Virginia IP Law : Virginia Intellectual Property Lawyer & Attorney : Troutman Sanders Law Firm : Technology & Patent Litigation

Benchmark Litigation has just announced its short list of nominations for its Annual Awards-South, and Troutman Sanders has been nominated as Firm of the Year and its IP Group has been nominated as Practice Area of the Year. One of Virginia IPLaw’s contributors, Robert Angle, has also been nominated as Litigator of the Year in Virginia, and his successful defense of Twitter in VS Technologies v. Twitter, has been nominated as case of the year in Virginia. The full list of nominations can be found here.

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While the AIA bars the joinder of patent infringement claims against multiple defendants (discussed here), there are still a few pre-AIA suits alleging that multiple defendants independently infringed the same patents. Judge Smith recently became the latest Eastern District of Virginia judge to dismiss such a suit for improper joinder. Automated Tracking Solutions, LLC v. Awarepoint Corp., et al., Case No. 2:11CV424 (E.D.Va. Jan. 13, 2012), found here.

Automated Tracking accused five separate defendants of infringing four different patents. According to the defendants, the Complaint asserted different patent claims against each defendant’s product, and so there was no commonality at all between the claims. In response, Automated Tracking asserted only that joinder of all claims into one suit created significant efficiencies and that there was no evidence of prejudice from proceeding jointly.

Unfortunately for Automated Tracking, Rule 20 does not allow joinder based solely on efficiency and lack of prejudice. As Judge Smith pointed out, claims against separate defendants must also arise out of the same transaction, occurrence or series of transactions and occurrences. Judge Smith also rejected Automated Tracking’s claims of judicial economy, holding that the “type of joinder in the case at bar represents judicial ineconomy and serves no purpose but to thwart the rules of proper procedure for filing separate lawsuits.” 

Judge Smith dismissed all but Awarepoint, the first named defendant. As of this date, Automated Tracking has re-filed suit against three of the dismissed defendants, and those cases have been assigned to separate judges in Alexandria and Norfolk. It will be interesting to see whether and to what extent the district judges handling these cases attempt to coordinate claim construction, discovery and other pre-trial matters.

Automated Tracking also provides an interesting contrast to Judge Cacheris’ recent decision in Coach, Inc. v. 1941 coachoutletstores.com to allow joinder of claims under the ACPA against 356 unrelated alleged cybersquatters. It is difficult to articulate a distinction between the two decisions other than that practical considerations support allowing a plaintiff  to join claims against multiple accused cybersquatters, but those same considerations do not apply to other types of litigation, including patent litigation.

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In Geographic Services, Inc. v. Anthony Collelo, et al., ___ Va. ___ (2012) (copy here), the Supreme Court of Virginia held that Virginia's Trade Secrets Act, Virginia Code Section 59.1-336 et seq., does not require competitive use of a stolen trade secret.  While this holding is unremarkable, Justice McLanahan in dissent offered a critique of plaintiff's evidence of damages that, if followed, could lead to the result rejected by the majority.

Graphic Services, Inc. ("GSI") claimed that a former employee, Collelo, breached the provisions of his employment agreement by using GSI's proprietary information at his new job for Boeing, Inc.  While the evidence strongly supported GSI's claim, the trial court granted the defendants' motion to strike at the conclusion of GSI's case-in-chief on the ground that "even if Mr. Collelo had taken something,... Boeing is not doing and has not been doing the same work as GSI" and "[t]here has been no [showing] that Boeing has made more money because it has used these trade secrets."  There is no way, the trial court concluded, "that the jury could find that Boeing has taken GSI's secret in order to do the work that the secret was designed for."  The Virginia Trade Secrets Act, however, does not require any proof of competition or competitive use of the trade secret, and the Supreme Court rightly reversed the trial court's clear error of law.  

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In Coach, Inc., v. 1941 coachoutletstores.com, Civil Action No. 1:11cv309 (JCC/JFA), Coach, Inc., the well-known leather goods company, sought to enjoin 356 alleged cybersquatters – almost all of which registered domain names in Hong Kong or China – from using Coach’s registered trademarks as part of the alleged cybersquatters’ domain names.  The problem from Magistrate Judge Anderson’s perspective, however, was that many of these 356 alleged cybersquatters were unrelated to each other, and therefore Coach could not meet the “transaction or occurrence” test for joinder under Fed. R. Civ. P. 20. Thus, when Coach filed a motion for entry of default judgment, Magistrate Judge Anderson issued Report and Recommendation on Nov. 25, 2011, that found joinder improper as to 345 alleged cybersquatters, and recommended severing those defendants from the action. 

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The Virginia State Bar Intellectual Property Section is seeking papers written by law students who are attending law school in Virginia or are residents of Virginia attending law school outside of Virginia and relating to an intellectual property law issue or the practice of intellectual property law.  The winner receives a cash prize of $4,000.  The judge of the final round of the competitor is the Honorable Richard Linn, judge of the U.S. Court of Appeals for the Federal Circuit.  The deadline for submissions is Friday, May 25, 2012 at 4:00 EDT.

A flyer regarding the competition can be found here, and a complete set of rules for the competition is here.  Additional information is available at the section’s website.

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If you thought passage of the America Invents Act would end the flood of false patent marking claims, think again. In December, Judge Turk in the Western District of Virginia ruled that a false marking plaintiff could proceed under state consumer protection laws and that such claims were not preempted by the patent laws or the AIA. Sukumar v. Nautilus, Inc., Case No. 7:11CV218, 2011 U.S. Dist. LEXIS 145960 (W.D.Va. Dec. 19, 2011) found here. 

Sukumar alleged that Nautilus had falsely marked a number of products in violation of 35 U.S.C. 292. After enactment of the AIA, Sukumar amended its Complaint to allege that it had suffered a competitive injury and that Nautilus acted in bad faith. Sukumar also added state-law claims of false advertising and unfair competition under California law and unfair competition under Washington law.

Nautilus moved to dismiss the state law claims as preempted by federal patent law and the AIA. While acknowledging that “the patent grant is within the exclusive purview of federal law,” Judge Turk denied the motion holding:

• The AIA contains no express preemption provision.
   
• There is no field preemption of state unfair competition claims that rely on a substantial question of federal patent law, relying on Hunter Douglas, Inc. v. Harmonic Design, Inc., 153 F.3d 1318 (Fed. Cir. 1998), overruled on other grounds, Midwest Indus. Inc. v. Karavan Trailers, Inc., 175 F.3d 1356, 1359 (Fed. Cir. 1999). 
   
• Neither the AIA nor its legislative history reveals any evidence that Congress intended to “impose upon the traditional authority of the states to regulate areas of consumer protection.”
   
• There was no direct conflict that made it physically impossible for Nautilus to comply with both federal and state law.
   
• Sukumar’s state-law unfair competition claims did not create an obstacle to Congress’ intent in passing the AIA

Judge Turk’s opinion contains two important limitations on state-law unfair competition claims for false marking. 

First, citing Hunter Douglas, Judge Turk held that federal law would preempt Sukumar’s claims if Nautilus did not act in bad faith. In effect, Judge Turk added an element of bad faith to Sukumar’s claims by judicial fiat and allowed this new “unfair competition plus bad faith” claim to go forward. Second, Judge Turk left open the possibility of preemption if a plaintiff did not allege competitive injury.

Two days after his ruling, Judge Turk heard argument on Sukumar’s motion for partial summary judgment on liability on both its false marking claims under Sec. 292 and its unfair competition claims. Judge Turk took the motions under advisement and has not ruled as of today.

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While no Virginia court has addressed the issue, a split has developed in orher federal district courts on whether the requirements of Bell Atlantic v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009) apply to counterclaims for patent invalidity.  The Northern District of Illinois recently weighed in on the issue, holding that the Twombly/Iqbal standard applied and dismissing a counterclaim for invalidity. Cleversafe, Inc. v. Amplidata, Inc., 2011 U.S. Dist. LEXIS 145995 (N.D. Ill. Dec. 20, 2011) found here.

The Ruling

In Cleversafe, the defendant/counterclaim plaintiff, Amplidata, alleged only that the asserted patents were “invalid for failing to comply with provisions of the United States patent laws, including one or more of 35 U.S.C. §§ 101-103 and/or 112.” 

The Court dismissed the counterclaim under Twombly/Iqbal because Amplidata did not articulate why the patents were invalid, identify the statutory provisions that applied or provide any factual support for the counterclaim. The Court also dismissed Amplidata’s affirmative defense of invalidity on the grounds that “bare bones conclusory allegations” did not meet the Seventh Circuit’s standard for an affirmative defense under Fed. R. Civ. P. 8(c).

Split Among the District Courts

Some courts have reached the same conclusion as Cleversafe, while others have applied a more lenient standard to patent invalidity counterclaims. Compare Groupon, Inc. v. MobGob LLC, 2011 WL 2111986 (N.D. Ill. May 25, 2011) (dismissing counterclaim); and Tyco Fire Products LP v. Victaulic Co., 777 F.Supp.2d 893 (E.D. Pa. 2011) (dismissing counterclaim but not affirmative defense); with Pfizer v. Apotex, Inc., 726 F.Supp. 2d 921 (N.D. Ill. 2010) (notice of claim sufficient for invalidity counterclaim); and Elan Pharma Int’l. Ltd. v. Lupin Ltd., 2010 U.S. Dist. LEXIS 32306 (D.N.J. Mar. 31, 2010) (same). 

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