Chicago IP Attorney & Lawyer : R. David Donoghue : Chicago IP Litigation Blog

It is the time of year for the Best of 2008 lists.  The legal blogosphere* is no different as evidenced by Blawg Review #193 -- click here to read it -- recounting the 51 weekly Reviews from this year and soliciting nominations for the annual Review of the Year award from anyone who has hosted or is scheduled to host a Review. As someone who has hosted (click here to read my 2008 Review # 173, and who plans to host another in 2009, I exercise my right to vote for the following Reviews:

• Rush on Business -- Click here to read Review #147 which followed law blogs as they participated in Iowa's famous RAGBRAI cycling race/ride (I love cycling).
   
• Patent Baristas -- Click here to read Review #161 which provided a powerful message on Memorial Day.
   
• Likelihood of Confusion -- Click here to read Review #191 which took a legal look at the possible explanations for the miracle of Chanukah.

*  Ed. how can you insist upon Blawg Review, but than refer to the legal blogosphere.  Are you just trying to get to Mr. O'Keefe?

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Welsh v. Big Ten Conf., Inc., No. 08 C 1342, Slip Op. (N.D. Ill. Nov. 21, 2008) (Gottschall, J.).

Judge Gottschall granted defendant the Big Ten Conference's motion to dismiss plaintiff's complaint, but denied the Big Ten's motion for its attorney's fees. Plaintiff claimed that it presented the Big Ten with a trade secret business plan for a Big Ten television network named the "Big Ten Network." The Big Ten allegedly told plaintiff it was not interested and then several years later started the Big Ten Network using plaintiff's trade secrets, including the Big Ten Network name. Plaintiff claimed that the Big Ten violated § 38 of the Lanham Act by filing a false declaration with the PTO stating that the Big Ten had the sole right to use the Big Ten Network mark in commerce. Plaintiff argued that the Big Ten should have disclosed plaintiff's trade secret rights in the mark. But the Court held that even if plaintiff could establish trade secret rights, the Seventh Circuit had held that it was "far from clear" whether trade secret claims fall within the scope of § 38, which is directed to statements about ownership, as opposed to statements about use in commerce. Additionally, the Court held that plaintiff's alleged development of the name did not necessarily grant plaintiff any rights in the trademark. Trademark rights are granted based upon use, not discovery or invention. And inclusion in a business plan is not a "use in commerce." Having dismissed plaintiff's federal claim and noting that the parties were not diverse, the Court declined to exercise supplemental jurisdiction over the remaining state law claims and dismissed the case.

The Court denied the Big Ten's request for its fees. First, the case was resolved on a motion to dismiss filed two months after the complaint and while plaintiff's arguments lost, the theory had not been "squarely rejected by the Seventh Circuit." As such, plaintiff's suit could not be deemed "oppressive" as is required for an award of fees.

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Whether you are celebrating Christmas, Hanukkah or just a long weekend, I hope you are enjoying the holiday season.  I plan to spend Christmas and the weekend building toys for the kids, watching bowl games and enjoying food and cheer with family and friends.  I hope that the holidays find you happy, healthy and looking forward to an exciting 2009.

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The Stanford Law School launched its Intellectual Property Litigation Clearinghouse (“IPLC”) earlier this month – click here to go to the site (registration required).  The IPLC is a  searchable database of IP lawsuit filings and outcomes since 2000, at least for patents, trade secret, trademark and copyright information is currently a bit more limited.  IPLC shows that patent cases have remained relatively constant during this decade, but that the number of patent defendants has increased dramatically. It also proves what Northern District litigators already know, the vast majority of Northern District cases, 86%, settle (this figure includes consent judgments). 1% of cases are resolved on procedural issues. That leaves about 12% of cases to be decided on the merits. Defendants win two-thirds of those cases, 8%, and plaintiffs win the remainder, 4%.

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Every litigator knows that email is discoverable, and that it can be dangerous because of a tendency to be less formal in email writing.  And litigators are increasingly aware that instant messages are often archived and are likely discoverable, especially where they are used in the ordinary course of business.  There is also an interesting question as to whether document retention policies should require that instant messages be archived and retained, but that is difficult issue for a separate post.  But many litigators are unaware of the latest frontier in internet communications -- Twitter posts, or tweets.  Tweets are posts of no more than 140 characters that the user shares with, except in some limited cases, anyone who wishes to see them.  And Lawyers USA has an interesting news brief (click here to read it) arguing that they are discoverable.  So, the question for litigants and potential litigants is what to do about it.  The answer to that question is very fact specific, but as a starting point you should be aware that tweets may be discoverable and corporations should make their employees, particularly those that tweet at the direction of the company, aware that their tweets may become part of future litigations.

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Few skills are more important to litigators than legal writing.  That is especially true for IP litigators tasked with explaining complex technologies to an audience without a deep background in the technology.  Your ability to package facts and law into a compelling, understandable story can make or break your case.  Because of that, I follow several writing blogs, for example Manage Your Writing and Adams Drafting.  Here are a few writing tips from some of my favorite writing blogs:

• Managing Your Writing has a great post focused on using parallel language in lists -- click here to read it and here to read the cited Writing Matters post.  I love bulleted lists in briefs and letters, but if you do not make them parallel, you really harm the effectiveness of the list.  My additional thought is that you also must pay attention to the visual layout of the list, going for approximately equally sized bullets whenever possible (as you can see from this list, it does not always work.
   
• Trial Practice Tips Weblog discussed the dangers of overstating your positions -- click here to read it and here to read the cited Robust Writing post.  Zealous advocacy puts litigators in danger of overstating their positions.  The overstatement often reads well in a vacuum, but rarely fares well with the court.  Few things are as detrimental to a lawyer or litigant's credibility than overstatements in pleadings.  Practice tip:  When team-editing a brief you have to be especially careful to do a final edit to remove accidental overstatements.

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I am a little late to this story, but before Thanksgiving the new e-Justice Blog published a list of the top 50 internet and digital law blogs -- click here for the list.  I am honored that this blog made the e-Justice list, especially when you look at the other blogs on the list.  Here are some of the blogs, listed more or less by e-Justice's categories:

Academic Blogs

• Berkman Center for Internet and Society
   
• Stanford Center for Internet and Society
   
• Law Blog (John Marshall's own Prof. Sorkin)
   
• Lessig
   
• Eric Goldman's Technology & Marketing Law Blog

Copyright, Intellectual Property and Defamation

• The Trademark Blog
   
• Internet Law - Copyright Law

New Media and Digital Law

• New Media and Technology Law Blog (another LexBlog creation) 
   
• Silicon Valley Media Law Blog

Firms & Lawyers

• Technology, eBusiness and Digital Media Law Blog (another LexBlog creation)
   
• Internet Law Attorney Blog
   
• Ernie the Attorney
   
• Internet Cases

News and Business

• Gahtan’s Technology and Internet Law Blog
   
• Technology and Marketing Law Blog
   
• DennisKennedy

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The TicketRESERVE, Inc. v. Viagogo, Inc., No. 08 C 5202, Slip Op. (N.D. Ill. Nov. 19, 2008) (Shadur, Sen. J.).*

Judge Shadur ordered that plaintiff's amended complaint was entered without need for plaintiff's motion for leave to file the amended complaint.  While defendant Yoonew had already answered the complaint, the amendment added a party that appeared related to defendant Viagogo, which had filed a motion to dismiss instead of answering.  The Court held that plaintiff's Fed. R. Civ. P. 15(a)(1)(A) absolute right to amend its complaint before it is answered was not destroyed as to a particular defendant until that defendant answers.  So, plaintiff was free to amend any claims made against Viagogo until Viagogo answered, but presumably would have to seek leave to amend should the amendments impact defendant Yoonew.

*  This case is assigned to Judge Moran, but during Judge Moran's absence from the bench Judge Shadur has taken over his docket.

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Polyad Co. v. Indopco Inc., No. 06 C 5732, 2008 WL 4287623 (N.D. Ill. Sep. 12, 2008) (Coar, J.).

Judge Coar granted defendant Indopco's motion for summary judgment regarding plaintiff Polyad's tortious interference and unjust enrichment claims.  I do not normally deal with diversity cases based solely upon state law causes of action, but one of the alleged tortious interferences in this case was Indopco's allegedly false statements that Polyad's products may have infringed Indopco's patents.  But the Court held that the evidence only showed that Indopco only suggested that Polyad's products "may" have infringed patents and suggested that the customer ask Polyad for assurances of noninfringement.  Furthermore, Indopco was actually testing Polyad's products to determine whether they infringed.  Ultimately, Indopco's tests were inconclusive and Indopco did not pursue a patent infringement case.  But the possibility of infringement and Indopco's inconclusive testing were sufficient for a grant of summary judgment in Indopco's favor.

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Stereo Optical Co., Inc. v. Judy, No. 08 C 2512, 2008 WL 4185689 (N.D. Ill. Sep. 8, 2008) (Kocoras, J.).

Judge Kocoras granted in part defendants' Fed. R. Civ. P. 12(b)(6) motion to dismiss plaintiff's copyright, trade secret and related state law claims. The Court noted that the Seventh Circuit required a registered copyright, not just pre-registration, to file a copyright complaint. But the Court held that it was sufficient to allege the registration and did not dismiss the claim because the registration was not attached. The Court did note, however, that the registration requirement was jurisdictional and the motion, therefore, should have been styled a Fed. R. Civ. P. 12(b)(1) motion for lack of jurisdiction.

The Court also denied defendants' motion to dismiss plaintiff's trade secret complaints. While plaintiff did not specifically identified the allegedly misappropriated trade secrets they did allege misappropriation of customer lists, vision test methodologies and other information that could be trade secrets.

Finally, the Court dismissed plaintiff's unjust enrichment claim because it was preempted by the copyright and trade secret claims. The alleged unjust enrichment sought damages for either the alleged copyright infringement or the alleged trade secret misappropriation. Plaintiff's other state claims, however, required additional elements and were not preempted.

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At the request of Federal Circuit Chief Judge Michel, an all-star panel was established to create a comprehensive set of model patent jury instructions -- click here to download them.  The panel included patent litigation heavy weights like Don Dunner and federal judges -- Judges Ward (E.D. Texas) and Whyte (N.D. Cal.).  The Federal Circuit has not officially endorsed the jury instructions, but they are very comprehensive and deal with just about every recent case law development.  In particular, they provide an excellent glossary of patent terms for the jury (something that should be in every set of patent jury instructions, but often is not) and they provide two KSR obviousness instructions, one for if the jury is making the final determination and one if the judge does (the panel could not come to a consensus on what the correct reading of the law was). 

The one instruction I had hoped to see that was missing was an instruction for awarding royalties on post-verdict sales -- see the MTTLR Blog on the issue here or read commentary on Judge Clark's plan to submit post-verdict damages to the jury here at Michael Smith's E.D. Texas blog.  If anyone has seen an instruction for post-verdict damages, send it to me and I will post it for all to consider.

You can also read more about patent jury instructions in the Blog's archives -- click here for the Seventh Circuit's model patent jury instructions and here for a list of jury instructions Northern District judges have offered as precedent in IP cases.

Hat tip to Dennis Crouch for linking to the new model jury instructions here at Patently-O.

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Litigators universally struggle to enforce order over complex cases, and patent cases are some of the most difficult.  They often include multiple patents, numerous accused products, inventors, experts and often various contracts.  Generating systems for both capturing and organizing facts and issues is critical, but difficult.  And once you organize it for yourself, you need to find a way to organize it for the Court and then the jury, an even more difficult task.

I have generally used notebooks including marked up copies of the patents, key prior art, any contracts , accused product information and other hot documents.  Others use computer programs or even whiteboards.  But the Settlement Perspectives Blog (via Vickie Pynchon at the IP ADR Blog) has converted me to mind mapping -- click here for the Settlement Perspectives post and here for the IP ADR Blog post.  Mind maps allow you to graphically depict all of the critical facts and issues in your case, how they interconnect and to hyperlink to the relevant documents or testimony.  And the best part is that you can burn your mind map onto a DVD and offer it to the judge as an aid for resolving summary judgment motions or construing claims.  This one graphic depiction of your case with hyperlinks to the evidence could be more powerful than a twenty-five page brief explaining your arguments in detail.  Mind maps are excellent tools for creating order from the disorderly facts of a litigation. 

Here is an example of what a mind map can look like:

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American Taxi Dispatch, Inc. v. American Metro Tax & Limo Co., __ F. Supp.2d __, 2008 WL 4616855 (N.D. Ill. Oct. 20, 2008) (St. Eve, J.).

 Judge St. Eve permanently enjoined defendants' (collectively “Metro”) use of trademarks infringing plaintiff American Taxi's American Taxi marks, and awarded American Taxi damages in the amount of Metro's gross sales as well as attorney's fees. American Taxi began using its marks in 1975. Metro incorporated and began using their American Metro Taxi marks in early 2007. American Taxi filed the instant suit for trademark infringement, Lanham Act unfair competition and related state law claims. Metro initially defended itself, but after repeatedly missing deadlines th Court entered a default judgment and allowed American Taxi to submit proofs, which led to this opinion.

Pursuant to Fed. R. Civ. P. 54(c), the award could not exceed in form or amount what was demanded in the pleadings. The Court held that the complaint justified a permanent injunction. American Taxi alleged that Metro's infringing acts harmed American Taxi's goodwill, and the Seventh Circuit has held that damage to goodwill can constitute irreparable harm. And American Taxi backed up its complaint with an affidavit detailing actual confusion between the marks. Furthermore, a tailored injunction would not put Metro out of business. In fact, Metro's owner claimed that Metro had been dissolved. So, the balance of harms weighed in American Taxi's favor. And finally, there is a public interest in knowing whom they conduct business with, which favored an injunction. The Court, therefore, permanently enjoined Metro and its affiliates, successors and assigns from using its marks or any others that were confusingly similar to the American Taxi marks.

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Blawg Review #189 is up at Colin Samuels' Infamy or Praise Blog -- click here to read it.  As would be expected of a Blawg Review Sherpa, Samuels' provided an epic Review, centered around The Rime of the Ancient Mariner.  In addition to excellent writing focused around a strong theme, Samuels features some excellent IP content, including my post about the unequal application of Twombly pleading standards in patent cases:

Maya Richard suggested four tactics to preemptively protect patent assets from patent trolls: monitoring patent filings for applications related to your portfolio; hedging risk with patent infringement insurance; retaining skilled IP counsel to build a case for major patent assets; and joining an industry protection group. Also writing on a patent-related topic was R. David Donoghue, who noted that despite the Twombly decision, "many district courts are requiring that patent defendants plead affirmative defenses and, in some cases, counterclaims to the higher plausibility standard." He suggests remedies for this uneven application of the Twombly standards.

And as an encore, after seeing Twitter driving traffic to his Review, Samuels posted a list of the Twitter accounts of the bloggers featured in Blawg Review #189 -- click here to read it.

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Hyundai Construc. Equip. U.S.A., Inc. v. Chris Johnson Equip., Inc., No. 06 C 3238, Slip Op. (N.D. Ill. Oct 21, 2008) (Leinenweber, Sen. J.).

Judge Leinenweber, having previously granted plaintiff summary judgment of Lanham Act unfair competition and deceptive trade practices,* enjoined defendant's continued sale of gray market goods and use of plaintiffs' trademarks and awarded plaintiffs damages and costs.  The Court awarded plaintiffs defendant's profits from sales of gray market construction equipment (equipment made abroad for sale abroad that was imported to the United States without authority for resale), but the Court held that awarding plaintiffs a multiple of defendant's actual damages would be inappropriately punitive.  Additionally, the Court gave defendant an opportunity to prove its costs before entering a final damages amount. 

The Court also entered a permanent injunction.  The Court, however, denied plaintiffs' request that defendant have to provide plaintiffs and the Court a report proving defendants' compliance with the injunction.  Such a requirement was unduly burdensome.

Finally, the Court awarded plaintiffs their costs, but held attorney's fees were not appropriate because the case was not exceptional.  Among other reasons the case was not exceptional, the Court noted evidence that defendants "apparent pains" to warn customers that defendants' products lacked a warranty and came from overseas.  And the Court held that no actual confusion had yet been proven.

*  Click here for the prior decision in the Blog's archives.

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Idex Corp. v. Dripping Wet Water, Inc., No. 08 C 1114, 2008 WL 4372038 (N.D. Ill. Feb. 26, 2008) (Shadur, Sen. J.).

Judge Shadur sua sponte gave plaintiffs one week to amend their pleadings to resolve potential subject matter jurisdiction issues.  The Court noted that the breach of a patent settlement did not create federal question jurisdiction because the agreement was about a patent.  And the Court held that it was not sufficient for diversity jurisdiction just to plead the parties' residences.  Both residence and citizenship must be pled for the purposes of diversity jurisdiction.  The Court, therefore, ordered plaintiffs to amend their complaint to plead both residence and citizenship, or otherwise prove jurisdiction.  The Court also ordered plaintiffs to explain why the case was filed in the Northern District rather than in Texas where the parties had an ongoing suit or Connecticut where the litigation resulting in the settlement at issue took place.

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Here are several blog posts that are worth your time on this Monday morning:

• At Deliberations, Anne Reed warns of six mistakes that can derail voir dire -- click here to read the post.  Anyone who follows Deliberations knows that when Reed discusses voir dire, everyone should listen.
   
• The Federal Circuit heard oral argument in Tafas v. Dudas last week.  Here is some of the commentary:  Patent Baristas; Patently-O; & PLI Blog.
   
• At IP ADR Blog, Victoria Pynchon offers to arbitrate your patent case and says under expedited AAA commercial rules you can get a decision within 45 days of selecting the arbitrator -- click here to read the post.  Amazing, I may try that in the dispute resolution clause of my next license agreement.
   
• Anyone who read his 2007 NYC Marathon Blawg Review will not be surprised that Eric Turkewitz's post-Thanksgiving Blawg Review last week at his New York Personal Injury Law Blog was one of the best of the year -- click here to read it.

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I published an article  in the most recent edition of the John Marshall Review of Intellectual Property Law surveying the application of the Twombly "plausibility" pleading standard, in place of the former any set of facts regime, to patent cases -- The Uneven Application of Twombly in Patent Cases: An Argument for Leveling the Playing Field (click here to read it).  I found that district courts have largely followed the Federal Circuit's one case addressing Twombly, which unfortunately involved a pro se plaintiff, and held that Twombly did not change the pleading standards for patent plaintiffs.  But despite that ruling, many district courts are requiring that patent defendants plead affirmative defenses and, in some cases, counterclaims to the higher plausibility standard.  This creates a harmful dichotomy which can be remedied in two ways:  1) as some courts already do, use strict Local Patent Rules to require early disclosures of plaintiff's claims followed in short order by defendant's defenses; or 2) as at least the Western District of Wisconsin already does, require patent plaintiffs to identify the asserted claims and the accused products.  Either or both level the playing field for the parties and come at little cost to plaintiffs who already have a Fed. R. Civ. P. 11 pre-suit investigation requirement.

In addition to my article, there are several excellent pieces in Volume 8, Issue 1 of Review of Intellectual Property Law, including:

• European IP attorney Paul Cole provides a Eurpoean view of the KSR obviousness standard -- click here to read the article;
   
• Timothy Trainer looks at inconsistent international application of TRIPS and discusses what can be done to better protect intellectual property worldwide -- click here to read the article.
   
• Lawrence Ebert (of IPBiz fame) draws lessons from the patenting and licensing of the transistor -- click here to read the article;
   

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 Bobak Sausage Co. v. Bobak Orland Park, Inc., No. 06 C 4747, Slip Op. (N.D. Ill. Nov. 3, 2008) (Kennelly, J.).*

Judge Kennelly denied without prejudice plaintiff Bobak Sausage Co.'s ("Bobak") motion to compel defendant's interest in Bobak Fifty Third Street LLC (“Bobak 53”). Bobak makes and sells meat products and operates a related restaurant in Chicago.  Bobak's founder, Frank Bobak, transferred ownership of Bobak's to his sons.  In early 2006, Bobak's reorganized, leaving two of the sons owning Bobak's and a third, defendant, owning a grocery store that Bobak's had been building.  All of the brothers maintained as interest in Bobak 53. As part of the reorganization, Bobak's granted two entities rights to use Bobak's trademarks at retail locations for a six month period.  After the six month period ended, Bobak's filed suit against defendants (including the third son and the licensed retail locations) for, among other things, trademark infringement based upon the continued use of the Bobak's marks.  The parties settled that dispute based at least in part upon a stipulated permanent injunction, which the Court entered, setting various limits on what marks each defendant could use, requirements that the defendants remove and change their signage and requirements that defendants use disclaimers that they were not affiliated with Bobak's.  The Court later held certain defendants in contempt for violating the permanent injunction and entered a remedial fine of $150,000. When defendants failed to pay the fine, the Court added interest to it.

Because defendants continue not to pay the fine, Bobak moved the Court for an order compelling the transfer of defendant's interest in Bobak 53 pursuant to Fed. R. Civ. P. 69(a) and 70. The Court, however, held that Rule 70 only allows for enforcement of money judgment in very narrow circumstances, circumstances that were not yet met in this case.

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Foboha GMBH v. Gram Tech., Inc., No. 08 C 969, 2008 WL 4619795 (N.D. Ill. Oct. 15, 2008) (Grady, J.).

Judge Grady denied defendants' (collectively “Gram”) Fed. R. Civ. P. 12(b)(6) motion to dismiss plaintiffs' (collectively “Foboha”) Lanham Act unfair competition and related state law claims. Foboha alleged that Gram made false and misleading statements about Gram's patent and about Foboha's alleged infringement of the patent. In particular, Gram allegedly claimed that its technology was patented while its application was still being processed and that Gram made false statements about the status of the reexamination filed by Foboha. The Court held that Foboha's claims were governed by Fed. R. Civ. P. 9(b)'s heightened pleading requirements because they were based upon Gram's allegedly false and misleading statements. And at least for the statements allegedly made about the patent during reexam, Foboha met the heightened standard by explaining what statements were made, when and where they were made, who made them and how they were made.

The Court did, however, hold that Gram's direct communications, in person or in letters to individuals, did not constitute commercial advertising and, therefore, did not constitute Lanham Act unfair competition. But Gram's statements on its website and press releases could constitute commercial advertising.

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24 Hour Fitness USA, Inc. v. Bally Total Fitness Holding Corp., No. 08 C 3853, 2008 WL 4671748 (N.D. Ill. Oct. 21, 2008).

Judge Lefkow granted defendants' Fed. R. Civ. P. 12(b)(1) motion to dismiss plaintiff 24 Hour Fitness's (“24”) trade secret misappropriation complaint for lack of subject matter jurisdiction. 24 alleged that defendant Bally Total Fitness (“Bally) and the individual defendant (“Defendant”) misappropriated 24's trade secrets when Defendant resigned his position as 24's COO and became Bally's CEO. But defendants argued that the Court lacked subject matter jurisdiction over 24's state law trade secret claims because there was no diversity of citizenship – both 24 and Defendant were California citizens. 24 argued that Defendant was, in fact, a citizen of Illinois because he worked at Bally's Illinois headquarters and because Defendant's contract with Bally required that he move to Illinois before the case was filed.

Looking at the totality of the circumstances, the Court held that Defendant remained a citizen of California, where he had lived while employed by 24. Defendant had put his California home for sale and did have a contract requiring that he become domiciled in Illinois, although the particulars of the contract were disputed. But the most significant factor in the analysis was that Defendant's family remained in California. And Defendant had not purchased or rented a home in Illinois or gotten an Illinois driver's license, bank account or voter registration card.

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As I mentioned here, I recently gave a presentation for the National Constitution Center on settlement agreement best practices.  I focused on the important principles of:  knowing your client's and opponent's needs; generating trust between the parties during the negotiation and through any ongoing responsibilities pursuant to the agreement; bringing in experts on various topics; and making sure that your agreement and its terms had buy in from all relevant client stakeholders (not just legal, but accounting, media relations, tax and the appropriate C-level or business executives.  You can see a copy of the slides here.

Mike Graham, the Seattle Trademark Lawyer, is presenting soon on a related topic, except he is looking at planning ahead for potential litigation in trademark licensing.  It promises to be a very interesting presentation based on Graham's initial notes  -- click here to read them.  Just as litigators do well to bring in licensing experts to finalize settlement agreements, licensing attorneys do well to have a litigator's perspective on their agreements.

[UPDATE:]  I just learned that Seattle Trademark Lawyer (the blog, not Graham) turned two yesterday -- click here to read Graham's birthday post.  Congratulations Mike.  Two years of top quality content, and going strong.  I started this blog a few months before Graham started STL.  It is nice to see my contemporaries succeeding.

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