Accent Designs, Inc. v. Jan Jewelry Designs, Inc., 92 Civ. 0482 (RWS).

• Decision Date: 12 July 1993
• Docket Number: No. 92 Civ. 0482 (RWS).,92 Civ. 0482 (RWS).
• Citation: 827 F. Supp. 957
• Parties: ACCENT DESIGNS, INC. and Jesse Bands, Inc., Plaintiffs, v. JAN JEWELRY DESIGNS, INC. and Jan Brzozowski (an individual), Defendants.
• Court: U.S. District Court — Southern District of New York

827 F. Supp. 957

ACCENT DESIGNS, INC. and Jesse Bands, Inc., Plaintiffs, v. JAN JEWELRY DESIGNS, INC. and Jan Brzozowski (an individual), Defendants.

No. 92 Civ. 0482 (RWS).

United States District Court, S.D.New York.

July 12, 1993.

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Lackenbach Siegel Marzullo Aronson & Greenspan, P.C., Scarsdale, NY, for plaintiffs; Howard N. Aronson, Anita H. Grosz, of counsel.

Ladas & Parry, New York City, for defendants; Alan K. Roberts, Clifford J. Mass, of counsel.

SWEET, District Judge.

The Defendants, Jan Jewelry Designs, Inc. ("Jan") and Jan Brzozowski ("Brzozowski") (collectively, the "Defendants"), have moved for an order for the following relief: partial summary judgment in their favor and against the plaintiffs, Accent Designs, Inc. ("Accent") and Jesse Bands, Inc. ("Jesse") (collectively, the "Plaintiffs") pursuant to Rule 56, Fed. R.Civ.P.; sanctions against the Plaintiffs and their counsel pursuant to Rule 11, Fed.R.Civ. P.; the preclusion of certain evidence pursuant to Rule 1006, Fed.R.Evid.

The Plaintiffs have cross-moved for an order imposing sanctions against the Defendants and awarding the Plaintiffs costs, expenses, and attorney's fees pursuant to Rule 11, Fed.R.Civ.P., and 28 U.S.C. § 1927.

For the reasons set forth below, the Defendants' motion is granted in part and denied in part, and the Plaintiffs' cross-motion is denied.

Parties

Accent is a corporation duly organized under the laws of the State of New York, having its principal place of business in New York, New York.

Jesse is a corporation duly organized under the laws of the State of New York, having its principal place of business in New York, New York.

Jan is a corporation duly organized under the laws of the State of New York, having its principal place of business in New York, New York.

Brzozowski is a natural person who is a citizen of the State of New York, residing and domiciled in New York, New York.

Prior Proceedings

The Plaintiffs brought this action against the Defendants on January 22, 1992, and on May 27, 1992, they were granted leave to file an amended complaint ("Amended Complaint"). The Amended Complaint was filed on May 28, 1992.

On January 22, 1992, by way of an Order to Show Cause, the Plaintiffs moved for expedited discovery pursuant to Rules 30, 33, and 34, Fed.R.Civ.P. The motion for expedited discovery was granted to both sides on January 23, 1992.

On March 11, 1992, again by way of an Order to Show Cause, the Plaintiffs moved for a preliminary injunction pursuant to Rule 65, Fed.R.Civ.P., enjoining the Defendants from harassing, charging, or threatening the Plaintiffs or any of their customers with infringement of the Defendant's patent, U.S. Patent No. 4,566,294 (the "'294 patent"), in connection with certain channel-set jewelry manufactured, contracted, offered for sale or sold by the Plaintiffs. A hearing on the Order to Show Cause was held on April 2, 1992 (the "Preliminary Injunction Hearing"), at which time this Court declined to issue the requested equitable relief on the ground that the Plaintiffs made no showing of irreparable injury.

The present motion was filed by the Defendants on December 17, 1992. Oral argument was heard on February 10, 1993, and the motion was considered submitted as of that date.

Facts

This is a diversity action brought by the Plaintiffs for declaratory relief and damages as set forth in the six-count Amended Complaint. At the center of this action is the '294 Patent, which was filed with the U.S. Patent and Trademark Office (the "PTO") on February 2, 1984 and issued to Brzozowski on January 28, 1986 for a "Method of the Mounting of Gems and Resulting Product." The '294 Patent set forth a method of mounting gems in jewelry by employing a channel setting which is a V-shaped groove.

Accent, Jesse, and Jan are engaged in the business of designing, manufacturing, having manufactured, distributing, and selling jewelry. Brzozowski is the president of Jan and is the owner of the '294 Patent.

In 1989, Peter Kielpinski ("Kielpinski"), a low-level production employee, left Jan and formed a partnership with Christopher Slowinsky ("Slowinsky") to form Laser Wedding Bands, Inc. ("Laser"). While employed at Jan, Kielpinski became aware of the '294 Patent held by Brzozowski. At the time Laser was formed, Kielpinski and Slowinsky decided to determine whether the product they intended to produce would infringe the '294 Patent. Laser sought the advice of counsel regarding the scope of the '294 Patent on channel-set jewelry constructed with a trapezoidal- or U-shaped groove. Laser's counsel determined that the proposed products would not infringe the '294 Patent and concluded that the '294 Patent was weak and could be invalidated. Laser relied upon this advice and began manufacturing channel-set jewelry using trapezoidal- and U-shaped grooves.

By the end of 1989, the partnership between Kielpinski and Slowinsky ended, and Kielpinski formed Jesse with three other individuals. On the basis of the advice of Laser's counsel, Jesse began producing channel-set jewelry with trapezoidal- and U-shaped grooves. Jesse also sought a second independent "validity and infringement" opinion regarding Brzozowski's '294 Patent. As a result of this second opinion and in an effort to avoid litigation, Jesse stopped production of jewelry using the trapezoidal-shaped groove.

Prior to the creation of Jesse, Accent, a Swiss-cutting jewelry manufacturer, was formed and operational. Using the business relationships and customers of Accent, Jesse began to sell its services. Jesse developed a clientele which included Feature Rings, Inc. ("Feature") and David Klein Mfg. Co. Inc. ("Klein")

In or prior to March 1991, Brzozowski saw a catalog in which Klein used photographs of the rings having the Defendants' patented V-shaped groove sometime after Klein had stopped purchasing rings from Jan. The Defendants requested that their counsel prepare a cease-and-desist letter, which the Defendants sent to Klein on or about March 15, 1991, advising it of the Defendants' rights in the '294 Patent and the apparent infringement of that patent by certain products Klein was offering for sale.

Upon receiving the cease-and-desist letter from Jan, Klein contacted Jesse and expressed concern about the possibility of a being made a party to legal action by Jan. The Plaintiffs contend that, as a result of this concern, Klein curtailed the sales of a substantial portion of its product which was being manufactured by Jesse.

In or about February 1991, Brzozowski saw rings with V-shaped grooves being sold by Wright & Lato ("Wright") at a trade show. Wright had not bought these rings from the Defendants. On or about March 22, 1991, as the Defendants had previously done with Klein, they sent a letter to Wright advising it of the Defendants' rights in the '294 Patent. According to the Plaintiffs, the results of this letter were also similar; Jesse lost a substantial portion of Wright's business.

On or about September 12, 1991, the Defendants sent a similar letter to Leo Ingwer, Co. ("Ingwer"), which, the Plaintiffs assert, had a similar detrimental impact on the business relationship between Ingwer and Jesse.

Beginning prior to 1991, Brzozowski designed and Jan sold to Feature Rings, Inc. ("Feature") different styles of rings consisting of gemstones mounted in and forming parts of different artistic settings. At one point, Feature stopped buying a number of these styles from Jan and became a major customer of Jesse. Feature was informed orally by Jan that Jesse was infringing the '294 Patent, and in the Plaintiffs' view, these representations caused Feature to stop doing business with Jan.

The Plaintiffs allege that Jesse lost additional business as a result of Jan's representations to actual and potential customers that it was suing Jesse. In response to these representations, Jesse contends that business from Kayes Merchandise Mart and Faculty Enterprises was diminished or lost.

In anticipation of the National Manufacturers, Jewelers, and Silversmiths of America Trade Show (the "1992 Trade Show"), scheduled for March 15, 1992, the Plaintiffs sought expedited discovery to facilitate their preparations for a motion for a preliminary injunction. As was noted above, expedited discovery was granted to both parties to eliminate the possibility of prejudicing the Defendants. Several depositions had been conducted by the end of February, and by the second week of March, the Plaintiffs had prepared the preliminary injunction motion. However, due to the short period of time prior to the 1992 Trade Show, the aforementioned Order to Show Cause was sought, and out of concerns of fairness to both parties, the hearing was scheduled for and held on April 2, 1992.

During the Preliminary Injunction Hearing, Philip Perlmutter, an officer and stockholder of both Accent and Jesse, testified regarding the structure of the products made by the Plaintiffs. The preliminary relief sought was confined to jewelry having the U-shaped groove, which was the shape of the channel purported used in 98% of the Plaintiffs' products. The remainder of the channel-set jewelry had grooves of various shapes, including a trapezoidal-shaped groove which was constructed into approximately 1,000 to 2,000 out of some 15,000 rings.

After a day of testimony at the Preliminary Injunction Hearing, the preliminary injunction motion was denied on the ground that the Plaintiffs failed to demonstrate that they would suffer irreparable harm if the preliminary relief were not granted. This Court concluded:

There has been no quantification of any damages. Indeed, there hasn't been any evidence presented ... in a probative fashion that these letters have produced a reason in the marketplace to harm the plaintiff, and indeed, even if such a reaction could be established, the degree of irreparability certainly hasn't been

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