180s et. al. v. Walgreen et. al

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    UNITED STATES DISTRICT COURT

    DISTRICT OF MARYLAND

    (BALTIMORE DIVISION)

    180s, Inc.,700 South Caroline StreetBaltimore, Maryland 21231,

    a Delaware Corporation,

    ))))

    Plaintiff, ))

    Civil Action No. 12-cv-2117

    )and )

    )180s, LLC,

    700 South Caroline StreetBaltimore, Maryland 21231,

    a Maryland Limited Liability Company,

    ))))

    COMPLAINT

    Plaintiff, ))

    v. )))

    Walgreen Co.

    200 Wilmont RoadDeerfield, IL 60015,

    a Illinois Corporation,

    )

    )))

    DEMAND FOR JURY TRIAL

    Defendant,

    and

    LTV Wholesale & Importer, LLC110 Giant DriveRichmond, VA 23224

    a Virginia Limited Liability Company

    Defendant.

    ))))))))

    )__________________________________________ )

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    2.

    Plaintiffs 180s, Inc. and 180s, LLC (collectively 180s or Plaintiffs) allege as follows:

    THE PARTIES

    1. 180s, Inc. is a corporation organized under the laws of the State of Delaware, having itsprincipal place of business at 700 South Caroline Street, Baltimore, Maryland 21231. 180s, Inc. owns

    all right, title, and interest in the intellectual property that is the subject matter of this suit. 180s, LLC is

    a limited liability company organized under the laws of the State of Maryland, having its principal place

    of business at 700 South Caroline Street, Baltimore, Maryland 21231. 180s, LLC is a wholly-owned

    subsidiary of 180s, Inc. and the exclusive licensee of the intellectual property that is the subject matter

    of this suit.

    2. Defendant Walgreen Co. (Walgreen), on information and belief, is a corporationorganized under the laws of the State of Illinois having its principal place of business at 200 Wilmont

    Road, Deerfield, Illinois, 60015. Walgreen is a national chain of drugstores and pharmacies, owning

    and operating thousands of Walgreens retail locations throughout the country.

    3. Defendant LTV Wholesale & Importer, LLC (LTV), on information and belief, is alimited liability company organized under the laws of the Commonwealth of Virginia having its

    principal place of business at 110 Giant Drive, Richmond, Virginia 23224. On information and belief,

    LTV is in the business of purchasing, importing, and distributing miscellaneous, low-cost retail goods.

    JURISDICTION AND VENUE

    4. This is a civil action for: (i) patent infringement arising under the United States patentstatutes, Title 35, United States Code, 1 et seq.; (ii) trade dress infringement and unfair competition

    under the federal trademark statute (the Lanham Act), Title 15, United States Code, 1051 et seq.;

    and (iii) breach of contract.

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    3.

    5. This Court has jurisdiction of the subject matter of this action under Title 28, UnitedStates Code, 1331, 1332, 1338(a), and 1367, and Title 15, United States Code, 1121.

    6. This Court has personal jurisdiction over Walgreen because Walgreen is doing and hasdone substantial business in this judicial district and has committed acts of infringement, and other acts

    complained of herein, in this judicial district. According to its website (www.walgreens.com), Walgreen

    operates over sixty retail stores in the State of Maryland.

    7. This Court has personal jurisdiction over LTV at least because, on information and belief(i) LTV purposely placed or caused to be placed infringing product into the stream of commerce through

    an established distribution channel, specifically, by selling infringing product to Walgreen for re-sale at

    Walgreens retail stores, and some of such infringing product was subsequently offered for sale, sold,

    and/or used within the District of Maryland; (ii) LTV has used, sold, and/or offered to sell infringing

    product within this judicial district; and (iii) LTV has contracted to supply infringing product and/or

    transacted business related to infringing product in the District of Maryland within the meaning of

    section 6-103 of the Maryland Code.

    8. Venue is proper in this District pursuant to 28 U.S.C. 1391(b)-(c) and 1400(b) becauseDefendants have committed acts of infringement and done business in this District.

    180s INNOVATIVE EARWARMER PRODUCTS

    9. 180s designs, manufactures and sells innovative performance wear, including earwarmers, gloves, and glasses. 180s was founded in 1994 by Brian E. Le Gette and Ronald L. Wilson, II,

    two University of Pennsylvania Wharton Business School students, who invented and patented the first

    of its kind wrap-behind-the-head ear warmer. When introduced into the marketplace in 1995, the 180s

    ear warmer achieved immediate success.

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    4.

    10. 180s success has been driven largely by its innovative ear warmer products, which areprotected by a significant portfolio of patents, including the patents asserted in this action, a U.S.

    trademark registration for its trade dress, and 180s common law rights in its trade dress. True and

    correct reproductions of photographs of a 180s brand ear warmer are attached as Exhibits A and B.

    The overall look and feel of the 180s ear warmer product, including without limitation the wrap-

    behind-the-head design, binding on the perimeter of the product, and a narrow band portion connecting

    the larger ear portions, constitutes distinctive trade dress.

    11. 180s has invested considerable effort in promoting its ear warmer products and theassociated trade dress. Since at least 1995, 180s has consistently and widely marketed and advertised its

    ear warmer products by highlighting their distinctive trade dress. As a result, the ear warmer trade dress

    has become widely recognized by consumers and has acquired secondary meaning in the minds of the

    consuming public such that it serves as an indicator of the source of the ear warmer product, and has

    come to embody the substantial and valuable goodwill of 180s.

    12. The ear warmer trade dress, while enormously valuable as a source indicator, is notessential to the use or purpose of the products. Moreover, 180s exclusive rights in its trade dress do not

    put competitors at a significant non-reputation-related disadvantage.

    13. On May 18, 2004, United States Patent No. 6,735,784 (the 784 Patent), entitledApparatus and Method for Making an Ear Warmer and an Ear Warmer Frame, was duly and legally

    issued to Isom, et al. The 784 Patent has been assigned to 180s, Inc. A true and correct copy of the

    784 Patent is attached as Exhibit C.

    14. On July 26, 2005, United States Patent No. 6,920,645 (the 645 Patent), entitledApparatus and Method for Making an Ear Warmer and an Ear Warmer Frame, was duly and legally

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    its stores, turned over all gross revenues from its infringing sales to 180s, and reimbursed 180s for

    attorneys fees incurred by 180s in resolving the infringement.

    21. On information and belief, less than one year after 180s put a stop to Walgreens sale ofthe second infringing product, in the fall of 2010, Walgreen stores began selling yet another knock-off

    ear warmer labeled Ear Cover (the Accused Product). The Ear Cover was very inexpensive,

    retailing at less than $2.00 per unit. True and correct copies of photographs of the Accused Product are

    attached as Exhibits F and G.

    22. As shown in Exhibits F and G, the Accused Product is similar to 180s ear warmers in atleast the following ways: the overall shape of the product, the wrap-behind-the-head design, binding on

    the perimeter of the product, and the narrow band portion connecting the larger ear portions. This

    similarity in design would likely cause confusion to an ordinary observer as to the source of the product.

    23. A true and correct copy of a photograph of the Ear Cover hangtag, bearing the nameLTV Imports and stating it is Made in China, is attached as Exhibit H. The Accused Product was

    distributed to Walgreen by Defendant LTV.

    24. On information and belief, LTV began shipping the Accused Product to Walgreen storesin September 2010 and has sold over half a million units to Walgreen. Over 99% of LTVs sales of the

    Accused Product were made to Walgreen stores.

    25. Despite Walgreens knowledge of 180s intellectual property rights relating to earwarmers, and notwithstanding its two prior agreements to cease selling infringing ear warmers,

    Walgreen never contacted 180s before it began offering the Accused Product for sale in thousands of

    Walgreens stores across the country, including a significant number of stores located in Maryland, and

    apparently made no effort to determine whether the Accused Product infringed any of 180s intellectual

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    property rights.

    26. On information and belief, Walgreen continued offering the Ear Cover for sale until theend of 2011, selling hundreds of thousands of units of infringing product.

    WALGREEN CONTRACTS TO SELL AUTHENTIC 180s EAR WARMERS WHILE

    CONTINUING ITS SALES OF THE INFRINGING EAR COVER

    27. Without disclosing its continued sale of the Ear Cover, in November 2011, Walgreennegotiated a contract with 180s to purchase and re-sell authentic 180s Degrees ear warmers in its retail

    stores (the November 2011 Contract). A true and correct copy of the November 29, 2011

    Commitment Letter sent by 180s to Walgreen summarizing certain terms of the November 2011

    Contract is attached as Exhibit I. Walgreen subsequently issued a purchase order for 47,616 units of

    Degrees.

    28. 180s, unaware that Walgreen intended to offer the 180s Degrees ear warmers for salealongside a knock-off being sold at a fraction of the price, agreed as part of the November 2011 Contract

    that any 180s ear warmers purchased by Walgreen that remained unsold as of March 2, 2012 could be

    returned to 180s. Based on the quantity of ear warmers Walgreen purchased and 180s experience with

    other similar retail customers, 180s expected few if any returns.

    29. On December 6-9, 2011, 180s shipped the 47,616 units of Degrees purchased byWalgreen to 1,984 Walgreen stores. 180s timely invoiced Walgreen for the shipped product.

    30. Just weeks after shipping product to Walgreen stores, 180s discovered the knock-off EarCover for sale in Walgreen stores. On December 22, 2011, counsel for 180s sent a letter to Defendant

    LTV notifying LTV of the 784 and 645 Patents and the 225 Registration, and of 180s view that the

    Ear Cover product infringed 180s patent and trademark rights. The December 27, 2011 letter further

    demanded that LTV, as well as all of its affiliates, distributors, and resellers, cease and desist from any

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    future making, using, selling, offering to sell, and importing of the Accused Product. A true and correct

    copy of the December 22, 2011 letter to LTV is attached as Exhibit J.

    31. On December 27, 2011, counsel for 180s sent a similar letter to a Walgreen seniorlitigation attorney, notifying Walgreen of the 784 and 645 Patents and the 225 Registration, and of

    180s belief that the Ear Cover product infringed 180s patent and trade dress rights, and demanding

    that Walgreen cease and desist from any future making, using, selling, offering to sell, and importing of

    the Accused Product. A true and correct copy of the December 27, 2011 letter to Walgreen is attached

    as Exhibit K.

    32. On December 29, 2011, Walgreen pulled the Accused Product from its shelves. LTValso ceased taking orders for the product on December 28, 2011.

    33. Around the same time that 180s approached Walgreen about Walgreens sale of this mostrecent infringing product, Walgreen abandoned its commitment to sell 180s Degrees pursuant to the

    November 2011 contract. Walgreen stores returned thousands of unsold Degrees to 180s weeks or even

    months in advance of the contractually-permitted date for any product returns. In some cases, Walgreen

    stores returned all units of 180s Degrees they received within two weeks of receipt, reporting that they

    could not sell 180s Degrees because they were already offering the much cheaper LTV Ear Cover

    product.

    34. Walgreen failed to timely pay 180s for the purchased units of Degrees. 180s received nopayments in response to its initial invoice or payment demands. After prolonged negotiations with 180s

    outside counsel, and nearly five months after its stores received the product shipments, Walgreen

    submitted a partial payment to 180s covering the units it actually re-sold to retail customers. Walgreens

    partial payment comprised only about one-third of the purchase price owed pursuant to the purchase

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    order it submitted.

    35. Walgreen deliberately failed to make reasonable efforts to sell the 180s Degrees itpurchased and received in early December 2011. Instead, Walgreen marketed the Accused Product

    through sales and in-store product displays. A true and correct copy of a photograph of a sale display of

    the Accused Product in a Walgreen store taken in December 2011 is attached hereto as Exhibit L.

    36. Walgreens active promotion of the Accused Product directly undermined sales of any180s Degrees that were actually placed onto Walgreens store shelves. Even after it stopped selling the

    Accused Product, Walgreen still failed to make reasonable efforts to offer 180s Degrees for sale. As a

    result, according to Walgreen, its stores sold less than twenty percent of the 180s inventory that

    Walgreen was supposed to purchase from 180s, an abysmal sales performance compared to other similar

    retail customers of 180s.

    37. Before using, offering for sale, selling, and/or importing at least some of the AccusedProduct, Walgreen had actual or constructive knowledge of 180s brand ear warmers and 180s

    intellectual property rights in behind-the-head ear warmers, including 180s rights in the 784 Patent, the

    645 Patent, and the 225 Registration.

    COUNT ONEINFRINGEMENT OF THE 784 PATENT

    38. Plaintiffs reallege and incorporate herein by this reference paragraphs 1 through 37 ofthis Complaint as though fully set forth herein.

    39. Walgreen has infringed the 784 Patent under Section 271 of Title 35 of the United StatesCode by using, selling and/or offering to sell in, and/or importing into, the United States the Accused

    Product, which embodies inventions claimed in the 784 Patent.

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    40. LTV has infringed the 784 Patent under Section 271 of Title 35 of the United StatesCode by making, using, selling, and/or offering to sell in, and/or importing into, the United States the

    Accused Product, which embodies inventions claimed in the 784 Patent.

    41. On information and belief, Walgreens infringement of the 784 Patent has been willful.42. Plaintiffs have been, and will continue to be, damaged and irreparably harmed by the

    actions of Defendants, which will continue unless Defendants are enjoined by this Court.

    COUNT TWO INFRINGEMENT OF THE 645 PATENT

    43. Plaintiffs reallege and incorporate herein by this reference paragraphs 1 through 42 ofthis Complaint as though fully set forth herein.

    44. Walgreen has infringed the 645 Patent under Section 271 of Title 35 of the United StatesCode by using, selling and/or offering to sell in, and/or importing into, the United States the Accused

    Product, which embodies the inventions claimed in the 645 Patent.

    45. LTV has infringed the 645 Patent under Section 271 of Title 35 of the United StatesCode by making, using, selling, and/or offering to sell in, and/or importing into, the United States the

    Accused Product, which embodies the inventions claimed in the 645 Patent.

    46. On information and belief, Walgreens infringement of the 645 Patent has been willful.47. Plaintiffs have been, and will continue to be, damaged and irreparably harmed by the

    actions of Defendants, which will continue unless Defendants are enjoined by this Court.

    COUNT THREE TRADE DRESS INFRINGEMENT UNDER 15 U.S.C. 1114

    48. Plaintiffs reallege and incorporate herein by this reference paragraphs 1 through 47 ofthis Complaint as though fully set forth herein.

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    49. Plaintiff 180s, Inc. owns valid and protectable rights in its trade dress, aspects of whichare embodied in the 225 Registration, and licenses its rights to 180s, LLC.

    50. Defendants had constructive notice of 180s, Inc.s ownership of the trade dress disclosedin the 225 Registration as of May 9, 2006, the date of registration, pursuant to 15 U.S.C. 1072.

    51. On information and belief, after issuance of the 225 Registration, Defendants beganselling or using in commerce the Accused Product bearing trade dress that is confusingly similar to the

    trade dress of the ear warmer products sold by 180s, LLC.

    52. The trade dress used in connection with the Accused Product is likely to cause confusion,mistake, or deception as to the source or sponsorship of the Accused Product and/or is likely to lead the

    consuming public to believe that Plaintiffs have authorized, approved, or somehow endorsed the

    Accused Product.

    53. The actions of Defendants described above and specifically, without limitation, theDefendants use of the confusingly similar trade dress with respect to the Accused Product, constitutes

    trademark infringement in violation of 15 U.S.C. 1114.

    54. Plaintiffs have been, and will continue to be, damaged and irreparably harmed by theactions of the Defendants. Plaintiffs have no adequate remedy at law in that the amount of damage to

    Plaintiffs business and reputation and the diminution of the goodwill of 180s trade dress protected by

    the 225 Registration is difficult to ascertain with specificity. Plaintiffs are therefore entitled to

    injunctive relief pursuant to 15 U.S.C. 1116.

    55. Plaintiffs are entitled to recover damages in an amount to be determined at trial and theprofits made by Defendants on sales of the Accused Product.

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    56. On information and belief, Plaintiffs allege that the actions of Walgreen were undertakenwillfully and with the intention of causing confusion, mistake, or deception, making this an exceptional

    case entitling Plaintiffs to recover trebled damages and reasonable attorneys fees from Walgreen

    pursuant to 15 U.S.C. 1117.

    COUNT FOURUNFAIR COMPETITION AND FALSE

    DESIGNATION OF ORIGIN UNDER 15 U.S.C. 1125(a)

    57. Plaintiffs reallege and incorporate herein by this reference paragraphs 1 through 56 ofthis Complaint as though fully set forth herein.

    58. Plaintiff 180s, Inc. owns valid and protectable rights in its trade dress and licenses itsrights to 180s, LLC.

    59. On information and belief, Defendants have been selling or using in commerce theAccused Product bearing trade dress that is confusingly similar to the trade dress of the ear warmer

    products sold by 180s, LLC.

    60. Defendants actions as described herein are likely to cause confusion, mistake, ordeception as to the source or sponsorship of the Accused Product and/or are likely to lead the consuming

    public to believe that Plaintiffs have authorized, approved, or somehow endorsed the Accused Product.

    61. Defendants actions constitute unfair competition and false designation of origin inviolation of 15 U.S.C. 1125(a).

    62. Plaintiffs have been, and will continue to be, damaged and irreparably harmed byDefendants actions. Plaintiffs have no adequate remedy at law in that the amount of damage to

    Plaintiffs business and reputation and the diminution of the goodwill of 180s trade dress is difficult to

    ascertain with specificity. Plaintiffs are therefore entitled to injunctive relief pursuant to 15 U.S.C.

    1116.

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    63. Plaintiffs are entitled to recover damages in an amount to be determined at trial and theprofits made by Defendants on the sales of the Accused Product.

    64. On information and belief, Plaintiffs allege that the actions of Walgreen were undertakenwillfully and with the intention of causing confusion, mistake, or deception, making this an exceptional

    case entitling Plaintiffs to recover trebled damages and reasonable attorneys fees from Walgreen

    pursuant to 15 U.S.C. 1117.

    COUNT FIVEBREACH OF CONTRACT

    65. Plaintiffs reallege and incorporate herein by this reference paragraphs 1 through 64 ofthis Complaint as though fully set forth herein.

    66. Walgreens actions described above constitute a breach of the November 2011 Contractentered into by 180s and Walgreen, including specifically, without limitation, Walgreens actions in:

    failing to pay for approximately two-thirds of the 180s Degrees Walgreen purchased and 180s shipped

    to Walgreens stores; failing to use reasonable efforts to sell 180s Degrees it purchased in Walgreens

    retail stores; intentionally marketing, through sales, in-store displays, and other promotional efforts, the

    Accused Product; and prematurely returning unsold 180s Degrees before the contractually-permitted

    deadline.

    67. 180s has sustained significant losses as a result of Walgreens breach in an amount to bedetermined at trial, including but not limited to full payment for all 180s ear warmers purchased by

    Walgreen.

    68. While 180s disputes that Walgreen was entitled to return any inventory shipped to itsstores by 180s, in the event the Court determines Walgreen was entitled to return any portion of such

    inventory, 180s may seek consequential damages with respect to such returned inventory, including but

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    not limited to lost profits and costs associated with product transportation, repackaging, and reselling.

    REQUEST FOR RELIEF

    WHEREFORE, Plaintiffs request the following relief:

    A. a preliminary and permanent injunction against Defendants as well as their respectiveofficers, agents, servants, employees, parent and subsidiary corporations, assigns and

    successors in interest, and those persons in active concert or participation with them,

    enjoining them from continued acts of infringement of the 784 Patent;

    B. a preliminary and permanent injunction against Defendants as well as their respectiveofficers, agents, servants, employees, parent and subsidiary corporations, assigns and

    successors in interest, and those persons in active concert or participation with them,

    enjoining them from continued acts of infringement of the 645 Patent;

    C. a preliminary and permanent injunction against Defendants as well as their respectiveofficers, agents, servants, employees, attorneys, parent and subsidiary corporations,

    assigns and successors in interest, and those persons in active concert or participation

    with them, enjoining them from continued acts of infringement of Plaintiffs trade dress;

    D. a judgment holding Defendants liable for infringement of the 784 and 645 Patents;E. a judgment holding Defendants liable for infringement of Plaintiffs trade dress;F. a judgment holding Defendants liable for unfair competition;G. a judgment holding Defendant Walgreen liable for breach of contract;H. an accounting of damages and award of all Defendants respective profits resulting from

    Defendants infringement of the 784 and 645 Patents, together with prejudgment and

    post-judgment interest;

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    I. an accounting and award of all Defendants respective profits and Plaintiffs damagesresulting from the infringement of Plaintiffs trade dress by Defendants;

    J. an accounting and award of all damages sustained by Plaintiffs as a result of DefendantWalgreens breach of contract;

    K. that the infringement by Defendant Walgreen of the 784 and 645 Patents be adjudgedwillful and Plaintiffs damages be trebled pursuant to 35 U.S.C. 284;

    L. that the infringement by Defendant Walgreen of 180s trade dress be adjudged willfuland Plaintiffs damages be trebled pursuant to 15 U.S.C. 1117;

    M. that this be adjudged an exceptional case and that the Plaintiffs be awarded theirattorneys fees pursuant to 35 U.S.C. 285 and 15 U.S.C. 1117; and

    N. that the Court grant Plaintiffs such other relief as it may deem just and equitable.Dated: July 17, 2012 Respectfully submitted by:

    /s/ Brendan J. HughesCOOLEY LLPBrendan J. Hughes (Bar No. 17042)777 6th Street, NW, Suite 1100Washington, D.C. 20001Tel: (202) 842-7826Fax: (202) [email protected]

    Jonathan G. GravesOne Freedom SquareReston Town Center

    11951 Freedom DriveReston, Virginia 20190Tel: (703) 456-8000Fax: (703) [email protected]

    Attorneys for Plaintiffs180s, Inc. and 180s, LLC

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    DEMAND FOR JURY TRIAL

    Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiffs 180s, Inc. and 180s, LLC,

    hereby demand a trial by jury of all issues triable of right by a jury.

    Dated: July 17, 2012

    /s/ Brendan J. HughesCOOLEY LLPBrendan J. Hughes (Bar No. 17042)777 6th Street, NW, Suite 1100Washington, D.C. 20001

    Tel: (202) 842-7826Fax: (202) [email protected]

    Jonathan G. GravesOne Freedom SquareReston Town Center11951 Freedom DriveReston, Virginia 20190Tel: (703) 456-8000Fax: (703) [email protected]

    Attorneys for Plaintiffs180s, Inc. and 180s, LLC

    524907 /RE