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

On March 8, I will be speaking at the Publishing Business Conference & Expo in New York City with Camille Miller of Cozen O'Connor.  Our panel is titled Online Legal-ease: Fair Use, Copyright and Content Aggregation Issues in the Digital Age, and here is the program description:

With the advent of digital publishing, social networking and user-generated content, publishers are faced with a litany of new legal issues to consider. A pair of legal experts will arm you with strategies to protect yourself -- and your content -- in this increasingly litigious age.

We have a lot to cover in a one hour program, so it promises to be a lively discussion.  If you are interested in attending the premier conference for book and magazine publishers click here for registration information.

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This week President Obama appointed Illinois Appellate Court Justice Sharon Johnson Coleman and Sidley Austin partner Gary Scott Feinerman to the Northern District of Illinois bench.  Here is biographical information from President Obama's press release:

• Justice Sharon Johnson Coleman sits on the Illinois Appellate Court in Chicago, a position she has held since 2008.  From 1996 until 2008, Justice Coleman served as a judge of the Circuit Court of Cook County, Illinois.  Between 1993 and 1996, she held the position of Deputy State’s Attorney and Bureau Chief for the Public Interest Bureau of the Cook County State’s Attorney’s Office.  From 1989 to 1993, Justice Coleman served as an Assistant United States Attorney in the Northern District of Illinois.  From 1984 until 1989, she was an Assistant State’s Attorney in Cook County.  Justice Coleman received her J.D. in 1984 from Washington University School of Law in St. Louis and her B.A. in 1981 from Northern Illinois University.
   
• Gary Scott Feinerman is a partner in the Chicago office of Sidley Austin LLP, where he practices in the general litigation and appellate practice groups.  He received his B.A., summa cum laude¸ from Yale College in 1987 and his J.D. from Stanford, where he was a member of the Order of the Coif and the Law Review, in 1991.  After law school, Feinerman clerked for Judge Joel M. Flaum of the Seventh Circuit and for Justice Anthony M. Kennedy of the Supreme Court of the United States.  After his clerkships, Feinerman worked in the Justice Department’s Office of Policy Development (now known as the Office of Legal Policy).  From 2003- 2007, Feinerman served as Solicitor General of Illinois, where he received  Best Brief Awards from the National Association of Attorneys General in each year from 2004-2007.

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Chicago Bd. Options Exchange Inc. v. Realtime Data, LLC d/b/a IXO, No. 09 C 4486, Slip. Op. (N.D. Ill. Jan. 8, 2009) (Lindberg, Sen. J.).

Judge Lindberg granted declaratory judgment for defendant Realtime's Fed. R. Civ. P. 12(b)(2) motion to dismiss for lack of personal jurisdiction. The parties agreed that the Court lacked general jurisdiction and focused their arguments on specific jurisdiction. Because plaintiff Chicago Board Options Exchange ("CBOE") brought declaratory judgment claims, the analysis focused upon whether Realtime's patent enforcement activities were directed at the jurisdiction. CBOE argued that specific jurisdiction was created by Realtime's Texas patent infringement suit against, among others, Chicago-based defendants, including eventually CBOE. But the Court held that Realtime's Texas action alone did not create specific jurisdiction, and the Court did not consider the Texas suit against CBOE because CBOE was not added to the Texas action until after the instant suit was filed.

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Scala's Original Beef & Sausage Co., LLC v. Alvarez d/b/a Michaelangelo Foods, No. 09 C 7353 (N.D. Ill. Dec. 22, 2009 (Dow, J).

Judge Dow denied plaintiff Scala's motion for a temporary restraining order ("TRO") in this Lanham Act case regarding Scala's and Scala's Preferred marks for giardiniera.

Likelihood of Success

Scala's made a "fairly strong showing" that defendants' (collectively "Michaelangelo Foods") labels using the marks were likely to cause consumer confusion. Scala's also met its burden to show some likelihood of success that its trademark license to Michaelangelo Foods was terminable at will, even though the license lacked a termination provision. Finally, Scala's showed some likelihood of success as to its argument that licensee estoppel barred Michaelangelo Foods' challenges to Scala's marks. The Court noted, however, that at the early stages of the litigation it appeared that Michaelangelo Foods might be able to overcome licensee estoppel upon equitable grounds.

Irreparable Harm

Irreparable harm is presumed in trademark cases, and Michaelangelo Foods did not challenge the presumption. Instead, Michaelangelo Foods argued that Scala's harm was not sufficiently immediate because Scala's was not selling competing products. But the fact that Scala's did not make a product, did not eliminate the harm. Scala's was harmed by not being able to control Michaelangelo Foods' quality. Additionally, Scala's was using the marks with other products.

But the Court noted that the facts of this case mitigated the strength of Scala's irreparable harm. In particular, Scala's licensed the marks at least in part because Scala's was unable to consistently pay suppliers or deliver products to its customers. And Michaelangelo Foods took substantial steps to fix those relationships, thereby enhancing the marks' value.

Balance of Harm

The Court held that Michaelangelo Foods would be harmed by a TRO. A TRO would allow the sale of existing inventory, but individual defendant invested a significant portion of his savings into the business and the business had relatively low profits. A TRO would, therefore, likely do substantial damage to Michaelangelo Foods' finances. This financial harm combined with Michaelangelo Foods' efforts to rebuild the marks and the business tipped the balance of harm in Michaelangelo Foods' favor.

Conclusion

While it was a close call, the Court denied a TRO. In view of the importance of a decision to both parties, the Court set an expedited discovery, briefing and hearing schedule for Scala's preliminary injunction motion.

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I am working on some additional analysis of the Local Patent Rules, after I finish with a trial in the next several weeks.  But for now, this Chicago Daily Law Bulletin story quotes me and several others about the impact of the Rules:

New rules could boost patent filings
By Jerry Crimmins
Law Bulletin staff writer

New rules for patent litigation that have been in effect here for only a month are expected to increase patent litigation in the Northern District of Illinois, local lawyers say.

Until Oct. 1 the Northern District of Illinois did not have standard local rules for the scheduling of events in patent cases, according to these lawyers.

"I think [the rules] will increase filings … for a couple reasons," said R. David Donoghue, who writes the Chicago IP Litigation Blog.

"They benefit plaintiffs in a few ways that would draw plaintiffs to file their claims in the Northern District of Illinois when they can," Donoghue said.

Donoghue is a partner at Holland & Knight LLP.

The rules will "speed up the average length of time in patent cases from filing to trial," said Allan J. Sternstein, director of the Intellectual Property and Intellectual Property Litigation Department at Dykema, Gossett PLLC.

Yet the rules "will maintain sufficient time so the case can get done in a manner beneficial to both parties," Sternstein added. "Simply stated, it won't be too fast. It won't be a rocket docket.

"The biggest advantage," Sternstein said, is "it gives the attorneys and clients a much more solid foundation on which to base budgets and scheduling."

That in itself will bring more patent litigation to Chicago, Sternstein predicted.

Local patent lawyers on the Litigation Committee of the Intellectual Property Law Association of Chicago certainly saw it that way, he said.

"A lot of local patent attorneys felt a lot of the business was going to places where they did have local patent rules," according to Sternstein.

Bradford P. Lyerla of Marshall, Gerstein & Borun LLP, also agreed the new rules could bring more patent cases to the Northern District of Illinois. "No question about that."

But "I wouldn't expect to see a huge uptick," Lyerla noted.

He said the customs followed in the Eastern District of Texas and in Delaware are more advantageous to plaintiffs in patent cases so those places will continue to attract more filings.

Lyerla is a trial lawyer who focuses on patent and trade secret litigation.

The new rules were drafted by a committee of lawyers affiliated with the Intellectual Property Law Association of Chicago and four federal judges here.

Judge Matthew F. Kennelly chaired the drafting committee, which also included Judge James B. Zagel, Judge Amy St. Eve and Judge James F. Holderman, chief judge of the U.S. District Court here.

Sternstein and Lyerla were among the seven practitioners on the drafting committee.

The rules expect a case to be ready for trial in 25 to 26 months, Donoghue said.

This compares to a previous average time to trial of up to 43 months, according to Lyerla.

"The time to trial in the Northern District of Illinois for a patent cases was really, really, really long, just way out of kilter with other cases in the Northern District of Illinois," Lyerla said.

For other federal litigation here, time to trial is about 24 months, according to Lyerla.

As examples of the new rules, Donoghue cited two benefits to plaintiffs and two benefits to defendants.

"The claim construction process is held late in discovery ... later than in most other local patent rules'' found in some other federal jurisdictions, Donoghue said.

The claims construction process is the way a judge decides on the meaning of certain, disputed words or phrases in the patent at issue, Donoghue said.

To have this process late in the litigation allows the plaintiff broader discovery and depositions and a broader patent infringement theory throughout, Donoghue explained.

The new rules also require both sides to produce "initial disclosures'' or categories of documents that could be relevant along with names of witnesses and individuals with knowledge about the case only about nine weeks after the complaint is filed, Donoghue continued.

The earliness is another advantage for plaintiffs, he said.

As an advantage for defendants, he said the new rules require plaintiffs to produce early on the documents showing ownership of the patents allegedly infringed as well as documents on the development of those patents.

That early discovery helps defendants, according to Donoghue.

"The other big benefit to the defendant is the claim construction briefing process," he continued.


Normally, a plaintiff writes the opening brief in the claims construction process. The defendant responds, and the plaintiff then replies to that, he said.

"In these rules, it's reversed," Donoghue said. "Defendant files the opening and reply brief. Plaintiff files just the response brief."

Lyerla said that five years ago, he proposed to Holderman in private that local patent rules be drawn up for the Northern District of Illinois. Lyerla said he was politely rebuffed.

Holderman "said it would never happen," explaining that the tradition here is that district court judges "pretty much run their own show in terms of scheduling," according to Lyerla.

But since then Holderman has become an advocate for "a more thoughtful approach to patent litigation in the federal courts," Lyerla said.

The Litigation Committee of IPLAC began discussing the issue again under its new chairman, Dean A. Monco, Lyerla added.

In 2007 Sternstein, who was on that committee, said he approached Holderman about drawing up rules, and "Judge Holderman was very receptive."

Sternstein was named chairman of a subcomittee of the IPLAC Litigation Committee to work with the judges to draw up the new rules.

After a long process of publishing drafts, comments and revisions, the rules went into effect Oct. 1.

But Sternstein said as soon as the drafts started circulating, "some of the judges started using our drafts."

The other lawyers on the drafting committee were Edward D. Manzo, Michael P. Padden, Marshall Seeder, and Paul K. Vickrey.

jcrimmins@lbpc.com

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Integrated Cards, L.L.C. v. McKillip Indus., Inc. d/b/a USA/Docufinish, No. 06 C 2071 (N.D. Ill. Nov. 19, 2009) (Kendall, J.). 

Judge Kendall, following a bench trial, held that pre-suit damages were barred by laches, but that the claims were not barred by equitable estoppel, in this patent case involving integrated labels.  Laches was presumed because plaintiff and its founder/predecessor entities were aware of defendant's alleged infringement for more than six years before filing.  And defendant was prejudiced by plaintiff's delay because defendant purchased more than $1M in machines for producing the allegedly infringing integrated labels.  Laches, therefore, barred pre-suit damages.

Equitable estoppel, however, did not apply and bar all damages because plaintiff never suggested to defendant that plaintiff would not sue.  There was no evidence that plaintiff or its predecessors ever threatened litigation or otherwise misled defendant into believing it would not get sued.  And when litigation has not been threatened, courts typically will not estop patentee's suit.  Plaintiff's suit, therefore, was not equitably estopped.

*  Click here for more on this case in the Blog's archives. 

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Morningware v. Hearthware Home Prods., Inc., No. 09 C 4348, Slip. Op. (N.D. Ill. Nov. 16, 2009) (St. Eve, J.).

Judge St. Eve denied defendant Hearthware's Fed. R. Civ. P. 12(b)(6) motion to dismiss plaintiff Morningware's Lanham Act unfair competition and product disparagement claims, as well as related state law claims.  Hearthware allegedly bought Morningware's trademarks as Google AdWord keywords so that when a Google user searched for Morningware's trademarks, a Hearthware "sponsored link" showed up above the standard search results, along with the following text written by Hearthware:

        The Real NuWave® Oven Pro Why Buy an Imitation?  90 Day Gty.

Hearthware did not dispute that the MORNINGWARE mark was protectible or that it was owned by Morningware.  Instead, Hearthware argued that purchasing "Morningware" as an AdWord keyword was not a "use" in commerce.  The Court noted that although the Seventh Circuit had not decided the issue, courts have largely adopted a broad reading of "use" that included AdWords purchases.  But in this case, the Court could not decide the issue without fact-finding which was not appropriate in a Rule 12(b)(6) motion.  The Court, therefore, denied the motion to dismiss.

Hearthware also argued that purchasing AdWords could not create customer confusion.  But the Court held that Morningware pled sufficient facts to show initial interest confusion which is actionable pursuant to the Lanham Act, even if the confusion is only brief and the customer is aware of the true source of the goods by the time a purchase is made.

The Court also held that Hearthware's alleged "Why Buy an Imitation" advertisement text was sufficient for a disparagement case as a fact-finder could determine that the text could lead a consumer to believe that Morningware's product was an imitation of Hearthware.  Morningware's state law claims survived the motion to dismiss for the same reasons as the Lanham Act claims. 
 

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Loufrani v. Wal-Mart Stores, Inc., No. 09 C 3062, Slip. Op. (N.D. Ill. Nov. 12, 2009) (Kendall, J.).

Judge Kendall denied counterclaim defendants' (collectively "Smiley Company") Fed. R. Civ. P. 12(b)(6) motion to dismiss counterclaim plaintiff Wal-Mart's Lanham Act and related state law declaratory judgment claims related to Smiley Company's potential use of Wal-Mart's Mr. Smiley Mark, from Wal-Mart's well-known roll back campaign, after the Trademark Trial and Appeal Board ("TTAB") held that Smiley Company's mark was not distinctive and that the mark would create a likelihood of confusion with Wal-Mart's Mr. Smiley Mark.

First, the  Court held that Wal-Mart had plead sufficient facts to establish a controversy existed warranting Wal-Mart's declaratory judgment claims.  All of Wal-Mart's claims related to likelihood of confusion.  And the parties had developed "clear positions" on likelihood of confusion through their TTAB proceedings.  Furthermore, Smiley Company had already raised numerous claims against Wal-Mart, evidencing an actual controversy.  The Court also noted that this case was not like Geisha v. Tuccilli, 552 F. Supp. 2d 1002 (N.D. Ill. 2007) (click here and here to read more about the case in the Blog's archives).  In that case, the Court held there was no controversy, but declaratory judgment defendant had never used its mark and if he did use it by opening a restaurant, it would have been easy for declaratory judgment plaintiff to identify the use and alleged infringement.  Smiley Company, however, admitted to using its mark internationally since the 1970s.  Furthermore, Geisha was a summary judgment decision where the parties and the Court had the benefit of discovery.

Smiley Corp. also argued that the Court should only address its appeal of the TTAB decision and not Wal-Mart's broader claims.  The Court, however, held that a district court is free to decide infringement and likelihood of confusion issues as part of reviewing a TTAB decision.  The TTAB review instituted by Smiley Company was both an appeal and a new action which allowed the Court to address new issues and to admit new evidence.

Finally, Wal-Mart's Illinois Consumer Fraud and Deceptive Business Practices Act claim was not insufficient for failing to plead actual damages.  While actual damages were required, they could not exist in a declaratory judgment claim seeking to prevent future acts and, therefore, future damages.
 

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Wednesday, February 17, 2010 at noon central, Law.com is hosting an in-depth webinar discussion of the Seventh Circuit's new Principles Relating to the Discovery of Electronically Stored Information – click here for registration information. The Principles are designed to streamline discovery and resolve e-discovery disputes by, among other things, incentivizing early and informal information exchange on common issues. The Principles also identify formats of e-discovery that are generally not required to be preserved in order to reduce fights and costs. For more on the Principles, click here.  In October 2009, the Seventh Circuit initiated Phase One of its E-Discovery Pilot Program across the Seventh Circuit's district courts, with a special emphasis on the Northern District of Illinois. In Phase One, the Principles are being applied to 80 selected cases during Phase One. 

The panelists for the webinar include:

• Chief Judge Holderman;
  
• Magistrate Judge Nolan;
  
• Thomas Lidbury, Mayer Brown; and
  
• Alexandra Buck, Senior Counsel and Director of E-Discovery and Records Management at Abbott Laboratories.   

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Continental Datalabel, Inc. v. Avery Dennison Corp., No. 09 C 5980, Slip. Op. (N.D. Ill. Dec. 9, 2009 (Shadur, Sen. J.).

Judge Shadur ordered the parties to be prepared to discuss at a status conference why defendants' respective noninfringement and invalidity declaratory judgment counterclaims should not be stricken as duplicative of plaintiff's patent infringement claims. 

* Click here for more on this case in the Blog's archives.

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The annual Chicago IP Colloquium continues this Tuesday, February 9, 2010.  The Chicago IP Colloquium is jointly sponsored by Chicago-Kent College of Law and Loyola University Chicago School of Law  to discuss a range of issues in intellectual property and cyberspace law based upon papers by six nationally renowned intellectual property scholars.  The sessions are uniformly excellent, and well worth your time.  The next session will be Tuesday, February 9 from 4:10 pm to 5:50 pm at Loyola and will feature Professor Jeanne C. Fromer, Fordham University School of Law, discussing her paper District Courts as Patent Laboratories.

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 Chief Judge Holderman announced that the Northern District of Illinois has appointed three new magistrate judges to seven year terms.  All three new magistrates are former Northern District law clerks.  Here are the biographies of each new judge as provided by the Northern District (emphasis added):

• Jeffrey T. Gilbert received his law degree from Northwestern University (1980). He is a partner with Reed Smith in its Chicago office and is a member of the firm’s regulatory litigation group. Mr. Gilbert originally practiced with Sachnoff & Weaver, which combined with Reed Smith in 2007. Prior to entering private practice, Mr. Gilbert served as Law Clerk to The Honorable Marvin E. Aspen, U.S. District Court for the Northern District of Illinois. He has been recognized as an Illinois Super Lawyer by 2010. Mr. Gilbert is also an Adjunct Professor of Trial Advocacy at Northwestern University Law.
   
• Administrative Law Judge Young B. Kim was born in South Korea. He received his law degree from Loyola University of Chicago School of Law (1991). Judge Kim began his legal career as an Assistant Public Defender in Cook County, working in various misdemeanor courtrooms and in the Domestic Violence Division. Two years later, he served as Law Clerk to The Honorable Charles R. Norgle, Sr., U.S. District Court for the Northern District of Illinois. After his clerkship, Judge Kim joined the U.S. Attorney’s Office for the Northern District of Illinois, where he litigated both civil and criminal cases. During his seven-year service, Judge Kim focused on healthcare fraud, medical malpractice, and employment discrimination cases. In 2001, Judge Kim accepted an appointment with the United States Equal Employment Opportunity Commission as an Administrative Law Judge. Judge Kim is one of the recipients of the National Asian Pacific American Bar Association’s "2004 Best Lawyers Under 40" award.

• Sheila M. Finnegan received her law degree from the University of Chicago (1986) and currently co-chairs Mayer Brown’s Chicago litigation practice, handling civil and criminal trials.  In 2008, 2009, and 2010, she was recognized as one of the top 50 women lawyers in Illinois by Super Lawyers.  Prior to joining Mayer Brown, Ms. Finnegan served as Chief of the Criminal Division in the U.S. Attorney’s Office for the Northern District of Illinois. She also served for several years on the Financial Fraud Task Force. Ms. Finnegan served as Law Clerk to The Honorable Milton I. Shadur, U.S. District Court for the Northern District of Illinois, and is an Adjunct Professor of Trial Advocacy at Northwestern University Law School.

Welcome to the Northern District bench Judges Finnegan, Gilbert and Kim.  

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World Wide Sales, Inc. v. Church & Dwight Co., Inc., No. 08 C 1198, Slip Op. (N.D. Ill. Nov. 9, 2009) (Kennelly, J.).

Judge Kennelly granted defendant Church & Dwight (“CD”) summary judgment on each of plaintiff World Wide Sales’ (“WWS”) claims for trademark infringement, Lanham Act unfair competition and fraud on the Patent and Trademark office. WWS claimed that CD infringed and unfairly competed with WWS’s Forever Fresh for the Fridge trademark, used with a refrigerator odor elimination product, by using CD’s Fridge Fresh mark with its Arm & Hammer refrigerator deodorizer product.

Lanham Act

The parties stipulated that CD’s mark was protectable for purposes of this motion. The only issue, therefore, was whether there was a likelihood of confusion. Generally, a court would consider whether consumers believed CD’s mark referred to WWS’s product. But WWS relied upon a theory of reverse confusion, arguing that CD had so saturated the market with its junior mark that consumers believed WWS’s products were CD’s products. Courts apply the same likelihood of confusion factors in both reverse confusion and confusion cases, although the factors are weighted differently:

• Similarity of Products. The products had similar deodorizing uses, but they were presented so differently that there was little chance of consumer confusion.
   
• Degree of Similarity. Beyond both using “Fridge” and “Fresh” the marks were not similar. Among other things, WWS’s mark was surrounded by pictures of refrigerated food stored with or without its product, CD’s mark was against a yellow-orange background, similar to other Arm & Hammer products without any pictures of food. The factor weighed strongly in CD’s favor as it was “extraordinarily unlikely” that consumers would be confused.
   
• Use and Manner of Concurrent Use. The parties' distribution channels were vastly different. WWS offered no evidence of the products being sold in the same store or advertised in the same publication.
   
• Strength of Mark. WWS’s mark was descriptive and relatively little had been invested in promoting the mark. As a result, the Court held that the mark was relatively weak.
   
• Consumers’ Degree of Care. While the products at issue were relatively inexpensive, the Court still held that there was little chance consumers would confuse the products.
   
• CD’s Intent. Because the junior user does not seek to profit from the senior user’s mark in reverse confusion cases, CD’s intent was irrelevant.
   
• Actual Confusion. WWS offered no evidence of actual confusion.

Based upon the factors, the Court held that no reasonable fact finder could find a likelihood of confusion.

Fraud on the PTO

Because WWS’s registration disclaimed the exclusive use of “fridge” and “fresh,” no reasonable fact finder could have found that CD lacked a reasonable belief that “fridge” and “fresh” were unprotected words. And therefore, failing to disclose WWS’s "Forever Fresh for the Fridge" registration to the PTO during the prosecution of CD's "Fridge Fresh" mark was not fraud.

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