The Key to Patent Lawsuits

Almost all litigation involving the jewelry industry and patents, copyrights, or trademarks is conducted in the United States Federal District courts. The federal courts retain exclusive jurisdiction for patents and copyrights and share jurisdiction for trademarks with state courts. Much of the federal practice is conducted by very large firms, which can quickly generate huge fees once a lawsuit begins.

Federal courts are well run and efficient and can produce results fairly quickly, often within one to two years. After a complaint and the answer are filed, the courts require that the parties set forth a “discovery” schedule, which establishes the time periods for each party to conduct fact discovery—i.e., discover information in the other side's possession and conduct its own investigation. Discovery involves document production, witness depositions, third-party information, and electronic discovery or “e-discovery.” Discovery is also the legal activity in which fees can mount very quickly.

The purpose of discovery is to obtain information and admissions. In most cases, young associates are charged with the task. Since they often are not directly in contact with the clients, they use traditional resources to conduct research, such as the Internet, legal journals, and publicly available documents. These documents may exist within the United States Patent Office, foreign patent offices, or online.

One of the most important questions in patent litigation is whether or not a patent holder was the first to make the invention covered by the patent. An effective defense against patent lawsuits is to show that the patentee was not the first to make the patented invention. Since patents last for 20 years from filing, one may need to find prior art that is quite old. (Prior art is not as important in copyright cases.)

Finding the best prior art in the jewelry industry is difficult. It's found most often through personal information from people in the industry who are familiar with the prior-art jewelry items, so it's helpful to have industry contacts. Most law firms don't have such access and use a traditional approach, which can be time consuming and turn up little. That's because the jewelry industry is largely made up of small and medium-size manufacturing companies, often multigenerational, so there's no publicly available archival source of preexisting jewelry designs.

Few jewelry manufacturers are public companies. The jewelry industry, by and large, has eschewed the corporate mold. Information is passed from person to person. Companies make sales by visiting customers and showing designs to potential buyers, attending shows around the world, and relying on personal contacts.

Certain public documents, such as auction catalogs and journals like JCK, contain dated jewelry designs. There is no central repository for this information, but many jewelry companies and retailers retain sales files in-house. Unfortunately, many companies regularly dispose of older catalogs and flyers.

I was involved in a litigation brought by Frederick Zettl against the major jewelry retailers concerning the sale of the Huggy-style earring. (Huggy is a registered trademark of Jordan Meryl Inc.) Since I represent many jewelry manufacturers who supplied the accused items to many retailers, I ultimately defended most of the majors through their suppliers in this lawsuit. When the lawsuit began, I had a mystery to solve: Is this earring an old design? Where does it exist and how can I find it? How can I produce good evidence of the early existence of the earring?

I needed to find prior art, so I contacted personal sources in the industry. Many were willing to cooperate and shared original design books (now often computerized), which are dated and show every design the company has ever produced.

Zettl's lawyers, while excellent, were not directly connected to the jewelry industry and may have thought the retailers would give in and pay royalties on a hot jewelry item. They hadn't considered that the retailers would turn to their suppliers, who would join together to share the cost of the litigation. Moreover, Zettl and its lawyers didn't understand that if a manufacturer sues retailers, the manufacturer can almost always forget about doing business with those retailers. Thus, a German manufacturer, which was trying to sell to the majors in the United States, found itself suing its potential customers.

I turned to every source I had. Everybody agreed the style was old, but nobody could produce solid evidence of its existence prior to 1983. I was looking for a specific, patented aspect of the earring design. I scoured trade shows asking where I could find evidence of early sales of the design in the United States. Ultimately, I found a jewelry manufacturer in Valenza, Italy, that had sold a specificring to a customer in Chicago in the 1970s. That customer still had its original cost cards showing the design and sales dates, and I was able to obtain shipping records going back to the '70s. The Valenza manufacturer took the time to help as a favor to his old customer.

The case was settled—the terms are confidential, but suffice it to say the activities in producing good prior art coupled with Zettl's desire to sell its line in the United States were compelling reasons to terminate the lawsuit. Without the personal interaction and trust, I never would have found that small manufacturer in Italy, nor would I have been given access to its documents. The lesson for any manufacturer involved in litigation is this: Make sure you're closely involved in how your lawyers look for prior art.