Argument Recap / Panel Activity

The Federal Circuit heard oral argument earlier this month in Gorge Design Group LLC v. Xuansheng, a patent case that attracted an amicus brief. In this case, the Federal Circuit reviewed a determination by a district court that Gorge’s claims against NeoMagic were not frivolous and that NeoMagic was not entitled to its attorneys’ fees. Judges Taranto, Clevenger, and Hughes heard the oral argument. This is our argument recap.

Andrew Oliver argued for NeoMagic. He began by arguing that due process through notice and hearing has historically been and should still be provided before depriving a party of its rights, and, he argued, due process was not provided in this case. Oliver explained that his client was harmed because the plaintiff got an order from the court prohibiting his client from transferring any assets as well as requiring it to shut down its website.

One of the judges then asked whether the court’s action violated any rule governing temporary restraining orders. Oliver responded by pointing out that Federal Rule of Civil Procedure 65 requires plaintiffs to give notice of a temporary restraining order or show the court it attempted to give notice. A judge then inquired about a PayPal email that was sent to NeoMagic, which arguably put NeoMagic on notice of the temporary restraining order. Oliver explained that PayPal sent a notice that money was seized, but PayPal included an incorrect email for Gorge.

Another judge then asked what NeoMagic’s best arguments are for reversible error. Oliver responded that the district court did not follow the appropriate standards and procedures for assessing whether the asserted claims were legitimate or frivolous.

Stanley Ference argued for Gorge. He began by asserting that this case is about a small family-owned company building a business off of one product and that business being threatened by NeoMagic selling knockoff products.

Ference explained that the reason this case was filed under seal and the defendant’s PayPal accounts frozen is that it is typically done in cases like this. Moreover, he contended, when defendants have notice in these types of cases, they will move funds out of their accounts.

A judge asked if NeoMagic made an argument below that the temporary restraining order was improper because of Rule 65. Ference admitted it had, but he argued that, with regard to notice, Gorge gave PayPal Gorge’s contact information.

A judge then asked if the Third Circuit had held that the kind of voluntary dismissal effectuated here is not one that entitles the other side to be a prevailing party. Ference responded by arguing that the dismissal here was without prejudice, and, he continued, under Federal Rule of Civil Procedure 41 a voluntary dismissal before an answer has been served does not entitle one to be a prevailing party.

Finally, Ference asserted, NeoMagic ignores the fundamental nature of its conduct because it sold a product that is nearly identical to Gorge’s. He argued that NeoMagic does not even try to dispute the relevant underlying facts.

In rebuttal, Oliver argued that the court is looking at a case where a company has a product that looks a certain way and that company does not want anyone to compete in the market even though they have no relevant patent, copyright, or trademark. The district court, he asserted, abused its discretion by not applying the correct legal standards.

Notably, the Federal Circuit summarily affirmed the judgment in this case a few days after the oral argument.