Trademark Infringement Filed by Culligan International Company against Former Culligan Franchise

Culligan International Company is a well-known global seller of water treatment products and services to residential, commercial and industrial customers, with over 800 franchise dealers and licensees to sell and distribute its products and who are licensed to use certain Culligan intellectual property. The defendant, Water Systems of Birmingham, Inc., is a former Culligan franchisee  which lost its franchise rights in 2010 due to alleged violations of its franchise obligations.

As of June 19, 2013, defendant’s website states it

…was an exclusive Culligan dealer for more than 16 years. In 2010, we decided to broaden our product lines and services to offer additional brands…Although we no longer are exclusive to the Culligan brand, we still offer repair and maintenance service to all of the many Culligan equipment customers that we currently have throughout Alabama.

In its complaint filed on June 7, 2013, in the U.S. District Court for the Northern District of Alabama, Southern Division, Culligan claims that the defendant has ignored several cease and desist letters from Culligan to stop using Culligan’s intellectual property and to stop falsely identifying itself with Culligan, allegedly causing mass confusion in the marketplace.

Culligan has also filed a separate lawsuit against the same defendant in the Circuit Court of Tallapoosa County, Alabama (Dadeville Division) that solely addresses state court actions regarding the defendant’s alleged unauthorized and illegal use of Culligan’s marks. That case is pending as of the date of this blog.

Culligan seeks compensatory and punitive damages, injunctive relief, attorneys’ fees and costs in its federal case.

The federal case is Culligan International Company, v. Water Systems of Birmingham, Inc., Case No.: 2;13-CV-01085. The case has been referred to Judge Virginia Emerson Hopkins.

Choice of Law Principles and Statute of Limitations Bar Plaintiff’s Trade Secret Claim

Alabama Aircraft Industries, Inc. (“AAI”) sued Boeing Co., Inc. in the U.S. District Court for the Northern District of Alabama, Southern Division, for, inter alia, misappropriation of trade secrets. AAI argued its trade secrets claim should be determined in accordance with Missouri law because the parties’ Non-Disclosure Agreement stated that the interpretation of the that Agreement would be governed by Missouri law, excluding it conflicts of law principles.

The Court rejected AAI’s argument in favor of applying Missouri law since the choice of law provision in the parties’ Non-Disclosure Agreement did not extend to subsequent written agreements between the parties. The significance of this case is the Court’s application of the  lex loci delicti rule.

AAI has its principle place of business in Alabama and the Court noted that any financial injury suffered by AAI would have been was suffered in Alabama. The Court held that a federal court considering diversity cases is compelled to apply the choice of law rules in the state in which it sits, citing Fitts v. Minnesota Mining & Manufacturing Co., 581 So.2d 819, 820 (Ala. 1991). In Alabama, the  long established choice of law rule of lex loci delicti governs tort causes of action and requires that the substantive law of the place where the tort occurred must be employed while procedural law of the forum state is to be applied. Therefore, the Court held that the parties’ trade secrets dispute was governed by Alabama’s Trade Secret Act (Ala. Code § 8-27-5).

The consequence of the Court’s application of Alabama law to the trade secrets dispute was that AAI’s claim was barred by the applicable Alabama two-year statute of limitation.

This case illustrates the fundamental importance of recognizing choice of law issues in both the contract negotiation phase as well as educating clients to alert counsel promptly after a plaintiff becomes aware of trade secret violations by a third party.

The case is Alabama Aircraft Industries, Inc. v. Boeing Co., Inc., 2013 WL 1178720, N.D.Ala., March 20, 2013 (No. 2:11-CV-3577-RDP, decided by District Judge R. David Proctor.

Singing the Emu Blues: Merger Provision in Contract Clauses and Simple Oversight Cause Loss of Trademark Rights

Valuable intellectual property rights can be lost due to basic contract drafting and mere oversight.

Progressive EMU, Inc. (“Pro Emu”) runs an emu farm in the Birmingham area and sells emu oil from various sources including the slaughter of birds raised on its farm. Nutrition & Fitness, Inc. (“NFI”) manufactures, markets and distributes various health products including products made with emu oil. Emu oil is marketed as a dietary supplement with a wide variety of claims health benefits. Pro Emu sold emu oil to NFI. NFI’s main emu-based product is marketed as “BLUE EMU”.

In 2002 the parties entered into a letter of intent which provided, inter alia, that they would jointly own the BLUE EMU trademark. However, the following year the parties entered into a written Sales Agreement that stated in its merger clause that the Sales Agreement “…supersedes and cancels any and all prior agreements…including without limitation…that Letter of Intent between the parties dated 2002.” Thus, the court held that Pro Emu’s claim to partial ownership of the trademark BLUE EMU is ineffectual because the parties’ letter of intent was superseded by the parties’ subsequent Sales Agreement.

The court also noted that Pro Emu never objected to NFI’s claim of ownership of the BLUE EMU trademark or asserted that it had any type of ownership interests during the parties’ eight year course of performance.

This case is a good reminder that the simple things in a business, long taken for granted, can result in the loss of valuable rights.

The case is Progressive EMU, Inc. v. Nutrition & Fitness, Inc., Civil Action No.: 2:12-CV-01079-WMA in the United States District Court for the Northern District of Alabama, Southern Division and the Order was entered on June 7, 2013 by District Court Judge William M. Acker, Jr.

BBVA Compass Latest Bank Defendant in Patent Infringement Litigation Filed by National Non-Practicing Entity

BBVA Compass Bancshares, Inc. and Compass Bank N.A., doing business as BBVA Compass, have become the latest banking targets of Intellectual Ventures II, LLC (“Intellectual Ventures”). In a lawsuit filed in the U.S. District Court for the Northern District of Alabama on June 12, 2013, Intellectual Ventures alleges that the BBVA Compass infringes five of its patents in connection with BBVA Compass’ online banking services. Intellectual Ventures seeks damages for past and continuing infringement of the five patents, pre and post judgment interest, costs, disbursements and attorney fees.

Intellectual Properties filed virtually identical lawsuits against the First Bank of Omaha on May 25, 2013, and against JPMorgan Chase & Co. on June 4, 2013, claiming infringement of the same patents.

The five patents cited in the complaint relate to the alleged methods and functionality used for the bank’s on-line banking services. Intellectual Ventures owns all of the rights, title and interest in the five patents by assignment from third parties.

Intellectual Properties is one of the top-five owners of U.S. patents. Although the company claims that it creates and collaborates in the creation of inventions, and files patent applications for those inventions, its business model appears to focus on buying patents and combining them into a large patent portfolio and licensing them to third parties or filing lawsuits for infringement of patents. The practice of prosecuting patent infringements not used by the plaintiff to produce goods or services is commonly referred to as “patent trolling”. Intellectual Properties has been the center of controversy since 2010 when it filed its first lawsuit and its and has been described as a “patent troll” by the CTO of Hewlett Packard and others. A more euphemistic term used to describe plaintiffs such as Intellectual Ventures is “non-practicing entities.”

This suit against BBVA may portend additional patent infringement cases against other banks in Alabama and elsewhere.

Intellectual Ventures is represented by Nick Gaede, Jr. and Jennifer Hanson of Bainbridge, Mims, Rogers  & Smith, LLC in Birmingham. Several attorneys from Feinberg Day Alberti & Thompson LLP in Menlo Park, California are listed of counsel on behalf of the plaintiff and intend to file  pro hac vice applications in the Northern District.

The case is Intellectual Ventures II, LLC v. BBVA Compass Bancshares, Inc., and Compass Bank, N.A. d/b/a BBVA Compass, Civil Action No. 2:13-cv-01106 in the United States District Court for the Northern District of Alabama.