Justia U.S. 7th Circuit Court of Appeals Opinion Summaries

An episode of the animated television show, South Park, entitled “Canada On Strike,” satirized the 2007-2008 Writers’ Guild of America strike, popular viral videos, and the difficulty of monetizing Internet fame. In the episode, characters create a video that is a parody of the real world viral video, “What What (In The Butt),” Brownmark, the copyright holder for the original WWITB video, sued for copyright infringement under the Copyright Act of 1976, 17 U.S.C.101. SPDS claimed that the South Park version was fair use and attached the two works. Brownmark argued that the court could not consider fair use on a 12(b)(6) motion to dismiss. The district court dismissed. The Seventh Circuit affirmed the “well-reasoned and delightful opinion.” The court properly decided fair use on a motion; the only evidence needed to decide the issue were the original version of WWITB and the episode at issue. Under the incorporation-by-reference doctrine, reliance on the attached works did not violate Rule 12(d); if a plaintiff mentions a document in his complaint, the defendant may then submit the document to the court without converting defendant’s 12(b)(6) motion to a motion for summary judgment.

FS and AOS discussed working together to develop a pump motor to prevent entrapment of swimmers by suction created by pool drains. FS sent a letter discussing specific features. After months of correspondence, FS sent another letter, with test results from a previous unsuccessful design and desired features. None of the correspondence mentioned confidentiality. Eventually FS signed the AOS standard one-way confidentiality agreement, stating that FS was a supplier of research consulting services. FS did not require AOS to enter into a confidentiality agreement. After signing the agreement FS shared more details. The relationship broke down when the companies began discussing a formal marketing agreement. AOS eventually introduced and marketed pump motors that FS claims incorporated its trade secrets. FS sued for misappropriation of trade secrets and unjust enrichment under Wisconsin law. The district court granted summary judgment in favor of AOS, finding the misappropriation claim barred by a three-year statute of limitations and that FS failed to take reasonable steps to protect claimed trade secrets. Voluntary disclosure of information defeated the unjust enrichment claim. The Seventh Circuit affirmed.

Two computer programs hold the registered trademark "CONDOR." After the district court entered summary judgment, the Seventh Circuit concluded that a trial was required on a confusion-in-trade allegation, but held that the state university was immune from federal jurisdiction. On rehearing, the Seventh Circuit reversed itself, citing the doctrine of waiver by litigation conduct and again rejected summary judgment.The state is not entitled to assert sovereign immunity over the counterclaims.

Plaintiff claimed that several of defendant's brands of toilet paper infringed on its trademark design. The district court entered summary judgment, holding that toilet paper embossed patterns are functional and cannot be protected as a registered trademark under the Lanham Act, 15 U.S.C. 1115(b)(8). The Seventh Circuit affirmed. Plaintiff patented the design, claiming it to be functional and can only claim the protection of a patent, not that of a trademark. The "central advance" claimed in the utility patents is embossing a quilt-like diamond lattice filled with signature designs that improves perceived softness and bulk, and reduces nesting and ridging. This is the same essential feature claimed in the trademarks.

In negotiations for architectural services for construction of a hotel, the parties agreed that defendant would pay an additional $15,000, apart from design fees, if defendant elected not to use plaintiff's construction affiliate. The agreement stipulated that architectural designs would remain plaintiff's intellectual property. Defendant did not use plaintiff's construction affiliate and the relationship deteriorated. Plaintiff claimed that it had no further design obligations; defendant refused to pay what $28,000 demanded by plaintiff. Plaintiff accepted an $18,000 payment in satisfaction, but registered a copyright for designs that it had produced and filed copyright infringement claims against defendant. The district court ruled in favor of defendant, holding that plaintiff had not complied with registration requirements (17 U.S.C. 408(b)) when it submitted re-created designs because its office had been robbed. The Seventh Circuit affirmed. Plaintiff did not identify anything in the designs that was original and protectable; the designs were, for the most part, based on the Holiday Inn Express prototype.

XMH sought Chapter 11 bankruptcy relief and obtained permission to sell a subsidiary's assets (11 U.S.C. 363), indicating that a contract between the subsidiary and WG would be assigned to purchasers. WG objected, claiming that the contract was a sublicense of a trademark and could not be assigned without permission. The bankruptcy judge agreed with WG, but allowed XMH to renegotiate so that the subsidiary would retain title to the contract but the purchasers would assume all duties and receive all fees. The district court granted a motion substituting the purchasers for XMH and ruled that the order barring assignment was erroneous. First holding that the order was appealable and that it should exercise jurisdiction despite the absence of the bankruptcy trustee as a party, the Seventh Circuit affirmed. If WG had wanted to prevent assignment, it could have identified the contract as a trademark sublicense to trigger a default rule that trademark licenses are assumed to be not assignable. The contract was not simply a sublicense: WG retained control over "all other aspects of the production and sale of the Trademarked Apparel." Such a designation would have been more effective than a clause forbidding assignment because it would have survived bankruptcy.

One defendant was a research assistant for one of the plaintiffs, an engineering professor, when the professor developed a mathematical model of how electrons behave under certain circumstances. The assistant switched to a different research group without returning a notebook. The plaintiff-professor retained a new assistant, who continued the work and shared some of her material with the defendant. The defendants submitted a symposium paper and an article, describing the model and its applications. The district court rejected copyright claims and state law claims. The Seventh Circuit affirmed, holding that the materials were not protected by the Copyright Act, 17 U.S.C. 102(b) because the model is an idea. The Act protects the expression of ideas, but exempts the ideas themselves from protection; the equation, figures and text are the only ways to express this idea, and, under the merger doctrine, these expressions are not copyrightable. Because state law conversion and fraud claims were the equivalent to assertions under the Act, those claims are preempted. A claim of trade secret misappropriation could not survive on the merits.

In 1993 a hip-hop group released a track that contains a segment of plaintiff's 1969 song. The district court dismissed plaintiff's 2003 copyright suit. Under the Copyright Act, sound recordings fixed before February 15, 1972 are not subject to copyright protection, but may be protected by state law (17 U.S.C. 301(c)). The court denied a motion to amend and awarded $321,995.25 in attorneyâs fees and $10,620.53 in costs. A new claim, filed in state court, was removed to federal court and dismissed as res judicata. The Seventh Circuit affirmed. The trial court correctly denied the motion to amend, based on the undue delay between the plaintiff's notice of the defects in his claim and the motion. The fact that the material was not under copyright did not deprive the court of jurisdiction and the second complaint was properly dismissed.

For many years the owners of the original bridal shop allowed family members to operate similar businesses under the same name. The owners sold one of their own shops and the buyer agreed to pay $75,000 per year for the use of the name and marks. When the agreement expired in 2002, the buyer continued to use the name and marks, without paying. The district court dismissed a 2007 claim under the Lanham Act, 15 U.S.C. 1117, 1125. The Seventh Circuit affirmed, holding that the owners abandoned their mark by engaging in "naked licensing:" allowing others to use the mark without exercising reasonable control over the nature and quality of the goods, services, or business on which the mark is used. It was not enough that the owners had confidence in the high quality of the buyer's operation; they retained no control.

A German online dating service, serving U.S. customers through a Delaware subsidiary, sued a New Jersey resident for operating an online dating service with a "confusingly similar" name, in violation of Illinois law, the Lanham Act, 15 U.S.C. 1114(1), and federal common law. The district court entered default judgment and denied a motion to vacate. The Seventh Circuit reversed for lack of personal jurisdiction. The Lanham Act does not create nationwide jurisdiction and, even discounting a finding that the defendant was not credible, the defendant did not have ties sufficient to establish jurisdiction in Illinois. Beyond operating a website accessible from the state, the defendant took no steps to target the Illinois market; the 20 Illinois residents who created profiles did so unilaterally, having "stumbled upon" the site.