New Decisions

August 28, 2013

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

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

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

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

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

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

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

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

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

Practice Tip:

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

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

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

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

August 21, 2013

Judgment of $151,425 Granted Against Defendant Who Failed to Answer Allegations of Illegal Downloading of Pornography

By Overhauser Law Offices, LLC

Indianapolis, Indiana — The Southern District of Indiana has granted a motion for default judgment by CP Productions, Inc. (“CP”) of Arizona, which had sued Gerald L. Glover, III (“Glover”) of Indianapolis, Indiana alleging infringement of the copyrighted work “GH Hustlers — Maryjane’s Second Visit” which has been registered by the U.S. Copyright Office.

CP produces adult-entertainment content. Copyright lawyers for CP filed suit in the Southern District of Indiana alleging that Glover and his joint tortfeasors, without Plaintiff’s authorization or license, downloaded CP’s copyrighted work via the Internet. Specifically, it was alleged that they had, knowingly and illegally, reproduced and distributed CP’s copyrighted creative work, and materially contributed to the infringing conduct of others by acting in concert via the BitTorrent file-sharing protocol. CP also alleged that Glover was a serial infringer of copyrights in adult content stating that agents for CP had observed him infringing on multiple copyrighted works involving adult content.

In the complaint, CP’s attorneys listed counts of copyright infringement, civil conspiracy and contributory infringement. CP sought statutory damages of $150,000 under the Copyright Act, 17 U.S.C. § 504 for Glover’s alleged willful infringement of CP’s copyright. CP also asked the court for attorneys’ fees and costs of $1,425 under 17 U.S.C. § 505, for a total judgment of $151,425. Glover did not respond to the complaint.

Because he had failed to plead or otherwise defend in this action, despite having been properly served with a summons and a complaint, Judge Jane Magnus-Stinson ordered an entry of default against Glover for $151,425, the full amount requested.

Practice Tip: When a defendant fails to appear to address assertions of wrongdoing made by a plaintiff, the court takes as true all of the plaintiff’s well-pled allegations. On Friday, we blogged about a default-judgment case wherein the defendant was ordered by the court to pay $20,000 for illegally downloading copyrighted material. As the Glover case shows, however, damages for illegally downloading copyrighted material can be much higher.

August 16, 2013

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

By Overhauser Law Offices, LLC

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

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

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

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

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

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

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

Practice Tip:

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

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

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

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

August 14, 2013

Stryker Prevails Again: Court Considers Zimmer’s Willful Infringement, Triples Jury’s $70 Million Award to $210 Million and Adds Another $18 Million

By Overhauser Law Offices, LLC

Grand Rapids, Michigan — In 2010, Stryker Corp. of Kalamazoo, Michigan; Stryker Puerto Rico, Ltd. and Stryker Sales Corp. (collectively, “Stryker”), sued Zimmer, Inc. and Zimmer Surgical, Inc. of Warsaw, Indiana (collectively, “Zimmer”), alleging infringement of U.S. Patent Nos. 6,022,329; 7,144,383; and 6,179,807, which have been issued by the U.S. Patent Office. A jury awarded $70 million in damages. In August 2013, the U.S. District Court for the Western District of Michigan trebled the jury’s award. The court also awarded supplemental damages, which were also trebled; attorneys’ fees and prejudgment interest.

Stryker and Zimmer are the two principal participants in the market for orthopedic pulsed lavage devices. A modern, orthopedic pulsed lavage device is a combination spray-gun and suction-tube, used by medical professionals to clean wounds and tissue during surgery. In 2010, Stryker sued Zimmer, alleging that Zimmer’s line of Pulsavac Plus pulsed lavage devices infringed three of Stryker’s patents — U.S. Patent No. 6,022,329 (“the ‘329 patent”), U.S. Patent No. 7,144,383 (“the ‘383 patent”) and U.S. Patent No. 6,179,807 (“the ‘807 patent”). Zimmer lost every argument it advanced at claim construction and subsequently lost most of the disputed claims on summary judgment. After claims construction and summary judgment, one infringement claim and 22 invalidity defenses remained for trial.

In February 2013, after two weeks of trial — featuring hundreds of exhibits, more than a dozen witnesses, and multiple days of deliberation — the jury returned a verdict unequivocally in Stryker’s favor. In particular, the jury found: (1) that the Pulsavac Plus products infringed upon the ‘329 patent; (2) that Zimmer failed to establish any of its 22 invalidity contentions; and (3) that Stryker was entitled to $70 million in lost profits.

Zimmer brought ten post-verdict motions for judgment as a matter of law (“JMOL”) or for a new trial:

for JMOL to preclude Stryker from recovering lost profits damages from before November 5, 2010;
for JMOL as to the invalidity of claim 2 of the ‘329 patent, or, in the alternative, for a new trial on the validity of claim 2;
for JMOL barring Stryker from recovering pre-suit damages under the doctrine of laches;
for JMOL of non-infringement of claim 2 of the ‘329 patent, or, in the alternative, for a new trial on the issue of non-infringement of claim 2;
for JMOL limiting Stryker’s damages because Stryker failed to mark its pulsed lavage devices in accordance with 35 U.S.C. § 287(a) and for a new trial on the issue of marking;
for a new trial;
for JMOL that Stryker’s asserted claims under the ‘383 patent are invalid, or, in the alternative, for a new trial on the validity of those claims;
for JMOL that claims 45, 50, 51, and 52 of the ‘807 patent are invalid, or, in the alternative, for a new trial on the validity of those claims;
for JMOL that Zimmer did not willfully infringe Stryker’s patents; and
for JMOL to preclude Stryker from receiving lost profits damages and limiting Stryker’s reasonable royalty recovery, or, in the alternative, for a new trial on damages.

In its 58-page decision, the court discussed the various motions by Zimmer and elucidated the standard for granting a JMOL: Rule 50 of the Federal Rules of Civil Procedure permits a court to render JMOL only if a party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue. It then discussed the standard for granting a new trial following a jury trial: “a court may grant a new trial under Rule 59 if the verdict is against the weight of the evidence, if the damages award is excessive, or if the trial was influenced by prejudice or bias, or otherwise unfair to the moving party.”

The court held that neither the standard for granting JMOL nor the standard for granting a new trial had been met in any instance and denied all ten motions.

Stryker also brought several post-verdict motions; specifically, it sought:

a permanent injunction against Zimmer or, in the alternative, an ongoing royalty;
supplemental damages;
a finding that the case was an “exceptional case” and an award of attorney’s fees;
an award of prejudgment interest; and
enhanced damages for willful infringement.

Each of Stryker’s five motions was granted. The court entered a permanent injunction prohibiting Zimmer from manufacturing, marketing or selling any products found to have infringed the ‘807 patent, including the infringing Pulsavac Plus products. This was held to be appropriate as the evidence had shown that Zimmer’s sale of infringing products had cost Stryker between 15% and 18% of its market share. Such a loss of market share to an infringer was cited as a textbook example of irreparable harm which, in turn, supported the injunction.

Supplemental damages were also awarded. The court held that the jury’s $70 million award to Stryker of lost profits reflected the damages Stryker had suffered only through November 30, 2012. Subsequently, Zimmer had supplemented the sales data for its infringing products, reflecting sales from December 1, 2012 through February 28, 2013. Based on those supplemental data, Stryker’s damages expert calculated Stryker’s additional lost profits for that time frame to be $2,351,257.66, which the court awarded.

Stryker also moved for an award of attorneys’ fees under 35 U.S.C. § 285. Section 285 provides that, if the prevailing party establishes by clear and convincing evidence that the case is “exceptional,” the court may exercise its discretion to award attorneys’ fees. The court cited various factors that could be used in determining whether a case was exceptional, for example: “willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation, [or] conduct that violates Federal Rule of Civil Procedure 11.” The court awarded Stryker’s attorneys’ fees, holding that that the jury’s finding of willful infringement weighed heavily in favor of such an award (“indeed, when a trial court denies attorney fees in spite of a finding of willful infringement, the court must explain why the case is not ‘exceptional’ within the meaning of the statute.”)

Prejudgment interest of $11,167,670.50 was also granted on both the jury award and the supplemental lost-profit damages Stryker incurred from December 1, 2012 to February 28, 2013. In addition, for the same reasons the court found this to be an “exceptional case,” the court awarded Stryker additional prejudgment interest on its reasonable attorney’s fees.

Stryker’s final motion was for enhanced damages under 35 U.S.C. § 284, based on Zimmer’s willful infringement. Under § 284, “the court may increase the damages up to three times the amount found or assessed” at trial. For this determination, the court referred to Read Corp. v. Portec, Inc.. In Read, the Federal Circuit held that the “paramount determination in deciding to grant enhancement and the amount thereof is the egregiousness of the defendant’s conduct based on all the facts and circumstances.” In evaluating the egregiousness of the defendant’s conduct, courts typically rely on the nine Read factors, which are:

whether the infringer deliberately copied the patentee’s ideas or design;
whether the infringer investigated the scope of the patent and formed a good faith belief that it was invalid or not infringed;
the infringer’s conduct during litigation;
the infringer’s size and financial condition;
closeness of the case;
duration of the infringing conduct;
remedial actions, if any, taken by the infringer;
the infringer’s motivation for harm; and
whether the infringer attempted to conceal its misconduct.

The court found that all nine Read factors favored substantial enhancement of the jury’s award. It noted that, regarding the first factor, multiple trial witnesses testified that Zimmer deliberately copied Stryker’s patented inventions. On the second factor, Zimmer had presented no evidence that it had retained intellectual property counsel to advise it about the scope of Stryker’s patents to form a good faith belief about invalidity or infringement, or that it had or had otherwise investigated whether it was likely infringing. The third factor also favored enhancement, as Zimmer had needlessly delayed in producing requested information concerning its application for a patent for the Pulsavac Plus. With respect to the fourth factor, the court noted that Zimmer is a multi-billion dollar company with reported annual profits in excess of three-quarters-of-a-billion dollars. It opined that while a $70 million verdict may sound large in the abstract, in the context of the substantial size and profitability of Zimmer, $70 million may not be enough, without enhancement, to deter infringing conduct.

As to the fifth factor, the court noted for again that this was not a close case. Every major decision — from claim construction through post-verdict motions — had gone against Zimmer. On the sixth factor, the court commented that Zimmer’s infringement had spanned more than a decade, from 2000 all the way through the date of the opinion. With respect to the seventh factor, the court observed that at no point during its 12-plus years of infringement had Zimmer taken any remedial action to stop infringement or mitigate damages, including the two-plus years covered by the litigation. In fact, as of the date the opinion was written, Zimmer was still manufacturing and selling the infringing products. The eighth factor also counseled in favor of enhancement, principally because Zimmer and Stryker had been the only major competitors in the orthopedic pulsed lavage device market. As a result, Zimmer’s infringement of Stryker’s patents could only have been motivated by a desire to harm Stryker by depriving it of market share. Finally, on the ninth factor, although Zimmer had not attempted to hide the entirety of its misconduct, it had attempted to prevent Stryker from discovering certain aspects of its infringement in the period before the trial.

The court held that its analysis of the Read factors “overwhelmingly favor enhancement.” In accordance with that analysis, the court trebled both the jury’s award of $70 million and the court’s award of supplemental damages.

In total, Zimmer has been ordered to pay Stryker over $228 million. According to Reuters, Zimmer plans to appeal both the jury verdict and the recent rulings by the court.

Practice Tip:

While Zimmer’s decision to infringe was presumably a business strategy, the findings of willfulness — and, later, egregiousness — made this approach an extremely expensive one. The court acknowledged and considered Zimmer’s tactic in its opinion, stating, “Zimmer chose a high-risk/high-reward strategy of competing immediately and aggressively in the pulsed lavage market and opted to worry about the potential legal consequences later.”

Willfulness consists of two elements: (1) an objective element that is often, but not always, a question of law, and (2) a subjective element that is inherently a question of fact, to be decided by the jury.

Under the first prong, if an “accused infringer’s position is susceptible to a reasonable conclusion of no infringement,” the infringer’s conduct cannot be objectively unreasonable. Conversely, an action is objectively unreasonable if the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.

When considering the second prong — the element of subjective willfulness — fact-finders should consider: (1) whether the infringer copied the patentee’s commercial products; (2) whether the infringer presented evidence that it obtained legal opinions of patent counsel to justify its infringing actions; (3) whether the infringer attempted to avoid infringement by designing around the patents; and (4) whether the infringer acted in accordance with the standards of commerce.
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July 19, 2013

Batman Villainess Catwoman Gets “Clean Slate”

By Overhauser Law Offices, LLC

South Bend, Indiana — The Northern District of Indiana has ruled in favor of Warner Brothers Entertainment, Inc. (“Warner Bros.”) of Burbank, California which had been sued by trademark holder Fortres Grand Corporation (“Fortres Grand”) of Plymouth, Indiana. Fortres Grand had alleged that Warner Bros. infringed its trademark, Registration No. 2,514,853, for the mark CLEAN SLATE, which has been registered by the U.S. Trademark Office.

Fortres Grand develops, markets and sells software. Since 2000, it has marketed and sold software called “Clean Slate.” The Clean Slate software protects the security of computer networks by erasing all evidence of user activity so that subsequent users see no indication of a previous user’s activity, meaning that each new user starts his or her computer activity with a “clean slate.” Fortres Grand has sold millions of dollars worth of its Clean Slate software. In 2001, Fortres Grand obtained a federal trademark registration for the use of “Clean Slate” in connection with “computer software used to protect public access computers by scouring the computer drive back to its original configuration upon reboot.”

Warner Bros. is one of the most famous names in movie history. In the summer of 2012, it released its latest Batman film, The Dark Knight Rises. One of the plot lines in the film involves the character Selina Kyle (a.k.a. supervillainess Catwoman) and her attempt to procure a software program that will erase her criminal history from every computer database in the world. The software program she is trying to obtain was designed by the fictional company Rykin Data and is referred to four times in the film as “clean slate.”

Two websites — rykindata.com and rykindata.tumblr.com — were also created to promote the film. These websites are consistent with a recent trend in the online advertising of films: rather than just creating a straightforward promotional website where consumers can get information about the film (like, in this instance, www.thedarkknightrises.com), additional websites are created that market the film in a more subtle or creative way. In this instance, the websites are essentially a creative outgrowth of the fictional world of the film. They look like what a (fictional) citizen of Gotham might find if they were looking for information on the (fictional) Rykin Data company. These websites also use the term “clean slate” to describe the software referenced in the film.

Fortres Grand filed suit on September 19, 2012 alleging three counts based on the use of “clean slate” in the film and on the websites: 1) trademark infringement under the Lanham Act (15 U.S.C. § 1051 et seq.); 2) unfair competition under the Lanham Act; and 3) unfair competition under Indiana state law.

Fortres Grand asserted that it is, in fact, trademark infringement when a fictional product bears the same name as a real product. Warner Bros. took the opposite view and moved to dismiss the case.

The court began by noting that there is surprisingly little case law in matters such as these. Despite the many movie and television releases every year, courts have rarely been called upon to answer the question of whether it is trademark infringement if a fictional company or product in a movie or television drama bears the same name or brand as a real company or product.

The court analyzed all three of Fortres Grand’s claims — infringement, federal unfair competition, and state unfair competition — under the same trademark infringement analysis. It noted that an essential ingredient of trademark infringement is a likelihood of confusion among consumers as to the source of a product. Specifically, only confusion about origin supports a trademark claim. For this purpose, “origin” means the producer of the tangible product sold in the marketplace. Moreover, although the hallmark of trademark infringement is protecting against consumer confusion, it is not enough that there just be some generalized confusion. Trademark infringement protects only against mistaken purchasing decisions and not against confusion generally.

In this case, Grand Fortres was arguing a case of reverse confusion. This type of confusion exists when a junior user uses its size and market penetration to overwhelm the senior, but smaller, user. The “senior user” (here, Grand Fortres) is the first to adopt and use a mark anywhere in the country. The “junior user” (Warner Bros.) is the second user. The reverse confusion doctrine protects the senior user’s control of its mark and the goodwill created by the mark from a junior user’s employment of the mark, and protects the public from being deceived into believing that the senior user’s product emanates from, is connected to, or is sponsored by the junior user.

The court was not persuaded by Grand Fortres’ claim of confusion. To state a claim for reverse confusion in this case, the court held that Fortres Grand had to make plausible allegations that Warner Bros. saturated the market with a product that the public had been deceived into believing emanated from, was connected to, or was sponsored by Fortres Grand. The fatal flaw in Fortres Grand’s case had to do with correctly identifying the exact product that Warner Bros. had introduced to the market — a film, not a piece of software.

The court held that a comparison between the two products led to the conclusion that there was no plausible claim for consumer confusion regarding a consumer’s purchasing decision between the two nonfictional products — Fortres Grand’s software and Warner Bros.’s film. “Plaintiff is not in the motion picture business,” the court stated, citing a Warner Bros. pleading. “[I]t would be absurd to think that customers buy tickets to The Dark Knight Rises or purchase the DVD/Blu-ray because of a perceived association of the Film with Fortres Grand’s products.”

Finally, the court discussed the First Amendment issues associated with considering a trademark infringement claim under the Lanham Act when the asserted infringement took place in an artistic work. The Second Circuit’s Decision in Rogers v. Grimaldi, a landmark opinion in such cases, in discussing the use of intellectual property in the title of a work states:

[T]he [Lanham] Act should be construed to apply to artistic works only where the

public interest in avoiding consumer confusion outweighs the public interest in

free expression. In the context of allegedly misleading titles using a celebrity’s

name, that balance will normally not support application of the Act unless the title

has no artistic relevance to the underlying work whatsoever, or, if it has some

artistic relevance, unless the title explicitly misleads as to the source or the

content of the work.

As several Circuits have done, the court extended this analysis to cover not only the title of an artistic work, but also the body of the work. It concluded by holding that, even if there were a potential for consumer confusion caused by the use of “clean slate” in the film, the case still must be dismissed because Warner Bros.’s use of the term is also protected by the First Amendment.

Practice Tip: A more plausible legal argument might have been trademark dilution. The complaint, however, did not bring a claim under the Trademark Dilution Act. This may have been because Fortres Grand recognized that its “Clean Slate” trademark was not a “famous” one, which is a requirement for bringing a trademark dilution case.

July 10, 2013

BMI Wins on Summary Judgment in Infringement Case

By Overhauser Law Offices, LLC

Indianapolis, Indiana — The Southern District of Indiana has granted a motion by New York-based Broadcast Music, Inc. et al. for summary judgment against Diamond Investments, Inc. and Salvatore Mazza of Franklin, Indiana for copyright infringement for the unlicensed use of copyrighted musical compositions in live performances at The Juke Box Live.

Broadcast Music, Inc. (“BMI”) is a “performing rights society” under 17 U.S.C. § 101 that operates on a non-profit-making basis and licenses the right to publicly perform copyrighted musical works on behalf of the copyright owners of these works. The other plaintiffs in this action are the copyright owners of the eight compositions at issue in this lawsuit.

Diamond Investments, Inc. (“Diamond”) is an Indiana corporation that operated The Juke Box Live, a “nightclub restaurant entertainment venue.” Musical compositions were publicly performed at The Juke Box Live in connection with Diamond’s operation of that business.

Salvatore T. Mazza (“Mazza”) was an officer of Diamond with primary responsibility for the operation and management of Diamond and The Juke Box Live. Mazza also had a direct financial interest in the corporation and The Juke Box Live.

Prior to February 2010, BMI learned that The Juke Box Live was offering musical entertainment without a license from BMI and without permission from the copyright owners whose music was being publicly performed. Between February 4, 2010 and May 31, 2011, BMI repeatedly informed Diamond and Mazza (collectively, “defendants”) in writing of the need to obtain permission for public performances of copyrighted music and offered to enter into a license agreement with defendants, but they refused. BMI also sent four letters instructing defendants to cease unauthorized public performances of BMI’s music and telephoned on 55 occasions to advise defendants of the need to enter into a license agreement.

Nonetheless, the infringement continued. On March 19, 2011, a BMI investigator went to The Juke Box Live and recorded the performance of songs owned by the various non-BMI plaintiffs. An action for copyright infringement of eight works performed at The Juke Box Live, brought pursuant to 17 U.S.C. § 101 et seq. (the “Copyright Act”), followed.

BMI later moved for summary judgment and the defendants, although represented by counsel, did not respond. The court held that, due to their failure to answer or object to BMI’s requests for admissions, defendants were deemed to have tacitly admitted to copyright infringement.

The court awarded $3,000.00 for each of the eight findings of infringement in this case, for $24,000.00 in total, for the infringement itself. It also found that the infringement had been willful and consequently awarded to the plaintiffs $17,985.55, to cover in full plaintiff’s costs and attorney’s fees. The court also ordered that post-judgment interest be paid. These damages and costs were assessed against Diamond and Mazza jointly and severally.

Finally, the court ordered that Diamond and Mazza, each individually, as well as all persons acting under their permission or authority, be permanently enjoined from infringing the copyrighted musical compositions licensed by BMI.

Practice Tip:

The Copyright Act empowers a plaintiff to elect to receive an award of statutory damages between $750 and $30,000 per infringement in lieu of an award representing the plaintiffs’ actual damages and/or the defendants’ profits. In a case where the copyright owner proves that infringement was committed willfully, the court may increase the award of statutory damages to as much as $150,000 per infringed work. A finding of willful infringement will also support an award of attorney’s fees.

Here, the court awarded $3,000 per infringement plus attorney’s fees. Courts considering awards of statutory damages have recognized that awards in the range of $3,000 to $7,000 or higher per infringement are appropriate in cases where the infringement resulted from deliberate indifference toward copyright laws.

Furthermore, not only is the performer liable for infringement, but so is anyone who sponsors the performance. A corporate officer will be found jointly and severally liable with his corporation for copyright infringement if he (1) had the right and ability to supervise the infringing activity, and (2) has a direct financial interest in such activities.

July 8, 2013

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

By Overhauser Law Offices, LLC

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

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

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

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

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

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

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

July 5, 2013

Indiana Court Orders BitTorrent Defendants Severed

By Overhauser Law Offices, LLC

Ft. Wayne, Indiana — The Northern District of Indiana has directed Malibu Media, LLC of Los Angeles, California to file separate amended complaints against each defendant in its lawsuit for copyright infringement.

The case, initially filed in July 2012 against 14 Doe defendants, had only four defendants remaining. In December 2012, the court had denied the motions to sever and declined to exercise its own discretion to sever the Doe defendants.

The court, in a recent opinion issued by Magistrate Judge Roger Cosbey, moved sua sponte to reconsider the issue. It held that, while permitting joinder earlier had promoted judicial economy and facilitated the discovery process, the case had reached the point where continued joinder would instead create judicial inefficiency due to the different factual issues and legal defenses in each defendant’s case. Does No. 5, 9 and 12 were severed, leaving Doe No. 6 as the only defendant remaining in the current suit.

The practical effect of severance of previously joined claims is the creation of one or more new actions. The court directed Malibu Media to file a separate amended complaint for each of the severed Does.

Practice Tip:

It has been estimated that over 200,000 users of various peer-to-peer file-sharing protocols, usually users of BitTorrent, have been sued for copyright infringement. Instead of a thorough investigation, followed by a lawsuit, these plaintiffs — usually holders of a copyright to a work of adult entertainment — gather the IP addresses of many potential/presumed infringers and then sue tens, hundreds or even thousands of defendants in a single suit. The plaintiffs then extract settlements from the defendants, who are motivated to settle to avoid the embarrassment of being associated with pornography and the expense of litigation, even if they may not have infringed the work.

The problem has become sufficiently widespread that it has garnered attention from mainstream press (see, e.g., here). Different approaches to the growing problem of copyright trolls have been taken. In some cases, defendants have filed suit, alleging fraud and extortion.

The problem has also caused considerable strain on the federal judiciary, leading one judge to deny joinder as serving no legitimate purpose in such cases once IPSs have been put on notice to preserve identifying information for particular IP addresses and to opine that it is “difficult to even imagine the extraordinary amount of time federal judges have spent on these cases.” Many other courts have also denied joinder, often on the theory that, while doing so does not solve the problem it, at least, makes pursuing such abusive litigation much less profitable.

Some courts have exercised their discretion to allow Doe defendants to proceed under a pseudonym, at least during the discovery phase of a suit.

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.

May 20, 2013

U.S. Supreme Court Rules Against Indiana Farmer in “Roundup Ready” Soybean Patent Decision

By Overhauser Law Offices, LLC

Washington D.C. — The U.S. Supreme Court has ruled that “patent exhaustion” does not bar an infringement claim against Indiana farmer Vernon Bowman for reproducing patented seeds by planting and harvesting second generation seeds without the patent holder’s permission. Bowman v. Monsanto Co., U.S., No 11-796, 5/13/2013. Monsanto produces and sells patented soybean seed that is genetically altered to resist its “RoundUp” herbicide. Bowman is a farmer who purchased soybean for planting from a grain elevator, expecting that most of the grain elevator soybean would be Monsanto’s herbicide-resistant soybean. In the subsequent patent infringement brought by Monsanto, Bowman argued that Monsanto’s sale of its seed that he ultimately purchased from the grain elevator exhausted any patent rights in the seed. The argument was rejected by both the District Court and the Federal Circuit, and the Supreme Court agreed to review the case.

Patent Exhaustion Only for Sold Article

Under the patent exhaustion doctrine, an authorized sale of a patented product cuts off the patent owner’s right to control of that product, because the sale of that product fulfills the patent law by providing a reward to the patentee. However, this limitation on patent rights applies only to the particular article sold. If the purchaser could make and sell endless copies, the patent would effectively protect just a single sale.

In this case, the patent exhaustion doctrine provides Bowman with the right to use the purchased product in several different ways without Monsanto’s permission, including resale, human consumption or animal consumption of the product. However, it does not permit Bowman to make additional patented soybeans without Monsanto’s permission.

Bowman contended that his use of the purchased seed was covered by the patent exhaustion doctrine because that is the normal way farmers use seed, and that Monsanto seeks an impermissible exception to the exhaustion doctrine for patented seeds and other self-replicating technologies.

The Court rejected the argument, pointing out that it is Bowman who seeks an unprecedented exception to the well-settled rule that the exhaustion doctrine does not extend to the right to make a new product.