Copyright infringement spurs knife fight in Warrick County

A copyright infringement dispute between two out-of-state companies has spurred criminal charges in Warrick County, a place where neither business has facilities, employees or quite possibly ever visited before these charges were brought.

Margaret and Ben Lu, founders of Wuu Jau Co. Inc., in Edmond, Okla., have each been charged with three counts of forgery, one count of theft and three counts of counterfeiting by the Warrick County prosecutor for allegedly infringing on the copyrights of Master Cutlery Inc., based in New Jersey.

Ben and Margaret Lu of Oklahoma face theft and forgery charges in Indiana for alleged copyright infringement. (Submitted photo)

The two companies import and distribute hunting and survival knives from manufacturers based in China. According to court documents, the Lus were arrested after they sold and shipped knives allegedly copyrighted by Master Cutlery to an entity in Warrick County.

Since Margaret and Ben Lu were arrested, Wuu Jau has filed a copyright infringement claim against Master Cutlery in the U.S. District Court for the Central District of California. A sister company of Wuu Jau, Neptune Trading Co., is located in the coastal state.

Master Cutlery then filed a counterclaim in federal court against Neptune and Wuu Jau.

Why Indiana is involved in this case baffles Evansville attorney Mark Foster. A lawyer at Foster O’Daniel Hambidge & Lynch LLP, Foster is part of the criminal defense team representing the Lus.

“I still don’t know why they took it,” Foster said of the Warrick County Prosecutor’s Office. “It doesn’t make a whole lot of sense to me. I’m sure (Chief Deputy Prosecutor Daniel Miller) had his reasons, but for Warrick County, Ind., to stick its nose in a fight between a New Jersey company and an Oklahoma company, I don’t know.”

Miller did not return a call seeking comment.

One possible connection to Indiana is the intellectual property consulting firm Continental Enterprises in Indianapolis. Court documents identify Continental as investigating Wuu Jau on behalf of Master Cutlery and organizing the purchases of the disputed knives.

The shipments brought the knives to Warrick County and established the connection to Indiana. Court filings state, Continental presented the evidence to Warrick County which filed the seven felony counts.

Through its vice president and intellectual property counsel Jeremiah Pastrick, Continental did not make any statements specifically about the Wuu Jau case, saying it did not want to comment while the matter is still pending.

Setting precedent

A trademark fight involving toy guns that reached the Indiana Supreme Court in 2012 involved Continental Enterprises and has similarities to the copyright case in Warrick County.

Working on behalf of firearms manufacturer Heckler & Koch Inc., Continental initiated an investigation of Houston-based toy gun importer Generation Guns that included having orders shipped to Indiana. Subsequently, the Huntington County Prosecutor’s Office charged Yu-Ting Lin, who imported the guns, and her business associate An-Hung Yao with three counts of counterfeiting, three counts of theft, and one count of corrupt business influence based on the similarities between one of the toy guns and H&K’s MP5 submachine gun.

The first time Yao and Lin set foot in Indiana was when they were brought here in a state van to face criminal charges, said Jeremy Gayed, partner at Barrett & McNagny LLP in Fort Wayne, who was one of Lin’s attorneys.

Huntington County Prosecutor Amy Richison said she decided to prosecute because of a series of police shootings in neighboring Allen County. At least one of those involved law enforcement mistaking an airsoft gun from Generation Guns for an actual gun.

Indiana State Police shared with Richison the results of its investigation which contained information gathered by Continental Enterprises. Richison said she wanted to prevent the tragedy of someone in her community being killed accidentally by a police officer.

Richison acknowledged she used Continental Enterprises as a resource to understand the intricacies of intellectual property law. She maintained it was no different than the toxicologists, scientists and other experts she relies on in other cases and emphasized the Indianapolis firm was not driving the prosecution.

“I make my own choices and decisions,” Richison said. “I don’t have people influencing me one way or another.”

The defendants’ motion to dismiss was appealed all the way to the Indiana Supreme Court. In An-Hung Yao and Yu-Ting Lin v. State of Indiana, 35S02-1112-CR-704, the court rejected the defense team’s arguments that Indiana lacked jurisdiction. The justices held that counterfeiters can be held criminally liable even if they do not affix an intellectual property owner’s name or logo to a product.

On its website, Continental calls the Yao decision a “resounding victory.” Pastrick said the justices understood the nuances emerging in intellectual property as counterfeiters move away from blatantly copying a product.

“It signifies Indiana’s willingness to protect intellectual property in innovative and creative ways that keep up with what’s going on in the marketplace,” Pastrick said.

Gayed said that significant civil remedies already exist in the federal code to address infringement issues. Continental Enterprises has found a “really creative way” to help stop whatever is happening in the marketplace that their clients do not like. It has found an avenue for persuading county prosecutors to file charges on behalf of their private clients.

“The civil approach, hiring an attorney, filing a lawsuit is definitely one approach,” Pastrick said, “but I don’t think it’s the only approach, and it seems the Supreme Court agreed.”

Motion to dismiss

Like the defendants in the Yao case, Margaret and Ben Lu’s attorneys have filed a motion to dismiss partly on the grounds that the state courts lack jurisdiction. The defense argues the Lu case is distinct because it involves copyright – not trademark as in Yao – and Indiana’s authority is preempted by the federal Copyright Act.

“My take on this case is that the state of Indiana is overreaching to charge someone with an act that the state of Indiana doesn’t have the right to police,” said Benjamin Ashurov, IP attorney at KB-Ash Law Group in California. He is a member of the defense team who is providing expertise on the intellectual property aspect.

The defense can offer no state court opinion nor 7th Circuit Court of Appeals decision on point, but they reference a Florida case, Crow v. Wainwright, 720 F. 2d 1224, 1225 (11th Cir. 1983). There, the court threw out a conviction for selling “bootleg” eight-track tapes because the Copyright Act preempted Florida’s regulation of the defendant’s actions.

Attorneys for Yao made the jurisdictional argument, but the Supreme Court rejected it.

If the trial court denies the motion to dismiss, Ashurov said the defense will ask the federal court to issue an injunction to stop the state criminal proceeding while the civil copyright claim is being considered.

Margaret and Ben Lu maintain their innocence and their daughter, Jennifer, has launched an intense crusade to get the charges dropped. She has written directly to the prosecutor and has drafted a letter to Gov. Mike Pence.

However, it may be too late.

Tyler Helmond, an attorney at Voyles Zahn & Paul in Indianapolis who worked on the Yao defense, pointed out that a person charged with a crime not only has to incur the expense of hiring a lawyer but, unlike a civil suit, is faced with losing their reputation and liberty.

“It creates a scenario where the first company that is able to convince a prosecutor to charge a crime has really won,” he said. •