litigation misconduct Archives

Don’t Tread on Illinois’ Absolute Litigation Privilege

by Connor M. Larson | Oct 17, 2024 | Trademarks

Addressing when Illinois law’s “absolute litigation privilege” bars certain counterclaims, the US Court of Appeals for the Federal Circuit affirmed a district court’s summary judgment finding that the plaintiff lacked a valid trade dress and reversed the district court’s decision that declined to apply the absolute litigation privilege as a complete defense to all of the alleged infringer’s counterclaims. Toyo Tire Corp v. Atturo Tire Corp., Case No. 22-1817 (Fed. Cir. Oct. 4, 2024) (Moore, Clevenger, Chen, JJ.) (nonprecedential).

Toyo and Atturo are competitors in the tire design business. After perceiving widespread copying of its tire designs, Toyo filed a district court action asserting design patent infringement and trade dress infringement against Atturo. Atturo asserted counterclaims, including false designation of origin under the Lanham Act and several state law counterclaims. The district court eventually dismissed with prejudice Toyo’s design patent infringement claims and proceeded with just the trade dress infringement claim.

A primary issue in the case was the description of the asserted trade dress. In its complaint, Toyo identified its trade dress merely as “the overall appearance” of its line of tires. Over the course of discovery, disputes arose concerning Toyo’s failure to distinctly describe its asserted trade dress. Toyo answered an interrogatory that requested this information with a non-limiting definition. The district court compelled Toyo to provide a more specific answer, which Toyo did by providing highlighted images.

Toyo’s fact witness was subsequently deposed under Fed. R. Civ. P. 30(b)(6) and gave answers that were inconsistent with Toyo’s interrogatory response. This led the district court to compel more testimony on what exactly the asserted trade dress contained, and which tire features met the definition of the trade dress, and which did not. On the advice of counsel, the corporate witness declined to answer more than 100 different questions. Toyo’s inability to describe its trade dress continued into expert discovery. When it served its expert reports, Toyo introduced yet another aspect of its trade dress – that the trade dress only included two-dimensional aspects. Toyo introduced this new argument to support the requirement that to qualify as trade dress the designated feature must be nonfunctional.

Atturo moved for sanctions. In granting the sanctions, the district court barred Toyo from asserting only the two-dimensional aspects of the trade dress, precluding Toyo from continually shifting its position because doing so “would effectively lead to trial by ambush.” Having struck the only argument that could save the trade dress from invalidity, the district court granted summary judgment of invalidity on both functionality and lack of secondary meaning.

Trial then proceeded only on Atturo’s counterclaims. The jury returned a verdict in favor of Atturo on six of the counterclaims, awarding $10 million in compensatory damages and $100 million in punitive damages. The district court set aside the jury verdict as it related to counterclaims of defamation and liability under the Illinois Deceptive Trade Practices Act. Both parties appealed.

The Federal Circuit affirmed the district court’s issuance of discovery sanctions, and the grant of [...]

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Well Runs Dry: Summary Judgment Denial Supports Non-Exceptional Case Finding

by Amol Parikh | Jun 1, 2023 | Patents

The US Court of Appeals for the Federal Circuit affirmed a district court’s denial of attorneys’ fees, explaining that when a district court denies summary judgment and allows a plaintiff’s case to proceed, the district court effectively determines that the position of the party opposing summary judgment is not objectively baseless. OneSubsea IP UK Limited v. FMC Techs, Inc., Case No. 22-1099 (Fed. Cir. May 23, 2023) (Moore, Clevenger, Dyk, JJ.)

OneSubsea and FMC compete in the subsea oil and gas exploration and extraction industry. In March 2015, OneSubsea filed a lawsuit against FMC alleging infringement of 95 claims across 10 OneSubsea patents. After the district court issued its claim construction ruling, FMC moved for summary judgment of noninfringement. OneSubsea opposed. While the summary judgment motion was pending, the Patent Trial & Appeal Board instituted inter partes review (IPR) proceedings on a subset of the asserted patents. FMC argued that while a stay of district court proceedings would be appropriate, it was unnecessary in light of its pending summary judgment motion. In August 2016, the district court denied summary judgment and stayed the case.

The case remained stayed for three years, during which time the Board invalidated 76 claims. In 2019, the district court lifted the stay. At a pre-trial hearing in 2020 discussing whether additional discovery was needed to address summary judgment, FMC doubted the need for more discovery and pointed to the 3,200 record pages illustrating differences between the designs of the accused device and the patented devices. In response, the district court stated, “And you really think I’m going to be able to grant summary judgment on that?” After the hearing, FMC renewed its summary judgment motion, which OneSubsea opposed. In reply, FMC moved to exclude the report of OneSubsea’s expert because he applied the wrong claim construction. Ultimately, the district court granted FMC’s motion to exclude and its motion for summary judgment.

In 2021, FMC moved for attorneys’ fees based on OneSubsea’s “substantively weak infringement claims” after the claim construction order was issued and “litigation misconduct.” After briefing was complete, the district court announced that the case had been reassigned to another judge following the retirement of the original assigned judge. The new judge rejected FMC’s view that OneSubsea’s case was objectively baseless and further rejected FMC’s claims of litigation misconduct. FMC appealed.

As a threshold matter, FMC argued that the Federal Circuit should apply de novo review instead of an abuse-of-discretion standard because the new judge only briefly “lived with the case” and should be disqualified from exercising discretion in deciding FMC’s attorneys’ fees motion. The Court rejected FMC’s invitation to change the standard of review, citing the substantial body of law in which appellate courts have consistently reviewed successor judges’ decisions on discretionary issues for abuse of discretion.

Turning to the merits, the Federal Circuit found that FMC’s exceptional case argument lacked merit. The Court explained that the argument disregarded the district court’s observation that FMC’s demand for a prompt favorable noninfringement judgment based [...]

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Too Little Too Late: No Tenable Misappropriation Claim Based on 11-Year-Old Prototype

by Tessa Kroll | Aug 11, 2022 | Trade Secrets

In a dispute between an employer and a former employee, the US Court of Appeals for the Seventh Circuit affirmed a district court’s grant of summary judgment against an employer asserting trade secret misappropriation and breach of implied-in-fact contract claims relating to an 11-year-old prototype developed by a former employee. The Court also affirmed the district court’s finding of litigation misconduct by the former employer but vacated the lower court’s award of attorneys’ fees, remanding the case for a more detailed justification for the considerable award. REXA, Inc. v. Chester, Case Nos. 20-2953; -3213; -2033 (7th Cir. July 28, 2022) (Wood, Hamilton, Brennan, JJ.)

Mark Chester is a former employee of Koso America, a manufacturer of hydraulic actuators. Chester participated in a 2002 project at Koso that sought to develop a new flow matching valve for Koso’s actuators. While the project team failed to design a new flow matching valve, they did manage to develop an experimental prototype of an actuator with solenoid valves. Koso abandoned the new design because of the improbability of commercial success, and the prototype was disassembled. Chester—who had never signed a confidentiality or employment agreement with Koso—resigned from Koso in 2003 and later joined MEA Inc. in 2012. In 2013, 11 years after developing the Koso prototype, Chester helped MEA design a new actuator with solenoid valves and an improved motor. MEA filed a patent application in 2017 claiming the actuator, and the US Patent & Trademark Office issued a notice of allowance in 2018 based on the improved motor limitations.

REXA, a successor company to Koso, sued Chester and MEA for misappropriation under the Illinois Trade Secrets Act (ITSA) and for breach of an implied-in-fact contract. REXA alleged that MEA and Chester misappropriated the 2002 designs by filing the 2017 patent application and by incorporating the 2002 designs into MEA’s Hawk brand actuator, and that Chester breached an implied-in-fact obligation to assign any patent rights associated with the 2017 application to REXA. Chester and MEA accused REXA of improper conduct during discovery after REXA appended a confidentiality agreement that Chester had never received to Chester’s 2002 bonus letter and used the manipulated document during Chester’s deposition. The parties filed cross motions for summary judgment. The district court ruled for Chester and MEA and awarded them almost $2.4 million in attorneys’ fees for REXA’s litigation misconduct. REXA appealed.

Misappropriation of Trade Secrets

The Seventh Circuit first considered the trade secret misappropriation claim, specifically whether REXA had identified a trade secret with enough specificity. The ITSA requires that a plaintiff “present a specific element, or combination of elements, that is unknown to the trade and was allegedly misappropriated.” Applying this standard, the Court found that REXA had not identified any protectable trade secrets because it had broadly asserted that the “2002 designs” qualified as trade secrets without explicitly identifying an element that was not well known in the industry.

The Seventh Circuit further concluded that even if REXA had identified a specific and protectable trade secret, [...]

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