Heckler & Koch, Inc. v. German Sport Guns GMBH, & Am. Tactical Imports, Inc.

976 F.Supp.2d 1020

HECKLER & KOCH, INC., and Heckler & Koch GmbH, Plaintiffs/Counterclaim Defendants,

v.GERMAN SPORT GUNS GMBH, and American Tactical Imports, Inc., Defendants/Counterclaimants,andGerman Sport Guns GmbH, and American Tactical Imports, Inc., Third–Party Plaintiffs,

v.G. Wayne Weber and Niels Ihloff, Third–Party Defendants.

No. 1:11–cv–01108–SEB–TAB.

United States District Court,

S.D. Indiana,

Indianapolis Division.

Sept. 30, 2013.

Anne L. Cowgur, Jonathan G. Polak, Michael Zachary Gordon, Peter Jon Prettyman, Tracy Nicole Betz, Taft Stettinius & Hollister LLP, Darlene R. Seymour, Indianapolis, IN, for Plaintiffs/Counterclaim Defendants.

Bruce Benjamin Paul, Douglas B. Bates, Neal F. Bailen, Stites & Harbison, LLP, Jeffersonville, IN, Charles M. Landrum, III, Jason M. Sneed, Jason Sneed PLLC, Davidson, NC, for Defendants/Counterclaimants.

ORDER ON MOTIONS RELATED TO DEFENDANTS' AMENDED COUNTERCLAIM AND THIRD–PARTY COMPLAINT

SARAH EVANS BARKER, District Judge.

This cause is before the Court on two related motions: (1) Plaintiffs' Motion to Strike Answer to Amended Complaint and Third–Party Counterclaim pursuant to Federal Rules of Civil Procedure 12(f) [Docket No. 57], and (2) Third–Party Defendants' Motion to Strike and/or Dismiss for Failure to State a Claim pursuant to Federal Rules of Civil Procedure 12(b)(6) [Docket No. 103]. Because these motions present intertwined issues of fact and law, we have chosen to resolve them jointly. For the reasons set forth below, Plaintiffs' Motion to Strike is DENIED and Third–Party Defendants' Motion to Strike and/or Dismiss is GRANTED in part and DENIED in part.

Factual and Procedural Background

Plaintiffs are two firms engaged in the design, manufacture, and sale of firearms. Heckler & Koch GmbH (“HK GmbH”) is incorporated and based in Germany, and HK, Inc. (“HK USA”) is incorporated and based in the state of Virginia. Am. Compl. ¶¶ 5, 6.¹ The two companies, although distinct entities, are corporate affiliates, and Plaintiffs refer to themselves jointly as “HK.” Am. Compl. 1. HK owns intellectual property (IP) rights related to its firearm products; according to Plaintiffs, these include federal and state registered trademarks, trade dress, copyrights, and patents. ¶ 12. Of HK's products, the primary focus of litigation is the MP5® line of .22 caliber sub-machine guns—a brand of firearm that Plaintiffs assert is recognized worldwide. ¶ 1. HK GmbH currently holds the registered federal trademark for the MP5® gun (Regis. # 1594109), ¶ 12, and the company has granted an exclusive license to Carl Walther GmbH (“Walther”)—another German weapons manufacturer—to produce replicas of the MP5®, including for sale in the United States. ¶¶ 1, 19.

Defendants are also firearms concerns: German Sports Guns GmbH (“GSG”) is an arms manufacturer based in Germany, and American Tactical Imports, Inc. (“ATI”) is an arms importer and seller incorporated and based in New York. ¶¶ 7–8.

Third–Party Defendants are HK officers. G. Wayne Weber is the President of HK USA. Defs.' Answer 18, ¶ 14.² Niels Ihloff ³ is a managing director of HK GmbH and consulted HK USA during the 2009 settlement negotiations. Id. at ¶ 15, 28.

HK USA first brought suit in the Southern District of Indiana against Defendants in 2009, alleging trademark infringement, trade dress infringement, and other related claims. ¶ 20; see Heckler & Koch, Inc. v. German Sports Guns GmbH, et al, Cause No. 1:09–cv–00039. HK USA's principal allegation was that the GSG–5 weapon manufactured by GSG and sold by ATI copied the well-known design features of the MP5®, and thus violated HK's intellectual property rights. Id. The parties ultimately resolved their differences through a Mediated Settlement Conference; both Third–Party Defendants Weber and Ihloff were present and represented HK USA at this conference. Defs.' Answer 18, ¶ 15. The fruit of the conference was a Settlement Agreement dated October 8, 2009, which was signed by representatives of HK USA, including Third–Party Defendant Weber. Id. Plaintiffs have attached the full Agreement as an exhibit to their current complaint. Am. Comp., Ex. A. Under the terms of the Agreement, Defendants agreed to cease all manufacture, distribution, and sales of the GSG–5 after the “sell-off dates,” which were March 17, 2010, for GSG and January 21, 2010, for ATI. Am. Compl. Ex. A, ¶ 3–4. Defendants also agreed to pay $300,000 to HK. Id. at ¶ 1. In exchange for these commitments, Plaintiffs agreed to stipulate to the dismissal of the 2009 suit. Id. at ¶ 2. Finally, the parties agreed that another GSG weapon design, the GSG–522, did not infringe on HK USA's intellectual property; HK USA agreed not to sue Defendants for their manufacture or sale of the GSG–522, photographic exhibits of whose design were attached to the Agreement. ¶ 23.

HK contends that Defendants have failed to abide by the Settlement Agreement. Specifically, they allege that Defendants have “repackaged” the GSG–5—a “knock-off” weapon designed to “replicate the look and feel of the famous MP5®”—and sold it under the label of the GSG–522. ¶ 2. By manufacturing, importing, and selling this GSG–5 in a GSG–522's clothes, Plaintiffs argue, Defendants have both violated their covenant not to sell the GSG–5 and deceptively deviated from the GSG–522 design that they submitted for HK's approval in the Agreement. Id. Plaintiffs also allege that Defendants continued to manufacture and sell the GSG–5 under its own label even after the 2010 “sell-off dates.” ¶ 3, 27–32. According to Plaintiffs, this conduct directly contravenes Paragraph 3 of the Settlement Agreement.

Bearing these grievances, HK has again brought GSG and ATI before this court. The original complaint was brought by HK USA alone, and it contained only a claim for breach of contract. See Docket No. 1. Plaintiffs subsequently sought leave to amend the complaint to add HK GmbH as a plaintiff and to include additional claims for tortious interference and fraud against both Defendants, as well as claims of state and federal trade dress infringement, trademark dilution, and unfair competition against GSG alone. Magistrate Judge Baker granted leave to amend, Docket No. 44, and Plaintiffs filed their amended complaint on May 22, 2012. Defendants filed this Motion to Dismiss [Docket No. 49] on June 5, 2012.

During the course of this litigation, it has emerged that HK assigned the registered trademark for its MP5® weapon—the cornerstone of its IP claim against Defendants—after initiating the 2009 litigation but well before the negotiation and signing of the Settlement Agreement. On March 19, 2009, HK USA executed an assignment of “all right, title and interest in and to” the MP5® trademark, “together with the good will of the business symbolized by the said mark and the respective registration,” to HK GmbH, its German parent company. Defs.' Answer 22, ¶ 26. Weber signed this assignment agreement, and Defendants allege that Ihloff, as a high-ranking officer of HK GmbH, also knew of it. Id. at ¶ 27. Additionally, Defendants allege that HK USA concluded a separate agreement with HK GmbH for the transfer of trade dress rights and related goodwill associated with the MP5®. Id. at ¶ 26. Despite having assigned the MP5® trademark, HK recited in a preliminary clause of the Settlement Agreement that it “own[ed] a federal trademark registration in the mark ‘MP5’ ” and “claims to own in the United States a proprietary trade dress comprised of the designs of certain elements of the MP5 firearms.” Am. Compl., Ex. A at 1.

On their discovery of these facts, Defendants filed an answer to the amended complaint on July 13, 2012, containing counterclaims against Plaintiffs and a third-party complaint asserting multiple causes of action against Third–Party Defendants Weber and Ihloff. Docket. No. 56. Plaintiffs responded with this Motion to Strike [Docket No. 57] on July 30, 2012, and Third–Party Defendants brought this Motion to Strike and/or Dismiss [Docket No. 103] on November 13, 2012.

Legal Analysis

Standard of Review

A. Under Rule 12(f)

Both Plaintiffs and Third–Party Defendants bring motions to strike under Federal Rules of Civil Procedure 12(f). Rule 12(f) provides that a court may, sua sponte or on motion, strike from a pleading “an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed. R. Civ. Pro. 12(f). As the rule's language indicates, a motion to strike should be granted only in rare circumstances, and such motions are “disfavored” because they “potentially serve only to delay.” Heller Financial, Inc. v. Midwhey Powder Co., Inc., 883 F.2d 1286, 1294 (7th Cir.1989); Crowder v. Foster Wheeler, LLC, 265 F.R.D. 368, 370 (S.D.Ind.2009). For this reason, a motion will be successful where it “remove [s] unnecessary clutter from the case,” expediting the resolution of the case rather than erecting another obstacle to its consideration on the merits. Id. (citing United States v. 416.81 Acres of Land, 514 F.2d 627, 631 (7th Cir.1975)).

B. Under Rule 12(b)(6)1. The Rule 8(a) Standard

Federal Rules of Civil Procedure 12(b)(6) authorizes dismissal of claims for “failure to state a claim upon which relief may be granted.” Fed.R.Civ.P. 12(b)(6). In determining the sufficiency of a claim, the court considers all allegations in the complaint to be true and draws such reasonable inferences as required in the plaintiff's favor. Jacobs v. City of Chi., 215 F.3d 758, 765 (7th Cir.2000). Federal Rules of Procedure 8(a) applies, with several enumerated exceptions, to all civil claims, and it establishes a liberal pleading regime in which a plaintiff must provide only a “short and plain statement of the claim showing that [he] is entitled to relief,” Fed. R. Civ. Pro. 8(a)(2); this reflects the modern policy judgment that claims should be “determined on their merits rather than through missteps in pleading.” E.E.O.C. v. Concentra Health Servs., Inc., 496...