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American Beverage Corp. v. Diageo North America, Inc.

United States District Court, W.D. Pennsylvania

March 28, 2013

AMERICAN BEVERAGE CORPORATION and POUCH PAC INNOVATIONS, LLC, Plaintiffs,
v.
DIAGEO NORTH AMERICA, INC. and DIAGEO AMERICAS SUPPLY, INC. trading and doing business as CAPTAIN MORGAN CO., Defendants

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March 28, 2013, Filed

For AMERICAN BEVERAGE CORPORATION, POUCH PAC INNOVATIONS, LLC, Plaintiffs: Steven W. Zoffer, LEAD ATTORNEY, Dickie, McCamey & Chilcote, Pittsburgh, PA; Stanley D. Ference, III, Ference & Associates, Pittsburgh, PA.

For DIAGEO NORTH AMERICA, INC., DIAGEO AMERICAS SUPPLY, INC., trading and doing business as CAPTAIN MORGAN CO., Defendants: Arthur H. Stroyd, Jr., LEAD ATTORNEY, Del Sole Cavanaugh Stroyd LLC, Pittsburgh, PA; Edward E. Vassallo, PRO HAC VICE, Fitzparick, Cella, Harper & Scinto, New York, NY; Joanna G. Goldstein, PRO HAC VICE, Fitzpatrick Cella Harper & Scinto, New York, NY; Matthew Thomas Logue, Logue Law Firm LLC, Pittsburgh, PA; Pasquale A. Razzano, Timothy J. Kelly, PRO HAC VICE, Fitzpatrick, Cella, Harper & Scinto, New York, NY.

For DIAGEO AMERICAS SUPPLY, INC., DIAGEO NORTH AMERICA, INC., ThirdParty Plaintiffs: Arthur H. Stroyd, Jr., LEAD ATTORNEY, Del Sole Cavanaugh Stroyd LLC, Pittsburgh, PA; Edward E. Vassallo, PRO HAC VICE, Fitzparick, Cella, Harper & Scinto, New York, NY; Joanna G. Goldstein, PRO HAC VICE, Fitzpatrick Cella Harper & Scinto, New York, NY; Matthew Thomas Logue, Logue Law Firm LLC, Pittsburgh, PA; Pasquale A. Razzano, Timothy J. Kelly, PRO HAC VICE, Fitzpatrick, Cella, Harper & Scinto, New York, NY.

For PPI TECHNOLOGIES GLOBAL, LLC, PPI TECHNOLOGIES, INC., ThirdParty Defendants: Stanley D. Ference, III, Ference & Associates, Pittsburgh, PA; Steven W. Zoffer, Dickie, McCamey & Chilcote, Pittsburgh, PA.

For DIAGEO AMERICAS SUPPLY, INC., DIAGEO NORTH AMERICA, INC., Counter Claimants: Arthur H. Stroyd, Jr., LEAD ATTORNEY, Del Sole Cavanaugh Stroyd LLC, Pittsburgh, PA; Edward E. Vassallo, PRO HAC VICE, Fitzparick, Cella, Harper & Scinto, New York, NY; Joanna G. Goldstein, PRO HAC VICE, Fitzpatrick Cella Harper & Scinto, New York, NY; Matthew Thomas Logue, Logue Law Firm LLC, Pittsburgh, PA; Pasquale A. Razzano, Timothy J. Kelly, PRO HAC VICE, Fitzpatrick, Cella, Harper & Scinto, New York, NY.

For AMERICAN BEVERAGE CORPORATION, POUCH PAC INNOVATIONS, LLC, Counter Defendants: Steven W. Zoffer, LEAD ATTORNEY, Dickie, McCamey & Chilcote, Pittsburgh, PA; Stanley D. Ference, III, Ference & Associates, Pittsburgh, PA.

OPINION

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Joy Flowers Conti, United States District Judge.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

I. INTRODUCTION

Pending before the court is the Motion for Preliminary Injunction (ECF No. 8) and brief in support (ECF No. 9) filed on May 7, 2012 by plaintiffs American Beverage Corporation (" ABC" ) and Pouch Pac Innovations, LLC (" PPi" ) (collectively " plaintiffs" ) against defendants Diageo North America, Inc. and Diageo Americas Supply, Inc. (collectively " defendants" or " Diageo" ). On June 8, 2012, defendants filed their response in opposition to plaintiffs' motion (ECF No. 37) and brief in support (ECF No. 51.) Plaintiffs filed a reply brief on June 25, 2012. (ECF No. 54.) Plaintiffs' complaint (ECF No. 1) and the present motion (both filed the same day) allege that frozen cocktail products produced by defendants under the PARROT BAY and SMIRNOFF brand names infringe the design patent and trade dress utilized in frozen cocktail products produced by plaintiffs under the DAILY'S brand name. Specifically with respect to the patent infringement claim, plaintiffs allege that the pouches used by Parrot Bay and Smirnoff for their frozen cocktail products (individually the " Parrot Bay pouch" and the " Smirnoff pouch" and collectively the " Diageo pouches" ) infringe United States Design Patent No. D 571,672 (the " '672 patent" ), which is exclusively licensed to ABC by PPi.

Following an expedited discovery period, the court held an evidentiary hearing on August 14, 15, 16, and 22, 2012 during which evidence was admitted and testimony from several witnesses was presented. Testimony was heard from: (1) R. Charles Murray (" Murray" ) (the inventor of the '672 patent); (2) Timothy Barr (" Barr" ) (ABC's vice president of marketing and strategy); (3) Ian Lander (" Lander" ) (senior vice president of client services at directive analytics); (4) Michael Ward (" Ward" ) (Diageo's senior vice president for innovation in North America); (5) Travis Funk (" Funk" ) (a scientist for Diageo's

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innovation team) (6) Dr. Robert Kimmel (" Kimmel" ) (defendants' technical expert); and (7) Nicholas Mesiti (" Mesiti" ) (plaintiffs' patent expert). The court ordered the parties to file proposed findings of fact and conclusions of law by September 27, 2012. The matter now being ripe for disposition, the court makes the following findings of fact and conclusions of law.

II. FINDINGS OF FACT[1]

A. The Parties

1. Plaintiffs

1. ABC is a Delaware corporation with its principal place of business in Verona, Pennsylvania. (ECF No. 1 ¶ 1.)

2. PPi is a Florida limited liability company with its principal place of business in Sarasota, Florida. (Id. ¶ 2.)

2. Defendants

3. Diageo North America, Inc. is a Connecticut corporation with its principal place of business in Norwalk, Connecticut. (Id. ¶ 3.)

4. Diageo Americas Supply, Inc. is a New York Corporation with its principal place of business in Norwalk, Connecticut. (Id. ¶ 4.)

B. The Daily's Cocktails

1. Pouch Development and the '672 Patent

5. In 2005, ABC sought to develop a ten-ounce, single-serve ready-to-drink (" RTD" ) frozen cocktail product in a flexible foil pouch to be sold under its Daily's brand name. (Aug. 14 Tr. at 147-48.)

6. PPi initially provided ABC designs for two different pouches, Exhibits 31 and 32, which were used by ABC for its Daily's frozen cocktails for short periods respectively, in 2005 and 2006. (Id. at 151-52.)

7. ABC wanted its frozen cocktail products to be packaged in a unique and distinctive flexible pouch. (Id. at 148-49.)

8. ABC contacted PPi's owner, Murray, to create and develop a pouch for its Daily's frozen cocktail products. (Id. at 50.)

9. ABC reviewed more than a dozen possible pouch designs over the course of approximately eighteen months in the process of developing its package design. (Id. at 50, 59, 151-52.)

10. Ultimately, PPi produced a new pouch design for the Daily's pouches, which ABC has used for the Daily's frozen cocktail products since 2007. (Id. at 151.)

11. Murray's pouch design for ABC is allegedly embodied in the '672 patent. (Id. at 60-61, 67); (Ex. A).

12. Murray assigned the '672 patent to PPi, which in turn licensed it exclusively to ABC. (Ex. B; Ex. C.)

2. The Daily's Frozen Cocktail Products' Appearance

13. The appearance of the Daily's frozen cocktail products is generally consistent across all the flavors offered by ABC. (Ex. 146 (Frozen Peach Daiquiri); Ex. 147 (Frozen Pina Colada); Ex. 148 (Frozen Margarita); Ex. 149 (Frozen Lemonade); Ex. 150 (Frozen Pomegranate Acai Margarita); Ex. 151 (Frozen Mojito)).

14. The Daily's frozen cocktail products are sold in pouches which all have a generally hourglass shape when viewed from the

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front, a wedge shape when viewed from the side, and a lenticular shape when viewed from the bottom. (Id.)

15. The graphic treatments on the packaging for the Daily's frozen cocktail products include three general areas. (Ex. 151.) The topmost portion contains the words " FREEZE AND ENJOY" on a solid background in a color that generally corresponds to the flavor of the beverage (e.g. green for mojito, red for strawberry, etc.). (Id.) The large central portion contains a black rectangle with the words " DAILY'S READY TO DRINK" in silver at the top. (Id.) Below the black rectangle are the words " ALCOHOL IS IN IT!" printed above and just to the right of the central imagery on the package. (Id.) The central imagery (also in the central portion) is an image of a glass containing a colored liquid, surrounded by garnishes, both of which generally correspond to the flavor of the beverage (e.g., a peach-colored liquid surrounded by peach wedges). (Ex. 146.) The garnishes are depicted swirling around and splashing into the glass itself. (Id.) The images of the glass and the fruit, as well as the text related to alcohol are all presented over a background of a " swirl" pattern of two colors: one color is always white, while the other color is generally dictated by the flavor of the beverage, i.e. green for margarita and mojito, peach for peach, yellow for pina colada, etc. (Ex. 146; Ex. 147; Ex. 151.) The frozen lemonade " swirl" pattern is blue and white. (Ex. 149.) The bottommost band, below the central imagery, contains the name of the beverage, i.e. " Frozen Mojito." (Ex. 151.) Text at the bottom of the package includes the alcohol content information, the volume of the pouch, and the words " AMERICA'S PREMIUM BRAND" in white text on a black background (Ex. 146; Ex. 147; Ex. 148; Ex. 149; Ex. 150; Ex. 151.)

C. The Smirnoff and Parrot Bay Frozen Cocktail Products

1. Diageo Product Development

16. Diageo, the world's largest liquor manufacturer, noticed the rapid expansion of the RTD frozen pouch market segment as a result of the Daily's frozen cocktail products and sought to enter the market in approximately December 2010 or January 2011. (Aug. 15 Tr. at 210-13.)

17. Pursuant to that goal, Diageo initiated " Project Vineyard," which was aimed at producing a malt-based frozen cocktail product in a flexible pouch under its Parrot Bay brand to compete with the Daily's frozen cocktail products. (Id. at 202-03.) Diageo also initiated a companion project, " Project Supersonic," to produce a similar pouch under Diageo's Smirnoff brand name. (Ex. LLL.) Diageo chose these two brands because customers are familiar with them, even outside the spirits categories with which they are traditionally associated. (Aug. 15 Tr. at 198-99.)

18. Diageo acquired the Parrot Bay trademark in 2002, after it had been in the marketplace for at least five years. Parrot Bay products have yielded Diageo over six hundred million dollars in sales, and Diageo has spent over one hundred million dollars on advertising those products. (Id. at 211-12.)

19. The Smirnoff brand has been sold in the United States for at least fifty years, and has enjoyed billions of dollars of sales in the last ten years alone. (Id. at 212.)

20. Diageo sought to enter the RTD frozen cocktail market because it had seen a loss in market share in the overall RTD category, specifically with its Smirnoff Ice line, as a result of the growth of Daily's products in the frozen cocktail segment of the RTD market. (Id. at 213-14.)

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21. In consultation with Wal-Mart, Diageo determined that a malt-based product could be brought to market more quickly than a wine-based product, and could be sold in more and different retailers--specifically, Wal-Mart stores in Tennessee, Kentucky and New York. (Id. at 198, 204-08.)

22. Diageo had no experience with producing and filling pouches prior to beginning the Vineyard and Supersonic projects, but had worked with other frozen beverages in the past. (Id. at 220.)

23. Diageo followed an accelerated timetable for creating its frozen cocktail products, designing and launching the products in approximately five months in order to have them in the market by the summer of 2011. (Id. at 218-20.)

24. To meet its time goal, Diageo accelerated its multi-stage review and approval procedure, known as a gate process. (Aug. 16 Tr. at 75.) The acceleration required doing several activities at the same time, including designing the package and trade dress, locating pack film suppliers, package filling equipment, developing the beverage fluid, and determining the physical and technical requirements for the pouch. (Aug. 15 Tr. at 218-20.)

25. Diageo shortened the timeframe for product development by " wargaming" or engaging in " competitive benchmarking" with respect to the Daily's frozen cocktail products. (Id. at 214-17); (Ex. AAA). This process involved examining the Daily's products and determining what contributed to their success. (Id.) It also included reviewing the Daily's packaging while designing the packaging for the Parrot Bay and Smirnoff products, (Aug. 16 Tr. at 43), and approximating the size and shape of the Daily's pouch. (Aug. 16 Tr. at 163-64); (Ex. BBBB, FFFF, HHHH, NNNN).

26. Diageo sought to approximate the size and shape of the Daily's pouch because it is common practice in the beverage industry to use the same or similar serving format and size as competing products so that consumers do not believe that they are getting less value from the competition. (Aug. 16 Tr. at 149.) In an effort to capture the " value . . . perception" in the " overall pack appearance" of the Daily's products, Diageo relied heavily upon the Daily's pouch. (Aug. 15 Tr. at 216.) Diageo employee Rob Warren posed this question to a fellow employee: " Mike: What merchandising creativity can we steal from Daily's?" (Ex. HHH.) Another Diageo employee, Stephen Chandler, sought to order prototype pouches from the manufacturer PTIS and confirmed in correspondence that he did not care what the prototypes looked like, but merely stated " Copy Daily's." (Ex. HHHH.) Ultimately Diageo sought a pouch size that would " match Daily's," and be the same width and height of the Daily's pouch, and would have a " 'hole' at top the same as on Daily's." (Aug. 14 Tr. at 104); (Ex. BBBB, FFFF.)

27. Diageo employee Katie Raath (" Raath" ) was asked to produce an initial sketch of a possible pouch design for the Parrot Bay frozen cocktail product. (Ex. 132.) The initial pouch design was based upon a pouch die line[2] produced by the company Liquid Manufacturing (Aug. 16 Tr. at 95; Ex. 134), which Raath modified to include a cutout in the upper right-hand corner shaped like a parrot's wing. See (Ex. 133.)

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28. Funk sent Raath's sketch to Matthews Graphics Corporation for engineering guidelines and drawings. (Aug. 16 Tr. at 87.) Matthews returned a proposed die line, (Ex. 136), which Funk altered. (Ex. 137; Aug. 16 Tr. at 97-100.) Finally, Matthews returned a new die line reflecting Funk's changes; specifically, the waist on the right-hand side of the pouch was moved up, and the location of the tear notches was changed. (Ex. 139); (Aug. 16 Tr. at 101-02).

29. Despite the effort put into the die line, the Diageo engineering team had concerns that the wing cutout could cause inadvertent tearing--it could become essentially a pull-tab for the tear-off portion of the pouch--or it could catch in the filling machines. (Aug. 16 Tr. at 102-03.) In order to save time and get the product into production, Diageo ultimately scrapped the wing cutout and approved the pouch shape and die line as set forth in Exhibit 140--specifically, a pouch shape that is symmetrical from left to right. (Aug. 16 Tr. at 103-06.) Funk approved the die line for the Parrot Bay pouch on February 25, 2011. (Id. at 105, 122.)

30. In February 2011, Funk expressed concern that " legal challenges on the die line" posed a risk for the Parrot Bay project, stating that the initial review was conducted, but " was not definitive." (Ex. PPPP.) Funk acknowledged that waiting for legal approval would result in delays to the project and that the cost of the die itself was at risk if the die line was not approved by the legal department. (Id.) Ultimately, Diageo concluded that a die line similar to that used for the Daily's pouch would " be okay in the short term." (Aug. 16 Tr. at 163-64); (Ex. NNNN). Following approval of the die line in February 2011, Diageo employees continued to use a photograph of a marked-up Daily's pouch in correspondence related to the Parrot Bay product. (Ex. L); (Aug. 14 Tr. at 71-72).

31. Angela Campisi (" Campisi" ) (Diageo's Engineering Asset Strategy Director) met with Murray at the PPi offices on May 4, 2011, at which time she was specifically informed about the existence of the '672 patent. (Aug. 14 Tr. at 73.) Murray presented Diageo with four potential alternative pouch designs to consider at that time. (Id. at 73-74.)

32. After the May 4, 2011 meeting, Kevin Scherry (Diageo's Global Category Specialist for Flavors and Grain Neutral Spirits) (" Scherry" ) received an email from Murray, in which Scherry was informed that the Daily's pouch is patented. (Id. at 75-76.) In response, Scherry asked Murray what the patents were " around," believing that Diageo " may need to avoid certain design attributes." (Id. at 76; Scherry Dep. at 118-120; Ex. G.)

33. During the development process, Diageo used a Daily's frozen cocktail product as a stand-in for the Parrot Bay product while conducting product testing, a procedure that Funk admitted was " bad behavior." (Aug. 16 Tr. at 142-46); (Ex. YYY).

2. The Parrot Bay and Smirnoff Frozen Cocktail Products' Appearance

34. The graphics on the Parrot Bay frozen cocktail products are based upon the Parrot Bay rum bottle graphics (Ex. 104) and the Myers's frozen cocktail shaker graphics (a separate Diageo rum brand). (Ex. 100); (Aug. 15 Tr. at 199).

35. The Parrot Bay and Smirnoff frozen cocktail products are sold in pouches which all have the same general shape, including an hourglass shape when viewed from the front, a wedge shape when viewed from the side, and a lenticular shape when viewed from the bottom.

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36. The packaging for the Parrot Bay and Smirnoff frozen cocktail products prominently features an image of a glass surrounded by fruit to depict the product, provide a serving suggestion, and indicate the flavor and potential garnishes for the product. (Aug. 15 Tr. at 231-32); (Ex. 23, 97.) The colored bands at the top and bottom of the Diageo packages generally reflect the flavor of the product itself. (Aug. 15 Tr. at 232.) The top band contains the words " FREEZE & SQUEEZE," while the bottom band contains the word " FROZEN," the flavor of the beverage, and other product information including the alcohol content and a notice that the beverage is malt-based and contains added flavorings and colorings. (Ex. 23, 97.) Both the Parrot Bay and Smirnoff packages have a centrally-located notice that states " BEVERAGE ALCOHOL DO NOT SELL TO CONSUMERS UNDER 21." (Id.) The notice on the Parrot Bay packages is crafted to look like a postal cancellation stamp, (Ex. 97.)

37. Just above the image of the glass on the Smirnoff packages is the Smirnoff name and " double eagle" mark. (Ex. 23.) Each Smirnoff package incorporates a silver background with rays extending out from the Smirnoff mark, intended to convey a " more vibrant, high energy . . . type of offer." (Aug. 15 Tr. at 229-30); (Ex. 23).

D. Design Patent Infringement

1. Claim Construction

38. The '672 patent claims an ornamental design for a flexible liquid-containing pouch, as shown in Figures 1-8 of Exhibit A.

From left to right, FIG. 1, FIG. 2, FIG. 3, and FIG. 4 from the ''672 patent [3]

2. Defendants' Validity Challenges

a. Functionality

39. The design claimed in the '672 patent was one of at least a dozen proposed designs that resulted in the design for the Daily's pouch. (Aug. 14 Tr. at 58-59.)

40. The curved sides claimed in the '672 patent are one of many ways of achieving a generally hourglass shape in a flexible pouch, as can be seen by reviewing other design patents in evidence. (Ex. OOOOO (U.S. Design Patent No. 410,838); Ex. VVVVV 20 (U.S. Design Patent No. 435,440); Ex.VVVVV 24 (U.S. Design Patent No. 502,092); Ex. 40 (U.S. Design Patent No. 434,976)). Other design patents for flexible pouches do not claim curved sides or an hourglass shape. (Ex. 44.) Murray and Kimmel both testified that there are many alternatives for the shapes of the sides of a flexible pouch. (Aug. 14 Tr. at 63); (Aug. 22 Tr. at 33.) The ARBOR

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MIST frozen wine cocktail pouch does not have curved sides. (Ex. 87.) The SEAGRAM'S ESCAPES frozen sangria pouch has sides that continuously curve from top to bottom, as opposed to having a discrete curved portion of the side. (Ex. 143.)

41. The curved sides of the flexible pouch embodying the '672 patent make the pouch more difficult to produce and manufacture, thus making it more expensive. (Aug. 14 Tr. at 146-47.) The curved sides, therefore, are not necessary and their shape is ornamental and not purely dictated by function.

42. The portion of the pouch above the side curvatures in the design claimed in the '672 patent is one of many possible choices for the top of a flexible pouch, as can be seen in Exhibit 92, wherein that portion of the pouch curves inward, (Ex. 92), or the top can resemble the top of a cocktail shaker, as shown by the Arbor Mist pouch. (Ex. 87.)

43. The triangle-shaped notches, or " tear notches" indicated on both sides near the top of the pouch depicted in Figure 1 of the '672 patent are one of several ways of removing the flat portion at the top of the pouch and can be placed in multiple locations, or not included at all. (Aug. 14 Tr. at 64, 104.) Murray testified that other shapes can be used for the tear notches. (Id. at 104.) The Seagram's Escapes pouch, Exhibit 143, only has one tear notch, as does the design embodied in Exhibit 43. Testimony indicated that there are other, cheaper ways of removing the top of a pouch, including a simple tear in the packaging. (Aug. 14 Tr. at 104.)

44. The hole at the top of the pouch in Figure 1 of the '672 patent (often called a " sombrero hole" ) is one of several ways available to hang a flexible pouch. Both the Seagram's Escapes (Ex. 143) and the Arbor Mist (Ex. 87) pouches employ circular holes of two different sizes. Murray testified that such an opening " can be a circle; it can have two 70-degree cuts; it can be a larger sombrero; it can be an oval; many shapes." (Aug. 14 Tr. at 64.)

45. The double lines on the outside edge of the pouch design claimed in Figure 1 of the '672 patent are " seal lines." Seal lines can be of varying widths, thereby achieving different ornamental results. (Id. at 65.)

46. The two circles at the bottom of the pouch in Figure 1 of the '672 patent are known as " cooling holes," which are an unsealed area that allows for a higher pressure to be applied when affixing the gusset to the bottom of a pouch. (Ex. 46.) Murray " chose those smaller round holes to fit into the design" of the '672 patent. (Aug. 14 Tr. at 135.) As evidenced in Exhibit 46, there can be more of these holes (the image in Figure 1 of Exhibit 46 contains six holes), and they can be of varying shapes and sizes (the image in Figure 1 of Exhibit 46 contains circular and oval holes). Murray testified that the holes can be triangular, as well. (Aug. 14 Tr. at 103.) The holes are visible in the commercial embodiment of the '672 patent, i.e. the Daily's pouch. See e.g. (Ex. 149.) Although the cooling holes do assist in the manufacturing process, the number, size, and shape can be varied as part of the ornamental design of a pouch.

47. The semicircular shapes between the seal lines near the base of the pouch in Figure 1 of the '672 patent reflect cutouts in the gusset panel that allow the two sides of the pouch to seal together. These are referred to as " seal holes" and Kimmel agreed that " these patterns and shapes [are] interchangeable." (Aug. 22 Tr. at 21.)

48. The rounded shape that occupies the center of the base of the pouch in Figure 1 of the '672 patent is known as a " gusset

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seal." Gusset seals can be of varying heights and shapes, as indicated in Exhibit 5 (the Daily's " Party in a Pouch" ), which has a hexagonal seal. (Ex. 5.)

49. The base of the pouch, or " gusset," as depicted in Figure 4 of the '672 patent, can be of varying shapes and sizes. (Aug. 14 Tr. at 121-22.) Changing the size and shape of the curve changes the overall visual impression of the pouch. (Id.); (Aug. 16 Tr. at 203); (Aug. 22 Tr. at 65). Although the base of most stand-up flexible pouches (known as " Doyen-style" pouches) have a generally lenticular shape, as shown in Figure 4 of the '672 patent, the shape of the base can vary based upon the design. (Ex. 5, 92, 93, 94.)

50. Likewise, the side perspective of the '672 patent as shown in Figure 2 is characteristic of Doyen-style pouches in that it is generally wider at the bottom than at the top; however, other design patents entered into evidence reveal that the shape of those sides also can vary. (Ex. 92, 93, 94.)

51. Other testimony and documentary evidence indicates that the curved sides of the pouch offer an " ergonomic" shape that makes the pouch comfortable for the user to hold.[4] Defendants indicate that the " waist" in the pouch allows the consumer to manipulate the product; and it acts as a dam to hold the slush in place. (Aug. 16 Tr. at 112.) Finally, defendants note other allegedly functional aspects of the hourglass shape, including helping the filling process. (Id. at 113.)

b. 35 U.S.C. § 112 Indefiniteness

52. The design claimed in the '672 patent shows one pouch design and two embodiments of that design. (Aug. 16 Tr. at 200.) Figures 1 through 4 illustrate the first embodiment and Figures 5 through 8 illustrate the second. (Id.)

53. The design claimed in the figures of the '672 patent passed without objection by the patent examiner, as evidenced by the issuance of a design patent with respect to the application embodying that design. (Ex. 7.)

54. Figures 1 and 5 of the '672 patent illustrate the front elevational views of the claimed design; Figures 2 and 6 illustrate the side elevational views of the same; Figures 3 and 7 illustrate the rear elevational views of the same; and Figures 4 and 8 illustrate the bottom elevational views of the same. (Ex. A); (Aug. 16 Tr. at 200-01). The patent claims that each view is of the same pouch. (Ex. A.)

55. Testimony at the hearing indicated that the pouch illustrated by the figures of the '672 patent is filled. (Aug. 16 Tr. at 201). If the pouch illustrated in the '672 patent was not filled, the gusset would not expand, and the pouch would be essentially flat, thus rendering Figures 2, 4, 6, and 8 inconsistent. (Id.)

56. Murray testified that the pouch illustrated in the '672 patent is an open pouch, unsealed at the top. (Aug. 14 Tr. at 99.) Murray could not specifically articulate what the line[5] just above the sombrero hole was. (Id.) He did confirm that such a line is not the bottom edge of the top seal of the pouch. (Id. at 100.) Murray's application for a utility patent for a flexible pouch similar to the pouch claimed in the '672 patent identifies line 2a as a " closing seal," but does not specify whether the line

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corresponds to the top or bottom of the seal, or whether such a line is present in an unsealed pouch. (Kelly Dec. (ECF No. 43) Ex. Q.)

57. A review of the commercial embodiment of the '672 patent--the Daily's pouch, reveals that such a line is present, and that it is not the bottom edge of a top seal. (Ex. 148.) It is unclear whether such a line is present on an unsealed pouch.

58. If line 2a were construed as a seal line, the pouch would not function, since liquid could freely flow out through the sombrero hole. (Ex. A.) Moreover, a wider seal can be placed at the top of the pouch, based upon customer specifications, as confirmed by defendants' own packaging expert. (Aug. 16 Tr. at 197); (Murray Dep. 138-39, 141). The court concludes that line 2a in Figure 1 represents a line on a filled, unsealed pouch, prior to the top seal being applied. (Aug. 14 Tr. at 82.)[6] This construction is consistent with the shape of the pouch claimed in Figure 2, which does not include a straight line at the very top (which would be present if a top seal had been applied). (Ex. A.)

59. The tear notches in Figures 1, 3, 5, and 7 are illustrated with a closed outside edge. (Ex. A.) Testimony at the hearing revealed that these notches should be illustrated as " open Vs" that would allow a user to tear off the top portion of the pouch. (Aug. 22 Tr. at 19.)

c. Defendants' Section 102 Anticipation Claims and Section 103 Obviousness Claims

60. The design claimed in the '672 patent is an ornamental design for a flexible Doyen-style pouch. Doyen-style pouches were first invented in 1963 by the Doyen brothers, who obtained United States Patent No. 3,380,646. (Aug. 16 Tr. at 192-96); (Ex. 10). Subsequently, many ornamental designs have been applied to Doyen-style pouches, and those designs have received design patent protection. (Ex. A, 40, 43, 92, 93, 94.) Testimony from Murray indicates that the design claimed in the '672 patent is unique and that at the time of its invention, there was nothing else like it in the world. (Aug. 14 Tr. at 52, 84, 122.)

61. Defendants' expert on packaging suggests that several hourglass-shaped pouches (when viewed from the front) with lenticular bases (when viewed from below) and triangular or wedge shapes (when viewed from the side) existed prior to the issuance of the '672 patent. (Aug. 16 Tr. at 197-98); (Aug. 22 Tr. at 8-10). Defendants cite numerous pieces of prior art that they claim show that the '672 patent was anticipated and, therefore, lacks novelty.

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62. Exhibit 92, pictured above, is the design claimed in United States Design Patent No. 392,559.[7] Exhibit 92 discloses a flexible pouch with sides that continuously curve in and out from the center of the pouch, and are never vertical or parallel to one another. The design discloses no sombrero hole, gusset curve, tear notches, cooling holes, sealing holes, and has a top seal that appears to be taller than the seals on the sides.

63. Exhibit 40, pictured above, is the design claimed in United States Design Patent No. 434,976. Exhibit 40 discloses a flexible pouch with an hourglass shape and straight sides above and below the waist of the pouch. The corners both above and below the waist are sharp, and the sides above and below the waist are approximately the same length. The design claimed in Exhibit 40 discloses no sombrero hole, no cooling holes, no sealing holes, and no tear notches. When viewed from the side, the front and back portions of the pouch remain parallel to each other as they extend from the bottom of the pouch, before making a rounded curve inward toward the top of the pouch. When viewed from below, the base of Exhibit 40 forms a narrow oval shape with fins extending from each side.

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64. The design in Exhibit 43,[8] pictured above, is the design disclosed in United States Patent No. 6,912,825. Exhibit 43 has sharply pronounced side curvatures and sharp corners at the base. Exhibit 43 does not disclose a sombrero hole or cooling holes, but does disclose a single, large tear notch on the left-hand side. When viewed from the side, the front and back portions of Exhibit 43 remain parallel to each other from the bottom to almost the top, where they sharply curve inward toward the top.

65. All the prior art pouches relied upon by defendants include a straight line extending from the top of the pouch when viewed from the side. This line is meant to illustrate the top seal on the pouch. The front and back walls of the pouches, however, curve differently from the bottom to the top of the pouch. (Ex. 40, 92, 93, 94.) While all the prior art pouches relied upon by defendants share a generally lenticular-shaped base, the ovals and circles formed by those bases can be continuously curving (Ex. 94), can have straight sides (Ex. 92), or can resemble a narrow oval. (Ex. 40.)

66. Defendants also contend that the design claimed in the '672 patent is embodied in the Daily's Party in a Pouch (the " Party Pouch" ). (Ex. 5.) The Party Pouch was in use as early as 2004, which makes it prior art to the '672 patent. (Aug. 15 Tr. at 42.) Testimony indicated that the Party Pouch was produced by Saddlesprings for ABC. (Id. at 50.)

67. The design pictured above is the Party Pouch. As with Exhibit 40, discussed above, the corners both above and below the curved sides on the Party Pouch are sharp and not rounded. The Party Pouch does not have a sombrero hole, and instead has a zipper top, which allows the pouch to be resealed after the top has been removed. The base of the pouch has a distinctly hexagonal appearance, due to the use of a hexagonal gusset piece. The resulting gusset curve is not rounded, but instead looks like one-half of a hexagon when viewed from the front. The tear notches on the Party Pouch are quite close to the top edge of the pouch, and are correspondingly quite far from the top of

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the curved sides. When viewed from the side, the bottom half of the Party Pouch is quite bulbous, above which point the sides narrow quickly, with approximately the top one-quarter to one-half of the package appearing as essentially a straight line.

68. Defendants also contend that Exhibits 31 and 32 are prior art to the '672 patent, insofar as Exhibit 31 was in use in 2005 and Exhibit 32 was in use in 2006 by Daily's. (Aug. 15 Tr. at 29.) Exhibits 31 (left) and 32 (right) are pictured below.

69. As described by Murray, Exhibits 31 and 32 both have a " radius top," in which the sides above the waist on the pouch are not straight, but instead are constantly curving. (Murray Dep. at 62.) As a result, Murray indicated that they are " totally different" from the Daily's pouch in issue (the commercial embodiment of the '672 patent). (Aug. 14 Tr. at 60.) Neither pouch pictured above has a sombrero hole. (Ex. 31, 32.) With respect to Exhibit 31, the gusset is hexagonal in shape, as discussed previously with respect to the Party Pouch, thus giving the base more of a hexagonal shape.

70. With respect to obviousness, Kimmel opined that the design of the pouch pictured in Exhibit 43 could serve as a primary reference for the design claimed in the '672 patent, even though Kimmel acknowledged that there are differences between the two. (Aug. 22 Tr. at 30.) Kimmel also opined that one skilled in the art would understand that the bottom curves on the pouch claimed in Exhibit 92 could be substituted for the top curves on the pouch embodied in Exhibit 43, thus creating a piece of hypothetical prior art that he opines is similar to the '672 patent. (Id. at 30-35.) Kimmel previously testified, however, that the curves on the sides of the '672 patent were purely functional, and opined that if all functional features of the '672 patent were removed, all that would remain is a " rectangle with rounded corners." (Id. at 61.)

3. Plaintiffs' Infringement Claims

71. A comparison between the design claimed in the '672 patent (shown in the middle picture below), the relevant prior art (as embodied in the Party Pouch and shown in the picture on the left below), and the allegedly infringing Parrot Bay pouch (shown in the picture on the right below) reveals the similarities between the design claimed in the ''672 patent and the Parrot Bay pouch.

72. The Parrot Bay pouch and the design claimed in the '672 patent share many features in common. The sides both above

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and below the waist on the pouches are straight, with the sides below the waist being substantially longer than those above the waist. The corners above the waist are both generally smooth rather than sharp, while the corners below the waist of the design claimed in the '672 patent are slightly more pronounced than on the Parrot Bay pouch. The curvature of the waist on both the Parrot Bay pouch and the design claimed in the '672 patent are approximately the same depth, although the rate of curvature is slightly different. Both share a sombrero hole that is the same size and proportion, and the tear notches on both are in the same location. Both have a large rectangular space above the waist in the pouch (regardless where the seal is placed, the space is the same on both pouches). The bottom corners of both pouches are nearly identical as well. The top corners of the Parrot Bay pouch are slightly sharper, but they are still rounded, much like those of the design claimed in the '672 patent. A closer inspection reveals that, despite the printing on the Parrot Bay pouch, the seal holes and the cooling holes are both visible, as is the curvature of the gusset seal.

73. Based upon the above comparison, the Parrot Bay pouch appears more like the design claimed in the '672 patent than the Party Pouch. The most pronounced difference between the Party Pouch and the Parrot Bay pouch is the square bottom, which results in the sides below the waist appearing to angle inward, while the same sides on the Parrot Bay pouch remain parallel from the waist down. The curvature on the sides of the pouches also differ. The curve on the Party Pouch is a discrete cutout with sharp corners, whereas there ...


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