Federal Circuit Upholds $3.5 Million Jury Award in Wallet Ninja Patent Lawsuit

The Federal Circuit has affirmed a $3.5 million district court jury award in favor of Dynamite Marketing, Inc. for infringement of its US Patent No. D751,877.

As the court explained,

In early 2013, Alexander Shlaferman (“Shlaferman”), the principal of Vante Inc. (“Vante”), conceived of a design for a rectangular credit-card-sized multi-tool, later named the Wallet Ninja. After creating preliminary sketches, Shlaferman contracted the freelance services of a mechanical engineer, LaErik Cooper (“Cooper”), to create manufacturing drawings for the Wallet Ninja. Through frequent communication, the Wallet Ninja’s design evolved iteratively to its final form, submitted as part of the D877 Patent application.

Before the patent was issued, Shlaferman assigned all his rights in the application to Vante. He then reassigned those rights to Dynamite Marketing, Inc., Vante’s successor.

The Wallet Ninja’s features included “a ruler, various-sized screwdrivers, a set of hex wrenches, a letter opener, a can opener, and a box cutter.”

The court noted that Cooper never asked to be included as an inventor on the application.

Over two years after filing the application, the D877 Patent was granted, listing Shlaferman as the sole inventor.

The Wallet Ninja went on sale in 2014. By mid-2017, approximately 1.9 million units had been sold.

In March 2017, an executive at Dynamite’s competitor, Sherman, emailed pictures of the Wallet Ninja to three independent entities, asking them to source the product.

In July 2017, Sherman began selling its own versions of wallet-compatible multi-tool products.

Vante sent Sherman cease-and-desist letters starting in early 2018.

Soon after, Sherman redesigned its wallet tool products, making what the court called minimal changes.

Sherman then received another cease-and-desist letter but continued to sell its redesigned products—about 30,000 to 40,000 units.

In 2019, Dynamite sued Sherman in the District Court, alleging willful infringement of the D877 Patent. Sherman counterclaimed seeking a declaratory judgment that Sherman’s products didn’t infringe, and that the D877 Patent was invalid as obvious under 35 U.S.C. § 103 and invalid as a primarily functional design.

However,

During discovery, the matter of Cooper’s assistance to Shlaferman surfaced and raised the question of whether Cooper’s work amounted to a contribution to the patent sufficient to require him to be named the inventor, or at least a co-inventor, and thus owner or co-owner. If Cooper was entitled to such status, Dynamite’s suit against Sherman would require dismissal because Dynamite failed to name Cooper as a plaintiff. See Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1467– 68 (Fed. Cir. 1998) (“An action for infringement must join as plaintiffs all co-owners.”). Consequently, in early 2021, Dynamite sought Cooper’s voluntary agreement to be added as a co-inventor of the D877 Patent and to assign all his patent rights to Dynamite.

That effort to add Cooper failed, and Dynamite filed suit against Cooper and his company, seeking a declaratory judgment that it was the sole owner of the D877 Patent and that Shlaferman was the sole inventor.

Cooper then counterclaimed for correction of inventorship under 35 U.S.C. § 256, alleging that his participation in the development of the Wallet Ninja made him the sole owner and inventor, or at least a co-owner and co-inventor, of the Patent.

One week after this, Cooper assigned his patent rights to Sherman, with retroactive effect. In exchange, Sherman agreed to cover all of Cooper’s legal costs.

The cases were consolidated.

At trial, the jury found that Cooper failed to prove by clear and convincing evidence that he made a significant contribution to the Patent and thus was unable to prove his status as at least a co-inventor and co-owner of the Patent.

The jury also upheld the validity of the Patent, found that Sherman willfully infringed it, and awarded Dynamite lost profit damages totaling $1,850,000.

Dynamite moved for attorney’s fees and costs, which the District Court granted for $1,536,644.27, and $148,673.06 prejudgment interest, for a total award of $3,535,317.33.

Sherman appealed, but Cooper didn’t.

The Federal Circuit noted that the case presented several issues for review:

• whether Sherman has the right to appeal Cooper’s counterclaim for inventorship in Cooper’s absence, and if so, whether the District Court erred in its determinations on the inventorship issue;
• whether the District Court properly denied Sherman’s post-verdict motion upholding the jury’s determination that the D877 Patent was not invalid under 35 U.S.C. § 103 for obviousness or invalid for functionality;
• whether the District Court properly denied Sherman’s post-verdict motion upholding the jury’s determination that Sherman willfully infringed the D877 Patent;
• whether the District Court properly denied Sherman’s post-verdict motion for remittitur or new trial on damages, upholding the jury’s damages award; and
• whether the District Court properly awarded Dynamite attorney’s fees.

Sherman argued that Cooper’s claim for correction of inventorship was improperly given to the jury, that the jury wrongly decided it, and that the District Court wrongly denied Sherman’s post-verdict motion on the issue.

The court noted the general rule that “only parties to a lawsuit, or those that properly become parties, may appeal an adverse judgment.”

However, the US Supreme Court has recognized that there are some circumstances where a nonparty “should be considered a ‘party’ for the purposes of appealing.”

Those factors are:

• whether the nonparty participated in the proceedings below;
• whether the nonparty has a personal stake in the outcome;
• whether the equities favor hearing the appeal; and
• whether the nonparty has an alternative path to appellate review of the decision.

Here, the court found that Sherman didn’t have the right to appeal the correction of the inventorship claim and accordingly dismissed Sherman’s appeal with respect to that correction.

As for the obviousness claim, the court noted that

an obviousness challenge at least must (a) put in evidence a prior art primary reference, and (b) show by clear and convincing record-supported reasons that an ordinary designer in the field without hindsight would have been motivated to modify the primary reference in evidence by combining specific features from specific pieces of additional prior art to create the same overall visual appearance as the claimed design.

The court rejected Sherman’s request for a remand to reconsider obviousness and affirmed the lower court’s denial of Sherman’s post-verdict motion on obviousness.

The court also affirmed the District Court’s denial of Sherman’s post-verdict motion on non-infringement, the jury’s award for damages, and the District Court’s grant of Dynamite’s attorney’s fees, in the total amount of $3,535,317.33.