Uncharmed: bitter litigation results in sanctions

Pandora Jewelry, LLC v. Chamilia, LLC, 2008 WL 4533902 (D. Md.)

The parties compete in the specialty jewelry market—they make charms that are designed to be strung together. Pandora sued Chamilia this time for false advertising, injurious falsehood, tortious interference, and unfair competition.

In 2006, Pandora sued Chamilia for patent infringement. Chamilia counterclaimed for tortious interference and antitrust violations. Pandora’s motion to bifurcate the trials and stay discovery on the counterclaims was granted, and thus Chamilia’s motion to quash a related subpoena for records was also granted.

Chamilia then sent a letter to a number of jewelry retailers, including many Pandora customers, misrepresenting (the court’s term) the granted motion to quash; it sent the same letter via email to a number of blind copy recipients. Pandora then filed the instant lawsuit. The court granted a TRO directing Chamilia to file a recipient list and issue a corrective notice. Months later, Chamilia sent another letter to jewelry retailers and email recipients about the PTO’s publication of a Chamilia patent application. This letter stated that the PTO’s publication acknowledged Chamilia’s “unique product offering” and indicated the patent would issue in 2007. Pandora amended its complaint to include this letter and moved for a preliminary injunction, which the court denied.

Then the court granted in part and denied in part Chamilia’s motion for claim construction, prompting yet another letter/email, and then an “anonymous” email that purported to come from a Pandora email account but was signed “The Chamilia Team”; both sides denied sending that email, but it was identical to the Chamilia email. And then an anonymous caller contacted at least six Pandora retailers and one Pandora sales representative to tell them that Pandora lost a patent lawsuit and that the retailers should remove Pandora ads from their stores or risk false advertising suits. Chamilia denied involvement. Chamilia also resisted discovery and failed to produce any relevant documents for some of the emails, maintaining that it had switched servers twice during the pendency of the litigation and that Pandora’s requests had been improper.

Despite these facts, Chamilia won summary judgment on the first letter/email, because Pandora couldn’t show any injury. Pandora couldn’t show a single diverted “or even disgruntled” retailer or any loss of reputation. This was telling because the first letter/email was the “most egregious” of the communications at issue, as evidenced by the court’s grant of a TRO and requirement of a corrective letter. (Jewelry retailers are hardy sorts, apparently.) Query whether the type of evidence deemed sufficient to sustain a multimillion-dollar award in the Payless case, testimony from marketing experts about inchoate harm to brand value and goodwill, would have changed the outcome here.

Likewise, Pandora failed to show that the second letter/email did harm. The court noted that Pandora never got a recipient list out of Chamilia, but there was still no evidence of injury. Though three retailers contacted Pandora about the letter, their mere queries fell short of the necessary injury in a Lanham Act claim. This absence of sales diversion and lost goodwill also doomed the tortious interference and injurious falsehood claims.

And finally, Pandora failed on its unfair competition claim because there was insufficient evidence of retailer confusion—just one retailer asking if Pandora knew anything about Chamilia receiving a patent. Though actual damage is unnecessary for this tort, the evidence was insufficient to show that Chamilia even jeopardized Pandora’s business.

Pandora did win monetary sanctions because of Chamilia’s spoliation, though it didn’t convince the court to draw adverse inferences on the substantive claims as a sanction.