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May 20, 2015

Indiana Trademark Litigation: Integrity Trade Services Sues Ex-Employees Alleging Conspiracy and Conversion

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South Bend, Indiana - Trademark attorneys for Integrity Trade Services, Inc. ("ITS") of Frankfort, Illinois filed an intellectual property complaint in the Northern District of Indiana naming as Defendants Integrity Employment Partners, LLC, Integrity Trade Services, LLC, Janice Hernandez, James Hernandez, Tiffany Heineman, Michaela Williams, and Jason Reis, all of Indiana, and alleging multiple claims, including trademark infringement, conversion of ITS trade secrets, breach of contract, and tortious interference with business relationships.

ITS is a national staffing services company, doing businesses in multiple states, including Indiana, Florida, Illinois, and Texas. ITS is wholly owned by John E. Cumbee, III. In 2008, ITS acquired all of the operational assets of the Knox, Indiana branch of a staffing company owned by CES America, Inc. ITS also hired most, if not all, of the CES employees then working at the Knox facility, including defendants James and Janice Hernandez.

ITS contends that, since purchasing the Knox facility, it has invested well over $1 million to build the Knox business and the ITS brand as it is related to that facility. It asserts in this federal lawsuit, inter alia, that Defendants conspired to convert ITS' customers, employees and trade secrets for their own use.

The accused in this case are husband and wife Janice Hernandez and James Hernandez; several family members of Janice Hernandez, including Tiffany Heineman, Michaela Williams, and Jason Reis; and two entities apparently owned by the Hernandezes, Integrity Employment Partners, LLC, Integrity Trade Services, LLC.

Defendant James Hernandez ("James") worked for ITS from the time that ITS acquired the business until April 30, 2015 when he was fired. ITS asserts that James engaged in a conspiracy to solicit away and convert (a) ITS' office employees at the Knox location, (b) at least the active ITS field employees servicing the Knox location, and (c) customers comprising the Knox-area business. He is accused of attempting to transfer them to Integrity Employment Partners, LLC, an Indiana limited liability company formed to process the Knox business converted from ITS for his benefit and the benefit of the other co-conspirators.

Defendant Janice Hernandez ("Janice"), also became employed by ITS when ITS was acquired from its prior owner. She has been accused of not only being an integral part of the alleged conspiracy but also of being "likely its "'mastermind.'" Defendant Tiffany Heineman ("Tiffany") is Janice's niece. Defendant Michaela Williams is Janice's daughter. Defendant Jason Reis is the ex-son-in-law of James and Janice, having been married to another of Janice's daughters.

ITS states that, in the last two weeks in April 2015, it discovered various anomalies in the Knox business. These anomalies alerted ITS to the activities that triggered this federal lawsuit. They included a drop off in weekly gross sales, the formation of Integrity Employment Partners, LLC ("IEP"), and checks issued by existing ITS customers made payable to IEP (and not ITS).

Defendants are accused of orchestrating a scheme to confuse ITS' customers and employees regarding with which staffing businesses using the name "Integrity" - Plaintiff's firm or Defendants' firms - those customers and employees were transacting business. In doing so, ITS contends, Defendants attempted with some success to convert ITS' business assets and relationships for Defendants' benefit. Allegations of criminal conduct by Defendants were also made. In a 48-page complaint, filed by trademark lawyers for Plaintiff, those claims and others are made:

• Count I: Federal Trademark Infringement
• Count II: Federal Unfair Competition
• Count III: Illinois Deceptive Trade Practices Act
• Count IV: Breach of Fiduciary Duty
• Count V: Breach of Tiffany's Agreement
• Count VI: Tortious Interference with Contract
• Count VII: Tortious Interference with Business Relationships
• Count VIII: Conversion
• Count IX: Computer Fraud and Abuse Act
• Count X: Uniform Trade Secrets Act
• Count XI: Civil Conspiracy
• Count XII: Unjust Enrichment

• Count XIII: Breach of Contract

Plaintiff asks the court for, inter alia, injunctive relief, compensatory damages, punitive damages, attorneys' fees, interest and costs.

Continue reading "Indiana Trademark Litigation: Integrity Trade Services Sues Ex-Employees Alleging Conspiracy and Conversion " »

May 14, 2015

Ninth Circuit Copyright Proceedings: Prenda Law Parties Ask to be Prosecuted

San Francisco, California - A lawyer for Prenda Law argued before the United States Court of Appeals for the Ninth Circuit and was heard by Judges Harry Pregerson, Richard Tallman and Jacqueline Nguyen. The appeal focused on the rulings of U.S. District Court Judge Otis Wright II.

The intellectual property attorney representing Prenda Law, the now-infamous copyright trolling law firm, squared off with the judges of the Ninth Circuit recently. In a hearing before the appellate court, he contended that the district court had denied due process to the Prenda Law parties. He noted that Judge Wright had threatened incarceration argued and, in doing so, Judge Wright had indirectly initiated a criminal contempt proceeding.

"The entire proceeding was tainted. Mark Lutz, the CEO of Ingenuity 13, was not allowed to testify. As soon as they asserted their Fifth Amendment rights, the judge stopped the proceeding," Prenda Law's lawyer said. "He can't use that against them," he continued, arguing that Judge Wright had punished the Prenda Law parties for invoking their Fifth Amendment rights against self incrimination.

Judge Tallman countered, "Sure he can." Because this was a civil proceeding, Judge Wright was allowed to "draw adverse inferences" as a result of an invocation of the Fifth Amendment. Judge Pregerson added that the Prenda parties "should have taken the Fifth, because they were engaged in extortion. They sent out thousands of extortionate letters."

"Let's say you're right," Pregerson said. "Do you want us to send this back and have this turn into a criminal contempt proceeding?" The court was surprised when the answer was "yes."

Judge Pregerson continued: "They used our court system for illegal purposes to extort money--they used our discovery system. They bought these pornographic films, and seeded the Internet with them.... If they really want to have a trial on this, with all protections of a criminal case--burden of proof, and a prosecutor, and all the rest of it--you sure they want that?"

"I'm amazed that you are asking us to vacate the sanctions and send it back for an independent prosecutor to pursue," said Judge Nguyen added, noting that the case currently before the court was not the only matter that prosecution could include.

Judge Tallman also seemed surprised that Prenda Law had asked that the matter be considered as a criminal matter: "With a potential penalty of life in prison for criminal contempt? They're prepared to run that gauntlet?"

Prenda Law's attorney repeated that, yes, the Prenda Law parties wanted their day in court.

March 18, 2015

Member Of Megaupload Conspiracy Pleads Guilty to Copyright Infringement Charges and is Sentenced to One Year in U.S. Prison

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A computer programmer for the Mega copyright piracy conspiracy, Andrus Nomm, 36, of Estonia, pleaded guilty recently in connection with his involvement with Megaupload.com and associated piracy websites. He was sentenced to a year and a day in federal prison for conspiring to commit felony copyright infringement.

Assistant Attorney General Leslie R. Caldwell of the Justice Department's Criminal Division, U.S. Attorney Dana J. Boente of the Eastern District of Virginia and Assistant Director in Charge Andrew G. McCabe of the FBI's Washington Field Office made the announcement. U.S. District Judge Liam O'Grady of the Eastern District of Virginia accepted the guilty plea and imposed the sentence.

"This conviction is a significant step forward in the largest criminal copyright case in U.S. history," said Assistant Attorney General Caldwell. "The Mega conspirators are charged with massive worldwide online piracy of movies, music and other copyrighted U.S. works. We intend to see to it that all those responsible are held accountable for illegally enriching themselves by stealing the creative work of U.S. artists and creators."

"This outcome is the result of years of hard work by our office and our partners from the Criminal Division and the Federal Bureau of Investigation," said U.S. Attorney Dana J. Boente. "The Mega Conspiracy engaged in massive criminal infringement of copyrighted works on the Internet, and we are confident that this case will be a sign to those who would abuse technology for illegal profit."

"Today one conspirator who infringed upon the work of countless artists, actors and musicians takes responsibility for his actions," said Assistant Director in Charge McCabe. "We continue to pursue his co-conspirators until they face justice in the American legal system. This sentence and the remaining charges in this case are the direct result of the hard work of dedicated FBI Special Agents, intelligence analysts and prosecutors who have invested countless hours of effort to bring justice in this case."

Nomm agreed to waive his extradition hearing in the Netherlands, where he was arrested in January 2012, and plead guilty in the United States. In light of his role in the conspiracy and acceptance of responsibility, prosecutors agreed to recommend the sentence of a year and a day in federal prison.

Nomm was initially charged along with six other individuals and two privately-held corporations by a federal grand jury on Jan. 5, 2012, and a superseding indictment with additional charges was subsequently returned on Feb. 16, 2012. The superseding indictment charged the defendants with three separate conspiracies: conspiracy to commit racketeering, conspiracy to commit copyright infringement and conspiracy to commit money laundering. In addition, the defendants are charged with five counts of criminal copyright infringement and five counts of wire fraud. The indictment alleges that, for more than five years, the Mega Conspiracy operated websites that willfully reproduced and distributed infringing copies of copyrighted works, including works that had not been commercially released. The charges and allegations contained in an indictment are merely accusations and the remaining defendants are presumed innocent unless and until proven guilty.

In court papers, Nomm agreed that the harm caused to copyright holders by the Mega Conspiracy's criminal conduct exceeded $400 million. He further acknowledged that the group obtained at least $175 million in proceeds through their conduct. Megaupload.com had claimed that, at one time, it accounted for four percent of total Internet traffic, having more than one billion total visits, 150 million registered users and 50 million daily visitors.

In a statement of facts filed with his plea agreement, Nomm admitted that he was a computer programmer who worked for the Mega Conspiracy from 2007 until his arrest in January 2012. Nomm further admitted that, through his work as a computer programmer, he was aware that copyright-infringing content was stored on the websites, including copyright-protected motion pictures and television programs, some of which contained the "FBI Anti-Piracy" warning. Nomm also admitted that he personally downloaded copyright-infringing files from the Mega websites. Despite his knowledge in this regard, Nomm continued to participate in the Mega Conspiracy.

An extradition hearing for co-defendants Kim Dotcom, Mathias Ortmann, Bram Van der Kolk and Finn Batato is currently scheduled for June 2015 in Auckland, New Zealand. Co-defendants Julius Bencko and Sven Echternach remain at large.

This case is being investigated by the FBI's Headquarters and Washington Field Office. The case is being prosecuted by Senior Counsel Ryan K. Dickey and Brian L. Levine of the Criminal Division's Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Jay V. Prabhu of the Eastern District of Virginia. The Criminal Division's Office of International Affairs also provided significant assistance.

February 16, 2015

Third Member of International Computer Hacking Ring Pleads Guilty to Hacking and Conspiracy to Steal Intellectual Property; Charges Against Indiana Defendant Pending

picture02162015.pngDelaware - A third member of an international computer hacking ring has pleaded guilty to conspiring to break into computer networks of prominent technology companies to steal more than $100 million in intellectual property and other proprietary data.

Nathan Leroux, 20, of Bowie, Maryland, pleaded guilty to conspiracy to commit computer intrusions and criminal copyright infringement based on his role in the cyber theft of software and data related to the Xbox One gaming console and Xbox Live online gaming system, and popular games such as the "FIFA" online soccer series; "Call of Duty: Modern Warfare 3;" and "Gears of War 3." Leroux has been in custody since attempting to flee into Canada from Buffalo, New York, on June 16, 2014. A sentencing hearing is set before U.S. District Judge Gregory M. Sleet of the District of Delaware on May 14, 2015.

Sanadodeh Nesheiwat, 28, of Washington, New Jersey, and David Pokora, 22, of Mississauga, Ontario, Canada, previously pleaded guilty to the same conspiracy charge on Sept. 30, 2014. They remain in custody pending their sentencing hearings, which are scheduled for April 2015. Pokora's guilty plea is believed to have been the first conviction of a foreign-based individual for hacking into U.S. businesses to steal trade secret information. Charges against a fourth defendant, Austin Alcala, 19, of McCordsville, Indiana, remain pending.

According to Leroux's admissions in connection with his guilty plea, he was part of the hacking conspiracy between January 2011 and September 2012. During that period, hacking group members located in the United States and abroad gained unauthorized access to computer networks of various companies, including Microsoft CorporationEpic Games Inc., Valve Corporation and Zombie Studios. The conspirators accessed and stole unreleased software, software source code, trade secrets, copyrighted and pre-release works, and other confidential and proprietary information. Members of the conspiracy also allegedly stole financial and other sensitive information relating to the companies - but not their customers - and certain employees of such companies.

Specifically, the data theft targeted software development networks containing source code, technical specifications and related information for Microsoft's then-unreleased Xbox One gaming console, as well as intellectual property and proprietary data related to Xbox Live and games developed for that online gaming system.

Leroux admitted in court that he and others used the stolen intellectual property to build, and attempt to sell, counterfeit versions of the Xbox One console before its public release in November 2013. In July 2013, the FBI intercepted a counterfeit console built by Leroux, which was destined for the Republic of Seychelles.

Leroux also admitted that he developed a software exploit that allowed him and others to generate millions of "coins" for the FIFA soccer games playable on the Xbox Live platform. These coins are the virtual, in-game currency used to build a "FIFA Ultimate Team" in the games. Without the authorization of Electronic Arts, the intellectual property rights holder to the FIFA games, Leroux and others sold bulk quantities of the "FIFA coins" via online black markets.

The value of the intellectual property and other data stolen by the hacking ring, as well as the costs associated with the victims' responses to the conduct, is estimated to range between $100 million and $200 million. To date, the United States has seized over $620,000 in cash and other proceeds related to the charged conduct.

This case was investigated by the FBI, with assistance from the Criminal Division's Office of International Affairs, the U.S. Department of Homeland Security's Homeland Security Investigations and Customs and Border Patrol, and the U.S. Postal Inspection Service. The investigation also has been coordinated with the Western Australia Police and the Peel Regional Police of Ontario, Canada.

The case is being prosecuted by Trial Attorney James Silver of the Criminal Division's Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Edward J. McAndrew of the District of Delaware.

Assistant Attorney General Leslie R. Caldwell of the Justice Department's Criminal Division, U.S. Attorney Charles M. Oberly III of the District of Delaware and Special Agent in Charge Stephen E. Vogt of the FBI's Baltimore Field Office made the announcement.

Continue reading "Third Member of International Computer Hacking Ring Pleads Guilty to Hacking and Conspiracy to Steal Intellectual Property; Charges Against Indiana Defendant Pending" »

February 3, 2015

Federal Agencies Seize Over $19.5 Million in Fake NFL Merchandise During 'Operation Team Player'

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Phoenix, Arizona - Federal officials teamed with the National Football League (NFL) Thursday to announce the results of a nationwide law enforcement effort aimed at combatting counterfeit sports merchandise.

Speaking at a NFL news conference, U.S. Immigration and Customs Enforcement (ICE) Director Sarah R. Saldaña, U.S. Customs and Border Protection (CBP) Director of Field Operations William K. Brooks, and NFL Counsel Dolores F. DiBella discussed the results of the initiative, dubbed "Operation Team Player."

This year's operation began immediately following the conclusion of Super Bowl XLVIII and targeted international shipments of counterfeit merchandise as it entered the United States. Authorities identified warehouses, stores, flea markets, online vendors and street vendors selling counterfeit game-related sportswear and tickets throughout the country.

Fake jerseys, ball caps, t-shirts, jackets and other souvenirs are among the counterfeit merchandise and clothing confiscated by teams of special agents and officers from ICE's Homeland Security Investigations (HSI), CBP, U.S. Postal Inspection Service (USPIS), and state and local police departments around the country - all in partnership with the NFL and other major sports leagues.

"Counterfeiting is not a game," said ICE Director Saldaña. "It is most certainly not a victimless crime either. Whether it's the child in Southeast Asia working in deplorable conditions, or local stores going out of business, intellectual property theft is a very real crime with very real victims. No good comes from counterfeiting American products regardless of whether they are all-star jerseys, airbags, or aspirin."

Special agents from HSI and officers with CBP worked with sports leagues and law enforcement agencies throughout the nation to identify illegal shipments imported into the U.S., as well as stores and vendors selling counterfeit trademarked items. The teams seized more than 326,147 items of phony sports memorabilia along with other counterfeit items worth more than $19.5 million. Law enforcement officers have made 52 arrests in relation to Operation Team Player so far, with Super Bowl XLIX efforts continuing through Feb. 6.

"The NFL is proud to once again partner with ICE and the IPR Center in combating the illegal sale of counterfeit merchandise and tickets," said DiBella. "Together, we are working hard to protect fans and prevent them from being scammed by criminals seeking to profit from the public's passion for the NFL, their home teams and Super Bowl XLIX."

"The sale of counterfeit products [is] connected to smuggling and other criminal activities and threatens the competitiveness of our businesses, the livelihoods of U.S. workers, and in some cases the health and safety of the consumer," said CBP Commissioner R. Gil Kerlikowske. "CBP works closely with our federal government partners to protect the United States from these damaging and unsafe goods."

Understanding the economic impact of intellectual property theft, the U.S. Chamber of Commerce is also spreading the word about the dangers that counterfeit products pose to the economy.

"Major events like the Super Bowl can highlight an economic problem we face throughout the year - counterfeit products put good, high-paying jobs at risk in places like Seattle, New England and Phoenix," said David Hirschmann, president and CEO of the U.S. Chamber's Global Intellectual Property Center. "Innovative IP-intensive industries are responsible for over 1.4 million jobs in Massachusetts, 1.2 million in Washington, and 750,000 in Arizona. Sports fans need to be aware of criminals trying to take advantage of big events and holidays to sell counterfeit goods and compete with legitimate companies, like the ones that make the hats, jerseys, or other Super Bowl souvenirs from many of our most trusted brands."

The IPR Center is one of the U.S. government's key weapons in the fight against criminal counterfeiting and piracy. Working in close coordination with the Department of Justice Task Force on Intellectual Property, the IPR Center uses the expertise of its 23 member agencies to share information, develop initiatives, coordinate enforcement actions and conduct investigations related to intellectual property theft. Through this strategic interagency partnership, the IPR Center protects the public's health and safety and the U.S. economy.

To report IP theft or to learn more about the IPR Center, visit www.IPRCenter.gov.

January 15, 2015

Indiana Trade Secret Law: Federal Prosecutors Drop All Charges Against Scientists Accused of Theft of Lilly Trade Secrets

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Indianapolis, Indiana - All federal criminal charges against Guoqing Cao and Shuyu Li, who were formerly employed by Eli Lilly and Company ("Lilly"), were recently dropped by federal prosecutors, who stated that "additional information" had been received that altered "the investigative facts initially relied upon by the government" in its case against Cao and Li.

This federal indictment was brought in 2013 in the Southern District of Indiana. Defendants Cao and Li, two doctoral-level scientists, were charged with multiple counts of theft. At issue was intellectual property belonging to Indiana-based Lilly valued at $55 million. Counts one through three of the indictment, as well as counts five through ten, were listed as theft of trade secrets and aiding and abetting. Count four alleged conspiracy to commit theft of trade secrets.

In the initial proceedings, the United States maintained that Defendants were traitors who had conveyed "American trade secrets" - specifically, "crown jewels" in the form of many millions worth of intellectual property belonging to Lilly - to Jiangsu Hengrui Medicine Co., Ltd., a company located in Shanghai, China.

A second indictment was later filed by the United States modifying the initial charges. Under the new indictment, Defendants faced no counts of trade-secret theft. Instead, they were charged with one count each of wire fraud, aiding and abetting, and conspiracy to commit wire fraud. As a result of this change, the court ordered that the Defendants be released from lockdown, noting that the earlier allegation - that Lilly's "crown jewel" trade secrets had been stolen and provided to China - had been a critical factor in justifying the Defendants' incarceration.

The nature of this new "additional information" recently received by the U.S. Department of Justice that prompted prosecutors to drop all charges is not entirely clear. Contentions by defense attorney Alain Leibman include that "Lilly provided bad information to the government," and that "information originally alleged to be confidential and proprietary was actually not confidential and proprietary." David Hensel, also serving as a criminal defense attorney in the case, added that Lilly's handling of computer data may have amounted to "spoliation of evidence material to the defense."

November 26, 2014

Indiana Trademark Litigation: Hoosier Momma Sues Founding Member Erin Edds

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Indianapolis, Indiana - Indiana trademark attorneys for Hoosier Momma, LLC ("Hoosier Momma") of Brownsburg, Indiana sued Erin Edds ("Edds") of Marion County, Indiana in the Southern District of Indiana. In this Indiana litigation, Hoosier Momma accuses Edds of violations of the federal Lanham Act, the Computer Fraud and Abuse Act and Indiana's Uniform Trade Secret Act, as well as computer tampering, misappropriation and attempted misappropriation of trade secrets, breach of contract, breach of fiduciary duties, tortious interference with business relationships, and conversion. Among its allegations, Hoosier Momma contends that Edds tarnished its "Hoosier Momma" trademark as well as its "Betty Design" trademark, U.S. Trademark Registration Nos. 4584165 and 4584167, which have been registered with the U.S. Trademark Office.

In 2010, Kimberly Cranfill ("Cranfill"), Catherine Hill and Edds formed Hoosier Momma. They are the sole members of Hoosier Momma, which is in the business of developing and selling vegan, gluten-free products that are sold in more than 600 restaurants, stores and hotels in at least six states.

Hoosier Momma alleges multiple wrongs by Edds, including making damaging false statements, engaging in conduct that conduct negatively affects Hoosier Momma's reputation and sales of its products, tarnishing its trademarks, and changing passwords to Hoosier Momma's social media accounts without authorization, refusing to relinquish control of the accounts and continuing to post to those accounts.

Edds is also accused of accessing Cranfill's e-mail account to obtain confidential information as well as sharing confidential information with Wilks & Wilson, a competitor of Hoosier Momma. Hoosier Momma also contends that Edds contacted Tone Products, Inc. ("Tone,") a direct competitor of Hoosier Momma's packer, and asked that Tone reverse engineer a Hoosier Momma product to allow Tone to determine the confidential recipe of such product, a trade secret of Hoosier Momma, and provide it to Edds for her personal use and/or a use that jeopardized the disclosure of Hoosier Momma's trade secrets. Hoosier Momma also claims that Edds improperly contacted several of Hoosier Momma's distributors, clients, manufacturers and other business partners.

Further, Edds allegedly attempted to sell her interest in Hoosier Momma without the consent purportedly required under the Hoosier Momma operating agreement. Finally, Hoosier Momma contends that Edds sold and traded Hoosier Momma product and improperly retained the proceeds.

In its Indiana trademark complaint, filed by trademark lawyers for Hoosier Momma, the following is claimed:

  • Count I: Violation of the Lanham Act, 15 U.S.C. § 1051, et seq.
  • Count II: Violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, et seq.
  • Count III: Computer Tampering
  • Count IV: Misappropriation and Attempted Misappropriation of Trade Secrets and Violation of Indiana Uniform Trade Secret Act
  • Count V: Breach of Contract
  • Count VI: Breach of Fiduciary Duties
  • Count VII: Tortious Interference with Business Relationships
  • Count VIII: Conversion
  • Count XI [sic]: Unjust Enrichment

Hoosier Momma asks for injunctive relief; compensatory and exemplary damages; costs; expenses; and attorneys' fees.

Continue reading "Indiana Trademark Litigation: Hoosier Momma Sues Founding Member Erin Edds" »

October 13, 2014

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

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

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

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

On September 30, Assistant Attorney General Leslie R. Caldwell of the Justice Department's Criminal Division, U.S. Attorney Charles M. Oberly, III of the District of Delaware and Special Agent in Charge Stephen E. Vogt of the FBI's Baltimore Field Office announced the guilty pleas of two of the defendants.

"As the indictment charges, the members of this international hacking ring stole trade secret data used in high-tech American products, ranging from software that trains U.S. soldiers to fly Apache helicopters to Xbox games that entertain millions around the world," said Assistant Attorney General Caldwell. "The American economy is driven by innovation. But American innovation is only valuable when it can be protected. Today's guilty pleas show that we will protect America's intellectual property from hackers, whether they hack from here or from abroad."

"Electronic breaking and entering of computer networks and the digital looting of identities and intellectual property have become much too common," said U.S. Attorney Oberly. "These are not harmless crimes, and those who commit them should not believe they are safely beyond our reach."

Nathan Leroux, 20, of Bowie, Maryland; Sanadodeh Nesheiwat, 28, of Washington, New Jersey; David Pokora, 22, of Mississauga, Ontario, Canada; and Austin Alcala, 18, of McCordsville, Indiana, were charged in an 18-count superseding indictment returned by a federal grand jury in the District of Delaware on April 23, 2014, and unsealed in September. The charges in the indictment include conspiracies to commit computer fraud, copyright infringement, wire fraud, mail fraud, identity theft and theft of trade secrets. The defendants are also charged with individual counts of aggravated identity theft, unauthorized computer access, copyright infringement and wire fraud.

Today, Pokora and Nesheiwat pleaded guilty to conspiracy to commit computer fraud and copyright infringement and are scheduled for sentencing on Jan. 13, 2015. Pokora was arrested on March 28, 2014, while attempting to enter the United States at the Lewiston, New York, Port of Entry. Pokora's plea is believed to be the first conviction of a foreign-based individual for hacking into U.S. businesses to steal trade secret information.

According to the superseding indictment and other court records, from January 2011 to March 2014, the four men and others located in the United States and abroad allegedly hacked into the computer networks of Microsoft Corporation, Epic Games Inc., Valve Corporation, Zombie Studios and the U.S. Army. The defendants and others allegedly obtained access to the victims' computer networks through methods including SQL injection and the use of stolen usernames and passwords of company employees and their software development partners. Once inside the victims' computer networks, the conspirators accessed and stole unreleased software, software source code, trade secrets, copyrighted and pre-release works and other confidential and proprietary information. Members of the conspiracy also allegedly stole financial and other sensitive information relating to the companies - but not their customers - and certain employees of such companies.

Specifically, the data cyber-theft allegedly included source code, technical specifications and related information for Microsoft's then-unreleased Xbox One gaming console; intellectual property and proprietary data related to Xbox Live, Microsoft's online multi-player gaming and media-delivery system; Apache helicopter simulator software developed by Zombie Studios for the U.S. Army; a pre-release version of Epic's video game, "Gears of War 3;" and a pre-release version of Activision's video game, "Call of Duty: Modern Warfare 3." The defendants also allegedly conspired to use, share and sell the stolen information.

The value of the intellectual property and other data that the defendants stole, as well as the costs associated with the victims' responses to the conduct, is estimated to range between $100 million and $200 million. To date, the United States has seized over $620,000 in cash and other proceeds related to the charged conduct.

In addition to those charged in the United States, an Australian citizen has been charged under Australian law for his alleged role in the conspiracy.

An indictment is merely an allegation, and the defendants are presumed innocent unless and until proven guilty in a court of law.

This case is being investigated by the FBI, with assistance from the Criminal Division's Office of International Affairs, the U.S. Department of Homeland Security's Homeland Security Investigations and Customs and Border Patrol, and the U.S. Postal Inspection Service. The investigation also has been coordinated with the Western Australia Police and the Peel Regional Police of Ontario, Canada.

The case is being prosecuted by Trial Attorney James Silver of the Criminal Division's Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Edward J. McAndrew of the District of Delaware.

Practice Tip:

The Computer Crime and Intellectual Property Section ("CCIPS") of the U.S. Department of Justice ("DOJ") is responsible for implementing the DOJ's national strategies in combating computer and intellectual property crimes worldwide. CCIPS prevents, investigates, and prosecutes computer crimes by working with other government agencies, the private sector, academic institutions, and foreign counterparts.

Section attorneys work to improve the domestic and international infrastructure - legal, technological, and operational - to pursue network criminals most effectively. The Section's enforcement responsibilities against intellectual property crimes are similarly multi-faceted.

Intellectual property has become one of the principal U.S. economic engines, and the nation is a target of choice for thieves of material protected by copyright, trademark, or trade-secret designation. In pursuing all these goals, CCIPS attorneys regularly run complex investigations, resolve unique legal and investigative issues raised by emerging computer and telecommunications technologies; litigate cases; provide litigation support to other prosecutors; train federal, state, and local law enforcement personnel; comment on and propose legislation; and initiate and participate in international efforts to combat computer and intellectual property crime.

July 30, 2014

Indiana Trade Secret Law: Removing Allegation of Theft of Trade Secrets Results in Defendants' Release from "Lockdown"

secret-300x237.jpgIndianapolis, Indiana - In 2013, a federal indictment including counts of theft of trade secrets belonging to Eli Lilly and Company ("Lilly") was presented to the Southern District of Indiana. On the basis of this indictment, the court ordered Defendants Guoqing Cao and Shuyu Li, formerly employed by Eli Lilly and Company, to be detained at housing provided by Volunteers of America - Indiana ("VOA"), pending their criminal trial. When the 2013 indictment was superseded by a second indictment that did not include counts for the theft of trade secrets, the court granted Defendants' request to be released to home detention.

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

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

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

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

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

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

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

Continue reading "Indiana Trade Secret Law: Removing Allegation of Theft of Trade Secrets Results in Defendants' Release from "Lockdown"" »

July 25, 2014

Indiana Passes New Statute Criminalizing Offenses Against Intellectual Property

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

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

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

(a) A person who knowingly or intentionally and who without authorization:

  (1) modifies data, a computer program, or supporting documentation;
  (2) destroys data, a computer program, or supporting documentation; or
  (3) discloses or takes data, a computer program, or supporting documentation that is:

(A) a trade secret (as defined in IC 24-2-3-2); or
(B) otherwise confidential as provided by law; and that resides or exists internally or externally on a computer, computer system, or computer network, commits an offense against intellectual property, a Level 6 felony.

(b) However, the offense is a Level 5 felony if the offense is committed for the purpose of devising or executing any scheme or artifice to defraud or to obtain any property.

Violation of the statute is a Level 6 felony, with a sentencing range of six to 30 months. TheCyber-Attack-full.jpg advisory sentence is one year. This falls within Credit Classification A, available to most misdemeanants and Level 6 offenders, which allows the sentence to be reduced by one day for each day served.

If the offense is committed for purpose of defrauding or obtaining property, the crime is a Level 5 felony, with a sentencing range of one to six years. The advisory sentence is three years. This falls within Credit Classification B, which is available to offenders who have committed an offense that is Level 5 or above and who are not credit restricted. Credit Classification B allows the sentence to be reduced by one day for each three days served.

Practice Tip: When sentencing, a court is required under Indiana Code § 35-38-1-3 to make a record of its reasons for selecting the sentence that it imposes if it has found aggravating or mitigating circumstances.

June 26, 2014

Indiana Patent Law: Magistrate Declines to Grant Crime-Fraud Exception to Attorney-Client Privilege

Evansville, Indiana - In the matter of Berry Plastics Corp. v. Intertape Polymer Corp., Indiana patent attorneys for Berry Plastics Corporation ("Berry") invoked the crime-fraud exception to the attorney-client privilege, asking the court to compel Intertape Polymer Corporation ("Intertape") to produce documents and testimony it had withheld as privileged. Magistrate Judge William G. Hussmann, Jr. of the Southern District of Indiana denied the request.

This Indiana patent lawsuit was filed in January 2010 and seeks a declaratory judgment. Plaintiff Berry of Evansville, Indiana requested a judgment that Patent No. 7,476,416, titled Process for Preparing Adhesive Using Planetary Extruder, was invalid and unenforceable due to inequitable conduct before the U.S. Patent and Trademark Office ("USPTO") by Intertape, a company located in Bradenton, Florida.

In this current order, Magistrate Judge Hussmann addresses Berry's request to compel Intertape to produce documents and testimony that had been withheld as subject to attorney-client privilege. Indiana patent lawyers for Berry argued that this was proper because Intertape had engaged in inequitable conduct or defrauded the USPTO.

The Magistrate first emphasized that this ruling pertained only to discovery, as the question of whether Intertape had perpetrated a fraud upon the USPTO was one of the ultimate issues in the litigation. As such, that question of fact would be decided at trial by Chief Judge Richard L. Young.

The general rule in discovery is that a party to litigation is entitled to discover from his adversary "any nonprivileged matter that is relevant to any party's claim or defense." An exception to the attorney-client privilege is made when the communication between the attorney and the client is made in furtherance of a crime or fraud. To successfully invoke this exception, Berry must offer evidence demonstrating that:

1) Intertape made a false representation as to a material fact;
2) Intertape made its false representation with intent to deceive;
3) the USPTO justifiably relied upon Intertape's false representation; and
4) the USPTO suffered an injury as a consequence of its reliance on Intertape's false representation.

In an attempt to prove that the elements of the crime-fraud exception applied, Berry offered "numerous allegations and ... extensive evidence suggesting Intertape engaged in inequitable conduct or defrauded" the USPTO. Intertape responded to each allegation with "numerous defenses and extensive evidence suggesting its dealings with the USPTO were lawful and forthright."

The Magistrate held for Intertape. Citing Federal Circuit precedent, which governs the application of the crime-fraud exception to privilege in patent cases, the court called the piercing of the attorney-client privilege an "extreme remedy." The rule in such cases is that, if the court were to find Intertape's explanation satisfactory, it must leave the privilege intact. After an analysis of the defenses proffered by Intertape, the court found that Intertape's explanation for each of the allegations of fraud sufficient to avoid a piercing of the privilege.

Practice Tip: Magistrate judges are adjuncts to Article III district judges. They often dispose of pretrial matters such as motions, evidentiary hearings and pretrial conferences. However, their authority, and thus their role, in federal litigation is constrained by constitutional and statutory limits. Because the factual issue of whether Intertape committed fraud against the USPTO was one of the ultimate issues in the litigation, Magistrate Hussman expressly limited his ruling in this opinion to the discovery dispute before him. At trial, Chief Judge Young, in his role as the ultimate finder of fact, may determine that Intertape did, indeed, commit fraud.

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June 23, 2014

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

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

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

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

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

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

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

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

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

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

Practice Tip:

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

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

Under 17 U.S.C. § 504(c)(1), a copyright owner may elect actual or statutory damages. Statutory damages range from a sum of not less than $750 to not more than $30,000. The determination of the exact amount is left to the discretion of the court. In this case, Richard Bell asked the court for no less than $5,000. In some cases, courts in determining damages in cases of default judgment have granted the entire amount. In this case, the court took the additional step of considering the cost to purchase Plaintiff Bell's picture - $200 - and incorporated that into its determination of the proper amount of damages to be awarded.

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May 23, 2014

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

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

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

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

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

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

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

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

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

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

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

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

Practice Tip #2: Under 17 U.S.C. § 504(c)(1), a copyright owner may elect actual or statutory damages. Statutory damages range from a sum of not less than $750 to not more than $30,000 per infringed work.

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

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

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April 9, 2014

Indiana Copyright Litigation: Richard Bell Files Another Copyright Infringement Lawsuit

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

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

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

In his complaint, Bell lists the following claims:

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

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

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

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

 

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March 31, 2014

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

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

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

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

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

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

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

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

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

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

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

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