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Crosman Corp. v. Heckler & Koch

September 16, 2008

CROSMAN CORPORATION, PLAINTIFF,
v.
HECKLER & KOCH, INC., DEFENDANT.



The opinion of the court was delivered by: Charles J. Siragusa United States District Judge

DECISION AND ORDER

INTRODUCTION

In this action, Plaintiff Crosman Corporation ("Plaintiff"), a manufacturer of air guns, seeks a declaratory judgment that its Pulse R74 Electric Soft Air Rifle does not infringe the intellectual property rights of Defendant Heckler & Koch, Inc. ("Defendant"). Now before the Court is Defendant's motion [#20] captioned, "Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(4), 12(b)(5), Forum Non Conveniens, Or, In The Alternative, To Transfer Pursuant to 28 U.S.C. Section 1404." For the reasons that follow, the motion to transfer venue is granted, and this action is transferred to the United States District Court for the Southern District of Indiana.

BACKGROUND

Plaintiff is a Delaware corporation with its principal place of business in East Bloomfield, New York, in the Western District of New York. Plaintiff manufactures "soft air" guns, which fire small plastic projectiles, using compressed air or carbon dioxide. Defendant is a Virginia corporation with offices in Virginia and Georgia. In contrast to Plaintiff's soft air guns, which are essentially toys, Defendant manufactures various "real" weapons including the MP5 submachine gun ("the MP5"). Defendant owns certain intellectual property rights in its products, and in that regard, it retained Continental Enterprises ("Continental"), located in Indianapolis, Indiana, to assist in policing and protecting those rights.

Some time prior to 2007, Plaintiff began manufacturing and selling the Pulse R74 Electric Soft Air Rifle ("the Pulse R74") through distributors, including Dick's Sporting Goods ("Dick's"). Subsequently, Continental learned that the Pulse R74 was being sold at Dick's stores in Indiana. In or about June 2007, Continental sent a cease-and-desist letter to Dick's, alleging that the Pulse R74 violated Defendant's intellectual property rights. The letter demanded, among other things, that Dick's provide an accounting and voluntarily surrender its inventory of the Pulse R74. The letter further stated that if Dick's did not comply with those demands, that Defendant would "take appropriate steps to enforce [its] rights and to protect the public from continued deception."

(Affidavit of Darlene Seymour, Exhibit ("Ex.") A). On or about June 26, 2007, Defendant sent an essentially-identical cease-and-desist letter to Plaintiff. (Id.). Subsequently, the parties had settlement discussions, and "exchanged several letters in an attempt to settle the dispute, to no avail." (Aff. Of Athena Jamesson, ¶ 6). On September 4, 2007, Plaintiff tendered a settlement proposal, pursuant to which Plaintiff demanded the right to phase out its production of the Pulse R74, and to sell its remaining inventory. On September 5, 2007, Defendant rejected that offer, stating that it was "adverse to any resolution that includes a sell-off provision," and further stating that it was "not willing to discuss settlement until Crosman has complied with [Defendant's] demand for an accounting of all sales of the offending item." (Jamesson Aff., Ex. E).

Two weeks later, on September 19, 2007, Plaintiff commenced civil action number 07-CV-6457 MAT, in the United States District Court for the Western District of New York, against Defendant's German parent corporation, Heckler & Koch Gmbh Ltd. ("Heckler GmbH"), seeking a declaratory judgment that Plaintiff did not violate Heckler GmbH's intellectual property rights. Plaintiff did not serve Heckler GmbH with a summons and complaint, nor, during a subsequent settlement discussion with Defendant's counsel, did Plaintiff's counsel reveal the filing. Eventually, on October 10, 2007, Defendant's counsel independently learned of the lawsuit. During a subsequent telephone conversation, Plaintiff's counsel assured Defendant's counsel that Plaintiff did not intend to actually pursue the lawsuit, and that it had filed the action "to preserve jurisdiction in New York and avoid litigation in Germany." (Seymour Affidavit ¶ 16). Plaintiff never actually served the summons and complaint on Heckler GmbH, and the Court eventually issued an Order to Show Cause, directing Plaintiff to show cause why the action should not be dismissed for failure to prosecute. On May 12, 2008, Plaintiff indicated that it did not oppose the dismissal of the action, and the case was dismissed without prejudice.

During the Fall of 2007, the parties continued to explore settlement. On November 8, 2007, Defendant's counsel sent Plaintiff's counsel a proposed complaint, and advised Plaintiff that it was already in the process of pursing litigation against other alleged infringers. (Seymour Reply Aff., Ex. H). The letter further demanded that Plaintiff provide an accounting by November 19, 2007, and that otherwise, Defendant would "have to reevaluate its position on settlement." (Id.). Plaintiff declined to provide an accounting. However, on November 27, 2007 and December 18, 2007, Defendant tendered settlement demands to Plaintiff. Plaintiff did not respond to Defendant's last settlement demand.

Instead, on January 22, 2008, Plaintiff commenced the instant action in this Court, against Defendant and Heckler GmbH, seeking a declaratory judgment that Plaintiff does not infringe Defendant's intellectual property rights. According to Plaintiff's Corporate Counsel, Plaintiff filed this action "to vindicate its rights in the face of [Defendant's] threats of injunctive relief, damages, and impoundment." (Jamesson Aff. ¶ 12). However, as with the earlier action, Plaintiff did not take any immediate steps to serve Defendant with a summons and complaint.

On February 8, 2008, having received no response from Plaintiff to its last settlement offer, and apparently being unaware of this lawsuit, Defendant commenced a separate action against Plaintiff in the Marion County Superior Court in the State of Indiana, alleging infringement of intellectual property rights. Plaintiff subsequently removed the action to the United States District Court for the Southern District of Indiana. The Indiana District Court has since directed the parties to proceed with discovery.

On or about March 19, 2008, Plaintiff served a summons and complaint on Defendant and Heckler GmbH. Until that date, according to Defendant's counsel, Defendant was not aware that this lawsuit had been filed. On April 16, 2008, Plaintiff voluntarily discontinued this action as against Heckler GmbH. Consequently, Heckler & Koch, Inc. is the sole remaining defendant in this action.

On April 9, 2008, Defendant filed the subject motion [#20], captioned, as previously indicated, "Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(4), 12(b)(5), Forum Non Conveniens, Or, In The Alternative, To Transfer Pursuant to 28 U.S.C. Section 1404." In addition to arguing that the Western District of New York is an inconvenient forum, the motion alleged that Plaintiff had not properly served Defendant with a summons and complaint. Plaintiff subsequently re-served Defendant with a new summons and complaint, and Defendant has now withdrawn its motions under Rules 12(b)(4) and 12(b)(5). Accordingly, the application now before the Court is Defendant's motion for an order dismissing the action, on the grounds of forum non conveniens, or alternatively, transferring the action to the United States District Court for the Southern District of Indiana, pursuant to 28 U.S.C. § 1404(a). In support of that application, Defendant maintains that the alleged infringement occurred in Indiana, that its evidence of Plaintiff's alleged infringement is located in Indiana, and that the majority of its witnesses on the issue of infringement are employees of Continental, who are located in Indiana. Defendant further states that the Indiana action has progressed further than the instant case. Additionally, Defendant argues that, although courts usually will allow the first-filed action to proceed, the Court should not do so here, since Plaintiff acted unfairly in commencing this action, by using "the guise of settlement negotiations to win the race to the courthouse." (Def. Memo of Law at 10).

In opposition to the motion to transfer venue, Plaintiff denies that it filed the instant declaratory judgment action in order to gain a procedural advantage over Defendant. Plaintiff also contends that this Court is a more convenient forum, since Plaintiff's "witnesses and related documents" are ...


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