ZUP, LLC v. Nash Mfg., Inc., Civil Action No. 3:16–CV–125–HEH

229 F.Supp.3d 430

ZUP, LLC, Plaintiff,

v.NASH MANUFACTURING, INC., Defendant.

Civil Action No. 3:16–CV–125–HEH

United States District Court, E.D. Virginia, Richmond Division .

Signed January 13, 2017

Christine A. Williams, Wyatt B. Durrette, Jr., DurretteCrump PLC, Richmond, VA, Matthew Michael Wawrzyn, Stephen Charles Jarvis, Wawrzyn & Jarvis LLC, Richard Steven Wilson, Siprut PC, Chicago, IL, for Plaintiff.

Craig Lawrence Mytelka, Virginia Beach, VA, Jeffrey Robert DeCaro, DeCaro Doran Siciliano Gallagher & DeBlasis LLP, Fairfax, VA, Joseph Franklin Cleveland, Jr., Brackett & Ellis, P.C., Fort Worth, TX, William Penn Dickinson, III, Richmond, VA, for Defendant.

MEMORANDUM OPINION

(Granting Defendant's Motion for Summary Judgment)

Henry E. Hudson, United States District Judge

Plaintiff ZUP, LLC ("ZUP" or "Plaintiff") brings suit against Defendant Nash Manufacturing, Inc. ("Nash" or "Defendant") after a proposed business deal for a joint manufacturing venture turned sour. Both ZUP and Nash manufacture water recreational devices, with the former being a relative newcomer to the industry and the latter having worked in the area for over fifty years.

ZUP entered the market in 2012 with the introduction of its "ZUP Board," patented as U.S. Patent No. 8,292,681 (the " '681 Patent"). A year later, ZUP and Nash began discussions about a potential partnership, which eventually dissipated. Soon thereafter, Nash brought its "Versa Board" to market.

In response to Nash's new product, ZUP filed the present suit alleging four counts: contributory infringement of the '681 Patent (Count I); inducement of infringement of the '681 Patent (Count II); trade secret misappropriation (Count III); and breach of contract (Count IV). Nash brought two counterclaims against ZUP, seeking declaratory relief regarding non-infringement (Counterclaim I) and declaratory relief regarding invalidity of the apparatus and method claims—Claims 1 and 9 respectively—of the '681 Patent (Counterclaim II).

This matter is currently before the Court on Nash's Motion for Summary Judgment, filed on September 14, 2016. (ECF No. 35.) Both parties filed memoranda supporting their respective positions. Oral argument followed on November 16, 2016.

For the reasons discussed herein, the Court will grant the Motion as to Defendant's Counterclaim II—rendering Counts I and II of Plaintiff's Complaint and Defendant's Counterclaim I moot—and as to Counts III and IV of Plaintiff's Complaint. Consequently, this case will be dismissed with prejudice.

I. BACKGROUND

As required, the Court resolves all genuine disputes of material fact in favor of the non-moving party and disregards those factual assertions that are immaterial. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Applying this standard, the Court concludes that the following narrative represents the facts for purposes of resolving the Motion for Summary Judgment.

In or around 2008, Glen Duff, ZUP's Chief Innovative Officer, and his wife bought a boat and joined a local water skiing club. (Compl. ¶ 12; ECF No. 1.) Through their volunteer activities with their church, the Duffs took groups of kids on their boat to teach them how to water ski and wakeboard. (Id. ¶ 13.) During these outings, Glen Duff noticed how difficult it was for many of the children to fully engage the water recreational devices. (Id. ) As a result, he decided to develop a new product that would "allow any kind of rider, regardless of athleticism or amount of upper body strength, to get up and achieve a full standing and riding position." (Id. ) Over the next four years, Duff and others tested various board designs until they developed a working prototype of the ZUP Board. (Id. ¶ 15.) This new board allows riders "to transfer easily from a prone position, to a kneeling position, to a full upright standing position," thereby permitting "the widest spectrum of riders the most opportunity of experience." (Id. ¶¶ 14, 16.)

The ZUP Board has a top surface and a bottom surface, two side-by-side foot bindings located on the middle section of the board, two side-by-side handles on the front section of the board, and a retractable tow hook attached to the front section of the board. See generally U.S. Patent No. 8,292,681. Riders are instructed to grasp the handles and lie flat on the board in a prone position. The retractable tow hook is attached to a tow rope, which is in turn pulled by a boat. As the boat picks up speed, riders pull themselves up on the board and assume a kneeling position. Then riders crouch on the board, still grasping the handles for stability, and eventually place both feet in the side-by-side foot bindings displaced on the middle section of the board. Riders finally release their grip from the handles and then grasp the tow rope bar and disengage it from the retractable tow hook on the board as they assume a full upright standing position.

While developing a working prototype of the new device, Duff arduously fought to secure a patent for his new design, which he finally obtained on October 23, 2012. Id. The '681 Patent includes twelve (12) total Claims, with Claim 1 covering the apparatus and Claim 9 covering the method for using the ZUP Board. Id. at Claims 1, 9.

In September 2012, one month prior to the issuance of the '681 Patent, ZUP formally introduced its new product at the Surf Expo, a trade show for the water sports industry. (Compl. ¶ 17.) At some point during the spring of 2013, Nash became aware that ZUP had entered the industry and saw the ZUP Board for the first time. (App. 255 ¶ 4.)¹

Nash has been in the water recreational device industry for over fifty years and "has designed and manufactured ... water skis, knee boards, wake boards and other similar devices, and has sold these products to a variety of sporting goods retailers, including Bass Pro Shop, Academy Sporting Goods, Dick's Sporting Goods, Big Five Sporting Goods and others." (Mem. in Supp. of Mot. for Summ. J. 2.)

Nash's president, Keith Parten, is the named inventor for several patents, including an aquatic recreational system with a retractable tow hook (U.S. Patent No. 7,530,872 B2 ), a retractable tow hook (U.S. Patent No. 7,537,502 ), a water recreation board with a pass-through tow rope (U.S. Patent No. 6,042,439 ), a towing harness for water recreational boards (U.S. Patent No. 6,306,000 ), a design of a wake ski (U.S. Design Patent No. D557,635 ), a design of a towed inflatable device (U.S. Design Patent No. D650,462 ), and a method for manufacturing a skate board (U.S. Patent No. 921,513 ).

An initial round of conversations between the two parties concerning a potential manufacturing deal took place in the fall of 2013. (See App. 271.) Before engaging in serious discussions, it appears that ZUP requested that the parties enter into a confidentiality agreement. (See id. ) Parten questioned the necessity of such a contract on September 18, 2013, noting that "[w]e just need a sample so we can quote you a price to build your item. I assume we could just order one ...." (Id. (ellipses in original).) Without signing the agreement, Nash obtained a sample of the board. (Seeid. at 272.) On December 10, 2013, Parten determined that Nash would "[n]ever do this item" and sent the board back to ZUP. (Id. )

Nevertheless, a little more than one month later, Parten reached out to Duff on January 31, 2014, "to talk ... regarding production and distribution of [the] ZUP board." (Id. at 451.) Before meeting with Nash to discuss the possibility of entering into a manufacturing and distribution partnership or potential sale of the company, ZUP again required Nash to execute a confidentiality agreement, which it did on February 5, 2014. (Id. at 273–75.) After the agreement was signed, ZUP asserts that it provided Nash "with confidential and proprietary information, including, but not limited to, information regarding: (a) ZUP's vendors; (b) component costs and materials; (c) patent information; (d) marketing plans and strategies; (e) retailer arrangements and contacts; (f) new design concepts and materials; (g) ZUP's intellectual property development and enforcement strategies; and (h) ZUP's proprietary roto-molded 3D computer designed model." (Compl. ¶ 57.)

On February 5, 2014, the same day that the parties entered into the confidentiality agreement, representatives from ZUP and Nash held a telephone conference about the proposed deal. (See generally App. 568–72.) During the meeting, Parten allegedly told ZUP's representatives that they "had a great product" and noted that Nash "ha[d] no intentions in the next few years of doing anything that has any resemblance to the ZUP Board." (Id. at 568, 572.) Also during that conversation, Nash inquired about the issuance of the '681 Patent. (Id. at 572 ("Will your patent hold up against [another competitor's] new product[?]").)

Two days later, on February 7, 2014, Parten sent Duff an email with several questions regarding three Claims in the '681 Patent.² (Id. at 462.) In response, ZUP spoke with its patent attorney and forwarded the responses to Nash. (Id. at 461.) The scope of the patent attorney's advice was explaining the difference between independent and dependent patent claims. (See id. )

At the same time that he posed these questions to Duff, Parten asked Nash's patent attorney, Eric Karich, to look at the '681 Patent, specifically asking "[h]ow can this be issued?" (Id. at 306.) Karich responded, "It is supposedly an improvement over other such boards, the claims are quite narrow." (Id. ) Parten and the attorney later spoke by phone, and Parten asked whether Nash's proposed Versa Board would infringe the '681 Patent. (Id. at 259 ¶11.) Karich told Parten that Nash's new product would not infringe, and later memorialized that opinion in writing on October 6, 2014. (Id. at 307–13.)

In the meantime, discussions between Nash and ZUP ended without reaching an agreement. (Seeid. at 464–86.) And in ...