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Scholle Corporation v. Rapak LLC

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

July 24, 2014

SCHOLLE CORPORATION, Plaintiff,
v.
RAPAK LLC, Defendants.

MEMORANDUM OPINION AND ORDER

VIRGINIA M. KENDALL, District Judge.

Plaintiff Scholle Corporation filed this action in May 2013 based on Defendant Rapak LLC's alleged infringement of U.S. Patent No. 8, 448, 799. Following an evidentiary hearing on Scholle's motion for a preliminary injunction, this Court enjoined Defendant Rapak LLC from making, using, selling, or offering to sell in the United States the accused product, Rapak's Smoothie Valve (or products that include Rapak's Smoothie Valve as a component). In the wake of this Court's order enjoining Rapak, the parties have filed a series of motions and other pleadings with this Court. As explained herein, this Court: grants Dkt. No. 66, Rapak's Request To Construe More Than Five Claim Terms; grants Dkt. No. 87, Scholle's Motion for an Order That Rapak Show Cause Why It Should Not Be Held in Civil Contempt; grants in part and denies in part Dkt. No. 94, Rapak's Motion for Clarification of the Preliminary Injunction With Respect To Its Re-Designed Product; grants Dkt. No. 107, Rapak's Motion for Leave to File an Amended Counterclaim; and denies Dkt. No. 150, Rapak's Motion to Strike Scholle's Belated Claim Constructions and Supporting Expert Declaration.

A. Rapak's Motion Seeking Construction of More Than Five Claim Terms (Dkt. No. 66)

This Court grants Rapak's motion to construe more than five claim terms because to introduce any further delay into the proceedings. But this Court notes that Rapak has not certified whether any of the claim terms it intends to submit for construction are outcome-determinative. The Local Patent Rules require this certification to make the parties focus on significant disputes. See LPR 4.1, Comment. If Rapak truly intended to "avoid future claim construction issues and focus the issues of this case" as it suggested in its brief, (Dkt. No. 68 at 9), then it not only would have identified those claim terms that it considers outcome-determinative but also would have been more specific in its motion as to how and why prosecution disclaimer affects those claim terms. ( See Dkt. No. 68 at 8 ("Several of the terms and phrases which Rapak has identified as needed construction are impacted by those amendments.").)

This Court also notes that Rapak seeks to have this Court construe lengthy portions of the claim as opposed to discrete claim terms or phrases. Claim 1 of the '799 Patent has a number of limitations. Within each limitation, there are a number of claim terms or phrases. For example, the first limitation after the preamble of claim 1 states "a body having a top surface and a bottom surface, a spout engagement channel on the bottom surface thereof and an inner surface defining an opening extending therethrough." ( See Dkt. No. 20-2 at 5:13-16.) Rapak seeks construction of several claim terms or phrases within this limitation, to include "a body, " a "top surface, " and "a spout engagement channel, " and "an inner surface defining an opening extending therethrough." But Rapak also seeks to construe clauses such as "the body engaging tab extending into the recessed circumferential channel of the body to releasably sandwich, in sealed engagement, the body engagement flange of the sealing membrane between the sealing membrane engagement surface of the retaining ring, and the membrane engaging flange of the body." This clause contains multiple claim terms or phrases, to include "body engaging tab, " "recessed circumferential channel, " "releasably sandwich, " and "sealed engagement." This clause is representative of several purported claim terms or phrases that Rapak seeks to have construed in that it contains multiple claim terms or phrases for construction.

Despite Rapak's failure to follow the Local Patent Rules and its over-inclusive proposed claim terms or phrases for construction, this Court will consider all of Rapak's proposals. The primary reason this Court will do so is to avoid further delay. If this Court were to deny Rapak's motion, it would do so without prejudice. This means that Rapak would be free to file another motion seeking leave to propose more than five claim terms consistent with the Local Patent Rules and identifying discrete claim terms or phrases for construction. Such a motion would lead to another round of briefing on this issue, and may result in additional claim construction briefing as well. All of this would be pointless given that this Court can and will focus on the relevant claim terms or phrases within the lengthy portions of the claim identified by Rapak. Further, given that there is only one claim at issue, this Court is confident that all involved can manage the burden imposed by Rapak's request. For these reasons, this Court grants Rapak's motion.

B. Scholle's Motion for an Order That Rapak Show Cause (Dkt. No. 87)

This Court orders Rapak to show cause as to why this Court should not find Rapak in civil contempt for violating this Court's preliminary injunction. This Court enjoined Rapak from making, using, selling, or offering to sell in the United States the accused product, Rapak's Smoothie Valve, or products that include Rapak's Smoothie Valve as a component on March 31, 2014. In its order, this Court instructed the parties to submit position papers concerning the appropriate bond Scholle should post under Fed.R.Civ.P. 65(c). This was necessary because neither party addressed the issue of bond in their filings leading up to or at the preliminary injunction hearing.

A bond is not necessary for a preliminary injunction to take effect. See Wayne Chemical, Inc. v. Columbus Agency Services Corp., 567 F.2d 692, 701 (7th Cir. 1977) ("Finally, it was not error for the District Court to issue the preliminary injunction without a bond. Under appropriate circumstances bond may be excused, notwithstanding the literal language of Rule 65(c)."). The purpose of a bond in this context is to compensate a defendant for losses suffered due to an erroneously issued preliminary injunction. Ty, Inc. v. Publications International Ltd., 292 F.3d 512, 516 (7th Cir. 2002). A defendant cannot recover more than the bond amount for losses suffered due to an erroneously issued preliminary injunction. Roche Diagnostics Corp. v. Medical Automation Systems, Inc., 646 F.3d 424, 428 (7th Cir. 2011). Accordingly, courts should take care to set the bond amount high enough to cover any losses that an enjoined defendant may suffer because of an erroneously issued preliminary injunction. Mead Johnson & Co. v. Abbott Laboratories, 201 F.3d 883, 888 (7th Cir. 2000), amended 209 F.3d 1032 (7th Cir. 2000). Where appropriate, courts may increase the bond amount while the preliminary injunction is in effect. Contra Mead Johnson & Co. v. Abbott Laboratories, 201 F.3d 1032, 1034 (7th Cir. 2000) (courts may not increase bond amount once a preliminary injunction has been reversed).

Here, it was appropriate to excuse the bond temporarily until the parties had the opportunity to brief the issue. Rapak is in no position to complain about the opportunity to present its views on the bond amount after this Court enjoined it when it failed to raise the issue on its own prior to the entry of the preliminary injunction. See, e.g., Connecticut General Life Insurance Co. v. New Images of Beverly Hills, 321 F.3d 878, 882-83 (9th Cir. 2003) (district court may set bond amount at zero when defendant fails to request a bond or to submit evidence regarding likely damages). Recognizing not only that the preliminary injunction exposed Rapak to some risk of loss but also that there was time to set the bond amount prior to any reversal of the preliminary injunction, and understanding that parties should have the opportunity to present their views on the appropriate bond amount, see Mead Johnson & Co., 201 F.3d at 887, this Court provided Rapak with an opportunity to submit evidence of its likely damages and argue for the appropriate bond amount. But this Court did not give Rapak the opportunity to delay compliance with this Court's order to stop making, using, selling, or offering to sell in the United States the accused product-and nothing in this Court's order suggests otherwise. Just as it would not have been fair to deny Rapak the chance to argue for a bond amount that would cover its potential losses, it would not have been fair to delay entry of the preliminary injunction when Scholle showed a likelihood of success on the merits. Accordingly, this Court entered the preliminary injunction and gave Rapak the opportunity to argue for an increased bond amount.

Consistent with this approach, this Court ordered Scholle to post a $1, 000, 000 bond during a hearing on April 10, 2014. Hr'g Tr. 7:2-15 (Apr. 10, 2014). Although this Court set this bond to eliminate any dispute or concern as to whether the preliminary injunction was in effect, Hr'g Tr. 7:6-10, it did not substantively change matters. In its position paper on the appropriate bond amount, Rapak seeks to increase the bond amount set by this Court. (Dkt. No. 120 at 3.) The only difference is that Rapak now seeks to increase the bond amount from $1, 000, 000 whereas the increase would have been from zero prior to April 10, 2014. Although $1, 000, 000 is better than nothing had the preliminary injunction been reversed before this Court increased the bond from zero, neither amount affected whether the injunction was in effect. Indeed, the minute order this Court entered stated "[t]he preliminary injunction will remain in effect." (Dkt. No. 77.)

Because the preliminary injunction took effect when this Court entered its order on March 31, 2014 and because Rapak does not dispute that it shipped the enjoined product after March 31, 2014, (Dkt. No. 135 at 1), this Court orders Rapak to show cause as to why this Court should not find it in contempt. "A district court may not enter an order of civil contempt unless it finds by clear and convincing evidence that a party has violated the express and unequivocal command of a court order." In re Resource Technology Corp., 624 F.3d 376, 387 (7th Cir. 2010). If a district court finds a party to be in civil contempt, the court may impose a remedial sanction to compensate the aggrieved party. Feltner v. Title Search Co., 283 F.3d 838, 841 (7th Cir. 2002). The purpose of this hearing is to determine whether this Court should hold Rapak in contempt. This Court will set a date for this hearing at the next status hearing.

This Court will also determine the appropriate sanction, should this Court find Rapak to be in contempt, at the hearing. Having reviewed the parties' submissions, neither party's proposal as to the appropriate sanction is reasonable. Based on the allegations, it seems that the appropriate sanction would be a finding that any infringement by Rapak after the entry of the preliminary injunction was willful. Each party should explain ...


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