Heckler & Koch, Inc. v. German Sport Guns GmbH
HECKLER & KOCH, INC., Heckler & Koch GMBH v. GERMAN SPORT GUNS GMBH, American Tactical Imports, Inc., Defendants American Tactical Imports, Inc., German Sport Guns GmbH, Counter v. Heckler & Koch, Inc., Heckler & Koch GMBH, G. Wayne Weber, and Niels Ihloff, Counter
Attorneys
Anne L. Cowgur, Jonathan G. Polak, Melissa A. Gardner, Michael Zachary Gordon, Tracy Nicole Betz, Taft Stettinius & Hollister LLP, Darlene R. Seymour, Continental Enterprises, Indianapolis, IN, for Plaintiffs/Counter Defendants., Bruce Benjamin Paul, Douglas B. Bates, Neal F. Bailen, Stites & Harbison, LLP, Jeffersonville, IN, Charles M. Landrum, III, Jason M. Sneed, Sneed PLLC, Davidson, NC, for Defendants/Counter Claimants.
Full Opinion (html_with_citations)
ORDER ON PENDING MOTIONS
This cause is before the Court on three motions: (1) Defendantsâ motion to strike Plaintiffsâ affirmative defenses to counterclaims [Docket No. 282], filed on March 17, 2014; (2) Plaintiffsâ motion for summary
Factual and Procedural Background
This matter has been pending on our docket for more than three years, and its antecedent disputes stretch back still further. The array of motions to strike, motions to dismiss, and motions for reconsideration filed by the parties have given us occasion to explore aspects of the caseâs factual background, but only now do we arrive at the merits of the intellectual property dispute lying at the core of this sprawling body of litigation. While we have summarized the record previously, we endeavor here to outline the undisputed facts, cognizant that the presence of cross-motions for summary judgment will require us to draw varying inferences from them as we address each of those motions in turn.
Plaintiffs Heckler & Koch, Inc. (HK USA) and Heckler & Koch GmbH (HKG) are firms engaged in the manufacture and sale of firearms â headquartered, respectively, in the United States and Germany.
Defendants are also engaged in the firearms business: German Sports Guns GmbH (âGSGâ) is an arms manufacturer based in Germany, and American Tactical Imports, Inc. (âATIâ) is an arms importer and retailer incorporated and based in New York. Am. Compl. ¶¶ 7-8.
A number of the claims and counterclaims in this case are premised on differing interpretations of two parallel series of events that unfolded between 2008 and 2010: first, HK USAâs initial suit against the Defendants (âthe 2009 litigationâ); and second, HKGâs attempts to obtain a United States trademark registration for the MP5 weapon.
HK USA filed suit in the Southern District of Indiana against GSG, ATI, and a
WHEREAS, GSG, ATI, and Orion have filed in said Lawsuit Defendantsâ Answer and Counterclaim in which they seek a judgment declaring, inter alia, that their activities do not infringe, and have not infringed, any intellectual property rights of HK or otherwise violate any law, and that HK does not own the trademark, trade dress and other intellectual property rights it claims to own.
Id. (emphasis added); see also id. at ¶ 9 (âDefendants make no admission of liability for the claims made against them.â). As for the substance of the Agreement itself, the defendant parties agreed to pay HK USA $300,000 in exchange for the dismissal of the suit. Id. at ¶ 1. They also agreed to halt manufacture of the allegedly infringing GSG-5 design, and to cease selling the weapons once a âsell-offâ date had passed. Id. at ¶ 2. For its part, HK USA covenanted not to sue GSG or any of its commercial partners in connection with a different weapon design, the âGSG-522â firearm:
HK has reviewed the design of the GSG-522 attached hereto as Exhibit âAâ (the âGSG-522 Firearmâ) and covenants not to sue GSG or any of its customers, distributors, dealers or importers for its sale in the United States or anywhere in the world, provided GSG otherwise complies with this Agreement. This covenant extends to airsoft guns in the design of the GSG-522 firearm.
Id. at ¶ 5.
While the 2009 litigation was pending, ownership of the MP5 registered trademark â together with any accompanying trade dress rights â changed hands between HK USA and HKG. The process began on June 8, 2008, when HKG filed an application for an âinternational registration under the Madrid Protocolâ for the MP5 trademark within the United States, triggering a PTO office action. Cooper Decl. ¶ 7. On September 19 of the same year, the PTO wrote back to HKG, informing it that had provisionally refused the application for at least two reasons: first, the MP5 trademark was registered in the name of HK USA rather than HKG; second, an application by an unrelated company for an intent-to-use registration for the similar mark âMP5A5â was already pending before the PTO, and would need to be resolved before further action could be taken. See Docket No. 332-12 (Defs.â Ex. L); Cooper Decl. ¶ 8. In order to remove this first obstacle to HKGâs registration of the MP5 mark in the United States, HK USA president G. Wayne Weber executed an assignment agreement (âthe Assignmentâ) transferring to HKG âall right, title
Meanwhile, HKG continued in its efforts to secure U.S. trademark registration for the MP5, and both of the Heckler & Koch entities continued to represent to the PTO in the interim that HK USA owned the MP5 trademark, notwithstanding the Assignment. On March 23, 2009, HKG, by counsel, wrote to the PTO that an assignment of the MP5 trademark registration from HK USA to HKG was âbeing worked,â and therefore requested that its application for Madrid Protocol registration be held in abeyance until the questions of ownership and the pending third-party application could be resolved. Docket No. 332-13 at 5-7. Cooper Deck ¶ 8. Nearly a year later, complying with PTO deadlines for trademark registrantsâ periodic filing of affidavits verifying their continued use and intent to renew their marks, HK USA filed a âSection 8/9â declaration with the PTO, holding itself out as the current owner of the MP5 mark. Docket No. 332-15.
In May 2010, the PTO informed HKG that the third partyâs competing trademark application had been abandoned, advising HKG that it was nonetheless still necessary for HKGâs ownership of the MP5 mark to be established before the companyâs application for U.S. registration of the MP5 could be granted. Cooper Deck ¶ 10. HKG then recorded the Assignment with the PTO on June 20, 2010; this marked Plaintiffsâ first public acknowledgment of the transfer of rights.
Procedural History
Plaintiffs contend that Defendants have failed to abide by the Settlement Agreement. Specifically, they allege that Defendants have ârepackagedâ the GSG-5 â a âknock-offâ weapon designed to âreplicate the look and feel of the famous MP5Âźââ and sold it under the label of the GSG-522. Am. Compl. ¶2. By manufacturing, importing, and selling this GSG-5 in GSG-522âs clothes, Plaintiffs argue, Defendants have both violated their covenant not to sell the GSG-5 and deceptively deviated from the GSG-522 design that they submitted for HK USAâs approval in the Agreement. Id. Plaintiffs also allege that Defendants continued to manufacture and sell the GSG-5 under its own label even after the 2010 âsell-off dates.â Id. at ¶ 3, 27-32. According to Plaintiffs, this conduct directly contravenes Paragraph 3 of the Settlement Agreement.
Bearing these grievances, Plaintiffs again brought suit against GSG and ATI.
Defendants have also asserted a number of counterclaims alleging that Plaintiffs wronged them in surreptitiously assigning the MP5 IP rights during the pendency of the 2009 litigation; Defendants also bring counterclaims for breach of the Settlement Agreement and seek declaratory judgments that Plaintiffs lack trade dress rights in the MP5 weapon design and that Defendants are not liable for breach of fhe 2009 Agreement. The tort counterclaims implicate not only HK USA, but also Weber, Ihloff and HKG. Weber signed the Assignment, and Defendants allege that Counter Defendant Ihloff, as a high-ranking officer of HKG, also knew of it. Docket No. 251 at ¶ 27. Defendants initially alleged that an additional agreement between HK USA and HKG arranged for the transfer of trade dress rights and related goodwill associated with the MP5, but after discovery they have asserted that HK USA and HKG completed the assignment in a single signed agreement. Id. at ¶ 26; Docket No. 251 at ¶ 32(f)(v). On September 20, 2012, Ihloff executed a âRatification and Consentâ in which he, on behalf of HKG, announced that the company âhereby ratifies, affirms, and agrees to be bound in all respects to the Settlement Agreementâ reached between HK USA and the Defendants. Docket No. 251 at ¶ 34., According to Defendantsâ theory, Ihloff and HKG were aware of the false representations contained in the Settlement Agreement at the time they ratified it. Docket No. 274 at 35-39.
The Court subsequently dismissed the actual fraud and constructive fraud claims against Plaintiffs and the two Counter Defendants, and it dismissed the deception and tortious interference claims against Ihloff. Docket No. 215. In its order, the Court primarily addressed Defendantsâ failure to establish proximate causation between their alleged damages and the misrepresentations of HK USA and its officers. Id.
Defendants took two steps in response to the Courtâs partial dismissal of their counterclaims against HK USA, HKG, Weber, and Ihloff. First, on October 30, 2013, they filed a motion for leave to file an amended answer and counterclaims. Docket No. 228. Second, they filed a motion for reconsideration. Docket No. 235. On January 14, 2014, Magistrate Judge Baker granted Defendantsâ motion for leave to amend, and they accordingly filed an Amended Answer that restated all of the counterclaims present in their first Answer â including those that had been dismissed by the Court â and added allegations against Ihloff and HK GmbH based on their ratification of the Settlement Agreement. Compare Docket No. 56 with Docket No. 251. We then granted Plaintiffsâ renewed motion to dismiss as to
Legal Analysis
Defendantsâ Motion to Strike
On March 17, 2014, Defendants filed a motion to strike elements of Plaintiffsâ Answer and affirmative defenses to Defendantsâ Amended Counterclaims. Docket No. 282. The pleading that was the subject of this motion, however, has since been replaced by Plaintiffsâ Amended Answer to Defendantsâ Amended Counterclaims [Docket No. 304], filed on May 29, 2014.
Plaintiffsâ amended answer supersedes their previous answer, and it therefore renders Defendantsâ motion to strike moot. See Massey v. Helman, 196 F.3d 727, 735 (7th Cir.1999); Loren Specialty Mfg. Co. v. Clark Mfg. Co., 241 F.Supp. 493, 500 (N.D.Ill.1965) (noting that amended answers, like amended complaints, supersede the previous'pleading); Horton Archery, LLC v. Farris Bros., Inc., 2014 WL 1239382, at *2 (S.D.Miss. Mar. 26, 2014) (noting that the filing of an amended answer moots a pending motion to strike).
We therefore DENY Defendantsâ motion to strike without prejudice.
Motions for Summary Judgment
Standard of Review
Federal Rule of Civil Procedure 56 provides that summary judgment should be granted when the record evidence shows that âthere is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.â Fed. R. Civ. Pro. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322-823, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The purpose of summary judgment is to âpierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial.â Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Disputes concerning material facts are genuine where the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In deciding whether genuine issues of material fact exist, the court construes all facts in a light most favorable to the non-moving party and draws all reasonable inferences in favor of the non-moving party. See id. at 255, 106 S.Ct. 2505. However, neither the âmere existence of some alleged factual dispute between the parties,â id., 477 U.S. at 247, 106 S.Ct. 2505, nor the existence of âsome metaphysical doubt as to the material facts,â Matsushita, 475 U.S. at 586, 106 S.Ct. 1348, will defeat a motion for summary judgment. Michas v. Health Cost Controls of Ill., Inc., 209 F.3d 687, 692 (7th Cir.2000).
Plaintiffs and Defendants have both filed motions for summary judgment. Plaintiffs seek summary judgment in their favor on Counts I and III through IX of Defendantsâ Counterclaims
Count One of the amended counterclaims alleges actual fraud against HK USA, HK GmbH, Weber, and Ihloff.
Defendants allege that HK USA and its president Weber engaged in fraud when they falsely represented in the 2009 Settlement Agreement that HK USA held the registered trademark and associated rights for the MP5 weapon when, in fact, they had assigned away those rights to HKG some six months earlier.
A. Litigation Privilege
Indianaâs âlitigation privilegeâ is a common-law doctrine barring liability for certain statements made in the course of .judicial proceedings. Van Eaton v. Fink, 697 N.E.2d 490, 494 (Ind.Ct.App.1998). The privilege is based on the idea that the âpublic interest in the freedom of expression by participants in judicial proceedings ... is so vital and necessary to the integrity of our judicial system that it must be made paramount to the right of the individual to a legal remedy when he has been wronged.â Briggs v. Clinton Cnty. Bank & Trust Co., 452 N.E.2d 989, 997 (Ind.Ct.App.1983). Because it embodies the value of âfreedom of expression,â the privilege originally applied only to bar actions for defamation arising out of statements in the course of litigation. See Hartman v. Keri, 883 N.E.2d 774, 777 (Ind.2008); Miller v. Reinert, 839 N.E.2d 731, 735 (Ind.Ct.App.2005). The Seventh Circuit, however, has recently endorsed a limited expansion of Indianaâs privilege âbeyond defamation and other similar tort claims to encompass breach of contract claimsâ; in its 2010 decision in Rain v. Rolls-Royce Corp., 626 F.3d 372 (7th Cir.2010), the court ruled that the privilege barred a breach of contract suit asserting that a partyâs statements in the course of litigation violated its obligations under a prior ânon-disparagementâ covenant. 626 F.3d at 376-378,
In reaching this ruling, the Rain court noted that Indiana law was silent on the precise question at hand, and the court therefore âexamine[d] the reasoning of courts in other jurisdictions addressing the same issue and applying their own law for
In doing so, however, Plaintiffs ignore a caveat crucial to the Seventh Circuitâs reasoning in Rain â that expansion of the doctrine is appropriate âwhere immunity from liability is consistent with the purpose of the privilege.â 626 F.3d at 377. Rain and the cases it cited applied the litigation privilege to claims broadly analogous to defamation; in such contexts, concern for the integrity of judicial proceedings â including the* protection of statements or disclosures otherwise actionable â was thought to outweigh the interests ordinarily protected by tort or contract law. Id. (citing Ellis v. Kaye-Kibbey, 581 F.Supp.2d 861, 880-881 (W.D.Mich.2008); Wentland v. Wass, 126 Cal.App.4th 1484, 25 Cal.Rptr.3d 109, 114-115 (2005) (â[Wjhether the litigation privilege applies to an action for breach of contract turns on whether its application furthers the policies underlying the privilegeâ)). While it is true that Indiana courts have countenanced the limited expansion of the privilege beyond its original scope as a defense to the specific tort of defamation, we are aware of no case in which they have ventured far beyond this core rationale. Cf. Estate of Mayer v. Lax, Inc., 998 N.E.2d 238, 249 (Ind.Ct.App.2013); Rain, 626 F.3d at 378 (â[T]he question [is] whether applying the litigation privilege in this case would promote the due administration of justice and free expression by participants in judicial proceedings.â). Defendantsâ counterclaim for fraud alleges that HK USA and its agents lied to GSG and ATI during the 2009' litigation about having assigned away the trademark rights upon which the suit was predicated; we determine that this is not analogous to a suit for defamation or breach of a non-disparagement covenant. See Estate of Mayer, 998 N.E.2d at 250 (noting that the privilege does not shield from causes of action âbased on the malicious or abusive use of the judicial systemâ). Barring suits for fraudulent inducement of settlement agreements would undermine, rather than buttress, the integrity and openness of the judicial process that the litigation privilege seeks to protect. See Tru-Cal v. Conrad Kacsik Instrument Sys., Inc., 905 N.E.2d 40, 46 (Ind.Ct.App.2009) (recognizing a cause of action for fraudulent misrepresentation in procuring a settlement of litigation). Accordingly, we decline to anticipate or predict that Indiana courts would construct the privilege so expansively. Defendantsâ fraud counterclaim may thus stand or fall on its merits.
B. Material Misrepresentation and Intent to Deceive
The first broad prerequisite for fraud liability is the existence of an intentionally deceptive written statement. In order to give rise to liability, Plaintiffsâ alleged
The distinction, however, is illusory. As the Indiana courts have explained, the concept of intentionality is inseparable from the tort of fraud. âAn intent to deceive, or âscienter,â is an element of actual fraud, whether classified as a knowing or reckless misrepresentation or as an additional element to a knowing or reckless misrepresentation.â Wright v. Pennamped, 657 N.E.2d 1223, 1230 (Ind.Ct.App.1995). See also Francis v. AIT Labs., 2008 WL 4585423, at *5 (S.D.Ind. Oct. 14, 2008). A tortfeasorâs state of mind, of course, can seldom be proved directly; evidence that a defendant knew, or should have known, that a representation would induce reliance is one, of several factors that may be probative of scienter. âProof of intent to deceive is determined by a review of all of the relevant factors of the particular case.... Where a person knowingly or recklessly makes false representations which the person knows or should know will induce another to act, the finder of fact may logically infer an intent to deceive.â In re McGinnis, 2010 WL 4956376, at *3 (Bankr.S.D.Ind. Nov. 30, 2010) (citing Mayer v. Spanel Intâl, Ltd., 51 F.3d 670, 673 (7th Cir.1995)).
Plaintiffs urge that HK USAâs representations regarding its ownership of the MP5 intellectual property in the 2009 Agreement were not actually false â or, alternatively, that the representations were made in forgivable ignorance of their falsity. According to Plaintiffs, this is because the assignment was not complete until HKG accepted it in June 2010 â and HK USAâs recitations that they still owned the MP5 intellectual property in the 2009 Agreement were thus both true and made in good faith. We are thus presented with two questions: first, whether the Assignment was complete upon execution; and second, if so, whether HK USA and its agents intentionally deceived Defendants in 2009 by failing to disclose the Assignment.
Plaintiffsâ contention that HKG did not manifest this assent until it âacceptedâ the Assignment in June 2010, however, is contradicted both by the text itself and by Plaintiffsâ previous statements to the Court. The Assignment speaks of the two entitiesâ meeting of the minds in the past tense, reciting that they had exchanged âgood and valuable consideration, receipt of which is hereby acknowledged.â Docket No. 251-2 at 5. In their court filings, Plaintiffs have conceded, implicitly or explicitly, that the Assignment was effective at the date of its execution, just as it appears to be on its face. In a reply brief in support of their motion to amend their complaint, Plaintiffs stated in March 2012 that the MP5 ârights were assigned on March 19, 2009,â and that â[assignment of the registered MP5 marks from HK USA to HK GmbH, a matter of public record, was effectuated March 19, 2009 and recorded on June 20, 2010.â Docket No. 39 at 7, 8-9. More recently, in answering Defendantsâ amended counterclaims, Plaintiffs stated that the - âpublicly-filed Short Form Assignment speaks for itself.â Docket No. 265 at ¶ 26. Still more recently, in a November 2014 motion for interlocutory appeal of an earlier ruling, Plaintiffs unequivocally state, as âundisputedâ facts, that: âHK USA assigned the MP5 trademark to HKG on March 19, 2009â and âHK did not disclose the assignment of the trademark to GSG/ATI before the execution of the Settlement Agreement.â Docket No. 399 at 6, ¶¶ 2, 6. The only evidence that Plaintiffs present to support their theory of a belated 2010 âacceptanceâ by HKG is the declaration of HKGâs attorney, Isolde Kurz-Cooper. Cooper Deck ¶ 10. Plaintiffs do not claim that there was any written memorialization of this acceptance, nor does Cooper provide any further details than this bare assertion. Even assuming that Cooper had the requisite firsthand knowledge to convert her statement into admissible evidence, we decline to accept Plaintiffsâ newly-proffered and clearly self-serving theory when it cuts so clearly against the consistent body of their own statements on the question.
A genuine issue of material fact remains, however, with respect to Plaintiffsâ intent to defraud. HK USAâs president G. Wayne Weber, who signed both the Assignment and the Agreement on the companyâs behalf, did state that he âexpected them [GSG, ATI, and Orion] to rely on the representations made by HKâ in the discussions leading to the 2009 settlement. Docket No. 332-1 Weber Aug. 2014 Dep.) at 91-92.
C. Reliance and Proximate Causation
The intertwined issues of reliance and proximate cause have been the focus of the partiesâ arguments through several stages of the litigation. We conclude,' at last, that Defendants have failed to meet their evi-dentiary burden, and that summary judgment on the fraud counterclaim must therefore be granted in Plaintiffsâ favor.
For a claimant to recover under a fraud theory, âit must show that it had a right to rely on the ... misrepresentations and that it did in fact rely on the misrepresentations to its detriment.â Young v. Thompson, 794 N.E.2d 446, 448 (Ind.Ct.App.2003) (quoting Scott v. Bodor, Inc. 571
1. The right of reliance
The parties first join issue on the right of reliance â whether a litigant in the position of GSG and ATI in the 2009 litigation could ever reasonably rely on the representations of their party opponents in the preliminary clauses of a settlement agreement. In a previous ruling on Plaintiffsâ motion to dismiss the fraud counterclaim, we concluded that Defendants â had adequately stated a claim with respect to reliance; in doing so, we refused to foreclose, as a matter of law, the possibility that GSG and ATI could have reasonably relied on Plaintiffsâ misrepresentations in signing the 2009 Agreement. See Docket No. 215 at 16-17. Plaintiffs now urge that no right of reliance ever existed, for two reasons: first, because the alleged misrepresentations were only âpreliminary recitalsâ to a contract and thus not the proper subjects of reliance; and second, because adversaries in a lawsuit cannot reasonably rely on the representations of their opponents in armâs length settlement negotiations.
Plaintiffs assert that, because the preliminary recitals of a settlement agreement are âtypically restatements of the very issues over which the parties disagreed in the litigation,â they should not be considered âmisrepresentationsâ giving rise to an opponentâs reasonable reliance. Docket No. 330 at 17-18. â[I]n nearly 200 years of jurisprudence,â they add, âCounterclaim Defendants are not aware of a single Indiana state court opinion holding that the preliminary recitals of a settlement agreement may form the basis of a fraud claim.â Id. While Plaintiffs are correct that Indiana law has not endorsed recovery for a fraud claim based on such âpreliminary recitals,â neither has it specifically foreclosed such a possibility. Rather, Indiana courts have recognized that preliminary recitals, although less probative than the language of the âbodyâ of a contract, may be useful in interpreting the contract as a whole. In Stech v. Panel Mart, Inc., 434 N.E.2d 97 (Ind.Ct.App.1982), the Indiana Court of Appeals read a preliminary recital as âclearly establishing] the intention of the partiesâ and as âerasing] the ambiguityâ which clouded the body of the contract as to its meaning. 434 N.E.2d at 101. Cf. Kerfoot v. Kessener, 227 Ind. 58, 84 N.E.2d 190, 199 (1949) (observing that âthe preliminary recitals of the contract may be of some value, but they are not contractual, and can not [sic] be permitted to control the express provisions of the contract which are contractual in natureâ).' The Seventh Circuit, in a decision applying Indiana law, ruled that a party was estopped from reciting in a contractâs preliminary clauses that it was âengaged in the business of selling scientific and rare earth metalsâ and then later claiming to be inexperienced in the subject. Taurus Holding Co. of Am., Inc. v. Thompson, 129 F.3d 1268, at *36 (7th Cir.1997).
Second, Plaintiffs assert that GSG, ATI and Orion cannot have reasonably relied on HK USAâs representations in the Agreement because it was a settlement negotiated at armâs length, and as such, Defendantsâ âduty ... to be diligent in safeguarding [their] interestsâ foreclosed any right of reliance. See Young, 794 N.E.2d at 449 (citing Plymale, 419 N.E.2d at 762). In doing so, they rely primarily on Prall v. Indiana National Bank, 627 N.E.2d 1374 (Ind.Ct.App.1994), in which the Indiana Court of Appeals rejected the argument of a party to a liability release agreement that it had been fraudulently induced to sign the agreement- by false oral representations. 627 N.E.2d at 1378-1379. There, the court found that the plaintiff had âpresented no evidence or argument to show that [defendantâs] alleged misrepresentations about the disbursements induced him to sign the release .... Also, in executing the release [plaintiff] was an adverse party dealing at arms length with [defendant].â Id. at 1379.
We agree with Defendants that the present case is distinguishable, and the general rule Plaintiffs seek to derive from Prall is overbroad. Prall dealt with an agreements integration clause, and the policy interest in reconciling the possibility of claims for fraudulent inducement with the dictates of the parol evidence rule. As the Indiana court in a similar case put it; âThe exception for a party who has âbeen induced by a fraudulent misrepresentation to enter the contract,â must not be stretched or inflated in a way that would âseverely undermine the policy of the parol evidence rule.â â Circle Ctr. Dev. Co. v. Y/G Ind., L.P., 762 N.E.2d 176, 180 (Ind.Ct.App.2002) (quoting Urschel Farms, Inc. v. Dekalb Swine Breeders, Inc., 858 F.Supp. 831, 840 (N.D.Ind.1994)). Here, Defendants do not seek to void a release on the grounds that it was fraudulently induced by oral statements; rather, the misrepresentations to which they point are present on the face of the Agreement itself. See Tru-Cal, Inc. v. Conrad Kacsik Instrument Sys., Inc., 905 N.E.2d 40, 46 (Ind.Ct.App.2009) (distinguishing Prall, which âdealt with alleged oral misrepresentations made prior to the execution of the contract,â from facts in which âthe alleged fraud ... involves a forged employment agreement that was filed in a court of lawâ).
Plaintiffs also overreach in citing Prall as establishing a general rule that â[a] prerequisite to the right of reliance is that the relying party be in a subordinate position.â
2. The fact of reliance
It is upon the fact of reliance that Defendantsâ fraud counterclaim founders. In denying Plaintiffsâ motion to dismiss, we concluded that Defendants had successfully pleaded their reliance, judging that âit is at least plausible that [Defendantsâ] willingness to pay $300,000 to settle the [2009] litigation reflected their judgment that HKâs claims of trademark infringement had merit â a judgment informed by HKâs representations that it owned the MP5 trademark.â Docket No. 215 at 16-17. In a second ruling on Plaintiffsâ motion to dismiss the amended counterclaim, we held that Defendants had also sufficiently pleaded proximate causation. See Docket No. 298 at 17-23.
The strongest evidence weighing against Defendants is the Settlement Agreement itself. One of the Agreementâs preliminary recitals reads as follows:
WHEREAS, GSG, ATI and Orion have filed in said Lawsuit Defendantsâ Answer and Counterclaim in which they seek a judgment declaring, inter alia, that their activities do not infringe, and have not infringed, any intellectual property rights of HK or otherwise violate any law, and that HK does not own the trademark, trade dress and other intellectual property rights it claims to own.
Docket No. 45-1 at 1. In the body of the Agreement itself, Defendants make the following statement:
9. No admission of liability. In entering into this Agreement, Defendants make no admission of liability for the claims made against them in the Lawsuit or otherwise acknowledge the existence of any rights claimed by HK Similarly, HK makes no admission of the validity of Defendantsâ contentions and/or claims in this proceeding against HK.
Id. at ¶ 9 (emphasis added). Defendants counter that these statements in the Agreement are ânothing other than a rephrasing of Defendantsâ counterclaim in the 2009 Litigation,â and were not intended to reflect Defendantsâ actual belief at the time the Agreement was signed. Docket No. 349 at 25,. This argument is a double-edged sword for Defendants: if these contractual statements are not construed as ârepresentationsâ on their part, then the preliminary recitals on which the entire fraud counterclaim is based â whose language is markedly similar â can hardly be construed as ârepresentationsâ themselves.
Even if we look beyond the Agreementâs text, Defendants have proven unable to show any affirmative evidence that they relied upon Plaintiffsâ false statement of
Defendants point to three pieces of testimony on the question, but none suffices to carry their burden. The first is the deposition of ATI president Anthony DiChario, who answered a question on cross-examination as follows:
Q: So if what Iâm understanding is correct, the only thing that would have kept you from signing that very same Settlement Agreement with HK Germany as opposed to HK USA was your belief, whether correct or not, that HK Germany is not allowed to bring a lawsuit in this country against you; is that right?
A: I told you I would not settle the suit with [HK] Germany. There would be no cause to it, no reason, no ability for them to control the commerce here in America unless they had an interest like HK USA here. I know that. I knew that when the suit started and itâs not an option. I would not settle.
Docket No. 332-7 (DiChario Dep.) at 307. DiCharioâs testimony speaks to the strategic considerations governing the decision to settle a hypothetical 2009 suit initiated by HKG rather than HK USA; he did not testify as to whether GSG and ATI actually believed HK USAâs representations or acted according to that belief.
Second, Defendants point to the testimony of GSG president Michael Swoboda, who testified in 2012 to his understanding of the nature of his companyâs fraud counterclaim against HK USA:
Q: Can you describe for me what your understanding was of the nature of those [counterclaims?19
A: One point is as I know that we have made a Settlement Agreement with the company. They have had no rights at all. So Iâm a German, I know a little bit [sic] German. Iâm not familiar with the U.S. law, but I can speak only for German law. If you make an agreement with company [sic] that has no rights itâs fraud and my opinion is [that this] Settlement Agreement we have made is only confetti, nothing more, because this*889 company has had- no rights at all, because they refer to the rights of another company.
Docket No. 332-2 (Swoboda Dep.) at 318-319. Mr. Swobodaâs testimony establishes that, as of 2012, he believed that his company had been defrauded by HK USA â at least according to the standards of German law. It says nothing at all, however, about whether Defendants relied on the misrepresentations at issue in 2009.
Finally, Defendants refer us to the testimony of their expert Dr. Kenneth Ger-main, who opined:
The ownership issues that had developed by the time of the Settlement Agreement in the 2009 litigation so significantly undermined the validity of the MP5 registration and the enforceability of the MP5 mark that the HK Entities had unwarranted leverage to extract concessions from GSG/ATI because of the HK Entitiesâ failure to disclose the vulnerability of the trademark to GSG/ ATI.
Docket No. 251-3 (Germain Report) at 6. Accepting Germainâs opinions as correct for the purposes of this motion would support the conclusion that the Settlement Agreement was worth less than the price Defendants paid for it. But as an outside expert, Germain did not, and could not, testify to' the separate question of whether HK USAâs âunwarranted leverageâ actually influenced Defendantsâ calculations in signing the Agreement.
It seems clear to us that HK USA, at the very least, conducted itself in an underhanded manner by initiating a suit for trade dress infringement, assigning away the rights that formed the basis of the suit, and then settling the suit without disclosing the Assignment. Such behavior may have been subject to sanction by the court with jurisdiction over the 2009 Litigation. Liability for fraud is a different matter, however. As regrettable as it may be to allow such a failure of forthrightness to go unpunished, the law intentionally gives fraud claimants a steep mountain to climb, for âfraud is easy to allege and difficult to prove.â See Bower v. Jones, 978 F.2d 1004, 1012 (7th Cir.1992). Defendantsâ claim here is fatally undermined by the plain text of the Agreement disavowing any reliance. While we recognize, of course, the abstract possibility that such language was disingenuous boilerplate, a reasonable fact-finder would need affirmative evidence to find it so. Defendants have come forth with some evidence that the Agreement was harmful to their interests, but not that it was Plaintiffsâ misrepresentations, rather than other considerations, that prompted them to enter into it.
We accordingly GRANT Plaintiffsâ motion for summary judgment on Counterclaim Count I and DENY Defendantsâ motion for summary judgment on that count.
II. Counterclaim Count III â Deception Under Indiana Code § 35-43-5-3(a)
Defendantsâ Counterclaim Count III seeks treble damages under the Crime Victim Relief Act for Plaintiffsâ crime of âdeception.â Docket No. 251 at ¶¶ 69-72. Both parties seek summary judgment on this count.
Indianaâs Crime Victim Relief Act (CVRA), Ind.Code § 34-24-3-1, provides that a person who âsuffers a pecuniary lossâ as a result of another personâs violation of certain criminal statutes may recover treble damages and other costs and fees. Ind.Code § 34-24-3-1. Among the crimes for which victims may obtain recovery under the CVRA is âdeception,â a Class A misdemeanor defined for purposes of this action as âknowingly or intentionally makfing] a false or misleading written statement with intent to obtain property, employment, or an educational opportunity.â Ind.Code- § 35-43-5-3(2). The factu
Plaintiffs' seek summary judgment on three grounds: that the counterclaim is barred by the CVRAâs statute of limitations, that Defendants have failed to establish the prerequisite elements for tort recovery, and that the counterclaim is barred by Indianaâs litigation privilege. Plaintiffsâ argument for the application of the litigation privilege merely reprises the theory they, presented in relation to the fraud counterclaim, see Docket No. 330 at 33; we therefore reject that argument for the same reasons we outlined above. We address Plaintiffsâ two remaining arguments in turn.
A. The Statute of Limitations
Because claims under the CVRA are âpenalâ in nature, Indiana courts have determined that a two-year statute of limitations applies. Clark v. Univ. of Evansville, 784 N.E.2d 942, 945-946 (Ind.Ct.App.2003) (citing Browning v. Walters, 616 N.E.2d 1040, 1046 (Ind.Ct.App.1993)). As Defendants point out, however, the stateâs âfraudulent concealmentâ statute may influence the two-year periodâs starting point: âIf a person liable to an action conceals the fact from the knowledge of the person entitled to bring the action, the action may be brought at any time within the period of limitation after the discovery of the cause of action.â Ind.Code § 34-11-5-1 (emphasis added). This provision âeffectively moves the date on which the statute of limitation^] begins to run forward from the date of the alleged tort to the discovery date.â Alldredge v. Good Samaritan Home, Inc., 9 N.E.3d 1257, 1262 (Ind.2014) (citing Malachowski v. Bank One, Indianapolis, 590 N.E.2d 559, 563 (Ind.1992)).
Defendants first asserted this deception counterclaim on July 13, 2012, when they filed their first Answer and Counterclaims. See Docket No. 56. The claim is therefore barred by the two-year statute of limitations if Defendants knew of, or should have known of, the alleged deception before July 13, 2010. See Laun v. Laun, 2008 WL 90778, at *12-15 (N.D.Ind. Jan. 9, 2008). Plaintiffs insist that, even if the âdate of discoveryâ rule applies, the two years should have begun to run on June 20, 2010, when Plaintiffs filed the Assignment with the PTO â thus, according to their account, giving Defendants âconstructive noticeâ of the alleged deception they had suffered. Docket No. 330 at 31-32 (citing 15 U.S.C. § 1060(4)).
The key issue raised by Plaintiffsâ statute of limitations defense is therefore whether, and for how long, Plaintiffs concealed the Assignment from Defendants after the date the alleged harm occurred in 2009. âThe law narrowly defines concealment, and generally the concealment must be active and intentional.â Olcott Intâl & Co. v. Micro Data Base Sys., Inc., 793 N.E.2d 1063, 1072 (Ind.Ct.App.2003). âThe affirmative acts of concealment must be calculated to mislead and hinder a plaintiff from obtaining information by the use of ordinary diligence, or to prevent inquiry or elude investigation. There must be some trick or contrivance intended by the defrauder to exclude suspicion and prevent inquiry.â Johnson v. Blackwell, 885 N.E.2d 25, 32 (Ind.Ct.App.2008). As to the alleged victim, âto invoke the protection provided by this statute ... the plaintiff is charged with the responsibility of exercising due diligence to discover the claims.â Malachowski, 590 N.E.2d at 563-564 (citing Hinds v. McNair, 235 Ind. 34, 129 N.E.2d 553, 560 (1955)).
B. Elements of the Deception Claim [14,15] The CVRA is âpunitive in nature and must be strictly construed.â Flaherty & Collins, Inc. v. BBR-Vision I, L.P., 990 N.E.2d 958, 968 (Ind.Ct.App.2013); NationsCredit Commercial Corp. v. Grauel Enters., Inc., 703 N.E.2d 1072, 1078 (Ind.Ct.App.1998). In order to obtain a civil recovery under the statute, Defendants must accordingly âshow a violation of at least one of the code sections listed in the statute and must demonstrate that the violation caused the loss suffered by the plaintiff.â Flaherty, 990 N.E.2d at 968 (citing McLemore v. McLemore, 827 N.E.2d 1135, 1144 (Ind.Ct.App.2005)).
In addition to proof of a prohibited act and proximate causation, Plaintiffs contend that Defendants are required to establish reliance, just as they were in order to recover for fraud. Docket No. 330 at 32. Plaintiffs rely for this assertion, primarily on Puller Mortgage Associates, Inc. v. Keegan, 829 F.Supp. 1507 (S.D.Ind. 1993), a decision in which the Southern District of Indiana court found that deception and other statutory offenses are âbased on and are essentially permutations ofâ common law fraud â and thus implicitly endorsed the notion that proof of reliance is a prerequisite of recovery for deception under the CVRA. 829 F.Supp. at 1521. This is not quite correct. As the United States Supreme Court has noted, â[r]eliance is not a general limitation on civil recovery in tort; it âis a specialized condition that happens to have grown up with common law fraud.â â Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639, 655-656, 128 S.Ct. 2131, 170 L.Ed.2d 1012 (2008) (quoting Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 477, 126 S.Ct. 1991, 164 L.Ed.2d 720 (2006) (Thomas, J., concurring in part and dissenting in part)). In Indiana, of course, âno common-law crimes exist, and the legislature fixes the elements necessary for any statutory crime. We may not read into a statute that which is not the expressed intent of the legislature.â Am. Heritage Banco, Inc. v.
Plaintiffsâ argument for summary judgment prevails in spite of their definitional overreach, however. ' Here, as is so often the case, proof of reliance is intertwined with proof of proximate cause. In order for one partyâs act to be the proximate cause of anotherâs harm, it âmust have set in motion a chain of circumstances that in natural and continuous sequence lead to the resulting injury. Proximate cause requires, at a minimum, that the harm would not have occurred but for the defendantâs conduct.â Carey v. Ind. Physical Therapy, Inc., 926 N.E.2d 1126, 1129 (Ind.Ct.App.2010) (citing Hamilton v. Ashton, 846 N.E.2d 309, 316 (Ind.Ct.App.2006)). The only pathway in this case through which Plaintiffsâ written misrepresentations could have harmed Defendants is the Settlement Agreement â and those misrepresentations could not have been the âbut forâ cause of Defendantsâ decision to sign that Agreement unless Defendants relied upon them. Defendants attempt to establish proximate cause by pointing to evidence that the Agreement damaged them, chiefly because Plaintiffsâ loss of standing after the Assignment undermined the strength of their infringement claims.
For the same reason that we granted Plaintiffsâ motion for summary judgment against the fraud counterclaim, we therefore GRANT Plaintiffsâ motion for sum
III. Counterclaim Count VII â Tortious Interference with Business Relationship
Both parties seek summary judgment on Count VII of Defendantsâ counterclaims, which alleges that Plaintiffs tortuously interfered with GSG and ATIâs business relationships in the course of the 2009 litigation. In order to prevail on a tortious interference claim, a claimant must establish the following: (1) the existence of a valid relationship; (2) the defendantâs knowledge of the existence of the relationship; (3) the defendantâs intentional interference with that relationship through some independent unlawful acts; (4) the absence of justification; and (5) damages resulting from defendantâs wrongful interference with the relationship. Meridian Fin. Advisors, Ltd. v. Pence, 763 F.Supp.2d 1046, 1063 (S.D.Ind.2011). See also Levee v. Beeching, 729 N.E.2d 215, 222 (Ind.Ct.App.2000) (citing Bradley v. Hall, 720 N.E.2d 747, 750 (Ind.Ct.App.1999)).
Defendants assert that HK USA committed tortious interference by filing the 2009 lawsuit, maintaining it after it had surreptitiously assigned to HKG the MP5 intellectual property rights, and serving subpoenas on Defendantsâ business partners during the 2009 litigation. More specifically, they state that Orion Arms Corporation, an ATI customer, ceased making weapons, purchases from ATI after Plaintiffs named it as a co-defendant with GSG and ATI in the 2009 lawsuit. Docket No. 330-9 (ATIâs Third Supplemental Answers to Interrogatories) at 5. Defendants list a further 13 ATI customers who they assert reduced their business relationships with Defendants â or ceased them entirely â after Plaintiffs served them with subpoenas on August 24, 2009, in connection with the 2009 litigation.
As a preliminary matter, we note that damage to the relationship between GSG and ATI themselves is not a valid basis for a tortious interference -with business relationship claim. Plaintiffs have designated evidence, uncontroverted by Defendants, that the relationship between GSG and ATI at the time of the settlement of the 2009 litigation was governed by a written âExclusive Distribution Agreementâ between them. Docket No. 347-11 (Exclusive Distribution Agreement)
As to Defendantsâ cognizable claims for tortious interference, Plaintiffs advance four arguments for summary judgment: (1) that the counterclaim is barred by Indianaâs litigation privilege, (2) that HK USAâs actions in the 2009 Litigation were justified, (3) that HK USA committed no âindependent unlawful acts,â (4) that Defendants have failed to show damages. Docket No. 330 at 33-34. We reach only the first of these arguments.
We have already addressed, and rejected, Plaintiffsâ general arguments for construing Indianaâs litigation privilege to bar Defendantsâ counterclaims for fraud and deception. This counterclaim, however, is based on a different series of predicate acts: HK USAâs filing and maintenance of the 2009 Litigation against GSG, ATI, and Orion and the serving of subpoenas on Defendantsâ other business partners in connection with that action. As such, the question of the litigation privilege warrants consideration anew.
Plaintiffs contend that âIndiana has explicitly expanded the litigation privilege to preclude tortious-interference claims arising from statements in litigation.â Docket No. 330 at 35 (citing Estate of Mayer v. Lax, Inc., 998 N.E.2d 238, 249 (Ind.Ct. App.2013)). In fact, they urge, Indiana courts have countenanced the expansion of the privilege in this context to apply to âstatements in litigation even where the statements are not alleged to be defamatory. In other words, a statement is privileged against a tortious-interference claim simply if it is made in litigation.â Id. at 36 (citing Watson Rural Water Co. v. Ind. Cities Water Corp., 540 N.E.2d 131, 139 (Ind.Ct.App.1989)). Defendants rest on their previous arguments, apparently con-, fident that the reasoning that excluded Plaintiffsâ alleged fraud and deception from the litigation privilege will suffice here. Defendants err in giving the issue such short shrift, for we conclude that the privilege does apply to the tortious interference claim, warranting summary judgment in favor of Plaintiffs.
The two recent Indiana cases cited by Plaintiffs lend weight to their argument. In Estate of Mayer v. Lax, Inc., 998 N.E.2d 238 (Ind.Ct.App.2013), a party brought claims for defamation, negligent supervision and retention, tortious interference with a business relationship, and tortious interference with a contract against its opponent in a prior action, on the grounds that the opponent had brought counterclaims in that action accusing it of conspiracy, bribery, racketeering, and other species of chicanery. 998 N.E.2d at 243-244, 249. Rejecting the
In its counterclaim Watson essentially contends that Indiana Citiesâ public representations, that it, rather than Watson, had the right to provide water utility service to the hospital and other disputed areas, constituted interference with Watsonâs business relationships. Such representations made in good faith, simply do not constitute illegal acts sufficient to support a claim of tor-tious interference with a business relationship. Furthermore, insofar as Indiana Cities representations were made within the context of litigation, such representations are privileged and will not serve as a basis for liability.
Id. (citing Briggs v. Clinton Cnty. Bank & Trust Co., 452 N.E.2d 989, 997 (Ind.Ct.App.1983)) (emphasis added).
Here, Defendants allege that Plaintiffs maintained a baseless
There is also no doubt that HK USAâs communications arose in the context of litigation and were pertinent to that litigation. See Briggs, 452 N.E.2d at 997 (noting that the ârelevancy or pertinencyâ of a communication to litigation is a matter of law, and is to be construed liberally). âLawsuits are not peace conferences. Feelings are often wounded and reputations are sometimes maligned.â Estate of Mayer, 998 N.E.2d at 247. Forms of redress do exist for a party that has been injured by anotherâs misuse of the litigation process; ânot everything a lawyer files in court on behalf of a client is absolutely privileged from being the subject of a lawsuit by a third party.â Id. at 250.
There is significant conceptual overlap between the litigation privilege and the âlack of justificationâ element necessary to establish a tortious interference claim. Because we have interpreted Indiana case law in a manner that would bar tortious interference suits based on the filing of a lawsuit, we pause briefly to address a previous, unpublished decision of this Court that employed a different analytical approach. In support of their argument that the acts upon which their tortious interference counterclaim is based, were unjustified, Defendants rely on Square D Co. v. Breakers Unlimited, Inc., 2009 WL 1407017, *2 (S.D.Ind. May 19, 2009). There, as here, the court addressed a defendantâs counterclaim that the filing of a lawsuit constituted tortious interference. Though admitting that Indiana precedent was not conclusive of the question, the Square D court held that the filing of a lawsuit â at least where not in bad faithâ could never give rise to such a claim. frivolous â lawsuit cannot form the basis of a tortious interference claim under Indiana law .... If a party has a legitimate legal claim against a competitor, the party is âjustifiedâ in pursuing that claim, even if by doing so it might interfere with its competitorâs business relationships.
While the Indiana Supreme Court has not spoken directly on this issue, this Court determines that the filing and/or prosecution of a legitimate â that is, not
2009 WL 1407017, at *2. Relying on the negative implication of this language, Defendants insist that their tortious interference claim remains viable so long as a fact-finder could determine that HK USAâs 2009 suit was in bad faith. Docket No. 349 at 46-47.
The court in Square D did not explicitly consider- the applicability of the litigation privilege. In a footnote, however, it did ruminate on the possibility that a more categorical bar would apply to this type of suit:
It is possible that if the Indiana Supreme Court considered the issue it might agree with Illinoisâs rule that âthe only cause of action recognized for the wrongful filing of a lawsuit is one for malicious prosecution or abuse of process.â Havoco v. [of] America, Ltd. v. Hollobow, 702 F.3d[F.2d] 643, 647 (7th Cir.1983) [additional citation omitted]. This Court need not decide that question, however, because it is clear that a tortious interference claim cannot be maintained based upon the facts of record in this case.
Like the court in Square D, we see no need to venture a prediction as to whether the Indiana Supreme Court would opt to follow Illinoisâs rule, whatever policy strengths such a rule may have to recommend it. Based on our reading of the Indiana case law, however â particularly Estate of Mayer, which post-dated this courtâs opinion in Square D â we do conclude that the litigation bars tortious interference claims like those brought here and
We therefore GRANT Plaintiffsâ motion for summary judgment on Defendantsâ Counterclaim Count XII for tortious interference with business relationships, and DENY Defendantsâ motion for summary judgment on the same count.
IV. Breach of Contract Counterclaims
Defendants assert in their counterclaims that Plaintiffs have breached the 2009 Agreement in a number of respects. They allege that Plaintiffs breached the Agreementâs confidentiality clause (Counterclaim Count IV), its forum-selection clause (Counterclaim Count VI), and its covenant not to sue in connection with the GSG-522 firearms and alternative dispute resolution (ADR) provisions (Counterclaim Count V). Both parties seek summary judgment as to all of these counts.
A. Counterclaim Count IV â Breach of the Confidentiality Clause
The 2009 Agreement contained a confidentiality clause providing that â[e]ach party agrees that the terms of this Agreement shall be maintained confidential and shall not be disclosed except for purposes of enforcement of the Agreement.â Docket No. 45-1, ¶24. Defendants allege that Plaintiffs have violated that clause in two respects: (1) by attaching a copy of the Agreement to their Complaint in this suit, see Docket No. 251 at ¶ 76; and (2) and by emailing a copy of the final version of the Agreement to an exĂ©cutive with the company Umarex GmbH on two occasions shortly after the Agreement was concluded. See Docket No. 349 at 15, ¶¶ 11-12 (citing Docket No. 332, Exs. 4-5).
Defendantsâ claim that attaching the Agreement to Plaintiffsâ complaint constituted breach of contract is foreclosed by the plain text of the confidentiality clause. Under Indiana law, settlement agreements âare governed by the same general principles of contract law as any other agreement.â Zukerman v. Montgomery, 945 N.E.2d 813, 819 (Ind.Ct.App.2011). As with other contracts, then, the interpretation of the 2009 Settlement Agreement is a question of law for the Court. See Motorists Mut. Ins. Co. v. Wroblewski, 898 N.E.2d 1272, 1275 (Ind.Ct.App.2009) (citing Briles v. Wausau Ins. Cos., 858 N.E.2d 208, 213 (Ind.Ct.App.2006)). âWhen construing a contract, unambiguous contractual language is conclusive upon the parties and the courts.â Niezer v. Todd Realty, Inc., 913 N.E.2d 211, 215 (Ind.Ct.App.2009) (citing Trustcorp Mortgage Co. v. Metro Mortgage Co., Inc., 867 N.E.2d 203, 212 (Ind.Ct.App.2007)). âIf an instrumentâs language is unambiguous, the partiesâ intent is determined from the four corners of the instrument.â Id. The confidentiality clause here prohibits disclosure of the Agreement except âfor purposes of enforcement.â Docket No. 45-1 at ¶ 24. We can think of no clearer fit to this exception than attaching the Agreement to a complaint alleging its breach.
Summary judgment against Defendants is also warranted on their allegation that Plaintiffs violated the confidentiality clause by attaching a copy of the Agreement to emails sent to a Umarex GmbH executive. While Plaintiffs appear to concede that this constituted a violation of the clause, Docket No. 332-6 (Ihloff Dep.) at 296-297,
The only evidence of damages upon which Defendants rely falls short of this standard. In his deposition testimony, ATI president DiChario contended that disclosure of the Agreement was harmful to his company. He stated:
Paying $300,000 [in the Agreement], it could be construed as an admission of guilt by our customers, by our fans, as an admission â or making us look like weâre just not .good business people. People can take things out of context and make anything they want with it. Itâs certainly not the nicest thing to wear around your neck.
Docket No. 332-7 (DiChario Dep.) at 205. This statement is not âevidenceâ of damages from the email disclosures, for two chief reasons. First, DiCharioâs comments were in response to a question about the filing of the Agreement as an attachment
Q: Have you lost a single sale as the result of the Settlement Agreement being put on public record?
A: No idea. I canât answer that. I havenât even looked at that.
DiChario Dep. at 205.
In support of their motion for summary judgment, Plaintiffs also refer us to the testimony of GSG president Swoboda, a German-speaker who was deposed in the company of an interpreter.
The principal offense of which Defendants complained was no breach at all, and Defendants have failed to show that any breach that did occur produced damages.
B. Counterclaim Count VI â Breach of the Agreementâs Forum-Selection Clause
The Agreementâs forum-selection clause states: âThe parties agree that the United States District Court for the Southern District of Indiana shall retain jurisdiction to enforce this Agreement.â Docket No. 45-1 at ¶ 8. Arguing that this clause is mandatory â requiring that any dispute arising from the Agreement be adjudicated in the Southern District â Defendants con
A mandatory forum-selection clause is âone that contains clear language showing that jurisdiction is appropriate only in the designated forum.â Duggan OâRourke, Inc. v. Intelligent Office Sys., LLC, 2012 WL 4057215, at *2 (S.D.Ind. Sept. 14, 2012). Clauses that do not contain mandatory language are only permissive and not enforceable. âThe law is clear: where venue is specified with mandatory or 'obligatory language, the clause will be enforced; where only jurisdiction is specified, the clause will generally not be enforced unless there is some further language indicating the partiesâ intent to make venue exclusive.â Paper Exp., Ltd. v. Pfankuch Maschinen GmbH, 972 F.2d 753, 757 (7th Cir.1992) (citing Docksider, Ltd. v. Sea Technology, Ltd., 875 F.2d 762, 763-764 (9th Cir.1989)).
Defendants insist that since the clause uses â âthe mandatory language of shall â and not the âpermissive language may,ââ its language should be read as mandatory. Docket No. 349 at 51 (citing Indep. Stationers, Inc. v. Vaughn, 2000 WL 1449854, *8 n. 7 (S.D.Ind. Jan. 3, 2000); Paper Exp., 972 F.2d at 756) (emphasis added). But the use of the word âshallâ in forum-selection clauses is no shibboleth. In the cases Defendants cite, the mandatory intent of the contractual language was evident not on the basis of a single word, but the totality of the partiesâ statement. In Independent Stationers, Inc. v. Vaughn, 2000 WL 1449854 (S.D.Ind. Jan. 3, 2000), for instance, the court read a forum-selection clause specifying that âany action to enforce this Agreement ... may be brought in the courts of Indianaâ as merely permissive; it noted, however, that a clause using the same language, but with the phrase âshall be broughtâ instead, would have been mandatory. 2000 WL 1449854, at *8 n. 7. In Paper Express Ltd. v. Pfankuch Maschinen GmbH, 972 F.2d 753 (7th Cir.1992), the Seventh Circuit interpreted a clause providing that â[i]n all disputes arising out of the contractual relationship,â the action shall be filed in the court which has jurisdiction for the principal place of business of the supplier.â 972 F.2d at 755. The court determined that the language âall disputes ... shall be filedâ left no doubt about the mandatory nature of the provision. Id. at 756.
At the same time, however, a clause merely specifying that a certain court possesses jurisdiction, even if it uses the word âshall,â is permissive unless it clearly expresses the exclusive nature of the grant. See, e.g., Pioneer Life Ins. Co. of Ill. v. Anderson, 1988 WL 143726, at *1 (N.D.Ill. Dec. 21, 1988) (interpreting a clause stating âWinnebago County, Illinois shall be the place of jurisdictionâ as permissive); Hunt Wesson Foods, Inc. v. Supreme Oil Co., 817 F.2d 75, 77-78 (9th Cir.1987) (ruling that a clause providing that a certain California court âshall have jurisdictionâ over contract disputes was permissive, not' mandatory). Here, the most natural reading of the Agreementâs forum-selection clause â stating that the Southern District shall retain jurisdiction â is that it grants jurisdiction to this Court, but in a non-exclusive fashion. We read the clause as similar to one addressed by the Northern District of Indiana in Parker v. Hostetler, 2008 WL 346007 (N.D.Ind. Feb. 6, 2008). There, the contract provided that â[t]he parties ... agree to submit to the personal jurisdiction and venue of a court of subject matter jurisdiction located in the County in which the property sits.â 2008 WL 346007, at *3. Finding that the clause was not âambigĂș-
We therefore GRANT Plaintiffsâ motion for summary judgment on Counterclaim Count VI for breach of the 2009 Agreementâs forum-selection clause, and DENY Defendantsâ motion for summary judgment on the same count.
C. Counterclaim Count Y â Breach of ADR and Covenant Not to Sue Provisions
Defendantsâ Counterclaim Count V alleges that Plaintiffs violated two related provisions of the 2009 Agreement by filing the current suit. Both parties seek summary judgment as to both aspects of this counterclaim. Because Plaintiffs never raise the issue of damages, however, we construe Defendantsâ motion on this Count as a partial motion for summary judgment on the question of breach only.
1. Paragraph 14 â ADR Provision and Covenant Not to Sue ATI
The Agreement provides an alternate dispute resolution (ADR) process that applies to future trade dress infringement disputes between Plaintiffs and ATI. The provision states as follows:
Covenant Not to Sue ATI and Liquidated Damages. In the event HK becomes aware of any products being sold by ATI that HK believes infringes [sic] upon the claimed HK MP5 trade dress or the trade dress of the HK G3 (âAlleged Infringing Productsâ), HK shall give written notice (âWritten Noticeâ) to ATI. HK and ATI shall meet within ten (10) working days of the submission of the Written Notice to discuss the matter in good faith. ATI will have the option of either: (1) ceasing sales of the Alleged Infringing Products; or (2) identifying the supplier of the Alleged Infringing Products (the âSupplierâ). If ATI elects either option, HK covenants not to sue ATI or any of ATIâs customers or distributors for any intellectual property claim, remedy, damage or right it has or may have against ATI or any customers or distributors of ATI for the sale by any of them of the Alleged Infringing Products....
Docket No. 45-1 ¶ 14. It is undisputed that Plaintiffs did not engage in this prescribed ADR procedure before filing the current suit. See Docket No. 349 at 20, ¶ 50 (citing Docket No. 33211 at ¶ 8a).
Plaintiffs argue that initiating this litigation without following the notice and ADR procedures did not constitute a breach of the Agreement, because the clause applies narrowly to claims against ATI for trade dress infringement. Docket No. 330 at 41-42. The provision was not implicated, they contend, because their initial complaint against both ATI and GSG stated only a contract claim (not trade dress infringement) and their Amended Com
Accordingly, we GRANT Plaintiffsâ motion for summary judgment on Defendantsâ Counterclaim Count V with respect to paragraph 14 of the Agreement, and we DENY Defendantsâ motion for summary as to that portion of that count.
2. Paragraph 5 â The GSG-522 firearms
Defendants also allege that Plaintiffs have breached paragraph 5 of the Agreement, which reads as follows:
GSG-522 Fir earns. HK has reviewed the design of the GSG-522 attached hereto as Exhibit âAâ (the âGSG-522 Firearmâ) and covenants not to sue GSG or any of its customers, distributors, dealers or importers for its sale in the United States or anywhere in the world, provided GSG otherwise complies with this Agreement. This covenant extends to airsoft guns in the design of the GSG-522 Firearm.
Docket No. 45-1 at ¶ 5. Defendants contend that Plaintiffs ignored this restriction, filing a âbaselessâ breach of contract suit against GSG and ATI in their original complaint. Docket No. 349 at 51. Plaintiffs retort that the Agreementâs covenant not to sue applies only if GSG sells weapons conforming to the design approved by the parties in 2009; according to Plaintiffs, their current suit is based in part on Defendantsâ retailing of weapons that are labeled âGSG-522â but which do not conform to the approved design.
The question whether the GSG-522 as it is currently sold differs materially from the GSG-522 as described by the parties in Exhibit A to the Agreement is one of fact. Plaintiffs contend that the GSG-522 has been altered from the approved design to include an âMP5-styleâ stock, foregrip,
We therefore DENY both Plaintiffsâ and Defendantsâ motions for summary judgment on Defendantsâ Counterclaim Count V for breach of contract with respect to paragraph 5 of the Agreement.
V. Counterclaim Counts VIII and IXâ Cancellation of Trademark under 15 U.S.C. § 1119 and Damages under 15 U.S.C. § 1120
Defendants seek cancellation of the MP5 trademark, U.S. Trademark Reg. No. 1,594,109, on the grounds that HK USAâs âCombined Declaration of Use/Application for Renewal of Registrationâ under Sections 8 and 9 of the Lanham Act (âthe Section 8/9 Applicationâ) contained fraudulent statements to the PTO. They also seek damages on the theory that they have incurred the expenses of this lawsuit as a consequence of the registrationâs procurement by fraudulent means. See Docket No. 215 at ¶¶ 97-106. We conclude that any misrepresentations made by HK USA were not material to the Section 8/9 Application and thus do meet the high standards necessary for trademark cancellation on the basis of fraud.
The Lanham Act provides: âIn any action involving a registered mark the court may determine the right to registration, order the cancelation of registrations, in whole or in part, restore canceled registrations, and otherwise rectify the register with respect to the registrations of any party to the action.â 15 U.S.C. § 1119. Fraud in procuring a trademark registration or, as Defendants allege here, in renewing the registration under Sections 8 and 9, is a potential basis for cancelation by the Court. See In re Bose Corp., 580 F.3d 1240, 1243 (Fed.Cir.2009). A party seeking cancelation, however, faces a formidable burden of proof with respect to both the persuasiveness of the evidence and the showing of fraudulent intent on the part of the registrant. See Money Store v. Harriscorp Fin., Inc., 689 F.2d 666, 670-671 (7th Cir.1982); W.D. Byron & Sons, Inc. v. Stein Bros. Mfg. Co., 54 C.C.P.A. 1442, 377 F.2d 1001, 1004 (1967); Donovan v. Bishop, 2011 WL 1560991, at *3 (S.D.Ind. Apr. 21, 2011). In order to prevail on their counterclaim, then, Defendants must show by âclear and convincing evidenceâ that HK USAâs misstatements to the PTO were â(1) made with the knowledge of their falsity, and (2) material to the determination to grant the application.â Oreck Corp. v. Thomson Consumer Elecs., Inc., 796 F.Supp. 1152, 1159 (S.D.Ind.1992) (quoting Marshak v. Sheppard, 666 F.Supp. 590, 598 (S.D.N.Y.1987)) (emphasis original). âThere is no room for speculation, inference or surmise and, obviously, any doubt must be resolved against the charging party.â In re Bose, 580 F.3d at 1243.
HK USAâs allegedly fraudulent conduct here consisted of filing the Section 8/9 Application with the PTO on March 17, 2010 â representing in its communication to the PTO that it remained the âownerâ of the registered MP5 trademark. Docket No. 332-15 (Defs.â Ex. N). As we have already discussed, see supra § 1(B), there is at least a genuine issue of fact as to whether HK USAâs claim to own the mark as of March 2010 was false. Defendantsâ theory that the misrepresentation was made with the requisite scienter hangs from a thin evidentiary thread, but we can
In order to cancel a trademark registration on grounds of fraud, the charging party must show that a misrepresentation to the PTO was âmaterial to the determination to grant the applicationâ â in other words, one that âwould have affected the PTOâs action on the applications.â Halo Mgmt, LLC v. Interland, Inc., 308 F.Supp.2d 1019, 1031 (N.D.Cal.2003) (quoting Orient Express Trading Co. v. Federated Depât Stores, Inc., 842 F.2d 650, 653 (2d Cir.1988)); Oreck, 796 F.Supp. at 1159. In neither section of the Lanham Act under which HK USA filed its joint Application is the identity of the current owner of the mark dispositive to the PTOâs grant or denial of the application. Section 9 of the Lanham Act, 15 U.S.C. § 1059, prescribes the procedure for renewal of registrations after 10-year intervals: â[EJaeh registration may be renewed for periods of 10 years at the end of each successive 10-year period following the date of registration upon payment of the prescribed fee and the filing of a written application, in such form as may be prescribed by the Director.â 15 U.S.C. § 1059(a). The relevant section of the PTOâs Trademark Manual of Registration Procedure (TMEP), a document elaborating on the agencyâs evaluating criteria, specifies that â[t]he Trademark Act and the Trademark Rules of Practice do not require that a renewal application be filed by the owner of the registration. Therefore, if the renewal applicant is not the owner of record, the USPTO does not require that the renewal applicant show continuity of title from the original registrant.â Trademark Manual of Registration Procedure § 1606.06 (Oct. 2014).
The Section 8 affidavit, with which a Section 9 affidavit is typically combined, avers that the trademark in question has been in continuous use on the registered goods or services since the date of registration. 15 U.S.C. § 1058. Unlike Section 9, Section 8 does require the affidavit to be filed by âthe owner.â Id. However, the Act provides specifically that â[i]f any submission- filed within the time period set forth in subsection (a) is deficient, including that the affidavit was not filed in the name of the owner of the registration, the deficiency may be corrected after the statutory time period, within the time prescribed after notification of the deficiency.â Id. at § 1058(c).
As Plaintiffs point out, the PTO has issued neither HK entity a notice of deficiency with respect to their Section 8 declaration, and if it had, the Act provides that HKG would have an opportunity to rectify the error before the MP5 trademark would be endangered. As the statutory language indicates, the primary purpose of declarations under Sections 8 and 9 is âto remove from the register automatically marks which are no longer in use.â In re Bose, 580 F.3d at 1246 (quoting Torres v. Cantine Torresella S.r.l, 808 F.2d 46, 48 (Fed.Cir.1986)). In light of
Our determination that HK USAâs alleged misrepresentation was not material, and thus did not constitute a fraudulent application for renewal, forecloses not only Defendantsâ counterclaim for cancelation under 15 U.S.C. § 1119, but also Defendantsâ counterclaim for resulting damages under 15 U.S.C. § 1120. In order to recover under the Actâs âcivil liabilityâ provision, of course, a claimant must prove the underlying fraud on the PTO as well as its own entitlement to damages. See Gilbert/Robinson, Inc. v. Carrie Beverage-Missouri, Inc., 989 F.2d 985, 992-993 (8th Cir.1993), abrogated on different grounds by Lexmark Int'l, Inc. v. Static Control Components, Inc., â U.S. -, 134 S.Ct. 1377, 188 L.Ed.2d 392 (2014); King-Size, Inc. v. Frankâs King Size Clothes, Inc., 547 F.Supp. 1138, 1167 (S.D.Tex.1982). Plaintiffs are therefore entitled to summary judgment on both the cancelation claim and the damages claim.
Accordingly, we GRANT Plaintiffsâ motion for summary judgment on Counterclaim Counts VIII and IX, and. DENY Defendantsâ motion for summary judgment on the same counts.
VI. Counterclaim Count XI â Lack of Trade Dress in Design of MP5 Firearms
Section 43(a) of the Lanham Act provides a cause of action against the unauthorized use by any person of âany word, term, name, symbol, or device, or any combination thereof ... which ... is likely to cause confusion ... as to the origin, sponsorship, or approval of his or her goods.â 15 U.S.C. § 1125(a). Both the courts and Congress have long since recognized that Section. 43(a) may apply to protect the design of a product when the' resulting appearance is used to identify the product â the âtrade dressâ â as well as proprietary names or symbols. See 15 U.S.C. § 1125(a)(3) (describing cause of action for âtrade dress infringementâ); Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205, 210, 120 S.Ct. 1339, 146 L.Ed.2d 182 (2000); Publâns Int'l, Ltd. v. Landoll, 164 F.3d 337, 338 (7th Cir.1998). In order to be protectable under Section 43(a), a claimed trade dress must be both distinctive and nonfunctional.
Defendants seek a declaratory judgment that Plaintiffsâ claimed trade dress in the design of the MP5 family of firearms is not protectable, and their argument rests on four grounds: (1) the claimed trade is insufficiently identifiable, in that Plaintiffsâ descriptions of it are âgeneric, unspecific, and inconsistentâ; (2) the design in question is functional and thus not entitled to protection; (3) the claimed trade dress has not acquired the necessary âsecondary meaningâ; and (4) Plaintiffs have abandoned the claimed trade dress, forfeiting any rights they may have to it. Docket No. 32 at 52-70.
A. The Kokalis Expert Report
We address these arguments in turn, but we first pause to address Defendantsâ objections to the admissibility of the expert report of Peter J. Kokalis, which Plaintiffs have designated in support of the protectability of their trade dress. Docket No. 346-8.
[I]t is typically unworkable to require the non-moving party to anticipate the grounds on which its opponent may move for summary judgment and whether it will utilize expert testimony in response to the motion. The expert disclosure deadline occurs after the dis-positive motions deadline in a typical case management plan, and if a party does not anticipate using expert testimony to move for summary judgment, it should not be required to disclose ex*907 pert testimony sixty days prior to the dispositive motion deadline.
Dugdale, Inc. v. Alcatel-Lucent USA, Inc., 2011 WL 2261318, at *3 (S.D.Ind. June 7, 2011). See also Paul Harris Stores, Inc. v. PricewaterhouseCoopers, LLP, 2006 WL 2644935, at *3-4 (S.D.Ind. Sept. 14, 2006). But see Pond v. Bd. of Trustees, Ball State Univ., 2004 WL 2538645, at *2 (S.D.Ind. Sept. 9, 2004). We agree here with the courtâs reasoning in Dugdale. Plaintiffs have not sought summary judgment on their Lanham Act claims, and they have offered Kokalisâs testimony only in response to Defendantsâ motion on those claims. Since they complied with the amended Case Management Planâs relevant deadline for disclosure of expert testimony, we will not strike the testimony on untimeliness grounds. See Docket No. 281 at 2.
Defendants also argue that the Kokalis report should be set aside because it fails to comply with Federal Rule of Evidence 702 and the Daubert standard. Courts employ a three-part analysis in determining whether expert witness testimony is relevant and reliable: â[1] the witness must be qualified as an expert by knowledge, skill, experience, training, or education; [2] the expertâs reasoning or methodology underlying the testimony must be scientifically reliable; and [3] the testimony must assist the trier of fact to understand the evidence or to determine a fact in issue.â Ervin v. Johnson & Johnson, Inc., 492 F.3d 901, 904 (7th Cir.2007) (quoting Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 592-593, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993)) (additional citations omitted). Thus, â[i]t is not the trial courtâs role to decide whether an expertâs opinion is correct. The trial court is limited to determining whether expert testimony is pertinent to an issue in the case and whether the methodology underlying that testimony is sound.â Smith v. Ford Motor Co., 215 F.3d 713, 719 (7th Cir.2000).
Plaintiffs rely on Kokalisâs report primarily on the issues of functionality and secondary meaning. .Applying the first prong of the Daubert analysis, Defendants assert that Kokalis is unqualified to testify to such questions. âWhile Kokalis may be knowledgeable about the proper use of firearms, he lacks the qualifications for which his report is presented, namely the creation and design of MP5 firearms and the marketplace perception of MP5 firearms.â Docket No. 364 at 13. We find this objection to be misguided. Kokalisâs report includes an extensive description of his credentials as an expert on firearms, a consultant to a number of national armed forces, and a published commentator in the field. Docket No. 346-10 at ¶¶2-10. Kokalis concedes that he is not a firearm design engineer, but his curriculum vitae renders him fit to offer opinion on the design of weapons from a userâs perspective and on the place of the MP5 design in the marketplace. Id. at ¶ 11. In support of the notion that Kokalis is unqualified to offer expert testimony on consumer perceptions of the MP5, Defendants cite Sassafras Enterprises, Inc. v. Roshco, 915 F.Supp. 1 (N.D.Ill.1996), a decision in which the court stated that an expert could not speak to the âmental reactions that other persons would have,â the âbasis for his expression of other peopleâs views,â or whether consumers âdesire the product with the particular feature because it signifies that producer.â 915 F.Supp. at 8. But the context of Sassafras renders it readily distinguishable, and actually helps illustrate that relative strength of Kokalisâs qualifications here. In that case, a plaintiff had failed to offer any evidence as to secondary meaning other than the affidavit of its sales representative, who offered the bare assertion that customers associated a productâs look with the plaintiff. Id. Regardless of whether the affiant was qualified as an expert, the court concluded that
As to the second Daubert factor, Defendants assert Kokalis has failed to identify any scientific âreasoning or methodologyâ underlying his testimony. Docket No. 364 at 14. Undoubtedly, Kokalis does not derive his opinions on the non-functionality or distinctiveness of the MP5 from any scientific methodology â nor does he claim to. Rather, he claims to derive his opinion from his âknowledge, training, experience, skill, and educationâ as applied to his review of the facts of this case and an extensive review of the features of the MP5 in comparison to other guns of similar type available on the market.
Lastly, Defendants argue that Kokalisâs testimony is not helpful to a fact-finder, either because Kokalis fails to grasp the issue adequately or because he defines the MP5 trade dress differently than do Plaintiffs. Such an interpretation results from reading his report out of context. On two occasions, Kokalis stated that he had âdifficulty comprehending the point of Defendantsâ argumentsâ or that he had âa problem ... understandingâ Defendantsâ summary judgment motion. Kokalis Report ¶¶ 19, 30. These were not confes
We therefore reject Defendantsâ argument that we must disregard the Kokalis expert report, and we proceed to consider the merits of Defendantsâ trade dress invalidity counterclaim.
B. Sufficiency of Plaintiffsâ Identification of the Trade Dress
Defendants assert that âPlaintiffsâ claimed MP5 trade dress fails inasmuch as its constituent elements are unspecified, constitute generic gun parts, and are inconsistently claimed.â Docket No. 332 at 54. See also Maharishi Hardy Blechman Ltd. v. Abercrombie & Fitch Co., 292 F.Supp.2d 535, 542 (S.D.N.Y.2003) (âA trade dress which is either generic, nonspecific, or inconsistent among its products cannot be distinctive.â). Defendants are correct to note that before courts can recognize any putative trade dress as âdistinctive,â they must be able to discern identifiable characteristics in the design a plaintiff seeks to protect. While there is no concrete, authoritative test guiding the courtsâ evaluation of this issue, two points have particular relevance in guiding our consideration here.
First, the requirement that a trade dress be discrete and identifiable does not preclude a plaintiff from claiming the overall look or design of the product as protected. âWe have defined âtrade dressâ as the âtotal image of a product, including such features as size, shape, color or color combinations, texture, graphics, or even particular sales techniques.â â Kohler Co. v. Moen, Inc., 12 F.3d 632, 641 n. 11 (7th Cir.1993) (quoting Roulo v. Russ Berrie & Co., Inc., 886 F.2d 931, 935 (7th Cir.1989)). âDoubtless the overall appearance is what matters.... Dissecting a product or package into components can cause a court to miss an overall similarity.â See also August Storck K.G. v. Nabisco, Inc., 59 F.3d 616, 620 (7th Cir.1995) (citing Kohler, 12 F.3d at 641 n. 11). However, the claimed protection must be pitched at the proper level of generality. A plaintiff cannot claim protection for the âgenus of which the particular product is a species.â New Colt Holding Corp. v. RJG Holdings of Fla., Inc., 312 F.Supp.2d 195, 203 (D.Conn.2004) (quoting Yurman Design, Inc. v. PAJ, Inc., 262 F.3d 101, 115 (2d Cir.2001)). Further, the claimed dress must restrict itself to tangible, rather than ethereal or
The aura about a product, the cachet that ownership or display of it creates, and the kind of appeal it has to certain consumers do not dress a good in trade. Rather, those intangible âthingsâ emanate from the good, its dress, and the marketing campaign that promotes the dressed good. Trade dress is tangible or otherwise objectively observable by the senses; its constitution is a matter of subjective interpretation.42
Abercrombie, 280 F.3d at 630-631.
Second, and relatedly, a plaintiff must offer some enumeration of the design elements that comprise the âoverall lookâ of a product if such a holistic trade dress claim is to be cognizable. âSimply pointing to a productâs overall appearance is [not]- enough to state a claim for trade dress infringement. Rather, the overall appearance of the trade dress comes into play only after the trade dress is first properly identified with the discrete elements which make up that combination ... separated out and identified in a list.â Weber-Stephen, 2013 WL 5782433, at *3 (additional citations omitted). As the Second Circuit noted, failing to require some specificity in description would make it âtoo easy for the question of design and configuration (âoverall lookâ) to degenerate into a question of quality, beauty, or cachet. ... The identification of design elements that compose the asserted trade dress will thus assist in winnowing out claims that are overbroad as a matter of law.â Yurman, 262 F.3d at 116-117.
Defendants here object to Plaintiffsâ descriptions of the MP5 trade dress on the grounds that they are impermissi-bly vague and generic, and that Plaintiffsâ enumerations of the elements of the protected design have been inconsistent over the lifetime of its lawsuits with Defendants. The first description of the MP5 trade dress to which Defendants point was proffered by HK USA in response to an interrogatory in the course of the 2009 litigation. When asked to âidentify and describe with particularity each discrete element and each combination of discrete elements comprising the putative trade dress,â HK USA stated that the following photograph was a âfair depictionâ of the trade dress:
*911 [[Image here]]
Docket No. 332-18 (Defs.â Ex. Q) at 3. In a supplemental response to the same interrogatory, HK USA provided photographs of the four variations on the core MP5 model â the MP5 A3, the MP5 SD, the Mp5K, and the MP5 A2 â reproduced below, clockwise from the top left:
[[Image here]]
Docket No. 332-19 (Defs.â Ex. R) at 3-6. Plaintiffs also offered a more comprehensive description to accompany the photographs:
In truth, as pictured above, there are three basic models: the âMP5Kâ; the âMP5Aâ (the âMP5A2â features a fixed butt stock and the âMP5A3â features a retractable butt stock); and the âMP5SD.â Although these weapons are compatible with a number of accessories, the recognizability and secondary meaning of the famous MP5 shape is not affected by this fact. HK believes its trade dress is reflected in the following elements present in all three basic weapons as depicted generally in the pictures ...: (1) the upper profile (including its distinctive front and rear sights); (2) the cocking handle; (3) the magazine; and (4) the unique trigger group (including but not limited*912 to the fire select switch, trigger guard and grip). It might be that secondary meaning in the marketplace is derived by [sic] a combination of less than all four above-dĂ©scribed factors, and again, reference is made to the overall shape of the MP5 weapon as depicted in the photographs below and not necessarily the word descriptions above standing alone.
Id. at 6-7 (emphasis added). When served with a similar interrogatory in the course of the current litigation, HK USA initially referred back to this previous response. Docket No. 332-20 (D.efs.â Ex. S) at 7-8. After HKG became party to the suit, Defendants served it with a similar interrogatory. In response, HKG submitted an illustration of the MP5A2 model and a verbal description that differed somewhat from that offered by HK USA in 2009:
[The] MP5 trade dress can be defined by the overall silhouette of the MP5 weapon in its various modularities. In this action, the trade dress and product configuration sought to be protected is the entirety of the form, shape, and appearance of the well-recognized MP5 weapon. This can include, but is not necessarily limited to, such aspects of the weapon as the unique and characteristic gun sighting mechanism, curved ammunition magazine, grip, trigger group (including the fire-select switch), trigger guard, barrel stock and body casing, including the foregrip.
Docket No. 332-8 (Defs.â Ex. H) at 2-4. As Defendants note, HKGâs 2012 description departs from HK USAâs 2009 description in that it discusses the weaponâs âbarrel stockâ and âbody casing,â but does not mention the âcocking handle.â Docket No. 332 at 26. Defendants also point to the deposition of HKG managing director Ihl-off, in which he agreed, that HK USAâs original 2009 illustration of the weapon fairly depicts the âoverall look and feelâ of the MP5; when asked if HK USAâs original verbal description of the trade dress was accurate, he elaborated: âI think it would include or can be described and defined in such a way that there may well be other feature[s], depending on the variants or the registration of the gun.... It typically includes exactly some of these elements as spelled out [in the 2009 interrogatory] or specified here.â Docket No. 332-21 (Defs.â Ex. T) at 103, 113. Ihloff added that, âfrom a personal perspective,â there were âdetails with regards to the sheet metal as well as the type of finishing that is just beyond functional,â and thus also part of the trade dress. Id. at 122.
Defendants contend that this body of descriptions contains unduly âgenericâ language â such as references to the gunâs âbarrel stockâ without any elaborationâ and they assail the lack of specificity Ihloff displayed in- his deposition (such as his statement that there âmay well be other featuresâ in the trade dress) as underscoring the fatal vagueness of the companiesâ efforts to describe the MP5 trade dress. Docket No. 332 at 56-57. Citing the differences in Plaintiffsâ own explanations as well as the (undisputed) existence of numerous variants of the MP5 weapon, Defendants argue that âthere is no consistent or constant overall image associated with the product.â Id. at 57.
While we acknowledge that Plaintiffs have made statements since 2009 that have been unhelpfully vague and that they have not been fully consistent in defining its contours, we conclude that a core; identifiable description of the putative MP5 trade dress has emerged despite these shortcomings. In comparing Plaintiffsâ photograph of the original model MP5 with those of MP5 variants, a recurring design profile is recognizable; the structural center of the weapons remains consistent from variant to variant, even as the peripheral elements
Examining the facts of two of the decisions upon which Defendants rely most heavily in stressing the stringency of the identifiability requirement helps illustrate the sufficiency of Plaintiffsâ descriptions here. In Weber-Stephen Products, LLC v. Sears Holding Corp., 2013 WL 5782433 (N.D.Ill. Oct. 25, 2013), the court found that the plaintiff had not sufficiently identified its putative trade dress in a line of outdoor grills, noting that, â[ijnstead of precisely identifying the character and scope of its trade dress, [plaintiff] simply includes photographs of two entire grillsâ not even close-ups of particular grill features â and describes its trade dress as âincluding, without limitation, their distinctive shape, proportions and feature placements.ââ 2013 WL 5782433, at *3. âWithout more factual detail as to what exactly the grill shapes, proportions, and features are,â the court observed, âthese extremely broad categories are insufficient to .put the Court and Sears on notice of what Weber believes is its protectable trade dress.â Id. Similarly, in Yurman Design, Inc. v. PAJ, Inc., 262 F.3d 101 (2d Cir.2001), the Second Circuit found that the manufacturer of a line of rings and bracelets lacked a viable trade dress claim as a matter of law because its minimalist descriptions of the âoverall look and feelâ of the various products offered no reasonable insight into what, exactly, supposedly tied the products together. The courtâs explanation is instructive:
We need not decide whether Yurman could formulate a description of design elements to support a trade dress claim sufficient to protect a line of Yurman jewelry, because Yurman has not even offered one for our consideration. The trade dress of works that are decorative or artistic may be harder to capture in words, and may need descriptions more broadly framed, or may need drawings; but the party seeking protection must nonetheless be able to point to the elements and features that distinguish its trade dress. Pressed by PAJ on appeal to provide some description of its trade dress, Yurman produced the following: âthe artistic combination of cable [jewelry] with other elements.â But the word âartisticâ simply begs a question; and unless Yurman seeks protection for cable itself, the jewelry must be supposed to combine cable âwith other elements.â*914 This articulation is altogether too broad to be a protectable, source-identifying expression.
Here, by contrast, Plaintiffs seek to protect the overall design of the MP5 line, but, unlike the claimants in Weber-Stephen or Yurman, they have described a discernible body of design elements that allows the court to evaluate the claimed trade dress within the realm of tangible reality rather than that of guesswork or abstract aesthetic speculation. They have identified the elements that constitute the overall design of their product much as a gun manufacturer seeking trade dress protection in a Colt revolver did in New Colt Holding Corp. v. RJG Holdings of Florida, Inc., 312 F.Supp.2d 195 (D.Conn.2004). There, the plaintiff claimed âthe overall appearance of the gunâ as its protectable trade dress, but it supplemented that description with a brief enumeration of the gunâs salient components. 312 F.Supp.2d at 205. Setting aside the defendantâs objections that these descriptions lacked the requisite specificity and that there had been variations in the shape or appearance of various components of the gun over time, the court nonetheless determined that the plaintiff had identified its trade dress sufficiently, concluding that âany lack of clarity in Plaintiffsâ descriptions stems from their attempts to claim the entire appearance of the revolver and the difficulty inherent in adequately describing all the requisite details.â Id. at 206. Although Plaintiffsâ efforts to delineate the scope of their trade dress have not been a model of explanatory precision or of consistency, their descriptions have been detailed enough, and enough in sync with the visual evidence of the appearance of the MP5 weapons, to be readily identifiable.
C. Non-Functionality
The Lanham Act provides that, in an âaction for trade dress infringement under this chapter ... the person who asserts trade dress protection has the burden of proving that the matter sought to be protected is not functional.â 15 U.S.C. § 1125(a)(3). The Supreme Court has expanded and refined its operative definition for âfunctionalityâ over the years, and it has lately endorsed two complementary formulations. â âIn general terms, a product feature is functional,â and cannot serve as a trademark, âif it is essential to the use or purpose of the article or if it affects the cost or quality of the article.â â TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 29, 121 S.Ct. 1255, 149 L.Ed.2d 164 (2001) (quoting Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 850 n. 10, 102 S.Ct. 2182, 72 L.Ed.2d 606 (1982)). A feature may also be classified as functional if it âis one the âexclusive use of [which] would put competitors at a significant non-reputation-related disadvantage.ââ Qualitex Co. v. Jacobson Prods. Co., Inc., 514 U.S. 159, 165, 115 S.Ct. 1300, 131 L.Ed.2d 248 (1995). As the Seventh Circuit has recognized, the core question to be answered is whether a particular design has value for its aesthetic quality â and as a means of source-identification in the marketplace â or, rather, whether the design exists so that the product can perform its intended function better. Specialized Seating, Inc. v. Greenwich Indus., LP, 616 F.3d 722, 727 (7th Cir.2010). âSo if a design enables a product to operate, or improves on a substitute design in some way (such as by making the product cheaper, faster, lighter, or stronger), then the design cannot be trademarked .... â Jay Franco & Sons, Inc. v. Franek, 615 F.3d 855, 857 (7th Cir.2010).
The Seventh Circuit has endorsed a list of five factors useful for evaluating claimed feature or product designs within this conceptual framework. These are:
â(1) [T]he existence of a utility patent, expired or unexpired, that involves or*915 describes the functionality of an itemâs design element; (2) the utilitarian prop--erties of the itemâs unpatented design elements; (3) advertising of the item that touts the utilitarian advantages of the itemâs design elements; (4) the dearth of, or difficulty in creating, alternative designs for the itemâs purpose; (5) the effect of the design feature on an itemâs quality or cost.â
Georgia-Pacific Consumer Prods. LP v. Kimberly-Clark Corp., 647 F.3d 723, 727-728 (7th Cir.2011). In considering the functionality or non-functionality of Plaintiffsâ claimed MP5 trade dress, it is important to emphasize that functionality is fundamentally a question of fact. Specialized Seating, 616 F.3d at 726 (â âFunctionality certainly isnât an issue of law; it represents a fact-specific conclusion.... â); Modern Fence Technologies, Inc. v. Qualipac Home Imp. Corp., 726 F.Supp.2d 975, 987-988 (E.D.Wis.2010) (citing Service Ideas, Inc. v. Traex Corp., 846 F.2d 1118, 1123 (7th Cir.1988)). It is therefore appropriate for disposition on summary judgment only where a plaintiff is unable to meet its burden of raising a genuine issue of material fact that its trade dress is nonfunctional. Invisible Fence, Inc. v. Perimeter Techs., Inc., 2007 WL 273129, at *9 (N.D.Ind. Jan. 26, 2007). See also Clicks Billiards, Inc. v. Sixshooters, Inc., 251 F.3d 1252, 1262 (9th Cir.2001).
1. The existence of a utility patent [50] The existence of a utility patent for a given product design (or design feature) is âstrong evidence of functionality.â Georgiar-Pacific, 647 F.3d at 728. âIf trade dress protection is sought for those features!,] the strong evidence of functionality based on the previous [utility] patent adds great weight to the statutory presumption that features are deemed functional until proved otherwise by the party seeking trade dress protection.â TrafFix, 532 U.S. at 29-30, 121 S.Ct. 1255. Any overlap with a patent is a âcheat sheetâ for functionality because âany design claimed in a patent is supposed to be useful.â Jay Franco & Sons, Inc. v. Franek, 615 F.3d 855, 857 (7th Cir.2010). So persuasive are utility patents as evidence of functionality, in fact, that all of the decisions cited by the Georgiar-Pacific court in support of its statement that summary judgment may be granted in âappropriate casesâ relied strongly on the âpresumption of functionalityâ created by the existence of a relevant patent in the feature. See TrafFix, 532 U.S. at 29-30, 121 S.Ct. 1255; Specialized Seating, 616 F.3d at 727; Eco Mfg. LLC v. Honeywell Intâl, Inc., 357 F.3d 649, 653 (7th Cir.2003)' (âdetermining summary judgment appropriate where plaintiff had failed to overcome the âheavy burdenâ created by the existence of a utility patentâ); Franek, 615 F.3d at 857-859 (noting that the- âTrafFix presumptionâ of functionality applied and supported summary judgment). See also Georgia-Pacific, 647 F.3d at 728.
Here, Defendants bring to our attention no utility patents for designs overlapping with Plaintiffsâ claimed design features. While the absence of such patents does not preclude the functionality of the design, of course, the lack of a âcheat
2. Utilitarian properties of the design elements
Defendants present extensive evidence that individual features of the MP5, including those design components that we have ' recognized as part of Plaintiffsâ identifiable claimed trade dress, have utilitarian properties. This evidence includes HK USA president Weberâs testimony that elements such as the fire-select switch, the trigger guard, and the grip have features that enhance the user-friendliness
Plaintiffs largely do not dispute the utilitarian qualities of various individual components of the MP5 design. Rather, they stress that a productâs overall configuration may still be nonfunctional even if a large portion of its component features are functional. â[A] product whose overall appearance is distinctive can be protected under the trademark laws, even though most of the products constituent elements serve some function.â Specialized Seating, 616 F.3d at 727. When concededly utilitarian components comprise a putatively non-functional whole, âthe critical question is the degree of utility present in the overall design of the mark.â In re Becton, Dickinson & Co., 675 F.3d 1368, 1373 (Fed.Cir.2012). (emphasis added). On one hand, trade dress protection can extend to designs that are âornamental, fanciful, [and] decorative,â for such aesthetically-based configurations âare not in short supply, so appropriating one of them to serve as an identifying mark does not take away from any competitor something that he needs in order to make a competing brand.â W.T. Rogers Co., Inc. v. Keene, 778 F.2d 334, 339 (7th Cir.1985). In the broadest sense, this is what separates the shape of a football, unusual and iconic though it might be, from the design of a carâs hood ornament; a footballâs shape cannot be a trade dress because its oblong shape is what makes it a football, while a car will serve its purpose no matter which of the infinite styles of front bumper or hood ornaments are placed upon it. Id. at 339-340. On the other hand, however, the Seventh Circuit has cautioned, a design may be functional even though it is not the only possible utilitarian configuration. In Specialized Seating, Inc. v. Greenwich Industries, LP, 616 F.3d 722 (7th Cir.2010), for instance, the court ruled that a particular design for an x-frame folding chair was functional ânot because it is the only way to do things, but because it represents one of many solutions to a problem,â based on the overall
Here, Plaintiffs contend that the arrangement of weapon features that constitutes its trade dress is essentially arbitrary, and provides value as a stylistic profile or signature. In fact, they contend, the MP5 is a âheritage firearm,â without any overall utilitarian advantages over modern competitors with more advanced designs. Weber Decl. ¶ 8. In support of this argument, Plaintiffs rely primarily on the expert report of Peter Kokalis, who opines that â[t]he MP5 trade dress constitutes a combination of design elements in an arbitrary and protectable product configuration,â and that â[t]here are infinite potential combinations of material, design elements, and mechanical geometries available to firearm manufacturers.â Docket No. 346-8 (Kokalis Report) at ¶¶ 12, 72.
While the nature of a firearm mandates that any marketable gun contain certain functional features, âthe fact that an item serves or performs a function does not mean that it may not at the same time be capable of indicating sponsorship or origin, particularly where the decorative aspects of the item are nonfunctional.â Dallas Cowboys Cheerleaders, Inc. v. Pussycat Cinema, Ltd., 604 F.2d 200, 204 (2d Cir.1979). See also Docket No. 346-26 (Pls.â Ex. 26) (PTO trade dress registration for the particular configuration of the Thompson machine gun). Plaintiffs have at least raised an issue of fact as to whether the particular configuration of parts embodied in the MP5 line of weapons is non-functional, despite the inescapably functional nature of some of the components themselves. Cf. Service Ideas, Inc. v. Traex Corp., 846 F.2d 1118, 1123 (7th Cir.1988). We therefore conclude that the utilitarian features of the weapon to which Defendants point are not necessarily fatal to Plaintiffs case for non-functionality.
3. The existence of advertising touting the designâs utilitarian qualities
Where a companyâs advertising âunequivocally link[s]â its product design to functional benefits, a court is justified in weighing its own word against its claim of non-functionality. See Georgia-Pacific, 647 F.3d at 730; Mortar Net USA, Ltd. v. Hohmann & Barnard, Inc., 2013 WL 5407183, at *3 (N.D.Ind. Sept. 26, 2013). Here, Defendants point to a limited number of instances in which, they assert, Plaintiffs advertised the MP5 using the language of utility.
First, in what appear to be magazine advertisements, HK USA quoted Alan Ladd in the 1953 film Shane, who stated that â[a] gun is a toolâ; they then added the tagline that HK produces âpower tools for a new century.â Docket No. 333-7 (Defs.â Ex. HH). In another brochure, HK
Defendants secondly point to a 2001 book, the Heckler & Koch âofficial history,â which contains the following statement: âA weapon, and particularly a sub-machine gun is undeniably a technical item. But why should one restrict oneself to sheer functionality if there are vacant MP5 surfaces inviting decoration?â Docket No. 333-5 at 264-265. Leaving aside the question of whether the statements contained in such a book are âadvertisingâ materials for the MP5, we do not believe that this statement, when placed in context, touts the MP5 as a functional item. The bookâs authors refer to the MP5âs âvacant spacesâ in tongue-in-cheek fashion, by way of introducing a series of photographs â labeled âbeautiesâ â displaying highly elaborate special-edition weapons, including a gold-plated MP5 and a gun decorated with ivory animal motifs apparently given as a gift from the company to the late Shah of Iran. Id. at 264. While the design of the MP5 may be pedestrian in comparison with these one-off curiosities, it is difficult to read this bit of text as a serious assertion that the MP5âs design is itself functional rather than aesthetic in value. Lastly, a company-issued calendar, which contains several blurbs discussing the MP5, notes that âcurrent MP5 models still boast of features seldom found on any other weapons.â It goes on to describe the quality of the steel use to produce the gunâs barrel and the weaponâs modularity, while its trigger mechanisms are âa rarity these days.â Docket No. 332-22 at 4. But the features of which the calendar boasts in functional terms â namely the quality of the gunâs steel and its modular capabilities â are not claimed by Plaintiffs as part of its trade dress; while the trigger unit is part of the trade dress, the reason the calendar describes it as a ârarityâ is that most other modern designs have supplanted the original MP5 system with a more fully automatic trigger mechanism. Id.
' In Georgiar-Pacific, the Seventh Circuit determined that advertisements for a brand of toilet paper singing the praises of its quilted design â âquilted to create thousands of places for moisture to goâ and âgently quilted together to give you and your family exceptional softness and comfortâ â weighed in favor of functionality. â[T]he language in the ads is clear â the Quilted Diamond Design is unequivocally linked to functional benefits such as absorbency, softness, and comfort.â 647 F.3d at 730. The advertising materials that Defendants have identified here stand in contrast; none urges the consumer to purchase the MP5 on the strength of any particular utilitarian quality. On the flip side of the coin, as Defendants points out, Weber testified that the companyâs advertising âdefinitely [doesnât] characterize [the MP5] as a distinctive trade dress.â Docket No. 332-2 (Defs.â Ex. C) at 223. For this reason, we find that the Heckler & Koch advertisements have little to say on the question.
As we have noted, a product design is likely to be considered functional if it represents a âsolution to a problemâ â if, in other words, its protection as trade dress would deprive competitors of a uniquely efficient or useful design, even if other possible designs exist. To use the example of the folding chair design at issue in Specialized Seating, this factor is therefore implicated where, though other chair designs are possible, creating an alternative design that achieves a particular, desirable âstrength to weight ratioâ would be difficult or impossible. 616 F.3d at 727. In the case at hand, then, we must ask a teleological question: whether the particular design of the MP5 makes it tangibly better at achieving the ends of submachine guns such that locking up the design under the aegis of one brand will harm the consumersâ interests.
Plaintiffs again lean on the Kokalis expert report, which states that other designs fulfilling the same purpose are not only possible, but plentiful. Docket No. 246-10 at ¶¶ 17, 22. In fact, Kokalis asserts, a rival manufacturer endeavoring to copy the design of the MP5 for a .22 caliber weapon â such as GSGâs allegedly infringing version of its GSG-522 â would place itself at a functional disadvantage, because a modern gun of smaller caliber" can be built lighter and more flexible. Id. at ¶ 81. Despite their success in showing the functional value of individual components, Defendants have presented no evidence supporting a theory that the MP5 represents even âone of many solutions to a problem.â Cf. Georgia-Pacific, 647 F.3d at 731 (citing Specialized Seating, 616 F.3d at 727).
5. Effect of the design on the itemâs quality or cost
As to this final factor, Plaintiffs assert that, although the manufacturing quality of the MP5âs components may differentiate them from comparable alternatives, nothing about the design arrangement itself drives the gunâs quality or cost. Docket No. 346 at 4, 8 (citing Kokalis Report at ¶¶ 4, 77; Weber Decl. ¶ 10). According to Weber, the MP5 âclonesâ products sold by GSG, despite having the same design, sell for roughly 80% less because of this difference in manufacturing quality. Weber Decl. ¶ 10. Defendants do not directly assail Plaintiffs evidence on this score; instead, they argue that â[ejxpense does not establish non-functionality; nuclear reactors are expensive to make, while paperclips are not.â Docket No. 364 at 30. While it is, of course, true that Plaintiffsâ evidence here does not establish non-functionality, it is at least relevant to the question of whether the design â as opposed to other factors â differentiates the product in terms of quality or cost.
In sum, we determine that Plaintiffs have at least .raised a genuine issue of material fact with respect to the non-functionality of the MP5 design in which they claim trade dress. Defendantsâ evidence of the functionality of the weaponâs components will be highly relevant to a fact-finder, but the question remains whether the design of the whole has an aesthetic or source-identifying value that transcends the utilitarian qualities of its constituent elements. The lack of a utility patent, coupled with the lack of strong evidence in Defendantsâ favor with respect to any of the remaining evaluative factors identified by the Seventh Circuit, leads us to conclude that summary judgment against Plaintiffs on the question of functionality is not appropriate.
In order to qualify as âdistinctiveâ and thus eligible for protection under the Lanham Act, an unregistered trade dress must possess-a secondary meaning. Wal-Mart Stores, 529 U.S. at 210-215, 120 S.Ct. 1339; Bodum USA, Inc. v. La Cafetiere, Inc., 621 F.3d 624, 627 (7th Cir.2010). â[A] mark has acquired distinctiveness, even if it is not inherently distinctive, if it has developed secondary meaning, which occurs when, âin the minds of the public, the primary significance of a [mark] is to identify the source of the product rather than the product itself.â â Id. at 211, 120 S.Ct. 1339 (quoting Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 851 n. 11, 102 S.Ct. 2182, 72 L.Ed.2d 606 (1982)). Proof of secondary meaning can be established through direct consumer testimony, consumer surveys, length and manner of use, amount and manner of advertising, volume of sales, place in the market, and evidence of intentional copying. Packman v. Chicago Tribune, 267 F.3d 628, 641 (7th Cir.2001).
Defendants assert that the MP5 design lacks secondary meaning because the market is flooded with MP5 look-a-likes or unlicensed or altered versions of the weapon. As evidence, they cite manuals distributed to owners by Plaintiffs themselves, warning that â[t]here are a lot of look-alike products being sold today that are not produced by HK. There are also used MP-5âs available that were not reconditioned by HK, GmbH or HK, Inc.â Docket No. 332-23 (Defs.â Ex. V) at 12. Defendants also provide evidence of a number of firms in the United States and elsewhere that sell knock-off or imitation MP5s, or that produce kits that can be assembled into weapons resembling the MP5. See Docket No. 332 at 27-28, ¶¶ 74-82. Additionally, Defendants assert that Plaintiffs have been lax in allowing the proliferation of these imitators. They note that Plaintiffs have never made a valuation of the alleged MP5 trade dress, Docket No. 332 at 29, ¶ 84, and that HK USA official Steven Galloway conceded that the company had hired an investigative firm to track down copycats after discerning that it had been ânegligentâ or âinattentiveâ in âprotecting our intellectual property.â Defs.â Ex. C at 142, 171-172. Citing McCarthy on Trademarks, they contend that the MP5 lacks distinctiveness if it is âhemmed in on all sides by similar marks on similar goods.â 2 McCarthy on Trademarks and Unfair Competition § 11:85 (4th ed.). âWhen numerous sellers in a product or service line use similar marks, there may be little if any individual distinctiveness and consumers may have difficulty telling one seller from another.â Id.
We do not read McCarthy on Trademarks to suggest that the existence of a âcrowded fieldâ forecloses the existence of secondary meaning if the competitors are imitators who have entered the market to capitalize on the familiarity or cachet of a pre-existing design.
Here, in addition to the evidence that Defendants have designated regarding the existence of MP5 imitators and repacka-gers, see Docket No. 332 at 27-28, ¶¶ 74-82, Plaintiffs point to evidence that GSG and ATI themselves have engaged in intentional copying. One GSG advertisement exclaims that âThe GSGU5 is an identical replication of the MP-5 except one great thing: itâs a 22 cal.â Docket No. 346-19 (Pis.â Ex. 12) at 2. Another GSG advertisement touts: âThe worldâs most recognizable tactical carbine is now available for the everyday shooter! The GSG-5 is an identical clone of the renowned MP5 with one major change â it fires .22LR!â Docket No. 346-10 (Pis.â Ex. 13). Two ATI executives stated in deposition testimony that the GSG-5 intentionally resembled the MP5, making it âmore attractiveâ than other cheap guns on the market. Docket No. 347-5 (Defs.â Ex. 14) at 35; Docket No. 347-8 (Defs.â Ex. 19). Though courts in the Seventh Circuit have stopped short of according a presumption of secondary meaning to a trade dress on the strength of evidence of intentional copying, they have recognized such evidence as highly persuasive. See Schwinn Bicycle, 870 F.2d at 1182 n. 13; Turtle Wax, Inc. v. First Brands Corp., 781 F.Supp. 1314, 1324 (N.D.Ill.1991).
Plaintiffs also present some evidence of the MP5âs âplace in the market.â HK USA president Weber testifies to the MP5âs extensive presence at trade shows, Weber Deck ¶¶3-5, 6, 10, and Plaintiffsâ expert, Kokalis, avers that the gun has been featured in âwell over 100 feature films and countless television episodes, books, and articles.â Kokalis Report at ¶ 80. Even more striking evidence of the MP5 designâs place in the market is GSGâs advertising of its expressly imitative weapons â advertising clearly plays on the fame of the physical profile of the MP5, describing it as ârenownedâ and the âworldâs most recognizable tactical carbine.â Pis.â Ex. 13 (emphasis added). Plaintiffs have also made at least a minimal showing of the MP5âs volume of sales and its history of use. Although Plaintiffsâ sales data is not comprehensive, it does show that the MP5 sold in considerable volume in the years 2005-2014. Docket No. 335-2 (Defs.â Ex. III).
In a small but perhaps telling linguistic-slip, Defendants argue that they have successfully âput at issueâ Plaintiffsâ claim of secondary meaning for the MP5. Docket No. 364 at 32. Indeed, as the evidence we
E. Abandonment
The abandonment of an alleged trade dress is an affirmative defense to a claim for trade dress infringement.
Defendants argue that HK USA engaged in naked licensing in signing the 2009 Agreement with them. They present then- case in a conceptually muddled fashion
The abandonment claim fails because the Agreement did not license the MP5 to Defendants. â[A] license to use a mark ... is a transfer of limited rights, less than the whole interest which might have been transferred.â Exxon Corp. v. Oxxford Clothes, Inc., 109 F.3d 1070, 1076 (5th Cir.1997). The essential inquiry is whether, âunder cover of the agreement claimed to be a license, âthe licensee is engaging in acts which would infringe the licensorâs mark but for the permission granted in the license.â â Id. (quoting 2 McCarthy on Trademarks § 18:79). The portion of the 2009 Agreement to which Defendants refer surrendered no rights in the MP5 at all; rather, it stipulated that a certain GSG design for the âGSG-522â weapon did not infringe the MP5 trade dress. Docket No. 45-1 at ¶ 5.
Plaintiffs cannot be guilty of naked licensing where they have not granted a license at all. Defendants wisely discard their naked licensing claim in their reply brief, and they have presented no other arguments in support of an abandonment affirmative defense.
Therefore, having concluded that Plaintiffs have sufficiently identified their alleged trade dress and that they have pro
VII. Plaintiffsâ Federal Trade Dress Claims
Defendants seek summary judgment on three federal trade dress claims contained in Plaintiffsâ Amended Complaint: Count V for trade mark dilution under Section 43(c) of the Lanham Act, 15 U.S.C. § 1125(c); Count VI for infringement of an unregistered trade dress under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); and Count VII for common-law trade dress infringement. Docket No. 332 at 70.
As we have noted, a plaintiff under Section 43 of the Lanham Act must establish that its trade dress is protectable in order to press a claim for infringement or dilution. Defendants reprise here their arguments that Plaintiffsâ putative trade dress is insufficiently identified, functional, and lacking secondary meaning. We have already considered and rejected those arguments, determining that summary judgment is unwarranted on the protectability of Plaintiffsâ claimed trade dress. See supra § VI.
The only new argument Defendants present here concerns Plaintiffsâ trade dilution claim. Section 43(c) of the Lanham Act provides:
[T]he owner of a famous mark that is distinctive, inherently or through acquired distinctiveness, shall be entitled to an injunction against another person who, at any time after the ownerâs mark has become famous, commences use of a mark or trade name in commerce that is likely to cause dilution by blurring or dilution by tarnishment of the famous mark, regardless of the presence or absence of actual or likely confusion, of competition, or of actual economic injury.
15 U.S.C. § 1125(c)(1) (emphasis added). The Act further clarifies that a mark is defined as âfamousâ if it is âwidely recognized by the general consuming public of the United States as a designation of source of the goods or services of the markâs owner.â 15 U.S.C. § 1125(e)(2)(A). Defendants allege that, because Plaintiffs have failed to identify or sufficiently define their trade dress, they âcannot show as a matter of law that the alleged MP5 trade dress ... is recognized by the general consuming public of the United States .... â Docket No. 332 at 71.
Defendants fail to offer any support for their contention that the MP5 trade dress is not famous. They correctly note that Plaintiffs must âshow that the alleged MP5 trade dress is famous [apart] from the âMP5â mark required to be engraved on each such firearm,â but they err in supposing that this statutory requirement is anything other than a restatement of the unremarkable principle that the trade dress rather than the verbal MP5 trademark must qualify for protection. Although they cite two district court cases
Defendantsâ motion for summary judgment on Counts V, VI, and VII of Plaintiffsâ Amended Complaint is therefore DENIED. Defendants have also moved for summary judgment on Counterclaim Count XII, which seeks a declaratory judgment of Defendantsâ non-infringement. The parties did not specifically address Counterclaim Count XII, but we DENY Defendantsâ motion for declaratory judgment of non-infringement for the same reason that we deny Defendantsâ motion as to Plaintiffsâ claims for infringement.
VIII. Plaintiffsâ Count IX â State Trademark Infringement
Count IX of Plaintiffsâ Amended Complaint states a claim for state trademark infringement under Indiana Code § 24-2-1-13. Docket No. 45 at 12. The Indiana Trademark Act, Ind.Code § 24-2-1 et seq., imposes liability when a defendant usep a âreproduction, counterfeit, copy, or color-able imitationâ of a registered mark either: (1) âin connection with the sale, offering for sale, distribution, or advertising of goods or services,â or (2) âon or in connection with which the use is likely to cause confusion or mistake, or result in deception regarding the source of origin of the goods or services.â Ind.Code § 24-2-1-13(1); Felsher v. Univ. of Evansville, 755 N.E.2d 589, 599 (Ind.2001). Because Indianaâs body of trademark law is ârelatively undeveloped,â the Indiana Trademark Act âis intended to provide a system of state trademark registration and protection that is consistent with the federal system of trademark registration.â Serenity Springs v. LaPorte Cnty. Convention & Visitors Bureau, 986 N.E.2d 314, 323 (Ind.Ct.App.2013) (citing Ind.Code § 24-2-1-0.5). The stateâs law therefore tracks the terminology of the Lanham Act almost identically, and the essential elements of a state claim are the same as those of a federal one, with one notable difference. Id. Unlike the federal statute, the Indiana Trademark Act makes state registration of a trademark an explicit prerequisite to recovering for its infringement. Ind.Code § 24-2-1-14(a).
Defendants advance two grounds for summary judgment on this claim: that a cause of action for trade dress infringement is not cognizable under the Indiana statute, and that in any case Plaintiffs have failed to meet the incorporated Lan-ham Act requirements of ânongenericness, specificity, consistency, and nonfunctionalityâ as a matter of law. Docket No. 332 at 72.
As we have stated, the body of Indiana trademark infringement law is not richly developed. Given that the stateâs courts have reaffirmed quite recently that the state law aims at creating a âsystem of state trademark registration and protection that is consistent with the federal system of trademark registration,â however, we can perceive no reason why the state law would not follow in the footsteps of federal law in recognizing trade dress protection. See Serenity Springs v. La-Porte Cnty. Convention & Visitors Bureau, 986 N.E.2d 314, 323 (Ind.Ct.App.2013). Defendants have certainly presented no substantive argument in favor of the theory that trade dress is unprotected under state law. We have already implicitly recognized Count IX as a cognizable cause of action, see Docket No. 215 at 24-25 (denying Defendantsâ motion to dismiss), and wĂ© do not disturb that conclusion now.
Recognizing the parallel nature of the federal and state claims, Defendantsâ only
Defendantsâ motion for summary judgment as to Count IX of Plaintiffsâ Amended Complaint is therefore DENIED.'
IX. Defendantsâ Counterclaim Count X â Declaratory Judgment for No Breach of Contract by GSG and ATI
Defendants seek a declaratory judgment in their favor that they are not liable to Plaintiffsâ for their alleged breach of the 2009 Agreement, on the grounds that Plaintiffs are guilty of a first material breach. Docket No. 251 at 55. Because they âbreached the confidentiality clause before the ink was dryâ and attaching a copy of the Agreement in an email to an executive with nonparty Umarex shortly after the settlement was signed, Defendants insist, Plaintiffs cannot recover for any subsequent breaches by Defendants as a matter of law. Docket No. 332 at 73.
â[A] party first guilty of a material breach of contract may not maintain an action against the other party or seek to enforce the contract against the other party should that party subsequently breach the contract.â Boston Scientific Corp. v. Mirowski Family Ventures, LLC, 2012 WL 5996482, at *9 (S.D.Ind. Nov. 30, 2012) (quoting Licocci v. Cardinal Assocs., Inc., 492 N.E.2d 48, 52 (Ind.Ct.App.1986)). âA material breach is one that goes to the heart, of the contract.â New Berean Missionary Baptist Church, Inc. v. State Farm Fire & Cas. Ins. Co., 2010 WL 2010464, at *5 (S.D.Ind. May 18, 2010).
The parties do not appear to dispute that Plaintiffsâ attaching a copy of the Agreement in an email was at least a technical breach of its confidentiality clause. We have already granted Plaintiffsâ motion for summary judgment on the counterclaim for breach of the confidentiality clause on grounds that Defendants failed to demonstrate the existence of damages. See supra, § IV(A). It does not necessarily follow, however, that the email was not a material breach. In support of their argument for materiality, Defendants cite only one case, a Florida state court decision. There, in Gulliver Schools, Inc. v. Snay, 137 So.3d 1045 (Fla.Dist.Ct.App.2014), a teacher who settled his employment discrimination claims against his employer signed an agreement that included a confidentiality clause; shortly thereafter, however, he discussed the agreement with his college-age daughter (presumably not a law student), who proceeded to broadcast that information to some 1200 of her Face-book friends. 137 So.3d at 1046-1047. When the teacher later brought a suit against the school for breach of the agreement, the court ruled that his antecedent breach of the confidentiality clause foreclosed any recovery. Id. at 1048. Although the court did not expressly discuss the question of materiality, it did state that the confidentiality clause was âcentralâ to the settlement agreement, and that â[t]he significance of this provision is evidenced by the fact that [plaintiffs] entitlement to
Plaintiffs, by contrast, argue that such a breach of the Agreementâs confidentiality clause was not material because it did not go âto the heart of the contract.â Cf. Goff v. Graham, 159 Ind.App. 324, 306 N.E.2d 758, 765 (1974). The âheartâ of the 2009 Settlement, they insist, was GSG and ATIâs agreement to cease production and sale of the allegedly infringing GSG-5 in exchange for a sum of money and the âapprovalâ of the GSG-522. Docket No. 346 at 69. In support of this notion, they point out that the language of the confidentiality clause itself suggests that the maintenance of secrecy about the existence of a deal was not of paramount importance. See Docket No. 45-1, ¶ 24. They also refer us to a Delaware decision that they view as analogous to our facts and as a useful counterpoint to the Snay decision leaned upon by Defendants. In Texas Instruments, Inc. v. Qualcomm, Inc., 2004 WL 1631356 (Del.Ch. July 14, 2004), the Delaware court of chancery found that a partyâs breach of the confidentiality provision of a settlement agreement between two patent litigants was not material, because âpeaceâ in the patent dispute, not confidentiality, was the agreementâs central objective. âThe [agreement] is not a "confidentiality agreement. Nor was confidentiality identified by the parties as a critical term or goal of the [agreement]. The âroot of the agreementâ or the âessence of the contractâ was patent peace between Qualcomm and [Texas Instruments].â 2004 WL 1631356, at *1.
We are not a court of chancery, and we do not enjoy a chancery courtâs freedom to decide summarily factual questions that are in genuine dispute. We believe that significantly more conclusive evidence of the centrality of the confidentiality clause would be necessary in order to take the question of materiality away from the jury. See Canada Dry, 723 F.2d at 517 (âWe think that there was enough dispute as to these matters that the issues both of the occurrence of a breach and of its significance were properly left to the jury.â). Defendants fail to meet their burden. While they present a slightly more extended discussion of the issue in their reply brief, they offer only unsupported argument regarding the Restatement factors applied by the Indiana courts, particularly whether confidentiality was central to the âbenefit of the bargain.â See Frazier v. Mellowitz, 804 N.E.2d 796, 802-803 (Ind.Ct.App.2004) (citing Restatement (Second) of Contracts § 241). For instance, they make the naked, conclusory assertion that âDefendants agreed to the settlement only because HKI agreed to keep it confidential.â Docket No. 364 at 37 (emphasis added). This â and Defendantsâ other such assertions â may be true, and if they are, Plaintiffsâ breach may have been material. But we are not in a position to say so. We therefore decline to declare as a matter of law that Plaintiffsâ alleged prior material breach of the 2009 Agreement vitiates Plaintiffsâ own contract claims.
Defendantsâ motion for summary judgment on Counterclaim Count X is accordingly DENIED. Because first material breach is the only argument Defendants present in support of their motion for sĂșm-mary judgment against Plaintiffsâ own contract claims (Amended Complaint Counts I and II), Defendantsâ motion for summary judgment on Plaintiffsâ Counts I and II is also DENIED.
Conclusion
We have resolved the pending motions as follows. Defendantsâ motion to strike Plaintiffsâ affirmative defenses to counterclaims [Docket No. 282] is DENIED as moot, as detailed above.
Defendantsâ motion for summary judgment [Docket No. 331] is DENIED with respect to Counterclaim Counts I, III, IV, V, VI, VII, VIII, IX, X, XI and XII and with respect to Counts I, II, V, VI, VII, and IX of Plaintiffsâ Amended Complaint.
IT IS SO ORDERED.
.As the caption indicates, HK USA and HKG are, together with individual corporate officers G. Wayne Weber and Niels Ihloff, defendants in the counterclaims asserted by GSG and ATI. For the sake of simplicity, however, we will refer to HK USA and HKG collectively throughout this Order, where their individual identities often are not relevant to the discussion.
. GSG and ATI are both Defendants and Counterclaimants; for simplicity, we refer to them jointly throughout as "Defendants.â
. Mr. Ihloff's name is misspelled in some of the partiesâ submissions and captions as "Nils Ilhoff.â
. Plaintiffs contend that HKG did not "acceptâ the Assignment until June 15, 2010. Docket NO. 330 at 11, ¶ 26 (citing Cooper Decl. V 10). Plaintiffs' account relies only on the declaration of HKGâs attorney Isolde Kurz-Cooper, and the parties vigorously dispute whether such a delayed acceptance occurred, whether âacceptanceâ is even necessary for an assignment of the type executed by HK USA, and whether such an acceptance has any relevance to the parties' claims and counterclaims. We address some of these contentions below.
. The Court has already dismissed Counterclaim Count II, and Plaintiffs do not seek summary judgment as to Counterclaims Counts X, XI, and XII.
. The Court has already dismissed Counts III, IV, and VIII of Plaintiffsâ Amended Complaint; the surviving claims are Counts I, II, V, VI, VII, and IX. Defendants do not frontally challenge Plaintiffsâ two contract claims (Counts I and II); rather, they contend in seeking summary judgment on their Counterclaim Count X that any recovery for Plaintiffs on those claims is foreclosed by Plaintiffsâ own earlier material breach of the 2009 Agreement. See infra, § IX.
. Defendantsâ initial Answer contained counT terclaims alleged fraud against only HK USA and Weber; it is only in this new pleading that they have added HK GmbH and Ihloff as Counter Defendants.
. Defendants also allege that fellow Counterclaim Defendants HKG and Niels Ihloff share liability for the fraud on an agency theory through their later ratification of the Agreement. Docket No. 332 at 49-52. Because we ultimately grant summary judgment on the fraud claim and other counterclaims in which such agency liability is implicated, we do not need to address further this theory.
. These cases involve the construction of a federal bankruptcy statute rather than Indiana law, but they derive the "intent to deceiveâ element of fraud from the common law. âThe word 'fraud' implies a requirement of intent to deceive.â Mayer, 51 F.3d at 674 (citing Ernst & Ernst v. Hochfelder, 425 U.S. 185, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976); Neal v. Clark, 95 U.S. 704, 709, 24 L.Ed. 586 (1877)).
. Defendants cite an Eastern District of Virginia bankruptcy decision for the proposition that an assignment becomes valid and "irrevocableâ when properly supported by consideration. See Docket No. 370 (Defs.â Sur-Reply) at 7 (citing In re Himes, 53 B.R. 948, 951 (Bankr.E.D.Va.1985)). As Defendants own citations to Williston on Contracts make clear, however, an assignment â like any other contract â requires the mutual assent of the parties to be valid. See 29 Williston on Contracts § 74:3 (4th ed.). While Defendants are thus correct to assert that an assignment is irrevocable once completed, their argument skips a step.
, Plaintiffs assert in reply that the incongruity between their body of earlier statements
. While Weber was asked in this deposition, more specifically, if he intended GSG and ATI to rely on the representations HK USA made in the agreement, he answered in different form, stating: "I expected them to rely on the' representations made by HK during this meeting, yes.â Weber 2014 Dep. at 92 (emphasis added).
. This account is lent at least some plausibility by the fact that HK USA and HKG are, as their names suggest, corporate affiliates. Though the entities were separated by two "layersâ at the time, Heckler & Koch GmbH (HKG) was and'is the "ultimate parentâ company of Heckler & Koch, Inc. (HK USA). Weber Apr. 2013 Dep. (Docket No. 330-2) at 51-55.
. As Plaintiffs point out, Taums Holding is an unpublished decision without precedential weight. We cite it only for its illustrative value, and not under any misapprehension that it is controlling. Plaintiffs also note that the court in Taurus Holding Co. rejected a
. A special relationship between the parties is a per se requirement for constructive fraud liability. A party may be liable for constructive-fraud on the basis of its omissions as well
. In doing so, we noted Defendants' plausible allegations concerning the effect of the assignment on Plaintiffsâ standing to bring the 2009 lawsuit (and, accordingly, the amount of damages it could have recovered had its assignment of the IP rights been disclosed), as well as the testimony of Defendantsâ expert Kenneth Germain that the Assignment had weakened the value of the underlying trademark and trade dress rights. See Docket No. 298 at 18-22. We do not need to revisit these conclusions under the more exacting summary judgment standard, because we conclude that Defendants have failed to establish the element of reliance â which is, of course, a
. One preliminary clause in the Agreement recites that "HK claims to own in the United States a proprietary trade dress comprised of the designs of certain elements of the MP5 firearms (the 'MP5 trade dressâ),â while another states more emphatically that "HK owns a federal trademark registration in the mark âMP5.â " Docket No. 45-1 at 1 (emphasis added). Since Plaintiffs did not claim in the 2009 Litigation (or now) that Defendants infringed the MP5 trade mark itself, it is the representation concerning trade dress that is more relevant.
. Defendants contend in support of their claim for tortious interference that ATI president DiChario was pressured to settle the 2009 litigation by Plaintiffs' subpoenas of ATIâs business partners and the threats of further subpoenas. See Docket No. 118-1 at 118. â
. Defendantsâ counsel objected to this question on the grounds that it called for a legal conclusion. While the objection likely has merit, we present the testimony since it is Defendants who now designate it in their favor.
. Defendants incorporate here by reference their proximate cause evidence in connection with the fraud counterclaim. See Docket No. 349 at 44; 39-42. Of particular salience is an excerpt from the expert report of Kenneth Germain, in which he opines that "falsehoods imperiling the continued vitality of the MP5 mark almost certainly caused GSG/ATI to settle on terms more favorable to the HK Entities than a weakened or invalid mark would have justified.â Docket No. 251-3 at 9, ¶ 19. If accepted as true, this tends to establish that the weakness of HK USAâs claim to own the intellectual property rights, unbeknownst to Defendants, made the settlement terms more beneficial for HK USA than they should have been. To the extent that this statement implies that the "falsehoods imperiling the continued vitalityâ caused Defendants to decide to settle â rather than caused the Agreement to be unfavorable, we determine that any such assertion by Germain is speculative and outside his expertise, which is in trademarks and intellectual property law, not Defendants' decision-making process. See Docket No. 251-3 at ¶ 1 (expert credentials). As we have stated above, drawing an inference of reliance from the unfavorable nature of the Agreement to Defendants in light of later-disclosed facts is unreasonable when weighed against the structure and language of the Agreement itself.
. These subpoenas were thus served after the Assignment was executed, and allegedly consummated, in March 2009.
. Defendants have moved to seal this document, arguing that it contains confidential business information. Plaintiffs have cited it only to demonstrate the existence of the contractual relationship, and that is the only purpose for which the Court cites it now.
. In contending that the litigation privilege does not apply to the tortious interference counterclaim, Defendants quote a statement we made in denying Plaintiffsâ first motion to dismiss this count. In our Order of September 30, 2013, we said: "Since the 'more than two dozen lawsuitsâ initiated by HK USA are alleged to be in bad faith, the privilege for good-faith litigation ... is no bar to their serving as the basis for a tortious interference claim.â Heckler & Koch, Inc., et al. v. German Sport Guns GmbH, et al., 976 F.Supp.2d 1020, 1037 (S.D.Ind.2013) (citing Watson Rural Water Co. v. Ind. Cities Water Corp., 540 N.E.2d at 139). That language arose in our discussion of the "independent unlawful actâ element of the tortious interference claim; we did not address the litigation privilege at all in that Order because the issue was not before us on the motion to dismiss. We used the word "privilegeâ in a more general, colloquial sense there â and as we discuss below, the holding of Watson Rural is fully consistent with the conclusion we reach with regard to the privilege here.
. The counterclaim certainly differs from the typical defamation-type allegation in that the reason Defendants assert the suit to have been baseless was, at least in part, that HK USA lacked any enforceable rights in the trademark rather than Defendants were necessarily innocent of infringing the MP5 trade dress. While the truth or falsity of the communication at issue is, of course, a dispositive issue in a bona fide defamation claim, see Ind. Natâl Bank v. Chapman, 482 N.E.2d 474 (Ind.Ct.App.1985), we do not think the distinction is critical with respect to the applicability of the litigation privilege.
. Watson Rural is consistent with this reasoning as well. There, the court held that a tortious interference suit failed for two reasons: (1) the "representationsâ embodied in a partyâs litigation position, at least if they are made in good faith, do not constitute "unjustifiedâ conduct, and (2) any such representations, if made in connection with litigation, are privileged. See Watson Rural, 540 N.E.2d at 139.
. Plaintiffsâ initial complaint in state court alleged only breach of contract; the Amended Complaint added the intellectual property claims. See Docket No. 1, Ex. A (Complaint as removed from state court); Docket No. 45 (Amended Complaint).
. Defendants -assert that Plaintiffs could have filed the Agreement under seal, disclosed only limited parts of the Agreement, or declined to disclose it entirely, relying on courtsâ discretion to allow litigation to proceed despite a technical rules violation under Trial Rule 9.2F. These proffered alternative courses of action miss the point: Plaintiffsâ conduct did not violate the confidentiality clause, and the possibility that the court would have let them get away with less disclosure is immaterial.
. While HKG managing director Ihloff did not explicitly state that this action violated the confidentiality clause, Defendants reasonably construe his concession that the Agreement had not been "performed perfectlyâ as a tacit admission. Docket No. 349 at 15. Plaintiffs do not argue that there was not a technical breach, instead focusing their arguments as to this point on the lack of evidence of damages.
. The parties engage in an acrimonious debate about whether the conduct of Swobodaâs interpreter, who was also an attorney, was proper. Because we do not view Swoboda's testimony on this issue as supporting any inferences in Defendants' favor, we need not wade into that issue.
. The "Stephens Declarationâ is a sworn statement by Taft Stettinius & Hollister attorney Connie Stephens, a German-speaker who reviewed the videotaped Swoboda testimony and transcribed Swoboda's conversation in German with his attorney/translator. Docket No. 330-8.
.Defendants argue in their.brief, without any citation to evidence other than the aforementioned DiChario deposition, that their injury was in being âdeprived of the benefit of their bargain.â Docket No. 349 at 48. "Such a breach is actionable,â they assert, citing Gulliver Sch., Inc. v. Snay, 137 So.3d 1045 (Fla.Dist.Ct.App.2014). The Florida case they cite says nothing about the issue of damages; while there is no doubt that a material breach of contract depriving a party of the benefit of its bargain may be "actionable,â the element of their cause of action Defendants have failed to establish here is not actionability in the abstract, but damages from this particular alleged breach.
. The amount of damages if a breach is proven is, of course, an issue for the jury, but Plaintiffs could have argued, as they did in connection with the confidentiality clause, that no facts in the record could warrant a reasonable juror to infer that damages existed in some ascertainable amount.
. In granting Plaintiffsâ motion for leave to amend their complaint in 2012, we observed that "the dispute resolution provision only applies to ATI.â Docket No. 44 at 4. That characterization was accurate enough for purposes of rejecting Defendantsâ Rule 12 futility argument, but it was something of an oversimplification. The important point on the motion to dismiss â and here â is that the clause does not implicate GSG.
. In their motion for summary judgment, Defendants argue that a jury could infer, primarily from the statements of HKG managing director Ihloff, that ample motive for deception existed for HK USA and HKG â namely, HKGâs .desire to avoid being drawn into U.S. litigation, and the companies' desire to meet the April 2010 deadline for registration renewal. See Docket No. 332 at 43 (citing Defs.â Ex. F (Ihloff Dep.) at 274, 281-282).
.Defendants point to the expert testimony of Kenneth Germain that "it could not have been the PTO's intent to allow a deficiency known only to the owner but not to, the PTO (i.e., because the owner had assigned away its rights before filing the Section 8) to go unr cured forever without affecting the validity of the registration.â Ex. E at 6, ¶ 14(b). The materiality of a misrepresentation to the PTO, however, is a question of law for the Court â a question of which Germainâs opinion is not probative. See Gilbert/Robinson, Inc. v. Carrie Beverage-Missouri, Inc., 989 F.2d 985, 992-993 (8th Cir.1993).
. Artcraft was decided under an earlier version of Section 8 that more expressly allowed successors and assigns to file, but we nonetheless agree with the courtâs reasoning that a misstatement as to ownership is not material â even if the current version of Section 8 does make it a formal violation subject to the remedy provided in subsection (c).
. In order to prevail on an infringement claim under Section 43(a), a plaintiff must
. A trademark may also be "inherently distinctive," but the Supreme Court in Wal-Mart Stores held that, as to trade dress protection, "a product's design is distinctive, and therefore protectible [sic], only upon a showing of secondary meaning.â 529 U.S. at 215, 120 S.Ct. 1339.
. Defendants also object to the expert report of Jeffrey M. Samuels, Docket No. 346-13. We need not address the objections to the Samuels report, whose contents have not proved material to our disposition of any of the motions before us. Defendantsâ objection based on the untimeliness of the report, however, is unfounded for the same reasons discussed in connection with the Kokalis report.
. Indeed, the impossibility of "reading mindsâ is part of why consumer survey information is considered so valuable as an indicator of secondary meaning. See Sassafras, 915 F.Supp. at 7-8. Plaintiffs have, unfortunately, not presented such data here, but as we discuss below, the evidence they have mar-shalled is enough to withstand summary judgment.
. To the extent Kokalis offers opinion or factual evidence (such as Appendix C to his report, an internet print-out listing MP5 appearances in popular culture) that is not reasonably derived from his expertise in the field, such evidence can be discounted or disregarded on a more narrow basis. Subject to authentication issues, for instance, Appendix C may serve as documentary-evidence of the MP5âs popular exposure, but it does not bear the imprimatur of expert opinion.
. The court in Abercrombie capped its discussion of the issue by reminding readers of a certain fairy tale: "Lest we lose sight of the body of law here in question, that of trade dress, we are reminded that certain 'thingsâ held out as 'dress' are not dress at all." 280 F.3d at 631 (citing Hans Christian Andersen, The Emperor's New Clothes (Naomi Lewis, trans., Candlewick Press, 1997)). We reserve judgment on the aptness of the allusion for explaining trade dress rights, but the potency of the imagery is undeniable.
. These last three elements comprise what HK USA in 2009 called the "trigger group.â Defs.' Ex. R at 6-7.
. We agree with Plaintiffs that the companiesâ considered interrogatory responses carry more weight than HKG managing director Ihloff's (admittedly rather muddled) efforts at describing the trade dress in a 2014 deposition. See Custom Vehicles, Inc. v. Forest River, Inc., 2005 WL 3299499, at *2 (N.D.Ind. Dec. 2, 2005) (noting that a party's deposition testimony does not render "nugatoryâ its pri- or interrogatory responses).
. Defendants are correct to note that Plaintiffs bear the ultimate burden of persuasion on the issue of functionality, as specified by Section 43(a) of the Lanham Act. Docket No. 332 at 58-59. They go astray, however, in implying that Plaintiffs must prove non-functionality in order to survive a motion for summary judgment. They also err in their conception of the five-part Seventh Circuit "testâ for functionality: it is a list of probative factors rather than prerequisites. See Georgia-Pacific, 647 F.3d at 727.
. Macabre though the term "user-friendlinessâ may be to describe a military-style machine gun, we must consider the weapon in this respect as if it were any other consumer item.
. Plaintiffs filed the Kokalis Report manually rather than on the electronic docket.
. Plaintiffs also point to the existence of a design patent for the GSG-522 (a weapon whose alleged infringement of the MP5 trade dress is at issue in this case), which GSG characterized in an application to the PTO as an "ornamental design for semi-automatic firearm.â â Docket No. 346-17.
. Further, while Plaintiffs' alleged inattentiveness to protecting their intellectual property may be a valid equitable issue, we are unaware of any precedent for its relevance to the question of whether the trade dress itself has acquired secondary meaning as defined by the Supreme Court and the Seventh Circuit.
. Because this exhibit has been sealed and the precise volume of sales is not relevant to our resolution of the issue, we need not go into any further detail regarding the sales numbers.
. As such, the abandonment claim would apply not only to Defendantsâ counterclaim for invalidity, but also as a defense to Plaintiffsâ Lanham Act trade dress infringement and dilution claims. Our conclusion that the defense fails as a matter of law applies to its use in conjunction with those claims as well.
. In the same breath as they describe the Agreement as a naked license, they state: âYet the Agreement is not a license but a freedom to practice within the 'safe harbor.â " Docket No. 332 at 70.
. Namely, Mike Vaughn Custom Sports, Inc. v. Piku, 15 F.Supp.3d 735 (E.D.Mich.2014), and Luv Nâ Care, Ltd. v. Regent Baby Prods. Corp., 841 F.Supp.2d 753, 757-758 (S.D.N.Y.2012).
. Defendants fault Plaintiffs for citing a list of factors relevant to materiality as enumerated in Frazier v. Mellowitz, 804 N.E.2d 796, 802-803 (Ind.Ct.App.2004), noting that Indiana courts now look to a different formulation, as encapsulated in Restatement (Second) of Contracts § 241.