The US Court of Appeals for the Fifth Circuit held that, under Texas law, a plaintiff can sustain an action for trade secret misappropriation even if the plaintiff voluntarily communicated the alleged trade secrets to the defendant. Hoover Panel Systems, Inc. v. HAT Contract, Inc., Case No. 19-10650 (5th Cir. June 17, 2020) (per curiam). (more…)
In 2019, Nokia filed a series of patent infringement complaints against Daimler before several German courts. Nokia alleged that connected cars made by Daimler infringed Nokia’s patents. Nokia considered the relevant patents as essential for certain wireless communication standards. Nokia v. Daimler, Case No. 2 O 34/19 (Mannheim District Court). On 18 June 2020, the litigation took a surprising turn: The German competition authority, the Federal Cartel Office (FCO), filed an amicus curiae brief with the relevant patent infringement courts (FCO docket no. P-66/20). (more…)
Addressing the appropriateness of the district court’s decision to deny attorneys’ fees relating to a copyright claim it labeled “frivolous,” the US Court of Appeals for the Seventh Circuit affirmed the denial, despite the strong presumption in favor of awarding fees. Timothy B. O’Brien LLC v. Knott, Case No. 19-2138 (7th Cir. June 17, 2020) (Flaum, J).
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The Supreme Court of Texas held that a limited partner had standing to sue for alleged loss in the value of its interest in the partnership, but reversed a damages award in favor of that limited partner for insufficient evidence. Pike v. Texas EMC Management, LLC, Case No. 17-0557 (Tex. June 19, 2020) (Busby, J) (Bland, J, dissenting).
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A unanimous panel of the US Court of Appeals for the Seventh Circuit awarded sanctions under Federal Rule of Appeals 38 against Amazon seller Ellishbooks for its frivolous appeal from a default judgment. Quincy Bioscience, LLC v. Ellishbooks, et al., Case No. 19-1799 (7th Cir. June 5, 2020) (Wood, J.).
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The United States Patent and Trademark Office (USPTO) has announced a new prioritized examination program to expedite the examination of applications for marks used to identify qualifying COVID-19 medical products and services. Applications that qualify for the program will immediately be assigned to an examining attorney for review, which expedites examination by approximately two months. The USPTO will not charge additional fees for applications that qualify for the program because it considers the COVID-19 outbreak to be an “extraordinary situation” for trademark applicants.
To qualify for prioritized examination, the trademark or service mark application must cover a product that is subject to the United States Food and Drug Administration (FDA) approval for use in the prevention and/or treatment of COVID-19, or a medical service (including medical research) for the prevention and/or treatment of COVID-19.
The USPTO started accepting petitions to advance the initial examination of applications for qualifying COVID-19-related marks beginning June 16, 2020.
Read the full announcement here.
A Texas Court of Appeals reversed a jury verdict for the plaintiff on claims of trade secret misappropriation under the Texas Uniform Trade Secrets Act (TUTSA) and fraud. The Court reversed the misappropriation verdict because the jury form commingled valid and invalid theories of liability, and reversed the fraud verdict because the jury instructions permitted a finding of liability under theories that were closely related to trade secret misappropriation and therefore preempted by TUTSA, as well as theories that were not. The Court ordered a new trial on both claims. Title Source, Inc. v. HouseCanary, Inc., Case No. 04-19-00044-CV (Tex. App. – San Antonio June 3, 2020) (Watkins, J.).
Title Source (TSI) provides title insurance, property valuations and settlement services. HouseCanary is a real estate analytics company. TSI hired HouseCanary to build an iPad application for its appraisers to use. The app would be based on HouseCanary’s automated valuation models (AVM). The parties’ agreement specifically prohibited TSI from reverse-engineering or attempting to discover HouseCanary’s source code or confidential information. Nonetheless, and despite its assurances to the contrary, TSI sought and used HouseCanary’s proprietary information to develop its own AVM. The parties’ contract required HouseCanary to maintain a certain “hit rate” (a metric of accuracy), but TSI’s employees took steps to purposely drive down the hit rate (including searching for an appraisal of the supposed street address: “Wiping a Vendor Wipes the fee”). The parties’ contract originally provided for a per-appraisal royalty to be paid to HouseCanary; the parties later amended the agreement to provide for a flat fee in exchange for TSI’s promise to deliver valuable historical valuation data (which it did not deliver).
TSI sued HouseCanary for breach of contract and fraud, alleging that HouseCanary had failed to deliver the app as promised. HouseCanary counterclaimed for breach of contract, fraud, unjust enrichment, quantum meruit and misappropriation of trade secrets under TUTSA. The jury rejected all of TSI’s affirmative claims and found in favor of HouseCanary on its misappropriation, fraud and breach of contract claims. TSI moved for a new trial, which the trial court denied. HouseCanary elected to recover on its misappropriation and fraud claims. The trial court entered judgment in favor of HouseCanary and awarded almost $740 million. TSI appealed.
HouseCanary’s TUTSA Claim
On appeal, TSI argued that the verdict was insufficiently supported by evidence and that two questions on the jury form commingled valid and invalid theories of recovery (Casteel error). The first question involved ownership of trade secrets. The Texas Court of Appeals held that sufficient evidence had been presented to sustain the finding of trade secret ownership, and that TSI had waived its objection based on the alleged Casteel error.
The second question asked the jury whether TSI misappropriated HouseCanary’s trade secrets, and the corresponding instruction provided that misappropriation could be found on either a “use” or an “acquisition by improper means” theory. The Court found that there was enough evidence to sustain a verdict on the “use” theory, but that the jury instructions regarding “acquisition by improper means” was overbroad, [...]
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The US Court of Appeals for the Second Circuit affirmed a district court’s denial of a motion to dismiss a copyright infringement suit on the ground of sovereign immunity, holding that advertising activity in the United States on behalf of a sovereign government falls within the commercial activity exception to sovereign immunity. Pablo Star Ltd. v. Welsh Gov’t, Case No. 19-1262 (2d Cir. June 8, 2020) (Lynch, J.).
Pablo Star is a company registered under the laws of Ireland and the United Kingdom. The Welsh government is a political subdivision of the United Kingdom. Pablo Star sued the Welsh government, along with multiple New-York-based media companies working with the Welsh government, for copyright infringement. Pablo Star alleged infringement of its copyrights in photographs that the Welsh government used in online and printed materials advertising Welsh-themed events in New York and promoting tourism to Wales. The Welsh government moved to dismiss, asserting sovereign immunity under the Foreign Sovereign Immunities Act (FSIA), which provides for presumptive immunity of a foreign state in federal court. The district court denied the motion to dismiss, holding that the commercial activity exception to the FSIA applied because the acts of the Welsh government that resulted in Pablo Star’s claims constituted commercial activity, and the activity had substantial contact with the United States. The Welsh government sought an interlocutory appeal.
The Second Circuit affirmed, finding that the Welsh government abrogated its sovereign immunity by engaging in commercial activity that had substantial contact with the United States. On the commercial activity prong, the Court rejected the argument that the Welsh government’s conduct was governmental, rather than commercial, because it promoted tourism to Wales. The Court explained that an activity is deemed commercial based on its nature rather than its purpose. Activity is commercial if a foreign state performs the types of actions typical of a private party engaging in commerce. A state’s motives, including motives without profit or to fulfill sovereign objectives, are irrelevant. The Welsh government’s assertion that it acted as a sovereign government to promote Welsh culture and tourism conflated the act with its purpose. The broader characterization of promoting tourism also did not distinguish the activity from functions regularly undertaken by private entities because the profit motive was irrelevant. Because the publication of advertising materials is an activity regularly performed by private-sector businesses, the court affirmed the district court’s conclusion that the Welsh government engaged in commercial activity.
The Second Circuit also distinguished Pablo Star’s claims from those in cases where sovereign immunity applied. Claims dismissed on the ground of sovereign immunity lacked a sufficient nexus between a party’s injury and the governmental entity’s commercial activity. They instead stemmed from functions unique to government, such as detention and punishment or the employment of civil service personnel. Pablo Star’s copyright infringement claim, by contrast, directly resulted from the Welsh government’s commercial conduct, including its unauthorized use of photographs in advertising materials promoting Welsh culture and tourism.
On the substantial contact prong, the Second Circuit agreed that the [...]
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The South Carolina Supreme Court (S.C. Supreme Court) affirmed a state Court of Appeals finding that information taken by a minority LLC member did not have the requisite independent value to be considered a “trade secret” under the state’s Trade Secrets Act. Wilson v. Gandis, Case No. 27980 (S.C. June 3, 2020) (James, C.J.).
In response to what the trial court classified as an “unconscionable,” “brazen,” “classic squeeze-out,” Wilson brought an action against his business partners, Gandis and Shirley, along with Carolina Custom Converting (CCC), a broker of industrial film materials. Wilson was a 45% member of CCC, while Gandis and Shirley were 45% and 10% members respectively. Starting in 2011, Gandis and Shirley made multiple efforts to remove Wilson as a member of CCC. The laundry list of “oppressive acts” cited by the trial court included Gandis and Shirley’s (1) withholding guaranteed monthly distributions to Wilson, (2) monitoring Wilson’s private emails, (3) limiting Wilson’s access to CCC financials, (4) terminating Wilson’s family healthcare plan, (5) surreptitiously forming a competing business, (6) funneling money to Gandis through inflated rent payments to Gandis-owned properties and (7) attempting to physically remove Wilson from his own office using a police officer. In response to these acts, Wilson left his office with his company laptops and Blackberry, which contained information about CCC clients. The trial court and Court of Appeals found for Wilson, forcing Gandis and Shirley to buy out Wilson’s share of CCC and denying all of their counterclaims against Wilson. CCC, Gandis and Shirley filed petitions for writ of certiorari to the S.C. Supreme Court, which were granted.
The issue on certiorari was whether the trial court erred in finding CCC failed to prove its trade secret misappropriation claim against Wilson (and his subsequent employers) under the South Carolina Trade Secrets Act. In a relatively short analysis, the S.C. Supreme Court found that the trial court did not err in finding CCC failed to prove its trade secret misappropriation claim against Wilson. The South Carolina Trade Secrets Act defines a “trade secret” as information that “derives independent economic value … from not being generally known to … the public [and efforts are made] to maintain its secrecy.” The Court applied its own precedent requiring an initial analysis of “the extent to which the [alleged trade secret] is known outside of his business and … the difficulty with which the information could be properly acquired … by others.” Relying on trial testimony by two “experienced film brokers” who stated that the type of business information taken by Wilson was “widely available,” “ascertainable from trade associations [and] publicly available sources,” and that customers “are free to share” that type of information, the Court held that the record supported the trial court’s finding that the information taken by Wilson “did not have the required independent economic value” to be considered a trade secret. The Court affirmed and remanded on an issue related to the details of Wilson’s buyout from CCC.
Reversing an award of attorney’s fees, the US Court of Appeals for the Federal Circuit found that a district court abused its discretion in making an exceptional-case determination where patent and trademark infringement claims were reasonable. Munchkin, Inc. v. Luv N-Care, LTD., Admar International, Inc., Case No. 19-1454 (Fed. Cir. June 8, 2020) (Chen, J.).
Munchkin sued LNC for trademark infringement, unfair competition, trade dress infringement and patent infringement based on LNC’s no-spill drinking cups. LNC filed a petition for inter partes review (IPR) with the Patent Trial and Appeal Board (PTAB). While the IPR was pending, Munchkin voluntarily dismissed all of its non-patent claims with prejudice. The PTAB subsequently found Munchkin’s patent was unpatentable. After the PTAB’s finding, Munchkin dismissed its patent infringement claim.
LNC filed a motion for attorney’s fees under 35 U.S.C. § 285 and 15 U.S.C. § 1117(a), arguing that the trademark and trade dress infringement claims were substantively weak and that Munchkin should have been aware of the weakness of the patent’s validity. The district court agreed that the case was exceptional and granted LNC’s motion. Munchkin appealed.
The Patent Act and Lanham Act allow courts to award reasonable attorney’s fees to the prevailing party, but only in exceptional cases. The Federal Circuit reviewed the district court’s award for abuse of discretion under the Ninth Circuit standard for attorney’s fees as set forth in Octane Fitness LLC v. ICON Health & Fitness, Inc. (IP Update, Vol. 17, No. 5). The Supreme Court in Octane Fitness held that an exceptional case is “one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”
The Federal Circuit noted that the district court’s exceptional-case determination rested on issues that were not fully litigated before the court. Addressing the patent infringement claim, the Court first found that the district court’s claim construction ruling favored Munchkin, creating a serious hurdle for LNC’s invalidity challenge. However, to find the case exceptional, the district court dismissed its own Markman construction as merely a non-final interim order. The Court found that was not the right question, and instead, the relevant question was whether Munchkin’s validity position was reasonable—not whether there is a possibility of reconsideration of the claim construction.
LNC argued that Munchkin was unreasonable in maintaining its patent infringement lawsuit once the PTAB instituted the IPR because, based on the statistics, it was more likely than not that the patent would be found invalid. The Federal Circuit disagreed, stating clearly that IPR statistics combined with the merits outcome is not enough. What is required is a “fact-dependent, case-by-case” analysis. The Federal Circuit found nothing unreasonable about Munchkin’s patent infringement claim.
Addressing the trademark claims, the Federal Circuit determined that Munchkin cannot be faulted for litigating a claim it was granted permission to pursue. Since the district court allowed Munchkin to amend its complaint, finding no grounds for prejudice, bad faith [...]
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