Illinois Tamale Co. v. El-Greg, Inc.

Filing 202

MEMORANDUM Opinion and Order written by the Honorable Matthew F. Kennelly on 12/14/2018: For the reasons stated, the Court finds defendant's defense of laches meritorious to the following extent: plaintiff's damages on its Lanham Act c laims are reduced to $10,000 (as opposed to $20,000), and its recovery of defendant's profits on the Lanham Act claims is reduced to $30,000 (as opposed to $60,000). It appears that these amounts do not duplicate the damage s the jury awarded on the breach of contract claim, which total $100,000. The Court directs the Clerk to enter judgment in favor of plaintiff Illinois Tamale Co. on all of its claims against defendant El-Greg, Inc, awarding Illinois Tamale damages in the total amount of $140,000. Mailed notice. (pjg, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ILLINOIS TAMALE CO.,
Plaintiff,
vs.
EL-GREG, INC.,
Defendant.

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Case No. 16 C 5387

FINDINGS OF FACT AND CONCLUSIONS OF LAW
MATTHEW F. KENNELLY, District Judge:
This case was tried before a jury on plaintiff Illinois Tamale Co.'s claims of
trademark infringement, trade dress infringement, and false advertising under the
Lanham Act and a state law breach of contract claim. The jury found in favor of Illinois
Tamale and against defendant El-Greg, Inc. on all claims. The jury also made a finding
of willfulness on each of the Lanham Act claims. It awarded damages and profits in
amounts to be discussed below.
El-Greg has asserted a defense of laches based on what it contends was Illinois
Tamale's unreasonable delay in filing suit. The parties agreed that laches would be
tried to and decided by the Court, not the jury, and that the Court could rely on the entire
trial record as well as any additional evidence or argument presented to the Court. The
Court held what amounts to a bench trial on November 7, 2018 at which some exhibits
were introduced but that primarily consisted of arguments by counsel. This constitutes
the Court's findings of fact and conclusions of law under Federal Rule of Civil Procedure

52(a).
Discussion
Illinois Tamale has asserted four claims under the Lanham Act. First, it claims
that El-Greg infringed its mark Pizza Puffs by selling a product with the label "Pizza
Pies™ (Puffs)." Second, it claims that El-Greg's product label infringed its trade dress
because the label was confusingly similar to Illinois Tamale's. Third, Illinois Tamale
claims infringement of its alleged rights in a family of trademarks based on the term puff
based upon El-Greg's sales of products called Spinach Puffs, Chili Cheese Puffs,
Deluxe Beef Puffs, Veggie Puffs, and Pizza Pies™ (Puffs). Fourth, Illinois Tamale
claims that El-Greg engaged in false advertising by using the slogan "Makers of the
Original Puffs." As indicated above, the jury found in favor of Illinois Tamale on each of
these claims.
El-Greg has asserted a defense of laches. The application of laches depends
upon a showing of an unreasonable lack of diligence by the party against whom the
defense is asserted and prejudice arising from the lack of diligence. Hot Wax, Inc. v.
Turtle Wax, Inc., 191 F.3d 813, 822 (7th Cir. 1999). In support its laches defense, ElGreg contends that Illinois Tamale was aware of the alleged infringement as early as
August 2011 but did not file suit until nearly five years later, in May 2016. El-Greg
contends that it was unfairly prejudiced by the delay.
For laches to apply, the defendant must show that the plaintiff had knowledge of
the defendant's use of an allegedly infringing mark; the plaintiff inexcusably delayed
taking action with respect to the defendant's use; and the defendant would be
prejudiced by allowing the plaintiff to assert its rights. Chattanoga Mfg., Inc. v. Nike,

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Inc., 301 F.3d 789, 792-93 (7th Cir. 2002). El-Greg has established the first element;
Illinois Tamale's sending of a cease-and-desist letter in August 2011 shows its
knowledge of El-Greg's claimed infringement of the Pizza Puffs mark.
As for the second element, there is a presumption of unreasonable delay if the
plaintiff, having knowledge of the claimed infringement, does not act within the most
analogous state statute of limitations (the Lanham Act does not have its own statute of
limitations). Chattanoga Mfg., Inc., 301 F.3d at 793; Hot Wax, Inc., 191 F.3d at 821.
The most analogous state statute is the three-year limitations period found in the Illinois
Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/10a(e). See
Chattanoga Mfg., Inc., 201 F.3d at 793-94 (at least implicitly approving the district
court's reliance on this statute). The Court overrules Illinois Tamale's contention that
the five-year Illinois limitations period for fraud claims should apply because the conduct
in this case constitutes passing off; that is not the "most analogous" statute even under
that scenario, and that aside, no finding of passing off was made or necessarily had to
be made for the jury to find for Illinois Tamale. Thus, because Illinois Tamale did not file
suit within three years after learning of the claimed infringement, a presumption of
unreasonable delay applies. Illinois Tamale has not rebutted the presumption. It
contends that the whole five years should not count against it, but that is not a viable
argument. It is undisputed that El-Greg not only did not respond promptly to the letter; it
never responded and instead kept selling the alleged infringing product. This was
tantamount to a rejection of the cease-and-desist demand. Thus El-Greg's nonresponse did not justify delay in taking further action beyond a very brief period. Illinois
Tamale identifies no other basis upon which to justify its delay. The Court concludes

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that El-Greg has met the second element of the test for application of laches.
The third question is whether Illinois Tamale's unreasonable delay in filing suit
prejudiced El-Greg. Prejudice exists "when a defendant has changed his position in a
way that would not have occurred if the plaintiff had not delayed." Hot Wax, Inc., 191
F.3d at 824. El-Greg identifies four ways in which it was prejudiced. First, it contends
that it was deprived of the opportunity to cut off damages at an earlier date by changing
its label; El-Greg points out that it did exactly this seven months after Illinois Tamale
eventually filed suit. Second, El-Greg argues that it was prejudiced by continuing to
market its product and build its business during the intervening period. See id. at 824;
Chattanoga Mfg., Inc., 301 F.3d at 795. Third, El-Greg argues that the delay allowed
damages to "pil[e] up . . . over the years." Nov. 7, 2018 Tr. at 753. Finally, El-Greg
contends that the delay allowed Illinois Tamale's registered mark to become
incontestable, thereby precluding El-Greg from arguing at trial that the mark was merely
descriptive and lacked the required secondary evidence to support a claim of
infringement. Relatedly, El-Greg contends that it could have challenged the mark
before the Trademark Office when Illinois Tamale's application for registration was
pending.
El-Greg's second point is unpersuasive. There is no evidence in the record that
would support a finding that the company made any sort of significant investment in
marketing or product development to promote its Pizza Pies™ (Puffs) mark or label.
El-Greg's fourth point has some surface appeal, but it is premised upon the
proposition that if Illinois Tamale had pursued litigation earlier, El-Greg would have been
able to successfully contest registration of the Pizza Puffs mark or would have prevailed

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at the infringement trial because the mark would have been considered descriptive and
evidence of secondary meaning would have been lacking. The problem is that El-Greg
has done nothing to support either of these propositions. On the first (regarding
contesting of the registration), El-Greg has not persuasively argued that Illinois Tamale
would not have been able to overcome such a challenge and attain registration,
particularly given its longtime continuous use of the Pizza Puffs mark. 1 Nor has it made
any effort to show that secondary meaning evidence would have been lacking in a way
that would have resulted in a verdict for El-Greg at a trial. El-Greg has effectively
forfeited this point by making it in a perfunctory way; even if not, it has not supported its
contention.
El-Greg's first point—that it was deprived of the opportunity to cut off damages at
an earlier date—and its third point—that Illinois Tamale's delay allowed damages to pile
up in a prejudicial way—are actually two sides of the same coin. The argument has
merit. First, it is supported factually. El-Greg changed its label after the suit was filed,
not immediately, but soon enough to reasonably infer that there was a cause-and-effect
relationship. There is every reason to believe that El-Greg would have acted similarly
had it been sued in 2011, or 2012, or any earlier time. Second, El-Greg's argument is
supported legally. See Hot Wax, Inc., 191 F.3d at 824 (had plaintiff pressed its claims
in a timely manner, defendant "certainly could have . . . simply renamed its products").
For these reasons, the Court concludes that El-Greg has established its defense
of laches. The Court rejects Illinois Tamale's contention that El-Greg's willfulness

The Court also notes that El-Greg had every opportunity after getting the cease-anddesist letter to go to the Trademark Office to challenge the application, but it did not do
so.

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constitutes unclean hands that precludes it from relying on a laches defense. Illinois
Tamale has not shown that El-Greg's conduct amounts to the type of "actual fraud"
directly bearing on the issue of laches that would be needed to bar reliance on this
defense. See Hot Wax, Inc., 191 F.3d at 826 (discussing La Republique Française v.
Saratoga Vichy Spring Co., 191 U.S. 427, 439 (1903)).
The final question concerns the consequences of Illinois Tamale's laches. "By
reason of laches, a plaintiff in a trademark infringement action may lose the right to
recover damages or wrongfully derived profits during the period prior to the filing of suit.
Upon a showing of infringement, however, the plaintiff may still be entitled to injunctive
relief, and to damages and profits for the period subsequent to the filing of suit." James
Burrough Ltd. v. Sign of Beefeater, Inc., 572 F.2d 574, 578 (7th Cir. 1978) (per curiam).
The reason is that trademark infringement "is a continuous wrong and, as such, gives
rise to a claim for relief so long as the infringement persists."
El-Greg argues, albeit a bit half-heartedly, that Illinois Tamale's laches should
completely wipe out its ability to seek damages, profits, and equitable relief. The Court
rejects that argument. There are cases where the Seventh Circuit has approved this,
but they involved much more extreme delay than what's involved here: in Hot Wax,
over twenty years, see Hot Wax, Inc., 191 F.3d at 818, and in Chattanoga
Manufacturing, at least nine and more likely fourteen years, See Chattanoga Mfg., Inc.,
201 F.3d at 793. El-Greg cites no Seventh Circuit case authorizing a laches-based
complete dismissal in the present scenario.
In sum, Illinois Tamale's delay is not so extreme as to warrant a denial of relief
beyond what the Seventh Circuit described in James Burrough: denial of damages and

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profits that predate the filing of suit. James Burrough Ltd., 572 F.2d at 578.
Fortunately, those figures exist: at El-Greg's behest, the Court asked the jury to provide
two separate sets of damages figures, one set for the entire period at issue, and one set
for the period postdating the filing of suit.
Conclusion
For the reasons stated above, the Court finds defendant's defense of laches
meritorious to the following extent: plaintiff's damages on its Lanham Act claims are
reduced to $10,000 (as opposed to $20,000), and its recovery of defendant's profits on
the Lanham Act claims is reduced to $30,000 (as opposed to $60,000). It appears that
these amounts do not duplicate the damages the jury awarded on the breach of contract
claim, which total $100,000. The Court directs the Clerk to enter judgment in favor of
plaintiff Illinois Tamale Co. on all of its claims against defendant El-Greg, Inc, awarding
Illinois Tamale damages in the total amount of $140,000.
Date: December 14, 2018
________________________________
MATTHEW F. KENNELLY
United States District Judge

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