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Sep 13 2011

Toilet Paper Case Shows How Crappy Litigation Can Be

Ever notice those little diamond shapes on Quilted Northern toilet paper made by Georgia Pacific? No? OK, well, neither did I, but GP noticed the same design on Scott and Cottonelle products (made by Kimberly Clark, its biggest competitor), so it sued alleging that the “quilted diamond design” on Kimberly-Clark’s products violated its trademark and its utility patent for the product. Ultimately a federal judge dismissed the trademark suit awarding summary judgment to KC, finding that the design was “functional” and thus not possible to trademark. While this proves the difficulty of establishing “design trademarks” in functional products, the case also is an abject lesson about the perils of litigation.

KC did not ask to get sued of course. But it found itself in a “Godzilla vs Mothra” scenario when GP brought its claim. Two multi-billion dollar companies fighting it out for the right to press diamonds onto toilet paper. After it won , and GP’s appeal was dismissed, KC applied to the court to try and get back some of the hundreds of thousands it spent defending the case, arguing that GP had gone overboard in how it prosecuted the case, that the lawsuit was “oppressive” and caused “unreasonable legal fees.” (That last phrase is an oxymoron in my dictionary!)

But the court found nothing special here either. “Extensive discovery, defending depositions, exchanging expert reports, and responding on the merits to motions are garden variety expenditures in such cases,” said Judge Arlander Keys of the Federal Court in Chicago. He added, “Defendants fail to point out any specific instance that could be regarded as oppressive, exceptional, or unlike the cost required to defend against a trademark infringement suit between any two multi-billion dollar companies.” Just par for the course, said the wise old judge. Each side bears it own costs.

So here is a perfect example of why litigation can be so frustrating for both the winner and the loser. Here GP was I am sure hyped up by its counsel that the lawsuit was a winner. After all, GP had been awarded a utility patent for the toilet paper and had come out with the diamond design first. Why shouldn’t KC be forced to put hearts or spades on their damn toilet paper? Yet, all that was for naught, because of the difficulty in enforcing design marks in functional items. KC, not willing to lose the right to imprint a diamond on TP, bunkered down and won; but even though it was vindicated, it cost a fortune to litigate the case to conclusion. Many times clients come into my office with similar (though smaller of course) claims and cases. It is difficult to explain to them that the cost of winning or losing can be significant and they need to make sure that their cause is worth fighting for and worth bankrolling. For many companies, being involved in an infringement claim like this can stop their business cold and force them to expend all their time, attention and money on winning the case. Heaven forbid if their opponent is in a stronger financial condition so that they can bully around the littler guy. In those situations, it could literally be life and death for a company. Imagine launching a new product you have worked on for years or which is the culmination of your dream and plans only to be slapped with an infringement lawsuit that halts production and eats all your capital?

That’s why small to midsize companies need to make sure they are staying far and away from another company’s intellectual property. Researching and clearing all potential obstacles before you launch is vital and critical so that your business and idea don’t go down the drain like a few sheets of quilted toilet paper.

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