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Pet Product Innovations, LLC, et al v. the Paw Wash

June 5, 2012

PET PRODUCT INNOVATIONS, LLC, ET AL., PLAINTIFFS,
v.
THE PAW WASH, LLC, DEFENDANT.



The opinion of the court was delivered by: Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER

The Paw Plunger is a cylindrical mug shaped container lined with bristles. To wash dirty dog paws, one inserts the paw into the cylinder and, using a plunging-like motion, removes the dirt. The Paw Wash is nearly identical in design--it is a also a cylindrical container, though it more closely resembles a thermos, and it too is lined with bristles. The Paw Wash also cleans dirty paws by applying a plunging-like motion to dirty dog feet. The two compete against each other in the market for dog foot bathing products. After protracted, multi-round litigation between The Paw Wash and Paw Plunger, LLC in the United States District Court for the Western District of Missouri concerning the validity of a patent held by The Paw Wash, judgment was entered against Paw Plunger, LLC. In a Stipulated Order, the Missouri court found that The Paw Wash's patent was valid and enforceable, and later issued a permanent injunction enjoining Paw Plunger, LLC from continuing to manufacture and sell their Paw Plunger product. Paw Plunger, LLC subsequently dissolved and sold all of its assets to Pet Product Innovations, a newly formed entity. Pet Product Innovations now manufactures and sells the Paw Plunger. Zeus & Company Pet Supply Distributions, Inc. is the product's exclusive distributor. Pet Product Innovations, LLC and Zeus brought suit in this Court against The Paw Wash, LLC, seeking a declaratory judgment holding that they are not infringing on The Paw Wash's patent. They also seek damages and injunctive relief against The Paw Wash's claims that they are infringing on the Paw Wash patent. The Paw Wash asserted various counterclaims, including that res judicata bars the action in this Court, and a declaration that its patent is valid. The Paw Wash now moves for summary judgment. For the reasons set forth below, the Court grants The Paw Wash's Motion for Summary Judgment.

I. The Material Undisputed Facts

The Paw Wash, LLC is a Missouri company that is in the business of canine hygiene products. (Pl. 56.1 Resp. ¶ 1).*fn1 In particular, The Paw Wash manufactures a product called Paw Wash, which is a device for cleaning dirty dog feet.*fn2 Pet Product Innovations, LLC, is an Illinois corporation. (Id. ¶ 2). Pet Product Innovations is the manufacturer of the Paw Plunger, which was previously produced by Paw Plunger, LLC. (Id. ¶ 24). Zeus & Company Pet Supply Distributors is an Illinois corporation that distributes goods in the pet supply market. (Id. ¶ 3).

On February 8, 2005, the United States Patent and Trademark Office issued U.S. Patent No. 6,851,391 (hereafter "the 391 Patent"). (Id. ¶ 7). The 391 Patent covers an apparatus and method for cleaning animal paws. The Paw Wash owns the 391 Patent. (Id. ¶ 9). This includes the right to bring suit for injunctive relief and damages resulting from the infringement of the patent. (Id.) On February 15, 2008, The Paw Wash filed suit against Paw Plunger, LLC in the United States District Court for the Western District of Missouri. (Id. ¶ 11). The Paw Wash alleged that Paw Plunger, LLC was infringing on the 391 Patent by its manufacture and sale of another paw cleaning device called the Paw Plunger. (Id. ¶ 12).

The case of Paw Wash, LLC v. Paw Plunger, LLC, No. 08-0113-CV-W-GAF (W.D. Mo. Feb. 15, 2008), was resolved pursuant to a settlement agreement on June 27, 2008, when the parties submitted a Stipulated Order of Dismissal to the District Court. (Id. ¶ 13). On June 30, 2008, the case was officially dismissed. (Id.). The Stipulated Order of Dismissal "ordered, adjudged, and decreed" a judgment in favor of The Paw Wash. (Id. ¶ 14). The District Court's order states that the 391 Patent is valid and enforceable, and that claim 17 of the patent was infringed by Paw Plunger, LLC through the manufacture and sale of the Paw Plunger device. (Id.). Pet Product Innovations disputes that the 391 Patent is valid and enforceable. They do not cite anything in the record to support this contention, except for their Answer to The Paw Wash's Affirmative Defense that the patent is valid. An adequate denial of fact requires a citation to specific support in the record; an unsubstantiated denial is not adequate. See Albiero v. City of Kankakee, 246 F.3d 927, 933 (7th Cir. 2001). The Court therefore concludes that the 391 Patent is valid and enforceable under the patent laws of the United States. The Order also states that it "represents a final adjudication of all claims, counterclaims and defenses which were or could have been made in this action...with respect to the 391 Patent...(and any other product that has insubstantial differences and/or which comes within the scope of the 391 Patent)...All such claims and counterclaims are hereby dismissed with prejudice." (Id. ¶ 15).

After the litigation between the parties concluded, the two companies entered into a Settlement and License Agreement. (Id. ¶ 18). Paw Plunger, LLC failed to fulfill its obligations under the Agreement, so on August 25, 2011, The Paw Wash reopened its lawsuit in the Western District of Missouri as The Paw Wash, LLC v. Paw Plunger, LLC, No. 08-0113-CV-W-GAF (W.D. Mo. Feb. 15, 2008). (Id. ¶ 19). On November 15, 2011, The Paw Wash prevailed in its suit by obtaining an Order from the District Court permanently enjoining Paw Plunger, LLC from manufacturing or selling its Paw Plunger product. (Id. ¶ 20).*fn3

In September 2011, Pet Product Innovations, LLC incorporated as an Illinois corporation. (Id. ¶ 21). Shortly thereafter, Pet Product Innovations executed an Asset Purchase Agreement with Paw Plunger, LLC to purchase all of Paw Plunger, LLC's assets. (Id. ¶ 22). Under the terms of that Agreement, Pet Product Innovations took ownership of all of Paw Plunger, LLC's existing inventory of the Paw Plunger; the molds used to manufacture the Paw Plunger; and the registered trade name "Paw Plunger." (Id. ¶ 23). Using the assets it obtained from Paw Plunger, LLC, Pet Product Innovations continues to manufacture and sell the same infringing Paw Plunger device earlier sold by Paw Plunger, LLC.*fn4 (Id. ¶ 24). Pet Product Innovations sells the paw washing product under the registered trade name "Paw Plunger."*fn5 (Id. ¶ 25). This is the same name originally registered to, and used by, Paw Plunger, LLC. (Id.). Zeus & Company Pet Supply Distributors, Inc. is the exclusive distributor of the Paw Plunger product that is now manufactured by Pet Product Innovations.*fn6 (Id. ¶ 28).

Pet Product Innovations does not employ any former Paw Plunger, LLC employees. (Id. ¶ 32). Pet Product Innovations uses a different factory to manufacture its Paw Plunger devices than Paw Plunger, LLC used. (Id. ¶ 33). On or about November 4, 2010, Zeus began its business relationship with Paw Plunger, LLC. (Id. ¶ 34). Zeus began its business relationship with Pet Product Innovations on or around October 3, 2011. (Id. ¶ 38). Zeus no longer purchases any Paw Plunger devices from Paw Plunger, LLC. (Id. ¶ 37). Pet Product Innovations does not have a formal distribution agreement with Zeus, despite the fact that Zeus is the exclusive distributor of Pet Product Innovations's Paw Plunger product. (Id. ¶ 41).

Pet Product Innovations and Zeus brought suit in this Court seeking a declaratory judgment that they do not infringe the 391 Patent. (Doc. 1, Amended at Doc. 9). Pet Product Innovations and Zeus also seek damages and injunctive relief as a result of Paw Wash's alleged false assertions about the 391 Patent. (Id). The Paw Wash filed an Answer, asserted affirmative defenses against Pet Product Innovations and Zeus's claims, and filed counterclaims against Pet Product Innovations and Zeus. (Doc. 18). Among its affirmative defenses, The Paw Wash asserts that the Plaintiffs's suit is barred by res judicata (Id. at pg. 4). As counterclaims, The Paw Wash seeks a declaratory judgment in its favor declaring, inter alia, that the Plaintiffs are estopped from challenging the validity of the 391 Patent; declaring that they are estopped from claiming that the Paw Plunger does not infringe on the 391 Patent; enjoining Plaintiffs from manufacturing, using, or selling the Paw Plunger; and declaring the 391 Patent valid. (Id. at pg. 10).

II. The Standard of Review and Choice of Law

Summary judgment is proper when "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In determining whether a genuine issue of material fact exists, the Court must view the evidence and draw all reasonable inferences in favor of the party opposing the motion. See Bennington v. Caterpillar Inc., 275 F.3d 654, 658 (7th Cir. 2001); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). However, on summary judgment the Court will limit its analysis of the facts to that evidence that is supported by the parties' Local Rule 56.1 statements properly before the Court. See Bordelon v. Chicago Sch. Reform Bd. of Tr., 233 F.3d 524, 529 (7th Cir. 2000).

When a cause of action arises under federal law, choice of law principles dictate that a district court should look to the law of the applicable regional circuit--in this case, the Seventh Circuit. See Transclean Corp. v. Jiffy Lube Int'l, Inc., 474 F.3d 1298, 1304 (Fed. Cir. 2007); County Materials Corp. v. Allan Block Corp., 502 F.3d 730, 733 (7th Cir. 2007). There are exceptions to this general rule. Where the issue in a suit is peculiar to patent law it may be appropriate to look instead to the law of the Federal Circuit. See Transclean Corp., 474 F.3d at 1304 (holding that res judicata is not peculiar to patent law, and therefore looking to the law of the applicable regional circuit is appropriate). In deciding whether to apply the law of the relevant territorial circuit or the law of the Federal Circuit, a court should look to the well-pleaded complaint to determine whether the cause of action is created by federal patent law. See County Materials Corp., 502 F.3d at 733. A cause of action is created by federal patent law if patent law is a necessary element of the claim. See id.

Here, the Court must look to the counterclaims asserted by The Paw Wash, because it is those claims that require resolution at this stage in the litigation. The Paw Wash's claims essentially boil down to res judicata. To resolve the issue of whether this suit is barred by the prior suit, the Court will have to resolve whether the Stipulated Order was a final judgment; whether the parties are in privity; and whether this suit seeks redress for a claim that has already been adjudicated in a prior suit. These issues are not peculiar to patent law. See Translucent Corp, 474 F.3d at 1304. Thus, for the most part, it is the law of the Seventh Circuit that governs resolution of the Defendant's Motion for Summary Judgment. The Seventh Circuit regularly decides res judicata issues, even when those principles are to be applied to patent cases. See, e.g., Allan Block Corp. v. County Materials Corp., 512 F.3d 912, 915 (7th Cir. 2008). Nor is the law of successor liability, privity, or the finality of consent decrees peculiar to patent law--even when they arise in the patent context. The effect of a consent decree regarding the validity of a patent is a question of law that is peculiar to patent law, and therefore the Court will look to the law of the Federal Circuit. Likewise, contributory infringement and induced infringement are doctrines unique to patent law, and the Court will accordingly look to the law of the Federal Circuit. The Court takes note of the fact that the underlying issues in ...


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