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HSW Enterprises, Inc. v. Woo Lae Oak

December 15, 2009

HSW ENTERPRISES, INC., PLAINTIFF,
v.
WOO LAE OAK, INC., INDIVIDUALLY AND D/B/A WOO LAE OAK SOHO AND WOO LAE OAK BEVERLY HILLS, WOO LAE OAK 50, INC., INDIVIDUALLY AND D/B/A BANN RESTAURANT, AND YOUNG SOOK CHOI, DEFENDANTS.



The opinion of the court was delivered by: Sand, J.

MEMORANDUM & ORDER

Plaintiff HSW Enterprises, Inc. ("HSW") and Defendants Woo Lae Oak, Inc. et al. ("WLO") bring cross-motions for partial summary judgment relating to WLO's failure to make license fee payments under the parties' 2007 License Agreement ("License Agreement"). The Court finds that the doctrine of licensee estoppel bars WLO from challenging the validity of HSW's trademark, and grants partial summary judgment to HSW and denies partial summary judgment to WLO to that extent. As to the personal liability of Defendant Young Sook Choi ("Choi"), the Court grants WLO's motion for summary judgment insofar as piercing the corporate veil is inappropriate in this case, but reserves decision as to whether Choi can be held personally liable for trademark infringement.

I. Background

In 1946, Jin Keon Jang ("Jang") opened a restaurant called "Woo Lae Oak" in Seoul, Korea. (Paik Aff. ¶ 2.) Jang and Chun Bong Lee ("Lee"), each with children from prior marriages, eloped to the United States in the early 1970s. (Def's. Mem. Opp. Pl's Mot. Summ. J. 2.) Beginning in 1975, the couple founded four Woo Lae Oak restaurants in (1) Beverly Hills, (2) New York City, (3) Tyson's Corner, Virginia, and (4) Jakarta, Indonesia. (Choi Aff. ¶ 2.) Jang and his family also opened a Woo Lae Oak restaurant in Chicago in 1996. (Choi Aff. ¶ 6.)

In the late 1990s, there were disputes between Jang and Lee regarding property division. (Choi Aff. ¶ 5.) Lee passed away in 1998. (Choi Aff. ¶ 3.) Jang and his family, doing business as HSW, Inc., assumed ownership and management of the Virginia and Chicago locations. (Choi Aff. ¶ 8.) Lee's family, doing business as Woo Lae Oak, Inc., assumed ownership and management of the New York and Beverly Hills locations. (Choi Aff. ¶ 9.)

Unbeknownst to Lee, Jang registered the Woo Lae Oak service mark ("Mark") with the U.S. Patent and Trademark Office in 1976. (Choi Aff. ¶ 4.) In 1997, Jang assigned the rights to the mark to HSW. In 2000, HSW sued WLO in the Southern District of New York for trademark infringement.*fn1 The case was discontinued with prejudice and without costs to either party by an order dated May 18, 2001 because the parties had informed Judge Baer that all claims were settled or in the process of being settled. (Paik Aff. Ex. E.) Neither party applied to have the case reopened, but the parties dispute whether or not a settlement was ever effectuated.

The parties entered into a licensing agreement in 2007, whereby WLO was granted a ten year license to use the Mark in connection with the New York and Beverly Hills restaurants, and WLO was to pay HSW a total of $400,000 in five installments. (HSW 56.1 Ex. F.) The License Agreement provides for a late payment fee of $300 a day, as well as payment of the non-breaching party's legal fees in the event of a breach.

(HSW 56.1 Ex. F.) In the License Agreement, WLO acknowledged that HSW was the owner of the Mark and agreed that it would do "nothing inconsistent with [HSW's] intellectual property rights in the Mark." (HSW 56.1 Ex. F.) WLO made the first two installment payments of $50,000 each in July and August of 2007, but has not made any other payments. The parties dispute whether the 2007 License Agreement was meant to effectuate a settlement of the litigation dismissed in 2001.

HSW brought this action, alleging breach of contract for the missed payments, inter alia, and now moves for partial summary judgment on this claim. WLO brings a cross motion for summary judgment seeking (i) a declaration of non-infringement of the Mark, rescission of the License Agreement, and damages; and (ii) dismissal of the claims against Defendant Young Sook Choi in her individual capacity.

II. Standard of Review

Summary judgment is warranted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). A material fact is one that might affect the outcome of a suit under governing law. Kinsella v. Rumsfeld, 320 F.3d 309, 311 (2d Cir. 2003). A "genuine" issue exists when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When deciding cross-motions for summary judgment, the Court analyzes each motion on its own merits, drawing all reasonable inferences in the light most favorable to the nonmoving party. Heublein, Inc. v. United States, 996 F.2d 1455, 1461 (2d Cir. 1993).

III. Discussion

The parties do not dispute that WLO has failed to make payments owing to HSW under the terms of the License Agreement. WLO bases its opposition to HSW's motion for partial summary judgment and its own motion on the naked licensing doctrine. HSW responds that such an argument is estopped by the doctrine of licensee estoppel.

Licensee estoppel is an equitable doctrine that bars a licensee from disputing the validity of the licensor's trademark on the theory that in entering the agreement, the licensee has assented to the validity of the mark. "A 'no challenge' provision in a license agreement," such as the one in the parties' License Agreement, "makes the estoppel clear and explicit." 3 J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION ยง 18:63 (4th ed. 2009). Licensee estoppel is premised on the maxim that "one should not be permitted to challenge the validity of a trademark while reaping its benefits." Papercraft Corp. v. Gibson Greeting Cards, Inc., 515 F. Supp. 727, 728 (S.D.N.Y. 1981). The doctrine is "equitable in nature and is not subject to ...


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