Only the owner of a trademark has standing to enforce rights under that trademark. This may seem like common sense, but all too often shareholders and executives of companies file for trademark registration in their own personal names. Not only does this devalue the company by depriving it of assets, but also it could hinder or outright prevent the company from enforcing its rights against competitors using the same or similar trademark. It could also jeopardize the validity of the trademark registration.
District courts have held that a company does not have standing to assert infringement of a registered trademark where the registration is not in the company’s name, even if it is in the name of a sole shareholder. In a recent case (Inflatable Zoo Inc. v. About to Bounce, No. 12 CV 1709 (E.D. La. Apr. 11, 2013)), the plaintiff had been doing business under a registered trademark for over 20 years before the defendant (a customer) started using the same trademark. The court dismissed the plaintiff’s federal trademark infringement and cybersquatting claims because the registration was owned by the sole shareholder of the company, not the company itself. Since individuals and businesses are distinct legal entities, the company could not enforce the registration.
A trademark registration may be invalid if the owner is not the person or entity that controls the nature and quality of the goods and services provided under the trademark. In the case of a sole shareholder that is also the managing director of a company, that person likely controls the company to be a valid owner of trademark rights (although this may not be wise for at least the reasons discussed above). However, a shareholder or executive of a company who does not control the company’s goods and services is likely not appropriate to list as the owner of the company’s trademarks. Doing so could void any resulting registration.
Trademarks are extremely valuable and potentially perpetual assets and should always be treated as such. Although the electronic forms for federal trademark applications may be easy to fill out and file online, and there are many firms that act as drop boxes for trademark applications, business owners and decision-makers should consult with a trademark lawyer who can provide guidance on how to best protect these assets, not simply obtain certificates of questionable value. Anything worth doing, is worth doing right.
After plaintiff waived privilege as to prosecution counsel by submitting a privileged letter from counsel to the USPTO during reexamination of the patent-in-suit, defendant asked that the Court reopen discovery as to the privilege waiver. The Court denied defendant’s motion, because the letter had originally been identified on plaintiff’s privilege log in August 2006, and even though privilege was not waived until March 2012, defendant waited until September 2012 to request additional documents from plaintiff. With the pre-trial order having been entered in October 2010 and trial scheduled to commence in less than three weeks, the Court held that reopening discovery at this late stage would unduly delay the case. Unicom Monitoring, LLC v. Cencom, Inc., No. 06-cv-01166 (D.N.J. Apr. 9, 2013) (Arpert, M.J.).
A non-practicing entity requesting dismissal (with prejudice) will also be on the hook for at least some of the defendant’s legal fees in defending the case, the Court ruled in Lamina Packing Innovations, LLC v. Monsieur Touton Selection, Ltd., No. 12-CV-05039 (S.D.N.Y. Apr. 4, 2013) (McMahon, J.).
Plaintiff Lamina is a non-practicing entity that filed four patent infringement cases last year, two of which were before this Court. The Court denied Lamina’s request for a protracted discovery schedule and instead ordered an expedited Markman proceeding. On the day after the parties submitted their disputed claim terms to the Court, Lamina moved for dismissal of the case with prejudice.
Defendant Touton opposed the motion, seeking conditions to protect it against future litigations and seeking attorneys’ fees. In particular, Touton was concerned about two other patent infringement actions that Lamina had filed in other jurisdictions against a party that Touton is in privity with. The Court granted the dismissal with prejudice and clearly explained that such a dismissal on the merits binds plaintiff as against the defendant and all those in privity with the defendant. The Court left it to Touton to establish such privity before the other courts.
The Court also granted Touton leave to apply for an award of attorneys’ fees, stating that at the very least the Court would award fees for preparation of the claim construction papers that Lamina unnecessarily forced Touton to file.
This case is one of many recent examples in which courts are cracking down on “patent trolls” and putting pressure on them to put up their proofs quickly. Since the strategy of NPEs/trolls is generally to make defendants choose between paying legal fees or relatively modest settlement amounts, working with the court to set an expedited schedule and force plaintiff’s hand early is usually to the defendant’s benefit.
Even though laches and unclean hands are not valid defenses to a pure claim of contract at law that is brought within the statute of limitations, such defenses may survive in a mixed case of contract and patent law, the Court held in Koninklijke Philips Elects. N.V. v. Cinram Int’l Inc., No. 08-CV-00515 (S.D.N.Y. Apr. 8, 2013) (Stearns, J.).
In denying Philips’ motion for judgment on the pleadings regarding unclean hands, laches, and estoppel, the Court reserved its judgment on the defenses since the case is a mix of contract and patent law. The Court found that Philips was too late in arguing that the defendants did not adequately plead these defenses, since the case has been pending for over five years and Philips has had ample opportunity in discovery to explore the basis of defendants’ affirmative defenses.
Permissive joinder of anonymous defendants, such as in a BitTorrent illegal downloading case, requires a causal connection between the defendants beyond the common allegation of infringement of the same copyrighted work, the Court ruled in Malibu Media, LLC v. John Does 1-19, No. 12-cv-6945 (D.N.J. Mar. 28, 2013) (Arpert, M.J.).
Malibu Media sued 19 anonymous defendants for allegedly downloading unauthorized copies of movies using a BitTorrent service. Upon motions by three of the defendants, the Court was effectively asked to reconsider its decision in a 2012 Malibu Media case, where the Court had denied a motion to sever, in light of other recent decisions by the Court. In particular, two recent decisions by District Judges Hochberg and Hayden had dismissed and severed all but the first anonymous defendant.
As Judge Hochberg explained, permissive joinder requires a “connection between the defendants beyond the copyrighted work and method of distribution, namely that the defendants were involved in the same transaction with the same downloader at the same time.” Judge Hayden similarly concluded that severing and dismissing all but the first anonymous defendant would best ”promote case-management efficiency, judicial economy, and fairness.”
Judge Arpert concurred with Judges Hochberg and Hayden, finding that Malibu had not presented the requisite causal connection between the defendants and that permitting joinder would cause a strain on judicial resources. The Court thus granted the motions and sua sponte severed and dismissed the non-moving defendants except for John Doe #1.
A stay pending inter partes reexamination is appropriate even where the proponent is not a party to the reexamination. The District of New Jersey granted defendants’ motions to stay pending inter partes reexamination of the patents-in-suit, agreeing with defendants that “stays pending reexamination are freely given in this District, as almost every reported New Jersey District Court opinion that has considered the issue has granted a stay where a reexamination request was pending.” Synchronoss Techs., Inc. v. Asurion Mobile Applications, Inc., No. 11-cv-5811, slip op. (D.N.J. Mar. 22, 2013) (Bongiovanni, M.J.).
Synchronoss had filed three patent infringement actions in the District of New Jersey, one of which was against NewBay Software Ltd., which filed the requests with the USPTO leading to the inter partes reexaminations at issue in these motions. After the USPTO granted the requests and issued Office actions rejecting all of the subject claims, Synchronoss dismissed the action against NewBay after Syncrhonoss reached an agreement to acquire NewBay. Asurion’s and Onmobile’s motions were based on the NewBay reexamination.
The Court applies a three-part test in determining whether to stay a matter pending reexamination:
- whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-moving party;
- whether a stay will simplify the issues in question and trial of the case; and
- whether discovery is complete and whether a trial date has been set.
As to the first factor, the delay inherent in the reexamination process is itself insufficient to establish undue prejudice. Even if the parties are direct competitors, this does not necessarily translate to undue prejudice for the opponent.
As to the second factor, there is no requirement that a reexamination resolve all issues or even most of the issues in the case. Any analysis by the USPTO that could provide valuable guidance to the Court in resolving the remaining issues could support granting a stay. Furthermore, it is not inappropriate to grant a stay even where the movant is not a party to the reexamination proceeding.
The third factor takes into account only that which has been done in litigation and does not consider any pre-litigation efforts of the patentee. Where the case is still relatively early in discovery, this factor will favor a stay.
We previously reported on Tomita’s $30.2 million verdict against Nintendo in the Southern District of New York. After trial, the Court ruled in open court that Tomita had failed, as a matter of law, to prove willful infringement by clear and convincing evidence. Judge Rakoff issued his Memorandum Order on willful infringement on March 15, 2013.
The Court found that objective willfulness did not exist. At trial, the Court found that Nintendo’s evidence of how the 3DS operates and evidence relating to invalidity of the patent-in-suit provided a reasonable basis for the assertion of non-infringement and invalidity defenses. Tomita failed to prove by clear and convincing evidence that Nintendo’s defenses were objectively unreasonable.
Willful infringement requires both an objective and subjective showing. (In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007).) To demonstrate objective willfulness, the “patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” (Id.) The objective determination of recklessness lies with the judge as a question of law. (Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., 682 F.3d 1003, 1007 (Fed. Cir. 2012).)
This case is one of many examples demonstrating that the clear and convincing standard for willful infringement is difficult to meet where there is a bona fide dispute between the parties about infringement and validity.
After a jury found that Nintendo’s 3DS game system infringed Tomita Technologies’ patent, the Southern District of New York entered judgment against Nintendo in the amount of $30,200,000 in compensatory damages in Tomita Techs. v. Nintendo Co., No. 11-CV-4256, slip op. (S.D.N.Y. Mar. 14, 2013) (Rakoff, J.).
Seijiro Tomita, principal of Tomita Technologies, had worked for Sony for almost 30 years before quitting in 2002 and applying for the patent-in-suit in 2003. Tomita sued Nintendo in 2011 after Nintendo launched its 3DS system. Tomita had presented his technology to Nintendo in 2003, including the same employees who later developed the 3DS system. Nintendo has stated that it plans to appeal.
Patentee litigants should be careful that they have appropriate remedies for complying with disclosure obligations to the USPTO for information obtained under protective orders in litigation. Specifically, patentees should make sure that protective orders contain appropriate provisions permitting required disclosures to the USTPO.
The EDNY recently denied a plaintiff-patentee’s motion to modify a protective order to permit the patentee to submit confidential prior art disclosed by the defendant in the litigation to the USPTO as part of the patentee’s disclosure obligations during an inter partes reexamination filed by third parties, in Leviton Mfg. Co. v. Pass & Seyour, Inc., No. 12-cv-2257 (E.D.N.Y. Mar. 5, 2013) (Cogan, J.).
The inter partes reexamination was requested on May 16, 2012, against one of the patents-in-suit. The parties stipulated to, and the Court so ordered, the protective order four months later on September 17, 2012. After entry of the protective order, defendant served its preliminary invalidity contentions, which included certain confidential information about defendant’s products, which defendant argued it would not have produced but for the protective order.
The Court denied plaintiff’s motion to modify the protective order to permit plaintiff to submit defendants preliminary invalidity contentions to the USPTO as part of an information disclosure statement for three reasons:
- Plaintiff failed to present any binding case law on the matter.
- Plaintiff could not demonstrate that the protective order was improvidently granted since it was agreed upon by the parties.
- Plaintiff’s “conflicting obligations” were not extraordinary nor compelling since plaintiff was aware of the reexamination prior to negotiating and agreeing to the protective order and knew that defendant would rely on confidential documents in its defense.
In the event of a catch-22 situation such as in the present case, patentees will likely need to turn to alternative disclosures with the USPTO, such as submission of the physical article described by the confidential information or other non-confidential information concerning the article (or process) along with an affidavit explaining what information could not be submitted and why. If possible, the patentee should have the Examiner sign off on the “substitute” references submitted and acknowledge, perhaps in an interview, that the substitute information is adequate.
Following a motion for reconsideration of Magistrate Judge Cott’s report and recommendations of sanctions in the amount of $187,308.65 against plaintiff for bringing a baseless and frivolous patent infringement case, District Judge McMahon affirmed the sanctions and awarded additional sanctions in the amount of $12,745.35 against plaintiff for a frivolous motion for reconsideration, in Source Vagabond Sys., Ltd. v. Hydrapak, Inc., No. 11 Civ. 5379 (S.D.N.Y., Feb. 21, 2013).
The Court previously granted summary judgment in defendant’s favor, which was affirmed without opinion on appeal to the Federal Circuit. We posted previously about the Court’s original sanctions order for plaintiff’s failure to perform an adquate pre-filing investigation, finding that plaintiff’s claim construction in support of its infringement claim violated every relevant rule of claim construction.
The Court found that this case was not close on the merits and lacked any arguable basis in fact, satisfying the standard for awarding sanctions in the first instance. The Court further found that the motion for reconsideration of the sanctions decision “caused this court to waste even more time, and [defendant] to waste even more money, than had already been wasted in supervising and defending against this lawsuit.”
The sanctions, totaling $200,054.00, were imposed jointly and severally against plaintiff’s law firm and the individual attorneys of record.