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NEIL BROTHERS LIMITED v. WORLD WIDE LINES

November 2, 2005.

NEIL BROTHERS LIMITED, Plaintiff,
v.
WORLD WIDE LINES, INC., APS PROMOTIONAL SOLUTIONS, INC and JOHN DOES I-III, Defendants.



The opinion of the court was delivered by: ARTHUR SPATT, District Judge

MEMORANDUM OF DECISION AND ORDER

This case arose out of a dispute between Neil Brothers Limited ("Neil Brothers" or the "plaintiff"), World Wide Lines, Inc. ("World Wide"), and APS Promotional Solutions, Inc. ("APS"), regarding the manufacture and sale of novelty drinking mugs. The defendants APS and John Does, I-III have not appeared in this action. Presently before the Court is a motion by World Wide pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure ("Fed.R.Civ.P.") to dismiss Count III of the plaintiff's amended complaint for lack of subject matter jurisdiction.

I. BACKGROUND

  The following facts are derived from the amended complaint, unless otherwise noted, and are taken as true for the purpose of this motion.

  A. The Plaintiff's '099 and '775 Patents

  The plaintiff is the owner of two United States Patents. Patent No. 6,759,099 B2 (the "'099 patent") is entitled "Decoration Method Using Thermochromic Ink," and was issued by the United States Patent and Trademark Office ("USPTO") on July 6, 2004. Patent No. 6,902,775 (the "'775 patent") is entitled "Decoration Method," and was issued by the USPTO on June 7, 2005. Both patents describe processes employing "thermochromism." The definition of thermochromism is "the phenomenon of reversible change of color of a substance with change of temperature." Webster's Third New International Dictionary 2373 (1976). In other words, when thermochromic ink is applied to an article, application of heat to that article will cause the appearance of the ink to change. For example, the thermochromic ink might become transparent when heated, revealing a picture concealed beneath. When the heat is removed, the appearance of ink, and hence the object, reverts back to its original appearance. The plaintiff alleges that, during or about December, 1997, Shinel Bhagi, Managing Director and an owner of Neil Brothers, met with representatives of an entity known as "Atlas Crystal Works, Inc." and operating as "World Wide Art Studios" ("World Wide Art"), which is a predecessor of the defendant World Wide. According to the plaintiff, at the meeting Bhagi described to World Wide Art a method for using thermochromic ink to make drinking mugs that change color when hot liquid is poured into them. World Wide Art expressed an interest in selling the color-change mugs and, on February 7, 1998 the plaintiff entered into a written agreement with World Wide Art for it to market in the United States mugs made employing the disclosed method. With instruction from Bhagi, World Wide Art manufactured and sold the mugs. Originally, the mugs were marketed under the trademark MYSTERYTM, and later under the trademark MYSTIQUE®.

  World Wide Art sold the plaintiff's mugs through September, 2003 and paid Neil Brothers a royalty on its sales. In September, 2003 World Wide Art changed ownership and became World Wide Line's, Inc. The plaintiff claims that (1) the trademark registration for the MYSTIQUE® mark was transferred to World Wide when it acquired World Wide Art; (2) after September, 2003 World Wide continued to manufacture the color-change mugs with the MYSTIQUE® mark by the process introduced by Bhagi to World Wide Art; (3) the process disclosed from Bhagi to World Wide Art later became covered by the '099 and '775 patents; and (4) World Wide has not paid any royalties to the plaintiff from sales of the MYSTIQUE® mugs. These allegations form the basis of Counts I and II of the plaintiff's amended complaint.

  B. World Wide's '165 Patent

  World Wide is the owner of United States Patent No. 6,281,165 (the "'165 patent") entitled "Thermochromatic Ink Covered Article Having Image Disposed Thereon and Method of Making the Same." The '165 patent was issued on August 28, 2001. Similar to the plaintiff's '099 and '775 patents, World Wide's '165 describes a method for manufacturing a product that changes its appearance when heated.

  The plaintiff alleges that on January 27, 1998, Bhagi and several representatives from World Wide Art attended a convention in Texas where World Wide Art displayed and offered to sell the color-change mugs. Approximately one year later, World Wide Art filed or caused to be filed on its behalf the patent application which eventually became the '165 patent. As the successor in interest to World Wide Art, the defendant World Wide currently owns the rights to the '165 patent.

  C. The September 24, 2004 Meeting

  In support of its motion, World Wide submitted the declaration of Mark Hobbs, President of World Wide; the declaration of Donald Godsey, the owner of World Wide; the declaration of Matthew Stavish, Esq., annexing as exhibits a license agreement and three letter correspondence between the parties; and a transcript, video tape, and dvd recording of a September 24, 2004 meeting between the parties. Bhagi, Hobbs, and Godsey were present at the meeting. In opposition, the plaintiff submits Bhagi's declaration and the declaration of an independent businessman named James Peng.

  From these documents the Court has learned that on September 24, 2004, the parties met for the purpose of negotiating an agreement whereby the parties would cross-license each other's patents. The parties dispute whether an agreement was actually reached at this meeting. World Wide claims that "the parties amicably ended" the meeting "with no threats of litigation being made" and that "a verbal, handshake agreement was reached." The plaintiff, as is apparent from its correspondence with World Wide shortly after the meeting, did not believe that an agreement was reached and thought that negotiations would continue.

  On September 28, 2004, the plaintiff sent World Wide a letter purporting to reject what it perceived as World Wide's offer of a cross-royalty settlement extended on September 24, 2004. The plaintiff rejected the offer based on advice from legal counsel. Specifically, the plaintiff sought more favorable terms because of Neil Brothers' confidence in the strength of its own patents, and what it thought to be the comparative vulnerability of the defendant's '165 patent. On October 29, 2004, World Wide responded in a letter signed by Hobbs. In this letter, World Wide denied any infringement of the plaintiff's '099 patent. Hobbs also informed the plaintiff that World Wide would not "engage in any future partnership"; criticized Neil Brothers' "obdurate position on the subject of [Neil Brothers patents'] superiority as ...


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