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Kenall Manufacturing Co. v. Cooper Lighting, LLC

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

June 20, 2018

KENALL MANUFACTURING COMPANY, Plaintiff,
v.
COOPER LIGHTING, LLC, and EATON CORPORATION, Defendants.

          MEMORANDUM OPINION AND ORDER

          Gary Feinerman Judge

         Kenall Manufacturing Company brings this suit against Cooper Lighting, LLC and Eaton Corporation, alleging patent infringement and breach of contract. Doc. 1. The parties have cross-moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). Docs. 35, 45, 48, 51, 54. Kenall seeks judgment on all its claims, while Defendants seek judgment only on Kenall's patent claims. Kenall's motion is denied without prejudice to renewal after Defendants replead their affirmative defenses, and Defendants' motion is granted in part and denied in part.

         Background

         The court reviews a Rule 12(c) motion under the same standard as a Rule 12(b)(6) motion. See Guise v. BWM Mortg., LLC, 377 F.3d 795, 798 (7th Cir. 2004). The court may consider “the complaint, the answer, and any written instruments attached as exhibits.” N. Ind. Gun & Outdoor Shows, Inc. v. City of South Bend, 163 F.3d 449, 452 (7th Cir. 1998). Because the court will partially grant Cooper's motion and deny Kenall's motion, the facts are set forth in the light most favorable to Kenall. See Garofalo v. Vill. of Hazel Crest, 754 F.3d 428, 430 (7th Cir. 2014).

         Kenall and Cooper are competing commercial lighting manufacturers. Doc. 1 at ¶¶ 19-20. In 2012, Eaton acquired Cooper, which operates as “Eaton's Lighting Division.” Id. at ¶ 6. For ease of reference, and because Eaton may be ignored for purposes of the present motions, Eaton and Cooper are referred to together as “Cooper.”

         Kenall holds several patents. The first, U.S. Patent No. 6, 984, 055 (“the '055 patent”), issued on January 10, 2006, covers a “modular lighting fixture adaptable for being implemented in various shapes and configurations.” Doc. 1-2 at 11; Doc. 1 at ¶ 21. Kenall's Millennium Stretch lighting products are based on the patented technology. Doc. 1 at ¶ 23. In 2004, while Kenall's first patent application was pending, Cooper discussed with Kenall the possibility of licensing Kenall's technology, but did not enter into a license at that time. Id. at ¶ 25. In February 2005, Cooper launched its Fail-Safe Harmony VR Linear Series lighting fixtures, which Kenall believed infringed its patent. Id. at ¶ 26. On January 16, 2006, Kenall informed Cooper that its patent had issued days earlier. Id. at ¶¶ 21, 27.

         Just over a year later, Kenall filed a patent infringement suit against Cooper. See Kenall Mfg. Co. v. Cooper Lighting, Inc., No. 07 C 603 (N.D. Ill. filed Jan. 31, 2007). The parties resolved the suit pursuant to a Settlement Agreement and Confidential License Agreement. Doc. 1 at ¶ 29. The Settlement Agreement provided that, “[s]ubject to full compliance by Cooper with this Agreement and with the terms of the Confidential License Agreement, Kenall waives … its claims against Cooper for patent infringement damages with respect to manufacture and sale occurring before the date of this Agreement.” Doc. 1-1 at p. 3.

         In the License Agreement, Kenall granted Cooper “a world-wide, nonexclusive license, ” “[s]ubject to the terms, conditions and limitations in this Agreement, ” to manufacture and sell Cooper's “Linear Continuous” and “Linear Single” products-which the Agreement refers to as the “Subject Continuous Products” and “Subject Single Products, ” respectively, and together as the “Subject Products”-within the scope of the '055 patent and any patents stemming therefrom (the “Subject Patents”). Id. at pp. 35-36, § 1. In return, Cooper agreed to place a patent notice on every licensed product starting no later than December 31, 2007; to make a one-time payment of $30, 000 within seven days of executing the Agreement; and to make quarterly royalty payments of five percent of net sales of the Subject Continuous Products starting on January 1, 2008 and continuing through the expiration of the last Subject Patent. Id. at pp. 37-39, §§ 5.A, 5.B, 9. Cooper also agreed to redesign its Subject Single Product “to have a one-piece end unit instead of the current two-piece end unit, such redesigned product being referred to … as the ‘Re-Designed Single Product, '” by January 1, 2008. Id. at p. 36, § 2. If Cooper needed additional time for the redesign, it could continue to sell the Subject Single Product until April 1, 2008, subject to a five percent royalty. Id. at pp. 36-37, §§ 2, 5.C.

         The License Agreement further provided that, in the event of a breach by Cooper, Kenall could terminate the license “by a one-month written notice specifying such breach; however, termination can be avoided if within the notice period Cooper takes reasonable steps to remedy the breach.” Id. at p. 40, § 12. The Agreement included a “No Challenge Clause, ” which provided that, although “Cooper does not admit infringement, validity or enforceability of the Subject Patents, and reserves all defenses to any allegation of infringement … [, ] Cooper shall refrain from contesting the validity, enforceability, or infringement of the Subject Patents in any court of law or other forum unless Kenall asserts the Subject Patents against Cooper products other than the Subject Products.” Id. at pp. 41-42, § 15. The Agreement also included an Illinois choice-of-law provision. Id. at p. 41, § 14.

         Kenall filed this suit in June 2017, alleging that Cooper had failed to make royalty payments, had not placed the required patent notices on its products, had not redesigned the Subject Single Product to have a one-piece end unit, and continued to sell the Subject Single Product with a two-piece end unit at least until mid-2016. Doc. 1 at ¶¶ 48-53. Kenall claims that Cooper's actions breached the License Agreement, and also that Cooper's unauthorized sale of Subject Products infringed the Subject Patents.

         Discussion I.Cooper's Motion for Judgment on the Patent Claims

         The holder of a valid U.S. patent may “exclude others from making, using, … or selling [its] invention throughout the United States or importing the invention into the United States” by suing for infringement. 35 U.S.C. § 154(a). A nonexclusive license such as the License Agreement between Kenall and Cooper is a promise by the patent holder not to exercise that right by suing the licensee. See U.S. Philips Corp. v. Int'l Trade Comm'n, 424 F.3d 1179, 1189 (Fed. Cir. 2005) (“A nonexclusive patent license is simply a promise not to sue for infringement.”).

         Cooper argues that Kenall, by giving Cooper a “worldwide, nonexclusive license” to manufacture and sell the Subject Products, relinquished its right to sue Cooper for patent infringement. Doc. 42 at 1-2. Insofar as Cooper has failed to abide by the license's terms, Cooper contends, Kenall's only remedy lies in a breach of contract suit, not a patent infringement suit. Id. at 1.

         Kenall responds that that the License Agreement's “No Challenge Clause” prevents Cooper from “rais[ing] a defense against Kenall's infringement count.” Doc. 69 at p. 13, ¶ 41. That particular argument is far-fetched, as the No. Challenge Clause cannot possibly prevent Cooper from raising the license itself as a defense to a patent infringement claim. Cooper must be permitted to argue that its allegedly infringing conduct is authorized by the license, else the license-which is, at bottom, a promise not to sue for infringement-would be illusory. See Keefe v. Allied Home Mortg. Corp., 912 N.E.2d 310, 314 (Ill.App. 2009) (“An illusory promise is … defined as one in which the performance is optional [and] is not sufficient consideration to support a contract.”) (citations and internal quotation marks ...


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