Tinnus Enterprises, LLC et al v. Telebrands Corporation et al

Filing 379

ORDER ADOPTING REPORT AND RECOMMENDATIONS for 368 Report and Recommendations. All objections are OVERRULED. 355 Motion to Dismiss-DENIED. Signed by District Judge Robert W. Schroeder, III on 10/31/2018. (saenz, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
TYLER DIVISION
TINNUS ENTERPRISES, LLC, ZURU
LTD., ZURU, INC., ZURU, LLC, ZURU
PTY LTD., ZURU UK LTD.,
Plaintiffs,
v.
TELEBRANDS CORPORATION, BED
BATH
&
BEYOND
INC.,
BULBHEAD.COM, LLC,

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CIVIL ACTION NO. 6:15-CV-00551-RWS

Defendants.
ORDER ADOPTING REPORT AND RECOMMENDATION
OF MAGISTRATE JUDGE
The above entitled and numbered civil action was referred to United States Magistrate
Judge John D. Love pursuant to 28 U.S.C. § 636. The Report and Recommendation of the
Magistrate Judge (“Report”), which contains his proposed findings of fact and recommendation,
has been presented for consideration. Docket No. 368. Plaintiffs Tinnus Enterprises Ltd. ZURU
Ltd., ZURU Inc., ZURU LLC, ZURU PTY Ltd., and ZURU UK Ltd. (collectively “Plaintiffs”)
filed partial objections to the Report (Docket No. 371), to which Telebrands Corporation
(“Telebrands”), Bed Bath & Beyond Inc. (“Bed Bath”), and Bulbhead.com LLC (“Bulbhead”)
(collectively “Defendants”) filed a response. Docket No. 376. Defendants also filed partial
objections to the Report (Docket No. 370), to which Plaintiffs filed a response. Docket No. 375.
The Court reviews de novo the portions of the Magistrate Judge’s findings to which the parties
have raised objections. 28 U.S.C. § 636 (b)(1). Having considered the parties’ objections, the
Court ADOPTS the Report and Recommendation of the Magistrate Judge as the findings and
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conclusions of the Court. All objections are overruled. Defendants’ Motion to Dismiss for Lack
of Standing (Docket No. 355) is DENIED.
A. Plaintiffs’ Objections
Plaintiffs object to the Magistrate Judge’s finding that only ZURU Ltd. had sufficient
rights to collect lost profits for its sales during the time period of alleged infringement. Docket
No. 371 at 2. Specifically, Plaintiffs object to the Magistrate Judge’s findings that ZURU Inc. did
not possess an exclusive license during 2015 (the time period of infringement), and that ZURU
Inc. could not claim lost profits in this matter. Id. Plaintiffs’ objections reiterate the “new”
evidence that Plaintiffs contend supports the conclusion that ZURU Inc. held exclusive rights in
2015. Id. at 3–4. The Magistrate Judge specifically considered all of this evidence and concluded
that “additional extrinsic evidence does not change the Court’s prior conclusion” that ZURU Inc.
did not have standing to collect lost profits because “it does not change the rights that were
actually granted (or not granted) in the written license agreements that existed during the time
period of infringement.” Docket No. 368 at 9–10. The Court agrees with the Magistrate Judge
and the Court’s prior conclusion that ZURU Inc. cannot collect lost profits for the time period of
infringement. While the time period of infringement in this case is earlier—2015—a written
exclusive license agreement still existed during this time that defined the parties’ rights with
respect to the patent-in-suit. Specifically, during the time period of alleged infringement in this
case, the original license agreement between Tinnus and ZURU Ltd. was in place. Docket No.
355-2. This original license agreement named ZURU Ltd. as “Licensee” and ZURU Inc. was
indisputably not a named party to this written license agreement. Id.
Plaintiffs argue that the Magistrate Judge should have addressed Novartis1 in reaching his
conclusion. As an initial matter, the Delaware court’s decision in that matter is, of course, not
1

Novartis AG v. Actavis, Inc., 243 F. Supp. 3d 534, 543–44 (D. Del. 2017).

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binding on this Court. Moreover, the facts of this case are distinguishable. While the entity
seeking standing in Novartis, NPC, had evidence of a similar statement to the United States
Patent and Trademark Office (“PTO”) that the court relied on in finding that NPC had an implied
exclusive license, the court also importantly noted that NPC also owned the New Drug
Application for the drug in question. Novartis, 243 F. Supp. 3d, at 543–44. Notably, while
Plaintiffs have presented extrinsic evidence of statements made that ZURU Inc. was an exclusive
licensee, Plaintiffs do not provide any other legal relationship that might indicate exclusivity.
This circumstantial evidence is inconsistent with the actions of the parties previously discussed
by the Court and the written license agreement. See Case No. 6:16-cv-33, Docket No. 485.
Moreover, in Novartis, NPC was the Plaintiff who brought the suit. Here, ZURU Inc., although
in existence at the time, did not bring suit with ZURU Ltd. in 2015, and indeed did not seek to
intervene until almost three years later. As the Court previously explained, the extrinsic evidence
presented at best gives rise to the right to “use” the intellectual property, which is insufficient
to give ZURU Inc. legal title to the patents or exclusionary rights to the patents. Aspex Eyewear, Inc.
v. Altair Eyewear, Inc., 288 F. App’x 697, 705 (Fed. Cir. 2008) (categorizing “those who
lack exclusionary rights” as “those licensees who are authorized to make, use, and sell the
patented product but who have no right to prevent others from also doing so.”). For these same

reasons, the Court OVERRULES Plaintiffs’ objections.
B. Defendants’ Objections
Defendants object to the Magistrate Judge’s finding that ZURU Ltd. has standing to sue
and that the other ZURU entities may remain as intervenors for the purpose of seeking a
permanent injunction. Docket No. 370 at 5–12. Defendants disagree with the Magistrate Judge’s
conclusion that the relevant license agreement does not clearly grant each ZURU entity the right
to sublicense such that it deprives ZURU Ltd. of standing as the exclusive licensee. Id. at 7–8.
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Defendants also cite to Novartis in support of the conclusion that all ZURU entities must lack
standing because each retains the right to sublicense. Id. at 8. Again, while the Delaware court’s
decision is not binding on this Court, the facts are also distinguishable. In Novartis, there was
ultimately no dispute that Novartis Pharma AG (“NPAG”)—the original named licensee—
retained the right to sublicense. Novartis, 243 F. Supp. 3d at 542–43. Here, as the Magistrate
Judge explained, ZURU Ltd. was repeatedly the only named licensee in the written license
agreements. Docket No. 368 at 10–13. The Magistrate Judge further noted that even while the
Second Amended License Agreement added other ZURU entities, “it retained the language of a
singular ‘Licensee’ in the grant of rights in paragraph 2.1.” Id. at 12 citing Doc. No. 355-5, at ¶
2.1. Thus, the Magistrate Judge concluded that “the rights granted were granted to a collective
whole—a singular unified ‘Licensee’—that did not deprive ZURU Ltd. of its standing to sue by
simply retaining the language on sublicensing.” Id. Contrary to Defendants’ suggestion, the
Magistrate Judge did not rely on Plaintiffs’ argument that the ZURU entities would never have
granted a sublicense to a third party, but rather explained that the fact that they had not done so
over the course of three years of contentious litigation was persuasive evidence of the fact that
the individual sublicense rights claimed by Defendants to be contained in the Second Amended
License Agreement were not granted. Id. at 14. Moreover, the Magistrate Judge found that the
extrinsic evidence uniformly supported this conclusion. Id. at 13–14. The Court agrees with this
conclusion.
Finally, Defendants object to the Magistrate Judge’s conclusion that the remaining ZURU
entities may remain in this action as intervenors for the sole purpose of seeking a permanent
injunction. Docket No. 370 at 11. Defendants first attack Plaintiffs’ procedural tactics for filing
an amended complaint as opposed to a motion to intervene. Id. However, as the Magistrate Judge
noted, the Magistrate Judge directed Plaintiffs to file an amended complaint so as to streamline
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any potential standing issues for resolution as raised by the parties during the Court’s status
conference. Docket No. 368 at 15–16. Further, the Magistrate Judge did not conclude the
remaining ZURU entities had standing to sue at the time of filing because that argument was not
presented. Docket No. 368 at 15, n. 3. However, the Magistrate Judge found that the ZURU
.
entities may presently remain in the case as intervenors for the limited purpose of seeking a
permanent injunction. Id. The Magistrate Judge concluded that “allowing these parties to remain
in this action avoids any possibility of duplicative litigation in the future.” Id. The Court agrees.
For these reasons, the Court OVERRULES Defendants’ objections.
Therefore, the Court adopts the Report and Recommendation of the United States
Magistrate Judge as the Order of this Court. All objections are OVERRULED. Defendants’
Motion to Dismiss for Lack of Standing (Docket No. 355) is DENIED.
SIGNED this 31st day of October, 2018.

____________________________________
ROBERT W. SCHROEDER III
UNITED STATES DISTRICT JUDGE

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