Plasmart, Inc. v. Wincell Intern. Inc.

• Decision Date: 07 July 2006
• Docket Number: No. 05 Civ. 10745(PKC).,05 Civ. 10745(PKC).
• Citation: 442 F.Supp.2d 53
• Parties: PLASMART, INC., Plaintiff, v. WINCELL INTERNATIONAL INC., et al., Defendants.
• Court: U.S. District Court — Southern District of New York

442 F.Supp.2d 53

PLASMART, INC., Plaintiff, v. WINCELL INTERNATIONAL INC., et al., Defendants.

No. 05 Civ. 10745(PKC).

United States District Court, S.D. New York.

July 7, 2006.

COPYRIGHT MATERIAL OMITTED

Jeffrey Sonnabend, Sonnabendlaw, Brooklyn, NY, for plaintiff.

Matthew Terrence McLaughlin, Venable LLP (NYC), New York, NY, for defendants.

MEMORANDUM AND ORDER

CASTEL, District Judge.

Plaintiff PlaSmart Inc. brings this action against defendants Wincell International Inc., Jar Chen Wang, and Hong Jiun Gu, asserting five causes of action. Plaintiff seeks a declaratory judgment that its product, the PlasmaCar, does not infringe certain patents alleged to be held by defendants, and/or a declaration that those patents are invalid or unenforceable. Plaintiff also asserts causes of action for trade dress infringement, tortious interference with business relations and trade libel.

Defendants have answered and defendants Wincell and Wang have asserted counterclaims against plaintiff (and also named as a counterclaim defendant Timothy Kimber, plaintiff's president and founder) for patent infringement, trade dress infringement, and violation of New York's anti-dilution statute, New York Gen. Bus. Law § 360-1.

Plaintiffs have moved for a preliminary injunction: (1) enjoining defendants from asserting that plaintiff is infringing or has infringed "any patent of Defendants," (2) enjoining defendants from advertising or selling their "TwistCar" toy or any toy "substantially similar in overall visual impression to Plaintiff's PlasmaCar ride on toy," and (3) requiring defendants to recall any of their TwistCar toys or other toys substantially similar to plaintiff's Plasma-Car that are currently in the possession of wholesalers or retailers.¹ The Court held a hearing on plaintiff's motion on July 6, 2006, at which hearing both plaintiff and defendants were afforded the opportunity to call witnesses or present additional evidence. Each side rested on its written submissions, supplemented by argument.

Based on the argument at the hearing and on the papers submitted in support of and in opposition to plaintiff's motion, the motion is denied.

Preliminary Injunction Standard

In order to obtain a preliminary injunction, the moving party must show that it will suffer irreparable injury in the absence of an injunction, and either (1) a likelihood of success on the merits or (2) sufficiently serious questions going to the merits and a balance of hardships in its favor. Green Party of New York State v. New York State Bd. of Elections, 389 F.3d 411, 418 (2d Cir.2004) (citation omitted). "[A] preliminary injunction is an extraordinary remedy that should not be granted as a routine matter." JSG Trading Corp. v. Tray-Wrap, Inc., 917 F.2d 75, 80 (2d Cir. 1990).

Injunction Precluding Assertions of Patent Infringement

Plaintiff asserts a cause of action for tortious interference with business relations, and, in connection with that claim, seeks to enjoin defendants from asserting that plaintiff's products infringe defendants' patents. A claim for tortious interference with business relations under New York law requires proof that (1) the plaintiff had a business relationship with a third party; (2) the defendant knew of and intentionally interfered with that relationship; (3) the defendant acted solely out of malice, or used dishonest, unfair, or improper means; and (4) the interference in fact injured the relationship. State St. Bank and Trust Co. v. Inversiones Errazuriz Limitada, 374 F.3d 158, 171 (2d Cir.2004) (citations omitted), cert. denied, 543 U.S. 1177, 125 S.Ct. 1309, 161 L.Ed.2d 161 (2005).²

However, "federal patent law preempts state-law tort liability for a patentholder's good faith conduct in communications asserting infringement of its patent and warning about potential litigation." Globetrotter Software, Inc. v. Elan Computer Group, Inc., 362 F.3d 1367, 1374 (Fed.Cir.2004) (citation omitted); see also Golan v. Pingel Enter., Inc., 310 F.3d 1360, 1370 (Fed.Cir.2002) ("federal patent law bars the imposition of liability [under federal or state law] for publicizing a patent in the marketplace unless the plaintiff can show that the patent holder acted in bad faith.") (internal quotation marks and citations omitted) (alteration in original). Moreover, "[t]he law recognizes a presumption that the assertion of a duly granted patent is made in good faith; this presumption is overcome only by affirmative evidence of bad faith." C.R. Bard, Inc. v. M3 Sys., Inc., 157 F.3d 1340, 1369 (Fed.Cir.1998), cert. denied, 526 U.S. 1130, 119 S.Ct. 1804, 143 L.Ed.2d 1008 (1999).

Thus, where, as here, a plaintiff asserts claims under state tort law based on assertions of patent infringement, even if it is not generally a required element of the state cause of action, there can be no liability unless plaintiff clears the additional hurdle of proving bad faith. See Globetrotter, 362 F.3d at 1374 (citing Zenith Elecs. Corp. v. Exzec, Inc., 182 F.3d 1340, 1355 (Fed.Cir.1999)). Threats of patent infringement suits cannot constitute "improper means" for purposes of a tortious interference claim under New York law unless made in bad faith. B & G Plastics, Inc. v. Eastern Creative Indus., 269 F.Supp.2d 450, 468 (S.D.N.Y.2003).

Even if a defendant's contention that its patents are being infringed eventually proves inaccurate, statements asserting infringement are protected unless a plaintiff can provide "clear and convincing evidence that the infringement allegations are objectively false, and that the patentee made them in bad faith, viz., with knowledge of their incorrectness or falsity, or disregard for either .. .." Golan, 310 F.3d at 1371. The burden rests with the plaintiff to prove bad faith. Id. at 1373 (citing C.R. Bard, 157 F.3d at 1369).

The Federal Circuit has made clear that, even if plaintiff can demonstrate subjective bad faith, liability cannot be imposed unless the assertions of patent infringement are not merely incorrect, but "objectively baseless." Globetrotter, 362 F.3d at 1375-77. In applying the "objectively baseless" standard to the assessment of state law tort claims premised on patent infringement contentions, the Federal Circuit expressly adopted the definition of "objectively baseless" set forth by the Supreme Court in Professional Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 113 S.Ct. 1920, 123 L.Ed.2d 611 (1993) ("PRE"). That is, the threat of an infringement suit "`must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits.'" Globetrotter, 362 F.3d at 1376 (quoting PRE, 508 U.S. at 60, 113 S.Ct. 1920).

Here, plaintiff has failed to demonstrate a likelihood of success on the merits, or even serious questions going to the merits, on its tortious interference claim. Plaintiff has failed to demonstrate that it is likely to overcome the presumption that any assertions of patent infringement were made in good faith, see C.R. Bard, 157 F.3d at 1369, rather than with knowledge that the relevant patents were invalid or not infringed, or with disregard for whether the infringement allegations were false. See, e.g., Golan, 310 F.3d at 1371-72 ("the evidence does not clearly show that Pingel knew the '921 patent was invalid at the time it asserted infringement or that Pingel had no reason to believe that Golan did not infringe any of Pingel's asserted patents"). Simply put, plaintiff has failed to come forth with any evidence whatsoever to indicate that any assertions of patent infringement were made in bad faith.

Even if the Court accepts that one of defendants' motives was to encourage plaintiffs customers to purchase defendants' products instead of plaintiffs, "a competitive commercial purpose is not of itself improper ...." Mikohn Gaming Corp. v. Acres Gaming, Inc., 165 F.3d 891, 897 (Fed.Cir.1998). Enjoining a patentee from advising potential infringers of its patent rights would be inappropriate where, as here, "[t]he record provided shows no more than a negligible likelihood of success in showing bad faith...." Id. at 898; see also Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700, 709-10 (Fed.Cir. 1992) (vacating injunction against infringement notices where no bad faith was alleged).

In light of the conclusion that plaintiff has not demonstrated that it is likely to overcome the presumption that Wincell's notice of patent rights and assertions of potential infringement are made in good faith, the Court need not engage in a detailed assessment of the likely merits of plaintiff's claim for a declaration of noninfringement or defendants' counterclaim for infringement of U.S. Patent No. 6,722,674 (the "'674 patent"), which would entail the resolution of disputed issues of claim construction on a record that is, at this stage, less than complete. Having reviewed the parties' respective papers, however, the Court is not persuaded that plaintiff is likely to succeed in demonstrating that defendants' contention that the PlasmaCar infringes the '674 patent is "objectively baseless," such that "`an objective litigant could [not] conclude that the suit is reasonably calculated to elicit a favorable outcome.'" Globetrotter, 362 F.3d at 1376 (quoting PRE, 508 U.S. at 60, 113 S.Ct. 1920).

On this motion, plaintiff has placed before the Court only a single letter from defendant Wincell to one of its customers (Exhibit 1 to the complaint). The letter asserts infringement of four patents, and was transmitted to the customer prior to the commencement of any litigation between the parties. Specifically, the letter states that the PlasmaCar "has infringed both [defendants'] U.S. design patent and utility patents. The patents are: USD448430S, US6431566B1, US6722674B2 and US6860497B2." It further requests that, "[i]n order to avoid unnecessary patent litigation suit [sic] ... would you please told your buyers [sic] to cease the...