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MOOG CONTROLS, INC. v. MOOG

May 7, 1996

MOOG CONTROLS, INC., Plaintiff, -vs- MOOG, INC., Defendant.


The opinion of the court was delivered by: CURTIN

 Prior to 1987, MCI was owned by Moog and was operated as a division under the name "Domestic Industrial and Automotive Services" Division of Moog, Inc. The division was in the business of designing manufacturing and servicing electrohydraulic servovalves and similar products. In January of 1988, Moog, Inc., formed Moog Controls, Inc. ("MCI"), as a separate Delaware corporation. In doing so Moog, Inc., authorized and consented to MCI's future use of the name Moog. Between January 18, 1988, and February 27, 1988, MCI was a wholly owned subsidiary of Moog. On February 27, 1988, Moog entered into a transaction with William C. Moog, who was at that time the largest shareholder of Moog, Inc. There was a stock exchange agreement, pursuant to which Mr. Moog transferred to Moog, Inc., all of his shares in Moog, Inc., in return for all of Moog's shares in MCI. Since that time, MCI has been independent of Moog, Inc., and no portion of its shares have been owned, either directly or indirectly, by Moog, Inc.. At the same time, there was an "asset transfer agreement" with MCI, transferring almost all of the assets of the former industrial and automotive division to MCI. There also was a trade name license agreement, which states in relevant part:

 
1. Grant. Licensor [Moog] hereby grants to Licensee [MCI] the right to use the designation "Moog" as part of Licensee's corporate title "Moog Controls Inc." and as part of Licensee's trade name "Moog Controls." This grant of rights does not extend to use of "Moog" as a trademark or service mark. This grant of rights permits Licensee's use of "Moog" in the kind of composite formats identified above and does not permit the use of "Moog" alone as a corporate identifier or trade designation or in any other capacity.

 At oral argument, the parties explained that when the License Agreement was executed, the two companies were not competitors, and enjoyed a largely complementary relationship. Subsequently, however, William Moog sold MCI. The company that purchased MCI entered into direct competition with Moog both in the United States and Europe. Consequently, there are now two companies offering competing products, both using the name "Moog."

 The first issue to be decided is whether this court has subject matter jurisdiction of the controversy. The parties have extensively briefed the question, and I have considered oral argument. My prior order referring this matter to United States Magistrate Judge Leslie G. Foschio (Item 2) is vacated.

 This lawsuit was triggered by the activities of certain European subsidiaries of Moog and MCI. Moog's Italian subsidiary, Moog Italiani S.r.1. ("MIS") sued MCI's European distributors alleging name and trademark infringement, among other causes of action. MIS is an Italian corporation, organized under the laws of Italy. It is a subsidiary of Moog GmbH, a German corporation. Moog GmbH is a subsidiary of Moog. Mumax S.r.l. ("Mumax") is an Italian corporation organized under Italian law. Mumax is an independently-owned distributor of MCI products in Italy. Mumax was formed in 1995 when a sales executive of MIS left the company to start Mumax.

 On January 11, 1996, MIS filed a lawsuit in Italy against Mumax alleging unfair competition and intellectual property right infringement. Neither Moog nor MCI are named parties in the Italian suit. The Italian suit seeks to forbid Mumax from the further use if the name "Moog" to identify servovalves and other products, and to prohibit the distribution, sales, and publicity of certain products which have shapes similar to MIS products. Since the Italian suit was filed, Moog's other European subsidiaries have either filed or threatened similar actions in other countries.

 In a letter dated February 28, 1996, Robert Brady, president of Moog, informed Edward Krasnicki, President, Controls Group, Moog Controls, Inc., that it was terminating the Trade License Agreement. Brady stated that the termination was justified because the License Agreement specified no term, and consequently could be terminated by either party at any time, pursuant to New York State law. Item 9 Ex. H.

 In a letter dated March 1, 1996, Krasnicki responded that the rule invoked by Brady does not apply to contracts that specify events under which the contract may be terminated. In that case, according to the letter, the contract is only terminable under the specified events. Krasnicki stated that the License Agreement does specify three events under which the contract may be terminated, and that none of these events had occurred. Item 9, Ex. I.

 Plaintiff's complaint in this court alleges that MIS's filing of the Italian suit against Mumax interferes with MCI's rights under the Trade Name License agreement. The complaint states five causes of action. In its papers and at oral argument, MCI conceded that the first three causes of action are contract claims, but alleges that the fourth and fifth causes "arise under" federal statutes so as to confer federal jurisdiction. The fourth and fifth causes of action state, in relevant part:

 In its fourth cause of action, plaintiff MCI seeks a declaratory judgment and the cancellation of the trademark and tradename of Moog. Moog, at the present time, is the registered owner of the trademark and tradename of "Moog." At the present time, Moog takes the position, through MIS, that MCI does not have the right to use the name "Moog Controls" on its products. MCI denies this, uses the name Moog Controls on its products, and manufactures and sells under this name. Moog, Inc., has been aware of this since early 1988. MCI alleges in this cause that Moog has failed to police the use of its tradename "Moog" and has permitted infringement of it, thereby abandoning this mark.

 The fifth count alleges that pursuant to 28 U.S.C. § 2201, and 15 U.S.C. § 1119, MCI is entitled to declaratory judgment, stating that Moog has acquiesced in MCI's use of the name Moog Controls, and that the trademark registration is no longer valid and enforceable.

 In its fifth cause of action, plaintiff seeks a declaratory judgment that it has not infringed on the mark, and it is entitled to judgment declaring that MCI has the right to use the name Moog on products manufactured and sold on a worldwide basis.

 This court holds that it has no subject matter jurisdiction over plaintiffs claim for the reasons now expressed. For clarity, the fifth cause will be discussed first, and then the fourth cause of action.

 A. Plaintiff's fifth cause of action

 
The Declaratory Judgment Act, 28 U.S.C. § ...

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