Optigen, LLC v. International Genetics, Inc., 2012 WL
2574805 (N.D.N.Y.)
Optigen, which provides DNA-based diagnostic services to test
for inherited diseases in dogs, sued defendants for patent infringement as well
as false advertising/unfair competition.
Defendant Dobbins founded defendant PinPoint, which offered DNA testing
for dogs and cats and allegedly infringed Optigen’s patents. It stopped operating and then Dobbins
established defendant InGen in the Bahamas.
InGen purchased PinPoint’s assets, including its Pawsitive I.D.
trademark, database, and domain names. InGen’s website stated, “InGen now
offers the test for ... [ ]PRCD[ ] that [Defendant] PinPoint was forced to
withdraw in April 2008 due to patent issues.... [Defendant] InGen does not have
these issues and has recommended the testing for this eye disease.’” Other statements include: “[t]hese patents[,
which] prohibit unlicensed use of the scientific techniques used in the
detection of genetic mutations for some diseases[,] ... were never filed in The
Bahamas and therefore it is perfectly legal and ethical to use the scientific
processes needed to determine if an animal has the mutation in this
jurisdiction” and that the price of the test increased “from $49.95 to $75.00”
because, “[i]n order to legally offer some of [InGen's] genetic tests, [the
company] needed to build a laboratory in The Bahamas[, which] has added many
expenses to [the company's] product.” InGen’s
website has a Q&A column “acknowledging that [Defendant] InGen's services
would amount to patent infringement if offered in the United States, Canada
and/or European Union,” and InGen advertised in the US and offered the service
to US customers, who made up approximately 80-85% of its customer base. InGen, in fact, had no employees in the
Bahamas; its business was mostly conducted from Georgia, though its website’s
server was in the Bahamas.
The court denied Optigen’s motion for partial summary
judgment on its patent infringement claims, but partially granted its motion on
the false advertising claims. Optigen
alleged that InGen and Dobbins misrepresented that (1) InGen operated/was
headquartered in the Bahamas; (2) all its business was transacted offshore, so
therefore any transaction was outside any jurisdiction covered by any patent;
(3) the patents “were never filed in The Bahamas and therefore it is perfectly
legal and ethical to use the scientific processes in the Bahamian jurisdiction”;
and (4) “PinPoint, as a company, is no longer involved with [Defendant] InGen.”
The court found that the first statement about where InGen
and Dobbins operated didn’t relate to “an inherent or material quality of the
product.”
The statement that PinPoint was no longer involved with
InGen gave rise to a false designation of origin claim. There was a genuine dispute of material fact on
literal falsity, given the details of the asset transfer. It was therefore possible that “an
appreciable number of ordinary prudent purchasers [could] be misled, or indeed
simply confused” as to whether the services for which they have paid were provided
by PinPoint or InGen. (Why did Optigen
have standing to raise this claim?
Shouldn’t we also be asking about materiality? Why would consumers care about this misstatement, if it is such? Optigen certainly isn’t claiming that
PinPoint had goodwill that InGen misappropriated! Once again, the unjustified TM/false
advertising divide creates weird results.)
The other statements were literally false. As for (2), when a customer buys a test from
InGen, at least part of the transaction takes place in the US. On (3), which I would have thought covered by
the general rule that nonlawyers' statements about legality are rarely if ever actionable
because they are statements of opinion rather than fact, the court found that
whether the defendants’ testing methods practice all the claims of Optigen’s
patents was a disputed factual issue.
Because defendants weren’t insulated from patent liability, statements
to customers “purporting to conclude that its business operations are legal ‘conflict[ed]
with reality.’” (I also don’t know why
this is false as opposed to potentially false, if and only if defendants lose
the patent claim, since the reason for noninfringement isn't likely to matter, though if there is patent infringement I see the argument for materiality even if the
customers are never at risk of being sued—people might well feel different
about enabling lawbreaking v. taking advantage of territorial rules.)
Interesting side note: the court also denied summary
judgment on the state-law unfair competition claims, which required
unauthorized reproduction and distribution of Optigen’s work, because it had
denied summary judgment on the patent claims.
Patent preemption isn’t my field, but why isn’t this claim preempted?
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