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Max Impact, L.L.C., Et. Al. v. Sherwood Group

February 14, 2011

MAX IMPACT, L.L.C., ET. AL. PLAINTIFFS,
v.
SHERWOOD GROUP, INC., DEFENDANT.
SHERWOOD GROUP, INC., THIRD-PARTY PLAINTIFF,
v.
BAMBAMS, L.L.C., ET.AL., THIRD-PARTY DEFENDANTS.



MEMORANDUM AND ORDER

Plaintiff Max Impact, LLC ("Max Impact") brought this action against Sherwood Group, Inc. ("Sherwood"), asserting claims of patent infringement, copyright infringement, false designation of origin under the Lanham Act, and related claims under New York law. Plaintiffs Chanelia Ltd. ("Chanelia") and Argo Development & Production, Ltd. ("Argo") were later joined as necessary parties to Max Impact's patent infringement claim. Defendant Sherwood asserts counterclaims against Max Impact*fn1 , alleging false advertising under the Lanham Act, tortious interference with business relationships, patent false marking, and patent misuse. Sherwood also asserts these claims against Third-Party Defendants BamBams, LLC ("BamBams"), Max Impact's exclusive U.S. supplier, and Jim Manhardt ("Manhardt"), a member of Max Impact.

There are several motions currently pending before this Court. Max Impact*fn2 moves to dismiss Sherwood's false marking and patent misuse counterclaims pursuant to Rule 12(b)(6) for failure to state a claim. Manhardt and BamBams move to dismiss Sherwood's Amended Counterclaims pursuant to Rule 12(b)(6) for failure to state a claim. Sherwood moves to dismiss Plaintiffs' Amended Complaint for lack of standing and Plaintiffs cross-move for disqualification of Sherwood's counsel.

For the reasons set forth below, Max Impact's motion to dismiss Sherwood's false marking and patent misuse counterclaims is GRANTED, Manhardt's motion to dismiss

Sherwood's Amended Counterclaims is GRANTED, and BamBams' motion to dismiss Sherwood's Amended Counterclaims is GRANTED in part and DENIED in part. This Court will hold a hearing to resolve the issues raised in Sherwood's motion to dismiss Plaintiffs' Amended Complaint and Plaintiffs' cross-motion to disqualify Sherwood's counsel.

BACKGROUND

A. Factual Background

Max Impact manufactures, markets, and sells a hand-held, self-rollable banner, under the ROLLABANA trademark. (Am. Compl. ¶ 15.) Max Impact asserts that ROLLABANA utilizes U.S. Patent Nos. 4,848,437 ("'437 patent") and 5,176,774 ("'774 patent"), which both teach methods for developing a self-rolling banner that can be used as a handheld promotional display. (Am. Compl. ¶¶ 8, 9, 15.) Both patents were issued to Joseph Lanado (since deceased) and Mosh Har-el.*fn3 (Id.) The patents were initially assigned to Roll-Screens, Inc., and then to Argo, an Israeli corporation of which Harel is the sole owner. (Am. Compl. ¶¶ 6, 10.) In 2007, Argo and Harel entered into an agreement that granted Chanelia "sole, exclusive, worldwide rights to manufacture, market and sell products made in accordance with the claims of the '437 and '774 patent." (Am. Compl. ¶ 11.) Chanelia then entered into an agreement with Max Impact, (the "Distribution Agreement"), whereby Max Impact became the exclusive North American distributor and licensee of products made in accordance with the '437 and '774 patent. (Am. Compl. ¶ 12.)

In approximately 2008, Max Impact granted a license to BamBams to manufacture a hand-held, self-rollable banner in accordance with the '774 patent and BamBams is currently Max Impact's exclusive U.S. supplier of ROLLABANA . (Third-Party Defs.' Memo. in Supp. of Their Mot. to Dismiss Sherwood's Am. Countercls. ("Third-Party Defs.' Memo.") at 1-2.)

Defendant Sherwood also manufactures, markets, and sells a hand-held, self-rolling promotional banner, known as the "Expand-A-Banner". (See Am. Compl. ¶ 17.) In 2007, Chanelia sent Sherwood a cease-and-desist notice asserting that its Expand-A-Banner infringed on the '437 and '774 patents. (Id.) Sherwood denied infringement (Am. Compl. ¶ 18) and when Chanelia did not pursue litigation against Sherwood, Max Impact initiated this action*fn4 alleging patent infringement in violation of 35 U.S.C. § 271, copyright infringement in violation of 17 U.S.C. § 101, false designation of origin in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and violations of related New York statutory and common law. In response, Sherwood asserted counterclaims against Max Impact seeking declaratory judgment of non-infringement, alleging false advertising under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and alleging tortious interference with business relationships.

B. Relevant Court Rulings

Since this action's inception, the Court has ruled on a number of motions that are relevant to the issues before the Court today.

On August 10, 2009, this Court denied Sherwoods' motion to amend its counterclaims to add a count for patent false marking under 35 U.S.C § 292, holding that Sherwood's proposed amendment would not withstand a Rule 12(b)(6) motion to dismiss because Sherwood failed to sufficiently allege that Max Impact acted with the requisite deceptive purpose. (See Mem. and Order, Aug. 10, 2009, at 4-5.)

On May 4, 2010, this Court held that Argo and Chanelia were necessary parties to Max Impact's patent infringement claim because Argo had retained substantial rights in the patents at issue. (Mem. and Order, May 4, 2010, at 7-8.)

On August 23, 2010, this Court denied Sherwood's motion for leave to join Manhardt and Harel as third-party defendants. (Mem. and Order, Aug. 23, 2010, at 3.) Specifically, this Court held that at all times, Manhardt was a member of Max Impact and acted as such, rather than as an individual, in the activities attributed to him by Sherwood, and that Sherwood did not attribute any relevant activities to Harel, let alone activities that could give rise to personal liability. (Id.)

C. Amended Pleadings

On September 20, 2010, Max Impact, Chanelia, and Argo filed an Amended Complaint, asserting the same causes of action against Sherwood. (See Am. Compl. ¶¶ 24-58.)

On September 30, 2010, Sherwood filed its Answer to Plaintiffs' Amended Complaint and Amended Counterclaims. Sherwood added Manhardt, BamBams, and Harel as third-party defendants.*fn5 (See Ans. & Am. Counterclms. ΒΆΒΆ 8(a), 9, 10.) Sherwood also added claims of patent false marking under 35 U.S.C. ...


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