Summary
outlining the unfair competition elements for a Lanham Act claim and subsequently noting that "[e]ach of the above listed elements are essential to the claim"
Summary of this case from Carpenter Technology Corp. v. Allegheny TechnologiesOpinion
CIVIL ACTION No. 02-6605
February 27, 2004
MEMORANDUM
I. INTRODUCTION
On August 5, 2002, Plaintiff Lawman Armor Corporation ("Lawman") filed suit against Defendant Master Lock Company ("Master Lock") asserting Master Lock is infringing on design patent number 357, 621 (the "621 patent"). In July of 2002, Lawman became the exclusive licensee of the 621 patent. In its Complaint, Lawman asserts that Master Lock's two hook automobile wheel locks infringe on the 621 patent. In its Answer, filed on September 16, 2002, Master Lock asserts seven Counterclaims against Lawman. The Counterclaims are Patent Invalidity (Count I), Violation of the Lanham Act (Count II), Unfair Competition under Pennsylvania Law (Count III), Unfair Trade Violation under Pennsylvania Law (Count IV), False Advertising under Wisconsin Law (Count V), Commercial Disparagement (Count VI) and Abuse of Process (Count VII).
Presently before the Court is Lawman's Motion for Partial Summary Judgment of Counts II thru VII of Master Lock's Counterclaims. In its Response to Lawman's Motion for Partial Summary Judgment, Master Lock has agreed to dismiss Counts IV thru VII of its Counterclaims. Therefore, the Court will only discuss the Lanham Act and Pennsylvania Unfair Competition Counterclaims. For the following reasons, Lawman's Motion for Partial Summary Judgment on Master Lock's Lanham Act and Pennsylvania Unfair Competition Counterclaims will be granted.
Lawman requests that the Court grant it attorneys fees and costs associated with defending these four Counterclaims. The Court denies this request. First, the Court notes that the underlying facts of the Lanham Act and Unfair Competition Counterclaims also formed a basis for some of Master Lock's four other Counterclaims. Second, as Lawman correctly states in its Reply Brief, it is within the Court's discretion to allow Master Lock to amend and drop its Counterclaims.
Lawman has not moved for summary judgment on Count I of Master Lock's Counterclaims, namely Patent Invalidity. Therefore, this Counterclaim remains.
II. FACTUAL BACKGROUND
Lawman filed its Complaint alleging patent infringement against Master Lock on August 5, 2002. Both Lawman and Master Lock sell automobile wheel locks which act as anti-theft devices. On the same day that the Complaint was filed, Lawman sent out letters to various customers of Master Lock who sell Master Lock's auto wheel locks. The following day, on August 6, 2002, Lawman issued a press release stating that Lawman had filed suit against Master Lock for patent infringement. More recently, Lawman sent out additional letters to Master Lock's customers on October 30, 2003. Master Lock argues that because of the August 5, 2002 letter and the August 6, 2002 press release, Master Lock had to devote substantial time and effort to dispel the concerns of its customers. Additionally, Master Lock emphasizes that it had to produce indemnification agreements upon request of its customers.
The letter states as follows:
Lawman Armor Corporation ("Lawman") filed a lawsuit against Master Lock Company ("Defendant") on August 5, 2002, in the United States District Court for the Eastern District of Pennsylvania for infringement of its US Patent D357, 621 entitled, "Sliding Hook Portion of a Vehicle Steering Wheel Lock Assembly." [sic] A copy of the `621 patent' [sic] is enclosed.
Lawman will be seeking an injunction to prevent Master Lock from selling any of the infringing steering wheel lock products. Lawman is also seeking monetary relief for past retail sales. Lawman is evaluating its Mexican and Canadian rights as well. A copy of the lawsuit is enclosed.
Federal law states that it is illegal to make, use, offer to sell or sell infringing products. And while it is Lawman's policy not to sue customers, such suits may need to be brought in order to avoid any loss of rights in the event that customers buy infringing products. To prevent such a situation, I would recommend that before purchasing any steering wheel lock with "two hooks" from a company other than Lawman, a sample should be submitted to Lawman for evaluation.
In a prior patent lawsuit, Lawman prevailed in its Preliminary Injunction Motion against Winner International and its "The Club-Auto Brake Lock." In summary, on January 22, 2002, the United States District Court for the Eastern District of Pennsylvania ruled that Winner, together with its agents, and those acting on its behalf, are "HEREBY PRELIMINARY ENJOINED AND RESTRAINED" from selling, offering for sale, licensing, using, or otherwise distributing in the United States any Winner "Auto Brake Lock" and any other Winner products that compete directly against Lawman's "Unbreakable AutoLock" brake/clutch lock and infringe claims of Lawman's patent.
(Def.'s Resp. Br. in Opp'n to Pl.'s Mot. for Partial Summ. J. Regarding Countercl., Ex. A).
The press release states as follows:
Lawman Armor Corporation ("Lawman") filed a lawsuit against Master Lock Company, a subsidiary of Fortune Brands, Inc., ("Defendant") on August 5, 2002, in the United States District Court for the Eastern District of Pennsylvania, alleging infringement of its US Patent D357, 621 entitled, "Sliding Hook Portion of a Vehicle Steering Wheel Lock Assembly." [sic] The Civil Action-Case Docket number is 02-6605.
In a prior patent lawsuit, Lawman prevailed in its Preliminary Injunction Motion against Winner International, LLC (makers of "The Club" steering wheel lock) and its "The Club-Auto Brake Lock." In summary, on January 22, 2002, the United States District Court for the Eastern District of Pennsylvania ruled that Winner, together with its agents, and those acting on its behalf, are "HEREBY PRELIMINARY ENJOINED AND RESTRAINED" from selling, offering for sale, licensing, using, or otherwise distributing in the United States any Winner "Auto Brake Lock" and any other Winner products that compete directly against Lawman's "Unbreakable AutoLock" brake/clutch lock and infringe claims of Lawman's patent.
(Def.'s Resp. Br. in Opp'n to Pl.'s Mot. for Partial Summ. J. Regarding Countercl., Ex. B).
These letters state the following:
As you may know, Lawman Armor Corp. ("Lawman"), filed a lawsuit against Master Lock Company and Winner International, LLC ("Defendant"), in the United States District Court for the Eastern District of Pennsylvania for infringement of its US Patent D357, 621 entitled, "Sliding Hook Portion of a Vehicle Steering Wheel Lock Assembly."
Currently the trials are scheduled for early 2004. I am notifying you of this because your company sells a version of the "two hooks" steering wheel lock that is manufactured by the Defendant and is the subject of this patent litigation. It is the policy and practice of Lawman to enforce its patent rights and gives notice of its intention to take all appropriate action to enforce such rights and seek damages. Lawman's 2-Hooks brochure is enclosed for your reference.
Lawman recently secured the rights to four (4) Chinese 2-Hook patents, which are the counterparts of the 2-Hooks design patents in the United States. There are two (2) utility patents and two (2) design patents. The patent filing dates are as early as 1994. Lawman is now taking steps to identify those manufacturers who are engaged in infringement of its patent rights and will seek to terminate the exportation of their infringing two hook products from China.
(Def.'s Resp. Br. in Opp'n to Pl.'s Mot. for Partial Summ. J. Regarding Countercl., Ex. E).
III. STANDARD
Pursuant to Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is proper "if there is no genuine issue as to any material fact." FED. R. CIV. P. 56(c). Essentially, the inquiry is "whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). The moving party has the initial burden of informing the court of the basis for the motion and identifying those portions of the record that demonstrate the absence of a genuine issue of material fact.Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). An issue is genuine only if there is a sufficient evidentiary basis on which a reasonable jury could find for the non-moving party. Anderson, 477 U.S. at 249. A factual dispute is material only if it might affect the outcome of the suit under governing law. Id. at 248.
To defeat summary judgment, the non-moving party cannot rest on the pleadings, but rather that party must go beyond the pleadings and present "specific facts showing that there is a genuine issue for trial." FED. R. CIV. P. 56(e). Similarly, the non-moving party cannot rely on unsupported assertions, conclusory allegations, or mere suspicions in attempting to survive a summary judgment motion. Williams v. Borough of W. Chester, 891 F.2d 458, 460 (3d Cir. 1989) (citing Celotex, 477 U.S. at 325 (1986)). Further, the non-moving party has the burden of producing prima facie evidence to establish each element of its claim. Celotex, 477 U.S. at 322-23. If the court, in viewing all reasonable inferences in favor of the non-moving party, determines that there is no genuine issue of material fact, then summary judgment is proper. Id. at 322; Wisniewski v. Johns-Manville Corp., 812 F.2d 81, 83 (3d Cir. 1987).
IV. DISCUSSION
Master Lock's Lanham Act Counterclaim is based on 15 U.S.C. § 1125(a). There
Specifically, 15 U.S.C. § 1125(a) states as follows:
(1) [a]ny person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation or origin, false or misleading, description of fact, or false or misleading representation of fact, which —
(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection or association of such person with another person, or as to the origin, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or
(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities,
shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.15 U.S.C. § 1125(a).
are several elements that are necessary to establish a Lanham Act claim. Specifically, a plaintiff has to show:
1) that the defendant has made false or misleading statements as to his own product [or another's]; 2) that there is actual deception or at least a tendency to deceive a substantial portion of the intended audience; 3) that the deception is material in that it is likely to influence purchasing decisions; 4) that the advertised goods traveled in interstate commerce; and 5) that there is a likelihood of injury to the plaintiff in terms of declining sales, loss of good will, etc.U.S. Healthcare, Inc. v. Blue Cross of Greater Phila., 898 F.2d 914, 922-23 (3d Cir. 1990) (quotation and citations omitted). The elements for an Unfair Competition claim under Pennsylvania law are identical to those under the Lanham Act, except for the requirement of an affect on interstate commerce. See Int'l Hobby Corp. v. Rivarossi S.P.A., No. 96-3082, 1998 WL 376053, at *7 n. 7 (E.D. Pa. June 29, 1998), aff'd, 203 F.3d 817 (3d Cir. 1999).
Importantly, where the Lanham Act or state law Unfair Competition claim arises from a patentee's marketplace activity in support of its patent, an additional element is required. The United States Court of Appeals for the Federal Circuit ("Federal Circuit") has stated that where a patentee is asserting its patent rights in the marketplace, such statements need to be made in bad faith for there to be a Lanham Act or state law Unfair Competition claim. See Zenith Elecs. Corp. v. Exzec, Inc., 182 F.3d 1340, 1353 (Fed. Cir. 1999) (stating that "before a patentee may be held liable under § 43(a) for marketplace activity in support of its patent, and thus be deprived of the right to make statements about potential infringement of its patent, the marketplace activity must have been in bad faith"); see also id. at 1355 (stating that bad faith is a requirement for state law tort claims or else the state law claim will be preempted by patent law). Therefore, in addition to the elements normally required to establish a Lanham Act or Pennsylvania Unfair Competition claim, Master Lock will also have to show that Lawman acted in bad faith in pursuing its patent rights. Each of the above listed elements are essential to the claim and summary judgment is appropriate "if there is no material issue of fact as to any one of the elements." Synygy, Inc. v. Scott-Levin, Inc., 51 F. Supp.2d 570, 575 (E.D. Pa. 1999), aff'd, 229 F.3d 1139 (3d Cir. 2000). As the Federal Circuit has noted, to survive summary judgment, Master Lock "must present affirmative evidence sufficient for a reasonable jury to conclude that the patentee acted in bad faith, in light of the burden of clear and convincing evidence that will adhere at trial." Golan v. Pingel Enters., Inc., 310 F.3d 1360, 1371 (Fed. Cir. 2002).
"Exactly what constitutes bad faith remains to be determined on a case by case basis." Zenith, 182 F.3d at 1354. The Federal Circuit though has set forth the types of statements that might equate to bad faith. Specifically:
if the patentee knows that the patent is invalid, unenforceable, or not infringed, yet represents to the marketplace that a competitor is infringing the patent, a clear case of bad faith representations is made out. Furthermore, statements to the effect that a competitor is incapable of designing around the patent are inherently suspect.Zenith, 182 F.3d at 1354. However, "[a]lthough `bad faith' may encompass subjective as well as objective considerations, and the patent holder's notice is not irrelevant to a determination of bad faith, a competitive commercial purpose is not of itself improper, and bad faith is not supported when the information is objectively accurate." Mikohn Gaming Corp. v. Acres Gaming, Inc., 165 F.3d 891, 897 (Fed. Cir. 1998) (emphasis added). Therefore, "the communication of accurate information about patent rights, whether by direct notice to potential infringers or by a press release, does not support a finding of bad faith." DCI Mktg., Inc. v. Justrite Mfg. Co., 213 F. Supp.2d 971, 972 (E.D. Wis. 2002). We will now examine whether the statements made by Lawman in its letters and press release violated the Lanham Act and constituted Unfair Competition under Pennsylvania law. We will particularly focus on whether such statements meet the required bad faith element.
A. AUGUST 5, 2002 LETTER
The first two paragraphs of the letter state that Lawman filed suit against Master Lock for patent infringement and that Lawman is seeking monetary and injunctive relief. This information is factually accurate and, as such, these statements cannot meet the threshold requirement of falsity needed to prove bad faith. See Mikohn Gaming, 165 F.3d at 897 (stating "threshold requirement of incorrectness or falsity, or disregard for either, is required in order to find bad faith"); DCI Mktg, 213 F. Supp.2d at 974 (declaring if a statement is accurate, it does not pass threshold requirement of falsity since "subjective factors cannot turn a document that is objectively accurate into bad faith"); The Gleason Works v. Oerlikon Geartec, AG, 141 F. Supp.2d 334, 339 (W.D.N.Y. 2001) (finding that a letter which sets forth that a patent holder filed suit against alleged patent infringer is factually accurate).
These statements by Lawman only declare that Lawman has filed suit against Master Lock and do not state that Master Lock is in fact infringing on the 621 patent. However, Master Lock argues because Lawman represented to Master Lock's customers that Lawman filed suit, Lawman's message was false because of the "necessary implication" that Master Lock was in fact infringing. Master Lock's "necessary implication" argument predominately relies on Novartis Consumer Health, Inc. v. Johnson Johnson-Merck Consumer Pharmaceuticals Co., 290 F.3d 578, 586-87 (3d Cir. 2002). Relying on this case, Master Lock argues that "an advertising claim may be false even if comprised of statements that are literally true." (Def.'s Resp. Br. in Opp'n to Pl.'s Mot. for Partial Summ. J. Regarding Countercl., 6). Novartis Consumer Health was not a case where a competitor was bringing a Lanham Act claim against a patent holder for its statements to consumers regarding the patent holder's rights. The United States Court of Appeals for the Third Circuit ("Third Circuit") never had to consider the bad faith element since that case did not involve a statement made in the marketplace regarding patent rights. As previously stated, the Federal Circuit has articulated that only a statement which is objectively false or factually inaccurate can satisfy the threshold requirement of falsity necessary to meet the bad faith requirement. See Mikohn Gaming, 165 F.3d at 897.
The next statement within the August 5, 2002 letter pertains to Lawman's recommendation to Master Lock's customers that they submit a sample of any two hook product not made by Lawman for evaluation before they buy any steering wheel lock with two hooks. The Federal Circuit has previously noted that statements in which a patentee alleges that a competitor is incapable of designing around a patent might constitute bad faith. See Zenith Elecs., 182 F.3d at 1354. Master Lock principally relies on Zenith to argue that the recommendation by Lawman gives rise to a Lanham Act and Pennsylvania Unfair Competition claim because it falsely represents to Master Lock's customers that Lawman is the exclusive source of two hook auto wheel locks. In this case, however, Lawman's recommendation is not that a competitor cannot design around the 621 patent. Rather, Lawman's recommendation that retailers of two hook auto wheel locks submit a sample to Lawman for evaluation illustrates that Lawman recognizes that it is possible to design around its patent. Otherwise, there would be no need for an evaluation by Lawman since any two hook product would automatically infringe upon the 621 patent. Thus, we disagree with Master Lock's interpretation of this statement. Additionally, we note that Lawman's statement is simply a recommendation. In light of the aforementioned, we find that Lawman's recommendation does not give rise to a Lanham Act or Unfair Competition claim since it does not meet the required falsity threshold necessary to establish the bad faith requirement.
Finally, the last statement in the letter contends that Lawman was successful against Winner International ("Winner") in obtaining a preliminary injunction to stop Winner from selling its Auto Break Lock. This information is literally true. Lawman was successful in obtaining a preliminary injunction against Winner in a prior patent lawsuit to prevent Winner from selling its Auto Brake Lock. See Lawman Armor Corp. v. Winner Int'l, Inc., No. 01-1605, 2002 WL 123342, at *20-21 (E.D. Pa. Jan. 28, 2002), aff'd, 50 Fed. Appx. 427 (Fed. Cir. 2002). Obviously, mentioning the Winner litigation serves little to no purpose other than perhaps a competitive commercial one. However, the Federal Circuit has made clear that "a competitive commercial purpose is not of itself improper, and bad faith is not supported when the information is objectively accurate." Mikohn Gaming, 165 F.3d at 897. Master Lock argues that by bringing up the previous Winner litigation, Lawman is likely to deceive Master Lock's customers "into believing that the issues, products, and patents in the two cases are related." (Def.'s Resp. Br. in Opp'n to Pl.'s Mot. for Partial Summ. J. Regarding Countercl., 9). Thus, Master Lock is arguing that by mentioning the Winner preliminary injunction, Lawman is attempting to create a cloud of infringement on Master Lock's two hook products.
We reiterate that the information set forth in the fourth paragraph of the letter is accurate, and, therefore, Master Lock cannot pass the threshold requirement of falsity necessary to establish the bad faith requirement as it relates to this statement. See DCI Mktg., 213 F. Supp.2d at 974. In DCI Marketing, the defendant asserted counterclaims under the Lanham Act and various state law tort claims arising out of a letter that the plaintiff sent to defendant's customers. Id. at 972. The defendant argued that the plaintiff was attempting to create a cloud of infringement by referencing, yet not identifying other intellectual property rights.See id. That court noted that even if this was the case, since the information the plaintiff set forth in its letter was accurate, it did not meet the threshold requirement of falsity necessary to establish bad faith. See id. Similarly, this Court finds that since the information Lawman set forth in its August 5, 2002 letter regarding the Winner litigation was accurate, the element of bad faith cannot be satisfied.
B. AUGUST 6, 2002 PRESS RELEASE
The August 6, 2002 press release is similar to the August 5, 2002 letter. Lawman states in the press release that it has filed suit against Master Lock for patent infringement. As previously stated, such information is objectively accurate and cannot meet the threshold requirement of falsity necessary to establish bad faith.
The press release also practically mirrors the August 5, 2002 letter's discussion of the preliminary injunction Lawman obtained against Winner for Winner's Auto Brake Lock. Again, as was set forth in the previous section, while such a discussion by Lawman is probably for a competitive purpose, the information Lawman presents is accurate, and, as such, Master Lock cannot meet the bad faith requirement necessary to establish a Lanham Act or Pennsylvania Unfair Competition claim.
C. OCTOBER 30, 2003 LETTER
Within this letter, Lawman sets out in its opening paragraph that it has filed suit against Master Lock for patent infringement. As previously stated in discussing the August 5, 2002 letter, this statement is objectively true. Thus, Master Lock cannot meet the threshold requirement of falsity necessary to establish the bad faith requirement as it relates to this statement.
We will next examine the second paragraph of the October 30, 2003 letter. Lawman states that trial is currently scheduled for early 2004. The Scheduling Order entered on September 20, 2002 states that "the case will be placed in the trial pool fourteen (14) days after the Court's disposition of the [dispositive] motions." The motions are currently before the Court. The second paragraph of this letter states that Lawman is notifying the customers because they purchased a two hook product that is the subject of the litigation. This statement is accurate and, therefore, Master Lock cannot establish that such statement was made in bad faith.
Even if we were to accept Master Lock's interpretation that this statement regarding the scheduling of trial is false, Master Lock has failed to produce evidence establishing a nexus between this one purportedly false statement and its Lanham Act and Unfair Competition Counterclaims. See Synygy, 51 F. Supp.2d at 578. Indeed, the evidence Master Lock provides the Court regarding the elements for its Lanham Act and Unfair Competition Counterclaims relates to the circumstances and impact surrounding the August, 5, 2002 letter and August 6, 2002 press release and not the October 30, 2003 letter. As previously stated, at the summary judgment stage, Master Lock has the burden to produce prima facie evidence to establish each element of its claim as it relates to the October 30, 2003 letter.Celotex, 477 U.S. at 322-23.
Finally, we will examine the third paragraph of the October 30, 2003 letter. The third paragraph of the letter states that Lawman has secured the rights to four Chinese patents and "is taking steps to identify those manufacturers who are engaged in infringement of its patent rights and will seek to terminate the exportation of their infringing two hook products from China." (Def.'s Resp. Br. in Opp'n to Pl.'s Mot. for Partial Summ. J. Regarding Countercl., Ex. E). Master Lock argues that such a statement "implies a broader scope of protection than is available to Lawman in the United States." (Id. at 4). However, we find that this statement does not say what Master Lock suggests. Simply stated, this section states that Lawman is seeking to identify those manufacturers who might be exporting infringing products from China in light of Lawman's recently secured rights to those Chinese patents. However, Master Lock does not contend that these statements are objectively false or inaccurate, only that these statements imply a broader scope of protection than is available to Lawman in the United State. As such, Master Lock has failed to establish that Lawman made these statements in bad faith since Master Lock does not assert that such statements regarding Lawman's rights to the Chinese patents are false.
V. CONCLUSION
We have considered Lawman's Motion for Partial Summary Judgment of Master Lock's Counterclaims Counts II thru VII. Master Lock has agreed to dismiss Counts IV thru VII. Thus, these Counterclaims are dismissed. Upon consideration of the parties arguments regarding Counts II and III of the Counterclaims, we find that Master Lock has failed to meet its burden to create a triable issue of fact as to these two Counterclaims. Therefore, we grant Lawman's Motion for Partial Summary Judgment regarding Counts II and III of the Counterclaims.
An appropriate Order follows.
ORDER
AND NOW, this 27th day of February, 2004, upon consideration of Plaintiff's Motion for Partial Summary Judgment (Doc. No. 25), the Response, Reply, Memoranda and Exhibits attached thereto, it is hereby ORDERED that:
1. Counts IV, V, VI and VII of Master Lock Company's Counterclaims are hereby DISMISSED;
2. Plaintiff's request for attorneys fees and costs associated with defending Counts IV, V, VI and VII is DENIED; and
3. Plaintiff's Motion for Partial Summary Judgment on Master Lock's Counterclaims Counts II and III is GRANTED.
As stated within the Memorandum Opinion, Master Lock has agreed to dismiss its Counterclaims, Counts IV, V, VI and VII. (Def.'s Resp. Br. in Opp'n to Pl.'s Mot. for Partial Summ. J. Regarding Countercl., 1).