Columbia Sportswear North America, Inc. v. Seirus Innovative Accessories

REPLY to Response to Motion re Motion to Adopt Modified Trial Management Plan

S.D. Cal.September 14, 2017

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DAVID R. BOYAJIAN (CBN #257825) DAVID W. AXELROD (OSB #750231) admitted pro hac vice BRENNA K. LEGAARD (OSB #001658), admitted pro hac vice NICHOLAS F. ALDRICH, JR. (OSB #160306), admitted pro hac vice SCHWABE, WILLIAMSON & WYATT, P.C. 1211 SW 5th Ave., Suite 1900 Portland, OR 97204 Telephone: 503.222.9981 E-mail: dboyajian@schwabe.com daxelrod@schwabe.com blegaard@schwabe.com naldrich@schwabe.com Attorneys for Plaintiff UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA SAN DIEGO DIVISION COLUMBIA SPORTSWEAR NORTH AMERICA, INC., an Oregon corporation, Plaintiff, v. SEIRUS INNOVATIVE ACCESSORIES, INC., a Utah corporation, Defendant. Case No.: 3:17-cv-01781-HZ COLUMBIA’S REPLY IN SUPPORT OF MOTION TO ADOPT MODIFIED TRIAL MANAGEMENT PLAN Judge: Marco A. Hernandez Courtroom: 3C Date: September 18, 2017 Time: 9:00 a.m. Date Action Filed: January 12, 2015 Trial Date: September 18, 2017 Case 3:17-cv-01781-HZ Document 287 Filed 09/14/17 PageID.12259 Page 1 of 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 COLUMBIA’S REPLY ISO MOTION TO ADOPT MODIFIED TRIAL MANAGEMENT PLAN CASE NO.: 3:17-CV-01781 Plaintiff Columbia Sportswear North America (“Columbia”) submits this reply in support of its Motion to Adopt Modified Trial Management Plan. I. All issues under § 289 should be decided by this Court. In deciding whether Columbia’s claim for disgorgement under § 289 should be tried to the Court, the sole issue is whether the claim is legal or equitable in nature. Seirus does not dispute that it has no right to a jury trial if the claim is equitable in nature. Instead, Seirus urges only that a claim for disgorgement under § 289 “sounds in law, not equity” and involves factual determinations that must be made by the jury. [Dkt. 278, p. 2.] But no authority supports Seirus’s position. Seirus is correct that parties and courts regularly-even if inconsistently-have presumed that claims under § 289 are submitted to the jury. The United States Supreme Court, however, recently confirmed that such disgorgement claims are equitable in nature. See Petrella v. MGM, 134 S. Ct. 1962, 1967 n. 1, 1978-79 (2014) (infringement remedies of “disgorgement of unjust gains and an injunction against future infringement” under § 504 of Copyright Act are “equitable remedies”); SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC, 137 S. Ct. 954, 964 (2017) (holding same and recognizing the remedy of accounting of profits in patent law was an “equitable” remedy). That clarification is consistent with longstanding precedents recognizing that an award of disgorgement of profits is an equitable remedy. Because there is no right to a jury trial on a disgorgement claim under § 289, and because it would greatly simplify matters for the jury, all § 289 issues should be decided by this Court. II. A claim for disgorgement under § 289 is not a claim for lost profits. In arguing that Columbia’s disgorgement claim under § 289 is legal in nature, Seirus first mistakenly characterizes a claim under § 289 as “a claim for lost profits.” [Dkt. 278, p. 2.] That is incorrect. The equitable remedy of disgorgement of the infringer’s profits-historically known as accounting, Robert Bosch, LLC v. Pylon Mfg. Corp., 719 F.3d 1305, 1309-10 (Fed. Cir. 2013)-is not the same as damages for Case 3:17-cv-01781-HZ Document 287 Filed 09/14/17 PageID.12260 Page 2 of 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2 COLUMBIA’S REPLY ISO MOTION TO ADOPT MODIFIED TRIAL MANAGEMENT PLAN CASE NO.: 3:17-CV-01781 lost profits. As the Supreme Court recently explained, the “remedy of damages seeks to compensate the victim for its loss, whereas the remedy of an accounting … [seeks] the disgorgement of ill-gotten profits.” SCA Hygiene Prods. Aktiebolag, 137 S. Ct. at 964. Columbia’s claim under § 289 seeks disgorgement of profits that Seirus wrongfully made with its design patent infringement, not lost profits. III. Disgorgement of profits under § 289 is an equitable remedy. Seirus also is wrong in arguing that a claim for relief under § 289 is legal in nature and subject to a jury-trial right. In deciding whether a jury-trial right attaches to a statutory claim, courts must consider both the nature of the claim and the remedy sought, with the nature of the remedy sought being “more important.” Tull v. United States, 481 U.S. 412, 417-18, 421 (1987). Only those issues “which are regarded as fundamental, as inherent in and of the essence of the system of trial by jury, are placed beyond the reach of the legislature” and are subject to the Seventh Amendment. Id. at 426; see Markman v. Westview Instruments, 517 U.S. 370, 377-78 (1996) (same). As described in Columbia’s motion, the remedy of disgorgement of profits-or accounting-long has been recognized as an equitable remedy. See, e.g., Root v. Ry. Co., 105 U.S. 189, 207 (1881) (describing disgorgement as equitable remedy, “requir[ing] the wrong-doer to refund them, as it would be inequitable that he should make a profit out of his own wrong.”); see also Gucci Am. v. Bank of China, 768 F.3d 122, 131 (2d Cir. 2014) (describing accounting as “one of the earliest examples of a restitutionary action in equity, imposing on a defendant the obligation to disclose and return profits from the use of the plaintiff’s property”). That was true in context of patent law, with claims for disgorgement of an infringer’s profits arising purely in equity. See Packet Co. v. Sickles, 86 U.S. 611, 617-18 (1873); Burdell v. Denig, 92 U.S. 716, 720 (1875). Seirus tries to dismiss the precedents cited by Columbia, arguing that the cases “predate the passage of the predecessor to § 289 … and in [any] event addressed lost profits for infringement in utility patents, not design patents.” [Dkt. No. 278, p. 3 n. Case 3:17-cv-01781-HZ Document 287 Filed 09/14/17 PageID.12261 Page 3 of 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 COLUMBIA’S REPLY ISO MOTION TO ADOPT MODIFIED TRIAL MANAGEMENT PLAN CASE NO.: 3:17-CV-01781 1.] But the authorities cannot be so dismissed. Indeed, although Seirus ignores it, the Supreme Court’s recent decision in Petrella confirmed that the infringement remedy of disgorgement of profits is equitable in nature. 134 S. Ct. 1962, 1967 n.1. Although Petrella involved a copyright infringement claim, the Supreme Court subsequently has clarified that the reasoning in Petrella applies equally in the context of patent law. SCA Hygiene Prods. Aktiebolag, 137 S. Ct. at 964 (holding same and recognizing remedy of accounting of profits in patent context was considered an “equitable” remedy). Seirus offers no basis to distinguish this authority. There also is no merit to Seirus’s argument that profit disgorgement is not an equitable remedy if it is “accomplished exclusively by a judgment for money.” [Dkt. 278 at 4.] Although monetary damages generally are considered legal in nature, the Supreme Court has explained that monetary damages are equitable “where they are restitutionary, such as in ‘actions for disgorgement of improper profits.’” Chauffeurs, Teamsters and Helpers, Local No. 391 v. Terry, 494 U.S. 558, 570 (1990) (citation and alterations omitted); see also, e.g., SEC v. Rind, 991 F.2d 1486, 1493 (9th Cir. 1993) (“[T]he Supreme Court has observed that actions for disgorgement of improper profits are equitable in nature.”). There is no right to a jury trial on Columbia’s claim for disgorgement of profits under § 289. IV. Because § 289 is an equitable remedy, this Court must decide all factual issues relating to relief under § 289. Because the remedy of disgorgement of profits under § 289 is an equitable remedy, all issues arising under § 289 are triable to the Court. In arguing to the contrary, Seirus contends that fashioning an award under § 289 involves factual issues for the jury, including identification of the “article of manufacture” to which the infringed design has been applied. See Samsung Elecs. Co. v. Apple, Inc., 137 S. Ct. 429, 434 (2016) (award under § 289 involves two-step analysis of “identify[ing] the ‘article of manufacture’ to which the infringed design has been applied” and then Case 3:17-cv-01781-HZ Document 287 Filed 09/14/17 PageID.12262 Page 4 of 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 COLUMBIA’S REPLY ISO MOTION TO ADOPT MODIFIED TRIAL MANAGEMENT PLAN CASE NO.: 3:17-CV-01781 “calculat[ing] the infringer’s total profit made on that article of manufacture”). But, contrary to Seirus’s argument, this Court-not the jury-must decide all issues relating to relief under § 289, including any factual disputes about the “article of manufacture.” For claims seeking only equitable relief, it is a well-established rule that there is no right to a jury trial on any disputed factual issues. See Am. Universal Ins. Co. v. Pugh, 821 F.2d 1352, 1356 (9th Cir. 1987) (“equitable remedies are not triable of right by a jury”). Instead, all issues-including disputed factual issues relating to the equitable award-must be resolved by the court. See, e.g., SEC v. Jasper, 678 F.3d 1116, 1130-31 (9th Cir. 2012) (holding there is “no right to have a jury find all predicate facts to the remedy of disgorgement” under the Sarbanes-Oxley Act); Am. Calcar, Inc. v. Am. Honda Motor Co., 651 F.3d 1318, 1333 (Fed. Cir. 2011) (“Inequitable conduct is equitable in nature, with no right to a jury, and the trial court has the obligation to resolve the underlying facts of materiality and intent.”). No different rule applies in the context of patent infringement claims seeking relief under § 289. As the United States Supreme Court recently reiterated, “[p]atent law is governed by the same common-law principles, methods of statutory interpretation, and procedural rules as other areas of civil litigation.” SCA Hygiene Prods. Aktiebolag, 137 S. Ct. at 964. Just as there is no right to a jury trial for factual issues relating to other claims for equitable relief-such as claims seeking injunctive relief-all factual issues relating to relief under § 289 must be tried to the court. The question of the relevant “article of manufacture” is part of the analysis for relief under § 289 and, as such, must be decided by the court. Cf., e.g., Teva Pharms. USA, Inc. v. Sandoz, Inc., 135 S. Ct. 831, 835 (2015) (because construction of a patent claim is an issue for the court, not the jury, the court must decide all issues, including factual disputes, relating to claim construction). In seeking a different rule, Seirus points only to the amicus curiae brief of the United States in Samsung Elecs. Co. v. Apple, Inc., which argued that the jury should Case 3:17-cv-01781-HZ Document 287 Filed 09/14/17 PageID.12263 Page 5 of 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5 COLUMBIA’S REPLY ISO MOTION TO ADOPT MODIFIED TRIAL MANAGEMENT PLAN CASE NO.: 3:17-CV-01781 be charged with deciding the “article of manufacture” in determining an award under § 289. See [Dkt. No. 278-2, United States Amicus Br. at 41 (arguing same).] But the argument by the United States as amicus must be viewed in the context of its overall arguments. In arguing that the “article of manufacture” was a jury question, the United States appeared to presume that the jury-not the court-would be tasked with deciding the plaintiff’s claim of disgorgement of profits under § 289. See id. Such a presumption was understandable given that the parties consented to a jury trial. Additionally, other parties in other cases have regularly (although inconsistently) requested that their § 289 disputes be heard by a jury. See, e.g., Catalina Lighting v. Lamps Plus, 295 F.3d 1277, 1289 (Fed. Cir. 2002) (reviewing jury award of disgorgement of profits under § 289), Nordock, Inc. v. Systems Inc., 803 F.3d 1344, 1350 (Fed. Cir. 2015) (in a design patent case, “[t]he district court conducted a jury trial . . . on the issues of infringement, validity, and damages”), rev’d and remanded on other grounds by, 137 S. Ct. 589; but see Nike, Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437, 1447 (Fed. Cir. 1998) (reviewing court award of disgorgement of profits under § 289, including court’s accounting methodology and factual findings in making the award). But the historical practice that some parties consented to a jury trial does not mean they had a Seventh Amendment right to it or that they were obligated to do so. In its recent decision in SCA Hygiene Prods. Aktiebolag, 137 S. Ct. 954, the Supreme Court made clear that the reasoning in Petrella-including its recognition of the important distinction between damages and equitable relief-applies equally in the context of patent law. See id. at 964 (“the equitable remedy of an accounting, however, was not the same as damages”). Thus, it is incorrect to presume that a claim for disgorgement of profits under § 289 is a jury issue. Just as all issues relating to other equitable relief is triable to the court, all issues relating to relief under § 289 is triable to the court with no right to a jury trial. Case 3:17-cv-01781-HZ Document 287 Filed 09/14/17 PageID.12264 Page 6 of 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6 COLUMBIA’S REPLY ISO MOTION TO ADOPT MODIFIED TRIAL MANAGEMENT PLAN CASE NO.: 3:17-CV-01781 V. This Court should decline Seirus’s request for an advisory jury verdict. Finally, this Court should decline Seirus’s request for an advisory jury verdict on the proper award of disgorgement relief under § 289. Seirus has expressed concerns about a jury’s ability to determine the measure of legal damages under § 284 and the proper award of equitable disgorgement of profits under § 289. Under Columbia’s proposal, the decisions for the jury will be greatly simplified and will avoid any risk of confusion. Because an advisory jury verdict is unnecessary and would only complicate the issues, this Court should order that all issues arising under § 289 will be decided only by this Court. See Am. Calcar, Inc., 651 F.3d at 1333-34 (when court sitting in equity submits issue to advisory jury, jury’s determination is not binding on court). VI. Conclusion. This Court has already granted summary judgment on the issues of the design patent infringement. All that is left is the determination of the proper remedies owed to Columbia. To mitigate the possibility of jury confusion in the application of differing remedies, Columbia withdraws its request to have the disgorgement remedy // // // // // // // // // // // // Case 3:17-cv-01781-HZ Document 287 Filed 09/14/17 PageID.12265 Page 7 of 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7 COLUMBIA’S REPLY ISO MOTION TO ADOPT MODIFIED TRIAL MANAGEMENT PLAN CASE NO.: 3:17-CV-01781 under 35 U.S.C. § 289 heard by a jury, and requests that the Court hear all issues related to this issue, including what the relevant “article of manufacture” is. Dated: September 14, 2017 SCHWABE, WILLIAMSON & WYATT, P.C. By: /s/ Nicholas F. Aldrich David R. Boyajian E-mail: dboyajian@schwabe.com David W. Axelrod, pro hac vice E-mail: daxelrod@schwabe.com Brenna K. Legaard, pro hac vice E-mail: blegaard@schwabe.com Nicholas F. Aldrich, Jr., pro hac vice E-mail: naldrich@schwabe.com Attorneys for Plaintiff Case 3:17-cv-01781-HZ Document 287 Filed 09/14/17 PageID.12266 Page 8 of 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 - CERTIFICATE OF SERVICE PDX\106477\192966\NFA\21468454.2 CERTIFICATE OF SERVICE I hereby certify that on September 14, 2017, I served the foregoing document on the following counsel of record for Defendant Seirus Innovative Accessories, Inc.: By electronic service via the Court’s CM/ECF System Renée E. Rothauge ReneeRothauge@markowitzherbold.com Markowitz Herbold PC Suite 3000, Pacwest Center 1211 SW Fifth Avenue Portland, OR 97204-3730 Christopher S. Marchese marchese@fr.com Garrett K. Sakimae sakimae@fr.com Seth M. Sproul sproul@fr.com Tucker N. Terhufen Terhufen@fr.com Fish & Richardson PC 12390 El Camino Real San Diego, CA 92130 by delivering to them a true and correct copy thereof, certified by me as such. /s/ Nicholas F. Aldrich Nicholas F. Aldrich Email: naldrich@schwabe.com Case 3:17-cv-01781-HZ Document 287 Filed 09/14/17 PageID.12267 Page 9 of 9