STEALTH mark owner hit with heavy sanctions

On October 4 2006 habitual trademark litigant Leo Stoller suffered a serious setback in the form of extraordinary injunctive relief issued by the US District Court for the Northern District of Illinois (Eastern Division) as part of the final order in Central Mfg Co v Pure Fishing Inc. Stoller filed the case in February 2005 on behalf of himself and several of his wholly owned corporate entities, through which Stoller has obtained, and has repeatedly sued for alleged infringement of, numerous federal trademark registrations including the word STEALTH. In the Pure Fishing Case, Stoller targeted three companies using the term 'stealth' in connection with fishing line products. The defendants brought several counterclaims, including claims seeking cancellation of some of Stoller's STEALTH marks, declarations of non-infringement and injunctive relief.

On November 16 2005 the court dismissed Stoller's case with prejudice, and identified repeated and egregious litigation misconduct in which Stoller and his counsel had engaged (see STEALTH mark owner suffers another setback). The conduct included sanctionable violations of the Federal Rules of Evidence and Rule 11 of the Federal Rules of Civil Procedure, as well as what the court described as "an appalling lack of regard for this court and lack of respect for the judicial process". In particular, the court pointed to the fact that Stoller had drafted numerous meritless pleadings on which he had signed his counsel's name (apparently with counsel's consent), including motions to disqualify the court and defence counsel.

Soon thereafter, Stoller filed for bankruptcy, at which point the Pure Fishing proceedings were automatically stayed. In August 2006, however, the bankruptcy court handling his case held that the defendants/counterclaim-plaintiffs in the Pure Fishing Case could proceed with the trademark litigation and liquidate any claims against Stoller. The Illinois district court then granted the defendants'/counterclaim-plaintiffs' motion to lift the stay and enter final judgment, entering a final ruling that imposes several unusually strong remedies and severe sanctions against Stoller, including the following:

  • The court found that the case was "exceptional" under Section 35 of the Lanham Act and thus held Stoller and the other plaintiffs/counterclaim defendants jointly and severally responsible for the attorneys' fees and costs that the defendants/counterclaim plaintiffs had incurred in connection with the case.

  • The court declared that the principal STEALTH mark that Stoller had placed at issue (for fishing bobbers) was invalid, unenforceable and forfeited, and it cancelled each of the other several dozen registrations Stoller had identified in the complaint.

  • The court declared that Stoller and the other plaintiff/counter-defendant companies were "vexatious litigants" and imposed an exceptional injunction under the All Writs Act, 28 USC Section 1651(a), prohibiting Stoller and the companies from bringing any lawsuit or trademark opposition proceedings without leave of the court.

The anti-suit injunction, in particular, appears clearly aimed at ending the torrent of trademark litigation Stoller has brought involving his so-called family of STEALTH marks. (In its November 2005 ruling, the court noted that Stoller and the related entities had been involved in at least 49 cases in the northern district of Illinois alone, and had been ordered to pay opponents' attorneys' fees in at least seven reported decisions.) While such anti-suit injunctions are rarely granted, there is little question that the All Writs Act can support for such a strong sanction; the precedent includes US Court of Appeals for the Seventh Circuit decisions cited by the defendants/counterclaim-plaintiffs (see eg, In re Chapman, 328 F 3d 903 (7th Cir 2003); Coleman v Comm'r of Internal Revenue, 791 F 2d 68 (7th Cir 1986)) and decisions from other federal circuits (see eg, Riccard v Prudential Ins Co of Am, 307 F 3d 1277 (11th Cir 2002); Packer Avenue Assoc v Ceritano, 884 F 2d 745 (3rd Cir 1989) (citing several other cases)). It remains to be seen, of course, whether Stoller will comply with the court's broad injunction and whether the trademark world has seen the last of him.

Alec Rosenberg, Arent Fox PLLC, Washington DC

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