Agrizap, Inc. v. Woodstream Corp., Civil Action No. 04-3925.

• Decision Date: 23 August 2006
• Docket Number: Civil Action No. 04-3925.
• Parties: AGRIZAP, INC., Plaintiff, v. WOODSTREAM CORPORATION, et al., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

450 F.Supp.2d 562

AGRIZAP, INC., Plaintiff, v. WOODSTREAM CORPORATION, et al., Defendants.

Civil Action No. 04-3925.

United States District Court, E.D. Pennsylvania.

August 23, 2006.

Kate M. Neiswender, K M Neiswender Law Office, Ventura, CA, Thomas S. Farnish Larrimore & Famish, LLP, Philadelphia, PA, for Plaintiff.

Abraham C. Reich, Theodore H. Jobes, Fox Rothschild O'Brien & Frankel LLP, David H. Colvin, Fox Rothschild LLP, Philadelphia, PA, Harvey B. Jacobson, Jr., Michael R. Slobasky, Philip L. O'Neill, Jacobson Holman PLLC, Washington, DC, for Defendants.

MEMORANDUM

ROBERT F. KELLY, Senior District Judge.

Presently pending before this Court is Defendant Woodstream Corporation's ("Woodstream") Motion for Partial Summary Judgment on Plaintiff Agrizap, Inc.'s ("Agrizap") state law claims. For the following reasons, Woodstream's Motion is granted in part and denied in part.

I. BACKGROUND

In 2000, Woodstream contacted Agrizap about the possibility of the two parties entering into a marketing and distribution agreement for Agrizap's Rat Zapper Product. The Rat Zapper is a consumer product that consists of a plastic canister with a metal plate at the bottom and an electrical charge which ultimately kills the rodent. The two parties engaged in negotiations from April 2000 to the fall' of 2000.

During this time period, Woodstream sent samples of the Rat Zapper to an offshore Chinese manufacturer that prepared and sent to Woodstream a cost evaluation report breaking down the cost of the Rat Zapper by its components. On August 15, 2000, Robert G. Noe, President of Agrizap, wrote an e-mail to Andy Woolworth, Executive Vice President of Woodstream, in which he expressed concern about the Rat Zapper being sent overseas for cost evaluation. Noe wanted Woodstream's assurance that this action was covered by the Mutual Confidentiality Agreement the parties signed in May 2000 and that there would be no attempt to "clone" the Rat Zapper. (Woodstream's Mot. Partial Summ. J., Ex. E). In this email, Noe also expressed that he "was hoping at this time, to be further along with [the] relationship." (Id.). On August 24, 2000, Woolworth sent an email to Noe saying he shares his frustration that the "relationship has progressed slowly." (Id., at Ex. G). Woolworth then said:

Let[']s stop dwelling on what we do not agree on and develop a relationship on what we agree on: Woodstream's distribution strengths and your high quality product. Why don't we just get started? We can show you what we can do with our distribution clout and you can start enjoying the benefit of higher sales.

(Id.). Noe responded that he would tell Scott Heaton, Agrizap's Vice President of Sales, to get back to Woolworth about that proposal. (Id.). Noe once again asked for assurance that the forwarding of the Rat Zapper overseas to an unknown third party for production cost evaluation fell within the terms and intent of the Mutual Confidentiality Agreement. (Id.). Woolworth responded that the Mutual Confidentiality Agreement covers Noe's concern. (Id.).

Various proposals and negotiations occurred during the summer of 2000. After these discussions, Woodstream issued to Agrizap a first written purchase order on September 19, 2000 for 1080 Rat Zappers. On September 21 and then again on September 27, Agrizap issued an invoice to Woodstream acknowledging shipment of portions of that order. In the fall of 2000, Woodstream sent Agrizap a copy of its Victor Launch Plan. (Robert G. Noe Decl., at 000001-000008). The Launch Plan was an overview of the objectives of the business relationship between Woodstream and Agrizap.

Thereafter, for a little less than three years, Agrizap manufactured and delivered Rat Zappers with Woodstream labels to Woodstream. Woodstream would then distribute the Rat Zappers to various retailers. The above-mentioned pattern of a written purchase order followed by a confirming invoice continued during the period of September 19, 2000 through July 6, 2003. It is undisputed that Woodstream paid for all of these invoices timely and in full.

According to Agrizap, in early 2004, Agrizap discovered that Woodstream was manufacturing and marketing its own electronic rat trap. Agrizap claims that Woodstream used its technology and infringed the Rat Zapper patent to develop its own electronic rat trap. Agrizap also asserts that confusion in the retail market developed because of Woodstream's branding of the Agrizap Rat Zapper and because of Woodstream's newly introduced electronic rat traps. Agrizap asserts that if this continued, Woodstream would effectively undermine Agrizap's ability to sell its goods in the market.

Based on these allegations, Agrizap filed suit against Woodstream. Agrizap's second Amended Complaint contains the following five counts against Woodstream: Violation of California's Unfair Business Practices Laws & Professions Code (Count I); Breach of an Oral Contract (Count II); Patent Infringement (Count III); Intentional Misrepresentation (Count IV); and Trade Disparagement (Count V). Woodstream's present Motion for Partial Summary Judgment addresses the state law claims encompassed by Count I, II, IV, and V. On July 11, 2006, this Court granted Woodstream's Motion to Strike certain materials submitted by Agrizap in its opposition to this present Motion for Partial Summary Judgment. These materials deemed inadmissible are: Declaration of Donald Gunn, Declaration of Stephanie O'Neill, Doc. No. W1674, Declaration of Robert G. Noe ¶¶ 12-13 and Doc. Nos. 000049-000078 attached thereto. For the following reasons, summary judgment is granted on the California Unfair Business Practices Laws & Professions Code claims, the trade disparagement claim, and the breach of contract claim; however, summary judgment is denied for the intentional misrepresentation claim.

II. SUMMARY JUDGMENT STANDARD

"Summary judgment is appropriate when, after considering the evidence in the light most favorable to the nonmoving party, no genuine issue of material fact remains in dispute and `the moving party is entitled to judgment as a matter of law.'" Hines v. Consol. Rail Corp., 926 F.2d 262, 267 (3d Cir.1991) (citations omitted). The inquiry is "whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so onesided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party carries the initial burden of demonstrating the absence of any genuine issues of material fact. Big Apple BMW, Inc. v. BMW of N. Am. Inc., 974 F.2d 1358, 1362 (3d Cir.1992). "A fact is material if it could affect the outcome of the suit after applying the substantive law. Further, a dispute over a material fact must be `genuine,' i.e., the evidence must be such `that a reasonable jury could return a verdict in favor of the non-moving party.'" Compton v. Nat'l League of Profl Baseball Clubs, 995 F.Supp. 554, 561 n. 14 (E.D.Pa.1998), aff'd, 172 F.3d 40 (3d Cir.1998) (citations omitted). Once the moving party has produced evidence in support of summary judgment, the non-moving party must go beyond the allegations set forth in its pleadings and counter with evidence that demonstrates that there is a genuine issue of fact for trial. See Big Apple BMW, at 1362-63. Summary judgment must be granted "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

III. DISCUSSION

A. Preemption of State Law Claims by Federal Patent Law

Woodstream initially argues that Agrizap's state law claims, except for the trade disparagement claim, are preempted by federal patent law. According to Woodstream, these state law claims derive from the same core allegation that Woodstream broke its assurance to Agrizap that it would not clone the Rat Zapper. Woodstream states that Agrizap's "no cloning" allegation simply means that Woodstream promised not to infringe Agrizap's patent. Thus, Agrizap is merely recasting its patent infringement claim as a breach of contract claim, an intentional misrepresentation claim, an unfair trade practices claim, and unfair competition claim.

State law can be preempted by federal law in one of three ways: (1) by explicit preemption by Congress, (2) by field preemption, or (3) by conflict preemption. Hunter Douglas, Inc. v. Harmonic Design, Inc., 153 F.3d 1318, 1332 (Fed.Cir. 1998). Here, the type of preemption at issue is conflict preemption. For conflict preemption to apply, the state law actions must frustrate the accomplishment and execution of the full purposes and objectives of Congress. Id. at 1335. "In general, patent law will not pre-empt state law claims, if they include additional elements not found in the federal patent law cause of action and if they are not an impermissible attempt to offer patent-like protection to subject matter addressed by federal law." Robert L. Harmon, Patents and the Federal Circuit, § 1.4(c) (7th ed.2005).

Here, Agrizap is using these state law claims in conjunction with and not in opposition to its rights under federal patent law. Cryovac Inc. v. Pechiney Plastic Packaging Inc., 430 F.Supp.2d 346, 358-59 (D.De1.2006). While whether Woodstream infringed Agrizap's Rat Zapper patent does relate to its state law claims, Agrizap has to prove additional elements beyond the infringement to prove its alleged California Business & Professions Code violations, its breach of contract claim, and its intentional misrepresentation claim. See id. (stating that no conflict preemption because plaintiff must prove more than just willful infringement to prove its tortious interference with contract and prospective business relations claim). For example, Agrizap would have to prove an...