Lis Pendens, It’s Not Just for Real Estate Litigation Anymore
IP owners are borrowing a big hammer from the real estate industry. In real estate litigation, there is one legal device that strikes fear into the heart of the adversary—the lis pendens. A lis pendens, or notice of pendency of action, is a legal remedy that the courts describe as a “a powerful weapon.” Essentially, a lis pendens allows a party to a lawsuit asserting a claim affecting real property to record a notice upon the property giving notice to the world that there is pending litigation that may affect the title to the property. A lis pendens can grind to a halt any contemplated transfer or financing involving the property. A lis pendens is not something oft seen in the world of intellectual property law. Nonetheless, grounds can arise for its use in conjunction with cases primarily about intellectual property. Counsel in IP cases may be able to utilize a lis pendens to good effect in certain circumstances against an infringer or wrongdoer even before an IP case is prosecuted through a final judgment.
A good example is Hunting World, Incorporated v. Superior Court. The alleged wrongdoer was sued in federal court for selling counterfeit purses, bags, fanny packs, and other goods bearing counterfeit Hunting World trademarks. Hunting World, Incorporated v. Superior Court (1994) 22 Cal.App.4th 67, 69. Shortly after the filing of the lawsuit, the wrongdoer quitclaimed his residence to his wife, which prompted a state court lawsuit by Hunting World to seek to set aside the conveyance. Hunting World also recorded a lis pendens against the property.
The defendant challenged the validity of the lis pendens, and the trial court ruled that the fraudulent transfer action did not affect title to real property because Hunting World was not seeking title to the property but only a way to reach the assets of the wrongdoer in the event of a money judgment in Home World’s federal IP case.
On appeal, the California Court of Appeal reversed the trial court’s decision and held that the lis pendens was valid. The Court of Appeal declined to “look through” the fraudulent transfer action in order to ascertain the purpose of the party seeking to maintain the lis pendens. Hunting World could still prove a fraudulent transfer claim, even though the underlying IP case primarily sought money damages on intellectual property claims, and did not affect title to real property.
The Hunting World case demonstrates that a party can bring to bear the potent remedy of a lis pendens, even when the crux of the matter is about intellectual property and not real property. A party bringing an infringement or other IP case against a wrongdoer should utilize the power of a fraudulent transfer action and a lis pendens where there is evidence that the wrongdoer has sought to shelter real property assets from possible collection in an IP lawsuit.