Heckler & Koch, Inc. v. German Sport Guns GmbH

• Decision Date: 24 December 2014
• Docket Number: No. 1:11–cv–01108–SEB–TAB.,1:11–cv–01108–SEB–TAB.
• Citation: 71 F.Supp.3d 866
• Court: U.S. District Court — Southern District of Indiana
• Parties: HECKLER & KOCH, INC., Heckler & Koch GMBH, Plaintiffs, v. GERMAN SPORT GUNS GMBH, American Tactical Imports, Inc., Defendants. American Tactical Imports, Inc., German Sport Guns GmbH, Counter Claimants, v. Heckler & Koch, Inc., Heckler & Koch GMBH, G. Wayne Weber, and Niels Ihloff, Counter Defendants.

71 F.Supp.3d 866

HECKLER & KOCH, INC., Heckler & Koch GMBH, Plaintiffs
v.
GERMAN SPORT GUNS GMBH, American Tactical Imports, Inc., Defendants.

American Tactical Imports, Inc., German Sport Guns GmbH, Counter Claimants
v.
Heckler & Koch, Inc., Heckler & Koch GMBH, G. Wayne Weber, and Niels Ihloff, Counter Defendants.

No. 1:11–cv–01108–SEB–TAB.

United States District Court, S.D. Indiana, Indianapolis Division.

Signed Dec. 24, 2014.

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Anne L. Cowgur, Jonathan G. Polak, Melissa A. Gardner, Michael Zachary Gordon, Tracy Nicole Betz, Taft Stettinius & Hollister LLP, Darlene R. Seymour, Continental Enterprises, Indianapolis, IN, for Plaintiffs/Counter Defendants.

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

ORDER ON PENDING MOTIONS

SARAH EVANS BARKER, District Judge.

This cause is before the Court on three motions: (1) Defendants' motion to strike Plaintiffs' affirmative defenses to counterclaims [Docket No. 282], filed on March 17, 2014; (2) Plaintiffs' motion for summary

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judgment [Docket No. 329], filed on July 17, 2014; and (3) Defendants' motion for summary judgment [Docket No. 331], filed on July 17, 2014. For the reasons set forth below, Defendants' motion to strike is DENIED as moot, Plaintiffs' motion for summary judgment is DENIED in part and GRANTED in part, and Defendants' motion for summary judgment is DENIED in its entirety.

Factual and Procedural Background

This matter has been pending on our docket for more than three years, and its antecedent disputes stretch back still further. The array of motions to strike, motions to dismiss, and motions for reconsideration filed by the parties have given us occasion to explore aspects of the case's factual background, but only now do we arrive at the merits of the intellectual property dispute lying at the core of this sprawling body of litigation. While we have summarized the record previously, we endeavor here to outline the undisputed facts, cognizant that the presence of cross-motions for summary judgment will require us to draw varying inferences from them as we address each of those motions in turn.

Plaintiffs Heckler & Koch, Inc. (HK USA) and Heckler & Koch GmbH (HKG) are firms engaged in the manufacture and sale of firearms—headquartered, respectively, in the United States and Germany.¹ Among products sold under the Heckler & Koch name is the “MP5,” a weapon originally designed as a nine millimeter submachine gun by HKG in the 1960s, and which has since become the basis of a “family” of firearms sharing certain core design features; Heckler & Koch first sold the MP5 in the United States in the 1970s. Docket No. 346–5 (Weber Decl.) at ¶¶ 4, 8; Docket No. 333–5 (HKG “Official History”) at 247–249, 252–264. In 1990, HK USA registered the MP5 as an international class 13 (firearms) trademark with the United States Patent and Trademark Office (“PTO”). Cooper Decl. ¶ 5. HKG registered the MP5 with the German patent office on June 4, 2008. Id. at ¶ 6.

Defendants are also engaged in the firearms business: German Sports Guns GmbH (“GSG”) is an arms manufacturer based in Germany, and American Tactical Imports, Inc. (“ATI”) is an arms importer and retailer incorporated and based in New York. Am. Compl. ¶¶ 7–8.² Two individuals, both executives for the Plaintiff companies, are also parties to this suit: Counterclaim Defendant G. Wayne Weber is the president of HK USA, Docket No. 251 at ¶ 5; and Counter Defendant Niels Ihloff³ is a managing director of HKG and consulted HK USA during the 2009 settlement negotiations. Id. at ¶ 6.

A number of the claims and counterclaims in this case are premised on differing interpretations of two parallel series of events that unfolded between 2008 and 2010: first, HK USA's initial suit against the Defendants (“the 2009 litigation”); and second, HKG's attempts to obtain a United States trademark registration for the MP5 weapon.

HK USA filed suit in the Southern District of Indiana against GSG, ATI, and a

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third firearms manufacturer, Orion Arms Corporation, on January 13, 2009 alleging trademark infringement, trade dress infringement, and other related claims. See Docket No. 1; Heckler & Koch, Inc. v. German Sports Guns GmbH, et al., Cause No. 1:09–cv–00039. The crux of the 2009 litigation was HK USA's claim that GSG, ATI, and Orion were engaged in the manufacture and sale of a weapon—styled the “GSG–5”—that copied the design of the Heckler & Koch MP5. Id. At the instigation of the parties' respective executives, the parties engaged in settlement negotiations, and on October 8, 2009 they signed a Settlement Agreement (“the Agreement”) that stipulated to the dismissal of the infringement suit. The Agreement's preliminary recitals stated that HK USA owned “a federal trademark registration in the mark ‘MP5’ (Reg. No. 1594109)” and that it claimed to own “in the United States a proprietary trade dress comprised of the designs of certain elements of the MP5 firearms (the ‘MP5 trade dress').” Docket No. 45–1 at 1. The Agreement also recited that GSG, ATI, and Orion neither admitted that they had infringed HK USA's rights nor conceded that HK USA even had any such rights:

WHEREAS, GSG, ATI, and Orion have filed in said Lawsuit Defendants' Answer and Counterclaim in which they seek a judgment declaring, inter alia, that their activities do not infringe, and have not infringed, any intellectual property rights of HK or otherwise violate any law, and that HK does not own the trademark, trade dress and other intellectual property rights it claims to own.

Id. (emphasis added); see also id. at ¶ 9 (“Defendants make no admission of liability for the claims made against them.”). As for the substance of the Agreement itself, the defendant parties agreed to pay HK USA $300,000 in exchange for the dismissal of the suit. Id. at ¶ 1. They also agreed to halt manufacture of the allegedly infringing GSG–5 design, and to cease selling the weapons once a “sell-off” date had passed. Id. at ¶ 2. For its part, HK USA covenanted not to sue GSG or any of its commercial partners in connection with a different weapon design, the “GSG–522” firearm:

HK has reviewed the design of the GSG–522 attached hereto as Exhibit “A” (the “GSG–522 Firearm”) and covenants not to sue GSG or any of its customers, distributors, dealers or importers for its sale in the United States or anywhere in the world, provided GSG otherwise complies with this Agreement. This covenant extends to airsoft guns in the design of the GSG–522 firearm.

Id. at ¶ 5.

While the 2009 litigation was pending, ownership of the MP5 registered trademark—together with any accompanying trade dress rights—changed hands between HK USA and HKG. The process began on June 8, 2008, when HKG filed an application for an “international registration under the Madrid Protocol” for the MP5 trademark within the United States, triggering a PTO office action. Cooper Decl. ¶ 7. On September 19 of the same year, the PTO wrote back to HKG, informing it that had provisionally refused the application for at least two reasons: first, the MP5 trademark was registered in the name of HK USA rather than HKG; second, an application by an unrelated company for an intent-to-use registration for the similar mark “MP5A5” was already pending before the PTO, and would need to be resolved before further action could be taken. See Docket No. 332–12 (Defs.' Ex. L); Cooper Decl. ¶ 8. In order to remove this first obstacle to HKG's registration of the MP5 mark in the United States, HK USA president G. Wayne Weber executed an assignment agreement (“the Assignment”) transferring to HKG “all right, title

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and interest in and to the said [MP5] mark, together with the good will of the business symbolized by the said mark and the respective registration.” Docket No. 251–2 at 5. Weber signed the Assignment on March 19, 2009—some two months after HK USA had initiated the 2009 litigation, and more than six months before the parties to that litigation settled it. But despite the pendency of the litigation, neither Weber nor any other representative of HK USA informed GSG and ATI that the rights upon which the suit was predicated had been transferred. Docket No. 332 at 20 (citing Defs.' Ex. H).

Meanwhile, HKG continued in its efforts to secure U.S. trademark registration for the MP5, and both of the Heckler & Koch entities continued to represent to the PTO in the interim that HK USA owned the MP5 trademark, notwithstanding the Assignment. On March 23, 2009, HKG, by counsel, wrote to the PTO that an assignment of the MP5 trademark registration from HK USA to HKG was “being worked,” and therefore requested that its application for Madrid Protocol registration be held in abeyance until the questions of ownership and the pending third-party application could be resolved. Docket No. 332–13 at 5–7. Cooper Decl. ¶ 8. Nearly a year later, complying...