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Foboha GMBH v. Gram Technology

October 15, 2008

FOBOHA GMBH AND FOBOHA US, INC., PLAINTIFFS,
v.
GRAM TECHNOLOGY, INC. AND JESS GRAM, DEFENDANT.



The opinion of the court was delivered by: John F. Grady, United States District Judge

MEMORANDUM OPINION

Before the court is defendants' motion to dismiss plaintiffs' complaint pursuant to Fed. R. Civ. P. 12(b)(6). We deny defendants' motion for the reasons explained below.

BACKGROUND

This case arises from statements allegedly made by Gram Technology, Inc. and its chief executive officer, Jess Gram (collectively, "Gram"), concerning Gram's rights in "a process for molding and assembly of a plastic object using two rotatable molds." (Compl. ¶¶ 10, 12, 22.) Gram licenses its patents to third parties without making, using or selling products utilizing its patented inventions. (Id. at ¶¶ 10, 15-16.) The particular invention at issue in this case was the subject of Gram's United States patent application U.S. Ser. No. 10/415,281 ("Procedure and Machinery for the Molding and Assembly of an Assembled Object"), filed with the United States Patent and Trademark Office ("USPTO") on April 28, 2003. (Id. at ¶ 22.) Foboha GmbH and its United States affiliate, Foboha US, Inc. (collectively, "Foboha"), design and manufacture injection molds for the plastics industry. (Id. at ¶¶ 3-5.) They allege that Gram began making "comments and statements of infringement" to members of the plastics industry as early as 2004-long before the USPTO issued a patent. (Id. at ¶ 23.) The real thrust of the complaint, however, concerns Gram's statements after the USPTO issued a Notice of Allowance on May 24, 2006. (Id. at ¶ 25.)

On or about June 19, 2006, during a trade show held in Chicago, Gram and its attorneys demanded that Foboha take a license for Gram's "patented technology." (Id. at ¶ 26.) A Foboha press release contemporaneous with the 2006 trade show indicates that Gram also contacted other exhibitors and made similar demands. (Press Release "Re: NPE 2006," attached as Ex. 4 to Compl.) Foboha knew that the USPTO had not yet granted Gram's patent and told Gram as much. (Compl. ¶ 27.) They also told Gram that his claims were invalid based upon the prior art reference German Patent DE 4123690A1 (the "German Reference"), which was not cited during patent prosecution. (Id.) After the USPTO issued U.S. Patent 7,081,222 (the "'222 Patent") to Gram on July 25, 2006, Foboha filed a Request for Reexamination "primarily in view of" the German Reference. (Id. at ¶¶ 28-29.) The USPTO granted Foboha's request and on April 27, 2007 rejected each claim (1-10) of the'222 Patent as either obvious in light of, or anticipated by, the German Reference. (Office Action in Ex Parte Reexamination, attached as Ex. 7 to Compl.) In response, defendants added six additional claims and amended independent claims 1 and 6 of the'222 patent to include the claim language "by a purely mechanical assembly of said parts." ("Amendment Under 37 CFR 1.111," attached as Ex. 8 to Compl., at 2, 4-7.) Plaintiffs allege that these amendments "substantially changed the scope of the original'222 patent claims." (Compl. ¶ 54.)

On or about December 16, 2007, defendants published on their website the following press release concerning the reexamination:

In the reexamination, requested by Foboha GMBH's attorneys, the [USPTO] has confirmed the patentability of the 10 original claims of the'222 patent, as applied to mechanical in-mold assembly processes. In addition the USPTO have [sic] confirmed the patentability of 6 additional new claims sought by Gram.... Upon completion of the reexamination process, Gram intends to enforce its valuable intellectual property rights to the fullest extent permitted by law. (Press Release, attached as Ex. 9 to Compl.) Two days later, Gram told a representative of one of Foboha's customers, Stull Technologies, that Foboha's "Double Cube Mold" technology infringed the'222 patent. (Id. at ¶¶ 40-48.) Then, in a letter to Foboha's parent corporation dated December 21, 2007, Jess Gram laid out what he believed was the factual basis for his infringement claims. (Letter from Jess Gram to Walter Gruebler et al., dated Dec. 21, 2007, attached as Ex. 10 to Compl.) In the letter, Gram falsely claimed that another company had already "settled" and that "others might consider doing the same in view of the IP situation and the events that has take place [sic] in the past." (Id. at 3.)

Plaintiffs have filed a four-count complaint alleging federal unfair competition under the Lanham Act (Count I), state unfair competition under Illinois' Uniform Deceptive Trade Practices Act ("UDTPA") (Count II), tortious interference with prospective economic advantage (Count III), and common law unfair competition (Count IV). Defendants have moved to dismiss the entire complaint.

DISCUSSION

A. Legal Standard

The purpose of a 12(b)(6) motion to dismiss is to test the sufficiency of the complaint, not to resolve the case on the merits. 5B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1356, at 354 (3d ed. 2004). When evaluating such a motion, the court must accept as true all factual allegations in the complaint and draw all reasonable inferences in the plaintiff's favor. Hentosh v. Herman M. Finch Univ. of Health Sciences, 167 F.3d 1170, 1173 (7th Cir. 1999); Jang v. A.M. Miller & Assocs., 122 F.3d 480, 483 (7th Cir. 1997). However, the "allegations must plausibly suggest that the plaintiff has a right to relief, raising that possibility above a'speculative level.'" EEOC v. Concentra Health Serv., Inc., 496 F.3d 773, 776-77 (7th Cir. 2007) (quoting Bell Atlantic Corp. v. Twombly,-U.S.-, 127 S.Ct. 1955, 1964, 167 L.Ed.2d 929 (2007)).

B. Rule 9(b)

The parties dispute whether Foboha's Lanham Act claim is subject to Rule 9(b)'s heightened pleading requirement. Some judges in this district have applied Rule 9(b), others have not, and it appears that the Seventh Circuit has not addressed the issue. Compare Conditioned Ocular Enhancement, Inc. v. Bonaventura, 458 F.Supp.2d 704, 709 (N.D. Ill. 2006) ("Claims that allege false representation or false advertising under the Lanham Act are subject to the heightened pleading requirements of Fed.R.Civ.P. 9(b)."), with Logan Graphic Products, Inc. v. Textus USA, Inc., 02 C 1823, 2002 WL 31507174, *3 (N.D. Ill. Nov. 8, 2002) (applying Rule 8(a)). "A claim that'sounds in fraud'--in other words, one that is premised upon a course of fraudulent conduct-can implicate Rule 9(b)'s heightened pleading requirements." Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502, 507 (7th Cir. 2007). Plaintiffs allege in the second paragraph of their complaint that "[t]his action results from Defendants' false and misleading descriptions and representations of fact made in interstate commerce regarding Foboha's products." (Compl. ¶ 2.) According to plaintiffs, Gram has for years overstated or misstated the extent of its patent rights in an effort to extract licensing fees. (Id. at ¶¶ 23-24, 39, 41-48.) In paragraph 76, plaintiffs allege that the defendants engaged in the "aforementioned acts"-that is, all the acts alleged in the complaint-"maliciously, oppressively, and fraudulently." (Id. at ¶ 76.) Plaintiffs' complaint, and each separately enumerated count, "sounds in fraud." Borsellino, 477 F.3d at 507 (Concluding that the plaintiffs' tortious interference claim was governed by Rule 9(b) where the allegations supporting that claim sounded in fraud.). Therefore, plaintiffs "must state with particularity the circumstances constituting fraud." Fed. R. Civ. P. 9(b).

With the exception of a few vague, sweeping allegations, plaintiffs have satisfied their pleading burden. Their allegations are insufficient with respect to defendants' allegedly fraudulent conduct prior to June 19, 2006. They only vaguely allege that during that time frame defendants made "comments and statements of infringement in the industry." They ask us to infer the content of defendants' statements from a press release that plaintiffs issued on October 20, 2004, but the press release does not indicate specifically what defendants said, or when or how they said it. See Windy City Metal Fabricators & Supply, Inc. v. CIT Tech. Financing Serv. Inc., 536 F.3d 663, 668 (7th Cir. 2008) (To comply with Rule 9(b), the plaintiff must allege "the who, what, when, where, and how" of the alleged fraud.) (internal citation and quotation marks omitted). On the other hand, plaintiffs have sufficiently alleged four specific instances after June 2006 where the defendants misrepresented the ...


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