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).
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)
(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 ...