Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_07-cv-00499/USCOURTS-casd-3_07-cv-00499-0/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 35:271 Patent Infringement

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

AADVENTURE PRODUCTS, INC., a

California corporation,

Plaintiff,

CASE NO. 07cv499 BTM(AJB)

ORDER GRANTING IN PART AND

DENYING IN PART MOTION TO

DISMISS AND DENYING MOTION

FOR PARTIAL SUMMARY

JUDGMENT

vs.

SIMPLY SMASHING, INC., a California

corporation,

Defendant.

Defendant Simply Smashing, Inc. (“Defendant”) has filed a motion to dismiss Plaintiff’s

seventh, eighth, and ninth causes of action for failure to state a claim. Defendant has also

filed a motion for summary judgment on Plaintiff’s first cause of action for patent

infringement. For the reasons discussed below, the motion to dismiss is GRANTED IN

PART and DENIED IN PART, and the motion for partial summary judgment is DENIED. 

I. FACTUAL BACKGROUND

Plaintiff Addventure Products, Inc., is a California corporation that owns a patented

process for compressing t-shirts into a variety of shapes. (Compl. at ¶¶ 1, 7.) Many of these

shapes are also protected by Plaintiff’s design patents. (Compl. at ¶ 1.) According to

Plaintiff, Defendant, also a California corporation, entered into the compressed t-shirt

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business and began selling “knock-offs” of Plaintiff’s patented compressed t-shirt shapes at

a deep discount. (Compl. at ¶¶ 2, 8.) On March 1, 2004, Plaintiff sued Defendant for

infringement of its design patents. (Compl. at ¶¶ 3, 17.) The parties settled pursuant to a

written settlement agreement (“Settlement Agreement”) under which Defendant paid $25,000

to Plaintiff, agreed to stop making or selling any “Protected Designs” (as defined by the

Settlement Agreement), and agreed to remove any of Plaintiff’s “Protected Designs” from its

website. (Id. at ¶¶ 19, 20.) The “Protected Designs” are identified in Exhibit A to the

Settlement Agreement. (Ex. 7 to Compl.) 

Plaintiff alleges that Defendant subseqeuntly breached the Settlement Agreement

by making available on its website “Shape Sheets” which include nineteen of Plaintiff’s

“Protected Designs,” and by continuing to make and sell identical copies and colorable

imitations of several “Protected Designs.” (Compl. at ¶¶ 23, 50.) Plaintiff describes

Defendant as being engaged in a “widespread campaign of willful patent infringement and

unfair competition” which is eroding Plaintiff’s profit margins. (Compl. at ¶ 4.) 

The Complaint asserts claims for (1) infringement of U.S. Patent No. 5,042,227; (2)

infringement of U.S. Design Patent No. D441,282; (3) infringement of U.S. Design Patent

No. D442,476; (4) infringement of U.S. Design Patent No. D451,009; (5) infringement of

U.S. Design Patent No. D451,797; (6) infringement of U.S. Design Patent No. D456,244;

(7) unfair competition in violation of Section 43(a) of The Lanham Act, 15 U.S.C. §

1125(a); (8) unfair competition in violation of Cal. Bus. & Prof. Code § 17200; (9) common

law unfair competition; and (10) breach of contract. 

II. DISCUSSION

A. Motion to Dismiss

Defendant moves to dismiss Plaintiff’s unfair competition claims on the ground that

they fail to state a claim. As discussed below, for the most part, Plaintiff has sufficiently

stated a claim for unfair competition under the Lanham Act, Cal. Bus. & Prof. Code §

17200, and common law.

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Plaintiff’s seventh cause of action asserts a claim of trade dress infringement

under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). To state a claim for trade

dress infringement, a plaintiff must plead (1) that its claimed dress is nonfunctional; (2)

that its claimed dress is either inherently distinctive or has acquired a secondary

meaning; and (3) that the defendant’s product creates a likelihood of consumer confusion. 

Clicks Billiards, Inc. v. Sixshooters, Inc., 251 F.3d 1252, 1258 (9th Cir. 2001). 

Defendant argues that Plaintiff has failed to define its trade dress. However, the

Complaint identifies the trade dress at issue as the “Protected Designs” set forth in

Exhibit A to the Settlement Agreement. (Ex. 7 to Compl.) Exhibit 7 lists the design patent

numbers and shapes of forty-five “Protected Designs.” For purposes of a motion to

dismiss, Plaintiff has sufficiently identified its claimed trade dress. 

Although Plaintiff does not explicitly state that its claimed dress is nonfunctional,

that fact can be implied by the existence of the design patents. “A design patent protects

the nonfunctional aspects of an ornamental design as shown in the patent.” Elmer v. ICC

Fabricating, Inc., 67 F.3d 1571, 1577 (Fed. Cir. 1995).

The Complaint also alleges that its claimed dress is distinctive and has acquired

secondary meaning and that Defendant’s infringement of the trade dress is likely to cause

consumer confusion. (Comp. at ¶¶ 108-09.) Defendant argues that many of the shapes

at issue are common or generic shapes that either cannot qualify as trade dress or

cannot satisfy the requirement of distinctiveness/secondary meaning. These arguments

are better-suited for summary judgment.

Plaintiff’s seventh cause of action also asserts a claim of false advertising under

the Lanham Act. Defendant argues that this claim fails because Plaintiff has not identified

any false statement made by Defendant. However, a plaintiff can maintain a claim for

false advertising under the Lanham Act even if an advertisement is not literally false, but

has misled, confused, or deceived the consuming public. Southland Sod Farms v. Stover

Seed Co., 108 F.3d 1134, 1140 (9th Cir. 1997). Plaintiff alleges that by displaying

Plaintiff’s “Protected Designs” on its website, Defendant misled consumers into thinking

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that Defendant was authorized to sell Plaintiff’s “Protected Designs,” causing confusion

as to the origin of Defendant’s goods. (Comp. at ¶¶ 45-46, 111.) These allegations are

sufficient to state a claim of false advertising.

Plaintiff also asserts that Defendant violated the Lanham Act by “passing off”

Plaintiff’s “Protected Designs” as its own. This claim fails as a matter of law. “Reverse

passing off” occurs when a “producer misrepresents someone else’s good or services as

his own.” Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 28 n. 1 (2003). 

Reverse passing off occurs “when one party purchases or otherwise obtains a second

party’s goods, removes the second party’s name, and then markets the product under its

own name.” Summit Machine Tool Mfg. Corp. v. Victor CNC Sys., Inc., 7 F.3d 1434,

1437 (9th Cir. 1993). Reverse passing off can also occur when a defendant sells or

offers for sale another’s product that has been modified slightly and then labeled with a

different name. Id.

Here, however, Plaintiff does not claim that Defendant took Plaintiff’s actual

products and sold them as Defendant’s own. Instead, Plaintiff claims that Defendant sold

its own products that infringed on Plaintiff’s design patents and trade dress. In Dastar,

the Supreme Court held that the “origin of goods,” within the meaning of the Lanham Act,

refers to the producer of the tangible “goods” that are made available to the public. Id. at

31. “[T]he phrase ‘origin of goods’ is in our view incapable of connoting the person or

entity that originated the ideas or communications that ‘goods’ embody or contain.” Id. at

32. Therefore, Plaintiff’s “reverse passing off” claim fails to state a claim. See CMSI, Inc.

v. Pacific Cycle, Inc., No. C06-488 JLR, 2006 WL 2942794, (W.D. Wash. Sept. 15, 2006)

(holding that Plaintiff’s reverse passing off claim failed because Defendant produced the

scooters at issue, and, therefore, properly designated the “origin” of the scooters). 

Plaintiff’s eighth and ninth causes of action for unfair competition under Cal. Bus. &

Prof. Code § 17200 and state common law state a claim because, as discussed above,

Plaintiff has sufficiently pled trade dress infringement and false advertising. The state

claims are not preempted by federal patent law because they require additional elements

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not found in federal patent law. See Rodime PLC v. Seagate Tech., Inc., 174 F.3d 1294,

1306 (Fed. Cir. 1999); Summit, 7 F.3d at 1440. 

 B. Motion for Summary Judgment

Plaintiff’s first cause of action alleges infringement of its utility patent. Defendant

contends that it is entitled to summary judgment on this claim because Plaintiff is

equitably estopped from enforcing its utility patent against Defendant. The Court finds

that there is a triable issue of material fact as to whether equitable estoppel bars Plaintiff’s

patent infringement claim. 

1. Pertinent Facts

The utility patent, U.S. Patent No. 5,042,227, was assigned to Novapak, Inc.

(“Novapak”), in June 1991. (Ex. A to Mason Decl.) Novapak assigned the patent to

Compaction Technologies LLC on December 28, 2002, who then assigned the patent to

Plaintiff on October 3, 2005. Id.

Defendant first learned of the utility patent in December 1998, when its president

Tim Fruehe (“Fruehe”) received a facsimile from John Corbino (“Corbino”), a

representative of Graphix International (“Graphix”), which was the authorized

representative of Novapak. Corbino requested that someone call to discuss licensing. 

(Fruehe Decl. ¶ 6, Ex. B.) Fruehe informed Corbino that he did not believe Defendant

infringed the patent. (Id. at ¶ 7.) Fruehe then had numerous conversations with Corbino

regarding how the two companies could work together, but the utility patent was not

discussed. (Id. at ¶ 8.) 

On March 18, 1999, Defendant learned that one of its customers received a letter

from Graphix which stated that Novapak owned U.S. Patent No. 5,172,629, which

covered the compaction of t-shirts, and that Graphix had “started and will continue to

vigorously protect [its] patent rights.” (Id. at ¶ 9.) Defendant subsequently obtained an

opinion letter, which was sent to Herbert Silver (“Silver”) of Graphix on March 26, 1999. 

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The opinion letter stated that Defendant did not infringe either patent. (Id. at ¶ 11.) 

According to Fruehe, Silver approached him at an industry show on or about March 28,

1999, asked how the companies could work together, and “implied that the threatening

letters would stop.” (Id. at ¶ 12.) However, on August 25, 1999, Defendant received a

cease and desist letter from Silver, who was then president of Compaction Technologies,

with an attached opinion letter stating that the utility patent and Patent No. 5,172,629

covered knitted textiles. (Id. at ¶ 13, Ex. E.) Silver requested that Defendant’s legal

counsel contact his legal counsel. (Fruehe Decl. ¶ 13.) 

On October 20, 1999, Defendant’s attorney received a letter from Silver, which

stated that his company was interested in entering into a license agreement with

Defendant and proposed a lump sum for settlement of Defendant’s prior sales. (Id. at ¶

14, Ex. F.) In a letter dated November 1, 1999, Defendant’s attorney declined the offer

and reiterated Defendant’s position that it did not infringe any patent. (Id. at ¶ 15, Ex. G.) 

Defendant’s attorney also explained that Defendant would continue to use its processes

to manufacture and sell t-shirts. Fruehe was not aware of any response to that letter. 

(Fruehe Decl. ¶ 16.) 

Between November 1, 1999 and the filing of Plaintiff’s Complaint, Fruehe had no

contact with Corbino or Silver except cordial greetings at trade shows at which

Defendant’s booths displayed compressed t-shirts and catalogs. (Id. at ¶ 17.) During this

time, Fruehe received no communications alleging that Defendant infringed the utility

patent. (Id. at ¶ 18.) The utility patent was removed from the Graphix catalog and 

website in 2000, which Fruehe interpreted as an indication that the patent owners

believed the patent was unenforceable. (Id.) 

Fruehe claims that he relied on Silver’s silence by expanding his business. (Fruehe

Dec. ¶ 20.) In 1999, Defendant owned two machines it used to compress t-shirts, sold

475,000 units, and spent approximately $50,000 for marketing the company and its

products. (Id.) Since then, Fruehe has increased Defendant’s production capabilities by

adding a compression machine every year until Defendant had six machines in 2003. 

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(Id.) Since 1999, Fruehe has also increased the number of molds used by Defendant

from 15 to over 200, and has increased the marketing budget every year. (Id.) In 2006,

Defendant spent over $200,000 for marketing and sold over 1,900,000 units. (Id.) 

2. Equitable Estoppel

Equitable estoppel is cognizable as an equitable defense to a patent infringement

claim. A.C. Aukerman Co. v. R.L. Chaides Const. Co., 960 F.2d 1020 (Fed. Cir. 1992). 

The defendant must prove by a preponderance of the evidence that (1) the patentee

communicated something in a misleading way, either by words, conduct, or silence; (2)

the defendant relied upon that communication; and (3) the defendant would be materially

harmed if the patentee is later permitted to assert any claim inconsistent with his earlier

conduct. Id. at 1041.

With respect to the first element, the question is whether the patentee’s conduct

supported a reasonable inference that the patentee did not intend to press an

infringement claim against the alleged infringer. Aukerman, 960 F.2d at 1042. On

summary judgment, such inference must be the only possible inference from the

evidence. Id. at 1044.

Here, the only reasonable inference from the facts before the Court is that

Novapak and Compaction Technologies did not intend to enforce the utility patent against

Defendant. Defendant’s November 1, 1999 letter restated Defendant’s position that

Defendant was not infringing the utility patent and would continue to use its current

processes in the manufacture and sale of t-shirts. This letter was followed by seven

years of silence. During these seven years, Fruehe saw Silver and Corbino at trade

shows where Defendant openly displayed its compressed t-shirts and catalogs. Silver

and Corbino were cordial to Fruehe and never brought up their claims of patent

infringement. There were no further communications about the possibility of a licensing

agreement. Indeed, in the November 1, 1999 letter, Defendant made clear that it was not

interested in pursuing the issue of licensing any further.

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 However, there is a question as to whether Defendant relied on Novapak and

Compaction Technologies’ conduct rather than on a business judgment of its own. 

Fruehe claims that he relied on Silver’s silence in expanding his business and further

claims that he would have acted differently if Novapak or Compaction Technologies had

filed suit. However, courts have refused to grant summary judgment on the basis of such

post hoc conclusory statements. See, e.g., Gasser Chair Co., Inc. v Infanti Chair Mfg.

Corp., 60 F.3d 770, 776 (Fed. Cir. 1995); Hall v. Aqua Queen Mfg., Inc., 93 F.3d 1548,

1558 (Fed. Cir. 1996). 

Other than Fruehe’s assertions of reliance, Defendant has presented no evidence

that it relied on Silver’s silence in deciding to expand its operations. Indeed, the evidence

shows that during 1999, Defendant consistently insisted that its processes did not infringe

Plaintiff’s utility patent and informed Plaintiff that it would continue to manufacture and sell

t-shirts. There is no evidence that Defendant did anything differently during the time

period when Silver was asserting that Defendant was infringing the utility patent. 

Therefore, there is a triable issue as to whether Defendant expanded its business, relying

on the fact that it would not be sued, or whether Defendant would have expanded its

business anyway. See Gasser, 60 F.3d at 776 (holding that there was a triable issue as

to reliance where the evidence showed that the defendant paid little attention to the

plaintiff’s complaints of infringement because the defendant believed the patent was

invalid). 

Accordingly, Defendant’s motion for partial summary judgment is DENIED

WITHOUT PREJUDICE. 

III. CONCLUSION

For the reasons discussed above, Defendant’s motion to dismiss Plaintiff’s

seventh, eighth, and ninth claims is GRANTED IN PART and DENIED IN PART. 

Plaintiff’s “reverse passing off” claim under the Lanham Act is DISMISSED. Defendant’s

motion for summary judgment as to the first cause of action is DENIED WITHOUT

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PREJUDICE. 

IT IS SO ORDERED.

DATED: September 20, 2007

Honorable Barry Ted Moskowitz

United States District Judge

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