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Legacy Seating, Inc. v. Commercial Plastics Co.

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

August 20, 2014

LEGACY SEATING, INC., Plaintiff,
v.
COMMERCIAL PLASTICS CO., Defendant

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[Copyrighted Material Omitted]

Page 544

For Legacy Seating, Inc., Plaintiff: George C. Summerfield, LEAD ATTORNEY, Stadheim & Grear, Ltd., Chicago, IL; Christopher Heyer St. Peter, Kyle L. Harvey, Steven R. Pedersen, Stadheim & Grear Ltd., Chicago, IL; Rolf O. Stadheim, Law Offices of Rolf Stadheim, Ltd., Chicago, IL.

For Commercial Plastics Co., Defendant: David I. Roche, LEAD ATTORNEY, Daniel Alan Tallitsch, Baker & McKenzie LLP (Chicago), Chicago, IL.

James P. Watters, Movant, Pro se, South elgin, IL.

For Legacy Seating, Inc., Counter Defendant: George C. Summerfield, LEAD ATTORNEY, Stadheim & Grear, Ltd., Chicago, IL; Rolf O. Stadheim, Law Offices of Rolf Stadheim, Ltd., Chicago, IL; Steven R. Pedersen, Stadheim & Grear Ltd., Chicago, IL.

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MEMORANDUM OPINION AND ORDER

Rubé n Castillo, Chief United States District Judge.

Plaintiff Legacy Seating, Inc. (" Legacy" ) brings this action for patent infringement, conversion, violation of the Illinois Uniform Deceptive Trade Practices Act, and trademark infringement against Defendant Commercial Plastics Company (" CPC" ). (R. 1, Compl.) Presently before the Court is CPC's motion to dismiss the complaint for lack of standing pursuant to Federal Rule of Civil Procedure 12(b)(1). (R. 46, CPC's Mot.) For the reasons stated below, CPC's motion is granted in part and denied in part.

RELEVANT FACTS

Legacy is an Illinois corporation with its principal place of business in Libertyville, Illinois. (R. 1, Compl. ¶ 1.) CPC is an Illinois corporation with its principal place of business in Mundelein, Illinois. ( Id. ¶ 3.) In November 2007, Michael Price, owner of H. Wittur & Co., a supplier of tabletop products for parties and other events, initiated plans to design an updated version of a popular Italian plastic chair that could be sold in the United States. (R. 47-4, Ex. C, Price's Aff. ¶ ¶ 5-6.) In December 2007, Price approached James Watters, a friend with experience in furniture sales and relationships in the plastics supply industry, to discuss finding a plastic

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molder to create a mold from which the new chairs would be produced. ( Id. ¶ ¶ 7-8.) During January 2008, Price and Watters met with plastics molders at H. Wittur & Co.'s offices to discuss their ideas for the chair. ( Id. ¶ ¶ 9-10.)

In February 2008, Price and Watters showed the existing Italian chair at a trade show to measure potential demand for a new chair. (R. 50-2, Ex. A, Price's Suppl. Aff. ¶ 4.) After the show, Price and Watters agreed to establish a company to " design, market, and sell" this new chair. ( Id. ¶ 4.) Throughout early 2008, Price and Watters were in contact with CPC. (R. 47-4, Ex. C, Price's Aff. ¶ ¶ 9-13; R. 1, Compl. ¶ 4.) Around April 2008, CPC, Price, and Watters reached an agreement with CDM Tool & Manufacturing Co. (" CDM" ) that CDM would manufacture the mold needed for CPC to produce the chairs. (R. 47-4, Ex. C, Price's Aff. ¶ 13.) CPC agreed to pay for fifty percent of the mold manufacture cost, and a corporation to be formed by Price and Watters paid the remaining fifty percent. ( Id. ) Price and his wife paid his and Watters's portion of the down payment for the mold, $55,000.00, from their personal funds. (R. 50-2, Ex. A, Price's Suppl. Aff. ¶ 5.) H. Wittur & Co. contributed $5,500.00 to buy a computer program used to design the chair mold. ( Id. ) Legacy agreed to repay CPC for its expenditure towards the mold over time through a surcharge on the manufacturing price of the chair. ( Id. ) CPC alleges that its portion of the expenditure on the mold was approximately $391,050.00. (R. 13, CPC's Answer & Countercl. at 13.)

During April and May 2008, Price and Watters worked together to design the chair. (R. 50-2, Ex. A, Price's Suppl. Aff. ¶ 6.) They also hired an attorney to formally establish Legacy, which was incorporated on May 29, 2008. (R. 47-4, Ex. C, Price's Aff. ¶ 17.) Watters was named president and owned fifty percent of the company; Price was designated as vice president/treasurer, and Price's wife was named secretary and owned the remaining fifty percent of the company. (R. 47-4, Ex. C, Price's Aff. ¶ 17; R. 47-6, Ex. E, Legacy's Petition to Add Joint Inventor ¶ ¶ 6-7.) During meetings with counsel to prepare for incorporation of Legacy, Price and Watters stated their intention to apply for a design patent that Legacy would own. (R. 50-2, Ex. A, Price's Suppl. Aff. ¶ 8.)

During July and August 2008, Watters and Price agreed to name the chair the " Mirage Chair" and worked with CDM to develop a stamp within the mold identifying the chair as " Mirage By Legacy Seating, Made in the USA, Patent Pending." ( Id. ¶ 12.) In July 2008, Price authorized H. Wittur & Co. to issue to Watters a payment of $6,000.00, followed by a payment of $2,000.00 in August 2008, to compensate Watters for his work on the chair. ( Id. ¶ ¶ 10-11.)

By October 2008, CPC received the mold and began to produce the Mirage Chair. (R. 47-4, Ex. C, Price's Aff. ¶ 16.) Through the end of 2008 and into 2009, sales of the Mirage Chair were lower than expected. (R. 50-2, Ex. A, Price's Suppl. Aff. ¶ 14.) During this time, Legacy alleges that CPC pushed for a surcharge on the chairs above the agreed amount. ( Id. ) Legacy alleges that CPC subsequently demanded that Legacy pay the entire mold cost plus a fifteen-percent increase over CDM's total charge. ( Id. ) CPC alleges that Legacy only sold a small number of chairs and then quit selling the chair. (R. 13, CPC's Answer & Countercl. at 12.) CPC further alleges that Legacy failed to pay the balance due for the chair mold, which was $270,165.00. ( Id. at 13.)

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Price and Watters met with patent attorney Dennis Gross in April 2009 to discuss the Mirage Chair and request that Gross prepare an application for a design patent. (R. 47-5, Ex. D, Gross's Statement ¶ ¶ 4-6.) Gross prepared an application, which named Watters as sole inventor and assigned the patent to Legacy, and delivered the application and power of attorney forms to Watters by e-mail on June 8, 2009. ( Id. ¶ ¶ 7-8.) Legacy alleges that Price and Watters received the documents and agreed that Watters would execute them on behalf of the company. (R. 50-2, Ex. A, Price Suppl. Aff. ¶ 13.)

By July 2009, the business relationship between Price and Watters had eroded, due in part to the pressure CPC applied by demanding the increased surcharges to repay the cost of the chair mold. ( Id. ¶ 15.) Price attests that Watters was terminated in July 2009, with a buyout later negotiated with Watters in September 2009. ( Id. ¶ ¶ 15-16.) Price attests that Watters refused to recognize this buyout or his termination. ( Id. ¶ 15.)

During September 2009, Gross contacted Watters and Legacy to inquire whether Watters had approved the patent application and power of attorney documents. (R. 47-5, Ex. D, Gross's Statement ¶ 10.) Price told Gross's assistant that Watters had left Legacy and had no further contact with it. ( Id. ) At Price's request, Gross modified the patent application to name Price as the sole inventor, and assign the rights to Legacy. ( Id. ¶ ¶ 10-11.) After reviewing the application for the Mirage Chair patent, Watters contacted Gross's assistant on September 29, 2009, and told her that the application " looks ok." (R. 50-4, Ex. C, Watters's Sept. 29, 2009 E-Mail at 1.) In the e-mail, Watters stated that Legacy was " having some internal problems with the partners" that would be " resolved shortly." ( Id. ) Two months later, Watters e-mailed Gross claiming to still be president of Legacy and stating that the company was working through legal problems. (R. 50-5, Ex. D, Watters's Nov. 29, 2009 E-Mail at 1.) In this e-mail, Watters requested that Gross modify the patent application to indicate that Watters and Price shared ownership of the Mirage Chair equally. ( Id. ) Watters also stated that he " wanted to get on record ahead of time" that he no longer wanted to transfer his rights to Legacy. ( Id. )

In December 2009, after subsequent e-mail exchanges and separate meetings with Watters and Price, Gross advised Price that Watters could be added as a co-inventor to the patent application, which had previously been submitted with Price listed as the sole inventor. (R. 47-5, Ex. D, Gross's Statement ¶ 21.) Gross further advised that Watters was under a fiduciary obligation to assign his interest in the patent to Legacy for two reasons: because Watters was president of Legacy at the time and authorized Gross to begin the application, and because Watters expressly agreed to assign the patent to the company. ( Id. ) During subsequent e-mail exchanges, Watters demanded that his fifty percent share of rights in the patent be assigned to another entity, Watters & Associates. (R. 50-7, Ex. F, Watters's Dec. 3, 2009 E-Mail.) Watters eventually demanded that Gross withdraw the patent application. (R. 47-5, Ex. D, Gross's Statement ¶ 26.) Watters also refused to sign the application for joint ownership. ( Id. ) Gross filed a petition with the United States Patent and Trademark Office (USPTO) to add Watters to the patent application as a co-inventor without his signature, pursuant to 37 C.F.R. § 1.47(a). (R. 47-6, Ex. E, Legacy's Petition to Add Joint Inventor ¶ ¶ 1-3.) The USPTO issued the patent for the chair, Patent #D618006 (" the '006 patent" ), to Price and Watters on June 22, 2010, with an accompanying assignment

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of rights from Price to Legacy. (R. 47-3, Ex. B, PTO ...


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