation.

In 1996, patent attorneys for Guidant (Boston Scientific’s predecessor) sued St. Jude for infringement of, inter alia, Mirowski’s Patent No. 4,407,288 (“the ‘288 patent”) which had been issued by the U.S. Patent Office, and for which Guidant had an exclusive license. Mirowski was added as a Plaintiff in 2001. That same year, a jury found that St. Jude had infringed the ‘288 patent that had been licensed to Guidant and jointly awarded Guidant and Mirowski $140 million in damages.

The court disagreed with the jury’s conclusions and, in 2002, entered a judgment as a matter of law for St. Jude on most issues, including finding both the ‘288 patent and another of Mirowski’s patents invalid. It granted a new trial on many of the issues on which St. Jude had not prevailed. The court also sanctioned Guidant $300,000 for misconduct relating to a Guidant expert witness.

Mirowski and Guidant appealed. Guidant also ceased royalty payments to Mirowski, as the agreement for royalties was limited to only those devices that were covered by a valid, unexpired patent. The Federal Circuit reversed the district court’s determination of invalidity of the ‘288 patent and remanded the case for further proceedings.

In 2010, Boston Scientific (which had acquired Guidant in 2006), Mirowski and St. Jude entered into a stipulation of dismissal and the case was closed. Boston Scientific paid Mirowski approximately $5.3 million and later slightly less than $1.4 million, the latter amount covering an error in the calculation of the earlier payment.

Mirowski objected to the amount of the royalty payments, contending that more was due. Mirowski also argued that Boston Scientific breached the parties’ agreement when it settled portions of its claims with St. Jude without Mirowski’s knowledge and approval.

On May 31, 2011, Boston Scientific filed suit against Mirowski, seeking declarations of non-infringement, satisfaction of royalty obligation, and no breach of contract regarding both the Indiana and the Delaware litigation. See a previous post discussing the commencement of this suit here. [NB: The Plaintiff listed in that complaint, Cardiac Pacemakers, Inc., is now a wholly-owned subsidiary of Boston Scientific.]

In the current matter, in a motion in limine pursuant to the suit for declaratory judgment, Boston Scientific asked the court to exclude certain testimony regarding damages by Mirowski’s expert witness, Dr. Mohan Rao. After discussing a substantial list of his credentials, the court found Dr. Rao to be qualified to testify as an expert. The court also found the data on which Dr. Rao relied to be sufficient. The court then addressed Boston Scientific’s objections to Dr. Rao’s opinions in the areas of relevancy and methodology under the standard set forth in Daubert.

Dr. Rao summarized his opinions in four points: 1) his opinion regarding baseline royalties, 2) his opinion about the expected damages in the Delaware litigation, 3) his settlement valuations of the Indiana and Delaware litigations and 4) his unjust enrichment analysis. The court excluded the first, third and fourth opinions.

The court excluded the first opinion regarding baseline royalties as irrelevant. Through Dr. Rao, Mirowski argued that a baseline level of damages should be established that reflected the royalty that it would have received had Boston Scientific sought Mirowski’s consent before proceeding with the lawsuit, stating that such consent would not have been forthcoming. The court excluded this opinion, as it had already held that, pursuant to an agreement between the parties, Boston Scientific had no duty to obtain Mirowski’s consent to litigate. To the contrary, under the licensing agreement, Boston Scientific was obligated to sue St. Jude and similar infringers unless Boston Scientific and Mirowski agreed that a lawsuit should not be brought. Because Boston Scientific had an unfettered right to sue under the licensing agreement, Mirowski could not prove a factual predicate – that Boston Scientific had acted improperly by failing to obtain consent to sue – of its baseline-royalties argument. As such, the argument was impossible to win and the testimony was excluded as irrelevant.

The court excluded Dr. Rao’s third opinion, regarding the settlement valuations of the Indiana and Delaware litigations, as inconsistent with his own stated methodology of calculating an estimated settlement value. Dr. Rao had explained his methodology as consisting of two parts: the range of damages that the Plaintiff would accept at settlement and the range that the Defendant would offer. The estimated settlement value, then, would be within the overlap of those two ranges. However, in calculating his estimated settlement value, the court found that Dr. Rao appeared to have considered only the Plaintiff’s point of view. Because Dr. Rao failed to apply the methodology he described, this opinion was held to be inadmissible.

The court excluded the fourth opinion, regarding unjust enrichment, as demonstrating a fundamental misunderstanding of the doctrine. Specifically, Dr. Rao seemed to believe that a finding of unjust enrichment would result in a payment that would be split approximately evenly between Boston Scientific and Mirowski. He stated, “Mirowski would only get a portion of the proceeds on whatever it is that Boston Scientific was enriched, unjust or otherwise…Boston Scientific’s unjust enrichment would be roughly twice what the expected proceeds would be to Mirowski.” Holding that this testimony evinced a lack of understanding of the doctrine of unjust enrichment, the contractual relationship of the parties, and the parties’ positions at the time the settlement occurred, the court held the fourth opinion to be inadmissible.

The court denied one of the four motions to exclude, allowing in Dr. Rao’s testimony as to “expected damages” (the second opinion). Boston Scientific had characterized the testimony as “irrelevant, confusing, and a waste of time” and argued that, on the issues to which this testimony pertained, Mirowski could not meet its burden of proof. The court found that this issue could have been properly raised on a motion for summary judgment (but had not been) but was not properly excluded on Daubert grounds.

Practice Tip #1: Raising an argument when one of the factual predicates to that argument has already been settled by the court in favor of your opponent is not likely to be a winning strategy. To prevent such an error, it is useful to ensure that you have thoroughly considered each element of each of your claims.

Practice Tip #2: On the surface, the errors with opinions three and four seem easy to avoid: 1) make sure your expert follows his own stated methodologies and 2) make sure your expert is well versed – and conversant at deposition – in all elements of each legal claim at issue.

June 27, 2012

APP Press Sues Apress Media for Declaration of Non- Infringement of Trademark “App Press”

By Overhauser Law Offices, LLC

Indianapolis; IN – Trademark attorneys for App Press, LLC of Indianapolis, Indiana filed a declaratory judgment suit seeking a declaration that it is not infringing the trademarks of Apress Media, LLC of New York, New York.

App Press, LLC brings action against Apress Media, LLC in order to protect the right to use and continue to conduct business under the registered trademark, and asserts that use of the mark for App Press does not infringe on any trademark held by Apress. App Press is a company that creates, owns, and licenses the use of web-based software that allows consumers to create apps that can be used on mobile devices. According to the Complaint, App Press applied for trademark registration on January 7, 2011 and was registered by the United State Patent and Trademark Office on August 9, 2011. During this period, the trademark was open to opposition on May 24, 2011. Apress Media is a publishing company that edits, publishes and sells books with the focus on technological issues and how-to advice. Apress Media applied for trademark registration on May 7, 2010 and was registered on March 8, 2011. According to App Press, on August 15, 2011, Apress Media sent a cease and desist letter demanding App Press immediately stop the use of their trademark alleging that it infringed on the trademark of Apress and constituted trademark infringement, unfair competition, cyberpiracy and dilution. App Press claims that they forwarded the letter to their counsel who contacted Apress Media’s counsel by phone. Almost two weeks passed that counsel for both parties went back and forth via telephone before they were able to confer regarding the issues set forth in the letter in which App Press agreed and sent a letter describing their product and why it was not infringing on Apress Media’s trademark. Approximately eight months later, on May 8, 2012, Apress again contacted App Press and again asserted that App Press’s use of the App Press trademark was infringing on the Apress trademark. Counsel for App Press has filed the Complaint for declaratory relief and to obtain declaration that App Press’s use of their trademark does not infringe upon any trademarks owned by Apress Media.

Practice Tip: The remedy of declaratory judgment is found in 28 U.S.C.A. § 2201 and allows for any US court to declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.
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