NJOY v. Victory Electronic Cigarettes et. al.

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  • 8/13/2019 NJOY v. Victory Electronic Cigarettes et. al.

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    ATTORNEYS A T L AW

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    FENNEMORE CRAIG, P.C.Andrew M. Federhar (Bar No. 6567)Ray K. Harris (Bar No. 7408)

    [email protected]@fclaw.com2394 East Camelback Road, Suite 600Phoenix, AZ 85016

    (602) 916-5301 / (602) 916-5972 (Fax)

    LATHAM & WATKINS LLPPerry J. Viscounty*Ryan R. Owens*

    perry.viscounty @[email protected] Town Center Drive, 20th FloorCosta Mesa, CA 92626-1925(714) 540-1235 / (714) 755-8290 (Fax)*Pro hac vice applications pending

    Attorneys for Plaintiff

    NJOY, Inc.

    UNITED STATES DISTRICT COURT

    DISTRICT OF ARIZONA

    NJOY, INC., a Delaware corporation,

    Plaintiff,

    v.VICTORY ELECTRONIC CIGARETTESCORPORATION, a Nevada corporation;VICTORY ELECTRONIC CIGARETTESINC., a Nevada corporation,

    Defendants.

    Civil Action No.

    Complaint For:

    (1) Patent Infringement(35 U.S.C. 271)

    (2) Trade Dress Infringement(15 U.S.C. 1125)

    Demand For Jury Trial

    Plaintiff NJOY, Inc. (NJOY), for its Complaint against Victory Electronic

    Cigarettes Corporation and Victory Electronic Cigarettes, Inc. (collectively,

    Defendants), alleges as follows:

    THE PARTIES

    1. NJOY is a Delaware corporation with its principal place of business at

    15211 North Kierland Blvd., Suite 200 Scottsdale, AZ 85254.

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    2. On information and belief, Victory Electronic Cigarettes Corporation is a

    Nevada corporation with its principal place of business at 1880 Airport Drive, Ball

    Ground, GA 30107.

    3. On information and belief, Victory Electronic Cigarettes, Inc. is a Nevada

    corporation with its principal place of business at 1880 Airport Drive, Ball Ground, GA

    30107 and it is a wholly owned subsidiary of Victory Electronic Cigarettes Corporation.

    4. On information and belief, Defendants were the agents of each other and, at

    all times mentioned, acted within the course and scope of such agency.

    JURISDICTION AND VENUE

    5. This Court has subject matter jurisdiction over NJOYs claims for patent

    and trademark infringement pursuant to 15 U.S.C. 1121(a) and 28 U.S.C. 1331 and

    1338(a).

    6. On information and belief, this Court has general and specific personal

    jurisdiction over Defendants because (1) Defendants have (a) conducted substantial

    business in the State of Arizona; (b) derived financial benefits from residents of the State

    of Arizona, including by marketing and selling infringing products to residents of the

    State of Arizona and otherwise placing infringing products into the stream of commerce,

    with the knowledge or understanding that such products are sold in the State of Arizona,

    including within this district; (c) purposely availed themselves of the privilege of

    conducting business within the State of Arizona; and (d) sought protection and benefits

    from the laws of the State of Arizona; and (2) the causes of action arise directly from the

    Defendants business contacts and other activities in the State of Arizona.

    7. Venue is proper in this judicial district under 28 U.S.C. 1391 and 1400

    because Defendants have, among other things, committed infringing acts in this district

    and generally conduct business in this district.

    NATURE OF ACTION

    8. Electronic cigarettes, which allow users to inhale a mixture of nicotine,

    carriers, and flavorings and exhale vapor, are rapidly gaining popularity in the United

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    States. Industry analysts anticipate electronic cigarette sales will reach $2 billion this

    year within the United States, up from $500 million in 2012.

    9. NJOY, the leading independent electronic cigarette company in the United

    States, has remained on the forefront of the industry with its best-in-class and patented

    electronic cigarettes and unique product packaging and branding.

    10. NJOY's leading product is its NJOY King Cigarette (NJOY Cigarette),

    which embodies various forms of intellectual property that NJOY has developed and

    vigorously protected. For example, NJOY has (1) obtained a patent for the technology

    used to simulate the natural burn of a traditional cigarette (U.S. Patent No. 8,539,959

    (the 959 Patent)); and (2) developed substantial common law trade dress rights in the

    NJOY Cigarettes product packaging (the NJOY Case), which consumers immediately

    recognize as indicating the source of the products contained therein as originating from

    NJOY.

    11. Beyond developing the innovative NJOY Cigarette and NJOY Case, NJOY

    has garnered widespread media acclaim and developed a deep connection with its loyal

    consumer base. For example, NJOY has received numerous industry awards and

    countless reviewers have raved about NJOYs high quality and paradigm-shifting NJOY

    Cigarette and NJOY Case. Further increasing NJOY's sterling reputation and brand

    recognition, numerous famous investors, such as Sean Parker (of Facebook fame) and

    Bruno Mars (a Grammy Award winning Pop star), as well as market luminary Douglas

    Teitelbaum, have joined NJOY in its mission to render traditional cigarettes obsolete.

    12. Capitalizing on its strong reputation, NJOY has experienced tremendous

    sales of its NJOY Cigarette since its launch in December 2012 with millions of units

    being sold across the nation and in all 50 states. NJOY has also heavily advertised the

    NJOY Cigarette and NJOY Case, including during the Super Bowl and Academy

    Awards, one of which sparked significant publicity for showing a man smoking an

    NJOY Cigarette, an activity banned from television with traditional cigarettes for several

    decades.

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    13. Defendants, on the other hand, have unfairly attempted to gain an

    advantage in the electronic cigarette market by infringing NJOYs rights and attempting

    to trade off NJOYs reputation for high quality electronic cigarettes.

    14. Rather than develop their own technology and branding identity,

    Defendants have blatantly copied NJOYs (1) lighting technology in their disposable

    electronic cigarette (the Victory Cigarette), thereby infringing the 959 Patent; and

    (2) NJOY Case in their product case (the Victory Case), thereby infringing NJOYs

    trade dress rights in the NJOY Case.

    15. Accordingly, to stop Defendants unlawful conduct and obtain

    compensation for the violations that have already occurred, NJOY brings this Complaint

    against Defendants for patent infringement in violation of 35 U.S.C. 271, et seq., and

    federal trade dress infringement in violation of 15 U.S.C. 1125, et seq.

    FACTS COMMON TO ALL CLAIMS FOR RELIEF

    The NJOY Cigarette

    16. NJOY is a market leader in the electronic cigarette industry because, among

    other things, it offers consumers a product that is both familiar to, yet vastly different

    than, a traditional cigarette. Specifically, the NJOY Cigarette resembles a traditional

    cigarette in look, size, feel (including a paper wrapping and soft tip in place of a fibrous

    filter), and taste. Indeed, NJOYs leading advertisement for its NJOY Cigarette, which

    aired during the Super Bowl and Academy Awards, features a man enjoying what

    appears to be a traditional cigarette (but is an NJOY Cigarette) with the announcer stating

    that: You know what the most amazing thing about this cigarette is? It isnt one.

    Introducing the NJOY King, the first electronic cigarette with the look, feel, and flavor of

    the real thing. . . . Cigarettes, youve met your match. A key frame from the

    commercial is as follows:1

    1See www.njoy.com/how-it-works(Last visited Nov. 14, 2013)

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    17. At the heart of the NJOY Cigarettes similarity to cigarettes is its lighted tip

    that radiates a familiar red glow from the tip and surrounding sides of the cigarette and

    simulates the familiar burn of a traditional cigarette when the user inhales. The NJOY

    Cigarette so closely resembles a traditional cigarette that people often mistake it for a

    traditional cigarette. For example, consumers enjoying it in bars and clubs (where

    traditional cigarettes are largely banned) have developed a unique social ritual to alert

    security guards that their cigarette is an NJOY Cigarette. Specifically, consumers will

    inhale from the NJOY Cigarette, thereby activating the red tip, and then quickly press it

    to their forehead to clearly indicate that it is not actually burning and is therefore

    electronic and not prohibited.

    18. Not only have consumers recognized the value of the NJOY Cigarettes

    similarity to cigarettes, including the lighted tip technology, by purchasing millions of

    NJOY Cigarettes since their launch, but the United States Patent and Trademark Office

    (USPTO) issued NJOY a patent for this technology. On September 24, 2013, the

    USPTO duly and legally issued the 959 Patent, entitled Electronic Cigarette Configured

    to Simulate the Natural Burn of a Traditional Cigarette. NJOY is the sole owner of the

    959 Patent. A true and correct copy of the 959 Patent is attached hereto as Exhibit A.

    ///

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    ///

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    The NJOY Case

    19. To further deepen consumer loyalty and goodwill, distinguish its products

    from competitors, and allow consumers to quickly identify NJOYs products on crowded

    store shelves, NJOY developed a distinctive product case. The NJOY Case is a highly

    unique product packaging that appears as follows:

    20. NJOY designed its highly stylish and unique NJOY Case to serve as a

    source identifier of its products. As revealed by numerous studies, cigarette packaging

    functions as a badge product because users consistently carry it with them throughout

    the day and often publicly display it while smoking. As explained by a cigarette package

    designer, [a] cigarette package is unique because the consumer carries it around with

    him all day . . . its a part of a smokers clothing, and when he saunters into a bar and

    plunks it down, he makes a statement about himself.2

    21. Badge products allow users to associate themselves with a particular brand

    and that brands identity and personality, as well as quickly identify the source of the

    product. As one study succinctly stated, when a cigarette pack is displayed in a store, it

    2See, e.g., M. Wakefield, et al, The Cigarette Pack as Image: New Evidence from

    Tobacco Industry Documents, Tobacco Control (March 2002, Volume 11, suppl. 1).(Last visited Nov. 14, 2013)

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    is the sum of its contents, the pack, and its associated imagery, that is purchased by the

    consumer.3

    22. Accordingly, NJOY developed its uniquely proportioned NJOY Case to

    allow users to easily identify NJOY as the source of the products contained therein and

    proudly affiliate themselves with the NJOY brand. As intended, consumers have become

    attached to the NJOY Case and recognize it as a source identifier uniquely tied to NJOY.

    For example, numerous reviewers of electronic cigarettes post videos to YouTube

    discussing and describing their experiences with the NJOY Cigarette and NJOY Case. In

    many of these videos, the reviewers rave about the unique nature of the NJOY Case and

    spend a significant amount of time discussing the case, rather than the NJOY Cigarette

    (the actual target of the review).4

    23. NJOY has also heavily advertised its NJOY Case and it routinely features it

    as the focal point of advertisements, which also tout its unique nature:5

    3Id.

    4See, e.g., hwww.youtube.com/watch?v=h1AjbJvcz4o(Last visited Nov. 14, 2013)

    5See, e.g., www.njoy.com/how-it-works(Last visited Nov. 14, 2013)

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    24. As a result of the NJOY Cases unique design, extensive advertising, and

    extraordinary sales, the trade and consuming public have come to recognize the

    distinctive styling and look and feel of the NJOY Case as representing products

    originating solely from NJOY. Accordingly, the NJOY Case is entitled to trade dress

    protection.

    Defendants Infringing Activities

    25. Rather than innovate and develop its own distinctive technology, style, and

    brand, Defendants have improperly piggybacked on NJOYs success and reputation by

    blatantly copying NJOYs patented technology and protectable trade dress to sell its

    Victory Cigarette and Victory Case throughout the nation (including Arizona) through

    their online storefront (victoryecigs.com) and various convenience stores.

    26. The Victory Cases overall appearance strongly shows Defendants

    wrongful and willful intent to confuse consumers into believing that there is an

    affiliation, connection, or relationship between Victory and NJOY when there is not. A

    simple comparison of the cases confirms Defendants intentional copying:

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    27. Moving beyond the products overall appearances, Defendants copied the

    exact dimensions and proportions of the NJOY Case, as well as the white hinge on the

    flip-top lid:

    (Width: 1.5 inches) (Height: 3.5 inches) (Depth: 0.406 inches)

    28. Further, Defendants copied various other features of the NJOY Case and

    NJOYs marketing practices to confuse consumers into thinking that the Victory label is

    an NJOY sub-brand. For example, Defendants copied many of the smaller features of the

    NJOY Case, such as the inclusion of a stylized crown on the flip top lid:

    29. Even the name of Defendants brand Victory heightens the potential for

    consumer confusion as it may be understood to be a sub-brand offered by NJOY in

    connection with its widely publicized mission to render traditional cigarettes obsolete. 6

    6See, e.g., www.forbes.com/sites/marcbabej/2013/07/18/njoy-the-e-cigarette-that-aims-

    to-snuff-out-smoking/; mobile.nytimes.com/2013/10/27/business/the-e-cigarette-industry-waiting-to-exhale.html

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    30. Defendants also copied NJOYs practice of providing an informational

    insert in the NJOY Case that provides information about the NJOY Cigarette and

    NJOYs recycling program. Not only did they copy these practices, Defendants slavishly

    copied the actual text of NJOYs informational insert, such as the following sentences:

    1) From its size, feel and look to its amazing taste, the

    [NJOY/Victory] King gives you everything you love about the

    smoking experience. So, go ahead, give it a try.

    2) To begin take one long slow puff on the cigarette no lighting or

    charging required. The tip will light up reach each time you puff

    3) [NJOY/Victory] . Send [NJOY/Victory] eight used

    [NJOY/Victory] Kings electronic cigarettes and well send you one

    FREE [NJOY/Victory] King!7

    31. Consumers understanding and expectations of the electronic cigarette

    industry further increases the likelihood that consumers will view the Victory Cigarette as

    an NJOY sub-brand. As a preliminary matter, the relative youth and innovative nature of

    the electronic cigarette industry heightens the potential for consumer confusion between

    two products sold in identical cases. As one commentator noted, [p]eople are easily

    confused when it comes to electronic cigarette brands. They have been launched on the

    market so quickly and so many tobacco brands have already embraced the movement that

    for many smokers making the difference between the brands is a true challenge. 8

    32. Consumers have also grown to expect that a cigarette company will offer

    several sub-brands at different price points to capture different segments of the market.

    For example, Reynolds America (the second largest tobacco company in the United

    States) offers a wide variety of brands at various price points, such as Camel ($4.61),

    7Attached as Exhibit B is a copy of both parties informational inserts. Defendants

    copied other sections of the product insert as well and the above are just a few examples.8

    www.esontechnologies.com/blog/2013/electronic-cigarette-marketing-by-tobacco-companies (Last visited Nov. 14, 2013)

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    L&M ($4.14), and Pall Mall ($4.09). Similarly, the Lorillard Tobacco Company offers

    the Newport ($4.19) and Maverick ($4.09) brands, while Altria (the parent company of

    Philip Morris USA (amongst others)) offers Marlboro cigarettes at various price points

    with slightly different product packaging, such as traditional ($5.32) and Special Blend,

    72s, and Edge ($4.42). Given this and the other numerous similarities between the

    NJOY and Victory Cases, consumers will likely be misled into believing that the Victory

    Cigarette ($6.99) is a sub-brand of the more expensive NJOY Cigarette ($7.99).

    33. Shortly after learning about the Victory Case, NJOY sent a cease and desist

    letter (Cease and Desist Letter) to Defendants. Attached as Exhibit C is a true and

    correct copy of NJOYs Cease and Desist Letter. However, Defendants never responded

    to NJOYs Cease and Desist Letter and continue to willfully infringe NJOYs intellectual

    property rights.

    NJOY Is Suffering Harm from Defendants

    Continuing Infringement and Unlawful Conduct

    34. Due to NJOYs renown and consumers recognition of its NJOY Case,

    consumers will likely suffer confusion and mistakenly believe that Defendants and their

    goods are endorsed, approved, or sponsored by, or affiliated, connected, or associated

    with NJOY. Defendants will thus enjoy the benefits of NJOYs reputation and goodwill

    based on this consumer confusion, to NJOYs detriment.

    35. Defendants continued use of the Victory Case in commerce violates

    NJOYs valuable intellectual property rights in the NJOY Case, and Defendants

    knowing, intentional, and willful use of NJOYs trade dress is damaging NJOY.

    36. Because of Defendants continuing willful infringement and unlawful

    conduct, NJOY is now forced to bring this Complaint to protect its valuable intellectual

    property rights. NJOY has had to retain counsel and incur attorneys fees and costs (and

    it continues to incur those fees and costs) to prosecute this lawsuit and pursue its claims.

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    37. NJOYs interest in protecting its intellectual property rights and its products

    from consumer confusion outweigh any harm to Defendants. The public interest is best

    served by granting NJOYs requested relief against Defendants.

    38. Defendants are direct competitors of NJOY and they are infringing NJOYs

    intellectual property in an emerging and new market to improperly erode and interfere

    with NJOYs sales.

    FIRST CLAIM FOR RELIEF

    Patent Infringement 35 U.S.C. 271

    39. NJOY incorporates by reference the factual allegations set forth above.

    40. On September 24, 2013, the USPTO duly and legally issued the 959 Patent

    for an invention entitled Electronic Cigarette Configured to Simulate the Natural Burn

    of a Traditional Cigarette. NJOY is the owner of the 959 Patent and holds all rights and

    interests in the patent.

    41. On information and belief, Defendants have been and currently are

    infringing the 959 Patent by, among other things, making, using, selling, and/or offering

    to sell, within the territorial boundaries of the United States, products that are covered by

    one or more claims of the 959 Patent, including without limitation an electronic cigarette

    with a lighted tip as described and claimed in the 959 Patent. Such products include,

    without limitation, the Victory Cigarette.

    42. As a direct and proximate result of Defendants infringement of the 959

    Patent, NJOY has been and will continue to be irreparably damaged and deprived of its

    rights in the 959 Patent. Thus, NJOY is entitled to its actual damages and a permanent

    injunction against further infringement pursuant to 35 U.S.C. 283 and 284.

    43. Defendants acts make this an exceptional case under 35 U.S.C. 285, and

    NJOY is thus entitled to an award of attorneys fees and costs.

    SECOND CLAIM FOR RELIEF

    Trade Dress Infringement 15 U.S.C. 1125(a)

    44. NJOY incorporates by reference the factual allegations set forth above.

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    45. NJOY has established a unique, protectable, and recognizable trade dress

    for the NJOY Case, such that the trade and the general public recognize the NJOY Case

    as originating from NJOY.

    46. On information and belief, Defendants intended to, and did in fact, confuse

    and mislead consumers into falsely believing that Defendants products originated from,

    were licensed, sponsored, or approved by, or were somehow affiliated, connected, or

    associated with NJOY.

    47. In fact, there is no connection, association, or licensing relationship

    between NJOY and Defendants, nor has NJOY ever authorized, licensed, or provided

    permission to Defendants to use the NJOY Case trade dress in any manner whatsoever.

    48. Defendants actions constitute trade dress infringement in violation of 15

    U.S.C. 1125(a).

    49. As a direct and proximate result of Defendants wrongful conduct, NJOY

    has been damaged and, unless Defendants are enjoined, will continue to be damaged.

    50. On information and belief, Defendants activities have caused, and will

    cause, irreparable harm to NJOY for which it has no adequate remedy at law, in that

    (1) NJOYs trade dress rights comprise unique and valuable property rights that have no

    readily determinable market value; (2) Defendants infringement constitutes an

    interference with NJOYs goodwill and customer relationships and will substantially

    harm NJOYs reputation as a source of high quality goods and services; and

    (3) Defendants wrongful conduct, and the damages resulting to NJOY, are continuing.

    Accordingly, NJOY is entitled to injunctive relief pursuant to 15 U.S.C. 1116(a).

    51. Pursuant to 15 U.S.C. 1117(a), NJOY is entitled to an order: (1) requiring

    Defendants to account to NJOY for any and all profits derived by Defendants from their

    actions, to be increased in accordance with the applicable provisions of law; and

    (2) awarding all damages sustained by NJOY caused by Defendants conduct.

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    52. Defendants conduct was intentional and without foundation in law, and

    thus, pursuant to 15 U.S.C. 1117(a), NJOY is entitled to an award of treble damages

    against Defendants.

    53. Defendants acts make this an exceptional case under 15 U.S.C. 1117(a),

    and NJOY is thus entitled to an award of attorneys fees and costs.

    PRAYER

    WHEREFORE, NJOY prays for a judgment that:

    A. Defendants have infringed the 959 Patent in violation of 35 U.S.C. 271.

    B. Defendants have willfully infringed NJOYs trade dress in violation of

    15 U.S.C. 1125(a).

    C. Defendants, their officers, agents, servants, employees, successors, and

    assigns, their subsidiary and related entities, attorneys, and all other persons, firms,

    associations, and entities who are in active concert or participation with them, be

    permanently enjoined from:

    1. infringing the 959 Patent; and

    2. infringing NJOYs trade dress.

    D. Within thirty (30) days after the entry and service on Defendants of an

    injunction, Defendants must, pursuant to 15 U.S.C. 1116(a), file with this Court and

    serve upon NJOYs counsel, a report in writing and under oath setting forth in detail the

    manner and form in which Defendants have complied with the injunction.

    E. NJOY be awarded damages as follows:

    1. pursuant to 35 U.S.C. 284, all damages adequate to compensate

    NJOY for Defendants infringement of the 959 Patent, and in no

    event less than a reasonable royalty for Defendants acts of

    infringement;

    2. pursuant to 15 U.S.C. 1117(a), NJOYs actual damages, as well as

    all of Defendants profits or gains of any kind from their acts of

    trade dress infringement, including a trebling of those damages;

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    ATTORNEYS A T L AW

    ORANGE C OUNTY

    OC\1704069.1

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    F. This case be adjudged an exceptional case under 35 U.S.C. 285, and

    NJOY be awarded attorneys fees, expert witness fees, costs, and expenses incurred in

    this action.

    G. This case be adjudged an exceptional case under 15 U.S.C. 1117(a), and

    NJOY be awarded its reasonable attorneys fees.

    H. NJOY be awarded pursuant to 35 U.S.C. 284 and 15 U.S.C. 1117(a) all

    of its costs, disbursements, and other expenses incurred due to Defendants unlawful

    conduct.

    I. NJOY be awarded interest.

    J. NJOY be awarded any other relief as the Court may deem just and

    appropriate.

    JURY DEMAND

    Pursuant to Rule 38 of the Federal Rules of Civil Procedure, NJOY hereby

    demands a trial by jury.

    Dated: November 20, 2013 Respectfully submitted,

    FENNEMORE CRAIG, P.C.Andrew M. FederharRay K. Harris

    LATHAM & WATKINS LLPPerry J. Viscounty*Ryan R. Owens*

    By s/ Andrew M. FederharAndrew M. Federhar

    *Pro hac vice applications pendingAttorneys for PlaintiffNJOY, Inc.