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The Oneida Group Inc. v. Steelite International U.S.A. Inc.

United States District Court, E.D. New York

December 15, 2017

THE ONEIDA GROUP INC., Plaintiff,
v.
STEELITE INTERNATIONAL U.S.A. INC., TABLEWERKS INC., RICHARD ERWIN, STEVEN LEFKOWITZ and ANTHONY DELOSREYES, Defendants.

          Milbank Tweed Hadley & McCloy, LLP Attorneys for the Plaintiff Christopher J. Gaspar, Esq., Mark C. Scarsi, Esq., Ashlee Lin, Esq., Kristin L. Yohannan, Esq., Ryan N. Hagglund, Esq., Nathaniel T. Browand, Esq., of Counsel.

          Gordon & Rees LLP Attorneys for the Defendants Steelite International U.S.A., Inc., Steven Lefkowitz, and Anthony DeLosReyes Howard Shipley, Esq. John G. Ebken, Esq., Thomas L. Allen, Esq., Paul Eastgate, Esq., Peter G. Siachos, Esq., of Counsel.

          Moses & Singer Attorneys for the Defendants Tablewerks, Inc., and Richard Erwin David M. Rabinowitz, Esq., Shari Ann Alexander, Esq., Of Counsel.

          MEMORANDUM OF DECISION AND ORDER

          ARTHUR D. SPATT UNITED STATES DISTRICT JUDGE.

         This action centers on whether certain dishes obtained trade dress protections under the Lanham Act or New York State law, and whether two parties ever entered into an exclusive distribution contract for those dishes.

         The Plaintiff Oneida Group, Inc. (the “Plaintiff” or “Oneida”) brought this action against the Defendants Steelite International U.S.A. Inc. (“Steelite”), Tablewerks Inc. (“Tablewerks”), Richard Erwin (“Erwin”), Steven Lefkowitz (“Lefkowitz”), and Anthony DeLosReyes (“DeLosReyes”) (collectively, the “Defendants”). Oneida seeks damages and injunctive relief, alleging trade dress infringement under the Lanham Act, 15 U.S.C. § 1125(a) and New York common law; unfair competition under New York common law; trade secret misappropriation in violation of the Defend Trade Secrets Act (“DTSA”), 18 U.S.C. § 1836; New York state common law pertaining to misappropriation of trade secrets; Ohio state laws pertaining to misappropriation of trade secrets, Ohio Rev. Code § 1333.61 et seq.; breach of contract; and tortious interference with business relations.

         Presently before the Court are four motions: a motion to dismiss the Plaintiff's unfair competition and misappropriation of trade secrets claims pursuant to Federal Rule of Civil Procedure (“Fed. R. Civ. P.” or “Rule”) 12(b)(6) by Steelite, Lefkowitz, and DeLosReyes (the “Steelite Defendants”); a motion to dismiss the Plaintiff's tortious interference with business relations claims pursuant to Rule 12(b)(6) by Tablewerks and Erwin (the “Tablewerks Defendants”); a motion to intervene as a plaintiff by Steelite Distribution, LLC (“Steelite Distribution”) pursuant to Rule 24; and a motion by the Plaintiff to amend the complaint pursuant to Rule 15 to add Steelite Distribution as a defendant, and to add several claims.

         For the following reasons, the Steelite Defendants' motion to dismiss is denied; the Tablewerks Defendants' motion to dismiss is granted; Steelite Distribution's motion to intervene is granted; and Oneida's motion to amend the complaint is granted in part and denied in part.

         I. BACKGROUND

         A. The Relevant Facts

         The following facts are drawn from the Plaintiff's proposed amended complaint ((ECF No. 100-2) the “PAC”). See, e.g., MB v. Islip Sch. Dist., No. 14-cv-4670, 2015 WL 3756875, at *4 (E.D.N.Y. June 16, 2015) (stating that when a party files a motion to amend while a motion to dismiss is pending, the Court “has a variety of ways in which it may deal with the pending motion to dismiss, from denying the motion to dismiss as moot to considering the merits of the motion in light of the amended complaint.” (quoting Schwartzco Enters. LLC v. TMH Mgmt., LLC, No. 14 -cv -1082, 2014 WL 6390299, at *1 (E.D.N.Y. Nov. 17, 2014) (internal quotation marks omitted)).

         As not all of the Plaintiff's claims are challenged by the Defendants, the Court will not go through a detailed recitation of all of the allegations or facts contained in the complaint. Instead, the Court will review the relevant facts.

         Oneida designs and sells dinnerware. For more than twenty years, Oneida sourced many of its premier dinnerware products from Royal Porcelain Public Co., Ltd. (“Royal Porcelain”), a manufacturer located in Thailand. Oneida purchased the Royal Porcelain products through Tablewerks, which is purportedly the exclusive North American distributor of Royal Porcelain. Oneida alleges that it had the exclusive right to sell Royal Porcelain products in North America; and that Royal Porcelain and Tablewerks agreed not to supply any competitors with Royal Porcelain designs sold by Oneida.

         On December 12, 2016, Steelite apparently acquired substantially all of the assets and rights of Tablewerks. On December 13, 2016, John Miles (“Miles”), the Chief Executive Officer (“CEO”) and President of Steelite, sent a letter to Oneida advising it of this acquisition. In the letter, Steelite advised Oneida that Steelite would self-distribute all products produced by Royal Porcelain. Steelite stated that it had been advised that there was no contractual agreement between Oneida and either Tablewerks or Royal Porcelain. Steelite offered to make several accommodations to Oneida: fulfilling all of Oneida's existing purchase orders for Royal Porcelain products; allowing Oneida to sell its current inventory of Royal Porcelain products; and respecting Oneida's intellectual property-namely, Oneida's registered product names.

         Oneida alleges that Steelite refused to respect Oneida's intellectual property, and that the letter was incorrect in stating that there was no contractual relationship between Oneida and Tablewerks or Royal Porcelain.

         Steelite and Tablewerks are now selling dinnerware designs that were previously sold under Oneida's Sant' Andrea line, and Oneida claims that it has trade dress protections in those designs. Steelite and Tablewerks have told Oneida's customers that Oneida will not be able to provide the Sant' Andrea dinnerware, and that such products will only be available through Steelite. Furthermore, Steelite and Tablewerks have represented to customers that Steelite has acquired the designs and the distribution rights of Royal Porcelain products. Oneida further alleges that, upon information and belief, the Defendants have used Oneida's trademarks in their promotional and sales media.

         In January 2017, representatives from Oneida and Steelite engaged in mediation. As a result of the mediation, the parties entered into a standstill agreement. However, forty-eight hours after the mediation, Steelite purportedly displayed Royal Porcelain products at a trade show that had been exclusively sold by Oneida.

         1. Alleged Trade Secrets and Intellectual Property

         The complaint further alleges that Oneida has developed valuable proprietary and confidential information that constitute trade secrets. The purported trade secrets concern “valuable marketing, sales and strategy information . . . .” (PAC ¶ 39). These include but are not limited to:

(1) Oneida's “where to play and how to win” business strategy that includes information about customer segmentation and product category particularized by sub-category and sub-channels, (2) Oneida's go-to market strategy for interacting with customers based on proprietary developed customer segmentation and end-user analysis, (3) Oneida's product margins, costs, rebate programs, other trade spend activities, and proposed changes in those rebate programs and trade spend activities, (4) Oneida's costs, margins, and expected pricing of customer specific designs, and (5) Oneida's customer sales forecasting and customer-specific account strategy.

(Id.).

         To protect these purported trade secrets, Oneida requires employees and consultants to sign non-disclosure agreements; maintains a handbook that prohibits unauthorized disclosure of confidential business information; and has a records retention policy in place that requires securing and properly disposing of all documents which contain trade secrets.

         Oneida alleges that Lefkowitz and DeLosReyes, who both left Oneida to work for Steelite, violated those agreements by divulging Oneida's trade secrets to Steelite.

         When Lefkowitz met with an Oneida employee to return all Oneida property on January 4, 2017, Lefkowitz refused to give the employee access to his computer. Lefkowitz would only provide copies of certain files to the employee. During the meeting with the Oneida employee, Lefkowitz was able to find Oneida materials on his computer despite his claims that he had deleted all Oneida materials. The complaint does not state what files Lefkowitz had on his computer that would be considered trade secrets.

         As to DeLosReyes, Oneida alleges that “on information and belief, on January 3, 2017, he connected an external memory drive to his Oneida laptop computer and copied files from his Oneida laptop computer to the external memory drive.” (PAC ¶ 68). The complaint does not state what files DeLosReyes had on his laptop that would be considered trade secrets.

         Oneida claims that because Steelite has been able to offer Oneida's claimed designs to Oneida's own customers, Lefkowitz and DeLosReyes must have disclosed some trade secrets. The amended complaint also states that a Steelite employee possessed a confidential Oneida video, and Oneida confidential information. While it states that the video and the information were contained in an email, the amended complaint does not identify what the information was, or what was on the video.

         The complaint further alleges, based on “information and belief, ” that “each of the Defendants knowingly acquired, disclosed, and/or used Oneida trade secrets and confidential information to injure Oneida[, ] . . . [and] threatens to misappropriate Oneida's trade secrets and confidential information . . . .” (PAC ¶¶ 96-97).

         The amended complaint also alleges that the Defendants are using Oneida's registered trademarks to promote and sell the Defendants' products.

         Oneida further states that Steelite has advertised that “Belisa was the first pattern in the market to feature an ergonomic set of ridges on the underside to facilitate easy handling, making its design unrivaled in the hospitality industry.” (PAC ¶ 236). Oneida avers that this is false and misleads consumers because Oneida's Botticelli dinnerware, which is now being sold by Steelite under the name Belisa, was the first pattern to feature that design.

         Finally, Oneida alleges that Steelite Distribution's claimed patents and copyrights are ineligible for intellectual property protection. Specifically, Oneida states that Patent D481, 261 (the “'261 Patent”), which is a division of Patent D463, 955 (the “'955 Patent”), describes features that lack the novelty, ornamentality, and nonobviousness required for patentability.

         As to the copyrights, Oneida states that the Defendants' copyright application reference no. #1-4108448151 was denied by the Copyright Office on April 5, 2017, several days before this Court conducted a hearing to determine whether to grant Oneida's motion for a preliminary injunction. During that hearing, the Defendants introduced evidence that the copyright application was pending, and relied on the copyright application in support of their opposition to Oneida's motion for a preliminary injunction. The Defendants never informed Oneida or the Court during or after the hearing that their copyright application had been denied.

         Oneida does not allege that the same misrepresentation occurred in regards to copyright application reference number #1-4734329381, but nevertheless claims that the subject matter of the application is not copyrightable material.

         B. The Relevant Procedural History

         On February 20, 2017, Oneida filed its initial complaint. Oneida sought injunctive and declaratory relief, along with damages. As stated above, Oneida brought claims for trade dress infringement under the Lanham Act and New York common law; unfair competition under New York common law; misappropriation of trade secrets in violation of the DTSA, New York common law and the Ohio Rev. Code § 1333.61 et seq.; breach of contract; and tortious interference with business relations.

         On February 22, 2017, the Court signed an ex parte order directing the Defendants to show cause why Oneida's motion for a temporary restraining order, preliminary injunction, and expedited discovery should not be granted. The Court referred Oneida's motion to Magistrate Judge A. Kathleen Tomlinson.

         On February 28, 2017, Judge Tomlinson issued a report and recommendation (the “R&R”) recommending that the Court issue a temporary restraining order pending resolution of Oneida's motion for a preliminary injunction. Judge Tomlinson followed up her initial R&R with a full written opinion on March 14, 2017. Following that ruling, the Court held a five day hearing from April 10, 2017 through April 14, 2017 to resolve Oneida's motion for a preliminary injunction.

         On May 10, 2017, the Court issued a memorandum of decision and order denying Oneida's motion for a preliminary injunction, and granting Oneida's motion for expedited discovery.

         On March 31, 2017, while the Plaintiff's motion for a preliminary injunction was being entertained by the Court, two sets of Defendants filed two separate motions to dismiss several counts contained in the initial complaint pursuant to Rule 12(b)(6). The motion to dismiss filed by the Steelite Defendants seeks to dismiss the Plaintiff's misappropriation of trade secrets and unfair competition claims against them. The other motion to dismiss, filed by the Tablewerks Defendants, seeks a dismissal of the Plaintiff's tortious interference with business relations claims against them.

         On June 14, 2017, Steelite Distribution filed a motion to intervene as a plaintiff pursuant to Rule 24. In its proposed complaint, Steelite Distribution brings claims for patent infringement; copyright infringement; trade dress infringement in violation of the Lanham Act; false designation of origin in violation of the Lanham Act; common law trade dress infringement; unfair competition, commercial disparagement; interference with contractual relations; breach of contract; and declaratory judgment. Oneida does not oppose the motion. (ECF No. 94 (“[Oneida] (i) does not object to Steelite Distribution, LLC's intervention . . . but (ii) does not waive any right to challenge the proposed Complaint . . . [, ] including to challenge both the sufficiency of the claims and any purported Rule 11 basis for them.”)).

         On August 7, 2017, Oneida filed a motion to amend its complaint pursuant to Rule 15 to add Steelite Distribution as a defendant; to add certain factual allegations; and to add claims for breach of implied contract; promissory estoppel; false endorsement and false designation of origin under 15 U.S.C. § 1125(a)(1)(A); false advertising; and for declaratory judgments regarding alleged invalidity of patents and copyright ineligibility. Only Steelite Distribution opposes Oneida's motion to amend. Oneida's proposed amended complaint includes causes of action against Steelite Distribution for unfair competition; tortious interference with business relations; false endorsement and false designation of origin; false advertising; and declaratory judgment.

         II. ...


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