FINNSUGAR BIOPRODUCTS, INC. v. THE AMALGAMATED SUGAR CO. (N.D.Ill. 2002)

MICHAEL T. MASON, United States Magistrate Judge

The motion to compel presently before us concerns discovery requests propounded by defendant/counter-plaintiff Amalgamated Research, Inc. ("ARI") to counter-defendant Finnsugar Bioproducts, Inc. ("Finnsugar"). Finnsugar's original complaint for patent infringement has been dismissed in its entirety; what remains are the three counts of ARI's counterclaim. For the following reasons, we grant the motion to compel.

Finnsugar holds three patents for processes used to extract sucrose and/or betaine from beet molasses (the `430 patent, the `957 patent and the `398 patent). It sued ARI and The Amalgamated Sugar Co., LLC ("ASC") for patent infringement with regard to all three patents; the parties dismissed the claims regarding the `430 and `957 patents by stipulation and the District Court granted summary judgment for the defendants on the `398 patent, finding that it was invalid. The second count of ARI's counterclaim alleges that Finnsugar violated § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). ARI contends that Finnsugar made false statements to ARI's customers and potential customers about the patents, stating in the marketplace that ARI was infringing on the patents, even though Finnsugar knew they were unenforceable, and allegedly implying that the customers might be liable for patent infringement if they bought products containing betaine or sucrose from the defendants, or used the defendants' processes to extract betaine or sucrose themselves.

ARI's current motion asks that we compel Finnsugar to provide certain sales information that is relevant to its Lanham Act unfair competition claim. District courts have wide range of discretion when fashioning a remedy for a Lanham Act violation, subject to the principles of equity. 15 U.S.C. § 1117(a); Roulo v. Russ Berrie Co., Inc., 886 F.2d 931, 941 (7^th Cir. 1989). Pursuant to the statute, a plaintiff may be entitled to recover 1) defendant's profits; 2) any damages sustained by the plaintiff; and 3) the costs of the action. 15 U.S.C. § 1117(a). "Remedies are intended to make a violation of the Act unprofitable, but not to act as a penalty." BASF Corp. v. Old World Trading Co., Inc., 41 F.3d 1081, 1092 (7^th Cir. 1994) citing Otis Clapp Son, Inc. v. Filmore Vitamin Co., 754 F.2d 738, 742 (7^th Cir. 1985). ARI seeks to obtain information on Finnsugar's sales of betaine and sucrose products as part of its case for damages.

In response, Finnsugar argues that even if AR! could prove Finnsugar violated the Lanham act, it is not entitled to Finnsugar's profits as part of its damages because ARI has not lost any sales as a result of Finnsugar's alleged statements. Finnsugar points out that ARI has identified only two instances in which Finnsugar allegedly made false statement to ARI customers, and both of those customers still purchased products from ARI, not Finnsugar. Further, Finnsugar points out that ARI's belated identification of four other companies from which it allegedly lost sales does not help its claim, since it has made no allegation that Finnsugar made false statements to these companies.

All of Finnsugar's arguments go to the merits of ARI's counterclaim, i.e., it argues that ARI should not be able to conduct discovery relevant to damages because it is not going to win its case, and even if it does win, there is no way the District Court, in its discretion, will award ARI the defendant's profits. In response, ARI notes that it has in fact been damaged by Finnsugar's alleged behavior by, among other things, being forced to indemnify its customers against any possible suit for infringement before they agreed to purchase from ARI. Further, the Lanham Act does not require either that the parties be direct competitors or that the defendant acted wilfully before damages may be awarded. Roulo, 886 F.2d at 941.

It is not our place to decide the merits of ARI's Lanham Act claim; we are only concerned with the relevance of ARI's discovery requests. Because it has a Lanham Act claim against Finnsugar that is at least minimally viable ( i.e., not subject to a motion to dismiss), its request for profit information from Finnsugar is relevant. Whether the District Court actually decides to award such profits as damages if ARI wins its case is a separate question not before us. Therefore, Finnsugar is ordered to respond to ARI's outstanding discovery requests concerning its sales of betaine and sucrose. It is so ordered.