The Hapless Case of the Hookless Defendants: A Cautionary Tale on Treble Damages and Costly Attorneys’ Fees
Launching a product, even a simple one, can be lucrative, but also presents risks, not the least of which is patent infringement. Before selling a product, it is wise to invest in patent clearance advice, which includes an investigation of active patents relevant to the function and design of that product. In obtaining clearance advice, it is important to seek counsel from experienced, competent attorneys and to heed that advice. There are at least two hookless shower curtain vendors who appreciate these sentiments, as they learned the hard way and now are “on the hook” for enhanced damages far exceeding the cost of obtaining sound advice. The recently decided case, Focus Products Group Int'l, LLC v. Kartri Sales Co., Inc. Marquis Mills, Int'l, Inc., serves as a cautionary tale demonstrating the importance of investing in clearance advice and the risks of failing to do so. No. 15CIV10154PAESDA, 2023 WL 3815276, at *1 (S.D.N.Y. June 5, 2023).
The Plaintiff, Focus, is the exclusive licensee of three U.S. utility patents (U.S. Patent Nos. 6,494,248, 7,296,609, and 8,235,088), a U.S. design patent (U.S. Patent No. D746,078), and other intellectual property including trademarks and trade dress directed to hookless shower curtain rings. Focus sued Defendants Marquis and Kartri in 2015 after discovering competing shower curtain rings for sale throughout the United States. A comparison of FIG. 20 of the ’248 patent and the Defendants’ design is below.
In decisions on summary judgment and after a bench trial, the Court found Kartri and Marquis liable for utility patent infringement, trademark infringement, trade dress infringement, and unfair competition. The Court also found that Kartri’s and Marquis’ utility patent infringement was willful and trebled the nearly $1 million lost profits damages award to almost $3 million. Post-trial, the Court granted Focus’ motion for attorneys’ fees, awarding Focus nearly $1 million in attorneys’ fees. The Court based its willfulness finding and attorneys’ fees award on pre-litigation acts by Kartri and Marquis, showing willful blindness to the high probability that their products were infringing, in addition to litigation misconduct.
First, the Court found Kartri’s and Marquis’ clearance efforts deficient. Before the litigation, neither Kartri nor Marquis investigated whether their shower curtain rings potentially infringed any active patents. When Marquis learned of Focus’ patents covering hookless shower curtain rings through a Chinese vendor, it relied on unsubstantiated assurances by that Chinese vendor about the potential risks those patents presented, their legal status, and their likelihood of being enforced. Marquis did not seek advice from competent IP counsel to validate the vendor’s assurances.
Second, the Court found that Kartri’s and Marquis’s actions after receiving a cease-and-desist letter evidenced willfulness and egregious conduct. In February of 2015, Focus sent both Kartri and Marquis a cease-and-desist letter alleging that the shower curtain rings infringed their intellectual property rights, including the patents at issue. Despite being put on notice, Kartri and Marquis disregarded the letter and continued selling their products without investigating these allegations or seeking advice of competent IP counsel. The Court made particular note that the Defendants deliberately ignored the cease-and-desist letter while continuing to sell the product for a prolonged period of time, failed to investigate, failed to remediate (such as changing a design), and had a profit motivation while being a direct competitor to Focus.
In addition to pre-litigation deficiencies, the Court found that Defendants’ litigation misconduct warranted the attorneys’ fees award. The Court determined that Defendants and their attorneys prolonged litigation, thereby driving up Focus’ costs while burdening the Court. The Court emphasized that the Defendants alone and through their counsel: (1) failed to comply with discovery obligations, including failing to deliver financial information, (2) violated Court protocols and rules, including improperly raising defenses, failing to conform to local rules, and frequently missing filing deadlines, (3) made assertions without sufficient support, and (4) ignored Court rulings, including revisiting defenses previously ruled on.
The Court rejected Kartri’s argument that, as a family-owned business, it has fewer resources than Focus. In rejecting this excuse, the Court emphasized that, regardless of the level of sophistication of a business, once put on written notice of a competitor’s patent rights, there is an obligation to address the potential risks. In other words, lack of sophistication did not excuse willful infringement or litigation misconduct, and did not prevent an award of trebled damages and the opposing party’s attorneys’ fees.
After more than eight years of costly litigation, Kartri and Marquis are on the hook for an additional amount of nearly $3 million above the damages determination due to the Court enhancing damages and awarding attorneys’ fees. As a cautionary tale, there several important lessons to be learned from this case.
First, even a little investment in clearance advice upfront can pay dividends in the future. Here, the Court admonished Kartri and Marquis for failing to obtain clearance advice investigating active patents relevant to the shower curtain rings. In this regard, the Court also highlighted Marquis’ decision to ignore an offer by the Chinese vendor’s patent attorney to conduct a patent analysis on Focus’ patents for $3,500—a small amount compared to the damages and attorneys’ fees for which the Defendants would later be liable (i.e., around $4 million). Further, the Court criticized Marquis’ decision to blindly accept a Chinese vendor’s unsubstantiated advice that Focus’s utility patents would soon expire, that the product design had entered the public domain, that the vendor owned a corresponding Chinese patent, and that Focus was too weak to enforce its IP rights.
Second, ignore risks at your own peril. After receiving the cease-and-desist letter detailing Focus’ IP rights, including its patents, Kartri and Marquis could have stopped selling the allegedly infringing shower curtain rings and contacted IP counsel to address the Focus patents, such as conducting a prior art search to invalidate the patents, obtaining a formal opinion of non-infringement, or designing around the patents. Much of the contention with the utility patents hinged on whether the Defendants’ shower curtain ring included certain specific structural designs, such as the angle of a component and the location of a certain edge. IP counsel could have advised Defendants about the risk of selling the current ring design and the benefits of designing around the patented design.
Third, risks typically become more difficult and more costly to mitigate the longer they are unaddressed. In other words, it is best to act sooner when vetting risks. For example, in this case, Focus was awarded treble damages for the infringement during the period of from March 2015 to November 2018, which started after Kartri and Marquis received the cease-and-desist letter. Thus, rather than addressing the problem when notified, Kartri and Marquis ignored the letter and, instead, chose not to investigate the patents, chose not to remediate, and chose to continue to sell the shower curtain rings, which contributed to the trebling of the damages.
Last, seek competent and experienced counsel. Kartri and Marquis were found liable for nearly $1 million in Focus’ attorney fees. The Court based this award, in part, on litigation misconduct, such as uncooperative handling of discovery obligations, missed deadlines, the lack of compliance with court protocol and local rules, and putting forth unsupported assertions.
In view of these lessons, it is critical to establish a relationship with competent, experienced IP counsel to avoid issues that could proliferate. The Quarles team routinely helps clients address and avoid potential timely and costly litigation by offering proactive services before product releases, including conducting FTO analyses, obtaining formal Opinions, invalidating patents, and designing around problematic patents. In the event litigation arises, the Quarles team is equipped to achieve any number of desired outcomes, ranging from a quick settlement to a successful trial.
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