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J.S. NICOL, INC. v. PEKING HANDICRAFT

October 13, 2004.

J.S. NICOL, INC., Plaintiff,
v.
PEKING HANDICRAFT, INC., Defendant.



The opinion of the court was delivered by: ANDREW PECK, Magistrate Judge

OPINION AND ORDER

Presently before the Court are the parties' cross-motions for partial summary judgment as to the proper interpretation of their "License Agreement." (Dkt. Nos. 29-36, 41-46, 48, 50-56.) The parties consented to decision of the summary judgment motions by a Magistrate Judge pursuant to 28 U.S.C. § 636(c). By prior Order, I indicated my intent to deny the motions with an opinion to follow. (Dkt. No. 47.) This is the promised Opinion.

THE PARTIES' LICENSE AGREEMENT

  On or about February 13, 2001, plaintiff J.S. Nicol, Inc. ("Nicol" or "JSN") and defendant Peking Handicraft, Inc. ("Peking" or "PHI") entered into the License Agreement, the differing interpretations of which are at the heart of this lawsuit. (See Dkt. No. 20: Peking Answer & Counterclaims Ex. A: 2/13/01 License Agreement.) The License Agreement begins with a "Whereas" clause that "JSN [Nicol] desires to grant to PHI [Peking] the right to use the artwork in connection with the manufacture, sale, distribution and promotion of the articles as described below." (License Agmt., last Whereas clause, emphasis added.)

  Under the heading "Term and Exclusivity," the License Agreement provides:
1. Term and Exclusivity. (a) The term of this agreement shall commence from the date that the last party executes this agreement and end on the third anniversary of such date (the "Initial Term"), and thereafter shall continue from year to year for additional one-year terms (the "Additional Terms"), unless and until either party shall give notice of such party's intent to terminate not less than 90 days prior to the end of the then-current Initial Term or Additional Term, which termination shall be effective at the expiration of said term, or until sooner terminated as hereinafter set forth. Upon termination of this Agreement, PHI shall be entitled to distribute any remaining inventory of Licensed Products bearing the Artwork and to honor any contractual commitments then in effect to provide Licensed Products bearing the Artwork subject to the survival provisions set forth in Section 14 below.
(b) PHI will direct JSN as to the accounts and Licensed Products for which JSN will develop Artwork (the "Exclusive Accounts"). PHI shall not present designs to the Exclusive Accounts that would compete with JSN Artwork produced for PHI.
(c) JSN will provide artwork to PHI during the Initial Term and any Additional Terms on an exclusive basis, with the exception of existing JSN agreements as described in Exhibit C hereto. JSN will create and deliver an amount of artwork adequate for each of the Exclusive Accounts as determined by mutual agreement of JSN and PHI in advance of each account presentation. Upon acceptance by PHI of any item of artwork of JSN, (i) the parties will amend Exhibit A to include such item, which thereupon will become "Artwork" for all purposes of this Agreement, and (ii) JSN will deliver to PHI the original Artwork necessary for PHI to reproduce the Artwork on the Licensed Products (the "Original Artwork"). JSN will participate with PHI in presentations and visits to Exclusive Accounts as necessary, and at such times and with such frequency as may be mutually agreed to by JSN and PHI.
(License Agmt. ¶ 1(a)-(c), emphasis added.) The "Grant of License" section provides: 3. Grant of License. JSN hereby grants to PHI an exclusive worldwide license to use, reproduce, display and distribute the Artwork described in Exhibit A hereto on the products described in Exhibit B hereto ("Licensed Products") and in connection with the manufacture, sale, distribution and promotion of the Licensed Products commencing upon the date identified above for so long as this Agreement is in effect. Additional products may be added to Exhibit B from time to time upon the mutual agreement of the parties as evidenced by the amendment of Exhibit B, at which time such additional products shall become "Licensed Products" for all purposes of this Agreement. All rights not specifically transferred by this Agreement are reserved by JSN.

 (License Agmt. ¶ 3.)

  "Licensed Products" are identified in Exhibit B as "All bedding products including but not limited to: Quilts, Comforters, Shams, Duvets, Window Treatments and coordinated products." (License Agmt., Ex. B.)

  The list of "Existing JSN Agreements" include not only companies for bedding products, but also agreements with other companies for greeting cards, paper products, wall coverings and rugs. (License Agmt., Ex. C.)

  The License Agreement calls for an advance against a "nonrefundable royalty of five percent (5%) of the Net Sales of the Licensed Products bearing the Artwork." (License Agmt. ¶ 6.)

  The License Agreement provides that Nicol retains the copyright in the Artwork (License Agmt. ¶ 4), and requires Peking to return the Original Artwork to Nicol after non-acceptance or, for accepted designs, after production (id. ¶ 5).

  Finally, the License Agreement provides for survival of certain provisions upon termination of the Agreement for "breach":
14. Breach. If either party deems the other to be in breach of this Agreement, it shall notify that party in writing and allow a period of thirty days from receipt of notice within which remedy of such breach may be made if the same is remediable within thirty days, or within a reasonable time if remedy cannot physically be accomplished within thirty days. If the party in breach fails to cure a breach within such time, the non-breaching party may immediately terminate this Agreement. Sections 2, 4, 5, 6(a), 8, 9, 12 and 23 shall survive the termination of this Agreement to the extent such provisions remain applicable following termination.
(License Agmt. ¶ 14.)

  ANALYSIS

  The standards for contract interpretation, and for summary judgment in such cases, are set out in my prior opinions and will not be separately set forth herein. See, e.g., Chevron TCI, Inc. v. Talleyrand Assoc., LLC, 03 Civ. 4043, 2003 WL 22977498 at *4-7 ...


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