242 F.3d 772 (7th Cir. 2001), 00-3254, Berthold Types Ltd. v Adobe Systems Incorp.

Docket Nº:00-3254
Citation:242 F.3d 772
Party Name:Berthold Types Limited, Plaintiff-Appellee, v. Adobe Systems Incorporated, Defendant-Appellant.
Case Date:March 09, 2001
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

Page 772

242 F.3d 772 (7th Cir. 2001)

Berthold Types Limited, Plaintiff-Appellee,

v.

Adobe Systems Incorporated, Defendant-Appellant.

No. 00-3254

In the United States Court of Appeals, For the Seventh Circuit

March 9, 2001

Argued February 16, 2001

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 00 C 1490--Elaine E. Bucklo, Judge.

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Before Easterbrook, Manion, and Diane P. Wood, Circuit Judges.

Easterbrook, Circuit Judge.

Both Berthold Types and Adobe Systems design and sell typefaces. Adobe includes all of its own faces, plus many licensed from other type foundries such as Agfa and Monotype, in the Adobe Type Library, which contains more than 2,750 typefaces in PostScript and OpenType formats. Individual faces (or collections of related faces) can be licensed and downloaded from Adobe's Web site or purchased on CD-ROM. The Adobe Font Folio, a CD-ROM that gives the purchaser access to all of the Library's type, is available for about $9,000. Berthold Types has been among Adobe's partners in this endeavor: a contract between Adobe and two German firms (H. Berthold AG and Berthold Types GmbH) gives Adobe a non-exclusive right to include many of Berthold's typefaces in the Adobe Type Library, and to use Berthold's trademarks in connection with the Library, from 1990 through 2015. Berthold Types Ltd., a U.S. corporation that we call Berthold, succeeded to the German firms' interests in 1997 and the next year signed its own contract with Adobe as a continuation of the 1990 deal.

According to the complaint Adobe first included Berthold typefaces in the Library in 1991, and since 1993 "parties other than Adobe, including Berthold, have marketed the Adobe Type Library as including the Berthold typefaces" (emphasis added). Berthold receives royalties when customers purchase individual Berthold typefaces from the Library or buy the Adobe Font Folio disc; it also believes that the presence of Berthold typefaces in the Library amounts to an endorsement by Adobe (the creator of PostScript and co-designer of OpenType) that has "greatly contributed to Berthold's reputation as a provider of high-quality typefaces and has materially

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enhanced the prestige and goodwill associated with the Berthold typefaces and associated trademarks." Berthold also alleged that some time in 1999 or early 2000 Adobe removed all Berthold typefaces from the Adobe Type Library. This step, Berthold contended, violated the contract, the Lanham Act, 15 U.S.C. sec.1125(a) (on the theory that customers have come to expect the Library to contain Berthold faces, making it misleading for Adobe to offer the Library without Berthold type), and the consumer-deception statutes of several states (on the theory that Adobe has falsely told customers that they can get Berthold typefaces direct from Berthold at prices higher than Adobe used to charge).

Adobe moved to dismiss the complaint under Fed. R. Civ. P. 12(b)(6) for failure to state a claim on which relief may be granted. The district court agreed with Adobe's position. 101 F.Supp.2d 697 (N.D. Ill. 2000). The contract claim failed for a simple reason: neither the 1990 contract nor the 1998 replacement requires Adobe to use any Berthold typefaces. Adobe has the right, but not the obligation, to include the typefaces; Adobe's only obligation is to pay royalties for typefaces it licenses through the Library. The Lanham Act claim failed because federal law does not prohibit resellers from changing their inventory or require them to alert the public to every alteration in product mix. (One wonders what Berthold had in mind. "New! Improved! No Berthold typefaces!" would not flatter the foundry. Alternatives such as "The Adobe Type Library contains no caffeine, saturated fats, or Berthold typefaces" also would displease it. Advertising exactly what changes had been made between editions of the Font Folio would be cumbersome, given the large number of faces and type designers involved.) As the district judge observed, the Adobe Type Library has many attributes of a catalog or retail store, and no one thinks that Neiman Marcus must perpetually carry the clothing of designers whose line it has sold in the past (or post signs at entrances and warnings in catalogs that particular suppliers' products no longer are for sale within). Finally, the district judge wrote, even if some of Adobe's sales personnel have overstated the prices at which Berthold licenses its own typefaces, this cannot be deemed fraudulent or deceptive "if it is unwitting and innocent, and Berthold does not say that it was not." 101 F.Supp.2d at 699.

While the district court had under advisement Adobe's motion to dismiss the contract, Lanham Act, and state-law claims, Berthold filed a motion to amend its complaint by dropping a fourth claim and replacing it with a new contention that Adobe wrongly interfered with a contract between Berthold and a German partnership, Freydank K"rbis Pillich Talke GbR. The partnership, which succeeded to some of the royalty interests H. Berthold AG held in the 1990 contract with Adobe, believes that Adobe had not paid all of the royalties due. According to Berthold's revised complaint, the partnership assigned to Berthold its claim for unpaid royalties, and Adobe then interfered with this assignment by attempting to settle the matter directly with the partnership. The district court allowed Berthold to file the new complaint:

Adobe's motion to dismiss Count I (breach of contract), Count II (false and misleading advertising), Count III (fraud, deceptive trade and business practices), and Count IV (unjust enrichment) of the plaintiff's first amended complaint is GRANTED, and the complaint is DISMISSED without...

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