VitalGo, Inc. v. Kreg Therapeutics, Inc.

• Decision Date: 27 March 2019
• Docket Number: Case No. 16-cv-5577
• Citation: 370 F.Supp.3d 873
• Parties: VITALGO, INC. and VitalGo Systems Ltd., Plaintiff, v. KREG THERAPEUTICS, INC. and Craig Poulos, Defendants.
• Court: U.S. District Court — Northern District of Illinois

370 F.Supp.3d 873

VITALGO, INC. and VitalGo Systems Ltd., Plaintiff,

v.KREG THERAPEUTICS, INC. and Craig Poulos, Defendants.

Case No. 16-cv-5577

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

Signed March 27, 2019

Benjamin Patrick Gilford, Matthew Joshua Levinstein, Richard Daniel Harris, James J. Lukas, Jr, Greenberg Traurig, LLP, Chicago, IL, for Plaintiff.

Peter Michael Spingola, John Montgomery Owen, Sara Lillian Siegall, Chapman & Spingola, LLP, Chicago, IL, for Defendants.

Robert M. Dow, Jr., United States District Judge

MEMORANDUM OPINION AND ORDER

Plaintiffs VitalGo, Inc. ("VitalGo") and VitalGo Systems Ltd. (collectively, "Plaintiffs") bring this action against Defendants Kreg Therapeutics, Inc. ("Kreg") and Craig Poulos (collectively, "Defendants") alleging copyright and trademark infringement and unfair competition under federal and state law. Currently before the Court is Defendants' combined motion [77] to strike portions of Plaintiffs' Second Amended Complaint and to dismiss all claims in the Second Amended Complaint with prejudice. For the reasons stated below, Defendants' motion [77] is granted in part and denied in part. The Court grants Defendants' motion to strike in part as follows: portions of paragraphs 29, 51, 60, 122, 131, 159, 167, and 180 (29(1), 51(i), 60 (last sentence), 122 (last clause), 131(i), 159(i), 167(i), 180(i) ) are stricken from the Second Amended Complaint as they address claims that this Court has previously dismissed. Furthermore, the Court grants Defendants' motion to dismiss Count III, and denies Defendants' motion as to Count I, Count II, Count IV, Count V, Count VI, and Count VII. This case is set for further status hearing on April 10, 2019 at 9:30 a.m.

I. Background¹

The background of this case, and of the more extensive litigation in which VitalGo and Kreg have been engaged before this Court, is set forth in the Court's previous opinions in this case, knowledge of which is assumed here. [See 41, at 1–7; 67, at 1–4.] Briefly summarized, the parties entered into an agreement pursuant to which Kreg was granted the exclusive right to distribute Plaintiffs' Total Lift Bed product in certain regions of the country. In 2011, VitalGo terminated the parties' agreement, and Kreg thereafter filed suit (the "2011 Lawsuit") against VitalGo for breach of that agreement. VitalGo counterclaimed that Kreg had violated the parties' agreement by both making unauthorized alterations to the Total Lift Bed without VitalGo's prior written approval and by failing to obtain VitalGo's approval of all advertisements and promotional materials Kreg used to promote and sell Total Lift Beds. The 2011 Lawsuit ended after a bench trial in which the Court concluded that Kreg was entitled to $ 642,610 in damages plus $ 364,593 in prejudgment interest, for a total award of $ 1,007,203. See Kreg Therapeutics, Inc. v. Vitalgo, Inc. , Dkt. Entry 250, No. 11-cv-6771 (N.D. Ill.). The Seventh Circuit recently affirmed that judgment. See Kreg Therapeutics, Inc. v. VitalGo, Inc. , 919 F.3d 405 (7th Cir. 2019).

In May 2016, Plaintiffs filed the instant lawsuit, bringing claims against Defendants for copyright infringement in violation of 17 U.S.C. § 501 (Count I); unfair competition and false designation of origin pursuant to Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(A) (Count II); unfair competition and false advertisement pursuant to Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B) (Count III); common law trademark infringement (Count IV); common law unfair competition (Count V); violation of the Illinois Uniform Deceptive Trade Practices Act (IUDTPA), 815 Ill. Comp. Stat. 510/1 et seq. (Count VI); and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA), 815 Ill. Comp. Stat. 505/1 et seq. (Count VII). [1, ¶ 2.] According to the original complaint, Plaintiffs began using the VitalGo and TOTAL LIFT BED marks in the United States in 2008; Plaintiffs began showing the Total Lift Bed in advertising and marketing materials in approximately 2008; and Plaintiffs have filed copyright applications for a brochure and for two digital renderings of the Total Lift Bed. [1, ¶¶ 14, 18.] Plaintiffs alleged that (1) Defendants marketed Plaintiffs' Total Lift Bed as an "Exclusive Kreg Product" or as a "Kreg Bed" and used Plaintiffs' Copyrighted Works in doing so since October 2011; (2) Defendants made modifications to Plaintiffs' Total Lift Beds but continued to advertise them as Total Lift Beds in 2010 or 2011; and (3) Defendants developed the Kreg Catalyst Bed in 2014 to compete with the Total Lift Bed and, until March 2016, they promoted the Catalyst Bed using the Total Lift Bed mark and Plaintiffs' Copyrighted Works. [41, at 7.]

Defendants moved to dismiss [18] Plaintiffs' complaint in July 2016. In support of their motion, Defendants argued that (1) Plaintiffs were judicially estopped from asserting their claims; (2) Plaintiffs' claims could not be alleged in an independent lawsuit because they constituted impermissible claim splitting; (3) no factual allegations demonstrated Defendant Poulos's personal liability; (4) the doctrine of laches barred Plaintiffs' Lanham Act claims; (5) Plaintiffs did not allege actual consumer reliance on Defendants' alleged misleading advertisements as necessary to support its Lanham Act claims; and (6) Plaintiffs could not seek attorneys' fees under the Copyright Act. On March 29, 2017, the Court granted in part and denied in part Defendants' motion. [See 41.] The Court held that the doctrine of claim splitting precluded Plaintiffs from bringing claims against Defendants relating to Defendants' modifications to the Total Lift Bed and to Defendants' allegedly infringing marketing and promotional materials for the Total Lift Bed because those claims were based on the same set of operative facts underlying VitalGo's counterclaim in the 2011 Lawsuit. [41, at 9–18.] However, the Court determined that Plaintiffs could proceed with their claims to the extent the claims were based on Defendants' alleged marketing of their Catalyst Bed using Plaintiffs' intellectual property because the underlying facts on which the allegations were based were separate and distinct from those underlying Plaintiff VitalGo's counterclaims in the 2011 Lawsuit. [41, at 18–19.] The Court also dismissed Plaintiffs' claims for attorneys' fees pursuant to § 505 of the Copyright Act. [41, at 27.]

Plaintiffs then filed their First Amended Complaint on May 3, 2017. [See 43.] Defendants responded on May 31, 2017 by filing a motion [49] to strike various allegations from the First Amended Complaint concerning the Total Lift Bed pursuant to Federal Rule of Civil Procedure ("Rule") 12(f) and to dismiss the remaining claims in the First Amended Complaint pursuant to Rule 12(b)(6). To support their motion, Defendants asserted (1) that the majority of the factual allegations contained in Plaintiffs' First Amended Complaint had to be stricken because they only related to the previously dismissed claims, and (2) that once the irrelevant allegations against them were removed pursuant to Rule 12(f), the First Amended Complaint would be insufficient to support the remaining claims under either the heightened pleading standard of Rule 9(b) (for Counts II–III and V–VII) or the regular pleading standard of Rule 8(a) (for Counts I and IV). [See 49, 50.] The Court granted Defendants' motion to strike in part, striking significant portions of the Plaintiffs' First Amended Complaint. [See 67.] The Court similarly granted Defendants' motion to dismiss with regard to Count II, Count III, Count V, Count VI, and Count VII, and denied the motion with regard to Count I and Count IV. [See id. ] The Court then gave Plaintiffs one final opportunity to adequately plead the dismissed counts. [Id. at 22.]

Plaintiffs subsequently filed their Second Amended Complaint [71] on January 22, 2018. In their Second Amended Complaint, Plaintiffs allege that the Defendants' previously challenged advertisements regarding the Total Lift Bed were part of a conspiracy that ultimately concluded in the Defendants' use of Plaintiffs' intellectual property to sell their own competing lift bed. [See generally 71.] Defendants responded to the Second Amended Complaint on March 20, 2018 by filling another motion [77] to again strike various allegations from the Second Amended Complaint concerning the parties' pre-2014 relationship pursuant to Rule 12(f) and to dismiss the remaining claims in the Second Amended Complaint pursuant to Rule 12(b)(6). Plaintiffs filed a response [79], and Defendants have filed their reply [84].

II. Defendants' Rule 12(f) Motion to Strike

A. Legal Standard

Under Rule 12(f), "the court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f). Motions to strike are generally disfavored but may be used to expedite a case by "remov[ing] unnecessary clutter." Heller Fin., Inc. v. Midwhey Powder Co., Inc. , 883 F.2d 1286, 1294 (7th Cir. 1989) ; see also NewNet Commc'n Techs., LLC v. VI E-Cell Tropical Telecom, Ltd. , 85 F.Supp.3d 988, 993 (N.D. Ill. 2015) ("But where a defendant's asserted [affirmative defenses] are both legion and mostly frivolous, a motion to strike can aid the parties in resolving the case by removing irrelevant issues from consideration."). When requesting a court to strike specific allegations, "the movant must show that the allegations being challenged are so unrelated to plaintiff's claim as to be void of merit and unworthy of any consideration and that the allegations are unduly prejudicial." Cumis Ins. Soc'y, Inc. v. Peters , 983 F.Supp. 787, 798 (N.D. Ill. 1997) (internal quotation marks and citation omitted); see also Manuel v. Lucenti , 2004 WL 2608355, at *2 (N.D. Ill. Nov. 16, 2004) ("To prevail on a motion to strike under Rule 12(f), defendants must demonstrate that the material...