BLOGS: Georgia IP Litigation

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Wednesday, June 3, 2015, 3:28 PM

Obligation to Enforce Arbitration under FAA Policy Trumps Motion to Prevent Enforcement of “Clearly Void” Non-Competition Agreement

On May 20, 2015, Judge Dudley H. Bowen of the United States District Court for the Southern District of Georgia, entered an order denying the Motion for Preliminary and Permanent Injunction filed by one of the plaintiffs (Christopher Hermann) and granting in part the motion for dismissal and to compel arbitration filed by Defendant Unishippers Global Logistics, LLC (“Unishippers”). Mr. Hermann’s motion sought to prevent Unishippers from claiming that he was in violation of a covenant not to compete agreement signed with MSA which had originally made Unishippers a third party beneficiary (the “Non-competition Agreement”).  Mr. Hermann asserted the Non-competition Agreement was invalid and unenforceable.

The case was initiated by one corporate (Morning Star Associates, Inc.) and three individual franchisees (collectively “MSA”) against their franchisor, Unishippers, following the termination of three franchise agreements. MSA alleged several claims largely based on Unishippers termination of the franchise agreements under one provision and then pursing enforcement of inconsistent, waived provisions. Both the franchise agreements and the Non-competition Agreement contained arbitration provisions.

The Court noted that it “must ‘construe arbitration clauses generously, resolving all doubts in favor or arbitration.” Becker v. Davis, 491 F.3d 1292, 1305 (11th Cir. 2007). The author notes that the 11th Circuit and the State of Georgia lead the country in enforcement of arbitration provisions and hospitality to non-resident claimants and their representatives. The Atlanta International Arbitration Society.[1]

MSA challenged enforcement of the arbitration provisions on four grounds: (1) the FAA exempts transportation workers, (2) the Non-competition Agreement was waived or invalid, (3) Unishippers has no valid agreement to arbitration, and (4) the claims are outside the scope of the Franchise Agreements’ arbitration provisions.

The FAA Exemption. The Court noted that the asserted exemption was to be “narrowly construed to apply only to ‘transportation workers; and not to employment contracts in general,” quoting Hill v. Rent-A-Center, Inc., 298 F.3d 1286, 1289 (11th Cir. 2005). Noting again that “the Eleventh Circuit has been exceptionally clear about one thing; ‘[A]ll doubts are to be resolved in favor of arbitration,’” the Court found that MSA had not proven employment status (and found as a matter of law to the contrary). Ruby-Collins, Inc. v. City of Huntsville, Ala., 748 F.2d 573, 576 (11th Cir. 1984). Similarly, the Court found no employer-employee relationship between Mr. Hermann and Unishippers based on the Non-competition Agreement between Mr. Hermann and MSA (of which Unishippers was a terminable third-party beneficiary). Reinforcing its decision, the Court found that Mr. Hermann as a freight broker was not a transportation worker as required for the exemption and the eight-factor test to meet the relation to interstate commerce requirement had not been met.[2]

The Court found that the other three arguments raised by MSA were controlled by the fact the Franchise Agreements and the Non-competition Agreement all contained a delegation provision, conferring authority on the arbitrator to resolve disputes of enforceability (including whether the agreement is void or voidable). Citing Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 70-71 (2010), the Court noted that the arbitration provision is severable from the remainder of the contract and, therefore, the delegation provision is unaffected by assertions the underlying contract, was void, terminated, voidable, or even that the dispute was exempted from the arbitration provision’s application.

Despite the Court’s unequivocal adherence to the legal compulsion of arbitration for all issues under the law,[3] the Court did pause to note that “the Non-Competition Agreement is clearly void under applicable Georgia law.” Query whether many arbitrators would ignore this comment when it is placed before them during the arbitration.

The case is Morning Star Associates, Inc. v. Unishippers Global Logistics, LLC, No. 1:15-cv-033-DHB, 2015 WL 2408477, entered 05/20/15 by Judge Dudley H. Bowen in the U.S. District Court for the Southern District of Georgia, Augusta Division.
[1] The author is a member of the Executive Board of the Atlanta International Arbitration Society.

[2] The eight factors as set forth in Lenz v. Yellow Transp., Inc., 431 F.3d 348, 351 (8th Cir. 2005), are: (1) works in transportation industry; (2) directly responsible for transporting goods; (3) handles goods that travel interstate; (4) supervises other transportation workers; (5) is within a class for which special arbitration already existed when FAA enacted; (6) vehicle itself is vital to commercial enterprise of employer; (7) strike by specific individual would disrupt interstate commerce; and (8) there is a nexus between employee and vehicle he utilizes necessary to perform job.

[3] The Court noted in beginning its Conclusion, “the Court is obliged to adhere to the strong federal policy of the FAA encouraging the enforcement of arbitration provisions.”

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Monday, February 2, 2015, 5:43 PM

PPS Asserts Exclusive Rights To Remote Deposit System For Banks

PPS Data, LLC (“PPS”), a Nevada corporation formerly known as NetDeposit, LLC, commenced a patent infringement action against two Georgia corporations, VSoft Corporation (“VSoft”) and VServe, Inc. (“VServe”) on January 9, 2015 in the Northern District of Georgia.  The complaint asserts infringement of patents relating to check imaging, truncation, optimized clearing, and full settlement reporting, including United States Patent Numbers 7,181,430 (the ‘430 Patent), 7,216,106 (the ‘106 Patent), 7,440,924 (the ‘924 Patent), 7,624,071 (the ‘071 Patent), and 8,660,956 (the ‘956 Patent).

The complaint alleges that PPS is "a software provider for banks, third party processors, and commercial businesses to enable check imaging, truncation, optimized clearing and full settlement reporting, including the design and sale of remote deposit capture products and services."

The complaint asserts infringement of PPS patents by VSoft, which “designs, manufactures, and markets software, products and services to facilitate remote deposit capture, deposit processing and remote deposit solutions,” and by VServe, which “provides item and deposit solutions including the VSoft Agile systems.”

The infringement claims for the five patents are set forth in five identically worded counts in the complaint.  The five patents are in the same family and share the same specification.  Figure 1 from the five patents, which illustrates the process flow of the claimed invention, is depicted below.

The complaint alleges notice on defendants no later than service of the complaint and seeks increased damages for willfulness, as well as a declaration that the case is exceptional, justifying attorneys’ fees, and also seeks an injunction, damages, interest, and costs.

The case is PPS Data, LLC v. VSoft Corporation and VServe, Inc., No. 1:15-cv-00084, filed in the U.S. District Court for the Northern District of Georgia, Atlanta Division, on January 9, 2015, and assigned to Judge Amy Totenberg.

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Monday, January 5, 2015, 11:12 AM

Guardian Accused Of Wrongfully Treating Humidifier Goo

K2 Concepts, Inc. (“K2”), a Georgia corporation, filed a patent infringement action on October 17, 2014 against Guardian Technologies, LLC (“Guardian”), an Ohio corporation, relating to United States Patent Number 7,422,759 (the ‘759 Patent), which is directed to a mineral-based antimicrobial product. 

The complaint alleges that K2 informed Guardian on May 13, 2011 that its Aquaball anti-microbial humidifier cleaning cartridge infringed the ‘759 Patent.  Pictured below on the left is Figure 1 from the ‘759 Patent, with the Aquaball product of Guardian pictured on the right.

K2 further alleges that an additional infringing product was later introduced under the name Aquastick – pictured below:

The complaint alleges that in addition to its active infringement, Guardian has induced others to infringe the ‘759 Patent and contributed to the infringement of that patent by others.  K2 seeks an injunction, an accounting, damages including the trebling of damages and a declaration that the case is exceptional under 35 U.S.C. § 285 together with an award of attorneys’ fees, costs, and expenses.
The case is K2 Concepts, Inc. v. Guardian Technologies, LLC, No. 1:14-cv-03348, filed in the U.S. District Court for the Northern District of Georgia on October 17, 2014, and assigned to U.S. District Judge Thomas W. Thrash, Jr.

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Monday, December 22, 2014, 2:50 PM

Eagle Parts Seeks to Fasten Custom Golf Car Supply with Injunction and Damages for Patent Infringement

Eagle Parts & Products, Inc. (“Eagle”), a Georgia corporation with its principal place of business in Augusta, Georgia, filed a patent infringement action on October 3, 2014 against Custom Golf Car Supply, Inc. (“Golf Car”), a North Carolina corporation, relating to U.S. Patent No. 7,380,860 (the ‘860 Patent) directed to a windshield fastening device, which issued on June 3, 2008. 

The ‘860 Patent permits golf cart drivers to enjoy the protection of a full windshield or to fold the top half of the windshield down and enjoy the resulting wind flow as they speed from one tee to the next on the course of their choice.  Figures from the ‘860 Patent illustrating how the device works are reproduced below:

Figure 3 on the left shows the attaching device for the fold down windshield.  Figure 5 shows the device on the complete golf cart, with the numeral 60 referring to the windshield in both figures.

Eagle alleges that it has marked its covered products with Patent Pending until the patent published and, thereafter, marked its products with the specific patent number, thereby placing Golf Car on constructive notice of the patent.  On information and belief, Eagle further alleges that Golf Car had actual notice of the ‘860 Patent from its issuance on June 3, 2008.

Eagle asserts infringement by three Acrylic Hinged models in the 6100 series and by one Flex-Fold Hinged model in the 6200 series of windshields.

Eagle seeks a permanent injunction, a finding of infringement, an accounting and damages, that Golf Car’s conduct be found willful justifying enhanced damages under 35 U.S.C. § 284, and that the Court find the case to be exceptional under 35 U.S.C. § 285 and award reasonable attorneys’ fees and expenses.

The case is Eagle Parts & Products, Inc. v. Custom Golf Car Supply, Inc., No. 1:14-cv-00189, filed in the U.S. District Court for the Southern District of Georgia, Augusta Division, on October 3, 2014, and assigned to U.S. District Judge J. Randall Hall.

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Wednesday, November 19, 2014, 2:26 PM

Georgia District Courts Gain Four Judges -- Three in the Northern District and One in the Middle District

In votes held last night and last Thursday, the U.S. Senate confirmed four judicial appointees for the Georgia district courts, a welcome sight for the federal bench and bar.  The Northern District in particular had been in need of new appointments, especially following former Chief Judge Julie Carnes' elevation to the Eleventh Circuit Court of Appeals.

Leigh Martin May
On November 13, 2014, Leigh Martin May (Georgia Institute of Technology, B.S., 1993; University of Georgia, J.D., 1998), a partner at Butler, Wooten & Fryhofer, LLP, was confirmed by a vote of 99-0 to fill a vacancy on the Northern District of Georgia.  Judge May received her commission the following day.

Leslie Abrams
Last night, the Senate confirmed three more appointees.  First, in a unanimous 100-0 vote, Assistant U.S. Attorney Leslie Joyce Abrams (Brown University, B.A., 1997; Yale University, J.D., 2002) was confirmed as the first African-American woman to serve on any federal district court in Georgia.  She fills a vacancy in the Middle District of Georgia left by Judge Louis Sands, who assumed senior status in April.

Mark Cohen and Eleanor Ross
Following the vote on Abrams, the Senate held voice votes for the two remaining appointees, both of whom were unanimously confirmed.  Eleanor Louise Ross (American University, B.A., 1989; University of Houston, J.D., 1994), a DeKalb County State Court judge, becomes the first African-American woman to serve on the Northern District of Georgia.  Mark Howard Cohen (Emory University, B.A., 1976; Emory University, J.D., 1979), a partner at Troutman Sanders LLP, will join Ross and May on the bench of the Northern District of Georgia.

Welcome to the newest judges of our Georgia federal courts!

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Friday, October 31, 2014, 9:42 AM

Gutter Battle Reignites With New Action

In the latest salvo exchanged between two competing drainage product companies, Invisaflow, LLC ("Invisaflow"), based in Alpharetta, Georgia, filed a complaint in the Northern District of Georgia against competitors Euramax International, Inc. and Euramax Holdings, Inc. (collectively "Euramax"), both based in Norcross, Georgia, alleging that Euramax infringes its patent directed to gutter downspout extension attachments.

Invisaflow asserts U.S. Patent No. 8,556,195 ("the '195 Patent"), entitled "Low Profile Attachment For Emitting Water," which issued on October 15, 2013.  As reported here, in August 2012 Invisaflow filed a similar action based on a parent patent of the '195 Patent, U.S. Patent No. 8,251,302.  Invisaflow voluntarily dismissed that action in November 2012 (see here).

The complaint alleges that Euramax's "Extend-A-Spout v2 Low Profile Drainage System" product infringes the '195 Patent, and further alleges that Invisaflow met with Euramax on May 22, 2014, to notify Euramax of its infringement and requested that Euramax cease and desist from further production and sale of the accused product.  Representative Figure 1 of the '195 Patent is shown below:

On October 27, Invisaflow filed an amended complaint, which revised some details regarding giving notice of the patent, but also added three new counts to the action for alleged trade dress protection relating to the StealthFlow downspout extension product.  The amended complaint added counts for federal trade dress infringement and unfair competition under Section 43(a) the Lanham Act (15 U.S.C. 1125(a)), and violation of the Georgia Deceptive Trade Practices Act (O.C.G.A. 10-1-370 et seq.).

Invisaflow alleges that the StealthFlow product incorporates a distinctive and nonfunctional "long low-profile shape beginning with a gradual transition that emanates from a round-shaped piping." Invisaflow claims that the StealthFlow trade dress has acquired secondary meaning among the consuming public and further alleges that Euramax purposefully designed the accused "Extend-A-Spout" product to replicate the unique look and feel of the StealthFlow product.  Invisaflow alleges that it has "received numerous inquiries from consumers who believe that the "Extend-A-Spout" product originates from, or is sponsored or approved by, Plaintiff Invisaflow."  A comparison of the two extension products is depicted below:

Invisaflow seeks injunctive relief, damages, including trebled damages for willful infringement, and attorneys' fees and costs.

The case is Invisaflow, LLC v. Euramax Int'l, Inc. et al., Case No. 1:14-cv-03026-WSD, filed on September 19, 2014 in the Northern District of Georgia, Atlanta Division, and is assigned to U.S. District Judge William S. Duffey, Jr.

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Thursday, October 30, 2014, 1:15 PM

Solo Inventor Files Two Suits Over Allegedly Infringing Uninterruptible Power Supply Systems

Walter Farmer, of Atlanta, Georgia, filed separate suits against Alpha Technologies, Inc, ("Alpha"), of Bellingham, Washington, and Aspin Kemp & Associates ("Aspin Kemp"), of Owen Sound, Ontario, Canada, alleging that each company infringes Farmer's patent directed to uninterruptable power supply systems.

Farmer is the sole named inventor of U.S. Patent No. 7,362,007 ("the '007 Patent"), entitled "Hybrid Uninterruptible Power Supply System."  The claimed system allows for a telecommunications system to alternate between AC and DC power systems based on unplanned interruptions and other events. Representative Figure 5 of the '007 Patent is reproduced below:

Alpha Micro 1000 UPS System

The complaints do not state whether Farmer practices the invention or licenses the patent to any other entities.  The complaints allege that Alpha and Aspin Kemp infringe the '007 patent by "developing, using, offering to sell and/or selling in the United States or importing into the United States" their Alpha Micro 1000 UPS System and Omni B System, respectively.[1]  The complaints allege, without detail, that Alpha and Aspin Kemp had "actual knowledge and/or notice of the '007 Patent from a time prior to the filing of the present Complaint," and thus are liable for willful infringement.  The complaints also allege that Farmer will suffer immediate and irreparable harm in the absence of an injunction.

The complaints request preliminary and permanent injunctions -- although no motion for preliminary injunctive relief has been filed in either case -- damages, including trebled damages for alleged willful infringement, and attorneys' fees and costs under 35 U.S.C. § 285.

The first case is Farmer v. Alpha Technologies, Inc., Case No. 1:14-cv-02958-SCJ, filed September 15, 2014 in the Northern District of Georgia, Atlanta Division, and is assigned to U.S. District Judge Steve C. Jones.  The second case is Farmer v. Aspin Kemp & Associates, Case No. 1:14-cv-02959-RWS, filed September 15, 2014 in the Northern District of Georgia, Atlanta Division, and is assigned to U.S. District Judge Richard W. Story.  One assumes that the two cases will be handled by the same judge, should they proceed, but no reassignments have been docketed to date.
[1] The Alpha complaint calls the allegedly infringing system the "Micro 1000 USB System," but after inspection of Alpha's website and the '007 Patent, it is evident that this is a typographical error and is intended to refer to the "UPS," or "Uninterruptible Power Supply," system.

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