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Loggerhead Tools, LLC v. Sears Holdings Corp.

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

December 22, 2017

LOGGERHEAD TOOLS, LLC Plaintiff,
v.
SEARS HOLDING CORPORATION and APEX TOOL GROUP, LLC Defendants.

          MEMORANDUM OPINION AND ORDER

          REBECCA R. PALLMEYER UNITED STATES DISTRICT JUDGE

         Plaintiff LoggerHead Tools, LLC sued Defendants Sears Holdings Corporation and Apex Tool Group, LLC alleging, inter alia, willful infringement of United States Patents No. 6, 889, 579 (hereafter “‘579 patent”) and No. 7, 992, 470 (hereafter “‘470 patent”). Judge John Darrah construed the claims of the patents, and after his death the case proceeded to trial before this court. A jury returned a verdict for Plaintiff. Defendants have moved for reconsideration of Judge Darrah's claim-construction opinion and for judgment as a matter of law on the issues of infringement, invalidity, and willfulness. In the alternative, they request a new trial on the issue of willfulness.

         As explained in greater detail below, the court agrees with Defendants that Judge Darrah's claim construction reads important language out of the patents. This language relates to the shape of the “gripping element” in the hand tool those patents describe. Plaintiff's patent claims require that the gripping element include an “arm portion, ” which in turn must be “configured to engage” certain other components of the hand tool. Based on Judge Darrah's claim construction, however, the jury was instructed that the tool need only include a “portion of the gripping element(s) configured to engage” those other components.

         Although the court agrees with Defendants that the prior claim construction (and thus the jury instruction) was erroneous, it does not agree that the appropriate remedy is to grant judgment as a matter of law to Defendants based on their proposed alternative construction. Doing so would unfairly deprive Plaintiff of an opportunity to present arguments that the Defendants infringe Plaintiff's patents, even when those patents are properly construed. Instead, the court concludes that the erroneous jury instruction requires a new trial on the issues of infringement and invalidity, as well as willfulness. The court therefore denies Defendants' motion for judgment as a matter of law and grants their alternative motion for a new trial.

         BACKGROUND

         I. LoggerHead's patents

         Plaintiff is the assignee of two patents at issue in this case. (Def.'s Local Rule 56.1 Statement of Facts [280] (hereafter “DSOF”) ¶ 9.) Both patents claim priority back to an application filed on January 23, 2004, both are titled “Adjustable Gripping Tool, ” and both describe a hand-tool designed to “impart work upon a workpiece.” (Id. at ¶ 10.) The parties dispute whether the patent claims are limited to wrenches, rather than a broader range of “adjustable gripping tools, ” (Pl.'s Statement of Disputed Material Facts (hereafter “PSODMF”) [301-1], at ¶ 10), but the version of the tool relevant to this case is, for all practical purposes, a wrench. Squeezing the tool's handles together causes several tooth-like “gripping elements” to close in on, and grip, a lug nut or other workpiece. An embodiment of the tool appears below:

         (Image Omitted)

(DSOF ¶¶ 9-10.)

         All of the asserted claims in these patents include a “first element” (number 22 in the figures above) and a “second element” (number 24 above). (DSOF ¶¶ 16, 19.) The first element includes at least one gripping element (26), which in turn includes a body portion (34), an arm portion (36), and a force transfer element (38). (DSOF ¶ 16.) A more detailed embodiment of the gripping element appears below:

         (Image Omitted)

         (PTX 1 LH-00001225, App. 3 to Defs.' Mot. for J. as a Matter of Law [456] (hereafter “Defs.' Mot. for JMOL”).)

         The second element (24 in the figure below) includes an opening (44) concentric with an opening in the first element (30), an actuation portion (42), and at least one slot (46). (DSOF ¶ 19.) In the ‘470 patent, these features must be “formed within and integral to the tool head.” (Id.) An embodiment of the second element appears in the center of the image below:

         (Image Omitted)

         (PTX 1 LH-00001225, App. 3 to Defs.' Mot. for JMOL.)

         During prosecution of the ‘470 patent, the patent examiner initially rejected several of Plaintiff's claims on the grounds that they were anticipated by United States Patent No. 2, 787, 925 (hereafter “Buchanan patent”). (DSOF ¶ 13.) That patent, dated April 9, 1957, and titled “Wire Crimping Tool with Cam-Slot Actuating Means, ” describes a “multifunctional tool, more especially adapted for use in the insulted electrical wire art, ” which can be used “to carry out a wide variety of operations . . . such for example as cutting, splicing, insulation stripping, holding, crimping, etc.” (DTX 75 LH-00002333, App. 4 to Defs.' Mot. for JMOL.) The Buchanan patent claims, inter alia, “a wireworking tool having a plurality of centrally converging crimping plungers, means to converge said crimping plungers comprising a central cam plate having a central aperture therein and a plurality of radial slots.” (Id.) An image from the Buchanan patent appears below:

         (Image Omitted)

(Id. at LH-00002332.)

         The Patent Office appears to have provided only a cursory explanation for its initial rejection of Plaintiff's claims as anticipated by Buchanan. Most of this explanation simply identifies the similarities between the two patents by reciting Plaintiff's own proposed claims together with numerical references to the illustration of Buchanan above to demonstrate the similarities between the tools. (See PTX 4 LH-00001798, App. 3 to Def.'s Mot. for JMOL.) The examiner's explanation states, for example, that “Buchanan et al. discloses an adjustable an adjustable [sic] gripping tool for engaging a work piece to impart work thereto, the tool comprising . . . a first element (16) and a second element (12) connected for relative movement which generates movement of at least one gripping element (25).” (Id.) Buchanan's gripping element, in turn, “includ[es] a body portion (24) adapted for engaging the work piece, an arm portion (adj. 25) configured to engage one [of] the at least one guide (19) and a force transfer element (26) contiguous with the arm portion.” (Id.)

         In response to the examiner's rejection, Plaintiff argued that Buchanan could not have anticipated Plaintiff's claims because “Buchanan's gripping element does not contain an arm portion, ” as Plaintiff's proposed claims required. (Id. at LH-00001837.) “Instead, ” Plaintiff explained, “the force transfer element (i.e., pin 26) of Buchanan is directly attached to the body portion.” (Id.) Buchanan's force transfer element, Plaintiff continued, “is contiguous with the body, not an arm portion because Buchanan does not teach or suggest an arm portion.” (Id.) Plaintiff included the following image in its response, attempting to distinguish Plaintiff's gripping element from the element labeled “plunger” in the Buchanan patent:

         (Image Omitted)

(Id. at LH-00001836.)

         These arguments persuaded the patent examiner to allow Plaintiff's claims. (Id. at LH-00001853.) Buchanan, the examiner concluded, “fails to provide, inter alia, at least one gripping element including a body portion . . ., and arm portion configured to engage on said at least one guide and a force transfer element contiguous with the arm portion.” (Id. (emphasis in original.))

         II. Sears discovers the market for adjustable gripping tools

         Defendant Sears Holding Corporation began retailing LoggerHead's “Bionic Wrench” in 2009. (Pl.'s Statement of Disputed Material Facts in Opp. to Defs.' Mot. for Summ. J. on Pl.'s Fraud Claims [311-1] (hereafter “PSDMF on Fraud Claims”) ¶ 4.) Sears ordered 15, 000 Bionic Wrenches that year and 75, 000 wrenches the following year. (Id. at ¶ 7.) In the spring of 2011, Sears and LoggerHead agreed to terms for the promotion and sale of the Bionic Wrench through January 31, 2012. (Id. at ¶ 8.) Pursuant to this agreement, Sears promoted the Bionic Wrench through direct-to-consumer television promotion during the 2011 Christmas shopping season, resulting in “significantly” increased sales of the product. (Id. at ¶ 10.) The two companies negotiated for several months over promotional terms for the following year, but never finalized an agreement. (Id. at ¶ 59.). Dan Brown Jr. represented LoggerHead in these negotiations and Stephanie Kaleta represented Sears. (Id. at ¶¶ 12, 17.)

         As negotiations wore on, both parties began to explore alternatives to a deal. In February 2012, LoggerHead informed Sears that it would “be pursuing TV promotions with all other possible outlets for 2012.” LoggerHead Tools, LLC v. Sears Holding Corp., No. 12-cv-9033, 2016 WL 5111573, at *2 (N.D. Ill. Sept. 20, 2016). Around the same time, Sears began to formulate what Kaleta's supervisor referred to as a “backup plan, ” which involved negotiations with Defendant Apex Tool Group to develop and market another adjustable gripping tool. (PSDMF on Fraud Claims ¶¶ 44-45.) On May 15, 2012, a Sears inventory analyst provided LoggerHead with a “120 day advanced notice of Q4 forecast” that identified the number of Bionic Wrenches Sears anticipated purchasing as part of its proposed marketing agreement with LoggerHead. (Id. at ¶ 38.) The analyst's forecast stated that it was “subject to change pending father's day performance and finalization of Q4 marketing assets.” (Id.) On May 17, Brown Jr. explained in an email to Kaleta that LoggerHead anticipated “selling our production out” as a result of Sears' forecast and “strong demand for the fourth quarter.” (Id. at ¶ 40.) Kaleta quickly confirmed with Apex that the company would be able to produce enough units of its own adjustable gripping tool to justify a direct-to-consumer television promotional campaign, and on May 25 Sears withdrew from promotional negotiations with LoggerHead. (Id. at ¶¶ 53-56.) The next month, Sears informed LoggerHead that it expected to purchase fewer Bionic Wrenches than the parties had previously discussed. (Id. at ¶ 57.) Nevertheless, Sears continued to purchase Bionic Wrenches from LoggerHead and continued to sell the product on its website through at least June 2016. (Id. at ¶ 59.)

         Both Sears and Apex were aware of LoggerHead's patents during the development of their backup plan. (Defs.' Resp. to Pl.'s SOF on Infringement [306], at 8.) Apex consulted with outside patent counsel on numerous occasions during the design process. (PSODMF ¶ 30.) On one such occasion, in March 2012, attorney John Owen (of the firm Coats & Bennett, PLLC) suggested to Apex that mimicking certain design features from Buchanan's wire-crimping tool would likely preclude a finding that Apex had infringed LoggerHead's patents. (Letter from John Owen to Eric Broadway, Ex. 14 to DSOF.) Owen noted that LoggerHead had “argued multiple times during prosecution . . . that Buchanan's plungers do not have an arm portion.” (Id. (emphasis in original.)) “This means, ” Owen explained, “that [LoggerHead] is very likely prevented from now asserting that a flat body structure like in Buchanan's ‘plungers' falls within the scope of [LoggerHead's] claims that require an arm portion on the gripping element.” (Id.) Owen advised Apex that it would be “likely to avoid [LoggerHead's] patents” if its tool included, among other design features, a “flat type gripping element like Buchanan's plungers.” (Id.)

         Sears began retailing Apex's tool, styled as the “Max Axess Locking Wrench” (hereafter “Max Axess” or “MALW”), in September 2012. LoggerHead Tools, LLC v. Sears Holding Corp., No. 12-cv-9033, 2016 WL 5080028, at *1 (N.D. Ill. Sept. 20, 2016). The MALW appears similar, though not identical, to the tool depicted in LoggerHead's patents. Both tools allow a user to squeeze two handles together and thereby cause several tooth-like gripping elements to close in on a lug nut or other workpiece. Both tools include a first element, a second element, guides, slots, force transfer elements, and gripping elements. (Cf. Def.'s Resp. to Pl.'s SOF on Infringement 11.) Unlike the gripping element depicted in LoggerHead's patents, however, the MALW's gripping element is a solid rectangle rather than U-shaped. The rectangular shape of the gripping elements, in turn, requires that the MALW's force transfer elements make contact with the tool's slots on the sides of the gripping elements, rather than between each gripping element's arm portions. Images of the MALW appear below:

         (Image Omitted)

LoggerHead Tools, Inc. v. Sears Holding Corp., No. 12-cv-9033, 2016 WL 5112057, at *1 (N.D. Ill. Sept. 20, 2016).

         III. Procedural history

         Plaintiff filed suit against Defendants in November 2012, alleging willful infringement of multiple claims in both the ‘579 and the ‘470 patents.[1] (DSOF ¶ 8; Pl.'s Resp. to DSOF ¶ 8.) Plaintiff also alleged common law fraud, unfair competition, and numerous violations of the Lanham Act, the Illinois Consumer Fraud and Deceptive Business Practices Act, and the Illinois Uniform Deceptive Trade Practices Act. (Second Am. Compl. [136] ¶¶ 99-221.) The late Judge Darrah presided over the case until the Executive Committee of the Northern District of Illinois re-assigned it to this court on February 3, 2017. (See Order of the Executive Committee [390].)

         A key question in this litigation is whether the MALW's rectangular gripping element includes an “arm portion, ” as Plaintiff's patent claims expressly require. The meaning of the term “arm portion, ” however, is not immediately clear. Judge Darrah issued a claim construction opinion on August 27, 2015, which defined several ambiguous terms in Plaintiff's claims, including “arm portion.” See LoggerHead Tools, LLC v. Sears Holding Corp., No. 12-cv-9033, 2015 WL 5118063, at *3-5 (N.D. Ill. Aug. 27, 2015) (hereafter “LoggerHead Claim Construction Opinion”). Judge Darrah considered and rejected Defendants' proposed construction of “arm portion” as “portion of gripping element that projects from the body portion and to which the force transfer element is connected.” Id. at *3-5. Instead, Judge Darrah concluded, “arm portion” simply means “portion of the gripping element(s) configured to engage one of the guides and contiguous with a force transfer element.” Id. at *5.

         Defendants later moved for summary judgment on each of Plaintiff's claims. In a series of opinions published on September 20, 2016, Judge Darrah granted Defendants' motions as to all claims except those alleging patent infringement.[2] Plaintiff moved for reconsideration of the order granting summary judgment to Defendants on the issue of willfulness, but Judge Darrah denied this motion. See LoggerHead Tools, LLC v. Sears Holding Corp., No. 12-cv-9033, 2016 WL 6778881 (N.D. Ill. Nov. 15, 2016). On March 2, 2017, shortly after the case was transferred to this court, Plaintiff again moved for reconsideration of the willfulness determination. This court entered Plaintiff's motion and continued it for determination in a bifurcated proceeding at trial. (See Notification of Docket Entry, March 8, 2017 [396].)

         The court presided over a two-week trial in early May 2017. There, the parties presented the jury with evidence on two key questions relevant to the motions now before this court: (1) whether the Max Axess wrench satisfies the “arm portion” limitation on the gripping element in Plaintiff's asserted claims, thereby infringing those claims; and (2) whether the earlier Buchanan patent satisfies the limitation requiring the “second element” in Plaintiff's asserted claims to include “an actuation portion . . . having at least one slot, ” thereby rendering those claims invalid as anticipated by Buchanan. Although not immediately relevant to any of Plaintiff's claims, the jury also heard testimony that LoggerHead manufactured many of its Bionic ...


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