Haan Crafts Corp. v. Craft Masters, Inc.

• Decision Date: 30 March 1988
• Docket Number: Civ. No. L 87-95.
• Parties: HAAN CRAFTS CORP., Plaintiff, v. CRAFT MASTERS, INC. and Jerald W. Chitwood, Defendants.
• Court: U.S. District Court — Northern District of Indiana

683 F. Supp. 1234

HAAN CRAFTS CORP., Plaintiff, v. CRAFT MASTERS, INC. and Jerald W. Chitwood, Defendants.

Civ. No. L 87-95.

United States District Court, N.D. Indiana, Hammond Division at Lafayette.

March 3, 1988.

As Amended Nunc Pro Tunc March 30, 1988.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

John McNett, James M. Durlacher, Indianapolis, Ind., Jerome L. Withered, Lafayette, Ind., for plaintiff.

Richard T. Heide, Lafayette, Ind., for defendants.

MEMORANDUM AND ORDER

ALLEN SHARP, Chief Judge.

Plaintiff's Motion for a Preliminary Injunction was heard in open court in Lafayette, Indiana, on September 18, November 12, and November 13, 1987, respectively. At this court's request, the parties have since filed post-preliminary injunction hearing briefs. Based on the information and arguments presented, both orally and in writing, this court now makes findings of facts and conclusions of law as required by Rule 52 of the Federal Rules of Civil Procedure. For reasons set forth below, plaintiff's motion is hereby GRANTED in part and DENIED in part.

I.

This court has jurisdiction to entertain this cause of action by virtue of 28 U.S.C. § 1331 which gives district courts original jurisdiction of all civil actions arising under the laws of the United States. Plaintiff's amended complaint includes two federal law counts. Plaintiff claims a violation of the Lanham Trade-Mark Act, Title 15 U.S. C. § 1125(a) and copyright infringement under Title 17 U.S.C. § 501.

This court also has jurisdiction over plaintiff's unfair competition claim under Title 28 U.S.C. § 1338(b). Plaintiff's other state law claims allege (1) a violation of the Indiana Uniform Trade Secrets Act, IC 24-2-3-1 et seq. and (2) tortious interference of a business relationship. This court has pendant jurisdiction over those state law claims.

II.

Plaintiff Haan Crafts, Inc. is a mail-order catalog business owned and operated by Robert and Ellen Haan of West Lafayette, Indiana. The company, which was incorporated in 1978, designs, manufactures and sells sewing kits to junior and senior high schools for home economics classes. Most of the sewing kits are for stuffed animals, stuffed balls, "sweat" outfits, jackets, and athletic bags. A new catalog is published annually to coincide with the start of the school year. Many items reappear from year to year. Others may be deleted or added each year. Haan Crafts is one of approximately fifteen such companies which do business on a national basis.

Defendant Jerald W. Chitwood was employed as controller of Haan Crafts from August 24, 1985 to March 6, 1987. Robert Haan testified that Chitwood left because Haan fired him in late January of 1987, giving him several weeks' notice before he had to actually leave. On April 20, 1987, less than two months after he left, Chitwood started defendant company, Craft Masters Inc. The company was incorporated on May 20, 1987. Chitwood's only contact with Haan Crafts after March 6, 1987 was approximately three weeks later when he was called by Robert Haan who needed help with the Haan Crafts' computer system. Chitwood at that time had in his possession the Haan Crafts' general ledger software which he then brought to the company and helped load into the system.

Craft Masters, Inc. is also a mail-order business, specializing in sewing kits for junior and senior high school home economics classes. The company's first catalog came out immediately prior to the 1987-88 school year. Craft Masters, Inc. sells sewing kits for stuffed animals, "sweats", athletic bags, stuffed balls and a few miscellaneous items. In any case, the company's product line is virtually identical to Haan Crafts' product line. In fact, the finished products of many of the Craft Masters kits are basically indistinguishable from the finished products of the Haan Crafts kits. For example, both companies offer stuffed footballs and basketballs made of "furry" material which can be ordered (as both companies' catalogs suggest) in the client's school colors. Both companies offer kits to make sweatshirts and sweatpants. In particular, both offer sweatshirts with a single contrasting horizontal band across the chest and a single contrasting band on each sleeve. There are several other similar product offerings: gym bags with the respective company logo, similar stuffed animals, furry dice, furry feet, and aprons. There is no question that the product lines and many of the finished products are nearly identical.

Apparently, at least two of the items which were new to the Haan Crafts 1987-88 catalog appeared in the Craft Masters 1987-88 catalog. These were (1) a pair of 11-inch stuffed feet and (2) the sweatshirts with bands on the chest and sleeves.

Plaintiff introduced into evidence certificates of copyright registration for its catalogs and some of its products. However, none of those certificates is dated before this lawsuit was filed on September 15, 1987. Apart from these certificates, plaintiff has produced no evidence of any other federally registered trademarks or copyrights in its possession.

The conduct of at least three (3) of Haan Crafts' former employees may have some bearing on this case. The first, Linda Trost, left her employment at Haan Crafts sometime in mid-April of 1987. She was immediately employed by Craft Masters beginning April 20, 1987. Her job at each company was primarily to design the sewing kits. Trost was obviously intimately acquainted with the Haan Crafts designs and before she left she became aware of the new designs which were going to be introduced in the Haan Crafts 1987-88 catalog.

A second former employee, Sharon Salm stayed with Haan Crafts until August of 1987. After giving notice to Haan Crafts but before leaving there, she began working in the evenings at Craft Masters. It is unclear exactly how long Salm was "moonlighting" but it appears to have been from one to three weeks at least.

A third former employee of Haan Crafts was Davina Ward. Ward went to work for Craft Masters immediately after Haan terminated her on Friday, September 4, 1987. A few days after she was terminated, Ward was discovered in the Haan Crafts building taking patterns of certain designs from the instructions files. Robert Haan, who caught her, took the materials from her at that point. Ward claims she was taking her own designs for her employment portfolio. In any case, the designs did not leave the building in Ward's hands.

Two final details should be mentioned. First, all of the Haan Crafts' and Craft Masters' designs are basically simple. That is, technically and artistically, the designs are uncomplicated and rather ordinary in appearance. Second, there is no question that plaintiffs themselves copy extensively, at least at the beginning of their design process. Ideas for many kits come initially from scrutinizing patterns already on the market or from taking apart various store-bought items and figuring out how they are made. Then Haan Crafts makes slight variations in style and size to produce the final kit.

III.

Before a preliminary injunction may issue:

A plaintiff seeking a preliminary injunction must demonstrate: (1) a threat of irreparable harm without an adequate remedy at law; (2) some likelihood of success on the merits of the claim; (3) a balance of relative harm weighing in favor of granting the injunction; and (4) compatability (sic) of the injunction and the public interest (citations omitted).

Naked City, Inc. v. Aregood, 667 F.Supp. 1246, 1252 (N.D.Ind.1987); Chicago Board of Realtors v. City of Chicago, 819 F.2d 732 (7th Cir.1987); accord, BeerMart Inc. v. Stroh Brewery Co., 633 F.Supp. 1089, 1104 (N.D.Ind.1986), rev'd on other grounds, 804 F.2d 409 (7th Cir.1986); Lafayette Beverage Distributors v. Anheuser-Busch, 545 F.Supp. 1137, 1146 (N.D. Ind.1982); Eaton Corp. v. Appliance Valves Corp., 526 F.Supp. 1172 (N.D.Ind. 1981), aff'd 688 F.2d 842 (7th Cir.1982).

The Supreme Court of the United States in Doran v. Salem Inn, Inc., 422 U.S. 922, 95 S.Ct. 2561, 45 L.Ed.2d 648 (1975), held:

The traditional standard for granting a preliminary injunction requires the plaintiff to show that in the absence of its issuance he will suffer irreparable injury and also that he is likely to prevail on the merits.

Id. at 931, 95 S.Ct. at 2568. The decision to grant or deny preliminary injunctive relief is committed to the sound discretion of the district judge; there is no "right" to obtain a preliminary injunction. Naked City, 667 F.Supp. 1252. See also A.J. Canfield Co. v. Vess Beverages, Inc., 796 F.2d 903, 905-06 (7th Cir.1986); Adams v. Attorney Registration and Disciplinary Commission of the Supreme Court of Illinois, 801 F.2d 968, 971 (7th Cir.1986); Amoco Production Co. v. Village of Gambell, ___ U.S. ___, 107 S.Ct. 1396, 1402, 94 L.Ed.2d 542 (1987).

In considering a motion for preliminary injunction, the district court must evaluate the four required factors as listed above, must make factual determinations on the basis of a fair interpretation of the evidence before the court, and must draw legal conclusions in accord with a principled application of the law. Darryl H. v. Coler, 801 F.2d 893, 898 (7th Cir.1986) citing Lawson Products, Inc. v. Avnet, Inc., 782 F.2d 1429, 1438 (7th Cir.1986); see also Roland Machinery Co. v. Dresser Industries, Inc., 749 F.2d 380, 386-388 (7th Cir.1984).

The "likelihood of success factor" is to be balanced against the "balance of harm factor." BeerMart, 633 F.Supp. at 1104 citing Lawson, 782 F.2d at 1434. The more heavily the balance of harm weighs in favor of the plaintiff, the degree with which the plaintiff must demonstrate likelihood of success on the merits decreases and vice versa. Id. None of the four factors is controlling; the court must weigh them all together in an attempt to reach a just result, that will maintain the status quo pending final resolution on the merits and that will avoid the error that is more...