Levenger Co. v. Feldman
| Decision Date | 21 September 2007 |
| Docket Number | No. 06-81054.,06-81054. |
| Citation | 516 F.Supp.2d 1272 |
| Parties | LEVENGER COMPANY, a Florida Corporation, Plaintiff, v. Jacobo (Jack) FELDMAN, et al, Defendants. |
| Court | U.S. District Court — Southern District of Florida |
Melissa Segarra Zinkil, Jerold Ira Schneider, Eduardo J. Quinones, Akerman Senterfitt & Eidson, West Palm Beach, FL, for Plaintiff.
Jennifer Elaine Simpson, Scott Topolski, Buckingham, Doolittle & Burroughs, LLP, Boca Raton, FL, for Defendants.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This is an action for patent invalidity, patent unenforceability, patent non-infringement, trade dress infringement, misappropriation of trade secrets, breach of a license agreement, and other equitable relief. The matter came before the Court upon a bench trial held from August 25, 2007, to August 29, 2007, on Plaintiffs Amended Complaint (DE 8), filed January 16, 2007, and Defendant's Counterclaims (DE 21), filed March 21, 2007. Having reviewed the evidence, counsels' argument, and the parties' submissions, the Court finds in favor of Plaintiff on some of its claims and for Defendants on one of its claims for the reasons stated below.
Levenger Company, the Plaintiff in this case, is a Florida corporation that is in the business of selling, high-end disk-bound notebooks and accessories, among other reading and writing tools. Jack and Shirley Feldman, two of the Defendants in this case, are a husband and wife team residing in Florida who in addition to manufacturing and distributing disk-bound notebooks through their company Rollabind, LLC, are also the owners of the patents at issue in this dispute. In 1995, Defendants, Jack and Shirley Feldman, obtained two patents relating to a notebook system. In early 1996, Defendants began supplying Plaintiff with notebooks for retail pursuant to an oral agreement between the two parties. In July of 2004, the parties entered, into a written contract ("the License Agreement"). In this license agreement, Defendants agreed to allow Plaintiff to manufacture the notebooks in exchange for royalties. In July of 2006, Plaintiff stopped paying Defendants the royalties and commenced this action in November of 2006. In this action, Plaintiff seeks a declaration of patent invalidity, patent unenforceability, patent non-infringement, as well as an injunction against trade dress infringement and other equitable relief. Defendants counterclaim that Plaintiff has breached the license agreement misappropriated trade secrets, anti willfully infringed on their patents. Both parties seek an equitable accounting. Pursuant to Rule 52(a), Federal Rules of Civil Procedure, the Court now makes the following findings of fact and conclusions of law. Fed. R.Civ.P. 52(a).
Jack Feldman moved to Israel in 1991 seeking business opportunities. While living there he came across the product line "Flic" which was manufactured by an Israeli company called Mapal Plastics. One of its products was a disk-bound notebook system, wherein paper is bound together using circular disks' which are inserted into mushroom-shaped slots along the edge of the paper (the "Flic notebook"). The slots have a narrower stem portion and a larger bulbous opening portion; the bulbous opening portion comprises an arcuate or curved top portion and a substantially flat bottom portion, extending from and perpendicular to the stem portion. Mr. Feldman founded a company called Flic Distributors, Inc., and he and his wife began distributing the Flic products. The Feldmans then moved to the United States in 1992, and Mr. Feldman changed the name of the company from Flic Distributors, Inc., to Flic Industries, Inc. The company began importing and selling the Flic products to stores in the United States and eventually got involved in manufacturing them as well. Catalogs containing the Flic notebook were publicly available in the United States prior to June of 1994, as evidenced in the Flic 'N Roll trademark application, filed by Mapal, Plastics with the United States Patent and Trademark Office ("USPTO") on July 28, 1993.
Jack and Shirley Feldman received numerous complaints from the stores they sold the products to that the Flic notebooks did not work properly because the paper would fall out of the notebook and the paper did not move easily around the disks. In response to these complaints, the Feldmans made improvements to the product. As far as the Court can tell, these improvements appear to be minor and mostly have to do with changing the dimensions of the disks and the mushroom-shaped openings.
In June of 1995, Jack and Shirley Feldman filed a patent application with the USPTO. They sought to patent the improvements they had made to the Flic notebook. On September 10, 1996, the USPTO issued to the Feldmans Patent No. 5,553,959 (the "959 Patent"). On May 12, 1998, the USPTO issued to the Feldmans Patent No. 5,749,667 (the "667 Patent"). Both patents relate to the same notebook system at issue in this case: the 959 Patent addresses the notebook itself and the 667 Patent addresses the sheet refills for the notebook. Both patents also address a strap that wraps around the notebook which is not at issue in this case and therefore will not be discussed.
Claims 1-4 of the 959 Patent refer to a notebook system including a plurality of sheets where each sheet has a plurality of mushroom-shaped openings or slots. These slots have a narrower stem portion and a bulbous opening portion which includes an arcuate or curved top portion and a substantially flat bearing surface, extending from and substantially perpendicular to said stem portion (the mushroom shape). These claims also require a plurality of binding disks to be inserted into the slots, each disk having a substantially flat central surface portion and a continuous projecting rim portion perpendicular to the central surface portion. The rim has an arcuate exterior shape and the disk is sized to fit in the slots. Claims 1-4 of the 959 Patent also restrict the amount of pages to be used in the notebooks. The radius of the central portion of the disk must be greater than the thickness of the stack of sheets inserted into the notebook.
Claims 1, 2, and 9 of the 667 Patent are a plurality of refill sheets, where each sheet is pre-punched with a plurality of the mushroom-shaped slots. Claims 1, 2, and 9 also refer to the fact that the disks are insertable into the slots, but do not claim the disks as part of the invention.
The Feldmans hired an attorney named Leonard Holtz from Frishauf, Holtz, Goodman, Langer & Chick, a New York law firm, to help them with the patenting process. Mr. Feldman claims he provided his attorney with samples of the Flic notebook upon which he and his wife based their invention. However, the Flic disk and slot that most resemble the claimed invention do not appear as relevant prior art in the patents. Instead what may be another Flic disk and slot appear in Figures 6 and 7 of the patents. The Flic disk appearing in the patents as relevant prior art contains raised bumps on the inside portion of the disk and the slot is an oval shape. There were other Flic disks and slots available, and observed by this Court and various witnesses, that did not contain the raised bumps and had a mushroom-shaped slot, akin to the claimed invention. Moreover, it was established during trial that the description of the 959 and 667 Patents contained in the "claims" section of their patents matched a description of the Flic notebook which had not been revealed to the USPTO.
The Feldmans claim that their failure to disclose the more relevant Flic notebook was an innocent mistake. As evidence, they point to the fact that they disclosed their affiliation with Flic Industries, Inc., on a Verified Statement Claiming Small Entity Status form which was signed and dated by the Feldmans and appears in the file histories of the patents. The Feldmans also claim to have very little knowledge of patent law. Mr. Feldman stated that he handed over the information to his attorney and his attorney handled everything. The problem with this argument is that, in their patent applications, the Feldmans signed a declaration under oath stating that they had read their patent application, they understood the application, and they acknowledged the duty to disclose prior art which was material under Rule 56 (i.e., 37 C.F.R. § 1.56).
Whether innocently omitted or not, the Feldmans' patent application also fails to reveal other relevant prior art. The most significant omission is Spanish Patent No. 295,374 to Comercial Milos, S.A., published in December of 1986 (the "Milos Patent"). The Milos Patent contains a single similar mushroom-shaped disk inserted onto a mushroom-shaped slot along the side of a stack of paper. Instead of discussing the Milos patent, Italian patent 625,130 (the "Camarda Patent") appears in Figures 4 and 5, as relevant prior art. The Camarda Patent is similar to the Feldmans' patent, except that the arcuate surface of the slot and disk have flattened sides before meeting the bearing surfaces. The attorney who drafted the patent application distinguishes the Feldmans' invention from the Camarda Patent by pointing to these flattened sides. This distinction shows up in the description of the patent. Thus the two pieces of prior art discussed in the patent — the Camarda Patent and the lessrelevant Flic product — are not as similar to the claimed invention as other pieces of prior art in existence at the time of the patent application.
Sometime in late 1995 or early 1996, Jack Feldman and Levenger met and entered into a business arrangement. Feldman, through Flic Industries, Inc., began manufacturing notebooks for Levenger. Feldman represented to Levenger that he either had patents on the notebooks or was in the process of...
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