Groupon Inc. v. MobGob LLC, No. 10 C 7456, Slip Op. (N.D. Ill. May 25, 2011) (Hibbler, Sen. J.).
Judge Hibbler granted plaintiff Groupon’s motion to strike defendant MobGob’s affirmative defenses and to dismiss MobGob’s counterclaims, and denied MobGob’s motion to dismiss Groupon’s claim in this patent dispute involving online marketing systems.
MobGob’s Motion to Dismiss
Groupon pled the intent elements of its indirect infringement claims upon information and belief. And that pleading was sufficient even though intent is governed by Fed. R. Civ. P. 9(b) because even pursuant to Rule 9(b), intent and knowledge can be pled generally. Additionally, it was reasonable to infer from Groupon’s allegations that MobGob created or had someone create the accused system and the public nature of Groupon’s patent that MobGob had actually knowledge of its accused infringement.
Groupon’s Motions to Strike and Dismiss
First, Groupon sought to strike MobGob’s affirmative defense of invalidity. The Court initially noted that motions to strike are disfavored because they are unlikely to streamline a case or make resolving the case more efficient. But the Court still struck MobGob’s invalidity defense. MobGob’s invalidity defense did nothing more than identify the relevant statutory sections, offering not a single fact, upon information and belief or otherwise. While the Court noted there were some policy reasons for not holding affirmative defenses and counterclaims to the Twombly/Iqbal standards, the Seventh Circuit required that they be met for any pleading. The Court, therefore, struck MobGob’s invalidity defense. And for the same reason, the Court dismissed MobGob’s invalidity counterclaim because it also offered no facts. The Court also noted that it would not excuse inadequate pleading because of the Local Patent Rule 2.3(b) invalidity contentions that MobGob would be required to serve shortly after answering. The LPR 2.3(b) disclosures require significantly more detail than Fed. R. Civ. P. 8 notice pleading. So, MobGob could meet its Rule 8 obligations without providing the level of detail required by LPR 2.3(b).
The Court also struck MobGob’s affirmative defense regarding ownership of Groupon’s patent because it also lacked factual support, and because it did not accept Groupon’s facts as true, as required by an affirmative defense, instead challenging Groupon’s facts.

Continue Reading Local Patent Rules Do Not Trump Rule 8 Pleading Requirements

Golden v. Nadler Pritikin & Mirabelli, No. 05 C 283, Slip Op. (N.D. Ill. Dec. 21, 2010) (Gottschall, J.).
Judge Gottschall denied plaintiff Golden’s motion to dismiss or for a more definite statement pursuant to Fed. R. Civ. P. 12(b)(6) & (e) in this copyright dispute over real estate listings. Golden was not required to attach a copy of its copyright registration to its complaint. And while it was an “extraordinarily close question whether Golden’s “bare-bones” amended complaint satisfied Twombly, it did plead ownership of a registered copyright and it did plead that defendant allegedly copied the work without consent. Because Golden’s complaint was so bare-bones, defendant’s motion to dismiss was not in bad faith. The Court, therefore, denied Golden’s Fed. R. Civ. P. 11 motion regarding the motion to dismiss.

Continue Reading Plaintiff Need Not Attach Copyright Registration to Complaint

Trading Techs. Int’l., Inc. v. CQG, Inc., No. 10 C 718, Slip Op. (N.D. Ill. Aug. 12, 2010) (Shadur, Sen. J.).
Judge Shadur sua sponte struck defendants’ answer and counterclaim with leave to file an amended answer and counterclaim based upon a variety of pleading deficiencies. First, the Court struck statements that the patents-in-suit “speak for [themselves]” and related answers citing State Farm Mut. Auto Ins. Co. v. Riley, 199 F.R.D. 276, 279 (N.D. Ill. 2001). But the Court granted CQG leave to replead those answers.
The Court also struck several affirmative defenses. CQG’s Fed. R. Civ. P. 12(b)(6) defense was struck because it was not an affirmative defense. And no leave to replead was granted because when plaintiff Trading Technologies’ (“TT”) allegations were accepted as true CQG’s defense was “simply dead wrong.” The Court also struck various affirmative defenses that were only “skeletal recitals” of legal doctrines, with leave to replead if CQG could. Finally, the Court struck CQG’s noninfringement defense because denials in the answer already brought infringement into issue.
The Court also struck CQG’s counterclaim with leave to replead for failure to meet the Twombly/Iqbal pleading standards. Finally, the Court ordered that CGQ’s counsel should not charge CQG for preparing CGQ’s amended answer and counterclaim and should send CQG a copy of the Court’s Order.

Continue Reading Answer and Counterclaims Struck Sua Sponte

This is the third installment of my twenty five tips for Northern District of Illinois litigation practice, with a focus on IP litigation. The tips are gleaned from my practice in the Northern District, my time as a law clerk for the Hon. Gordon J. Quist in the Western District of Michigan, and my reading of all of the Northern District of Illinois intellectual property opinions over the last four years. As you read them, let me know if you come up with others. I will be glad to include them as I go. Here are tips eleven through fifteen:
11. Respect Twombly / Iqbal pleading standards. The Northern District is no different than the rest of the country’s district courts — patent infringement requirements have not changed from the form in the Federal Rules. But that is not necessarily the case for Lanham Act, copyright or trade secret claims. There are numerous decisions dismissing, often with leave to amend, these more fact-specific intellectual property claims. And even in the patent context plaintiffs benefit from pleading with more particularlity. The more detail a defendant has the more information they should disclose about their accused products or systems as part of their Local Patent Rule 2.1(b) initial disclosure document production requirements. That means that the plaintiff will have more material with which to prepare its Local Patent Rule 2.2 intial infringement contentions. Finally, regardless of the type of claim, many and perhaps most judges rely upon Twombly / Iqbal to require more than a bare recitation of the elements of affirmative defenses. So, it is especially important to add some facts to your affirmative defenses.
12. Prepare Local Rule 56.1 statements with care. This is probably the most frequent Local Rule hang up in Northern District of Illinois opinions. It is critical that movants meet the Local Rule 56.1 requirements, among others, a numbered statement of undisputed material facts supported by admissible evidence. If the facts are not supported or if they are legal conclusions, judges routinely strike or disregard them.
13. Respond to Local Rule 56.1 statements with evidence. Far too often, parties respond to Local Rule 56.1 statements without evidence. Those responses are almost always deemed admissions. Without admissibile evidence to counter statements of fact they are almost always admitted.
14. Watch your judge’s webpage. Each judge maintains the equivalents of standing orders on their webpage, often in multiple places and links across the page. It is critical that you read them at the beginning of your case and that you recheck them regularly. At a minimum, check them before you file anything with the Court. I find that the website instructions change with much greater frequency than the old, paper standing orders did. And while judges try to make it easy to see what they change, if you are not looking you will miss it.
15. Always file notices of motion. In some districts, notices of motions are not required or even discouraged. In the Northern District of Illinois, they are required of every motion. If you fail to file one, you will likely hear from the Clerk’s office. Also, make sure to file the notice after the motion, not before. If you file the notice before the motion, you will generally have to refile it.

Continue Reading Northern District of Illinois Practice Tips Nos. 11-15

Viskase Companies, Inc. v. World Pac Int’l AG, No. 09 C 5022, Slip Op. (N.D. Ill. May 10, 2010) (Bucklo, J.).
Judge Bucklo granted declaratory judgment defendants’ (collectively “World Pac”) motion to dismiss declaratory judgment plaintiff Viskase’s state law tort claims as preempted by Viskase’s declaratory judgment patent claims. Patent holders have a basis right to assert their patents. In order to make tort claims based upon patent assertions, therefore, Viskase had to show that defendants acted in bad faith in asserting their patents, and the bad faith had both objective and subjective components. Viskase’s general statement of bad faith did not meet the Twombly/Iqbal pleading standards. Furthermore, defendants need not have stated in their assertion letters to third parties that Viskase objected to defendants’ claims.
The Court had specific jurisdiction over foreign defendant World Pac. World Pac’s filing for U.S. patents and its enforcement letters regarding the patents-in-suite created specific jurisdiction.

Continue Reading State Tort Claim Preempted by Patent Claim Where Pleading of Bad Faith Did Not Meet Iqbal Standards

Viskase Companies, Inc. v. World Pac Int’l AG, No. 09 C 5022, Slip Op. (N.D. Ill. May 10, 2010) (Bucklo, J.).
Judge Bucklo granted declaratory judgment defendants’ (collectively “World Pac”) motion to dismiss declaratory judgment plaintiff Viskase’s state law tort claims as preempted by Viskase’s declaratory judgment patent claims. Patent holders have a basic right to assert their patents. In order to make tort claims based upon patent assertions, therefore, Viskase had to show that defendants acted in bad faith in asserting their patents, both objectively and subjectively. Viskase’s general statement of bad faith did not meet the Twombly/Iqbal pleading standards. Furthermore, defendants need not have stated in their assertion letters to third parties that Viskase objected to defendants’ claims.
The Court had specific jurisdiction over foreign defendant World Pac. World Pac’s filing for U.S. patents and its enforcement letters regarding the patents-in-suite created specific jurisdiction.

Continue Reading Tort Claims Preempted by Patent Claims Absent Objective & Subjective Bad Faith

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.

Continue Reading Google AdWords Purchase May be a Lanham Act “Use”

The Supreme Court hears oral argument today in Bilski v. Kappos. The Court will decide the proper test for Section 101 patentability and will either decide or at least significantly impact the patentability of software and business method patents. Here are the questions presented:
1. Whether the Federal Circuit erred by holding that a “process” must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing (“machine-or-transformation” test), to be eligible for patenting under 35 U.S.C. § 101, despite this Court’s precedent declining to limit the broad statutory grant of patent eligibility for “any” new and useful process beyond excluding patents for “laws of nature, physical phenomena, and abstract ideas.”
2. Whether the Federal Circuit’s “machine-or-transformation” test for patent eligibility, which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect “method[s] of doing or conducting business.” 35 U.S.C. § 273.
For more on the history of both the Bilski case, check out my recent article with my colleague Mike Grill in the Northwestern Journal of Technology and Intellectual Property. Patently-O has compiled the amicus briefs — click here for the briefs supporting Bilski or neither party, and here for the briefs supporting the government. The briefs supporting the government include a brief by a group of Internet Retailers that, I am proud to say, cites my law review article arguing for an even application of the Twombly pleading standard as to both patent plaintiffs and patent defendants — click here for the amicus brief and here for my article from the John Marshall Review of Intellectual Property Law.
Click here for the SCOTUSBlog’s preview of the argument. For post-argument CLE options, click here for a list of courses compiled by Patent Docs and here for information on a CLE from IPWatchdog’s Gene Quinn, who plans to attend oral arguments.

Continue Reading Patentability at the Supreme Court: Bilski Oral Arguments

While the Northern District has made clear that it is not transforming itself into a rocket docket like the Eastern District of Virginia or the Western District of Wisconsin, the newly enacted Local Patent Rules (“Rules” or “LPR”)* are going to have a significant impact on patent litigation filings in Chicago. The cases will not proceed to trial faster than the Northern District’s average for all cases of slightly more than two years, but the path to trial will be significantly different. The changes are even-handed, benefiting both patentholders and accused infringers. One might expect even-handed Rules to have little impact on filings, but in this case patentholders will likely decide that the Rules provide enough value to overcome the portions of the Rules that benefit accused infringers. The Rules, therefore, will draw patent cases to the Northern District. Here are the particular elements of the Rules that will attract patent plaintiffs to the Northern District:
1. Substantive Initial Disclosures & Document Production.
LPR 2.1 requires both parties to exchange substantive, non-evasive Rule 26(a) Initial Disclosures. Furthermore, LPR 2.1(b) requires that along with its Initial Disclosures, an accused infringer produce: 1) documents sufficient to show the operation and construction of each element of any product or process specifically accused in the Complaint; and 2) copies of all known prior art. This early document production, which is generally contemplated by Rule 26 but almost never done in practice, will be a major draw for patentholders. The ability to get immediate technical information in discovery, without the expense of serving document requests, is significant. It allows patentholders to have information before preparing their Initial Infringement Contentions. It also allows patentholders to evaluate the strength of their cases early using the technical information produced by the accused infringers, before incurring significant discovery expenses.
But while LPR 2.1 will attract patent plaintiffs, it also benefits accused infringers. LPR 2.1 also requires patentholders to make an initial document production, and patentholders have a more significant obligation. They must produce not just documents sufficient to show, but all documents regarding: 1) any sale, offer for sale or use of the patented invention before filing; 2) design, reduction to practice or invention of the patented technology generally; 3) all communications with the PTO (the prosecution history) for the patents in suit and any patents from which they claim priority; and 4) ownership of the patent. Additionally, as with accused infringers, patentholders must identify which documents correspond to each of the four categories. Having this early information will allow accused infringers to evaluate their defenses early in the case and prepare for early dispositive motions such as motions challenging ownership or validity based upon a bar date. And the documents will allow accused infringers to update affirmative defenses or add counterclaims before there could be any prejudice.
Finally, the accused infringers’ production obligation regarding its products is only triggered if the patentholder specifically identifies the accused products in its complaint. This will strongly encourage plaintiffs to identify the accused products in the complaint. A standard which comports with the Twombly/Iqbal pleading standards – click here to read my article on the uneven application of the Twombly standard between patentholders and accused infringers.
2. Defendant opens and closes Markman briefing.
Most Districts either have two rounds of concurrent claim construction briefing or a traditional opening-response-reply schedule with the patentholder opening and replying. Significantly, the Rules provide for a single set of briefs with the accused infringer–not the patent holder–submitting the initial and final briefs. Writing first and last benefits the accused infringer. But economically, the patentholder saves money by only writing one brief and can make any follow up arguments during a hearing or seek a sur-reply if the Court does not hold a hearing.
3. Late Claim Construction briefing.
The final major draw for patentholders is the late claim construction proceedings. In addition to cost savings in the briefing process, the claim construction is scheduled during the later portion of a discovery period that is scheduled to end forty-five days after the Court rules on claim construction. Maintaining pre-claim construction uncertainty through most of discovery benefits patentholders. Furthermore, the Rules make clear that a judge can disregard early dispositive motions that would require claim construction before the claim construction contemplated by the Rules. So, patentholders may face fewer early summary judgment motions.
The Rules are evenhanded, benefiting both patentholders and accused infringers. But the specific benefits afforded patentholders will still drive patentholders to file in the Northern District of Illinois over other courts, some that may have faster times to trial, with different rules.
* Click here for my post analyzing the Rules and here for my post analyzing the differences between the Rules and the Proposed Rules.

Continue Reading N.D. Illinois’s Local Patent Rules Will Drive Patent Cases to Chicago

SourceOne Global Partners LLC v. KGK Synergize, Inc., No. 08 C 7403, Slip Op. (N.D. Ill. Jul. 21, 2009) (Schenkier, Mag J.).
Judge Schenkier dismissed declaratory judgment defendant/counter-plaintiff KGK Synergize’s (“KGK”) patent, trademark, Lanham Act and related state law claims against declaratory judgment plaintiff/counter-defendant SourceOne’s President for failure to meet the Twombly/Iqbal pleading standards.* The Court held that KGK had not sufficiently pled allegations to support the factors in the veil piercing analysis, in particular:
* Allegations of episodes of “subpar record keeping” was not sufficient to prove SourceOne’s failure to observe corporate formalities;
* Conclusory statements that SourceOne’s corporate officers were allegedly not given autonomy to make decisions were not sufficient to show that officers or directors were non-functioning;
* The President and his family borrowing against a home equity loan to support SourceOne was not sufficient to show SourceOne was a “mere ‘dummy or sham.'”; and
* the allegation that the President exerted significant control over SourceOne and personified the company was not sufficient to show a failure to maintain arm’s-length relationships among related entities.
The Court also held that KGK’s direct patent infringement claims against the President did not meet the Twombly/Iqbal pleading standards. KGK’s only allegations about the President were conclusory and tied to SourceOne’s alleged infringing actions. KGK did not plead sufficient facts about the President independent of SourceOne to support direct patent infringement claims.
* For more on the application of the Twombly pleading standards to patent cases, click here in the Blog’s archives.

Continue Reading Piercing the Corporate Veil & Patent Infringement Does Not Meet Twombly/Iqbal Pleading