• Veteran Medical Products, Inc., et al., v. Bionix Development Corp., et al. No. 05-655 (W.D. Mich. Mar. 31, 2009)
  • June 17, 2009 | Authors: Karen A. Gibbs; Bernadette M. Stafford
  • Law Firm: Crowell & Moring LLP - Irvine Office
  • The U.S. District Court for the Western District of Michigan held that Bionix Development Corporation ("Bionix"), the manufacturer of a plastic ear curette, was entitled to judgment as a matter of law on the claims that it had engaged in unfair competition in violation of the federal Lanham Act and Michigan state law. The district court also held that this was an "exceptional case" warranting the award of attorneys' fees to the plaintiffs.

    Plaintiff Veteran Medical Products ("Veteran") sells a plastic double-ended ear curette, which is used to remove wax from ears. One of Bionix's employees contacted one of Veteran's suppliers and told the supplier that the ear curettes it was manufacturing for Veteran infringed Bionix's patent. Veteran and others sued, seeking a declaratory judgment that they did not infringe Bionix's patent and did not misappropriate trade secrets from Bionix. Veteran asserted three causes of action: unfair competition in violation of the Lanham Act; violation of the Michigan common law of unfair competition; and tortious interference with business relationships. Bionix filed counterclaims for patent infringement, misappropriation of trade secrets in violation of Michigan law and willful and malicious misappropriation.

    Before trial, the court determined that Veteran's device did not infringe Bionix's patent, granted Veteran's request for a declaratory judgment to this effect and dismissed Bionix's patent infringement counterclaim. The unfair competition claims against Bionix, however, were allowed to go to a jury, which found for the plaintiffs and awarded them nearly $2 million. Bionix then moved for judgment as a matter of law, claiming that the evidence introduced at trial did not support the jury's verdict.

    The court granted the motion for judgment as a matter of law on the Veteran's Lanham Act claim. A trade libel or product disparagement claim under the Lanham Act is premised on statements made in the marketplace to a company's customers. Veteran presented no evidence, however, that the defendants had contacted any of Veteran's customers or potential customers.

    The court next addressed the standing of some of the plaintiffs to bring an unfair competition claim under Michigan common law. An unfair competition claim requires that the plaintiffs and the defendants be in competition. The only plaintiff that actually competed with Bionix, however, was Veteran, the entity that sold plastic ear curettes. The other plaintiffs, Tillman Industries and its employees, only manufactured the ear curettes for Veteran. The court therefore granted Bionix's motion for judgment as a matter of law on standing for the unfair competition claims asserted by these plaintiffs.

    The court also granted Bionix's motion for judgment as a matter of law on Veteran's unfair competition claim. This claim "was premised on an allegation of corporate defamation as the unfair trade practice at issue." Corporate defamation claims do not require proof of the fact of damage as an element of the claim. However, Veteran still had the burden of establishing the amount of damages in a manner that may not "be based upon mere speculation, guess, or conjecture." Veteran failed to meet this standard because it presented no actual sales history or cost analysis from which the jury could have determined lost profits. Rather, Veteran attempted to rely upon the sales goals contained in a speculative marketing plan, and Bionix's sales information for its ear curettes. The court concluded that while Veteran was the prevailing party on its claim of corporate defamation constituting unfair competition, there was no evidence of actual damages, and the jury's award must be set aside.

    Finally, the court addressed Veteran's motion for a finding that Bionix's patent infringement counterclaim constituted an "exceptional case" that warranted the award of attorneys' fees. The court held that the "defendants' infringement suit was baseless and brought in bad faith." According to the court, the differences between the designs of the Veteran ear curette and the Bionix ear curette were "startling" and "no ordinary observer would be confused." The court found that Bionix was aware of these differences from the beginning of the lawsuit but nevertheless continued with the litigation in two federal courts over the course of two years, even after Veteran received its own patent for its ear curette. The court therefore found that Bionix's "aggressive posturing constituted 'vexatious, unjustified, or frivolous litigation' in support of defendants' desire to keep plaintiffs' product off the shelves" and concluded that this was an exceptional case warranting the award of attorneys' fees to the plaintiffs.