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Magistrate Judge Reyes Recommends Dismissal of DJ Action Against Assignee That Never Owned The Patent-In-Suit

On February 9, 2021, United States Magistrate Judge Ramon E. Reyes, Jr. (E.D.N.Y.) recommended that Sell Below Cost USA LLC’s (“Sell Below”) DJ complaint against Blue Island Holding Group (US) Inc. (“Blue Island”) that United States design patent No. D854,106 S (the “’106 patent”) is invalid and not infringed be dismissed because Blue Island never actually owned the ’106 patent even though it was the assignee named on the patent’s face.

Sell Below sells consumer products on Amazon.com.  On July 20, 2019, it “received notice that Amazon had delisted” its “Multi-Color Saucer Tree Swing” because of a complaint from Minglan Chen (“Chen”) that the swing infringed the ’106 patent.  The ’106 patent is directed to a “swing” and issued on July 16, 2019 from an application filed by Chen on January 15, 2018.  It identifies Blue Island as its assignee, despite the fact that Blue Island was “voluntarily dissolved on July 28, 2017,” almost six months before Chen filed her application. 

Sell Below filed suit on October 29, 2019 but was unable to effect service on Blue Island.  On December 23, 2019, the Clerk of the Court entered default against Blue Island, and on May 18, 2020, Sell Below moved for default judgment of invalidity and non-infringement against Blue Island but not Chen.

’106 patent, Figure 1

Judge Reyes found that Chen’s complaint to Amazon was an “affirmative act that welcomes a declaratory judgment to determine [Sell Below’s] rights” but explained that “[t]o have standing, Sell Below must sue the rights owner that contacted Amazon.”  Because Blue Island was dissolved prior to the filing of Chen’s patent application, it does not own the ’106 patent.  Instead, Chen, “the owner of the ’106 patent and the individual that contacted Amazon, . . . is the party that must be sued.”  The Court found that it was Chen who was “responsible for any injury [Sell Below] may have sustained.”  As a result, Judge Reyes determined that Sell Below “failed to meet its burden of establishing Article III standing . . . and therefore [its] motion for default judgment against Blue Island must be denied.”

Judge Reyes ultimately recommended that “the Complaint be dismissed without prejudice” and Sell Below “be afforded the opportunity to pursue [its] claims, or others, in a properly pleaded and served complaint.”

The case is Sell Below Cost USA LLC v. Blue Island Holding Grp. (US) Inc., et al., No. 19-cv-6095 (KAM) (RER) (E.D.N.Y.).