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Hillman Group, Inc. v. Minute Key Inc.

United States District Court, S.D. Ohio, Western Division

March 28, 2018

MINUTE KEY INC., Defendant.


          Susan J. Dlott, United States District Court.

         This matter is before the Court on Defendant Minute Key Inc.'s Renewed Motion for Judgment as a Matter of Law. (Doc. 255.) Plaintiff, The Hillman Group, Inc., has filed a memorandum in opposition (Doc. 264), to which Minute Key has replied (Doc. 267). For the reasons that follow, Defendant's Motion will be DENIED.

         I. BACKGROUND

         This litigation-between competitors in the self-service, automatic key duplication industry[1]-began on October 1, 2013 as a patent case. Hillman filed a Complaint against Minute Key, seeking a declaratory judgment of non-infringement and invalidity of U.S. Patent No. 8, 532, 809 B2 (“the '809 patent”). (Doc. 1.) Minute Key answered and asserted a counterclaim of infringement. (Doc. 14.) In an effort to conclude the dispute, Minute Key moved to dismiss its counterclaim with prejudice (Doc. 28) and to dismiss the case for lack of subject-matter jurisdiction (Doc. 29). Hillman opposed both motions (Docs. 32, 33), prompting Minute Key to provide Hillman with a covenant not to sue. (Doc. 35-1 at PageID 321.) Thereafter, Hillman conceded that the covenant not to sue divested the Court of jurisdiction over its non-infringement claim, but argued that jurisdiction remained to determine the validity of the patent. (Doc. 39 at PageID 1380-81.) At this point Hillman also filed a motion to amend its Complaint to add a claim for false advertising and misrepresentation under the Lanham Act, 15 U.S.C. § 1125(a)(1)(B), and a claim for violation of the Ohio Deceptive Trade Practices Act (“ODTPA”), Ohio Rev. Code § 4165.02(A)(10). (Doc. 40.)

         The Court granted Minute Key's motion to voluntarily dismiss its infringement counterclaim. (Doc. 55 at PageID 770-72.) And, in light of the voluntary dismissal and the covenant not to sue, the Court determined that it no longer had jurisdiction over Hillman's remaining invalidity claim and granted Minute Key's Rule 12(b)(1) motion to dismiss. (Id. at PageID 772-77.) However, the Court also granted Hillman leave to amend its Complaint to add the Lanham Act and ODTPA claims. (Id. at PageID 777-79.) Thus, pending as of September 4, 2014 were Hillman's allegations that Minute Key knowingly made false and misleading representations of fact concerning Hillman's FastKey kiosk to Walmart-the parties' mutual customer-in order to gain a business advantage. (Docs. 56 (SEALED)/58.)

         Two revised scheduling orders later (Docs. 71, 84), Minute Key moved for summary judgment. (Docs. 118 (SEALED)/119.)[2] It argued that Hillman could not establish the first element of proof in a Lanham Act case, urging that its communications with Walmart regarding patent infringement by Hillman were statements of opinion rather than statements of fact. It also argued that, regardless, the statements were not sufficiently disseminated. In addition, Minute Key maintained that Hillman could not demonstrate that Minute Key's claim of patent infringement was “objectively baseless.”[3] Finally, Minute Key contended that Walmart's license agreement with Hillman concerning placement of Hillman's FastKey kiosks undermined recovery of any damages sought in connection with its unfair competition claim. With respect to each premise, the Court concluded that genuine issues of material fact existed, and, accordingly, on July 8, 2016, denied Minute Key's motion. (Doc. 136.)

         The Court held a Final Pretrial Conference in this civil action the same day it released its Order denying summary judgment. At that time, the Court agreed to allow the parties to brief the issue of whether a claim construction of the '809 patent, otherwise known as a Markman[4]hearing, was necessary before proceeding to trial before a jury on August 22, 2016. Minute Key argued that it was (Doc. 138), while Hillman maintained that it was not (Doc. 139). Minute Key's argument was reminiscent of its argument made in support of summary judgment: The statements that Hillman believed to be actionable were statements about patent infringement. To prevail, therefore, Hillman must demonstrate that the statements were “objectively baseless” as part of the bad-faith requirement established in Zenith Elec. Corp. v. Exzec, Inc., 182 F.3d 1340 (Fed. Cir. 1999). That determination depended, in turn, on whether the infringement accusation was “so unreasonable that no reasonable litigant could believe it would succeed.” iLOR, LLC v. Google, Inc., 631 F.3d 1372, 1378 (Fed. Cir. 2011). In Minute Key's view, Hillman could not establish objective baselessness without first proving that its FastKey kiosk does not infringe the minuteKEY kiosk. And to meet that burden, Minute Key insisted that the claim terms in dispute must be construed by the Court in advance of the trial.

         Hillman countered that a claim construction was not necessary when the claim terms- “fully-automatic” and “fully automatic”-were clear on their face.[5] Indeed, to do so, Hillman believed, would usurp the role of the jury.[6] Hillman also maintained that the Court should decline to construe the claim terms because technical people skilled in the art used them consistent with their plain meaning.[7] Minute Key representatives had repeatedly characterized their own kiosk as being fully automatic because it does not require user involvement, and Hillman agreed. And they had repeatedly characterized Hillman's FastKey kiosk as not fully automatic because it does require user involvement, and Hillman again agreed. Accordingly, Hillman contended there was no dispute at the time the infringement statements were made among those of skill in this art as to what “fully automatic” does and does not cover.[8]

         The Court, siding with Hillman, concluded that a claim construction was not necessary. (Doc. 140.) It found that the claim terms “fully-automatic” and “fully automatic” were not technically complex and had a plain meaning that a jury, the rightful trier of fact, could and would understand.[9]

         After a two-day hearing with respect to deposition designations, the jury trial in this matter began on August 24, 2016. It ended with a verdict returned in Hillman's favor on September 7, 2016. Answering a series of interrogatories, the jury found that Hillman proved, by a preponderance of the evidence, that Minute Key made a “literally false” statement of fact to Walmart about Hillman's FastKey kiosk; that Minute Key's statement actually deceived, or was likely to deceive, Walmart; that Minute Key's deception was material in that it was likely to influence purchasing decisions by Walmart; and that Minute Key's statement resulted in actual or probable injury to Hillman. (Verdict Form, Doc. 240 at PageID 12464.) The jury also found that Hillman proved, by the higher standard of clear and convincing evidence, that Minute Key knew that Hillman's FastKey kiosk did not infringe the '809 patent but nonetheless represented to Walmart that it did. (Id. at PageID 12465.) The jury awarded Hillman damages in the amount of $164, 072 with respect to the September 27, 2013 “rollout freeze” at Walmart. (Id. at PageID 12466.) This amount, however, was only one-half of the amount ($328, 144) computed by Hillman's opinion witness regarding the freeze.[10] And the jury declined to award any damages to Hillman because of lost placement of FastKey kiosks beyond the initial 1, 000 awarded by Walmart from February 2014 to the present or because of Minute Key kiosk placements beyond the initial 400 awarded by Walmart. (See id.) The jury's verdict, therefore, was only a partial victory for Hillman.

         Minute Key moved for judgment as a matter of law pursuant to Fed.R.Civ.P. 50(a)(2) after the close of Hillman's case-in-chief and again after the close of all of the evidence but before submission of the case to the jury. In the wake of the jury's verdict, Minute Key now renews its Motion.


         The standard for a renewed motion for judgment as a matter of law under Fed.R.Civ.P. 50(b) is the same as one under Rule 50(a) made during trial. Such a motion “may only be granted if, when viewing the evidence in a light most favorable to the non-moving party, giving that party the benefit of all reasonable inferences, there is no genuine issue of material fact for the jury, and reasonable minds could come to but one conclusion in favor of the moving party.” Barnes v. City of Cincinnati, 401 F.3d 729, 736 (6th Cir. 2005). The court “may not weigh the evidence, question the credibility of witnesses, or substitute [its] own judgment for that of the jury.” Smith v. Rock-Tenn Servs., Inc., 813 F.3d 298, 306 (6th Cir. 2016). Further, the court “must indulge all presumptions in favor of the validity of the jury's verdict, and should refrain from interfering with a jury's verdict unless it is clear that the jury reached a seriously erroneous result.” Williams v. Nashville Network, 132 F.3d 1123, 1131 (6th Cir. 1997) (internal quotation marks and citation omitted). A movant carries a heavy burden, because, to succeed, “he must overcome the substantial deference owed a jury verdict.” Radvansky v. City of Olmsted Falls, 496 F.3d 609, 614 (6th Cir. 2007). When “[g]iven the evidence presented . . . reasonable minds could render a verdict in favor of [the non-movant], ” a Rule 50 motion must be denied. Easley v. Haywood, No. 1:08-cv-601, 2016 WL 1614019, at *3 (S.D. Ohio Apr. 22, 2016) (Black, J.). As one district court in this circuit has summarized the standard, “[i]n short, every effort must be made to uphold the verdict if reasonably possible.” In re Scrap Metal Antitrust Litig., No. 1:02 CV 0844, 2006 WL 2850453, at *8 (N.D. Ohio Sept. 30, 2006).

         III. ANALYSIS

         Section 43 of the Lanham Act permits a civil action against “[a]ny person, who on or in connection with any goods or services, . . . uses in commerce any . . . false or misleading description of fact, or false or misleading representation of fact, which . . . in commercial advertising or promotion, misrepresents the nature, characteristics, [or] qualities[] . . . of his or her or another person's goods, services, or commercial activities[.]” 15 U.S.C. § 1125(a)(1)(B). This type of claim is commonly known as a “false advertising” claim. Likewise, under the ODTPA, a civil action may be filed when “[a] person . . . [, ] in the course of the person's business, vocation, or occupation, . . . [d]isparages the goods, services, or business of another by false representation of fact[.]” Ohio Rev. Code § 4165.02(A)(10). Courts “evaluate an Ohio deceptive trade practices claim under the same analysis as that used for Lanham Act claims.” Papa Ads, LLC v. Gatehouse Media, Inc., 485 F. App'x 53, 55 (6th Cir. 2012) (citing ETW Corp. v. Jireh Publ'g, Inc., 332 F.3d 915, 920 (6th Cir. 2003)). Thus, as we noted at the summary judgment stage (see Doc. 136 at PageID 7817), Hillman's federal and state claims rise or fall together.

         To succeed on an unfair competition claim, a plaintiff generally must establish the following elements:

1) the defendant made false or misleading statements of fact concerning [its] own product or another's; 2) the statement actually or tends to deceive a substantial portion of the intended audience; 3) the statement is material in that it will likely influence the deceived consumer's purchasing decisions; 4) the advertisements were introduced into interstate commerce; and 5) there is some causal link between the challenged statements and harm to the plaintiff.

Am. Council of Certified Podiatric Physicians & Surgeons v. Am. Bd. of Podiatric Surgery, Inc., 185 F.3d 606, 613 (6th Cir. 1999). And if, as here, the claim involves marketplace representations of patent infringement, a plaintiff also must establish a sixth element-namely, that the representation was made in bad faith. Zenith, supra, 182 F.3d at 1353.[11] Bad faith is a “threshold” element. Judkins v. HT Window Fashion Corp., 529 F.3d 1334, 1338-39 (Fed. Cir. 2008) (citing Zenith). Notably, it must be established by the greater standard of clear and convincing evidence. Henrob Ltd. v. Bollhoff Systemtechnick GMBH & Co., No. 05-CV-73214-DT, 2009 WL 3188583, at *15 (E.D. Mich. Sept. 29, 2009) (quoting Golan v. Pingel Enterprise, Inc., 310 F.3d 1360, 1371 (Fed. Cir. 2002) (“To survive summary judgment, the party challenging such statements must present affirmative evidence sufficient for a reasonable jury to conclude that the patentee acted in bad faith, in light of the burden of clear and convincing evidence that will adhere at trial.”) (emphasis added).)

         Minute Key argues that the Court should enter judgment as a matter of law because Hillman failed to produce clear and convincing evidence of bad faith. Hillman also failed to produce, by a simple preponderance, evidence that the challenged statement was “literally false” or was “commercial advertising or promotion.” Likewise, the evidence does not support a potential alternative finding that, even if Minute Key's statement was not “literally false, ” Walmart nonetheless was misled and actually deceived, and, as a result, changed a purchasing decision. Finally, Minute Key contends that Hillman failed to produce adequate evidence of causation for the injury alleged and damages awarded. The Court will address each argument in sequence.

         A. A Reasonable Jury Could Have Found, by Clear and Convincing Evidence, That Minute Key's Statement Was Made in Bad Faith.

         1. The Statement

         On September 5, 2013, Minute Key CEO Randy Fagundo sent the following email to Walmart employees Anne Johnson (Director of Home Services) and Dan Hoelter (Senior Manager for Home Services):

Per our conversation yesterday I wanted to confirm with you that will be sending Hillman a patent infringement notice next Tuesday when our patent, U.S. Patent NO. 8, 532, 809 is issued. More specifically, It appears that The Hillman group's “FastKey” key-duplicating kiosk system infringes at least claims 1, 3, 5-7, 9 11-12 and 17.of our patent.
MinuteKey has clearly been the innovator in introducing networks of self-service key-duplicating kiosks, and MinuteKey's contributions would not have been possible without the investment of significant amounts of both time and money by our shareholders, to invent and develop this technology. Our investment is only protected by our intellectual property, and thus we have no choice but to enforce our intellectual property against anyone who attempts to misappropriate it, such as by infringing our patent rights. The patent to be issued next Tuesday is only the tip of the iceberg of our intellectual property, and there are many more on the way. Our shareholders expect, and are entitled to, a meaningful return on their investments, and this can be achieved only if our intellectual property is enforced against imitators. It is flattering to be imitated by others, but it also is evidence of the significance of the contribution that MinuteKey's technology has made to the industry, and our technology must be protected.
Not sure how Hillman will respond to the notice but wanted to give you a heads up as you roll out self service key duplicating kiosks into your stores. I have attached the notice of issuance and the claims allowed thus far. Please call if you have any additional questions or comments.

(PX-112 at PX-112-0001-0002 (emphasis added) (spacing and punctuation as in original).) Copied on the email was Chris Lohmann, Minute Key's Senior Vice President of Sales and Marketing. Fagundo testified that Minute Key's patent attorney, Stephen Rudisill, drafted the email for him. (Trial Tr. 6-46:8-15, Doc. 222 at PageID 11916; see PX-3.)

         2. The Jury Instructions Regarding Bad Faith[12]

         The Federal Circuit's decision in Zenith governs the bad faith inquiry. Zenith holds that “[e]xactly what constitutes bad faith remains to be determined on a case by case basis. Obviously, if the patentee knows that the patent is invalid, unenforceable, or not infringed, yet represents to the marketplace that a competitor is infringing the patent, a clear case of bad faith representations is made out.” 182 F.3d at 1354 (emphases added). Hence this Court instructed the jury:

[I]f a patent holder knows that its patent is not infringed and yet represents to the market that a competitor is infringing its patent, then a clear case of bad faith is made out. If Hillman has proved by clear and convincing evidence that Minute Key knew that the '809 patent was not infringed by Hillman's FastKey kiosk and yet represented to Walmart that it was, then you may conclude that Minute Key acted in bad faith.

(Trial Tr. at 9-20:14-21, Doc. 238 at PageID 12338; Doc. 264-1 at PageID 13076.) A “clear case” instruction essentially collapses the objective and subjective components of bad faith[13] into one inquiry. However, the Court also instructed the jury that bad faith could be proved “through a different method, one that has both objective and subjective components.” (Trial Tr. at 9-21:3- 5, Doc. 238 at PageID 12339; Doc. 264-1 at PageID 13077.) Continuing:

The objective component requires a showing by Hillman by clear and convincing evidence that Minute Key's infringement allegation to Walmart was objectively baseless. An allegation is objectively baseless if a reasonable company could not realistically expect to succeed in litigation on the merits of its infringement allegation. In other words, Minute Key must have made the infringement allegation to Walmart having no reasonable basis to believe that Hillman's FastKey kiosk could have infringed the '809 patent.
Now, Bad Faith, Subjective Intent. If you find that Minute Key's infringement allegation to Walmart was objectively baseless, then you may continue to the second component of bad faith, one that allows you to consider subjective intent. This second component, like the first, also must be established by clear and convincing evidence. In this regard, you may consider evidence of Minute Key's motivation, including whether its allegation of patent infringement by Hillman was an attempt to interfere with Hillman's business relationship with Walmart.

(Trial Tr. at 9-21:5-23, Doc. 238 at PageID 12339; Doc. 264-1 at PageID 13077.) Neither Minute Key nor Hillman objected to the “Clear Case”[14] or the “Objective Baselessness/Subjective Intent”[15] jury instructions at the charge conference.

         Regarding patent infringement generally, the Court instructed the jury as follows:

I instruct you that patent infringement is assessed on a claim-by-claim basis. The claim elements within a patent are often analogized to the metes and bounds of a property deed. The claim elements of a patent serve to outline and describe the scope of the invention that the patent protects. A patent cannot be infringed if even a single claim element is missing in an accused infringing product.
The parties dispute whether the patent claims at issue here require a, quote, “fully automatic, ” unquote, kiosk in order for the '809 ...

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