IP Law Daily, PATENT—S.D.N.Y.: Film production company denied stay pending interlocutory appeal of infringement finding, (Mar 25, 2014)

By Thomas Long, J.D.

Film production company Deluxe Entertainment Services Group, Inc. (“Deluxe”) has been denied a stay of proceedings by the federal district court in White Plains, New York, pending an interlocutory appeal of a determination that anti-piracy technology used by Deluxe infringed a patent held by the Swiss company Medien Patent Verwaltung, AG (“Medien”) (Medien Patent Verwaltung AG v. Warner Bros. Entertainment Inc., March 21, 2014, McMahon, C.).

In a February 5, 2013 opinion, the court found that Deluxe infringed U.S. Patent No. 7,187,633 (“the '633 patent”), entitled, “Marking of a Data Medium Material for Information Intended for Reproduction.” The patent disclosed a method for placing a sequence of identifying code markers on motion picture film print or other media, thereby allowing pirated copies to be traced back to a particular film master print. On January 29, 2014, the court rejected an invalidity challenge by Deluxe. Deluxe filed notice of its interlocutory appeal of the court’s liability determination on February 25 and then moved for a stay pending appeal.

Deluxe failed to demonstrate a substantial possibility that it would prevail in its interlocutory appeal of the court’s liability rulings, the court said. Deluxe’s motion rested primarily on its assumption that the Federal Circuit was going to reverse the court’s rulings on claim construction, infringement, and validity. However, the court did not believe that Deluxe enjoyed a substantial possibility of success on appeal.

Deluxe also failed to demonstrate that the other traditionally considered factors weighed in favor of a stay. First, Medien would sustain significant prejudice from further delay of the ultimate resolution of the case, in the court’s view. Medien was a small company, and the cost of the litigation had imposed substantial financial hardship on it. A Federal Circuit decision on the appeal likely would not issue for a year or more, which was long after the scheduled date for the trial on damages in June of this year. The court agreed with Medien’s argument that it should not have to wait another year before having a jury decide the amount of damages it is entitled to recover.

Second, Deluxe would not be unduly burdened by going forward with the damages trial as scheduled. The burden and expense of trial would only be delayed by a stay, not avoided. The trial was likely to take no longer than three days. Nearly all of the preparation work had already been done, so the remaining burden and expense to complete the damages trial should be relatively modest, according to the court.

Third, the interests of the court would be served by resolving the case in the most expeditious manner possible. Medien argued that the Federal Circuit was “close to settling an issue of law bearing on the action,” but it failed to identify the unsettled issue of law to which it referred.

Finally, Medien failed to demonstrate any public interest in the resolution of its motion to say. Deluxe argued that a stay would serve the public interest because conducting the damages trial now “would be a waste of judicial resources, and therefore tax dollars.” This argument, the court noted, applied to every motion to stay pending appeal if one assumed that the appeal would result in reversal. This case did not implicate the public interest one way or another, the court said.

Therefore, the court denied the motion to stay and directed that the damages trial should proceed as scheduled.

The case is No. Civ. 4119 (CM) (GWG).

Attorneys: Andrew Michael Riddles (Crowell & Moring LLP) for Medien Patent Verwaltung AG. Scott J. Bornstein (Greenberg Traurig, LLP) for Deluxe Entertainment Services Group, Inc.

Companies: Medien Patent Verwaltung AG; Deluxe Entertainment Services Group, Inc.

Cases: Patent NewYorkNews