S.A.M. Electronics, Inc. v. Osaraprasop

• Decision Date: 12 January 1999
• Docket Number: No. 96 C 7402.,96 C 7402.
• Citation: 39 F.Supp.2d 1074
• Parties: S.A.M. ELECTRONICS, INC., an Illinois corporation, Plaintiffs, v. Michael OSARAPRASOP, as an individual and doing business as Oshi Global Co., and Poo Fat Ping, as an individual and doing business as Oshi Global Co., jointly and severally, Defendants. Michael Osaraprasop, doing business as Oshi Global Co., Counterclaimant, v. S.A.M. Electronics, Inc., an Illinois corporation and Jay S. Gilbert, individually, Counterdefendants.
• Court: U.S. District Court — Northern District of Illinois

39 F.Supp.2d 1074

S.A.M. ELECTRONICS, INC., an Illinois corporation, Plaintiffs, v. Michael OSARAPRASOP, as an individual and doing business as Oshi Global Co., and Poo Fat Ping, as an individual and doing business as Oshi Global Co., jointly and severally, Defendants.

Michael Osaraprasop, doing business as Oshi Global Co., Counterclaimant, v. S.A.M. Electronics, Inc., an Illinois corporation and Jay S. Gilbert, individually, Counterdefendants.

No. 96 C 7402.

United States District Court, N.D. Illinois, Eastern Division.

January 12, 1999.

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Steven Bennett Towbin, Scott E. Becker, D'Ancona & Pflaum, Chicago, IL, Kenneth R. Nowakowski, Kathryn Mary West, Whyte, Hirschboeck & Dudek, Milwaukee, WI, John R. Landis, Chicago, IL, for S.A.M. Electronics, Inc. James Daniel Dasso, John R Landis, Foley & Lardner, Chicago, IL, for Michael Osaraprasop, Poo Far Ping.

Steven Bennett Towbin, Scott E. Becker, D'Ancona & Pflaum, Chicago, IL, for Jay S. Gilbert.

MEMORANDUM OPINION AND ORDER

GETTLEMAN, District Judge.

Plaintiff S.A.M. Electronics, Inc. ("S.A.M.") filed an amended complaint against defendants Michael Osaraprasop ("Osaraprasop"), as an individual and doing business as OSHI Global Co. ("OSHI") (together, "defendants"), and Poon Fat Ping ("Poon"), as an individual and doing business as OSHI. Plaintiff claims defendants are jointly and severally liable for copyright infringement (Count I), trade dress infringement and federal unfair competition (Count II), common law trademark/trade name infringement (Count III), dilution (Count IV), violation of the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS § 510/1 et seq., (Count V), violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS § 505/1 et seq., (Count VI), and breach of contract (Count VII). Plaintiff also demands an accounting (Count VIII). In response, defendants filed second amended counterclaims against S.A.M. and a third party complaint against Jay S. Gilbert ("Gilbert"), as an individual. Defendants allege breach of contract (Count I), breach of the covenant of good faith and fair dealing (Count II), conversion (Count III), and violation of the Illinois Uniform Fraudulent Transfer Act (the "IUFTA"), 740 ILCS § 160/1 et seq., (Count V). Defendants also seek a declaratory judgment (Count IV) and to pierce S.A.M.'s corporate veil (Count VI).

On March 16, 1998, the court denied S.A.M.'s motion to dismiss Counts V and VI of the second amended counterclaims pursuant to Fed.R.Civ.P. 8(a), 9(b), and 12(b)(6). Defendants moved for summary judgment on Counts I-VIII and on Counts I and II of the counterclaims. S.A.M. filed a cross motion for summary judgment. S.A.M. and Gilbert also filed a motion for summary judgment on Counts V and VI of defendants' counterclaims. As discussed below, the parties' cross motions are granted in part and denied in part. S.A.M. and Gilbert's motion on Counts V and VI of defendants' counterclaims is granted.

FACTS

S.A.M. is an Illinois corporation with its principal place of business in Chicago, Illinois. Gilbert is the president of S.A.M. and owns 100% of its stock. OSHI is a sole proprietorship organized and registered to do business in California. Osaraprasop is the sole owner of OSHI.

OSHI is in the business of designing, importing, distributing, and selling novelty items, including children's toys, pet toys and Halloween items. Since 1989, OSHI has distributed and sold a small children's plastic toy referred to as the Number 89 Frog. The Number 89 Frog is a realistic replica of a frog that is made of plastic and squeaks when it is squeezed. Osaraprasop conceived of and designed the Number 89 Frog using photographs from nature journals and other sources. The OSHI logo is imprinted on the bottom of the Number 89 Frog's hind legs.

OSHI advertises and sells its novelty items by attending trade shows and soliciting orders from distributors. In January 1995, Osaraprasop attended a trade show in Chicago, Illinois. Gilbert purchased a quantity of Number 89 Frogs at that trade show. Shortly thereafter, Gilbert telephoned OSHI's offices in San Francisco, California and asked Osaraprasop whether OSHI was capable of designing, manufacturing, and selling a larger version of the Number 89 Frog with a motion sensor that would activate a "ribbit" sound instead of a squeaking device. Osaraprasop stated that he was capable of designing, manufacturing, and selling such a frog.

Prior to January 1995, Vic's Novelty, Inc. ("Vic's Novelty") manufactured a plastic toy frog with a motion sensor ("the Vic's Frog"). Unlike the Number 89 Frog, the Vic's Frog was not lifelike and resembled a cartoon caricature of a frog. In February 1995, Gilbert shipped four Vic's Frogs to OSHI. Gilbert requested that OSHI manufacture and sell to him a motion sensor frog identical to the Vic's Frogs.

Because it could not use the cartoon-like design of the Vic's Frog, OSHI decided to design and produce a lifelike frog similar to the Number 89 Frog. Osaraprasop then designed an OSHI motion sensor frog. This motion sensor frog is nearly identical to the Number 89 Frog; the only differences in appearance are its increased size and slight variations in the back legs and lower body profile. In designing the OSHI motion sensor frog, Osaraprasop manufactured a two-piece ceramic model. The first piece of the model consisted of the hind legs of the frog. The second piece of the model consisted of the frog's torso, head, and forelegs. Neither Gilbert nor S.A.M. contributed to the design or production of the original two-piece ceramic model. Gilbert then asked OSHI to produce and sell the OSHI motion sensor frog based on the Number 89 Frog.

OSHI and S.A.M. entered into a series of separate contracts pursuant to which OSHI sold and S.A.M. purchased various quantities of the OSHI motion sensor frog. The parties entered into two agreements on February 27, 1996. One agreement read: "OSHI only guarantees product for manufacture defects to expire 30 days after delivery. All other guarantees are will [sic] and void." The other agreement read as follows:

All frogs and components will be shipped only to S.A.M. Chicago. There will be no diversions to any other destinations, agents, customers, reps, or unauthorized entities. S.A.M. will receive documentation of frogs of OSHI shipments from HK/China. There will be no infringement on the S.A.M. trademark, advertising, proprietary rights, customers, public relations unless written authorization is issue by S.A.M. Electronics. Product diversion will not take place as of 2/29/96. Violation cancels orders with immediate refund.

The parties also entered into a contract on August 31, 1996, which stated that S.A.M. would make "full payment upon acceptance of keepers at end of inspection (estimated at 7 calendar days)." In addition, the parties executed a number of individual purchase orders.

S.A.M. claims that OSHI infringed on S.A.M.'s copyright of the frogs and of the header cards which accompanied the frogs. The header cards at issue were used to close off the cellophane bags containing the motion sensor frogs. The motion sensor frogs were placed in the bag and the header cards were stapled to the top of the bag. The cards identified the product, the manufacturer, and the selling points of the motion sensor frog.

S.A.M. also claims that defendants breached several of the contracts between S.A.M. and OSHI by sending it nonconforming frogs. S.A.M. cites the testimony of several individuals and companies who purchased frogs from S.A.M. and reported them defective. S.A.M. alleges that it expended a fair amount of money employing people to repair the frogs and render them salable. Defendants claim that S.A.M. breached several of the contracts by refusing to pay for fourteen containers of motion sensor frogs. The parties dispute whether S.A.M. informed defendants of the nonconformities within the thirty days required by one of the February 27 agreements. On November 12, 1996, S.A.M. wrote a letter to defendants alleging that defendants had breached the various contracts and warranties, canceling the contracts, and revoking acceptance of the allegedly nonconforming frogs.

DISCUSSION

I. Summary Judgment Standard

Summary judgment is appropriate where "there is no genuine issue of material fact and ... the moving party is entitled to judgment as a matter of law." Fed. R.Civ.P. 56(c). This standard places on the movant the burden to point to evidence in the record that demonstrates that there are no genuine issues of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has met this burden, the burden then shifts to the nonmoving party to set forth specific facts to show that there is a genuine issue for trial. Fed.R.Civ.P. 56(c). "This standard is applied with added rigor in employment discrimination cases where intent and credibility are crucial issues." Robinson v. PPG Industries, Inc., 23 F.3d 1159, 1162 (7th Cir.1994). The court must address all facts in the light most favorable to the moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

II. Cross Motions for Summary Judgment on the Complaint

A. Count I: Copyright Infringement

S.A.M. brings two claims of copyright infringement in Count I of its complaint. First, S.A.M. alleges that defendants infringed an exclusive copyright in the motion sensor frog by selling the frog to third parties. Second, S.A.M. alleges that defendants infringed S.A.M.'s copyright in the header card used to package the frogs sold by OSHI. Defendants move for summary judgment and S.A.M. cross-moves for summary judgment. Both motions on S.A.M.'s first claim are denied. The motions on S.A.M.'s second claim are denied because genuine issues of material fact concerning access and substantial...