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

Avery Dennison Corp. v. Continental Datalabel, Inc., No. 10 C 2744, Slip Op. (N.D. Ill. Nov. 30, 2010) (Kennelly, J.).

Judge Kennelly granted plaintiff Avery Dennision's ("ADC") Fed. R. Civ. P. 12(b)(6) motion to dismiss defendant Continental Datalabel's ("CDI") inequitable conduct, Walker Process fraud and sham litigation counterclaims in this patent dispute regarding labels with a tear off liner to expose a portion of a label column for easy removal.

Inequitable Conduct

CDI alleged two bases of inequitable conduct. First, ADC allegedly intentionally failed to tell the examiner that certain limitations outlined in a series of bullet points were from a particular prior art reference. That claim filed because ADC had previously disclosed the prior art reference at issue to the examiner - once a reference is before an examiner, it cannot be found to have been withheld from the examiner. Second, ADC allegedly intentionally failed to disclose to the examiner that curling up of labels is an inherent characteristic of adhesive labels. But ADC had disclosed the inherent curling up by disclosing various prior art references regarding adhesive labels that taught the inherent curling up, combined with the examiner's presumed experience in the art.

Walker Process Fraud Claim

Because CDI's Walker Process claim was premised upon the alleged inequitable conduct, CDI's Walker Process claim failed. The Court further noted that because inequitable conduct is a broader concept than Walker Process fraud, a party that fails to make its case for inequitable conduct, cannot make a Walker Process fraud claim.

Sham Litigation

CDI's sham litigation claim was based upon allegations that ADC knew the patent was invalid based upon the Brady prior art reference, which was before the examiner, and because had ADC tested CDI's accused labels, ADC would have realized its suit was baseless. Because the Brady reference was before the examiner, however, the Court could not find that the claim was "objectively baseless" as required for sham litigation. ADC could have reasonably believed that after the examiner considered Brady and granted ADC's patent, ADC's patent was in fact valid over Brady.

And ADC's alleged failure to test the accused CDI product was not sufficient for a sham litigation claim. Sham litigation requires more than an unsuccessful suit. While CDI may eventually prove that it did not infringe, ADC's failure to perform one test identified by CDI does "not permit the court to infer more than the mere possibility" that ADC's suit was in bad faith.

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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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Continental Datalabel, Inc. v. Avery Dennison Corp., No. 09 C 5980, Slip Op. (N.D. Ill. Nov. 19, 2009) (Shadur,  J., Sen.).

Judge Shadur sua sponte notified the parties to be prepared to discuss plaintiff Continental Datalabels' (“CDL”) addition of defendant Memorex in this patent infringement and Lanham Act dispute.  CDL added Memorex by amending CDL’s complaint pursuant to Fed. R. Civ. P. 15(a) of right, before the original defendant Avery Dennison Corp. (“ADC”) answered.  The Court noted that Memorex’s and ADC’s accused products appeared to be unrelated.  The infringement proofs, therefore, were unlikely to have much overlap, although the invalidity cases would likely have commonality.  

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Avery Dennison Corp. v. Naimo, No. 06 C 3390, 2006 WL 3343762 (N.D. Ill. Nov. 16, 2006) (Grady, J.).

In this trade secret dispute, Judge Grady dismissed plaintiff's breach of contract claim alleging defendant's breach of the parties' Employment Agreement because the Separation Agreement the parties subsequently signed included an integration clause.  When defendant began his employment with plaintiff he signed an Employment Agreement which required that, among other things, defendant not compete with plaintiff for twelve months after his employment ended and that defendant never use plaintiff's proprietary information for the benefit of anyone besides plaintiff.  When defendant later stopped working for plaintiff, the parties signed a Separation Agreement with a similar proprietary information clause and a strong integration clause, but apparently without a similar non-compete clause. 

The Separation Agreement's integration clause read as follows:

This Agreement is the only and complete agreement between [defendant] and [plaintiff] on or in any way relating to the subject matter hereof, and supersedes all previous agreements, including without limitation, the Employment Agreement, except to the extent such Employment Agreement . . . is specifically referenced in Section 2 of this Agreement.

The Separation Agreement also stated that it was a "full and final settlement of all matters relating to or arising out of [defendant's] employment and separation of employment with [plaintiff]."  Based on the language of the Separation Agreement, the Court held that the Separation Agreement replaced the Employment Agreement "without limitation" except for plaintiff's payment obligations to defendant as set forth in Section 2 of the Employment Agreement.

Practice tip:  When preparing separation agreements, make sure to include all of the provisions from the employment agreement that you might need post-employment, otherwise you stand a good chance of losing those provisions left out of the separation agreement. 

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