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TY INC. v. PUBLICATIONS INTERNATIONAL LTD.

October 19, 2004.

TY, INC., Plaintiff,
v.
PUBLICATIONS INTERNATIONAL, LTD., Defendant.



The opinion of the court was delivered by: JAMES ZAGEL, District Judge

MEMORANDUM OPINION AND ORDER

Defendant Publications International Ltd. ("PIL"), pursuant to Rule 15(a) of the Federal Rules of Civil Procedure, moves to amend its Answer to Plaintiff Ty Inc.'s ("Ty") 1999 Complaint of copyright and trademark infringement. PIL also moves to exclude the expert opinion and testimony of Ty's witness Howard Fisher. I address each motion in turn.

I. PIL's Motion to Amend Its Answer

  Plaintiff Ty filed a Complaint alleging both copyright and trademark infringement against Defendant PIL in 1999. In its Answer to Ty's Complaint, PIL offered the following affirmative defense:

  As Plaintiff alleges 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 any relief at law or in equity. Defendant's Answer, ¶ 60. Shortly after the close of discovery, Ty moved for summary judgment on both its copyright and trademark claims. I granted summary judgment on the copyright claims but denied summary judgment on the trademark claims. PIL appealed both summary judgment rulings, and the Seventh Circuit reversed. Ty, Inc. v. Publ'ns Int'l. Ltd., 292 F.3d 512 (7th Cir. 2002), cert. den., 537 U.S. 1110 (2003).

  With respect to the copyright claims and defenses, I subsequently ruled that the Seventh Circuit limited the scope of remand to the issue of the defense of fair use and that PIL could not raise the defense of misuse on remand See Ty, Inc. v. Publ'ns Int'l, Ltd., No. 99 C 5565, 2003 U.S. Dist. LEXIS 9549, at *13-17 (N.D. Ill. June 5, 2003). In that June, 2003 decision, I noted that despite pleading the defense of misuse in paragraph 60 of its Answer, PIL waived the defense by failing to argue it in response to Ty's motion for summary judgment and by failing to argue copyright misuse in its appeal of my decision. Id. at 15.

  In 2003, Ty moved for partial summary judgment on PIL's affirmative defense of trademark misuse. I granted Ty's motion, holding that paragraph 60 of PIL's Answer pled only a limited defense of misuse. Ty, Inc. v. Publ'ns Int'l Ltd., No. 99 C 5565, 2004 U.S. Dist. LEXIS 10508 (N.D. Ill. May 27, 2004). In that decision, I held that the language of paragraph 60 limited PIL's allegations of misuse to Ty's actions in the present lawsuit alone and not its conduct with respect to third parties, e.g., Ty's licensees. Id. at *2-3 (noting that PIL "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'"). In light of that ruling, PIL now moves to amend its Answer pursuant to Federal Rule of Civil Procedure 15 (a) to include the following two affirmative defenses.

 
65. Copyright Misuse — Ty has used its copyrights to eliminate or control independent commentary and criticism about its products. Ty has entered into license agreements, usually as part of a litigation settlement, the terms of which give Ty control over the content of licensed publications. Ty exercised this control to extend its monopoly into the field of third-party commentary and criticism regarding Beanie Babies. At the same time that Ty exercised this control, the licenses required that these "licensed" publications disclaim any affiliation with, or sponsorship or endorsement by Ty.
66. Trademark Misuse — Ty has used its trademarks, and licenses thereof, to mislead consumers about the source of the content of the licensed publications, and/or Ty's sponsorship, endorsement or affiliation with the licensed publications. Ty has entered into license agreements, usually as part of a litigation settlement, the terms of which give Ty control over the content of the licensed publications. Ty exercised this control to extend its monopoly into the field of third-party commentary and criticism regarding Beanie Babies. At the same time that Ty exercised this control, the licenses required that these "licensed" publications disclaim any affiliation with, or sponsorship or endorsement by Ty.
I deny PIL's motion with respect to both defenses.

  A. PIL's Motion to Amend its Answer to Add the Defense of Copyright Misuse

  It is within my sound discretion to grant or deny this motion. Jones v. Hamelman, 869 F.2d 1023, 1026 (7th Cir. 1989). Under Fed.R. Civ. P. 15 (a), leave to amend a complaint "shall be freely given when justice so requires." The Supreme Court has interpreted this to mean that, "[i]n the absence of any apparent or declared reason — such as undue delay, bad faith or dilatory motive on the part of the movant . . . undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. — the leave sought should, as the rules require, be `freely given.'" Foman v. Davis, 371 U.S. 178, 182 (1962).

  PIL asserts that it satisfies the Foman standard with respect to the proposed copyright misuse amendment. I disagree. Prior to my June, 2004 decision that PIL ineffectively pled the full affirmative defense of copyright misuse, PIL had at least two opportunities to raise and argue the defense: first, in response to Ty's motion for summary judgment; and second, in its appeal of my decision granting summary judgment in Ty's favor on the copyright claim. At both of these junctures, PIL believed that it had pled copyright misuse as an affirmative defense in paragraph 60 of its Answer. PIL's failure to argue this defense arose prior to my decision that found the pleading inadequate. In the interim, Ty won a partial grant of summary judgment on the issue of copyright infringement, a decision that was remanded for limited consideration of the defense of fair use.

  At this late stage in the proceedings, PIL's motion to amend is both untimely and prejudicial to Ty. In 2000, when PIL failed to argue its defense of copyright misuse, PIL possessed the same facts as it does now. See Continental Bank, N.A. v. Meyer, 10 F.3d 1293, 1297-98 (7th Cir. 1993) (upholding denial of motion to amend answer when defendant was in possession of facts on which proposed amendment was based for more than two years). I will not allow PIL to raise now a defense that it believed it pled but failed to argue at two prior stages in this litigation.

  Furthermore, after a grant of summary judgment on the matter of copyright infringement, a subsequent appeal to the Seventh Circuit, and a remand limited to the discrete issue of fair use, it is simply too "late in the day" for PIL to attempt to amend its pleadings to include a new defense. Cleveland v. Porca Co., 38 F.3d 289, 297-98 (7th Cir. 1994) (no abuse of discretion to deny motion to amend to add new claim "after discovery was completed and after the motions for summary judgment were fully briefed"). See also Garner v. Kinnear Mfg. Co., 37 F.3d 263, 269-70 (7th Cir. 1994) (no abuse of discretion to deny motions to amend after opposing party moved for summary judgment when parties failed to "take advantage of the opportunities afforded them to press their case"); and Kleinhans v. Lisle Sav. Profit Sharing Trust, 810 F.2d 618, 625 (7th Cir. 1987) (plaintiff's motion to amend "represents an apparent attempt to avoid the effect of summary judgment" given that plaintiff based its motion on information known before defendants moved for summary judgment). Given the significant delay since PIL first learned of the facts that purportedly support its proposed defense and given that PIL's motion would result in litigation over new issues on a matter that has already been the subject of a grant of summary judgment, PIL's motion to Amend is denied. See Sanders v. Venture Stores, 56 F.3d ...


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