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Tinnus Enterprises, LLC v. Telebrands Corporation

United States District Court, E.D. Texas, Tyler Division

November 1, 2017

TINNUS ENTERPRISES, LLC, ZURU LTD., Plaintiffs,
v.
TELEBRANDS CORPORATION, BULBHEAD.COM, LLC, Defendants.

          MEMORANDUM OPINION AND ORDER

          ROBERT W. SCHROEDER, III UNITED STATES DISTRICT JUDGE.

         Before the Court is Plaintiffs Tinnus Enterprises, LLC and ZURU Ltd.'s ("Plaintiffs") Motion to Reconsider (Docket Nos. 423 (sealed), 425) and ZURU Inc., ZURU LLC, ZURU Pty Ltd., and ZURU UK Ltd.'s ("ZURU entities") Motion to Reconsider (Docket Nos. 422 (sealed), 424). Defendants Telebrands Corporation and Bulbhead.com, LLC ("Defendants") filed a response (Docket No. 435), to which Plaintiffs filed a reply (Docket No. 451), and Defendants filed a sur-reply. Docket No. 465. On October 25, 2017, the Court held an evidentiary hearing on the matter. For the reasons set forth herein, the Motions (Docket Nos. 422, 423, 424, 425) are DENIED

         BACKGROUND

         On January 26, 2016, Plaintiffs filed the instant action against Telebrands, alleging infringement of U.S. Patent No. 9, 242, 749 ("the '749 Patent"). Docket No. 1. On April 19, 2016, Plaintiffs amended their complaint to add allegations of infringement of U.S. Patent No. 9, 315, 282 ("the '282 Patent"). Docket No. 3. On April 20, 2017, Plaintiffs filed corporate disclosure statements identifying no parent corporations. Docket Nos. 5, 6. This case proceeded on a trial schedule through the completion of discovery and expert discovery and through the filing of dispositive motions. On July 7, 2017, Defendants filed a motion for partial summary judgment, alleging for the first time that Defendants were entitled to summary judgment on Plaintiffs' claim for lost profits because ZURU Ltd. had not made sales of the Bunch O Balloons products in the United States, but rather ZURU Inc. had made those sales and was not a named party to this action. Docket No. 334. Plaintiffs filed a response to Defendants' motion for partial summary judgment and also filed a separate motion to join the remaining ZURU entities. Docket No. 383. Thereafter, on August 29, 2017, the ZURU entities filed a motion to intervene. Docket No. 395. On September 1, 2017, Plaintiffs filed an amended notice of interested parties, including ZURU Inc. and ZURU LLC. Docket No. 401. Given the overlapping issues presented by the motions, the Magistrate Judge took up all matters related to Plaintiffs' claim for lost profits at a hearing held on September 7, 2017.

         On September 11, 2017, the Magistrate Judge issued three opinions related to Plaintiffs' claim for lost profits: (1) a Memorandum Opinion and Order granting-in-part and denying-in-part Defendants' Motion to Exclude Alan Ratliff s Opinions on Lost Profits (Docket No. 405); (2) a Report and Recommendation recommending that Defendants' Motion for Summary Judgment of No Lost Profits be granted-in-part and denied-in-part (Docket No. 406); and (3) an Order denying Plaintiffs' Motion to Join and the ZURU entities' Motion to Intervene as Moot in light of the concurrent findings (Docket No. 407).

         While Plaintiffs and the ZURU entities filed the instant motions to reconsider on the Magistrate Judge's denial of their respective motions to join and intervene, the basis they seek for reconsideration arises from the Magistrate Judge's finding in the Report and Recommendation that the ZURU entities did not have sufficient rights to collect lost profits during the time of alleged infringement. See, e.g., Docket Nos. 422, 423. The following timeline summarizes the relevant dates and events presented by Plaintiffs' Motions:

Date

Event

August 19, 2014

Original license between Tinnus and ZURU Ltd. (Docket No. 364-4).

November 19-20, 2014

First letter from Mr. Malone authorizing ZURU Inc. to “use the Intellectual Property subject to the terms of the License.” Email from Johanna Bejarano at ZURU to Josh Malone requesting that ZURU Inc. be added to the letter granting Trademark Assignment (Docket No. 435-7).

June 9, 2015

U.S. Patent No. 9, 051, 066 (“the '066 Patent”) issues; Tinnus and ZURU Ltd. file complaint for alleged infringement of the '066 Patent against Bed Bath & Beyond Inc., Prometheus Brands, LLC, Telebrands Corporation. (Case No. 6:15-cv-551.)

July 1, 2015

Josh Malone writes letter to ZURU stating that ZURU Inc. is “authorized by Tinnus to use the Intellectual Property subject to the terms of the License.” (Docket No. 390-2.)

November 4, 2015

Tinnus and ZURU Ltd. execute first amended license agreement. (Docket No. 364-5.)

December 22, 2015

Order on Injunction issues as to '066 Patent. (Case No. 6:15-cv-551, Docket No. 91.)

January 26, 2016

U.S. Patent No. 9, 242, 749 (“the '749 Patent”) issues and Tinnus and ZURU Ltd. file the instant action against Telebrands. (Docket No. 1.)

April 19, 2016

U.S. Patent No. 9, 315, 282 (“the '282 Patent”) issues and Tinnus and ZURU Ltd. file an amended complaint against Telebrands. (Docket No. 3.)

September 29, 2016

The Court grants Plaintiffs' Motion for Preliminary Injunction against Telebrands. (Docket No. 142.)

October 18, 2016

Tinnus and ZURU Ltd. execute the second amended license agreement. (Docket No. 364-6.)

October 31, 2016

Injunction Order issues on the '749 and '282 Patents. (Docket Nos. 159.)

July 7, 2017

Telebrands files motion for summary judgment of no lost profits. (Docket No. 334.)

July 31, 2017

Tinnus and ZURU Ltd. execute addendum to the second amended license agreement, expressly including all ZURU entities as licensees. (Docket No. 372-3.)

August 11, 2017

Plaintiffs file motion to join the ZURU entities. (Docket No. 383.)

August 29, 2017

ZURU entities file motion to intervene. (Docket No. 395.)

September 1, 2017

Tinnus and ZURU Ltd. file amended notice of interested parties including the ZURU entities. (Docket No. 401.)

         LEGAL STANDARD

         The Federal Rules of Civil Procedure do not specifically provide for motions for reconsideration. Shepherd v. Int'l Paper Co., 372 F.3d 326, 328 n.1 (5th Cir. 2004). Motions to reconsider are considered rare and filed only for the limited purpose: "to permit a party to correct manifest errors of law or fact, or to present newly discovered evidence." Krim v. pcOrder.com, Inc., 212 F.R.D. 329, 331 (W.D. Tex. 2002) (citations omitted). Mere disagreement with an order of the Court does not warrant reconsideration of that order. Id. at 332. A party should not restate, recycle, or rehash arguments that were previously made. Id.

         DISCUSSION

         In the motions to reconsider, Plaintiffs argue that the evidence suggests ZURU Inc. had an exclusive license to the patents-in-suit during the period of infringement. Docket No. 422 at 2. In his Report and Recommendation, the Magistrate Judge noted that at the hearing on September 7, 2017, Plaintiffs argued that ZURU Inc. had an oral license to the patents-in-suit that was confirmed by a July 1, 2015 letter from Josh Mai one. Docket No. 406 at 6. In relevant part, that letter states that ZURU Inc. is "authorized by Tinnus to use the Intellectual Property subject to the terms of the License." Docket No. 390-2. The Magistrate Judge found that this letter "did not provide ZURU Inc. with the exclusive rights to the patents-in-suit needed to recover lost profits in this action." Docket No. 406 at 6, citing Poly-America, L.P. v. GSE Lining Tech., Inc., 383 F.3d 1303, 1311 (Fed. Cir. 2004) ("a licensee generally may not sue for damages unless it has exclusive rights under a patent, including the right to sue.").

         Plaintiffs now seek to supplement the record with: (1) testimony from Mr. Malone and Ms. Anna Mowbray regarding the fact that an oral license did exist during the time of infringement; (2) evidence of royalty payments made during the period of alleged infringement; (3) sales by ZURU Inc. during that time; and (4) the course of conduct of the parties. Docket No. 422 at 7-11. As an initial matter, Plaintiffs have no legal basis to seek reconsideration given that this evidence was previously available to them and not presented to the Court when provided with such opportunities during briefing and at the Magistrate Judge's September 7, 2017 hearing. Beneficial Innovations, Inc. v. Blockdot, Inc., No. 2:07-CV-263-TJW-CE, 2010 WL 11469805, at *2 (E.D. Tex. Oct. 27, 2010) (denying reconsideration where "new evidence" was not convincing because it was not "new evidence at all."). Indeed, Plaintiffs do not contest that this evidence was previously available, nor do they explain why they did not present this evidence or testimony to the Magistrate Judge or why Ms. Mowbray or Mr. Malone were unable to provide their current statements in their prior declarations. However, for completeness of the record, the Court agreed to take in the new evidence at its October 25, 2017 hearing.

         At the hearing, Mr. Malone and Ms. Mowbray testified to the existence of an oral agreement between ZURU Inc. and Tinnus. Hearing Transcript "Tr." at 58:4-6; 87:20-22. Mr. Malone ultimately testified to a meeting he had with Ms. Mowbray in China where they reached an agreement that culminated in the August 19, 2014 original license agreement between ZURU Ltd. and Tinnus. Tr. at 58:7-60:2. Mr. Malone admits that ZURU Inc. was never included in any written license agreement until the October 2016 second amended license agreement but states that in his mind ZURU was ZURU and so he had no reason to distinguish the rights between ZURU Ltd. and ZURU Inc. Id. He confirmed ZURU Inc. had rights in letters for ZURU's customers. Id. Mr. Malone testified that, based on his understanding, an oral agreement between ZURU Inc. and Tinnus would have been in effect since November 2014. Tr. at 60:14-25. He admits he was unaware of ZURU Inc. at the time the original license agreement was executed in August 2014. Tr. at 61:1-9. Ms. Mowbray confirmed the meeting in China in August of 2014 and testified that the terms of the oral agreement between ZURU Inc. and Tinnus were the same as the terms of the original license agreement between ZURU Ltd. and Tinnus. Tr. at 87:23-89:9. Ms. Mowbray also contends that the oral agreement would have been in effect as of November 19, 2014 based upon Mr. Malone's November 2014 letter to ZURU. Tr. at 89:25-90:10.

         Even if the evidence in the record establishes an oral license to ZURU Inc. during the time of infringement as Mr. Malone and Ms. Mowbray testified, as the Magistrate Judge pointed out, the question is not merely whether an oral license existed but what rights to the patents-in-suit ZURU Inc. had during the time of alleged infringement. Docket No. 406 at 6-7. Indeed, it is the bundle of rights held by the alleged licensee that determines whether ZURU Inc. can recover lost profits for that time period. See Poly-America, 383 F.3d at 1311 ("a licensee generally may not sue for damages unless it has exclusive rights under a patent, including the right to sue."); see also Arachnid, Inc. v. Merit Indus., Inc.,939 F.2d 1574, 1579 (Fed. Cir. 1991) ("The ...


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