INTELLECTUAL PROPERTY BLOG
Hidden Path to Mandatory Recovery of Attorney Fees
Like Ponce de Leon searching for the fountain of youth, or the never-ending pursuit of a perpetual motion machine, IP attorneys have long sought a way to force their opponents to pay the entire cost of litigation. One can only imagine what a wonderful world that would be! Unfortunately, all such endeavors have turned out to be a fool’s errand. Until now.
Under an obscure Indiana law, the Indiana Crime Victim’s Relief Act (ICVRA), victims of certain crimes against property have been afforded a unique avenue for relief, even if the underlying crimes have never been adjudicated in criminal court. For crimes such as theft, conversion, forgery or counterfeiting, victims need not be passive bystanders, waiting on the sidelines while county prosecutors lead the charge.
Instead, any person suffering a pecuniary loss in Indiana, under such circumstances, has standing to file under the ICVRA. If a plaintiff can prove the elements of these crimes by a preponderance of the evidence in civil court, they are entitled to mandatory attorney fees as well as, potentially, treble damages. It should be noted that the plaintiff may offer no other theory of recovery than the ICVRA, in order to obtain mandatory attorney fees.
In the world of intellectual property, this is something like becoming one’s own prosecutor. While the ICVRA limits the issues at hand to proving each element of the relevant criminal statutes, when combined with the recent Indiana Supreme Court’s Yao decision, the ICVRA creates an elegantly simple path to plaintiff’s mandatory recovery of attorney fees, based on theft, conversion, counterfeiting and forgery.
Yao confirmed that anything of value, whether tangible or intangible, is property; including intellectual property and good will. Consequently, conversion requires the plaintiff to prove only three elements: the item in question is property, the property is owned by the plaintiff, and the defendant exerted unauthorized control over the property.
Exerting control, for the purpose of conversion and theft, is defined under Indiana Code. “ ‘[E]xert control over property’ means to obtain, take, carry, drive, lead away, conceal, abandon, sell, convey, encumber, or possess property, or to secure, transfer, or extend a right to property.” I.C. § 35–43–4–1(a). The Court, in Yao, found that intangible intellectual property can be encumbered and is, therefore, subject to theft and conversion. For theft, the defendant must also have intended to deprive the plaintiff of a part of the property’s value or use.
In a recent Indiana case, a swimming pool contractor misled homeowners into changing their chosen site for a proposed swimming pool, in order to charge additional construction costs. After the homeowners discovered the original site was best suited for the pool, they sued under the ICVRA. The contractor was found guilty of converting the dirt he moved in excavating the new site and the homeowners were awarded treble damages and mandatory attorney fees.
Another important element of Yao is even unregistered IP is protectable. The Indiana Supreme Court held that “markings…, or other objects or symbols of value, right, privilege, or identification.” are written instruments, subject to counterfeiting, forgery, conversion or theft. Most importantly, these markings, objects, and symbols are distinct from trademarks and trade dress and do not need to posses secondary meaning.
But how can the ICVRA be applied to IP infringements produced in other states and sold online? Yao also confirmed that a single sale of counterfeit merchandise into Indiana constitutes a crime. Consequently, the ICVRA is being applied to E-Commerce platforms, fulfillment distribution centers, domain name registries and other intractable infringers who have hid behind the Lanham Act’s safe harbor exemption. But that conundrum is the subject of another newsletter.
Because of the breadth of the Yao decision, a new tool has been forged to pry stolen IP from the hands of infringers. Indeed, the ICVRA is a powerful weapon that brings cost effective equity to IP owners who have, until now, found that protecting their property is a bit like buying their car back from the thieves, every time it is stolen.
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