The opinion of the court was delivered by: JAMES ZAGEL, District Judge
Ty Inc. has moved for summary judgment, pursuant to Federal Rule of
Civil Procedure 56(c), on Publication International Ltd.'s ("PIL")
affirmative defense of trademark misuse. Under Rule 56(c), a party is
entitled to summary judgment in its favor "if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to judgment as a
matter of law."
After there was a dispute as to whether PIL had even raised this
defense originally, I considered the issue and concluded that PIL had
"arguably, although not artfully" raised the defense in Paragraph 60 of
its Answer. Tylnc. v. Publ'ns Int'l, Ltd., No. 99 C 5565, 2003 U.S.
Dist. LEXIS 9549, at *9 (N.D. Ill. June 5, 2003). Paragraph 60 states:
As Plaintiff alleged in its Complaint, it has licensed
others who are in competition with this Defendant to
publish and/or distribute books similar to those upon
which this Complaint is based. This suit is an attempt
by Plaintiff to control the distribution and
dissemination of information regarding its products
and constitutes unfair competition and an improper
attempt to create a monopoly by Plaintiff so as to bar
it from obtaining relief at law or in equity.
Paragraph 60 was the only basis on which I found that PIL "arguably,
although not artfully" raised the defense. I went on to observe that
Paragraph 60 "involves PIL's allegation that Ty has misused its
intellectual property by using threats and litigation to force
individuals and companies to suppress information that is unfavorable or
unflattering to Ty, thereby unlawfully extending the scope of its
intellectual property rights." Id. However, upon further examination, the
allegation in Paragraph 60 is more limited. It alleges that only the
present suit is an attempt to "control the distribution and dissemination
of information regarding its products," and that only the present suit
"constitutes unfair competition and an improper attempt to create a
monopoly by Plaintiff so as to bar it from obtaining relief at law or in
equity." Nothing in Paragraph 60 refers to any lawsuits or threats of
litigation other than the present suit.
Ty now argues that it is entitled to summary judgment as to PIL's
misuse defense because "[m]erely filing [a] trademark infringement
lawsuit itself cannot constitute unclean hands." Thomas McCarthy,
McCarthy on Trademarks and Unfair Competition § 31:51 (5th ed. 2001). The
only exception to this rule is when a lawsuit filed is a sham. Estee
Lauder, Inc. v. Fragrance Counter, Inc., 189 F.R.D. 269, 273 (S.D.N.Y.
1999) ("Absent proof of a sham, the bringing of litigation cannot, as a
matter of law, form the basis of an antitrust claim or misuse
defense."). The test for sham litigation requires proof that: (1) the
suit was "objectively baseless in the sense that no reasonable litigant
could realistically expect success on the merits," and (2) there was
subjective intent to use the litigation to interfere directly with the
business relationships of a competitor. See Professional Real Estate
Investors v. Columbia Pictures Indus., 508 U.S. 49, 60-62(1993). "Under
the objective prong . . . sham litigation must constitute the pursuit of
claims so baseless that no reasonable litigant could realistically expect
to secure favorable relief." Id. at 62. "If an objective litigant could
conclude that the suit is reasonably calculated to elicit a favorable
outcome, the suit is immunized under [the First Amendment,] and [a] claim
premised on the sham exception must fail." Id. at 60.
Because there is absolutely no evidence that the claims brought by Ty
are "clearly baseless, or . . . accompanied by perjury, fraud,
conspiracy, bribery, misrepresentation," or other "illegal and
reprehensible practices," I find that the present lawsuit does not meet
the test for sham litigation. Surgidev Corp. v. Eye Tech., Inc.,
625 F. Supp. 800, 803 (D. Minn. 1986). Accordingly, the present lawsuit
cannot constitute a basis for trademark misuse, and because this lawsuit
was the sole basis for PIL's allegation of trademark misuse the defense
cannot stand. See Weber-Stephen Prods. Co. v. North American Prods., 1983
U.S. Dist. LEXIS 14926, at *12-13 (N.D. Ill. Aug. 3, 1983) ("The good
faith enforcement by plaintiff of its trademark rights does not
constitute an antitrust violation or a trademark misuse."). Accordingly,
Ty is entitled to summary judgment as to the defense.
As a final note, I did not rely upon Ty's Response to PIL's Local
Rule 56(B)(3) Statement in reaching this decision, and thus PIL's Motion to
Strike Ty's Response to PIL's Local Rule 56(B)(3) Statement is moot.
Nonetheless, the motion is granted.
For the reasons above, Ty's Motion for Partial Summary Judgment on
Defendant's Trademark Misuse Defense and PIL's Motion to Strike Ty's
Response to PIL's Local Rule 56(B)(3) Statement are GRANTED.
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