Cascades Branding Innovation LLC v. Walgreen Co.

Filing 84

MEMORANDUM Opinion and Order Signed by the Honorable Harry D. Leinenweber on 5/3/2012:Mailed notice(wp, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

CASCADES BRANDING INNOVATION,
LLC,
Plaintiff,

Case No. 11 C 2519

v.
Hon. Harry D. Leinenweber
WALGREEN CO., BEST BUY CO.,
INC., EXXON MOBIL CORP.,
TARGET CORP., and LIMITED
BRANDS, INC.,
Defendants.

MEMORANDUM OPINION AND ORDER
(REDACTED)
Before the Court are Defendant Best Buy Co. Inc.’s (“Best
Buy”)

Motion

to

Dismiss,

Defendant

Target

Corp.’s

(“Target”)

Partial Motion to Dismiss and Plaintiff’s Motion to Disqualify
Defendant Best Buy’s counsel, Robins, Kaplan, Miller & Ciresi
(“Robins Kaplan”).

For the reasons stated herein, Defendants’

Motions are denied and Plaintiff’s motion is granted.
I.
Plaintiff

Cascades

BACKGROUND

Branding

Innovation,

LLC

(“Cascades

Branding”) is wholly owned by Cascades Ventures, LLC (“Cascades
Ventures”). Cascades Ventures, in turn, is wholly owned by Anthony
O. Brown (“Brown”).

Brown is also the President and Co-Founder of

Cascades Branding. As Brown sees it, he and Cascades Ventures were
put on this earth to assist inventors and their companies in

“overcome[ing] obstacles to effective patent licensing,” helping
David-like small inventors slay Goliath “giant enterprises” who
infringe their patents.

Dkt. 54-1, 1.

“original patent troll.”

Other people call Brown the

Dkt. 64-1, Page ID 371.

Cascades Branding, an Illinois limited liability company, is
the

exclusive

licensee

No.

7,768,395

(“the

of

‘395

the

patent

suit,

The

Patent”).

in

U.S.

patent

Patent

relates

to

improvements in mobile devices, allowing devices to locate branded
products and services in their vicinity.

Best Buy and Target each

have a mobile device application (“app”) that allows mobile devices
to locate nearby stores without the user having to enter location
information.
and

that

the

Plaintiff claims this infringes on the ‘395 patent
apps

have

no

substantial

non-infringing

use.

Plaintiff accuses both Defendants of inducing infringement and
contributory

infringement

by

making

their

apps

available

for

customers (among others) to download and use.
Defendants Best Buy and Target are each incorporated in
Minnesota and have their principal places of business there also.
Best Buy is represented by Robins Kaplan.

Specifically, Emmett J.

McMahon (“McMahon”) of Robins Kaplan has appeared pro hac vice on
Best Buy’s behalf.
Brown, as owner of Cascades Ventures, approached Robins Kaplan
partner Ronald J. Schutz (“Schutz”) in the summer of 2010 as owner
of Cascades Ventures, seeking representation for Cascades Ventures

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(or a to-be-formed affiliate) in the licensing and enforcement of
a patent portfolio (the “Elbrus Portfolio”) unrelated to the patent
in suit.

The two exchanged a series of e-mails which have been

submitted to the Court by agreement of both Plaintiff and Robins
Kaplan.

Schutz declined to represent Cascades, and informally

notified him of this in an August 27, 2010 e-mail.

More formally,

Schutz

20,

definitively

closed

the

file

on

May

2011

and

communicated this in an e-mail of the same date.
The parties agree no attorney-client relationship was formed,
but dispute whether Schutz learned confidential information during
that exchange that could help Best Buy in the current litigation.
Several years ago, Schutz and McMahon represented a company
called TechSearch, LLC, which Brown co-founded and headed as
President until he sold it lock, stock and barrel in 2005.

As part

of that representation, Schutz, McMahon and other Robins Kaplan
attorneys

helped

litigate

two

lawsuits

related

to

a

patent

portfolio (the “Chan Portfolio”) unrelated to the patent at issue
in this lawsuit or the patents that were the issue of the 2010
negotiations.
represented

As

part

TechSearch

of
in

the

representation,

reaching

settlement

Robins
or

Kaplan

licensing

agreements with at least eight companies. That relationship lasted
from approximately 2002 to 2004.
Cascades contends that, through the two interactions, Robins
Kaplan has gained privileged information relating to Brown’s (and

- 3 -

thus Cascades Branding’s) litigation strategy, business model, and
approach

to

royalties.

negotiating

settlements,

licenses

and

reasonable

Dkt. 54-1, 3.

Events in this litigation began percolating on April 14, 2011,
when attorneys for Cascades Branding notified Best Buy it was
infringing on the patent (the same day they filed suit).
II.

Motions to Dismiss

A.

Legal Standard

On a motion to dismiss, all of a plaintiff’s allegations are
treated as true.

FED. R. CIV . P. 12(b)(6); Wigod v. Wells Fargo

Bank, N.A., No. 11-1423, 2012 U.S. App. LEXIS 4714, at *2 (7th Cir.
March 7, 2012).

Complaints will survive a motion to dismiss if

they contain sufficient factual matter to state a claim to relief
that is plausible on its face.
(2009).
of

Ashcroft v. Iqbal, 129 S. Ct. 1937

However, “threadbare recitals of the elements of a cause

action,

suffice.”

supported

by

mere

conclusory

statements,

do

not

Id. at 1940.
B.
1.

Target
infringement

does

not

charge,

Analysis

Direct Infringement
dispute

but

Best

the

sufficiency

Buy

does,

of

claiming

the

direct

Plaintiff’s

complaint is conclusory and does not meet the standards of Iqbal
and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). Plaintiff
responds that neither of those cases invalidated Form 18 of the
- 4 -

Rules of Civil Procedure (a sample form for patent infringement
complaints) and that its complaint is at least as sufficient as
that boilerplate.

It points to McZeal v. Sprint Nextel Corp., 501

F.3d 1354 (Fed. Cir. 2007), a post-Twombly but pre-Iqbal case that
allowed a bare-bones pro se infringement complaint to proceed.
Best Buy says Colida v. Nokia, Inc., 347 Fed.Appx. 568, 571 n.2
(Fed. Cir. Oct. 6, 2009), casts doubt on McZeal’s efficacy in light
of Iqbal.
This Court believes that the Federal Circuit knows how to
overrule itself, and a passing footnote reference in a design
patent case, where the Plaintiff did not even contend it met
Form 18 standards, does not overrule McZeal.

While it is true

McZeal was a pro se case, and made reference to additional latitude
for such litigants, it did not stand for the proposition that such
litigants could fall below the minimum required and the case merely
outlined that floor, which has been met here.

Plaintiff notes in

the Complaint that Defendants have infringed the ‘395 patent
through “making, using (for example by testing), offering to sell
and/or selling” the app.

This equates with Form 18.

Even if it

did not, the specific example of “testing” is non-conclusory
language not included in the statutory language or Form 18 that
brings the Complaint above that level.

The Motion to Dismiss the

direct infringement allegation is denied.

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2.

Indirect Infringement

A question requiring more examination is whether Plaintiff’s
allegations

in

regard

to

inducement

of

infringement

and

contributory infringement meet pleading standards.
The Court agrees with the numerous cases cited by Defendants
that hold that Form 18 does not apply to indirect infringement.
See, e.g., Elan Microelecs. Corp. v. Apple, Inc., No. C 09-01531
RS, 2009 WL 2972374, at *2 (N.D. Cal. Sept. 14, 2009) (“[i]n the
absence of any other form that addresses indirect infringement and
is made binding on the courts through Rule 84, the Court must apply
the teachings of Twombly and Iqbal.”)
Indirect infringement requires that the party inducing or
contributing to infringement know of the patent (or be willfully
blind to the existence of such a patent) and that the product or
activity at issue infringes. Lucent Techs., Inc. v. Gateway, Inc.,
580 F.3d 1301,

1320

Defendants

Plaintiff

say

(Fed.

Cir.

has

2009)

failed

(hereinafter

to

plead

this

Lucent).
level

of

scienter.
The

Court

disagrees.

Plaintiff’s

Complaint

specifically

alleged that it sent both Defendants, on April 14, 2011, a “Notice
of Infringement [that] included an infringement claim chart for the
Cascades Patent.”

Defendants fault Plaintiff for trying to attach

said notices of infringement in its response, but the Court did not
consider these, because the necessary information appears in the
- 6 -

Complaint itself.

It is arguably sufficient to merely note that a

notice of infringement was sent to a defendant, because implicit in
this is the inference that such notice (1) notified a defendant of
the existence of the patent in suit and (2) informed them of the
infringement.
Additionally, Plaintiff’s Complaint went even further and
noted that the notice “included an infringement claim chart for the
Cascades Patent, and a firm license offer to abate Best Buy’s [and
Target’s] infringement.”

This makes those inferences explicit,

and, particularly when coupled with the allegation that the apps
are

incapable

of

any

non-infringing

use,

meets

the

scienter

requirement.
The next objection is that indirect infringement requires a
primary instance of infringement by a third party (See, e.g., DSU
Med. Corp. v. JMS Co. Ltd., 471 F.3d 1293, 1303 (Fed. Cir. 2006))
and that Plaintiff failed to sufficiently allege this.

Defendants

argue that a specific third party must be identified.
Again, the Court disagrees.

Plaintiff noted that Defendants

“provide[] its customers the Target [and Best Buy] application” and
the app “operates on consumers’ smart phones.” As Plaintiff points
out, exact specificity of the third party is not required at the
trial level, let alone at the pleading stage.

In Lucent, the

Federal Circuit allowed a jury verdict finding inducement of
infringement and contributory infringement to stand where no single

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third party infringer had been identified.
1317-1320.

Lucent, 580 F.3d at

Instead, it was sufficient for the jury to infer from

circumstantial evidence that at least one person had done so.
at 1318.

Id.

The Court notes that case involved a product that was

capable of being used in a non-infringing manner, and so the
inference that someone used it in an infringing manner is an even
greater leap than what is alleged here, that no non-infringing use
is possible.
Plaintiff has alleged Defendants’ customers have downloaded
the app and that they have “operate[d]” them on their phones.

That

suffices.
C.
For
adequately

the

above

alleged

infringement.

Conclusion

reasons,
direct,

the

Court

contributory

finds

Plaintiff

has

and

inducement

of

The Motions to Dismiss are denied.
III.

MOTION TO DISQUALIFY
A.

Legal Standard

Although this is a patent case, which is governed by the
appellate law of the Federal Circuit, that Circuit defers to the
particular regional circuit court regarding procedural matters,
such as attorney disqualification.

Panduit Corp. v. All States

Plastic Manufacturing Co., Inc., 744 F.2d 1564, 1575 (Fed. Cir.
1984).

- 8 -

Disqualification “is a drastic measure which courts should
hesitate

to

impose

except

when

absolutely

necessary.

A

disqualification of counsel, while protecting the attorney-client
relationship, also serves to destroy a relationship by depriving a
party of representation of their own choosing.” Freeman v. Chicago
Musical Instrument Co., 689 F.2d 715, 721-722 (7th Cir. 1982)
(issue of appealability of disqualification later superseded by
Richardson-Merrell, Inc. v. Koller, 472 U.S. 424, (1985); see also,
In Re Firstmark Corp., Brouwer v. Ancel & Dunlap, 46 F.3d 653, 659660 (7th Cir. 1995)).
The parties also cite to the ABA Model Rules of Professional
Conduct and seem to agree that they are substantially similar to
both Illinois’ rules (where Plaintiff is located) and Minnesota’s
rules (where Robins Kaplan and Best Buy are located).

Best Buy

does not dispute that Illinois state court precedent is applicable;
merely that Illinois cases cited by Plaintiff are inapposite.
Since the parties agree Illinois rules are applicable, and because
questions of client confidences are judged from the perspective of
the client (Westinghouse Electric Corp. v. Kerr-McGee Corp., 580
F.2d 1311, 1319-1320 (7th Cir. 1978)), when it is necessary to
refer to specific rules of conduct, the rules of the state of the
purported client in this case (Illinois’ rules) will be cited.

- 9 -

Two primary Illinois rules govern: Rule 1.9 (Duties to Former
Clients) and Rule 1.18 (Duties to Prospective Client).

Rule 1.9

provides:
(a) A lawyer who has formerly represented a client
in a matter shall not thereafter represent another person
in the same or a substantially related matter in which
that person’s interests are materially adverse to the
interests of the former client unless the former client
gives informed consent.
(b) A lawyer shall not knowingly represent a person
in the same or a substantially related matter in which a
firm with which the lawyer formerly was associated had
previously represented a client
(1) whose interests are materially adverse to that
person; and
(2) about whom the lawyer had acquired information
protected by Rules 1.6 and 1.9(c) that is material to the
matter; unless the former client gives informed consent.
(c) A lawyer who has formerly represented a client
in a matter or whose present or former firm has formerly
represented a client in a matter shall not thereafter:
(1) use information relating to the representation
to the disadvantage of the former client except as these
Rules would permit or require with respect to a client,
or when the information has become generally known; or
(2)
reveal
information
relating
to
the
representation except as these Rules would permit or
require with respect to a client.
Illinois Rules of Professional Conduct of 2010, available at
http://www.state.il.us/court/supremecourt/rules/art_viii/default_
new.asp.

Comment 2 to the rule notes:

[A] lawyer who recurrently handled a type of problem for
a former client is not precluded from later representing
another client in a factually distinct problem of that
- 10 -

type even though the subsequent representation involves
a position adverse to the prior client.
Comment 3 notes:
Matters are “substantially related” for purposes of this
Rule if they involve the same transaction or legal
dispute or if there otherwise is a substantial risk that
confidential factual information as would normally have
been obtained in the prior representation would
materially advance the client’s position in the
subsequent matter. … Information acquired in a prior
representation may have been rendered obsolete by the
passage of time, a circumstance that may be relevant in
determining whether two representations are substantially
related. In the case of an organizational client, general
knowledge of the client’s policies and practices
ordinarily will not preclude a subsequent representation;
on the other hand, knowledge of specific facts gained in
a prior representation that are relevant to the matter in
question ordinarily will preclude such a representation.
Rule 1.18 provides:
(a) A person who discusses with a lawyer the
possibility of forming a client-lawyer relationship with
respect to a matter is a prospective client.
(b) Even when no client-lawyer relationship ensues,
a lawyer who has had discussions with a prospective
client shall not use or reveal information learned in the
consultation, except as Rule 1.9 would permit with
respect to information of a former client.
(c) A lawyer subject to paragraph (b) shall not
represent a client with interests materially adverse to
those of a prospective client in the same or a
substantially related matter if the lawyer received
information from the prospective client that could be
significantly harmful to that person in the matter,
except as provided in paragraph (d). If a lawyer is
disqualified from representation under this paragraph, no
lawyer in a firm with which that lawyer is associated may
knowingly undertake or continue representation in such a
matter, except as provided in paragraph (d).

- 11 -

Comment 3 to the rule provides:
Paragraph (b) prohibits the lawyer from using or
revealing that information, except as permitted by
Rule 1.9, even if the client or lawyer decides not to
proceed with the representation. The duty exists
regardless of how brief the initial conference may be.
Comment 6 provides:
Even in the absence of an agreement, under paragraph (c),
the lawyer is not prohibited from representing a client
with interests adverse to those of the prospective client
in the same or a substantially related matter unless the
lawyer has received from the prospective client
information that could be significantly harmful if used
in the matter.
As to whether a substantial relationship exists between a
client

and

an

attorney,

undertaken. . . .

“a

three-level

inquiry

[should]

be

First, the trial judge must make a factual

reconstruction of the scope of the prior legal representation.
Second, it must be determined whether it is reasonable to infer
that the confidential information allegedly given would have been
given to a lawyer representing a client in those matters.

Third,

it must be determined whether that information is relevant to
the issues raised in the litigation pending against the former
client.”

LaSalle Nat’l Bank v. County of Lake, 703 F.2d 252, 255-

256 (7th Cir. 1983).
In general, “an attorney for a corporate client owes his duty
[of loyalty] to the corporate entity rather than a particular
officer, director or shareholder.”

Bd. of Managers of Eleventh

Street Loftominium Ass’n. v. Wabash Loftominium, LLC., 876 N.E.2d

- 12 -

65, 72 (Ill. App. Ct. 2007) (hereinafter, Loftominium).
there may

be

circumstances

where

the lawyer

must

However,

consider

a

subsidiary or other constituent of a corporate client to be a
client as well, such as those instances where the subsidiary has
the same management group.

Id. at 72-73.
B.

Analysis

Without a doubt, the first question that must be answered is
whether

Cascades

Branding

has

any

former

or

prospective

relationship with Robins Kaplan.
Cascades Branding says that Loftominium decrees it has both.
Starting with TechSearch, the Court is confident that Robins
Kaplan’s relationship with this company imposes no former-client
duties in relation to Cascades Branding.

The Court finds that

Loftominium’s extension of the client definition was limited to
instances

of

subsidiaries

or

other

closely-related

entities

(phrased as “other constituents” of the corporate entity).
Cascades Branding is in no way, shape or form a subsidiary,
affiliate, parent or any other permutation of TechSearch.

That

Brown once ran and owned TechSearch, and now runs and owns Cascades
Branding (through the parent company Cascades Ventures) stretches
the understanding of Loftominium past the breaking point.

As Best

Buy

so,

points

out,

Brown

sold

TechSearch,

relinquished all claims to that company.

- 13 -

and

in

doing

he

Cascades’ only link

(either parent or subsidiary) is common personnel (Brown), a link
too tenuous to alone confer former client status.
Brown’s claim to former client status in regards to TechSearch
is further hampered by the comments to Illinois Rule 1.9 regarding
the passage of time.

Seven years passed between 2004 and the 2011

litigation

of

case,

crediting

the

relationship.
request

(as

this

TechSearch
Further

Cascades

a

factor

that

relationship

discrediting
Ventures

as

this

owner)

also
a

weighs

against

former

client

argument

for

a

is

Brown’s

client-attorney

agreement from Robins Kaplan during his 2010 discussions with that
firm.

It demonstrates that even Brown did not believe that

relationship governed his current interactions with the firm, and
that a new dynamic governed.

In sum, the TechSearch/Cascades

Branding connection is just too tenuous.
The question in relation to Brown and Cascades Ventures’
interactions with Robins Kaplan in 2010 merits a closer look,
however.
Just as in the TechSearch relationship, Cascades Branding was not
the party engaging in the relationship with Robins Kaplan.

But

unlike TechSearch, Cascades Branding is a wholly-owned subsidiary
of the party (Cascades Ventures) that had the relationship with
Robins Kaplan.

It is also clear that the parent company, Cascades

Ventures, is directing the current litigation.

See GSI, infra.

Cascades Ventures and Plaintiff are managed by the same personnel,

- 14 -

are part of the same corporate family and are closely aligned in
purpose.
It also appears that Cascades Ventures routinely operates its
litigation through subsidiaries created for that purpose. In fact,
the litigation which Brown sought to entice Robins Kaplan into
filing was eventually filed through a subsidiary, Cascades Computer
Innovation, LLC.

Dkt. 70-1, 5, n.2.

Loftominium is not the only authority for the proposition that
a parent, subsidiary or affiliate company can be a dual, if
unsuspected, client.

In Discotrade, Ltd. V. Wyeth-Ayerst Int.

Inc., 200 F.Supp.2d 355 (S.D.N.Y. 2002) (hereinafter Discotrade)
plaintiff, a distributor, sued defendant, a supplier, alleging
fraud

and

breach

of

contract.

Wyeth

moved

to

disqualify

plaintiff’s counsel on the grounds that Discotrade’s counsel also
represented a subsidiary of Wyeth’s parent company in a patent
application matter.

The court found the corporate relationship

between defendant and the parent company “so close as to deem them
a single entity for conflict of interest purposes.”
359.

Id.

at 358-

The closeness was based upon both companies being wholly-

owned subsidiaries of the parent company, sharing the same board of
directors and several senior officers, and using the same computer
network, travel department, letterhead and health benefit plan.
Id.

- 15 -

The Second Circuit approved of Discotrade, but cautioned that
it agreed with “the ABA that affiliates should not be considered a
single entity for conflicts purposes based solely on the fact that
one entity is a wholly-owned subsidiary of the other, at least when
the subsidiary is not otherwise operationally integrated with the
parent company.”

GSI Commerce Solutions, Inc. v. BabyCenter,

L.L.C., 618 F.3d 204, 210-212 (2nd Cir. 2010) (disqualifying
counsel for concurrent representation when the entities shared
responsibility for both the provision and management of legal
services). GSI noted that the focus on legal and management issues
“reflects the view that neither management nor in-house legal
counsel should, without their consent, have to place their trust in
outside counsel in one matter while opposing the same counsel in
another.”

Id.

The notion even has a home in the Seventh Circuit.

See Westinghouse, 580 F.2d at 1321 (protecting confidentiality
interest of affiliate of client).
These cases dealt with concurrent representation, however, and
the situation at hand deals with prospective representation, making
it a further step removed.

As Plaintiff points out, prospective

representation, at least where confidential information has been
shared, is viewed through the prism of Rule 1.9, governing former
clients.

But that one step of removal does not destroy the logic

of parties reasonably expecting confidentiality in their past
discussions with lawyers.

As Charles W. Wolfram noted,
- 16 -

Here, too, courts have generously protected
reasonable expectations
in the confidentiality of
information on the part of both the original corporate
client and its then affiliates. As with concurrentrepresentation analogs, the few decisions dealing with
the issue in the context of a corporate family have
rooted a prohibition against the later representation on
the grounds of confidentiality. Again in agreement with
concurrent-representation analogs, the duty of the lawyer
to avoid such conflicted representations applies whether
the lawyer is likely to have learned the linking
confidential information in the earlier representation
from either the corporate client or from the non-client
affiliate.
While the foregoing places important conflict
limitations on the right of a lawyer to represent an
adverse client, it is important to note that protection
of confidentiality exhausts the duties of a lawyer to any
former client, and certainly to a non-client to whom the
lawyer owes confidentiality duties. In other words, no
matter how adverse the later representation may be, if it
is
not
also
factually
linked
to
the
earlier
representation in the way required under the substantialrelationship standard, the later representation is
permissible.
Legal Ethics: Corporate-Family Conflicts, 2 J. Inst. Stud. Leg.
Eth. 295, 355-356.
This Court, too, believes that the once-removed analysis does
not destroy the expectation of confidentiality.

Further, it is

apparent

that

that

Cascades

Ventures

(the

party

had

the

prospective-client relationship with Robins Kaplan) is effectively
the same party as Cascades Branding for the purpose of conflict-ofinterest analysis.

This conclusion is based on the fact that

Cascades Ventures is the sole owner of Cascades Branding, and due
to

the

fact

acquiring

and

that

Cascades

managing

Ventures

the

legal

- 17 -

appears

responsible

representation

of

for
its

subsidiaries.

It is further based on the unique business model of

Cascades Ventures, a non-practicing entity (“NPE”) seeking to
enforce patents through subsidiaries.
No one disputes that the litigation is directly adverse to
Cascades Branding.

Therefore, under the above analysis, it is

directly adverse to Cascades Ventures as well.
The disqualification question, therefore, turns on whether
Cascades
Kaplan.

Ventures

had

a

substantial

relationship

with

Robins

Under the first prong of the Seventh Circuit’s analysis,

the Court must reconstruct the scope of the representation.

The

parties

not

do

discussed.

not

dispute

that

the

current

litigation

was

The scope, instead, was Cascades Ventures’ disclosure

of confidential information in the course of exploring whether the
law firm would represent it in the Elbrus patent portfolio matter.
The Court notes that the August 25, 2010 e-mail from attorney
Schutz

to

Brown

affirmatively

information was disclosed.
The

e-mail

demonstrates

that

confidential

Dkt. 63-3, PageID 357.

reflectsœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœ

œœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœ
œœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœ.
Another e-mail (the August 27, 2010 e-mail from Schutz to Brown,
Dkt. 63-4, PageID 360) reflects thatœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœ

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œœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœ
œœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœ.
These two e-mails show knowledge ofœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœ
œœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœœ.
The

August

25,

2010

communication

reflects

a

distinct

litigation strategy with regards to the Elbrus portfolio, and it
further reflects that Schutz (e-mailing from an airport) was able
to recall this information off the top of his head without the
benefit of a file.
Robins

Kaplan

maintains

that

this

e-mail

reflects

only

strategy specific to one target of the Elbrus litigation, and does
not reflect a wider knowledge of Cascades Ventures’ “playbook” in
regards

to

reasonable

royalties

in

licensing,

settlement

thresholds, litigation strategy, Cascades Ventures’ business model
or other information that would be useful to a lawsuit opponent.
Plaintiff alleges that all of those broader matters were, in
fact, communicated.
Robins

Kaplan

points

to

the

eventual

resultant

Elbrus

litigation (conducted by another firm), which did not necessarily
follow the strategy outlined in the August 25, 2010 e-mail.
The

e-mail

does

reflect

an

exchange

on

just

one

patent

portfolio, but the Court notes that the second prong of the
substantial relationship question does not call for who can prove
what information was communicated.

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It asks merely whether “it is

reasonable to infer that the confidential information allegedly
given would have been given to a lawyer representing a client in
those matters.”

See LaSalle, infra (emphasis added).

The Court believes the e-mail at issue not only reflects
strategy specific to one target in the Elbrus matter, but is
illuminating as to Cascades Ventures’ core litigation, licensing,
reasonable royalty and business model strategies.
mails

reflect

discussions

that

not

Cascades

reflected

in

Ventures
the

and

submitted

Further, the e-

Schutz

had

other

e-mails.

It

is

reasonable to assume that, particularly in the unique context of an
NPE, discussions would have necessarily touched on questions of
what sort of return Cascades Ventures would accept, what sort of
settlements would make litigation profitable, and what sort of
royalty and licensing agreements Cascades was looking for.

See,

generally, Intellectual Ventures, LLC v. Check Point Software
Techs., LTD, No. 10-1067-LPS (D.Del. April 6, 2011) (disqualifying
law firm, which had formerly represented NPE in non-litigation
matters, from representing defendants in litigation filed by that
same NPE, despite the existence of internal screening methods).
The second prong, therefore, is met.
As

to

the

third

prong,

it

must

be

determined

if

the

information learned in that consultation is relevant to the current
litigation.

The Court finds that it is.

NPE litigation is

dollars-and-cents driven phenomenon, unburdened, usually, by the
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emotional, bet-the-company patent litigation sometimes seen by
practicing entities.

Information on an NPE’s thresholds for

profit, licensing, royalty and litigation, therefore, give a much
clearer picture to an opponent of where one might be attacked in
litigation, and how an opponent will respond to those attacks.
Outside of the Seventh Circuit’s three-prong analysis, the
Illinois Rules call for the same result.
received

information

that

could

be

Robins Kaplan has

significantly

harmful

to

Cascades Ventures in this litigation, and Rule 1.18 mandates
disqualification not only of Schutz, but the entire firm.
The Court is careful to note that it does not intend to impugn
Schutz, McMahon or their firm in their conduct thus far revealed.
It is simply a fact of life that knowledge, once gained, cannot be
completely flushed out of someone’s head.

This is only further

demonstrated by Schutz’s ability to recall, without the benefit of
any paperwork in front of him, detailed confidential information
about the consultation with Brown.

It would not be fair to either

Cascades Ventures or Best Buy to ask him to operate without use of
that knowledge, and in any case, Rule 1.18 does not allow for it.
The Court does not reach its conclusion lightly, and is
cognizant that it deprives Best Buy of its long-term and preferred
counsel in this matter. As Plaintiff notes, however, local counsel
can continue to represent Best Buy, and this Court is prepared to
entertain any and all motions for extended deadlines by Best Buy

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that are premised on the need to retain new counsel and get them up
to speed.
IV.

CONCLUSION

Because Robins Kaplan learned confidential information in its
prospective

client

negotiations

with

Plaintiff

that

would

be

harmful to Plaintiff in this litigation, Plaintiff’s Motion to
Disqualify Robins Kaplan as Best Buy’s attorney is granted.
Because Plaintiff has adequately alleged its causes of action
against Best Buy and Target, the Motions to Dismiss are denied.
IT IS SO ORDERED.

Harry D. Leinenweber, Judge
United States District Court
DATE:5/3/2012

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