Justia U.S. 3rd Circuit Court of Appeals Opinion Summaries

Two business compliance companies entered into a partnership to develop a software product, with one company providing “white-label” services to the other. The partnership was formalized in a written agreement, but disputes arose over performance, payment for out-of-scope work, and the functionality of the software integration. As the relationship deteriorated, the company that had sought the services began developing its own infrastructure, ultimately terminating the partnership and launching a competing product. The service provider alleged that its trade secrets and proprietary information were misappropriated in the process.The United States District Court for the Eastern District of Pennsylvania presided over a jury trial in which the service provider brought claims for breach of contract, trade secret misappropriation under both state and federal law, and unfair competition. The jury found in favor of the service provider, awarding compensatory and punitive damages across the claims. The jury specifically found that six of eight alleged trade secrets were misappropriated. The defendant company filed post-trial motions for judgment as a matter of law, a new trial, and remittitur, arguing insufficient evidence, improper expert testimony, and duplicative damages. The District Court denied these motions.On appeal, the United States Court of Appeals for the Third Circuit reviewed the District Court’s rulings. The Third Circuit held that the defendant had forfeited its argument regarding the protectability of the trade secrets by not raising it with sufficient specificity at trial, and thus assumed protectability for purposes of appeal. The court found sufficient evidence supported the jury’s finding of misappropriation by use, and that the verdict was not against the weight of the evidence. The court also found no reversible error in the admission of expert testimony. However, the Third Circuit determined that the damages awarded for trade secret misappropriation and unfair competition were duplicative, and conditionally remanded for remittitur of $11,068,044, allowing the plaintiff to accept the reduced award or seek a new trial on damages. View "Harbor Business Compliance Corp v. Firstbase IO Inc" on Justia Law

Two employees of a debt-collection firm, one of whom was out sick with COVID-19, collaborated to resolve an urgent licensing issue for their employer. The employee at home, unable to access her work computer, asked her colleague to log in using her credentials and retrieve a spreadsheet containing passwords for various company systems. The colleague, with express permission, accessed the computer and emailed the spreadsheet to the employee’s personal and work email accounts. Both actions violated the employer’s internal computer-use policies. Separately, the employee at home had, over several years, moved accounts into her workgroup to receive performance bonuses, believing she was eligible for them. Both employees also alleged persistent sexual harassment at work, which led to internal complaints, one employee’s resignation, and the other’s termination.After these events, the employer, National Recovery Agency (NRA), sued both employees in the United States District Court for the Middle District of Pennsylvania, alleging violations of the Computer Fraud and Abuse Act (CFAA), federal and state trade secrets laws, civil conspiracy, breach of fiduciary duty, and fraud. The employees counterclaimed for sexual harassment and related employment claims. On cross-motions for summary judgment, the District Court entered judgment for the employees on all claims brought by NRA, finding no violations of the CFAA or trade secrets laws, and stayed the employees’ harassment claims pending appeal.The United States Court of Appeals for the Third Circuit reviewed the case. It affirmed the District Court’s judgment in full. The Third Circuit held, first, that the CFAA does not criminalize violations of workplace computer-use policies by employees with authorized access, absent evidence of hacking or code-based circumvention. Second, it held that passwords protecting proprietary business information do not, by themselves, constitute trade secrets under federal or Pennsylvania law. The court also affirmed the dismissal of the state-law tort claims. View "NRA Group LLC v. Durenleau" on Justia Law

Amgen Inc., a biotechnology company, holds patents in the U.S. and South Korea for denosumab, a drug used in treating certain bone cancers. Amgen filed patent infringement suits against Celltrion Inc. (Celltrion Korea) in both countries. To support its case, Amgen sought discovery from Celltrion Korea’s subsidiary, Celltrion USA, located in New Jersey. Amgen filed an application under 28 U.S.C. § 1782 in the District of New Jersey to subpoena Celltrion USA for documents and testimony related to Celltrion Korea’s denosumab products.The Magistrate Judge granted Amgen’s § 1782 application, rejecting Celltrion USA’s argument that § 1782 cannot compel it to produce information held by its foreign parent company. The Judge also found the request not unduly burdensome and ordered the parties to meet and confer to agree on a confidentiality agreement. The District Court affirmed the Magistrate Judge’s order, leading Celltrion USA to appeal.The United States Court of Appeals for the Third Circuit reviewed the case to determine if the order under § 1782 was final and thus appealable under 28 U.S.C. § 1291. The Court concluded that the order was not final because the scope of permissible discovery had not been conclusively defined. The Court emphasized that without a definite scope of discovery, it could not properly review whether the District Court had abused its discretion. Consequently, the Third Circuit dismissed the appeal for lack of jurisdiction, holding that an order granting discovery under § 1782 but leaving the scope of discovery unresolved is not a final order under § 1291. View "Amgen Inc v. Celltrion USA Inc" on Justia Law

Dyax Corporation performed research for Ares Trading S.A. and licensed patents to Ares, including some held by Cambridge Antibody Technology (CAT Patents). Ares used Dyax’s research to develop a cancer drug, Bavencio, and agreed to pay royalties to Dyax based on the drug’s sales. The royalty obligation outlasted the lifespan of the CAT Patents. The District Court held that Ares’ royalty obligation was not unenforceable under Brulotte v. Thys Co., which prohibits royalties that extend beyond a patent’s expiration.The United States District Court for the District of Delaware found that Ares’ royalty obligation did not violate Brulotte because it was not calculated based on activity requiring the use of inventions covered by the CAT Patents after their expiration. The court characterized the royalties as deferred compensation for Dyax’s pre-expiration research. Additionally, the court noted that Ares’ royalty obligation could run until the latest-running patent covered in the agreement expired, which included patents other than the CAT Patents.The United States Court of Appeals for the Third Circuit affirmed the District Court’s decision. The Third Circuit held that Ares’ royalty obligation was not calculated based on activity requiring post-expiration use of the CAT Patents, and thus, Brulotte did not apply. The court emphasized that the royalties were based on sales of Bavencio, which did not require the use of the CAT Patents after their expiration. The court also rejected Ares’ argument that Dyax violated the implied covenant of good faith and fair dealing, noting that Ares received all the benefits promised under the agreement. The court concluded that Dyax did not breach any obligations under the agreement, and Ares’ royalty obligation remained enforceable. View "Ares Trading SA v. Dyax Corp" on Justia Law

Lontex Corporation, a small Pennsylvania business, holds a registered trademark for “Cool Compression” used in its athletic compression apparel. Lontex sued Nike, Inc. for trademark infringement after discovering Nike's use of the phrase “Cool Compression” in its product names and marketing materials. Nike had rebranded a line of its athletic clothing as “Nike Pro” and used the phrase “Cool Compression” in product names on its website and catalogs. Lontex sent a cease-and-desist letter to Nike in 2016, but Nike continued using the phrase for some time.The United States District Court for the Eastern District of Pennsylvania held a trial where the jury found Nike liable for willful trademark infringement and contributory infringement, awarding Lontex $142,000 in compensatory damages and $365,000 in punitive damages. The District Court also trebled the compensatory damages to $426,000 and awarded Lontex nearly $5 million in attorney’s fees, deeming the case “exceptional” under the Lanham Act. Nike appealed the findings and the damages awarded, while Lontex cross-appealed the dismissal of its counterfeiting claim and the denial of profit disgorgement.The United States Court of Appeals for the Third Circuit reviewed the case and affirmed the District Court’s findings on trademark infringement, willfulness, and the trebling of damages. The Court held that a reasonable jury could find Nike’s continued use of “Cool Compression” after receiving the cease-and-desist letter as willful infringement. However, the Court vacated the award of attorney’s fees, finding that the District Court relied on broad policy considerations rather than specific facts of the case. The Court remanded the issue of attorney’s fees for further proceedings. The Court also upheld the dismissal of Lontex’s counterfeiting claim and the denial of profit disgorgement. View "Lontex Corp v. Nike Inc" on Justia Law

The case involves a long-standing trademark dispute between two charities, Kars 4 Kids, Inc. and America Can! Cars for Kids. Both organizations sell donated vehicles to fund children's education programs. In 2003, Texas-based America Can discovered a Kars 4 Kids advertisement in the Dallas Morning News and sent Kars 4 Kids a cease and desist letter, asserting America Can’s rights to the “Cars for Kids” mark in Texas. Kars 4 Kids, based in New Jersey, did not respond to the letter and continued to advertise in Texas.The case was first brought to the United States District Court for the District of New Jersey in 2014, where both parties alleged federal and state trademark infringement, unfair competition, and trademark dilution claims. A jury found that Kars 4 Kids infringed on America Can’s unregistered mark in Texas. The District Court awarded monetary and injunctive relief. However, the court's decision was appealed, and the case was remanded for the District Court to reexamine its conclusion that the doctrine of laches did not bar America Can’s claims.On remand, the District Court again concluded that laches did not bar relief. The court found that Kars 4 Kids’ advertising in Texas was not open and notorious enough to prompt America Can to act more quickly to protect its mark. The court also found that Kars 4 Kids was not prejudiced by America Can’s delay because Kars 4 Kids had assumed the risk of its advertising campaigns after receiving the 2003 cease and desist letter.The United States Court of Appeals for the Third Circuit disagreed with the District Court's findings. The appellate court held that the District Court abused its discretion by not properly applying the presumption in favor of laches. The court found that America Can failed to establish that its delay in bringing suit was excusable and that Kars 4 Kids was not prejudiced as a result of that delay. Therefore, the court vacated the District Court's judgment granting monetary and injunctive relief and remanded with instructions to dismiss America Can’s claims with prejudice based on laches. The court also dismissed as moot America Can’s cross-appeal. View "Kars 4 Kids Inc v. America Can Cars For Kids" on Justia Law

The case in question is a petition for a writ of mandamus filed by Abbott Laboratories, Abbvie Inc., Abbvie Products LLC, Unimed Pharmaceuticals LLC, and Besins Healthcare, Inc. These petitioners were involved in a patent and antitrust lawsuit concerning the drug AndroGel 1%. They sought a writ of mandamus after a district judge ruled that the application of the crime-fraud exception to the attorney-client privilege justified an order compelling the production of certain documents. The Petitioners claimed those documents were privileged.The Court of Appeals for the Third Circuit denied their petition. The court reasoned that the petitioners failed to meet the high standard for granting a petition for writ of mandamus. Specifically, they failed to show a clear and indisputable abuse of discretion or error of law, a lack of an alternate avenue for adequate relief, and a likelihood of irreparable injury.The court also found that the district court did not err in its interpretation of the crime-fraud exception to the attorney-client privilege as it applies to sham litigation. The court held that sham litigation, which involves a client’s intentional “misuse” of the legal process for an “improper purpose,” can trigger the crime-fraud exception. The court also rejected the argument that a "reliance" requirement must be applied in this context. View "In re: Abbott Laboratories" on Justia Law

About 20 years ago, PIM introduced a chewy candy, watermelon-flavored, wedge-shaped Sour Jacks Wedges. Its colors match its flavor: a green layer topped by a thin white band with a larger red section. PIM advertised the candy as “The Ultimate Shape of Sour” and told consumers to “Respect the Wedge.” Years later, PIM tried to trademark the wedge shape. The Patent and Trademark Office required PIM to add colors. PIM registered the shape of a wedge, with an upper green section with white speckles, followed by a narrow middle white section, with a lower red section with white speckles. PIM later produced Sour Jacks Wedges in other flavors. Each has a color to match its flavor. The Patent Office granted PIM a supplemental registration for a tricolored wedge with unspecified colors. Haribo recently introduced its own chewy watermelon candy as an elongated watermelon wedge in red, white, and green.PIM sued for trademark and trade-dress infringement, Lanham Act, 15 U.S.C. 1114(1), 1125(a)(1)(A). Haribo countered that PIM’s trade dress was functional and asked the court to cancel PIM’s trademark. The district court granted Haribo summary judgment. The Third Circuit affirmed. PIM may have created the wedge shape to distinguish its product in the market but in doing so, it made a candy reminiscent of a juicy watermelon wedge, which makes the whole trade dress functional when applied to a watermelon candy. The cancellation order should apply to the primary registration. View "Pim Brands Inc v. Haribo of America Inc." on Justia Law

PPG, a Pittsburgh company, developed a new kind of plastic for airplane windows, “Opticor™ A former PPG employee, Rukavina, agreed to share proprietary information concerning Opticor with TMG, a China-based manufacturer. TMG contacted the PPG subcontractor that made Opticor window molds, asking it to manufacture the same molds, attaching photographs and drawings from a proprietary report. The subcontractor alerted PPG, which notified the FBI, which executed warrants to search Rukavina’s email account and residence. Rukavina was charged with criminal theft of trade secrets.PPG filed a civil action against TMG, under RICO, 18 U.S.C. 1962(c)-(d) and Pennsylvania law. TMG did not respond to the complaint, nor did it answer requests for admissions. More than a year after TMG should have appeared the clerk entered a default. PPG asserted actual damages of $9,909,687.31. Four months later, TMG appeared and unsuccessfully moved to set aside the default. The court held that PPG had sufficiently established TMG’s liability and was entitled to treble damages, an injunction, and attorneys’ fees, costs, and expenses. The court found that $8,805,929 of the claimed actual damages were supported by sufficient evidence and entered judgment for $26,417,787.The Third Circuit affirmed. TMG effectively conceded the complaint’s allegations. Under the Uniform Trade Secrets Act, it can be appropriate to measure unjust enrichment from a misappropriated trade secret by looking at development costs that were avoided but would have been incurred if not for the misappropriation. The district court carefully analyzed such evidence; its methodology and conclusion are sound. View "PPG Industries Inc v. Jiangsu Tie Mao Glass Co Ltd" on Justia Law

Since 2004, Nichino has offered a trademarked pesticide, “CENTAUR.” Valent trademarked a competing product, “SENSTAR,” in 2019, with a similar logo. Both pesticides are used by farmers in the same geographic areas against many of the same insects. SENSTAR is a liquid, a unique combination of two active chemicals. CENTAUR is manufactured as a solid, packed into bags and cases.Nichino sued for trademark infringement, seeking a preliminary injunction. The court applied the newly-effective Trademark Modernization Act of 2020 (TMA) Pub. Law 116-260, which establishes a rebuttable presumption of irreparable harm favoring a plaintiff who has shown a likelihood of success on the merits of an infringement claim. The district court found Nichino narrowly demonstrated its infringement claim would likely succeed, though “there is not an abundance of evidence of likelihood of confusion,” applied a 10-part, non-exhaustive analysis of likely confusion, then denied a preliminary injunction.The Third Circuit affirmed. The TMA’s rebuttable presumption requires courts considering a trademark injunction to assess the plaintiff’s evidence only as it relates to a likelihood of success on the merits. If that evidence does establish likely trademark infringement, the TMA is triggered, and the burden of production shifts to the defendant to introduce evidence sufficient for a reasonable factfinder to conclude that the consumer confusion is unlikely to cause irreparable harm. If a defendant successfully rebuts the TMA’s presumption by making this slight evidentiary showing, the presumption has no effect. View "Nichino America Inc v. Valent USA LLC" on Justia Law