Articles Posted in Damages

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Washington, D.C. -The United States Supreme Court has agreed to hear appeals in two separate lawsuits, Halo Electronics, Inc. v. Pulse Electronics, Inc., et al., Case No. 14-1513, and Stryker Corp, et al. v. Zimmer, Inc., et al., Case No. 14-1520, on the issue of willfulness as a prerequisite for awarding enhanced damages in patent infringement litigation. The two cases were consolidated.

Under 35 U.S.C. § 284 of the Patent Act, a district court “may increase … damages up to three times the amount found or assessed.” Despite this language, which on its surface is permissive and discretionary, the Federal Circuit imposes a stricter test. For a district court to award enhanced damages under § 284, this test requires that a patentee prove by clear and convincing evidence that infringement was “willful.” A determination of willfulness requires a finding of both (1) an objectively high likelihood that the infringer’s actions constituted infringement, and (2) that this likelihood was either known or so obvious that it should have been known to the accused infringer.

The questions presented to the Supreme Court are:

1. Has the Federal Circuit improperly abrogated the plain meaning of 35 U.S.C. § 284 by forbidding any award of enhanced damages unless there is a finding of willfulness under a rigid, two-part test, when this Court recently rejected an analogous framework imposed on 35 U.S.C. § 285, the statute providing for attorneys’ fee awards in exceptional cases?

2. Does a district court have discretion under 35 U.S.C. § 284 to award enhanced damages where an infringer intentionally copied a direct competitor’s patented invention, knew the invention was covered by multiple patents, and made no attempt to avoid infringing the patents on that invention?

The Court granted motions by Independent Inventor Groups and Nokia Technologies OY, et al. to file briefs as amici curiae.

Practice Tip: In December 2014, the Federal Circuit overturned the decision of the Western District of Michigan to triple the damages awarded to Stryker, reducing the amount from $228 million to $70 million.

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Indianapolis, Indiana – Plaintiff and Indiana copyright attorney Richard Bell of McCordsville, Indiana was ordered by Judge Tanya Walton Pratt of the Southern District of Indiana to pay almost $34,000 in attorney’s fees and costs to Defendant Charles Lantz, whom Bell had sued on unsupported allegations of copyright infringement.

Indiana copyright attorney Richard Bell, who is also a professional photographer, has sued hundreds for copyright infringement. The lawsuits began in 2011. At issue in Bell’s spate of litigation were allegations of unauthorized use of his copyrighted photograph of the Indianapolis skyline, which had been registered at the U.S. Copyright Office. The ongoing saga of this multiplicity of copyright lawsuits took an interesting, if unsurprising, turn last week.

According to an article in The Indiana Lawyer, Bell has said that most Defendants whom he has sued have settled early. Acknowledging the expense of litigation – and the relative ease of escaping litigation by simply paying a settlement without any finding of liability – Bell said, “A responsible lawyer and their clients, they obviously know it’s going to be far more expensive to try it.”

A current copyright-infringement lawsuit, filed January 8, 2013 by Bell, named forty-seven Defendants. Forty-six of those Defendants were dismissed from the lawsuit, including some who settled and some against whom a default judgment was issued. Default judgments of $2,500 were awarded in this litigation.

One Defendant, Charles Lantz, refused to pay for copyright infringement that he had not committed and hired Indiana intellectual property attorney Paul Overhauser (publisher of this blog) to defend him. In December 2014, Lantz’s perseverance paid off and the court granted an unopposed motion for voluntary dismissal of the litigation against Lantz. Last week, Lantz’s perseverance paid off again when Overhauser, on behalf of Lantz, sought and was awarded $33,974.65 in attorney’s fees and costs from Plaintiff Bell.

The court explained that, because Bell’s copyright litigation against Lantz had been dismissed with prejudice, Lantz became the “prevailing party” under the Copyright Act. Under 17 U.S.C. § 505, in any civil copyright action, the district court may award litigation costs, including attorney’s fees, to the prevailing party.

In evaluating whether to exercise its discretion to award such costs to Lantz, the court stated, “Defendants who defeat a copyright infringement action are entitled to a strong presumption in favor of a grant of fees.” The court looked to the Fogerty factors, which are so named after Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994), a U.S. Supreme Court case involving the shifting of costs in copyright litigation. These factors are nonexclusive and include: “(1) the frivolousness of the action; (2) the losing party’s motivation for filing or contesting the action; (3) the objective unreasonableness of the action; and (4) the need to advance considerations of compensation and deterrence.”

The court found that each of these factors weighed against Bell. It stated that Bell had possessed no evidence against Lantz that would prove either a conversion or a copyright claim. It also characterized Bell’s motivation for filing the lawsuit as “questionable,” noting that Bell had attempted to save himself “extensive filing fees” by improperly joining defendants and had “sued forty-seven defendants and then quickly offered settlements to defendants who were unwilling to pay for a legal defense.”

Regarding the third and fourth factors, the court held that the litigation was objectively unreasonable, given that Lantz had been sued “without any evidence to support the claims.” The court then turned to the last of the Fogerty factors, the need to advance considerations of compensation and deterrence. It noted that Bell had leveraged his status as a practicing attorney “to file meritless suits and to attempt to outmaneuver the legal system” (which was perhaps a hat tip to the now-famous opinion written by Judge Otis D. Wright III, who employed similar language against another copyright plaintiff widely regarded as a copyright troll).

Finally, the court was not swayed by Bell’s assertions that Lantz had failed to inform Bell that the wrong defendant had been sued and that Lantz had incurred unnecessary attorney’s fees. In response to these claims, the court noted that Lantz had “denied liability at his first opportunity.” The court also opined that, while defense counsel is not required to take the most economical defense strategy in defending a copyright lawsuit, it appeared that the “most economical approach feasible” may have been taken.

With all Fogerty factors weighing against Bell and no viable opposition permitting either an escape from fees and costs or a lessening of the amount, the court awarded to Defendant Lantz $33,974.65, the full amount requested.

Practice Tip: The Indiana Lawyer wrote an interesting piece regarding Judge Pratt’s order. That article may be viewed here.

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Coach-Picture.jpgSouth Bend, IndianaChief Judge Philip P. Simon of the Northern District of Indiana ordered Defendants The Treasure Box, Inc. and Heather Hiatt, both of Elkhart, Indiana to pay statutory damages, attorney’s fees and costs to Coach, Inc. of New York, New York and Coach Services, Inc. of Jacksonville, Florida for trademark infringement and counterfeiting.

By way of summary judgment, the court had earlier determined in this Indiana trademark and counterfeit litigation that Defendants The Treasure Box and Hiatt were liable for the trademark infringement and trademark counterfeiting of Plaintiff Coach’s trademarks. The court’s summary judgment determinations also included a finding that “The Treasure Box and Heather Hiatt acted with knowledge and intent” that was sufficient to support enhanced statutory damages. In this opinion and order, the court fixed the amount due to Coach from Defendants.

Instead of requesting actual damages resulting from Defendants’ trademark infringement and counterfeiting within Indiana, Coach opted for statutory damages under §1117(c). It asked the court for damages of $100,000 for each of the 15 infringing marks, for a total of $1,500,000. The Treasure Box and Hiatt, unrepresented by counsel at the time, filed no response or opposition to Coach’s damages request.

The court first addressed the proper measure of damages. Statutory damages for trademark infringement and trademark counterfeiting under 15 U.S.C. §1114 are limited to:

(1) not less than $1,000 or more than $200,000 per counterfeit mark per type of goods…, as the court considers just; or
(2) if the court finds that the use of the counterfeit mark was willful, not more than $2,000,000 per counterfeit mark per type of good…, as the court considers just.

Because the statute provides little guidance regarding what constitutes a “just” award, the court referred to the relevant factors under the analogous statutory damages provision in the Copyright Act, 17 U.S.C. §504(c). These considerations include: the profits reaped by the infringer; the revenues lost by the plaintiff; the value of the trademarks; whether the infringing conduct was willful; the duration of the infringement; and the potential deterrent effect on the defendant and others.

The court considered each factor in turn. It found that, because The Treasure Box’s operations were both brief and “even trivial” in scale, neither Defendants’ profits nor Coach’s lost revenue supported a large statutory damages award. Instead, the court cited Nimmer on Copyright for the proposition that statutory damages “should be woven out of the same bolt of cloth as actual damages.” “Statutory damages,” said the court, “should represent some approximation of actual damages and are not to represent a windfall to a prevailing plaintiff.”

In contrast, the factors of “value of the trademarks” and “willful conduct” weighed against Defendants. The court acknowledged that the Coach trademarks were valuable and noted that, in determining statutory damages, other courts had valued the trademarks at between $2,000 per mark and $30,000 per mark, for an average of approximately $14,000 per mark. Moreover, it characterized Hiatt’s infringement as having been pursued with “bold willfulness” with regard to her efforts to sell what she knew was knock-off Coach merchandise.

The last two considerations – duration of infringement and potential deterrent effect on Defendant and others – weighed against a large award of damages. The Treasure Box had operated for only three months, closing in late 2011. Such a brief term of infringement, as well as the court’s conclusion that Hiatt and the defunct The Treasure Box were now apparently beyond deterrence, militated in favor of lower damages. Regarding deterrence for others, the court stated, “Mom & Pop operators such as the Hiatts could doubtless be deterred from similar conduct by much less frightful sums than the $1.5 million Coach requests.”

The court concluded that an award of $3,000 per trademark for each of the 15 counterfeited trademarks at issue, for a statutory damages award of $45,000, was appropriate.

The court was also asked to award to Coach attorney’s fees of $14,780 pursuant to §1117(a)(3). This section permits a court “in exceptional cases” to award reasonable attorney’s fees to the prevailing party. The court first noted the ambiguity inherent in the placement of §1117(a)(3) within the statute. Specifically, subsection (a) addresses recovery for actual damages, while subsection (c) allows a plaintiff to opt for statutory damages. Here, Coach chose an award of statutory damages under subsection (c), which raised the question of whether the provision for attorney’s fees under §1117(a)(3) could be applied.

The only Court of Appeals to have addressed the question was the Second Circuit. That court concluded that subsection (c) offers an election as to the basis for damages, but not an election regarding remedies, including attorney’s fees. Thus, it concluded, a court could award attorney’s fees in conjunction with an award for either actual or statutory damages. Chief Judge Simon adopted the Second Circuit’s reasoning. He also determined that the definition of an “exceptional” case – for example, one in which “the losing party was the defendant and had no defense yet persisted in trademark infringement” – was also met, given the willfulness of Defendants’ knowing sale of counterfeit Coach goods and that Defendants had no viable defense.

In addition to the statutory damages award of $45,000, the court awarded attorney’s fees of $14,780 as well as expenses and costs of $1,076.16 to Coach. The judgments were entered against Treasure Box, Inc. and Heather Hiatt jointly and severally.

Practice Tip: Chief Judge Simon noted that Coach had a history of requesting statutory damages that were considerably in excess of what was eventually awarded by the courts in other cases. In Coach, Inc. v. Paula’s Store Sportwear LLC, 2014 WL 347893 (D.N.J. Jan. 31, 2014), Coach requested $800,000 in statutory damages – $100,000 for each of eight counterfeited marks – at a shop from which four counterfeit Coach wallets and two counterfeit Coach handbags had been seized. In that litigation for counterfeiting, the court noted that the retail value of the six counterfeit items was less than $1500 and awarded $5000 for each of the eight marks that had been counterfeited, multiplied by the two types of goods, for a total statutory damages award of $80,000.

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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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Washington, D.C. – Public meetings called for in U.S. Commerce Department’s Green Paper on “Copyright Policy, Creativity, and Innovation in the Digital Economy” will be held in Tennessee, Massachusetts and California.

The U.S. Department of Commerce’s Internet Policy Task Force will host roundtable discussions in cities around the country on several copyright Internet policy topics, as part of the work envisioned in the Green Paper. The purpose of the roundtables is to engage further with members of the public on the following issues: (1) the legal framework for the creation of remixes; (2) the relevance and scope of the first sale doctrine in the digital environment; and (3) the appropriate calibration of statutory damages in the contexts of individual file sharers and of secondary liability for large-scale infringement.

The roundtables, which will be led by the U.S. Patent and Trademark Office (“USPTO”) and the National Telecommunications and Information Administration (NTIA), will be held in Nashville, Tennessee on May 21, 2014, Cambridge, Massachusetts on June 25, 2014, Los Angeles, California on July 29, 2014, and Berkeley, California on July 30, 2014.

Miami, Florida – The Third District Court of Appeal for the State of Florida heard the appeal of Gulliver Schools, Inc. (“Gulliver”) and School Management Systems, Inc. in the age-discrimination and retaliation lawsuit of Patrick Snay. Appellants prevailed on their claim that Mr. Snay had breached the confidentiality clause of the settlement agreement, thus gulliver Stamp picture.jpgeliminating Gulliver’s obligation to pay portions of the settlement amount.

Patrick Snay, formerly the headmaster of Gulliver, sued for age discrimination and retaliation when Gulliver did not renew his contract for the 2010-2011 school term. The dispute was settled and the parties executed a release for the full and final settlement of Snay’s claims. Under the settlement, the school would pay $10,000 in back pay and $80,000 to Snay to settle the matter, as well as $60,000 for Snay’s legal fees.

As part of the settlement, Snay agreed to a detailed confidentiality clause, which provided that the existence and terms of the agreement between Snay and the school were to be kept strictly confidential and that, should Snay or his wife breach the confidentiality provision, a portion of the settlement proceeds (the $80,000) would be disgorged by Snay to Gulliver. This provision read, in pertinent part: “[T]he plaintiff shall not either directly or indirectly, disclose, discuss or communicate to any entity or person, except his attorneys or other professional advisors or spouse any information whatsoever regarding the existence or terms of this Agreement . . . A breach . . . will result in disgorgement of the Plaintiffs [sic] portion of the settlement Payments.”

Shortly after the agreement was signed, Snay informed his daughter that his lawsuit against Gulliver had been settled and that he was happy with the result. Snay’s daughter posted news of the agreement on Facebook, “Mama and Papa Snay won the case against Gulliver. Gulliver is now officially paying for my vacation to Europe this summer.” This Facebook post was available for viewing by approximately 1,200 of Snay’s daughter’s Facebook friends, many of whom were either current or past Gulliver students.

Gulliver learned of the Facebook post. Four days after the agreement was signed, Gulliver notified Snay that it considered the Facebook post to be a material breach of the agreement. Gulliver stated that, while it would pay the amount of the settlement which constituted attorneys’ fees, it would not pay any of Snay’s portion as a result of the breach of the confidentiality clause.

Snay moved to enforce the settlement agreement, arguing that his statement to his daughter and her comment on Facebook did not constitute a breach. The trial court agreed, finding that neither Snay’s comments to his daughter nor his daughter’s Facebook comments constituted a breach of the confidentiality agreement.

Gulliver appealed. The appellate court held that the plain language of the contract prohibited the disclosure that Snay had made, stating “before the ink was dry on the agreement, and notwithstanding the clear language . . . mandating confidentiality, Snay violated the agreement by doing exactly what he had promised not to do.” Moreover, the court noted that the significance of confidentiality to Gulliver was evinced by the fact that the majority of the proceeds of the settlement agreement expressly hinged on compliance with the confidentiality provision.

Based on the clear and unambiguous language of the parties’ agreement and Snay’s subsequent testimony that he had, in fact, breached the confidentiality provision, the appellate court found for Gulliver and reversed the trial court’s order granting the Snays’ motion to enforce the settlement agreement.

Practice Tip:

It’s not hard to see how this happened. As parents, the Snays recognized that it was important to inform their daughter of the resolution of this matter. Not only was this settlement significant to Mr. Snay, but the news that a satisfactory resolution had been reached also was presumably intended to assist his daughter in dealing with the difficulties she had apparently encountered as a result of the dispute with Gulliver. According to Mr. Snay, these difficulties had left his daughter with “quite a few psychological scars which forced [him] to put her into therapy.” It is also not difficult to imagine that, feeling vindicated, the Snays’ college-aged daughter would do what many people that age do with big news: she posted it on Facebook.

In situations such as these, contract attorneys must take special care to provide whole-picture legal counseling to their clients, both during settlement negotiations and after. It was not unforeseeable that Mr. or Ms. Snay would inform their daughter of the settlement. Nor was it unforeseeable that she would, in turn, want to share the news with her friends. Presumably, the Snays’ daughter had not realized the importance of confidentiality.

Here, this problem might have been avoided. First, in drafting the confidentiality clause, release of the information to the daughter could have been included. Thus, Mr. Snay would not have signed an agreement that he presumably knew – as he was signing it – that he would soon violate. Second, an explicit and dire warning by the settlement attorney representing Mr. Snay should have been given to anyone privy to the settlement to lessen the chance of an inadvertent breach of the contract, for example: “You, your wife and your daughter absolutely must adhere to the provisions of the confidentiality clause or you could lose some or all of the benefits of this settlement agreement.”

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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.          

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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.

 

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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.

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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 Logo.pnginfringement 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:

  1. whether the infringer deliberately copied the patentee’s ideas or design;
  2. whether the infringer investigated the scope of the patent and formed a good faith belief that it was invalid or not infringed;
  3. the infringer’s conduct during litigation;
  4. the infringer’s size and financial condition;
  5. closeness of the case;
  6. duration of the infringing conduct;
  7. remedial actions, if any, taken by the infringer;
  8. the infringer’s motivation for harm; and
  9. 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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