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TY INC. v. PUBLICATION INTERNATIONAL

United States District Court, N.D. Illinois


June 9, 2004.

Ty Inc.
v.
Publ'ns Int'l, Ltd

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 ยง 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.

20040609

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