West v. Quality Gold, Inc., 2012 WL 2913207 (N.D. Cal.)
West owns nine patents relating to finger rings, and
licenses them; as a result, he alleged, the finger ring industry has become “highly
sensitive” to patents. Quality, under
the name Dura Tungsten, allegedly began advertising its finger rings as “patent
pending,” then changed its catalogs to “patent pending USPTO 12,141,791 was
granted,” allegedly conveying to the public and to competitors that it had
exclusive righs in a lighter tungsten carbide ring and that others, including
West’s licensees, couldn’t lawfully sell similar products. In fact, the application had been published,
not granted. He sued for false marking
(a claim that had to be substantially revised after the AIA) and false
advertising under federal and California law.
The court dismissed the false marking claim for failure to
plead with the requisite particularity under Rule 9(b), but indicated that this
was a close case and that an amended complaint might well suffice. For a false marking claim, Rule 9(b) means
that a plaintiff can allege the identities of particular people in defendant’s
company who knew that a particular patent used to mark products was expired, or
alternatively can allege other facts from which intent to deceive can
reasonably be inferred. This could
include suing a third party for infringement after the patent expired, or making
multiple revisions of the marking after expiration.
West’s argument that intent to deceive could be inferred
from the fact that Quality Gold “changed its catalogs to reflect that a patent
had been granted when in fact the patent application in question merely had
been published.” But he simply alleged
that Quality Gold knew or should have known that no patent had issued based on
the publication notice; he didn’t allege that any individuals in particular knew
that no patent had issued or facts from which such knowledge could be inferred. Similarly, allegations that the defendant was
a sophisticated company with patent experience were insufficient in themselves:
intent could not be deduced merely from the marking itself. However, West asserted a number of facts in
his opposition brief and at oral argument that weren’t pled in the complaint,
and incorporation of those facts might cure the pleading deficiencies. For example, West’s counsel “discussed the
history of West's patent enforcement efforts in the area of tungsten jewelry
finger rings, West's interactions with particular persons associated with
Quality Gold, and the manner in which a patent application is processed by the
PTO” in greater detail; adding those facts could help, along with an allegation
about the layout of Quality Gold’s advertising drawing consumers’ attention to
the word “granted” in the claim, “The Dura Tungsten band was developed in 2006.
Patent Pending USPTO 12,141,791 was granted and published in December 2009
worldwide.”
Quality Gold also argued that West hadn’t alleged the
requisite “competitive injury,” a term the 9th Circuit has yet to
interpret in the AIA context. One
district court has required allegations that the false marking was “harmful to the
plaintiff’s ability to compete with the defendant,” while another has required
the parties to be competitors, vying from the same dollars from the same
consumers. Another court defined “competitive
injury” as “predatory pricing, price discrimination, injury to competition, or
loss of business opportunities.” Here, West
claimed that its licensees were direct competitors of Quality Gold, and that
Quality Gold’s false marking resulted in lost royalty shares of sales and lost
licensing opportunities. Given that the
Second Circuit, in Famous Horse,
found that parties may be considered competitors for Lanham Act purposes “even
though one is a retailer and the other a wholesaler, so long as ‘the goods they
sell are in direct competition in the marketplace,’” the court found the
competitive injury element adequately pled.
The California and federal false advertising claims were
dismissed for reasons similar to the false marking claim, with a twist: Quality
Gold alleged that these claims were preempted by the false marking provisions
of patent law. Preemption might not
apply if the claims in question alleged bad faith. But, as noted above, West hadn’t yet sufficiently
alleged facts giving rise to an inference of bad faith. Presumably an amended complaint could also
fix this.
No comments:
Post a Comment