This decision serves as a cautionary tale for franchisors whom act aggressively and rashly in the protection of its IP. Here, Sub Zero sued a Louisville, Kentucky, ice cream business (Frank Nye Consulting, LLC d/b/a Arctic Scoop) alleging that the defendant company had violated a patent and breached a contract. Presumably following the dismissal of plaintiff’s pleadings, the defendants filed a motion seeking Rule 11 sanctions against counsel for Sub Zero, the Kirton McConkie firm, with offices in Salt Lake City.
The Court found that the firm had violated the rule several times by signing the complaint and amended complaint asserting baseless allegations of patent infringement, breach of contract, and misappropriation of trade secrets. The Court found that the firm had “failed to conduct a reasonable investigation into any information allegedly given to Defendants by Sub Zero and/or its franchisees, as well as into any information actually used by Defendants in the operation of the Arctic Scoop.”
The firm knew it was in the cross hairs. The Court noted the following in a footnote: “In finding that sanctions are warranted, the court notes the following comments made by Kirton McConkie’s counsel at hearing: ‘I want to start by apologizing to the Court on behalf of my firm. I am representing my firm in the capacity as an attorney. My firm is my client. And I stand in a position where I can apologize, extend a very heartfelt apologies to the Court. I’ve done the same with the defendant’s counsel. We’re sorry this has happened. And we are willing to fall on our sword here, Your Honor. The problem is that the sword that the defendants are asking us to fall on is larger than it should be.’”
The Court awarded $361,841.93, which appears to be the full amount requested by the defendants.
Citation: 2018 U.S. Dist. LEXIS 71474
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