Howarth v. Szlag (D. Mass. 20-cv-11721).

Photographer Morgan Howarth accuses David Szlag, who operates Parkside on Ellery Bed and Breakfast in Cambridge, of copying one of Howarth’s photographs off of the internet and using it for promotional purposes.  The photograph depicts an individual rower about to pass under the Weeks Footbridge, which crosses the Charles River near Harvard University (and near Szlag’s inn).  According to the complaint, Szlag placed copies of the photograph in his inn’s advertisement on www.BedandBreakfast.com.  Howarth asserts willful copyright infringement, based on Szlag’s failure to respond to two demand letters, sent in the spring and early summer of 2018.  Interestingly, there is no accusation that Szlag used the photograph on the inn’s actual website, and there are no factual allegations in the complaint that Szlag had control over the third-party BedandBreakfast website or that Szlag, and not the website owners, who selected the photograph.  Judge Woodlock has this case.

Boston East Brunswick Holdings LLC et al. v. Saco and Biddeford Savings Institution et al. (D. Mass. 20-cv-11696).

Plaintiff Boston East bought the Captain Daniel Stone Inn in Brunswick Maine from Saco on 2013, two years after Saco itself had acquired the property from one of its borrowers.  Over four months of diligence, Boston East claims it was never informed of significant problems in the HVAC and sprinkler systems at the inn by Saco.  Boston East obtained a loan from Saco to make the purchase.  Boston East says that is invested over $2.8 million on renovations and upgrades to convert the inn into a high-end boutique hotel, which it rebranded as “The Daniel Hotel,” with an interior restaurant branded as “Coast Bar + Bistro.”  Boston East asserts that, through its considerable advertising and promotional efforts, these brands have acquired trademark status and have become famous.

When two separate instances of HVAC pipe failures in the summer of 2019 caused the hotel to shut down during the peak season, Boston East fell behind on its payments to vendors and upon its loans., and the company filed for Chapter 11 bankruptcy in January 2020.  This bankruptcy was dismissed a month later, after which Saco offered to hold off on foreclosure proceedings if Boston East agreed to forgo refiling for bankruptcy and instead market the hotel for sale.  According to Boston East, Saco was aware that sale of the hotel would likely take some time, as Saco had taken 23 months in 2011 to find a buyer and Maine (like the rest of the country) was at that point entering into the COVID pandemic, which would necessarily impact travel, lodging and real estate sales.  Nevertheless, despite knowing that Boston East would expend considerable resources maintaining and running the hotel while seeking a buyer, Saco determined in July to foreclose, and in August Saco changed the locks on the property and placed it with an auction house, co-defendant Tranzon Auction Proprties to auction the property.  The auction is scheduled for today, September 17th.  According to Boston East, in marketing the hotel, the defendants wrongfully used, and tarnished, the marks used by Boston East in running the hotel.  Boston East brings counts for common law trademark infringement, false designation of origin, unfair competition and trademark dilution under the Lanham Act, trademark dilution under Massachusetts G.L. c. 110H § 13, violation of the Federal Trade Commission Act through unfair and deceptive practices, violation of c. 93A, conversion in connection with the retention of Boston East property that was in the hotel when the locks were changed, breach of contract, detrimental reliance and violation of the implied covenant of good faith and fair dealing.

Update from D. Mass. On Resumption of Trials.

Chief Judge Saylor held a Zoom conference this afternoon to inform the bar on the steps the District has taken to resume jury trials.  Four of the larger courtrooms in Boston have been configured to allow for proper social distancing, including plexiglass barriers, spreading the jury out into the well of the courtroom, and electronic equipment to allow for sidebars without counsel approaching the bench.  While this will allow for jury trials to resume, the continuing COVID issues will require some differences from the pre-COVID era:

  • Criminal trials will take preference, particularly where the defendant remains in custody;
  • Civil trials will resume based on the level of complexity and the number of people likely to be required, although they will potentially provide more flexibility for witnesses by video or the like; and
  • Courtrooms will be limited to a maximum of 24 people (and will be less for smaller courtrooms), inclusive of jurors, Judge, parties, lawyers, witnesses, courtroom reporters, clerks, etc.

The trials will also entail some safety precautions.  Everyone, including lawyers, parties, and jurors, will be required to wear masks throughout, other than witnesses who are testifying – they will speak without masks to enable jurors to assess their credibility.  Jury rooms will not be available, as they are too small to allow for proper distancing; instead, smaller courtrooms will be used as jury rooms or staging rooms for trial teams, to limit the number of attorneys and staff necessary at any one time in the courtroom.  Public access will likely be restricted to Zoom (or the equivalent), although the right to public access remains to be balanced with the restrictions on broadcasting federal trials.  Even access to elevators in the courthouse will be limited to four people at a time, with each facing a different wall.  Attorneys, potential jurors, and witnesses will be required to fill out self-assessments relating to their health and potential COVID exposures.  Further, given the civil unrest (which has included attacks on court security personnel in Arizona), courthouse security would remain a priority.  Judge Saylor indicated that the same restrictions would apply in the Worcester and Springfield courthouses.

A number of issues remain to be determined.  No determination has been made with regard to an attorney or juror getting sick – HIPPA likely prevents the Court from determining whether they have symptoms consistent with, or a diagnosis of, COVID, and would likely prevent the Court from notifying co-jurors or others should this occur Judge Saylor did indicate that a single juror’s illness would not result in a termination of the trial.  No decisions have yet been made for dealing with witnesses who refuse to attend trial, or witnesses from locations from which travel is prohibited by Governor Baker’s emergency orders – while the state’s travel restriction do not apply to federal court proceedings, the Court is reluctant at this time to counter these restrictions. Finally, the potential jury pool will potentially be reduced due to the exclusion of those more at risk from COVID, as well as those who choose not to appear as a result of the pandemic and/or political climate.

The first jury empanelment is scheduled to begin on September 29th, and the first few trials will allow the court to determine the effectiveness of the safety procedures put in place.  While the Moakley Courthouse has four courtrooms set up for trials, all four will not be put into initial simultaneous use.  After that, the Court will determine a trial schedule as a collective whole – trials will not be scheduled at the discretion of the individual judges.  The Court is looking at alternative spaces in which to hold bigger trials, which might include Hanscom Air Force Base in Bedford and/or the courtroom in the McCormack Building that formerly housed the federal courthouse (although neither remain certain yet).  It seems likely, however, that complex civil matters will not occur until 2021.

ecobee, Inc. v. Ayarzl et AL. (d. Mass. 20-cv-11620).

Ecobee sued Ayarzyl, Certified Tech USA, Maj Deals, and Bitsnbites 1, accusing each of selling ecobee products on-line without authorization.  Ecobee brings counts of trademark infringement, false advertising and unfair competition.  As has been the case with its many similar prior complaints, ecobee does not assert that counterfeit goods bearing the registered ECOBEE mark are being sold; instead, it asserts that they sell used or liquidated ecobee products through their respective Amazon Seller Accounts that they improperly identify as “new.”  As these entities are not authorized, they lack the training and quality controls to which ecobee’s authorized resellers are subject.  Customers may, for example, order products meant for professional installation, or products configured and intended for use outside of the United States.  Ecobee cites a number of customers who left negative feedback after purchasing ecobee products from these sites, evidencing customers’ belief that the products were new when they turned out not to be.  As a result of these issues, ecobee contends that the products being sold by the Defendants are “materially different” than authorized ecobee products, and thus fall outside of the “first sale” doctrine that would normally permit the resale of a product bearing the original seller’s trademark.  

Ecobee has brought a number of complaints against unauthorized Amazon resellers who are selling actual ecobee products, albeit used, damages, liquidated, or other products that ecobee would not itself have offered for sale.  Since October 2018, ecobee has filed twelve such complaints in this district (including this one).  Each of these involved obtaining leave of court to serve the defendants by alternative means, namely via the resellers’ Amazon e-mail service that the resellers used to communicate with their customers.  Of the eleven prior suits, one was transferred to the Eastern District of New York, where it remains pending and one settled.  In the remainder, ecobee successfully obtained default judgment and a permanent injunction.  While these suits were effectively unopposed, the court still must determine that the well-pled facts of the complaint stated a proper claim on which the relief could be granted.

Bio-Rad Laboratories, Inc. et al. v. 10X Genomics, Inc. (D. Mass. 19-cv-12533).

In this long-running, multi-district dispute, Bio-Rad accused 10X Genomics of infringing a number of patents, and 10X filed counterclaims alleging antitrust violations based on Bio-Rad’s patent enforcement practices.  10X says that Bio-Rad is improperly exploiting its market power in two types of genetic analysis and in the market for genetic droplet research technology.  Judge Young has denied in part and granted in part Bio-Rad’s motion to dismiss these counterclaims pursuant to Rule 12(b)(6). 

10X asserted that Bio-Rad had acquired several companies holding patents in ddPCR technology that allows for more accurate and sensitive gene sequencing, and that Bio-Rad controls more than 90% of the market in this technology, allegations which are assumed to be true for the purposes of analyzing the motion to dismiss.  10X asserts that it and Bio-Rad together make up the majority of the Droplet Single-Cell Product market, which dominates single-cell NGS sample preparation.  Finally, 10X says that Bio-Rad will be a monopolist in the Droplet Genetic Anaysis Technology market that covers broadly all droplet-based genetic analysis, if Bio-Rad’s claims are construed as broadly as Bio-Rad asserts.  With respect to all three categories, 10X asserts that Bio-Rad’s acquisition of RainDance Technologies, Inc. in 2017 led to near-monopoly market power both by eliminating a competitor (Bio-Rad eliminated RainDance’s competing product lines upon completion of the acquisition) and by consolidating patents in the technology areas.  10X also asserts that Bio-Rad is trying to drive 10X out of the market through aggressive patent litigation, including through the assertion of the patents acquired from RainDance and refusal to license at reasonable rates.  All of the antitrust counterclaims were brought under Sections 7 of the Clayton Act, 15 U.S.C. 18 (which bans the acquisition of sock in a company when the effect may be substantially to lessen competition or to tend to create a monopoly) or Section 2 of the Sherman Act, 15 U.S.C. 2 (making it illegal to monopolize or attempt to monopolize any part of trade or commerce among the several states).  To properly state such a claim, 10X is required to assert both the possession of monopoly power in a relevant market and the willful acquisition or maintenance of that power, as distinguished from growth or development as a consequence of a superior product, business acumen, or historical accident.

Judge Young first denied Bio-Rad’s bid to bar the counterclaims as compulsory claims that should have been brought in the parties’ on-going litigation in the Northern District of California.  He noted that the Supreme Court has determined that antitrust counterclaims in a patent infringement case are permissive rather than compulsory, and that the District of Massachusetts continues to view patent misuse claims to be permissive (despite having determined that antitrust claims based on the assertion of invalid patents were compulsory).  Judge Young then applied the Noerr-Pennington doctrine, which protects activity relating to petitioning the government from antitrust liability, applied to enforcement of patents through litigation.  Two exceptions exist to this doctrine – the assertion of patents obtained through fraud and assertion of patents as a sham – is objectively baseless – to cover impermissible anticompetitive conduct.  He noted that so long as the litigation is not baseless, this doctrine shields litigation even if it is brought with the intent to harm a competitor.  Judge Young declined to bar 10X’s requested remedy of divesiture by Bio-Rad of the RainDance patents under the laches doctrine, opting to adhere to the Ninth Circuit’s determination that laches should not apply until at least four years had passed since the cause of action accrued, based on the statute of limitations found in the Clayton Act.  He further determined that 10X had properly pled the technical elements for the market definitions, while noting that they “barely cross the required threshold of specificity.”

With respect to the DSCP market, Judge Young noted that market power traceable to a previous merger can serve as the basis for a violation, but that RainDance was never a major competitor in the DSCP market and thus the acquisition was not the source of any market power that Bio-Rad may now have.  He further faulted 10X’s claim because 10X asserted that Bio-Rad had only entered the NGS Sample Prep market after acquiring RainDance, noting the unlikelihood that the acquisition of patents to enter a market was unlikely to form a violation of the Clayton Act.  He also pointed to 10X’s assertion that 10X, not Bio-Rad, held the most market share in the DSCP market at the time the counterclaim was filed; while 10X asserts that the two parties dominate that market, the pleadings suggest that Bio-Rad does not hold a monopoly share and provide no way to determine what percentage of the market Bio-Rad actually controls.  Absent a showing of market power, the acquisition of competitors or patents cannot serve as a Clayton Act violation.  Further, while 10X asserted that Bio-Rad charged supracompetitive prices, it provided no specificity to allow this allegation to be evaluated.  Judge Young determined that the bald allegation of supracompetitive pricing constituted a legal, rather than factual assertion, and moreover that 10X had made no connection between any such overpricing and Bio-Rad’s acquisition of RainDance, likely because (as noted) RainDance was not in the market at the time of the acquisition.  Judge Young concluded that the antitrust claims should be dismissed with respect o the DSCP market. 

The outcome was different for the Droplet Genetic Analysis Technology market, with Bio-Rad’s requested dismissal being denied.  RainDance had competed in this market prior to the acquisition, and 10X alleged that the acquisition removed a potential competitor and left Bio-Rad with a dominant market share, and had immediately raised royalty prices upon obtaining the additional patents, indicative of newly-acquired market power.  Judge Young determined that 10X’s antitrust claims based on the assertion of patents in litigation, noting that patent litigation is not forbidden by antitrust law, because 10X would have been subject to litigation regardless of who owned the patents, as evidenced by the fact that prior to the acquisition, RainDance had asserted some of the patents against 10X.  Nevertheless, the Clayton Act count with respect to this market was allowed to proceed.

With respect to the ddPCR market, Judge Young noted that 10X’s allegations that Bio-Rad had increased its market share above 90% through the RainDance merger formed a classic example of conduct negatively impacting competition through monopolization behavior.  Accordingly, this count was upheld.

With respect to the Sherman Act counts, allegations that a dominant competitor acquires a patent (or patents) covering a substantial share of the same market can constitute monopolization, provided the claimant can show a specific intent to destroy competition and a predicate illegal act.  10X could not make this showing.  Most of 10X’s theories of how it was harmed were not the result of anticompetitive action, and the series of patent litigation cases filed by Bio-Rad are protected by the Noerr-Pennington doctrine from antitrust scrutiny.    Judge Young denied Bio-Rad’s motion with respect to the ddPCR market, given the already-dominant position Bio-Rad held prior to the RainDance acquisition, but granted the motion with respect to the other markets.

D. Mass. Presentation on Resumption of Jury Trials

The District of Massachusetts has announced a Zoom presentation on September 16th at 4:00, at which Chief Judge Saylor will provide an update on the resumption of jury trials during the COVID pandemic.  The session will include a question and answer period.  It is my understanding from comments from other judges in the district that at least two courtrooms have been equipped with plexiglass screens and other equipment to better enable proper distancing while in the courtroom – I expect we will learn more about this.  You can register for the presentation here.

Vigilone v. 15 Beacon Street Corp. et al. (D. Mass. 19-cv-12486).

Keith Vigilone sued 15 Beacon Street Corp., Beacon Street LLC, and Paul Roiff, the president of the corporation and manager of the LLC, accusing them of misusing a copyrighted photograph of the Prudential Building with “GO PATS” emblazoned in the building lights and reflected off of the Charles River.  Vigilone asserted that the defendants used the photograph on the website for XV Beacon Hotel.  Judge Stearns has now granted Vigilone’s motion to amend the complaint to add Luxe Social Media and its manager, Tiffany Dowd, who the defendants had engaged to manage their social media.  While the time for amending the complaint by right had passed, meaning that “good cause” standard applied to the motion to amend, Judge Stearns noted that Vigilone only found out about Luxe’s role through discovery, and did not unduly delay upon so discovering, demonstrating good cause.

Mediating Online – Best Practices Program.

The Massachusetts Chapter of the Federal Bar Association is hosting a Zoom program titled “Mediating Online – Best Practices for Virtual Mediations” on Wednesday, September 2, from 12:30 to 1:30.  Magistrate Judge Bein and retired Superior Court Judge Hinkle (now with JAMS) are presenting,  Anyone interested in participating (I am so doing) can register at https://forms.mad.uscourts.gov/VirtualMediations.html

Bassett v. Jensen et al. (18-cv-10576).

Martha’s Vineyard homeowner and artist Leah Bassett sued a number of individuals and businesses in connection with an individual who was employed with one of the businesses filming pornographic videos at Bassett’s home, which he had leased for a multi-month period of time.  As part of her claim, Bassett asserted copyright infringement based on a variety of her arts and crafts that had been used to decorate the home appearing in numerous videos and promotional still shots.  Earlier this summer, Judge Saris dealt with the bulk of the parties’ respective summary judgment motions, dismissing some of the state law claims as lacking factual or legal basis and others on statute of limitations grounds.  On the copyright claim, Judge Saris determined that the collections that Bassett registered met the low bar of originality for works titled as drawings, paintings, photographs, wall hangings, collages and pottery.  She determined that stencils on tabletops qualified for copyright protection so long as they were designed by Bassett, but that slipcovers and pillows do not qualify, because the fabric were not designed by Bassett and the shapes were selected for their functional purposes, not aesthetic.  Judge Saris decided that Defendants’ fair use defense does not apply.  She rejected the argument that the use was “incidental,” noting that this exception would swallow copyright law, at least with regard to set decorations, and allow for wholesale appropriation for movies and television.  She instead characterized the nature of the use as commercial, which weighs against fair use.  She further found that at least some of the copyrighted works appeared in full in the films, weighing against fair use.  While acknowledging that the effect on the potential market weighs in favor of fair use, in that Bassett had never intended to sell the works, Judge Saris determined that, balancing these factors, Defendants were not entitled to summary judgment of fair use. 

Judge Saris held off on ruling on the dueling motions regarding infringement.  Defendants argued that the use of the works in the films was de minimis.  Judge Saris adopted the framework set forth in Ringgold v. Black Entm’t Television, Inc., a Second Circuit case that dealt with visual works appearing in films, which identified the “observability of the copied work – the length of time the copied work is observable in the film and factors such as lighting, focus, camera angles, and prominence, in determining whether the use was de minimis and thus non-infringing.  Judge Saris determined that the evidence presented by both sides lacked sufficient information to analyze the issue under the Ringgold analysis, and deferred a final determination on copyright infringement.  She ordered Bassett to provide an analysis describing which works appear in which films, how long the works appear, and the level of detail that the works appear, along with representative screenshots.

Bassett made the required filing, and Judge Saris has now granted summary judgment of infringement to Bassett.  The supplementary filing showed that at least one work was clearly visible for at least 30 seconds (either continuously or in aggregate), and often for several full minutes, in each of the ten accused films.  

A jury trial on copyright damages and on the remaining state law claims is scheduled for February 2021.  With luck, the Covid crisis will have subsided and this schedule will be met.  

CardioNet, LLC et al. v. InfoBionic, Inc. (D. Mass. 15-cv-11803).

Judge Talwani denied without prejudice InfoBionic’s motion for leave to file its motion for attorney’s fees and accompanying exhibits under seal.  The motion asserted that the attorney’s fees documents included both parties’ confidential information and noted that CardioNet was not opposing the motion.  Judge Talwani noted that there is a presumptive right of public access to judicial documents, and that only the most compelling reasons can justify denying this access.  Accordingly, and on a document-by-document basis, a party seeking impoundment must make a particular factual demonstration of potential harm that would result through disclosure.  Judge Talwani found InfoBionic’s statements too conclusory to provide the factual backing needed to justify impoundment.  She required InfoBionic to refile with factual information on its confidential information and to flag CardioNet’s confidential information, with CardioNet to file a response providing a factual basis for sealing its confidential information, should the parties wish to refile.  She further noted that she did not envision agreeing to impound entire documents, and suggested the parties propose redactions instead.  Finally, she noted that attorney billing records are commonly filed on open court dockets, suggesting that she would not agree to impound the records.