TYLER – A federal court has denied a motion to reconsider a magistrate judge's denial of their motions to join and intervene in a patent infringement case.

The decision was made Nov. 1 in the Tyler Division of the Eastern District of Texas. The plaintiffs in the case, Tinnus Enterprises LLC and Zuru LTD, are the patent owner or exclusive licensee of the Bunch O Balloons toy product. They had sued Telebrands Corp. and Bulbhead.com LLC last year over patent infringement claims.

District Judge Robert Schroeder III noted that there was most likely an “unintentional oversight in the licensing of the patents-in-suit and the structuring of the Zuru entities,” but that the court had not found any sufficient evidence that Zuru Inc. had the necessary rights to collect lost profits, or the right to sue, and denied the motion to join the Zuru entities.

According to the court's decision, in 2014, Bunch O Balloons inventor Josh Malone gave China-based Zuru LTD exclusive patent rights to the water toy, a hose attachment that can fill 100 water balloons in a minute using flexible tubes, via his production company Tinnus. After Bunch O Balloons hit the market, the alleged copycat product Balloon Bonanza began selling at Bed Bath and Beyond, marketed by Telebrands.

After failing to get a response from their cease and desist letter to Telebrands, Zuru LTD and Tinnus filed a lawsuit for patent infringement in 2016, the ruling states.   

Zuru LTD sought damages for infringement and lost profits, and an injunction to halt sales of Balloon Bonanza, which the court issued in 2016. 

The original lawsuit claims that Telebrands “engaged in a scheme to mimic the successful Bunch O Balloons,” and has been sued over 50 times for property rights infringement, resulting in the Better Business Bureau revoking Telebrands’ status as an “accredited business.” 

Telebrands filed a motion for summary judgment in July, stating that they had discovered that Zuru LTD had no right to lost sales, as the profits actually went to Zuru Inc., not Zuru LTD, as named in the original case. The magistrate judge held a hearing Sept. 11, and found that the Zuru entities did not have sufficient rights to collect lost profits during the time of alleged infringement. The plaintiffs instantly motioned to reconsider.

The district court agreed to take in the new evidence for the Oct. 25 hearing for the sake of completion of the case, but were cautious. 

Schroeder advised, “Plaintiffs have no legal basis to seek reconsideration given that this evidence was previously available to them and not presented to the court when provided with such opportunities during briefing and at the Magistrate Judge’s Sept. 7, 2017 hearing”

As evidence, Malone provided testimonies that an oral agreement in 2014 gave Zuru Inc. exclusive licensing along with Zuru LTD. The agreement was never put into writing, and Malone’s previous statements were not consistent. Schroeder expressed his reservations about the validity of Zuru Inc., having rights beyond the right to use. 

"If Mr. Malone had indeed intended to license Zuru Inc. there is no explanation as to why Zuru Inc. was not then included in the first amended license agreement,” Schroeder stated in the ruling. 

Malone stated in previous hearings that he simply didn’t realize the importance of adding Zuru Inc. to the suit, as in his mind Zuru Inc. and Zuru LTD were the same, and Zuru LTD also indicated on several occasions that it was the exclusive licensee of the patents-in-suit.

District Judge Robert Schroeder III quoted from a previous ruling, stating that '"one seeking to recover money damages for infringement of a United States patent . . . must have held the legal title to the patent during the time of the infringement. ... The right to 'use' alone is not sufficient to give ZURU Inc. legal title to the patents or even all exclusionary rights to the patents."

Zuru Inc. was not present at any of the hearings, and there was nothing expressly written to line out the rights of the entity.

The plaintiffs are represented by attorneys with Dunlap Bennett & Ludwig PLLC in Leesburg and Richmond, Virginia, and the Tyler law firm Findlay Craft PC.

Tyler Division of the Eastern District of Texas case number 6:16-CV-00033-RWS

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Tyler Division of the Eastern District of Texas
211 West Ferguson Street
Tyler, TX - 75702

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