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Georgia IP Litigation: July 2012

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Tuesday, July 31, 2012, 2:29 PM

Judge Totenberg Holds that Twombly does not Apply to Affirmative Defenses

On July 26, 2012, Judge Amy Totenberg of the Northern District of Georgia issued an order granting-in-part and denying-in-part a counterclaimant's Motion to Strike Affirmative Defenses in Catch Curve, Inc. v. Integrated Global Concepts, Inc., Case No. 1:06-cv-02199-AT.  Integrated Global Concepts, Inc. ("IGC"), defendant and counterclaimant, moved to strike affirmative defenses raised by Catch Curve, Inc. ("Catch Curve"), plaintiff and counterclaim defendant, in response to IGC's counterclaims against Catch Curve, pursuant to Rule 12(f) of the Federal Rules of Civil Procedure.

IGC contended that none of Catch Curve's defenses were pled with enough specificity to give fair notice of the nature of the defenses.  IGC argued that the Supreme Court's decision in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), which clarified the pleading standards for a complaint under Rule 8(a) of the Federal Rules of Civil Procedure, extends to the pleading of affirmative defenses under Rules 8(b)(1) and 8(c).  Judge Totenberg noted that courts have been in disagreement whether Twombly's "plausibility" standard applies to the pleading of affirmative defenses, pointing to decisions in the Northern District of Alabama (declining to apply Twombly) and the Northern District of Ohio (applying Twombly).  Judge Totenberg cited Eleventh Circuit case law which indicates that the purpose of Rule 8(c) is to give the opposing party notice of the affirmative defense and a chance to rebut it, and she then stated that "it is not at all obvious that affirmative defenses were impacted by Twombly."  See Navarro v. Santos Furniture Custom Design, Inc., 372 F. App'x 24, 27 (11th Cir. 2010).  Declining to extend the plausibility pleading requirement to affirmative defenses, Judge Totenberg instead reviewed the defenses to "ensure they provide fair notice of the nature of the defense and the grounds upon which it rests."

Judge Totenberg also addressed the common but ill-advised practice of including a mere denial of an element of plaintiff's prima facie case as an affirmative defense.  For instance, regarding IGC's defense that the "Counterclaims fail to define a cognizable relevant market," Judge Totenberg explained that "[t]his pleading alleges an infirmity somewhere in the counterclaims" but is simply a denial and not an affirmative defense.  A common example in patent infringement cases is where a defendant asserts an affirmative defense of non-infringement (e.g., "Defendant has not infringed Plaintiff's patent").  Judge Totenberg's order suggests that this would not be an adequate affirmative defense at all.  Even if that was not the case, why would a defendant raise an affirmative defense on an issue in which the plaintiff already bears the burden of proof?  Of course, a counterclaim for declaratory judgment of noninfringement would be different.

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Monday, July 30, 2012, 3:33 PM

Yanmar Files Trademark Infringement Action Over "Grey Market" Tractors

On July 26, 2012, Yanmar America Corporation of Adairsville, Georgia ("Yanmar") filed a trademark infringement action in the Northern District of Georgia against Huel Elliott and Elliott Farm Equipment of Gainesville, Georgia ("Elliott").  Yanmar alleges that Elliott sells or facilitates the importation and sale into Georgia of certain "grey market" tractors -- that is, tractors bought and sold outside of the manufacturer's authorized trade channels -- bearing various YANMAR trademarks.  Yanmar asserts causes of action for trademark infringement and unfair competition under Section 43(a) of the Lanham Act (15 U.S.C. § 1125(a)(1)(A)), false advertising under Section 43(a)(1)(B) of the Lanham Act § 1125(a)(1)(B)), trademark infringement and unfair competition under Section 42 of the Lanham Act (15 U.S.C. § 1124), infringement of registered trademarks (15 U.S.C. § 1114), trademark dilution under Section 43(c) of the Lanham Act (15 U.S.C. § 1125(c)), trademark infringement and unfair competition under common law, violation of the Georgia Unfair Competition and Deceptive Trade Practices Act (O.C.G.A. § 10-1-372), violation of the Georgia Fair Business Practices Act (O.C.G.A. §§ 10-1-390, et seq.), and violation of the Georgia False Advertising Statute (O.C.G.A. §§ 10-1-420, et seq.).
According to the complaint, Yanmar's Japanese parent company, Yanmar Company Limited ("YCL"), was founded in 1912 and "developed the world's first commercially viable small diesel engine in 1933."  YCL is involved in the global manufacture, sale, promotion, and distribution or tractors, marine engines, construction equipment and other products under its trademark YANMAR.  Yanmar alleges that it was established in 1979 to distribute and sell diesel engines and industrial equipment in the United States.  Yanmar claims to operate out of a 500,000-square foot facility in Adairsville, Georgia.  YCL is the registered owner of nine federal trademark registrations for various configurations of YANMAR, including word and design marks.  According to the complaint, Yanmar is the exclusive licensee of YCL's federal trademarks and is entitled to pursue actions against alleged infringers.

Yanmar alleges that YCL manufactures tractors specifically for distribution in Japan ("Japanese Local Market YANMAR® tractors") that are used primarily in flat, muddy rice paddies and are typically equipped with only a small rotary tiller.  Yanmar claims that the YANMAR® tractors sold in the United States are materially different, are intended for use in agriculture and construction on a variety of terrains, and include front end loaders, backhoes, and large rotary mowers.  Yanmar further alleges that the Japanese Local Market YANMAR® tractors differ from the U.S. tractors in a number of respects, primarily in the area of safety standards, and are not suitable for distribution and use in the U.S. 

Yanmar claims that Elliott intentionally purchased, imported, distributed, and sold Japanese Local Market YANMAR® tractors in the U.S. in order to "exploit the valuable and favorable reputation and goodwill earned by YANMAR® tractors," and knowing that such actions would create a likelihood of consumer confusion and possible products liability exposure.  Yanmar asks the Court to grant an injunction prohibiting Elliott from using the YANMAR trademarks and from importing and selling the Japanese Local Market YANMAR® tractors.  Yanmar further asks the Court to order the impounding and destruction of Elliott's infringing goods, as well as for monetary and other relief.

The case is action number 2:12-cv-00181-WCO, and has been assigned to Judge William C. O'Kelley. 

UPDATE:  The parties filed a Consent Judgment and Injunction to settle the case, whereby Elliott is prohibited from importing and selling the accused products.  Judge O'Kelly entered the judgment and injunction on August 7, 2012.

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Thursday, July 26, 2012, 3:24 PM

Eleventh Circuit Rules in Favor of Artist Daniel Moore in Dispute Over University of Alabama Football Paintings

On June 11, 2012, the U.S. Court of Appeals for the Eleventh Circuit issued an opinion largely in favor of artist Daniel A. Moore ("Moore") in a long-standing battle between Moore and the University of Alabama ("Alabama") over Moore's right to depict the Crimson Tide's football uniforms on paintings, prints, calendars, and other merchandise.  On appeal from the Northern District of Alabama, the Court found that the First Amendment's protection of artistic expression was such that Moore's paintings, prints, and calendars did not violate the Lanham Act.  The Court held that Moore waived his right to assert First Amendment protection over the other merchandise -- such as mugs and "postcard-sized mini-prints" -- but nevertheless remanded to the district court for a determination of whether Alabama acquiesced to Moore's uses on those products.

Moore's "Goal Line Stand" from the 1979 Sugar Bowl
In 1979, Moore, an Alabama alum, began selling originals and prints of paintings depicting historic scenes in Alabama football, such as the "Goal Line Stand" shown here.  Moore's notoriety grew as he continued to paint scenes without any kind of agreement or relationship with Alabama.  From 1991 to 1999, Moore signed a dozen licensing agreements with Alabama to produce works according to certain terms and often bearing Alabama's registered trademarks on the packaging or a "seal of approval" evidencing its officially licensed status.  During that time period and with Alabama's apparent knowledge, Moore also created and sold numerous unlicensed paintings and prints and did not pay royalties to Alabama for any of those items.

In 2002, Alabama told Moore that he needed permission to portray Alabama's uniforms, including the jersey and helmet designs and the crimson and white colors, and that he would have to license all of his Alabama-related products.  Moore disagreed and the parties' subsequent negotiations were unsuccessful.  Alabama brought suit on March 18, 2005 in the Northern District of Alabama, contending that Moore breached the prior license agreements and that Moore's products violated the Lanham Act, 15 U.S.C. 1125(a), by infringing Alabama's trademark rights in the football uniforms.

After discovery on the Lanham Act issues, both parties moved for summary judgment.  The district court found that the parties' prior licensing agreements did not cover the items at issue because "uniforms were not included in the agreements' definitions of 'licensed indicia'," that the depiction of the uniforms in paintings and prints was protected by the First Amendment and also the fair use doctrine, and that the depiction of the uniforms on mugs, calendars, and other "mundane products" was not protected by the First Amendment and would likely cause consumer confusion. Accordingly, the district court entered summary judgment in favor of  Moore with regard to the original paintings and prints, and entered summary judgment in favor of Alabama with respect to the calendars, mugs, and "mundane products."  Both parties appealed.

Varying slightly from the grouping at the district court level, the Court split the products into two categories.  The first category was composed of paintings, prints, and calendars.  The second category contained mugs and other merchandise.

Paintings, Prints, and Calendars

Regarding the first category, the Court first determined that the paintings, prints, and calendars were not covered by the prior licensing agreements.  The Court found that while the language of the agreements was ambiguous, the parties' subsequent course of conduct clearly demonstrated that the parties did not intend that Moore's portrayal of the Alabama uniforms in unlicensed paintings would violate the agreements.  The Court laid out a non-exhaustive list of the evidence supporting this finding:
  • Throughout the period of the licensing agreements, Moore continued to sell new and previously produced unlicensed paintings and did not pay royalties to Alabama.  The evidence showed that Alabama knew of these sales and did not act upon them.
  • From 2001 to 2004, Alabama sold over $12,000 worth of Moore's unlicensed calendars in its campus store.
  • The Bryant Museum, run by Alabama, displayed and sold unlicensed Moore prints and prominently featured one of his unlicensed paintings on its brochure.
  • In 2001, Alabama asked Moore to complete a sketch on live television during an Alabama football game.  The sketch was unlicensed and featured a Crimson Tide football helmet.
  • For many years, the Alabama Athletic Department displayed Moore's unlicensed paintings and prints in its offices, and granted Moore press credentials so he could take photographs to be used as source material for his paintings.
  • The Eleventh Circuit then turned to the trademark claims and Alabama's contention that the products create a likelihood of confusion on the part of buyers that Alabama sponsored or endorsed the products. Rather than evaluate the strength of the marks, however, the Court settled the matter on First Amendment grounds.  Alabama argued that Moore's works were "more commercial than expressive speech" and therefore entitled to a lower degree of First Amendment protection.  The Eleventh Circuit rejected Alabama's argument, ruling that Moore's paintings, prints, and calendars were expressive speech "entitled to full protection under the First Amendment," despite having been sold for money.

    2012 calendar featuring Moore's works
    Addressing the tension between trademarks and free speech, the Eleventh Circuit declared: "the Lanham Act should be read narrowly to avoid impinging on speech protected by the First Amendment."  It then concluded that Moore's paintings, prints, and calendars were protected and did not violate the Lanham Act, pursuant to the balancing test set forth in Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989), the "landmark case for balancing trademark and First Amendment rights."  According to the Court, the "uniforms' colors and designs are needed for a realistic portrayal of famous scenes from Alabama football history."
    Ultimately, the Court stated:
    "[W]e conclude that the First Amendment interests in artistic expression so clearly outweigh whatever consumer confusion that might exist on these facts that we must necessarily conclude that there has been no violation of the Lanham Act with respect to the paintings, prints, and calendars."
    Mugs and Other Merchandise
    Regarding the second category, the Eleventh Circuit found the record inconclusive as to whether the mugs and other merchandise were covered by the prior licensing agreements.  As a result, it reversed the grant of summary judgment in favor of Alabama, and remanded the case back to the district court to resolve the disputed issues of material fact.
    Moore argued that because his original paintings and prints did not violate Alabama's trademarks, his copyrights in the works granted him the right to produce derivative works featuring those paintings.  The Court disagreed and expressed concern that such a broad holding would enable the circumvention of trademark law.  "Selling the copyrighted drawing [of another's trademark] may not amount to a trademark infringement, but its placement on certain products very well might."
    The Court then evaluated Alabama's trademark claims, and noted that Moore had failed to challenge the district court's conclusions that his use of the uniforms on these products was not a fair use and was not protected by the First Amendment.  The Court found that acquiescence was the only trademark defense Moore had preserved on appeal, and again held that the record was inconclusive as to the parties' course of conduct relating to these products.  The Court remanded the acquiescence issue to the district court for further proceedings.

    The reported appellate and district court decisions are Univ. of Ala. Bd. of Trustees v. New Life Art Inc., 677 F. Supp. 2d 1238 (N.D. Ala. 2009), aff'd in part, rev'd in part, and remanded, ___ F.3d ___, 2012 U.S. App.LEXIS 11794 (11th Cir. Jun. 11, 2012).

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    Monday, July 23, 2012, 10:13 AM

    Eleventh Circuit Denies Petition for Rehearing in Pharmaceutical "Pay for Delay" Case

    On July 18, 2012, the U.S. Court of Appeals for the Eleventh Circuit issued an order denying a petition for rehearing an appeal by the Federal Trade Commission ("FTC") concerning a "pay for delay agreement" between brand-name licensee Solvay Pharmaceuticals, Inc. ("Solvay") and generic drug makers Watson Pharmaceuticals, Inc. ("Watson"), Paddock Laboratories, Inc. ("Paddock"), and Par Pharmaceutical Companies, Inc. ("Par").  That denial means the Eleventh Circuit will not reconsider its April 2012 decision that affirmed a dismissal of the FTC's complaint challenging the legality of those agreements.

    The Eleventh Circuit defines "pay for delay agreements," also called "reverse payment agreements," as agreements in which a patent owner settles infringement litigation by paying "the allegedly infringing generic drug company to delay entering the market until a specified date, thereby protecting the patent monopoly against a judgment that the patent is invalid or would not be infringed by the generic competitor."

    The underlying patent litigation involved the prescription drug sold under the trademark AndroGel®, a topical gel that treats the symptoms of low testosterone in men, and which is the commercial embodiment of U.S. Patent No. 6,503,894 ("the '894 Patent").  Besins Healthcare, S.A. developed AndroGel® and granted Solvay a license to sell it in the United States.  Solvay then obtained approval from the Food and Drug Administration ("FDA") to market and sell that product.  It then filed the patent application that issued as the '894 Patent, which expires in August 2020.

    Subsequently, Watson and Paddock developed generic versions of AndroGel® and applied for FDA approval to market them.  Solvay, however, sued both of them, in the U.S. District Court for the Northern District of Georgia ("Northern District") for infringement of the '894 Patent.  Par gained interest in the lawsuit by partnering with Paddock to share its costs of defending the patent litigation in exchange for a share of profits from sales of Paddock's generic drug, if the FDA were to ultimately approve that drug.  Following the discovery phase of the case, Watson and Paddock filed motions for summary judgment, seeking a declaration that the '894 Patent was invalid. 

    Before the court ruled on those summary judgment motions, and before either generic product was brought to market, the parties settled the case by entering into a "pay for delay" agreement.  Under the terms of that agreement:
    Watson, Par, and Paddock agreed not to market generic versions of AndroGel until August 31, 2015, unless another manufacturer launched one before then.  In addition, Watson agreed to promote branded AndroGel to urologists, and Par agreed to promote it to primary care doctors. Par also agreed to serve as a backup manufacturer for branded AndroGel but assigned that part of the agreement to Paddock.
    For its part, Solvay agreed to pay Par/Paddock $10 million per year for six years and an additional $2 million per year for the backup manufacturing assistance. Solvay also agreed to share some of its AndroGel profits with Watson through September 2015, projecting that those payments would be between $19 million and $30 million per year.
    Following the voluntary dismissal of the patent litigation resulting from their settlement, the parties filed their settlement agreements with the FTC, as required by federal law.  The FTC then sued all parties for violating federal antitrust laws.  Following transfer of the FTC's action to the Northern District, the parties moved to dismiss the FTC's complaint, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, for failure to state a claim.  The Northern District granted that motion, agreeing with the movants that the FTC failed to allege that the "pay for delay" agreement exceeded the scope of the '894 Patent, and that such an allegation was required under Eleventh Circuit precedent to state an antitrust claim directed to such agreements.  In other words, the FTC failed to allege the the agreement resulted in a greater exclusion of generic products from the market than that already imposed by the patent.

    In its April 2012 decision, the Eleventh Circuit affirmed the Northern District's dismissal of the FTC's complaint.

    While some appellate courts from other circuits agree with the Eleventh Circuit's "scope-of-the-patent" test, the Third Circuit does not, revealing a clear split of authority and setting the stage for eventual resolution by the Supreme Court.  On July 16, 2012 - just 2 days before the Eleventh Circuit issued its order denying the petition for rehearing - the Philadelphia-based U.S. Court of Appeals for the Third Circuit issued a decision expressly disagreeing with the Eleventh Circuit.  The Third Circuit held that a "pay for delay" agreement should be evaluated under a "quick look rule of reason" analysis, under which it is presumptively in violation of antitrust laws, unless a party can show that the payment either: "(1) was for a purpose other than delayed entry, or (2) offers some pro-competitive benefit."

    The April 2012 decision by the Eleventh Circuit discussed above is Federal Trade Comm'n v. Watson Pharms., Inc., 677 F.3d 1298 (11th Cir. 2012).

    UPDATE:  On October 4, 2012, the FTC filed a Petition for Writ of Certiorari, seeking Supreme Court review of the Eleventh Circuit's decision (see our October 8 post), and on November 13, 2012, Watson responded to that petition, and 31 states jointly filed a brief on November 5, 2012 supporting the FTC's position (see our November 15 post).  The Supreme Court granted the FTC's petition on December 7, 2012 (see our December 10 post).

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    Friday, July 20, 2012, 5:31 PM

    The American Parts Company Files Declaratory Judgment Action Over Firearm Adaptor Kit Patent

    On July 16, 2012, The American Parts Company, Inc. of Kennesaw, Georgia ("TAPCO") filed a declaratory judgment action in the Northern District of Georgia against Advanced Technology International USA, LLC of Milwaukee, Wisconsin ("ATI").  TAPCO alleges that in April of 2012, ATI sent a cease-and-desist letter contending that TAPCO infringes at least one claim of U.S. Patent No. 6,374,528 (the "'528 Patent") and stating that ATI would "take the legal steps necessary to insure that no additional infringement occurs" if TAPCO did not reply by May 11, 2012.  TAPCO requests that the Court declare that TAPCO does not infringe any valid and enforceable claim of the '528 Patent, that the '528 Patent is invalid, and that the case is exceptional under 35 U.S.C. § 285, warranting an award of attorneys fees and expenses to TAPCO.

    The '528 Patent is entitled "Stock And Kit For Accommodating Mounting On A Plurality Of Different Firearms," and issued on April 23, 2002.  According to the specification, the buttstock (or shoulder stock) of firearms, particularly shotguns, must be replaced at certain intervals.  The specification states that replacement stocks are commonly known but that the various types of receivers on firearms require different forms of stocks.  The '528 Patent claims to provide a stock and adaptor kit which allow for the stock to be attached to a plurality of receivers, thus eliminating the need to maintain different replacement stocks.

    The case, action number 1:12-cv-02490, has been assigned to Judge Amy Totenberg.

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    Wednesday, July 18, 2012, 3:45 PM

    ARAC Files Declaratory Judgment Action Over "Orange" Color Trademarks For Home Contracting Services

    On July 13, 2012, ARAC Experts, LLC of Georgia ("ARAC") filed a declaratory judgment action in the Northern District of Georgia against Cedar Valley Exteriors, Inc. of Coon Rapids, Minnesota ("Cedar Valley"). ARAC alleges that Cedar Valley threatened litigation for alleged infringement of Cedar Valley's federally registered trademarks for the color "orange" used in the field of general contracting services, particularly in the area of roofing, siding, rain gutter and window repair to home owners. ARAC seeks a judgment declaring that Cedar Valley's trademarks are functional and have not acquired distinctiveness or secondary meaning, and, as a result, the mark registrations should be cancelled and ARAC's use of the color orange does not infringe any of Cedar Valley's marks.

    Cedar Valley's service marks, Serial Nos. 77142831 and 77143590, are registered in International Class 37, and claim the color "orange" as the sole feature of the mark.  ARAC contends that the color orange "yields a utilitarian or functional advantage" in the construction industry, primarily for safety purposes.  ARAC also asserts that Cedar Valley's marks do not distinguish between the many shades of the color orange.  As a result, ARAC asks the Court to cancel the federal registrations for the marks.

    The case has been assigned action number 1:12-cv-02448, and has been assigned to Senior Judge Robert L. Vining, Jr.

    UPDATE:  On October 24, 2012, the parties filed a Joint Stipulation of Dismissal, terminating the case.  See our November 13 post.

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    Monday, July 16, 2012, 5:17 PM

    Recognicorp Files New Patent Infringement Action Against CCP Over Popular Video Game Eve Online

    On July 11, 2012, Recognicorp, LLC of Round Rock, Texas ("Recognicorp") filed a complaint for patent infringement in the Northern District of Georgia against CCP hf of Reykjavik, Iceland and CCP North America, Inc. of Stone Mountain, Georgia (collectively, "CCP").  Recognicorp alleges that CCP makes, uses, imports, sells, and/or offers for sale in the United States products incorporating composite image customization that infringe one or more claims of U.S. Patent No. 8,005,303 ("the '303 Patent"), entitled "Method and Apparatus for Encoding/Decoding Image Data."  

    In particular, Recognicorp identifies Eve Online, a popular online multi-player video game, as an infringing product.  According to the complaint, the Eve Online product infringes the '303 Patent by including features such as "character creation and customization that allow the selection of a facial feature, incorporation of the facial feature into a composite image, and instructions for modifying the selected facial feature image that has been incorporated into the composite image." 

    Recognicorp requests that the Court grant an injunction, award damages, and declare the case exceptional under 35 U.S.C. § 285.  The case has been assigned action number 1:12-cv-02410, and has been assigned to Senior Judge Robert L. Vining, Jr. 

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    Thursday, July 12, 2012, 1:02 PM

    Preliminary Injunction Entered Against Maker of "PetArmor Plus" Parasiticide

    On June 29, 2012, the U.S. District Court for the Middle District of Georgia, Athens Division, in an opinion and order authored by Judge Clay D. Land, granted a Motion for Preliminary Injunction barring the manufacture, sale, and offering for sale in, and importation into, the United States of "PetArmor Plus" parasiticide, pending further order of the court.

    Judge Land began his 40-page order with the introduction: "This Order constitutes the latest chapter in the intellectual property saga that may ultimately conclude with a determination of who has the legal right to an apparently magical formulation for ridding our dogs and cats of fleas and ticks."

    Plaintiffs Merial Limited and Merial SAS (collectively "Merial") are the exclusive licensees of U.S. Patent No. 6,096,329 ("the '329 Patent"), directed to parasiticides comprised of the chemical compounds fipronil and methoprene, for veterinary treatment of dogs and cats. The court observed that the commercial embodiment of those compositions, sold under the trademark Frontline Plus®, is the leading flea and tick treatment in the United States. Before the court was a motion brought against defendants Velcera, Inc. and FidoPharm Inc. (collectively "Velcera") to preliminarily enjoin Velcera from marketing a similar product called "PetArmor Plus."

    In separate action initiated in 2007, Merial had sued a Mumbai, India-based company known as Cipla, Ltd. ("Cipla"), along with some Internet retailers, in the same district court for infringement of the '329 Patent and another Merial patent ("the 2007 lawsuit"). Cipla sold the accused veterinary pesticide products in the United States under the marks "Cipla Protektor" and "Cipla Protektor Plus." Neither Cipla nor any of the other defendants responded to Merial's complaint. The court thus held the asserted patents to have been infringed and not proven invalid. This resulted in the entry of a default judgment and a permanent injunction in March 2008, barring the manufacture, sale, and offering for sale in, and importation into, the United States of any product that infringed Merial's patents, including "Cipla Protektor" and "Cipla Protektor Plus." The permanent injunction applied not only to Cipla, but also to "those persons and entities in active concert with [Cipla]" who have notice of that order.

    Meanwhile, through a series of transactions initiated in February 2008, Velcera (led by former Merial executives) engaged with Cipla to develop, test, manufacture, and distribute products that would directly compete with Frontline Plus® at much lower prices. Cipla was to be an offshore manufacterer of such a product, to be called "PetArmor Plus," which would then be shipped to Velcera for sale within the United States. The first shipments of that product ("the 2011 Pet Armor Plus") arrived in the United States in March 2011.

    Merial, however, became aware of the impending launch of the 2011 PetArmor Plus and of Cipla's involvement in it, and on March 28, 2011, brought contempt proceedings against Cipla in the U.S. District Court for the Middle District of Georgia, asserting that the 2011 PetArmor Plus "was no more than a rebranded version of Cipla's enjoined Protektor Plus product and that the importation and sale of PetArmor Plus within the United States therefore violated the injunction." Velcera moved to intervene in the contempt proceedings and was then made a party defendant. The district court, after a hearing, found that "Velcera acted in concert with Cipla to violate the injunction," and that the 2011 PetArmor Plus infringed at least one claim of the '329 Patent. On June 21, 2011, "[t]he Court entered an injunction against Velcera prohibiting Velcera from selling a veterinary product containing fipronil and methoprene if Cipla participated in the development, manufacture and/or packaging of the product." In an opinion that issued on May 31, 2012, the U.S. Court of Appeals for the Federal Circuit affirmed the district court's order.

    One would think the story would end there - but this is a "saga," no mere story. Velcera pressed on with a new version of its product, bringing us to this "latest chapter."

    Following the district court's June 2011 contempt order, "Velcera severed ties with Cipla and reformulated the PetArmor Plus product with a minor formula amendment," resulting in "PetArmor Plus for Cats" and "PetArmor Plus for Dogs" (collectively, "the 2012 PetArmor Plus"). Merial sought to prevent the launch of the 2012 PetArmor Plus and brought contempt proceedings solely against Velcera, contending that the proposed launch of the 2012 PetArmor Plus violated the 2011 injunction. The district court denied Merial's motion for contempt because the 2011 injunction only applied to infringing products that Cipla had helped to develop, package, and/or manufacture. Merial then filed a new infringement lawsuit against Velcera based on the '329 Patent, and also filed its motion for preliminary injunction. On this motion, Merial succeeded.

    The district court prefaced its analysis by acknowledging the legal standard applicable to preliminary injunctions, namely:
    "'A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.'" Apple, Inc. v. Samsung Elecs. Co., 678 F.3d 1314, 1323 (Fed. Cir. 2012) (quoting Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008)).
    Regarding likelihood of success on the merits, a plaintiff must not only show a likelihood of infringement, but also, if the defendant presents evidence in support of its position that the patent is invalid, show that it will likely withstand such an invalidity challenge. The district court recognized that the plaintiff in such an instance must show that the invalidity defense "lacks substantial merit."

    Before delving into the substance of Velcera's invalidity defenses, the court rejected Merial's argument that Velcera was collaterally estopped from contesting infringement because of the infringement findings in the June 2011 contempt order. The court reasoned that those findings were "based, at least in part, on factual findings that were established due to Cipla's default," and that as a nonparty to the 2007 lawsuit, Velcera had no opportunity to contest those findings.

    Sequentially addressing each of Velcera's defenses in detail, the court held that Merial was likely to withstand all of Velcera's asserted invalidity defenses, namely, that the '329 Patent was indefinite, that it was not enabling, and that it failed to contain an adequate written description of the invention, all required by 35 U.S.C. § 112, and also that the '329 Patent is invalid for obviousness based upon prior art under 35 U.S.C. § 103(a). As to the § 112 defenses, the court accorded substantially greater credence to Merial's expert testimony over that from Velcera's expert, noting in one instance that Velcera's expert "was effectively impeached through the use of a patent which he authored," and that the expert's patent "was broader, more indefinite, and less enabling than the '329 Patent, yet Velcera's expert criticized the '329 Patent for deficiencies that were glaringly more pervasive in the patent which he authored."

    The court observed that, while not dispositive of validity, the fact that the '329 Patent had emerged from a USPTO reexamination proceeding intact suggested that it was not invalid under any of the grounds advanced by Velcera. This was particularly applicable to Velcera's § 103(a) defense because Velcera in the present litigation asserted the same prior art that had been considered during the reexamination proceeding. The court further credited testimony from Merial's expert that the prior art actually taught away from the patented composition. Finally, the court found that Merial presented "significant objective evidence of nonobviousness" - commercial success, long-felt industry need, and industry praise - regarding Merial's Frontline® products.

    On the question of infringement, Merial's experts testified persuasively that the 2011 PetArmor Plus contained "fipronil and methoprene in synergistically effective amounts," and that the 2012 reformulation did not affect the synergy of those ingredients, the latter conclusion also being supported by prior testimony of Velcera's own VP of Research and Development and Regulatory Affairs, as well as a representation to the U.S. Environmental Protection Agency.

    As to the remaining preliminary injunction factors, the court cited its prior findings concerning Merial's proof of irreparable harm in the absence of injunctive relief (i.e., threatened loss of market share, price erosion, and negative attitudes of veterinarians concerning Frontline Plus®), the balance of hardships in Merial's favor, and the public interest favoring issuance of the injunction. Its assessment as to balance of hardships was also influenced by the fact that Velcera had not yet launched the 2012 PetArmor Plus, so an injunction would be less burdensome on Velcera than it would have been had that product already been on the market.

    On the basis of all of these findings, the district court preliminarily enjoined Velcera from launching the 2012 PetArmor Plus in the United States, pending further order.

    The order and opinion summarized above is Merial Ltd. and Merial SAS v. Velcera, Inc. and FidoPharm, Inc., Case No. 3:12-CV-75 (CDL) (M.D. Ga. June 29, 2012).

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