Articles Posted in New Decisions

January 9, 2014

Supreme Court’s Holding in Gunn Requires Remand of Suit Alleging Malpractice in Patent Law

Indianapolis, Indiana – Citing the recent U.S. Supreme Court decision in Gunn v. Minton, the Southern District of Indiana has remanded to the Marion Superior Court the legal malpractice lawsuit filed by the Indiana patent lawyer for Miller Veneers, Inc. The Defendants in the case are Indiana patent attorney Clifford W. Browning as well as two Indiana law firms, Krieg DeVault, LLP and Woodard, Emhardt, Moriarty, McNett & Henry, LLP.

In September 2012, Miller Veneers sued Clifford W. Browning; Krieg DeVault; and Woodard, Emhardt, Moriarty, McNett & Henry in Marion Superior Court alleging attorney malpractice regarding the acquisition of patents. Defendants removed the case to the Southern District of Indiana in October 2012, asserting federal question jurisdiction and 28 U.S.C. § 1338(a) (2008).

Although the court originally found that it had subject matter jurisdiction under 28 U.S.C. § 1338(a), the Supreme Court’s recent decision in Gunn v. Minton led the court to reconsider the question of federal jurisdiction and to conclude that it did not, in fact, have subject matter jurisdiction over the suit, despite that the legal malpractice claims were based on underlying patent matters.

According to the new standard set forth in Gunn, federal jurisdiction exists over state law claims “if a federal issue is (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.”

While the issues of federal law in this malpractice lawsuit were found to meet the first two prongs, the court held that they failed the second two prongs. Specifically, the third Gunn prong requires that the issue be “substantial,” which requires the court “to look to the importance of the issue to the federal system as a whole.” The court held that, as was the case in Gunn, this issue was not important to the federal system as a whole but merely to the parties. The court also held that the fourth prong had not met. It stated that, where issues such as malpractice are to be litigated, the balance is in favor of the states as they have “a special responsibility for maintaining standards among members of the licensed professions.”

The court, upon determining that it lacked jurisdiction under the standard set forth in Gunn, remanded the matter to the Marion Superior Court.

Practice Tip: In Gunn, the Supreme Court held that a legal malpractice claim pertaining to the handling of a patent infringement case did not afford jurisdiction under 28 U.S.C. § 1338(a), stating, “We are comfortable concluding that state legal malpractice claims based on underlying patent matters will rarely, if ever, arise under federal patent law for purposes of § 1338(a).”

January 8, 2014

Court Strikes Four Affirmative Defenses of BitTorrent Defendant

By Overhauser Law Offices, LLC

Fort Wayne, Indiana – District Magistrate Judge Roger B. Cosbey struck four affirmative defenses asserted by anonymous Defendant John Doe in Plaintiff Malibu Media’s lawsuit in the Northern District of Indiana for copyright infringement.

Plaintiff Malibu Media, LLC, filed a copyright infringement action against Defendant John Doe. Defendant answered with ten affirmative defenses. Malibu Media sought to strike four of those defenses–laches, unclean hands, waiver, and estoppel; failure to mitigate damages; failure to join an indispensable party; and implied license, consent, and acquiescence.

Plaintiff first moved to strike Defendant’s second affirmative defense–that “Plaintiff’s claims are barred by the equitable doctrines of laches, unclean hands, waiver and estoppel”–as a bare conclusory allegation unsupported by any factual basis. The court ordered that defense stricken, stating “[m]erely stringing together a long list of legal defenses…does not do the job of apprising opposing counsel and this Court of the predicate for the claimed defense–which is after all the goal of notice pleading.”

Plaintiff next moved to strike Defendant’s fifth affirmative defense–that Plaintiff did not mitigate its damages. Malibu Media argued that this defense was improper because it had elected to pursue only statutory, rather than actual, damages. The court agreed that a copyright plaintiff’s exclusive pursuit of statutory damages invalidates a failure-to-mitigate defense and struck this affirmative defense.

The court also struck Defendant’s seventh affirmative defense, in which Defendant argued that Plaintiff had failed to join an indispensable party. Defendant asserted that he had not engaged in any infringing activity and Plaintiff has not joined those who had. The court held that Defendant’s assertion that he had not engaged in any improper activity was not an affirmative defense but rather a mere denial of liability. It further held that Defendant was incorrect in asserting that joinder was necessary, holding that the court would be able to adjudicate the matter and “accord complete relief to Plaintiff regardless of whether any other allegedly infringing members were joined in the action.

Finally, Plaintiff asked that Defendant’s eighth affirmative defense as be struck as conclusory. Defendant had asserted that “Plaintiff’s claims are barred by Plaintiff’s implied license, consent, and acquiescence to Defendant because Plaintiff authorized use via Bit Torrent [sic].” The court held that Defendant’s Answer foreclosed the possibility of an implied license defense, as Defendant had denied downloading the copyrighted work. As such, Defendant could not also argue that he had downloaded the copyrighted work with a license.

Practice Tip #1: Generally speaking, motions to strike portions of pleadings are disfavored as they consume scarce judicial resources and may be used for dilatory purposes. Such motions will generally be denied unless the portion of the pleading at issue is prejudicial. When faced with a motion to strike affirmative defenses under Rule 12(f), Indiana federal courts apply a three-part test: (1) whether the matter is properly pled as an affirmative defense; (2) whether the affirmative defense complies with Federal Rules of Civil Procedure 8 and 9; and (3) whether the affirmative defense can withstand a Rule 12(b)(6) challenge. An affirmative defense that fails to meet any of these standards must be stricken.

Practice Tip #2: Defendant did not file a response to Malibu Media’s motion to strike Defendant’s affirmative defenses. For that reason alone, the court could have ruled on the motion summarily under the Northern District’s Local Rule 7-1(d)(4).

Practice Tip #3: Even under the liberal notice pleading standards of the Federal Rules, an affirmative defense must include either direct or inferential allegations as to all elements of the defense asserted. Bare bones conclusory allegations are insufficient. Moreover, laches, waiver, estoppel, and unclean hands are equitable defenses that must be pled with the specific elements required to establish the defense.

Practice Tip #4: An implied license, which Defendant argued as an affirmative defense, arises when (1) a person (the licensee) requests the creation of a work, (2) the creator (the licensor) makes that particular work and delivers it to the licensee who requested it, and (3) the licensor intends that the licensee-requestor copy and distribute his work.

Practice Tip #5: This opinion demonstrates one of the pitfalls of pleading in the alternative. Defendant appears to have tried to argue that he didn’t download the copyrighted material but that, if he had, it was with an implied license from Plaintiff. The court was not persuaded, however, as Defendant’s Answer had denied downloading the copyrighted material with BitTorrent. As a result, Defendant was not permitted to argue also that he downloaded the copyrighted material using BitTorrent but that he had an implied license to do so.

A well-known example of such alternative pleading was demonstrated by Richard Haynes: “Say you sue me because you say my dog bit you. Well, now this is my defense: My dog doesn’t bite. And second, in the alternative, my dog was tied up that night. And third, I don’t believe you really got bit. And fourth, I don’t have a dog.”

December 27, 2013

Federal Circuit Rejects Broad Right of Public Access to Patent Trials

By Overhauser Law Offices, LLC

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.

October 25, 2013

Patrick Collins Twice Requests to Dismiss Lund; Lund Dismissed; Court Denies Patrick Collins’ Request to Reinstate

By Overhauser Law Offices, LLC

Indianapolis, Indiana – Magistrate Judge Mark J. Dinsmore of the Southern District of Indiana has recommended that Plaintiff Patrick Collins, Inc.’s request to void the judgment entered as a result of Plaintiff’s two earlier requests for voluntary dismissal of Defendant Derrick Lund be denied.

[Full Disclosure – Overhauser Law Offices, the publisher of Indiana Intellectual Property Law News, represented the successful defendant in this case.]

Attorney Paul Nicoletti, copyright counsel for Plaintiff Patrick Collins, filed a complaint in June 2012 against thirteen “John Doe” Defendants identified only by their Internet Protocol addresses. Patrick Collins claimed that the Defendants had infringed upon its copyrighted films by downloading them using BitTorrent, a peer-to-peer file-sharing service. Defendant Derrick Lund was identified following a subpoena to his internet service provider.

Initially, Lund filed neither an answer nor any other pleading. Consequently, a default judgment was granted against him. What followed was a series of requests to the court by counsel for Patrick Collins that was characterized by the court as a “complicated procedural history.” On the day following the default judgment against Lund, Nicoletti filed a notice of voluntary dismissal against Lund, seeking to dismiss him with prejudice. On that same day, Nicoletti also filed an unopposed motion making the same request: to vacate the default judgment against Lund and to dismiss him with prejudice. Judge Pratt granted Patrick Collins’ motion the next day.

One day following Judge Pratt’s order, Patrick Collins filed a motion to withdraw the voluntary dismissal. The court granted this motion and reinstated Lund as an active Defendant. Lund filed a motion for reconsideration on Lund’s reinstatement. The court granted Lund’s motion and vacated its reinstatement order, finding that Lund had not been properly served.

In this current opinion, the court again considered Patrick Collins’ motion to withdraw its voluntary dismissal, asking “whether Plaintiff can just ‘withdraw’ this notice of dismissal.” The court answered, “[s]imply, the answer is no, as the dismissal [constituted] a final judgment.” Once the Plaintiff filed a notice of dismissal, “the case is closed and the plaintiff may not unilaterally withdraw or amend the notice.”

In its latest request to the court, Patrick Collins had neither cited Rule 60(b) of the Federal Rules of Civil Procedure nor given reasons under this Rule that the judgment should be subject to vacatur. Instead, Plaintiff had simply argued that “the parties had not reached a settlement agreement and therefore the dismissal with prejudice was unintentional.”

Nonetheless, the court sua sponte considered whether the final judgment should be set aside under Rule 60(b). Again, the court was not inclined to grant the Plaintiff’s plea to void an order that the Plaintiff itself had requested. While Rule 60(b) permits the Plaintiff to ask the court to vacate a dismissal, relief from a final judgment is an extraordinary measure and may only be granted in the exceptional circumstances.

Rule 60(b) permits a court to relive a party from a final judgment, order or proceeding for the following reasons:

1) mistake, inadvertence, surprise, or excusable neglect;
2) newly discovered evidence;
3) fraud, misrepresentation, or misconduct by an opposing party;
4) the judgment is void;
5) the judgment has been satisfied, released or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable; or
6) any other reason that justifies relief.

The court noted that “Plaintiff twice filed requests with the Court – each filing being hours apart – to not only dismiss the action against Lund, but to dismiss it with prejudice. These filings show an unequivocal intent to dismiss Lund with prejudice.” Magistrate Judge Dinsmore concluded that Patrick Collins had not demonstrated “how its argument amounts to mistake, inadvertence, surprise, or excusable neglect” and recommended that Judge Pratt deny Plaintiff’s motion to withdraw voluntary dismissal.

Practice Tip #1: This case highlights the distinction between a dismissal “with prejudice” and “without prejudice.” The opinion focuses on whether Plaintiff Patrick Collins, Inc. could obtain “relief” from its own dismissal. Why would a litigant need “relief” from a court order granting its own motion? Because the dismissal was “with prejudice,” meaning that Patrick Collins was not allowed to simply file a second suit asserting the same claim. Because the dismissal was “with prejudice,” the defendant may be a considered a “prevailing party,” even though a judgment was never entered in either party’s favor. Nonetheless, because the Copyright Act allows a “prevailing party” to recover its attorney’s fees, the defendant can recover them.

Practice Tip #2: Patrick Collins, Inc. is represented by Paul Nicoletti, one of the country’s most notorious “copyright troll” attorneys. In addition to filing suits on behalf of Patrick Collins, Inc., he has also sued hundreds of defendants on behalf of copyright trolls Malibu Media, LLC and TCYK, LLC. (Search for these company names on this site to find articles about those other suits, or visit www.fightcopyrighttrolls.comor www.dietrolldie.com.)

October 21, 2013

Dissimilarity Between Trademarked Goods and Allegedly Infringing Goods is Not Dispositive

By Overhauser Law Offices, LLC

Indianapolis, Indiana — In June 2013, Australian Gold, LLC of Indianapolis, Indiana sued Devoted Creations, LLC of Oldsmar, Florida in the Southern District of Indiana alleging trademark infringement of the mark LIVE LAUGH TAN, Trademark Registration No. 4,154,194, which has been registered with the U.S. Trademark Office. Devoted Creations moved to dismiss the lawsuit for failure to state a claim.

Australian Gold has been in the business of selling indoor-tanning preparations for over 20 years. Devoted Creations also sells indoor-tanning preparations. Australian Gold contended in its complaint that, since at least October 2010, it has used the registered mark “LIVE LAUGH TAN” as a trade name and trademark in conjunction with sales of its Australian Gold line of indoor-tanning products.

Devoted Creations, which competes directly with Australian Gold for customers, uses the name “LIVE LOVE TAN” to advertise its indoor-tanning preparations. Australian Gold alleges that Devoted Creations’ use of a similar trademark to sell products similar to those which it sells infringes on its intellectual property rights in the “LIVE LAUGH TAN” trademark. It further asserted that Devoted Creations was aware of the goodwill and reputation associated with Australian Gold’s trademark, and that Devoted Creations intentionally copied that trademark. Australian Gold sued for trademark infringement and unfair competition.

In this opinion, Judge Jane Magnus-Stinson addressed the request of Defendant Devoted Creations to invoke Federal Rule of Civil Procedure 12(b)(6) and dismiss the case against it on the basis that Australian Gold had stated no plausible claim. Devoted Creations asserted that the claims against it failed because Devoted Creations’ use of a mark on one product – indoor tanning preparations – could not as a matter of law infringe on Australian Gold’s use of its own mark in conjunction with an entirely different product – tote bags, the class of products for which the trademark is registered.

Judge Magnus-Stinson pointed out that Devoted Creations made two errors. Devoted Creations’ first error was one of fact. Devoted Creations asserted that Australian Gold did not use the trademark in conjunction with the sale of tanning products but, rather, that the mark was used only for tote bags. The court did not accept this version of the facts. Instead, the court referred to the standard of review for a motion to dismiss under 12(b)(6), which asks whether the complaint “contain[s] sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” As Australian Gold had explicitly alleged in its complaint that its use of the trademark was “in conjunction with the marketing and sale of its AUSTRALIAN GOLD® line of indoor tanning preparations,” the court was not persuaded that a motion to dismiss was appropriate.

The second error was one of law. Even if it were true that the purported infringement occurred only on a different type of goods, that dissimilarity is not dispositive, as the analysis of likelihood of confusion requires the application of a seven-factor test.

Finally, the court reminded Devoted Creations and its counsel of the ethical duties imposed by “both Federal Rule of Civil Procedure 11(b)(2) (stating that a motion presented to the Court functions as a certification by the presenting attorney that ‘the claims, defenses, and other legal contentions are warranted by existing law’) and 28 U.S.C § 1927 (providing for sanctions for unreasonably protracting litigation) when filing a motion with the Court.”

Practice Tip: The precedent in the Seventh Circuit is that similarity between a plaintiff’s goods and a defendant’s allegedly infringing goods is only one of seven factors considered in evaluating whether there is a likelihood of confusion. Dissimilarity alone is not dispositive. Even when products are “quite different,” an evaluation of the other factors is required. The factors are:

1. the similarity between the marks in appearance and suggestion;
2. the similarity of the products;
3. the area and manner of concurrent use;
4. the degree of care likely to be exercised by consumers;
5. the strength of the plaintiff’s mark;
6. any actual confusion; and
7. the intent of the defendant to “palm off” his product as that of another.

October 11, 2013

Copyright Infringement Using BitTorrent Asserted, Judgment of $38,645 Granted Against Defendant Who Failed to Appear

By Overhauser Law Offices, LLC

Indianapolis, Indiana — Judge Sarah Evans Barker of the Southern District of Indiana has entered a default judgment for copyright infringement in favor of Malibu Media, LLC of Los Angeles, California. The copyrighted works at issue had been registered by the U.S. Copyright Office.

In June 2012, copyright attorney Paul Nicoletti filed another copyright infringement lawsuit in the Southern District of Indiana on behalf of serial plaintiff Malibu Media. The lawsuit listed multiple defendants, including William Meeks Sr. of Decatur, Indiana. In its complaint, Malibu Media alleged that Meeks had infringed 16 copyrighted works. Specifically, Malibu Media contended that Meeks and others directly and contributorily infringed its copyrighted works when they downloaded and disseminated all or a portion of the works using BitTorrent, a peer-to-peer file-sharing protocol. The initial complaint was served upon 23 defendants. Discussed in this opinion are the allegations, findings and judgments against Meeks only.

Judge Barker held that, as a result of his failure to defend against Malibu Media’s assertions, Meeks was deemed to have admitted to willful copyright infringement. Judge Barker also held that, without an injunction, Meeks’ use of the BitTorrent protocol would continue to cause Malibu Media irreparable injury, stating that there existed a “threat of continued violations” of Malibu Media’s exclusive rights to reproduce, distribute, perform and display the 16 copyrighted works.

The court entered a permanent injunction against Meeks after finding that such an injunction promoted creativity and individual effort and was therefore in the public interest. Meeks was also ordered to pay to Malibu Media $36,000.00 in statutory damages, as authorized under 17 U.S.C. § 504(c)(1), and $2,645.00 for attorneys’ fees and costs, as authorized under 17 U.S.C. § 505, for a total of $38,645.00. He was further ordered to pay post-judgment interest accruing under 28 U.S.C. § 1961 as of the date of the default judgment until the date of its satisfaction. Finally, Meeks was ordered to destroy all copies of Malibu Media’s works that he had downloaded onto any computer hard drive without proper authorization, including all copies that he had in his possession, custody or control.

Practice Tip #1:

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. The determination of the exact amount is left to the discretion of the court.

There is a significant disparity in the dollar amount awarded in default judgments against defendants in copyright infringement cases involving BitTorrent. In two separate cases, Judge William T. Lawrence recently ordered two defendants who failed to appear to pay $20,000 in statutory damages for copyright infringement that was deemed to have been admitted by the defendants’ failure to defend against the allegations. See here and here. However, in a similar case, Judge Jane Magnus-Stinson ordered an entry of default judgment against a defendant for $151,425. Judge Barker has issued several prior default judgments in this case, each for $36,000 plus attorneys’ fees.

Practice Tip #2:

Deciding to simply ignore a complaint, as William Meeks Sr. 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.

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

September 5, 2013

Common Themes Between Elton John’s “Nikita” and Hobbs’ “Natasha” Insufficient to Support Claim of Copyright Infringement

By Overhauser Law Offices, LLC

Chicago, Illinois – The United States Court of Appeals for the Seventh Circuit has affirmed the judgment of the Northern District of Illinois, Eastern Division. Copyright lawyers for Guy Hobbs of the United Kingdom had sued alleging copyright infringement by Elton John and Bernie Taupin of the United Kingdom of Hobbs’ copyrighted work “Natasha” which has been registered in the United Kingdom. The district court dismissed the complaint and the appellate court affirmed.

While working on a Russian cruise ship, Hobbs composed a song entitled “Natasha” that was inspired by a brief love affair he had with a Russian waitress. He tried to publish his song, but was unsuccessful. A few years later, John and Taupin released a song entitled “Nikita” through a publishing company to which Hobbs had sent a copy of “Natasha.” Believing that “Nikita” was based upon “Natasha,” Hobbs eventually demanded compensation from John and Taupin. He ultimately filed suit asserting a copyright infringement claim and two related state-law claims. The Defendants asked the district court to dismiss Hobbs’ complaint for failure to state a claim.

In supporting his claim for copyright infringement in the district court, Hobbs asserted both traditional copyright infringement of individual elements of “Natasha” and also copyright infringement based upon “Natasha” as a combination of similar elements that would be unprotectable individually.

After considering Hobbs’ first argument of copyright infringement, the district court concluded that the elements identified were not entitled to copyright protection when considered alone.

Hobbs’ second legal theory to support a claim of copyright infringement was that the unique selection, arrangement, and combination of individually unprotectable elements in a song could be entitled to copyright protection. The district court also rejected Hobbs’ “unique combination” argument because it interpreted the law, as stated in Peters v. West, 692 F.3d 629, 632 (7th Cir. 2012), to preclude Hobbs’ copyright infringement claim based upon a combination of similar elements that are unprotectable individually. Despite rejecting Hobbs’ “unique combination” argument in this set of circumstances as an impermissible application of copyright law, the district court nevertheless considered the facts under this theory.

In defending his “unique combination” theory, Hobbs identified a number of allegedly similar elements between the two songs. He argued that his selection and combination of those elements in “Natasha” constituted a unique expression entitled to copyright protection, and that the Defendants’ similar use of those elements in “Nikita” supported a claim for copyright infringement. Hobbs identified the following allegedly similar elements that are found in both songs:

· A theme of impossible love between a Western man and a Communist woman during the Cold War;

· References to events that never happened;

· Descriptions of the beloved’s light eyes;

· References to written correspondence to the beloved;

· Repetition of the beloved’s name, the word “never,” the phrase “to hold you,” the phrase “I need you,” and some form of the phrase “you will never know”; and

· A title which is a one-word, phonetically-similar title consisting of a three-syllable female Russian name, both beginning with the letter “N” and ending with the letter “A.”

The district court held that the similar elements, even when considered under the “unique combination” theory, still could not support a claim for copyright infringement. It also concluded that the Copyright Act preempted Hobbs’ state-law claims.

The sole issue for appeal was Hobbs’ “unique combination” theory. The Seventh Circuit held that Hobbs failed to state a claim for copyright infringement because, even when the allegedly similar elements between the songs were considered in combination, “Natasha” and “Nikita” did not share enough unique features to give rise to a breach of the duty not to copy another’s work. It held that, although both songs contained the idea of an impossible love affair due to a conflict, each song expressed this general idea differently. That is, “Natasha” and “Nikita” tell different stories about impossible romances during the Cold War. Thus, as a matter of law, they were not substantially similar and the dismissal of Hobbs’ claim for copyright infringement was affirmed.

Practice Tip #1:

The Seventh Circuit declined to decide whether Hobbs was correct when he argued that a unique selection, arrangement, and combination of individually unprotectable elements in a song can support a copyright infringement claim. Instead, careful review of both songs’ lyrics reveals that Hobbs’ first four allegedly similar elements are expressed differently in “Natasha” and “Nikita.” The remaining similar elements were standard fare in popular love songs and, thus, could not serve to serve as evidence that infringement had occurred.

Practice Tip #2:

The Copyright Act does not protect general ideas, but only the particular expression of an idea. Additionally, even at the level of particular expression, the Copyright Act does not protect incidents, characters or settings which are as a practical matter indispensable, or at least standard, in the treatment of a given topic.

However, there is a wealth of authority recognizing that, in certain situations, a unique arrangement of individually unprotectable elements can form an original expression entitled to copyright protection. See Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 362 (1991) (“The question that remains is whether [the plaintiff] selected, coordinated, or arranged these uncopyrightable facts in an original way.”); JCW Invs., Inc. v. Novelty, Inc., 482 F.3d 910, 917 (7^th Cir. 2007) (“[T]he very combination of these [unprotectable] elements as well as the expression that is [the work itself] are creative.”); Bucklew v. Hawkins, Ash, Baptie & Co., 329 F.3d 923, 929 (7th Cir. 2003) (“[I]t is the combination of [unprotectable] elements, or particular novel twists given to them, that supply the minimal originality required for copyright protection.”); Roulo v. Russ Berrie & Co., 886 F.2d 931, 939 (7th Cir. 1989) (“While it is true that these elements are not individually capable of protection, just as individual words do not deserve copyright protection, it is the unique combination of these common elements which form the copyrighted material.”); see also Stava v. Lowry, 323 F.3d 805, 811 (9th Cir. 2003) (“It is true, of course, that a combination of unprotectable elements may qualify for copyright protection.”); Knitwaves, Inc. v. Lollytogs Ltd., 71 F.3d 996, 1003-04 (2d Cir. 1995) (“As the Supreme Court’s decision in [Feist] makes clear, a work may be copyrightable even though it is entirely a compilation of unprotectible elements.”).

Practice Tip #3:

Although Hobbs brought his action twenty-seven years after “Nikita” was authored and eleven years after Hobbs allegedly first encountered “Nikita,” the Defendants did not raise the three-year statute of limitations, see 17 U.S.C. § 507(b), as a defense in their motion to dismiss.