IP Law Alert : Intellectual Property Lawyers & Attorneys : Gibbons Law Firm : Copyrights, Patent Infringement, Unfair Competition

On October 14, 2010, the U.S. District Court for the Southern District of Texas granted what is reportedly the largest judgment ever awarded in an action involving on-line counterfeiting. In Farouk Systems, Inc. v. Eyou Int’l Trading Co., Judge Kenneth M. Hoyt entered a default judgment and permanent injunction against more than seventy defendants, who were operating an Internet counterfeiting ring out of China. The judgment required that each of the defendants pay Farouk statutory damages of $4 million, resulting in an award of approximately $300 million. In addition to being significant because of the amount of the damages awarded, this decision is noteworthy for the pragmatic approach that the Court took to ensure that the relief awarded to the plaintiff would be meaningful.

In Farouk, the Court found the defendants guilty of operating an on-line counterfeiting ring that distributed spurious CHI® and FAROUK® branded hair care products, including straightening irons and hairdryers. Judge Hoyt noted that the defendants had gone to “great lengths to conceal and/or move themselves and their ill-gotten proceeds from Plaintiff’s and [the] Court’s detection and reach, including by using multiple false identities and addresses associated with their operations and purposely-deceptive contact information.” To give teeth to the decision, Judge Hoyt required that PayPal, Inc. release money in the defendants’ PayPal accounts to Farouk, in partial payment of the judgment. He also enjoined a broad array of third parties from providing services that would assist any defendant with its infringing activities. Among those enjoined are Internet Service Providers, sponsored search engine and ad word providers, banks, payment processing services, and entities such as Alibaba.com and DIYtrade.com, which provide on-line B2B (business to business) selling platforms.

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Recently, the U.S. District Court for the Southern District of New York ruled that a generic drug manufacturer may not be required to provide advance notice to the innovator of their intent to launch at-risk a competing product. This decision is noteworthy in that it contrasts with the practice in the District Court of New Jersey where at least one generic company has been ordered to provide advance notice to the brand companies of an impending at-risk launch.

In Teva et al. v. Sandoz, Inc., 08-7611 (S.D.N.Y. October 12, 2010), the district court for the Southern District of New York, denied Teva's request for 10 days advance notice of Sandoz’s launch at risk of a generic version of Copaxone®. The court held that, “[w]hile other courts may have, in other circumstances, ordered generic drug makers to provide another party with notice of its intent and ability to launch, the Court finds that it is unnecessary to do so here.” The court found that Sandoz had no legal obligation to provide Teva with advance notice, particularly since there are no regulatory impediments by the FDA barring entry of Sandoz’s generic product. As such, the court held that ordering Sandoz to provide advance notice would effectively require it to disclose confidential business information to Teva. The court also dismissed Teva’s argument that advance notice could potentially avoid “saddling” the court with an emergency request for a temporary restraining order, noting that Fed. R. Civ. P. 65 sufficiently addresses any such concerns.

Lisa H. Wang is an Associate in the Gibbons Intellectual Property Department.

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