Z-man Fishing Prod.s Inc. v. Renosky, Case No. 2:11-cv-428-RMG-JDA

Decision Date10 May 2011
Docket NumberCase No. 2:11-cv-428-RMG-JDA
PartiesZ-Man Fishing Products, Inc. and Holding One, Inc.,Plaintiffs, v. Joseph F. Renosky and Renosky Fishing Lures, Inc.,Defendants.
CourtU.S. District Court — District of South Carolina
REPORT AND RECOMMENDATION
OF MAGISTRATE JUDGE

This matter is before the Court on Plaintiffs' motion for a temporary restraining order ("TRO") and expedited hearing. [Doc. 7.] Pursuant to the provisions of Title 28, United States Code, Section 636 and Local Rule 73.02(B)(1), D.S.C., this magistrate judge is authorized to review pre-trial motions and submit findings and recommendations to the District Court.

BACKGROUND

Plaintiff Z-Man Fishing Products, Inc. ("Z-Man") is a privately held fishing tackle company based in Ladson, South Carolina. [Doc. 7-2 ¶ 3.] Z-Man is a directly owned subsidiary of Plaintiff Holding One, Inc. ("Holding One"). [Id. ¶ 5.] Holding One is the owner by purchase and assignment of all right, title, and interest in two patents practiced by the CHATTERBAIT®, a line of fishing lures sold by Z-Man: (1) U.S. Patent No. 7,726,062 ("the '062 Patent") entitled "Snag-Resistant Fishing Lure" and (2) U.S. Patent No. 7,627,978 ("the '978 Patent") also entitled "Snag-Resistant Fishing Lure." [Id. ¶¶ 4, 6.] In addition, Holding One is the owner of a trade dress registration, Registration No. 3,505,384, directed toward a class of products including fishing lures. [Id. ¶ 6.] The tradedress is a blade configuration consisting of the five unattached sides of a hexagonal blade. Registration No. 3,505,384. Z-Man is the exclusive licensee of the rights associated with the '062 Patent and the registered trade dress, and it practices both the patent and the protected trade dress in its CHATTERBAIT® series of fishing lures. [Id. ¶ 7.]

Defendant Joseph F. Renosky ("Renosky") is the owner and operator of Defendant Renosky Lure, Inc. ("Renosky Lure"). [Doc. 21-1 ¶ 2.] Renosky has been in the fishing lure business for many years. [Id. ¶ 3; Doc. 7-1 at 4.] Until December 2010, Defendants acted as the sole distributors of the CHATTERBAIT® brand lures to several retailers, including Wal-mart. [Doc. 7-2 ¶ 18; Doc. 21-1 ¶ 26.] Defendants were not granted a license to practice the '062 Patent or the registered trade dress in lure other than the CHATTERBAIT®. [See Doc. 7-2 ¶ 19.]

In 2011, Wal-mart ceased carrying seven stock-keeping units ("SKUs") in the CHATTERBAIT® line of fishing lures. [Id. ¶ 21.] Plaintiffs claim that these SKUs were replaced with lures made by Defendants that are knock-offs of Plaintiffs' CHATTERBAIT® lures that infringe the '062 Patent and Holding One's registered trade dress. [Id.; Doc. 7-1 at 4.] Plaintiffs complain that these knock-offs are sold at lower prices than their CHATTERBAIT® lures and are confusingly similar to their CHATTERBAIT® lures, allowing Defendants to prey upon the brand recognition and goodwill of the CHATTERBAIT® line to erode Plaintiffs' market share. [Doc. 7-2 ¶¶ 22-23, 25.]

Defendants contend that in early 2010, Renosky designed a fishing lure that has a number of advantages over the lure described in the '062 Patent. [Doc. 21-1 ¶¶ 23-24.] Defendants argue this lure does not infringe the '062 Patent because it does not contain every limitation of the allegedly infringed claim [Doc. 21 at 7], and it does not infringeHolding One's registered trade dress because the trade dress is not distinctive and there is no likelihood of confusion [Id. at 9]. Further, Defendants contend that they did not influence Wal-mart's decision to remove the CHATTERBAIT® lures from the seven SKUs; they argue Wal-mart makes its stocking decisions based on sales performance. [Doc. 21-1 ¶¶ 30-32; Doc. 21-3 ¶ 7.]

APPLICABLE LAW

Under the Federal Rules of Civil Procedure, a court may issue a TRO without notice to the adverse party or its attorney. Fed. R. Civ. P. 65(b). The order expires at a time set by the court, which should not exceed 14 days from the time the court enters the TRO unless there is good cause for or the adverse party consents to an extension. Id. If the court issues a TRO without notice to the adverse party, the motion for a preliminary injunction must be set for hearing at the earliest possible time; a preliminary injunction may not issue without notice to the adverse party. Id.; Fed. R. Civ. P. 65(a). The court must dissolve the TRO if the party who obtained it does not proceed with the motion for preliminary injunction at the hearing. Fed. R. Civ. P. 65(b). Further, the court may not issue a preliminary injunction nor a TRO unless the movant "gives security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained." Fed. R. Civ. P. 65(c).

A preliminary injunction "protect[s] the status quo... to prevent irreparable harm during the pendency of a lawsuit ultimately to preserve the court's ability to render a meaningful judgment on the merits." In re Microsoft Corp. Antitrust Litigation, 333 F.3d 517, 525 (4th Cir. 2003). It is "an extraordinary remedy never awarded as of right." Winterv. Natural Res. Def. Coucil, Inc., 555 U.S. 7, 129 S. Ct. 365, 376 (2008) (citing Munaf v. Green, 553 U.S. 674, 689-90 (2008)). To obtain a TRO or a preliminary injunction, a plaintiff must show four elements:

1) he is likely to succeed on the merits,
2) he will suffer irreparable harm if the TRO or preliminary injunction is not granted,
3) the balance of equities favors him, and
4) the TRO or injunction is in the public interest.

Winter, 129 S. Ct. at 374; Moore v. Kempthorne, 464 F. Supp. 2d 519, 525 (E.D. Va. 2006) ("The standard for granting either a TRO or a preliminary injunction is the same."); see also Real Truth About Obama, Inc. v. Fed. Election Comm'n, 575 F.3d 342, 345-47 (4th Cir. 2009) (explaining how the Winter standard for preliminary injunctions was different from the standard previously applied in the Fourth Circuit), judgment vacated and remanded, 130 S. Ct. 2371 (2010), in light of Citizens United v. Fed. Election Comm'n, 130 S. Ct. 876 (2010). The plaintiff must establish all four elements to receive injunctive relief. Winter, 129 S. Ct. at 374.

The Fourth Circuit explained the Supreme Court in Winter requires "that the plaintiff make a clear showing that it will likely succeed on the merits at trial." Real Truth About Obama, Inc., 575 F.3d at 346 (citing Winter, 129 S. Ct. at 374, 376). Moreover, the party seeking the injunction must make a clear showing that it will likely suffer irreparable harm without an injunction. Id. at 347 (citing Winter, 129 S. Ct. at 374-76). Further, the Supreme Court in Winter emphasized the public interest requirement, id., requiring courtsto "'pay particular regard for the public consequences in employing the extraordinary remedy of injunction, '" Winter, 129 S. Ct. at 376-77 (quoting Weinberger v. Romero-Barcelo, 456 U.S. 305, 312 (1982)).

DISCUSSION

As discussed above, the same standard governs the grant of a TRO and a preliminary injunction. Moore, 464 F. Supp. 2d at 525. Because the Court has already conducted a hearing, where both parties presented arguments regarding how the TRO/preliminary injunction standard applies in this case, the Court will consider Plaintiffs' motion for a TRO to be a motion for a preliminary injunction.1See Fed. R. Civ. P. 65.

In patent cases, "a preliminary injunction... involves substantive matters unique to patent law and, therefore, is governed by the law of [the Federal Circuit]." Hybritech Inc. v. Abbott Labs., 849 F.2d 1446, 1451 n.12 (Fed. Cir. 1988). However, "purely procedural questions involving the grant of a preliminary injunction are controlled by the law of the appropriate regional circuit." Id. Therefore, the Court will apply Federal Circuit law with respect to substantive patent issues and Fourth Circuit law with respect to non-patent substantive issues and procedural issues.

Likelihood of Success on the Merits
Patent Infringement and Validity

To establish a likelihood of success on the merits, a patentee must demonstrate (1) that it will likely prove that the defendant is infringing one or more claims of the patent atissue and (2) that at least one of the allegedly infringed claims will also likely withstand validity challenges presented by the defendant. AstraZeneca LP v. Apotex, Inc., 633 F.3d 1042, 1050 (Fed. Cir. 2010) (quoting Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1351 (Fed. Cir. 2001)). The Federal Circuit "views [a motion for a preliminary injunction] in light of the burdens and presumptions that will inhere at trial." Titan Tire Corp. v. Case New Holland, Inc., 566 F.3d 1372, 1376 (Fed. Cir. 2009) (noting that at trial, "an issued patent comes with a statutory presumption of validity under 35 U.S.C. § 282"). "A preliminary injunction should not issue if an alleged infringer raises a substantial question regarding either infringement or validity, i.e., the alleged infringer asserts an infringement or invalidity defense that the patentee has not shown lacks substantial merit." AstraZeneca, 633 F.3d at 1050 (citing Genentech, Inc. v. Novo Nordisk A/S, 108 F.3d 1361, 1364 (Fed. Cir. 1997)).

Before it can determine whether the defendant is infringing the patent at issue or the patent is invalid, the court must construe the claims at issue, giving the claims the same meaning for purposes of both the infringement and validity analyses. Amazon.com, 239 F.3d at 1351 ("Only when a claim is properly understood can a determination be made whether the claim 'reads on' an accused device or method, or whether the prior art anticipates and/or renders obvious the claimed invention.... Because the claims of a patent measure the invention at issue, the claims must be interpreted and given the same meaning for purposes of both validity and infringement analyses.") Then, to determine if the defendant is infringing the patent, the court compares...

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