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Maui Jim, Inc. v. Bargain Depot Enterprises

July 30, 2007


The opinion of the court was delivered by: Michael M. Mihm United States District Judge


Now before the Court is Plaintiff Maui Jim's Motion for Summary Judgment. For the reasons set forth below, the Motion [#23] is GRANTED IN PART and DENIED IN PART.


The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1338(a), as it arises under an Act of Congress relating to patents, 35 U.S.C. § 1, et seq.


Early in 2006, Plaintiff Maui Jim, Inc. ("Maui Jim") discovered that Defendant Bargain Depot Enterprises ("BDE") was selling sunglasses on its website under the name "Compare to Maui Jim 6601." These glasses allegedly infringed on Maui Jim's U.S. Design Patent No. D481,059 ("the '059 patent"). Maui Jim filed this action for patent infringement on June 28, 2006. BDE almost immediately ceased selling the "knock-offs."

The case is now before the Court on Plaintiff Maui Jim's Motion for Summary Judgment. The Motion seeks judgment on the liability issues of patent validity and infringement, and also seeks attorney fees under 35 U.S.C. § 285, which provides that in patent disputes, "The Court in exceptional cases may award reasonable attorney fees to the prevailing party." In response to Maui Jim's Motion, BDE does not dispute the patent's validity or any of the liability issues, but disputes that this case is "exceptional" within the meaning of the statute, such that Maui Jim should be entitled to recover its attorney fees.

I. The Settlement Attempts

Very early in the lawsuit, in July 2006, the parties apparently agreed to settlement terms. After negotiations, BDE counsel sent an email to Maui Jim counsel confirming that BDE had accepted the following terms: That BDE "does not contest Maui Jim's allegation of infringement and admits only that Maui Jim's patent is valid," and that BDE would remit to Maui Jim $250.00, representing the minimum amount Maui Jim could recover (by statute) under the circumstances of this case. Pl.'s Ex. 4.

On August 11, 2006, BDE returned to Maui Jim a check and a signed settlement agreement. However, BDE had drawn a line through the term that it "admits that the '059 patent is valid." Maui Jim immediately rejected the altered settlement agreement, stating that "it is unacceptable that [BDE] chose to manually mark up the agreement rather than signing it with the terms that had been agreed upon . . . ." Pl.'s Ex. 6.

BDE admits that it never intended to genuinely challenge the patent's validity. However, BDE claims that, upon a final review of the settlement clause requiring its admission that the '059 patent is valid, it realized that "it could not determine the actual validity of Maui Jim's patent, which required a judicial determination." Def.'s Resp. to Mtn for Summ. J., at 4. Without any citation to supporting authority, BDE has repeatedly taken the position that it was unable to stipulate to validity of the '059 patent because the patent's validity could only be determined by a court. For example, in its response to Maui Jim's Motion for Fees under Rule 37, BDE states, "[N]either Mr. Lindhart (BDE President), nor anyone else at BDE had any knowledge, actual or otherwise, regarding the validity of the '059 patent . . . . [V]alidity, to the extent it was an issue . . needed to be determined by the Court, not any party to the litigation."

During negotiations, BDE apparently proposed alternative settlement language, such as it "does not dispute the validity" of the patent, or "BDE, based on Maui Jim's filing of its patent, recognizes the validity of such patent." While Maui Jim characterizes BDE's conduct as "reneging" upon the already-agreed-upon terms of settlement, BDE characterizes the parties as still being in negotiation, and claims that it only sought proper clarification of its ability to attest to the validity of Maui Jim's patent. At oral argument, BDE counsel stated that BDE's president was "uncomfortable" with signing a stipulation agreement, "under penalty of perjury," in which he admitted that the patent was valid.

The parties apparently continued negotiating, and a November 2, 2006, email between counsel confirms that Maui Jim was still willing to settle for the original terms (admitting validity and not contesting infringement), but would now require payment of $2,000.00, to defray its rising legal costs. Maui Jim again made the same offer in writing on December 5, 2006.

In a February 2007 email from Maui Jim counsel to BDE counsel, Maui Jim stated that it does believe that wording such as "not disputing the validity of Maui Jim's '059 patent can be agreed upon, provided the other settlement facets can also be agreed upon." Def.'s Ex. A. Once again, Maui ...

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