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Solo Cup Operating Corp. v. Lollicup USA, Inc.

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

May 17, 2017

SOLO CUP OPERATING CORPORATION, Plaintiff,
v.
LOLLICUP USA, INC., Defendant.

          OPINION AND ORDER

          Joan H. Lefkow U.S. District Judge.

         Solo Cup Operating Corporation filed suit against Lollicup USA, Inc., alleging trademark infringement and unfair competition under the Lanham Act, 15 U.S.C. §§ 1125(a) and 1114; unfair competition under both the Illinois Uniform Deceptive Trade Practices Act, 815Ill.Comp.Stat. 510, and the Illinois Consumer Fraud and Deceptive Business Practices Act, 815Ill.Comp.Stat. 505; and breach of contract under Illinois common law. (Dkt. 30 at 1.) In response, Lollicup filed a number of counterclaims and affirmative defenses. (Dkt. 33 at 12-21, 40-51.) Solo Cup now moves to dismiss several of the counterclaims and defenses. For the reasons stated below, Solo Cup's motion is granted.[1]

         BACKGROUND[2]

         Solo Cup has a registered product configuration mark, [3] Registration No. 3, 284, 076, for its "Traveler" coffee-cup lid, pictured below.

         (Image Omitted)

         The lid is the subject of design and utility patents that expired in 2001 and 2003, respectively. These two patents were disclosed to the Patent and Trademark Office (PTO) during Solo Cup's trademark registration application process.

         Lollicup manufactures, advertises, and sells coffee cup lids under the brand name "Karat." Solo Cup alleges that Lollicup's "Karat" lids infringe its product configuration mark. In response to Solo Cup's complaint, Lollicup filed numerous counterclaims and affirmative defenses. Solo Cup moves to dismiss and strike some of those claims and defenses, including Lollicup's claims that (1) Solo Cup fraudulently procured the trademark registration for the "Traveler" lid configuration in violation of 15 U.S.C. § 1120, rendering it subject to cancellation under 15 U.S.C. §§ 1064 and/or 1119 (counterclaims II, V, and VI and affirmative defenses 3 and 9), (2) Solo Cup's use of its product configuration mark on the "Traveler" lid constitutes false advertising in violation of 15 U.S.C. § 1125(a) (counterclaim VII), and (3) the product configuration trademark for the "Traveler" lid is invalid and unenforceable due to either unconstitutionality or preemption (counterclaims III and IV and affirmative defenses 4 and 5).

         LEGAL STANDARD

         The legal standard applied to a motion to dismiss a counterclaim or strike an affirmative defense is the same as the standard applied in a 12(b)(6) motion to dismiss for failure to state a claim. See Intercon Sols., Inc. v. Basel Action Network, 969 F.Supp.2d 1026, 1067 (N.D. 111. 2013), affd, 791 F.3d 729 (7th Cir. 2015); Safe Bed Techs. Co. v. KCI USA, Inc., No. 02 C 0097, 2003 WL 21183948, at *2 (N.D. 111. May 20, 2003). To survive such a motion, the non-fraud counterclaims and affirmative defenses 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, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting BellAtl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Lollicup's fraud allegations must be stated with particularity in accordance with Federal Rule of Civil Procedure 9(b). While factual allegations must be accepted as true, legal conclusions will not be considered. See Iqbal, 556 U.S. at 678.

         ANALYSIS

         I. Fraudulent Procurement (Counterclaims II, V, [4] and VI and Affirmative Defenses 3 and 9)

         Fraudulent procurement of a trademark registration occurs where the applicant either "withhold[s] from the Patent and Trademark Office . . . material information or fact which, if disclosed to the Office, would have resulted in the disallowance of the registration sought or to be maintained, " Northwestern Corp. v. Gabriel Mfg. Co., No. 95 C 2004, 1996 WL 732519, at *16 (N.D. 111. Dec. 18, 1996) (quotingFirstInt'l Servs. Corp. v. Chuckles, Inc., 5 U.S.P.Q.2d 1628 (T.T.A.B. 1987)), or makes "a deliberate attempt to mislead the PTO into registering [the] mark by presenting materially false and misleading information to the PTO when . . . seeking the trademark registration." Specialized Seating, Inc. v. Greenwich Indus., L.P., 472 F.Supp.2d 999, 1016 (N.D. 111. 2007) (citing Money Store v. Harriscorp Finance, Inc., 689 F.2d 666, 670 (7th Cir. 1982); Zip Dee, Inc. v. Dometic Corp., 900 F.Supp. 1004, 1009 (N.D. 111. 1995)).[5]

         Lollicup alleges that Solo Cup fraudulently procured its product configuration trademark registration by misrepresenting to or misleading the trademark examiner about whether the mark was functional. Lollicup argues that, despite Solo Cup's disclosure to the PTO of the expired patents describing that mark, Solo Cup's written and oral statements made during the trademark application process regarding non-functionality constitute fraud. (See Dkt. 33 at 31-35; Dkt. 40-1 at 24-30.[6])

         "[I]n general terms, a product feature is functional, and cannot serve as a trademark, if it is essential to the use or purpose of the article or if it affects the cost or quality of the article." Traffix Devices v. Mktg. Displays,532 U.S. 23, 32, 121 S.Ct. 1255, 149 L.Ed.2d 164 (2001) (internal quotation marks omitted) (citations omitted). The threshold inquiry in the Seventh Circuit is "whether the feature for which trademark protection is sought is something that other producers of the product in question would have to have as part of the product in order to be able to compete effectively in the market." W.T. Rogers Co. v. Keene,778 F.2d 334, 346 (7th Cir. 1985). The existence of a utility patent that encompasses the ...


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