Tinnus Enterprises, LLC et al v. Telebrands Corporation et al
Filing
328
REDACTED MEMORANDUM AND OPINION AND ORDER. Signed by District Judge Robert W. Schroeder, III on 7/16/2018. (gsg)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
TYLER DIVISION
TINNUS ENTERPRISES, LLC and
ZURU LTD.,
Plaintiffs,
v.
TELEBRANDS CORPORATION,
BULBHEAD.COM, LLC and BED BATH
& BEYOND INC.,
Defendants.
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CIVIL ACTION NO. 6:17-CV-00170-RWS
MEMORANDUM OPINION AND ORDER
Before the Court are Plaintiffs Tinnus Enterprises, LLC’s (“Tinnus”) and ZURU Ltd.’s
(“ZURU”) (collectively “Plaintiffs”) Motion for Injunctive Order and Bond Amount (Docket No.
100) and Defendants Telebrands Corp. (“Telebrands”), Bulbhead.com, LLC (“Bulbhead”), and
Bed Bath & Beyond Inc.’s (“Bed Bath & Beyond”) (collectively “Defendants”) Response to
Court’s Order Regarding Form of Injunction (Docket No. 102). On May 19, 2017, the Court issued
a sealed Memorandum Opinion and Order (Docket No. 89) granting Plaintiffs’ Motion for a
Preliminary Injunction (Docket No. 41) and ordered the parties to meet and confer regarding the
appropriate amount for bond and the form of the injunctive order. Docket No. 142. Upon
consideration of the arguments, the Court resolves those disputes and sets forth the terms of the
injunction herein.
As an initial matter, Defendants argue that the Court should take no further action on the
preliminary injunction until the Court has ruled on Defendants’ Motion to Dismiss for Improper
Venue (Docket No. 90). Docket No. 102 at 1–2. Defendants argue that, as a result of TC Heartland
LLC v. Kraft Foods Grp. Brands LLC, No. 16-341, 2017 WL 2216934, at *3 (Sup. Ct. May 22,
2017), venue is improper in this district. Docket No. 102 at 1–2. Defendants cite Chrysler Credit
Corp. v. Country Chrysler, Inc., 928 F. 2d 1509, 1515 n.3 (10th Cir. 1991), Hendricks v. Bank of
Am., N.A., 408 F.3d 1127, 1135 (9th Cir. 2005), Stuart v. Stuart, No. 3:12-CV-159 CSH, 2012 WL
370089, at *2 (D. Conn. Feb. 3, 2012) and Richmond Techs., Inc. v. Aumtech Bus. Sols., No. 11CV-02460-LHK, 2011 WL 2607158, at *8 (N.D. Cal. July 1, 2011) and state that Plaintiffs’
claims, including the motion for a preliminary injunction, cannot proceed because venue is
improper. Docket No. 102 at 2. Defendants contemporaneously filed an Emergency Motion to
Stay (Docket No. 91) requesting that the Court stay the entry of this injunction. Defendants’
Motion to Stay is substantially identical to and requests the same relief as their request in their
Response to Court’s Order Regarding Form of Injunction (Docket No. 102) for the injunctive order
to be stayed. See Docket No. 91 at 2–3 and Docket No. 102 at 1–2. The Court will therefore
address both the Motion to Stay and the request in the Response to Court’s Order Regarding Form
of Injunction together here.
The Court finds that a stay of the entry of this injunction would be inappropriate.
Defendants’ request is based on a complex set of motions, including motions relating to venue,
transfer, and failure to state a claim, all of which are in the early stages of briefing. Delaying entry
of this Order and allowing Defendants to continue selling the Easy Einstein Balloons products
while the Court analyzes each of these motions would undermine the purpose of the preliminary
injunction against Defendants—to maintain the status quo until the resolution of the litigation. See
Abbott Labs v. Sandoz, Inc., 544 F.3d 1341, 1344–45 (Fed. Cir. 2008).
This is especially true given the history of this case. Plaintiffs and Defendants are direct
competitors in a two-player market for a seasonal product. Docket No. 89 at 25. Defendants have
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launched a new product at the beginning of each summer season for the last three years. See
Docket No. 1 in Case No. 6:15-cv-551; Docket No. 1 in Case No. 6:16-cv-33; Docket No. 1 in
Case No. 6:17-cv-170. Defendants have continued selling their product throughout the entire
summer season before being enjoined by this Court. See Case No. 6:15-cv-551 (where a motion
for preliminary injunction was filed on June 18, 2015 (Docket No. 7), the Magistrate Judge
recommended granting the motion on September 11, 2015 (Docket No. 66), Defendants objected
to the Magistrate Judge’s recommendation on September 25, 2015 (Docket No. 70), this Court
adopted the Magistrate Judge’s recommendation on December 2, 2015 (Docket No. 84), and an
injunctive order was entered on December 22, 2015 (Docket No. 91)); see also Case No. 6:16-cv33 (where a motion for preliminary injunction was filed on May 3, 2016 (Docket No. 19), the
Magistrate Judge recommended granting the motion on July 20, 2016 (Docket No. 99), Defendants
objected to the Magistrate Judge’s recommendation on August 1, 2016 (Docket No. 102), a hearing
was held on Defendants’ objections on August 23, 2016 (Docket No. 130), this Court adopted the
Magistrate Judge’s recommendation on September 29, 2016 (Docket No. 142), and an injunctive
order was entered on October 31, 2016 (Docket No. 159)); see also Case No. 6:17-cv-170 (where
motion for preliminary injunction was filed on April 3, 2017 (Docket No. 41), the motion was
granted on May 19, 2017 (Docket No. 89), and Defendants requested that the Court stay the entry
of the injunctive order on May 26, 2017 (Docket No. 102)). Then, each year, following issuance
of the injunction, Defendants have released a slightly altered product at the beginning of the next
summer season. See Docket No. 1 in Case No. 6:16-cv-33; Docket No. 1 in Case No. 6:17-cv170. Defendants now seek to repeat this process and to continue to sell, at the height of the summer
season, a product against which a preliminary injunction has already been granted while the Court
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considers its motions. Allowing this would only add to the irreparable harm that the Court has
already found to exist.
The cases cited by Defendants do not compel a different result. In Chrysler, the Tenth
Circuit held that a district court lacked jurisdiction to clarify its order transferring the case after it
had been docketed in the transferee forum. Chrysler, 928 F.2d at 1521–22. The Tenth Circuit
explained that, unlike transfer under 35 U.S.C. § 1404(a), where venue is proper in both the
transferor and transferee forums, transfer under § 1406(a) is mandatory once the district court has
determined that venue is improper: “in the case of § 1406(a), the transferor court lacks venue and
must transfer the action in order for it to proceed.” Id. at 1515 n.3 (emphasis original). Unlike in
Chrysler, the Court in this case has not made a determination on venue, nor has Defendants’ venue
motion even been fully briefed. Chrysler is therefore inapplicable here.
Further, the defendants in Stuart and Richmond each raised their venue arguments prior to
the Court’s consideration of any preliminary-injunction issues. See Stuart, 2012 WL 370089, at
*2; Richmond, 2011 WL 2607158, at *1. Here, however, the Court granted the preliminary
injunction against Defendants before Defendants filed the motions that underlie their request to
stay the entry of the injunction.1 See Docket No. 89. Finally, in Hendricks, the district court issued
a temporary restraining order and a preliminary injunction before reaching a determination on
venue, and the Ninth Circuit affirmed. Id. at 1132, 1142.
The Court notes that Defendants filed a “Contingent Motion to Dismiss for Improper Venue” (Docket No. 68) after
the hearing on the motion for preliminary injunction but prior to the Court’s granting of the injunction. However, in
their contingent motion, Defendants did not move to dismiss for improper venue, but instead stated that “[u]nder
present Federal Circuit venue law, which defendants recognize that this Court is bound to apply, venue is appropriate.
. . . [I]f the Supreme Court rules in TC Heartland that the venue rule stated in Fourco applies to patent cases,
Defendants move this Court to dismiss for improper venue.” Docket No. 68 at 2. Defendants did not ask this Court
to dismiss the action for improper venue, but instead asked the Court “simply to hold the matter in abeyance pending
[the Supreme Court’s] ruling . . . .” Id. at 3. Therefore, the Court could not have dismissed or transferred the case
until Defendants filed their Motion to Dismiss (Docket No. 90) on May 26, 2017, one week after the Court granted
the injunction (Docket No. 89).
1
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Accordingly, the Court DENIES Defendants’ request to stay the issuance of this Order and
DENIES Defendants’ Emergency Motion to Stay (Docket No. 91).2
The parties present two main disputes with respect to the issuance of the injunctive order:
(1) whether Bed Bath & Beyond should be permitted to sell off its remaining inventory; and (2)
whether the bond should be set at
.
First, regarding Defendants’ request that Bed Bath & Beyond be permitted to sell through
its remaining inventory, the Court sees no reason to grant such a request. Defendants summarily
repeat their invalidity and non-infringement arguments and argue that Bed Bath & Beyond
purchased its current inventory in “good faith,” stating that “[t]he fact that the [C]ourt has found
that the PVC cap . . . is an elastic fastener is, at a minimum, heavily debatable.” Docket No. 102
at 6. The Court is unaware of—and Defendants fail to cite to—any authority that permits an
exception to a preliminary injunction on a showing of “good faith.” Further, to the extent that
Defendants argue the underlying merits of the motion for a preliminary injunction, the Court has
already rendered a decision on that motion. See Docket No. 89 at 30 (“Having found that all four
factors weigh in favor of granting a preliminary injunction, Plaintiffs’ Motion for Preliminary
Injunction (Docket No. 41) is GRANTED.”). The Court therefore DENIES Defendants’ request.
Second, with respect to the bond amount, Telebrands requests the bond be set at
, which Defendants estimate would cover the financial losses they would suffer if later
found to be improperly enjoined. Docket No. 102 at 3–4. Plaintiffs assert that a bond of
would be appropriate. Docket No. 100 at 2. Defendants bear the burden of showing the extent of
their injury resulting from an injunction prohibiting the sale or offering for sale of the Easy Einstein
2
Defendants’ Motion to Stay substantively addresses only whether the Court should delay entry of the injunctive
order, which the Court has addressed in this Order. See Docket No. 91. This Order does not prejudice Defendants’
ability to file a motion to stay any other aspect of the proceedings in this case, though the Court notes that there are
no pending deadlines and that a scheduling order has not yet been entered.
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products. See Oakley, Inc. v. Sunglass Hut Int’l, No. SA CV 01-1065 AHS, 2001 WL 1683252,
at *12 (C.D. Cal. Dec. 7, 2001), aff’d on other grounds, 316 F.3d 1331 (Fed. Cir. 2003) (“A
successful movant for a TRO or preliminary injunction must post security ‘for the payment of such
costs and damages as may be incurred or suffered by any party who is found to have been
wrongfully enjoined or restrained.’ It is Defendants’ burden to reasonably estimate the extent to
which they would be damaged if this preliminary injunction were improvidently granted.” (quoting
FED. R.CIV. P. 65(c)). “The amount of a bond is a determination that rests within the sound
discretion of a trial court.” Sanofi–Synthelabo v. Apotex, Inc., 470 F.3d 1368, 1386 (Fed. Cir.
2006).
Here, Telebrands asserts that it would suffer
in losses if wrongly enjoined.
Docket No. 102 at 5. Telebrands has submitted a declaration of its Executive Vice President and
COO, Bala Iyer, in support of its proposed portion of the bond. Docket No. 102-1. Telebrands
states that it has sold
would sell another
of Easy Einstein Balloons so far this year and estimates that it
this year if not for the injunction, leading to a loss of
Id. at ¶¶ 13–14. Telebrands also contends that sales of the Easy Einstein Balloons in 2018 would
mirror those of the Battle Balloons in 2016 and that it would therefore lose sales of
of Easy Einstein Balloons in 2018 for a loss of approximately
therefore estimates its total loss to be
. Id. at ¶ 11. Telebrands
. Id. at ¶ 16.
Bed Bath & Beyond has submitted a declaration of its employee, James Seymour, in
support of its proposed portion of the bond. Docket No. 102-2. Bed Bath & Beyond states that its
total retail sales of the Easy Einstein Balloons product so far this year has been approximately
. Id. at ¶ 7. Bed Bath & Beyond estimates that, because it sold
of balloons
last year and expects a yearly decrease in revenue for these products of
, it would
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generate another
in revenue on the product the rest of this year. Id. at ¶ 5–7. Based
on these retail numbers and their estimated margin of approximately
Beyond estimates that it will lose approximately
, Bed Bath &
in profits this year as the result of
the injunction. Id. at ¶ 9. Bed Bath & Beyond also contends that sales of the Easy Einstein
Balloons in 2018 would decrease another
, and that it would therefore have generated
in revenue on the product in 2018 for a loss of
Bed Bath & Beyond therefore
in profits. Id. at ¶ 10.
. Id. at ¶ 11.
Plaintiffs argue that Defendants have failed to meet their burden of showing a rational basis
for the proposed bond amount. Docket No. 100 at 4. Plaintiffs argue that while Telebrands here
states that its Battle Balloons product made a substantial profit in 2016 in order to support its
proposed bond amount, Telebrands’s own documents in Case No. 6:16-cv-33, a case between these
same parties over the Battle Balloons product, state that the Battle Balloons product produced a
net loss of
. Id. at 5. Plaintiffs state that Telebrands’s inconsistent numbers are not
reliable and cannot support a bond amount. Id. at 6. Plaintiffs further contend that while
Telebrands has based its projected losses on Battle Balloons revenues for 2016, Telebrands has
not shown any rational basis to use those numbers for the Easy Einstein Balloons product, which
has underperformed its predecessor to date and which Telebrands has stated is substantially
different from the Battle Balloons product. Id. at 6–7. Plaintiffs also argue that Telebrands should
not have based its bond amount on two years’ worth of sales, as the bond amounts for each of the
two prior preliminary injunctions entered against Telebrands in the related cases in this Court were
based off a single year’s sales. Id. at 7.
Plaintiffs also argue that Bed Bath & Beyond’s portion of the proposed bond amount is
unsupported. Plaintiffs contend that Bed Bath & Beyond’s methodology for calculating its bond
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amount is based on the same flawed methodology used by Telebrands. Id. Plaintiffs further argue
that in the related cases, Telebrands stated that it would provide credits to retailers that returned
products based on the injunction, which, if offered here, would eliminate any losses to Bed Bath
& Beyond. Id. at 8.
Plaintiffs argue that the bond amount should be set at
because neither Defendant
has met its burden of supporting its proposed bond amount. Id.
The Court credits Mr. Iyer’s estimation of Telebrands’s sales of Easy Einstein Balloons for
the remainder of 2017. Further, the Court notes that a trial date has not yet been set for this case.
In each of the related actions, the trial date was set approximately 18 months from the scheduling
conference. Therefore, the Court finds it appropriate to include projected lost sales from 2018 in
the calculation for the bond amount.
However, the Court finds Telebrands’s projections for its 2018 sales to be unsupported.
Telebrands’s calculations for its lost profits in 2018 rely on an assumption that 2018 sales of the
Easy Einstein Balloons product will mirror the 2016 sales of the Battle Balloons product. While
the Court notes that the Easy Einstein Balloons sales may have suffered some this year due to a
recall on the product—an event that is unlikely to be repeated in 2018—the Court finds
Telebrands’s estimation for 2018 sales to be overly speculative. The Easy Einstein Balloons
product is
. Therefore, the Court
will base Telebrands’s projected lost profits for 2018 on its projected profits for the Easy Einstein
Balloons product in 2017.
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Telebrands estimates that it would sell a total of
units of Easy Einstein Balloons
in 2017 absent an injunction. Docket No. 102-1 at ¶¶ 13–14. As Telebrands has already sold
approximately
lose
in 2017, see id. at ¶ 13, the Court finds that Telebrands is likely to
in 2018. Based on Telebrands’s estimated average
in 2017 and
price of
and
on the
profit margin, Telebrands would lose approximately
lost in 2017 and approximately
on the
lost in 2018. Accordingly, the Court finds that Telebrands has shown that it is reasonably likely
to suffer a total of approximately
in losses due to this injunction.
As to Bed Bath & Beyond, the Court finds that its proposed bond amount is unsupported.
Bed Bath & Beyond bases its bond amount entirely on sales numbers for the Battle Balloons
product from 2016 and ignores the sales data it has for the Easy Einstein Balloons product for this
year. Bed Bath & Beyond states that its total retail sales of this year for Easy Einstein Balloons,
which first went on sale in March, is
. Docket No. 102-2 at ¶ 7. It is unclear to the Court
why retail sales for the second half of 2017—which Bed Bath & Beyond estimates to be
—would equal almost the total sales for Battle Balloons in 2016—
—especially
given that Bed Bath & Beyond estimates that sales for the products will decline with time. See Id.
Therefore, the Court will assume that Bed Bath & Beyond’s sales of Easy Einstein Balloons will
continue at the current pace, approximately
approximately
per three-month period, for a total revenue of
through the end of 2018. Given Bed Bath & Beyond’s estimated profit
margin of approximately
, the Court finds that Bed Bath & Beyond has shown it is
reasonably likely to suffer approximately
in losses due to this injunction.
Accordingly, the Court will set Plaintiffs’ total bond amount at $4,250,000.
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Having considered the parties’ submissions and for the reasons set forth in Docket No. 89,
it is hereby ORDERED as follows:
The Court FINDS that Plaintiffs have carried their burden of showing (a) that Plaintiffs
will likely succeed on the merits of their patent infringement claims by showing that U.S.
Patent Nos. 9,242,749 (“’749 Patent”) and 9,315,282 (“’282 Patent”) are valid and
enforceable and that Defendants have infringed the ’749 Patent and the ’282 Patent, (b)
that Plaintiffs have suffered and will continue to suffer irreparable harm if a preliminary
injunction is not entered, (c) that the balance of hardships between Plaintiffs and
Defendants favors the Plaintiffs, and (d) that the public interest would be served by issuing
a preliminary injunction in the present case. See Docket No. 89.
Pursuant to Federal Rule of Civil Procedure 65, 35 U.S.C. § 271, 35 U.S.C. § 283 and the
inherent equitable powers of the Court, the Court hereby preliminarily RESTRAINS AND
ENJOINS Defendants, their officers, agents, servants, employees, attorneys, and all other
persons who are in active concert or participation with Defendants who receive actual
notice of this Order by personal service or otherwise from making, using, importing,
marketing, advertising, offering to sell, or selling in the United States the Easy Einstein
Balloons product or any colorable imitation of the same that infringes the ’749 Patent
and/or the ’282 Patent. See Fed. R. Civ. P. 65(d).
This preliminary injunction shall remain in effect until further order of this Court.
Plaintiffs are directed to file proof of bond in the amount of $4,250,000 within seven (7)
business days of this Order. See Fed. R. Civ. P. 65(c). The bond shall serve as security for
all claims with respect to this preliminary injunction.
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Within seven (7) days of the issuance of this Order, the parties shall file a notice with the
Court as to whether this Order can be unsealed, or request appropriate redaction.
Further, Defendants’ Emergency Motion to Stay (Docket No. 91) is DENIED for the
reasons stated above.
SIGNED this 16th day of July, 2018.
____________________________________
ROBERT W. SCHROEDER III
UNITED STATES DISTRICT JUDGE
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