United States District Court, Northern District of Illinois, Eastern Division
April 10, 2002
ALLERGY ASTHMA TECHNOLOGY, LTD., PLAINTIFF,
I CAN BREATHE, INC. AND ADRIEN J. BLEDSTEIN, DEFENDANTS I CAN BREATHE! INC., COUNTERCLAIMANT, V. ALLERGY ASTHMA TECHNOLOGY, LTD., COUNTERCLAIM DEFENDANT
The opinion of the court was delivered by: Milton I. Shadur, Judge
FINDINGS OF FACT AND CONCLUSIONS OF LAW
In this litigation stemming from the total deterioration of the once
amicable business relationship between Allergy Asthma Technology, Ltd.
("Allergy Asthma") on the one hand and I Can Breathe! Inc. ("I Can
Breathe") and its President and sole shareholder Adrien Bledstein
("Bledstein") on the other, this Court has conducted a bench trial of
Allergy Asthma's claims and I Can Breathe's counterclaim. What follows in
accordance with Fed. R. Civ. P. ("Rule") 52(a) are the resulting
findings of fact ("Findings") and conclusions of law ("Conclusions"). To
the extent (if any) that the Findings as stated may be deemed conclusions
of law, they shall also be considered Conclusions. In the same way, to
the extent (if any) that matters later expressed as Conclusions may be
deemed findings of fact, they shall also be considered Findings. In both
of those respects, see Miller v. Fenton, 474 U.S. 104, 113-14 (1985).
Findings of Fact*fn1
1. Allergy Asthma is a Delaware corporation with its principal place of
business in Morton Grove, Illinois. In August 1999 Allergy Asthma
purchased the assets (including the name) of an existing Illinois
corporation with the identical name. Among the products that Allergy
Asthma sells and that its predecessor sold are facial masks that cover
the nose and mouth of the wearer (St. ¶ 1, 2, 4).
2. I Can Breathe is an Illinois corporation with its principal place of
business in Chicago. It too sells facial masks that cover the nose and
mouth of the wearer (St. ¶¶ 5, 7). Its President, sole director and
sole shareholder is Bledstein, who is herself an asthmatic (St. ¶
3. Allergy Asthma and I Can Breathe are competitors in the sale of (a)
multi-purpose facial masks, which filter dust, pollen, mold and other
airborne irritants, and (b) cold-weather facial masks, which serve a
similar filtering function but also warm and moisturize air breathed in
sub-freezing temperatures (Bledstein). By any measurement — e.g.,
in terms of sales volume, number of employees or number of products
— Allergy Asthma is much larger than I Can Breathe. Allergy Asthma
sells many products in addition to facial masks, while I Can Breathe's
facial masks are its only significant products (P. Exs. 1, 2; Bledstein
4. I Can Breathe! ® is a trademark registered with the United
States Patent and Trademark Office ("PTO") and Illinois Secretary of
State for I Can Breathe facial masks (D. Exs. 148, 149). I Can Breathe's
multi-purpose masks are made of silk, and its cold-weather masks are
silk-lined. Both types of masks have adjustable ear loops and a piece of
wire to seal the mask under the eyes (St. ¶ 28; D. Exs. 5, 147). In
addition, I Can Breathe masks contain a patented feature (invented by
Bledstein, who designed the masks for use by herself and others having
respiratory difficulties) that keeps the fabric from collapsing against
the wearer's nose and mouth. I Can Breathe is Bledstein's exclusive
licensee of the patent (St. ¶ 6). Each I Can Breathe mask has a
identifying both the trademark and the patent (D. Exs. 1, 2; P. Ex. 4).
5. Allergy Asthma facial masks are dissimilar from I Can Breathe facial
masks in several important respects:
(a) Allergy Asthma's facial masks are made of a
material known as Pristine polyester and contain no
silk. Allergy Asthma never sold any masks containing
silk except during the time that it was selling I Can
Breathe masks (St. ¶ 14).
(b) Allergy Asthma's facial masks are sold under the
name "AllerTech ®," a name that is not registered
for facial masks with the PTO (D. Ex. 152).
(c) Allergy Asthma's facial masks are not patented
and contain no label (P. Ex. 3). Pristine polyester is
patented for use in mattresses and pillow covers
(U.S. Patent No. 6,277,770), not for facial masks (P.
(d) Allergy Asthma's facial masks do not contain a
wire to seal the mask against airborne irritants, nor
do they contain the patented feature of I Can Breathe
facial masks, thus creating the potential (or indeed
the actuality) that a person wearing the Allergy
Asthma mask will have the mask sucked against the
wearer's mouth and nostrils when he or she inhales
(D. Exs. 5, 147; P. Ex. 3; Bledstein).
There are however several characteristics that the masks have in common:
Allergy Asthma's masks are shaped to look like I Can Breathe masks and
are advertised to function like I Can Breathe masks (D. Ex. 5; P. Exs.
1, 2; Bledstein).
6. At all relevant times:
(a) Both Allergy Asthma and I Can Breathe contracted
out (and continue to contract out) the manufacturing of
their facial masks (Krugman and Bledstein).
(b) Both Allergy Asthma and I Can Breathe sold (and
continue to sell) their masks to wholesale and retail
(c) All of I Can Breathe's retail sales were and are
solely by mail order (id.).
7. Allergy Asthma was I Can Breathe's principal wholesale customer for
several years ending in early 2000 (St. ¶ 13). All of their
transactions were documented solely by the exchange of purchase orders
and invoices, with no other written agreements or contracts between the
companies (St. ¶ 10). Despite Bledstein's requests on numerous
occasions that Allergy Asthma use the "I Can Breathe! ®" brand name,
the latter's catalog and website referred to I Can Breathe as "ICB
™", though there is no such registered trademark (Bledstein and
8. In 1996 Allergy Asthma's President Krugman attempted without success
to persuade I Can Breathe to grant Allergy Asthma an exclusive
irrevocable license of I Can Breathe's patent (D. Ex. 151). Thereafter
Allergy Asthma continued to be a nonexclusive purchaser of (though it was
the principal customer for) I Can Breathe's patented masks. Early in 1999
I Can Breathe made clear to Allergy Asthma that other retailers in
addition to Allergy Asthma would be listed on I Can Breathe's website
(D. Ex. 153; Bledstein).
9. During the entire period that I Can Breathe sold silk and silk-lined
facial masks to Allergy Asthma, it was Allergy Asthma's responsibility to
package the masks for resale. I Can Breathe masks are intended primarily
for a vulnerable population with respiratory problems. Relatedly, I Can
Breathe needs to protect itself against possible product liability claims
brought by consumers who have not been adequately informed as to the
proper care and use of I Can Breathe masks. For those reasons, I Can
Breathe provided Allergy Asthma with a number of suggested package
inserts that described the products, provided care instructions and
included information for appropriate use (Bledstein).
10. Allergy Asthma never expressed (and indeed never experienced)
dissatisfaction with I Can Breathe facial masks (Bledstein). When in late
1999, without I Can Breathe's knowledge, it nonetheless decided to shift
to masks made from Pristine polyester (Krugman; see Finding 14)*fn2
— masks that were much cheaper and of lower quality, and lacking a
number of the advantages provided by I Can Breathe masks, Allergy Asthma
ordered from a printer package inserts for facial masks that it marketed
under the name "AllerTech ®'s (Krugman) and that, when used in the
sale of those masks, conveyed materially misleading information (D. Ex.
(a) Allergy Asthma's order for package inserts for
an "AllerTech ®" multi-purpose facial mask showed
Pristine polyester as the fabric content but stated
that the mask should be hand washed "in cool water
with a mild detergent formulated for silk." To the
contrary, in contrast to silk, Pristine polyester
fabric is designed to be machine-washed in hot water
(P. Exs. 5, 43 at P 295-96).
(b) Allergy Asthma's order for package inserts for
an "AllerTech ®" cold weather mask described the
contents as "polar fleece with a silk lining" (P. Ex.
5; D. Ex. 28). That was totally false as to the
Pristine polyester masks.
(c) When those package inserts were delivered to
Allergy Asthma, copies were included in all packages of
masks shipped by Allergy Asthma (both its I Can Breathe
masks remaining on hand and its newly obtained Pristine
polyester masks) (D. Exs. 22, 28; Krugman).
At the same time Allergy Asthma, without so advising Bledstein, discarded
the package inserts that she had delivered to Allergy Asthma for proposed
inclusion with I Can Breathe facial masks — rather than including
those inserts in the packages containing such masks (or at a minimum
conferring with Bledstein to resolve any objections that Krugman had to
the form or content of such inserts) (Krugman and Bledstein). By omitting
any I Can Breathe package insert from packages of I Can Breathe masks,
and by inserting information relating to Pristine polyester masks instead
(information that was materially misleading when the package contained an
I Can Breathe mask), Allergy Asthma deceived facial mask consumers, a
particularly vulnerable population, and created a risk to I Can Breathe of
product liability (Bledstein).
11. In mid-December 1999, following a successful effort to obtain
catalog and website listing of facial masks by Retired Persons Services,
the retail pharmacy unit of AARP,*fn3 Allergy Asthma shipped to RPS'
telecenter some samples of I Can Breathe facial masks. As indicated by
Finding 10, those samples were accompanied by an insert that represented
the fabric content as including Pristine polyester, when in fact the
masks were made of silk and contained no Pristine polyester (P. Ex. 11A;
D. Ex. 92; Krugman).
12. In late December 1999 RPS began to advertise I Can Breathe facial
masks in RPS' catalog and on its website (P. Ex. 11A; D. Ex. 89)
(a) RPS denominated the multi-purpose silk facial
masks as Product No.
M6214 and the silk-lined cold
weather facial masks as Product No. M6142 (P. Ex. 12;
D. Exs. 89-91).
(b) In fact the products pictured in RPS' catalog
and on its website were I Can Breathe facial masks,
and the text described I Can Breathe masks. Allergy
Asthma furnished the pictures and text to RPS (P. Ex.
12; D. Exs. 89-91; Krugman and Bledstein).
(c) When Allergy Asthma then stopped shipping I Can
Breathe facial masks to RPS and shipped only Pristine
polyester masks (see Finding 14), Allergy Asthma took
no steps to alert RPS to the fact that the
previously-furnished pictures and text now depicted
and described different (and more expensive and higher
quality) products from the ones that Allergy Asthma
was now providing for sale by RPS.
(d) Accordingly, throughout the period that RPS was
a customer of Allergy Asthma, RPS falsely (though
innocently, for the fault was Allergy Asthma's)
continued to advertise I Can Breathe masks by picture
and description (P. Ex. 12; D. Exs. 89-91).
13. At all relevant times until October 2000, Allergy Asthma's catalog
(and, for much of that period, Allergy Asthma's website) advertised I Can
Breathe silk and silk-lined facial masks for sale (P. Ex. 1; D. Exs.
(a) All of the products pictured and described there
were I Can Breathe facial masks, with the silk
multi-purpose mask being denominated Product No, D2700
and the silk-lined cold weather mask being denominated
Product No. D2500 (P. Ex. 1; D. Exs. 138-39).
(b) Allergy Asthma's initial order for its 1999
catalog was 500,000 copies (D. Ex. 23).
14. In December 1999 Allergy Asthma ordered Pristine polyester facial
masks from J. Lamb, Inc., also known as Philmont Manufacturing Co.
("Lamb") (P. Ex. 10):
(a) Lamb's first delivery of masks was made to Allergy
Asthma in about February 2000 (P. Ex. 10).
(b) Through August 2000 Allergy Asthma purchased
from Lamb approximately 1,000 Pristine polyester
multi-purpose masks and 800 Pristine polyester cold
weather masks (P. Ex. 10 at P 1526, 1530 and 1537).
(c) In September 2000 Allergy Asthma purchased from
Lamb 650 additional Pristine polyester multi-purpose masks
but no Pristine polyester cold weather masks (P. Ex. 10 at
P 1533 and 1534).
(d) In December 2000 and January 2001 Allergy Asthma
purchased from Lamb 200 more Pristine polyester
multipurpose masks and 800 more Pristine polyester
cold weather masks (P. Ex. 10 at P 1535 and 1536).
15. In early March 2000, without I Can Breathe's knowledge, Allergy
Asthma stopped shipping I Can Breathe silk and silk-lined facial masks to
wholesale and retail customers who ordered I Can Breathe masks pictured
and described in Allergy Asthma's catalog and on its webpage. Instead
Allergy Asthma began shipping its own Lamb-manufactured Pristine
polyester facial masks to those customers (Krugman and Bledstein).
16. Until late March 2000 all invoices issued by Allergy Asthma to
wholesale and retail customers who ordered I Can Breathe multi-purpose
facial masks identified the masks being sold and shipped as Product No.
D2700 and as "silk multi-purpose masks." From late March until October
2000, in almost every instance where Allergy Asthma shipped its Pristine
polyester multi-purpose masks to customers ordering I Can Breathe silk
multi-purpose masks, the invoice continued to identify the masks being
sold and shipped
as Product No. D2700, though the word "silk" was no
longer included (P. Ex. 11A; D. Exs. 32-40, 42, 43, 125; Krugman). In
like fashion, from sometime in March until October 2000 Allergy Asthma's
invoices for cold weather facial masks sold and shipped to customers
ordering I Can Breathe silk-lined masks continued to identify the masks
being sold and shipped as Product No. D2500, even though Allergy Asthma
was then shipping Pristine polyester masks (P. Ex. VIA; Krugman).
17. All of RPS' facial mask orders to Allergy Asthma were likewise
placed to call for Product Nos. D2700 and D2500 (P. Ex. 11A). Despite the
fact that only I Can Breathe silk and silk-lined facial masks continued
to be pictured and described on RPS' website and in its catalogs,
beginning sometime in March 2000 Allergy Asthma shipped to RPS only
Pristine polyester masks with the same numbers, D2700 and D2500. All
masks shipped by Allergy Asthma to RPS were prepackaged for resale
18. Almost immediately after Allergy Asthma began shipping its Pristine
polyester facial masks to customers who believed they were ordering I Can
Breathe masks, customers began to complain of confusion and displeasure:
(a) As early as mid-March 2000 customers began
returning the Pristine polyester masks to Allergy
Asthma, complaining that they could not breathe
through the masks or that the masks delivered to them
were not the ones advertised (D. Exs. 29, 31).
(b) I Can Breathe's limited search of Allergy
Asthma's files for purposes of this litigation
disclosed that during the period March to November
2000 more than 20 Allergy Asthma customers complained
about and returned the polyester masks for refunds
(D. Exs. 29, 31-50; Bledstein).
19. Among the customers deceived by Allergy Asthma's misrepresentations
in its marketing materials were Cheryl Coston ("Coston"), Margaret Snow
("Snow") and Debra Greane ("Greane"):
(a) In mid-March 2000 I Can Breathe received an
e-mail from Coston, an irate Allergy Asthma customer
who lives in Fairdealing, Missouri.*fn4 Coston's
e-mail stated that she had ordered I Can Breathe silk
facial masks from Allergy Asthma but had received
Pristine polyester facial masks. That was I Can
Breathe's first knowledge that Allergy Asthma was
shipping its Pristine polyester masks to customers who
had ordered I Can Breathe silk masks (P. Exs. 15-17;
(b) In mid-March 2000 Snow, an equally irate RPS
customer who lives in Anaconda, Montana, called
Allergy Asthma to complain that she had ordered an I
Can Breathe silk-lined cold weather facial mask from
RPS but had received a polyester-lined facial mask.
Snow then called I Can Breathe, told Bledstein what
had happened and ordered a silk-lined cold weather
mask (P. Exs. 15-17; D. Exs. 31; Bledstein).
(c) In mid-November 2000 Greane, an Allergy Asthma
customer who lives in Madison, Wisconsin, called
Allergy Asthma to order a new I Can Breathe mask to
replace the one that she had misplaced. Instead she
was sent a Pristine polyester mask. Greane tried it,
concluded that it appeared to be a different and
unsatisfactory product and called Allergy Asthma to
complain. Greane was told that the type of mask she
had misplaced was no longer available and was invited
to return the mask for a refund, which she did. Later
her I Can Breathe mask and observed the
differences (D. Ex. 47; Greane Dep. 8-10, 15-16,
20. For a brief period of time in the spring of 2000, I Can Breathe's
website (quoting Coston's e-mail verbatim and summarizing Snow's
comments) cautioned facial mask customers truthfully that Allergy Asthma
was shipping its polyester facial masks to persons ordering I Can Breathe
silk and silk-lined facial masks (P. Exs. 15-17). Nothing contained on I
Can Breathe's website was deceptive, false or misleading.
21. In late June 2000, four months after Allergy Asthma had stopped
shipping I Can Breathe facial masks and had been shipping only Pristine
polyester masks, Allergy Asthma ordered 24,000 reprints of its 1999
catalog with its continued depictions and descriptions of I Can Breathe
masks, and without either pictures or descriptions of Pristine polyester
masks — the only facial masks then being sold by Allergy Asthma
(D. Ex. 24; Krugman).
22. During the spring of 2000, after hearing from Snow, I Can Breathe
communicated with RPS as to the facial masks that it was selling:
(a) One of the earliest of those communications
involved I Can Breathe's request for written information
about the masks RPS was offering for sale. In response RPS
faxed to I Can Breathe a "Product Knowledge Inquiry" form
that provided a detailed description of the masks. That
form, however, did not accurately describe either I Can
Breathe masks or Allergy Asthma masks (D. Ex. 72;
(b) I Can Breathe then wrote and phoned RPS
personnel to express concern about RPS' advertising of
silk facial masks for sale when it was shipping
Pristine polyester facial masks instead (P. Exs.
29-33, 35, 37, 38; Bledstein).
(c) In one of those communications I Can Breathe
wrote (1) that Allergy Asthma's masks "may be a danger
to the health of seniors," (2) that I Can Breathe was
investigating the possibility that Allergy Asthma had
infringed I Can
Breathe's patent and (3) that Allergy
Asthma had been guilty of "bait-and-switch tactics"
(P. Exs. 29-33, 35, 37, 38; Bledstein). Each of those
statements was true, as further explained in Finding
(d) Nothing stated by I Can Breathe in its letters
to or its phone conversations with RPS was deceptive,
false or misleading.
23. This Finding elaborates on the truthfulness of I Can Breathe's
statements referred to in Finding 22(c). As to the statement that
"Allergy Asthma's masks may be a danger to the health of seniors," that
was fully justified by the fact that the Allergy Asthma mask, when held
in a way that provided the same kind of assurance against the
introduction of ambient air that is provided by I Can Breathe's wire
structure (a structure that is absent in Allergy Asthma's masks), led to
the mask being inhaled so as to block the nose and mouth.*fn5
As for the
possibility that the Allergy Asthma masks had infringed I Can Breathe's
patent, that was justified by the potential (based on Bledstein's
discussion with I Can Breathe's patent counsel) that the Allergy Asthma
stitched seam covering the nose might operate under the then-existing
version of the doctrine of equivalents to infringe the corresponding
patented element in the I Can Breathe mask. Finally, as to the asserted
"bait and switch tactics,"*fn6
that characterization was entirely
reasonable in light of the information that Bledstein had learned as to
situations in which customers had ordered facial masks on the
understanding that I Can Breathe masks would be provided them, only to
receive the lower-cost (and from the customers' point of view, less
desirable) Pristine polyester masks instead:
(a) Allergy Asthma's failure to take the steps
necessary to eliminate the continued use by RPS of
photographs and descriptions that depicted I Can
Breathe masks, even after Allergy Asthma had switched
to the Pristine polyester masks in its sales to RPS,
may fairly be viewed as the cause of consumer
deception in that respect. In view of the relationship
between Allergy Asthma as supplier and RPS as
purchaser of the masks, Allergy Asthma will not be
heard to argue (as it has) that it had no
responsibility for the RPS catalog or website.
(b) Although it would not be reasonable to have
required Allergy Asthma to redo its own existing
catalog (a 500,000 copy printing) to reflect its
product change during the one-year period when the
catalog was in use, Allergy Asthma did have the
obligation to apprise anyone who ordered the facial
mask from its catalog that the product that was
depicted and described there was no longer the one
that it was selling.
24. In response to I Can Breathe's correspondence and phone calls, RPS
communicated with Allergy Asthma by letter and by phone. Among the false
statements Allergy Asthma then made to RPS was that its facial masks had
been approved by the manufacturer of Pristine polyester (a matter as to
which Allergy Asthma has provided no evidence that the manufacturer of
Pristine polyester has tested, let alone approved, Allergy Asthma's
facial masks) and that no one but Bledstein's friends and relatives
recommended the use of I Can Breathe facial masks (a groundless assertion
tending to improperly disparage I Can Breathe's product) (P. Exs. 25,
28, 43; D. Ex. 85; Krugman and Bledstein).
25. In October 2000 Allergy Asthma issued a new catalog that did not
advertise I Can Breathe facial masks and that for the first time pictured
and described Pristine polyester facial masks. It was then that Allergy
Asthma — also for the first time — changed its product
numbers to eliminate the potential for misleading customers in that
respect, by referring to its multi-purpose mask as Product No. D2701 and
to its cold weather mask as Product No. D2501 (P. Ex. 2; D. Exs. 138-39;
26. Allergy Asthma did not purchase any I Can Breathe masks after
February 2000 (Krugman and Bledstein). During 2000 Allergy Asthma sold I
Can Breathe silk multi-purpose and silk-lined cold weather masks, which
it had purchased both before 2000 and during the first two months of
2000, at these retail prices (P. Ex. 2;
D. Ex. 138)
Adult cold weather masks $19.95
Child cold weather masks 14.95
Multi-purpose masks 14.95
27. Medical Self Care ("Self Care") was one of Allergy Asthma's
wholesale customers for facial masks (D. Ex. 125; Krugman). In January
2000 Allergy Asthma sold and shipped 24 I Can Breathe silk multi-purpose
facial masks to SelfCare, accompanied by the same package inserts (which
incorrectly referred to the contents as Pristine polyester) that had
accompanied the samples sent to RPS. Although Allergy Asthma paid I Can
Breathe $10.40 for each of the 24 masks, Allergy Asthma charged SelfCare
$6.50 each (substantially below Allergy Asthma's cost) D. Ex. 125).
28. From December 1999 through February or early March 2000, Allergy
Asthma sold and shipped to RPS an aggregate of 390 I Can Breathe silk
multi-purpose facial masks and 5281 Can Breathe silk-lined cold weather
facial masks. Allergy Asthma charged RPS $10 each for the multi-purpose
masks and $11 each for the cold weather masks, below Allergy Asthma's
respective costs of $10.40 and $11.40 (P. Ex. VIA at P 491, 492, 824,
842, 851, 865, 867, 908, 916, 922, 939, 942 and 945)
29. This Finding summarizes the wholesale prices at which Allergy
Asthma sold I Can Breathe silk and silk-lined facial masks during 2000
(P. Ex. 11A; D. Ex. 125):
cold weather masks $11 none
masks 10 $6.50
30. During 2000 Allergy Asthma paid Lamb $3 each for Pristine polyester
multi-purpose masks and $3.50 each for the Pristine polyester cold
weather facial masks (P. Ex. 10). Allergy Asthma did not purchase
Pristine polyester cold weather masks for children. Allergy Asthma sold
those masks at these retail and wholesale prices (Krugman):
Retail Prices Prices to RPS
Adult cold weather masks $19.95 $11
Multi-purpose masks 14.95 10
31. From December 3, 1999 through January 17, 2001 Allergy Asthma
purchased from Lamb an aggregate of 1, 850 Pristine polyester
multi-purpose facial masks and 1,600 cold weather polyester-lined facial
masks (P. Ex. 10 at P 1526, 1530, 1533, 1534, 1535, 1536, and 1537):
(a) From February through September 2000 Allergy
Asthma sold and shipped to RPS an aggregate of 275 of
those multi-purpose masks and an indeterminate number
of those cold weather masks (P. Ex. 11A at P 487,
831, 835, 838, 885, 897, 901, 905, 911 and 1344).
(b) Allergy Asthma made a gross profit of $7 ($10
minus $3 cost) on each of the 275 multi-purpose
masks, or an aggregate gross profit of $1,925 (P.
Exs. 10 and 11A).
(c) Allergy Asthma made a gross profit of $11.95
($14.95 minus $3 cost) on each of the multi-purpose
masks sold at retail and $16.45 ($19.95 minus $3.50
cost) on each of the cold weather masks sold at retail
(d) Retail sales of the 1,575 multi-purpose masks
not sold to RPS (2,150 minus the 275 sold to RPS)
would produce an aggregate gross profit of $18,821.25
(1,575 x $11.95). Retail sales of all 1,600 cold
weather masks purchased from Lamb*fn7 would produce
an aggregate gross profit of $26,320.
(e) Accordingly Allergy Asthma's total gross profit
from the sales of the Pristine polyester masks during
that time frame, the sum of the amounts in Finding 31
(b) through (d), came to $47,066.25.
32. Allergy Asthma's effort to prove damages in support of its own
claims is based on its assertedly lost profits from sales that it claims
it would have made but for I Can Breathe's and Bledstein's conduct (see
its most recently tendered Supplemental Statement of Facts ("AA Supp.")
¶¶ 91 and 95). These Findings and the ensuing Conclusions establish
that none of the complained-of conduct has been wrongful as to Allergy
Asthma so as to be actionable — but what is relevant for purposes
of I Can Breathe's Counterclaim is that Allergy Asthma has mistakenly
calculated such profits on the sale of goods not only by deducting the
cost of those goods but also by deducting (a) all other components that
enter into a calculation of corporate gross margin plus (b) its ratable
overall operating expenses as a percentage of the total corporate sales.
As this Court pointed out to both sides' counsel during post-trial
argument, the true profit on added sales or lost sales takes into account
not average across-the-board expenses but only incremental expenses:
After all, a host of expenses such as rent, officers' salaries, payroll
and maintenance costs (to name just a few) are not increased at all by
the purchase of a few thousand more dollars of goods for later resale.
Yet no evidence has been proffered by Allergy Asthma that goes to
establishing the real profits at issue. If Allergy Asthma were to have
prevailed on any aspect of its own claim (as it has not), its calculation
of a claimed lost profit equal to 7.2% of net sales would have
understated its damages figure. But as the record stands, the only
properly established deduction from Allergy Asthma's incremental gross
sales is the cost of goods sold. Hence the amount in Finding 31(e)
represents the measure of I Can Breathe's recoverable damages under
Lanham Act § 35(a), 15 U.S.C. § 1117 (a) (see Conclusion 4).
33. Even though the findings to this point, coupled with the
Conclusions that follow, operate to defeat Allergy Asthma's claims in
their entirety because of its failure to demonstrate any wrongful conduct
by I Can Breathe and Bledstein, this further Finding is in order to
identify an additional flaw in Allergy Asthma's case. Its own submissions
claim as damages only $7,484.03 in the way of net profit on asserted lost
sales to RPS (see its AA Supp. ¶ 95), a figure that it asks to have
trebled because it speculates that it also lost sales from product
placement in future AARP/RPS catalogs and on its website) (AA Supp.
¶ 96). That however proceeds from the asserted premise that RPS'
decision not to do further business with Allergy Asthma was attributable
to the allegedly wrongful conduct of I Can Breathe and Bledstein. And
Allergy Asthma simply has not proved that — indeed, even though
representatives of RPS were of course available to it as potential
witnesses, Allergy Asthma offered nothing from what would seem
been that impartial source as to RPS' reason or reasons for not
continuing those business relations. It is surely plausible — in
fact, it appears more probable from the evidence — that RPS looked
at the information that it had received as to the nature of Allergy
Asthma's misleading activities and simply decided that it therefore had
no desire to number Allergy Asthma among its suppliers for that reason.
This is a situation in which Allergy Asthma had the burden of proof and
simply failed to discharge it.
34. Finally, I Can Breathe and Bledstein have tendered a proposed
Finding 50 to the effect that Allergy Asthma "conducted this litigation
in a manner designed to add insult to I Can Breathe's injury," setting
out several bases for that assertion. In part the conduct that they
ascribe to Allergy Asthma in that respect is not before this Court (such
as what is said to be "an insulting and harassing deposition" of
Bledstein's neighbor "for which there was no excuse"). But this Court
does find that this litigation has all the earmarks of having been
motivated by a desire on Allergy Asthma's part to impose injustice on I
Can Breathe and Bledstein, rather than to obtain justice for itself.
Allergy Asthma was no doubt wounded by its loss of what it hoped might
develop into a major account with RPS. But Allergy Asthma was (and is)
unwilling to recognize that the most likely cause of that loss was its
own conduct, brought to RPS' attention by I Can Breathe through Bledstein
(as was their right). Allergy Asthma's effort to punish Bledstein and her
company for having done so is not, of course, the first time that a
whistleblower has ended up as the target of retaliatory action.
Conclusions of Law
1. This Court has jurisdiction (a) under 15 U.S.C. § 1121 (a) over
Allergy Asthma's claim for violation of Lanham Act § 43(a) (
15 U.S.C. § 1125 (a)) and (b) under 28 U.S.C. § 1338 (b) and 1367
(a) over Allergy Asthma's claims for violation of Illinois Consumer Fraud
and Deceptive Business Practices Act § 2 (815 ILCS 505/2) ("Consumer
Fraud Act") and Illinois Uniform Deceptive Trade Practices Act § 2
(815 ILCS § 510/2) ("Deceptive Trade Practices Act") and for common
law defamation and unfair competition. This Court has jurisdiction under
corresponding auspices over I Can Breathe's counterclaims for violation
of Section 43(a) of the Lanham Act § 43, Consumer Fraud Act § 2
and Deceptive Trade Practices Act § 2 and for common law unfair
competition, breach of contract and account stated. I Can Breathe's
claims for breach of contract and account stated were dismissed before
2. All of the parties are citizens and residents of the Northern
District of Illinois, and the acts of which Allergy Asthma and I Can
Breathe complain took place here. Venue in this district exists under
28 U.S.C. § 1391 (b).
3. B. Sanfield, Inc. v. Finlay Fine Jewelry Corp., 168 F.3d 967, 971
(7th Cir. 1999) (footnote and numerous citations omitted) explains what
either claimant must demonstrate in order to prove a violation of Lanham
Act § 43(a) under the circumstances of this case:
Under the federal Lanham Act, which generally
proscribes the false description of goods and their
origins, the plaintiff must show that the defendant
(1) made a false or misleading statement, (2) that
actually deceives or is likely to deceive a substantial
segment of the advertisement's audience, (3) on a
subject material to the decision to purchase the goods,
(4) touting goods entering interstate commerce, (5) and
that results in actual or probable injury to the
4. Lanham Act § 35(a) (is U.S.C. § 1117(a)), the corresponding
provision, specifies that when a violation of Lanham Act
§ 43(a) has been established:
the plaintiff shall be entitled . . . to recover
(1) defendant's profits, (2) any damages sustained by
the plaintiff, and (3) the costs of the action. In
assessing the profits the plaintiff shall be required
to prove defendant's sales only; defendant must prove
all elements of cost or deduction claimed. In
assessing damages, the court may enter judgment,
according to the circumstances of the case, for any sum
above the amount found as actual damages, not exceeding
three times such amount. If the court shall find that
the amount of the recovery based on profits is either
inadequate or excessive the court may in its discretion
enter judgment for such sum as the court shall find to
be just, according to the circumstances of the case.
Such sum in either of the above circumstances shall
constitute compensation and not a penalty. The court
in exceptional cases may award reasonable attorney fees
to the prevailing party.
5. In this instance both Allergy Asthma in its Complaint and I Can
Breathe in its Counterclaim have sought to call Lanham Act § 43(a),
and hence Lanham Act § 35(a), to their aid. What has been set out in
the Findings amply explains why Allergy Asthma is unsuccessful and why I
Can Breathe is successful in doing so. What follows in these
Conclusions, then, sets out the operative legal principles that provide
both the yardstick for those determinations and the measure of I Can
6. In those respects several portions of the extended and thoughtful
opinion by Judge Ripple in Sands, Taylor & Wood v. The Ouaker Oats Co.,
34 F.3d 1340 (7th Cir. 1994) provide useful guidance for the awarding of
appropriate relief here:
Consequently, the courts have required that the final
remedy imposed under section 35(a) provide a sufficient
deterrent to ensure that the guilty party will not
return to its former ways and once again pollute the
Our circuit has recognized that the need for deterrence
is an important dimension of section 35(a).
A year later, Judge Eschbach, writing for the Court in
Web Printing Controls Co., Inc. v. Oxy-Dry Corp.,
906 F.2d 1202, 1205 (7th Cir. 1990), noted that many of the
remedies available under the Lanham Act "flow not from
the plaintiff's proof of its injury or damage, but from
its proof of the defendant's unjust enrichment or the
need for deterrence."
In Otis Clap & Son, Inc. v. Filmore Vitamin Co.,
754 F.2d 738 (7th Cir. 1985), we dealt with this tension in
rather explicit terms. We stated that "[t]he trial
court's primary function is to make violations of the
Lanham Act unprofitable to the infringing party." Id.
A further cautionary note was sounded in Badger Meter,
Inc. v. Grinnell Corp., 13 F.3d 1145, 1157 (7th Cir.
1994). There the court, through the pen of Judge
Cummings, emphasized that any monetary award ought to
be grounded in either an ascertainable loss of the
plaintiff or a benefit accruing to the defendant on
account of its infringement. Id. Moreover, it
described the enhancement of an award under this
section as a method by which a fair recovery might be
approximated when damages and profits are not easily
And relatedly BASE Corp. v. Old World Trading Co., 41 F.3d 1081
1095-96 (7th Cir. 1994) (citations omitted) teaches:
Disgorgement initially developed as a remedy to provide
a plaintiff relief in equity, to serve as a proxy for
damages, or to deter the wrongdoer from continuing his
violations. The variety of circumstances in which a
court may award disgorgement by no means indicate that
the district court is required to award disgorgement.
Contrary to BASF's assertions that disgorgement of
wrongful profits is the "norm" in a Lanham Act case,
disgorgement is most appropriate if damages are
7. In this instance, as already held, Allergy Asthma is not entitled to
relief against either I Can Breathe or Bledstein. On the other side of
the coin, though I Can Breathe's own damages are difficult to quantify,
the considerations of deterrence well described in Sands, Taylor & Wood
and the concept of disgorgement as described in BASF call for an award to
I Can Breathe on its Counterclaim against Allergy Asthma in an amount
equal to Allergy Asthma's total gross profits of $47,066.25 referred to
in Finding 31(e). This Court further concludes that enhancing (let alone
trebling) that amount, as Section 1135(a) permits and I Can Breathe
requests, would be unduly punitive, so that possible added relief is
rejected. Accordingly Allergy Asthma is ordered to pay the sum of
$47,066.25 plus attorneys' fees (of which more later) to I Can Breathe on
the latter's Counterclaim.
8. As for the Consumer Fraud Act, its Section 10a (815 ILCS 505/10a)
provides in relevant part:
Any person who suffers actual damages as a result of a
violation of this Act committed by any other person may
bring an action against such person. The court, in its
discretion, may award actual economic damages or any
other relief which the court deems proper.
For purposes of liability under that statute, this Court has held in
Recreation Servs., Inc. v. Odyssey Fun World, Inc., 952 F. Supp. 594, 597
(N.D. Ill. 1997) that the claimant need not be the one who was deceived
— it suffices that defendant intended to deceive others (see that
statute's Section 2 (815 ILCS 505/2)). This Court adheres to that ruling
9. As is true of Allergy Asthma's unsuccessful Lanham Act claim, the
Findings confirm that its Consumer Fraud Act claim must fail as well. As
for I Can Breathe's corresponding claim, it is true that Allergy Asthma's
conduct in continuing to depict and describe I Can Breathe's masks even
after Allergy Asthma was in fact selling the Pristine polyester products
instead constituted a clear violation of the Consumer Fraud Act. This
Court nevertheless holds that the remedy already ordered in Conclusion 7
need not be enhanced to provide adequate relief for I Can Breathe because
of that violation — in effect, any remedy under the Illinois
statute would duplicate the like relief afforded under the Lanham Act.
One exception is worth mentioning: Allergy Asthma's wilful violation of
that state statute provides added support for the award of attorneys'
fees referred to in Conclusion 7 (in that respect, see the statute's
Section boa(c) (815 ILCS 505/10a(c)).
10. As for the Deceptive Trade Practices Act, Illinois courts
interpreting that statute have expressly applied the regulations
promulgated under Section 5(a) of the Federal Trade Commission ("FTC")
Act — see, e.g., Garcia v. Overland Bond & Inv. Co.,
282 Ill. App.3d 486, 493, 668 N.E.2d 199, 204-05 (1st Dist. 1996). In
that respect, Section 5(a) prohibits bait-and-switch advertising, a
prohibition that is elaborated upon in the FTC Guides
Against Bait Advertising, 16 C.F.R. § 238 in
Bait advertising is an alluring but insincere offer to
sell a product or service which the advertiser in
truth does not intend or want to sell. Its purpose is
to switch consumers from buying the advertised
merchandise, in order to sell something else, usually
at a higher price or on a basis more advantageous to
the advertiser. The primary aim of a bait
advertisement is to obtain leads as to persons
interested in buying merchandise of the type so
No advertisement containing an offer to sell a product
should be published when the offer is not a bona fide
effort to sell the advertised product.
No statement or illustration should be used in any
advertisement which creates a false impression of the
. . . quality, make, value, . . . usability, or origin
of the product offered, or which may otherwise
misrepresent the product in such a manner that later,
on disclosure of the true facts, the purchaser may be
switched from the advertised product to another.
11. Just as with Allergy Asthma's other claims, it has failed under the
Findings in its attempt to invoke the Deceptive Trade Practices Act. As
for I Can Breathe, the description in conclusion 10 accurately portrays
Allergy Asthma's conduct as set out in the Findings. But just as stated
in Conclusion 9, this Court again holds that the remedy ordered in
Conclusion 7 need not be enhanced to provide adequate relief for I Can
Breathe. And the parallel to Conclusion 9 also extends to the exception
providing added support for an attorneys' fee award — see that
statute's Section 3 (815 ILCS 510(3)).
12. Allergy Asthma's common law defamation claim, like its federal and
state statutory claims, loses too. In that regard Allergy Asthma falls at
the first hurdle: the need to prove an actionable falsehood. As the
Findings have set out in detail, Bledstein'5 (and hence I Can Breathe's)
critical comments about Allergy Asthma satisfy the required standard of
"substantial truth" — the legal test under Illinois law as
described in Wynne v. Loyola Univ. of Chicago, 318 Ill. App.3d 443, 451,
741 N.E.2d 669, 675-76 (1st Dist. 2000) and cases cited there, including
this Court's opinion in Hollymatic Corp. v. Daniels Food Equip., Inc.,
39 F. Supp.2d 1115, 1118 (N.D. Ill. 1999).
13. Finally as to both sides' claims of common law unfair competition,
both the nonliability on the part of Bledstein and I Can Breathe on
Allergy Asthma's Complaint and the liability on the part of Allergy
Asthma on I Can Breathe's Counterclaim are really subsumed under what has
already been said as to their respective Lanham Act § 43(a) claims.
Hence that final claim on Allergy Asthma's part is rejected and I Can
Breathe's is upheld, with no additions being required to the results
already prescribed in these Findings and Conclusions.
14. As suggested earlier in the Findings and Conclusions, both (a) the
nature of Allergy Asthma's conduct of this litigation and (b) its
motivations for attempting to convert a problem of its own making into a
lawsuit asserting multiple claims despite minor potential damages even if
it were successful justify characterizing this as an "oppressive suit" on
its part within the meaning of Door Sys., Inc. v. Pro-Line Door Sys.,
Inc., 126 F.3d 1028, 1032 (7th Cir. 1997). That entitles I Can Breathe
and Bledstein, as prevailing parties, to the recovery of their attorneys'
fees under Lanham Act § 35(a) (15 U.S.C. § 1117 (a)). And as
Conclusions 9 and 11 indicate, even if that were not the case the same
conclusion is separately bolstered by like considerations applicable to
statutory claims at issue here, each of which independently
supports an award of attorneys' fees.
Judgment is ordered to be entered in favor of I Can Breathe and against
Allergy Asthma in the sum of $47,066.27. Judgment is further ordered to
be entered dismissing all of Allergy Asthma's claims with prejudice.
Lastly, I Can Breathe is entitled to an award of reasonable attorneys'
fees, and in that respect the parties are ordered to comply with the
procedural requirements of this District Court's LR 54.3 (but under
Budinich v. Becton Dickinson & Co., 486 U.S. 196 (1988) this order does
not impair the finality of the judgment ordered in the preceding two