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

Ashley Furniture Indus., Inc. v. Value City Furniture, Inc., No. 10 C 5413, Slip Op. (N.D. Ill. Aug. 31, 2010) (Shadur, Sen. J.).

Judge Shadur sua sponte ordered plaintiff Ashley Furniture to submit a brief memorandum citing the principal cases supporting Ashley Furniture's trademark infringement claims based upon Value City Furniture's "aggressive competitive advertising" including the use of Ashley Furniture's trademark. The memorandum would help facilitate addressing the case at the Court's initial status conference. The Court also noted that while the use of a competitor's name in advertising was once verboten, it is now ubiquitous.

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Nordstrom Consulting, Inc. v. M&S Techs., Inc., No. 06 C 3234, Slip Op. (N.D. Ill. Mar. 4, 2008) (Darrah, J.).*

Judge Darrah granted in part and denied in part the parties' cross-motions for summary judgment. Plaintiff and counter-defendant (collectively "NCI") developed visual eye chart software that defendants and counter-plaintiffs (collective "M&S") incorporated into their visual acuity system which was sold to ophthalmalic distributors and end users. For a period of time, the parties worked together, selling and servicing product and sharing office space. But eventually the relationship broke down and NCI began selling a competing system. The parties charged each other with various IP claims and related state law claims. Each of the IP-related claims is addressed below.

Copyright Infringement

The Court held that NCI was the sole owner of the copyright and that its principal Nordstrom was the sole author of the copyrighted software. M&S argued that its principal Marino contributed to the software. But the Court held that Nordstrom wrote the software and Marino only offered direction and ideas.

The Court granted M&S summary judgment for all copyrighted software sales during the terms of the parties' agreements, but not as to sales outside of the agreement dates. And the Court granted summary judgment of non-infringement as to M&S's new software package "Sports Vision Testing" ("SVT"). NCI argued that SVT was an infringing derivative work. But NSI failed to produce evidence or expert testimony refuting M&S's evidence that it created its SVT software independent of NCI's software using clean room procedures.

Digital Millennium Copyright Act ("DMCA")

NCI alleged that M&S violated the DMCA by circumventing protections on a computer containing the software code in order to aid an NCI licensee of the code. Because the code was accessed to aid a licensee, NCI could not show that the password had been bypassed for the purpose of infringing NCI's copyright. The Court, therefore, granted summary judgment for M&S. 

The Court also denied summary judgment as to M&S's claim that NCI violated the DMCA by accessing a portion of M&S's computer system for which NCI lacked authorization and passwords. Summary judgment was not appropriate because the parties disputed whether NCI accessed the computers and whether the accessed material was copyrighted.

Lanham Act

The Court denied M&S summary judgment on NCI's Lanham Act false advertising claim and its related state law claims. M&S argued that it had not made any statements likely to cause customer confusion. But NCI countered that M&S stated in advertising that it had used the same system for five years. NCI argued that the statement must be false because M&S switched to its new SVT software during that time. Because of these disputed facts, summary judgment was not appropriate.

Illinois Trade Secret Act

The parties agreed that prior to terminating their relationship, NCI took various information from M&S's offices and computers. But the parties disagreed as to whether M&S took reasonable measures to protect the information's confidentiality. The parties agreed that M&S password protected the information. But NCI argued passwords alone were not enough and suggested other protections that allegedly could and should have been employed. The Court held that password protection alone was not per se insufficient. But the Court required more information regarding M&S's actions and the feasibility of alternative protections before it could rule on summary judgment.

The Court also denied summary judgment as to M&S's claim that NCI violated the DMCA by accessing a portion of M&S's computer system for which NCI lacked authorization and passwords. Summary judgment was not appropriate because the parties disputed whether NCI accessed the computers and whether the accessed material was copyrighted.

Lanham Act

The Court denied M&S summary judgment on NCI's Lanham Act false advertising claim and its related state law claims. M&S argued that it had not made any statements likely to cause customer confusion. But NCI countered that M&S stated in advertising that it had used the same system for five years. NCI argued that the statement must be false because M&S switched to its new SVT software during that time. Because of these disputed facts, summary judgment was not appropriate.

Illinois Trade Secret Act

The parties agreed that prior to terminating their relationship, NCI took various information from M&S's offices and computers. But the parties disagreed as to whether M&S took reasonable measures to protect the information's confidentiality. The parties agreed that M&S password protected the information. But NCI argued passwords alone were not enough and suggested other protections that allegedly could and should have been employed. The Court held that password protection alone was not per se insufficient. But the Court required more information regarding M&S's actions and the feasibility of alternative protections before it could rule on summary judgment.

*  Click here to read more about this case in the Blog's archives.

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Federal Trade Comm. v. Trudeau, No. 03 C 3904, 2007 WL 4109607 (N.D. Ill. Nov. 16, 2007) (Gettleman, J.).

Judge Gettleman held defendant Kevin Trudeau ("Trudeau") in contempt for violating the Court's Stipulated Permanent Injunction (the "Injunction").  In 2003, plaintiff Federal Trade Commission ("FTC") filed suit against Trudeau* alleging, among other things, false advertising pursuant to the FTC Act, 15 U.S.C. Section 52(a).  The advertisements at issue included various informercials in which Trudeau allegedly claimed that the coral calcium in his supplement Coral Calcium Supreme could treat cancer, multiple sclerosis and heart disease, among other medical conditions.  In settlement of the FTC's suit, the parties agreed to and the Court entered the Injunction.  The Injunction generally prohibited Trudeau from producing infomercials, with the exception that he could make infomercials promoting books, so long as the infomercials did not misrepresent the books.  The FTC argued that a series of three infomercials promoting Trudeau's new book The Weigh Loss Cure "They" Don't Want You to Know About (the "Book") violated the Injunction because Trudeau made claims in the infomericals that the weight loss program described in the book was "easy,"  "simple" and prevented weight gain forever once complete. 

The weight loss plan had four phases, the last of which was to be followed for the remainder of a person's life.  Each phase had various requirements (or strong recommendations) including colonics, various organ cleansings, avoiding use of over the counter or prescription drugs, daily walks and eating only 100% organic foods.  Phase two also required daily injections of human chorionic gonadotrophin ("HCG").  HCG is available only by prescription in the US, but the FDA specifically stated that it should not be used for treating obesity.  Trudeau argued that the claims were mere puffery and opinion which, therefore, did not violate the Injunction.  But the Court held that Trudeau's claims that the Book detailed an "easy" diet were false.  Furthermore, Trudeau's claims that once the diet was complete you could eat anything you wanted were false because the fourth phase of the diet lasted for the remainder of the dieter's life.  The Court, therefore, held Trudeau in contempt  and set a hearing to determine an appropriate remedy.

This opinion is also an excellent example of engaging judicial writing.  It has one of the most engaging introductions I have read with appeal beyond just the legal community:

Kevin Trudeau is one heck of a salesman. He is also a prolific author, self-described consumer advocate and "exposer of corporate and government corruption." He is also an ex-felon and, as discussed below, a contemnor of this court's orders. His favorite marketing tool is the "infomercial," a lengthy television advertisement that takes the form of a mock interview. Through this medium Mr. Trudeau has sold various products that he claimed could: cure numerous diseases, such as multiple sclerosis, cancer, substance abuse addictions, and arthritis (among many others); reverse hair loss; improve memory; and (apropos to the matter before the court) cause dramatic and permanent weight loss.

(Footnotes omitted).  This is the sort of introduction that engages a reader and opens the law to those without legal degrees.

* Click here for a copy of the complaint.

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Steiner Indus., Inc. v. Auburn Mfg., Inc., No. 07 C 668, 2007 WL 1834176 (N.D. Ill. Jun. 22, 2007) (Darrah, J.).

Judge Darrah denied declaratory judgment defendant Auburn Manufacturing’s (“Auburn”) motion to dismiss. Auburn argued that plaintiff’s (collectively “DJ Plaintiffs”) suit improperly anticipated Auburn’s complaint which alleged Lanham Act claims of false designation and false advertising, as well as related state law claims. Auburn filed its complaint in the District of Maine within a week of DJ Plaintiffs’ filing. Auburn alleged that DJ Plaintiffs’ use of “FM Approved” and “Made in the USA” in their catalogs and website advertising in connection with their welding blankets constituted false designation and false advertising. DJ Plaintiffs were aware of the allegations before they filed suit because, as part of an ongoing negotiation with plaintiffs, Auburn had provided plaintiffs a copy of its complaint. The Court acknowledged its discretion to dismiss the case in favor of Auburn’s later filed complaint, but did not dismiss the case. The two cases mirrored each other, so either could resolve the parties’ dispute. And because both cases were filed in federal courts, there was no concern that the DJ case would cause friction between federal and state courts. The deciding issue was whether the Maine Court could offer a full remedy. DJ Plaintiffs had a motion to transfer or dismiss pending before the Maine Court. In that motion, DJ Plaintiffs argued that the Maine Court lacked personal jurisdiction over two of the three DJ Plaintiffs – Steiner Industries, Inc. and Lab Safety Supply, Inc. DJ Plaintiffs, therefore, asked the Maine Court to transfer the case to the Northern District of Illinois or to dismiss the case.  The Court held that if the Maine Court transferred the case to the Northern District or dismissed Steiner and Lab Safety for lack of jurisdiction, those factors would weigh in favor of maintaining the DJ action. If, however, the Maine Court denied DJ Plaintiffs’ motion and held that it had jurisdiction over all DJ Plaintiffs, then the Main Court could more effectively decide the dispute than the Northern District. The Court, therefore, denied the motion to dismiss with leave to refile if the Maine Court finds it has jurisdiction over all DJ Plaintiffs and does not transfer the case to the Northern District.

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The Wall Street Journal print edition had an interesting article about a new trend in defending lawsuits that focused on an IP dispute -- A Growing Dispute:  Fertilizer Start-Up Uses Web as Defense (subscription required).  The article discusses TerraCycle Inc.'s use of a website (www.suedbyscotts.com) to bolster its defense of a lawsuit Scotts Miracle-Gro Co. filed against TerraCycle alleging trade dress infringement and false advertising.*  According to the article, TerraCycle has not raised much money from its online solicitation for defense fund donations.  But during the first four weeks of its online defense, TerraCycle's sales jumped 122%, as opposed to 31% during the same period last year.  TerraCycle also saw a corresponding spike in visits to its primary website.  The WSJ Law Blog picked up on the story and developed it further, identifying several other defendants that have used websites as an aspect of their defense strategies, including Vonage's site (www.freetocompete.com) developed in connection with its prominent patent dispute.

It appears that defending cases on the internet is a growing trend.  I doubt it will benefit defendants within the confines of the courtroom or the legal proceedings generally.  Perhaps bringing details of the suit into the public eye will help identify additional prior art or apply pressure from interest groups like consumers or shareholders to get plaintiffs to change tactics.  But it seems to me that the biggest benefit of these sites may commercial, they make news and drive additional traffic to the defendant's primary site.

* You can read more about the Scotts Miracle-Gro v. TerraCycle dispute at the Seattle Trademark Lawyer.

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Gencor Pacific, Inc. v. Nature's Thyme, LLC, No. 07 C 167, 2007 WL 1225362 (N.D. Ill. Apr. 24, 2007) (Kocoras, J.).

Judge Kocoras granted defendants' Fed. R. Civ. P. 12(b)(2)&(3) motion to dismiss for lack of personal jurisdiction and venue and dismissed the case.  Plaintiff brought this Lanham Act false advertising and copyright infringement case alleging that defendants used portions of plaintiff's copyrighted studies regarding the efficacy of a weight-loss and appetite suppressant containing Caralluma Fimbriata extract.  Defendants, a business and two individuals employed by the business, were residents of New Jersey and had a single sale to an Illinois customer, valued at $300.  Defendants only other contacts with Illinois were an interactive website accessible in Illinois and the fact that one or two of defendants' general solicitations may have been sent to Illinois.  Defendants did not own property in Illinois and there was no proof that any defendants sent any of the allegedly infringing information to Illinois.  The Court held these contacts were not sufficient to create either general or specific jurisdiction.  The Court also held that venue was not proper in the Northern District of Illinois because defendants were not residents of Illinois and the acts at issue in the suit did not occur in the Northern District.

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Gail Green Licensing & Design Ltd. v. Accord, Inc., No. 05 C 5303, 2006 WL 2873202 (N.D. Ill. Oct. 5, 2006) (St. Eve, J.).

Judge St. Eve dismissed plaintiffs's Lanham Act false advertising claim, but refused to dismiss plaintiffs's breach of contract claim, among others.  Both claims are based upon defendants's receipt of plaintiffs's copyrighted designs for pet clothing and accessories pursuant to a Non-Disclosure and Confidentiality Agreement (the "NDA") and defendants's subsequent alleged sale of  goods based upon plaintiffs's copyrighted designs.

The Court dismissed the false advertising claim for lack of standing.  In order to bring a false advertising claim, plaintiffs must compete with defendants in the same business.  In this case, however, plaintiffs develop, acquire and license pet clothing and accessories, while defendants manufacture and/or sell pet clothing and accessories.  Because plaintiffs neither manufacture nor sell the pet clothing and accessories, they lacked standing to bring a false advertising claim against defendants.

Defendants also sought dismissal of plaintiffs's breach of contract claim.  Because the alleged breach was the use of plaintiffs's copyrighted designs, defendants argued that the claim was preempted by the copyright laws.  The Court denied defendants's motion for two reasons.  First, the Court held that contract claims are not within the general scope of the copyright laws because:

"A copyright is a right against the world.  Contracts, by contrast, generally affect only their parties; strangers may do as they please, so contracts do not create 'exclusive rights.'"

ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1454 (7th Cir. 1996).  Second, plaintiffs did not allege that defendants breached the NDA by infringing the copyright.  Rather, defendants allegedly breached the NDA by breaching their duty of confidentiality when they allegedly disclosed the copyrighted works, which could have been done without infringing any copyrights.

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