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

Arcadia Group Brands Ltd. v. Studio Moderna SA, No. 10 C 7790, Slip Op. (N.D. Ill. Aug. 15, 2011) (Der-Yeghiayan, J.).

Judge Der-Yeghiayan granted plaintiffs' (collectively "Arcadia") motion to dismiss defendants' (collectively "Moderna") counterclaims and denied Moderna's motion to dismiss Arcadia's claims in this Lanham Act case involving Arcadia's TOPSHOP and Moderna's TOP SHOP TV marks.  In 2004, the parties entered a settlement agreement (the "Agreement") pursuant to which Moderna agreed not to use TOPSHOP to sell women's clothing in any country.  Arcadia alleged that Moderna violated the Agreement beginning in 2010 when it began selling women's clothing in the US on Moderna's topshoptv.com website.

Moderna's Motion

Moderna argued that Arcadia did not plausibly plead a protectable mark because Moderna was the first user of the mark.  But a motion to dismiss must assume the truth of Arcadia's allegations and Arcadia plausibly pled that it was the first user of the mark.  Additionally, Moderna's arguments ignored that Arcadia's complaint challenged the validity of Moderna's TOPSHELF TV registration.

Arcadia sufficiently pled fame as part of its trademark dilution claim.  While Arcadia did not parrot the language of the statute, it pled its TOPSHOP brands were "world famous", that the brand is one of the most successful in the world, that there have been millions of dollars in US sales and that the brand is regularly featured in US and international fashion and celebrity magazines and other media.

Arcadia's Motion

The Court dismissed Moderna's counterclaim for a declaratory judgment that it was the senior user of its TOP SHOP TV mark.  Arcadia, however, had never challenged Moderna's TOP SHOP TV mark.  Arcadia's only claims, in the suit or otherwise, were with respect to its TOPSHOP mark.  As a result, any decision regarding the mark would be an impermissible advisory opinion.

The Court dismissed Moderna's trademark misuse counterclaim because Moderna did not show that trademark misuse was an affirmative cause of action. Moderna was, however, allowed to amend its answer to add an affirmative defense of trademark misuse.

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Patent Compliance Group, Inc. v. Brunswick Corp., No. 10 C 4645, Slip Op. (N.D. Ill. Jan. 14, 2010) (Der-Yeghiayan, J.).

Judge Der-Yeghiyan denied defendant Brunswick's Fed. R. Civ. P. 12(b)(6) motion to dismiss plaintiff Patent Compliance Group's ("PCG") false patent marking claims regarding Brunswick's exercise equipment. First, the Court held that Rule 9(b) heightened pleadings applied to the intent to deceive requirement of false patent marking, and anologized to the Federal Circuit's inequitable conduct pleading requirements. While PCG's first complaint alleging that Brunswick was a sophisticated company, PCG's amended complaint attaching Patent Office documents identifying the expiration dates of the allegedly expired patents and identifying Brunswick's in-house patent counsel was sufficient.
 

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Nova Design Build, Inc. v. Grace Hotels, LLC, No. 08 C 2855, Slip Op. (N.D. Ill. Jun. 8, 2010) (Der-Yeghiayan, J.).

Judge Der-Yeghiayan granted defendant Grace Hotel's motion for costs and denied without prejudice Grace Hotel's motion for attorney's fees. As an initial matter, the Court held that Grace Hotels was a prevailing party pursuant to both Fed. R. Civ. P. 54(d) (costs) and 17 U.S.C. § 505 (attorney's fees). While the standards were different, Grace Hotels met both standards. Grace Hotels was granted summary judgment on plaintiff's copyright infringement claim because plaintiffs did not have a valid copyright registration – click here for more on this opinion in the Blog's archives. While the decision was jurisdictional and not substantive, Grace Hotel was a prevailing party because the Court's ruling "effectively foreclosed" Plaintiff's copyright claims. In other words, "Grace [Hotels] obtained more than just a moral victory on a minor jurisdictional point." Because Grace Hotels was a prevailing party, the Court awarded the reasonable costs Grace Hotels requested for court reporter fees pursuant to Fed. R. Civ. P. 54(d) - $2,534.70. 

While Grace Hotels was also a prevailing party for purposes of § 505, the Court denied Grace Hotels attorney's fees motion without prejudice. The fees did not appear reasonable. They were not limited to fees associated with defending the copyright claim. Grace Hotels was not entitled to fees for defending related state law claims which the Court declined to exercise supplemental jurisdiction over after resolving the federal copyright claim. Grace Hotels also sought fees for a separate case between the parties. The Court allowed Grace Hotels to file a renewal motion for attorney's fees tailored to the recoverable fees.

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Nova Design Build, Inc. v. Grace Hotels, LLC, No. 08 C 2855, Slip Op. (N.D. Ill. Feb. 26, 2010) (Der-Yeghiayan).

Judge Der-Yeghiayan granted defendant summary judgment as to plaintiffs' copyright infringement claims, and refused to exercise supplemental jurisdiction over plaintiff's state law claims. Plaintiffs had a registered copyright, which was prima facie evidence of registration. But the Court held the registration was invalid because it was not accompanied by original deposit materials.

Plaintiffs were robbed prior to filing for their copyright. The original building diagrams were taken at that time. So, in order for plaintiffs to get copyright protection, plaintiff prepared a reconstruction of the deposit materials – blueprints in this case. The fact that the deposit material was a close approximation of the originals was not enough. Furthermore, manual reconstruction without reference to the original was also not sufficient. Having denied plaintiffs' federal claims, the court exercised its discretion to refuse supplemental jurisdiction over the state law claims.

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

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Valley Entertainment, Inc. v. Friesen, No. 08 C 3470, Slip Op. (N.D. Ill. Feb. 17, 2010) (Der-Yeghiayan, J.).

Judge Der-Yeghiayan granted defendants summary judgment of noninfringement regarding plaintiff Valley Entertainment's ("Valley") copyright infringement claim regarding certain songs by the artist Raphael. The Court also granted defendants' motion to strike Valley's newly identified copyright, SR 107-850. Finally, the Court declined to exercise supplemental jurisdiction over Valley's remaining state law claims. Valley's asserted copyright covered only words and arrangement of sheet music, but defendants' alleged infringement was based upon the use of sound recordings of the songs at issue. Valley did not challenge this analysis, instead identifying a new copyright, SR 107-850, that covers sound recordings. But the Court struck that copyright because it was not identified until briefing of the summary judgment motion. The copyright was not identified in Valley's complaint or in any of Valley's numerous discovery responses as a basis for Valley's copyright infringement claims. The Court noted that Valley was no longer free to update its discovery pursuant to Fed. R. Civ. P. 26(a) because the update would no longer be timely.

Having resolved Valley's federal claims, the Court declined to exercise supplemental jurisdiction over Valley's related state law claims.

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Mindy's Restaurant, Inc. v. Watters, No. 08 C 5448, Slip Op. (N.D. Ill. Jun. 9, 2009) (Der-Yeghiayan).

Judge Der-Yeghiayan granted defendants' Fed. R. Civ. P. 12(b)(1) motion to dismiss for lack of subject matter jurisdiction even though plaintiff brought a federal Lanham Act trademark infringement claim.  While Lanham Act claims are generally considered federal questions creating subject matter jurisdiction, plaintiffs claims were in essence breach of contract claims.  Plaintiff was a franchisor of Mindy's Restaurants.  Defendants were franchisees, until they allegedly stopped making required franchise payments and plaintiff terminated the franchise agreement.  While plaintiff's claims were for use of plaintiff's trademarks when defendants allegedly continued operating their restaurant after the franchise agreement was canceled.  As a result, the Court held that the parties dispute and plaintiff's claims sounded in contract, not the Lanham Act.  The reason the trademarks were allegedly infringed was the termination of the franchise agreement.

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Americash Loans, LLC v. AO Ventures, LLC, No. 08 C 5147 (N.D. Ill. Mar. 19, 2009) (Der-Yeghiayan, J.).

Judge Der-Yeghiayan denied defendant AO Ventures (“AOV”) motion to dismiss plaintiff Americash Loans' Lanham Act and related state law claims. Americash Loans alleged that AOV infringed Americash Loans' “Americash Loans” mark by advertising confusingly similar mark on AOV's website. First, the Court held that Americash Loans' prior settlement of a trademark dispute with a third party did not preclude this suit. The prior suit involved a different mark, “Americash,” and Americash Loans did not allege that AOV was acting as an agent of the third party involved in the earlier settlement when it allegedly used the infringing marks.

The Court also held that the fact that AOV was not accused of using the exact mark, but a confusingly similar mark was not grounds to dismiss the complaint. The Court noted that customer confusion between similar marks was a recognized part of trademark infringement analysis and that suits were routinely filed alleging infringement based upon the use of marks that were not identical to the asserted trademark.

Further, the Court held that whether AOV's display of a third party's advertisement was a use of the accused mark was a question of fact that could not be resolved by a Rule 12 motion. Finally, the Court held that it could not decide whether AOV's alleged infringement was a nominative fair use of Americash Loans' mark because any fair use analysis involves questions of fact.

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Nova Design Build, Inc. v. Grace Hotels, LLC., No. 08 C 2855, Slip Op. (N.D. Ill. Mar. 25, 2009) (Der-Yeghiayan, J.).

Judge Der-Yeghiayan granted in part and denied in part plaintiffs' Fed. R. Civ. P. 12(b)(6) motion to dismiss defendants' counterclaim copyright infringement case. Plaintiffs claimed that they developed plans for a Holiday Inn Express hotel defendants planned to build, and that defendants infringed the copyrights in plaintiffs’ plans by revising them with another firm and using them without plaintiffs’ permission. The Court previously held that plaintiffs’ copyright claim was sufficiently pled -- click here for more on that opinion and the case generally in the Blog's archives.  After that opinion, defendants answered the complaint and filed a counterclaim seeking among other things declaratory relief.  The Court dismissed the counterclaim as to plaintiff Annex whom defendants agreed should be dismissed.  And the Court struck defendants' request that plaintiffs' complaint be struck because the Court already denied defendants' Rule 12(b)(6) motion to dismiss.

But the Court denied to dismiss defendants' counterclaim.  Plaintiffs argued that the counterclaim should be dismissed because it was not clearly pled, the legal basis was not specifically identified and it lacked factual detail.  But the Court held that notice pleading did not require good grammar or organization, nor were specific facts required.  Because defendants' counterclaim put plaintiffs on notice that their copyright was allegedly a derivative works to which defendants maintained certain rights.  To the extent plaintiffs believed additional information, the appropriate remedy was a Rule 12(e) motion for a more definite statement.  But the Court noted that a more definite statement was not required in this case because defendants' counterclaim put plaintiffs on notice.

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Mindy's Restaurant, Inc. v. Watters, No. 08 C 5448, Slip Op. (N.D. Ill. Feb. 27, 2009) (Der-Yeghiayan, J.).

Judge Der-Yeghiayan denied defendant's motion to disqualify plaintiff's counsel in this Lanham Act dispute regarding plaintiff's Mindy's Restaurant marks. Defendant previously was a licensee of plaintiff's marks. During their licensing arrangement, the parties explored a potential joint venture. As part of that process, plaintiff and defendant jointly met with a member of plaintiff's current law firm. Defendant contended that that meeting created an attorney-client relationship which disqualified plaintiff's counsel from this case. But the Court held that even if the single meeting with both parties created an attorney-client relationship, there was only a “slight tangential relationship” between the current case and the prior potential joint venture. And the attorney involved could not have received confidential information. The attorney met with both parties together and never spoke to either party about the matter after the initial meeting. So any information defendant provided to the attorney was also provided to plaintiff. Finally, there was no evidence that the attorney or any member of plaintiff's counsel's firm would ever be called as an essential witness in the case.

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Nova Design Build, Inc. v. Grace Hotels, LLC., No. 08 C 2855, 2008 WL 4450305 (N.D. Ill. Sep. 30, 2008) (Der-Yeghiayan, J.).

Judge Der-Yeghiayan denied defendants’ motion to dismiss plaintiffs’ copyright infringement and related state law claims. Plaintiffs claimed that they developed plans for a Holiday Inn Express hotel defendants planned to build, and that defendants infringed the copyrights in plaintiffs’ plans by revising them with another firm and using them without plaintiffs’ permission. The Court held that plaintiffs’ copyright claim was sufficiently pled. Plaintiffs alleged ownership of a copyright, attaching the copyright registration, and that defendants infringed the copyright. Defendants’ argument that plaintiffs’ plan were a derivative work were beyond the pleadings and, therefore, not appropriate for a Fed. R. Civ. P. 12(b)(6) motion. 

Similarly, defendants’ argument that plaintiffs, as authors of a derivative work, lacked standing to bring their copyright suit also was beyond the scope of a Rule 12(b) motion to dismiss. Furthermore, it was not ripe for decision because defendants made the argument for the first time on reply.

The Court also held that defendants’ arguments as to plaintiffs’ state law claims were beyond the complaint and, therefore, not sufficient for a motion to dismiss.

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The Seventh Circuit instituted a Commission to study the implementation of the ABA Jury Project.  The Northern District was heavily represented on the Commission.  The following Northern District Judges were members of the Commission:  Bucklo, Brown, Coar, Darrah, Denlow, Der-Yeghiayan, Gottschall, Holderman, Kennelly, Lefkow, Moran, Schenkier, St. Eve, and Zagel.  The Commission recently published its report -- click here to read it.  The report describes a two phase analysis.  In the first phase, district judges tested the following seven ABA Principles:

1.       Twelve-Person Juries;

2.       Jury Selection Questionnaires;

3.       Preliminary Substantive Jury Instructions;

4.       Trial Time Limits;

5.       Juror Questions;

6.       Interim Trial Statements by Counsel; and

7.       Enhanced Jury Deliberations.

Other Principles, such as juror notebooks and allowing jurors to take notes, were already in such widespread use that they were not tested.  Click here for the Phase One Project manual detailing the principles, the rationales and authority behind them, and suggested procedures.  Phase One resulted in questionnaires from 22 participating federal trial judges, 74 participating attorneys and 303 jurors from 38 trials that used one or more of the seven Principles.  Based upon the analysis of Phase One results and questionnaires, the Commission focused Phase Two on the following four Principles:

1.       Juror Questions;

2.       Interim Trial Statements by Counsel;

3.       Twelve-Person Juries; and

4.       Preliminary Substantive Jury Instructions.

These Principles were chosen because of Phase One popularity (78% of jurors reported that being able to ask questions increased their satisfaction with the process) and because of a desire to study the Principles more.  Click here for the Phase Two manual.

In Phase Two, 108 jurors from 12 trials employing one or more of the Phase Two Principles filled out questionnaires.  In addition, 12 attorneys and 4 district judges that participated also filled out questionnaires.  The results are interesting, but more importantly create the opportunity to powerfully impact the trial system across the Seventh Circuit in ways that benefit all of the stakeholders in the trial process -- the litigants, the jurors, the judge and the judge's chambers, and the litigators.

All four of the Phase Two Principles showed significant benefits to the trial process.  83% of jurors reported an increased understanding of the facts when allowed to ask written questions through a judge -- the questions were reworded to meet evidentiary rules.  And 75% of judges and 65% of attorneys thought the questions benefited jurors.  Similarly, preliminary substantive jury instructions were found to improve trials by jurors (80%), judges (85%) and attorneys (70%).  And the same was true for interim statements to the jury -- jurors (80%) and judges (85%).  Finally, twelve-person juries were found not to harm efficiency, while increasing juror diversity.

Each of the four Phase Two Principles, as well as several of the additional three Phase One Principles deserve more attention and analysis.  So, over the next several weeks I will provide follow up posts discussing the findings of those Principles in greater detail.  I will start with the idea of juror questions, which I find particularly important, later this week or early next.

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Personified, LLC v. Sales Consultants of Cary, LLC, No. 08 C 3123, 2008 WL 3200842 (N.D. Ill. Aug. 8, 2008) (Der-Yeghiayan, J.)

Judge Der-Yeghiayan granted declaratory judgment (“DJ”) defendant Sales Consultants of Cary’s (“SCC”) Fed. R. Civ. P. 12(b)(6) motion to dismiss DJ plaintiff Personified’s trademark case in favor of SCC’s later-filed District of North Carolina action. Shortly after its parent registered the trademark “Personified,” Personified began using the name and allegedly received a cease and desist letter from SCC who offered staffing services using the name “Personified.” SCC’s letter allegedly demanded that Personified immediately change its name and pay SCC damages. In response, Personified filed this suit seeking a declaratory judgment that it had not violated trademark laws or engaged in unfair competition. SCC countersued in the District of North Carolina several days later.

The Court had federal question jurisdiction because of the Lanham Act issues.  Personified was the first to file, but the Court noted that the Seventh Circuit did not strictly follow the first-to-file rule. And the Court exercised its “wide discretion,” declining to exercise jurisdiction over the declaratory action. SCC was the natural plaintiff. Instead of filing suit after receiving the cease and desist letter, Personified could have gone to SCC to resolve the dispute. Additionally, Personified was already preparing a motion to transfer the North Carolina action to the Northern District. The Court also denied a motion to stay its ruling pending a decision by the District of North Carolina. If the North Carolina Court transferred the case to the Northern District, Personified would not face substantial hardship by having to replead its DJ claim.

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Nilssen v. MagneTek, Inc., No. 05 C 2933, 2008 WL 1774984 (N.D. Ill. Apr. 16, 2008) (Der-Yeghiayan, J.).

Judge Der-Yeghiayan confirmed an arbitration award and denied plaintiff's motion to vacate it. The arbitrator awarded plaintiffs (collectively "Nilssen") approximately $23M for defendant Magnetek's patent infringement. MagneTek argued that the Court lacked jurisdiction because the arbitration agreement did not expressly confer the right to confirm the arbitration award. But the Court held that the Seventh Circuit only required that the right to confirm be inferred from the arbitration agreement. While the arbitration agreement did not explicitly allow confirmation, the parties evidenced their intent to allow confirmation:

• The parties' American Arbitration Association ("AAA") submission provided for confirmation;
  
• The parties agreed to be bound by the AAA's Commercial Arbitration Rules which provide for court confirmation; and
  
• MagneTek's post-arbitration press release said that the parties conducted binding arbitration which was not subject to appeal.

MagneTek also argued that certain prior art patents were new evidence which required vacating the award. But the Court held that MagneTek was aware of the patents during the arbitration. In fact, at least one patent was marked as an exhibit in the arbitration. Furthermore, MagneTek's post-arbitration prior art search could have been performed before the arbitration. And the Court would not reward MagneTek's late search with a second shot at invalidity.

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• Startup guru Guy Kawasaki has started the Alltop project which categorizes blogs by subject matter and aggregates blog content  for each subject on a single page.  The law Alltop site is excellent, although I would suggest adding the Chicago IP Litigation Blog.  It is like having someone else set up and update feed readers for you.  This is how Alltop describes itself:

We help you explore your passions by collecting stories from “all the top” sites on the web. We’ve grouped these collections — ”aggregations” — into individual Alltop sites based on topics such as environment, photography, science, celebrity gossip, fashion, gaming, sports, politics, automobiles, and Macintosh. At each Alltop site, we display the latest five stories from thirty or more sites on a single page — we call this “single-page aggregation.”

• The Patent Appeal Tracer follows patent cases from filing of a Federal Circuit appeal, after many of the regional IP blogs stop following them, until an opinion issues, when Patently-O and others take over.  It is an interesting idea and a well written blog.  As an example of what they do, check out this recent post on the Federal Circuit appeal of Northern District case Ball Aerosol and Specialty Container, Inc. v. Limited Brands, Inc., No. 05 C 3684 (N.D. Ill.) (Der-Yeghiayan, J.) -- click here or here for coverage of the case in the Blog's archives.

[UPDATE]:  The Chicago IP Litigation Blog has been added to Alltop's law page.  Thanks Guy.  Now, if I could just get Kawasakied.

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Ball Aerosol and Specialty Container, Inc. v. Limited Brands, Inc., No. 05 C 3684, 2008 WL 839993 (N.D. Ill. Mar. 27, 2008) (Der-Yeghiayan, J.).

Judge Der-Yeghiayan denied defendants' (collectively "Limited Brands") motion for reconsideration regarding the Court's claim construction opinion and its summary judgment opinions of infringement, validity and damages – click here to read more about those opinions in the Blog's archives. The Court previously construed the claims of plaintiff Ball Aerosol's ("BASC") patent covers a candle tine. The Court granted BASC summary judgment of infringement and validity, pre-KSR. When KSR revised the obviousness standard, the Court sua sponte ordered supplemental briefing regarding obviousness in light of KSR. Based upon that briefing, the Court again granted summary judgment of validity. The Court then granted BASC summary judgment on damages awarding it 20% royalties and finding Limited Brand's infringement willful.

The Court held that its original claim construction, validity and infringement holdings were correct and that Limited Brands had been given ample opportunities to defend itself. The Court also denied Limited Brands' argument that reasonable royalties could not be decided on summary judgment. Limited Brands' Seventh Amendment right to a jury trial regarding damages had not been violated. There is no right to a jury without a material question of fact.

The Court also held that while its initial grant of summary judgment of willfulness was made before the Federal Circuits' decision In Re Seagate, the undisputed facts also warranted summary judgment of willfulness pursuant to Seagate's objective recklessness standard. Limited Brands was aware of BASC's patent both before the suit was filed and before it began making the infringing candle tin. In fact, Limited Brands had extensive discussions with BASC regarding BASC's specifications for candle tins. Furthermore, Limited Brand's main defense – advice of counsel – was negated because Limited Brands did not disclose its opinion by the Court's deadline for doing so.

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Single Source, Inc. v. Harvey, No. 07 C 1201, 2008 WL 927902 (N.D. Ill. Apr. 7, 2008) (Der-Yeghiayan, J.).

Judge Der-Yeghiayan denied defendants' summary judgment motion. Defendant Harvey was employed by plaintiff Single Source (“SS”) as, among other things, its Sales Director. When Harvey was promoted to the Sales Director position he signed a confidentiality agreement which required that Harvey maintain the secrecy of SS's trade secrets and only use them for SS's benefit. SS alleged that Harvey became disgruntled and took a position with defendant Food Marketing Concepts (“FMC”). Before giving SS notice and leaving SS's employ, Harvey allegedly solicited SS's customers for FMC and used an SS expense account to pursue customers for FMC. Defendants argued that because Harvey was not an SS officer or director he did not owe SS a duty of loyalty. The Court, however, held that an employee owes it employer a duty not to compete with the employer or solicit the employer's customers before terminating the employment. The Court also held that the parties' competing evidence regarding whether Harvey had actually solicited SS's customers prior to ending his employment with SS created a material question of fact.

Practice Tip: You must respond to Local Rule 56.1 statements of material facts. The Court noted that defendants did not respond to SS's statement of additional facts. Because of that, the Court deemed each additional material fact admitted. The Court did not identify whether its decision turned on any of these admitted facts, but it is easy to imagine the circumstance in which the case could have turned on an inadvertently admitted fact.

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The Chicago Tribune is reporting that a trademark suit between well-known Southern California chain Roscoe's House of Chicken 'n Waffles (“Roscoe’s”) against new Chicago restaurant Rosscoe's House of Chicken and Waffles (“Rosscoe’s Chicago”) was at least partially resolved the day after it was filed when Rosscoe’sChicago agreed to change its name to Chicago's Home of Chicken and Waffles.

The restaurants had no affiliation with each other, but had numerous similarities, beyond just the names:

• Both use a cartoon chicken and a waffle as logos; and
  
• Both have drinks called "Sun Rise" and "Sunset".

Those involved in an early hearing yesterday appeared to have a sense of humor about the dispute. After the hearing, Rosscoe’s Chicago’s owner Darnell Johnson was quoted as saying “I'm happy as a chicken eating waffles."  And during the hearing, Judge Der-Yeghiayan summed up the case's status this way: "I see that both parties understand the issues and facts of life and none of the parties are waffling on the issue." Roscoe’s, however, did state that it intended to pursue damages for the period before Rosscoe’s Chicago’s name change.

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Strom v. Strom Closures, Inc., No. 06 C 7051, 2008 WL 489363 (N.D. Ill. Feb. 20, 2008) (Der-Yeghiayan, J.).

Judge Der-Yeghiayan granted plaintiff Victoria Strom’s (“Strom”) motion to dismiss defendants’ (collectively “SCI”) counterclaims. SCI filed an earlier suit charging Strom with patent infringement. The parties settled that suit pursuant to a Settlement Agreement (“Agreement”). SCI alleged that Strom breached the Agreement and was once again, therefore, infringing SCI’s patents. But the Court held that once a district court dismisses a case with prejudice, it cannot reopen the case for enforcement of a related agreement without independent jurisdiction. SCI’s appropriate claim was for breach of the Agreement, not patent infringement. Because breach of the Agreement was a state law claim and because there was no diversity (SCI pled that all parties were Illinois residents), the Court lacked jurisdiction. Finally, the Court held that there was not supplemental jurisdiction based upon Strom’s federal employment claims. Strom’s claims and the breach of the Agreement were not sufficiently related.

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ExcelStor Tech., Inc. v. Papst Licensing GMBH & Co. KG, No. 07 C 2467, 2007 WL 3145013 (N.D. Ill. Oct. 24, 2007) (Der-Yeghiayan, J.).

Judge Der-Yeghiayan granted defendant Papst Licensing’s (“Papst”) Fed. R. Civ. P. 12(b)(1) motion to dismiss for lack of subject matter jurisdiction. Plaintiffs, various related ExcelStor Technology entities (collectively “ExcelStor”) licensed Papst’s patent portfolio (the “Agreement”) related to hard disk drives (“HDD”). ExcelStor alleged that when the Agreement was signed, Papst had already given third party Hitachi a license covering the same HDDs. Furthermore, ExcelStor alleged that Papst concealed the Hitachi license from ExcelStor. 

Based upon the alleged double royalties, ExcelStor filed this action seeking declaratory judgments that both Papst and the Agreement violated the patent exhaustion doctrine* by extracting two licensing fees for the same product based upon the same patent portfolio. But the Court held that patent exhaustion is a defense to patent infringement, not a cause of action. Because patent exhaustion does not entitle ExcelStor to relief, it does not create federal question jurisdiction. Similarly, ExcelStor’s state law claims for fraud and breach of contract claim do not create federal question jurisdiction because they relate to patent exhaustion – they are questions of state law for which the Court lacked jurisdiction. The Court also noted that it did not consider whether diversity jurisdiction existed because neither party raised it.

* For more on patent exhaustion, specifically the Supreme Court’s patent exhaustion case this term, click here.

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Aguila Records, Inc. v. Federico, No. 07 C 3993, Slip Op. (N.D. Ill. Oct. 10, 2007) (Der-Yeghiayan, J.).

Judge Der-Yeghiayan denied defendants’ Fed. R. Civ. P. 12(b)(6) motion to dismiss plaintiff’s Lanham Act, copyright infringement and breach of contract complaint. Plaintiff, a music management and recording agency, alleged that it entered into an oral agreement with individual defendant Sergio Federico (“Federico”), a musician, giving plaintiff exclusive rights to Federico’s and his musical group Alacranes Musical’s (“Alacranes”) recordings. Shortly after agreeing to a ten-year extension of the agreement, plaintiff alleged that Federico quit the Alacranes and joined defendant musical group Aliados de la Sierra (“Sierra”). Plaintiff claimed that defendants infringed its scorpion trademark by using scorpion logos in their promotional material. Plaintiff also alleged that defendants violated plaintiff's copyright in the song “Por Tu Amor” – click here to watch the Alacranes’ music video on YouTube – by performing the song without authorization. Defendants argued that plaintiff failed to state its claims because several of plaintiff’s allegations were false, unsupported or otherwise incorrect. But the Court held that plaintiff had sufficiently pled its claims and that a Rule 12(b)(6) motion was not the appropriate vehicle for evaluating the strength of the evidence.

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Ball Aerosol & Specialty Container, Inc. v. Limited Brands, Inc., No. 05 C 3684, 2007 WL 2570351 (N.D. Ill. Sep. 4, 2007) (Der-Yeghiayan, J.).

Judge Der-Yeghiayan granted plaintiff Ball Aerosol & Specialty Container (“BASC”) summary judgment on the issue of patent damages, held that the case was exceptional and then doubled some of the damages and trebled the remainder. The Court previously construed the claims of BASC’s patent for a candle tin with a cover that can be used as a base and granted plaintiff summary judgment of infringement. In this opinion, the Court weighed the Georgia Pacific factors and held that they warranted a royalty rate of 20%. This rate represented an increase over the 17% rate BASC argued it would have granted in an arms-length negotiation to compensate BASC for the compulsory license. The Court then found that the case was exceptional because, among other reasons, defendants continued selling infringing product after the Court granted summary judgment of infringement. Based on the exceptional case holding, the Court doubled the damages from sales before the Court granted BASC summary judgment of infringement and trebled the damages for all sales after summary judgment.

Summary judgment of damages is a fairly rare occurrence. A quick review of the docket does not suggest that the parties waived their right to a jury. So, the facts in this case must have been very strong.

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Sotelo v. Suburban 171, Inc., No. 07 C 2447, 2007 WL 2570355 (N.D. Ill. Aug. 29, 2007) (Der-Yeghiayan, J.).

Judge Der-Yeghiayan denied defendants’ Fed. R. Civ. P. 12(b)(6) motion to dismiss plaintiffs’ Lanham Act unfair competition claim. Plaintiffs operated a salon called “Studio 171.” Defendants took over the location of plaintiffs’ salon and operated their own salon using all of the Studio 171 signage and marks. Defendants argued that plaintiffs’ unfair competition claim should be dismissed because the Studio 171 mark was either descriptive or generic and plaintiff did not plead secondary meaning. But the Court held that the argument was premature. A plaintiff need not plead secondary meaning.* And furthermore, plaintiffs did plead secondary meaning, stating that the Studio 171 mark had developed “considerable value” and become “uniquely associated” with plaintiffs’ business. The Court did, however, dismiss plaintiffs’ RICO claim for failing to plead their fraud allegations with particularity pursuant to Fed. R. Civ. P. 9(b).

* The Court did not cite the Supreme Court’s recent decision in Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007) (read more about the decision at the University of Chicago Faculty Blog).  But based on other recent opinions citing Twombly for heightened pleading requirements, I wonder if plaintiffs at least should plead secondary meaning now.

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Days Inns Worldwide, Inc. v. Lincoln Park Hotels, Inc., No. 06 C 2960, 2007 WL 1455798 (N.D. Ill. May 16, 2007) (Der-Yeghiayan, J.)

Judge Der-Yeghiayan granted in part defendants' motion for reconsideration of the Court's award of plaintiff's attorneys fees' and costs for preparing summary judgment motions.  Plaintiff owns various marks relating to its Days Inn chain (the "Days Inn Marks").  Plaintiff licensed defendants Lincoln Park Hotels, Inc. and Richard Erlich (collectively "LPH") to use the Days Inn Marks in connection with the operation of a hotel in Chicago's Lincoln Park neighborhood.  In 2005, LPH sold the hotel to defendant Gold Coast Investors ("GCI") without informing plaintiff, in violation of the parties' license agreement.  GCI continued operating the hotel using the Days Inn Marks without licensing the rights to the marks from plaintiff.  As a result, plaintiff brought this suit against defendants alleging that, among other things, GCI infringed plaintiff's Days Inn Marks and LPH contributorily infringed plaintiff's Days Inn Marks by selling the hotel to GCI with the knowledge that GCI intended to continue using the Days Inn Marks and without informing plaintiff of the sale or removing the Days Inn Marks from the hotel, as required in the parties' license agreement.  In February, the Court granted plaintiff's summary judgment motion on twelve of fifteen counts and dismissed the remaining three counts as moot (you can find discussion of that opinion in the Blog's archives).  The Court also awarded plaintiff its attorneys' fees, approximately $150,000, for preparing its summary judgment motion.  Defendants moved the Court to reconsider, arguing that the Court should have required the parties to meet to resolve the attorneys fees dispute pursuant to  Local Rule 54.3 before ruling on the fees and that the Court should specifically apportion the fees between defendants.  The Court held that it was not required to follow the Local Rule 54.3 procedure in this case because defendants did not object to plaintiff's requests for fees made in its summary judgment briefing and because additional briefing required by the rule would not have benefited the Court because of its intimate knowledge of the case.  The Court did, however, apportion the fees that it was able to identify as only applicable to one group of defendants.  And the Court awarded an additional $35,000 of fees and costs that had not been presented in the initial motion.

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Days Inns Worldwide, Inc. v. Lincoln Park Hotels, Inc., No. 06 C 2960, 2007 WL 551570 (N.D. Ill. Feb. 22, 2007) (Der-Yeghiayan, J.)

Judge Der-Yeghiayan granted plaintiff summary judgment on its trademark infringement and Illinois Deceptive Trade Practices Act ("IDTPA") claims, among others.  Plaintiff owns various marks relating to its Days Inn chain (the "Days Inn Marks").  Plaintiff licensed defendants Lincoln Park Hotels, Inc. and Richard Erlich (collectively "LPH") to use the Days Inn Marks in connection with the operation of a hotel in Chicago's Lincoln Park neighborhood.  In 2005, LPH sold the hotel to defendant Gold Coast Investors ("GCI") without informing plaintiff, in violation of the parties' license agreement.  GCI continued operating the hotel using the Days Inn Marks without licensing the rights to the marks from plaintiff.  As a result, plaintiff brought the instant action against defendants alleging that, among other things, GCI infringed plaintiff's Days Inn Marks and LPH contributorily infringed plaintiff's Days Inn Marks by selling the hotel to GCI with the knowledge that GCI intended to continue using the Days Inn Marks and without informing plaintiff of the sale or removing the Days Inn Marks from the hotel, as required in the parties' license agreement. 

Defendants did not challenge plaintiff's evidence on its trademark, IDTPA or other related state law claims and, it appears, did not fully respond to plaintiff's Local Rule 56.1 statement.  In fact, defendants' only defense was LPH's argument that they were not liable because the alleged infringement and related acts occurred after LPH sold the hotel to GCI.  But the Court denied this defense because LPH did not challenge plaintiff's statement of fact paragraph 37 which stated that at the time of sale LPH was aware that GCI intended to operate the hotel using the Days Inn Marks.  Paragraph 37 also stated that LPH neither removed the Days Inn Marks from the hotel themselves,  nor obligated GCI to remove them.  The Court held that LPH's actions as detailed in, at least, paragraph 37 "far surpass[ed]" the "willful blindness standard of contributory infringement.

Practice tip:  Make sure that you fully respond to each issue raised in every paragraph of your opponent's Local Rule 56.1 statements of material fact. 

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QSRSoft, Inc. v. Restaurant Tech., Inc., No. 06 C 2734, 2006 WL 3196928 (N.D. Ill. Nov. 2, 2006) (Der-Yeghiayan, J.).

In this trade secret and copyright dispute, Judge Der-Yeghiayan granted the individual defendants' motion to dismiss plaintiff's conversion claim because it was preempted by plaintiff's Illinois Trade Secrets Act claim.  The Court, however, denied the remainder of the motion.  The remainder of the challenged the sufficiency of the pleadings generally, as well as each count specifically.  The individual defendants argued that each of the counts was not sufficiently plead because plaintiff failed to specifically identify each defendant by name, instead they were collectively referred to in the allegations as "defendants."  The Court held that the general references to the "defendants" were more than sufficient to put defendants on notice of the alleged acts.

The individual defendants challenged plaintiff's trade secret claim arguing that plaintiff had no trade secrets because it gave the password to its password-protected database of alleged trade secret information to one of the defendants without a license or nondisclosure agreement restricting the defendant's use of the database's information.  But plaintiff alleged that it gave the defendant a password to its trade secret database after sending the defendant a copy of its license for the database and pursuant to an understanding that the defendant would sign the license or otherwise be bound by it prior to using the password.  The Court held that these allegations were sufficient to show that plaintiff had protected its trade secrets and were not proof that plaintiff had released its trade secret to the public.

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