bad faith Archives

bad faith

CEO Punches Ticket and Avoids Sanctions Based on Receiving Confidential Documents

by Alexander Piala, PhD | Jun 29, 2023 | Patents

Addressing protective order violations, the US Court of Appeals for the Fifth Circuit largely vacated a district court’s sanctions order. The Court explained that sanctions must comply with due process, barring parties from future litigation should be treated as a “death-penalty” sanction and damages calculations require specific factfinding. CEATS, Inc. v. TicketNetwork, Inc., Case No. 21-40705 (5th Cir. June 19, 2023) (Elrod, Haynes, Willett, JJ.)

To settle a long-running dispute, TicketNetwork licensed several patents from CEATS, a non-practicing patent assertion entity. Several years into the license, all of the licensed patents were invalidated in an unrelated litigation. TicketNetwork promptly stopped paying royalties and filed suit seeking a declaration that the license agreement was unenforceable. CEATS counterclaimed for breach of contract.

During discovery, CEATS requested TicketNetwork’s list of affiliates, which TicketNetwork refused to produce, citing its highly confidential nature. After two discovery hearings, the district court ordered TicketNetwork to produce the affiliate list but specifically prohibited CEATS from using the list for any purpose other than use in the present litigation.

At trial, a jury found that TicketNetwork breached the license, and the district court awarded attorneys’ fees and costs to CEATS. After the jury verdict, CEATS CEO Milford Skane asked his litigation consultants for a “non-confidential” list of TicketNetwork’s affiliates. The consultants gave Skane the confidential list, which was promptly used in settlement negotiations with TicketNetwork. TicketNetwork filed for sanctions, requesting damages from CEATS and an injunction preventing CEATS from suing or seeking licenses from the listed affiliates.

The district court ordered an investigation and, after two years of inquiry and an all-day evidentiary hearing, found that Skane, the consultants and CEATS all violated the protective order and were jointly and severally liable to TicketNetwork. As sanctions, the district court awarded $500,000 in attorneys’ fees (using a billing rate nearly double the one it used when calculating CEATS’s fees) and barred Skane, the consultants and CEATS from suing or seeking licenses from any of TicketNetwork’s affiliates.

The sanctioned parties appealed and argued:

The district court violated due process by finding Skane and the consultants personally liable without giving them notice or opportunity to respond.
The district court erred by barring the parties without a finding of bad faith.
The district court’s damages calculation was unsupported.

The Fifth Circuit began by addressing the sanctions against Skane and the litigation consultants. The Court explained that sanctions require due process, which includes both fair notice and the opportunity to defend against the claim. The Court observed that the first time Skane and the consultants were made aware that they could be sanctioned was in the sanctions order itself—and their only opportunity to defend themselves took place after that order. Given the lack of any advance notice, the Fifth Circuit concluded that due process had not been satisfied and vacated the monetary sanctions against Skane and the consultants.

The Fifth Circuit also vacated the bar preventing Skane, the consultants and CEATS from suing or seeking licenses from any of the affiliates. Core [...]

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Greek God or Continent? Defining “Confusing Similarity” under the Anti-Cybersquatting Consumer Protection Act

by Thomas DaMario | Sep 2, 2021 | Trademarks

Examining whether a registered mark and a domain name were confusingly similar under the Anti-Cybersquatting Consumer Protection Act (ACPA), the US Court of Appeals for the 11th Circuit affirmed the district court’s grant of summary judgment in favor of the trademark owner because the mark and domains are nearly identical in sight, sound and meaning. Boigris v. EWC P&T, LLC, Case No. 20-11929 (11th Cir. Aug. 6, 2021) (Marcus, J.) (Newsom, J. dissenting). The registered trademark is “European Wax Center” and the domain names in issue are “europawaxcenter.com” and “euwaxcenter.com.”

EWC runs a nationwide beauty brand titled European Wax Center that offers hair removal services and beauty products and also holds a trademark under the same name. Since 2015, EWC sold cosmetics under the marks “reveal me,” “renew me” and “smooth me.” Bryan Boigris has no direct background related to the production of beauty products, but in April 2016, he claimed an intent to begin selling such products and attempted to register trademarks at the US Patent & Trademark Office (PTO) for “reveal me,” “renew me” and “smooth me,” none of which had been used in commerce before by Boigris. Boigris also registered 11 domain names including, “euwaxcenter.com” and “europawaxcenter.com.” Upon discovery of Boigris’s pending applications, EWC filed for its own trademark applications for “reveal me,” “renew me” and “smooth me” and filed an opposition to Boigris’s pending applications at the Trademark Trial and Appeal Board (TTAB). The TTAB sustained the oppositions.

Boigris elected to contest the TTAB’s decision in district court. Specifically, Boigris sought reversal of the TTAB’s decision and an affirmative declaration that he was entitled to register the disputed marks. EWC counterclaimed for an affirmation of the TTAB’s decision as well as declaratory judgment that it had priority rights in the disputed marks, that Boigris’s use constituted infringement under the Lanham Act, damages and an injunction under the ACPA against Boigris’s use of the two domains, “europawaxcenter.com” and “euwaxcenter.com.” EWC moved for summary judgment on all of its claims, which the district court granted. Boigris appealed the ACPA decision only.

Under the ACPA, a trademark holder must prove that: (1) its trademark was distinctive when the defendant registered the challenged domain name; (2) the domain name is identical or confusingly similar to the plaintiff’s trademark and (3) the defendant registered the domain name with a bad faith intent to profit. Boigris challenged the second element only and did not contest that EWC’s trademarks were distinctive or that he registered the domains in bad faith. Specifically, Boigris argued that the issue of whether or not the “European Wax Center” mark and the “europawaxcenter.com” and “euwaxcenter.com” domains are confusingly similar should have been a question for the jury.

The 11th Circuit affirmed the district court’s ruling, determining that no reasonable jury could conclude that Boigris’s domain names are not confusingly similar to EWC’s mark. The Court acknowledged the difference between the Lanham Act’s traditional multi-factor likelihood of confusion test for trademark infringement and the test for confusing similarity, noting [...]

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Chill: Full Recoupment of Investment Not a Bar to Equitable Intervening Rights

by A. Shane Nichols | Mar 4, 2021 | Patents

The US Court of Appeals for the Federal Circuit affirmed the district court’s grant of summary judgment of equitable intervening rights, protecting an alleged infringer from liability for activity that would otherwise infringe patent claims that were substantively and substantially altered during re-examination of the patent. John Bean Technologies Corp. v. Morris & Associates, Inc., Case No. 20-1090, -1148 (Fed. Cir. Feb. 19, 2021) (Reyna, J.)

John Bean and its only domestic competitor, Morris, manufacture chillers for processing poultry. John Bean told its customers that Morris’s competing chillers infringed John Bean’s patent. Morris sent John Bean a letter demanding that it stop making infringement allegations, and identifying prior art that Morris contended rendered the patent invalid. John Bean never responded to Morris’s demand letter, and Morris continued to manufacture and sell its competing poultry chillers.

Eleven years later, John Bean submitted its patent for ex parte re-examination. During reexamination, John Bean’s only original claims were substantively and substantially amended. After its reexamination certificate issued, John Bean sued Morris for infringement.

In 2016, the district court granted Morris’s motion for summary judgment with respect to the affirmative defense of equitable estoppel. The Federal Circuit reversed on appeal, holding that equitable estoppel did not apply because Morris’s unanswered demand letter related solely to the patent’s original claims and not to the altered and new claims that Morris was accused of infringing in the later-filed suit.

On remand, the district court granted Morris’s motion for summary judgment that John Bean’s infringement claims were barred by equitable intervening rights. The district court weighed seven factors in analyzing Morris’s equitable intervening rights defense and found that Morris engaged in substantial preparation prior to the re-examination, including years of research and development, and the conversion of almost two-thirds of its business to selling the accused chillers. The district court also found that John Bean acted in bad faith by failing to dispute Morris’s contentions of invalidity until after Morris had built its business manufacturing and selling the chillers accused of infringement. John Beam appealed.

Under 35 USC § 252, a court has the discretion to permit an accused infringer to continue to manufacture and sell an otherwise infringing product if the accused infringer made substantial preparation to commercialize the product prior to the re-examination of the patent. The policy rationale underlying equitable intervening rights is that the public has a right to use anything that is not specifically claimed in the original patent. John Bean’s suit only accused Morris of infringing claims that were added or substantially altered during re-examination.

In the present appeal, John Bean argued that the district court improperly weighed several of the equitable intervening rights factors. In particular, John Bean argued that the district court failed to give sufficient weight to the fact that Morris had already recouped the cost of its substantial preparations through sales of its otherwise infringing chiller, and was thus not entitled to the equitable remedy Morris sought from the court.

The Federal Circuit rejected John Bean’s [...]

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“Icy” Guidance on Polaroid Factors

by Paul Devinsky | Dec 3, 2020 | Trademarks

In a “somewhat unusual” trademark case involving directly competing products and marks using the same words, the US Court of Appeals for the Second Circuit reversed in part and affirmed in part the grant of summary judgment for the accused infringer on trademark infringement and dilution claims. The Court found that the similarity of the marks and bad faith on part of the accused infringer weighed in favor of finding infringement. Car Freshner Corp. v. American Covers, LLC, Case No. 19-2750 (2d Cir. Nov. 19, 2020) (Newman, J.)

Car Freshner and American Covers both sell car air freshener products. Car Freshner filed a lawsuit against American Covers alleging that Car Freshner’s trademark “Black Ice” was infringed and diluted by American Covers’ sale of air freshener products using the words “Midnight Black Ice Storm.” The district court rejected Car Freshner’s trademark infringement claim, concluding that “Midnight Black Ice Storm” was not similar enough to “Black Ice” to create a likelihood of confusion about the source of the products. The district court also rejected Car Freshner’s trademark dilution claim, concluding that the marks in question were not sufficiently famous. Car Freshner appealed.

On appeal, the Second Circuit reversed the district court’s entry of judgment for American Covers on the trademark infringement claim. Reviewing the trademark infringement claim using the eight Polaroid factors, the Court noted the lack of guidance regarding how much weight to accord each of the factors. Despite this lack of guidance, the Court was particularly persuaded by two of the Polaroid factors: the similarity of the marks, and bad faith on the part of the accused infringer. As to the similarity of the marks factor, the Court noted that “[i]t is extremely unusual for the mark of a junior user to include two identical words of a senior user’s mark in sequence[,]” particularly when both users are competitors in the same market. Despite the differences in packaging between the two products, the Court found that the similarity of the marks weighed heavily in favor of a finding of trademark infringement. As to the bad faith factor, the Court found that emails produced by American Covers, which revealed that its employees specifically chose product names meant to encourage customers to form a connection between American Covers’ products and Car Freshner’s products, were “explicit evidence of bad faith” on the part of American Covers.

As to the dilution claim, the Second Circuit affirmed the district court’s summary judgment finding, concluding that there was no evidence that either of the marks in question was famous.

Practice Note: Although courts have not provided guidance on how to weigh the Polaroid factors in trademark cases, this case demonstrates that two of the factors (similarity of the marks and bad faith on the part of the accused infringer) can be especially persuasive, particularly when the evidence for these factors is strong.