We will be discussing two recent cases.  The first concerns two competitors with very similar patents issued in rapid succession.  The second deals with recovery for damages as a result of a wrongfully issued preliminary injunction. We will discuss these cases in our weekly SoCal IP Institute meeting on Monday, July 11, 2011.  Brief synopses of the cases are presented below.

Creative Compounds, LLC v. Starmark Labs, , 2010-1445 (Fed. Cir. June 24, 2011) (attached).  Creative Compounds and Starmark Labs both manufacture and sell creatine based dietary supplement products.  Both companies sought protection and received patents for dicreative malate compounds.  The patents were pending simultaneously and issued within a month of one another. After some threatening letters were exchanged by both parties via their customers, Creative Compounds sought declaratory judgment that Starmark Labs’ patent (the “‘373 Patent”) was invalid and not infringed by its own products.  Starmark alleged infringement of its own patent (the “‘273 Patent”) in its answer.  The district court granted Starmark’s motion for summary judgment that the ‘373 Patent was invalid and not infringed and denied Creative’s motion to dismiss for lack of jurisdiction.  Creative appealed.

On appeal, the Federal Circuit confirmed that clear and convincing evidence is the appropriate standard for a determination of validity.  Next, the court affirmed the summary judgment of Creative’s invalidity claims regarding the ‘373 patent primarily on the basis that Creative’s expert opinion was excluded for failure to conform to the deadlines set by the court and, absent that, there was not sufficient evidence to raise a material issue of fact.  The court affirmed the holding that Creative infringed the ‘273 Patent based upon a failure to meet their burden of providing any argument why the process to make their product did not infringe.

The court reversed  the district court’s refusal to dismiss Starmark’s declaratory judgment counterclaim for lack of subject matter jurisdiction.  Starmark’s declaratory judgment claim was for a finding of invalidity of the ‘273 Patent, not for an interference count.  The correspondence between the parties and their customers never actually alleged infringement.  In addition, the parties never sent letters to one another, but only to their customers with statements regarding the patents.  This, the court found, did not create a case or controversy sufficient to support subject matter jurisdiction for a declaratory judgment claim.  As a result, the invalidity finding regarding the ‘273 Patent was vacated.  Finally, the court affirmed the district court’s denial of Creative’s motion for leave to amend its answer filed only two months before trial.

Nokia Corp. v. InterDigital, Inc., No. 10-1358-CV (2d Cir. May 23, 2011) (attached).  In response to a complaint in the ITC by InterDigital against Nokia, Nokia sought and obtained a preliminary injunction forcing InterDigital to take part in arbitration pursuant to a prior agreement of the parties.  The district court granted the preliminary injunction, but required Nokia to put up a $500,000 bond.  As a result, InterDigital had to stay the ITC proceedings against Nokia and to take part in the arbitration.  InterDigital appealed and the preliminary injunction was vacated.  InterDigital and Nokia complied with the preliminary injunction during the time-period that it was in place.  In so doing, InterDigital incurred substantial legal fees and expenses.

Once the injunction was lifted and Nokia’s complaint dismissed, InterDigital sought to recover against the bond for the allegedly duplicative costs that were a result of the arbitration and staying the ITC proceedings as a result of the preliminary injunction.  The district court denied InterDigital’s motion asserting that the bond was to cover “damages” not fees and that InterDigital had failed to show that the attorneys’ fees were “proximately caused” by the injunction.

On appeal, InterDigital alleged that the district court improperly should have applied a rebuttable presumption in favor of recovery and that the district court incorrectly concluded that InterDigital did not establish that the damages were proximately caused by the injunction.  The 2nd Circuit determined that the district court had failed to properly employ a rebuttable presumption in favor of recovery, but that proximate cause for the damages is required.

The court then indicated that the district court’s decision is too vague for them to adequately review it.  The court noted that attorneys’ fees for defending an injunction are ordinarily not recoverable.  However, InterDigital sought not to recover those fees, but fees for having to comply with the injunction by beginning arbitration and halting the ITC proceeding.  These costs are attributable to the wrongful injunction and should be recoverable.  The district court was instructed to act accordingly on remand.

All are invited to join us in our discussion of these cases during the SoCal IP Institute meeting on Monday, July 11, 2011 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Amanda Jones by 9 am Monday morning.