United States District Court, S.D. New York
Decided September 29, 2014
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For Schutte Bagclosures Inc., Plaintiff, Counter Defendant: Carl Maria Reinier Van Der Zandt, LEAD ATTORNEY, Hand Baldachin & Amburgey LLP, New York, NY; Sherli Yeroushalmi, Nixon Peabody LLP, New York, NY.
For Kwik Lok Corporation, Defendant, Counter Claimant: Brian McQuillen, LEAD ATTORNEY, Robert Terry Parker Vanessa C. Hew, Duane Morris, LLP (NYC), New York, NY; Kevin S Costanza, PRO HAC VICE, Seed IP Law Group PLLC, Seattle, WA.
For Schutte Bagclosures B.V., ADR Provider, Counter Defendant: Sherli Yeroushalmi, Nixon Peabody LLP, New York, NY.
For Kwik Lok Corporation, Counter Claimant: Brian McQuillen, LEAD ATTORNEY, Robert Terry Parker, Vanessa C. Hew, Duane Morris, LLP (NYC), New York, NY.
OPINION AND ORDER
John G. Koeltl, United States District Judge.
This case concerns the well-known, small plastic clips commonly used to close bags of items such as bread and fruit. The defendant, Kwik Lok Corporation (" Kwik Lok" ), has been manufacturing and distributing these bag closures within the United States for many years, competing with other popular forms of bag closures such as twist ties. Counterclaim defendant Schutte Bagclosures B.V. (" Schutte BV" ) has sold similar plastic clip bag closures in Europe, and has incorporated plaintiff Schutte Bagclosures Inc. (" Schutte Inc." ) in New York with the intention of entering the United States bag closure market.
Schutte Inc. seeks a judgment against Kwik Lok declaring that Schutte Inc.'s use of its plastic bag closure products does not infringe on Kwik Lok's registered trademarks for its own bag closure products. Kwik Lok has filed counterclaims against Schutte Inc. for, among other claims, federal trade dress infringement and dilution.
Kwik Lok has brought third party claims against Schutte BV for substantially the same claims of federal trade dress infringement and dilution.
Presently before the Court are a motion by the Schutte parties to dismiss the counterclaims and third party claims and cross-motions for summary judgment by Kwik Lok and Schutte Inc. Schutte BV has moved to dismiss the claims against it pursuant to Federal Rule of Civil Procedure 12(b)(2) on the grounds that, as a Netherlands corporation, it has insufficient contacts with New York to be subject to jurisdiction under New York law or the United States Constitution. Schutte BV and Schutte Inc. have also moved to dismiss the counterclaims and third party claims pursuant to Federal Rule of Civil Procedure 12(b)(6) on the grounds that Kwik Lok's allegations of infringement do not plausibly state a claim upon which relief may be granted, or alternatively, for summary judgment on these claims.
Kwik Lok moves for partial summary judgment, urging that for the products added by Schutte Inc. in its Second Amended Complaint, there is no case or controversy under the Declaratory Judgment Act because Schutte Inc. has taken no steps to market any of those products in the United States. Kwik Lok offers to withdraw its counterclaims as to each product for which this Court finds there is no real controversy. Following argument of the current motion, Schutte Inc. withdrew numerous claims and limited its claims to those affecting one line of its bag closure products.
There is no dispute as to the following facts, except where noted.
The defendant and counterclaim plaintiff in this action, Kwik Lok, is incorporated and based in the State of Washington, and has been manufacturing and distributing plastic bag closures in the United States for more than fifty years. (See Sec. Am. Countercl. ¶ ¶ 2, 15.) Counterclaim defendant Schutte BV is a Netherlands corporation that manufactures and distributes plastic bag closures in Europe. (See Sec. Am. Compl. ¶ 96.) Plaintiff and counterclaim defendant Schutte Inc. was incorporated in New York as the wholly owned subsidiary of Schutte BV, and is presently based in New York as the U.S. marketing arm for Schutte BV. (See Sec. Am. Compl. ¶ ¶ 1, 123; Abbenhuis Dep. at 158, Jan. 29, 2014.)
The first dispute between these parties took place in the Netherlands. In March of 2010, the Court of Appeal of the Hague issued a final appeal decision in Kwik Lok Corporation v. Schutte Bagclosures, BV, in which Kwik Lok had asserted infringement claims under its European patent, trademark, and trade dress rights against Schutte BV. (See May 23, 2014 Decl. of Brian McQuillen (" May 23 McQuillen Decl." ) ¶ 2, Ex. A.) The Court determined that Kwik Lok's European Community Trade Dress Registration No. 55848429 was functional and thus invalid, and that Schutte BV's G-Series bag closures did not infringe on any of Kwik Lok's European patent, trademark, or trade dress rights. (See May 23 McQuillen Decl. ¶ 2, Ex. A.)
Kwik Lok has two registered trademarks for its product configurations in the United States, both registered in 1996: United States Trademark Registration No. 1,975,545 (the " '545 Registration" ), for a thin, rectangular plastic bag closure with two arched edges along the top and bottom, parallel edges on the sides, and a
beveled triangular slot opening at the center of one of the arches; and United States Trademark Registration No. 1,972,043 (the " '043 Registration" ), for a thin, square plastic bag closure with beveled portions on each corner, and a beveled triangular slot opening at the center of one side. (See Am. Countercl. ¶ ¶ 13-25; June 20, 2014 Decl. of Hal Miller (" June 20 Miller Decl." ) ¶ ¶ 5-8, Exs. Y, Z.) Kwik Lok has been selling products under these trademarks continuously each year since 1996, as well as similarly configured products for which it claims unregistered trade dress rights. (See Sec. Am. Compl. ¶ ¶ 118-20; June 20 Miller Decl. ¶ ¶ 7, 9, 12-19, Exs. S, T, W.)
In 2011 and 2012, Schutte BV began to evaluate entry into the United States market, from which it had been previously absent. (See Sec. Am. Compl. ¶ ¶ 118-20; June 20, 2014 Decl. of Brian McQuillen (" June 20 McQuillen Decl." ) ¶ 2, Ex. A.) On April 19, 2012, Schutte BV incorporated Schutte Inc. under New York law in order to serve as its United States operating entity. (See Sec. Am. Compl. ¶ 123.) Schutte BV had previously met in the Netherlands with a United States business services company, TABS Inc., which accepted Schutte Inc. as a client after it was incorporated. (See Willemsen Dep. at 15-17.)
In this action, Schutte Inc. requests a declaratory judgment of non-infringement and non-dilution of Kwik Lok's U.S. trade dress rights by five of Schutte Inc's products in the " Clipps" product line, including Types G, GL, BL, T, and K. (See Sec. Am. Compl. ¶ 101, Ex. D). Schutte Inc.'s products are generally square or rectangular, with four rounded corners with four small jagged protrusions near each rounded corner, a " v" shaped opening along one side, and a concave side opposite the side with the opening. (See Sec. Am. Compl. ¶ 104, Ex. D.) Schutte Inc. also seeks to cancel Kwik Lok's '043 Registration and claims damages under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and New York General Business Law § § 349, 350, and 350-a for Kwik Lok's alleged false advertising.
Schutte BV designs and manufactures all of the Schutte products in the Netherlands. (See Abbenhuis Aff. ¶ 8.) In June of 2012, Schutte BV shipped samples of over 100,000 Clipps G-Series bag closure products to the TABS Inc. office for Schutte Inc. to use in promotion in New York. (See Sec. Am. Compl. ¶ 126; Jan. 29 Abbenhuis Dep. at 106-08, Ex. 15.) As of December 2013, Schutte Inc. had not designed, manufactured, or offered any products for sale in the United States. (See Abbenhuis Aff. ¶ 7.) Furthermore, the Clipps G-Series was the only product being promoted on the Schutte website, www.clippsamerica.com. (See Jan. 29 Abbenhuis Dep. at 175). Besides the G-Series, no other Schutte products had been shipped into the United States, and nothing had been done to promote Schutte products in the United States as of April, 2014. (See Abbenhuis Dep. at 281, 315, Apr. 14, 2014.)
This lawsuit was filed by Schutte Inc. on July 18, 2012. In its original complaint, Schutte Inc. sought a narrower declaration,
requesting declaratory relief only for a single " Schutte Device." (Compl. ¶ 18.) Schutte Inc. claimed that Schutte BV developed a version of the device Schutte BV used in the European market specifically for the United States market. (Compl. ¶ 18.) What Schutte Inc. then referred to as the " Schutte Device" appeared to consist of two of its products, the Clipps G-Series, which it had shipped into the United States, and the Clipps GL-Series. (See Compl. Ex. E; Am. Compl. Ex. D.) Schutte Inc. filed an amended complaint on December 10, 2012, expanding its requested relief by adding nine additional Schutte products on which it sought a declaratory judgment. (Am. Compl. ¶ 74, Ex. D.) On December 28, 2012, Kwik Lok filed a motion to dismiss the amended complaint on the grounds that this Court lacked subject matter jurisdiction over the declaratory judgment claims, and a motion to dismiss the state and federal false advertising claims, the false patent marking claim, and the monopolization claim for failure to state a claim.
On July 23, 2013, this Court issued an order granting Kwik Lok's motion in part and denying it in part. This Court found that, at the motion to dismiss stage prior to fact discovery, Schutte Inc.'s allegations presented a sufficient case or controversy under the Declaratory Judgment Act for subject matter jurisdiction over at least some of its claims. This Court found that Schutte Inc. had standing at that stage as well, but granted Kwik Lok's motion to dismiss without prejudice Schutte Inc.'s trademark cancellation claims. This Court granted Kwik Lok's motion to dismiss Schutte Inc.'s false patent marking claim, but denied the motion to dismiss with respect to Schutte Inc.'s false advertising and monopolization claims. This Court also denied Kwik Lok's motion to transfer this action to the Western District of Washington.
Schutte Inc. filed its second amended complaint on August 6, 2013, and Kwik Lok filed counterclaims in an amended answer on September 5, 2013, naming Schutte BV as a counterclaim defendant. On November 15, 2013, Kwik Lok filed a second amended answer and amended counterclaims. On December 31, 2013, the Schutte parties filed their present motions to dismiss the counterclaims. On May 8, 2014, this Court stayed expert discovery until the parties' pending motions were resolved, but the parties continued with fact discovery, which has now been completed. On May 23, 2014, Kwik Lok filed its present motion for summary judgment. On May 27, 2014, Schutte filed its present cross-motion for summary judgment.
The counterclaim defendant Schutte BV moves to dismiss the complaint against it for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2).
A district court has " broad discretion" in deciding a motion to dismiss for personal jurisdiction pursuant to Rule 12(b)(2), including the discretion to conduct an evidentiary hearing if the Court believes one is warranted. See CutCo Indus. v. Naughton, 806 F.2d 361, 364 (2d Cir. 1986); see also Clarendon Nat'l Ins. Co. v. Lan, 152 F.Supp.2d 506, 515 (S.D.N.Y. 2001). To survive a motion to dismiss where no evidentiary hearing is held, the plaintiff need only make a prima facie case that the defendant is subject to the Court's personal jurisdiction. See In re Magnetic Audiotape Antitrust Litig., 334 F.3d 204, 206 (2d Cir. 2003); PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1108 (2d Cir. 1997); Rubinbaum LLP v. Related Corporate Partners V, L.P., 154 F.Supp.2d 481, 486 (S.D.N.Y. 2001).
The Court must construe the pleadings and supporting affidavits in the light most favorable to the plaintiff. See
CutCo Indus., 806 F.2d at 365; see also Berwick v. New World Network
Int'l, No. 06 Civ. 2641, 2007 WL 949767, at *9 (S.D.N.Y. Mar. 28, 2007). However, once discovery has been completed, as is true in this case, the plaintiff's prima facie case must be supported by an averment of facts that, if credited by the factfinder, would suffice to establish jurisdiction over the defendant. See Dorchester Fin. Sec., Inc. v. Banco BRJ, S.A., 722 F.3d 81, 85 (2d Cir. 2013) (citing Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990)).
Because the Lanham Act does not provide for nationwide service of process, this Court looks to the personal jurisdiction rules of the forum state. See
Sunward Elecs., Inc. v.. McDonald, 362 F.3d 17, 22 (2d Cir. 2004). The Court must therefore determine whether New York law allows the exercise of personal jurisdiction and, if so, whether doing so comports with constitutional due process guarantees. See Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945); Clarendon Nat. Ins. Co. v. Lan, 152 F.Supp.2d 506, 515 (S.D.N.Y. 2001); see also M. Shanken Commc'ns, Inc. v. Cigar500.com, No. 07 Civ. 7371, 2008 WL 2696168, at *3 (S.D.N.Y. July 7, 2008).
Kwik Lok first argues that personal jurisdiction over Schutte BV is proper under CPLR § 302(a)(1) because Schutte BV has directed business transactions at New York.
CPLR § 302(a)(1) authorizes jurisdiction where the defendant, " in person or through an agent . . . transacts any business within the state or contracts anywhere to supply goods or services in the state." C.P.L.R. § 302(a)(1). Under New York law, for § 302(a)(1) to apply, the cause of action must " arise out of" a defendant's activities in New York. See, e.g.,
CutCo Indus., 806 F.2d at 365.
Transacting business " has been interpreted to require a certain quality, rather than a specific quantity, of contacts with New York."
Broad Horizons, Inc. v. Central Crude Ltd., No. 94 Civ. 1593, 1994 WL 623075, at *2 (S.D.N.Y. Nov. 9, 1994) (citation omitted); see also Int'l Customs Assocs., Inc. v. Ford Motor Co., 893 F.Supp. 1251, 1259 (S.D.N.Y.1995), aff'd, 201 F.3d 431 (2d Cir. 1999); Cavalier Label Co., Inc. v. Polytam, Ltd., 687 F.Supp. 872, 876 (S.D.N.Y. 1988). Courts in New York focus on " whether the defendant's conduct constitutes purposeful [ ] avail[ment] of the privilege of conducting activities within [New York], thus invoking the benefits and protections of its laws." Best Van Lines, Inc., v. Walker, 490 F.3d 239, 247 (2d Cir. 2007) (internal quotation marks omitted) (citations omitted); accord Fort Knox Music, Inc. v. Baptiste, 203 F.3d 193, 196 (2d Cir. 2000); see also
CutCo Indus., 806 F.2d at 365; Ainbinder v. Potter, 282 F.Supp.2d 180, 187 (S.D.N.Y. 2003); Clarendon, 152 F.Supp.2d at 516. The courts consider a range of " purposeful activity," and even a single transaction of business is sufficient to give rise to personal jurisdiction under CPLR § 302(a)(1), if the claim arises out of the transaction. See Citigroup Inc. v. City Holding Co., 97 F.Supp.2d 549, 564 (S.D.N.Y. 2000) (collecting cases); see also
M. Shanken Commc'ns, 2008 WL 2696168, at *3-4.
Kwik Lok puts forth two main grounds on which it contends that Schutte BV transacted business in New York. First, Schutte BV has taken several acts on its own that are directed towards New York regarding the very products alleged to be infringing. Second, Schutte BV established Schutte Inc. in New York for the purpose of marketing the products that are at issue here, and controls the actions of Schutte Inc. such that Schutte Inc.'s acts may be attributed to Schutte BV because Schutte Inc. is the agent of Schutte BV.
For Schutte BV's own actions, Kwik Lok points to its shipment of reels containing at least 100,000 bag closures to New York, its sending of promotional materials to TABS Inc. to be sent to New York bakeries prior to the formation of Schutte Inc., and its hiring of a New York law firm for representation in obtaining a U.S. trademark registration for its products. Schutte BV responds that the 100,000 bag closures are only worth approximately one hundred U.S. dollars and that most of them were sent to Schutte Inc. without any attempt to market or sell them in the United States. Schutte BV argues that it only researched and compiled a list of bakeries to whom the closures might be marketed from within the Netherlands, and that the law firm was hired through a third party, and therefore neither of these bases suffices to establish jurisdiction.
Taken together, Kwik Lok's factually-supported allegations as to Schutte BV's contacts with New York are sufficient to exercise jurisdiction over Schutte BV under § 302(a)(1). The shipping of a single allegedly infringing product combined with the business activity of an associated company in the forum is enough to establish jurisdiction. See, e.g., Chloe v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158, 165 (2d Cir. 2010). Schutte BV purposefully availed itself of New York's laws and this action arose out of those contacts. In deciding that it would begin to market in the United States and in the New York market in particular, Schutte BV designed, developed, and sent samples and promotional materials to Schutte Inc. and TABS Inc., which were in turn sent to potential customers in New York. (See Jan. 29 Abbenhuis Dep. at 74-76, 101-110); Parker Waichman Alonso LLP
v. Orlando Firm, P.C., No. 09 Civ. 7401, 2010 WL 1956871, at *10 (S.D.N.Y. May 14, 2010) (finding personal jurisdiction where there were " tangible manifestations" of the defendant's intent to reach the New York market); see also Am. Network v. Access Am./Connect Atlanta., 975 F.Supp. 494, 498 (S.D.N.Y. 1997) (same).
Furthermore, Kwik Lok has made out a prima facie case of jurisdiction over Schutte BV based on Schutte Inc.'s acts as an agent. In order to make a prima facie showing of jurisdiction under an agency theory, the plaintiff does not need to establish a " formal agency relationship." See Merck & Co., Inc. v. Mediplan Health Consulting, Inc., 425 F.Supp.2d 402, 420 (S.D.N.Y. 2006). The plaintiff must demonstrate that the agent " engaged in purposeful activities in this State in relation to [the allegedly infringing products] for the benefit of and ...