Videri, Inc. v. Onawhim (Oaw) Inc.

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VIDERI, INC., Plaintiff, v. ONAWHIM (OAW) INC., Defendant.

No. 1:23-cv-2535-GHW

United States District Court, S.D. New York

September 3, 2024

MEMORANDUM OPINION & ORDER

GREGORY H. WOODS. UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

Plaintiff Videri, Inc. (“Videri” or “Plaintiff”) designs and sells ultrathin digital flatscreens, which it has marketed as “Canvases” since at least 2014. Defendant ONAWHIM (OAW) INC (“OAW” or “Defendant”) is a Videri spinoff that took with it one of Videri's flatscreen lines, called “WHIM.”

The “Canvas” and “WHIM” flatscreens are visually very similar, but the spinoff arrangement was intended to keep Videri and OAW from competing. The companies agreed to confine their commercial activities to distinct markets, with Videri selling exclusively to commercial enterprises and OAW selling exclusively to end-users. That way, in theory, businesses would continue to associate ultra-thin flatscreens with Videri's “Canvases,” while individual consumers might think of OAW's “WHIM.”

The spinoff was also intended to account for the parties' next generations of flatscreens, both of which were in development at the time. The parties agreed to cross-license the intellectual property pertaining to their respective flatscreens, and to collaborate and share information regarding their next-generation products. In particular, Videri's upcoming flatscreens were to be lower-cost derivatives of OAW's. OAW, accordingly, assumed much of the initial burden of development and information-sharing, so that Videri could then develop its cheaper version.

This entire arrangement has fallen apart, and Videri now alleges violations of each of the core tenets of the parties' agreement. According to Videri, OAW utterly failed to collaborate regarding the development of Videri's upcoming displays, misappropriated Videri's “Canvas” mark and marketed it to businesses, and even took Videri's office equipment and tooling without authorization. On these allegations, Videri brings a trademark claim, two contract claims, an implied-covenant claim, and a conversion claim. Videri also seeks a declaration that it validly terminated one of the parties' contracts after OAW's material breach.

Because Videri has adequately pleaded that OAW used the “Canvas” mark beyond the scope of its license, and because their licensing agreement did not preclude termination in such circumstances, Videri's trademark and declaratory-judgment claims survive. On the other hand, Videri's implied-covenant claim is duplicative of its contract claims, and its conversion allegations are impermissibly hypothetical. Accordingly, OAW's motion to dismiss the First Amended Complaint is GRANTED IN PART and DENIED IN PART.

II. BACKGROUND^[1]

A. The Parties and the “Canvas” Mark

Videri designs and sells ultra-thin flatscreens that display programmable digital content. FAC ¶¶ 2-3. Since “at least 2014,” Videri has continuously marketed these flatscreens as “Canvases.” Id. ¶ 108. Videri has allegedly “invested substantial resources in developing and promoting” the “Canvas” brand, to the point that “the ‘Canvas' mark identifies Videri as the source of the product.” Id. ¶¶ 108-09. Videri has not registered “Canvas” as a trademark in connection with its flatscreen products. See id. ¶¶ 106-13.

In May 2021, Videri's former CEO, Marc Trachtenberg, was bought out of the company, taking with him the rights to Videri's “WHIM” brand of flatscreens. Id. ¶¶ 14-15. He formed OAW to sell and market flatscreen products under the “WHIM” brand. Id. ¶ 15.

B. The Contracts

In August 2021, as part of the buyout arrangement, Videri and OAW agreed to two contracts: a Cross-License Agreement (the “License Agreement”); and a Mutual Transitional

Services Agreement (the “Services Agreement”). Id. ¶ 17; id. Ex. A, Ex. B.

i. The License Agreement

In the License Agreement, the parties cross-licensed certain existing and future intellectual property pertaining to their flatscreen products. Id. ¶ 29; id. Ex. B §§ 2.1(A)-(B). Videri's license to OAW provided:

VIDERI hereby grants to ONAWHIM, and ONAWHIM hereby accepts the grant from VIDERI of (i) an exclusive, royalty-free, fully-paid, worldwide license under the VIDERI Patents to make, have made, use, sell, offer for sale, import, and otherwise transfer or dispose of products and services for use in the ONAWHIM Field, and (ii) an exclusive, royalty-free, fully-paid, worldwide license under the VIDERI Proprietary Information to use, copy, perform, display, distribute, translate and modify the VIDERI Proprietary Information in connection with the design, manufacture, use, sale, offer for sale, and commercialization of products and services for use in the ONAWHIM Field ....

Id. Ex. B § 2.1(A). The License Agreement further provided for cross-licensing of the “technology and anticipated . . . improvements” to the parties' respective flatscreen products. Id. ¶ 29; Id. Ex. B §§ 1.11-13, 1.16-17, 1.20. Videri also irrevocably assigned to OAW various marks and domains, including the domain name “onyourcanvas.com.” Id. Ex. B § 3.1, Appendix C.

The License Agreement defined separate “Fields,” or markets, in which each party could use the licensed intellectual property. Id. Ex. B §§ 1.10, 1.15, 2.1; Id. ¶ 16. OAW's permitted market was defined as “products and services sold or distributed via any and all channels to end-user consumers, and never as a business-to-business offering by [OAW] in the digital signage, Out of Home (“OOH”),^[2] or corporate communications fields.” Id. Ex. B § 1.10; see also id. Ex. B § 2.1(H) (providing that OAW “shall not, in connection with the VIDERI License or otherwise, enter the digital signage, Out of Home (OOH), and corporate communications fields”); Ex. B § 4.3(B)(iii) (“[OAW] shall not itself market or sell . . . products or services covered or embodies by the VIDERI Patents or VIDERI Proprietary Information, for uses outside the [OAW] Field.”). Videri was permitted to use the licensed intellectual property in any other, non-excluded market, namely “products and services sold or distributed in a manner not included in the [OAW] Field.” Id. Ex. B § 1.15.

The License Agreement also obligated the parties to share technical information, including “all trade secrets, unpatented inventions and discoveries, research, development, programming, [and] designs,” regarding their products within 30 days of execution of the agreement, and then to provide monthly updates of any modifications to that information. Id. Ex. B §§ 1.13, 1.20, 2.1(D).

The License Agreement provides that it “shall terminate forthwith upon expiration or termination of this Agreement pursuant to Article IX.” Id. Ex. B § 2.1(A). Article IX is a “Term and Termination” clause. The “Term” section of the clause provides:

(A) Subject to the provisions for earlier termination set forth below, this Agreement shall expire on the date on which (i) all of the VIDERI Patents and ONAWHIM Patents have expired, or all of the valid claims of all of the VIDERI Patents and ONAWHIM Patents have been declared invalid and unenforceable in unappealed and unappealable decisions of one or more courts of competent jurisdiction, and (ii) all of the VIDERI Proprietary Information and all of the ONAWHIM Proprietary Information is subject to one or more of the exceptions to non-disclosure set forth in Section 7.1(A) above.

Id. Ex. B § 9.1(A). Two termination provisions ensue. In relevant part, they provide:

(B) This Agreement may be terminated by VIDERI if ONAWHIM commits a Payment Breach under the Services Agreement. A “Payment Breach” shall occur only when all of the following occur: (i) ONAWHIM fails to pay any invoices that have been pre-approved in writing under the Services Agreement (the “Invoices”); (ii) such Invoices remain outstanding for ten (10) or more days; (iii) the invoicing party thereafter provides written notice of non-payment (email to the signatories hereof, with “read receipt,” is sufficient); and (iv) the invoiced party fails to make payment within twenty (20) days thereafter....

(C) This Agreement and the License shall forthwith terminate upon the mutual written agreement of the Parties.

Id. Ex. B § 9.1(B)-(C). Thus, Article IX provides that the License Agreement “shall expire” when all relevant intellectual property becomes unenforceable; “shall forthwith terminate” on written consent of both parties; and “may be terminated” by Videri if OAW commits a Payment Breach under the Services Agreement. Id. Ex. B § 9.1.

ii. The Services Agreement

The parties also executed the Services Agreement, which set out OAW's obligations regarding Videri's next-generation flatscreens. The parties agreed that Videri's upcoming generation of flatscreens, the “NEXT-Enterprise (NEXT-E) Canvases,” would be “derivative products based on designs for” OAW's next generation of flatscreens, the “ONAWHIM NEXT platform.” Id. Ex. A at Ex. B. OAW was required to “provide VIDERI with overall management and all necessary and appropriate technical services to create a lower cost derivative canvas based on [OAW's] next generation canvas.” Id. This included “such narrative works, spreadsheets, graphics, specifications, data, compilations of data, software and hardware development, knowledge transfer, transition services and other works as may be requested by [Videri].” Id. Ex. A § 1.1. The Services Agreement expired on August 3, 2022, the first anniversary of its execution. Id. Ex. A § 3.1.

Under the Services Agreement, OAW was “responsible for all costs associated with the development of the WHIM NEXT platform, which comprises the majority of the work for creating the basis for the VIDERI NEXT E.” Id. Ex. A at Ex. B. Videri was “responsible for NEXT E...