Solaia Technology v. Specialty Pub. Co.

Decision Date22 June 2006
Docket NumberNo. 100555.,100555.
Citation221 Ill.2d 558,852 N.E.2d 825
PartiesSOLAIA TECHNOLOGY, LLC, et al., Appellees, v. SPECIALTY PUBLISHING COMPANY et al., Appellants.
CourtIllinois Supreme Court

Frederick J. Sperling, Sondar A. Hemeryck, of Schiff Hardin, L.L.P., Chicago, for appellants.

Paul K. Vickrey, Patrick F. Solon, Eric Mersmann, of Niro, Scavone, Haller & Niro, Chicago, for appellees.

David W. Andich, of Andich & Andich, Rock Island, for amicus curiae Chicago Reader, Inc.

James A. Klenk, Samuel Fifer, Gregory R. Naron, Natalie Spears, of Sonnenschein Nath & Rosenthal, Chicago, for amici curiae Chicago Tribune Company and The Copley Press, Inc.

Donald M. Craven, Springfield, for amicus curiae Illinois Press Association.

Justice FITZGERALD delivered the judgment of the court, with opinion:

The plaintiffs, Solaia Technology, LLC (Solaia Technology), the law firm of Niro, Scavone, Haller, & Niro, Ltd. (NSHN), and Raymond Niro, filed a defamation complaint against the defendants, Specialty Publishing Company, Peggy Smedley, John Buell, and John Doe. The circuit court of Cook County dismissed the complaint; the appellate court affirmed in part and reversed in part (357 Ill.App.3d 1, 292 Ill.Dec. 772, 826 N.E.2d 1208).

The central issue in this case is whether the so-called fair report privilege defeats the plaintiffs' allegations that the defendants made false statements with actual malice. The defendants argue it does; the plaintiffs argue it does not. The plaintiffs also request cross-relief, asserting that the appellate court erred in holding various statements made by the defendants were not defamatory. For the reasons that follow, we affirm in part, reverse in part, and remand.

BACKGROUND

In 2001, Solaia Technology purchased United States Patent No. 5,038,318, commonly known as the '318 patent, from Schneider Automation, Inc. (Schneider Automation). The '318 patent relates to a system or standard for communicating real-time information between computers and machines. According to Solaia Technology, this standard is employed by virtually every company that uses a computer to control its manufacturing operation. Since purchasing the patent, Solaia Technology has aggressively enforced it, bringing infringement claims against various well-known companies. Solaia Technology has been represented in these suits by Niro and his firm, NSHN.

Specialty Publishing Company publishes Start magazine, whose target readership is manufacturing company executives. In an April 2002 article entitled "Chaos in Manufacturing," Start began its coverage of Solaia Technology's infringement claims.1 Before discussing "patent attorneys pitting customers against suppliers," Start sketched the background of this litigation. According to Start, the "OPC Foundation" was founded in 1996 by a group of companies seeking to develop an "open standard" to provide "interoperability" between computers and machines used in manufacturing. The standard became very successful and was adopted by hundreds of companies:

"Clearly, on the surface, the goal of [the OPC Foundation] was to enable the staunchest of competitors to play nice in the sandbox and develop an elusive open standard. In the end, an open standard would mean less expense for vendors and more solutions for users.

Thus, came the birth of what is known as the OPC Foundation today. It all seemed so perfect. * * * Sharing data and information that was once was [sic] proprietary. Innocent enough. And it was, in the beginning."

Start described what it termed "The legal entanglement":

"So far, you should be asking yourself, what's the big deal? Until last year, there really wasn't any until a lawsuit was filed against [three] world-class manufacturers * * *.

Solaia Technology * * * filed the lawsuit alleging that all three end user manufacturers are violating a patent that it purchased from Schneider Electric's Automation Business * * *. Schneider sold the rights to its patent to Solaia between March and August of last year. Now Solaia, aided by the legal firm of Niro, Scavone, Haller & Niro, Chicago, Ill. is on a legal campaign targeting manufacturers who might be infringing on its patent."

Start then detailed Solaia Technology's infringement claims and offered comments on them from the OPC Foundation's attorney and Solaia Technology's attorney.

Under a subheadline "Baying for blood," Start continued:

"Before we discuss who created this mess, we need to stipulate to a few points. As we stated earlier, this is an amazing [sic] irresistible story that deserves a lot of coverage. It involves intrigue and lots of money. And the innocent companies who are being forced to defend themselves in this debacle—the victims whose fate is fueling the outrage—deserve a lot of sympathy. So how did this get so far out of line? Blame old-fashioned market mania, aided and abetted by deeply greedy people who wanted to make more money despite the costs. Without question, most of the frenzy is simply about money.

* * * [T]here is certainly a lot of finger-pointing going on and no one wants to take responsibility for creating this legal nightmare. To really grasp the enormity of the problem, we will need to explore in detail each of the players and what they had hoped to accomplish.

The manufacturing mob is baying for blood, and many companies blame Schneider. In fact, just about everyone Start spoke with either on or off the record within the manufacturing community is furious over Schneider's initial actions. Their anger is only being fanned by Solaia's lawsuits against leading manufacturers."

Start summarized the history of the '318 patent and Schneider Automation's sale of it to Solaia Technology:

"Solaia Technology acquired the patent for an undisclosed amount. Although Solaia and its legal firm will not confirm or deny it, some companies are speculating the offer for the patent was based on a contingency bid. If this assessment is correct, Schneider would only be paid if Solaia wins its legal battle."

According to Start, "If Solaia proves victorious, it clearly intends to turn its sights on other prey." But "[a]ttorneys from Niro, Scavone, Haller & Niro reiterate that they are just following the law and that its clients should not be punished for taking advantage of the rules."

Start closed with a general comment on patent reform:

"It seems that new patents are issued monthly, if not weekly, granting more and more patents. Some argue that the U.S. Patent And [sic] Trademark Office is not supposed to issue patents on ideas[;] however, many contend that is what it is doing with software patents. The end result is having a chilling effect on the software industry as more and more companies file lawsuits to defend these so-called patents.

* * *

Watergate spawned campaign-finance reform, perhaps the Solaia lawsuits will spawn patent reform."

In August 2002, Start's cover announced, "The Chaos Deepens: Clorox Settles . . . Others Are Sued." The cover and the accompanying article also featured a photocopy of the first page of Solaia Technology's patent infringement complaint against 16 well-known companies. Inside, Start noted that Clorox had settled with the "Solaia Technology LLC legal machine," but that more manufacturers "have been tossed into the legal fray as Solaia cast out a bigger net. * * * If Solaia is successful in its legal carnage it could set the stage for many other manufacturers both large and small, to be sued, or to be forced to pay Solaia royalty fees." In fact, Start reported, "[t]he legal nightmare deepens" for the 16 "world class manufacturers" named as defendants by Solaia Technology "just two days before Americans celebrated their independence." Start continued:

"Attorneys at Niro, Scavone, Haller & Niro strongly stress that this is just the beginning. Solaia's attorneys intend to continue to file suits against manufacturers they believe are infringing on patent '318. However, more and more manufacturers are publicly vowing to defend their positions in court.

* * *

Although individual inventors have been selling their patents for quite some time, many observers are frustrated the patent system is being used as a vicious legal weapon to generate revenue."

Start repeated much of its coverage of Solaia Technology's infringement claims from the April 2002 issue. Schneider Automation sold the '318 patent to Solaia Technology; Solaia Technology then began enforcing it. Start noted that one of Solaia Technology's attorneys and a member of NSHN denied any connection between Solaia Technology and Schneider Automation, but Start further noted that documents reveal "the relationship between these two companies might be more intimately linked." After reviewing these documents, Start continued:

"Despite the devastating news that more manufacturers are being targeted, what makes this litigation even more disturbing is how it will impact the manufacturing industry as a whole.

* * *

Daniel Henderson, the president of Solaia Technology, aided by the legal firm of Niro, Scavone, Haller & Niro is on a legal campaign targeting manufacturers that might be infringing on its patent. Henderson and his legal machine have a war chest of many patent victories. Niro, Scavone, Haller & Niro intend to parlay these victories into more money for both its client and its law firm."

Start concluded:

"For these * * * manufacturers there is no escape. They are now embroiled in a legal battle that many insist can only harm the manufacturing industry, costing manufacturers millions.

As industry observers, Start editors admit Solaia is hungry and will continue to target manufacturers. * * *

* * *

In the end, no one wins and money prevails."

In a column titled "Exhibit 5," Start president and publisher Peggy Smedley questioned why "people, and perhaps companies," including Solaia Technology, are "so gung ho to sue these days." Smedley answered...

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