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IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION
SPANX, INC., Plaintiff, v. TIMES THREE CLOTHIER, LLC d/b/a Yummie Tummie, Defendant.
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Civil Action No. 1:13-cv-00710-WSD
PLAINTIFF SPANX, INC.’S MEMORANDUM IN OPPOSITION TO DEFENDANT TIMES THREE CLOTHIER, LLC’S MOTION TO TRANSFER, OR, IN THE ALTERNATIVE, STAY THIS ACTION
Plaintiff Spanx, Inc. (“Spanx”) submits this memorandum in opposition to Defendant Times Three Clothier, LLC’s (“Defendant”) “Motion to Transfer, or in the Alternative, Stay This Action” (Dkt-4). This declaratory judgment action was filed by Spanx on March 5, 2013, asking the Court to declare that three Spanx products do not infringe seven of Defendant’s design patents (Dkt-1). Defendant seeks to transfer or stay this action due to a design patent infringement action, involving four of the same patents plus
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two additional patents, filed by Defendant in New York four weeks later, on April 2, 2013 (Dkt-4-14). Spanx respectfully submits that the facts and law warrant keeping this case in Georgia. INTRODUCTION Spanx and Defendant are in the shapewear business and both companies sell shaping tops and camisoles, among other products. (See Compl. [Dkt-1] ¶¶ 1-2). Spanx was formed in 2000 and has sold shaping camisoles since at least as early as 2005. (See Declaration of Leslie Slavich (“Slavich Dec.”) ¶ 2). Defendant entered the market later, in 2007, and then in 2008 filed a design patent application for its shaping tops that eventually issued as a series of design patents (e.g., Compl. [Dkt1] Exs. A - G). Defendant has claimed that its design patents cover tops that feature a line below the bust, a line at the hip and a hourglass middle shape. (See Declaration of Kathleen E. McCarthy (“McCarthy Dec.”) ¶ 4). An example of one of the design patent drawings is shown below:
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(Compl. [Dkt-1] Ex. C). Defendant has advertised its products to the public as though the patents cover functional features when in fact, as design patents, they are limited, as a matter of law, to coverage for non-functional ornamental designs. See Richardson v. Stanley Works, Inc., 597 F.3d 1288, 1293 (Fed. Cir. 2010) (“we have made clear that a design patent, unlike a utility patent, limits protection to the ornamental design of the article”). An example advertisement from Defendant’s website in 2011 is below:
(See Slavich Dec. ¶ 3, Ex. A). Spanx sold shaping tops before Defendant was even in business, including its Hide N Sleek tank introduced in 2005. (See Slavich Dec. ¶¶ 2, 4). The Hide N Sleek tank featured a line below the bust representing a functional seam connecting the different upper and lower fabrics and an hourglass middle shape as shown below:
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(See id. at Ex. B). Spanx has introduced many different variations of shaping tops over the years and recently introduced the three Spanx products at issue, shown below:
Total Taming Tank Top This Cami Top This Tank
(Slavich Dec. ¶ 5, Exs. C - E). By letter dated January 18, 2013, Defendant asserted that these three Spanx items infringe seven of its design patents, which Defendant contends cover tops with a line below the bust, a line below the waist, and an hourglass middle portion. (Dkt-4-3; McCarthy Dec. ¶ 4). Defendant’s letter was sent to Spanx at its offices in Atlanta, Georgia. Defendant’s letter also asserted that a shapewear competitor had paid Defendant $6.7 million dollars to settle a similar infringement claim.
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Spanx refuted Defendant’s claims of infringement in a letter dated February 14, 2013. (See McCarthy Dec. ¶ 5, Ex. G). Spanx noted that its products contain functional stitching, not ornamental designs, and that Defendant’s design patents do not cover -- and in fact specifically disclaim -- the functional stitching at issue. (See id. at Ex. G at 2). Spanx also noted that two of the three allegedly infringing items, the Top This Tank and Top This Cami, do not contain any external stitching below the bust and only include internal stitching representing a functional shelfbra that is in no sense ornamental. (See id. at Ex. G at 4). Spanx noted that design patents only cover ornamental features of the products at issue, not functional features. (See id. at Ex. G at 4). In addition to the exchange of letters, the parties also had several discussions regarding the scope and merits of Defendant’s claims. (See id. ¶¶ 2-9). Spanx did make one proposal, which was repeated, unchanged, over the course of the parties’ discussions. (See id. ¶¶ 5, 7, 8). Spanx proposed that, as part of a settlement and without accepting any liability, Spanx would agree to no longer sell the Total Taming Tank, a one-time product that had been discontinued for other reasons. (See id. ¶ 5). Defendant indicated that Spanx’s proposal was unacceptable, and indicated an intent to enforce its design patents to cover any product with two
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seams and an hourglass middle, regardless of the functionality of those elements. (See id. ¶¶ 6-7). When it became apparent that Defendant insisted upon a broad interpretation of its design patents that would compromise Spanx’s ability to continue to make functional shapewear and would affect not only the discontinued Total Taming Tank but also the Top This products (and presumably future functional garments as well), Spanx brought this action. (See id. ¶¶ 9-10). Nearly a month later, Defendant brought its own action in New York and now seeks to move the Georgia action to New York or to stay the Georgia action. (Dkt-4).1 ARGUMENT AND CITATION OF AUTHORITIES 1. A Strong Presumption Favors the Georgia Action as the First-Filed Action The subject Georgia action was filed first, by four weeks. The Eleventh Circuit applies the first-filed rule: “[w]here two actions involving overlapping issues and parties are pending in two federal courts, there is a strong presumption
The New York action asserts four of the same patents asserted in Defendant’s January 18, 2013 cease and desist letter, plus two additional patents. Three of the patents asserted in the cease and desist letter are not mentioned in the New York suit but are included in Spanx’s request for declaratory judgment of non-infringement, since Defendant indicated an intent to assert them against Spanx. If the Court decides to keep this action in Georgia, Spanx will amend its complaint to add the two additional patents asserted in the New York action. -6-
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across the federal circuits that favors the forum of the first-filed suit under the firstfiled rule.” Manuel v. Convergys Corp., 430 F.3d 1132, 1135 (11th Cir. 2005) (citing Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Haydu, 675 F.2d 1169, 1174 (11th Cir. 1982)). Defendant “carr[ies] the burden of proving ‘compelling circumstances’ to warrant an exception to the first-filed rule.” Id. There are no compelling circumstances here that merit transferring the case out of Georgia. Spanx did not file suit after any trickery but at the end of a series of bona fide settlement discussions, when it became apparent that Defendant would not accept Spanx’s settlement offer. (See McCarthy Dec. ¶¶ 8-10). Spanx is located in Georgia and received Defendant’s letter asserting infringement at its offices in Georgia. (See Slavich Dec. ¶ 6; Dkt-4-3). The Spanx items at issue were designed in Georgia by Spanx employees who reside in Georgia. (See Slavich Dec. ¶ 7). Other Spanx items potentially relevant to this case, including the prior 2005 Hide N Sleek camisole featuring a line at the bust and an hourglass middle, were also designed in Georgia by Spanx employees who reside in Georgia. (See id. ¶ 8). Documents regarding the Spanx products at issue are maintained in Georgia. (See id. ¶ 9). Spanx has a substantial connection to the Georgia forum and has good reason to wish to have its defenses heard in Georgia if this matter cannot be resolved on a
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reasonable basis before trial. Georgia has a strong connection to this case and an interest in hearing a dispute brought by a plaintiff company located in Georgia. Defendant asserts that the first-filed rule should not apply because the Georgia action was filed in anticipation of the New York action, and suggests that Spanx engaged in settlement negotiations only as a means to trick Defendant and give Spanx time to file suit first. The facts do not support a claim of trickery or deception and instead demonstrate a sincere effort by Spanx to resolve the dispute and a rejection of those efforts by Defendant. (See McCarthy Dec. ¶¶ 2-10). The cases cited by Defendant involve claims of deception or actions filed immediately after receipt of a threat of immediate action and are therefore readily distinguishable. See Ven-Fuel, Inc. v. Dep’t of the Treasury, 673 F.2d 1194, 1195 (11th Cir. 1982) (DJ action filed day after receipt of letter stating suit would be filed by adversary; other action filed one week later); Soroka v. Lee Techs. Servs., Inc., No. 1:06-CV-0710-TWT, 2006 WL 1734277, at *4 (N.D. Ga. June 19, 2006) (DJ action filed 11 days after receipt of cease and desist letter; other suit filed less than 2 weeks later); Woodbolt Distrib., LLC v. Natural Alternatives Intern., Inc., No. 11–1266 GMS, 2013WL 247041 (D. Del. Jan. 23, 2013) (DJ action filed prior to scheduled settlement call; other action filed the same day); Z-Line Designs, Inc. v. Bell’O Int’l, LLC, 218 F.R.D. 663, 666-67 (N.D. Cal. 2003) (DJ action filed
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during extension of time to respond to cease and desist letter; other action filed two days later); Mission Ins. Co. v. Puritan Fashions Corp., 706 F.2d 599, 602 (5th Cir. 1983) (DJ action filed during extension of time adversary requested to file his own suit; other action filed 3 weeks later); Xoxide, Inc. v. Ford Motors, Co., 448 F. Supp. 2d 1188, 1189 (C.D. Cal. 2006) (DJ action filed “as insurance” during negotiations and not served until a month later; other action filed 2 weeks later). Here, no deception occurred and legitimate settlement discussions took place. Indeed, Spanx continued to offer to discuss resolution of the matter after filing suit. In response, Defendant’s president took to the press and announced “I hope [Spanx] is ready for war because I will not lie down.” (McCarthy Dec. ¶ 15). Defendant’s president returned to television when Defendant filed the New York action four weeks later, stating “[Spanx] sued me so now I’ve countersued…. You want to sue me, I’ll fight back.” (Id.). If Defendant’s arguments are accepted, a party charged with infringement could never file a declaratory judgment action after engaging in settlement negotiations and only the sender of a cease and desist letter would have the right to bring suit. That is not the law. See Manuel, 430 F.3d. at 1137. In at least one other action involving the design patents at issue here, a shapewear competitor
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sought a declaratory judgment against Defendant2 -- so Defendant is well aware that its actions could lead to a suit such as this one. Moreover, even if a filing is found to be anticipatory, dismissal of the firstfiled action is not mandatory -- it is still only one equitable factor among many that a district court can consider in determining whether to hear a declaratory judgment action. See Manuel, 430 F.3d. at 1137 (no transfer even where former employee lied about where he was going to work and filed a declaratory judgment action to secure a forum with more favorable law on the enforceability of a non-compete clause); Spinevision, Inc. v. Burel, No. 1:06-cv-332-WSD, 2006 WL 3531723 (N.D. Ga. Dec. 5, 2006) (no transfer even when the declaratory judgment plaintiff first agreed to accept service of adversary’s complaint and then proceeded to file his own declaratory judgment action); Kate Aspen, Inc. v. Fashioncraft-Excello, Inc., 370 F. Supp. 2d 1333, 1338-39 (N.D. Ga. 2005) (anticipatory action a “narrow” exception to the first-filed rule; “even in instances where the first-filed lawsuit is a declaratory judgment action and an exception to the first-filed rule might thus conceivably apply, it is nonetheless still preferred that the first-filed rule govern”) (emphasis in original).
Maidenform Brands, Inc. v. Times Three Clothier, LLC, No. 1:10-cv-01661GBD-HBP (S.D.N.Y.). - 10 -
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This is also not a case where the two actions were filed nearly simultaneously. Instead, it took Defendant four weeks to file the New York action. Defendant claims that Defendant was ready to file suit in January but does not explain why the New York action was not filed until April and not until four weeks after the Georgia action was filed.3 The two actions are also not identical. In the New York action, Defendant has asserted two new patents not previously mentioned to Spanx and has dropped three patents previously asserted. (Dkt-4-14). 2. Other Relevant Factors Favor the Georgia Action The Court’s discretion to consider or transfer the declaratory judgment action is guided by the equitable considerations in a 28 U.S.C. § 1404(a) transfer analysis. These factors include: “(1) the convenience of the witnesses; (2) the location of relevant documents and the relative ease of access to sources of proof; (3) the convenience of the parties; (4) the locus of operative facts; (5) the
Notably, the filing of the New York action coincided with press announcements that Defendant’s president will return to the reality television series “Real Housewives of New York” and press reports entitled “‘Real Housewives of New York’ Season 6: Heather Thomson Continues To Talk Spanx Lawsuit” indicate Defendant’s president “[a] Real Housewife (who has been confirmed for season 6)[,] said that you ‘don’t mess with her’ and alluded to the Spanx lawsuit being a big part of her storyline during the next season of the show.” (McCarthy Dec. ¶ 15).
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availability of process to compel the attendance of unwilling witnesses; (6) the relative means of the parties; (7) a forum’s familiarity with the governing law; (8) the weight accorded a plaintiff’s choice of forum; and (9) trial efficiency and the interests of justice, based on the totality of the circumstances.” Manuel, 430 F.3d at 1135 n.1. Defendant bears the burden of establishing that the balance of the § 1404(a) interests favors the transfer. “[F]ederal courts traditionally have accorded a plaintiff’s choice of forum considerable deference,” In re Ricoh Corp., 870 F.2d 570, 573 (11th Cir. 1989), and “unless the balance is strongly in favor of the defendant, the plaintiff’s choice of forum should rarely be disturbed.” Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947); see also Moore v. McKiddon Bros., Inc., 41 F. Supp. 2d 1350, 1356 (N.D. Ga. Dec. 1, 1998). Defendant suggests that the convenience of the witnesses favors New York but identifies no witness by name other than two officers of Defendant. Defendant asserts that “given that the fashion industry is located in New York, industry experts would also be located in New York” but fails to provide any support for this statement. Defendant has not identified any relevant non-party witnesses in New York or elsewhere by name or subject matter of their testimony. A summary of a witness’s expected testimony “is necessary for the Court to evaluate whether
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and to what extent the testimony is relevant to the claims at issue in this case.” Griffin Indus., Inc. v. Couch, No. 1:05-cv-0684-WSD, 2006 WL 783354, at *2 (N.D. Ga. 2006). Defendant suggests that the location of relevant documents favors New York, but only because Defendant “assumes that Spanx may have relevant documents relating to its sales that are accessible in New York.” This assumption is without any support and is wrong. Spanx has no relevant documents in New York. (See Slavich Dec. ¶¶ 9-10). Defendant suggests that the convenience of the parties favors New York since Defendant is located there and Spanx has a showroom in New York, without any regard given to the location of Spanx’s records, relevant designers and business offices (all in Georgia). (See id. ¶¶ 8-10). In fact, Spanx does not even have a permanent New York showroom. (See id. ¶ 10). Spanx does have contract personnel and one employee who are located in New York, but none of these persons are likely to be witnesses here. (See id.). As previously noted, the designers of the items at issue are in Georgia. (See id. ¶ 8). Defendant suggests that transfer is appropriate because “Spanx is in the best financial position to absorb the cost of litigation.” Both Defendant and Spanx are active businesses that have sufficient assets to litigate. Defendant has sued others
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numerous times.4 Defendant itself proclaims receipt of nearly $7 million to settle a case in 2011, and press reports have stated Defendant’s sales are $60 million per year. (See Dkt-4-3; McCarthy Dec. ¶ 15). There has been no showing that the cost to litigate in Georgia will be substantially different for Defendant than the cost to litigate in New York. There is also no rule that whichever company proclaims itself to be smaller gets to choose where a case will be litigated. Moreover, Defendant has not shown an interest in cooperating to assist in keeping unnecessary litigation costs down. When asked to consent to a stipulation extending the time for Spanx to answer the New York action until after this Court rules on the pending motion to transfer or stay this action, Defendant’s counsel refused, necessitating motion practice in New York. (See id. ¶ 14, Ex. H). There can be no claim of forum shopping for purposes of selecting more favorable law in a patent case such as this. The same federal patent law applies regardless of where the suit proceeds, with any appeal going to the Federal Circuit. A company like Defendant that does business throughout the United States with its products “carried in over 2000 US and International retailers” (including
Times Three Clothier, LLC v. How Fashions International, Inc., No. No. 1:11-cv-02432-BSJ-MHD (S.D.N.Y.); Times Three Clothier, LLC v. Suyen Corp., No. 1:11-cv-09392-NRB (S.D.N.Y.); Times Three Clothier, LLC v. LF USA, Inc., No. 1:11-cv-09428-PKC (S.D.N.Y.); see also Maidenform case cited in Note 2, supra, wherein Defendant asserted counterclaims. - 14 -
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several in Georgia such as Nordstrom, Lord & Taylor and Dillards) cannot expect that all of its cases will be heard in New York. (See Slavich Dec. ¶ 11). A company like Defendant that aggressively asserts intellectual property rights against numerous competitors and has previously been a declaratory judgment defendant cannot claim surprise to find itself in that situation again. Here there has been no showing that the Georgia forum is inconvenient to any particular non-party witness. Even if Defendant had established that Georgia was an inconvenient forum for officers of Defendant, transfer should be denied if it would merely shift inconvenience from one party to another. See Paul, Hastings, Janofsky & Walker, LLP v. City of Tulsa, 245 F. Supp. 2d 1248, 1260 (N.D. Ga. 2002). CONCLUSION Georgia is as convenient a forum as New York. The presumptions applicable under Eleventh Circuit law favor allowing this action to proceed in Georgia, where it was first-filed. Spanx respectfully requests that the Court deny Defendant’s motion and that this action be allowed to proceed in Georgia.
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Respectfully submitted, this 16th day of April, 2013. KING & SPALDING LLP
s/ Natasha H. Moffitt Natasha H. Moffitt (Georgia Bar No. 367468) Laura S. Huffman (Georgia Bar No. 595909) 1180 Peachtree Street, N.E. Atlanta, Georgia 30309-3521 Telephone: (404) 572-4600 Facsimile: (404) 572-5134 E-mail: email@example.com E-mail: firstname.lastname@example.org Kathleen E. McCarthy (admitted pro hac vice) 1185 Avenue of the Americas New York, New York 10036 Telephone: (212) 556-2345 Facsimile: (212) 556-2222 E-mail: email@example.com Attorneys for Plaintiff SPANX, INC.
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CERTIFICATE OF COMPLIANCE I hereby certify, pursuant to L.R. 7.1.D of the Northern District of Georgia, that the foregoing PLAINTIFF SPANX, INC.’S MEMORANDUM IN OPPOSITION TO DEFENDANT TIMES THREE CLOTHIER, LLC’S MOTION TO TRANSFER, OR, IN THE ALTERNATIVE, STAY THIS ACTION was prepared in 14-point Times New Roman font. This 16th day of April, 2013. s/ Natasha H. Moffitt Natasha H. Moffitt
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CERTIFICATE OF SERVICE I hereby certify that on this day, I electronically filed the foregoing PLAINTIFF SPANX, INC.’S MEMORANDUM IN OPPOSITION TO DEFENDANT TIMES THREE CLOTHIER, LLC’S MOTION TO TRANSFER, OR, IN THE ALTERNATIVE, STAY THIS ACTION with the Clerk of Court using the CM/ECF system, which will send notification of such filing to Defendant’s counsel of record: Theodore H. Davis Jr. Kilpatrick Townsend & Stockton LLP 1100 Peachtree Street Suite 2800 Atlanta, GA 30309 This 16th day of April, 2013.
s/ Natasha H. Moffitt Natasha H. Moffitt