The opinion of the court was delivered by: McAVOY, Chief Judge.
MEMORANDUM-DECISION & ORDER
To the extent relevant, facts detailed in the Court's prior
decision in Frink America, Inc. v. Champion Road Machinery
Ltd., 961 F. Supp. 398 (N.D.N.Y. 1997) are also presented below.
The common corporate lineage of the parties involved in this
action dates back to 1945, when Melvin O. Simpson founded
Combined Enterprises Limited, a holding company later to become
known as Compro Limited ("Compro"). Compro later acquired two
companies relevant to the present discussion. In 1958, Compro
purchased Eastern Steel Products ("Eastern"), located in
Cambridge, Ontario. In 1961, Compro purchased plaintiff Frink
America ("Frink America"), a company headquartered in Clayton,
New York and engaged in the manufacture of highway and airport
snow plows in the United States. At the time Compro acquired
Eastern, Eastern was manufacturing the Frink snowplow product
line in Canada under license from Frink, and in fact later
became known as "Frink Canada."
In 1973, the Simpson family founded Melson Incorporated
("Melson"), a private Arizona holding company, fifty-percent of
the stock of which was held by Simpson's son, Melvin Jr., and
fifty-percent by the Dorothy C. Simpson Family Trust of
Scottsdale, Arizona. By 1980, Melson purchased the outstanding
stock of Compro, and thereby controlled Compro, Eastern (Frink
Canada) and Frink America. Accordingly, Frink America and Frink
Canada were essentially two divisions of the same organization.
By the early 1990s, Melson and its subsidiaries apparently
began suffering considerable losses. In an effort to make Frink
America and Compro more competitive in the snow plow business,
Melson developed a plan, "Operation Windrow," that called for
the combining of Compro and Frink America's manufacturing
operations at one location in the United States. Before this
consolidation occurred, however, the continuing financial
losses forced Melson to cease Frink America's operations in
Clayton and shift all production to the Eastern (Frink Canada)
facility in Cambridge. As part of this move, in August 1991,
certain of Frink America's manufacturing plans, product
drawings, jigs, dies, machine tools, technical manuals and
other items (collectively the "intellectual property") were
transferred to the Eastern facility so that Frink Canada could
satisfy Frink America's outstanding obligations. The legal
consequences of this transfer are the focus of defendant's
present motion.*fn1
By 1992, Frink America's manufacturing operations had been
fully integrated into Frink Canada's operations at its
Cambridge plant in Canada. Melson's plan to consolidate the
manufacturing operations of Compro and Frink America to one
facility in the United States was abandoned, and Melson decided
to renew Frink America's operations at its Clayton, New York
facility.
C. The Bankruptcy Proceedings
Compro's financial problems persisted, as did friction within
the ranks of Melson and Compro's management. As a result,
Compro's chief financial backer, the Royal Bank of Canada (the
"Royal Bank"), forced Compro into a Canadian bankruptcy
proceeding sometime in 1992. At the same time, Frink America
filed for protection under Chapter 11 of the Bankruptcy Code in
the Northern District of New York.
Prior to filing Chapter 11, however, Frink America's
manufacturing operations were recommenced at the Clayton
facility. Thus, the intellectual property "loaned" to Frink
Canada in connection with the failed Windrow operation was
transferred from Cambridge back to the Clayton facility in June
of 1992. While defendant acknowledges that copies of drawings
were retained by Frink Canada to complete orders on which it
had been working, plaintiff alleges that defendant also
retained jigs, fixtures and copies of drawings on its computer
system. This transfer additionally served a function in a
larger scheme: since the Royal Bank actually was a creditor of
both Compro and Frink America (Frink America having acted as
guaranty on certain loans by the Royal Bank to Compro), the
return of the intellectual property was part of an
agreement*fn2 executed by the three parties which, plaintiff
contends, was approved by the U.S. Bankruptcy Court in the
Northern District and Ontario Court of Justice. The agreement
further provided that "Compro would not replicate or retain any
copies of any item belonging to Frink [America] or disseminate
or deliver any copies to any other party other than Frink
[America]." Amended Compl. at ¶ 24.
In October of 1992, Peat Marwick Thorne, Inc. ("Peat
Marwick") was appointed Compro's receiver in the Canadian
bankruptcy proceeding. Peat Marwick sold Compro's assets to
1004704 Ontario Inc, a corporation controlled by David Lowry
("Lowry").*fn3 While Frink America was emerging from
bankruptcy, Lowry transferred Compro's assets to an entity
called Frink Environmental, Inc. ("FEI"), serving as its
president and chief executive officer. During the time Lowry
controlled both Frink America and FEI, Lowry maintained copies
of all of Frink America's engineering drawings at FEI's
Cambridge facility.
In September 1992, Royal Bank forced FEI into bankruptcy in
Canada, and Ernst & Young Ltd. ("Ernst & Young") was appointed
receiver of FEI in September 1994. Ernst & Young subsequently
sold FEI's assets to defendant Champion Road Machinery Ltd.
("defendant" or "Champion"). Accordingly, defendant allegedly
came to possess the intellectual property of Frink America by
way of this final transfer. Relevant to the parties' dispute is
whether Lowry made an effort to prevent Champion from retaining
copies of Frink America engineering drawings located at FEI's
Cambridge facility, or informed Champion that intellectual
property belonging to Frink America was in possession of
FEI.*fn4
D. Post-Bankruptcy Events
On or about January 1995, Champion began manufacturing snow
removal equipment at the Cambridge facility formerly owned by
FEI. Defendant acknowledges that while its purchase of FEI's
assets provided it with the right to use the FRINK trademark in
Canada, it did not possess the right to use the FRINK trademark
in the United States. See Deft. 7.1 Stat. at ¶ 32. Defendant
alleges that it "was always Champion's policy to use the
CHAMPION trademark when selling snow removal equipment in the
United States." Id. In 1996, Champion decided to phase out its
use of the FRINK trademark and sell its snowplows in Canada
exclusively under the CHAMPION trademark. See id. During this
time, however, defendant discovered that old FEI literature
bearing the FRINK trademark "was inadvertently sent to
Champion's United States dealers by an employee of Champion's
sales department." Id. Defendant contends, and plaintiff does
not dispute, that Champion took "immediate steps to insure that
the material was either returned to Champion or destroyed."
Id.; see also Pl. 7.1 Stat. at ¶ 32. The parties disagree,
however, on whether Frink America customers relied on the FEI
literature bearing the FRINK trademark when purchasing snowplow
equipment from defendant.
After experiencing losses in 1995 and 1996 from its sales of
snow removal equipment, Champion decided to cease operations in
its snow removal equipment business and, shortly thereafter,
sold those assets to Cives Corporation, a direct competitor of
Frink America in the United States.
Plaintiff Frink America filed its first action in this Court
on March 22, 1996 alleging, inter alia, trademark infringement
and dilution. In its Answer, defendant asserted a single
counterclaim against plaintiff, seeking cancellation of Frink
America's registration of the "Rollover" mark. Plaintiff filed
a second action against defendant on September 25, 1996
alleging: (1) misappropriation of trade secrets and conversion;
(2) tortious interference with business relations; (3) trade
dress infringement; (4) unfair competition under applicable
federal and state law; and (5) copyright infringement under
Canadian law, Plaintiff filed an Amended Complaint on October
29, 1997, adding an additional claim for breach of contract. In
its Answer, defendant asserted counterclaims against Frink
America and its president, Lowry, for patent and copyright
infringement, misappropriation of trade secrets and conversion,
and unfair competition. In an order dated March 21, 1997, the
Magistrate Judge consolidated the two actions.
On December 23, 1996, defendant moved for dismissal of the
second action based on three grounds: (1) forum non conveniens;
(2) failure to state a claim upon which relief may be granted,
based upon the doctrine of international comity; and (3)
failure to join a party, pursuant to FED. R. CIV. P. 12(b)(7)
and 19. In a Memorandum-Decision & Order dated April 8, 1997,
this Court denied defendant's motion in its entirety. See Frink
America, Inc., 961 F. Supp. at 406.
Presently before the Court is defendant Champion's motion for
summary judgment with respect to all claims asserted by
plaintiff. See Deft. Notice of Motion at 1.
A. The Standard for Summary Judgment
The standard for summary judgment is well-settled. Under FED.
R. CIV. P. 56(c), if there is "no genuine issue as to any
material fact . . . the moving party is entitled to a judgment
as a matter of law . . . where the record taken as a whole
could not lead a rational trier of fact to find for the
non-moving party." Matsushita Elec. Indus. Co. v. Zenith Radio
Carp., 475 U.S. 574, 106. S.Ct. 1348, 89 L.Ed.2d 538 (1986);
see also Chertkova v. Connecticut Gen. Life Ins. Co.,
92 F.3d 81, 86 (1996). The moving party bears the initial burden of
"informing the . . . court of the basis for its motion, and
identifying those portions of 'the pleadings, depositions,
answers to interrogatories, and admissions on file, together
with affidavits, if any,' which it believes demonstrate the
absence of a genuine issue of material fact." Celotex Corp. v.
Catrett, 477 U.S. 317, ...