Federal Jurisdiction

January 9, 2014

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

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

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

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

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

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

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

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

December 30, 2013

Draft of Secret Trans-Pacific Partnership Agreement Released by WikiLeaks

By Overhauser Law Offices, LLC

WikiLeaks recently released the entire Intellectual property Rights Chapter from the secret negotiated draft text of theTrans-Pacific Partnership (“TPP”) Intellectual Property Rights Chapter. The TPP is the largest-ever economic treaty, encompassing nations representing more than 40 percent of the world’s gross domestic product (“GDP”). The WikiLeaks release of the text came ahead of the decisive TPP Chief Negotiators summit in Salt Lake City, Utah. The chapter published by WikiLeaks is perhaps the most controversial chapter of the TPP due to its wide-ranging effects on medicines, publishers, internet services, civil liberties and biological patents. Significantly, the released text includes the negotiation positions and disagreements between all 12 prospective member states.

The TPP is the forerunner to the equally secret US-EU pact, the Transatlantic Trade and Investment Partnership (“TTIP”), for which President Obama initiated US-EU negotiations in January 2013. Together, the TPP and TTIP will cover more than 60 percent of global GDP. Both pacts exclude China.

Since the beginning of the TPP negotiations, the process of drafting and negotiating the treaty’s chapters has been shrouded in an unprecedented level of secrecy. Access to drafts of the TPP chapters is shielded from the general public. Members of the U.S. Congress are able to view only selected portions of treaty-related documents in highly restrictive conditions and under strict supervision. It has been previously revealed that only three individuals in each TPP nation have access to the full text of the agreement, while 600 ‘trade advisors’ – often lobbyists for large U.S. corporations – are granted privileged access to crucial sections of the treaty text.

October 30, 2013

Second-Filed Litigation Stayed Pending Venue Ruling in First-Filed Litigation

By Overhauser Law Offices, LLC

Indianapolis, Indiana – Nexans, Inc. of New Holland, Pennsylvania sued Belden, Inc. of Richmond, Indiana in the District of Delaware. At issue were allegations of infringement of Patent Nos. 6,074,503, Making enhanced data cable with cross-twist cabled core profile; 7,135,641, Data cable with cross-twist cabled core profile; 7,977,575, High performance data cable; 5,796,046, Communication cable having a striated cable jacket; and 7,663,061, High performance data cable, which have been issued by the U.S. Patent Office. Two days after Nexans’ complaint was filed, Belden sued Nexans regarding the same patent infringement claims in the Southern District of Indiana. The Indiana court has stayed the litigation filed by Belden pending a ruling by the Delaware court.

On November 19, 2012, Nexans filed a complaint for declaratory action in the District of
Delaware against Belden seeking a declaration of non-infringement and invalidity of U.S. Patent Nos. 6,074,503 (the “‘503 Patent”), 7,135,641 (the “‘641 Patent”), and 7,977,575 (the “‘575 Patent”), as well as a judgment that Belden has infringed U.S. Patent No. 5,796,046 (the “‘046 Patent”).

On November 21, 2012, Belden sued Nexans in Indiana, alleging infringement of the ‘503, ‘575, and ‘064 Patents. It also alleged infringement of U.S. Patent No. 7,663,061 (the “‘061 Patent”). On December 3, 2012, Nexans filed an amended complaint in the Delaware action, seeking an additional declaratory judgment of non-infringement and invalidity of Belden’s ‘061 Patent.

In this opinion, Magistrate Judge Mark J. Dinsmore ruled on Nexans’ motion to stay the patent infringement lawsuit filed by Belden in Indiana. Nexans argued that a stay should be issued until the Delaware Court, as the first-filed court, had decided the issue of venue.

Judge Dinsmore first discussed the analysis appropriate to a determination of whether to stay litigation. Specifically, the following factors must be considered in deciding whether to stay an action: (i) whether a stay will unduly prejudice or tactically disadvantage the non-moving party, (ii) whether a stay will simplify the issues in question and streamline the trial, and (iii) whether a stay will reduce the burden of litigation on the parties and on the court.

In the case of duplicative patent actions, the general rule is that the first-filed action is preferred, even if it is declaratory, unless consideration of judicial and litigant economy, and the just and effective disposition of disputes, requires otherwise. Belden argued that two circumstances warranted departing from the general first-filed rule: 1) the convenience factors under 28 U.S.C. § 1404, which it argued would favor proceeding in Indiana, and 2) that Nexans’ suit in Delaware constituted forum shopping, which would allow the Indiana court to bypass the first-filed rule.

The court was not persuaded by this reasoning. Instead, it noted that, while the Seventh Circuit has approved of second-filed courts doing this analysis, and proceeding when it is in the interests of justice to do so, the Federal Circuit’s rulings control this issue in patent infringement cases. In turn, the Federal Circuit has expressly declined to apply the departure test to patent infringement cases, and has held that it prefers the first-filed rule.

The court next addressed the issue of whether the second-filed court may decide the applicability of the first-filed rule. It observed that the Federal Circuit has not yet expressly addressed whether the second-filed court may decide the applicability of the first-filed rule. While commenting that district courts have come to differing conclusions on the issue, the court was most convinced by the reasoning in those cases that have reserved the application of the first-filed rule for the first-filed court.

In concluding, the court found that it “would be at odds with the promotion of judicial and litigant economy for the court to proceed with the analysis of the exceptions to the first-filed rule.” It held that the “first-to-file rule has generally been interpreted to dictate not only which forum is appropriate, but also which forum should decide which forum is appropriate” and stayed the Indiana litigation, pending a ruling on venue from the Delaware court.

Practice Tip: The present action was stayed pending the Delaware court’s resolution of the pending motions to enjoin and dismiss. The parties in this case have been instructed to notify the Indiana court of the Delaware district court’s rulings on these motions as soon as they are issued.

June 6, 2013

Southern District of Indiana Dismisses Declaratory Judgment Suit

By Overhauser Law Offices, LLC

Indianapolis, Ind. — The Southern District of Indiana has dismissed a declaratory judgment suit filed by ZPS America, LLC of Marion County, Ind. (“ZPS”) holding that it was an impermissible attempt to secure its preferred forum in anticipation of litigation that Hammond Enterprises, Inc. of Pittsburg, Calif. (“Hammond”) had promised to initiate imminently.

ZPS manufactures the Mori-Say TMZ 642 CNC machine (“TMZ machine”), a high-precision lathe that can be configured to manufacture various precision parts. In early 2009, after discussing its requirements, Hammond purchased two TMZ machines from ZPS. Accounts vary regarding whether the TMZ machines ever performed as had been promised. Attempts were made by the parties and their attorneys to resolve the issues with the machines but settlement discussions broke down in June 2012.

On June 4, 2012, Hammond’s lawyer sent ZPS a letter stating that the machines had been misrepresented and that Hammond was only interested in “hearing back from you…that ZPS is prepared to make arrangements to accept the return of both machines. If we do not hear from you by Friday, June 15 [2012], that you are prepared to accept their return, we have been authorized to file a lawsuit against ZPS and will proceed to do so.”

On June 14, 2012, one day before the deadline in Hammond’s letter, ZPS filed suit against Hammond in Marion Circuit Court, an Indiana state court. Its complaint was for damages and declaratory judgment. It asked that the court declare that Hammond had accepted the machines and was not entitled to revoke that acceptance; its damages claim arose from nonpayment by Hammond of amounts due for filter systems that had been purchased for the TMZ machines. Notice of that suit was served on June 26, 2012.

On July 10, 2012, Hammond filed a lawsuit against ZPS in the Northern District of California, seeking damages based on claims for negligent misrepresentation, revocation of acceptance, breach of contract, breach of express warranty, and breach of implied warranty. On July 12, 2012, Hammond served ZPS with a summons and complaint. On that same day, Hammond removed the action filed by ZPS in state court to the Southern District of Indiana, asserting diversity jurisdiction.

Hammond argued to the Indiana federal court that it should exercise its discretion to dismiss the complaint on the grounds that ZPS “raced to the courthouse” to deprive Hammond, the “natural plaintiff,” of the forum of its choosing.

The Indiana federal court held that ZPS’ declaratory judgment action was impermissible, as it had been filed in anticipation of litigation, beating Hammond to the courthouse by filing the day before the deadline to settle that had been set by Hammond. The court further held that the additional state-law claim for breach of contract that ZPS had asserted did not secure a place for it in the Indiana court.

The court cited three reasons for its decision: (1) the fact that a plaintiff filed a declaratory judgment action first does not give it a right to choose the forum; (2) the plaintiff’s additional claims for affirmative or coercive relief may be filed as counterclaims in the second-filed action; and (3) the plaintiff should not be rewarded for filing a declaratory judgment action as a pre-emptive strike. The court declined to exercise jurisdiction over the matter and dismissed the case without prejudice.

Practice Tip:

Declaratory judgment actions are frequently filed in intellectual-property matters, especially patent litigation. Such a suit allows the potential defendant not only to choose its own forum, to the extent that the forum is consistent with jurisdictional restrictions, but also to remove an ever-present cloud of potential litigation and potential damages for patent infringement that may be continuing to accrue.

The Declaratory Judgment Act provides that “any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” A federal district court may, in its discretion, decline to hear a case brought under the Act, even if the court has subject matter jurisdiction.

In general, if two actions are pending in two different courts that concern the same general claims, the case filed first takes priority. However, the Seventh Circuit has never adhered to a rigid first-to-file rule. In addition, courts generally give priority to the coercive action (such as an action for damages or an injunction) over the declaratory judgment action, regardless of which case was filed first.

Courts also depart from the first-to-file rule if, as was true in this case, the declaratory judgment action is filed in anticipation of litigation by the other party. Here, rather than responding to Hammond regarding its letter, which contained a plain declaration of intent to file suit with a deadline for a response, ZPS filed suit. Only after securing a favorable forum did ZPS offer to negotiate a settlement. It was this conduct that the court held justified a dismissal of the declaratory judgment action as an improper anticipatory filing.

November 12, 2012

Three Rivers Alleges Trademark Infringement against Parker Compound Bows re: Tomahawk Bows Mark

By Overhauser Law Offices, LLC

Fort Wayne, IN – Three Rivers Archery Supply, Inc. of Ashley, Indiana, along with Dale and Sandra Karch, have filed a trademark infringement suit against Parker Compound Bows, Inc. of Virginia. The suit alleges infringement of the mark TOMAHAWK BOWS, Registration No. 3, 156,258 issued by the US Trademark Office. The plaintiff claims that Parker has been distributing crossbows using the name TOMAHAWK, which infringes their products and could be confusing to the public.”

Practice Tip: The complaint does not appear to allege sufficient facts that would give the court personal jurisdiction over the defendant Parker. It merely alleges, “On information and belief, Parker has been conducting continuous and systematic business by marketing and selling infringing bows and related materials and equipment within the State of Indiana and within the Northern District of Indiana.” It is also curious that the TOMAHAWK registration is owned by Dale and Sandra Karch individually, yet the complaint alleges that they do not sell bows – only Three Rivers Archery is alleged to sell bows.

June 26, 2012

Dillinger Sues Pour House on Lincoln for Trademark Infringement of PUBLIC ENEMY

By Overhauser Law Offices, LLC

Indianapolis; IN – Trademark attorneys for Dillinger, LLC of Mooresville, Indiana filed a complaint for injunctive relief and damages in alleging The Pour House on Lincoln, Inc. d/b/a Dillinger’s Chicago Bar & Grill, Inc. of Chicago, Illinois infringed trademark registration nos. 3,483,359 for the mark DILLINGER’S and no. 4,091,160 for the mark PUBLIC ENEMY which have been registered by the US Trademark Office.

Dillinger, LLC is owned and operated by Jeff Scalf and, according to the Complaint, is the descendant of gentleman bandit John Dillinger. Dillinger, LLC owns numerous trademark registrations for DILLINGER, JOHN DILLINGER, PUBLIC ENEMIES, and many other trademarks related to the life of John Dillinger. Dillinger, LLC is also the owner of all rights, title, and interest to both DILLINGER’S and PUBLIC ENEMIES and both marks have been used in interstate commerce in connection with restaurant and bar services as early as 2002. According to the Complaint, Dillinger, LLC has never authorized The Pour House on Lincoln d/b/a Dillinger’s Chicago Bar & Grill to use the DILLINGER or PUBLIC ENEMIES marks in any way and also alleges that in July 2010 it came to their attention that the Defendants were operating a restaurant using the DILLINGER and PUBLIC ENEMIES trademarks. Upon their knowledge of the trademark usage, Dillinger, LLC alleges that The Pour House was contacted about the infringement and in August of the same year they traveled to Indianapolis for the purpose of obtaining a license for the use of the trademarks. The Complaint states that an oral agreement was reached and reduced to writing, but never executed and yet The Pour House willfully continued its infringing usage of the DILLINGER and PUBLIC ENEMIES trademarks, specifically on their website, food and drink menus and the menus posted on the storefront. Dillinger, LLC asserts five counts for the violations of the defendants, including demand for preliminary and permanent injunction; federal trademark infringement; cybersquatting; false designation of origin, false descriptions and unfair competition; and dilution by blurring. In order to avoid any irreparable harm from the loss of reputation the DILLINGER names could suffer as a result of the unauthorized use of the trademarks and the accrual thereof, Dillinger, LLC is seeking to permanently enjoin The Pour House from using the DILLINGER and PUBLIC ENEMIES trademarks or inducing such belief, actual damages suffered as a result of the alleged trademark violations, statutory and exemplary damages, and the profits derived from the infringing activities.

Practice Tip: U.S.C. title 15, chapter 22 governs trademarks, and §1117 specifically details the relief which can be granted as a result of trademark violation.
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May 30, 2012

Tower Reinforcement Sues Crown Castle International for Patent Infringement of TOWER REINFORCEMENT APPARATUS AND METHOD

By Overhauser Law Offices, LLC

Indianapolis; IN – Patent attorneys for Tower Reinforcement of Newburgh, Indiana filed a patent infringement suit in the Southern District of Indiana alleging Crown Castle International and Crown Castle Operating of Houston, Texas, and Aero Solutions, LLC of Boulder, Colorado infringed patent no.7,849,659, TOWER REINFORCEMENT APPARATUS AND METHOD, which has been issued by the US Patent Office.

Both the Crown Defendants and Aero Solutions are incorporated outside of Indiana, but the complaint alleges they maintain substantial contacts with Indiana by regularly conducting business in the state. Tower alleges patent infringement of three of their patents–“the ‘659 patent,” “the ‘972 patent,” and “the ‘712 patent”–to which Tower owns all the rights and interest. According to Tower’s complaint, the Defendants had actual notice of the Tower patents and still infringed on the patents through their making, using, selling and the offer of sale of products utilizing Tower’s patented technology. Tower asserts that the Defendants also encourage the design and construction of the protected patents, their actions being willful and deliberate. The complaint does not give many details about specific acts of infringement. Tower alleges they have, and will continue to, suffer substantial and irreparable financial loss and is therefore seeking to permanently enjoin the Defendants from their infringing activities of their ‘659, ‘972, and ‘712 patents.

Practice Tip: The US Patent laws applicable to this suit are 35 U.S.C. §§ 1, et seq. Specifically, 28 U.S.C. §§ 1338(a) gives district courts jurisdiction in any civil action relating to patents.

May 2, 2012

Aaron Suozzi Sues Coman Publishing Company for Copyright Infringement of Photographs

By Overhauser Law Offices, LLC

Fort Wayne; IN – Copyright attorneys for Aaron Suozzi of Fort Wayne, Indiana filed a copyright infringement suit in the Allen County Superior Court alleging Coman Publishing of Durham, North Carolina infringed the copyrighted work of photographs which has been registered by the US Copyright Office. Upon the request of the defendant, the case was removed to the Northern District of Indiana.

Aaron Suozzi is a freelance photographer who provided his services to Coman Publishing. On December 8, 2011, Suozzi was informed that his services would no longer be used by Coman. He immediately demanded his photographs back and that Coman cease using his copyrighted photographs. Coman continued to use Suozzi’s copyrighted photographs; the January issue of Blue and Gold Illustrated, published on December 13, 2011 contained 16 of Suozzi’s copyrighted photographs, one being the magazine’s cover photo. According to the complaint, on December 15, Coman again informed Suozzi that they would no longer be using his services. Suozzi sent a cease and desist letter to Coman to stop using any of Suozzi’s copyrighted photographs in their magazine and on their website. Coman failed to do so. The complaint alleges Coman’s continued use of the copyrighted photographs violates Indiana Code §35-43-5-3 and that Coman’s knowing misapplication of Suozzi’s property involved substantial risk of loss to Suozzi. Suozzi seeks to recover $6,000, which includes his damages and attorney fees, plus interest, and court costs.

Practice Tip: Any case filed in state court that makes a federal claim can be removed to federal court upon request. Most intellectual property cases involve a federal claim under the federal patent, trademark or copyright laws. Here, however, the plaintiff has not explicitly stated a federal claim. However, it is clear he seeks protection of “copyrighted” photographs, which would invoke federal copyright law.

March 30, 2012

Buztronics sues Toy Investments, Inc. for Declaratory Judgment for Non-Infringement of Patents

By Overhauser Law Offices, LLC

Indianapolis, IN. Patent attorneys for Buztronics, Inc. of Indianapolis, Indiana have filed a patent suit seeking that three patents owned by Toy Smith Investments, Inc. of Sumner, Washington be declared invalid and not infringed by Buztronics’ products. The three patents, all entitled “WRIST TOY” are: 6,685,582, 6,971,963, and 7,833,115.

Buztronics alleges that Toysmith “accused Buztronics of infringement of Toysmith’s patent rights.”

Practice Tip: Declaratory judgment suits are often filed intellectual property cases after the first allegation of infringement is made. The strategy is for the accused infringer to obtain “home court advantage” by having the dispute litigated nearby. This makes it more expensive for the patent owner to litigate, because they must hire local counsel. Coincidentally, two days before Buztronics filed this suit, the Court of Appeals for the Federal Circuit issued an Order clarifying when threats of infringement rise to a level sufficient to trigger declaratory judgment jurisdiction. In 3M Company v. Avery Denison Corporation, the Court stated that declaratory judgment jurisdiction requires more than “a communication from a patent owner to a party merely identifying its patent and the other party’s product line.”

March 21, 2012

Southern District Grants Motion to Dismiss for Pacific Coast Breaker, Inc. in Trademark Infringement Suit Over Circuit Breakers with the ZINSCO Mark

By Overhauser Law Offices, LLC

Indianapolis, IN – The Southern District of Indiana has granted a Motion to Dismiss in a trademark infringement lawsuit filed by Connecticut Electric, Inc. of Anderson, Indiana alleging that Pacific Coast Breaker, Inc. of McClellan, California and and PC Systems, Inc., also of California, infringed trademark registration no. 975,845 for the mark ZINSCO registered with the US Trademark Office.

The suit involves circuit breakers sold by Pacific Coast that are manufactured in China by PC and sold only to Pacific Coast. The plaintiff claimed that Pacific previously purchased its breakers from Connecticut, but stopped purchasing circuit breakers from plaintiff and began selling circuit breakers that look “identical in appearance to the ZINSCO circuit breakers.” We previously blogged about the case here.

The court granted this motion to dismiss finding a lack of personal jurisdiction because neither of the California defendants had sufficient contact with Indiana. Connecticut had argued that there were sufficient contacts with Indiana because Pacific Coast had sold 648 circuit breakers to Indiana residents over the last five years. However, the court could not distinguish whether these Indiana sales were of the allegedly infringing product or of the authentic product. At most, the court believe only $3,780 worth of sales were allegedly infringing products, which the court concluded was not substantial enough to create personal jurisdiction.

Practice Tip: The court also rejected Connecticut’s argument for personal jurisdiction because Pacific committed intentional torts of trademark infringement, trade dress infringement, unfair competition, forgery, and counterfeiting which were directed into Indiana.