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Behind the Scenes

Arent Fox Wins $69 Million Judgment in Fraud and Trademark Infringement Case

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Arent Fox Wins $69 Million Judgment in Fraud and Trademark Infringement Case

On March 17, 2015, Arent Fox LLP secured a summary judgment of more than $69 million for SD-3C, LLC when a federal judge ruled that two Chinese companies and four of their executives were guilty of fraud, trademark infringement, and breach of contract after underreporting sales and royalties on the sale of memory card technology licensed by SD-3C.

Complex Litigation partners Jerrold Abeles and Matthew Wright and Intellectual Property partner Pamela M. Deese represented SD-3C in the litigation that delivered a complete victory before the US District Court for the Northern District of California. In the request for summary judgment, Arent Fox successfully argued under the Lanham Act and California law that Biwin Technology Ltd. and Wintek Enterprises Ltd. had fraudulently entered into license agreements with SD-3C, did not accurately report sales or pay appropriate royalties, and continued selling trademarked products long after SD-3C had terminated the licenses.

The Court found that the corporate defendants operated as alter egos of the four individual defendants, who also operated other corporations that sold illegal SD-3C-trademarked products without ever obtaining licenses. The individual defendants were thus found to be jointly and severally liable for the corporate wrongdoing.

In SD-3C, LLC v. Biwin Technology Ltd., the China-based Biwin Technology Ltd. entered into a patent licensing agreement with SD-3C in 2006 to manufacture and sell SD memory cards, largely to be used in digital cameras. SD-3C licenses and enforces intellectual property rights essential to SD memory cards.

Under the terms of the contract, Biwin agreed to pay SD-3C a royalty on all SD card sales. But over the next two years, Biwin underreported and concealed its SD card manufacturing operation, leading SD-3C to terminate the agreement in 2009. Later that same year, SD-3C agreed to a similar contract with Wintek Enterprises Ltd., while not knowing the company was owned and operated by the same four executives who controlled Biwin. Wintek similarly underreported and concealed its SD card sales; Wintek’s license was terminated in 2010. In 2012, SD-3C brought suit after discovering that these companies continued to claim to produce SD cards under valid license agreements.

In his decision, Magistrate Judge Paul Singh Grewal not only accepted SD-3C’s claim for damages, including past due royalties and interest, but he also trebled the royalties based on the trademark infringement, accounting for the $69 million judgment.

Arent Fox’s Complex Litigation practice has been recognized by Chambers USA for its “streamlined” approach that delivers “quality” results. With more than 125 litigators, the practice boasts a deep bench and international reach while having extensive experience in high-stakes litigation before federal and state courts and regulatory agencies.

Chambers Global, Chambers USA, and Legal 500 have recognized the firm’s Intellectual Property practice and its attorneys as industry leaders. Arent Fox is one of the few “go-to” firms for novel and high-profile intellectual property issues. With more than 100 full-time IP professionals, the group offers a full range of services across copyright, patent, and trademark matters.

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ABOUT ARENT FOX LLP

Arent Fox LLP, founded in 1942, is internationally recognized in core practice areas where business and government intersect. With more than 350 lawyers, the firm provides strategic legal counsel and multidisciplinary solutions to clients that range from Fortune 500 corporations to trade associations. The firm has offices in Los Angeles, New York, San Francisco, and Washington, DC.