IP Law Daily, TRADEMARK—N.D. Ill.: Home decor designer states trade dress claims against manufacturer, competitor, (Jul 21, 2020)

By Deirdre Kennedy, J.D.

Trade secrets misappropriation claims were also adequately pleaded, but state-law consumer fraud claims were dismissed.

Chartwell Studio, Inc.—a designer, developer, and producer of home decor products, such as stickers and wall decals—adequately pleaded trade dress infringement and trade secrets misappropriation claims against a competing home decor seller and a manufacturer, the federal district court in Chicago has decided. The court also denied the defendants’ motion to dismiss Chartwell’s claim for tortious interference with business relationships. Claims under the Illinois consumer fraud law, however, were dismissed as time-barred, and also because Chartwell did not allege an injury to the public at large (Chartwell Studio, Inc. v. Team Impressions, Inc., July 20, 2020, Rowland, M.).

Chartwell specializes in the design, development, and production of home decor products, such as stickers and wall decals. Between 2004 and 2018, manufacturer Team Impressions, Inc., printed and packaged Chartwell’s products. Chartwell then sold the products to its major retail customers, including Dollar Tree. With Team Impressions, Chartwell shared certain confidential information about its products, including production files, and Team Impressions was aware of the confidential nature of the information. Chartwell shared such information on a confidential basis only for Team Impressions to manufacture its products.

Around 2013, The Peel People, LLC, a competitor of Chartwell, began its business relationship with Team Impressions. In June 2014, Chartwell discovered that Peel People was being supplied printed product from Team Impressions, and was selling stickers and decals that looked similar to those sold by Chartwell and used packaging that resembled Chartwell packaging. Team Impressions repeatedly confirmed that it was only a manufacturer, that it was not involved in "what Peel People was doing," and that it did not use or share any of Chartwell’s proprietary information with third parties.

In 2018, Peel People started selling certain products to Dollar Tree that looked similar to Chartwell products. Around the same time, Dollar Tree’s purchasing department informed Chartwell that Peel People had become an alternative supplier of choice over Chartwell for certain peel-and-stick items.

As a result of the defendants’ conduct, Chartwell’s sales volume to Dollar Tree allegedly dropped 26% from 2018 to 2019 and Chartwell suffered price concessions with Dollar Tree totaling $480,000 to date. Chartwell brought this action against Team Impressions and Peel People.

Trade dress infringement. To allege trade dress infringement under 15 U.S.C. § 1125(a), a plaintiff must describe the asserted trade dress in some detail. Chartwell pleaded seven specific elements of its trade dress and attached to its complaint images of the alleged trade dress. The defendants argued that none of the elements alone or in combination constituted protectable trade dress. The court disagreed.

The defendants further argued that the alleged copying of products themselves was not actionable. The court, however, noted that the trade dress was the overall look of the packaging, and the appearance of the product in the packaging was an element of the trade dress. Chartwell expressly stated that the products themselves, because of their visibility in the packaging, "are a distinctive element of the trade dress."

Trade dress is inherently distinctive if it is "sufficiently distinctive to allow consumers to identify the product from the trade dress." Chartwell alleged that consumers recognized its products because of their distinctive logos, coloring, and packaging. Chartwell further alleged that Peel People used similar trade dress, and that that similarity makes consumers likely to confuse products of the two companies. Therefore, Chartwell’s trade dress infringement claim survived the motion to dismiss.

Consumer fraud. Chartwell also claimed that Defendants violated the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA) by lying to Chartwell about their business relationship and manufacturing packaging and products that were essentially identical to those sold by Chartwell. The defendants contended that Chartwell’s ICFA claim was time-barred. The statute of limitations for an ICFA action is three years and begins to run when the cause of action accrues. Chartwell failed to respond to the argument that its ICFA claim was time-barred, which constituted constitutes waiver. An additional reason the ICFA claim failed was that the complaint alleged harm only to Chartwell "and thus seeks a remedy to address a wrong of a private party, not consumers at large," said the court. Therefore, Chartwell’s ICFA claim was dismissed with prejudice.

Illinois Trade Secrets Act. Chartwell alleged that the defendants misappropriated its trade secrets in violation of the Illinois Trade Secrets Act (ITSA). The defendants argued that this claim was also time-barred. Under the ITSA, an action for misappropriation must be brought within five years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered. The complaint in this case was filed on October 22, 2019. If Chartwell had actual or constructive notice of the alleged misappropriation before October 22, 2014, its claim would be time-barred. Chartwell argued that the statute of limitations did not start running until 2018, when it actually discovered that the defendants were using information and designs stolen from Chartwell and when Peel People started displaying its allegedly infringing products in Dollar Tree. The court found it plausible that Chartwell’s misappropriation claim did not accrue until 2018, and it therefore could not find that the ITSA claim was barred.

The court also determined that Chartwell sufficiently pleaded misappropriation of trade secrets. It claimed trade secrets in the pricing models, production files, designs, specific product specifications and technical components of its decals, and other key elements of its trade dress. The defendants contended that the information did not constitute trade secrets in part because Chartwell did not allege to have entered into any nondisclosure or confidentiality agreement with Team Impressions. However, Chartwell identified several measures it used to protect its confidential information.

Tortious interference. Chartwell alleged that the defendants tortuously interfered with its business relationship with Dollar Tree by (1) selling products to Dollar Tree that were similar to Chartwell’s; (2) manufacturing products that infringed on Chartwell products; (3) misappropriating Chartwell’s technical specifications and production files; and (4) misappropriating Chartwell’s pricing data. Chartwell plausibly pleaded a tortious interference claim against the defendants, in the court’s view. It had a long-standing business relationship with Dollar Tree, of which Team Impressions had actual knowledge. Chartwell alleged that Peel People knew of its business relationship with Dollar Tree and that Team Impressions intentionally teamed with Peel People to produce products that looked similar to Chartwell products. Peel People started selling to Dollar Tree with products that looked similar to Chartwell’s and became Dollar Tree’s supplier of choice for the products.

This case is No. 1:19-cv-06944.

Attorneys: Timothy Liam Epstein (Duggan Bertsch, LLC) for Chartwell Studio Inc. Norman T. Finkel (Schoenberg Finkel Newman & Rosenberg, LLC) for Team Impressions, Inc. and The Peel People, LLC.

Companies: Chartwell Studio Inc.; Team Impressions, Inc.; Peel People, LLC

Cases: Trademark TradeSecrets IllinoisNews GCNNews