Does a Trademark Owner Need a Judgment Against a Direct Infringer Before Pursuing a Vicarious Infringer?

No.

Slep-Tone Entertainment Corp. owns a U.S. Trademark Registration for the mark Sound Choice in connection with karaoke products.  Slep-Tone sued a restaurant, which had hired one or more karaoke operators who allegedly were using Slep-Tone's trademark without Slep-Tone's authority.  Slep-Tone's claim against the restaurant is that the restaurant derives a benefit from the karaoke operators' use of the mark, and the restaurant knows the karaoke operators are not operated to use the trademark.

The restaurant sought dismissal, arguing that Slep-Tone must first establish that the karaoke operators are infringing the trademark.  The Court was not convinced.

Defendant’s argument lacks merit. As Plaintiff points out, this Court previously held in a related Slep-Tone case that to prevail on a contributory trademark infringement claim, a plaintiff must show that the defendant “intentionally induces another to infringe a trademark, or [ ] continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement....” Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 854, 102 S.Ct. 2182, 72 L.Ed.2d 606 (1982).

Vicarious liability for trademark infringement “requires a finding that the defendant and the infringer have an apparent or actual partnership, have authority to bind one another in transactions with third parties or exercise joint ownership or control over the infringing product.” RGS Labs Intern., Inc. v. The Sherwin-Williams Co., 2010 WL 317778, at *3 (S.D. Fla. Jan. 11, 2010) (citing Hard Rock Café Licensing Corp. v. Concession Servs., Inc., 955 F.2d 1143, 1150 (7th Cir. 1992)).

Here, with respect to all of the claims alleged in the complaint, it is immaterial whether the karaoke operators are named in the complaint. Plaintiff also does not need to achieve a judgment in its favor against the karaoke operators before it brings the instant action. Plaintiff’s allegations are sufficient because they include the facts that Defendant was aware of the karaoke operators’ unlawful activity and continued to utilize their services at its establishment. In other words, a finder of fact could determine that Defendant had the ability to control whether its karaoke providers/operators were performing using lawful, properly licensed accompaniment tracks.

Motion to dismiss denied.
Slep-Tone Entertainment Corp. v. Il Mio Sogno, LLC, Case No. 8:12-cv-1187 (M.D. Fla. Aug. 3, 2012) (J. Moody)

Patent eligible subject matter for a method of managing financial instruments?

Digitech Information Systems sued BMW Financial Services NA, LLC for infringement of U.S. Patent 7,739,180 directed to a method of managing financial instruments, equipment lease derivatives, and other collateral instruments, data architecture, application and process program.  Claim 1 recites:

A method for selecting leases to optimize an investment portfolio comprising
the steps of:
     receiving data regarding an equipment purchase price, an equipment sales price, a number of units, a lease purchase price, a life of lease, a lease acquisition fee, an accelerated depreciation of change, and a yearly payment;
     calculating by computer a total purchase price by adding the lease purchase price to the lease acquisition fee;
     calculating by computer an accelerated depreciation result by multiplying the equipment purchase price by the number of units;
     calculating by computer a rate of return by subtracting from the yearly payment the total purchase price and the accelerated depreciation result and dividing by the lease purchase price; and
     selecting a lease based on the rate of return being greater or equal to a predetermined value and using the selected lease to create lease backed financial instrument derivatives and optimize the investment portfolio.

Months ago, BMW sought and was awarded summary judgment that the '180 Patent is invalid for not being directed to patent eligible subject matter under 35 U.S.C. § 101.  Digitech sought to undo that damage by asking the Court to reconsider.

Motions for reconsideration are tough.  Three main grounds can justify reconsideration: (1) change in the law; (2) new evidence; or (3) a need to correct clear error or prevent manifest injustice.   Digitech argued that all three applied here.  As to a change in the law, a few recent Federal Circuit decisions (CLS Bank Int'l. v. Alice Corp, 103 U.S.P.A.2d 1297 (Fed. Cir. 2012) and Bancorp Services, LLC v. Sun Life Assur. Co. of Canada (U.S.), ___ F.3d ___ (Fed. Cir. 2012)) and  have addressed patent eligibility under § 101.  As to new facts, Digitech brought up some deposition testimony.  As to clear error, Digitech raised some challenges to how the Court had construed the claims.

The Court was not persuaded by any of these arguments.  Regarding the new law, the Court recognized that the test for patent eligibility under § 101 - the abstract idea test -- is not well defined:

This so-called "abstract idea test" is not a concrete test but rather a set of guidelines promulgated in various Supreme Court and Federal Circuit opinions.

True enough.  This has created the unfortunate result that the test for abstractness still works out as "I know it when I see it" reasoning and logic.  Dennis Crouch (a.k.a. Patently-O) recently posted on the CLS Bank and Bancorp decisions.  CLS Bank found computerized stock trading claims patent eligible, while Bancorp found computer related financial claims patent ineligible.  Prof. Crouch aptly concluded his post as follows:

It is simply ridiculous that after 40 years of debate, we still do not have an answer to the simple question of whether (or when) software is patentable.

I would rephrase that comment slightly, as we know that software is patent eligible, but we still have a great lack of clarity as to when.  And it has less to do with the software itself and more to do with how that software is claimed.

The Digitech decision is another example of this theme.  Judge Antoon analyzed the CLS Bank and Bancorp decisions and found Digitech's claims closer-in-kind to Bancorp's.  Accordingly, the '180 patent remains invalid.  We'll have to see what happens on appeal.

Motion for Reconsideration Denied.
Digitech Information Systems, Inc. v. BMW Financial Services NA, LLC, Case No. 6:10-cv-1373 (M.D. Fla. July 30, 2012) (J. Antoon)