X-It Products v. Walter Kidde Portable Equipment

• Decision Date: 25 June 2002
• Docket Number: No. Civ.A. 2:00cv513.,Civ.A. 2:00cv513.
• Citation: 227 F.Supp.2d 494
• Parties: X-IT PRODUCTS, L.L.C., Plaintiff, v. WALTER KIDDE PORTABLE EQUIPMENT, INC., Defendant.
• Court: U.S. District Court — Eastern District of Virginia

227 F.Supp.2d 494

X-IT PRODUCTS, L.L.C., Plaintiff, v. WALTER KIDDE PORTABLE EQUIPMENT, INC., Defendant.

No. Civ.A. 2:00cv513.

United States District Court, E.D. Virginia, Norfolk Division.

June 25, 2002.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Gregory N. Stillman, Robert M. Tata, Hunton & Williams, Norfolk, VA, for Plaintiff.

Beth Hirsch Berman, William F. Devine, Hofheimer Nusbaum, PC, Norfolk, VA, Laura B. Luger, Moore & Van Allen, PLLC, Durham, NC, John Christopher Filosa, Baker & McKenzie, Chicago, IL, for Defendant.

ORDER

DOUMAR, District Judge.

After a four week trial, a verdict was rendered by a jury in this matter on August 17, 2001 in favor of the Plaintiff, X-It Products, L.L.C., Inc. ("X-It") for in excess of $116 million dollars. X-It and Defendant, Walter Kidde Portable Equipment, Inc., ("Kidde") have filed numerous post trial motions regarding the propriety of this verdict including: X-It's Motion for Order Granting Permanent Injunction,¹ Kidde's Motion for Transcript Portions to Remain Under Seal,² Kidde's Motion for Post Verdict Relief, X-It's Motion for Finding of Unfair Competition and Trade Practices and for Prejudgment Interest, and X-It's Motion to Strike Kidde's Post Trial Offer of Evidence.³ The Parties have fully briefed the issues, and have inundated the Court with extraneous briefs, cases, and documents. The Court held a hearing on December 17, 2001, the main focus of which was the issue of damages both compensatory and punitive. The Court heard oral argument on the issues.

Although the suit contains ten different counts, this case is composed of just two major issues. First, it is a copyright case and a trade dress case in that one company, Kidde, replicated the copyrighted picture and trade dress of X-It and used it. Second, it is a case where a company, Kidde, unfairly and fraudulently appropriated the trade secret patent application of X-It, to market a competing product, while breaching its contract which prohibited its disclosure and use. A confusing factor in the case requires the Court to state what this case is not. THIS CASE IS NOT A PATENT INFRINGEMENT CASE, but it necessarily involves and centers around patents.

The damages are related first to the copyright and trade dress violation,⁴ and second to the sum of money the Plaintiff would reasonable have received for the Defendant to be able to utilize the trade secret information which it fraudulently appropriated at the time and place of obtaining it. Also, this fraudulent appropriation of the trade secret was a clear breach of contract. On this second aspect of damages, relating to the fraudulent appropriation of the trade secret patent application, and breach of contract, the jury clearly awarded multiplicatus compensatory damage awards for several causes of action on the same facts. The jury was fully instructed on each of the counts with sixty-eight interrogatory questions, including subparts, concerning the matter. Indeed, the jury instructions clearly stated without objection that, "[t]he total amount of compensatory damages may not exceed the value found for any one violation, except for the copyright violation, if any." (Tr. pg. 4300). There were no objections to this instruction, and this instruction is the law of the case. For this reason, as well as the common law, the Court now Orders the Plaintiff, X-It Products, L.L.C. ("X-It"), to elect the remedy for which it desires judgment, and the corresponding verdict, under which it wishes to recover compensatory damages for the Defendant's fraudulent actions in fraudulently appropriating the trade secret patent application or the breach of contract. This amount will be awarded in addition to any damages for the copyright violation if appropriate plus any punitive damages, and/or attorney's fees, if appropriate to the elected remedy. In addition pre-judgment interest on the amount of compensatory damages will be awarded from August 15, 1999 at the rate of 8% per annum on any and all awards except contract judgment, if any, until date of judgment,⁵ and from August 15, 1999, at 9% per annum until date of judgment on the contract action.⁶ The federal judgment rate of interest will begin on date of judgment. The Plaintiff cannot recover for both contract and tort. Depending on the remedy elected, the copyright damages may be subsumed in the damages for the breach of contract and/or the damages for fraud. A new trial is DENIED.

I. Introduction

It is always helpful to understand the posture of a suit at the time of trial. This suit centers around X-It's product, packaging, and patent application and the supposed proposed purchase of X-It by Kidde. In the nearly fifty years that the undersigned has been a member of the bar, working almost always in litigation, of which twenty years have been on the bench, the undersigned has never seen a case which entailed more rancor between attorneys handling a case or involved in the case. Never have so many objections, obstructions, and motions been put forward by both sides than in any prior case seen by the undersigned during those almost fifty years.⁷

X-It claims that actions taken by Kidde and its agents entitle X-It to recovery on several counts. Specifically, X-It seeks recovery under the following theories: 1) copyright infringement, 2) false designations in violation of Section 43(a) of the Lanham Act, 3) false advertising in violation of Section 43(a) of the Lanham Act, 4) breach of contract, 5) misappropriation of trade secrets in violation of the Illinois Trade Secrets Act, 6) misappropriation of trade secrets in violation of the North Carolina Trade Secrets Act, 7) breach of the North Carolina Unfair Trade Practices Act, 8) breach of the Illinois Consumer Fraus and Deceptive Business Practices Act, 9) breach of Illinois Common Law through unfair competition, and 10) breach of Virginia Common Law though unfair competition. The Court's concern is that, but for the theory of recovery based on copyright infringement, the same theory of damages was presented by the Plaintiff on all counts except for the copyright violation.

II. The Jury Awards and Damages

To award damages in this case, the jury needed to determine what would have taken place, monetarily speaking, but for the wrongful acts of the Defendant. The jury necessarily determined that Kidde would have had to buy X-It, as it had set out to do, because it was clearly going to put out a web-type ladder in August 1999. Kidde realized that X-It's ladder was a revolutionary and exceedingly practical product. Indeed, Kidde sold 100,000 of the copy web ladder in a very short time — much better sales than for the old style chain ladders they had previously sold. In July and August, 1999, Kidde was faced with X-It being in a position to capture the prime market for such products, especially with retailers such as Home Depot. It chose to prevent this by presenting essentially the same product and packaging to its vast distribution system. In order to determine the damages to X-It, one must look at what would have happened had Kidde not stolen its patent information, copyright, and trade dress. In this case, Kidde would have had to purchase X-It entirely, which its officers had planned to do some time prior to their introduction of the copies of X-It's ladder and packaging at the 1999 Hardware Show. In fact, Kidde had done little or no research on packaging or ladder design; it had merely copied and slightly modified X-It's product by causing a new hook to be devised in a contest some 20 days before their first presentation of their prototype ladder. This presentation was done at a pre show meeting in Chicago on August 14, 1999, the day before the National Hardware Show, which began on August 15, 1999. The only substantial difference between the ladder that Kidde displayed as its own at the Show and X-It's ladder was the hook. The packaging was substantially the same except Kidde used its name instead of X-IT's. Since Kidde would not market a product which infringed another's patent, Kidde could not introduce a copy ladder without having knowledge of what was in the pending patent application or buying or licensing the product or company. It chose through deceit to obtain the secret patent application and modify a ladder based thereon to avoid patent infringement. It also appropriated X-It's copyrighted packaging.

In essence, Kidde pulled the rug out from under X-IT, a promising young company with an innovative product, package, and an aggressive marketing plan. In the aftermath of Kidde's having stolen both X-IT's product, package, and its marketing, as well as having willfully deceived X-IT's management, X-IT lost all its forward momentum and began to fall apart. Absent the intervention of the courts, Kidde had succeeded in its scheme to practically destroy an up and coming rival through deceit.

As far as sales were concerned, Ive, X-It's former president, testified that while in 1999 X-IT had sold 13,000 ladders, a 350% increase on its sales for the prior year, in 2000, following Kidde's actions, sales dropped to 8,800 ladders. (Tr. 403). Additionally, prior to the 1999 Hardware Show X-IT had fifteen different companies handling sales covering the entire country. (Tr. 404). After the show, "it was somewhat like we had a disease. People were not calling us any more. And we were not getting our phone calls returned." (Tr. 404). Sales representatives who managed X-IT's accounts with Target and Wal-Mart, two giant retailers, actually saw the Kidde display at the 1999 Hardware Show and accused X-IT of trying to undercut them. (Tr. 404). At the time of the trial, those fifteen marketing firms handling X-IT sales had been reduced to two. (Tr. 463). Moreover, given that X-IT was the first company to produce a web ladder, prior to the 1999 Hardware Show it commanded nearly 100% of that market for web ladders. (Tr. 463). As a...