Summary
ruling that even initiating litigation to enforce patent in the United States is "insufficient to constitute the transaction of business New York within the meaning of §302"
Summary of this case from Franklin v. Coloplast Corp.Opinion
No. 00 Civ. 8670 (LTS)(GWG).
March 8, 2005.
WAGNER, MYERS SANGER, P.C., Nicholas A. Della Volpe, Esq., Knoxville, TN, Attorneys for E-Z Bowz, LLC, E-Z Crafts, LLC, E-Z Bowz, Inc., Arthur D. Cavender and Lea Cavender.
JANVEY, GORDON, HERLANDS, RANDOLPH, ROSENBERG COX, L.L.P., William H. Cox, Esq., Hiram D. Gordon, Esq., New York, NY, and STEVENS, DAVIS, MILLER MOSHER, L.L.P., Thomas P. Pavelko, Esq., Christopher M. Collins, Esq., Washington, D.C., Attorneys for Professional Product Research Co., Inc.
Brian M. Murphy, Esq., New York, NY, Attorney for Luedeka, Neely Graham, P.C., John O. Threadgill, and Threadgill Associates, P.C.
OPINION AND ORDER ADOPTING REPORT AND RECOMMENDATION
On September 5, 2003, Magistrate Judge Gabriel W. Gorenstein issued three Reports and Recommendations (the "Reports") relating to various motions that have been filed in the instant case. In his Report addressing the various summary judgment motions that are pending ("Summary Judgment Report," docket number 168), Judge Gorenstein recommended that the partial summary judgment motion of Defendant-Counterclaim Plaintiff Professional Product Research Co, Inc. ("PPR") be granted in part and denied in part as to the patent claims of E-Z Bowz, L.L.C. ("E-Z Bowz"), and that the partial summary judgment motion of PPR be denied as to E-Z Bowz's trade dress claims. Judge Gorenstein also recommended that E-Z Bowz's motion for partial summary judgment seeking dismissal of Counts 1-4 and 6-7 of PPR's Amended Counterclaims and Third-Party Complaint be granted.
Judge Gorenstein also issued a Report ("Motion to Dismiss Report I," docket number 167) addressing the third-party defendants' motions pursuant to Fed.R.Civ.P. 12(b) to dismiss PPR's third-party complaint for lack of personal jurisdiction, recommending that the motion be granted and that the third-party complaint be dismissed. In addition, Judge Gorenstein issued a Report ("Motion to Dismiss Report II," docket number 169) addressing PPR's motion pursuant to Fed.R.Civ.P. 12(b)(7) to dismiss the complaint filed by E-Z Bowz for failure to join an indispensable party under Fed.R.Civ.P. 19, recommending that PPR's motion be denied.
Subsequent to the issuance of the three Reports, objections to certain aspects of the Reports, as well as submissions related to those objections, were filed by the various parties to the instant litigation. The undersigned has reviewed and considered carefully all of the parties' submissions relating to the various pending motions and Judge Gorenstein's Reports.
In reviewing a Report and Recommendation, the Court "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C.A. § 636(b)(1)(C) (West Supp. 2004). "To accept the report and recommendation of a magistrate, to which no timely objection has been made, a district court need only satisfy itself that there is no clear error on the face of the record." Nelson v. Smith, 618 F. Supp. 1186, 1189 (S.D.N.Y. 1985). "However, when timely objection has been made to a portion or portions of a magistrate's report, the district judge must 'make a de novo determination . . . of any portion of the magistrate's disposition to which specific written objection has been made. . . .'" Id. (quoting Fed.R.Civ.P. 72(b)). The Court is not required to conduct a hearing on the matter. See United States v. Raddatz, 447 U.S. 667, 676 (1980). The Court need only "'arrive at its own, independent conclusion about those portions of the magistrate's report to which objection is made. . . .'" Nelson, 618 F.Supp. at 1189-90 (quoting Hernandez v. Estelle, 711 F.2d 619, 620 (5th Cir. 1983)). When a party makes only conclusory or general objections, however, or simply reiterates its original arguments, the Court reviews the Report and Recommendation only for clear error. See Schoolfield v. Dep't of Corr., No. 91 Civ. 1691 (JL), 1994 WL 119740, at *2 (S.D.N.Y. Apr. 6, 1994); United States ex rel. Casa Redimix Concrete Corp. v. Luvin Construction Corp., 00 CV 7552 (HB), 2002 U.S. Dist. LEXIS 24700, at *4-5 (S.D.N.Y. Dec. 26, 2002);Camardo v. General Motors Hourly-Rate Employees Pension Plan, 806 F. Supp. 380, 382 (W.D.N.Y. 1992); Chabrier v. Leonardo, No. 90 Civ. 0173 (PKL), 1991 WL 44838, at *1 (S.D.N.Y. Mar. 26, 1991). "[O]bjections to a Report and Recommendation are to be specific and are to address only those portions of the proposed findings to which the party objects." Camardo, 806 F. Supp. at 381-82.
Familiarity with Judge Gorenstein's three Reports is assumed.Judge Gorenstein's Summary Judgment Report PPR's Motion for Summary Judgment on E-Z Bowz's Patent Claims
PPR has moved for summary judgment on its counterclaim, asserted in Count Five of its Amended Counterclaims and Third-Party Complaint, alleging that E-Z Bowz's '979, '733 and '998 patents are invalid on the grounds (1) that they are precluded by the "on-sale bar" in 35 U.S.C. § 102(b), and (2) that Deborah Lee Cavender ("Cavender") failed to include Tina Lucille Benton Slater ("Slater") as a co-inventor of the '979 patent. PPR has also moved for summary judgment with respect to E-Z Bowz's patent infringement claims relating to those patents. Judge Gorenstein determined that PPR lacked standing to challenge the validity of the '733 patent and claims 1-8 of the '979 patent. Judge Gorenstein also determined that PPR has not met its burden of establishing by clear and convincing evidence that the remaining claims of the '979 patent are invalid under the on-sale bar, although PPR has met its burden of showing invalidity under the on-sale bar with respect to the '998 patent. Accordingly, Judge Gorenstein recommended that PPR's summary judgment motion be denied as to the remaining claims of the '979 patent and granted as to the '998 patent. Further, Judge Gorenstein determined that summary judgment would be inappropriate as to PPR's claim that the '979 patent is invalid for failure to name a co-inventor.
Standing
Judge Gorenstein found that, although PPR does have standing to challenge the validity of the '998 patent and claims 9-10 (formerly designated as claims 15-16) of the '979 patent, PPR lacks standing to challenge the validity of the '733 patent and claims 1-8 of the '979 patent because PPR has failed to meet its burden of establishing the existence of an actual controversy as to those patents/claims. (Summary Judgment Report at 18-20.) Judge Gorenstein noted that PPR could meet its burden of establishing the existence of an actual controversy by demonstrating that there is both:
(1) an explicit threat or other action by the patentee, which creates a reasonable apprehension on the part of the declaratory plaintiff that is will face an infringement suit, and (2) present activity which could constitute infringement or concrete steps taken with the intent to conduct such activity.Super Sack Mfg. Corp. v. Chase Packaging Corp., 57 F.3d 1054, 1058 (Fed. Cir. 1995) (emphasis in original) (internal citation and quotation marks omitted). However, Judge Gorenstein pointed out that E-Z Bowz's Complaint alleges only that PPR infringed upon the '998 and '979 Patents, which include descriptions of devices with two retaining members. The Complaint does not allege that PPR infringed upon the '733 patent, which describes a device with three retaining members. (Summary Judgment Report at 19.) Further, Judge Gorenstein noted that PPR has never produced, nor intimated that it has taken "concrete steps" with the intent to produce, a device with three retaining members. Thus, since the '733 patent concerns only a device with three retaining members and E-Z Bowz has not made an allegation that PPR infringed this patent, PPR lacks standing to challenge its validity.
As to the '979 patent, which includes claims for both two and three member retaining devices, Judge Gorenstein concluded that, since PPR is only alleged to have infringed upon the '979 patent by selling a device with two retaining members, PPR may only challenge the validity of those claims dealing with a two retaining member device — claims 9-10.
PPR objects to Judge Gorenstein's conclusion that it lacks standing to challenge the validity of the '733 patent and claims 1-8 of the '979 patent. As to claims 1-8 of the '979 patent, PPR contends that E-Z Bowz did not limit its charge of infringement in the original Complaint and Amended Complaint to any particular claims of the '979 patent, or ever seek to amend the Complaint to exclude any claims of the '979 patent. (PPR's Written Obj. to the Summary Judgment Report at 3-4.) As to the '733 patent, PPR contends that E-Z Bowz never withdrew its claim that PPR's product infringed that patent. (Id. at 4.)
The Court has conducted a de novo review with respect to this issue, and concurs with Judge Gorenstein's conclusion that PPR lacks standing to challenge the validity of the '733 patent and claims 1-8 of the '979 patent for the reasons articulated in Judge Gorenstein's Report. The Amended Complaint does not include a claim of infringement relating to the '733 patent. In addition, E-Z Bowz's claims of infringement are, indeed, limited to devices with two retaining members, and claims 1-8 of the '979 Patent relate to a device with three retaining members. PPR has not offered evidence that it has ever made or taken concrete steps to make a device with three retaining members. Thus, PPR has not established that there has been an action by E-Z Bowz creating a reasonable apprehension on PPR's part that it will be subject to an infringement suit relating to the '733 patent or claims 1-8 of the '979 patent, or that there is present activity, or concrete steps taken with the intent to engage in such activity, which could constitute infringement with respect to these patents/claims. Accordingly, the Court adopts Judge Gorenstein's Report with respect to the standing issue and denies PPR's summary judgment motion to the extent it seeks a declaratory judgment that the '733 patent and claims 1-8 of the '979 patent are invalid.
On-Sale Bar
PPR asserts that it is entitled to summary judgment in its favor on its counterclaim seeking a declaratory judgment that the '979 and '998 patents are invalid on the ground that those patents are precluded by the on-sale bar in 35 U.S.C. § 102(b). The statute provides that a person is not entitled to a patent if "the invention was . . . on sale in this country, more than one year prior to the date of the application for patent in the United States." 35 U.S.C. § 102(b) (West 2001). Since it is undisputed that the inventions at issue in this case were offered for sale as of November 18, 1993, and the applications for the '979 and '998 Patents were filed on January 11, 1995, and November 2, 1995, respectively, PPR contends that the '979 and '998 Patents are rendered invalid by the on-sale bar. E-Z Bowz, however, argues that the '979 and '998 Patents acquired the filing date of the '618 Application, which was October 7, 1993, and therefore are not invalidated by the on-sale bar.
In order for the '979 and '998 Patents to have acquired the filing date of the '618 Application, certain conditions must be met. See 35 U.S.C. § 120. One such condition is that the '618 Application must satisfy the written description requirement of 35 U.S.C. § 112, see Summary Judgment Report at 22, which mandates that the description of the device in the earlier application describe the device in the later application in enough detail that a person skilled in the art could determine that the inventor invented the device in the later application as of the filing date of the original application. Lockwood v. Am. Airlines, Inc., 107 F.3d 1565, 1572 (Fed. Cir. 1997). PPR argues that the '618 Application fails adequately to describe the devices in the later-filed applications and that, therefore, the later-filed applications cannot acquire the filing date of the '618 Application.
Judge Gorenstein determined, with respect to the remaining claims of the '979 Patent, that a reasonable jury could find that the description in the '618 Application adequately described the device embodied in those claims such that an artisan in the bow making field would realize that Cavender had invented that device as of the time of the filing of the '618 Application. Therefore, the '979 Patent could acquire the earlier filing date and avoid the on-sale bar. As to the '998 Patent, Judge Gorenstein found that the device embodied in the '998 patent was also adequately described in the '618 Application within the meaning of 35 U.S.C. § 312, but that since the '998 Patent was filed after the abandonment of the '618 Application, an additional step would be required to determine whether the '998 Patent survives the on-sale bar challenge. Since the '998 Patent claimed to be a continuation of both the '618 Application and the '379 Application, the latter of which was filed before the abandonment of the '618 Application and later became the '733 Patent, the '998 Patent could acquire the filing date of the '618 Application if the '733 Patent could acquire the filing date of the '618 Application. Judge Gorenstein concluded, however, that no evidence was proffered that would permit a reasonable jury to conclude that the '618 Application adequately described the device embodied in the '733 Patent and, therefore, that since the '733 Patent was not entitled to the earlier filing date, neither was the '998 Patent. Accordingly, Judge Gorenstein recommended that PPR's motion for summary judgment be denied to the extent it seeks a declaratory judgment that the '979 Patent is invalid based on the on-sale bar, and that the motion be granted to the extent it seeks a declaratory judgment that the '998 Patent is invalid pursuant to the on-sale bar. Accordingly, Judge Gorenstein recommended that E-Z Bowz's claim of design patent infringement as to the '998 Patent be dismissed.
PPR objects to Judge Gorenstein's conclusion as to the '979 Patent. PPR argues that the application that matured into the '979 Patent was not filed before the abandonment of the '618 Application, and that the November 19, 2002, decision of the United States Patent and Trademark Office ("USPTO") granting Lea Cavender's petition for revival of the previously abandoned '618 Application, which achieved co-dependency of the application that matured into the '979 Patent and the '618 Application, is insufficient to avoid the on-sale bar because it would be beyond the scope of the authority of the Commissioner of Patent and Trademark Office for such a determination to have a legal effect on any other issued U.S. patent. (See PPR's Written Obj. to the Summary Judgment Report at 4-5.) PPR also contends that the presumption that the '979 Patent is valid has been rebutted.
Since these specific arguments have not been raised before by PPR, the Court will make a de novo determination as to the issue. The Court finds that PPR's contention that the revival of the '618 Application could not be the basis for avoidance of the on-sale bar with respect to the '979 Patent is not supported by the case law PPR cites. The fact that the '618 Application was revived prior to the filing of the application which matured into the '979 Patent is sufficient to establish co-dependency, and to enable a reasonable jury to conclude that the '979 Patent acquired the filing date of the '618 Application, thus avoiding the on-sale bar. Accordingly, PPR's motion for partial summary judgment is denied to the extent that it seeks a declaration of invalidity of the '979 Patent on the basis of the on-sale bar.
PPR also argues that the '979 Patent is rendered unenforceable by E-Z-Bowz's inequitable conduct in not disclosing the November 1993 sale of its patented product in its 1995 application for the '979 patent. (See PPR's Written Obj. to the Summary Judgment Report at 5-9.) However, as E-Z Bowz points out, E-Z Bowz filed the application for the '979 patent as a continuation-in-part of the earlier '618 Application and a rational jury could find that it was entitled to the earlier October 1993 filing date of that application and, therefore, that there was no sale prior to the filing date and no inequitable conduct. Thus, the Court concludes that granting PPR's motion for summary judgment on this ground would be inappropriate.
In addition, E-Z Bowz objects to the portion of the Summary Judgment Report granting PPR summary judgment as to its claim that the '998 Patent is invalid on the ground that the patent is barred by the on-sale bar. E-Z Bowz contends that Judge Gorenstein failed to give proper deference to the patent examiner's finding that the patent was valid, contending that, in order to successfully challenge the validity of the '998 Patent, PPR needed to prove invalidity by clear and convincing evidence. (See E-Z Bowz's Written Obj. to the Summary Judgment Report at 2-3; 35 U.S.C. § 282.) E-Z Bowz asserts that PPR has failed to meet its burden because Judge Gorenstein's conclusion that the '733 Patent fails to close the gap between the '998 Patent and the '618 Application such that the '998 Patent can acquire the earlier filing date of the '618 Application is erroneous. Judge Gorenstein based that conclusion on his finding that the description in the '618 Application of a device with "at least a first and second retainer member" would not have conveyed to a person skilled in the art that the inventor had invented the three retaining member device that is the subject of the '733 Patent because the description in the '618 Application, although referring to the possibility of more than two retaining members, did not specify the placement of a potential third retaining member in relation to the others and did not specify the dimensions of the third retaining member. In addition, the application included drawings depicting only a two member device, and numerous descriptions of the device referring to only two members.
The Court has applied a de novo standard in reviewing this objection. Even when applying the clear and convincing evidence standard to the question of whether PPR has proven invalidity, the Court finds, for substantially the reasons stated in Judge Gorenstein's Summary Judgment Report, that a reasonable jury could not find that the description of the device in the '618 Application would have enabled an artisan in the field to determine that the inventor invented the device in the '733 Patent as of the filing date of the '618 Application. Since the '733 Patent cannot acquire the earlier filing date of the '618 Application, neither can the '998 Patent. Thus, the Court finds that PPR has proven invalidity of the '998 Patent by clear and convincing evidence. Accordingly, the Court adopts the recommendation of Judge Gorenstein that the '998 Patent be found invalid under the on-sale bar contained in 35 U.S.C. § 102(b). PPR's motion for summary judgment is granted as to the '998 Patent, and E-Z Bowz's claim of design patent infringement as to the '998 Patent is dismissed.
Failure to Name Slater as Co-Inventor
PPR also contends that it is entitled to summary judgment on its counterclaim of patent invalidity with respect to the '979 Patent, as well as on E-Z Bowz's claim of patent infringement as to the '979 Patent, on the ground that when the initial application that later matured into the '979 Patent was filed, only Cavender (not Slater) was named as the inventor. Judge Gorenstein pointed out that omission of an inventor in an application for a patent can invalidate an application if it can be proven by clear and convincing evidence that there was an intent to mislead or deceive, and concluded that PPR has not met its burden of showing that it is entitled to summary judgment because the only evidence in the record suggests that there was an absence of deceptive intent. (See Summary Judgment Report at 31-32.) PPR has not specifically objected to this portion of the Report so the Court will review Judge Gorenstein's recommendations as to this issue for clear error only. The Court has considered carefully Judge Gorenstein's well-reasoned analysis on this point and finds no clear error. Accordingly, PPR's motion for summary judgment is denied as to its counterclaim of patent invalidity relating to the '979 Patent for failure to name a co-inventor.
PPR's Motion for Summary Judgment on E-Z Bowz's Trade Dress Infringement Claim
PPR contends that its motion for summary judgment should be granted to the extent it seeks dismissal of E-Z Bowz's trade dress infringement claims on the grounds that a reasonable jury could not conclude that E-Z Bowz has proven secondary meaning in its trade dress or that its trade dress is not functional. Judge Gorenstein concluded that E-Z Bowz has proffered sufficient evidence for a reasonable jury to conclude that its trade dress carries a secondary meaning and that it is not functional, recommending that PPR's motion for summary judgment on E-Z Bowz's trade dress claims be denied. PPR filed objections to both of these determinations. The Court will consider each of these issues in turn.
Secondary Meaning
Judge Gorenstein determined that, since E-Z Bowz's claimed trade dress is based at least partly on the design of the product, it must show that the trade dress has acquired secondary meaning in order to succeed on its trade dress infringement claim. (See Summary Judgment Report at 35.) As Judge Gorenstein discussed in his Report, E-Z Bowz has proffered a number of different types of evidence going to the issue of whether its trade dress has acquired secondary meaning, including evidence of 1) money spent on advertising, 2) television and print media coverage of the product at issue, 3) gross revenues of the sale of its products, 4) widespread sale of its products in retail stores across the United States and 5) other attempts to copy the asserted trade dress. (See Summary Judgment Report at 37.) Judge Gorenstein determined that this evidence was sufficient to create a material issue of fact as to whether E-Z Bowz's trade dress had acquired secondary meaning.
PPR essentially makes two arguments in objecting to Judge Gorenstein's conclusion that E-Z Bowz has proffered sufficient evidence to create a genuine issue of material fact on the issue of secondary meaning. First, PPR contends that the evidence relied upon by Judge Gorenstein is inadmissible and insufficient, arguing that the evidence underlying the Cavender Declaration fails to support the assertions made therein. Second, PPR asserts that the evidence is not specific to the product in question, relating instead to the entire product line. (See PPR's Written Obj. to the Summary Judgment Report at 10-12.) PPR made substantially similar arguments in its papers submitted in connection with its motion for partial summary judgment, so the Court reviews this portion of Judge Gorenstein's report only for clear error. (PPR's Reply Br. in Supp. of Motion for Partial Summ. J. at 8-9.) The Court finds no clear error in Judge Gorenstein's implicit conclusion that the evidence relied upon in his Report is admissible and sufficient to create a genuine material issue of disputed fact as to whether E-Z Bowz has shown secondary meaning. The Court also concurs with Judge Gorenstein's conclusion that PPR's argument regarding the specificity of the evidence goes to the weight to be afforded the evidence and not its existence. Thus, the Court, which would reach the same conclusion had it made a de novo determination, adopts Judge Gorenstein's Report as to this issue and denies PPR's motion for partial summary judgment to the extent that it seeks dismissal of E-Z Bowz's trade dress infringement claim on the ground that E-Z Bowz has not proffered sufficient evidence to create a triable issue of fact as to secondary meaning.
Functionality
PPR contends that it is entitled to summary judgment on E-Z Bowz's trade dress infringement claim because E-Z Bowz has failed to proffer sufficient evidence that its trade dress is not functional. More specifically, PPR argues that 1) the claimed trade dress was disclosed in a utility patent, the '979 Patent, 2) there are so many symbols and graphics on E-Z Bowz's products that no particular expression of trade dress exists, 3) the various products in E-Z Bowz's product line incorporate common shapes and graphics so as to be generic, and 4) the instructions provided by E-Z Bowz with its bow maker are functional and cannot serve as trade dress.
Judge Gorenstein concluded that the second and third arguments are not persuasive because E-Z Bowz has only sought protection as to one product, rather than its entire line, and that PPR's contention that certain elements of the trade dress are generic is relevant to a distinctiveness determination rather than a functionality determination. (See Summary Judgment Report at 28-39.) Judge Gorenstein also concluded that, even if certain individual elements of trade dress are functional, the proper inquiry is to focus on the trade dress as a whole. (Id.) Judge Gorenstein acknowledged that the existence of the '979 Utility Patent and the inclusion of the instructions on how to use the bow maker do weigh in favor of a finding of functionality, but concluded, when viewing the trade dress as a whole and considering the prosecution history of the '979 Patent, evidence proffered by E-Z Bowz that at least 36 different bow making machines exist that utilize dress unlike the E-Z Bowz maker, and the existence of the '998 Design Patent, that E-Z Bowz has met is burden of proffering sufficient evidence to create a genuine issue of material fact as to whether the claimed trade dress is functional. (Id. at 38-44.)
PPR objects to Judge Gorenstein's conclusions on a number of grounds. The Court will make a de novo determination as to the aspects of the Report to which these objections have been directed.
First, PPR contends that E-Z Bowz's trade dress is "essentially" functional and disputes whether the aspects or elements of the claimed trade dress that Judge Gorenstein viewed as being non-functional, when considered in light of the other elements that are functional and/or non-protectable, can form the basis for a conclusion that there is a material issue of fact regarding whether the trade dress is functional as a whole. However, PPR argues that Judge Gorenstein was incorrect to conclude that "[m]uch of the coloring and placement of graphics on the bow maker serve an aesthetic and ornamental purpose and are unrelated to the function of the bow maker," id. at 41, because those elements affect the cost or quality of the product. (See PPR's Written Obj. to the Summary Judgment Report at 13-14 n. 37.) At best, this argument indicates that there is a material issue of fact as to whether the elements cited by Judge Gorenstein really are unrelated to functionality, and the Court finds that, drawing all reasonable inferences in favor of E-Z Bowz, a rational factfinder could conclude that such evidence is unrelated to functionality. The Court further concludes that PPR's argument that the non-functional elements are insufficient in light of the functional elements goes to the weight of the evidence, and weighing evidence is not proper in the context of a motion for summary judgment.
Second, PPR contends that evidence that there are 36 other bow making machines which utilize different trade dresses and evidence of the issuance of the '998 Design Patent are insufficient to create a genuine issue of material fact as to functionality. With respect to the evidence of competitors utilizing different trade dresses, PPR contends that the Cavender Declaration, in which it was proffered, is unsubstantiated hearsay and is therefore inadmissible. PPR made the argument that the Cavender Declaration was inadmissible hearsay in its motion papers and the argument was implicitly rejected by Judge Gorenstein. The Court finds no clear error in Judge Gorenstein's determination, and concludes that the Cavender Declaration is admissible evidence. The Court also finds that such evidence is relevant to the issue of functionality in that it is suggestive that feasible alternatives to the trade dress at issue exist.See Neutrik AG v. Switchcraft, Inc., No. 99 CIV. 11931 (JSM), 2001 WL 286722, at *2 (S.D.N.Y. Mar. 23, 2001). As to the evidence of the '998 Patent, PPR contends that the '998 Design Patent "presents no distinct ornamental elements relevant to E-Z Bowz's alleged trade dress." (See PPR's Written Obj. to the Summary Judgment Report at 15.) Once again, at best, PPR has identified a material issue of disputed fact as to whether the '998 Design Patent lends weight to E-Z Bowz's argument that its trade dress is non-functional. Thus, the Court concludes that a reasonable jury could find that evidence of competitors utilizing different trade dresses and the '998 Design Patent counsel in favor of a finding of non-functionality.
Third, PPR argues that the existence of multiple proprietary marks on the bow maker at issue in this case — those of its non-exclusive distributors and its own trademark — "deprive the asserted trade dress of its ability to serve as an indicator of a single source." (PPR's Written Obj. to the Summary Judgment Report at 16-17.) First, the Court notes that PPR made this argument in its papers relating to its motion for partial summary judgment, see PPR's Br. in Supp. of Motion for Partial Summ. J. at 19, and the argument was implicitly rejected by Judge Gorenstein. The Court finds no clear error in Judge Gorenstein's determination in this regard. Further, as E-Z Bowz points out in its opposition papers to PPR's motion for partial summary judgment, PPR has not cited any relevant authority to support its argument that such marks render the asserted trade dress incapable of serving as a source indicator. The Court concludes therefore that the proprietary marks cited by PPR do not render the trade dress unprotectable.
The Court concurs with Judge Gorenstein's determination that E-Z Bowz has proffered sufficient admissible evidence that, when viewed in the light most favorable to E-Z Bowz, could lead a reasonable jury to conclude that the trade dress at issue, when considered as a whole, is non-functional.
Thus, the Court finds that E-Z Bowz has proffered sufficient evidence to create a triable issue of fact as to whether its trade dress has secondary meaning and is non-functional. Accordingly, PPR's motion for summary judgment as to E-Z Bowz's trade dress claim in Count One of the Amended Complaint is denied.
PPR's Motion for Summary Judgment on E-Z Bowz's Common Law Unfair Competition Claim
PPR has moved for summary judgment as to E-Z Bowz's claim for common law unfair competition articulated in Count Two of its Amended Complaint on the ground that E-Z Bowz has failed to proffer sufficient evidence of non-functionality as is required by the New York law of unfair competition. Judge Gorenstein recommended that PPR's motion be denied on this ground because E-Z Bowz has proffered sufficient evidence to create a triable issue as to functionality. PPR has objected to Judge Gorenstein's findings and recommendation only to the extent that, as noted above, it objects to the finding that E-Z Bowz has proffered sufficient evidence for a rational factfinder to make a determination of non-functionality. For the reasons articulated above, see pp. 13-17, the Court concludes that E-Z Bowz has proffered sufficient evidence such that a rational jury could find non-functionality. Accordingly, PPR's motion for summary judgment as to E-Z Bowz's common law unfair competition claim in Count Two of the Amended Complaint is denied.
E-Z Bowz's Motion for Summary Judgment as to PPR's Antitrust Counterclaims
E-Z Bowz has moved for summary judgment as to the antitrust claims asserted against E-Z Bowz in Count One of PPR's Amended Counterclaims and Third-Party Complaint. Judge Gorenstein has recommended that E-Z Bowz's motion be granted as to PPR's antitrust counterclaims on the grounds that PPR has failed to proffer evidence sufficient for a rational factfinder to conclude that PPR has defined a relevant market, that E-Z Bowz has market power, that PPR suffered antitrust injury, or that E-Z Bowz committed fraud before the USPTO. PPR has objected to each of these grounds, and the Court will consider each of them in turn.
Relevant Market
As to the issue of whether PPR has adequately defined the relevant market, PPR simply reiterates the arguments that it made in its opposition papers. (See PPR's Written Obj. to the Summary Judgment Report at 19-20; PPR's Mem. of Law in Opp. to Def's Mot. for Summ. J. at 9-13.) PPR contends that E-Z Bowz defined the relevant market in its discovery materials, and points to paragraph 76 of its Amended Counterclaims and Third-Party Complaint, which defines the market as the "domestic hand-tied bow maker market." Since PPR is merely restating its original arguments with respect to this issue, the Court will review Judge Gorenstein's Report on this point for clear error.
The Court concurs with Judge Gorenstein's determinations that, in order to succeed on its antitrust claims, PPR has the burden of defining the relevant market, that the language in the Amended Counterclaims and Third-Party Complaint to which PPR points is insufficient to enable a reasonable factfinder to conclude that PPR has carried that burden, and that the statements made by E-Z Bowz during the discovery process are likewise insufficient to enable a reasonable factfinder to conclude that PPR has carried its burden because they show that E-Z Bowz has not set out to monopolize a market as broad as that described in paragraph 76 of PPR's Amended Counterclaims and Third-Party Complaint. Thus, the Court finds no clear error as to Judge Gorenstein's determinations on this issue. Even if it were to review the determinations de novo, the Court would conclude, for substantially the reasons as stated in the Report, that PPR has failed to proffer sufficient evidence to enable a rational factfinder to conclude that PPR has adequately defined the relevant market.
Market Power
With respect to the issue of whether PPR has proffered sufficient evidence of market share to create a triable issue of fact, PPR again merely reiterates the arguments that it made with respect to this issue in its papers opposing E-Z Bowz's motion for partial summary judgment, arguing that Judge Gorenstein failed to take into account the evidence that PPR had proffered concerning E-Z Bowz's alleged use of allegedly fraudulently obtained patents to drive competitors from the market, E-Z Bowz's alleged ability to exclude competitors from the market and E-Z Bowz's alleged control of a large percentage of the relevant market. (See PPR's Written Obj. to the Summary Judgment Report at 20; PPR's Mem. of Law in Opp. to Def's Mot. for Summ. J. at 9-13.) Accordingly, the Court will review Judge Gorenstein's Report as to this issue for clear error.
The Court concurs with Judge Gorenstein's determinations that, in order to succeed on its antitrust claims PPR needs to establish the existence of market power, and that PPR has failed to proffer sufficient evidence that E-Z Bowz controlled prices or excluded competition, or that E-Z Bowz had a sufficiently high market share. The Court, as noted above, also concurs with Judge Gorenstein's determination that PPR has not proffered sufficient evidence for a rational factfinder to conclude that E-Z Bowz committed any kind of fraud in obtaining the patents at issue in this case. Thus, the Court finds no clear error in Judge Gorenstein's findings and conclusions with regard to the issue of market power. Even if it were to consider the issue de novo, the Court would conclude for substantially the same reasons as are articulated in the Report that PPR has not proffered sufficient evidence such that a rational factfinder could conclude the PPR has met its burden of proving market share.
Antitrust Injury
With respect to the issue of whether PPR has proffered sufficient evidence of antitrust injury, PPR again cites its opposition brief in reiterating the arguments that were considered and rejected by Judge Gorenstein in his Report. PPR contends that it proffered evidence that it was directly harmed because it was driven out of a profitable market by E-Z Bowz's efforts to enforce a patent that E-Z Bowz knew to be invalid and unenforceable, and that consumers throughout the United States were harmed by E-Z Bowz's conduct because competition was reduced as alternative sources of hand-tied bow makers were purged from the marketplace. (See PPR's Written Obj. to the Summary Judgment Report at 21.) PPR also argues that Judge Gorenstein misapprehended PPR's position in focusing on the lack of evidence of predatory pricing, contending that it never asserted predatory pricing against E-Z Bowz. (Id. at 21 n. 5.)
Since PPR has recited the arguments it made in its opposition papers, the Court will review the portion of Judge Gorenstein's Report relating to this issue for clear error. The Court finds no clear error in Judge Gorenstein's conclusion that PPR has not met its burden of proffering evidence such that a rational jury could find that the existence of antitrust injury. As Judge Gorenstein points out, PPR has not proffered any evidence that E-Z Bowz engaged in any predatory pricing, nor has E-Z Bowz proffered any evidence of injury to competition marketwide. Accordingly, the Court adopts Judge Gorenstein's Report as to this issue. Even if the Court were to review the issue de novo, the Court would conclude that PPR has not proffered sufficient evidence to raise a triable issue of fact as to antitrust injury.
Conspiracy or Attempted Monopolization
Judge Gorenstein concluded that PPR's claim of conspiracy to monopolize fails because PPR has not demonstrated that E-Z Bowz's alleged fraudulent conduct was undertaken with the intent to achieve an unlawful monopoly. Further, Judge Gorenstein found that PPR's attempted monopolization claim fails because PPR has not proffered sufficient evidence that E-Z Bowz engaged in predatory or anticompetitive conduct, that E-Z Bowz acted with a specific intent to monopolize, or that there is a dangerous probability of achieving monopoly power given that it has not proffered any evidence regarding market power. (See Summary Judgment Report at 55-56.)
In objecting to Judge Gorenstein's determination, PPR disputes Judge Gorenstein's characterization of the alleged fraud before the USPTO as the gravaman of PPR's claim. PPR contends that the invalidity of the patents at issue combined with E-Z Bowz's efforts to enforce these patents through "sham litigation' provide the basis for its attempted monopolization claim. Reviewing the issue de novo, the Court concludes for substantially the reasons articulated by Judge Gorenstein in his Report that PPR has not proffered sufficient evidence for a rational factfinder to conclude that the patents at issue were invalid or that the E-Z Bowz engaged in the pursuit of "sham litigation." More to the point, the Court also finds for the reasons stated by Judge Gorenstein that PPR has failed to proffer sufficient evidence of predatory or anticompetitive conduct, a specific intent to monopolize or a dangerous probability of achieving monopoly power. Accordingly, PPR has failed to create a triable issue of fact as to conspiracy or attempted monopolization.
Therefore, for all of the above-articulated reasons, the Court adopts Judge Gorenstein's Report as to PPR's antitrust counterclaims. Accordingly, E-Z Bowz's motion for summary judgment is granted as to PPR's counterclaim asserted against E-Z Bowz in Count One of PPR's Amended Counterclaims and Third-Party Complaint.
E-Z Bowz's Motion for Summary Judgment as to PPR's Unfair Competition Counterclaims Lanham Act
Judge Gorenstein recommends that PPR's counterclaim under the Lanham Act asserted in Count Two of PPR's Amended Counterclaims and Third-Party Complaint be dismissed because PPR has failed to proffer sufficient evidence such that a reasonable factfinder could determine that PPR has standing to assert such a claim. Judge Gorenstein concluded that PPR has failed to proffer any evidence suggesting that PPR suffered a cognizable injury as a result of E-Z Bowz's allegedly false statements. (See Summary Judgment Report at 57-58.) In addition, Judge Gorenstein notes that, since PPR seeks money damages, it is required either to proffer evidence of actual consumer confusion, or to proffer evidence of deceptive intent which results in a presumption of consumer confusion. Judge Gorenstein determined that PPR has not met its burden of proffering sufficient evidence for a rational factfinder to conclude that there was actual consumer confusion or deceptive intent.
PPR objects on the ground that it proffered sufficient evidence of cognizable injury and E-Z Bowz's deceptive intent to create triable issues of fact, and that Judge Gorenstein held PPR to an improper burden of proof concerning the issue of deceptive intent. The Court makes a de novo determination as to these issues.
With respect to cognizable injury, PPR points to several pieces of evidence in support of its contention that it has proffered sufficient evidence to create a material issue of fact. Even assuming such evidence is sufficient for a rational factfinder to conclude that there is cognizable injury, the Court finds, however, for substantially the same reasons as those articulated in Judge Gorenstein's Report, that PPR has not proffered sufficient evidence for a rational factfinder to conclude that there was actual consumer confusion or that E-Z Bowz intended to deceive the public and engaged in deliberate conduct of an egregious nature.
Accordingly, E-Z Bowz's motion for summary judgment is granted as to PPR's counterclaim under the Lanham Act asserted against E-Z Bowz in Count Two of PPR's Amended Counterclaims and Third-Party Complaint.
Common Law Unfair Competition
Judge Gorenstein recommended that PPR's counterclaim asserted in Count Three of PPR's Amended Counterclaims and Third-Party Complaint for common law unfair competition be dismissed because PPR has failed to proffer sufficient evidence of actual confusion or bad faith, which are required elements under New York law. PPR objects to Judge Gorenstein's conclusions, arguing that bad faith is demonstrated by E-Z Bowz's pursuit of the instant "sham litigation" and E-Z Bowz's mismarking of its products, and contending that actual confusion is demonstrated by the effects of E-Z Bowz's efforts to eliminate competition and control the entire market for hand-tied bow makers through false advertising and the unlawful assertion of monopoly power. The Court reviews the issue de novo.
The Court concludes that PPR has failed to proffer sufficient evidence for a rational factfinder to conclude that the instant litigation is a sham, and that the evidence proffered by PPR regarding E-Z Bowz's mismarking of its products is not, for the reasons articulated in Judge Gorenstein's Report, sufficient for a rational factfinder to conclude that E-Z Bowz acted egregiously and with deceptive intent. Further, the Court finds that PPR's conclusory assertions fall well short of establishing a material issue of fact concerning actual confusion. Accordingly, E-Z Bowz's motion for summary judgment is granted as to PPR's counterclaim for common law unfair competition.
E-Z Bowz's Motion for Summary Judgment as to PPR's Fraud and Deceit Claim
Judge Gorenstein has recommended that E-Z Bowz's motion for summary judgment be granted as to PPR's common law fraud and deceit claim asserted in Count Four of its Amended Counterclaims and Third-Party Complaint on the grounds that 1) several of the statements underlying PPR's claim were made to the general public and, thus, cannot form the basis of a fraud claim by PPR, 2) with respect to the statements concerning the validity of the patents that were made directly to PPR, PPR has not proffered sufficient evidence for a rational factfinder to conclude that there was reliance, and 3) PPR has not proffered sufficient evidence for a rational factfinder to conclude that E-Z Bowz knew or believed that the patents were invalid.
PPR objects to Judge Gorenstein's Report as to this issue by disputing Judge Gorenstein's interpretation of evidence relating to whether PPR relied on E-Z Bowz's attorney's representations that E-Z Bowz's patents were valid, and by reiterating its argument that the '979 Patent should be held invalid. Even if the Court were to find that there was a disputed issue of material fact as to whether PPR relied on E-Z Bowz's attorney's representations regarding patent validity, the Court, considering the issue de novo, concludes that PPR has failed to proffer sufficient evidence for a reasonable jury to conclude that E-Z Bowz knew or believed that the patents were invalid. Thus, PPR has failed to meet its burden on summary judgment as to an essential element of a New York common law fraud claim. Accordingly, E-Z Bowz's motion for summary judgment is granted as to PPR's common law fraud and deceit counterclaim asserted in Count Four of its Amended Counterclaims and Third-Party Complaint.
E-Z Bowz's Motion for Summary Judgment as to PPR's Trade Libel Claim
In Count Six of PPR's Amended Counterclaims and Third-Party Complaint, PPR asserts a claim for trade libel, purportedly under N.Y. General Business Law § 360-1. As Judge Gorenstein recognizes in his Report, N.Y. Gen. Bus. L. § 360-1 does not concern trade libel and, despite the fact that PPR seeks only monetary damages as to Count Six, establishes a cause of action for injunctive relief only. Accordingly, Judge Gorenstein analyzed PPR's claim in Count Six both as a claim for injunctive relief under N.Y. Gen. Bus. L. § 360-1 and as a New York common law trade libel claim. Judge Gorenstein concluded that PPR failed to proffer sufficient evidence to survive summary judgment on either the statutory or common law tort claim.
As to the claim under N.Y. Gen. Bus. L. § 360-1, Judge Gorenstein concluded that PPR has failed to proffer any evidence, or even assert, that it was the owner of a distinctive mark — an essential element of a claim of dilution under N.Y. Gen. Bus. L. § 360-1. As to the common law trade libel claim, Judge Gorenstein concluded that PPR has failed to proffer any evidence that E-Z Bowz published false statements regarding PPR and therefore has not met its burden on summary judgment as to an essential element of that claim.
PPR objects only to Judge Gorenstein's analysis of the common law trade libel claim, contending that it has proffered sufficient evidence of publication of the false statements to withstand summary judgment. Since PPR is reaffirming the arguments it made in its papers opposing E-Z Bowz's motion for partial summary judgment, the Court reviews Judge Gorenstein's Report as to this issue for clear error.
The Court concludes that, even if PPR is correct in its assertion that it has proffered sufficient evidence of publication to withstand summary judgment, PPR has failed to proffer sufficient evidence for a rational factfinder to conclude that E-Z Bowz's statements were false, that E-Z Bowz acted with malice, or that special damages are warranted. Accordingly, the Court finds that PPR has not proffered sufficient evidence to withstand summary judgment as to its trade libel claim. Accordingly, PPR's sixth counterclaim is dismissed.
E-Z Bowz's Motion for Summary Judgment as to PPR's Tortious Interference with Business Relations Claim
In Count Seven of its Amended Counterclaims and Third-Party Complaint, PPR asserts a claim for tortious interference with existing and prospective business relations. Judge Gorenstein acknowledged in his Report that New York recognizes claims for tortious interference with both contractual relations and economic advantage, and analyzed both causes of action. Judge Gorenstein concluded with respect to both claims that PPR had failed to proffer sufficient evidence of bad faith — an essential requirement under both claims — to survive summary judgment.
PPR again pointed to its argument concerning the alleged fraud relating to the validity of the '979 Patent in support of its contention that it has proffered evidence of bad faith. As already discussed above, the Court has rejected PPR's argument concerning fraud related to the '979 Patent. The Court, concludes therefore, considering the issue de novo, that PPR has not adduced evidence sufficient for a rational factfinder to conclude that E-Z Bowz acted with bad faith. Accordingly, E-Z Bowz's motion for summary judgment is granted as to PPR's claim of tortious interference with existing and prospective business relations asserted in Count Seven of its Amended Counterclaims and Third-Party Complaint.
Judge Gorenstein's Motion to Dismiss Report I
Deborah Lea Cavender, Arthur D. Cavender, E-Z Bowz, Inc. and E-Z Crafts, LLC ("Third Party E-Z"), Luedeka, Neely Graham, P.C. ("LNG"), and John O. Threadgill and Threadgill Associates, P.C. ("Threadgill") (collectively, "Third-Party Defendants"), have moved to dismiss PPR's claims against them pursuant to Fed.R.Civ.P. 12(b) for lack of personal jurisdiction. Judge Gorenstein has issued a Report and Recommendation ("Motion to Dismiss Report I") recommending that the Third-Party Defendants' motions be granted in their entirety and that the third-party complaint be dismissed.
Judge Gorenstein concluded, and the parties do not dispute, that New York's personal jurisdiction statute should be applied in this case. PPR contends that the Court has personal jurisdiction over all of the Third-Party Defendants pursuant to several of the provisions of New York Civil Practice Law Rules ("CPLR") § 302. PPR also asserts that personal jurisdiction can be exercised over LNG pursuant to CPLR § 301. The Court will consider each of these arguments in turn.
CPLR § 301Judge Gorenstein concluded that LNG is not subject to jurisdiction in this Court pursuant to New York's "doing business" statute, CPLR § 301, because PPR's assertions that LNG has appeared before the USPTO in Washington, D.C. on behalf of New York clients and that LNG has a website that can be accessed in New York are insufficient to show that LNG "engaged in continuous, permanent, and substantial activity in New York" as is required by the statute.Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 94 (2d Cir. 2000) (internal citation omitted).
In objecting to Judge Gorenstein's Report, PPR reiterates the arguments that it made in its papers opposing LNG's motion to dismiss for lack of personal jurisdiction, contending that Judge Gorenstein did not properly evaluate the arguments and evidence that were put before him. Specifically, PPR points to the Declaration of Eric P. Robins, dated January 17, 2002, which it proffered in opposition to LNG's motion, arguing on the basis of the information contained therein that PPR established that LNG handles a substantial amount of work for New York clients. Therefore, the Court will review Judge Gorenstein's Report as to this issue for clear error.
The Court has reviewed carefully Judge Gorenstein's well-reasoned Report as to this issue and finds no clear error. The Court also finds that even if it were to make a de novo determination, it would conclude, for the reasons stated in Judge Gorenstein's Report, that jurisdiction may not be invoked as to LNG pursuant to CPLR § 301, as the evidence cited by PPR is plainly insufficient to establish that LNG engaged in substantial, permanent and continuous activity in New York.
CPLR § 302PPR also contends that the Court has personal jurisdiction over all of the Third-Party Defendants pursuant to subdivisions (1), (2), and (3) of CPLR § 302(a). The Court will consider each of these subdivisions in turn.
Section 302(a)(1)Section 302(a)(1) allows personal jurisdiction to be exercised over a non-domiciliary provided that the defendant "transact[s] business" within New York and that the claim against the non-domiciliary arises out of that business activity. CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986).
As to Threadgill, Judge Gorenstein found unavailing PPR's argument that the Court has personal jurisdiction over Threadgill pursuant to § 302(a)(1) because Threadgill transacted business in New York through its pro hac vice legal representation of E-Z Bowz after the instant case was transferred to the Southern District of New York. Judge Gorenstein concluded that PPR failed to make the requisite showing of the existence of a New York business transaction within the meaning of the statute.
Judge Gorenstein reached similar conclusions with respect to LNG and Third-Party E-Z. As to LNG, Judge Gorenstein rejected PPR's argument that LNG transacted business within New York because of its role as patent counsel in prosecuting the original action and the fact that a principal of LNG, Geoffrey Kressin, has been admitted pro hac vice in connection with the third party action, finding that LNG's indirect role in the litigation of this case was not sufficient to constitute transacting business in New York. As to Third Party E-Z, Judge Gorenstein rejected PPR's argument that Third Party E-Z is subject to personal jurisdiction under § 302(a)(1) by virtue of the alleged existence of a conspiracy between the Third-Party Defendants to fraudulently secure and enforce the patents at issue in this case, finding, inter alia, that PPR has again failed to show that Third Party E-Z transacted business in New York.
PPR has objected to Judge Gorenstein's conclusion with respect to each of the Third-Party Defendants. As to Threadgill, PPR has largely reiterated the arguments made in its papers in opposition to Threadgill's motion to dismiss for lack of personal jurisdiction, contending that Judge Gorenstein did not give proper consideration to PPR's assertions that Threadgill sought to enter into a business transaction in which PPR would acknowledge certain patent rights alleged by E-Z Bowz, and that Threadgill was involved in the initiation and prosecution of the "sham litigation" against PPR. PPR also takes issue with Judge Gorenstein's analysis of Schur v. Porter, 712 F. Supp. 1140, 1145 (S.D.N.Y. 1989), a case relied upon by PPR in its opposition papers, arguing that Threadgill, like the lawyer in Schur, entered the forum to negotiate a business deal; namely, a license or settlement agreement in resolution of E-Z Bowz's patent infringement claims.
Reviewing the issue de novo, the Court finds, for substantially the reasons articulated in Judge Gorenstein's Report, that PPR's assertions concerning Threadgill's involvement in E-Z Bowz's efforts to enforce its patents, including involvement in the initiation and prosecution of the instant litigation and efforts to reach an agreement with PPR by which PPR would acknowledge that E-Z Bowz had certain rights in its patents, are insufficient to constitute the transaction of business New York within the meaning of § 302(a)(1). In addition, the Court concurs with Judge Gorenstein's analysis of Schur, and finds that Schur is, indeed, distinguishable from the case at bar because the lawyer in Schur provided services relating to a New York business transaction, while Threadgill's services related to the resolution of the issues underlying the instant litigation. As Judge Gorenstein noted in his Report, PPR has cited no authority to support the contention that participating in litigation that was originally filed in another jurisdiction brought on behalf of a foreign client constitutes transacting business within the meaning of § 302(a)(1).
As to LNG, PPR contends that LNG's role in the advancement of the alleged "sham litigation" through contact in New York and its submission of legal advice in connection with E-Z Bowz's prosecution of the allegedly invalid patents constitute transacting business within the meaning of § 302(a)(1). Reviewing the issue de novo, the Court concurs with Judge Gorenstein's determination that these activities by LNG are insufficient to support a finding that LNG "purposely avail[ed] [itself] of the privilege of conducting activities within [New York], thus invoking the benefits and protections of its laws." Cutco Indus, 806 F.2d at 365.
With respect to Third Party E-Z, PPR asserts, referring to its supplemental brief in opposition to Third-Party E-Z's motion to dismiss for lack of personal jurisdiction and the evidence cited therein, that each of the Third Party E-Z Defendants conduct regular business in New York selling bow maker products and other crafting devices and supplies, entering into contracts with manufacturers in New York, and traveling to New York to advertise E-Z Bowz products and conduct demonstrations. PPR also contends that the Third Party E-Z Defendants, through Threadgill, engaged in negotiations in hopes of obtaining an agreement with PPR in which PPR would acknowledge the validity of the patents at issue, and agree to pay money and to stop distributing its bow making kits. The Court has reviewed this issue de novo. As to the latter argument, for the reasons articulated above, the Court concludes that Threadgill's negotiations in New York to resolve the issues underlying the instant litigation as part of his representation of his client in the instant lawsuit do not constitute "transacting business" within the meaning of § 302(a)(1). As to PPR's argument that the Third Party E-Z Defendants conduct regular business in New York through sales and promotion of their products there, it cannot be said that PPR's claims arise out of that business activity. Thus, the Court concludes that jurisdiction may not be exercised over Third Party E-Z under § 302(a)(1).
Section 302(a)(2)Section 302(a)(2) gives New York jurisdiction over a non-domiciliary who in person or through an agent commits a tortious act within New York. Pi, Inc. v. Quality Prods., Inc., 907 F.Supp. 752, 760 (S.D.N.Y. 1995). As to Threadgill, Judge Gorenstein concluded that there are only three possible torts that Threadgill could have committed — the alleged fraud before the USPTO, alleged false statements concerning the origin, sales figures and patentability of the bow maker, and the prosecution of the instant action after it was transferred to New York, which PPR contends is a "sham litigation." Analyzing each of these three possible torts separately, Judge Gorenstein concluded that the first two occurred outside of New York, while the third — essentially the tort of malicious prosecution — is not completed until an action is resolved favorably to PPR. Since that has not yet happened, the tort of malicious prosecution can not serve as the basis for jurisdiction.
With respect to LNG, Judge Gorenstein found that PPR failed to frame a cause of action in tort that occurred in New York. Judge Gorenstein reached the same conclusion with respect to Third Party E-Z, and rejected PPR's argument that jurisdiction exists based upon the existence of a conspiracy tying the alleged co-conspirators together.
PPR has objected to Judge Gorenstein's conclusion with respect to each of the Third-Party Defendants. First, PPR contends that Judge Gorenstein failed to address its argument that the Third-Party Defendants could be subject to jurisdiction under § 302(a)(2) for the torts committed in New York by their alleged co-conspirators in connection with a conspiracy. In addition, as to Threadgill, PPR asserts that the underlying tort is "active complicity in a broad; unlawful anti-competitive conspiracy designed to limit competition improperly and extract money through threats of litigation." (PPR's Written Obj. to Motion to Dismiss Report I at 7.) PPR further asserts that Threadgill and his agents traveled to New York in furtherance of the conspiracy and that such activity forms the basis of jurisdiction pursuant to § 302(a)(2). PPR makes a similar argument with respect to LNG, contending that LNG, through its agents, engaged in activity in New York in furtherance of the above-described alleged anti-competitive conspiracy. Finally, PPR also contends that Third Party E-Z committed a tort within New York through its participation in the alleged unlawful conspiracy. The Court makes a de novo determination as to these issues.
The Court concludes that PPR has failed to "adequately frame a cause of action in tort arising from" the Third-Party Defendants' acts within New York, or the acts of the Third-Party Defendants' alleged co-conspirators within New York. Pi, Inc., 907 F. Supp. at 760 (internal quotation marks and citation omitted) (brackets in original). PPR, citing In re Sumitomo Copper Litig., 120 F. Supp. 2d 328, 338 (S.D.N.Y. 2000), contends that an out-of-state defendant can be subject to jurisdiction in New York under § 302(a)(2) for acts committed in New York by his co-conspirator in furtherance of a conspiracy. A plaintiff, though, has the burden not only of showing the existence of the conspiracy, but also showing the existence of the primary tort committed by the co-conspirator in New York.Id. at 339. Here, PPR seems to contend that the alleged anti-competitive conspiracy is the underlying tort. (See PPR's Written Obj. to Motion to Dismiss Report I at 7.) The Court finds that the alleged conspiracy itself is insufficient to constitute a "tortious act" within the meaning of § 302(a)(2). See Grove Press, Inc. v. Angleton, 649 F.2d 121, 123 (2d Cir. 1981) (in New York, conspiracy, per se, is not a tort). Further, assuming the alleged conspiracy can be broken down into the possible torts described in Judge Gorenstein's Report, the Court finds that PPR has failed to proffer sufficient evidence to support a finding that the Third-Party Defendants engaged in those torts inside New York.
Section 302(a)(3)Section 302(a)(3) provides for jurisdiction over a non-domiciliary who
commits a tortious act without the state causing injury to person or property within the state, except as to a cause of action for defamation of character arising from the act, if he
(i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or
(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce
N.Y.C.P.L.R. § 302(a)(3) (McKinney 2001).
Judge Gorenstein again pointed out that the filing and prosecution of the alleged "sham litigation" could not form the basis of jurisdiction absent a favorable determination on the merits of the case, and also concluded that PPR has failed to proffer sufficient evidence of any of the three potential torts he discussed in connection with § 302(a)(2) above to establish personal jurisdiction under § 302(a)(3) as to any of the Third-Party Defendants.
PPR objects to Judge Gorenstein's Report on the ground that Judge Gorenstein was incorrect in concluding that there is an absence of an underlying tort. The Court, reviewing the issue de novo, however, concurs with Judge Gorenstein's conclusion, for the reasons articulated in Judge Gorenstein's Report, that PPR has failed to proffer sufficient evidence of an underlying tort committed outside New York.
Conspiracy Theory of Jurisdiction
Judge Gorenstein also rejected PPR's contention that jurisdiction can be exercised over the Third-Party Defendants by virtue of their alleged participation in an unlawful conspiracy with each other and E-Z Bowz. Judge Gorenstein concluded that PPR has not proffered any evidence in support of an underlying tort, presumably, fraud, In addition, Judge Gorenstein found that PPR failed to aver facts to support an inference that the Third-Party Defendants were party to a corrupt agreement or part of an improper and illicit scheme.
PPR argues that Judge Gorenstein wrongly concluded that there is no evidence of fraud because he erroneously determined that the '979 Patent is valid. However, the Court has already found that Judge Gorenstein's analysis and conclusion as to the '979 Patent was indeed correct. Therefore, the central premise upon which PPR's objection is predicated falls away. The Court, reviewing the issue de novo, concurs with Judge Gorenstein that PPR has failed to show the existence of an underlying tort as well as the Third-Party Defendants' participation in a corrupt agreement.
Thus, for the foregoing reasons, the Third Party Defendants' motions to dismiss for lack of personal jurisdiction are granted (docket numbers 45, 48 and 74.). The Third Party Defendants' motions for summary judgment (docket numbers 107 and 110, insofar as it was brought by the Third-Party Defendants) are terminated as moot. Judge Gorenstein's Motion to Dismiss Report II
On March 21, 2000, PPR filed a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(7) for failure to join an indispensable party under Fed.R.Civ.P. 19. PPR contends that at the time the complaint was filed, E-Z Bowz was not the owner of the entire right, title and interest in the patents in suit because the '979 and '998 Patents were owned by E-Z Bowz and Tina Lucille Benton Slater. It is undisputed that Slater assigned her interest in those patents to E-Z Bowz subsequent to the filing of the instant action.
Judge Gorenstein concluded that, since Slater assigned her interest in the patents to E-Z Bowz after the filing of E-Z Bow's complaint, the requirements of Rule 19 are not met and Slater does not qualify as an indispensable party. (See Motion to Dismiss Report II at 6-9.) Accordingly, Judge Gorenstein recommended that PPR's motion to dismiss for failure to join an indispensable party be denied.
In its memorandum of law outlining its objections to the Motion Dismiss Report II, PPR concedes the "all of the rights of the parties can be effectively adjudicated now without Slater being a party to this action." (PPR's Written Obj. to the Motion Dismiss Report II at 3.) Nonetheless, and somewhat inconsistently, PPR argues that the Complaint should still be dismissed because E-Z Bowz failed to comply with the notice requirement of 35 U.S.C. § 287 by not positively identifying the owners of the patent at the time the action was commenced. As a result, PPR contends, the rights of the parties cannot be adequately litigated and decided in the instant action because § 287(a) prohibits damages until proper notice has been given. (Id. at 3-4.) The Court will make a de novo determination as to this issue.
35 U.S.C.A. § 287(a) (West 2001) provides as follows: Patentees, and persons making, offering for sale, or selling within the United States any patented article for or under them, or importing any patented article into the United States, may give notice to the public that the same is patented, either by fixing thereon the word "patent" or the abbreviation "pat.", together with the number of the patent, or when, from the character of the article, this can not be done, by fixing to it, or to the package wherein one or more of them is contained, a label containing a like notice. In the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice. Filing of an action for infringement shall constitute such notice.
According to the language of the statute, the notice requirement referred to by PPR is only triggered in the event that the patentee fails to mark its product in the manner described in the first sentence of the provision. PPR, however, has not asserted that E-Z Bowz failed to properly mark its product. E-Z Bowz, in fact, contends that it did mark the product at issue with the patent numbers in accordance with the language of the statute. The inclusion of such markings on the product obviates the need to notify the alleged infringer in the manner described in the latter portion of the statutory provision. Thus, even assuming the validity of PPR's assertion that sufficient notice under the latter portion of the provision requires positive identification of the owners of the patent at the time of the filing of the action, that type of notice was not required in the case at bar because PPR has not shown that E-Z Bowz failed to properly mark its products in accordance with the first sentence of § 287(a).
The Court therefore concludes, for substantially the reasons articulated in Judge Gorenstein's Report, as well as on the basis of the Court's analysis concerning the notice requirement of 35 U.S.C. § 287, that Slater is not an indispensable party within the meaning of Fed.R.Civ.P. 19. Accordingly, PPR's motion to dismiss for failure to join an indispensable party is denied.
CONCLUSION
For the foregoing reasons, the Court adopts Judge Gorenstein's three Reports. E-Z Bowz's motion for partial summary judgment (docket number 110) is granted and Counts 1-4 and 6-7 of PPR's counterclaims are dismissed as to E-Z Bowz, L.L.C. PPR's motion for summary judgment (docket number 105) is granted to the extent that it seeks a declaratory judgment that the '998 is invalid. PPR's motion for summary judgment is in all other respects denied. Based on these determinations, trial is necessary on the issues of whether the '979 Patent is valid and, if so, whether PPR infringed upon the patent, and whether E-Z Bowz has a protectable interest in its claimed trade dress, and if so, whether PPR infringed upon that dress. In addition, PPR's previously filed motion to dismiss or, in the alternative, for summary judgment (docket number 17) is denied.
In addition, the Third-Party Defendants' motions to dismiss the Third-Party Complaint for lack of personal jurisdiction (docket numbers 45, 48 and 74) are granted. Accordingly, the Third-Party Defendants' motions for summary judgment (docket numbers 107 and 110, insofar as number 110 was brought by the Third-Party Defendants) are terminated as moot.
Finally, PPR's motion to dismiss E-Z Bowz's Amended Complaint for failure to join an indispensable party is denied.
The parties shall promptly request a conference with Judge Gorenstein for settlement purposes and to address any outstanding pretrial management issues.
IT IS SO ORDERED.