Free Speech

Anonymous Business Plaintiffs in Patent Knockoff Case?


From Patent Holder Identified in Exh. 1 v. Does 1-254, as Identified in Exh. 2, decided Saturday by Judge Matthew F. Kennelly (N.D. Ill.); it's not quite my field, so I'm not sure what to think of it, but it seemed interesting enough to be worth passing along:

It has become commonplace in this district for holders of trademark and trade dress rights to file suits naming dozens or even hundreds of claimed infringers and counterfeiters, alleging that they are selling knock-off products via the Internet. The plaintiffs seek an injunction and recovery of damages. In these lawsuits, the actual identities and locations of the sellers are unknown to the trademark holder because they have used assumed names. The lawsuits are typically filed against a group of sellers whose assumed names are listed on an attachment to the complaint, usually called "Schedule A."

In these lawsuits, the plaintiff typically requests permission to file "Schedule A" and other information that would identify the sellers under seal, to avoid tipping off the defendants that a lawsuit has been filed. Public identification of the defendants, the plaintiff contends, would lead them to hide or transfer ill-gotten gains and destroy relevant evidence.

Once the lawsuit is filed, the plaintiff typically moves ex parte for entry of a temporary restraining order that, among other things, bars further infringing sales and freezes any assets held in the defendants' PayPal or similar accounts. The plaintiff also typically moves for permission to serve the defendants with summons via e-mail, as their addresses are unknown and often hidden, and they are typically based overseas.

Once the court enters a TRO, the plaintiff serves it along with the complaint on the defendants via e-mail; serves PayPal and other similar entities with the TRO to freeze the defendants' assets; and takes other steps to effectuate the TRO's terms. Due to the limited duration of a TRO, the plaintiff then seeks entry of a preliminary injunction with similar terms that will carry through to the conclusion of the case. Most cases of this type are concluded relatively quickly, after the plaintiff negotiates settlements with the defendants who make contact with the plaintiff's attorney and obtains default judgments against those who do not respond.

The present case is similar, but there are two differences from the usual suit. The first is that the plaintiff seeks to conceal even its own name; it asks to file the case, effectively, as a "Doe" plaintiff pending issuance and service of the hoped-for temporary restraining order. In support of this request, the plaintiff has filed a one-page motion that includes only the following by way of justification:

"If Defendants were to learn of these proceedings prematurely, the likely result would be the destruction of relevant documentary evidence and the hiding or transferring of assets to foreign jurisdictions, which would frustrate the purpose of the underlying law and would interfere with this Court's power to grant relief.

"We know it is likely Defendants will impede justice because Defendants participate in or operate a website,, that monitors this District's PACER filings and screens for Plaintiff counsel's filings as well as all Trademark and Patent filings throughout the District. Without sealing these filings, Plaintiffs will have their remedies thwarted."

The first sentence isn't a justification; it's a conclusion. The only justification is the second sentence, which says that the defendants participate in a website that monitors filings in this district. That might be part of a justification, but instead plaintiff asks the Court to make the inferential leap—worthy of Bob Beamon in the 1968 Olympics—that if it becomes known that the plaintiff has filed a lawsuit against someone, the defendants will all hide their assets. The Court is unwilling to draw this inference without some supporting evidence and argument. For this reason, the motion to seal is denied—to the extent it asks to conceal the plaintiff's identity—without prejudice to filing a new motion by February 10, 2021.

The second difference between this case and the usual "Schedule A" case is that the present case is a patent infringement suit, not a trademark infringement suit. The plaintiff alleges that each of the "Schedule A" defendants (actually, in this case, they are the "Exhibit 2" defendants) is selling products that infringe a patent issued to the plaintiff. The infringement allegations in the complaint itself are relatively conclusory; they include no information about how the claimed infringing products are alleged to infringe the design patent. And none of the allegations in the complaint says anything specific about any defendant; all of the defendants are lumped together.

Without addressing at this point the sufficiency of the complaint under Federal Rules of Civil Procedure 8(a) and 12(b)(6) as to each of the two hundred fifty-four defendants, there is a threshold problem with this particular case that does not exist in the typical "Schedule A" trademark/trade dress case. Specifically, the joinder of all the defendants in a single suit appears to run afoul of a provision of the America Invents Act, adopted in 2013.

Before the AIA, it was common for patent holders to sue or attempt to sue multiple infringers in a single suit. The AIA sought to put a stop to this. Under 35 U.S.C. § 299, parties that are accused infringers of a patent may be joined in a single action as defendants only if a right to relief "is asserted against the parties jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences" that involve making, using, importing, offering, or selling "the same accused product or process," and only if there are questions of fact common to all defendants that will arise. Importantly, "accused infringers may not be joined in one action as defendants … based solely on allegations that they each have infringed the patent or patents in suit."

In this case, it is questionable whether the plaintiff can clear all of the hurdles imposed by section 299. It alleges that that the defendants all sold infringing products, but that is not enough in light of section 299(b). The plaintiff also alleges that "some" of the defendants use "identical or equivalent language" to sell the products and use images taken from the plaintiff's website; that there are unspecified "similarities and indicia of being related to one another" among the defendants; and that they offer the product at similar prices. But it would not be particularly surprising for multiple sellers to attempt to match other sellers' prices, and it would not be at all surprising for counterfeiters of a product to copy images from the legitimate seller's site or even from other counterfeiters' sites.

The plaintiff also alleges that the defendants tend to post information to a "seller defense" website, but parallel action does not amount to action in concert. The Court questions whether these allegations are sufficient to satisfy the "same transaction, occurrence, or series of transactions or occurrences" requirement of section 299(a)(1), given Congress's express determination in section 299(b) that an allegation of infringement by multiple entities is not enough to allow joining all of them in one lawsuit. In addition, the plaintiff does not allege or explain how questions of fact common to all of the defendants will arise in the case, as required by section 299(a)(2).

Finally, the plaintiff does not allege that the defendants are selling the same accused product. This is a separate requirement of section 299(a)(1) that the plaintiff does not appear to satisfy or even address, even if it could legitimately contend that the defendants' conduct was part of the same series of transactions or occurrences and that fact questions common to all defendants will arise.

The Court notes that section 299(c) provides that an accused infringer may waive the statute's limitations as applied to itself. But the Court is not inclined to allow a lawsuit that appears on its face to run afoul of a Congressional enactment to proceed on the possibility that the defendants may eventually waive the statute's protections. Such an approach does not seem to the Court to be appropriate here, particularly given the manner in which lawsuits of this type typically proceed, with under-seal filing, ex parte temporary restraining orders, asset freezes, and the like.

The Court also notes that in a case like this one, the benefit to the plaintiff of naming multiple defendants in a single case is quite significant. Specifically, by suing 254 defendants in a single suit rather than 254 separate ones, the plaintiff will save, in one fell swoop, over $100,000 in filing fees.

For these reasons, plaintiff is ordered to show cause in writing by February 10, 2021 why the case should not be dismissed under 35 U.S.C. § 299….

NEXT: Today in Supreme Court History: February 9, 1937

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  1. Sounds like somebody experimenting with a new model for patent trolling.

    1. I don’t know. If they were patent trolling, why would they want the case under seal? Wouldn’t they want the people to know they were being sued?

      1. If the people don’t know they’re being sued until their accounts are locked, then they can’t organize to defend themselves.

        Usual patent trolling relies on the targets paying you to go away. Maybe this is a new model where they think they can actually prevail in court, and the anonymity is so that they can pursue the model longer without potential targets being alert to them.

        My last employer went under due to an otherwise legit company engaging in a form of patent trolling; We’d patented a major innovation that obsoleted their product, they then patented it overseas, and threatened to bankrupt us with the legal costs of defending our patent if we didn’t sell it to them. We did end up selling, but the lost revenue ended us.

        As an engineer who actually invents things from time to time, (Mostly NOT patented, I’m a tooling engineer, my employers usually go with proprietary.) I hate patent trolls with a burning passion.

        1. I hate to be tedious here, but if you aim to win in court, is it really “patent trolling”? Or is it legitimate patent infringement?

          1. I’d say it’s “patent trolling” if you’re not the inventor, you’re just exploiting the legal system to prey upon the actual inventor. That you have a strategy for winning in court is kind of orthogonal to that.

            And, “They can’t afford to defend because we arranged for their bank accounts to be seized.” IS a strategy for winning in court, isn’t it? A time honored one, damnably.

            1. Yeah, I think Brett has a point here.

              It’s worth remembering the history of attachments and the like. 60 years ago it was trivially easy to go into court and get a secret attachment order that froze all the bank accounts of a defendant you were suing. Secret TRO’s occurred sometimes too.

              More recently, courts have imposed due process protections against these things, and for good reason. You are supposed to make some sort of specific showing. I remember a colorful writs and receivers judge in Los Angeles Superior Court a couple of decades back who was lecturing a lawyer- “you need to put in a declaration that the money is about to come out of the bank account”.

              So while I don’t know if I would call this patent trolling, I am immediately suspicious when someone wants to make an anonymous filing against anonymous defendants for alleged activity and says they need a TRO against the anonymous defendants without notice, without an opportunity to be heard, and really in a sort of assembly line fashion. Honestly, a litigant should have to make a pretty substantial individualized showing against a defendant to get something like this.

              1. My guess is a weak patent and that they are concerned about it’s validity being challenged before they get any wins in court.

                Something on the order of well known technique (that’s been around for decades or even centuries) on a general purpose computer (or on the internet).

                There are dozens of such patents that are out there but never should have been granted in the first place.

            2. But again, if they have the patent, perhaps they actually ARE the inventor? It’s a crazy thought. And they’re trying to enforce the patent that is their rightful invention?

              Imagine if you’ve successfully patented something in the US. But a bunch of foreign operators are infringing on your patent and selling stuff in the US. They know they’re violating it, but they’re continuing to get money from people buying it over the internet. But the second a court decision drops, they clear out their paypal accounts and move on to a new e-mail and a new shell company?

      2. Why aren’t the assets hidden from the start?

        1. Presumably because the people this company is proposing to sue don’t understand themselves to be doing anything illegal, and so don’t see any need to protect themselves in that manner.

          1. Good point — but people form corporations to protect themselves from potential liability, not expected liability. You’d think — by this point — anyone dealing with PayPal would yank the money out as quickly as possible.

            *I* would — and not because I thought I was doing anything illegal.

  2. “The infringement allegations in the complaint itself are relatively conclusory; they include no information about how the claimed infringing products are alleged to infringe the design patent.”

    Shouldn’t this by itself be fatal?

    1. Yes, it could very well be. However, as the court noted just two sentences later, it was easier to dispose of the case on joinder grounds “[w]ithout addressing … the sufficiency of the complaint under Federal Rules of Civil Procedure 8(a) and 12(b)(6) as to each of the two hundred fifty-four defendants[.]”

  3. The infringement allegations in the complaint itself are relatively conclusory; they include no information about how the claimed infringing products are alleged to infringe the design patent.

    One thing that leapt out at me was this is a design patent, that is it does not concern a device or process it concerns the look of a thing.

    If I recall Correctly one of Apple’s successful allegations against Samsung in their long running smart phone litigation was that Apple had a design patent on a smart phone with rounded corners. They also had similar patents on a number of other rather obvious features. That seems to make this case more like a suit about knock off Gucci handbags of smartphones of any number of consumer items made in Asia and sold over the Internet that traditional patent litigation about a device or process.

    1. Yes, I agree. Aside from the improper and excessive joinder, this doesn’t really have much in common with patent troll/NPE/PAE cases, which ordinarily involve utility, not design patents—as you noted.

  4. This case was covered on Patently-O a week ago. At the time, I actually predicted that it would show up here—and sure enough it did.

    I agree with the court here that—given the threadbare arguments—it was an “inferential leap” too far to seal plaintiff’s identity. But I think plaintiff could have made a more fulsome argument. I could envision a situation where even sealing the defendants’ names still won’t prevent asset hiding. For example, if the defendants are intentionally dealing in counterfeit goods that they know infringe a specific company’s IP (design patents [as here] and/or trademarks), then just seeing that company’s name appear on the docket might be enough to clue them in.

    Also, does anyone know why these “Schedule A” cases are so popular in NDIL? I assume the defendants are all in China and/or somewhere else overseas, and have no particular connection to the District. Obviously there’s no shortage of firms in that area, so maybe that’s the reason?

    1. if the defendants are intentionally dealing in counterfeit goods that they know infringe a specific company’s IP (design patents [as here] and/or trademarks)

      Depending on the product the defendants may or may not know they are dealing with a design patent. In the Apple Samsung matter I mention above many people though Apple was pushing the vague simplistic and obvious design patent.

      If it were a trademark or product counterfeiting allegation then the plaintiff would have other potentially more effective means of pursuing their claims.

      To the point of the article without knowing who is suing, what the patent is for and who is being sued no one can know.

  5. Might the docket clue them in even without the plaintiff’s name appearing?

    1. It seems like it could, given how these kinds of cases in the District have played out previously.

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