Cost Ruling in Moshe Lavi vs. Zach Oz – A failed attempt to get a poorly written patent canceled.

December 20, 2017

Figs for ACMoshe Lavi owns Israel Patent No. 157035 titled “MODULAR SUPPORT BRACKET” which describes  a support bracket for an air-conditioner unit. He’s tried to enforce it in the past against Zach Oz Airconditioners LTD, and the parties came to an out-of-court settlement.

Lavi then sued again, and Zach Oz countered by applying to have the patent cancelled. This attempt was unsuccessful and a ruling upholding the patent issued on 5 March 2017.

Lavi then applied for costs under Circular MN 80. According to Lavi and his attorneys, Pearl Cohen Zedek Latzer Brats, the costs incurred in fighting the Opposition were a fairly massive 526,750.058 Shekels!? We assume that there is a typo here, and the costs requested were just over half a million Shekels and not just over half a billion shekels, as that would be ridiculous even for Pearl Cohen. It seems that they charge in dollars and not Shekels, and are unaware of the need to round up to the nearest 5 agarot.

Lavi claims that he is entitled to the real costs incurred, which are reasonable, necessarily incurred and proportional in the circumstances. He accuses Zach Oz of acting in bad faith by challenging the validity of the patent. His counsel appended a list of legal counsel’s hours, invoices, and an affidavit by Moshe Lavi.

The Respondents Zach Oz, confusingly represented by an Adv. Pearl (not Zeev, even he is aware that fighting both sides of an opposition proceeding is not acceptable) claimed that the costs were unreasonable and some were unnecessary or disproportional. They also claimed that it was Moshe Lavi who acted inequitably. They note that the case-law states that costs are not meant to be a punishment, and the costs in this case were unreasonable and were incurred due to unnecessary wariness by the patentee. Furthermore, the adjudicator is supposed to take into account the public interest and importance in maintaining the integrity of the patent register. Awarding inflated costs in cases that they lose, would discourage people from challenging the validity of patents and would prevent access to legal recourse.

Ruling

The winning party is entitled to costs incurred in legal proceedings. However, the arbitrator is not obliged to rule actual costs, and is required to consider the specifics of the case and judicial policy. See paragraph 19 of Appeal 6793/08 Loar LTD vs Meshulam Levinsten Engineering and Subcontracting Ltd. 28 June 2009.

In the case-law it was ruled that for the Applicant for actual costs to prove that they are reasonable, proportional and necessary in the specific circumstances. See Bagatz 891/05 Tnuva Cooperative for Marketing Agricultural Produce in Israel Ltd. et al. vs. The Authority for granting Import licenses et al. p.d. 70(1) 600, 615 from 30 June 2005. The limitation of costs to being necessary and proportional is:

To prevent a situation wherein the costs awarded are too great, and will discourage parties from seeking justice, will create inequalities and make court proceedings unnecessarily costly, limiting access to the courts. (Appeal 2617/00 Kinneret Quarries ltd. cs. The Nazareth Ilit, Planning and Building Committee, p.d. 70(1) 600, (2005) paragraph 20.

The amount of work invested in preparing submissions, their legal and technical complexity, the stage reached in the proceedings, the behavior of the parties before the court of the patent office and with regard to opposing party, inequitable behavior of the parties, etc. All these are considerations that should be taken into account when considering “the  specifics of the case”.

In this instance, the patentee did win his case and is entitled to recoup costs, and the losing party does not dispute this. However, in this instance, the patentee is not entitled to the requested costs for reasons detailed below.

Firstly, after consideration of the case and the submissions, none of the parties appear to have acted inequitably. It is not irrelevant that neither party has related to the decisions made in this instance, including the main ruling. This is because there is no evidence of inequitable behavior by the parties. Similarly the affidavits are acceptable. In this regard, it is not reasonable to accept the patentee’s allegation that the challenge to their patent was baseless. The file wrapper shows that the challenger made a reasonable and fair attempt to show that the patent was void, based, inter alia, on prior art.

Furthermore, as to the costs requested, the adjudicator, Ms Shoshani Caspi did not think that they were reasonable, essential or proportional, as required by the Tnuva ruling.

The expert opinion of the expert who attended the hearing, costs of 29,685 Shekels including VAT were incurred. This was considered reasonable. It also appears to have been necessarily incurred. However, the Applicants did not need to use lawyers to prepare the expert opinion’s opinion for him, whilst claiming costs for him preparing his opinion as well. This is a double request for costs and should be eradicated.

In his Affidavit, Mr Lavi claimed that the challenge to his patent caused him to spend $137,901.37 including VAT. This is the 499,065.058 Shekels requested by the Applicant, excluding the expert opinion. The Affidavit explains that this sum includes his legal counsel’s work, couriers, printing, etc., however, no evidence of couriers and printing costs were given, and it appears that these incidentals were included in the invoices from his legal representative. To provide evidence for the legal costs incurred, invoices from PCZL were appended which included the hours spent by attorneys working on the case.

One cannot ignore the fact that the list of work done included demanding extensions, attempts to negotiate an out-of-court settlement, interim proceedings that the opposing party won, an appeal of the refusal to throw the case out, https://blog.ipfactor.co.il/2015/03/08/il-157035-if-one-accused-of-infringing-a-patent-does-not-challenge-its-validity-is-the-accused-estoppeled/

and other costs that are not essential and thus not reasonably chargeable to the other side.

double dipThe attempt to roll these unnecessary costs to the losing side and the double charging for the expert witness are inappropriate to use an understatement, and one assumes that these requests were made inadvertently as they were signed by educated attorneys that are well versed in the relevant legal processes.

Furthermore, after a detailed review of the file, Ms Yaara Shashani Caspi concluded that the case was relatively simple and there were neither particularly complicated legal or factual questions. Consequently, it is difficult to accept that the request for costs of 499,065.058 Shekels [sic] including VAT is reasonable, essential or proportional in the circumstances. It will be noted that as ruled in the Tnuva case (paragraph 19). The real costs that the patentee incurred is only the starting point and not the end point of the costs ruling.

It transpires that the time spent in each round was very large. For example, 65 hours was spent on a request to cancel an expert opinion, and 44 hours on the request for costs, etc. The Applicant did not provide an acceptable justification for these figures.

In light of the above, legal costs will be awarded by estimation, and in addition to the 27,685 Shekels (including VAT) to the expert witness, a further 150,000 Shekels (including VAT) are awarded in legal fees.

The deadline for paying the costs is 30 days, then interest will be incurred.

Legal Costs Ruling by Ms Shoshani Caspi in cancellation proceedings of IL 157035 Moshe Lavie vs. Zach Oz, 25 October 2017.

Comment

The whole case was mishandled by Zach Oz, who could and should have won the original infringement case in court, but decided to accept a poorly worded out-of-court settlement. By any reasonable attempt to construe the claims so that the patent was not anticipated by support brackets for shelves, Zach Oz’ supports were not infringing. In other words, they could have used the Gillette defense.

Ms Shoshani Caspi’s criticism of PCZL overcharging and double dipping is appropriate in this instance. The attempt to have the case thrown out on a creative estoppel based on not having challenged the validity of the patent when sued for infringement was ridiculous. Ironically, this patent is not worth the costs spent on litigating it. This is a clear instance of lose-lose by all concerned except the lawyers.


Filing Baseless Patent Infringement Complaints in the US Can be Expensive

August 30, 2017
Octane fitnessIcon Health and Fitness sued Octane Fitness for patent infringement in 2009, claiming that Octane’s high-end elliptical machines infringed US Patent No. 6,019,710, which describes an elliptical machine that allows for adjustments to accommodate individual strides. After two years of litigation, a district court judge found that Octane’s machines didn’t infringe. Octane asked for an award of legal fees, but in 2011, a judge rejected the company’s bid. That decision was upheld on appeal.
It is very rare for US courts to rule costs. This has resulted in the so-called patent troll phenomenon, wherein companies sue for patent infringement on very shaky grounds assuming that they have little to lose.

In this instance, Octane Fitness appealed to the Supreme Court, which heard oral arguments on the case in 2014. In 9-0 vote, the court issued an opinion (PDF) making it much easier to get attorney’s fees. Justice Sonia Sotomayor wrote the opinion, holding that patent laws call for awarding fees in an “exceptional” case, which is “simply one that stands out from others with respect to the substantive strength of a party’s litigating position… or the unreasonable manner in which the case was litigated.”

With that, the case was kicked back down to the lower courts. Under the new standard, the district court judge awarded $1.6 million to Octane over the objections of Icon lawyers.

On Friday, the US Court of Appeals for the Federal Circuit upheld (PDF) that award in its entirety. The district court found that Icon’s claim construction arguments were “wholly at odds with the patent text, prosecution history, and inventor testimony,” The court also found that Icon included Nellie’s Fitness, an equipment distributor, as a defendant for the purpose increasing Octane’s legal costs.

The appeals judges found “no clear error in its analysis” and upheld the district court’s award. The panel dismissed a cross-appeal by Octane asking for a larger award, which would also cover litigation over the fees.

COMMENT

trollThe case is reminiscent of a frivolous law suit brought by Pearl Cohen on behalf of Vagabond Source, where the courts ruled that Source’s counsel (i.e. Pearl Cohen Zedek Latzer pay $187,308.65 in partial attorney’s fees, but that Source not be sanctioned. Pearl Cohen appealed that ruling, and lost again in the Federal Circuit Court of Appeals.

We think that such cost rulings are in order to prevent abuse of the system.

 


Finnegan Sued for Malpractice

July 9, 2017

In today’s world, patents are often owned by corporations or by groups of corporations. Inventors form companies with investors, or assign shares to investors, and these are considered separate legal entities.

Despite the legal niceties of firms of Attorneys representing companies, in practice Attorneys form connections with real persons who are sometimes the inventor, sometimes the head of R&D and sometimes the CEO or CTO. Often the patent attorney is not fully informed of the corporate structure. Structure itself is a misnomer. It implies something with a plan and a logic. Typically with solid foundations.

When receiving instructions from an inventor, receiving payment from a company and having a POA with another company, it is possible for the attorney to act in accordance with instructions from someone who is not the legal owner of an asset, and to find him or herself with a conflict of interest. Sometimes these are legal niceties that are over-looked. Sometimes they blow up.

Michael Kildavaeld conceived of a razor utility knife with a graphite pencil blade.  The “marking blade” invention marks surfaces with far greater precision than a standard carpenter’s pencil.

In October 2012, Kildavaeld met Robert Cumings, who allegedly had extensive experience in the marketing and manufacturing of tools.  That same month, Cumings introduced Kildavaeld to Harry Billado, who allegedly had experience in patent prosecution, licensing of patents, and bringing inventions to market. Together they formed a Delaware company called  “Contractor Trusted LLC”. In March 2013, Contractor Trusted LLC hired Finnegan Henderson to obtain patent protection on the marking blade invention.  Attached to the complaint is an engagement agreement between Finnegan Henderson and “Contractor Trusted, LLC c/o Mr. Michael Kildavaeld.”

The complaint alleges that Contractor Trusted LLC, marketing as Accutrax LLC began marketing its product to Stanley Black and Decker.  According to the complaint, in October 2014, while Stanley was negotiating with “the LLC” for a master purchase agreement, Kildavaeld individually contacted Stanley and tried to negotiate his own exclusive relationship with Stanley that eliminated Accutrax LLC from the picture.

According to the complaint, Stanley decided to back out of the deal rather than get caught in between the two sides who were in the midst of a patent ownership dispute. On December 23, 2014, the USPTO issued Patent No. 8,915,662.  No assignee was identified on the face of the ’662 Patent.

According to the complaint, the “patent for the Marking Blade” was issued “to Kildavaeld.”  Stanley Black and Decker withdrew from negotiations due to a dispute over who owned the patent.

“Contractor Trusted LLC” (Accutrax) has sued Finnegan for what it considers was acting in favour of the inventor and adverse to its interest, alleging claims against Finnegan for legal malpractice (count 1), breach of fiduciary duty (count 2), breach of contract (count 3), and aiding and abetting the commission of torts and breach of fiduciary duty (count 4). Accutrax seeks an unspecified amount of monetary damages.

The case is styled Accutrax LLC v. Finnegan, Henderson, Farabow, Garrett & Dunner LLP, Mass. Suffolk County Civil Superior Court, Case No. 1784CV01617.

For more details see here.


Israel Supreme Court Rejects Appeal from Shukha Trademark Infringers

June 9, 2017

shukhaThere are two branches of the Shukha family that market oil and other food stuffs: Sons of George Shukha ltd. and Antoine Shukha and Sons ltd.

Sons of George Shukha ltd, which also imports and distributes rice, have 27 registered trademarks including the name Shukra in English, Hebrew and Arabic.  The earliest registered mark is from 1984 but one mark is for Sons of George Shukra from 1930.

Over a six-year period, the Sons of George Shukha ltd attempted to enforce their marks through the courts with the parties reaching an agreement that allowed Antoine Shukra and Sons to use labels that include the name Shukra in a font size no larger than that for Antoine and Sons and together with a logo. The settlement, though ratified by the court, was not fulfilled and so Sons of George Shukha ltd. appealed to the Supreme Court. Antoine Shukra and Sons submitted various creative arguments arguing that since the size of their oil containers was larger, the agreed size of the label was no longer reasonable. They also claimed that the ruling only related to the name Shukra in Arabic. They submitted that two weeks to recall and remove all infringing products from the shelves was too short a period, and the penalty of 2500 Shekels for every day delay would cripple them.

Supreme Court Judge Amit pointed out that unless the penalty for failing to enforce was crippling, infringing parties would simply continue to prevaricate. He noted that in two of the three counts of continued infringement, Antoine Shukra and Sons acknowledged that they were infringing, and in the third case, where the issues that received court endorsement related to the size used for the name Shukra and to it being used together with a logo, even if there was some grounds to consider the Appeal based on font size, the infringers were not displaying the logo prominently. He refused to reconsider issues ruled on by District Judge but noted that the District Court judge had stated that the Appellants had made various claims in affidavits but withdrew them during the hearing, and had generally acted in bad faith.

Judge Amit noted that with financial penalties for failing to enforce, staying a ruling during Appeal was generally not appropriate since a monetary ruling could rectify any issues. Judge Amit refused to stay the enforcement, but granted a 30 days instead of 14 days for it to be enforced.  By the end of this period, the Appellants have to provide a full record od what was done to recall or relabel the infringing goods. Costs of 5000 Shekels were awarded to Sons of George Shukha ltd.

Appeal 4113/17 Sone of George Shukra ltd. vs. Antoine Shukra and Sons ltd. and various members of the Shukra clan and related companies. 8 June 2017


Costs Award for Drink Point Competing Marks Proceeding

June 9, 2017

Where two parties file confusingly similar or identical trademark applications in Israel, such that both are co-pending, a competing marks proceeding ensues under Section 29 of the Trademark Ordinance 1972. More important that who filed first, are the issues of inequitable behavior and the scope of use.

On 20 May 2012 Assaf Nakdai and Benny Molayof submitted Israel trademark application no. 246704 for DRINK POINT covering business management and business administration; office functions; advertisements; sales promotion; sale of alcoholic beverages; included in class 35.

On the same day Drink Point LTD submitted the identical mark for services for providing food and drink; all included in class 43

250525Then on 9 October 2017, Drink Point LTD submitted an application for the same mark for business management, advertisements and sales promotion (including sale of alcohol); all included in class 35 and on 23 October 2017 Drink Point LTD submitted an application for the stylized mark shown alongside.

On 8 March 2017 Assaf Nakdai and Benny Molayof withdrew their application following a ruling by Judge Cochava Levy of the Tel Aviv – Jaffa Magistrate’s Court. Consequently on 12 March 2017, the Deputy Commissioner terminated the competing marks proceeding and allowed Drink Point’s applications to proceed to examination.

Drink Point LTD requested 14,200 Shekels in costs, alleging inequitable behavior and costs incurred in the corresponding court proceeding.

Ruling

In the ruling, the Deputy Commissioner reiterated the principle that the winning party were entitled to recoup their actual costs. However, she could only consider costs incurred in the competing marks proceeding, not those relating to the court ruling which should be addressed to that court. Furthermore, she was not convinced that Nakdai and Molayof had acted inequitably. The invoices submitted for Drink Point ltd’s lawyer’s fees were not sufficiently detailed to be considered. Therefore, she estimated an appropriate fee for the amount of work performed and ruled 7000 Shekels costs.


More Coffee!

March 23, 2017

EdenFollowing on the heels of the Izhimis family feud, we now report on a competing marks proceeding between Abu Shukra Import Export and Marketing Ltd and Strauss Coffee B.V.

Again, this relates to Turkish coffee. On 2 May 2013, Abu Shukra filed Israel TM application number 255526 in class 30 shown alongside.

This ruling relates to all over packaging designs being used as trademarks and to branding concepts. To my mind, it also raises issues of monopolies and market abuse, but this is beyond the competence of the adjudicator and commissioner to relate to, although I think judges might see things differently.

22263EliteOn 16 July 2014, but before Abu Shukra’s mark was examined, Strauss filed Israel TM Application No. 266680 for Coffee, roasted coffee, roasted and ground coffee and coffee substitutes, all in class 30, and also Israel TM Application No. 266683 for Turkish coffee, roasted Turkish coffee, roasted and ground Turkish coffee and Turkish coffee substitutes, all in class 30. Strauss Coffee’s marks are shown alongside.

[At this stage we note that Strauss Coffee owns the Elite brand among many others. Strauss employees 14,000 people in 20 countries. The empire was built on their Turkish coffee brand, but they also now own Sabra, the leading hummus brand in the US, are partners with Yotvata dairies and Yad Mordechai Honey – MF]. Read the rest of this entry »


A Storm in a Coffee Cup

March 20, 2017

This ruling relates to competing rights of different relatives to register and use trademarks for a family business that eventually split up. The marks were registered by a cousin living in Ramallah, and cousins living in East Jerusalem applied to have the marks cancelled on various grounds including passing off, misleading marks, inequitable behavior and lack of use.

234876 LOGOChain Stores of Izhiman Coffee Company own two trademarks: Israel Trademark No. 234876 for the logo shown alongside, and 234877 for the Arabic and English word mark
بن ازحيمان IZHIMAN’S COFFEE.

Maazen and Shapik Izhimian applied to have the marks canceled under Section 39 of the Trademark Ordinance 1972, and further under Section 41 for lack of use.

The marks were first applied for by Muhammad Musa H’alad Izhiman in January 2011, and after examination, were registered on 2 May 2012 for “coffee and coffee spices in class 30.” On 27 February 2014, the marks was assigned to Chain Stores of Izhiman Coffee Company, a Palestinian Company based in Ramallah that was owned by Muhammad Musa H’alad Izhiman and his two sons Kassam and Nasser.

On 5 March 2014, the brothers Maazen and Shapik Izhimian who own a Jerusalem based business in Bet HaBad Street, for marketing and trading in coffee and spices under the name “Izhiman’s Coffee” and who are cousins of Muhammad, submitted a cancellation request. In July 2014, the owners Chain Stores of Izhiman Coffee Company submitted their response.

The Background

EnjoyMuhammad, his three brothers and the Applicants for cancellation are all members of the same clan, that were involved in the family business established by Musa, Muhammad’s father, together with Mahmud, the father of Maazen and Shapik in the 1980s. The company had three addresses, the Ramallah address, the Jerusalem address now run by Maazen and Shapik, and a third branch in Abu Dis.

In 1994, Muhammad fell out with his brothers and nephews and received sole ownership of the Ramallah store. His three brothers and the nephews shared the Abu Dis and the Bet HaBad Jerusalem shops and opened a further outlet themselves in Ramallah. In 2000 the applicants for cancellation and Muhammad’s three brothers opened a fourth branch in Salah Shabati Salahadin Street in East Jerusalem. In 2008, these partners ceased to cooperate, and Maazen and Shapik were left with the Jerusalem Store in Bet HaBad Street.

love.jpgMaazen and Shapik submitted an affidavit written by Maazen and a second one from Riyadh Ghazi Halaq, the owner of a coffee shop near the Bet HaBad address that buys his raw coffee from them. The mark owners responded with an Affidavit by Nasser Muhammad Musa Izhiman, Partner and authorized signatory. At the end of September 2016, the Adjudicator of IP, Ms Yaara Shoshani Caspi held a hearing and the witnesses were cross-examined.
Read the rest of this entry »