Neuros Co., Ltd et al v. Kturbo, Inc.
Filing
297
MEMORANDUM Opinion and Order entered by the Honorable John W. Darrah on 4/17/2013. Mailed notice (tlm)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
NEUROS CO., LTD. and
AVIATION AND POWER
GROUP INC.,
d/b/a APG-NEUROS, INC.,
Plaintiffs,
v.
KTURBO, INC.,
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Case No. 08-cv-5939
Judge John W. Darrah
Defendant.
MEMORANDUM OPINION AND ORDER
Plaintiffs, Neuros Co., Ltd. and APG-Neuros, Inc. (collectively, “Neuros”), filed a
motion, seeking the entry of a revised judgment, finding in favor of Plaintiffs and against
Defendant, KTurbo, on its Lanham Act and Illinois Uniform Deceptive Trade Practices Act
(“DTPA”) claims. Neuros’s motion further seeks an award of attorneys’ fees and injunctive
relief. KTurbo opposes the motion, which has been fully briefed and is ripe for ruling. Neuros
also separately moved to tax appellate costs and to release funds held in the registry of the Clerk
of the Court.
BACKGROUND
This suit was initiated in October 2008, when Neuros asserted six claims against KTurbo,
including: claims for false and misleading statements in violation of the Lanham Act; violations
of the DTPA; defamation per se and defamation per quod; common law trade libel/false
light/business disparagement; and intentional interference with prospective economic relations.
KTurbo alleged similar counterclaims against Neuros and also included one count under the
Illinois Consumer Fraud and Deceptive Business Practices Act.
The parties were competing manufacturers of high-speed turbo blowers in North
America. The blowers are used in the treatment of water at waste water treatment plants.
A bench trial was conducted from October 18, 2010 through October 22, 2010. On May
3, 2011, after post-trial briefs were submitted, the Court awarded judgment in favor of Neuros on
its defamation per se claim, including $10,000.00 in compensatory damages and $50,000.00 in
punitive damages, and in favor of Neuros on all of KTurbo’s counterclaims. Judgment was
awarded in favor of KTurbo on the remainder of Neuros’s claims against it. The Court found
that KTurbo’s false comments regarding Neuros’s business were not presented to members of
the general public and denied Neuros’s Lanham Act and DTPA claims on that basis. Bench
Trial Mem. Op. and Order, May 3, 2011, at 27. On appeal, KTurbo challenged the finding of
defamation on its part; Neuros challenged the dismissal of its Lanham Act and DTPA claims.
Neuros Co., Ltd. v. KTurbo, Inc., 698 F.3d 514, 519 (7th Cir. 2012) (Neuros).
The Seventh Circuit, in ruling on the cross-appeals, reversed the District Court in part,
finding that Neuros’s Lanham Act and DTPA claims should not have been dismissed and that
KTurbo did, in fact, disseminate information to relevant potential customers necessary to support
violations of the Lanham Act and DTPA. Id. at 521-23. The Seventh Circuit further held that,
upon a determination of the Lanham Act and DTPA violations, “the case must be remanded for
consideration of whether to award attorneys’ fees – plus injunctive relief, authorized in the same
section of the Act and also sought by Neuros and denied by the district court.” Id. at 521.
Therefore, Neuros seeks an entry of judgment on those two claims, as well as an award of
attorneys’ fees and injunctive relief. In response to Neuros’s motion, KTurbo opposes the
requests for fees and injunctive relief, but presents no opposition to the entry of judgment on
Neuros’s Lanham Act and DTPA claims. Accordingly, the judgment entered May 3, 2011, is
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amended and reversed in part, in favor of Neuros on its Lanham Act and DTPA claims, Counts I
and II of the Complaint. The Court finds that KTurbo acted in violation of section 43(a)(1) of
the Lanham Act, which addresses false advertising and provides:
Any person who, on or in connection with any goods or services, or any container
for goods, uses in commerce any word, term, name, symbol, or device, or any
combination thereof, or any false designation of origin, false or misleading
description of fact, or false or misleading representation of fact, which -***
(B) in commercial advertising or promotion, misrepresents the nature,
characteristics, qualities, or geographic origin of his or her or another person's
goods, services, or commercial activities,
shall be liable in a civil action by any person who believes that he or she is or is
likely to be damaged by such act.
15 U.S.C. § 1125(a)(1). The Court further finds that KTurbo violated the companion Illinois
state statute governing false advertising, 815 ILCS 510/1 et seq. A determination of attorneys’
fees and injunctive relief is therefore necessary.
LEGAL STANDARD
Attorneys’ Fees
Section 1117 of the Lanham Act addresses attorneys’ fees and provides that “[t]he court
in exceptional cases may award reasonable attorney fees to the prevailing party.” 15 U.S.C. §
1117(a). An award of attorneys’ fees is appropriate “if the opposing party’s ‘claim or defense
was objectively unreasonable – was a claim or defense that a rational litigant would pursue only
because it would impose disproportionate costs on his opponent.’” Neuros, 698 F.3d at 521
(quoting Nightingale Home Healthcare, Inc. v. Anodyne Therapy, LLC, 626 F.3d 958 (7th Cir.
2010) (Nightingale)). Attorneys’ fees are also appropriate where a party’s violation of the
Lanham Act is “especially egregious.” Neuros, 698 F.3d at 521. A party’s actions must be
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exceptional to merit an award of attorneys’ fees. A case is considered “exceptional” for purposes
of awarding fees under the Lanham Act “if the losing party was the defendant and had no
defense yet persisted in the trademark infringement or false advertising for which he was being
sued, in order to impose costs on his opponent.” Nightingale, 626 F.3d at 963-64.
Similarly, the DTPA provides that a court “may award . . . reasonable attorney’s fees and
costs to the prevailing party.” 815 ILCS 505/10a(c). The DTPA is “a statute generally thought
indistinguishable from the Lanham Act except of course in its geographical scope.” Neuros, 698
F.3d at 523. The test for a determination of a case being exceptional enough to merit attorneys’
fees is essentially the same under the Lanham Act and the DTPA. Nightingale, 626 F.3d at 961.
“The purpose of the Deceptive Trade Practices Act is to prohibit unfair competition, and it is
primarily directed toward acts that unreasonably interfere with another's conduct of his or her
business.” Chicago’s Pizza, Inc. v. Chicago’s Pizza Franchise Ltd. USA, 893 N.E.2d 981, 995
(Ill. App. Ct. 2008) (Chicago’s Pizza). “Costs or attorneys’ fees or both may be assessed against
a defendant only if the court finds he has wilfully engaged in a deceptive trade practice.” 815
ILCS 510/3.
Injunctive Relief
The Lanham Act also specifically provides for the granting of injunctive relief, stating
that a district court “shall have power to grant injunctions, according to the principles of equity
and upon such terms as the court may deem reasonable, to prevent the violation of any right of
the registrant of a mark registered in the Patent and Trademark Office or to prevent a violation
under subsection (a), (c), or (d) of section 1125 of this title.” 15 U.S.C. § 1116(a). A plaintiff is
not automatically entitled to injunctive relief. To be entitled to injunctive relief under the
Lanham Act, a court considers “if the evidence shows that they have suffered an irreparable
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injury for which there is no adequate legal remedy, the balance of hardships militates in favor of
such relief and issuing an injunction will not disserve the public interest.” DeVry Inc. v.
International University of Nursing, 638 F. Supp. 2d 902, 910 (N.D. Ill. 2009) (citing eBay, Inc.
v. MercExchange, LLC, 547 U.S. 388, 391 (2006) (eBay)).
Likewise, under the DTPA, “A person likely to be damaged by a deceptive trade practice
of another may be granted injunctive relief upon terms that the court considers reasonable.” 815
ILCS 510/3. The Court may grant injunctive relief where appropriate . . . .” 815 ILCS
505/10a(c). To obtain a permanent injunction under Illinois law, a party “must prove it has a
clear and ascertainable right in need of protection, irreparable harm will result if injunctive relief
is not granted, and no adequate remedy at law exists.” Bogner v. Villiger, 796 N.E.2d 679, 68586 (Ill. App. Ct. 2003) (Bogner) (citing Hasco Inc. v. Roche, 700 N.E.2d (Ill. App. Ct. 1998)).
ANALYSIS
Attorneys’ Fees Under the Lanham Act
First, consideration of whether this case is so exceptional as to merit attorneys’ fees is
necessary. Under the Lanham Act and applicable case law, Neuros is entitled to attorneys’ fees
if it is apparent KTurbo’s actions were egregious, or if KTurbo had no defense but persisted in its
activities to impose costs on Neuros. See Nightingale, 626 F.3d at 963-64. “The determination
of unreasonableness or egregiousness is to be made in the first instance by the district court.”
Neuros, 698 F.3d at 521.
Based on the evidence presented at the bench trial, and the findings made in the
Memorandum Opinion and Order entered on May 3, 2011, the Court further finds that the
defense presented by KTurbo to Neuros’s claims was objectively unreasonable.
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As the Seventh Circuit explained in its opinion, KTurbo presented information to
customers and prospective customers that asserted that Neuros’s claims of wire power, or its
ratio of electrical current to work, were exaggerated. Id. at 518. KTurbo continued to make
these statements about Neuros’s claims regarding wire power and efficiency well after Neuros
commenced this suit, on October 16, 2008. KTurbo’s allegations regarding Neuros’s purported
efficiency ratings were literally false. See Bench Trial Mem. Op. and Order, May 3, 2011, at 15.
Even after being made aware of Neuros’s lawsuit against KTurbo regarding its false statements,
it continued to make false representations regarding Neuros’s blowers. Id. at 11 (“As late as
October 25, 2009, [KTurbo’s CEO] Lee wrote to a large group of KTurbo partners and
supporters,” asserted that APG-Neuros’s blowers waste 15% more energy than they were
claiming, and discussed his plan to “terminate Neuros completely.”). “A ‘literal’ falsehood is
bald-faced, egregious, undeniable, over the top.” Schering-Plough Healthcare Products Inc. v.
Schwarz Pharma, Inc., 586 F.3d 500, 513 (7th Cir. 2009). The Seventh Circuit fairly
characterized KTurbo’s defense by describing it as “objectively unreasonable: KTurbo persisted
in denying that the slide show and related marketing activities were deceptive long after it was
evident that the denial was frivolous.” Neuros, 698 F.3d at 521.
Moreover, the evidence presented at trial demonstrated that KTurbo sought to drive
Neuros out of the market, and KTurbo’s conduct served only to impose costs on Neuros. See
Bench Trial Mem. Op. and Order, May 3, 2011, at 36 (KTurbo “stated its intent to ‘break’ and
‘terminate’ APG-Neuros; and continued to accuse APG-Neuros of cheating after its
representatives advised it not to do so, after receiving a cease-and-desist letter, and after the
initiation of this lawsuit.”). For KTurbo to maintain its defense and continue to violate the
Lanham Act in light of KTurbo knowing its claims regarding Neuros’s efficiency were false was
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both objectively unreasonable and egregious. Accordingly, Neuros is entitled to attorneys’ fees
under the Lanham Act, 15 U.S.C. § 1117(a).
Attorneys’ Fees Under the DTPA
As explained above, attorneys’ fees are awarded to the prevailing party under the DTPA
under a similar analysis as the Lanham Act. Neuros, 698 F.3d at 523. Neuros is entitled to
attorneys’ fees under the DTPA if it is apparent KTurbo wilfully engaged in a deceptive trade
practice. 815 ILCS 510/3. Wilful is defined as “voluntary and intentional, but not necessarily
malicious.” Chicago’s Pizza, 893 N.E.2d at 998 (quoting Black’s Law Dictionary 1630 (8th ed.
2004)).
KTurbo argues that while the statements it made about Neuros were not in good faith,
KTurbo’s conduct was not wilful. KTurbo’s contention belies the record, as discussed above.
The Court therefore further finds KTurbo acted with specific intent to thwart Neuros’s success
and “break” Neuros as competition. The Court also finds that KTurbo continued to attempt to
deceive customers and others associated with Neuros well after Neuros had sent KTurbo a cease
and desist letter and commenced this suit. See Chicago’s Pizza, 893 N.E.2d at 998
(“[D]efendants continued to mislead consumers . . . after the complaint was filed. Therefore, we
find because defendants ‘wilfully engaged in a deceptive trade practice,’ plaintiffs are entitled to
reasonable attorney fees.”). Upon review of the facts determined at trial and in conjunction with
the Seventh Circuit’s decision, Neuros is entitled to attorneys’ fees under the DTPA, as well.
Injunctive Relief Under the Lanham Act
Neuros is entitled to injunctive relief, provided it can demonstrate it suffered irreparable
injury for which there is inadequate legal remedy; that the balance of hardships weighs in favor
of an injunction; and that an injunction will not harm the public interest. 15 U.S.C. § 1116(a);
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eBay, 547 U.S. at 391. Based on KTurbo’s Lanham Act violations, it is apparent that no
adequate remedy at law exists to make Neuros whole; therefore, injunctive remedy is
appropriate. The false statements made by KTurbo regarding Neuros’s wire power and
efficiency will have lingering effects on its business, because employees of potential customers
could believe the false information KTurbo has disseminated.
Moreover, there is a “well-established presumption that injuries arising from Lanham Act
violations are irreparable, even absent a showing of business loss.” Abbott Laboratories v. Mead
Johnson & Co., 971 F.2d 6, 16 (7th Cir. 1992) (Abbott) (further providing, “This presumption, it
appears, is based upon the judgment that it is virtually impossible to ascertain the precise
economic consequences of intangible harms, such as damage to reputation and loss of goodwill,
caused by such violations.”) (citations omitted). Again, based on the trial evidence and previous
findings, the Court finds Neuros is unable to quantify damages it sustained on this claim to
adequately support an award of actual damages and that no adequate legal remedy exists. The
Court further finds Neuros suffered irreparable harm to its business due to KTurbo’s actions.
In balancing the hardships, it is further apparent that injunctive relief is an appropriate
remedy. KTurbo will have no hardship in having to refrain from repeating its false statements to
other potential customers, particularly in light of KTurbo’s admission that “it has not been in the
business of manufacturing and selling turbo blowers for more than two years” (Resp. at 14), and
the Court so finds. Neuros has proposed a narrowly tailored request for corrective advertising by
KTurbo that does not place a significant burden on KTurbo. See Abbott, 971 F.2d at 17 (finding
corrective advertising to be a less severe remedy than others proposed). More importantly,
because of the somewhat unique method of advertising in the industry, as discussed above and in
the Court’s May 3, 2011 Memorandum Opinion and Order and the Seventh Circuit’s opinion,
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without this kind of injunctive relief, it is reasonable that Neuros’s business could continue to
suffer hardship if the false statements about Neuros’s business are not affirmatively corrected by
KTurbo.
Finally, the Court finds the proposed injunctive relief does not disserve the public
interest; rather, to enjoin KTurbo from continuing to spread false information and require
KTurbo to provide corrective advertising to a relevant portion of consumers serves the public
interest. Truthful advertising is “an interest that lies at the heart of the Lanham Act.” Abbott,
971 F.2d at 19 (citing Wojnarowicz v. American Family Association, 745 F.Supp. 130, 141
(S.D.N.Y. 1990)). Therefore, injunctive relief is an appropriate remedy for Neuros with respect
to KTurbo’s Lanham Act violation.
Injunctive Relief Under the DTPA
Similarly, injunctive relief is an appropriate remedy under the DTPA. Under Illinois law,
a party must demonstrate irreparable harm, no adequate remedy at law, and a clear and
ascertainable right in need of protection to obtain an injunction. Bogner, 796 N.E.2d at 685-86.
As discussed above, Neuros has established the irreparable harm it suffered and that no adequate
remedy at law is available to it. Neuros has a clear and ascertainable right to be protected under
the DTPA, for the reasons stated above. Therefore, Neuros is entitled to the same injunctive
relief under the DTPA, as well.
Taxing Appellate Costs and Releasing Registry Funds
Finally, Neuros also moves to tax appellate costs and to release funds deposited by
KTurbo in the Court’s registry. This does not appear to be specifically opposed by KTurbo in its
Response. Federal Rule of Appellate Procedure 39(e)(4) provides that “the fee for filing the
notice of appeal” “are taxable in the district court for the benefit of the party entitled to costs . . .
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.” Neuros submitted a Bill of Costs, which indicated it paid a $455.00 fee in order to file its
appeal. (Mot. to Tax App. Costs, Ex. A.) KTurbo is therefore ordered to pay to Neuros $455.00
in appellate costs.
On October 6, 2011, the Court entered an order, providing for KTurbo to submit a check
in the amount of $94,193.89 to the Clerk of the Court for deposit into the Court’s registry. (Dkt.
No. 278, ¶ 1.) The Order further provided that if the Seventh Circuit found KTurbo to be liable
to Neuros for any amount of monetary relief, the deposited amount shall be released to Neuros
upon motion, following the issuance of the Seventh Circuit’s mandate. (Id. ¶ 3.) The Seventh
Circuit issued such a mandate, as explained above, and KTurbo is liable to Neuros for monetary
relief, including the $60,000.00 in damages awarded on May 4, 2011, and the district court costs
of $23,655.26 awarded on August 25, 2011. Furthermore, pursuant to 28 U.S.C. § 1961, KTurbo
is liable for post-judgment interest on both the damage award and the costs award, at a rate of
0.22% for the damages award, since May 4, 2011, and 0.11% for the costs award, since August
25, 2011, until the awards are paid.
CONCLUSION
Based on the foregoing, Neuros’s Motion to Enter Revised Judgment is granted. The
judgment entered May 3, 2011, is amended. Judgment is hereby entered in favor of Neuros on
its Lanham Act and DTPA claims (Counts I and II of the Complaint).
It is therefore ordered Neuros shall be awarded attorneys’ fees in an amount to be
determined pursuant to Local Rule 54.3.1
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Note Local Rule 54.3 requires the parties to discuss and attempt to agree on the amount
of attorneys’ fees and costs prior to filing a motion for recovery of such fees and costs.
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It is further ordered that a permanent injunction shall issue against KTurbo, its officers,
employees, agents, and anyone working for, in concert with, or on behalf of KTurbo:
1. To refrain from publishing, circulating, emailing, making available, or otherwise
distributing any confidential or proprietary Neuros documents, including but not
limited to bid documents and the report entitled Factory Test/trip Report NX300
Turbo Blower;
2. To refrain from publishing, circulating, emailing, making available, or otherwise
distributing any document that contains false, misleading, and/or deceptive
statements regarding Neuros, its products, its business, its employees, or its
customer or potential customer relationships, including without limitation the July
14, 2008 email described in the Complaint;
3. To refrain from, directly or indirectly, making any false or misleading
representations of fact concerning Neuros, either orally or in writing, and
including without limitation those made in the July 14, 2008 email described in
the Complaint;
4. To refrain from wrongfully interfering with or disrupting any prospective
economic relations of Neuros with any prospective customers through false,
misleading, or deceptive statement or use of confidential or proprietary
documents addressing Neuros, its businesses, or products; and
5. To issue corrective advertising under KTurbo’s name and at KTurbo’s expense,
that advises every known recipient of the July 14, 2008 email and any other
similar written or oral statements of the falsity of such written or oral statements.
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KTurbo shall submit a proposed statement and list of recipients to the Court
within 21 days of this order.
As discussed above, Neuros is awarded $455.00 in appellate costs and entitled to the
award of damages and costs, including post-judgment interest at the rates expressed above.
Neuros’s motion to release the requested amounts from the Court registry is granted.
Date:
April 17, 2013
______________________________
JOHN W. DARRAH
United States District Court Judge
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