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Speedfit LLC v. Woodway United States, Inc.

United States District Court, E.D. New York

October 10, 2014

SPEEDFIT LLC and AUREL A. ASTILEAN, Plaintiffs,
v.
WOODWAY USA, INC. and DOUGLAS G. BAYERLEIN, Defendants

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For Speedfit LLC, Aurel A. Astilean, Plaintiffs: Thomas B. Decea, Yenisey Rodriguez-McCloskey, LEAD ATTORNEYS, Danzig Fishman & Decea, White Plains, NY; Douglas E. Robinson, Fishman & Decea, White Plains, NY; John F. Vodopia, John F. Vodopia, Esq., Huntington, NY.

For Woodway USA, Inc., Douglas G. Bayerlein, Defendants: Kadie M. Jelenchick, LEAD ATTORNEY, Jeffrey N. Costakos, Foley & Lardner LLP, Milwaukee, WI; Sara Madavo, Yonaton Aronoff, Foley & Lardner LLP, New York, NY.

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MEMORANDUM AND ORDER

Kiyo A. Matsumoto, United States District Judge.

On March 11, 2013, plaintiffs Speedfit LLC (" Speedfit" ) and Aurel A. Astilean (together, " plaintiffs" ) filed an action for, inter alia, declaratory judgment invalidating defendants Woodway USA, Inc. (" Woodway" ) and Douglas G. Bayerlein's (together, " defendants" ) patent for a manually-powered treadmill. ( See generally ECF No. 1, Complaint.) Plaintiffs amended their complaint against defendants on June 17, 2013 to abandon their declaratory judgment claim and instead allege infringement of plaintiffs' own patents for components of a manually-powered treadmill. ( See generally ECF No. 18, Amended Complaint (" Am. Compl." ).) Presently before the court is defendant Woodway's motion, presumably pursuant to Fed.R.Civ.P. 12(b)(6),[1] to dismiss plaintiffs' patent infringement claims in favor of Woodway's pending declaratory judgment action against plaintiffs, currently before the Eastern District of Wisconsin, and to dismiss plaintiffs' state law claims for failure to state a claim upon which relief can be granted. Woodway moves this court, in the alternative, for transfer of this case to the Eastern District of Wisconsin pursuant to 28 U.S.C. § 1404(a). For the reasons discussed below, Woodway's motion to dismiss and motion to transfer are denied except as to plaintiffs' breach of fiduciary duty claim, which is dismissed for failure to state a claim.

BACKGROUND

I. Factual Allegations in the Amended Complaint

The allegations in the Amended Complaint are taken to be true for purposes of

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deciding a motion pursuant to Fed.R.Civ.P. 12(b)(6), and concern the inventorship and development of a manually-powered treadmill, currently marketed by Woodway as the " Curve" treadmill. Plaintiff Speedfit, founded by plaintiff Astilean, is a New York-based company that develops fitness programs and equipment. (Am. Compl. ¶ ¶ 3-4.) Together, Astilean, a former world-class athlete and resident of the Eastern District of New York, and Speedfit have developed a patented fitness program to promote speed training and " the leg-powered, non-motorized treadmill" at the center of this litigation. ( Id. ¶ 4.) Defendant Woodway is a Wisconsin-based corporation that manufactures and sells treadmills, including motorized models and the manually-operated Curve treadmill, both domestically and internationally. ( Id. ¶ 5.) Defendant Bayerlein is the president of Woodway. ( Id. ¶ 6.)

Astilean owns two active patents relating to a manually-powered treadmill: Nos. 8,308,619 (the " '619 Patent" ), filed on October 29, 2010 and granted by the United States Patent and Trademark Office (" PTO" ) on November 13, 2013, and 8,343,016 (the " '016 Patent" ), filed on November 1, 2010 and granted by the PTO on January 1, 2013). ( Id. ¶ ¶ 7-8; see also Am. Compl. Exs. A, B.) Both the '619 and '016 Patents " relate generally to a motorless leg powered curved treadmill that allows the rider to walk, jog, run or sprint without making any adjustments to the treadmill other than shifting the user's center of gravity forward or backwards." ( Id. ¶ 9.)

The events surrounding the development of the treadmill at issue are summarized below, based on the allegations of the Amended Complaint, which the court accepts as true for purposes of the instant motion. Astilean and Bayerlein first met at a fitness equipment trade show in San Francisco, California in the spring of 2002 and began discussing Speedfit's exercise programs and equipment. ( Id. ¶ 14.) Astilean and Bayerlein met in New York City on May 1, 2003, at which time they executed a non-disclosure/circumvention agreement. ( Id. ¶ 15.) After signing the agreement, they discussed Speedfit's idea for a non-motorized treadmill. ( Id.) Astilean provided the specifications for his treadmill design to Woodway in 2004, and Woodway agreed to build a prototype at no cost to Speedfit or Astilean. ( Id. ¶ 16.) Astilean and another business partner, Tami Mack, visited Woodway's offices in May 2005 and signed a second non-disclosure/circumvention agreement with Woodway. ( Id. ¶ 17.) The agreement included the following terms:

1. Woodway has signed a non-disclosure agreement (the " NDA" ) related to any designs and other information supplied by Speedfit. The NDA continues to be applicable to all disclosures made by Speedfit and all actions taken by Woodway as a result of said disclosures, including, without limitation, the construction of prototypes of personal exercise equipment based on Speedfit's design.
[...]
5. Speedfit owns every right of every kind in and to its designs and any other information supplied to Woodway, and to any prototypes that Woodway builds as a result thereof....

( Id.) Woodway completed the prototype by August 15, 2005. ( Id. ¶ 18.) Speedfit requested extra operative parts from Woodway (chassis with belts) so that it could continue to refine the treadmill design. ( Id.) On August 18, 2005, Woodway provided Speedfit with a memorandum acknowledging Speedfit's invention of the treadmill and corresponding intellectual property rights, as well as proposed agreements for partnerships between the two companies

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in the eventual sale of the product. ( Id. ¶ 19.) The proposed agreements provided for some amount of money to be paid from Woodway to Speedfit. ( Id.) Speedfit did not accept Woodway's proposals. ( Id.)

In December 2006, Astilean visited Woodway to supervise the ongoing construction of the latest version of the non-motorized treadmill, named the " Speedboard" by Speedfit. ( Id. ¶ 20.) Speedfit and Woodway debuted the Speedboard at an industry show in the spring of 2007, with logos for both companies on the treadmill itself. ( Id.) Plaintiffs allege upon information and belief that Woodway began selling the Speedboard to the public after the Spring 2007 trade show, without Speedfit's consent. ( Id. ¶ 22.) Woodway did not remit any of its profits from sale of the treadmill to Speedfit. ( See id.)

After the trade show, Speedfit continued to work on the Speedboard design in efforts to render it totally manually-operated, as it still contained a motorized mechanism to adjust the treadmill's incline. ( Id. ¶ 21.) By May 2008, Speedfit had become frustrated with Woodway's inability to meet Speedfit's specifications for the prototype and undertook a re-design on its own. ( Id. ¶ 23.) Speedfit completed a curved, wooden, fully non-motorized treadmill by August 2008. ( Id. ¶ 24.) The new curved design (the " Curve" ) allowed users to move to different sections of the treadmill in order to experience a greater incline, obviating the need for the industry-standard manual, motorized incline mechanism. ( Id.)

Astilean filed a provisional patent application (No. 61/193,239) on November 7, 2008, before presenting the Curve to Woodway in order to build a model for public sale. ( Id. ¶ 25.) Speedfit then sent Woodway the specifications for the Curve, along with the wooden version, for Woodway to duplicate in metal. ( Id. ¶ 25.) Around this time, Bayerlein confirmed to Astilean that Woodway was still bound to the terms of the non-disclosure agreement. ( Id.)

In January 2009, before Woodway's metal prototype of the Curve was ready, Speedfit introduced the wooden version of the Curve at a Discovery Channel program. ( Id. ¶ 26.) The metal version was completed in February 2009 and was named " 'SpeedFit Speedboard' by Woodway, SpeedFit Trade name." ( Id. ¶ 27.) Woodway would later rename the product as the " Woodway Curve," though the " Curve," " SpeedFit Speedboard," and " Woodway Curve" all refer to the same product design. ( Id.)

The SpeedFit Speedboard by Woodway was showcased at a March 2009 fitness show and enjoyed immediate success, including being featured in many print and online magazines and catalogs. ( Id. ¶ 28.) In May 2009, Woodway provided Speedfit with a " strategic evaluation agreement" (" SEA" ), which acknowledged Speedfit's development of the Curve and entitlement to patent the design, in an effort to secure a commercial interest in the product. ( Id. ¶ 29.) Speedfit refused to sign the agreement, finding it unfair, but plaintiffs continued to discuss its terms with Woodway in an effort to resolve the disagreement. ( Id. ¶ 30.) As recently as August 2009, Bayerlein wrote to Astilean that the purpose of the agreement was to protect Astilean and his invention. ( Id. ¶ 32.)

On March 17, 2009, and without Speedfit's knowledge, Bayerlein and other Woodway employees filed patent application number 13/235,065 (the " '065 Application" ) with the PTO for a leg-powered treadmill. ( Id. ¶ 31.) The '065 Application describes a " virtually identical leg powered treadmill." ( Id. ¶ 39; see Am. Compl. Ex. C.) Plaintiffs allege on information and belief that the '065 Application

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" was assigned to Woodway by the purported inventors." ( Id. ¶ 33.) Plaintiffs further allege that Woodway began manufacturing and selling the Curve without the Speedfit logo in December 2010 and continues to manufacture and sell the treadmill as its own product. ( Id. ¶ 34.) Woodway has not provided plaintiffs with any profits derived from the sale of its non-motorized treadmills. ( Id.)

II. Procedural History

Plaintiffs Speedfit and Astilean commenced this action on March 11, 2013 against defendants Woodway and its president, Bayerlein, seeking a declaratory judgment invalidating Woodway's '065 Application or, alternatively, adding Astilean as an inventor on the pending application. The complaint also included New York state law claims for breach of contract, unjust enrichment, constructive trust, breach of fiduciary duty, and conversion. On May 13, 2013, defendants filed a pre-motion conference letter in anticipation of filing a motion to dismiss plaintiffs' complaint for lack of subject matter jurisdiction. (ECF No. 10, Letter re: Motion to Dismiss for Lack of Jurisdiction.) On May 16, 2013, plaintiffs responded to defendants' letter and indicated that they intended to amend their complaint; subsequently, this court ordered plaintiffs to file an amended complaint by June 15, 2013. On May 17, 2013, counsel for plaintiffs represented to counsel for Woodway that plaintiffs planned to amend their complaint to claim that Woodway's treadmill infringes the '619 and '016 Patents.

On June 13, 2013, and before plaintiffs filed their amended complaint in this case, Woodway commenced a declaratory judgment action against Astilean in the United States District Court for the Eastern District of Wisconsin, Case No. 13-cv-681, (the " Wisconsin Action" ), seeking a declaration that plaintiffs' '619 and '016 Patents are invalid or, in the alternative, a correction of the '619 and '016 Patents to name the relevant Woodway employees as co-inventors.[2] Astilean and Speedfit filed their amended complaint in this action on June 17, 2013, which added allegations that Woodway infringed the '619 and '016 patents and dropped the claim for declaratory judgment relating to the '065 Application. Woodway served the instant motion on plaintiffs on September 27, 2013, seeking (1) dismissal of plaintiffs' patent infringement claims in favor of what Woodway claims is the earlier-filed Wisconsin Action, or, in the alternative, transfer to the Eastern District of Wisconsin pursuant to the first-to-file ...


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