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Spellbinders Lawsuit Against QuicKutz Dismissed

Spellbinders’ lawsuit against QuicKutz for patent infringement has been thrown out of court by the judge in the case after a nearly three year court fight.

The company filed suit against QuicKutz in Dec. 2009 for alleged infringement on a patent it had been granted (referred to in court filings as the “634 patent”) by the U.S. Patent & Trademark Office for creating dies with an aperture. QuicKutz responded to the suit with multiple defenses, including by challenging with the PTO the validity of the patent that the suit was based on.

In July 2010, QuicKutz sold all of its assets to an investment group that formed a new company called Lifestyle Crafts around the company’s product lines. The original QuicKutz, renamed legally as QK2015 because the QuicKutz trademark had been sold to Lifestyle Crafts but referred to as QuicKutz in court filings, continued to exist as an entity to fight the lawsuit against it. Spellbinders also filed suit in January 2012 against the new Lifestyle Crafts entity alleging infringement of the 634 patent by that company as well.

The case began to turn against Spellbinders in late 2010 when the grounds the 634 patent were originally granted on were rejected by the PTO upon completion of the ex-parte re-examination of the patent that had been requested by the QuicKutz. This effectively invalidated the patent, and launched a lengthy round of appeals and counter-arguments to the PTO by Spellbinders and QuicKutz over the validity of the grounds for the patent that lasted until yesterday. 

Tuesday, Judge Neil Wake of the U.S. District Court of Arizona issued a summary judgement against Spellbinders in the case that declared the 634 patent unenforceable due to what the court believed was material misconduct by Spellbinders in defending it to the PTO and the court. The patent infringement case was ordered terminated immediately.  A 2012 declaration that Spellbinders owner Jeffrey Caron made to the court under oath was also ordered stricken from the record of the case due to it being submitted to the court in what the judge termed “bad faith.”

The court’s opinion also left the door open for QuicKutz to proceed with action for collecting attorney’s fees for the case from Spellbinders – a bill that could total hundreds of thousands of dollars after three years of hard-fought litigation in the case.

The 33 page opinion issued by the judge explaining his ruling is scathing in its characterization of Spellbinders’  actions in the case.

Regarding Spellbinders’ actions in initially listing J. Michael Dywan as an inventor on the patent, and then attempting to remove him from it, the Judge wrote:

Plaintiffs intended to deceive the PTO by submitting inventorship information that suited their current interests without regard for its truthfulness. (p.9)

In ruling that Spellbinders misled the PTO by presenting supporting affidavits from industry experts and consumers about the success of the dies, and failing to fully disclose their financial ties to the experts, the court concluded:

The specific intent to deceive the PTO is the only reasonable inference that can be inferred from this evidence. Thus, the Court finds by clear and convincing evidence Plaintiffs acted with the specific intent to deceive the PTO by submitting the declarations…(p.17)

The judge was especially critical of a 2011 declaration filed with the PTO by Jeffrey Caron as part of the appeal by Spellbinders of the initial PTO action that removed the basis for the patent being granted, writing at various times in the opinion:

If Caron’s 2011 representations to the PTO about his knowledge of the method recited in claims 37-42 and 46 are true, his deposition testimony was more than evasive; it was false or misleading. If his deposition testimony was true and responsive, then his 2011 representations to the PTO are, at the least, misleading. (p.20)

In the Caron 2011 Declaration, Caron declared certain things to be true, including that “Hixon teaches dies having embossing features that are made by chemical etching from only one side of the die to form the embossing element” and other facts about chemical etching and Hixon’s teachings. The evidence submitted here establishes that he did not know those things to be true when he made the 2011 declaration and may not even now. (p.21)

…it is an “unmistakably false affidavit,” constituting an affirmative act of egregious misconduct because it misrepresented that it conveyed information that the declarant knew to be true and was submitted to the PTO with the misrepresentation that the declarant had firsthand knowledge about the subject of the declaration. (p.21)

Ultimately, the judge concluded that the only proper remedy was to rule the patent unenforceable:

QuicKutz has proven Plaintiffs’ intent to deceive and materiality by clear and convincing evidence. No evidence before the Court weighs against rendering the entire patent unenforceable. Therefore, having found by clear and convincing evidence that Plaintiffs’ misconduct was material and that they intended to deceive the PTO, the ’634 Patent is held unenforceable under the inequitable conduct doctrine, and QuicKutz’s Motion for Summary Judgment of Unenforceability Due to Inequitable Conduct (Doc. 160) will be granted. (p. 23)

Without the patent being deemed enforceable, there is nothing to sue QuicKutz for infringing and so the judge ordered the case terminated. The court also struck a 2012 declaration of Jeffrey Caron’s made in response to the motion for summary judgement by QuicKutz from the record in ruling on a second part of the QuicKutz motion, although doing so did not affect the overall outcome of the case.

Judge Wake also issued an order Tuesday in the case that Spellbinders has been pursuing against Lifestyle Crafts, in which he is also the presiding judge. That order gives Spellbinders, in light of the 634 patent that is the basis of their suit being ruled unenforceable in the QuicKutz action, until November 27th to provide the court a reason why the Lifestyle Crafts case should not also be dismissed. A dismissal in that case could leave Spellbinders vulnerable to a claim for legal fees from Lifestyle Crafts.

In a statement to Scrapbook Update, QK2015 owner Eric Ruff said he was grateful to see the suit come to an end finally:

It’s sad to see that so much time, energy, and money was wasted on such a frivolous and misguided lawsuit that has now, thankfully come to a proper end.  This judgment has restored the pristine honor and legacy to QuicKutz that all our customers knew and appreciated from the beginning.

Spellbinders’ co-owner Stacey Caron, on the other hand, says the company is not ready to concede defeat. She told Scrapbook Update:

We will appeal because the judge is incorrect.

In the past few years Spellbinders has been touted as one of the scrapbook industry’s great successes, making Inc. magazine’s list of the U.S.’s fastest growing companies, and earning multiple industry awards. It remains to be seen what effect the legal setback will have on the company long-term.

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19 Responses to Spellbinders Lawsuit Against QuicKutz Dismissed

  1. dorajacobs November 14, 2012 at 10:54 pm #

    Great summary! Thank you!

  2. Jennifer rogers November 14, 2012 at 11:49 pm #

    I wondered recently what the outcome of this case had been/would be.Thanks, Nancy! Finally something I could read in between normal work & “cheat” reading of my scrapbooking sites which bridges my two worlds.

  3. LindaBabe November 15, 2012 at 6:17 am #

    Oh. My. I love my Spellbinders, no doubt about it, but Quickutz was my very first at home diecutting experience, so I have the affection of long association for them. I always thought Spellbinders was the copycat. Perhaps not, legally. But it appears from this the judge didn’t leave them much of a leg to stand on. There would appear to be room in the market for both of them.

  4. Lorrie Greenway McCullers November 15, 2012 at 10:49 am #

    Very interesting! For the judge to deem the testimony of J. Caron as “false and misleading” and to have it stricken from the record, it must have been egregiously untruthful.

    It will also be interesting to see if QK will be able to have Spellbinders pay their attorney fees. That may be a make-or-break financial situation for Spellbinders.

    Thanks for the summary, Nancy!

  5. DKPhil November 15, 2012 at 11:11 am #

    Wow, very interesting. I think it would be wise to cut their losses and move forward. They could potentially lose everything–why drag it on and make matters worse? I love Spellbinders, but, Karma rules in this one, I’m afraid… Caron should not have intentionally been misleading and untruthful. They should swallow their pride and accept the consequences of their actions.

  6. Debby November 15, 2012 at 12:15 pm #

    Thanks for the summary. It is a shame that they had to drag this out for so long. The only ones who win in such a situation are the lawyers. This battle has cost both sides dearly. Let’s hope they can move on and get back to creating quality, innovative products.

  7. Sandra November 15, 2012 at 12:22 pm #

    I agree! Karma does rule in this case. Kind of disappointed in Spellbinders..the thruth will always come out sooner or later. Don’t know if I want to purchase from a company that handles things this way. I don’t know if I want to purchase the grand calibur.. may need to do research on other machines..maybe the Big Shot? or eBosser?

    Sandra

    • Mary November 15, 2012 at 3:09 pm #

      If I may make a suggestion on a machine to purchase. I have used all machines that are currently on the market. My favorite hands down is the BigShot. I find that the machine is well balanced, the plates last longer than most and it is heavy enough to prevent it from tipping if the die is going through a little tighter than normal. The one drawback of any of the machines is any die bigger than 6 inches can not be used. To alliviate this problem I bought a BigShot Pro. I know they are expensive, but after that you never have to purchase another machine. I got mine for a really good deal. 2 of us placed orders with our LSS and they gave us a deep discount. I am so grateful I did that. I now can cut QK, Spellbinders, Memory Box, Accucut and other commercial dies with ease. Hope this helps you with your decision.

      • DKPhil November 15, 2012 at 3:13 pm #

        Does the BS Pro handle the Grand dies, also? Is it an electric or manual machine?

        • Mary November 15, 2012 at 7:32 pm #

          Yes it does handle the Grand Dies. It is Manual but it is so easy to work the handle. I have Fibromyalgia and the starting of Arthritus and I have no problem what so ever. I did with the QK version and Cuttlebug because you had to hold the die in place and push at the same time to get it started. With the Cuttlebug and Spellbinder Wizard after the die was thru the cutting base shot it across the room if you forgot to hold on to it. I busted a knuckle more than once with those machines. Never ever with the BigShot or BigShot Pro.

    • Belinda November 19, 2012 at 10:13 am #

      Just posted on the Scrapbook.com site as I didn’t know much on this lawsuit.. I think I’m leaning towards the eBosser by Craftwell. I think I’m passing on the grand calibur after this.

      Belinda

  8. Mary November 15, 2012 at 2:59 pm #

    Thanks for the update. I have been following this as I have friends in both companies. I started as a QK person, but soon spread to Spellbinders also. Each company has their own style and strengths and in my humble opinion there is room for both. I hate to see the bitterness continue on with an appeal. It would be nice to see each channel their efforts into design and quality which would benefit all the scrapbookers.

  9. Mark English November 15, 2012 at 4:43 pm #

    I heard about this lawsuit a year or so ago. Spellbinders was dragging the other die companies through the mud and saying how unethical they were for infringing on their patent. I think it is interesting to now learn that Spellbinders were the unethical ones and only got their patent by defrauding the patent office. They should be ashamed of themselves.

  10. Gab November 15, 2012 at 7:55 pm #

    Thanks for that Nancy

  11. Gela November 16, 2012 at 9:21 pm #

    I hope spellbinders cuts their losses and not make lawyers richer. There is enough money for everybody to make. Make great products and people will buy it.

  12. asby November 18, 2012 at 9:32 pm #

    Nancy, thanks for the summary. I know the Ruffs only from shopping QuiKutz warehouse sales years ago. I remember when the Spellbinders suit was filed and how much they (clearly and obviously) suffered. While Spellbinders has legally (and rightfully) lost their claim, I still believe QK2015 (formerly QuiKutz) are the victims. Not only should Spellbinders and the Carons cover the QK2015 legal fees, but also for losses taken when the Ruffs had to sell out.

  13. jpk1102 November 19, 2012 at 11:03 am #

    Just because a court rules one way, it does not mean it is in the right, regretfully. That is why there is an appeals process. Rather than form conclusions based on one judge’s rulings, I would wait until the entire process plays out. It is not over, they say “until the fat lady sings.” One more thing…..my business partner and I had a conversation with the owners of Spellbinders about this concept/process long before the it was initiated elsewhere. So, ultimately, facts can be twisted by either party to suit their needs.

    • Mark English November 26, 2012 at 5:11 pm #

      jpk1102 what are you talking about? If you and your business partner had “conversations” with Spellbinders about these concepts and processses “long before” why was none of that ever brought up in this lawsuit? It would have been SUPER relevant. Maybe because Jeff Caron testified that he will “never forget the day” he invented these types of dies. He said it was November 2004. Thanks for continuing the lies. Have you read the judge’s ruling?? This wasn’t even a close call on the ruling. There was a mountain of evidence against Spellbinders. The judge ruled there was “a pattern of deception” with both the patent office and in court.

      If you take the time to read the original Spellbinders patent filing AND the reexamination of that patent AND all the court documents, then you would know the truth. I HAVE and I know exactly who was trying to twist the facts. I am guessing that you are somehow connected to Spellbinders and are out spreading their propoganda. Just like they did during the lawsuit.

      Yes. The appeals process is there for a reason. And yes, Spellbinders can appeal. But, no they will not win on appeal. Take the judge’s ruling and all the court documents to your nearest patent lawyer and have them give you an opinion of Spellbinders chances on appeal. You won’t like the answer.

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