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Weber-Stephen Products LLC v. Sears Holding Corporation

United States District Court, N.D. Illinois, Eastern Division

February 20, 2014

WEBER-STEPHEN PRODUCTS LLC, Plaintiff,
v.
SEARS HOLDING CORPORATION, Defendant.

MEMORANDUM OPINION AND ORDER

EDMOND E. CHANG, District Judge.

Plaintiff Weber-Stephen Products LLC brought this suit against Defendant Sears Holding Corporation, alleging patent infringement, in violation of 35 U.S.C. § 271, and trade dress infringement, in violation of section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). R. 1, Compl. Sears filed a number of counterclaims alleging, among other things, that the patent at issue (known as the 874 patent) is invalid and unenforceable because of Weber's inequitable conduct, that Weber engaged in anticompetitive acts in violation of state and federal antitrust laws, and that Weber breached its contract with Sears, Roebuck and Company. R. 36, Sears Answer. Weber has moved to dismiss the inequitable conduct and antitrust claims under Federal Rule of Civil Procedure 12(b)(6). R. 43, Mot. Dismiss. Weber also seeks to strike Sears's inequitable conduct affirmative defense. Id. For the reasons below, the motion is granted in part and denied in part.[1]

I. Background

Weber is a leading worldwide designer and manufacturer of outdoor gas, charcoal, and electric grills and grilling accessories, including the Weber Genesis line of grills. Compl. ¶ 3. Weber's and Sears's relationship ("Sears" in this opinion refers to the named defendant, the holding corporation entity) began in 1998, when Weber agreed to supply merchandise to Sears's subsidiary Sears, Roebuck and Company. R. 36, Answer at 20. In connection with sales of Weber grills, the agreement also authorized Sears to offer service contracts, by which Sears Roebuck would replace or repair Weber grills and parts for up to five years after purchase. Id.

In 2012, Weber notified Sears Roebuck that it intended to cease the parties' business dealings. Id. Weber would permit Sears Roebuck to retain and sell the balance of its inventory on hand, but would not supply new inventory of grills or accessories. Id. at 20-21. Weber stated it was terminating the business relationship because Sears was not dedicating enough resources to the Weber brand. Id. at 21. Weber also claimed Sears was using Weber products to lure consumers into Sears's stores and then selling them Sears's own Kenmore-brand products. Id. Sears notes that Weber's announcement came on the heels of Sears's initial efforts to develop a competing grill under its Kenmore Elite brand. Id. Sears's competing grill also gave rise to the underlying patent and trade dress infringement claims in this case. Compl. ¶¶ 25, 36, 47, 69.

Weber owns United States Patent No. 8, 347, 874 B2 (entitled "Grease Drip Pan and Gas Tank Blocker for a Barbecue Grill"). Answer ¶ 4. The '874 patent discloses a fuel-tank-blocking structure that prevents storage of a second fuel tank inside a grill frame to minimize fire and tipping hazards in gas barbecue grills. R. 14-1, Exh. A, '874 Patent at 2. To discourage removal of the tank blocker (removal would undermine the safety feature), the '874 patent describes the preferred embodiment as one "adapted to support a component of the grease management system, namely the grease drip pan." Id. Thus, consumers would not be able to remove the tank blocker without impairing the grease-management system. Id. Weber has alleged that Sears's Kenmore Elite Stainless grill and Kenmore Elite Espresso grill infringe the '874 patent by also featuring propane-tank blocking structures and grease-collecting cup brackets. Compl. ¶¶ 16, 20-23.

In its answer, Sears alleges that the '874 patent is unenforceable because Weber intentionally did not disclose relevant prior art to the Patent & Trademark Office (PTO for short) in connection with the '874 patent application. Answer at 23-33. Relatedly, Sears asserts inequitable conduct as an affirmative defense and a counterclaim to Weber's allegations of patent infringement. Id. at 15, 34 (Affirmative Defense No. 8; Counterclaim No. 3). Sears also asserts that Weber's fraudulent procurement of a patent and discontinuation of dealings with Sears constitute unlawful monopolization and attempted monopolization in violation of the Sherman Antitrust Act and its Illinois state-law equivalent. Id. at 37-40 (Counterclaims Nos. 8-12). Weber now moves to dismiss these counterclaims and to strike the inequitable conduct affirmative defense.

II. Standard of Review

"A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to state a claim upon which relief may be granted." Hallinan v. Fraternal Order of Police Chicago Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). "[W]hen ruling on a defendant's motion to dismiss, a judge must accept as true all of the factual allegations contained in the complaint." Erickson v. Pardus, 551 U.S. 89, 94 (2007). A "complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. v. Twombly, 550 U.S. 544, 570 (2007)). These allegations "must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. And the allegations that are entitled to the assumption of truth are those that are factual, rather than mere legal conclusions. Iqbal, 556 U.S. at 679.

Ordinarily, under Federal Rule of Civil Procedure 8(a)(2), a complaint need only include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). But claims alleging fraud must also satisfy the heightened pleading requirement of Federal Rule of Civil Procedure Rule 9(b), which requires that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b) (emphasis added). Rule 9(b)'s heightened pleading standard applies to claims of inequitable conduct. Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1326 (Fed. Cir. 2009); see also id. at 1318 ("Whether inequitable conduct has been pleaded with particularity under Rule 9(b) is a question governed by Federal Circuit law."). Thus, Rule 9(b) requires that Sears's allegations of inequitable conduct state "the specific who, what, when, where, and how of the material misrepresentation or omission committed before the PTO." Id. at 1327. Sears's antitrust claims are analyzed under the less demanding Rule 8(a)(2) standard.

III. Analysis

In its motion to dismiss, R. 43, Weber contends Sears has not pleaded inequitable conduct with sufficient particularity. Mot. Dismiss at 10. On Sears's monopoly and attempted monopoly counterclaims, Weber argues Sears has not adequately alleged that Weber holds monopoly power or engaged in anticompetitive acts to further such power. Id. at 20-21. Each issue is addressed in turn below.

A. Inequitable Conduct

"Inequitable conduct is an equitable defense to patent infringement that, if proved, bars enforcement of a patent." Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1285 (Fed. Cir. 2011). A claim of inequitable conduct requires a party to show "that information material to patentability was withheld from the PTO... with the intent to deceive or mislead the patent examiner into granting the patent." Outside the Box Innovations, LLC v. Travel Caddy, Inc., 695 F.3d 1285, 1290 (Fed. Cir. 2012). Inequitable conduct thus requires a showing of both (1) materiality and (2) intent to deceive. Therasense, 649 F.3d at 1287. The Federal Circuit recently "tighten[ed] the standards for finding both intent and materiality." Id. at 1290. To prevail on a claim of inequitable conduct, an accused infringer must now prove (1) ...


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