Monday, October 27, 2014, 10:59 AM

Court Crushes Krush’s Motions for Preliminary Injunction on Patent Infringement and Trade Secret Misappropriation

Krush Communications, LLC (“Krush”) brought suit in New Jersey in 2013 against Lunex Telecom, Inc., a Georgia corporation (“Lunex”), for patent infringement and misappropriation of trade secrets.  After the case was transferred to the Northern District of Georgia, Judge Jones considered Krush motions for a preliminary injunction on its trade secret and patent claims and a motion to strike inequitable conduct allegations from the complaint.  In a 45-page opinion, Judge Jones deconstructed Krush’s arguments and the factual basis for its position.

Both Krush and Lunex are in the pre-paid telephone charges business.  They provide customers with a highly automated system that does not require a card and utilizes the phone number of the purchaser to track the balance remaining and a SMS Text messaging system to confirm purchases of prepaid time.  Krush obtained patent U.S. Patent No. 8,295,805 relating to its system and initiated this action based on Lunex’s product, as well as the conduct of an individual who had a brief (less than 3 month) relationship with Krush in 2010.
Krush efforts to strike inequitable conduct allegations were rebuffed on the following grounds: (1)  Lunex met the threshold higher pleading requirement s of Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1326 (Fed. Cir. 2009) by disclosing the who, what, when, where , and how of Krush’s conduct and evidence of Krush’s deceptive intent.  [Krush failed to disclose information gathered about Lunex’s system to the PTO and “intentionally refrained from circulating a detailed letter of patent counsel until the day after the ‘805 Patent issued.”  Order, at p. 11]; (2) the material is related to whether or not the matter will be found to be an exceptional case, a prosecution estoppel claim, or a sufficiently pleaded inequitable conduct defense; and (3) the Court rejected Lunex’s assertion that Krush advanced “generalized and gratuitous facts, none of which correspond to a particular Defense.”  Id., at 13.

The patent infringement claims failed to meet the likelihood of success requirement based on the Court’s preliminary construction of the claims.  Under the Court’s preliminary analysis two limitations of the patent were not met by the Lunex system.  Specifically the Court found (1) the patent required that each individual phone number have a unique pin number, while the Lunex system allowed different phone numbers to use the same pin; and (2) the patent required that the unique pin for each phone number be the phone number itself, while the Lunex system used a randomly generated 12-digit pin number.

The thorough analysis of the ruling on the trade secret injunction motion reviews the elements required and details Krush’s failures to prove those elements.  The general allegations were not sufficiently supported by details to enable the Court to determine what was alleged stolen, how or when it was accessed, at what level of security the allegedly stolen materials resided, or what differed from materials in the public domain.  What is not entirely clear from the record or apparently to the Court is whether the failure to prove the case was due to a failure to present all the relevant facts or whether there were no additional relevant facts that could have been offered as evidence in support of the motion.  While there are references to different levels of security, the Court was unable to determine how the information at each level differed or which level information was allegedly misappropriated from.  Similarly, references were made to confidentiality and nondisclosure agreements, but none were produced and the allegedly misbehaving third-party was not shown to have signed any of them.

This ruling is an important lesson to all attorneys in two key ways: (1) before bringing a motion, assemble receivable evidence of each and every element necessary to prevail on the motion; and (2)  when the motion is filed ensure that evidence of each and every element necessary to prevail is clearly and effectively presented to the Court for consideration.

Krush Communications, LLC v. Lunex Telecom, Inc.., Case No. 1:13-cv-03167-SCJ, Dkt. No. 89 (Sep. 12, 2014).

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