Cascades AV LLC v. Evertz Microsystems Ltd., No. 17 C 7881, Slip Op. (N.D. Ill. Jan. 11, 2019) (Durkin, J.).

Judge Durkin denied defendants’ Fed. R. Civ. P. 12(b)(6) motion to dismiss plaintiff’s patent infrignement claims in this patent case involving lip-synching patents and defendant Everetz’s accused fingerprint reading systems.

Direct Infringement

Citing Disc Disease Sols. Inc. v. VGH Sols., Inc., 888 F.3d 1256, 1260 (Fed. Cir. 2017), the Court held that specific facts were not necessary to plead infringement. Fair notice only required identification of the patents and a claim, even a general one, that they infringed an identified product. Plaintiff Cascades – a predecessor entity to J. Carl Cooper – went beyond that making specific allegations regarding each element of the asserted claims.

Indirect & Willful Infringement

Both indirect and willful infringement required knowledge of the patents. Cascade claimed that it put Evertz on notice via letters that sought resolution of patent disputes, without providing claim charts, identifying specific products, or any infringement analysis. The Court held those letters were sufficient to plead notice at the Rule 12 stage because they claimed infringement, offered to discuss the dispute and “at least implied” infringement by the eventually accused product. Cascades also pled sufficiently egregious circumstances for willfulness by providing details of Evertz’s various refusal to respond to Cascades’ pre-suit communications. Whether or not those communications actually led to willfulness was a question more appropriate at the summary judgment stage.

Induced Infringement

Even though Cascades’ claims otherwise lacked factual support beyond conclusory statements of the law, the Court denied Evertz’s motion as to induced infringement because Cascades pled knowledge of the patents, that Evertz sold products with infringing features and that Evertz used them at trade shows.

Contributory Infringement

As with the induced infringement claims, the additional elements for contributory infringement were “conclusory recitals” of claim elements. The Court held that was sufficient, noting that “numerous” courts had allowed similar claims because of the “obvious difficulty” plaintiffs have in pleading a negative without discovery first.

Design Basics, LLC v. WK Olson Architects, Inc., No. 17 C 7432, Slip Op. (N.D. Ill. Feb. 11, 2019) (Ellis, J.).

Judge Ellis denied defendants’ Fed. R. Civ. P. 12(b)(6) motion to dismiss as to plaintiffs’ copyright infringement claims and granted it as to plaintiffs’ Digital Millenium Copyright Act (DMCA) claims in this suit involving architectural plans.

The Court dismissed plaintiffs’ initial complaint because its allegations were too conclusory. Plaintiffs amended their complaint asserting additional facts. Plaintiffs’ allege infringement of twelve copyrighted works by eighteen of defendants’ plans, all specifically identified.

Defendants do not dispute plaintiffs’ copyright ownership. They dispute whether plaintiffs’ infringement claims are sufficiently pled. Plaintiffs specifically identified elements of their plans that defendants allegedly copied in their own plans. The Court acknowledged that “opportunities for originally are tightly constrained” in architectural plans, citing the Seventh Circuit in another case brought by plaintiffs. Design Basics, LLC v. Lexington Homes, Inc., 858 F.3d 1093, 1100-01 (7th Cir. 2017). But in this case, the Court could not hold at the Rule 12 stage that the elements plaintiffs identified were no protectable. The Court also noted that it could not do a more complete analysis of the alleged similarities because plaintiffs did not, and were not required to, attaching the alleged infringing plans to the compliant.

Plaintiffs’ allegations of defendants’ access to the copyrighted works based upon widespread advertising, including mailing advertisements directly to defendants, were sufficient. Additionally, plaintiffs pled that they had put the copyrighted plans on the internet. These allegations were sufficient to plead defendants’ access.

Plaintiffs’ allegations that defendants knew of plaintiffs’ copyrights and removed copyright notices from plaintiffs’ plans were sufficient to plead willfulness.

The Court allowed plaintiffs’ vicarious infringement claims for the same reasons it allowed the direct infringement claims.

Plaintiffs did not sufficiently plead their DMCA claim. Plaintiffs argued that defendants removed copyright management information (CMI) by making their own allegedly infringing plans without putting plaintiffs’ name and copyright information on them. But the DMCA required removal of CMI from plaintiffs’ original work. Not including CMI on a new, allegedly infringing work was not sufficient for a DMCA claim.

I am honored to announce that I will be interviewing U.S. Patent & Trademark Office Director Andrei Iancu at the kickoff session of this year’s Rocky Mountain IP Institute in Denver, Colorado. First, I invite you to join me – register here. I have attended and spoken at the Institute for years and firmly believe that it is one of the best, if not the best IP conference in the country. Second, while there is a lot that I want to ask Director Iancu, I would love to get your thoughts on what I should ask. I am not promising I will ask every question you have. But I firmly believe collaboration and diversity build better results. So, I invite your thoughts. Please reply with questions or send them to me, if you would prefer.

 

DR Distribs., LLC v. 21 Century Smoking, Inc., No. 12 C 50324, Slip Op. (N.D. Ill. Feb. 12, 2019) (Johnston, Mag. J.).

Magistrate Judge Johnston denied defendants’ motion to amend dismissing their defamation counterclaim in this Lanham Act dispute.

At the outset, the Court explained that these “bizarre” circumstances – a party opposing its opponent’s decision to drop a claim – were created by an ESI “donnybrook” involving the loss of apparently relevant emails and instant messages. While it was not expressly stated, the “obvious” purpose of dismissing the claim was to moot the ESI dispute. And plaintiff’s reason for opposing was similarly obvious, plaintiff’s desire to leverage defendants’ ESI “blunder.” The Court also noted that plaintiff had promised to file a 75-page brief, “longer than a CVS receipt” addressing the ESI issues and seeking sanctions.

The case was filed in 2012 with a January 2015 deadline to amend pleadings. Defendants sought leave to amend in October 2018, three years and eight months after the deadline to amend. As an initial matter, because the motion was filed after a case management order was entered, it was governed by Rule 16’s good cause standard, not Rule 15’s liberal leave. The fact that defendants were removing a claim, not adding material, did not warrant applying the Rule 15 standard. The clear language of Rule 16 requires its application for all motions to amend after a case management order, not just those seeking to add claims.

The primary consideration under the Rule 16 standard is the amending party’s diligence. Litigation the claim for four years, including ongoing discovery disputes, and then seeking dismissal nearly four years after the deadline to dismiss while maintaining the viability of the claim did not evidence diligence. In fact, the Court noted that it would likely have dismissed the claim had defendant sought dismissal pursuant to Fed. R. Civ. P. 41(b), instead of continuing to state that the counterclaim was viable and that defendants would prosecute the counterclaim through trial, should it not be dismissed.

TheBrain Techs. LP v. AnyLogic N.A., LLC, No. 17 C 6574, Slip Op. (N.D. Ill. Mar. 4, 2019) (Coleman, J.).

Judge Coleman granted defendant’s Fed. R. Civ. P. 12(b)(1) motion to dismiss for lack of subject-matter jurisdiction in this patent infringement case involving graphical representations of information.

The assignment chain of the patent-in-suit did not show an assignment from TheBrain Corp. to TheBrain LP, the plaintiff. To remedy the issue, TheBrain LP relied upon a 2015 Confirmatory Assignment that stated that prior owner Natrificial LLC relinquished its rights to the patent to TheBrain Corp. in 2000. Even if it were accepted, the 2015 Confirmatory Assignment did not transfer any rights to TheBrain LP. But the Court noted that the Federal Circuit did not give post-hac document retroactive effect. The 2015 Confirmatory Assignment, therefore, could not be the basis for standing. TheBrain LP’s argument that the 2015 Confirmatory Assignment simply confirmed what had happened in the past did not change that it was a post-hac agreement. Furthermore, there were contradictory documents listing Natrificial as the patent’s owner after the alleged 2000 assignment.

TheBrain’s argument that the patent was assigned by operation of law upon dissolution of Natrificial failed. It appeared to be an issue of first impression in California, and TheBrain failed to cite a single instance of California’s law acting to transfer a patent upon dissolution. The Court, therefore, dismissed the case without prejudice.

Sens. Chris Coons (D-Del.) and Thom Tillis (R-N.C.), along with Reps. Doug Collins (R-Ga.), Hank Johnson (D-Ga.), and Steve Stivers (R-Ohio), have unveiled a bipartisan and bicameral framework on Section 101 patent reform. The framework, released last week, is short – only one page – but the intent is clear: temper the Section 101-based rejections and invalidations that have skyrocketed since the Supreme Court’s 2014 Alice decision.

For instance, the framework would define an exclusive set of categories of statutory subject matter that alone should not be eligible for patent protection, and “statutorily abrogate judicially created exceptions to patent eligible subject matter.” The framework would also “create a ‘practical application’ test to ensure that the statutorily ineligible subject matter is construed narrowly.”

Sen. Coons emphasized the framework’s intent, saying in a press release: “Today, U.S. patent law discourages innovation in some of the most critical areas of technology, including artificial intelligence, medical diagnostics, and personalized medicine … I look forward to continuing to receive feedback as we craft a legislative solution that encourages innovation.”

Rep. Stivers echoed that sentiment: “We have the opportunity to advance our society in so many exciting and unknown ways, and we need to ensure we have a patent system that encourages that kind of game-changing innovation, instead of stifling it.”[1]

Conclusion and Next Steps

Big tech, pharmaceutical companies, trial lawyers and intellectual property owners will surely be paying attention to the framework’s progress, but it is unclear how quickly it will move forward – or whether it will move at all. The next step for the legislation would be to turn the current framework into full legislative text. Once the legislation is formally introduced, it would have to survive markups in both the House and Senate Judiciary Committees as well as votes by the full House and Senate.

Reforms to patent eligibility will garner significant interest, and its ultimate enactment will require its sponsors to make its enactment a priority before the politics surrounding the 2020 presidential election take over next year. This particular proposal has the benefit of bipartisan support from leaders on the House and Senate Judiciary Committee that give it real potential for enactment. Interested stakeholders are encouraged to engage with Congress as early as possible to let their voices be heard.

Notes

[1]  The statements by Sen. Coons and Rep. Stivers, as well as the framework’s language, are in this press release: “Sens. Coons and Tillis and Reps. Collins, Johnson, and Stivers Release Section 101 Patent Reform Framework,” April 17, 2019.

 

The Intellectual Property Law Association of Chicago (IPLAC) is holding its annual meeting on Tuesday, May 7, 2019 with a reception at 5:30pm CDT and dinner following at 6:00pm CDT at the University Club of Chicago, 76 E. Monroe. All IPLAC members with 2019-20 dues paid are invited, but you must RSVP here by 5:00 pm CDT on Thursday,  May 2, 2019. You can also renew your membership and pay your dues online.

IPLAC will present its 2019 Creator of the Year Award during the dinner, and present college scholarships to Chicago Public School high school seniors. Additionally, IPLAC will vote on the following roster of candidates:

Officers:

  • President-Elect:  Marc A. Richards
  • Vice President: Erin W. Lothson
  • Treasurer: Peter J. Prommer

Board of Managers:

  • Clinton A. Hallman
  • Jared E. Hedman
  • RiKaleigh C. Johnson
  • Daryl Lim

In addition, current President Elect Charles Shifley becomes President at the annual meeting and Tiffany Gehrke will serve her second year as Secretary.

GemShares LLC v. Secured Worldwide, LLC, No. 17 C 6221, Slip Op. (N.D. Ill. Feb. 13, 2019) (Kennelly, J.).

Judge Kennelly granted plaintiff GemShares’ motion for partial summary judgment as to liability on its breach of contract claim against the individual defendant.

The Southern District of New York’s prior ruling on defendant’s liability for breaching a covenant not to compete precluded relitigation of the issue. Defendants did not dispute the validity or enforceability of the underlying agreement. They only disputed GemShare’s performance and whether GemShare was damaged. But defendants’ conclusory assertions of GemShare’s non-performance were not sufficient to create a disputed, material fact issue. Specific allegations would have been necessary. And while GemShare had not yet met its burden to prove reasonable damages, there was no issue that GemShare was damaged.

Sullivan & Survivor Music, Inc. v. Bickler, No. 18 C 3770, Slip Op. (N.D. Ill. Jan. 25, 2019) (Lee, J.).

Judge Lee denied defendant Bickler’s, the former lead singer of the band Survivor, Fed. R. Civ. P. 12(b)(2) & (6) motion to dismiss plaintiffs’ (collectively “Survivor”) Lanham Act claims related to the alleged misuse of its SURVIVOR trademarks.

Personal Jurisdiction

Bickler’s royalty-based interactions with Survivor did not create general or specific jurisdiction. Furthermore, Survivor offered no evidence that Bickler directed his alleged use of the SURVIVOR marks at Illinois. And Bickler no longer lived in Illinois. But Bickler’s contract-based interactions were a different matter. Bickler negotiated and signed the agreement while both he and Survivor were Illinois residents. As such, Bickler should have expected that he could be sued in Illinois.

Failure to State a Claim

Survivor sufficiently pled ownership of the SURVIVOR marks and that Bickler allegedly infringed them. Bickler argued that he had a First Amendment right to artistic expression which allowed the use of SURVIVOR and that he was using it in a non-trademark manner. But neither of those issues were properly decided at the Rule 12 stage.

Chicago Mercantile Exchange Inc. v. ICE Clear US, Inc., No. 18 C 1376, Slip Op. (N.D. Ill. Feb. 1, 2019) (Kennelly, J.).

Judge Kennelly granted defendants’ (collectively “ICE”) Fed. R. Civ. P. 12(b)(6) motion to dismiss and motion to strike paragraphs of the complaint in this Lanham Act and breach of contract case involving plaintiff CME’s SPAN trademarks related to a method of assessing portfolio risk.

The legal principle that a trademark owner may not transfer its duty to supervise and police its marks, does not prevent contractual obligations requiring a licensee to use best efforts to protect the mark’s goodwill and to provide licensor notice of any infringements. But having held that such provisions may exist and be breached, CME did not sufficiently plead a claim for breach. ICE’s naked licensing defense alone did not breach the best efforts or notice provisions. CME would have to plead additional facts showing that ICE failed to use best efforts to protect the marks for CME’s claim to survive. Similarly, ICE’s allegations regarding breach of the notice provision were also insufficient because they relied upon the naked licensing defense. CME did not identify any unregistered use of its marks that ICE knew or reasonably should have known about. And it does not follow from a naked licensing claim that there was necessarily unauthorized use. Naked licensing can result from the trademarkholder’s failure to supervise alone.

The Court also struck the paragraphs related to the naked licensing arguments from CME’s complaint pursuant to Fed. R. Civ. P. 12(f) because they did not state a plausible claim for relief.