180s et. al. v. Walgreen et. al.

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Official Complaint for Patent Infringement in Civil Action No. 1:12-cv-02117-JKB: 180s, Inc. et. al. v. Walgreen Co. et. al. Filed in U.S. District Court for the District of Maryland, the Hon. James K. Bredar presiding. See http://news.priorsmart.com/-l6q9 for more info.

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UNITED STATES DISTRICT COURT DISTRICT OF MARYLAND (BALTIMORE DIVISION) ) ) ) ) ) ) ) and ) ) 180s, LLC, ) 700 South Caroline Street ) Baltimore, Maryland 21231, ) ) a Maryland Limited Liability Company, Plaintiff, ) ) v. ) ) ) Walgreen Co. ) 200 Wilmont Road ) Deerfield, IL 60015, ) a Illinois Corporation, ) Defendant, ) ) and ) ) LTV Wholesale & Importer, LLC ) 110 Giant Drive ) Richmond, VA 23224 ) ) a Virginia Limited Liability Company Defendant. ) __________________________________________ ) 180s, Inc., 700 South Caroline Street Baltimore, Maryland 21231, a Delaware Corporation, Plaintiff,

Civil Action No. 12-cv-2117

COMPLAINT

DEMAND FOR JURY TRIAL

Plaintiffs 180s, Inc. and 180s, LLC (collectively “180s” or “Plaintiffs”) allege as follows: THE PARTIES 1. 180s, Inc. is a corporation organized under the laws of the State of Delaware, having its

principal place of business at 700 South Caroline Street, Baltimore, Maryland 21231. 180s, Inc. owns all right, title, and interest in the intellectual property that is the subject matter of this suit. 180s, LLC is a limited liability company organized under the laws of the State of Maryland, having its principal place of business at 700 South Caroline Street, Baltimore, Maryland 21231. 180s, LLC is a wholly-owned subsidiary of 180s, Inc. and the exclusive licensee of the intellectual property that is the subject matter of this suit. 2. Defendant Walgreen Co. (“Walgreen”), on information and belief, is a corporation

organized under the laws of the State of Illinois having its principal place of business at 200 Wilmont Road, Deerfield, Illinois, 60015. Walgreen is a national chain of drugstores and pharmacies, owning and operating thousands of Walgreen’s retail locations throughout the country. 3. Defendant LTV Wholesale & Importer, LLC (“LTV”), on information and belief, is a

limited liability company organized under the laws of the Commonwealth of Virginia having its principal place of business at 110 Giant Drive, Richmond, Virginia 23224. On information and belief, LTV is in the business of purchasing, importing, and distributing miscellaneous, low-cost retail goods. JURISDICTION AND VENUE 4. This is a civil action for: (i) patent infringement arising under the United States patent

statutes, Title 35, United States Code, §§ 1 et seq.; (ii) trade dress infringement and unfair competition under the federal trademark statute (the “Lanham Act”), Title 15, United States Code, §§ 1051 et seq.; and (iii) breach of contract.

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This Court has jurisdiction of the subject matter of this action under Title 28, United

States Code, §§ 1331, 1332, 1338(a), and 1367, and Title 15, United States Code, § 1121. 6. This Court has personal jurisdiction over Walgreen because Walgreen is doing and has

done substantial business in this judicial district and has committed acts of infringement, and other acts complained of herein, in this judicial district. According to its website (www.walgreens.com), Walgreen operates over sixty retail stores in the State of Maryland. 7. This Court has personal jurisdiction over LTV at least because, on information and belief:

(i) LTV purposely placed or caused to be placed infringing product into the stream of commerce through an established distribution channel, specifically, by selling infringing product to Walgreen for re-sale at Walgreen’s retail stores, and some of such infringing product was subsequently offered for sale, sold, and/or used within the District of Maryland; (ii) LTV has used, sold, and/or offered to sell infringing product within this judicial district; and (iii) LTV has contracted to supply infringing product and/or transacted business related to infringing product in the District of Maryland within the meaning of section 6-103 of the Maryland Code. 8. Venue is proper in this District pursuant to 28 U.S.C. §§ 1391(b)-(c) and 1400(b) because

Defendants have committed acts of infringement and done business in this District. 180s’ INNOVATIVE EARWARMER PRODUCTS 9. 180s designs, manufactures and sells innovative performance wear, including ear

warmers, gloves, and glasses. 180s was founded in 1994 by Brian E. Le Gette and Ronald L. Wilson, II, two University of Pennsylvania Wharton Business School students, who invented and patented the first of its kind wrap-behind-the-head ear warmer. When introduced into the marketplace in 1995, the 180s ear warmer achieved immediate success.

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180s’ success has been driven largely by its innovative ear warmer products, which are

protected by a significant portfolio of patents, including the patents asserted in this action, a U.S. trademark registration for its trade dress, and 180s’ common law rights in its trade dress. True and correct reproductions of photographs of a “180s” brand ear warmer are attached as Exhibits A and B. The overall “look and feel” of the “180s” ear warmer product, including without limitation the wrapbehind-the-head design, binding on the perimeter of the product, and a narrow band portion connecting the larger ear portions, constitutes distinctive trade dress. 11. 180s has invested considerable effort in promoting its ear warmer products and the

associated trade dress. Since at least 1995, 180s has consistently and widely marketed and advertised its ear warmer products by highlighting their distinctive trade dress. As a result, the ear warmer trade dress has become widely recognized by consumers and has acquired secondary meaning in the minds of the consuming public such that it serves as an indicator of the source of the ear warmer product, and has come to embody the substantial and valuable goodwill of 180s. 12. The ear warmer trade dress, while enormously valuable as a source indicator, is not

essential to the use or purpose of the products. Moreover, 180s’ exclusive rights in its trade dress do not put competitors at a significant non-reputation-related disadvantage. 13. On May 18, 2004, United States Patent No. 6,735,784 (“the ‘784 Patent”), entitled

“Apparatus and Method for Making an Ear Warmer and an Ear Warmer Frame,” was duly and legally issued to Isom, et al. The ‘784 Patent has been assigned to 180s, Inc. A true and correct copy of the ‘784 Patent is attached as Exhibit C. 14. On July 26, 2005, United States Patent No. 6,920,645 (“the ‘645 Patent”), entitled

“Apparatus and Method for Making an Ear Warmer and an Ear Warmer Frame,” was duly and legally

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issued to Le Gette, et al. The ‘645 Patent has been assigned to 180s, Inc. A true and correct copy of the ‘645 Patent is attached as Exhibit D. 15. On May 9, 2006, United States Trademark Registration No. 3,089,225 (“the ‘225

Registration”) was duly and legally issued to 180s, Inc. A true and correct copy of the ‘225 Registration is attached as Exhibit E. 16. 180s, Inc. is the sole owner of the entire right, title, and interest in the ‘784 Patent, and

180s, LLC is an exclusive licensee under the ‘784 Patent. 17. 180s, Inc. is the sole owner of the entire right, title, and interest in the ‘645 Patent, and

180s, LLC is an exclusive licensee under the ‘645 Patent. 18. 180s, Inc. is the sole owner of the entire right, title, and interest in the trade dress as

shown in the ‘225 Registration. The remaining trade dress rights in 180s’ ear warmers have been assigned to 180s, Inc. from 180s, LLC. These collective trade dress rights are exclusively licensed to 180s, LLC. WALGREEN’S HISTORY OF INFRINGING 180s’ INTELLECTUAL PROPERTY RELATED TO EAR WARMERS 19. Walgreen has a repeated pattern of selling infringing knock-off ear warmers, requiring

180s to enforce its intellectual property rights against Walgreen on two prior occasions. In 2004, 180s filed suit against Walgreen in this Court for patent infringement based on Walgreen’s sale of a knock-off “Ear Band” product. The case settled favorably for 180s, with Walgreen agreeing that this Court would retain jurisdiction to enforce the settlement agreement. 180s did not grant Walgreen any rights or license with respect to any of its intellectual property in connection with the settlement. 20. In late 2009, 180s discovered that Walgreen was selling another infringing ear warmer.

After 180s confronted Walgreen with this subsequent infringement, Walgreen pulled the product from

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its stores, turned over all gross revenues from its infringing sales to 180s, and reimbursed 180s for attorneys’ fees incurred by 180s in resolving the infringement. 21. On information and belief, less than one year after 180s put a stop to Walgreen’s sale of

the second infringing product, in the fall of 2010, Walgreen stores began selling yet another knock-off ear warmer labeled “Ear Cover” (the “Accused Product”). The “Ear Cover” was very inexpensive, retailing at less than $2.00 per unit. True and correct copies of photographs of the Accused Product are attached as Exhibits F and G. 22. As shown in Exhibits F and G, the Accused Product is similar to 180s’ ear warmers in at

least the following ways: the overall shape of the product, the wrap-behind-the-head design, binding on the perimeter of the product, and the narrow band portion connecting the larger ear portions. This similarity in design would likely cause confusion to an ordinary observer as to the source of the product. 23. A true and correct copy of a photograph of the “Ear Cover” hangtag, bearing the name

“LTV Imports” and stating it is “Made in China,” is attached as Exhibit H. The Accused Product was distributed to Walgreen by Defendant LTV. 24. On information and belief, LTV began shipping the Accused Product to Walgreen stores

in September 2010 and has sold over half a million units to Walgreen. Over 99% of LTV’s sales of the Accused Product were made to Walgreen stores. 25. Despite Walgreen’s knowledge of 180s’ intellectual property rights relating to ear

warmers, and notwithstanding its two prior agreements to cease selling infringing ear warmers, Walgreen never contacted 180s before it began offering the Accused Product for sale in thousands of Walgreen’s stores across the country, including a significant number of stores located in Maryland, and apparently made no effort to determine whether the Accused Product infringed any of 180s’ intellectual

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property rights. 26. On information and belief, Walgreen continued offering the “Ear Cover” for sale until the

end of 2011, selling hundreds of thousands of units of infringing product. WALGREEN CONTRACTS TO SELL AUTHENTIC 180s EAR WARMERS WHILE CONTINUING ITS SALES OF THE INFRINGING “EAR COVER” 27. Without disclosing its continued sale of the “Ear Cover,” in November 2011, Walgreen

negotiated a contract with 180s to purchase and re-sell authentic 180s “Degrees” ear warmers in its retail stores (“the November 2011 Contract”). A true and correct copy of the November 29, 2011 Commitment Letter sent by 180s to Walgreen summarizing certain terms of the November 2011 Contract is attached as Exhibit I. Walgreen subsequently issued a purchase order for 47,616 units of Degrees. 28. 180s, unaware that Walgreen intended to offer the 180s Degrees ear warmers for sale

alongside a knock-off being sold at a fraction of the price, agreed as part of the November 2011 Contract that any 180s ear warmers purchased by Walgreen that remained unsold as of March 2, 2012 could be returned to 180s. Based on the quantity of ear warmers Walgreen purchased and 180s’ experience with other similar retail customers, 180s expected few if any returns. 29. On December 6-9, 2011, 180s shipped the 47,616 units of Degrees purchased by

Walgreen to 1,984 Walgreen stores. 180s timely invoiced Walgreen for the shipped product. 30. Just weeks after shipping product to Walgreen stores, 180s discovered the knock-off “Ear

Cover” for sale in Walgreen stores. On December 22, 2011, counsel for 180s sent a letter to Defendant LTV notifying LTV of the ‘784 and ‘645 Patents and the ‘225 Registration, and of 180s’ view that the “Ear Cover” product infringed 180s’ patent and trademark rights. The December 27, 2011 letter further demanded that LTV, as well as all of its affiliates, distributors, and resellers, cease and desist from any

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future making, using, selling, offering to sell, and importing of the Accused Product. A true and correct copy of the December 22, 2011 letter to LTV is attached as Exhibit J. 31. On December 27, 2011, counsel for 180s sent a similar letter to a Walgreen senior

litigation attorney, notifying Walgreen of the ‘784 and ‘645 Patents and the ‘225 Registration, and of 180s’ belief that the “Ear Cover” product infringed 180s’ patent and trade dress rights, and demanding that Walgreen cease and desist from any future making, using, selling, offering to sell, and importing of the Accused Product. A true and correct copy of the December 27, 2011 letter to Walgreen is attached as Exhibit K. 32. On December 29, 2011, Walgreen pulled the Accused Product from its shelves. LTV

also ceased taking orders for the product on December 28, 2011. 33. Around the same time that 180s approached Walgreen about Walgreen’s sale of this most

recent infringing product, Walgreen abandoned its commitment to sell 180s Degrees pursuant to the November 2011 contract. Walgreen stores returned thousands of unsold Degrees to 180s weeks or even months in advance of the contractually-permitted date for any product returns. In some cases, Walgreen stores returned all units of 180s Degrees they received within two weeks of receipt, reporting that they could not sell 180s Degrees because they were already offering the much cheaper LTV “Ear Cover” product. 34. Walgreen failed to timely pay 180s for the purchased units of Degrees. 180s received no

payments in response to its initial invoice or payment demands. After prolonged negotiations with 180s outside counsel, and nearly five months after its stores received the product shipments, Walgreen submitted a partial payment to 180s covering the units it actually re-sold to retail customers. Walgreen’s partial payment comprised only about one-third of the purchase price owed pursuant to the purchase

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order it submitted. 35. Walgreen deliberately failed to make reasonable efforts to sell the 180s Degrees it

purchased and received in early December 2011. Instead, Walgreen marketed the Accused Product through sales and in-store product displays. A true and correct copy of a photograph of a sale display of the Accused Product in a Walgreen store taken in December 2011 is attached hereto as Exhibit L. 36. Walgreen’s active promotion of the Accused Product directly undermined sales of any

180s Degrees that were actually placed onto Walgreen’s store shelves. Even after it stopped selling the Accused Product, Walgreen still failed to make reasonable efforts to offer 180s Degrees for sale. As a result, according to Walgreen, its stores sold less than twenty percent of the 180s inventory that Walgreen was supposed to purchase from 180s, an abysmal sales performance compared to other similar retail customers of 180s. 37. Before using, offering for sale, selling, and/or importing at least some of the Accused

Product, Walgreen had actual or constructive knowledge of 180s brand ear warmers and 180s’ intellectual property rights in behind-the-head ear warmers, including 180s’ rights in the ‘784 Patent, the ‘645 Patent, and the ‘225 Registration. COUNT ONE—INFRINGEMENT OF THE ‘784 PATENT 38. Plaintiffs reallege and incorporate herein by this reference paragraphs 1 through 37 of

this Complaint as though fully set forth herein. 39. Walgreen has infringed the ‘784 Patent under Section 271 of Title 35 of the United States

Code by using, selling and/or offering to sell in, and/or importing into, the United States the Accused Product, which embodies inventions claimed in the ‘784 Patent.

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40.

LTV has infringed the ‘784 Patent under Section 271 of Title 35 of the United States

Code by making, using, selling, and/or offering to sell in, and/or importing into, the United States the Accused Product, which embodies inventions claimed in the ‘784 Patent. 41. 42. On information and belief, Walgreen’s infringement of the ‘784 Patent has been willful. Plaintiffs have been, and will continue to be, damaged and irreparably harmed by the

actions of Defendants, which will continue unless Defendants are enjoined by this Court. COUNT TWO— INFRINGEMENT OF THE ‘645 PATENT 43. Plaintiffs reallege and incorporate herein by this reference paragraphs 1 through 42 of

this Complaint as though fully set forth herein. 44. Walgreen has infringed the ‘645 Patent under Section 271 of Title 35 of the United States

Code by using, selling and/or offering to sell in, and/or importing into, the United States the Accused Product, which embodies the inventions claimed in the ‘645 Patent. 45. LTV has infringed the ‘645 Patent under Section 271 of Title 35 of the United States

Code by making, using, selling, and/or offering to sell in, and/or importing into, the United States the Accused Product, which embodies the inventions claimed in the ‘645 Patent. 46. 47. On information and belief, Walgreen’s infringement of the ‘645 Patent has been willful. Plaintiffs have been, and will continue to be, damaged and irreparably harmed by the

actions of Defendants, which will continue unless Defendants are enjoined by this Court. COUNT THREE— TRADE DRESS INFRINGEMENT UNDER 15 U.S.C. § 1114 48. Plaintiffs reallege and incorporate herein by this reference paragraphs 1 through 47 of

this Complaint as though fully set forth herein.

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49.

Plaintiff 180s, Inc. owns valid and protectable rights in its trade dress, aspects of which

are embodied in the ‘225 Registration, and licenses its rights to 180s, LLC. 50. Defendants had constructive notice of 180s, Inc.’s ownership of the trade dress disclosed

in the ‘225 Registration as of May 9, 2006, the date of registration, pursuant to 15 U.S.C. § 1072. 51. On information and belief, after issuance of the ‘225 Registration, Defendants began

selling or using in commerce the Accused Product bearing trade dress that is confusingly similar to the trade dress of the ear warmer products sold by 180s, LLC. 52. The trade dress used in connection with the Accused Product is likely to cause confusion,

mistake, or deception as to the source or sponsorship of the Accused Product and/or is likely to lead the consuming public to believe that Plaintiffs have authorized, approved, or somehow endorsed the Accused Product. 53. The actions of Defendants described above and specifically, without limitation, the

Defendants’ use of the confusingly similar trade dress with respect to the Accused Product, constitutes trademark infringement in violation of 15 U.S.C. § 1114. 54. Plaintiffs have been, and will continue to be, damaged and irreparably harmed by the

actions of the Defendants. Plaintiffs have no adequate remedy at law in that the amount of damage to Plaintiffs’ business and reputation and the diminution of the goodwill of 180s’ trade dress protected by the ‘225 Registration is difficult to ascertain with specificity. injunctive relief pursuant to 15 U.S.C. § 1116. 55. Plaintiffs are entitled to recover damages in an amount to be determined at trial and the Plaintiffs are therefore entitled to

profits made by Defendants on sales of the Accused Product.

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56.

On information and belief, Plaintiffs allege that the actions of Walgreen were undertaken

willfully and with the intention of causing confusion, mistake, or deception, making this an exceptional case entitling Plaintiffs to recover trebled damages and reasonable attorneys’ fees from Walgreen pursuant to 15 U.S.C. § 1117. COUNT FOUR—UNFAIR COMPETITION AND FALSE DESIGNATION OF ORIGIN UNDER 15 U.S.C. § 1125(a) 57. Plaintiffs reallege and incorporate herein by this reference paragraphs 1 through 56 of

this Complaint as though fully set forth herein. 58. Plaintiff 180s, Inc. owns valid and protectable rights in its trade dress and licenses its

rights to 180s, LLC. 59. On information and belief, Defendants have been selling or using in commerce the

Accused Product bearing trade dress that is confusingly similar to the trade dress of the ear warmer products sold by 180s, LLC. 60. Defendants’ actions as described herein are likely to cause confusion, mistake, or

deception as to the source or sponsorship of the Accused Product and/or are likely to lead the consuming public to believe that Plaintiffs have authorized, approved, or somehow endorsed the Accused Product. 61. Defendants’ actions constitute unfair competition and false designation of origin in

violation of 15 U.S.C. § 1125(a). 62. Plaintiffs have been, and will continue to be, damaged and irreparably harmed by

Defendants’ actions. Plaintiffs have no adequate remedy at law in that the amount of damage to Plaintiffs’ business and reputation and the diminution of the goodwill of 180s’ trade dress is difficult to ascertain with specificity. Plaintiffs are therefore entitled to injunctive relief pursuant to 15 U.S.C. § 1116.

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63.

Plaintiffs are entitled to recover damages in an amount to be determined at trial and the

profits made by Defendants on the sales of the Accused Product. 64. On information and belief, Plaintiffs allege that the actions of Walgreen were undertaken

willfully and with the intention of causing confusion, mistake, or deception, making this an exceptional case entitling Plaintiffs to recover trebled damages and reasonable attorneys’ fees from Walgreen pursuant to 15 U.S.C. § 1117. COUNT FIVE—BREACH OF CONTRACT 65. Plaintiffs reallege and incorporate herein by this reference paragraphs 1 through 64 of

this Complaint as though fully set forth herein. 66. Walgreen’s actions described above constitute a breach of the November 2011 Contract

entered into by 180s and Walgreen, including specifically, without limitation, Walgreen’s actions in: failing to pay for approximately two-thirds of the 180s Degrees Walgreen purchased and 180s shipped to Walgreen’s stores; failing to use reasonable efforts to sell 180s Degrees it purchased in Walgreen’s retail stores; intentionally marketing, through sales, in-store displays, and other promotional efforts, the Accused Product; and prematurely returning unsold 180s Degrees before the contractually-permitted deadline. 67. 180s has sustained significant losses as a result of Walgreen’s breach in an amount to be

determined at trial, including but not limited to full payment for all 180s ear warmers purchased by Walgreen. 68. While 180s disputes that Walgreen was entitled to return any inventory shipped to its

stores by 180s, in the event the Court determines Walgreen was entitled to return any portion of such inventory, 180s may seek consequential damages with respect to such returned inventory, including but

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not limited to lost profits and costs associated with product transportation, repackaging, and reselling. REQUEST FOR RELIEF WHEREFORE, Plaintiffs request the following relief: A. a preliminary and permanent injunction against Defendants as well as their respective officers, agents, servants, employees, parent and subsidiary corporations, assigns and successors in interest, and those persons in active concert or participation with them, enjoining them from continued acts of infringement of the ‘784 Patent; B. a preliminary and permanent injunction against Defendants as well as their respective officers, agents, servants, employees, parent and subsidiary corporations, assigns and successors in interest, and those persons in active concert or participation with them, enjoining them from continued acts of infringement of the ‘645 Patent; C. a preliminary and permanent injunction against Defendants as well as their respective officers, agents, servants, employees, attorneys, parent and subsidiary corporations, assigns and successors in interest, and those persons in active concert or participation with them, enjoining them from continued acts of infringement of Plaintiffs’ trade dress; D. E. F. G. H. a judgment holding Defendants liable for infringement of the ‘784 and ‘645 Patents; a judgment holding Defendants liable for infringement of Plaintiffs’ trade dress; a judgment holding Defendants liable for unfair competition; a judgment holding Defendant Walgreen liable for breach of contract; an accounting of damages and award of all Defendants’ respective profits resulting from Defendants’ infringement of the ‘784 and ‘645 Patents, together with prejudgment and post-judgment interest;

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I.

an accounting and award of all Defendants’ respective profits and Plaintiffs’ damages resulting from the infringement of Plaintiffs’ trade dress by Defendants;

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an accounting and award of all damages sustained by Plaintiffs as a result of Defendant Walgreen’s breach of contract;

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that the infringement by Defendant Walgreen of the ‘784 and ‘645 Patents be adjudged willful and Plaintiffs’ damages be trebled pursuant to 35 U.S.C. § 284;

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that the infringement by Defendant Walgreen of 180s’ trade dress be adjudged willful and Plaintiffs’ damages be trebled pursuant to 15 U.S.C. § 1117;

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that this be adjudged an exceptional case and that the Plaintiffs be awarded their attorneys’ fees pursuant to 35 U.S.C. § 285 and 15 U.S.C. § 1117; and

N.

that the Court grant Plaintiffs such other relief as it may deem just and equitable. Respectfully submitted by: /s/ Brendan J. Hughes COOLEY LLP Brendan J. Hughes (Bar No. 17042) 777 6th Street, NW, Suite 1100 Washington, D.C. 20001 Tel: (202) 842-7826 Fax: (202) 842-7899 [email protected] Jonathan G. Graves One Freedom Square Reston Town Center 11951 Freedom Drive Reston, Virginia 20190 Tel: (703) 456-8000 Fax: (703) 456-8100 [email protected] Attorneys for Plaintiffs 180s, Inc. and 180s, LLC

Dated: July 17, 2012

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DEMAND FOR JURY TRIAL Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiffs 180s, Inc. and 180s, LLC, hereby demand a trial by jury of all issues triable of right by a jury.

Dated: July 17, 2012 /s/ Brendan J. Hughes COOLEY LLP Brendan J. Hughes (Bar No. 17042) 777 6th Street, NW, Suite 1100 Washington, D.C. 20001 Tel: (202) 842-7826 Fax: (202) 842-7899 [email protected] Jonathan G. Graves One Freedom Square Reston Town Center 11951 Freedom Drive Reston, Virginia 20190 Tel: (703) 456-8000 Fax: (703) 456-8100 [email protected] Attorneys for Plaintiffs 180s, Inc. and 180s, LLC

524907 /RE

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