In the middle of May, a federal jury in the U.S. District Court for the Northern District of Illinois (N.D. Ill.) awarded nearly $6 million in damages to a father-and-son hand tool business against major American retailer Sears (NASDAQ:SHLD) and Apex Tool Group, a Maryland-based manufacturer of hand and power tools. The victory for LoggerHead LLC, which includes a finding of willful infringement, is a rare example of a small business taking on much larger entities in a patent infringement battle and coming away with a major victory.
LoggerHead asserted two of its patents in the case:
- U.S. Patent No. 6889579, titled Adjustable Gripping Tool. It claims an adjustable gripping tool for engaging a workpiece to impart work thereto which is designed to automatically configure to differently dimensioned and shaped workpieces and has self-energizing and de-energizing capabilities.
- U.S. Patent No. 7992470, same title as the ‘579 patent. It also claims an adjustable gripping tool having aligning elements which are advantageous when timing of the engagement between gripping elements and the workpiece are desired.
The inventor of the two patents-in-suit is Dan Brown, Sr., president and founder of LoggerHead. He also teaches engineering at Northwestern University’s Segal Design Institute. Brown came up with the concept for the adjustable gripping tool, which LoggerHead markets as the Bionic Wrench, after watching his son try to work on a lawnmower with a pair of pliers. Realizing that there was no good tool to serve as a substitute, Brown worked for three years to create a suitable gripping tool while performing market research, evaluating sales channels and searching for an American manufacturer for the product, according to LoggerHead’s second amended complaint filed in the case.
Brown first applied for a patent covering the Bionic Wrench in January 2004, about a year prior to founding LoggerHead and releasing the first Bionic Wrench to the market. The tool enables users to work a nut or bolt by providing a grip on the flat sides of hardware rather than its corners, as a typical wrench would, improving a user’s ability to work with a fastener having worn edges. The Bionic Wrench’s adjustable features allow it to easily fit both metric and nonmetric hardware within a certain range of size. Brown chose a U.S.-based supplier, Penn United Technologies, to manufacture and assemble the Bionic Wrench to develop a “Made in America” brand identity, despite the higher cost of domestic manufacturing compared to foreign suppliers.
The initial release of the Bionic Wrench earned a great deal of critical acclaim and commercial success. In March 2006, The Wall Street Journal covered an international design award won by LoggerHead making it one of two U.S. entities to earn such industry praise, the other being consumer electronics giant Apple. LoggerHead’s complaint notes that, by mid-2012, gross sales of Bionic Wrench units reached $20 million with Penn United employing between 20 and 50 employees to manufacture the device, succeeding despite the global economic recession. During that time, Brown turned down overtures from other retailers who offered to sell the Bionic Wrench under their brands. LoggerHead also obtained trademark status for the Bionic Wrench name in 2008 and the tool’s design in 2014. In the complaint, LoggerHead notes that it has shipped 1.75 million units of the Bionic Wrench by the time of the complaint’s filing.
The business relationship between LoggerHead and Sears goes back to before Christmas of 2009; Sears ordered 15,000 units to be sold in its retail stores during that holiday season. Sears sold every unit both that year and the next, when it ordered 75,000 Bionic Wrenches. As a result of this success, LoggerHead and Sears entered into a one-year supply agreement effective February 1st, 2011. Under the agreement, Sears was responsible for promoting the Bionic Wrench by subsidizing the production of a direct response television ad campaign; in return, LoggerHead agreed to exclusively sell the Bionic Wrench through Sears and not Home Depot or Lowes. Sears sold 300,000 units of the Bionic Wrench that year, exceeding the company’s own sales forecast by 23 percent.
Following this very successful sales campaign, Sears and LoggerHead discussed extending their supply agreement. LoggerHead alleged that Sears agreed to purchase 73,000 Bionic Wrench units for Father’s Day 2012 and a total 300,000 units through the year. LoggerHead worked to fulfill these orders from December 2011 until June 2012, when Sears sent a revised sales forecast of 2,971 Bionic Wrench units for the 2012 holiday season, drastically reducing its Christmas commitment from more than 200,000 units. Sears also backed out of a commitment to help produce additional direct response ads for the Bionic Wrench. LoggerHead alleged that Sears told it that disagreements between the parties led to their breaking the agreement, but that no true disagreement was ever identified by Sears.
In September 2012, Sears’ Craftsman tool brand announced that it would begin sales of the Max Axess Locking Wrench. LoggerHead alleged that Sears had purchased the trademark-protected Bionic Wrench title as an advertisement keyword, directing users of Google and other search engines to Sears’ webpage selling the Max Axess knockoff. LoggerHead alleged that this action constituted trademark dilution and caused consumer confusion. Sears then ran a direct response TV ad campaign for the Craftsman knockoff using elements that were identical to those in the Bionic Wrench ad campaign. The Max Axess unit sold for $9.99, a price point much lower than the Bionic Wrench which was achieved, in part, by copying successful elements of the Bionic Wrench. LoggerHead alleged that the decision to copy the Bionic Wrench was caused, in part, by the success of the Bionic Wrench, which “did not sit well” with Apex, a manufacturer of Sears’ Craftsman branded tools for two decades, and Sears employees responsible for promoting Craftsman. LoggerHead’s complaint notes that Sears and Apex employed an “efficient infringement” business model in which they calculated the benefits of copying patented technology against the risk of getting caught. “If the benefits exceed the cost, they steal,” LoggerHead’s complaint reads, citing a website on efficient infringement which appears to no longer be active.
The Markman order filed in the case identifies several terms from claims from LoggerHead’s asserted patents which were disputed, including “arm portion”, “body portion”, “workpiece” and “circumferentially engage the workpiece”. In most cases, the judge’s ruling in the Markman order appeared to be favorable to LoggerHead’s interpretation of the claims.
The post-trial briefing schedule order entered by the court shows that LoggerHead had filed motions for enhanced damages, entry of judgment and permanent injunction while defendants Sears and Apex moved for judgment as a matter of law (JMOL) under Rule 50(b) as well as a motion for remittitur or alternatively a Rule 59(a) motion for a new trial. Briefs were to be filed between late June and early July.
LoggerHead’s lead counsel in this case was Paul Skiermont of Skiermont Derby LLP; joining him from that firm were Sarah Spires and Sadaf Abdullah. Jason Peltz, Asha Spencer and Jeanne Tinkham, all from Bartlit Beck Herman Palenchar & Scott LLP, also joined the defense. Sears and Apex were represented by counsel from Kirkland & Ellis LLP, including Marc Sernal, Eric Hayes, Ian Block and Katherine Rhoades. Sears had one additional counsel member from Winston & Strawn LLP, James Hilmert.