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Baden Sports, Inc. v. Molten USA

February 13, 2008

BADEN SPORTS, INC., PLAINTIFF-CROSS APPELLANT,
v.
MOLTEN USA, INC. AND KABUSHIKI KAISHA MOLTEN (DOING BUSINESS AS MOLTEN CORPORATION), DEFENDANTS-APPELLANTS.



Appeals from the United States District Court for the Western District of Washington in Case No. 06-CV-210, Judge Marsha J. Pechman.

The opinion of the court was delivered by: Lourie, Circuit Judge.

Published opinion

Before LOURIE, RADER, and LINN, Circuit Judges.

Kabushiki Kaisha Molten and Molten USA, Inc. (collectively "Molten") appeal from a final judgment of the United States District Court for the Western District of Washington denying Molten's motions for a new trial and judgment as a matter of law ("JMOL") relating to a jury award of $8,054,579 for false advertising under Section 43 of the Lanham Act. See Baden Sports, Inc. v. Kabushiki Kaisha Molten, 541 F. Supp. 2d 1151 (W.D. Wash. 2008). Baden Sports, Inc. ("Baden") cross-appeals from the court's decision denying Baden's motion for a modified injunction against Molten. Because the court erred in denying Molten's JMOL motion, we reverse.

BACKGROUND

Baden manufactures inflatable sports balls, including high-end, game-quality basketballs. In 1997, Baden obtained U.S. Patent 5,636,835 ("the '835 patent"), which discloses a ball with "raised seams" and a "layer of padding underneath the outer covering." '835 patent col.2 ll.8-9,18 (filed May 12, 1995). Baden sells basketballs embodying the invention of the '835 patent and markets those balls as containing "cushion control technology."

Molten competes with Baden in the high-end basketball business. In 2002 or 2003, Molten began selling basketballs with an inner, padded layer. Molten advertised its new basketballs as containing "dual-cushion technology." According to Molten's advertisements, dual-cushion technology combines two different cushioning layers: one layer, made of foam, that surrounds the core of the ball, and a second layer of soft rubber seams.

On February 13, 2006, Baden filed a complaint alleging that Molten's sales and offers to sell basketballs in the United States constituted infringement of the '835 patent. In March of that year, Baden filed a First Amended Complaint alleging that Molten's advertising of its dual-cushion technology basketballs violated Section 43 of the Lanham Act, 15 U.S.C. § 1125. Sometime in the summer of 2006, after settlement discussions between the two companies failed, Molten ceased importing dual-cushion basketballs into the United States.

On July 16, 2007, the district court ruled on Baden's motion for summary judgment of patent infringement. Baden Sports, Inc. v. Kabushiki Kaisha Molten, No. 2:06-cv-210, 2007 U.S. Dist. LEXIS 51186 (W.D. Wash. July 16, 2007). Finding that Baden had "shown that every element in Claim 3 of the '835 patent is present in Molten's basketball," the district court granted summary judgment of infringement. Id. at *14. The court denied Baden's request for permanent and preliminary injunctions at that time and denied Molten's motion for summary judgment of invalidity. Id. at *27-31.

In a separate opinion entered the same day, the district court granted in part and denied in part Molten's motion for summary judgment on the false advertising claims. Baden Sports, Inc. v. Kabushiki Kaisha Molten, No. 2:06-cv-210, 2007 U.S. Dist. LEXIS 51252 (W.D. Wash. July 16, 2007). In doing so, the court narrowed the scope of Molten's marketing language to be presented to the jury. First, the court granted Molten's motion for summary judgment on Baden's false advertising claims based on advertisements that used the terms "proprietary" and "exclusive." The court found that "proprietary" and "exclusive" were terms that conveyed the idea that "Molten invented and owns the basketball technology." Id. at *16. Those terms, the court held, were precluded from Lanham Act liability by the Supreme Court's decision in Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003). Id. at *16-17. However, the court denied Molten's motion for summary judgment on Baden's false advertising claims based on advertisements that used the word "innovative." The court reasoned that "innovative" does not necessarily connote the inventor of the technology, and can describe "the nature, characteristics, or qualities of the basketballs themselves." Id. at *17. Such claims of basketball characteristics, the court reasoned, were permissible in light of Dastar. Thus, the court allowed Baden to proceed to trial with its false advertising claim, but only insofar as that claim was based on Molten's allegedly false use of "innovative."

In its opening statement at trial, Baden's counsel told the jury that evidence would be presented that Molten had falsely advertised that "dual cushion technology [was] a Molten innovation." Tr. of Oral Argument at 104, Baden Sports, 541 F. Supp. 2d 1151 (W.D. Wash. Aug. 6, 2007) (No. 363). Counsel further articulated that Molten should be required to "give up the financial benefit that they have received from falsely advertising dual cushion technology as their innovation." Id. at 127. After opening statements, Molten moved, under Federal Rule of Civil Procedure 50(a), for judgment as a matter of law on Baden's false advertising claims, arguing that Dastar precluded claims based on authorship of an idea. Tr. of Oral Argument at 192, Baden Sports, 541 F. Supp. 2d 1151 (W.D. Wash. Aug. 6, 2007) (No. 365). The court denied the motion.

Id. at 198.

During trial, the district court excluded some of Molten's proposed evidence. Of relevance to this appeal, the court refused to permit testimony from a number of witnesses regarding the differences between the companies' basketballs. The testimony excluded by the district court included proposed cross-examinations of Baden's expert, Richard Yalch, and Baden's CEO, Michael Schindler, as well as proposed direct examination of Molten USA's CEO, Kiyoaki Nishihara. The court excluded that comparative testimonial evidence based on its prior ruling on infringement. The court found that because summary judgment of infringement of the '835 patent had already been granted, Molten was precluded from arguing that its basketballs were different from Baden's basketballs. Tr. of R. at 578-81, Baden Sports, 541 F. Supp. 2d 1151 (No. 367) ("I've already made the determination . . . that Molten's technology infringes on Baden.").

After both parties rested at trial, the district court invited Molten to renew its Rule 50(a) motion. Molten declined to do so at that time. The jury then returned a verdict awarding Baden $38,031 for patent infringement and $8,054,579 for intentional false advertising under the Lanham Act.

After trial, the district court enjoined Molten from further infringing the '835 patent in the United States and from stating in its U.S. advertising that dual-cushion technology is "innovative." Baden Sports, Inc. v. Kabushiki Kaisha Molten, No. 2:06-cv-210, 2007 U.S. Dist. LEXIS 70776 (W.D. Wash. Sept. 25, 2007). Molten then moved for judgment as a matter of law under Fed. R. Civ. P. 50(b) and for a new trial under Fed. R. Civ. P. Rule 59. The court denied both motions. Baden Sports, 541 F. Supp. 2d at 1160-63. In denying Molten's Rule 50(b) JMOL motion, the court acknowledged that although some of the testimony at trial conflated "innovative" and "proprietary," the court felt that "other testimony ma[de] clear that the witnesses believed the advertising to be false because Molten's product was not 'new.'" Id. at 1159.

Molten timely appealed the district court's judgment, and Baden filed a timely cross-appeal. We have jurisdiction ...


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