Category Archives: Litigation

The Damaged are Welcome; the Merely Annoyed are Unwelcome in Federal Court

Two recently-decided cases brought by Apple illustrate the necessity of identifying real harm to one’s business before filing a lawsuit in federal court.  The court dismissed the first, Apple v Motorola, because Apple was unable to show that it had been damaged by the alleged patent infringement.  In contrast, Apple achieved a tremendous victory in Apple v. Samsung.  The court granted a preliminary injunction prohibiting Samsung from selling its new Galaxy Nexus smartphone, because Apple was able to demonstrate that it was likely to suffer irreparable harm if Samsung was permitted to continue to infringe Apple’s patents.

Apple v. Motorola illustrates the types of claims a business should not pursue.  At the end of that case, Apple was left with claims that Motorola had employed two features subject to its patents, the value of which Apple could not quantify.  At bottom, the court’s reaction was “stop wasting everyone's time.”  Finding that Apple would not be able to prove any money damages, and could not prove entitlement to an injunction, the court dismissed the case.  The court gave the back of its hand to Apple’s claims that the court should issue a declaration that Motorola had infringed or award symbolic “nominative” damages.  The court wrote:  “You can’t go into federal court and say you had a contract with X and X broke it and you’re really annoyed even though you sustained no injury of any sort (in fact you made money because you re-contracted at a higher price) so please give me a judgment for $1 that I can pin on my wall.”

Apple v. Samsung, on the other hand, illustrates precisely the type of case a business should pursue.  In that case Apple was able to show that, unless the court issued a preliminary injunction, Apple would be likely to lose not only phone sales, but immeasurable additional sales when purchasers of the Galaxy Nexus followed that purchase with purchases of other Android products and applications rather than the Apple products and applications they would be likely to purchase if they first purchased an iPhone.  The size of the victory for Apple is reflected in the size of the bond the court required Apple to post: $95 million, the amount of profit Samsung asserted it would lose if it could not sell the Galaxy Nexus.  It seems intuitive that Apple is correct that the smart phone is a “gateway” device that leads one to purchase additional products that use the same operating system as the phone.  Therefore posting the $95 million bond (which is unlikely to be posted in cash, and which will be returned to Apple unless Samsung succeeds in overturning the injunction on appeal or otherwise proving that the court was wrong to grant the injunction) to knock out the Galaxy Nexus seems like it will be good business for Apple.

The take away for businesses should be that there is little utility in starting lawsuits out of spite.  Although you may cause your adversary to incur legal fees and suffer disruption caused by litigation, you are bound to incur costs like that of your own, and to lose momentum when the strong action you trumpeted at the outset of the case turns into fodder for your adversary at the end.  On the other hand, Apple v. Samsung teaches that despite the incessant protests of those who would curtail the protection given to IP owners, those who do suffer actual harm can still obtain not mere vindication, but effective relief in federal court.


L.A. Printex v. Aeropostale III – Copyright Registration Errors

This third post discussing the L.A. Printex case concerns the effect of errors in copyright applications. The defendants sought summary judgment on the ground that L.A. Printex’s registration should be held invalid because its designs were registered as an unpublished collection, but included two designs that previously had been published.

The rule, however, is “inadvertent mistakes on registration certificates do not invalidate a copyright and thus do not bar infringement actions, unless the alleged infringer has relied to its detriment on the mistake, or the claimant intended to defraud the Copyright Office by making the misstatement.” The court held that the error did not invalidate the registration or render the certificate of registration incapable of supporting a copyright infringement claim. There was no evidence that L.A. Printex knew that the two designs had been published at the time it submitted its application for copyright registration, or that it intended to defraud the Copyright Office. Upon learning of its registration error, L.A. Printex corrected it. It filed an application for supplementary registration, communicated with the Copyright Office about the error through email and phone correspondence, and filed a second application for supplementary registration. Moreover, the Copyright Office’s decision to issue a supplementary registration after it was told of the two designs’ prior publication shows that the error was not one that “if known, would have caused the Register of Copyrights to refuse registration.

L.A. Printex v. Aeropostale – Part II Substantial Similarity

The Ninth Circuit’s opinion in the L.A. Printex case offers two useful insights with respect to the manner in which courts in that circuit are to evaluate substantial similarity. 

The first is a re-affirmation that a court should not evaluate the intrinsic test, involving a subjective comparison of the two works, on summary judgment.  The subjective comparison should be reserved for trial.  Court’s should only conduct the intrinsic test, the objective listing and comparison of similarities on summary judgment.

The second is the court’s actual application of the intrinsic test.  Here is an excerpt:

C30020 is a repeating pattern of bouquets of flowers and three-leaf branches. The idea of a floral pattern depicting bouquets and branches is not protectible, and C30020 has elements that are not protectible, for example the combination of open flowers and closed buds in a single bouquet or the green color of stems and leaves. However, L.A. Printex’s original selection, coordination, and arrangement of such elements is protectible. Because there is “a wide range of expression” for selecting, coordinating, and arranging floral elements in stylized fabric designs, “copyright protection is ‘broad’ and a work will infringe if it’s ‘substantially similar’ to the copyrighted work.” That is, “there are gazillions of ways” to combine petals, buds, stems, leaves, and colors in floral designs on fabric, in contrast to the limited number of ways to, for example, “paint a red bouncy ball on black canvas” or make a lifelike glass-in-glass jellyfish sculpture. Our comparison of Defendants’ allegedly infringing design and C30020 reveals objective similarities in protectable elements. Both patterns feature two types of small bouquets of flowers, one featuring the largest flower in profile view, the other featuring the largest flower in an open-face view, and both emerging from three buds. Both patterns also depict small, three-leaf branches interspersed between the two types of bouquets. The shape and number of the flower petals and leaves are similar in the two designs. The two types of bouquets are arranged at similar angles in both designs, and the bouquets and branches are coordinated in similar spatial combinations on a grid of similar scale and layout.  Moreover, the color arrangement of C30020 in white/berry is markedly similar to the color arrangement of Defendants’ design…The differences noted by the district court do not compel the conclusion that no reasonable juror could find that Defendants’ design is substantially similar to C30020. Rather, in light of the similarities described above, the differences support the opposite conclusion, that there is a genuine dispute of material fact on substantial similarity. It is true that the flowers, stems, and leaves in Defendants’ design are less detailed than those in C30020, and that Defendants’ design does not use multiple shades of color to give the flowers and leaves definition as does C30020. But a rational jury could find that these differences result from the fabric printing process generally and are “inconsequential,” or could credit Jae Nah’s assertion that these differences result in part from “print[ing] using cruder, lower quality techniques and machinery. Moreover, because we conclude that stylized fabric designs like C30020 are properly entitled to “broad” copyright protection, it is not necessary that Defendants’ design be “virtually identical” to infringe. A rational jury could find that despite some differences between Defendants’ design and C30020, the similarities in the selection, coordination, and arrangement of bouquets and three-leaf branches are sufficiently substantial to support an inference of copying. Accordingly, we hold that objective similarities in the expressive elements of Defendants’ design and C30020 present a genuine dispute of material fact under the extrinsic test.

If you don’t understand the intrinsic/extrinsic distinction, call me up or send an email.  I can probably confuse you even more.  Look for further discussion of this case, hopefully with pictures of the works in question, in the 2013 update of Substantial Similarity in Copyright Law.


L. A. Printex v. Aeropostale, Part I-Access

Widespread dissemination of a work sufficient to show a reasonable possibility of access can be confined to particular region and/or industry. That is one of the rulings in the Ninth’s Circuit’s recent decision in L. A. Printex v. Aeropostale.  This is the first of three posts about the case, each addressing a single aspect of the court’s opinion.

Most readers of this blog will know that in order to prove copyright infringement, a copyright owner must prove that the defendant copied the copyrighted work.  In most cases there is no confession, eyewitness or other direct evidence of copying, so plaintiffs typically prove copying by proving that the defendant had access to the plaintiff’s work, and that similarities between the plaintiff’s work and defendant’s suggest copying.

In the Aeropostale case, L. A. Printex claimed that Aeropostale and co-defendant Ms. Bubbles infringed L.A. Printiex’s copyright in a floral fabric design.  L.A. Printex asserted that defendants had access to the copyrighted print because it was widely disseminated in the Los Angeles fashion industry.  The Ninth Circuit agreed, writing:

L.A. Printex and Ms. Bubbles (Aeropostale’s wholesaler and co-defendant) operate in the same industry in the same Los Angeles area. L.A. Printex, a fabric printing company, sold more than 50,000 yards of fabric bearing C30020 to fabric converters. It is a reasonable inference that many or most of these purchasers were in the Los Angeles area. Apparel vendors like Ms. Bubbles purchase fabric from fabric printing companies and fabric converters. In addition, the dissemination of C30020 occurred over a four-year period immediately preceding Defendants’ alleged infringement. A reasonable jury could find that C30020 was widely disseminated in the Los Angeles-area fabric industry, and hence that there was a “reasonable possibility” that Defendants had an opportunity to view and copy L.A. Printex’s design…We hold that L.A. Printex raised a genuine dispute of material fact on access.


More Ways to Prove Irreparable Injury

In order to obtain an injunction prohibiting a competitor from violating your IP rights, one of the things you must prove is that his actions are causing you irreparable injury, as opposed to injury that can be remedied by paying money.  When considering possible ways in which your competitor is causing you irreparable injury, it may be worthwhile to consider two concepts proposed by Apple in the Apple v. Samsung case.

The first is a dilution argument.  Apple argued that Samsung’s use of a smartphone design in violation of Apple’s design patent eroded the distinctiveness of the iPhone design, causing Apple harm that would be impossible to quantify.

The second is that lost sales in the smartphone market would have repercussions for sales of other devices, primarily because of compatibility issues.  Once one chooses a phone that operates on the Android platform, for example, one will be more likely to purchase other Android/Samsung products rather than Apple products.

At the preliminary injunction stage, Apple did not succeed on either theory.  The Federal Circuit pointed out, however, that Apple lost not because its logic was flawed, but because there was not sufficient proof to support it.  It seems likely that Apple will be pursuing such proof with renewed vigor as the case goes forward.  Apple’s strategies of proof, whether they are based on surveys, statistics or other measures, and Apple’s success or failure, may provide IP owners with further insight regarding the effectiveness of these theories going forward.


Post-License Use of Trademark Is Counterfeiting

A former trademark licensee’s continued use of a trademark after termination of the license constitutes trademark counterfeiting. That is the holding in a recent District of Indiana default judgment case, Century 21 v. Destiny Real Estate.

The court explained:

If an unrelated entity had created an identical trademark and provided authorized goods or services (or the kind provided by the owner of the mark) under that mark, there would be no question that there was counterfeiting. The Court can conceive of no reason why an ex-franchisee should escape liability for counterfeiting simply because that person had access to a franchisor’s original marks because of the former relationship and therefore did not need to reproduce an identical or substantially similar mark.

Other courts have come to differing conclusions on this issue, in various contexts. In a 1997 case, the 6th Circuit held that a franchisee’s holdover use of a trademark was not counterfeiting. The 9th Circuit held that the licensee’s holdover was counterfeiting in a 2005 case involving continuing use of the Idaho potato certification mark.

The significance is that pursuant to 15 U.S.C. 1117(b), if he is found to be a counterfeiter, the former licensee can be liable for statutory damages (up to $2 million in cases of willful counterfeiting), and will be liable for three times profits or damages, whichever amount is greater, together with a reasonable attorney’s fee unless the court finds extenuating circumstances. If he is merely an infringer, statutory damages are not available and treble damages and attorneys’ fees are less certain to be awarded. They may be awarded subject to the principles of equity.

The Century 21 court’s damage, injunction and individual liability analyses also are noteworthy. Century 21 sought its actual damages plus treble damages. The court held that such an amount would be quadruple, rather than treble damages, one multiple too many. The court further reduced the award to two times damages, on the ground that the liquidated damages provided for in the license agreement and awarded by the Court coincided with the actual damages, and therefore to awarded treble damages in addition would again result in quadruple recovery.

On a cheerful note for trademark owners, the Court granted a permanent injunction, finding that the injury especially justifying injunctive relief is the loss of control over and harm to its valuable name and trademark, in which it has invested substantial effort and money over time to develop goodwill. If that is going to suffice under Ebay, trademark owners may not need to be as concerned that injunctions against infringers will be harder to come by.

The court declined to impose liability on Destiny Real Estate’s principal. After surveying the law on individual liability for corporate trademark infringement, the Court found that Century 21’s allegations that the individual was President of the company and authorized or approved of the misconduct were not sufficient bases to hold the individual liable for the corporation’s infringement.

Real World Effects of the Absence of a Presumption of Irreparable Harm

If you want to see the effect of recent cases abolishing the presumption of irreparable harm following automatically from a likelihood of success, consider the recent decision in the Apple v. Samsung case. Apple sued Samsung for infringements of three design patents and one method patent, each of which pertained to the IPad or IPhone.  Apple sought a preliminary injunction prohibiting sale of three Samsung phones and one tablet.

The court denied Apple a preliminary injunction with respect to all four Samsung products, despite finding that Apple had demonstrated a likelihood of success with respect to three of its patents, in whole or in part because Apple was unable to demonstrate irreparable harm.

If irreparable harm had been presumed, perhaps Apple would have gotten its injunction against one or more of the Samsung products.

The Case for Software Versions, Registrations and Record-Keeping

A recent case from the First Circuit underlines the utility, from a copyright perspective, of delineating versions of software, registering each version, and keeping copies. That is not always so easily done, because unlike other copyrightable works, such as a novel, software is never done. There is always another bug to fix, feature to add or compatibility issue to address. But to effectively employ copyright protection, it is a necessity.

The concern is proof. In order to prove infringement, the copyright owner must first prove what it is that is copyrighted, and that a copyrighted work was registered. That is generally simple enough, but with an evolving work, such as software, it becomes less so. That was the case in Airframe Systems v. L-3 Communications. In that case, Airframe accused L-3 of unauthorized copying of its software between 1997 and 2003.

The court’s opinion reports that Airframe had some pretty damning evidence, particularly a comment in the L-3 code that said “I do not know what this code is used for so I will leave it here anyway.” The problem was, Airframe did not have a copy of the software as it existed in those years and hadn’t registered a version during those years. Airframe attempted to prove infringement by comparing the L-3 code to an updated version of the Airframe software from 2009. The court held that without a copyright registration for the software as it existed during the years in question, and without a way of proving exactly which portions of the 2009 code were present in the version L-3 was accused of copying, Airframe could not prove infringement. The opinion reviews a number of cases in which copyright claims failed because of the plaintiff’s inability to prove the contents of the work allegedly infringed, and discuss the applicability of the best evidence rule in this context.

It seems that Airframe may not have registered any version of its software between 1988 and 2003. That is too long. Software developers and makers of other evolving works should anticipate the need to prove the state of their products at different times and register snapshots that will enable them to prevail when infringements come to light.