Au New Haven, LLC v. YKK Corp.

AU NEW HAVEN, LLC, and TRELLEBORG COATED SYSTEMS US, INC., Plaintiffs, v. YKK CORPORATION et al., Defendants.

1:15-cv-3411-GHW

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

July 30, 2020

MEMORANDUM OPINION AND ORDER

GREGORY H. WOODS, United States District Judge:

This is the parties' second stab at summary judgment. YKK Corporation et al. (collectively, "YKK") asks the Court to determine whether Plaintiffs' Lanham Act, Connecticut Unfair Trade Practices Act ("CUTPA"), and contract claims can proceed to trial, along with Plaintiffs' outstanding underlying patent claims. For the reasons that follow, YKK's motion is GRANTED as to Plaintiffs' CUTPA and breach of contract claims, and GRANTED IN PART and DENIED IN PART as to Plaintiffs' Lanham Act claim.

I. BACKGROUND¹

On March 31, 2019, the Court issued a summary judgment opinion, comprehensively zipping together the facts in this case. See Summ. J. Op., Dkt. No. 425, at 1-4. For the purposes of this opinion, the Court assumes the reader's general familiarity with the facts as set forth in that summary judgment decision, and will update the reader or call attention to specific facts only as needed to decide the limited, nuanced issues currently before the Court. Still, a brief reminder of theissues at the heart of this dispute might be helpful.

As the Court previously described in much greater depth, in early 2002, YKK entered into an exclusive licensing agreement (the "ELA") with Stuart Press and Harold Hoder, the owners of the recently issued U.S. Patent No. 6,105,214 (the "'214 patent") and the operators of Uretek, Inc. See Summ. J. Op. at 2, 17-18; ELA, Dkt. No. 406-3, at 1. Among other things, this agreement provided YKK an exclusive (but limited) field of use license—namely:

an exclusive, worldwide right to manufacture, use, sell, offer for sale and otherwise use and practice the invention contained in U.S. Patent No. 6,105,214, corresponding applications in Taiwan, Canada, Japan, and the European Patent Office . . . except for zippers placed in finished goods in the high end outerwear, marine, military and luggage (excluding sports and cosmetic bags) markets

in exchange for "a royalty of US$.03 per meter" for all patented zippers sold by YKK. ELA ¶ 2. Plaintiffs have sued YKK because, among other things, they believe that, for years, YKK has been selling its laminated zippers all around the world into the unlicensed, high-end outerwear market.

After the Court published its opinion—and after a flurry of motions for reconsideration and clarification—the parties began the slow march to take what remained of Plaintiffs' claims to trial. The Court originally scheduled the trial for January 13, 2020. See Dkt. No. 455. But as the motions in limine trickled in, it became abundantly clear that there were structural issues lurking in these motions that would more properly be raised in the context of summary judgment. The Court extended the deadline for motions for summary judgment to adjudicate those issues before—rather than doing so during or after—trial. See generally Dkt. No. 562 (discussing the reasons for the Court's decision to extend the deadline).

The briefs broadly addressed the following questions: first, whether the patent publication privilege bars Plaintiffs' Lanham Act false advertising claim; second, whether Plaintiffs can use CUTPA—a Connecticut statute that protects against unfair business practices that occur in that state—to sue YKK for selling its patented, water resistant zippers to customers all around the world;and third, whether Plaintiffs' remaining contract claim presents triable issues, given YKK's offer of judgment for the amount Plaintiffs sought to recoup by litigation.

The relevant facts necessary to adjudicate these questions are outlined below.

A. The Exclusive License Agreement

Plaintiffs' false advertising claim rests on four different categories of statements that YKK made that they allege inaccurately described the limits of YKK's field of use license under the ELA: (1) "YKK is the Exclusive Licensee of the water repellent zipper technology owned by Uretek in the United States as embodied in U.S. Patent No. 6,105,214 and its corresponding foreign patents," Rule 56.1 Stmt., Dkt. No. 591, ¶ 828; (2) "The owners of Uretek, an American company are the owners of patents deriving from EP1150586B1 & EP1629740B1 which relate to waterproof slide fasteners. YKK Corporation is licensed to manufacture and sell across the world, products protected by these patents," Rule 56.1 Stmt. ¶ 828; (3) "YKK Corporation is a licensee to manufacture and sell products protected by [the '214 and related foreign patents]," Rule 56.1 Stmt. ¶ 712; and (4) "YKK is the exclusive licensee of the water repellant slide fastener technology embodied in U.S. Patent No. 6,105,214 and its corresponding foreign patent. YKK has the exclusive right to manufacture, use, sell and import zippers incorporating this water repellant technology," Rule 56.1 Stmt. ¶ 816; see also, e.g., Ex. 621-28, Dkt. No. 567-22-567-29.²

B. Connecticut Connections

To ground their CUTPA claim, Plaintiffs assert that YKK's "grand scheme" to steal Uretek's "rightful share" of the worldwide water-resistant zipper market, involve some commercial activity that took place in Connecticut. Pls.' Opp'n to Defs.' Mot. for Summ. J., Dkt. No. 589 ("Opp'n"), at 2. To be clear, Plaintiffs do not allege that YKK sold any zippers to Connecticut customers, oradvertised to any customers in Connecticut; instead, they claim that YKK engaged in sufficient commercial conduct in Connecticut to subject them to Connecticut law for selling zippers to customers all over the world in the excluded markets. Plaintiffs link YKK's commercial conduct to Connecticut by reciting the following litany of facts:

1. YKK Group is a global conglomerate consisting of approximately 108 affiliates located in 72 countries. The members of YKK Group act, in essence, as a single enterprise.

2. Uretek was a family-owned business which operated a manufacturing plant located at 30 Lenox Street, New Haven, Connecticut (the "CT Plant"). Uretek employs approximately 100 people at its Connecticut manufacturing plant.

3. Press was a resident of New Haven, Connecticut when he invented and applied for a patent on the [water-resistant zipper] described in the '214 Patent.

4. YKK representatives traveled to New Haven, Connecticut on numerous occasions over many years to tour Uretek's CT Plant, to discuss Uretek's patents, to negotiate the terms of an output contact and of a license agreement, and to inspect Uretek's quality control systems.

5. YKK representatives engaged in continuous communication with Uretek and its attorneys in Connecticut concerning the business arrangements between YKK and Uretek.

6. YKK drafted and sent to New Haven, Connecticut, non-disclosure agreements governed by the laws of the State of Connecticut.

7. YKK agreed to a five-year Exclusive Output Contract with Uretek, executed by Uretek in Connecticut, whereby YKK would ship non-laminated zipper tape to Uretek's Connecticut manufacturing plant for lamination by Uretek.

8. During negotiations of the ELA with YKK, Uretek communicated to YKK that Uretek would continue to laminate "zippers for high end outerwear, US military, luggage trade, and other high end applications as in boats or tents" in New Haven, Connecticut.

9. YKK entered the ELA with Uretek, which was executed by Press and Hoder in Connecticut. Pursuant to the ELA, Uretek granted YKK a limited license to use the [']214 Patent worldwide, including in the United States and in Connecticut. YKK agreed to give any notice required under the ELA to Uretek at its New Haven, Connecticut address.

10. From 2003 through 2019, YKK made 34 discrete semi-annual royalty payments to Uretek pursuant to the ELA by wire transfer to Uretek's accounts in NewHaven, Connecticut, in an amount totaling $7,472,966. YKK, however, intentionally did not pay Uretek royalties on sales of six (6) lines of water resistant zippers, several of which YKK itself contemporaneously believed were covered by the ELA.

11. From 2002 to 2019, YKK shipped over 43 million meters of non-laminated zipper tape to Uretek in Connecticut for lamination by Uretek at Uretek's CT Plant, which laminated zippers Uretek shipped out of Connecticut to YKK. YKK paid Uretek in Connecticut approximately $40 million to laminate these zippers in Connecticut.

12. From 2003 to 2013, YKK sent over seventy (70) samples of third party polyurethane laminated reverse coil zippers to Uretek in New Haven, Connecticut for inspection and testing in Uretek's CT Plant to determine if those zippers infringed the [']214 Patent.

13. Despite the fact that Uretek did not grant YKK a license to sell YKK-laminated zippers into the Excluded Markets, YKK adopted an internal sales policy that instructed YKK employees to divert sales of the T4 zippers laminated by Uretek in Connecticut to the T8 zippers laminated by YKK in Japan, including zippers intended for use in the high end outerwear and luggage Excluded Markets.

14. To effectuate YKK's aforesaid sales policy, YKK falsely advertised (globally, including on its website which was accessible from the United States, including from Connecticut) that YKK was licensed to sell YKK-laminated zippers for use in finished goods in the Excluded Markets. Conversely, YKK never advised its customers that they were exposed to patent infringement claims by Uretek if the customer used a YKK-laminated zipper in finished goods in the Excluded Markets. Drafts of certain language contained in certain of these statements were sent to Uretek in Connecticut for review and approval, all without YKK ever advising Uretek that such language would be used by YKK to sell YKK-laminated zippers to Excluded Market customers.

15. From 2009 to 2019, YKK sold over 102 million meters of unlicensed YKK-laminated zippers into the Excluded Markets.

16. But for YKK's unfair and deceptive acts or

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