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Joint Marketing International, Inc. v. L&N Sales and Marketing

July 14, 2006

JOINT MARKETING INTERNATIONAL, INC., PLAINTIFF,
v.
L&N SALES AND MARKETING, INC., SCUNCI INTERNATIONAL, INC., LN INTERNATIONAL, INC., AND NHL II -- PAMCO PARTNERS, LLC, DEFENDANTS.



The opinion of the court was delivered by: Dora L. Irizarry, U.S. District Judge

MEMORANDUM AND ORDER

Plaintiff, Joint Marketing International, Inc. ("JMI"), filed suit against defendants, L&N Sales and Marketing, Inc., Scunci International, Inc., LN International, Inc., and NHL II -- Pamco Partners, LLC(collectively, "defendants"), on October 13, 2005. JMI alleges infringement of U.S. Patent 5,547,842 (the "'842 Patent"), a portable eyeglasses wiper, for which JMI was granted a license. Before the court is defendants' motion to dismiss under Fed. R. Civ. P. 12(b)(7) for failure to join an indispensable party under Rule 19. Plaintiff also has moved for a preliminary injunction, which the court does not address at this time. For the reasons set forth below, defendants' motion is granted. However, dismissal of this action is stayed, and plaintiff is granted twenty days, i.e., by August 3, 2006, to file a new complaint joining the appropriate parties required to cure the standing defect. Failure to do so will result in the entry of an order dismissing this action.

I. Facts

On September 20, 2005, JMI executed an "Exclusive License Agreement" (the "License Agreement") with Kun S. Chang ("Chang"), the inventor and owner of the '842 Patent, and Gainwise International Co., Ltd. ("Gainwise"), a manufacturing company. The License Agreement grants JMI the right to "exclusiv[e]ly sell, market and distribute the licensed product to all retail markets within" the United States and its territories, all Latin American Countries, and Canada. (Davis Decl. Ex. A ¶¶ 1.7, 3.0.) Chang warranted that he has "not knowingly granted any licenses or assignments to any other individual or entity in the territory of [the] agreement that would restrict the rights granted to [the] licensee." (Id. ¶ 2.0.) Though Chang and Gainwise are restricted from distributing the licensed product in the territory, they retain "the right to sell Products directly in Territory only to those customers in the ASI promotional market as listed in Appendix B," a list of six customers located in the United States. (Id. ¶¶ 3.2, 3.4, App. B.) JMI is permitted to grant sublicenses if it is "responsible for the operations of its sublicenses . . . as if the operations were carried out by the licensee." (Id. ¶ 3.1.) JMI is required to obtain "prior written consent" from Gainwise before any assignment of the License Agreement. (Id. ¶ 7.)

The License Agreement contains specifications by which JMI is required to purchase all of the licensed product from Gainwise. JMI must purchase a minimum of 2.4 million pieces of the licensed product per year and, if it fails to meet this requirement, Chang and Gainwise may terminate the agreement by giving written notice to JMI. (Davis Decl. Ex. A ¶ 5.1.) JMI may terminate the agreement by giving written notice to Chang and Gainwise if Gainwise does not deliver purchased quantities in a "timely fashion." (Id. ¶ 11.) Either party has a right to terminate the License Agreement if (1) the other party becomes bankrupt or has bankruptcy proceedings initiated against it, (2) the other party commits a material breach that is not remedied within thirty days of receiving notice of default by the non-breaching party, (3) a "force majeure" occurrence prevents either party from fulfilling its obligations during a consecutive 90-day period, or (4) a change in ownership, management, or control occurs that is "prejudicial to the commercial interests of either party." (Id. ¶ 10.0.)

The provisions in the License Agreement addressing infringement by third parties are as follows:

6.0 As soon as LICENSEE becomes aware of a potential patent infringement claim, LICENSEE will immediately notice GAINWISE/CHANG of said infringement claim which will be followed by the commencement of legal proceedings against the infringing party or parties. JMI will also forward written notice to GAINWISE/CHANG of any action or claim asserted against the infringing party(s).

6.1 Upon obtaining any information with regard to a potential patent infringement claim of the product by a third party, GAINWISE/CHANG will immediately provide said information to JMI.

6.2 JMI, GAINWISE and CHANG agree to share in a joint participation for the litigation of the potential patent infringement claims. In exchange and consideration for its proportionate share of litigation expenses, GAINWISE/CHANG will fund their share of the litigation expenses, which include legal fees, costs, disbursements and expenses in furtherance of the legal action(s), by extending to JMI a credit against product purchases in an amount equal to THIRTY PERCENT (30%) of said litigation expenses. Said contribution of the thirty percent will entitle GAINWISE/CHANG to 30% of any and all net recovery and/or compensation from the legal action(s), including past infringement, if any, generated from the legal action(s) or claims. JMI will be therefore entitled to SEVENTY PERCENT (70%) of any and all net recovery and/or compensation from the legal action(s), including past infringement, if any, generated form the legal action(s) or claims. . . .

6.3 In any infringement suit or dispute, the parties agree to cooperate fully with each other. At the request and expense of the party bringing suit, the other party will permit access to all relevant personnel, records, papers, information, samples, specimens, etc., during regular business hours.

6.4 JMI will not assume nor will it be obligated to assume any prior claims and/or lawsuits filed or made by GAINWISE/CHANG prior to this agreement.

6.5 GAINWISE/CHANG hereby grants full litigation and claim authority to JMI for any and all decisions made during the course of any infringement claim.

6.6 All documents that JMI receives or possesses pertaining to the litigation of infringement claims will be forwarded to GAINWISE/CHANG by JMI. (Davis Decl. Ex. A ΒΆΒΆ 6.0--6.6.) If JMI has already instituted an infringement suit against a third party and termination occurs, the License Agreement provides: "Gainwise agrees to allow licensee to conclude all legal claims and ...


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