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MMI Inc. v. Rich Godfrey & Associates Inc.

United States District Court, D. Arizona

September 29, 2017

MMI, Inc., Plaintiff,
v.
Rich Godfrey & Associates, Inc., et al., Defendants.

          ORDER

          STEVEN P. LOGAN UNITED STATE DISTRICT JUDGE.

         Before the Court is Defendants' partial Motion for Summary Judgment (Docs. 79; 80). The motion is fully briefed (Docs. 84-89), and no party has requested oral argument. For the reasons that follow, the motion will be granted.

         I. Background

         In the summer of 2006, Christopher Martin, owner of Martin Manufacturing, Inc., built a prototype of a small, gas-powered, two-wheeled minibike. Later that fall, Martin approached the president of Baja, Inc., then Richard Godfrey, to reproduce and sell the minibike. Martin claims that the parties entered into an oral agreement to license the minibike. Qunsheng Group Co. Ltd., a Chinese manufacturer, was selected to fabricate the minibike. Using the proposed prototype, the minibike was manufactured and marketed under variations of “Doodlebug” or “DB-30.”

         Between August and September of 2006, retail distributor Pep Boys Manny Mo & Jack of California placed orders for the minibikes with Baja. In turn, Baja placed purchase orders for the minibikes with Qunsheng, one for 50 units and one for 196. The minibikes were manufactured, invoiced, and shipped to the United States, and were delivered to freight carriers in October 2006. On or before November 10, 2006, the minibikes were delivered to Pep Boys distribution centers. They were then distributed to Pep Boys retailors where they were offered for sale and sold to customers in the United States. The minibike bearing VIN L4GSDGL056S00021 was among those manufactured and delivered to the United States in 2006. (Doc. 80 ¶¶ 6-8, 19-25, 27-32; Doc. 80-1 at 87; Doc. 84 ¶¶ 19, 43-46.)

         Between December 2006 and January 2007, feedback regarding the distributed minibikes was received, and improvements were discussed with Martin. Martin then made a prototype incorporating the modifications. (Doc. 84 ¶¶ 51-53.)

         On March 30 2007, Martin entered into a licensing agreement with Baja to manufacture and distribute the “Doodlebug 30 minibike (the ‘MiniBike').” (Doc. 85 at 13; Doc. 87 at 75.) The licensing agreement incorporated by reference blue prints, CAD drawings, specifications, and design parameters of the minibike, as well as a sample prototype of the minibike. A “depiction of the Minibike, ” shown below, was also attached to the agreement.

         (IMAGE OMITTED)

         (Doc. 87 at 83, Exh. J.) A second production of the minibikes ran in the spring of 2007. (Doc. 84 ¶¶ 53, 65.)

         In November of 2007, a dispute arose between Martin and Baja regarding the ownership of the “Baja Doodle Bug” design. Martin sent a letter to purchasers informing them that Martin Manufacturing had terminated all licensing of all products with Baja, and had selected a new distributor and/or manufacturer. Baja ceased paying Martin royalties for sales of the minibike.

         On November 15, 2007, Martin filed a patent application for his minibike design with the United States Patent Office. Following resubmission of an amended application, on April 28, 2009, the patent office issued United States Design Patent No. D591, 203S (“‘203 Patent”), entitled “Asymmetrical Mini Bike, ” the rights of which Martin assigned to MMI.

         MMI subsequently filed a complaint in federal court on March 3, 2010, MMI, Inc. v. Baja, Inc., et al, CV-10-00496-PHX-RCJ (D. Ariz.), bringing one claim of patent infringement against Baja and alleged distributors. (Doc. 80 at 69-75.) The case concluded by settlement and was dismissed without prejudice on August 5, 2011.

         Sometime between 2011 and 2012, MMI claims that Martin again entered into discussions with Godfrey, now owner of Rich Godfrey & Associates, Inc. (dba Coleman Powersports), to license and sell Martin's minibike. MMI claims that during those discussions, Godfrey made false representations which induced Martin to provide him with his minibike prototype. (Doc. 52.) Godfrey took possession of the prototype and refused to return it. Godfrey then shipped the prototype to China “to be copied into an almost identical mini bike model that directly incorporated the design elements of the ‘203 Patent ([] referred to as the ‘Infringing Products').” (Doc. 52 ¶ 24.) He marketed, imported, distributed and sold the “Infringing Products, ” which he made available to retail distributors for consumer purchase.

         On March 12, 2015, MMI filed a second lawsuit in federal court commencing the instant action. A First Amended Complaint was filed on November 25, 2015. (Doc. 52.) MMI sues Richard Godfrey (and spouse Susan Godfrey), Rich Godfrey & Associates, Inc., Cabela's, Inc., BJ's Wholesale Club, Inc., and Recon Enterprise, LLC, bringing claims against them for direct, induced, and contributory patent infringement, as well as breach of contract, fraud, fraudulent inducement and negligent misrepresentation. MMI seeks injunctive relief and damages.

         Defendants each filed an answer and counterclaim against MMI bringing two counts for declaratory judgment, seeking a declaration of invalidity and a declaration of non-infringement. Defendants presently move for partial summary judgment on their counterclaim of invalidity. (Doc. 79.)[1]

         II. Legal Standards

         Summary judgment is appropriate if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Summary judgment may also be entered “against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

         The moving party “bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact.” Celotex, 477 U.S. at 323. If the movant carries its initial burden of production, in response, the non-movant “must do more than simply show that there is some metaphysical doubt as to the material facts, ” and instead must “come forward with ‘specific facts showing that there is a genuine issue for trial.'” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) (quoting Fed.R.Civ.P. 56(e)).

         The court views the evidence and draws reasonable inferences “in the light most favorable to the party opposing the motion.” United States v. Diebold, Inc., 369 U.S. 654, 655 (1962). However, only disputes over facts that could affect the outcome of the suit will preclude the entry of summary judgment, and the disputed evidence must be “such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). See also Scott v. Harris, 550 U.S. 372, 380 (2007).

         Patents are presumed to be valid. 35 U.S.C. § 282; Microsoft Corp. v. i4i Limited Partnerhsip, 131 S.Ct. 2238 (2011). To obtain summary judgment on invalidity, the moving party must therefore overcome the presumption of validity by presenting clear and convincing evidence of invalidity under 35 U.S.C. §§ 101, 102, 103, 112, or 251.[2]Honeywell Int'l. Inc. v. Universal Avionics Systems Corp., 488 F.3d 982, 996 (Fed. Cir. 2007); Apple Computer Inc. v. Articulate Sys. Inc., 234 F.3d 14, 26 (Fed. Cir. 2000).

         III. Discussion

         The Court finds that Defendants have met their burden, and have overcome the presumption of ...


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