Plaintiff was the inventor of a toy glider and was issued a patent in 1992. Plaintiff formed a partnership called Wingers Co. After forming Wingers, Plaintiff then sent a letter to the defendant introducing the toy glider and ultimately an agreement was entered into between Allied (the defendant), Wingers Co. and Plaintiff (the "License Agreement") in 1993.
Under the License Agreement, plaintiff granted Allied an exclusive license "thereby permitting and designating Allied to be the sole and exclusive manufacturer, distributors and marketing company of Wingers, and any and all derivative toy products thereof." In exchange, Allied agreed to pay royalties.
Plaintiff filed his patent infringement suit in July 2010. In the amended complaint, plaintiff alleged that the defendants were in breach of the License Agreement for failing to pay royalties and provide a proper accounting. Plaintiff claimed that he gave notice of the breach and the License Agreement was null and void. Accordingly, he contended he could sue for patent infringement.
Defendants moved for summary judgment. Although the plaintiff did not include any contract claims, the district court noted that many of the plaintiff's contentions were based on the License Agreement, particularly failing to pay royalties. The defendant presented evidence on summary judgment that the plaintiff failed to contradict on the payment of royalties. "Plaintiff further alleges that Defendants have breached the License Agreement by failing to pay him royalties in accordance with the terms of that agreement. The License Agreement requires Allied to pay Wingers Co. a license fee of 5% of the gross receipts on wholesale sales of the toy glider. In his Declaration, Defendant Pack states that "since entering into the Agreement, Allied has sold approximately $800,000.00 worth of toy gliders covered by the Plaintiff's design patent, and accordingly paid Plaintiff over $40,000.00 as required by the Agreement." The Royalty Report submitted by Defendants supports this statement. Plaintiff has provided no evidence to contradict this. Therefore,
the Court finds that Defendants are entitled to summary judgment on this claim."
The district court also discussed that a number of plaintiff's claims were in direct contravention of the terms of the License Agreement. "Finally, Plaintiff makes a number of claims that are in direct contravention of the terms of the License Agreement. For example, Plaintiff takes issue with the fact that Allied used a different name when selling the toy glider. However, the License Agreement specifically provides that Allied could use a different name if it believed such name would best enhance sales. Plaintiff also takes issue with Allied's efforts at selling the toy glider. The License Agreement provides that "Allied shall use its best efforts to manufacture and market [the toy glider]. As stated, Allied sold approximately $800,000.00 worth of toy gliders and Plaintiff has provided nothing to suggest that Allied did not use its best efforts. Plaintiff also takes issue with Allied retaining possession over certain tooling and molds. But again, the License Agreement provides for Wingers Co. to "convey and deliver all of its right, title and interest" in these items to Allied. Finally, Plaintiff argues that Allied failed to pay him $26,000.00 per year. This argument, however, misreads the contract. Plaintiff was to be paid 'minimum aggregate royalties" of $26,000.00 "by the end of year four" of the License Agreement. The License Agreement further states that "[a]ny royalties paid by Allied to Wingers Co. in excess of $26,000.00 during years one, two and/or three of this Agreement shall be applied to the minimum royalties due in year four." Thus, under the terms of the License Agreement, Allied was required to pay a total of $26,000.00 by the end of year four, not every year as argued by Plaintiff. Even if Plaintiff's argument on this point was correct, it would be barred by the applicable statute of limitations. Therefore, the Court finds that each of these contract-based claims fails."
Accordingly, the district court found that plaintiff's claims were not supported by the facts and granted summary judgment in favor of the defendant.
The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.