Virginia Business Litigation Lawyer Blog

The Internet has been a boon to business. It brought local economies into the global market, cut down on communications costs, and made accessible information that was once only available through painstaking research. That is not to say, however, that the technology has not had its drawbacks. Towards the end of the 1990's, peer-to-peer file sharing websites became a haven for piracy of software, music, and movies. At first, those perpetrating these crimes were only a small segment of society, but gradually the practice became more widely accepted and piracy became prevalent in nearly every demographic. Various industries took notice and scrambled to fight back. Many are familiar with the Recording Industry Association of America's (RIAA) resort to the courts to sue and force settlements with those who share music over the Internet. While the RIAA pioneered this strategy, many companies are now following suit by filing suit. One such case was filed recently by Saregama India, Ltd., the biggest recording company in India, in the United States District Court for the Eastern District of Virginia.

Saregama discovered that many of its songs, popular both in India and among the Indian population in the United States, are being made available as ringtones on a website called Dishant.com. Saregama alleges that Dishant.com and its owners, Dishant Shah and Meeta Shah, violated Saregama's copyrights because they never bought the rights to these songs nor received approval from Saregama to share the songs as ringtones. Further, Saregama claims that Dishant.com displayed Saregama logos next to the titles of the songs, which would be a trademark violation.

Under the Copyright Act, the right to distribute copies of copyrighted work, or to prepare derivative works based on the copyrighted work, belongs solely to the copyright owner. Under the Act, if Saregama can prove that the materials provided by Dishant.com are identical to or substantially identical to any property owned by Saregama, and that Dishant.com provided those materials without permission, then Saregama's burden will be met. The consequences for a copyright violation can be substantial. If Saregama prevails, it may be entitled to recover any profits Dishant.com made from the use of the songs (or statutory damages up to $150,000 if the infringement was willful), plus reimbursement of its attorneys' fees.

The trademark aspect of Saregama's suit is based on the Lanham Act, the primary source of federal trademark law in the United States. The use of another's trademark in connection with the sale of a product constitutes infringement if it is likely to cause consumer confusion as to the source of the product or as to the sponsorship or approval of the product. In deciding whether consumers are likely to be confused, courts will typically look to a number of factors, including: (1) the strength of the mark; (2) the proximity of the goods; (3) the similarity of the marks; (4) evidence of actual confusion; (5) the similarity of marketing channels used; (6) the degree of caution exercised by the typical purchaser; and (7) the defendant's intent. Trademark violations can be costly as well. Under 15 U.S.C. 1117(a), a successful plaintiff may be entitled to defendant's profits, damages sustained by the plaintiff, and reimbursement of the costs of the action (including reasonable attorneys' fees in "exceptional cases"). Damages may be trebled upon showing of bad faith.

If you own rights to a trademark or copyright that is being infringed by another, don't wait for an industry trade group to bring legal action on your behalf. Consult an intellectual property attorney and find out whether action is needed to protect your business assets.

Trial lawyers drafting lawsuits on behalf of their clients generally try to plead as many causes of action as possible. In particular, they often try to add "tort" claims to a case that is really just about a breach of contract. Virginia law generally does not permit recovery on tort claims when the duty that is breached is based on a contractual relationship. What's the difference? For one thing, when it comes to assessing damages, the law of contracts looks to those that were within the contemplation of the parties when framing their agreement. Contract remedies are designed to compensate parties for foreseeable losses suffered as a result of a breach of a duty created by the contract itself. Tort law provides remedies for losses resulting from a breach of duty arising independently of any contract.

A recent case decided by Judge Conrad of the Western District of Virginia illustrates the distinction. In Raleigh Radiology, Inc. v. Eggleston and Eggleston, P.C., Raleigh Radiology ("RRI"), the plaintiff, entered into a contract with Eggleston, a practice management services business, which authorized Eggleston to manage and collect reimbursements owed to RRI for radiological services and which gave Eggleston control over RRI's accounts in order to facilitate the process. In return for Eggleston's work, the contract specified that RRI was to pay Eggleston $5.40 for each reimbursement it secured. Eventually, however, RRI came to believe that Eggleston had overcharged for services performed and had been billing for nonexistent reimbursements.

RRI sued Eggleston for breach of contract, unjust enrichment (a theory of implied contract) and the tort of conversion. Eggleston responded with a motion to dismiss the conversion claim on the ground that the duty breached was purely a contractual one, which precluded the filing of a tort claim. The court disagreed.

Focusing on the origin of the duties Eggleston allegedly breached, the court held that plaintiffs could legitimately assert conversion claims in conjunction with breach of contract claims when the breached duty arises separately from those required by the contract. The court defined the tort of conversion as "any distinct act of dominion or control wrongfully exerted over the property of another, either inconsistent with, or in denial of, the owner's rights." RRI claimed that Eggleston used its control over RRI's accounts to transfer payment for the alleged overcharges and nonexistent reimbursements into Eggleston's account. While Eggleston's access to RRI's accounts was only made possible by the contract, the court did not dismiss the conversion count because it was not merely redundant of a breach of contract claim. The court observed that every person owes a duty not to improperly make use of another person's bank accounts and that this duty exists regardless of whether parties have entered into a contract. Because the breached duty existed outside of the contract, RRI was not limited to remedies specified in the parties' agreement.

Windows 7 was not my idea. But the new amendments to the Federal Rules of Civil Procedure? Maybe! A few years ago I received a stern reprimand from a federal judge in the Eastern District of Virginia for supposedly filing a brief past the 5-day deadline. I respectfully explained to the court that, under the Rules then in effect, because weekend days are not counted in time periods of less than 11 days, and because additional days are added to the deadline when papers are served by facsimile, and because if a deadline expires on a Saturday then the deadline is extended to the following Monday--or Tuesday if Monday happens to be a national holiday--then a "5-day deadline" can actually allow up to 147 days! The judge was not impressed. But I was right (up to a point), so now the Rules have been amended to prevent this sort of nonsense.

Effective today, "days" means days. For lawyers who practice in federal court, this is a radical concept. Perhaps even more radical, defendants now have 21 days in which to respond to a lawsuit rather than merely 20. I pity those about to take the bar exam. In any event, here is a summary of what are, in my view, the most significant changes to the Federal Rules of Civil Procedure:

Rule 6. Computing and Extending Time; Time for Motion Papers
No longer are intermediate weekend and holiday days excluded from the computation for periods of less than 11 days. Every day is counted. This means that 10-day deadlines will no longer (in some circumstances) result in time periods longer than those permitted by 14-day deadlines. Additionally, what was once a 5-day deadline for noticing hearings has been converted to a 14-day deadline. Supporting affidavits must be filed with the motion and any opposing affidavits are now due a full 7 days before the hearing instead of just 1 day as under the previous Rule.

Rule 12. Defenses and Objections: When and How Presented; Motion for Judgment on the Pleadings; Consolidating Motions; Waiving Defenses; Pretrial Hearing
Hold onto that motion for default judgment! Defendants now have 21 days in which to serve an answer, as they do in Virginia state court, rather than 20 days. The new 21-day period also applies to counterclaims and cross-claims.

Rule 13. Counterclaim and Crossclaim
In the past, negligent lawyers who failed to file a compulsory counterclaim could turn to Rule 13(f), which permitted a late counterclaim if its omission was the result of "oversight, inadvertence, or excusable neglect." That Rule is gone! However, not all hope is lost: Rule 15 still provides a procedure for adding an omitted counterclaim.

Rule 15. Amended and Supplemental Pleadings
Under the former Rule, a plaintiff had a right to amend its complaint once, as a matter of course, only before being served with a responsive pleading. That right has been extended, presumably to encourage the informal resolution of early motions to dismiss without burdening the court's docket. Now, a plaintiff may amend its complaint (without leave of court) a full 21 days after service of a responsive pleading or Rule 12(b) motion.

Rule 56. Summary Judgment
The procedure for obtaining summary judgment in federal court has historically been very complicated, requiring numerous calculations. Under new Rule 56, the procedure is streamlined. Absent a local rule to the contrary, any party may now move for summary judgment at any time until 30 days after the close of discovery. The party defending against summary judgment then has 21 days in which to file a responsive brief. The movant has 14 days after that to file a reply brief.

Numerous other amendments were made to the Federal Rules, but I am not going to discuss them all here. A useful generalization (not without exceptions) is that most deadlines throughout the Rules have been converted to multiples of 7: previous deadlines of 1, 3, or 5 days are now 7 days; periods of 10 or 11 days are now 14 days; and 20-day deadlines now allow 21 days. Most discovery deadlines, however, remain unaffected. Litigants still have 30 days in which to respond to document requests and interrogatories.