Eastern America Trio Products v. Tang Electronic
| Decision Date | 03 May 2000 |
| Docket Number | No. 98 Civ. 8286(LAK).,98 Civ. 8286(LAK). |
| Citation | 97 F.Supp.2d 395 |
| Parties | EASTERN AMERICA TRIO PRODUCTS, INC., Plaintiff, v. TANG ELECTRONIC CORPORATION, Digital Import, and China Ching Kong Technology Corporation, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Andrew S. Langsam, Morris E. Cohen, Marilyn Neiman, Levisohn, Lerner, Berger & Langsam, New York City, for plaintiff.
Joseph J. Zito, Damascus, MD, Donald E. Creadore, Jr., Tunick, Kupferman, & Creadore, P.C., New York City, for defendants.
Plaintiff Eastern America Trio Products, Inc. ("Eastern") here sues two of its competitors for design patent, trade dress, and copyright infringement, as well as unfair competition. trademark dilution, and deceptive business practices. Eastern alleges that Tang Electronic Corporation ("Tang") and Digital Import1 are infringing its table top pay telephone design, imitating its packaging and product configuration, and that Tang is using plaintiff's own photos in its sales catalogs. Defendants deny all claims against them and counterclaim for unfair competition.
Tang moved for summary judgment on the design patent infringement claim2 on the ground that plaintiff's patent is invalid for failure to disclose known prior art to the United States Patent and Trademark Office ("Patent Office"). Plaintiff opposed the motion, and all parties agreed to a bench trial on a stipulated record consisting of sworn statements, exhibits, and other evidence. These are the Court's findings of facts and conclusions of law based on that stipulated record.
Eastern is a New York corporation owned by Jimmy and Judy Chien. It sells table top pay telephones, related telecommunications products, and other electrical products, at least in part through the use of sales catalogs.3 Eastern purchases its telephones from Holythai Industry Co., Inc. ("Holythai") which is located in Bangkok, Thailand, and run by Wan-Neng Chuang.
Like Eastern, the defendants are New York based businesses that sell table top pay telephones, related telecommunications products, and other electrical products through sales catalogs. Tang purchases its telephones from CCKT, a Hong Kong company that is owned by TungWen Chuang, who is either Wan-Neng's brother or nephew.4
Eastern and Tang sell competing telephones. Eastern's current model is said to have been invented by the Chiens and Wan-Neng Chuang of Holythai. It is manufactured for Eastern by Holythai and sold here under the designation SN-6806. Its design is protected by United States Patent No. 396,465 (the "'465 patent"), which was issued on July 28, 1998 and assigned to Eastern. Tang's current model, the accused device in this case, is manufactured for it by CCKT and sold under the designation CKT-686. Its design is protected by U.S. Patent No. 408,034 (the "'034 Patent"). Plaintiff here claims that the CKT-686 infringes the '465 patent. Tang, for its part, contends that the SN-6806 is nothing more than a modification of a design previously sold by CCKT and, in any case, that the '465 patent is unenforceable because the inventors failed to disclose to the Patent Office prior art that would have prevented the issuance of the patent.
The parties fundamentally disagree about the origins of the two designs at issue. According to defendants, the SN-6806 is merely a modified version of the CKT-679, a table top telephone that CCKT has been selling since at least 1995.5 Defendants contend that CCKT sold the CKT-679, unassembled, to Holythai which assembled and resold it in Thailand as the HT-900.6 Holythai subsequently modified the HT-900 to create the HT-910, which Eastern sells as the SN-6806 in the United States.7 In response to the unsanctioned use of its technology, CCKT severed business ties with Holythai in 1997.8 Then, in early 1998, CCKT modified the appearance of the CKT-679 to create the CKT-686,9 for which it obtained the '034 patent on April 13, 1999.10 It is this patented model that Tang purchases from CCKT for sale in the United States.11
Plaintiff tells a different story. According to plaintiff, the SN-6806 is "an entirely new [phone] design" created by Jimmy and Judy Chien and Wan-Neng Chuang.12 Because the SN-6806 replaced the HT-900 as Holythai's latest model, it is sold in Thailand as the HT-910.13 Plaintiff claims that the CKT-679 did not exist prior to commencement of this litigation, that plaintiff certainly was not aware of its existence,14 and that it now believes that the CKT-679 is the result of CCKT copying Holythai's HT-900.15 This is possible, plaintiff explains, because Wan-Neng Chuang mailed the HT-900 to Tung-Wen Chuang in September 1996, after CCKT expressed an interest in purchasing the HT-900 from Holythai.16 Although CCKT ultimately did not purchase the HT-900 from Holythai, plaintiff believes that CCKT took advantage of the opportunity to copy Holythai's design.17
The principal evidence bearing on this contretemps, apart from the parties' selfserving declarations, is a document submitted by defendants that purports to be a photocopy of an August 8, 1997 invoice reflecting the sale by CCKT to Holythai of spare parts for a model number 535-679, which defendants assert is the CKT-679.18 If genuine, the invoice would lend support to defendants' assertion that CCKT sold the CKT-679 and its parts to Holythai which, in turn, would substantiate defendants' version of events. Plaintiff, however, claims that the invoice is fabricated and that CCKT never sold the CKT-679 or parts for the CKT-679 to Holythai.19 Plaintiff accuses defendants of altering the invoice for purposes of this lawsuit, and submits an original carbon copy of the invoice as support for its position.20
The versions of the invoices submitted by the parties are identical in all material respects save that whereas both refer to a model number 535 in the Description of Goods column, the characters "-679" appear after that number on defendants' version alone. The number "679" on defendants' version is in a glaringly different typeface than that used for the balance of the invoice. Defendants have offered no credible explanation for the addition of those numbers. Moreover, there is no evidence that any model number 535-679 ever existed. While Holythai did have a model number HT-535,21 a comparison of that instrument with CCKT's CKT-679 reveals that their body shapes are so different that many of the items listed on the invoice could not possibly be interchangeable components of both models, particularly the body case, or housing.22 Accordingly, the Court finds that defendants altered the invoice by adding the number "679" in an effort to mislead the Court into believing that CCKT sold the CKT-679 or components thereof to Holythai.
Spoliation of evidence like this undermines a litigant's entire case because it gives rise to inferences that the litigant believes that it cannot prevail by fair means and, in any case, is not to be trusted.23 In all the circumstances, the Court finds that the SN-6806 was created by the Chiens and Wan-Neng Cheng and not copied by them from the CKT-679. Indeed, the Court finds that they were not aware of that design when the SN-6806 was created.
Defendants argue that plaintiffs patent is unenforceable because the inventors failed to disclose the CKT-679 and the HT-900 as relevant prior art in their patent application.24
A party seeking a patent has an affirmative duty to disclose to the Patent Office all information known to that individual to be material to patentability,25 including prior art that may be so similar as to make the new design unoriginal. Where an applicant has breached this duty, intentionally or through bad faith, no patent will be granted.26 If the patent already has been granted, failure to disclose material information may result in the patent being declared unenforceable.27 Once a patent is issued, however, it is presumed valid and enforceable unless the challenging party proves otherwise.28
In order to render plaintiffs patent unenforceable, defendants must prove by clear and convincing evidence29 that the applicants for the '465 patent engaged in inequitable conduct.30 Inequitable conduct based on nondisclosure of prior art requires that: (1) the prior art be material; (2) the patent applicant knew of the prior art and its materiality; and (3) the nondisclosure resulted from an intent to mislead the Patent Office.31
Defendants claim that the applicants knew of the HT-900 and the CKT-679, that these models constitute material prior art, and that they intentionally misled the Patent Office by failing to disclose these designs, thereby making the '465 patent unenforceable. As stated previously, plaintiff contends that the inventors of the '465 design never saw the CKT-679, and that CCKT did not advertise or sell the CKT-679, until after this litigation was commenced.32 The inventors acknowledge that they knew of the HT-900, but deny that its design was material to their patent application.33 Furthermore, plaintiff claims that neither the CKT-679 nor the HT-900 was material prior art because the elements common to those designs and the '465 design are found in prior art that was disclosed to the Patent Office.34
In this case the question of whether or not the Chiens and Wan-Neng Chuang knew about the CKT-679 at the time they filed their patent application is rendered immaterial by their admission that they knew of the HT-900 which, according to the parties, is the evolutionary equivalent of the CKT-679. Plaintiff admits that the inventors of the '465 design had knowledge of the HT-900 throughout the pendency of their patent application.35 The issue, then, is whether the HT-900 was material to the '465 patent application and, if so, whether the...
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