Justice Must Satisfy the Appearance of Justice— A Judge’s Family’s Financial Interest of 100 Shares of a Party’s Stock is a Serious Issue
Centripetal Networks, Inc. v. Cisco Systems, Inc., Appeal No. 21-1888, the Federal Circuit held that placing stock in a blind trust does not divest a judge of that stock for purposes of the judicial ethics statutes.
After a 22-day bench trial in patent case between Centripetal Networks and Cisco, Judge Morgan learned that his wife owned 100 shares of Cisco stock valued at $4,687.99. Instead of selling the stock, Judge Morgan placed the stock in a blind trust. Judge Morgan then denied Cisco’s motion requesting Judge Morgan’s recusal under 28 U.S.C. § 455, reasoning that placing the stock in a blind trust “cured” any conflict and that selling the stock would “imply concern about insider trading.” Judge Morgan ultimately held that Cisco willfully infringed Centripetal’s patents and awarded enhanced damages and royalties exceeding $2.75 billion.
On appeal, the Federal Circuit reversed. The Federal Circuit concluded that placing the stock in a blind trust did not “divest” Judge Morgan of the stock under the judicial ethics statutes because “ownership” can only be “divested” if the interest is sold or given away. The Court also noted that selling the stock would not have suggested the appearance of insider trading because “comply[ing] with ethical obligations is not insider trading.” Stressing the importance of judiciary credibility and the public’s confidence in the judicial process, the Federal Circuit also held that the appropriate remedy is to vacate the rulings which were issued after Judge Morgan learned of his wife’s financial interest in Cisco. Thus, the Federal Circuit, in part, reversed, vacated, and remanded Judge Morgan’s orders.
Proving Reputational Injury Without Use of the Marks in the United States
Meenaxi Enterprise, Inc. v. The Coca-Cola Company, Appeal No. 21-2209, the Federal Circuit held that to maintain a statutory cause of action under the Lanham Act for activities solely conducted outside the United States, the claimant must provide concrete evidence of reputational injury or lost sales.
The Coca-Cola Company sought to cancel Meenaxi Enterprise, Inc.’s registrations for THUMS UP and LIMCA under § 14(3) of the Lanham Act, 15 U.S.C. § 1064(3) asserting that Meenaxi was using these marks to misrepresent the source of its goods. Since the 1970s, Coca-Cola has distributed Thums Up cola and Limca lemon-lime soda in India and other foreign markets and obtained registrations for both marks in those countries. Meenaxi has distributed Thums Up cola and Limca lemon-lime soda in the United States since 2008 and registered the marks THUMS UP and LIMCA in connection with soft drinks (among other goods) in International Class 32 with the United States Patent and Trademark Office. Coca-Cola claimed that Meenaxi traded on Coca-Cola’s goodwill with Indian-American consumers by misleading them into thinking that Meenaxi’s beverages were the same as those sold by Coca-Cola in India. The Trademark Trial and Appeal Board (“Board”) held in Coca-Cola’s favor and cancelled Meenaxi’s registrations.
The Federal Circuit reversed the Board’s decision to cancel Meenaxi’s registrations. The Federal Circuit held that Coca-Cola failed to establish a statutory cause of action based on lost sales or reputational injury. The Federal Circuit noted that the territoriality principle was not implicated as Coca-Cola based its claim solely on its alleged injury occurring in the United States. The Federal Circuit reasoned that the limited sales of Coca Cola’s Indian products by third parties in the US and Coca-Cola’s assertion that Americans of Indian descent would be aware of the marks’ reputation in India, without any survey evidence, was insufficient to prove reputation of the marks in the US. Thus, Coca-Cola failed to establish the right to bring a statutory cause of action under § 14(3) of the Lanham Act, 15 U.S.C. § 1064(3).
Judge Reyna concurred to express that the case was governed by the territoriality principle and the well-known mark exception.
Disclosures Under Joint Defense Agreement Were Not A Protective Order Violation
Static Media LLC v. Leader Accessories LLC, Appeal No. 21-2303, the Federal Circuit held that it was an abuse of discretion to hold a party in contempt for an alleged protective order violation resulting from a third person’s use of confidential information in a co-pending litigation when the third person (1) agreed to be bound by the order, (2) was reminded of its obligations under the order, and (3) the disclosure was made pursuant to a joint defense agreement.
Static Media sued Leader for patent infringement in Wisconsin and the parties entered into a protective order during the course of the proceedings to govern the dissemination and use of confidential documents. In relevant part, the order stated that documents “shall be used solely for the propose of this proceeding.” Access to the confidential documents was limited to a select group of people, including outside individuals retained to furnish consulting, technical, or expert services provided they executed a “Written Assurance” to abide by the terms of the order. Static Media subsequently sued OJ Commerce for patent infringement in Florida, asserting the same patent as in the co-pending suit with Leader, and the two defendants entered into a joint defense agreement to consult one another with respect to issues of infringement and potential defenses. Leader’s attorney, Mr. Lee, had OJ Commerce’s attorney, Mr. Hecht, execute the Written Assurance of the order and began sharing confidential documents with Mr. Hecht. With each disclosure, Mr. Lee reminded Mr. Hecht that the documents were subject to the protective order and asked him to adhere to the order. However, Mr. Hecht subsequently used certain documents during settlement negotiations of the Florida action and disclosed his use of these confidential documents to Static. Static moved for discovery sanctions in the Wisconsin action arguing that Leader and Mr. Lee violated the protective order. The district court agreed and ordered a monetary sanction.
The Federal Circuit reversed the district court’s order, holding that there was no clear and convincing evidentiary support for the conclusion that Mr. Lee knew or should have known that Mr. Hecht would use the confidential information in the Floridan action. Noting that “Mr. Lee did exactly what was required to ensure that Mr. Hecht would abide by the protective order,” the Federal Circuit first focused on the execution of the Written Assurance by Mr. Hecht and the reminders that Mr. Lee provided with each disclosure. Thus, the fact that Mr. Hecht made an improper disclosure in the Florida action should not have been attributed to Leader and Mr. Lee. Moreover, the Federal Circuit held that Mr. Lee’s disclosure to Mr. Hecht did not violate the protective order’s restriction concerning use “solely” for the purpose of the Wisconsin action. The Federal Circuit determined that it was not objectively unreasonable to interpret the protective order as allowing use amongst individuals bound by the order while prohibiting disclosure only to third parties not bound by the order. Thus, there was a “fair ground of doubt” as to whether the protective order barred Mr. Lee’s disclosures to develop a joint defense strategy and such a contempt order was improper under the circumstances.
Judge Reyna dissented, arguing that deference to the district court was warranted and Mr. Lee knew or should have known that the disclosures to Mr. Hecht were not “solely” for use in the Wisconsin action.