Articles Posted in New Decisions

Chicago, Illinois – Arlington Specialties, Inc. of Elk Grove Village, Illinois appealed the summary judgment granted by the U.S. District Court of Northern Illinois, Eastern Division in favor of Urban Aid, Inc. of Los Angeles, California.

The Seventh Circuit does not issue trade dress opinions very often, but it issued one January 27, 2017.  It is especially helpful because it sums up the state of trade dress law in the Circuit.

The Court affirmed a Summary Judgment in favor of a defendant accused of trade dress infringement.  The plaintiff claimed a trade dress in a “bag” that had five elements: (1) the bag’s cuboidal shape; (2) the bag’s softness; (3) the zipper’s location on the bag; (4) the “folded and tucked” corners; and (5) the seam halfway up the bag’s sides.

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Indianapolis, Indiana – The U.S. Court of Appeals for the Federal Circuit has upheld the district court’s decision and ruled in favor of Eli Lilly regarding validity and infringement of the vitamin regimen patent for Alimta® (pemetrexed for injection).

In the case of Eli Lilly and Company v. Teva Parenteral Medicines, Inc., et al., the court affirmed the earlier district court’s rulings that the vitamin regimen patent is valid and would be infringed by the generic challengers’ proposed products. If the patent is ultimately upheld through all remaining challenges, Alimta would maintain U.S. exclusivity until May 2022, preventing marketing of generic products for as long as the patent remains in force. The Alimta compound patent remains in force through January 24, 2017.

In March 2014, the U.S. Court for the Southern District of Indiana upheld the validity of the vitamin regimen patent. In August 2015, the same court ruled in Lilly’s favor regarding infringement of the vitamin regimen patent.

Indianapolis, Indiana – The Indiana Court of Appeals affirmed the judgment of the Marion Superior Court in litigation between two civil engineering firms, Plaintiff American Structurepoint Inc. and Defendant HWC Engineering Inc.  Three former employees of ASI, also listed as Defendants in the trial court, were listed in this appeal.

This dispute arose in 2014 when ASI employee Martin Knowles left ASI to join HWC as its vice president of operations.  Jonathan Day and David Lancet also left ASI to begin employment at HWC.

These former ASI employees had entered into noncompetition and non-solicitation agreements with ASI.  Despite these agreements, ASI contended in a lawsuit filed in Indiana state court that its former employees engaged in various acts prohibited by the agreements.  ASI claimed that Day had created a list of ASI employees whom he believed might be interested in leaving to join HWC.  ASI also asserted that Day subsequently shared that list with Knowles and called various ASI employees regarding employment with HWC.  ASI alleged that a total of six job offers were made by HWC to ASI employees.  ASI further introduced evidence that Knowles engaged in prohibited business-development activities with ASI clients to ASI’s detriment.

Chicago, Illinois – The Seventh Circuit Court of Appeals has ruled against Plaintiff Reginald Hart in an intellectual property lawsuit filed against Amazon.com.

Plaintiff Hart, filing pro se, sued Amazon.com, Inc. alleging various state and federal claims, including copyright infringement, aiding and abetting counterfeiting, and intentional infliction of emotional distress.  Hart, the author of two self-published books, Vagabond Natural and Vagabond Spiritual, claimed that Amazon had permitted six counterfeit copies of his books to be advertised for sale and/or sold on its website by third parties.  Hart further claimed that Amazon had “forcefully exploited” the books by counterfeiting them “for its own commercial use.”  He stated that the books, which detailed his experiences as a homeless man, would have generated “millions of dollars for Amazon” and allowed him “to end homelessness [and not only for himself] both in the U.S. and abroad.”

Hart asserted to the court that he was certain that the books were unauthorized reproductions of his works as they did not bear “indicia of authenticity known only to him.”  The indicator that a book was genuine, according to Plaintiff, was his fingernail indentations on the cover of the book.  Plaintiff provided photographs purporting to show both authorized copies of Plaintiff’s books and books alleged to be fake.  The court, however, concluded that the “two types of book are in all respects identical.”

Indianapolis, IndianaAlcon Research, Ltd. of Fort Worth, Texas and Alcon Pharmaceuticals Ltd. of Fribourg, Switzerland filed an intellectual property lawsuit in the Southern District of Indiana.  They assert infringement of two patents covering Pataday®, an ophthalmic pharmaceutical.  Pataday is covered by U.S. Patent Nos. 6,995,186 (the “‘186 patent”) and 7,402,609 (the “‘609 patent”).

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Defendant Akorn, Inc., a generic drugmaker based in Lake Forest, Illinois, filed an Abbreviated New Drug Application (“ANDA”) with the U.S. Food and Drug Administration seeking approval to manufacture and sell a generic version of Plaintiffs’ drug prior to the expiration of the two patents-in-suit.  Plaintiffs contend that the submission of this ANDA is an act of patent infringement.

In this Indiana complaint, patent lawyers for Alcon ask the court to adjudicate the following:

Fort Wayne, Indiana – The Northern District of Indiana has denied Defendant’s motion to dismiss for improper venue, citing the connection of the Northern District to the events underlying the litigation.

This Indiana trademark litigation, Family Express Corp. v. Square Donuts, Inc., was filed to resolve a dispute over the use of the words “Square Donuts” in connection with the sale of donuts by two different Indiana-based companies.

Defendant Square Donuts of Terre Haute, Indiana claims trademark rights to “Square Donuts” under federal and Indiana law. It currently sells its “Square Donuts” in bakeries located in southern and central Indiana, including locations in Terre Haute, Indianapolis, Bloomington, and Richmond.

Plaintiff Family Express of Valparaiso, Indiana operates convenience stores in northern Indiana and uses the term “Square Donuts” in conjunction with doughnut sales. Plaintiff states that both it and Defendant are expanding their respective businesses into new markets, with Defendant expanding to the north while Plaintiff expands to the south. Thus, territory in which both operate concurrently has become a possibility.

In 2006, Defendant sent a cease-and-desist letter to Plaintiff. Plaintiff and Defendant subsequently discussed the possibility of entering into a co-existence arrangement, but did reach an agreement.

This trademark lawsuit followed. Plaintiff asks the Indiana federal court to declare that its use of the term does not infringe on the trademark rights in “Square Donuts” asserted by Defendant. Plaintiff also asks the court to cancel Defendant’s existing Indiana and federal “Square Donuts” trademarks.

Trademark litigators for Defendant asked the court to dismiss the lawsuit, claiming that it had been filed in an improper venue. In evaluating whether venue in the Northern District was permissible, the court first noted that, while it “must resolve all factual disputes and draw all reasonable inferences in the plaintiff’s favor,” Plaintiff then bears the burden of establishing that venue is proper. It also noted that venue can be proper in more than one district.

The federal venue statute, 28 U.S.C. § 1391(b), provides that venue can exist in “(1) a judicial district in which any defendant resides, if all defendants reside [in the same state]” or “(2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of the property that is the subject of the action is situated.”

Plaintiff relied on subsection (b)(2), claiming that a substantial part of the events giving rise to the lawsuit took place in the Northern District of Indiana. To establish venue, Plaintiff pointed to the fact that Defendant’s cease-and-desist letter and other communications had been relayed to Plaintiff in the Northern District. At least some rulings by districts courts located within the Seventh Circuit have held that the requirements for venue “may be satisfied by a communication transmitted to or from the district in which the cause of action was filed, given a sufficient relationship between the communication and the cause of action.”

The Northern District of Indiana concluded that such communications, which would be a typical element of litigation under the Declaratory Judgment Act, would defeat the purpose of protecting a defendant from having to litigate “in the plaintiff’s home forum, without regard to the inconvenience to the defendant at having to defend an action in that forum or whether the defendant has engaged in substantial activities in that forum.”

Instead, the Indiana court considered the underlying substance of the dispute: “whether the Defendant’s Square Donuts trademark is valid and, if it is, whether the Plaintiff nevertheless has refrained from infringing on the trademark in connection with the sale of its Square Donuts.” The court concluded that, given the extent to which the claims and events at issue in the litigation took place in both the Northern and the Southern District of Indiana, venue was not improper in the Northern District of Indiana.

Practice Tip #1: If neither subsection (b)(1) nor (b)(2) of 28 U.S.C. § 1391 applies, a third subsection may be utilized. That subsection, 28 U.S.C. § 1391(b)(3), permits venue in “any judicial district in which any defendant is subject to the court’s personal jurisdiction with respect to such action.”

Practice Tip #2: An inquiry into proper venue for a lawsuit is different from one into personal jurisdiction. Personal jurisdiction “goes to the court’s power to exercise control over a party,” while venue is “primarily a matter of choosing a convenient forum.”

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Chicago, Illinois – The Seventh Circuit Court of Appeals ruled against Plaintiffs Slep-Tone Entertainment Corp. and its successor in interest Phoenix Entertainment Partners LLC (collectively, “Slep-Tone”) in a Lanham Act lawsuit asserting trademark infringement and trade dress infringement.

Trademark attorneys for serial litigant Slep-Tone have filed more than 150 lawsuits throughout the country under the Lanham Act alleging unauthorized copying and performance of Slep-Tone’s karaoke tracks. Slep-Tone contends that such activities constitute trademark infringement and trade dress infringement.

This federal litigation springs from a technology upgrade available to Slep-Tone customers. Earlier formats on which karaoke songs were offered included CD+G compact discs (with the +G referring to the graphic component) and MP3+G media. With the advent of large-capacity hard drives, some customers opted to transfer the files contained on their lawfully purchased CD+G or MP3+G to a hard drive, a practice known as “media shifting.” Because many compact discs can be stored on one hard drive, media shifting removed the need to swap between multiple discs to access different songs. This transfer was permitted by Slep-Tone as long as the customers notified Slep-Tone, agreed to certain terms that restricted multiple copies from being made and agreed to submit to an audit to certify compliance with Slep-Tone’s media-shifting policy.

In this lawsuit, filed against Defendants Basket Case Pub, Inc. of Peoria, Illinois and Dannette Rumsey, its president and owner, Slep-Tone alleged that Defendants violated the media-shifting policy. This, it asserted, resulted in an improper “passing off” of illegitimate “bootleg” copies of tracks as genuine Slep-Tone tracks.

Slep-Tone contended that when these unauthorized copies were played by Defendants, the pub’s customers would be confused, believing that “they are seeing and hearing a legitimate, authentic Slep-Tone track, when in fact they are seeing an unauthorized copy.” This conduct, it claims, is prohibited trademark and trade dress infringement.

A district court in the Central District of Illinois concluded that Slep-Tone had not plausibly alleged that Defendants’ conduct resulted in consumer confusion as to the source of any tangible good sold in the marketplace and dismissed Plaintiffs’ complaint.

The Seventh Circuit agreed. While the appellate court granted that Slep-Tone may have had a plausible complaint of copyright infringement for “theft, piracy, and violation of Slep-Tone’s [media-shifting] policy,” consumer confusion is the touchstone of trademark infringement and such confusion was not present. It stated:

What pub patrons see and hear is the intangible content of the karaoke tracks. They will see Slep-Tone’s trademark and trade dress and believe, rightly, that Slep-Tone is the source of that intangible content. But patrons will neither see nor care about the physical medium from which the karaoke tracks are played; consequently, any confusion is not about the source of the tangible good containing the karaoke tracks.

Because Slep-Tone’s assertions did not constitute trademark infringement or trade dress infringement, the Seventh Circuit affirmed the district court’s dismissal of the lawsuit.

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Chicago, Illinois – The Seventh Circuit ruled in the ongoing intellectual property litigation between Plaintiff Lightspeed Media Corp. and Defendants Anthony Smith et al.

Attorneys for Lightspeed Media Corp. have filed numerous lawsuits nationwide in an apparent attempt to extract quick settlements from individual users who would rather avoid litigating their pornography consumption in open court. After pushback from Defendants and their internet service providers, as well as the imposition of sanctions by the Central District of California in a similar case, the attorneys began to voluntarily dismiss some of the cases.

The litigation against Defendant Smith was one such dismissed lawsuit. After the dismissal, Smith filed a motion for attorney’s fees. The Southern District of Illinois found that the Lightspeed lawsuit had been frivolous, baseless, and “smacked of bullying pretense,” and imposed sanctions of $261,025.11, jointly and severally, against three lawyers for Lightspeed: Paul Hansmeier, John Steele, and Paul Duffy.

Much legal wrangling ensued. While pleading to the court an inability to pay the sanctions, Steele withdrew over $300,000 from an account that he shared with his wife. Hansmeier withdrew a similar amount from one of his accounts. Each of these transfers was apparently an attempt to conceal the funds from the court and Smith. Other actions, also apparent attempts to conceal the funds, were also taken by the attorneys. Following these actions, Hansmeier filed for bankruptcy and Duffy passed away.

The Seventh Circuit was asked to consider the appropriateness of the sanction against the three attorneys. It declined to hear the matter as to Duffy, stating that because he was deceased he was “beyond [their] jurisdiction.” The appeals court dismissed the appeal as to Hansmeier, noting that, in a liquidation proceeding under Chapter 7 of the bankruptcy code, “only the trustee [of the bankruptcy estate] has standing to prosecute or defend a claim belonging to the estate.”

After a review of multiple instances of discovery misconduct, the appellate court held that the district court had acted within its discretion in imposing a discovery sanction against Steele for what it called a “pattern of vexatious and obstructive conduct” and “obviously egregious behavior.”

The appellate court then turned to the matter of the contempt sanction against Steele. Steele argued that the sanction was in fact criminal in nature, not civil. Thus, he contended, the district court had failed to abide by the enhanced procedural safeguards required for such a sanction.

The Seventh Circuit agreed. It held that, while “civil contempt may be imposed if proven by clear and convincing evidence, and without the full criminal procedural process,” imposing criminal contempt required more. Specifically, it required that the contemnor be “afforded the protections that the Constitution requires of such criminal proceedings.”

The appellate court also held that the fine, as ordered by the district court, was not “designed either to compel the contemnor into compliance with an existing court order or to compensate the complainant for losses sustained as a result of the contumacy,” as was appropriate for a finding of civil contempt. Instead, the sanctions that had been levied against Steele were punitive in nature, and “meant to vindicate the authority of the court.” Thus, they were properly deemed criminal sanctions.

Concluding that the procedures required under the Constitution for criminal contempt had not been applied, the Seventh Circuit vacated the contempt sanction.

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Washington, D.C. – In the matter of Kirtsaeng v. John Wiley & Sons, Inc., the U.S. Supreme Court unanimously held that, among the factors considered in awarding attorneys’ fees under the Copyright Act, courts must give substantial weight to the objective reasonableness of the losing party’s position.

The Court was not persuaded that special consideration should be given to whether the lawsuit resolved important and close legal issues, expressing doubt that fee shifting will encourage parties to litigate such issues. While the Second Circuit test is close to what the Supreme Court prescribes, Justice Kagan wrote, in the Second Circuit, “substantial weight” has become “dispositive weight.” However, the Court also stressed that all circumstances of the case must be considered in light of the goals of the Copyright Act, acknowledging that fees may be warranted despite the objective reasonableness of the losing party’s position.

The decision is consistent with the position advocated in an AIPLA amicus brief filed in this case.

Background

Supap Kirtsaeng, born in Thailand, attended college in the United States. While he was studying in the United States, Kirtsaeng asked his friends and family in Thailand to buy and mail to him copies of foreign edition English language textbooks at Thai book shops, where they are sold at low prices. When publisher John Wiley & Sons (“Wiley”) learned about Kirtsaeng’s sales in the United States at low prices, it sued Kirtsaeng for copyright infringement.

In 2013, the Supreme Court ruled in favor of Kirtsaeng, concluding that Wiley’s sales of the books in Thailand exhausted its copyright interest in the U.S. sales under the first sale doctrine. On remand, Kirtsaeng’s motion for attorneys’ fees was denied. In affirming the decision, the Second Circuit relied on the objective reasonableness of Wiley’s position that the first sale doctrine did not apply to extra-territorial transactions.

Kirtsaeng asked the Supreme Court to review the attorney fee decision.

Competing Factors

Justice Kagan noted that Section 505 of the Copyright Act states that district courts “may” award attorneys’ fees to the prevailing party in copyright litigation, but said that the statute provides no standards for deciding when such awards are appropriate. Guidance for fee awards can be found in the Court’s decision in Fogerty v. Fantasy, Inc, she added, which includes a non-exclusive list of factors that further the goals of the Copyright Act.

In this litigation, each party asserted a factor believed to merit substantial weight: for Kirtsaeng, it is whether the lawsuit resolved an important and close legal issue; for Wiley, it is whether the position unsuccessfully argued by the losing party was objectively reasonable.

The Court concluded that the objective reasonableness of the losing party’s position is more important than the lawsuit’s role in settling a significant and uncertain legal issue. According to Justice Kagan, Wiley’s proposal “both encourages parties with strong legal positions to stand on their rights and deters those with weak ones from proceeding with litigation.” The copyright holder with no reasonable infringement claim has good reason not to sue in the first instance, she explained, and the infringer with no reasonable defense has every reason to give in quickly, before each side’s litigation costs mount.

By contrast, the Court continued, Kirtsaeng’s proposal would not produce any sure benefits. While litigation of close cases can advance the public interest by helping to clearly demarcate the boundaries of copyright law, it is not clear that fee shifting will necessarily, or even usually, encourage parties to litigate those cases to judgment, according to the Court. Justice Kagan explained as follows:

Fee awards are a double-edged sword: They increase the reward for a victory–but also enhance the penalty for a defeat. And the hallmark of hard cases is that no party can be confident if he will win or lose. That means Kirtsaeng’s approach could just as easily discourage as encourage parties to pursue the kinds of suits that “meaningfully clarif[y]” copyright law. … It would (by definition) raise the stakes of such suits; but whether those higher stakes would provide an incentive–or instead a disincentive–to litigate hinges on a party’s attitude toward risk. Is the person risk-preferring or risk-averse–a high-roller or a penny-ante type? Only the former would litigate more in Kirtsaeng’s world. … And Kirtsaeng offers no reason to think that serious gamblers predominate. … So the value of his standard, unlike Wiley’s, is entirely speculative.

What is more, Wiley’s approach is more administrable than Kirtsaeng’s. A district court that has ruled on the merits of a copyright case can easily assess whether the losing party advanced an unreasonable claim or defense. That is closely related to what the court has already done: In deciding any case, a judge cannot help but consider the strength and weakness of each side’s arguments. By contrast, a judge may not know at the conclusion of a suit whether a newly decided issue will have, as Kirtsaeng thinks critical, broad legal significance. The precedent-setting, law-clarifying value of a decision may become apparent only in retrospect–sometimes, not until many years later. And so too a decision’s practical impact (to the extent Kirtsaeng would have courts separately consider that factor). District courts are not accustomed to evaluating in real time either the jurisprudential or the on-the-ground import of their rulings. Exactly how they would do so is uncertain (Kirtsaeng points to no other context in which courts undertake such an analysis), but we fear that the inquiry would implicate our oft-stated concern that an application for attorney’s fees “should not result in a second major litigation.”

Substantial, But Not Dispositive, Factor

All of that said, objective reasonableness can be only an important factor in assessing fee applications–not the controlling one, Justice Kagan cautioned. “Although objective reasonableness carries significant weight, courts must view all the circumstances of a case on their own terms, in light of the Copyright Act’s essential goals,” she wrote.

The Court particularly acknowledged the serious concerns raised over the Second Circuit approach. While it frames the inquiry in a similar way, the Second Circuit language at times suggests that a presumption against a fee award arises from a finding of reasonableness. That perspective goes too far in limiting the district court’s analysis, according to the Court, observing that district courts in the Second Circuit appear to have turned “substantial” weight into something closer to “dispositive” weight. In particular, the Court acknowledged that hardly any of those decisions have granted fees when the losing party raised a reasonable argument (and none have denied fees when the losing party failed to do so).

Without suggesting that a different conclusion be reached, the Court vacated and remanded the case for further consideration in line with this analysis.

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Evansville, Indiana – In the matter of Berry Plastics Corporation v. Intertape Polymer Corporation, Judge Richard L. Young of the Southern District of Indiana ruled on Defendant Intertape’s motion to reconsider the court’s conclusion of patent invalidity on the grounds of obviousness.

This Indiana patent litigation, filed in January 2010, sought a declaratory judgment of non-infringement of U.S. Patent No. 7,476,416 (the “‘416 patent”). Plaintiff Berry Plastics Corp. sued competitor Intertape Polymer Corp., which owns the ‘416 patent.

In the complaint, Berry asked the federal court to rule that it had not infringed the patent-in-suit, titled Process for Preparing Adhesive Using Planetary Extruder. In the alternative, it asked that the court rule that the patent was invalid and unenforceable. Among the reasons cited for this proposed conclusion were assertions that Intertape had engaged in improper conduct before the U.S. Patent and Trademark Office and that the patent was invalid as obvious.

The court held a jury trial in November 2014. The jury found, inter alia, that the ‘416 patent was not obvious. After the trial, the court heard additional argument on the issue of the validity of the patent and ruled for Berry, holding that the patent-in-suit was invalid as obvious.

In this recent entry, the court rules on Intertape’s motion to reconsider on the grounds that the court had ruled too broadly, inadvertently invalidating the entire patent instead of addressing only the asserted claims presented at trial. The court held that it was permitted under Fed. R. Civ. P. 54(b) to modify its previous order (“[A]ny order or other decision … that adjudicates fewer than all the claims …does not end the action as to any of the claims or parties and may be revised at any time before the entry of a judgment adjudicating all the claims …. “). It also concluded that, under Fed. R. Civ. P. 50, it had the authority to enter judgment against a party after a jury trial as long as “a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue.”

The court first held that certain dependent claims had not been challenged as invalid at trial and, consequently, the court had no jurisdiction to rule on the validity of those claims. On these claims, it granted the motion to reconsider.

Regarding those dependent claims that had been asserted at trial, the court evaluated the evidence and testimony presented and concluded that the dependent claims added no patentable subject matter but were instead simply obvious selections of prior art used in an ordinary way. Consequently, the court denied Intertape’s motion to reconsider.

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