Photo of Shannon Skelton HoltzmanPhoto of Kathryn GonskiPhoto of Carol "LuLu" Welborn Reisman

In a breach of contract case involving the overlay of intellectual property and contract law, Luv n’ care, Ltd, a global leader in the design and sale of baby products, filed suit against its former distributor, Groupo Rimar, a.k.a. Suavinex, S.A. (“Suavinex”), for breach of Suavinex’s contractual obligation not to copy any of Luv n’ care’s product designs.

In defense, Suavinex asserted that the pertinent contract provisions were unenforceable illegal restraints of trade, that patent law precluded Luv n’ care from obtaining patent-like protections over unpatented products offered for public sale, and that the parties’ contract protected only confidential, proprietary designs in which Luv n’ care had a “protectable interest.”

Before Liskow’s involvement in the case, the United States District Court for the Western District of Louisiana sided with Suavinex, granting summary judgment in its favor on the basis that its obligation extended only to Luv n’ care’s “proprietary” confidential information, not to products that were sold publicly.

On appeal,  the Fifth Circuit reversed in a unanimous opinion.  Luv n’ care, Ltd. v. Group Rimar, 844 F.3d 442 (5th Cir. 2016).  Applying Louisiana principles establishing broad freedom to contract, the Fifth Circuit held that Suavinex’s obligation not to copy any of Luv n’ care’s product designs applied to any product design, including those already in the public domain.  The Court found that the district court erred by failing to apply the plain meaning of the agreement and by imposing a requirement that the design be either confidential or protectable as intellectual property in order to fall within the definition of a “product design.”  This construction was flawed because:  (i) its interpretation improperly rendered certain contract provisions meaningless; (ii) parties to a contract can voluntarily agree to limit rights that they would otherwise have; and (iii) a review of the contract as a whole made clear that the pertinent provision related to information that was not intellectual property-protected.  The Court further found that the term “proprietary” is not limited to information in which the owner has a “protectable interest.”

Significantly, the Court also rejected Suavinex’s argument that patent law precluded Luv n’ care from protecting unpatented designs available in the public domain:

The intellectual property cases, which the district court relied upon in reaching beyond the plain language of the contract, are inapposite.  They concern the rights held by an inventor against the public at large, not, as here, the rights and obligations of parties in contractual privity with one another, who have bargained for benefits beyond what the law itself can provide.  Intellectual property law is no barrier to enforcement of a contract under state law, “merely because the contract relates to intellectual property which may or may not be patentable.” Aronson v. Quick Point Pencil Co., 440 U.S. 257, 262, 99 S. Ct. 1096 (1979).

The decision has significant and potentially far-reaching impacts for companies who seek to protect their product designs.

(Shannon Holtzman, Liskow & Lewis Shareholder, argued the appeal for Luv n’ care.)

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