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Continental Datalabel, Inc v. Avery Dennison Corporation

November 9, 2012

CONTINENTAL DATALABEL, INC., PLAINTIFF,
v.
AVERY DENNISON CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Judge Feinerman

MEMORANDUM OPINION AND ORDER

Plaintiff Continental Datalabel, Inc., and Defendant Avery Dennison Corporation are manufacturers of self-adhesive address labels. Continental alleges in suit that Avery had infringed Continental's patents in violation of federal patent law, had engaged in unfair competition through false or misleading advertising in violation of the Lanham Act, and had violated Illinois common law by tortiously interfering with Continental's efforts to sell its labels to office supply retailers Staples and Office Depot. The court stayed the patent claims pending a reexamination of Continental's patents by the U.S. Patent and Trademark Office ("USPTO"). Doc. 43 (Shadur, J.).

Before the court is Avery's motion for summary judgment on the Lanham Act and tortious interference claims, Doc. 132, and Continental's motion for summary judgment as to liability on the Lanham Act claim, Doc. 118. The case was reassigned from Judge Shadur's calendar to the undersigned judge's calendar after the motions were filed. Doc. 232. Avery's motion is granted and Continental's motion is denied. As to the Lanham Act claim, Continental has not adduced evidence from which a reasonable jury could conclude that Avery's advertising statements were literally false or caused actual consumer confusion. As to the tortious interference claim, Continental has not adduced evidence from which a reasonable jury could conclude that Avery in fact made the tortious statements it is alleged to have made to Staples and Office Depot, and the statements that Avery did make were not tortious as a matter of law.

Background

Avery's motion will be considered first and, because the motion will be granted, last. The following sets forth the material facts and inferences from those facts as favorably to Continental as the record and Local Rule 56.1 permit. See In re United Air Lines, Inc., 453 F.3d 463, 468 (7th Cir. 2006) ("With cross summary judgment motions, we construe all facts and inferences therefrom in favor of the party against whom the motion under consideration is made.") (internal quotation marks omitted). The same holds for the additional facts referenced in the Discussion section below.

Continental and Avery are competing manufacturers of self-adhesive address labels. Doc. 203-2 at ¶¶ 1, 44. In 2006, both companies began to market labels designed to be easier to peel from their backing sheets: Avery's "Easy Peel" labels and Continental's "FastPly" labels. Id. at ¶¶ 7, 23-24; Doc. 237 at ¶ 1. Both companies' backing sheets were perforated in a manner allowing them to be torn into strips, with each strip holding a single column of labels; because the perforations were situated beneath the columns of labels, near the edge of the labels in each column, rather than between the columns, tearing the sheet into strips exposed the edges of the labels on each strip, which enabled them to be grasped and peeled off more easily than labels on "traditional" backing sheets, which have to be pulled off one-by-one. Doc. 203-2 at ¶¶ 8-9, 28.

In 2008, Avery introduced its "next-generation" Easy Peel labels, which were designed to enable the sheets to be folded to expose the labels' edges. Id. at ¶¶ 13-14; Doc. 237 at ¶ 9. The advantage of these newer backing sheets was that, unlike sheets that had been torn, the folded sheets could be un-folded (that is, re-flattened) after a few labels had been removed, so that the remaining labels would be on an intact sheet without their adhesive edges exposed, allowing the user to re-run the sheet through a printer. Doc. 203-2 at ¶¶ 16-17. Although Avery's instructions advised the user not to put a sheet through a printer more than once, many consumers did so and Staples saw this capability as an advantage of the next-generation labels. Doc. 203-2 at ¶¶ 18, 128; Doc. 237 at ¶¶ 11-12, 22-23.

Continental continued to market its original FastPly labels rather than releasing a next-generation version. Doc. 203-2 at ¶ 24. Continental's instructions explicitly advised the user to tear the sheets along the perforations; they did not instruct the user to fold the sheets, as Avery's instructions for its next-generation Easy Peel labels did. Id. at ¶¶ 28-29. However, a Continental expert tested the FastPly labels, Avery's next-generation Easy Peel labels, and other labels to determine which labels could in fact be folded. Id. at ¶¶ 193-94, 198. The expert concluded that Continental's FastPly labels, like Avery's next-generation Easy Peel labels and unlike any other labels he tested, did possess the "pop-up feature," meaning that they could be folded to make the labels' edges "pop up" and become exposed without having to be torn. Id. at ¶¶ 195-96, 198-200; Doc. 237 at ¶ 82. For purposes of resolving Avery's summary judgment motion, the court will credit the expert's conclusion and assume that Continental's labels, like Avery's, possessed the pop-up feature.

When Avery introduced its next-generation Easy Peel labels in 2008, the packaging and other promotional materials included the following two statements: "Only Avery label sheets bend to expose the Pop-up EdgeTM" and "Only Avery offers the Pop-up EdgeTM for fast peeling-just bend the sheet to expose the label edge." Doc. 203-2 at ¶ 178. By including the trademark symbol ("TM"), the "Only Avery" statements indicated that Avery asserted ownership of the trademark "Pop-up Edge." Id. at ¶ 184. Avery applied to register the trademark with the USPTO, which granted the registration in 2010. Id. at ¶ 185. Continental does not challenge the validity of Avery's "Pop-up Edge" trademark. Id. at ¶ 188.

Continental had interactions with Staples in 2006-2007 and 2009 and with Office Depot in 2008 that Continental hoped would result in their deciding to carry Continental's FastPly labels; ultimately, neither Staples nor Office Depot did so. Id. at ¶¶ 45-46, 73, 134, 147, 159, 166; Doc. 237 at ¶¶ 28, 30, 34. Continental alleges that the retailers' decisions not to carry the FastPly labels were caused by Avery's threats to sue Staples and Office Depot for infringement of patents it ostensibly had on technology that Continental ostensibly had incorporated into its FastPly products. Doc. 203-2 at ¶¶ 45-46, 91, 171; Doc. 237 at ¶ 49. In fact, Avery did not possess patents on the relevant technology at the time of Continental's discussions with Staples and Office Depot; though it had filed patent applications in 2004 and 2009, a patent was not granted until 2010, after the alleged tortious statements had been made. Doc. 237 at ¶¶ 49-50; U.S. Patent No. 7,709,071 ("Label Sheet Design for Easy Removal of Labels").

No Continental representative actually heard any Avery representative make the alleged tortious statements to Staples or Office Depot. Doc. 203-2 at ¶¶ 87-88, 138, 168. But two Continental officers, Tim Flynn and Neal Hermanson, were told by Staples and Office Depot representatives that those retailers were reticent about carrying Continental's FastPly labels because they feared a patent suit from Avery. Doc. 237 at ¶¶ 52-62. Flynn also learned that other retailers feared a patent suit from Avery if they bought FastPly labels. Id. at ¶¶ 63-64.

In 2009, an Avery representative sent an email to a Staples representative that, referring to Avery's pending patent applications, stated: "Once the patents are granted Avery will aggressively defend its IP [intellectual property]." Doc. 203-2 at ¶ 116; Doc. 237 at ¶ 49. An internal Avery document from mid-2008 referred to the Easy Peel labels as a "Patented Avery Exclusive" well before Avery had actually been granted a patent on the relevant invention. Doc. 237 at ¶ 50; Doc. 213 at 11.

Discussion

I. Lanham Act Claim

Continental alleges that (1) the "Only Avery" statements assert that only Avery's labels could be folded to expose the labels' edges without having to be torn, (2) Continental's FastPly labels also possessed this feature, and (3) the "Only Avery" statements were therefore false or misleading in violation of the Lanham Act. The pertinent provision of the Lanham Act, 15 U.S.C. § 1051 et seq., provides:

(a) Civil action

(1) Any person who, on or in connection with any goods or services ., uses in commerce any word, term, name, symbol, or device ., or any . false or misleading description of fact, or false or misleading representation of fact, which-

* * * (B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities, shall be liable in a civil action by any such person who believes that he or she is or is likely to be damaged by such act.

15 U.S.C. ยง 1125(a)(1). "The purpose of the false-advertising provisions of the Lanham Act is to protect sellers from having their customers lured away from them by deceptive ads." Schering-Plough Healthcare Prods., Inc. v. Schwarz Pharma, Inc., 586 F.3d 500, 512 (7th Cir. ...


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