IP Law Daily, PATENT—E.D.N.Y.: Post-trial motions by defendants who willfully infringed Wallet Ninja patent denied, plaintiff awarded attorney fees, (Dec 4, 2023)

By Linda Panszczyk, J.D.

Defendants’ approach to this case, which was (and remains) highly unreasonable, justified an award of attorney fees.

In a case where a jury upheld the validity of plaintiff's design patent for a multipurpose tool, a credit-card sized Wallet Ninja, the defendants willfully infringed the patent, and the jury awarded the plaintiff $1.85 million in compensatory damages, the U.S. federal district court in Long Island denied in their entirety the defendants’ motions for post-trial relief. According to the court, the defendants failed to satisfy the exacting standards to warrant judgment as a matter of law or a new trial and so its motions were denied. Further, the plaintiff’s motion for the award of fees, costs and enhanced damages was granted in part and its motion for a permanent injunction against one group of defendants was granted but denied as to other parties. According to the court, plainly, the defendants’ conduct, both during the underlying infringement as well as during the course of the litigation, satisfied the requisite for the shifting of attorney fees and other costs and justified the imposition of an award of enhanced damages. That verdict followed on the heels of the jury’s initial determination that the claims to inventorship by defendant LaErik Cooper—a putative coinventor whose claims were subsidized and championed by defendant Sherman to torpedo Dynamite’s patent claims—lacked substance, as Cooper failed to prove that he had made substantial contribution to the asserted patent, U.S. Patent No. 751,877 (’877 patent) (Dynamite Marketing, Inc. v. Wowline Inc., December 1, 2023, Brown, G.).

Background. Around 2003, Alex Shlaferman, Dynamite’s principal, devised the concept of the Wallet Ninja, setting out to design a multitool that he could market. He drew a rough outline on a whiteboard, sending that drawing and other information to defendant Cooper. Cooper, a mechanical engineer, operated a business that offered to create mechanical drawings for inventors. His website boasted a commitment to protecting the rights of inventors, including the phrase “Helping to Engineer Your Ideas” in its logo, and representing that “Your ideas remain just that, your ideas.”

Shlaferman paid him hourly to produce various drawings for the Wallet Ninja and several other projects. Cooper provided drawings that he helped create under this arrangement to Shlaferman’s patent lawyer. In 2014, Shlaferman filed for a design patent protecting certain features of the device, which was granted in 2016.

The Wallet Ninja enjoyed remarkable market success, being distributed through major retailers and obtaining significant rankings on Amazon.com.

In 2017, defendant Davila, on behalf of the Sherman defendants, sent a catalog photo of the device to three producers in China seeking bids for supply. The Sherman defendants began selling a knockoff that they acknowledge infringes plaintiff’s patent; even after learning of the infringement, the group continued to sell through the inventory of the items they commissioned. After receiving a 2018 cease and desist letter from plaintiff, defendants “redesigned” the product—without making any meaningful changes—and continued to sell the product unabated. Defendants created "a blatantly false letter" designed to reassure customers that their new design did not infringe plaintiff’s patent. Overall, the various iterations of the knockoff proved the bestselling tool marketed by the Sherman defendants, and the group distributed approximately 800,000 units.

After the filing of this litigation, the Sherman defendants obtained an assignment of defendant Cooper’s rights as a putative inventor, trying to invoke a standing doctrine that requires the consent of all inventors to proceed with patent litigation. The Sherman defendants paid Cooper’s legal fees and all related expenses as a quid pro quo for assignment of the rights he might have held in the patent. In a bifurcated trial, the jury first determined that Cooper was not an inventor, and then proceeded to determine infringement, invalidity, and damages. The jury’s findings, contained in two verdict forms, establish that Cooper failed to prove that he had made significant contributions to the claimed design of the ’877 patent; that the ’877 patent was not invalid either on the basis of obviousness or lack of ornamentality; the defendants infringed the ’877 patent; that the infringement was willful; and that plaintiff proved damages in the amount of $1.85 million.

Here, at issue were a number of post-trial motions by the parties. Defendants attacked the verdict on several fronts, seeking judgment as a matter of law, a new trial and/or remittitur on the issues of inventorship, damages, standing, validity, infringement and willfulness. The plaintiff sought enhanced damages and attorney’s fees.

Defendant Cooper’s inventorship claims and the issue of standing. The court denied defendant Cooper’s inventorship claims and the issue of standing. Defendant Cooper contends that, based on the strength of his purported showing, that no reasonable jury could determine that he did not make substantial contributions to the claimed invention, rendering him a joint inventor of the design contained in the ’877 patent. According to the court, in itemizing Cooper’s comparative contributions to the Wallet Ninja, counsel notes that, as just one example, Shlaferman’s design above did not include the hex-shaped cutouts at the bottom of the Wallet Ninja, but, said the court, the hex cutouts encompass the only example of an element contributed by Cooper. More importantly, however, as the evidence made clear, the inclusion of hex wrenches was Shlaferman’s idea during their iterative exchanges. Cooper can only be credited, as counsel later clarifies, with “the placement and size of the hex-shaped design elements.” Thus, far from making a clear and convincing showing of inventorship, Cooper’s contributions to the patented design could best be described as incidental.

An array of facts, including Cooper's general knowledge of the patent process, his specific knowledge of Shlaferman’s efforts to patent the Wallet Ninja design, his promises to respect Shlaferman’s inventive ideas, his request to Shlaferman to use pictures of the Wallet Ninja on his company’s website, and his inexplicable silence about inventorship for years after the application for and issuance of the patent, support the jury’s finding that Cooper was not a co-inventor and further doom defendant Cooper's motion. Thus, said the court, the jury’s determination cannot, under any circumstances, be described as irrational or unlawful, and the court will not disturb the jury’s considered finding on inventorship and the court denied defendants’ motion for judgment as a matter of law. This determination also resolves defendants’ motion on the issue of standing, which was expressly conditioned upon a finding of co-inventorship.

Sherman defendants’ motions regarding damages. The Sherman defendants sought reduction of damages via a new trial and/or remittitur, claiming that the jury’s award was irrational and excessive. Plaintiff sought damages on a lost profit theory, while defendants argued that their profits from the infringement represented a more reliable measure of damages. The court called this the defendants attempt to "mischaracterize the jury’s determination." At no point, did the jury simply accept figures from plaintiff’s expert; rather, the determination by the jury represents a reasoned, independent determination of the lost profits sustained by plaintiff, for which there was ample support in the record, said the court.

The defense also misconstrued its own evidence, said the court, as the defense repeatedly and vehemently argued that it introduced evidence that defendants’ profits from the infringing activity totaled $150,000, and that the court should use this figure in evaluating the true scope of the loss, an assertion which the court described as "simply untrue" and "yet another attempt to distort the record and mislead the Court." The court concluded that, in short, the evidence amply supported the jury’s considered determination of damages, and defendants have failed to satisfy the demanding standard for post-trial relief.

Defendants’ motion regarding validity, infringement and willfulness. Defendants’ post-verdict motion purportedly seeks a new trial or relief from the verdict on the grounds of validity, infringement and willfulness under Rule 50(b), but according to the court, "the motion embodies a sweeping attack on the verdict unconstrained by the law, evidence, common sense or the truth." While defense counsel relies exclusively upon its expert’s opinion to suggest that the patent design was obvious when compared to the prior art, and therefore invalid, there was sufficient reason to question these opinions, as well as other evidence of record, that amply supports the jury’s determination. As the court indicated, the jury, quite reasonably found that the product infringed and that this determination was supported by substantial evidence, including testimony by plaintiff’s expert that the products were sufficiently similar so as to cause confusion. Evidence similarly supported the conclusion that the design was not solely functional.

The court further indicated that the balance of defendants’ “kitchen sink” motion requires little analysis. For example, counsel attempts to attack the jury’s finding of willful infringement based, in part, on a purported good faith belief by the Sherman defendants that Cooper was a coinventor, but since Cooper’s role was unknown to defendants until long after the infringing acts, even if true, the defense fails. Likewise, defendants’ reliance on the ersatz redesign of its infringing product "borders on frivolous," said the court.

Plaintiff’s motion regarding enhanced damages and attorney fees. Given the determination that defendants willfully infringed, the court retains the discretion to “increase the damages up to three times the amount found or assessed. "Generally, as the Supreme Court has held, that such enhancement is appropriate where defendants engage in conduct that is “willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or—indeed—characteristic of a pirate.”

According to the court, most, if not all, of the Halo factors could well support enhanced damages in this case. The jury’s finding of willful infringement was based on substantial evidence of a pattern of bad conduct on the part of defendants, including its initial theft of plaintiff’s patented design (which was, at a minimum, reckless), its failure to stop selling its inventory of pirated goods after receipt of a cease-and-desist letter and its utterly indefensible mock redesign process.

In addition, should the court determine that the action represents an “exceptional case,” it retains the discretion to award attorney fees. Perhaps unsurprisingly, after years of heated (and costly) litigation in a manner that defendants’ counsel concedes was “hard-fought,” plaintiff sought an award of enhanced damages and attorney fees and costs. Plaintiff’s counsel devoted considerable energy to recounting defendants’ conduct during the litigation—which was, at times, unacceptable. In considering an application for attorney fees, the court may consider “the unreasonable manner in which the case was litigated.”

According to the court, defendants’ approach to this case, which was (and remains) highly unreasonable, certainly justifies an award of attorneys’ fees. For example, defendants unnecessarily multiplied the proceedings by bankrolling Cooper’s inventorship claims, which bordered on frivolity. Moreover, defendants continued adoption of unreasonable positions, several of which are cataloged herein, plainly, and unfairly, added unjustified layers of complexity and expense to the resolution of the case.

On this motion, plaintiff sought attorney fees of $1,134,157.50; expert fees of $250,168.86; and costs of $152,317.91, which total $1,536,644.27. Importantly, in reviewing such requests, “trial courts need not, and indeed should not, become green-eyeshade accountants. The essential goal in shifting fees (to either party) is to do rough justice, not to achieve auditing perfection. So, trial courts may take into account their overall sense of a suit and may use estimates in calculating and allocating an attorney’s time.” In addition, plaintiff seeks the discretionary imposition of prejudgment interest.

The court awarded the amounts sought as requested, which will compensate plaintiff for the costs of this protracted litigation while simultaneously serving the ameliorative purposes of an award of enhanced damages under 35 USC §284. Plainly, said the court, defendants’ conduct, both during the underlying infringement as well as the course of the litigation, satisfied the requisite for the shifting of attorney fees and other costs and justify the imposition of an award of enhanced damages. Traditionally, in other contexts, such punitive damages are frequently awarded in small multiples of the amount of compensatory damages, a factor that becomes important here. Here, the amounts sought for attorney fees, expert fees and costs—totaling over $1.5 million plus interest—is roughly equivalent to an award of double damages, which here would amount to an additional $1.85 million. Thus, the court exercised its discretion to impose attorney fees, expert fees and costs in the amount of $1,536,644.27 plus pre-judgment interest from the date of the filing of the complaint in this action.

Plaintiff's motion for permanent injunction. Plaintiff sought a permanent injunction against the Sherman defendants, who endeavor to assure the court that such an injunction is moot as they claim to have discontinued their infringing activities. The court was unpersuaded that there is no ongoing risk, and therefore the motion for a permanent injunction against further infringement was granted as to the Sherman defendants. As to Cooper and other non-parties against whom plaintiff seeks a permanent injunction, however, the motion for a permanent injunction was denied.

The Case is No. 2:19-cv-03067-GRB-LGD.

Attorneys: Michael Cukor (McGeary Cukor LLC) for Dynamite Marketing, Inc. Andrew P. Cooper (Falcon Rappaport & Berkman PLLC) for The Wowline, Inc. and Sherman Specialty LLC.

Companies: Dynamite Marketing, Inc.; The Wowline, Inc.; Sherman Specialty LLC; www.Superiorpromos.com

Cases: Patent NewYorkNews