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Georgia IP Litigation: August 2012

BLOGS: Georgia IP Litigation

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Thursday, August 30, 2012, 2:36 PM

Two Northern GA Companies Square Off in Patent Case About Gutter Downspout Extensions

It's about the spouts.  A patent lawsuit over gutter downspout extensions pits companies based in Alpharetta, GA and Norcross, GA against one another.

Invisaflow, LLC ("Invisaflow"), based in Alpharetta, filed a patent infringement case against Euramax International, Inc. and Euramax Holdings, Inc. (collectively "Euramax"), based in Norcross, in the U.S. District Court for the Northern District of Georgia, Atlanta Division.  Invisaflow filed its complaint on August 28, 2012, the same date that its patent, U.S. Patent No. 8,251,302 ("the '302 Patent"), issued.

Invisaflow sells a downspout extension attachment called StealthSpout™, pictured on a web page that also recites the number of a predecessor patent related to the ‘302 Patent.  Figures in the ‘302 Patent show an attachment for a downspout extension, where a spout outlet has a rectangular shape, with its width exceeding the width of the inlet end, and with the outlet end having a lower elevation than the inlet end, among other features.  Euramax, through its division Amerimax Home Products, sells the “EXTEND-A-Spout™ Low Profile Drainage System” shown below, which Invisaflow contends includes the foregoing claimed features, as well as others.

Fig. 1 of Invisaflow's '302 Patent

Accused product as shown in Euramax / Amerimax web page

Exhibit 2 to the Complaint comprises a claim chart detailing Invisaflow's present contentions that the EXTEND-A-Spout™ system infringes claims 21 and 47 of the '302 Patent.  That claim chart depicts not only the above image of the Euramax / Amerimax system but also figures from U.S. Patent Publication No. 2012/0125465, which Invisaflow contends was assigned to Amerimax.  The court's Patent Local Rules will provide Invisaflow with the opportunity to later augment its contentions should it so choose, and will require Euramax to thereafter state with some particularity any grounds it may have for noninfringement as well as any grounds for specified claims of invalidity.

Invisaflow alleges that it gave pre-issuance notice of its claims to Euramax on July 20, 2012, but that Euramax continued to infringe.  On that basis, Invisaflow alleges that Euramax committed willful infringement of the '302 Patent.  Even if Invisaflow ultimately succeeds in establishing infringement liability, it remains to be seen whether its asserted basis for willful infringement will withstand judicial scrutiny.  In Emory University v. Glaxo Wellcome Inc., No. 1:96-cv-1868-GET, 1997 WL 854942 (N.D. Ga. Dec. 16, 1997), the Northern District of Georgia denied Emory's motion to amend its complaint to add an allegation of willfulness, where Emory (like Invisaflow) filed suit on the same day the patent issued, but where the defendant knew of Emory's patent application a year and a half before the application issued as a patent.  At the time defendant acquired that knowledge, the claims had been preliminarily rejected by the USPTO.  Invisaflow, by contrast, allegedly gave notice when its claims had already been allowed and their issuance was imminent.  Whether that distinction will matter, though, is an open question.  Another court, citing Emory, held that "the focus of a willfulness determination is generally on post-patent, rather than pre-patent conduct," and that absent circumstances such as "egregious copying" of the invention, pre-patent conduct cannot predicate a finding of willfulness.  Trading Techs. Int'l, Inc. v. eSpeed, Inc., No. 04 C 5312, 2008 WL 63233, at *1 & *2 (N.D. Ill. Jan. 3, 2008).  Of course, that Illinois court's decision is not binding on the Northern District of Georgia, but a judge could still regard that decision as persuasive authority, particularly since it cited Emory and followed its reasoning.

The case is Invisaflow, LLC v. Euramax International, Inc. and Euramax Holdings, Inc., No. 1:12-cv-2971-SCJ, U.S. District Court for the Northern District of Georgia, Atlanta Division, assigned to U.S. District Judge Steve C. Jones.

UPDATE:  On October 18, 2012, Invisaflow filed a Notice of Dismissal, terminating the case on that date.  See our November 13 post.

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Production Company Strikes with a Copyright Action Over Martial Arts Videos

On August 27, 2012, Ocean Aire Productions, Inc. ("Ocean Aire") and Sarah Beliza Tucker, both of Florida, filed a complaint in the Northern District of Georgia against Choe's Hapkido of Forsyth, LLC ("Choe's Hapkido"), Maurice Murphy, and Jong H. Choe, all of Georgia, seeking injunctive relief and damages for copyright infringement, unfair competition, false designation of origin, and fraud under United States and Georgia law.

According to the complaint, Plaintiffs create, produce, and distribute videos and associated content using animated characters directed at children learning or interested in martial arts.  Plaintiffs claim ownership of copyrights for the scripts, recordings, and theme music for Harry's First Martial Arts Lesson and Harry & Friends Black Belt Principles: Harry Gets into the Swing of Things.  Plaintiffs also claim ownership of a copyright to character designs for Harry, a "red-haired anthropomorphic lizard, and his other animal-based friends."  (See Harry and the other characters on the Black Belt Principles website.)  Plaintiffs state that the videos are sold primarily to martial arts schools and programs around the country for their resale and distribution as advertising and promotional materials.

The complaint alleges that Choe's Hapkido, a martial arts school with branches in Georgia, Maryland, Rhode Island, and Virginia, purchased the two videos, copied the content, stripped off the title screens, end credits, FBI warning, and all other information showing ownership and copyright status, and replaced them with Choe's Hapkido's own name and logo.  Plaintiffs claim that the altered videos are publicly accessible on YouTube and perhaps through other channels.  Plaintiffs raise claims for federal copyright infringement, unfair competition and false designation of origin under the Lanham Act, violation of the Georgia Uniform Deceptive Trade Practices Act (O.C.G.A. §§ 10-1-370 et seq.), and fraud under O.C.G.A. § 23-2-55.  Plaintiffs ask for preliminary and permanent injunctive relief, damages, seizure and destruction of all infringing works, and recoupment of attorneys' fees and costs.

The case is Ocean Aire Productions, Inc. et al. v. Choe's Hapkido of Forsyth, LLC et al., Civ. No. 2:12-cv-0205-WCO, United States District Court for the Northern District of Georgia, Atlanta Division, and has been assigned to Judge William C. O'Kelley.

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Tuesday, August 28, 2012, 3:17 PM

Mohawk Sues for Infringement of Horizon® Trademark

On August 23, 2012, Mohawk Carpet Distribution, Inc. (“Mohawk”) filed a complaint against Horizon Home Imports, Inc. (“HHI”) for infringement of the registered trademark Horizon®, as used in connection with floor coverings.

USPTO records name Mohawk as the current owner of U.S. Trademark Registration No. 1,422,031, for the mark HORIZON®, for “tufted textile carpets having a soft fiber pile surface.”  That registration, which issued in 1986, recites a first use date of January 5, 1972.  Mohawk alleges that it made “continuous and extensive” use of the HORIZON® mark over the past 40 years, endowing Mohawk with common law trademark rights as well as rights attendant to its federal registration.

Mohawk describes HHI, based in Charlotte, North Carolina, as “a factory direct importer and supplier of floor coverings and carpets that [HHI] offers, sells and markets to retailers for sale to consumers . . . .”  Mohawk alleges that HHI has sold goods under the mark HORIZON, and attached three exhibits to its complaint that purportedly show HHI’s use of the HORIZON mark in sales and promotion of rugs.  Mohawk claims that prior to filing suit, it notified HHI of Mohawk’s trademark rights, but that HHI refused to cease use of the HORIZON mark.

In addition to reciting causes of action for infringement of a federally-registered mark and for federal unfair competition under the Lanham Act, Mohawk’s complaint recites related counts under Georgia law.

The case is Mohawk Carpet Distribution, Inc. v. Horizon Home Imports, Inc., No. 1:12-cv-2919-TWT, U.S. District Court for the Northern District of Georgia, Atlanta Division, assigned to U.S. District Judge Thomas W. Thrash, Jr.

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State Agency Appeals Ruling that it Lacks Standing to Bring Suit Under Lanham Act

Florida VirtualSchool ("FLVS"), an agency of the state of Florida, has appealed a ruling by Judge Gregory Presnell of the Middle District of Florida dismissing its trademark infringement action for lack of standing to bring suit under the Lanham Act.

FLVS is an educational institution that provides online courses to students throughout the United States and foreign countries.  FLVS became an agency of the State of Florida in June 2000 pursuant to Section 1002.37 of the Florida Statutes, which provided in relevant part:
The board of trustees ... may acquire, enjoy, use and dispose of patents, copyrights, and trademarks and any licenses and other rights or interests thereunder or therein.  Ownership of all such patents, copyrights, trademarks, licenses, and rights or interests thereunder or therein shall vest in the state, with the board having full right of use and full right to retain the revenues derived therefrom.
Fla. Stat. 1002.37(2)(c).   Since 2002, FLVS has continuously operated under the names "Florida VirtualSchool" and "FLVS" and, in 2010, it registered those marks with the USPTO.  The marks were assigned registration numbers 3,830,765 and 3,873,393, respectively.

In 2003, the State of Florida authorized a program through which private online education providers could offer education services to Florida students.  K12, Inc. and K12 Florida, LLC (collectively, "K12") joined the program and adopted the name "Florida Virtual Academy" in documents filed with the state.  FLVS filed this suit alleging that K12's use of Florida Virtual Academy amounted to infringement of its registered trademarks under the Lanham Act.  K12 moved to the dismiss the complaint on the basis that FLVS lacked standing to bring the action due to the express statutory language vesting ownership in the State of Florida.

Judge Presnell of the Middle District of Florida issued a decision granting K12's motion to dismiss on July 16, 2012.  The Court noted that for "standing to exist under the Lanham Act, the plaintiff must be the owner of the mark in question or an exclusive licensee."  Judge Presnell held that the plain language of the statute "clearly vests 'ownership' of the marks in the State of Florida -- an entity separate and distinct from FLVS" and that the legislature's evident intent was to grant FLVS "specific, limited intellectual property rights."  FLVS argued that, at a minimum, it is an exclusive licensee such that it could bring the suit, but the Court noted that the statute's language also contemplated multiple licensees and that the licensor, the state of Florida, retained exclusive ownership.  As a result, Judge Presnell found that FLVS lacked standing to bring the lawsuit and dismissed the action without prejudice.

On August 17, 2012, FLVS filed a notice of appeal with the Eleventh Circuit.  The case is Florida Virtualschool v. K12, Inc., et al., No. 12-14271, on appeal from Case No. 6:11-cv-831-Orl-31KRS (M.D. Fla.).  

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Trademark Infringement Counts Included in 16-Count Lawsuit Filed by Sprint to Stop Unauthorized Trafficking of its Phones

Recounting observations by a private investigator, including surveillance photos and a visit to a Michigan office protected by bulletproof glass, Sprint invokes the authority of U.S. District Court for the Northern District of Georgia to help combat what Sprint calls “the global conspiracy to traffic in Sprint Phones.”

On August 21, 2012, Sprint Nextel Corporation and Sprint Communications Company, L.P. (collectively “Sprint”) filed a 16-count, 54-page complaint in the Atlanta Division against nine defendants regarding their activities in the unauthorized purchasing and reselling of phones designed for use in Sprint’s network (“Sprint Phones”). Paragraph 1 of Sprint’s complaint describes its legal action as one for damages and injunctive relief “arising out of Defendants’ participation in a conspiracy to willfully infringe Sprint’s rights” related to Sprint Phones, including but not limited to the iPhone 4® and the iPhone 4S.®

A November 2011 Wall Street Journal article (included in Exhibit F to the complaint) reported that Sprint had agreed to buy over 30 million iPhones from Apple at a cost of $20 billion.  Sprint regards this as “a significant amount of its business” and thus characterizes its request for relief as “an urgent business issue.”

Describing its own business model, Sprint states that it “subsidizes its customers’ acquisition of the Sprint Phones by selling [them] for substantially less than the Phones cost Sprint,” and that Sprint recoups this subsidy through profits earned from monthly service fees charged to its customers.  The manufacturers of Sprint Phones, according to Sprint, install proprietary software that prevents those phones from being used outside the Sprint network.  Sprint sells each Sprint Phone under Terms and Conditions that, among other things, require payment of monthly service charges and other related fees, and expressly prohibit the resale of Sprint Phones.

Sprint’s complaint alleges that the defendants and their co-conspirators orchestrated bulk purchases of Sprint Phones from Sprint or its authorized dealers, hacked the phones to disable the Sprint network software and them, and then sold those phones overseas, still using the Sprint trademarks, with no intent for those phones to ever connect with Sprint’s network.  These actions, according to Sprint’s complaint, have caused several problems, including:
  • “Once a Sprint Phone is shipped overseas and becomes operable on other wireless networks, Sprint no longer has a revenue source to recoup the invested subsidy on that phone.”
  • The Sprint Phones are resold without original packaging, accessories, or manuals.  Furthermore, the hacking and reselling of a Sprint Phone “voids the manufacturer’s warranty on the device.”  Sprint alleges these actions deprive it of a means to control the quality of its product and cause harm to its reputation and goodwill. 
  • Product shortages caused by the defendants’ bulk purchases of Sprint Phones from authorized dealers.  Such purchases were unauthorized in Sprint’s view because Sprint earlier sought to prevent bulk purchases by “limiting the number of Sprint Phones an individual may purchase on a daily basis.”  The defendants, according to Sprint, sought to circumvent that policy by employing “Runners” to make multiple phone purchases on their behalf.  The unauthorized bulk purchases have caused shortages of iPhone 4S® phones for the Sprint network, thereby, Sprint alleges, “substantially harming Sprint and its relationship with dealers and consumers because Sprint is not able to supply dealers with sufficient handsets to satisfy demand from legitimate consumers.”
Sprint’s complaint details information allegedly acquired through the efforts of its private investigator.  Such efforts included a visit to a retail location of defendant Ace Wholesale, Inc. in Taylor, Michigan.  The complaint describes that location as “a small office area with a larger office area behind bulletproof glass, and a secure rotating drawer to pass items through to the employees.”  The complaint alleges that the investigator was there told that Ace would pay $430 for Sprint iPhone 4S models, and that a day later such a purchase was made, though at a price of $425.  Around a week later, according to the complaint, the investigator conducted surveillance outside that location, during which time he observed 67 vehicles visiting the store, with most of those patrons having carried “multiple phone boxes, plastic bags, or cardboard boxes containing cellular telephones.”  Sprint describes Exhibit D to its complaint (excerpted above) as including photographs taken during that surveillance activity.  Additionally, the complaint describes interactions with Ace Wholesale personnel in Troy, Michigan, and Chicago, Illinois as well as in Atlanta.  One of the named defendants is a “Runner” purportedly interviewed by the private investigator outside the Atlanta location.

The table below recites the counts that Sprint’s complaint asserts against the named defendants. 

Cause of Action
Breach of Contract
Unfair Competition (O.C.G.A. § 23-2-55)
Tortious Interference with Business Relationships and Prospective Advantage
Civil Conspiracy
Unjust Enrichment
Conspiracy to Induce Breach of Contract
Common Law Fraud
Fraudulent Misrepresentation
Trafficking in Computer Passwords (in violation of Computer Fraud and Abuse Act[1], 18 U.S.C. § 1030(a)(6))
Unauthorized Access (in violation of Computer Fraud and Abuse Act, 18 U.S.C. § 1030(a)(5)(C))
Unauthorized Access with Intent to Defraud (in violation of Computer Fraud and Abuse Act, 18 U.S.C. § 1030(a)(4))
Federal Trademark Infringement (15 U.S.C. § 1114)
Federal Common Law Trademark Infringement and False Advertising (15 U.S.C. § 1125(a)(1)(A) and (B))
Contributory Trademark Infringement
Deceptive Trade Practices (O.C.G.A. § 10-1-372 et seq.)
Violation of Georgia Computer Systems Protection Act (O.C.G.A. § 16-9-93(a), (b), and (e))

The case is Sprint Nextel Corporation and Sprint Communications Company, L.P. v. Ace Wholesale, Inc., Jason Floarea, Eric Mandreger, Dominick Lanore, Tony Archie, Jose Genel, Barney Gunn, CopaTrade, Inc., and Moshe Alezra, No. 1:12-cv-2902-JEC, U.S. District Court for the Northern District of Georgia, Atlanta Division, assigned to Chief Judge Julie E. Carnes.

[1] For a general explanation of the Computer Fraud and Abuse Act, see Vicki M. Luoma and Milton H. Luoma, Jr., “The Computer Fraud and Abuse Act: An Effective Tool for Prosecuting Criminal and Civil Actions in Cyberspace,” The Forum on Public Policy (2008), available in http://www.mobiledia.com/news/110603.html.

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Friday, August 24, 2012, 11:08 AM

Wrapping Paper Designer Targets Wal-Mart and Arkansas Supplier with Copyright Lawsuit

Wal-Mart and an Arkansas supplier find themselves defendants to a copyright infringement action filed by a Georgia designer and manufacturer of wrapping paper.

On August 21, 2012, International Greetings USA d/b/a The Gift Wrap Company (“TGWC”), based in Midway, Georgia, filed a complaint in the U.S. District Court for the Northern District of Georgia, Atlanta Division, alleging that Bentonville, Arkansas-based defendants Wal-Mart Stores, Inc. and Seminole Consulting and Marketing, Inc. (“SCM”) infringed five copyrights owned by TGWC for wrapping paper designs.  The complaint also asserts a count for violation of the Georgia Uniform Deceptive Trade Practices Act.

TGWC’s complaint alleges that SCM realized at least $2,691,400.60 in gross revenues from sales of infringing products to Wal-Mart, and that Wal-Mart realized at least $2,481,096.60 in gross revenues from sales of such products to retail consumers.

Exhibits A-E to the Complaint purport to be copies of U.S. Copyright Registrations for the asserted works, all registrations bearing an effective date of February 13, 2012.  TGWC describes Exhibit F to the Complaint as showing the infringing products side-by-side with the copyrighted designs.  Shown below for illustrative purposes is an excerpt from that exhibit.

Excerpt from Exhibit F to complaint

The case is International Greetings USA, Inc. v. Seminole Consulting and Marketing, Inc. and Wal-Mart Stores, Inc., U.S. District Court for the Northern District of Georgia, Atlanta Division, No. 1:12:-cv-02897-SCJ, assigned to U.S. District Judge Steve C. Jones.

UPDATE:  On November 7, 2012, TGWC filed a Notice of Dismissal, resulting in termination of the case on November 8, 2012.  See our November 13 post.

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Thursday, August 23, 2012, 1:16 PM

Online Adult Videos the Focus of Copyright Action Filed in Northern District of Georgia

On August 17, 2012, Ventura Content, Ltd. ("Ventura"), an Anguillan corporation, filed a complaint in the Northern District of Georgia against UGC Internet Ventures, Ltd. ("UGC"), a corporation organized under the laws of Cyprus, and certain unknown persons or entities ("Does 1-10"), alleging that UGC and Does 1-10 have willfully infringed over 100 of Ventura's copyrights by operating websites that allow users to upload, view, and obtain copies of a library of adult video content for free.

Ventura purports to own numerous copyrights for adult-oriented content, including "high quality adult videos," and to invest hundreds of thousands of dollars annually to create and distribute adult videos "because the Copyright Act protects its economic incentive to do so."  Ventura distributes the works or licenses them for distribution through websites, DVDs and other video formats, and pay-per-view televisions systems.  According to the complaint, UGC and Does 1-10 operate so-called "Tube Sites," which encourage users to generate and upload content which can be freely accessed by other users.  Ventura claims that Tube Sites are nothing more than fronts for massive on-line piracy and copyright infringement, because instead of promoting user-generated content, users primarily upload copyrighted material generated and distributed by companies like Ventura.  According to the complaint, these works often include high-profile "pornstars," and UGC advertises that users can "Watch Free Porn Videos of Famous Pornstars," openly promoting and enabling infringement of copyrighted adult content.

Ventura alleges that the defendants have actual knowledge or "have turned a willfully blind eye to the infringement occurring on the Accused Sites."  According to the complaint, the infringement is open and notorious, and the websites contain "red flags" that infringing activity is occurring, such as the "presence of numerous full-length or extended videos often featuring well-known adult industry 'pornstars' who appear in studio-produced and copyrighted films."  As a result, Ventura claims that it will be irreparably harmed absent an injunction halting the defendants' activity.  Ventura also seeks the maximum statutory damages allowable under 17 U.S.C. § 504(c), or $150,000 per work, or in the alternative actual damages in an amount to be determined at trial, to compenstate for the alleged willful infringement of its copyrighted material.  Pursuant to 17 U.S.C. §§ 503 and 505, respectively, Ventura also asks that the Court order the impoundment and destruction of any infringing copies of Ventura's copyrighted content and award Ventura its attorneys' fees and costs.

The case is action number 1:12-cv-02856, and has been assigned to Judge Timothy C. Batten, Jr.

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Joao Bock Transactional Systems, LLC Files Three Lawsuits in Northern District of Georgia on Same Day over Same Group of Patents

The U.S. District Court for the Northern District of Georgia is but the latest litigation forum chosen by a patentee with a history of filing infringement lawsuits against other organizations in other courts.

On August 17, 2012, Yonkers, New York-based Joao Bock Transactional Systems, LLC (“JBTS”) filed three lawsuits in the Atlanta Division of the Northern District, namely:

(1)           Joao Bock Transaction Systems, LLC v. Charles Schwab & Co., Inc., No. 1:12-cv-02857-TWT, currently assigned to Judge Thomas W. Thrash, Jr.;

(2)           Joao Bock Transaction Systems, LLC v. Scottrade, Inc., No. 1:12-cv-02858-RWS, currently assigned to Judge Richard W. Story; and

(3)           Joao Bock Transaction Systems, LLC v. OptionsHouse, LLC and Peak6 Investments, L.P., No. 1:12-cv-2859-AT, currently assigned to Judge Amy Totenberg.

Each lawsuit alleges infringement of three related patents: U.S. Patent No. 6,047,270 (“the ‘270 Patent”), issued April 4, 2000 and titled “Apparatus and Method for Providing Account Security”; U.S. Patent No. 6,529,725 (“the ‘725 Patent”), issued March 4, 2003 and titled “Transaction Security Apparatus and Method”; and U.S. Patent No. 7,096,003 (“the ‘003 Patent”), issued August 22, 2006 and titled “Transaction Security Apparatus.” 

Figure 1 below schematically illustrates the technology disclosed in the asserted patents.  
Figure 1 of '270, '725, and '003 Patents
As an example of the disclosed technology, the ‘270 Patent describes an apparatus and method for notifying an account holder, at the time of a point of sale, when that holder’s wireless device or telephone number have been used in an unauthorized manner.  A point-of-sale authorization device and a connected a central processing computer communicate either individually or in tandem with a communication device owned by the account holder.  Information transmitted to the account holder “may include the name of the store or the service provider, the amount of the transaction, the time of the transaction and the location of the transaction.”  The account holder receiving that information may then transmit a signal corresponding to a desired action, such as directing the suspension of use of the card. 

The three complaints allege, without limitation, that the following items infringe all three patents:  in lawsuit (1), the “Schwab One® Brokerage Account”; in lawsuit (2), the “Scottrade Trading Website”; and in lawsuit (3), “OptionHouse Brokerage 2.0.”

To say that JBTS is not shy about asserting at least one of these patents in the federal court system against multiple defendants would be an understatement.  Prior to filing the three above-identified lawsuits, JBTS filed patent infringement complaints in the following civil actions:

1.      Joao Bock Transaction Systems, LLC v. Sleepy Hollow Bank and Jack Henry & Associates, Inc., U.S. District Court for the Southern District of New York, No. 3:03-cv-10199 (WWE), filed 12/24/03, asserting ‘725 Patent.  Case (“Sleepy Hollow”) terminated by way of judgment against JBTS, explained below.

2.       Joao Bock Transaction Systems of Texas, LLC  v. AT&T, Inc., Zions First National Bank, The Northern Trust Company, Wells Fargo Bank, N.A., M&I Marshall & Ilsley Bank, Regions Bank, PNC Bank, N.A., Bank of America, N.A., Visa, Inc., American Express Company, Discover Financial Services, JP Morgan Chase & Co., Chase Bank USA, N.A., Citibank, N.A., Lindale State Bank, and Texas National Bank of Jacksonville, U.S. District Court for the Eastern District of Texas, No. 6:09-cv-00208-LED, filed 05/11/09, asserting ‘003 Patent.  Case terminated by way of settlements.

3.       Joao Bock Transaction Systems of California, LLC v. Cathay Bank, Citizens Business Bank, Pacific Western Bank, Bank of the West, Silicon Valley Bank, East West Bank, Pacific Capital Bank, N.A., Santa Barbara Bank & Trust, First National Bank of Central California, South Valley National Bank, San Benito Bank, First Bank of San Luis Obispo, and West America Bank, U.S. District Court for the Central District of California, No. 2:10-cv-0735-DSF-JEM, filed 09/21/10, asserting ‘270 Patent.  Case is currently pending.

4.       Joao Bock Transaction Systems, LLC v. USAmeriBank, First Community Bank of America, Everbank, Mercantile Commerce Bank, N.A., CNL Bank, Florida Capital Bank, N.A., Bankfirst, First Southern Bank, Gulfstream Business Bank, International Finance Bank, Regent Bank, and Grand Bank & Trust of Florida, U.S. District Court for the Middle District of Florida, No. 8:11-cv-00887-MSS-TGW, filed 04/22/11, asserting ‘270 Patent.  Case is currently pending.

5.       Joao Bock Transaction Systems, LLC v. Barrington Bank & Trust Company, N.A., American Chartered Bank, Bridgeview Bank Group, Centrue Bank, Citizens First National Bank, Northbrook Bank and Trust Company, f/k/a First Chicago Bank & Trust, BMO Harris Bank N.A., Hinsdale Bank & Trust Company, Inland Bank & Trust, Lake Forest Bank and Trust Company, Libertyville Bank & Trust Company, North Shore Community Bank & Trust Company, The National Bank, West Suburban Bank, Associated Bank, N.A., First National Bank and Trust Company, Fifth Third Bank, and U.S. Bank National Association, U.S. District Court for the Northern District of Illinois, No. 1:11-cv-06472, filed 09/15/11, asserting ‘270 Patent.  Case is currently pending.

Before trial in the Sleepy Hollow case, the parties stipulated to a voluntary dismissal of claims against Sleepy Hollow Bank.  However, JBTS proceeded to trial against Jack Henry & Associates, Inc. (“Jack Henry”), asserting that Jack Henry’s “NetTeller online banking product” infringed six claims of the ‘725 Patent.  The jury returned a verdict finding not only noninfringement of those six claims, but also that those claims were invalid over cited prior art.  Interestingly, the jury also found that Raymond Joao, a named co-inventor on the ‘725 Patent (as well as on the ‘270 and ‘003 Patents), “was not a person of ordinary skill in the art.”  In a Judgment entered on July 21, 2010, following post-trial briefing, the U.S. District Court for the Southern District of New York elaborated upon that finding in the paragraph quoted below.

Findings of Fact 
            2.         Raymond Joao is not a person of ordinary skill in the relevant art because he does not have sufficient expertise or background in the relevant fields of online banking, banking operations, computers and internet communications.  Mr. Joao is not a person of ordinary skill in the art simply because he is the inventor, see Kimberly-Clark corp. v. Johnson & Johnson, 745 F.2d 1437, 1454 (Fed. Cir. 1984), nor does his education and experience in engineering and computers or his minimal experience with online banking transactions qualify him as a person of ordinary skill in the art of online banking transactions.

Commenting upon the judgment in a website post, defendants' counsel declared: “[I]n this case, the plaintiff had no intention of ever taking this product to market.  He had no knowledge of the software industry and knew nothing about this technology.”

JBTS appealed that judgment to the U.S. Court of Appeals for the Federal Circuit.  However, in a decision entered on December 13, 2011, the Federal Circuit affirmed the judgment.

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Friday, August 17, 2012, 9:28 AM

Successive USPTO Reexaminations Preclude Lifting Litigation Stay

On August 13, 2012, Judge Richard W. Story of the Northern District of Georgia denied a plaintiff's motion to lift a stay even though the reexamination that had been the basis for the stay was resolved.

Plaintiff Xpedite Systems, LLC ("Xpedite") filed an action alleging that Defendant J2 Global Communications, Inc. ("J2 Global") infringed U.S. Patent Nos. 5,872,640 (the "'640 Patent") and 7,804,823 (the "'823 Patent").  On July 26, 2011, J2 Global filed a request for ex parte reexamination of the '640 Patent with the United States Patent and Trademark Office ("PTO").  The PTO granted the reexamination request, finding 20 substantial new questions of patentability.  J2 Global also filed a petition seeking inter-partes reexamination of the '823 Patent.  On September 8, 2011, the PTO granted the inter-partes reexamination request, but the next day it issued an Action Closing Prosecution that rejected each of J2 Global's arguments and confirmed the patentability of every claim in the '823 Patent.

On October 14, 2011, Judge Story granted J2 Global's motion to stay the litigation while the ex parte reexamination of the '640 Patent was pending.  On February 2, 2012, the PTO issued a certificate of reexamination confirming the patentability of all of the '640 Patent claims without amendment.  On March 13, 2012, Xpedite filed a motion to lift the stay.

On March 22, 2012, J2 Global launched another attack through the PTO, filing an appeal of the PTO's decision to close the inter-partes reexamination of the '823 Patent and filing a second request for ex parte reexamination of the '640 Patent.  The PTO granted the second reexamination request on June 2, 2012.  Xpedite argued that the basis for the stay was the first reexamination filing, which has now been resolved.  Xpedite also argued that J2 Global's second round of filings were delay tactics to avoid litigating the matter.  Judge Story expressed some concern about not wanting "to encourage piece-meal litigation or delay tactics."  Nevertheless, Judge Story found that the original reasons for granting the stay were still valid -- the resolution of the reexamination proceedings would likely simplify the issues, promote judicial economy, and is not outweighed by the prejudice felt by Xpedite.

Under the America Invents Act ("AIA"), inter partes reexamination will be replaced by inter partes review on September 16, 2012.  In addition, while ex parte reexamination will still be available, the new option of post-grant review will be instituted.  The new rules for these proceedings can be found here.  For more information on this transition, the PTO has information on the changes brought about by the AIA on its website.

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Thursday, August 16, 2012, 5:30 PM

Frontline® Plus and Heartgard® Maker Launches Lawsuit over Competing Advertisements

The maker of Frontline® Plus and Heartgard® veterinary products has again turned to the judicial system to resolve disputes regarding its own advertisements, as well as those of its competitors.

On August 13, 2012, Merial LLC ("Merial") filed a complaint in the U.S. District Court for the Northern District of Georgia, Atlanta Division, against its competitor, Elanco Animal Health ("Elanco"), a division of Eli Lilly and Company.  The complaint asserts counts for false advertising under § 43(a) of the Lanham Act and related state law claims over Elanco's advertisements for its product Trifexis®.   

Additionally, the last count of the complaint asserts a claim for a declaratory judgment, asking the court to render a judgment that Merial’s own advertisements for its Frontline® Plus and Heartgard® products “are not false, misleading, or unsubstantiated and that they do not violate Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a).”

Merial alleges that Elanco’s ads state or imply that Trifexis® “is labeled and approved to prevent infection by intestinal parasites, when in fact it is only labeled to treat and control such infections [italics in original].”  Therefore, contends Merial, for Elanco to include the phrase “to protect (dogs / your dog) from parasites” is to engage in false advertising.  Merial additionally alleges that a television commercial for Trifexis®, which depicts a dog trapped in a “Plexiglass habitrail,” falsely suggests that other products constitute “extreme measures” for protecting dogs from parasites.

Regarding its declaratory judgment count, Merial states that it “seeks to clear its good name and put an end to Elanco’s baseless attacks on Merial’s advertising.”  Merial describes that advertising as comparing: (1) Elanco’s Trifexis® to Frontline® Plus and Heartgard®; and (2) Elanco’s flea product Comfortis® to Frontline® Plus.  Merial alleges: “Elanco’s ongoing accusations cast a cloud over Merial’s brands and need to be dealt with by a court of law.”

The case is Merial LLC v. Elanco Animal Health, a division of Eli Lilly and Company, No. 1:12-cv-02801, U.S. District Court for the Northern District of Georgia, Atlanta Division.  The case has been assigned to U.S. District Judge Richard W. Story.

Note:  Merial is also involved in a patent case against a different competitor.  See prior blog entry for details.

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Wednesday, August 15, 2012, 4:28 PM

Sounds Like a Trial: Speaker Design Patent Infringement Lawsuit Survives Pretrial Challenge

The overall similarity between patented and accused designs, a court ruled, is enough to let a jury decide whether design patent infringement occurred.

On August 14, 2012, the U.S. District Court for the Northern District of Georgia, Chief Judge Julie E. Carnes presiding, issued an order denying the defendant's motion for summary judgment, thus refusing to dispose of a lawsuit over speaker designs before it can be tried to a jury.

The order indicates that the plaintiff, Rapha Products Group, LLC ("Rapha"), based in Acworth, Georgia, owns U.S. Patent No. D555,636 ("the '636 Patent"), which issued in 2007, and "which encompasses the ornamental design for a tubular speaker as depicted in the six figures that are attached to the patent application."  As stated by the USPTO, a design patent "may be granted to anyone who invents a new, original, and ornamental design for an article of manufacture."  The term of a design patent is 14 years from the date of issuance; this differs from regular ("utility") patents, which carry a term of 20 years from the earliest effective filing date of the patent application.

Rapha contends that the Park City, Utah-based defendant Skullcandy, Inc. ("Skullcandy") infringed the '636 Patent with its "Pipe" and "Super Pipe" models of tubular speakers, depicted below next to Figure 3 of the patent.  These images are excerpts from Rapha's Infringement Contentions.
Fig. 3 of '636 Patent vs. accused "Pipe" speaker
Fig. 3 of '636 Patent vs. accused "Super Pipe" speaker
Skullcandy denies any infringement and filed counterclaims seeking declaratory judgments of invalidity, as well as of noninfringement, of the '636 Patent.  Skullcandy also responded to Rapha's Infringement Contentions and filed Invalidity Contentions, asserting several prior art references, three of which are shown below as mere examples.  Each of the illustrated prior art references were among those cited in Skullcandy's motion for summary judgment of noninfringement.

Excerpt from asserted prior art U.S. Pat. No. 5,191,177
Excerpt from asserted prior art U.S. Pat. No. D551,656
Excerpt from asserted prior art U.S. Pat. No. D384,350
The court began its infringement analysis by reciting the two-part test for infringement in design patent cases: "First, the patent claim is construed to determine its scope and meaning.  Second, the properly construed claim is compared to the accused design for overall similarity."
In step 1,  the court quoted precedent stating that "the illustration in the drawing . . . is its own best description."  It therefore construed the '636 Patent claim as "the tubular speaker design depicted in the six figures that are attached to the '636 patent application." 
Step 2 of the infringement analysis invokes the "ordinary observer test," in which the finder of fact decides "whether, an ordinary observer, familiar with the prior art, would be deceived into believing that the accused design is substantially the same as the patented design."  In this step, the factfinder compares the patented and accused designs side-by-side.  In cases where the accused design is not "plainly dissimilar" to the patented design, the prior art can be useful in "highlighting differences between the patented and the accused designs that might not be noticeable in the abstract."
The court recognized that one may obtain a summary judgment of noninfringement of a design patent "if the patented and the accused designs are 'plainly dissimilar,'" or "if in light of the prior art, a jury could not reasonably conclude that the patented and the accused designs are 'substantially the same.'”  However, it found that Skullcandy's showing did not rise to those standards.
A side-by-side comparison of the '636 Patent design with Skullcandy's accused designs, in the eyes of the court, "demonstrates sufficient similarity to support a claim for infringement."  Citing similarities in the respective locations of power switches, "line in" jacks, and a shallow rectangular cavity, the court found that the patented and accused designs combined features "in such a way as to create a similar overall appearance and visual effect."
The court credited Skullcandy's argument that its designs differed from the '636 Patent in terms of: "(1) protruding control buttons on the face of the device, (2) a pedestal stand, and (3) transparent end caps."  However, the court stressed that it must focus on the designs as a whole, and that it would be impermissible to exalt the importance of those differences over that of the designs in their entireties.  The ultimate significance to be accorded to the differences, the court reasoned, was a matter for the jury:
        Applying the above principles and properly focusing on the designs as a whole, the Court finds that the 636 patent and the Pipe and Super Pipe products are not “plainly dissimilar.” [Citation omitted.]  The cited differences are relevant to the analysis, and a jury might ultimately find them to be determinative of the infringement issue. However, the differences do not render the patented and the accused designs “sufficiently distinct that it [is] clear without more” that there is no infringement.” [Citation omitted.]
Finally, the court assessed the impact of Skullcandy's cited prior art upon the infringement issue, deeming that prior art "relevant but not determinative."  It acknowledged that the prior art "shows that cylindrically shaped speakers were fairly common," but it also observed that in every other respect, the prior art differs from both the '636 Patent and Skullcandy designs.  In fact, the court surmised that the prior art may actually highlight similarities between the patented and accused designs, rather than the differences.
Consequently, as it found that the differences between the '636 Patent and Skullcandy designs "are not so glaring as to dictate only one reasonable outcome," the court denied Skullcandy's motion for summary judgment of noninfringement.
The case is Rapha Products Group, LLC v. Skullcandy, Inc., No. 1:10-cv-3388-JEC, U.S. District Court for the Northern District of Georgia, Atlanta Division.

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Monday, August 13, 2012, 3:17 PM

Infringement Action Over Indoor Greenhouse Patents Transferred to Georgia Based on First-to-File Rule

On August 8, 2012, Judge Steve C. Jones of the Central District of California transferred a patent infringement case to the Northern District of Georgia based on the "first-to-file" rule.   The issue was whether a declaratory judgment action filed in Georgia four days before the infringement action was filed in California was merely a forum-shopping anticipatory filing such that the first-to-file rule should not apply.  (For more on the first-to-file rule, see this 2008 article by Mike Cicero.)

According to the original complaint and the Court's order, Atlantis Hydroponics, Inc. of College Park, Georgia ("Atlantis"), co-owned by Steve Sevener and Noah Hubbard, is a retailer of hydroponic growing kits, lights, "grow rooms," and other supplies.  Atlantis has three retail stores in Georgia, one in Tennessee, and an online store.  Atlantis' products are available on Home Depot's website, but not in Home Depot retail stores.  One of Atlantis' products is described as a "Pop-Up Greenhouse," and is manufactured by Viagrow, a Georgia company also co-owned by Sevener and Hubbard.

On March 26, 2012, International Growers Supply, Inc. of Los Angeles, California ("IGS") sent a letter to Atlantis, Sevener and Hubbard, "to acquaint [Atlantis] with [U.S. Patent Nos. 7,823,324 and 7,975,428] and to offer a license under highly favorable terms."  On April 9, 2012, without responding to the letter, Atlantis filed a declaratory judgment action in the Northern District of Georgia seeking a declaration of noninfringement and invalidity of the '324 and '428 Patents.  Four days later, on April 13, 2012, IGS filed an infringement action in the Central District of California against Atlantis, Sevener, Hubbard, Viagrow, and Home Depot, alleging that the "Pop-Up Greenhouse" product manufactured by Viagrow and sold by Atlantis and Home Depot infringed the '324 and '428 Patents.

The defendants in each action filed motions to dismiss or, in the alternative, to transfer venue to California and Georgia, respectively.  Judge Jones held that the first-to-file rule was applicable and transferred the action to the Northern District of Georgia.  The case is action number 1:12-cv-2378 and is currently unassigned.  The motion to dismiss the declaratory judgment action, case number 1:12-cv-1206, is still pending before Judge Charles A. Pannell, Jr.

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Wednesday, August 8, 2012, 5:59 PM

Defendants File Appeal with 11th Circuit of $1.79M+ Judgment in Trademark and Cyberpiracy Case

On July 25, 2012, defendants in a case with multiple claims, including trademark infringement and cyberpiracy under the Lanham Act, filed an appeal with the U.S. Court of Appeals for the Eleventh Circuit.  The defendants are appealing a final judgment rendered on July 10, 2012 by Senior Judge Hugh Lawson of the U.S. District Court for the Middle District of Georgia, Valdosta Division, awarding the plaintiff $1,791,591.61 in damages, attorneys' fees, and miscellaneous costs.

The plaintiff in the appealed case, B&F System, Inc. ("B&F"), based in Dallas, Texas, describes itself on its website as "one of America's leading direct importers and product designers."  B&F is the named registrant in several federal registrations for the trademark Maxam®, for a variety of products, such as cutlery and flatware, steel cookware, and china dinnerware.  Additionally, B&F registered on the federal "Supplemental Register" the shape of a knob used on pot and pan lids, pictured below ("the Lid Knob Trademark").  Under certain conditions, one may claim the shape of a product as a trademark.
Excerpt from U.S Trademark Reg. No. 3,266,496

The U.S. Patent and Trademark Office ("USPTO") describes the Supplemental Register as:
[a] secondary trademark register for the USPTO. It allows for registration of certain marks that are not eligible for registration on the Principal Register, but are capable of distinguishing an applicant’s goods or services.  Marks registered on the Supplemental Register receive protection from conflicting marks and other protections, but are excluded from receiving the advantages of certain sections of the Trademark Act of 1946.
The dispute arose out of a pair of November 1986 agreements between B&F and named defendant Lloyd LeBlanc, Jr.  One agreement ("the Distributor Agreement") defined the terms under which Mr. LeBlanc was to serve as an independent distributor for B&F, with operations to be based in Tifton, Georgia.  In the other agreement ("License Agreement"), B&F granted a license to Mr. LeBlanc of rights to the "MAXAM" service mark.  According to findings by the jury in the trial of the case, these agreements were terminated on May 31, 2007 and November 12, 2007, respectively.

B&F's amended complaint alleged that following termination of those agreements, the defendants continued to use the "MAXAM" marks, registered the domain names "www.maxamwholesale.com" and "www.maxamwholesale.net," and continued to use B&F's customer list.  B&F asserted several causes of action against the defendants, including infringement of registered marks under the federal Lanham Act (regarding certain defendants' use of the registered "MAXAM" mark and of the Lid Knob Trademark), common law trademark infringement (regarding certain defendants' use of the unregistered mark "MAXAM WHOLESALE"), and cyberpiracy under the Lanham Act (a claim added to the Lanham Act by the Anticybersquatting Consumer Protection Act ("ACPA")) arising from the registration of the domain names.  B&F's amended complaint also asserted state law claims, including a claim against Mr. LeBlanc for breach of contract and against certain other defendants for tortious interference with the contractual relationship between B&F and Mr. LeBlanc.

The defendants counterclaimed against B&F, and those that were ultimately adjudicated were Mr. LeBlanc's counterclaims for breach of contract and for breach of the implied covenant of good faith and fair dealing, and and all defendants' counterclaim against B&F for cancellation of the supplemental registration for the Lid Knob Trademark.

The Middle District of Georgia conducted a three-week trial of the case in three phases: 
·         In Phase I, the jury decided the issues of: (i) whether a partnership existed between defendants Lloyd Leblanc, Jr., Lloyd J. ("Jody") LeBlanc III, and Arthur Jeffrey LeBlanc for purposes of assigning potential liability on B&F's breach-of-contract claim; (ii) whether two individual defendants were aware of the License Agreement prior to November 12, 2007; and (iii) when the agreements were terminated;
·         Phase II dealt with liability issues on B&F's remaining claims and defendants' remaining counterclaims; and
·         Phase III involved the issue of whether, if B&F proved that certain defendants were liable for tortious interference, B&F was entitled to punitive damages.

The jury returned verdicts resolving the Phase I issues (including a finding of no partnership); finding in Phase II that all but one of the defendants were liable on B&F's claims (detailed below) and that B&F was not liable on counterclaims for breach of contract or for breach of the implied covenant of good faith and fair dealing; and finding in Phase III that B&F was not entitled to punitive damages.  More particularly regarding Phase II, the jury imposed monetary liability against certain defendants as follows:
·            $72,114 against Lloyd LeBlanc, Jr. for breach of the Distributor Agreement;
·            $35,665 against Lloyd LeBlanc, Jr. for breach of the License Agreement;
·            $7,500 against defendants Arthur Jeffrey LeBlanc, Lloyd LeBlanc III, Direct Source Imports, Inc. ("DSI"), and Productos Mexicanos Don Jose, Inc. ("PMDI"), jointly and severally, for tortious interference with the Distributor Agreement;
·            Damages for tortious interference with the License Agreement, namely:
$35,665 against defendants Arthur Jeffrey LeBlanc, Lloyd LeBlanc III, Lloyd J. LeBlanc Jr., and Edna LeBlanc for Arthur Jeffrey Leblanc's tortious interference;
$35,665 against defendants Lloyd LeBlanc III, Arthur Jeffrey LeBlanc, Lloyd J. LeBlanc Jr., and Edna LeBlanc, jointly and severally, for Lloyd LeBlanc III's tortious interference;
$35,665 against defendants PMDI, DSI, Arthur Jeffrey LeBlanc, and Lloyd LeBlanc III, jointly and severally, for PMDI's tortious interference; and
$57,066 against defendants DSI, PMDI, Arthur Jeffrey LeBlanc, and Lloyd LeBlanc III, jointly and severally, for DSI's tortious interference;
·            Monetary awards against all defendants (except defendant LeBlanc's LLC) on B&F's federal (Lanham Act) trademark infringement claims, namely:
o          $600,000 in actual damages; and
o          $357,040 in profits; and
·              Monetary awards against Arthur Jeffrey LeBlanc on B&F's Lanham Act cyberpiracy claim, namely:
o   $96,000 in actual damages; and
o   $96,000 in profits.

Additionally, the jury found against certain defendants on B&F's claim for violation of the Georgia Uniform Deceptive Trade Practices Act, and that the charged defendants knew their trade practice was deceptive.  The jury also found that the conduct concerning all Lanham Act claims was "malicious, fraudulent, deliberate, or willful."

In a post-trial order entered on June 29, 2012, the Middle District of Georgia:
·     Denied defendants' motion for a judgment as a matter of law or, in the alternative, for a new trial or remittitur;
·     Granted in part B&F's motion for statutory damages on the cyberpiracy claim, allowing B&F to elect between the jury's monetary award on that claim and a total of $180,000 in statutory damages;
·     Granted in part B&F's motion for attorney's fees under the Lanham Act, adding an award of $372,857.50 in attorney's fees and $2,354.11 in "non-taxable costs";
·     Granted in part B&F's motion for a permanent injunction; and
·     Dismissed the counterclaim for cancellation of the supplemental registration for Lid Knob Trademark.

Loosely stated, the permanent injunction ordered defendants to cease sale, advertising, and promotional activities regarding the marks "MAXAM," "MAXAM WHOLESALE," and the Lid Knob Trademark, and to destroy all advertising and promotional materials regarding the two "MAXAM" marks.

In the July 10 final judgment, the Middle District of Georgia entered judgment on the jury's monetary awards (except for the cyberpiracy award, which the court modified to reflect the $180K statutory damages award), imposed an award of post-judgment interest on all monetary awards, except for the attorney's fees and non taxable costs, and otherwise reiterated the post-trial rulings made in the June 29 order.

The Eleventh Circuit appeal now pending is The B&F System v. Lloyd LeBlanc, et al., No. 12-13946, docketed July 31, 2012.

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