Win in Water Balloon Battle Suggests Hope for Patent Owners at PTAB

Editors Note: This article was authored by the plaintiffs in the case.

IPWatchdog’s coverage of the November 2017 Bunch O Balloons district court trial left off with an Eastern District of Texas jury awarding $12.3 million in damages to patent owner Tinnus Enterprises and its partner ZURU against major U.S. telemarketing firms Telebrands and its subsidiaries. The jury found that Telebrands had willfully infringed Tinnus’ patents that protected Tinnus’ Bunch O Balloons invention, and that those patents were not invalid. But even with the November 2017 jury award in place, Tinnus still faced the upcoming specter of patent validity trials for which Telebrands had petitioned the Patent Trial and Appeal Board (PTAB) for the patents-in-suit. Additionally, the Eastern District of Texas had not yet ruled on post-trial motions regarding the jury’s verdict.

Telebrands’ Balloon Bursts

The district court and the PTAB have since issued their rulings, and both bodies independently agreed that the patents-in-suit (U.S. Patent No. 9315282 and U.S. Patent No. 9242749) were not invalid. On March 27, 2019, Judge Schroeder in the Eastern District of Texas released his unsealed post-trial order. Specifically, the Judge Schroeder agreed with the jury’s findings that the patents-in-suit were not invalid and that Telebrands willfully infringed those patents by selling its competing Battle Balloons product. In finding that “[t]his was not a close case,” the judge doubled the jury’s damages award to $24,500,000 under 35 U.S.C. § 284. The judge also found the case to be “exceptional” and awarded $4,750,000 in attorneys’ fees and costs. Tinnus and ZURU were also awarded pre- and post-judgment interest. In sum, the district court’s final judgment awarded over $30 million.

Similarly, in swatting down Telebrands’ serial invalidity challenges in the United States Patent Office, the PTAB relied on much of the same evidence presented before the district court. In that regard, on March 27, 2018, the PTAB issued two unsealed final written decisions finding that U.S. Patent No. 9315282 and U.S. Patent No. 9242749 were not invalid. In rejecting Telebrands’ obviousness challenges, the PTAB relied on an “abundant and compelling” number of objective indicia, which the district court similarly found was “substantial.” On that point, the PTAB and district court both took note of “communications between Telebrands employees and a contractor explaining how they copied plaintiffs’ Bunch O Balloons product.” The PTAB also found Telebrands’ expert testimony to be “inconsistent” and “not credible,” and thus gave it little weight.

The recent enhanced damages award—and Tinnus’ and ZURU’s victories in the PTAB—in many respects adds much needed closure to a lengthy dispute between Tinnus/ZURU and Telebrands. To date, the parties’ disputes spanned over four district cases in the Eastern District of Texas, over 12 appeals to the Federal Circuit, and eight post-grant review proceedings. To go the distance—and reach the $30 million plus result—Tinnus and ZURU (with the help of their law firm Dunlap Bennett & Ludwig) essentially had to prevail in every single one of those proceedings against Telebrands’ three expensive law firms. Which they did.

Given the extensive nature of the proceedings, one can’t help but wonder if having a water balloon fight might have been a simpler way to resolve the longstanding patent war. In July 2014, Josh Malone (the inventor of Bunch O Balloons and owner of plaintiff Tinnus) launched a Kickstarter.com campaign to fund his novel invention for a device that could rapidly fill and automatically seal multiple water balloons. As the district court found, Telebrands saw Josh Malone’s invention on Kickstarter. Thinking Josh Malone’s invention was a “cool idea,” Telebrands successively launched three highly-similar iterations of competing balloon products: Balloon Bonanza, Battle Balloons, and Easy Einstein Balloons. Each balloon-iteration resulted in Josh Malone (i.e. Tinnus) and ZURU seeking a preliminary injunction to stop the sale of the competing water balloon product. Of course, by the time the injunction issued, Telebrands was ready to go to market with another balloon product it contended was outside the scope of the prior injunction. The bloody patent battle resulted in thousands of ECF filings and over a dozen appeals. Telebrands maintained that its actions were justified because it was fairly competing in the market. Tinnus and ZURU strongly disagreed and asserted claims of patent infringement, trademark infringement, trade dress infringement, and false advertising. Ultimately, one of the patent infringement balloon cases went to trial in November 2017, which resulted in the more than $30 million final judgment discussed above.

The Settlement

And now, what the The Wall Street Journal has aptly characterized as “the most expensive water balloon fight in history” has come to a close. Just recently, Tinnus/ZURU and Telebrands entered into a settlement agreement that ends the Bunch O Balloons litigation. In that regard, Telebrands has made a payment to the plaintiffs, including payment in full of the final judgment and a substantial payment in respect of all other pending proceedings. Moreover, Telebrands has agreed that it will not sell any of the accused products at issue in the litigation.

The Bigger Picture

While the Bunch O Balloons case certainly includes a unique element of fun (after all, the parties’ disputes are a battle over water balloon rights), the case also made a splash (pun intended) regarding novel legal issues that should be of interest to intellectual property practitioners and patent owners. These issues resulted from a combination of: (1) Telebrands’ rapid release of attempted design-around balloon products; (2) new continuation patents issuing while the litigation advanced; and (3) the PTAB issuing rulings alongside appealed district court rulings. On a high-level, some of these issues (which we recommend for further reading) include:

• The PTAB Does Not Necessarily Triumph over the District Court: The Federal Circuit upheld a district court’s preliminary injunction (based on a patent) even where the PTAB found that patent to be invalid.
• Issue Preclusion for Related Patents: The Magistrate Judge in one of the Bunch O Balloons cases found that, based on the Federal Circuit’s Ohio Willow decision, Telebrands was precluded from asserting obviousness (and thus invalidity) in a separate but collateral proceeding involving separate patents with similar claims. See Ohio Willow Wood Co. v. Alps South, LLC, 735 F.3d 1333, 1342 (Fed. Cir. 2013); see also Case No. 6:15-cv-551, Doc. No. 474 (applying Ohio Willow). Patent owners should therefore be aware that victory in one case, or defeat, can have profound ramifications as to how your patent war with a competitor ultimately plays out.
• The Importance of Objective Indicia in Defeating Obviousness: Both the district court and the PTAB relied on abundant and compelling objective indicia (secondary considerations) in finding that Josh Malone’s patents were not obvious. A patent owner’s litigation strategy should therefore develop the record on issues like commercial success, nexus between the commercial embodiment and the patent’s claims, copying by competitors, and solving a well-recognized problem, among other things.

At bottom, the district court’s final judgment—and resulting settlement—should be a satisfying result to patent owners across the country. Malone’s unique Bunch O Balloons invention has gone on to become a worldwide phenomenon—and now for the first time enjoys true exclusive rights in the multiple-water-balloon-filling marketplace.

Still, it took four years to get to this point. The authors are all too aware that patent owners’ patents are routinely invalidated by the PTAB. Nevertheless, the Bunch O Balloons cases are a refreshing ray of sunshine in an ocean of PTAB proceedings—which demonstrates that even the PTAB can’t stop someone with enough perseverance to pursue the American Dream.