Found exclusively on the SMU STLR web site, the N.D. Texas Update is a continuously updated blog of recent IP cases decided in the U.S. District Court for the Northern District of Texas. We encourage you to check back regularly.

February 2011

M3Girl Designs LLC v. Blue Brownies LLCNorthern District of Texas (Dallas) Case No. 3:09-CV-2390-F, 2009 WL 6354925.

Plaintiff, M3 Girl Designs, LLC is a family owned business specializing in the creation, manufacturing, and selling of interchangeable bottle cap necklaces with unique artwork on the inside of the caps. The bottle cap necklaces are sold under the trademarked name, “Snap Caps”. The artwork used on their jewelry is also covered by copyright.  Examples of the designs include: “Letters on Tye Dye”, “I Love Gymnastics”, and “Cupcakes”. M3 Girl Designs also manufactures three styles of magnetic “keeper” boards that hold the designs. M3 Girl Designs claims to be the first to create bottle cap jewelry.
Blue Brownie, LLC, is a competitor of M3 Girl Designs in the bottle cap necklace market. They also create bottle cap necklaces with interior designs under similar and sometimes identical design names and offer four types of magnetic “keeper” boards.
In its complaint, M3 Girl Designs accused Blue Brownie of copyright infringement, violations of the Lanham Act (including trademark infringement), and unfair competition (a state law claim). 
Blue Brownie presented several arguments, but after a volley of new pleas and motions, its only remaining motion was a motion to dismiss state law claims due to federal preemption. Because M3 Girl Designs does not have any patents, Blue Brownie argued that the functional design of the magnetic bottle caps came under the umbrella of patent law and therefore preempted any state law claims based on that design.
In response, M3 Girl Designs admitted that interchangeable magnets were functional, but clarified its state law claim, by claiming that the state law claim encompassed the “improper use and taking of ‘information’ related to [M3 Girl Designs’] aesthetic jewelry designs (e.g., dimensions, specifications, shapes, sizes of jewelry and accessories) that are not functional and not patentable.” The court read M3 Girl Designs’ response to be arguing only for the specific tort of misappropriation of business opportunity, with the allegation that Blue Brownie sold “substantially similar” jewelry and “duplicat[ed] M3 Girl Designs’ products.
The court found that even though M3 Girl Designs shifted their argument’s focus from functional features to nonfunctional features, the foundation of its claim was the belief that being the first to create bottle cap jewelry should give it the sole right to capitalize on it.  The court explained that states do not have the power to regulate ideas except when it is neccesary to prevent confusion. In this case, M3 Girl Designs did not allege any consumer confusion and the tort claim it did assert does not remedy consumer confusion. Absent consumer confusion, the court cannot impose liability on persons who copy unpatented nonfunctional designs.
Citing United States Supreme Court case, Sears, Roebuck & Co. v. Stiffel Co. (376 U.S. 225 (1964)), the court reiterated the concern that ruling in favor of protecting an idea would grant M3 Girl Designs the “equivalent of a patent monopoly”.
Overall, the court determined that federal law would preempt the state in this case because the goal M3 Girl Designs sought was one “inside the contemplation” of federal patent law. No amount of redressing their argument to appear like a state claim changed the character of M3 Girl Designs’ complaint. Case dismissed.

Summary By: Brienne Davis, Comment and Case Note Editor.




Textron Innovation, Inc. v. Am. Eurocopter, LLC, No. 4:09-CV-377-A (N.D. Tex. 2011).
Decided: February 25, 2011

Plaintiff, Bell Helicopter Textron and Textron Innovations (Textron), alleged that the Defendant, American Eurocopter (American), infringed U. S. Patent No. 5,462,242 (’242 Patent).  The ’242 Patent is a landing gear assembly part for use on a helicopter.  Textron’s initial complaint contained three distinct counts claiming that American infringed its ’242 Patent.  Count I and Count II were dismissed by final judgment on May 10, 2010.  Count III alleged that American was “making, using, offering for sale, and/or selling within the United States, and/or importing into the United States helicopters with infringing landing gear assemblies, including without limitation [on] [defendant’s] EC120 helicopter.”

In response, American filed a summary judgment motion that it had not infringed the ’242 Patent.  First, American claimed that ’242 Patent is expressly limited to improved replacement landing gear while American’s landing gear is sold as parts of their EC 120 helicopter rather than replacement parts.  Second, the ’242 Patent refers to landing gear that extends to the engagement strap and does not have an outer surface.  In comparison the ’242 Patent, American’s design does not extend into the engagement strap and does not contain an outer surface.  Third, American’s design differs from the ‘242 Patent because the outer and inner surface design of cross-tube does not have built-in compressive resistance mechanism as the design provided in the ’242 Patent.  Fourth, there is no evidence to support Textron’s allegation that the cross tubes have a ratio of fatigue strength over yield strength when used in cross tube configuration.  Lastly, American denied that it has manufactured, used, imported, sold or offered to sell its EC 120 helicopter or parts in the United States. 

The district court granted American’s motion for summary judgment based on the first and second reasons provided by American. 

First, in determining the scope of the ’242 Patent, persuasive authority required the court to review the ’242 Patent in its entirety to determine whether the inventors intended the language in the preamble to represent an additional structural limitation or whether it was merely introductory language.  Here, the court found that American’s addition of the word “replacement” to each of the preambles indicated that the applicant intended the word as an additional structural limitation.  Further, the court found that the words “improved” and “replacement” were used throughout the the ’242 Patent and its prosecution history, either separately or together as “improved replacement.”  Therefore, the court concluded that American had not infringed  the ’242 Patent by installing landing gear as original equipment on their helicopters. 

Second, the ’242 Patent expressly required that the replacement landing gear assembly must contain certain parts.  These parts included the bracket that connects the landing gear to the helicopter fuselage, a crosstube, and a strap that is located on the cross tube.  Thus, a piecemeal replacement of individual parts is not considered a use of the patented three piece “assembly.”  Since American’s landing gear in their EC 123 helicopter did not contain the bracket that sits on the strap, the part cannot be considered an infringement as a matter of law. 

The court did not fully address the issue of infringement.  Rather, the court concluded that the first and second reasons alone were sufficient to conclude that Textron failed to raise a genuine issue of material fact that the helicopter landing gear assembly manufactured and sold by American infringed the ’242 Patent. 

Betty Lam, Notes Editor

January 2011

September 2010

Snapt Inc. v. Ellipse Communications Inc., 3:09-cv-00661-O (N.D. Tex. 2010)
Decided: September 28, 2010

Plaintiff Snapt Inc. (Snapt) filed suit against Defendants Ellipse Communications Inc. and Ellipse Communication I, L.P. (Ellipse) alleging Ellipse committed unfair competition with Snapt by “hacking” into Snapt’s secured computer server and violated Texas Common law relating to conversion and unfair competition. They further alleged infringement of the Texas Harmful Access by Computer Statute, violation of the Federal Lanham Act, violation of Federal Antitrust laws and violation of Federal Copyright law. Ellipse filed a notice of removal to the United States District Court for the Northern District of Texas, Dallas Division under 28 U.S.C. 1441 and 28 U.S.C. 1331 because Snapt alleged violations of federal law.

Ellipse asserted numerous affirmative defenses including the statute of limitations, the doctrines of unclean hands, laches, res judicata, fair use, estoppel, license, effective consent, slander by Snapt, and that Snapt lacked ownership.

 Ellipse filed a Motion for Summary Judgment on August 16, 2010. The motion stated that Snapt had taken no depositions, had not made disclosures and had not provided a single document in response to requests for discovery. As a result, Snapt had no evidence to support their allegations. The motion further stated that Snapt failed to specify which of the two Defendants hacked into the system, Snapt failed to provide evidence that Ellipse knowingly or intentionally committed hacking (as required by the Texas Penal Code), Snapt had no evidence of injury resulting from the alleged hacking of their computer system, and Snapt had no evidence to show their computer system was hacked into at all.

Snapt briefly responded to the motion for summary judgment alleging that the statements of Nate Jones and Keith Caven raised issues of material fact. Additional documents were attached but were sealed pursuant to a joint protective order.

The court granted Defendants’ Motion for Summary Judgment and disposed of all issues in the case. The court stated that Caven’s affidavit did not state any information to support Snapt’s hacking allegations that were based on his own personal knowledge. The court stated that Jones’s affidavit was inadmissible despite his experience in the software industry; he did not explain how he was qualified to research and discover hacking. He also did not provide any information on the methods he used to discover  hacking. The court denied Plaintiff’s Motion for Leave to supplement the two affidavits. The court concluded that absent admission of the two affidavits, Snapt did not have admissible evidence to oppose Defendants’ Motion for Summary Judgment.

Sara Stephens, Notes Editor

July 2010

Gillani Consulting, Inc., v. Ferguson Enter., Inc. 3:07-cv-1488-O (N.D. Tex. 2010).

May 2010

Mary Kay Inc. v. Lilly, 3:08-cv-02082-K (N.D. Tex. 2010).

Decided: May 19, 2010

                Plaintiff Mary Kay Inc. (Mary Kay) alleged that Defendants, Sharon Lilly and Dennis Lilly (Lilly), violated the United States Trademark Act.  Sharon Lilly signed an Independent Beauty Consultant (IBC) Agreement with Mary Kay in 2006, allowing Lilly to become an IBC. Lilly agreed to sell the Mary Kay products directly to ultimate consumers and not to display the products in retail outlets.  She also agreed to obtain Mary Kay’s permission prior to using the Mary Kay name in any advertising or literature.

Lilly began selling the products she purchased from Mary Kay on a website and EBay. Mary Kay informed Lilly this was a violation of their agreement.  She failed to respond or desist from the activity.  Mary Kay terminated her IBC Agreement in May 2006.  Since Lilly was no longer an IBC she did not have access to Mary Kay products.  She allegedly solicited Mary Kay products from current IBCs.  In May 2006, her husband Dennis executed an IBC Agreement. Mary Kay believed Dennis had no intention of ever directly selling the Mary Kay product as he agreed.  Upon learning of his fraud, Mary Kay terminated their agreement in 2008.  It was admitted later that Dennis had no involvement with the Mary Kay sales.

Lilly continued to use the Mary Kay trademarks without authorization or consent from Mary Kay.  Defendants Lilly responded that the court did not have proper jurisdiction over them. The court found that due to substantial sales in Texas, the minimum contacts for personal jurisdiction did exist.

Mary Kay then moved for summary judgment.  The court granted summary judgment and issued a permanent injunction.  The injunction ordered Lilly to stop selling, promoting or advertising any Mary Kay product on Ebay or Lilly’s website, sharonscosmeticshoppe.com. Further, the order enjoined Lilly from interfering with any of Mary Kay’s existing contractual relationships by purchasing or soliciting products from current IBCs.

Summary by Jonathon McCartney, Notes Editor                                                                                                

March 2010

 

7-Eleven Inc. v. Puerto Rico-7 Inc., 3:08-cv-0140-B (N.D. Tex. 2010).
Decided: March 22, 2010

    The United States Northern District Court for the Northern District of Texas, Dallas Division, granted summary judgment in favor of 7-Eleven Inc. (SEI) on December 9, 2009, and entered a final judgment on March 22, 2010, in the case of 7-Eleven Inc. v. Puerto Rico-7 Inc.
    SEI sought a declaratory judgment that the Area License Agreement (ALA) entered between itself and Puerto Rico-7 Inc. (PRSI) on April 23, 1987, was validly terminated on December 12, 2007.  SEI claims that the valid termination of the ALA were as follows: (1) PRSI breached the post-termination provisions of the ALA and therefore specific performance of those obligations should be granted; (2) SEI rightly declared all unpaid principal and interest due under a promissory note executed by PRSI in favor of SEI for $709,000 immediately due and payable; (3) PRSI’s use of the 7-Eleven marks constituted trademark infringement and unfair competition in violation of 15 U.S.C. § 1114(1)(a), U.S.C. § 1125, and Texas law; (4) PRSI should be permanently enjoined from any further acts of infringement, and, lastly; (5) SEI is entitled to attorney fees pursuant to the terms of the ALA and the guaranty.  PRSI’s sole defense was a denial that the defaults committed under the ALA were ‘substantial’ and ‘material’ enough to justify termination.
    The court found that the ALA was validly terminated by SEI on December 12, 2007. 
Specifically, PRSI failed to comply with three specific terms of the ALA: (1) to pay license royalties, (2) to maintain adequate capitalization, and (3) to open and maintain the requisite number of stores.  SEI had sent a default notice informing PRSI of such deficiencies and allowing thirty days to remedy such deficiencies.  The notice further stated that if the defaults were not completely cured within the specified time period, the ALA would terminate, triggering the post-termination provisions.  Ultimately, PRSI managed only to cure the license royalty payments, and failure to cure the other obligations amounted to a material default, terminating the ALA and triggering post-termination obligations.  However, PRSI continued to operate stores using the 7-Eleven marks and did not de-identify its formerly licensed stores even after their closing.  PRSI did not return the manuals, forms, or other materials provided by SEI.  PRSI’s actions constituted breach of contract. 
PRSI’s unauthorized use of registered marks created probable consumer confusion and irreparable harm, thus entitling SEI to specific performance of ALA post-termination obligations.  Furthermore, PRSI admitted that it received SEI’s letter accelerating the promissory note, obligating it to repay immediately the balance plus interest.  As to the trademark infringement and unfair competition claims, the evidence was incontrovertible that the 7-Eleven marks were displayed in both operating stores and now-closed stores following the termination of the ALA.  Trademark infringement had occurred as PRSI, used registered marks in a manner likely to cause confusion, or to deceive, or to cause mistake, without SEI’s authorization.  The unauthorized use wrongly identified PRSI’s formerly-licensed locations with SEI and impacted the entire SEI chain.  Such an association prevented SEI from distinguishing its services and had potential to create irreparable reputation damage.  The potential damage outweighed the threatened harm to PRSI, especially since PRSI failed to articulate any specific hardship that could outweigh SEI’s irreparable harm. 
Moreover, the court ordered PRSI to perform the post-termination obligations of the ALA, which included paying the note, de-identifying their stores as 7-Eleven stores, and returning all confidential materials and manuals relating to the operation of PRSI’s stores as 7-Eleven stores.  Finally, because threatened injury to business and reputation could not be compensated in damages, the court permanently enjoined PRSI from any further use or display of the 7-Eleven marks, and PRSI was responsible for all of SEI’s attorneys fees incurred as a result of the litigation.


Summary by Calie Carrick, Notes Editor


Joovy, LLC et al. v. Target Corp., 2010 WL 1006695 (N.D. Tex. 2010)
Decided: March 17, 2010

 

Plaintiffs, Joovy LLC and Albert T. Fairclough (“Joovy”), alleged that the Defendant, Target Corporation (“Target”), infringed U.S. Patent No. 5,622,375 (“the ‘375 Patent”).  The ‘375 Patent is a stroller framework that could carry a standing child on a platform behind the stroller’s rear wheels. Joovy claims its former licensee and marketer continued to sell the stroller to Target after the expiration of the license, with only a few minor changes, and that Target knew of the patent infringement. Joovy sought declaratory and injunctive relief in the United States District Court for the Northern District of Texas from Target for patent infringement under 35 U.S.C. § 271 and for cancellation of U.S. Trademark Registration No. 1,967,532 under 15 U.S.C. § 1052.

 

In its defense, Target claimed that the ‘375 Patent was invalid and unenforceable and therefore, the company did not infringe on the patent. Specifically, in this motion, Target challenged the testimony of the plaintiff’s expert witness.

 

Target brought a Motion to Strike or Preclude the Expert Testimony of the plaintiff’s expert witness, Dr. Hal Watson, Jr., in order to exclude his testimony, which Target believes improperly argued a question of law dealing with the scope of claim construction. Joovy disagreed, arguing that they did not offer their expert’s testimony for claim construction, but only to explain how a person of ordinary skill in infringement and invalidity claims would apply the term “rear wheels.”

 

The Court denied Target’s motion. The Court explained that Federal Rule of Evidence 702 requires expert testimony come from a qualified expert.  While the Court agreed with Target that Dr. Watson could not provide a legal conclusion to the jury on the construction of the disputed term “rear wheels,” Dr. Watson’s mention of the phrase “I have construed” did not mean that his testimony improperly answered a question of law reserved for the court. Additionally, the Court had not ruled on the construction of “rear wheels” or on Target’s invalidity argument. The Court explained that Target had not met its burden to show that Dr. Watson’s testimony was an inadmissible legal conclusion, but Target still had the ability to object at trial if Target felt Dr. Watson was testifying to inadmissible evidence. Since Joovy met its burden in proving Dr. Watson’s opinions were, in part, admissible evidence, the Court believed it should determine admissibility at the time the testimony is offered and in the context of the other evidence presented.

 

Summary by Brandon Darden, Notes Editor

SSL Services, LLC v. Citrix Systems, Inc., 2010 WL 547478 (E.D. Tex. 2010)
Decided: February 10, 2010

 

Plaintiff, SSL Services (“SSL”), alleged that Defendants, Citrix Systems and Citrix Online (collectively “Citrix”), infringed U.S. Patent No. 6,061,796. Specifically, SSL claims that Citrix’s products, GoToMYPC, GoToMeeting, GoToAssist, and GoToWebinar (collectively “the GoTo services”) infringed on SSL’s “Mutli-Access Virtual Private Network,” which was covered under the patent.

SSL brought a motion to compel production of damages expert’s reports from Citrix and its opponents in prior patent litigations that involved Citrix’s Goto services. Citrix is a defendant in two unrelated lawsuits filed by Accolade Systems and 01 Communique Laboratory. SSL seeks three damage expert reports from the Accolade case, and two damage expert reports from the 01 Communique case. Citrix argued that it had already produced the financial data underlying the reports and that the opinions of the experts of the prior cases were irrelevant and duplicative. SSL countered that the reports were relevant because they contained analysis that would influence SSL’s damages claims and could aid in offers of settlement.

The Court denied SSL’s motion. Pursuant to Federal Rule of Civil Procedure 26(b)(1), a party may obtain discovery regarding any non-privileged matter that is relevant to any party’s claim or defense” or “appears reasonably calculated to lead the discovery of admissible evidence.” In this case, SSL had the burden of showing that the damage reports were relevant and would lead to the discovery of admissible evidence. In addition to relevance, the court also weighed the burden of the discovery against the likely benefit. The Court held that SSL already had the relevant underlying data, and that analysis of the prior damage reports would be of little value since they came from different experts, patents, financial data, and plaintiffs. Therefore, the benefit SSL could obtain was minimal. Meanwhile, Citrix would have the burden to produce these reports and petition the other courts for a modification of the protective order. The Court ruled against the motion to compel, finding it duplicative and unduly burdensome.

Summary by Kyle Gross, Casenote & Comment Editor

 

February 2010

AT&T Mobility LLC v. Wireless Exclusive (3:08-cv-001980-M)
Decided: February 16, 2010

 

Defendant Wireless Exclusive was engaged in the Illicit Bulk Resale Scheme by purchasing large quantities of AT&T’s wireless prepaid telephones (“GoPhones”) for the purpose of “unlocking” and altering the phone’s software so that it can be sold for profit.  Wireless Exclusive solicited “runners” to purchase large quantities of GoPhones from retail stores on their behalf. Wireless Exclusive would remove the GoPhone’s original packing and accessories along with copies of the written warranties and ownership and proceed to ship the GoPhones overseas, unlocked or to be unlocked for resale at a substantial profit.

 

AT&T learned about Wireless Exclusive’s activity when it discovered a substantial number of GoPhones were purchased from retailers throughout the United States but were not being activated for use on AT&T network.  AT&T filed action for damage and injunctive relief arising out of Wireless Exclusive’s unlawful business enterprise, claiming that Wireless Exclusive willfully infringed upon AT&T’s trademark rights and other rights related to specially manufactured GoPhones and its wireless services.

 

The AT&T GoPhone business model relies on its ability to deliver an affordable prepaid wireless phone service to its consumer.  AT&T sells GoPhones at a loss but recoups its loss and earns a profit through the sale of airtime minutes. Thus, AT&T is able to offer GoPhones at an affordable price only if the phones are used as intended on the AT&T service network.

 

In order to ensure that GoPhones will be used on AT&T network, GoPhones are “locked” with a software that enables it to be used exclusively on AT&T’s wireless system.  In addition, GoPhones are sold subject to Terms and Conditions set forth in printed inserts in each package of GoPhones, and posted on AT&T’s website, that constitute a valid binding contract. AT&T asserted that Wireless Exclusive violated the Terms and Conditions when purchasing GoPhones with the intent that the phones would not be activated on AT&T service.  AT&T alleged that Wireless Exclusives’ intent was to unlock, repackage and resell the phones in violation of the Terms and Condition.

 

Wireless Exclusive denied unlocking or altering GoPhones.  Instead, Wireless Exclusive claimed that it lawfully purchased and resold the GoPhones from a retailer by paying valuable consideration in arms-length transactions.  Further, Wireless Exclusive argued that the fine print of the Terms and Conditions inside the packing cannot be considered as a binding contract since there can be no meeting of the minds at the time of purchase.

 

The Court found in favor of AT&T to enforce its right to use and enforce its trademark.  The Court finds that Wireless Exclusive’s action constituted violation of federal trademark, federal unfair competition, unfair competition under Texas common law, contributory trademark infringement, tortuous interference with business relationship and prospective advantage, tortuous interference with contract, harm to AT&T’s goodwill and reputation under Texas statute, civil conspiracy and unjust enrichment.  The Court awarded AT&T damages and injunctive relief which permanently enjoined Wireless Exclusive from directly or indirectly purchasing, altering or selling AT&T GoPhones.

 

Summary by Betty B. Lam, Notes Editor

 

 Ceramic Performance Worldwide, LLC v. Motor Works, LLC, et al.
Decided: January 21, 2010

 

Defendants Motor Works, LLC (“Motor Works”) and Cerma Organic International, Inc. (“Cerma”) sent an email to Plaintiff Ceramic Performance Worldwide (“Ceramic”) alleging that Ceramic had used test data, trademarks, and copyrights belonging to Motor Works and Cerma. Defendants threatened to file a lawsuit if the use continued.

In response, Ceramic filed suit in federal district court seeking a declaration of non-infringement for both the trademarks and the copyrights. Plaintiff also claimed tortious interference with its distribution of liquid ceramic bonding products. Defendants moved to dismiss the declaratory judgment and tortious interference claims.

In deciding defendants’ motion, the court shed considerable light on declaratory judgments in copyright cases. First, the court recognized that the power to grant or refuse declaratory judgments is discretionary with federal courts. Then, the court identified seven non-exhaustive factors to be considered, including:

 

(1) whether there is a pending state action in which all of the matters in controversy may be fully litigated;
(2) whether the plaintiff filed suit in anticipation of a lawsuit filed by defendant;
(3) whether the plaintiff engaged in forum shopping in bringing the suit;
(4) whether possible inequities in allowing the declaratory plaintiff to gain precedence in time or to change forums exist;
(5) whether the federal court is a convenient forum for the parties and witnesses;
(6) whether retaining the lawsuit would serve the purposes of judicial economy; and
(7) whether the federal court is being called on to construe a state judicial decree involving the same parties and entered by the court before whom the parallel state suit between the same parties is pending.
 

After considering these factors in the present case, the court determined that the factors weighed in favor of retaining jurisdiction over plaintiff’s claim with respect to defendants’ trademarks. In particular, the court found that “plaintiff was entitled to bring this declaratory judgment action in federal court rather than wait to see if defendants ever made good on their threats.”

On the other hand, the court determined that it lacked jurisdiction with respect to plaintiff’s declaratory judgment claim involving defendants’ copyrights. Determinative in this case was the fact that the copyrighted materials had not been registered with the United States Copyright Office.

The court then considered plaintiff’s claims for tortious interference—both with existing contracts and with prospective business relationships. Since plaintiff had not alleged that defendants knew about the contract or knowingly interfered with the contract, nor had the plaintiff alleged specific facts showing that any such interference was willful and intentional, the court dismissed these claims.

Summary by Jennifer Larson, Casenote & Comment Editor
 

January 2010

Mary Kay, Inc. v. Weber, 2009 WL 3147888 (N.D. Tex. Sept. 29, 2009).
Decided: September 29, 2009

 

Defendant Amy Weber was an Independent Beauty Consultant (IBC) for Mary Kay. An IBC has discretion to sell Mary Kay products at whatever price they choose. Amy stopped ordering from Mary Kay in September of 2004. In 2005, along with her husband Scott, Amy began to sell her large inventory of Mary Kay products on eBay. After selling their entire inventory, the Webers began purchasing more Mary Kay products through eBay and reselling them at higher prices. They, then set up an eBay store called “marykay1stop” to sell Mary Kay products.

When Mary Kay learned of the eBay store, the company sent Amy a letter informing her that she was in violation of her IBC agreement. After sending two more letters and receiving no reply, Mary Kay contacted eBay to complain of the Weber’s use of the Mary Kay name. It also sent a letter to Scott demanding that he stop using the Mary Kay name. Scott contacted a paralegal in the Mary Kay legal department. The Webers claim that the paralegal told Scott that they could continue the online store as long as the changed the name and removed all photographs copyrighted by Mary Kay.

The Webers removed all copyrighted Mary Kay images and changed their eBay account name to “Touch of Pink” and created an independent website, touchofpinkcosmetics.com. The website uses the name Mary Kay and only sells unaltered Mary Kay products purchased from current or former Mary Kay IBCs.

The Court granted summary judgment in favor of the Webers on several of Mary Kay’s claims except for the claims of (1) unfair competition under the Lanham Act, (2) passing off under the Lanham Act, (3) trademark infringement under the Lanham Act, and (4) unfair competition under Texas common law. The jury found in favor of Mary Kay on these claims. Mary Kay then asked the Court for a permanent injunction “to prohibit future acts of infringement, unfair competition, and passing off.” While the Webers do not contest that an injunction is proper, they asked that it be narrow in scope.

First, the Court ordered the Webers to stop using the name “Touch of Pink Cosmetics.” The Webers argued that “Mary Kay does not own the words ‘touch’ or ‘pink,’ and cannot control others’ use of those words.” While the Court agreed, it found that the Webers’ website “caused confusion and violated trademark law.” Because the jury found that the Webers were operating Touch of Pink in violation of trademark law, “it would be nearly impossible for the name ‘Touch of Pink’ not to be imbued with ‘infringing meaning.’”

Second, the Court ordered the Webers to stop selling expired or past-shelf life Mary Kay products. The first sale doctrine allows the sale of a trademarked good without the trademark owner’s consent. However, the doctrine does not apply if the goods are “materially” different. Following Warner-Lambert Co. v. Northside Development Corp., 86 F.3d 3 (2d Cir. 1996), the Court found that the expired goods were materially different from the goods sold by the manufacturer as Mary Kay took “legitimate, non-pretextual steps to insure that its products are fresh.”

Finally, the Court ordered the Webers to stop implying or suggesting that they were “endorsed by, sponsored by, or affiliated with Mary Kay.” The Court allowed the Webers to use the Mary Kay trademark to identify a product as manufactured by Mary Kay as long as it was accompanied by an explanation that the Webers are not Mary Kay and have no affiliation with the company.

Summary by Shayla Edwards, Casenote & Comment Editor

 

December 2009

EsNtion Records, Inc v. JonesTM, Inc. et al.(2009 WL 3805827)
Decided: November 13, 2009

 

Plaintiff EsNtion brought various claims against Defendants JonesTM and Jones International, Ltd. The Court dismissed the claims against Jones International Ltd. for lack of personal jurisdiction on June 16, 2008. Thereafter, Plaintiff was granted leave to amend, and filed its First Amended Complaint on April 7, 2009. Plaintiff asserted the following claims against Defendant Jones TM, who after a name change is now Triton TM, Inc.: copyright infringement, contributory copyright infringement, vicarious copyright infringement, unfair competition, and trademark infringement.

Plaintiff EsNtion is a record label based in Chicago, Illinois, and releases music recordings under several brand labels. Generally, Plaintiff contends that Defendant, who sells a weekly subscription through which subscribers receive one or more compact discs (CD’s) each week, included several of its copyrighted songs on these CD’s without permission, and further that the distribution of its songs by Defendant disrupted its promotional plans and hurt the sale of its music. On March 23, 2009, Defendant moved to dismiss all of Plaintiff’s claims.

To establish a copyright infringement claim, a plaintiff must prove that: (1) it owns a valid copyright and (2) the defendant copied constituent elements of the plaintiff’s work that are original. In accordance with the summary judgment evidence, the Court found that Defendant only distributed twenty-four of Plaintiff’s 235 songs. The Court, therefore, granted summary judgment on the other 211 songs. As for the remaining twenty-four songs, because precedent in the Fifth Circuit requires that jurisdictional requirements for a copyright action are only met when the Copyright Office actual receives the application, deposit, and fee, and because the Plaintiff only has pending copyright registrations as to the remaining songs, the Court determined that it did not have jurisdiction as to those songs. The Court then agreed with Defendant’s argument that Plaintiff was not entitled to statutory damages or attorney’s fees because none of the songs that were allegedly distributed was registered with the Copyright Office at the time of the alleged infringement. Finally, the Court found that there was no evidence that Plaintiff was actually damaged by any infringement by Defendant, as the deposition testimony of the President of Plaintiff EsNtion established that he cannot state any damage to EsNtion caused by TM’s alleged infringement of the songs at issue.

Perhaps the most notable section of the Court’s opinion is the Court’s discussion of Defendant’s claim for attorney’s fees. Defendant requested attorney’s fees as the prevailing party for many reasons, but primarily because Plaintiff’s claim is frivolous, Plaintiff’s conduct was objectively unreasonable, and Plaintiff’s damages were baseless. Finding that Defendant was entitled to move for attorney’s fees pursuant to Rule 54 of the Federal Rules of Evidence, the Court discussed the procedure by which Defendant could do so. The Court found that it needed additional information before it could rule on a motion for attorney’s fees, but noted that Defendant, in a subsequent motion filed according to Rule 54(d), should include specific evidence regarding the date that it contends Plaintiff made concessions regarding which songs were not distributed by Defendant and the amount of fees it incurred after that date defending claims based upon those songs. In drafting its motion, the Court directed the Defendant to limit its attorney’s fees request to services rendered for its response to Plaintiff’s copyright claim, and admonished that Defendant’s request for attorney’s fees not result in further major litigation.

The Court also granted Defendant’s Motion for Summary Judgment as to Plaintiff’s Digital Millennium Copyright Act, trademark, and unfair competition claims.

Summary by Jennifer Larson, Casenote & Comment Editor

 

November 2009

Massingill v. Stream, LTD., (2009 WL 3163549)
Decided: October 1, 2009

 

On January 22, 2008, individual plaintiff Michael Massingill filed a copyright infringement suit against Stream Gas & Electric, LTD (“Stream”) regarding the software program, Arsenal Customer Information System (“Arsenal”). Massingill claimed that he had created this accounting software prior to becoming the Director of Information Technology for Stream. Stream responded by arguing that Massingill developed Arsenal either during the scope and course of his employment or during his time as an independent contractor for Stream. The Court granted Stream’s motion to dismiss but denied its motion for summary judgment.

The issue in the motion to dismiss revolved around when an application for a copyright is deemed to be registered. Under the Copyright Act of 1976, a copyright infringement suit requires preregistration or registration of the copyright at issue prior to the filing of the suit. The Court stated that a copyright registration is effective on the day the application, deposit, and fee are received by the U.S. Copyright Office. While some circuits require a plaintiff to present a certificate issued by the Copyright Office prior to bringing suit, the Fifth Circuit only requires the application, deposit, and fee to be received. In the present case, Massingill failed to provide any proof that the U.S. Copyright Office received his application, or even that he had mailed it. His attorney merely declared that Massingill mailed all the required materials to the U.S. Copyright Office and that the fee check had been cashed by an unidentified person. The Court granted Stream’s motion to dismiss for lack of subject matter jurisdiction over the copyright infringement claim.

Stream’s motion for summary judgment was denied because there was a genuine issue as to a material fact. The issue was whether Arsenal was developed by Massingill during the course of his employment by Stream. The Copyright Act grants the employer copyright ownership of “works made for hire.” A work made for hire occurs when the work is prepared within the scope of employment or when it is specially ordered for use in a collective work. Stream claimed that Arsenal was written during Massingill’s scope of employment as its Information Technology Director. Massingill argued that he completed Arsenal while he was still an independent contractor. Viewing the facts most favorable to Massingill, the non-moving party, the Court held that there was a genuine issue as to material fact and denied the motion for summary judgment.

Summary by Thomas Plichta Jr., Casenote & Comment Editor

 

October 2009

Haggar Clothing Co. v. Sai Lakshmi Ind. (2009 WL 2868443)
Decided: September 3, 2009

 

Plaintiff Haggar Clothing Co. (“Haggar”), brought suit against Sai Lakshmi Industries (“SLI”) for trademark infringement, trademark counterfeiting, unfair competition, and dilution under both the Lanham Act and Texas state law. Haggar argued that SLI violated Haggar’s intellectual property rights when SLI accepted and delivered an order of clothing to a third party without Haggar’s consent. Haggar further alleged that the executive director of SLI, a nonresident foreign national, supervised and arranged the infringing sale. Defendants moved to dismiss the claims based on lack of personal jurisdiction over the SLI executive, and that Haggar failed to state a claim for which relief could be granted.

The court ruled that it had specific personal jurisdiction over SLI’s executive and denied the motion to dismiss. Since the executive knowingly sold clothes without Haggar’s permission, the corporate shield doctrine did not apply as the executive had engaged in tortuous conduct within the state of Texas. The court explained that when an individual acting for a corporation infringes upon a trademark, that corporation is liable under respondent superior.

The court denied SLI’s motion to dismiss Haggar’s trademark infringement claim. SLI admitted that it sold clothing bearing Haggar’s trademark without Haggar’s knowledge but argued that trademark law did not apply as the sale consisted of genuine goods bearing a true mark. While the court acknowledged this to be true, it also noted that trademark infringement can take place when there is any defect in the product that a customer would not readily be able to detect. As Haggar put forth claims that the sale was not of genuine products but that of clothes with serious quality defects, the court had no choice but to take the factual allegations as true and deny the motion to dismiss. Moreover, because the allegations regarding trademark infringement had survived a motion to dismiss, the court stated that, as a general rule, claims of unfair competition can rely on the same factual allegations to survive a motion to dismiss. Consequently, the court also denied SLI’s motion to dismiss Haggar’s unfair competition claim.

The court granted the motion to dismiss Haggar’s counterfeiting claim. Since Haggar admitted SLI was an authorized licensee of Haggar and had the right to place Haggar trademarks on trousers, the court ruled that there was no way for the defendant to be guilty of trademark counterfeiting.

Finally, the court denied SLI’s motion to dismiss Haggar’s dilution claim. First, Haggar provided proof of its trademark. Second, Haggar had invested time and money promoting the goods and services sold under its marks. Third, SLI’s sale of defective products bearing Haggar’s trademark hurt Haggar’s reputation and selling power. The court held that Haggar satisfied the elements for a dilution claim.

Summary by Kyle Gross, Casenote & Comment Editor

 

September 2009

Chevron Intellectual Property, L.L.C. v. Allen (2009 WL 2596610)
Decided: August 24, 2009

 

Chevron Intellectual Property, L.L.C, (Chevron) brought trademark infringement, trade dress infringement, trademark dilution, unfair competition, and unjust enrichment claims against Richard J. Allen (Allen) under both the Lanham Act and state law. Chevron Intellectual Property, L.L.C. v. Allen No. 7:08-CV-98-O, WL 2596610, at *1 (N.D. Tex. August 24, 2009). Specifically, Chevron alleges that Allen’s use of “TEXACO” and the “Star T” marks is “deceiving the consuming public.” Id. After Chevron’s licensing agreement with Allen ended in June 2006, Allen continued to use marks and trade dress identical to those owned by Chevron. Id. For example, Chevron alleges that Allen “replaced the ‘A’ in ‘TEXACO’ with a red ‘&’ symbol, removed the ‘T’ out of the so-called ‘Star T’ design, and was doing business as Allen's ‘TEX & CO.’” Id. Chevron moved for default judgment and also for permanent injunctive relief.

This decision sheds light on what is required in intellectual property cases to request both a default judgment and a permanent injunction. First, the Court must consider the traditional factors considered in Texas when determining whether to enter a default judgment; (1) if the default was caused by a good faith mistake or excusable neglect; (2) if there has been substantial prejudice; (3) the harshness of a default judgment; (4) if there are material issues of fact; (5) if grounds for a default judgment are clearly established; and (6) if the court would think itself obligated to set aside the default on the defendant's motion. Id. at *2 (citing Lindsey v. Prive Corp., 161 F.3d 886, 893 (5th Cir.1998)). Then, the Court must determine whether it would be appropriate to award the remedies requested in addition to the motion for default judgment. Chevron, 2009 WL 2596610, at *3. Here, the Court followed the traditional test for injunctive relief, requiring the movant prove (1) actual success on the merits; (2) no adequate remedy at law; (3) that the threatened injury to the plaintiff outweighs any damage to the defendant; and (4) that the injunction will not disserve the public interest. Id. First, a “default against a defendant is tantamount to actual success on the merits.” Id. Second, because monetary damages will in no way prevent future infringement by Allen, Chevron has no adequate remedy at law. Id. Third, the potential damage to Allen by restricting future infringement is minimal at best, and is “insignificant compared to the continuing harm to Plaintiff's business if the injunction is not granted.” Id. Lastly, enjoining Allen from using Chevron’s trademarks would not disserve the public interest; in fact, it will “serve the public interest by promoting compliance with intellectual property law.” Id.

Summary by Jennifer Larson, Casenote & Comment Editor

 

November 2008

TracFone Wireless, Inc. v. King Trading, Inc. (2008 WL 4826035)
Decided: November 06, 2008

 

TracFone Wireless, Inc. (“TracFone”) filed breach of contract, trademark and copyright infringement and unfair competition claims against the defendants on March 6, 2008. TracFone claimed the defendants conspired to purchase the pre-paid phones in bulk, unlock or “reflash” the software codes, and resell the phones for profit. Defendants King Trading, Inc. (“King”) and Amin Muhammad raised seven affirmative defenses including: (1) First Sale doctrine; (2) doctrine of unclean hands; (3) the Digital Millennium Copyright Act exemptions; and (4) violations of federal and state antitrust laws TracFone moved to strike King’s legally insufficient affirmative defenses under Fed.R.Civ.Pro 12(f).

The court denied Plaintiff’s motion to strike King’s First Sale doctrine defense. The First Sale doctrine protects a secondary buyer of copyrighted goods from the copyright holder who only “holds the exclusive right to sell and place restrictions on use during the first sale.” In this case, because the Defendants admitted they purchased genuine TracFones from independent contractors in arm-length transactions, the factual issue of whether that sale constitutes “a first sale” remains in dispute.

The court granted Plaintiff’s motion to strike Defendant’s affirmative defenses of unclean hands, the Digital Millennium Copyright Act exemptions and the violations of federal and state antitrust laws because King did not support its pleadings with sufficient facts. The Plaintiff was not given sufficient notice as required by Fed.R.Civ.Pro. 8(b).

Summary by Stephanie Gonzales, Casenote & Comment Editor

 

October 2008

Dexas Internat’l Ltd. v. Saunders Mfg. Co., Inc. (2008 WL 4526132)
Decided: October 07, 2008

 

This case involved design patent infringement claims for patented ornamental designs called “Clipcase,” a “Slim Case,” and “Document Case.” The defendant claimed plaintiff, the manufacturer of the items, lacked standing because it is “not the named inventor, assignee, or a licensee with sufficient rights to sue on the patents-in-suit.” For a licensee to have standing to sue for infringement of a patent it licenses, “all substantial rights” in the patent must be transferred via the license agreement. Moreover, the license agreement must not be non-exclusive or “bare.” The court found that the explicit language of the document evidenced the patentee’s intent to assign proprietary rights from the patentee’s “bundle of rights.” Thus, the plaintiff was considered an exclusive licensee. The license also granted the plaintiff “all right to sue for past and future infringement of the” patents-in-suit. Therefore, the patentee retained no rights to use the patents-in-suit in any manner whatsoever. Thus, the plaintiff possessed “all substantial rights” in the patents-in-suit. Therefore, the court found that the plaintiff was an exclusive licensee with the unlimited right to manufacture and distribute products under the patents-in-suit, while the patentee held no such rights. Plaintiff controlled the right to sue for infringement of the patents-in-suit with no obligations to the patentee. Since the plaintiff possesses “all substantial rights” in the patents-in-suit, it has standing to bring the suit for patent infringement. Additionally, the defendant’s motion for summary judgment on the question of infringement was held as premature because the court had yet to hold a Markman hearing.

Summary by Katharine Roberson, Casenote & Comment Editor

 

September 2008

U.S. Risk of Virginia, LLC v. Lighthouse Programs LLC (2008 WL 4387026) Decided: September 26, 2008

 

Plaintiffs brought this suit against Defendants on the basis of trademark infringement, pursuant to 15 U.S.C § 1114, and false designation and false representation, pursuant to 15 U.S.C. § 1125(a). U.S. Risk of Virginia, LLC v. Lighthouse Programs, LLC, No. 3:06-CV-2033-L, 2008 WL 4387026 at *1 (N.D. Tex. 2008). Plaintiffs, formerly known as Lighthouse Underwriters, LLC, is an insurance brokerage and managing agency that claims to have used the name “Lighthouse” since November 1998 and obtained a trademark registration for that name in 2002. Id. at *1. Plaintiffs assert that Defendants, an entity that sells worker’s compensation insurance programs, have wrongfully been promoting themselves as “Lighthouse, LLC” and “Lighthouse.” Id. at *1. The court discusses a number of issues but the two that are most pertinent to the trademark infringement cause of action are: (1) ownership of the Lighthouse mark and (2) whether a likelihood of confusion existed between the marks. With respect to the ownership of the Lighthouse mark, the court concludes that ownership of a trademark is established by use, and not by registration. Id. at * 4. Therefore, Plaintiffs are deemed to be the rightful owners of the name Lighthouse because ample evidence indicates they have been using the name since 1998. Id. As for evidence of a likelihood of confusion, the court restates a list of eight factors to consider: (1) strength of plaintiff’s mark; (2) similarity of designs between the marks; (3) similarity of the products; (4) identity of retail outlets and purchasers; (5) similarity of advertising media used; (6) the defendant’s intent; (7) actual confusion; and (8) degree of care exercised by potential purchasers. Id.

After taking into consideration each of the eight factors, the court found “[f]our of the factors weigh in favor of Plaintiffs, one weighs in favor of Defendant, and three are neutral. The seventh factor, actual confusion, weighs heavily in favor of Plaintiffs.” Id. at *8. Although a majority of factors weigh in favor of the Plaintiff, the court noted that “a finding of likelihood of confusion need not be supported even by a majority of the factors.” Id. Hence, the court concluded that “Plaintiffs have shown that there is a likelihood of confusion caused by Defendant's use of the lighthouse name and graphics in its company name and advertisements.” Id.

Summary by Amber Haque, Associate Casenote & Comment Editor

 

August 2008

Ultimate Living International v. Miracle Greens Supplements, Inc. (2008 WL 4133083)
Decided: August 29, 2008

 

The plaintiff, Ultimate Living International, sells nutritional supplements under their registered trademark, Green Miracle. Ultimate Living Inter. v. Miracle Greens Supplements, Inc., No. 3:05-CV-1745-M, 2008 WL 4133083, at *1 (N.D. Tex. Aug. 29, 2008). The plaintiff sued Miracle Greens Supplements for marketing a product under the name Miracle Greens. Id. The parties reached a settlement which included an injunction requiring Miracle Greens Supplements to phase out the use of the name Miracle Greens on its products and as its corporate name. Id. When the defendant violated the injunction by failing to meet its phase out deadline the Court awarded the plaintiff reasonable attorneys’ fees and costs. Id.

The issue before the court is whether the plaintiff’s requested attorneys’ fees are reasonable. Id. at *2. To determine a reasonable rate the Court uses the “prevailing market rate in the relevant legal community for similar services of lawyers of comparable skills, experience, and reputation.” Id. While determining the prevailing market rate the defendant cited to a Connecticut case which considered a reasonable hourly rate for counsel in a “routine trademark infringement case.” Id. at *4; Cartier Inter. B.V. v. Gorski, No. 3:01-CV-01948-PCD, 2003 WL 25739624 (D. Conn. Apr. 30, 2003). However, the Court held that Gorski could not be used in determining the prevailing rate because it analyzed prevailing rates in Connecticut while courts in the Northern District analyze the reasonable fees in Dallas. Ultimate Living Inter., 2008 WL 4133083 at *4. Additionally, the court in Gorski determined the market rate without the benefit of market data and the plaintiff in Gorski did not describe the size and reputation of the firm for which attorneys’ fees were being requested. Id. In contrast, the plaintiff in this case submitted billing surveys to support its billing fee and the Court had no means by which to determine whether the experience, sophistication and reputation of the counsel in Gorski were comparable to the plaintiff’s counsel in the present case. Id. In conclusion, the defendant’s failure to introduce evidence of a reasonable hourly rate for counsel handling a routine trademark infringement suit led the Court to find that the hourly rate submitted by the plaintiffs was reasonable. Id.

Summary by Leah Ammons, Associate Casenote & Comment Editor

Galderma Laboratories, L.P. v. Actavis Mid-Atlantic, L.L.C (2008 WL 3930027)
Decided: August 27, 2008

 

This is a patent infringement suit brought by Galderma Laboratories against Actavis Mid-Atlantic, alleging infringement of the patent behind the lotion that Galderma makes and sells under the trade name of Clobex. Galderma Laboratories, L.P. v. Actavis Mid-Atlantic, L.L.C., No. 4:06-CV-471-Y, , at *1 (N.D. Tex. Aug. 27, 2008). Actavis countered, seeking a declaration that the ‘848 patent was invalid. In this opinion, the court limited its role to claim interpretation. Although the specific claim interpretations decided upon by the court are not particularly illuminating, the court carefully laid out important guidelines that should be followed when construing the terms of a patent.

First, it stated that it is a “bedrock principle” in patent law that “the claims of a patent define the invention to which the patentee is entitled the right to exclude.” Id. at *2. Furthermore, the Court indicated that the terms of a claim should be given the ordinary and customary meaning that the terms would have to a person of ordinary skill in the art in question at the time of the invention. Id. at *2. The Court placed great importance on the specification of the patent because “the claims of a patent do not stand alone, but are a part of a fully integrated instrument that consists principally of a specification that concludes with the claims.” Id. at *3. Therefore, “claims must be read in view of the specification.” Id. Lastly, a Court may consider a patent’s prosecution history if it happens to be in the evidentiary materials. Id. Courts should reject, however, any expert opinions that merely offer conclusory and unsupported assertions as to the definition of a claim term. Id. at *4.

Summary by Amber Haque, Associate Casenote & Comment Editor

Veracity Research Co. v. Bateman (2008 WL 2951910)
Decided: August 1, 2008

 

Veracity Research, a private investigation company, is suing former employee Christopher Bateman who, after getting fired, started up vrcinvestigations.net, which has almost the identical domain name of Veracity Research’s website, vrcinvestigations.com. The claims brought against Bateman include: unfair competition under federal law and Texas statutory and common law, common law trademark infringement, trademark dilution, trade libel, breach of contract and violation of the federal Anti-Cybersquatting Act. Bateman moved to dismiss for lack of subject matter jurisdiction and personal jurisdiction, improper venue, improper service, and failure to state a claim upon which relief can be granted.

First, the court found that it had subject matter jurisdiction over the case because two of the claims arise under federal statutes: the Lanham Act and the Anti-Cybersquatting Act. Then it determined that personal jurisdiction is proper because the requisite minimum contacts with Texas were established and the exercise of personal jurisdiction would not offend notions of fair play and substantial justice: Bateman “directed his activities toward Texas by creating vrcinveestigations.net” and “Texas has the greatest interest in adjudicating this dispute.” Venue was deemed proper because vrcinvestigations.net is accessible to residents of the Northern District of Texas, Veracity Research does business in the Northern District of Texas and alleges that the website has caused it damage in this district.

All of Veracity Reasearch’s claims survived Bateman’s 12(b)(6) motion except for the statutory unfair competition violation: “Section 16.29 of Tex. Bus. & Com. Code does not create a statutory cause of action for unfair competition.” No big loss, though—Veracity Research still has claims for unfair competition under common law and under the Lanham Act. The court even recognized a legally cognizable claim for trade libel, based on Veracity Research’s allegations that Bateman posted false and misleading statements on his website, with knowledge of their falsity, and that said statements “hurt its ability to attract clients and high quality employees.”

Summary by Lisa Morrow, Associate Casenote & Comment Editor

July 2008

Alexander v. U.S. Bank, N.A. (2008 WL 3152989)
Decided: July 30, 2008

 

Plaintiff filed an Original Petition for Wrongful Foreclosure in state court wherein he referenced a claim based upon alleged trademark/copyright infringement. Defendants subsequently removed the case to the Northern District of Texas on basis of diversity and federal question jurisdiction. Plaintiff claimed the defendants violated his trademark and copyright by using his name on the docket of this case while it was pending in state court. Defendant’s argued that Plaintiff’s copyright and trademark claims failed because personal claims are not subject to copyright or trademark. Plaintiff’s copyright and trademark claims fail as a matter of law.

A plaintiff’s name cannot be copyrighted. See 37 C.F.R. § 202.1(a). Additionally, even if the Plaintiff had trademarked his name, Defendants’ use of his name as a party in a lawsuit does not constitute infringement. See 15 U.S.C. § 114(a).

Summary by Katharine Roberson, Casenote & Comment Editor

T-Mobile USA, Inc. v. Wireless Exclusive USA, LLC (2008 WL 2600016)
Decided: July 1, 2008

 

T-Mobile USA sued Wireless Exclusive for reselling T-Mobile’s prepaid mobile phones. T-Mobile USA, Inc. v. Wireless Exclusive USA, LLC, No. 3:08-CV-0340-G, 2008 WL 2600016, at *1 (N.D. Tex. July 1, 2008). In the present decision, there were two motions before the court. Id. Wireless Exclusive made a motion to amend a court order pertaining to the preservation of evidence; the motion required Wireless Exclusive to preserve all prepaid phones and related accessories in their possession. Id. T-Mobile made the other motion, requesting that the court strike several affirmative defenses made by Wireless Exclusive. Id. Wireless Exclusive argued that preserving the phones was not necessary when they have documentation of the number of phones in their inventory. Id. However, in response, T-Mobile argued that preservation was necessary because the specific phones contained in Wireless Exclusive’s inventory, “contain[ed] electronic information, including information about the origin of the [p]hones, their place of purchase, and the manner in which (and possibly by whom) they were unlocked.” Id. at *2. The court agreed with T-Mobile and denied Wireless Exclusive’s motion to amend the preservation of evidence court order. Id. at *1.

One of the affirmative defenses T-Mobile sought to strike was Wireless Exclusive’s claim that although it did not “[unlock] or [alter] the T-Mobile phones in any way,” those actions would have been permitted under the Digital Millennium Copyright Act. Id. at *3. Under the Digital Millennium Copyright Act, there are six classes of copyrighted works that are exempt from the Act’s provisions. Id. Computer programs, such as the one at issue in this case, which enable wireless telephone handsets to connect to a wireless telephone communication network are included in the Act’s exemptions. Id. The court held that Wireless Exclusive did provide T-Mobile with enough information to analyze the affirmative defense made by Wireless Exclusive, and therefore, the motion to strike the affirmative defense was denied in part because fair notice of this particular affirmative defense had been given to T-Mobile. Id. at *1, 3.

Summary by Leah Ammons, Associate Casenote & Comment Editor

June 2008

In re Subpoena of AmeriCredit Financial Services (2008 WL 2594767)
Decided: June 30, 2008

 

On May 22, 2008, AmeriCredit Financial Services, Inc. (AFS) received the subpoena at issue, requiring AFS to produce: "[A]ll records in your control or possession regarding Plaintiff's auto finance application ... including, but not limited to, the credit report upon which you based your credit decision as well as the specific reasons you denied credit, including but not limited to, the scoring model used and the rank of each reason and each reason." Subsequently, AFS filed a motion to quash the subpoena duces tecum on June 16, 2008. Id. After filing their motion, AFS did produce a copy of plaintiff’s credit report, however, they refused to provide any further documents, “including its ‘scoring model,’ on the grounds that such information in protected from disclosure as a trade secret.” Id.

The Federal Rules of Civil Procedure allow the issuing court discretion when making a determination of whether to quash or modify a subpoena if the person being subjected to the subpoena is asked to disclose “a trade secret or other confidential research, development, or commercial information[.]” Fed. R. Civ. P. 45(c)(3)(B)(i). Furthermore, because AFS is opposing discovery here, they have the initial burden of proving that the information plaintiff seeks is not only a trade secret, but that such disclosure may be harmful. AmeriCredit 2008 WL 2594767, at *1. While recognizing this burden, AFS failed to present evidence showing that the withheld documentation is protected as a trade secret and simply stated that they would meet their burden of proof at a later date. Id.

On the June 19, 2008, the court attempted to have the dispute settled through counsel and stated that “if no agreement [can] be reached” then both parties are “to file a joint status report by June 27, 2008.” Id. Nevertheless, AFS failed to file any evidence with their joint status report after more than five weeks of being served. Id at *2. The court held that such a failure of proof can only be explained by “counsel’s conclusory assertion, unsupported by any evidence,” that AFS’s “necessary affiant was not available to provide testimony” before June 27. Id. The court rejected this argument and AFS’s attempt to manipulate the “schedule and procedures” set in place by the court to settle this dispute. Id. Motion to quash subpoena duces tecum was denied and AFS was given twenty one days to comply. Id.

Summary by Zachary Drake, Associate Casenote & Comment Editor

Eddings v. Glast, Phillips & Murray (2008 WL 2522544)
Decided: June 25, 2008

 

Plaintiffs assert that Defendants Glast, Phillips & Murray, Richard E. Young, and John A. Thomas were negligent in their representation of Plaintiffs in a previous suit. On September 5, 2007, defendants removed this case to federal court on the basis of subject matter jurisdiction arguing that substantial questions of patent law need be resolved. See Eddings v. Glast, Phillips & Murray, 2008 WL 2522544. Plaintiffs subsequently moved to remand this case to state court contending that the court “need not resolve a substantial question of patent law to grant the relief they seek” because their claims simply focus on procedural errors “that resulted in the waiver of certain defenses” and led to a judgment against them. Id. at *3.

In Texas, a malpractice action of an attorney is based upon negligence and requires proof of “(1) the existence of a duty; (2) the breach of that duty; (3) that the breach proximately caused the plaintiff’s injuries; and (4) that damages occurred.” See Peeler v. Hughes & Luce, 909 S.W.2d 494, 496 (Tex. 1995). Accordingly, “a plaintiff must prove a ‘suit within a suit’ by demonstrating that he would have prevailed in the underlying action but for his attorney’s negligence.” Eddings at *3. The Federal Circuit has recently “considered whether a Texas attorney malpractice claim involving an underlying patent litigation arises under federal law. See Air Measurement Techs., Inc. v. Akin, Gump, Strauss, Hauer & Feld, L.L.P., 504 F.3d 1262 (Fed. Cir. 2007). In Air Measurement, the court addressed the “suit within a suit” requirement and held that “[i]f there is a theory upon which [plaintiffs] can prevail on their malpractice claim that does not involve a substantial patent law question, then patent law is not essential to the malpractice claim, and section 1338 jurisdiction is lacking.” Id. at 1270.

The court distinguishes this case from the circumstances in Air Measurement and holds that “patent law is not essential to Plaintiffs’ claim that Defendants failed to produce evidence that might have reduced or offset the judgment” of the trial court. Eddings at *5. Distinct from the plaintiffs in Air Measurement, Plaintiffs here “were not plaintiffs in the underlying lawsuit” and thus “were not required to prove that they would have succeeded on their patent infringement claims. Rather, their claims relate to procedural errors they allege Defendants made” that caused the particular judgment against them. Id. The court held that this “theory [did] not depend on any consideration of patent issues” and therefore, defendants did not meet their burden of establishing subject matter jurisdiction. Id. Plaintiffs’ motion to remand was granted. Id.

Summary by Zachary Drake, Associate Casenote & Comment Editor

Full Sail, Inc. v. Dauben, Inc. (2008 WL 2434313)
Decided: June 17, 2008

 

Defendant brought motion to dismiss Full Sail, Inc. (FSI)’s claims. FSI is an educational institution in Florida that has used the Full Sail mark in commerce since 1979. The defendant registered and used the fullsailuniversity.com domain. The domain would direct an internet user to a website featuring advertising with hyperlinks to educational institutions, including FSI. FSI alleged the domain was used in bad faith, without FSI’s consent, and that FSI lost the opportunity to interact with consumers while the defendant profited from the Full Sail name. FSI brought claims for trademark infringement under the Lantham Act, for unfair competition, for federal dilution, and for cybersquatting.

The defendant’s motion to dismiss the claims was denied. FSI alleged infringement of its established, registered trademark for Full Sail. FSI had an intent-to-use application for the mark Full Sail University, and planned to develop its mark in the future. This lack of registration did not insulate the defendant from FSI’s claims. Under the Lantham Act, the marks need not be identical to support a claim. It is likely consumers would confuse defendants fullsailuniversity.com with FSI mark. Thus, FSI has adequately stated a trademark infringement claim. Additionally, as a general rule, the same facts that support a trademark infringement claim also support an unfair competition claim. Moreover, registration is prima facie proof that a registered mark is distinctive for recovery under federal dilution claim. FSI also properly alleged the federal dilution elements that defendant adopted its mark after FSI’s mark became distinctive and that this use caused dilution of FSI’s mark. Finally, since FSI alleged its mark was widely recognized, distinctive, and registered for educational purposes, and that defendant registered and used the domain name with the Full Sail mark, which confuses consumers, a cybersquatting claim was properly alleged.

Summary by Katharine Roberson, Casenote & Comment Editor

May 2008

Fire King International, LLC v. Tidel Engineering, L.P. (2008 WL 2246911)
Decided: May 30, 2008

Plaintiff Fire King Inter, LLC sued Defendant Tidel Engineering, L.P. for infringement of a patent owned by Plaintiff. Fire King Int’l, LLC v. Tidel Eng’g, L.P., No. 3:07-CV-0655-G, 2008 WL 2246911, at * 1 (N.D. Tex. 2008). This patent, known as the “252 Patent,” is an electronic lock and money control system that is primarily used by merchants to collect and dispense money. Id. Defendant manufactures and sells products under the brand name of “Sentinel.” Id. at *2. Plaintiffs allege that certain products manufactured and sold by Defendant infringe one or more claims of the “252 Patent.” Id.

In deciding this case, the Court stated that the threshold issue in any patent infringement case is claim construction. Id. Both parties were seeking construction of the following phrases: “a connector interface mounted to the housing,” “a central system controller,” “an electronic lock and money control system,” “remote safe,” “integrated with” and “other network devices.” Id. at *3. Words of a claim are typically determined based on their ordinary and customary meaning. Id. at *2. “When the ordinary and customary meaning of a term is not readily apparent, ‘the court looks to those sources available to the public that show what a person of skill in the art would have understood disputed claim language to mean.’” Id. at *2 (quoting Innova/Pure Water, Inc. v. Safari Water Filtration Systems, Inc., 381 F.3d 1111, 1116 (Fed.Cir.2004)). The Court may also consider the prosecution history which “contains a complete record of all proceedings before the Patent and Trademark Office (“PTO”), including any express representations made by the applicant regarding the scope of the claims.” Id. at *2.

Based on these rules of law, the Court held that these disputed phrases should be construed as follows:
(a) the term “connector interface mounted to the housing” means a “component fixed to the housing of a safe that provides connectivity among various system components and network devices;”
(b) the term “central system controller” means “a processor that is part of the safe, though not necessarily internal to the safe, which operates to control remote safes in the network;” and
(c) the term “remote safe” means “an electronic lock and money collection/dispensing unit physically remote from a first such unit.””
(d) the term “integrated with” means “acting as part of;” and
(e) the term “other network devices” means “devices, other than the central processing system, having unique network addresses and capable of communicating over a network.”
The court declined to construe the term “[a]n electronic lock and money control system” because the preamble has no significance to claim construction. (Id. at *8-9).

Summary by Amber Haque, Associate Casenote & Comment Editor

Jacuzzi, Inc. v. Franklin Electric Co., Inc. (2008 WL 2185209)
Decided: May 27, 2008

Defendant Franklin Electric Company, Inc. (“Franklin”) brought a Fed.R.Civ.P. 12(b)(6) motion to dismiss Jacuzzi, Inc.’s (“Jacuzzi”) amended fraudulent inducement claim based on the parties’ Trademark Licensing Agreement. There was a reliance disclaimer in the parties’ contract, and Franklin asserts the reliance disclaimer prohibits Jacuzzi from basing its claim on allegedly omitted facts.

The court granted Franklin’s 12(b)(6) motion to dismiss and dismissed Jacuzzi’s fraudulent inducement claim with prejudice. The court granted Franklin’s motion to dismiss. The first amended complaint asserted two grounds of a fraudulent inducement claim based on the parties’ Trademark Licensing Agreement. On the first ground, Jacuzzi claimed Franklin knowingly misrepresented what its 2005 and 2006 sales would be. Then based on a fraudulent concealment theory, Jacuzzi said Franklin attempted to gain the exclusive rights to Jacuzzi brand water pumps while creating their own underground water pumps to compete with Jacuzzi. The court relied on Schlumberger Technology Corp. v. Swanson and granted Franklin’s first motion to dismiss. See 959 S.W.2d 171 (Tex. 1997). Due to the reliance disclaimer in the Trademark Licensing Agreement, the court held that Jacuzzi could not expect to rely on any representations of anticipated sales. In Jacuzzi’s second amended complaint, they assert Franklin failed to disclose “its intention to destroy and render worthless the well-known and valuable JACUZZI trademark and logo in the water systems market.” The court found that the Trademark Licensing Agreement contained strict restrictions on Franklin to ensure the JACUZZI trademark was preserved. There were over three pages of the Trademark Licensing Agreement that specifically laid out limitations to protect Jacuzzi’s trademark. Since the Trademark Licensing Agreement had a binding reliance disclaimer dealing with Jacuzzi’s trademark rights, the court found Franklin had agreed it did not intend to destroy Jacuzzi’s trademarks. Therefore, Jacuzzi’s amended non-disclosure claim failed as a matter of law.

Summary by Stephanie Gonzales, Casenote & Comment Editor

Transcore, LP v. Electronic Transaction Consultants, Corp. (2008 WL 2152027)
Decided: May 22, 2008

The plaintiff is a manufacturer and installer of automatic vehicle identification (AVI) systems. Transcore, LP v. Elec. Transaction Consultants, Corp., No. 3:05-CV-2316-K, slip op. at 1 (N.D. Tex. May 22, 2008). The defendant is not a manufacturer of AVI systems, but installs and tests AVI equipment manufactured by others. Id. In 2001, prior to the current suit, the plaintiff sued and reached a settlement with the manufacturer who supplied the defendant with AVI equipment. Id. In the 2001 settlement, the plaintiff agreed to not bring any other lawsuits against the non-party manufacturer for patent infringement. Id. However, absent from the settlement was language prohibiting the plaintiff from suing customers of the non-party manufacturer. In the present case, the plaintiff has done exactly that as the defendant is one of the non-party’s customers. Id.

The defendant filed a motion for summary judgment claiming that the covenant not to sue insulates the defendant from patent infringement claims. Id. at 2. The defendant aruges that the plaintiff should not be permitted to recover twice for patent infringement claims. Id. The court granted the defendant’s motion for summary judgment and dismissed the plaintiff’s claims with prejudice. It reasoned that the settlement between the plaintiff and the non-party manufacturer would be meaningless if the plaintiff could still prevent the non-party from manufacturing and selling the product by suing the non-party manufacturer’s customers. Id. at 7.

Summary by Leah Ammons, Associate Casenote & Comment Editor

March 2008

Super Future Equities, Inc. v. Wells Fargo Bank Minnesota, N.A. (2008 WL 865090)
Decided: March 17, 2008

Plaintiff certificate holder of commercial mortgage backed securities trusts filed suit against Defendants trustee and special servicer alleging breach of fiduciary duty, breach of contract, RICO violations, negligence, and gross negligence. On the same day the lawsuit was filed, Cyrus Rafizadeh, Secretary and Treasurer of Super Future Equities, created a website at www.predatorix.com. Shortly thereafter, Orix filed a counterclaim based on statements made on the website asserting libel per se, business disparagement, tortious interference with contractual relationships, common law conspiracy, and copyright infringement. Defendants were granted summary judgment on all of Super Future Equities’ claims and Super Future Equities moved for summary judgment on Orix’s counterclaims.

The website contained allegedly libelous statements accusing Orix of lying and illegally mismanaging funds. Plaintiff claimed that the statements were not actionable because they were satire, parody or opinion. In determining whether the statements were opinion or fact, the court followed the Bentley v. Bunton approach, taking into consideration the “verifiability and context in which the statements were made.” Bentley v. Bunton, 94 S.W.3d 561, 583 (Tex. 2003). Ultimately the court decided that the statements made on the website were verifiable statements of fact as opposed to protected opinions despite any disclaimer that “This is my private information and opinion.” The court held that the statements made on the website were not protected opinions because the website accused Orix of wrongdoings and purported to give factual information about Orix’s behavior; provided links to court documents, deposition videos, news articles, and court cases; and claimed to verify the accuracy of the information posted. Further, the court determined that the statements were not satire or parody because the website purported to gather factual information to document Orix’s alleged misconduct, which would have led a reasonable person to believe that the Predatorix website described actual facts. The court also determined that Orix is a private figure, which need only show negligence, not actual malice to establish a libel claim. Super Future Equities’ motion for summary was denied as to Orix’s libel per se claim because there remains a genuine issue of material fact. As litigation continues between the parties, Super Future Equities’ will have the burden of proving its affirmative defense—that the statements made were all true.

Summary by Lisa Morrow, Associate Casenote & Comment Editor