Last week, the U.S. Court of Appeals for the Federal Circuit issued a precedential opinion in Luv n' care, Ltd. v. Laurain, No. 2022-1905 (Apr. 12, 2024), affirming the district court’s judgment that unclean hands barred recovery on all counterclaims.
Luv n’ care, Ltd. and Nouri Hakim (collectively “LNC”) sued Lindsey Laurain and Eazy-PZ, LLC (collectively “EZPZ”) for acts of unfair competition and sought declaratory judgment that EZPZ’s U.S. Design Patent No. D745,327 and U.S. Patent No. 9,462,903 are invalid, unenforceable, and not infringed. EZPZ filed counterclaims for infringement of the ‘327 and ‘903 patents as well as copyright, trademark, and trade dress infringement, acts of unfair competition, and unjust enrichment. The district court found that the doctrine of unclean hands barred EZPZ from seeking relief on all counterclaims.
The Federal Circuit affirmed. The Court found no clear error in the district court’s finding that EZPZ engaged in unconscionable conduct with respect to its claim of infringement of the ‘903 patent which bore a necessary and immediate connection to all EZPZ’s counterclaims. First, the Court held that the record supported the district court’s finding that EZPZ “by deceit and reprehensible conduct attempted to gain an unfair advantage” resulting in “loss of confidence in [EZPZ’s] candor.” EZPZ failed to disclose relevant patent applications related to the ‘903 patent until after close of discovery and dispositive motion practice without providing good faith justification, attempted to prevent LNC from discovering relevant prior art searches, and EZPZ witnesses purposefully gave false testimony.
Second, the Court held that the record supported a finding that EZPZ’s conduct bore an “immediate and necessary” connection to EZPZ’s claim of infringement of the ‘903 patent. One undisclosed patent application was directly relevant to a disputed claim term in the ‘903 patent, the prior art searches may have supported a finding that EZPZ located key references prior to filing the patent application leading to the ‘903 patent, and false testimony by EZPZ witnesses deprived LNC of material information relevant to its litigation strategy.
Finally, the Court held that the record supported a finding that EZPZ’s conduct bore an “immediate and necessary” connection to its remaining counterclaims. The district court held that “[t]he [c]ourt’s loss of confidence in a party’s candor cannot be overcome with respect to other theories of recovery” and the Federal Circuit found no clear error. Accordingly, EZPZ is barred from seeking recovery on all counterclaims.
