Ark Patent Intl., LLC v. Tarksol Intl., LLC, 2009 NY Slip Op 52688(U) (N.Y. Sup. Ct. 12/11/2009)
| Decision Date | 11 December 2009 |
| Docket Number | 2007/11921 |
| Citation | 2009 NY Slip Op 52688 |
| Parties | ARK PATENT INTERNATIONAL, LLC; STONE CLIFF HOLDINGS, LLC; TARKSOL, INC.; AND A. RICHARD KOETZLE, Plaintiffs, v. TARKSOL INTERNATIONAL, LLC; PMK INTERNATIONAL, LLC; REXER, LLC; EMMET COTTER, WILLIAM F. REXER, JR.; AND AMREX CHEMICAL COMPANY, INC., Defendants. |
| Court | New York Supreme Court |
Defendants, Tarksol International, LLC, PMK International, LLC, Rexer, LLC, Emmet Cotter, William F. Rexer, Jr., and Amrex Chemical Company, Inc., move pursuant to CPLR 3212 for an order granting judgment dismissing plaintiffs' first, second, third, fourth, fifth, sixth, seventh, eight, ninth, tenth, eleventh, twelfth, thirteenth, fourteenth, fifteenth, sixteenth, seventeenth, nineteenth, twenty-first, twenty-second, and twenty-third causes of action. Plaintiffs, Ark Patent International, LLC, Stone Cliff Holdings, LLC, Tarksol, Inc., and A. Richard Koetzle, cross move for an order granting partial summary judgment declaring that ARK properly rescinded the License Agreement in September 2007, or in the alternative, an order rescinding the agreement as a matter of law in light of defendants' breaches and/or the fraudulent inducement of ARK to the License Agreement. Plaintiffs further seek an order restoring the respective patent rights to ARK and requiring defendants to have the patent rights fully restored and re-recorded in ARK's name with the USPTO.
Plaintiffs commenced this action in September 2007, shortly after they declared in a September 10th letter that the license agreement was rescinded/cancelled by defendants' non-performance. Since commencement, the complaint has been amended twice and now contains twenty-three causes of action. At issue in this litigation is a contract for patent rights between ARK and Tarksol International. Plaintiffs contend that the contract is a license, whereas defendants argue that the contract is an assignment of the patent rights.
A joint venture was entered into by A. Richard Koetzle, Emmet Cotter, and William F. Rexer, Jr., and the purpose of the venture was to pursue a patent application involving a method to increase flashpoints on flammable solvents. An application in that regard was filed on October 20, 2004, by Koetzle. In February 2005, in order to produce and market the products, Cotter introduced Koetzle to Rexer and discussions of a business relationship began. It is alleged that the purpose of the venture embarked upon by these gentlemen was to blend and distribute products, such as Tarksone and Tarkseal, which involved the method of the pending patent.
Defendants contend that Rexer hired Koetzle to work for Amrex in October 2005. It is further alleged that, in the winter of 2006, Koetzle, Cotter, and Rexer discussed creating a company or companies to further develop the commercial potential of the Tarksone and Tarkseal products. By February 2007, all three had formed Nevada limited liability companies: Rexer, LLC (sole member is Rexer), Stone Cliff Holdings, LLC (Koetzle was the sole member, but changed membership to include his children and a trust), PMK International, LLC (Cotter family members as sole members); and Tarksol International, LLC (Rexer, LLC, Stone Cliff Holdings, LLC, and PMK International, LLC members with equal interests). In February 2007, ARK was formed (Koetzle is the sole member) for the purpose of receiving and holding the pending patent from Koetzle individually. On February 27, 2007, Koetzle signed an "Assignment of Application" which transferred from Koetzle to ARK all of Koetzle's right, title, and interest in the method to increase flash points of flammable solvents.
On that same date, Koetzle also signed the contract which is at the heart of the dispute pending before the court: the "Exclusive License Agreement." On September 10, 2007, Tarksol International received a letter from ARK purporting to terminate the rights granted under the "Exclusive License Agreement." A Letter Patent was issued to Tarksol International, LLC on September 25, 2007, bearing U.S. Patent No. 7,273,839. Prior and subsequent to said issuance, ARK (by Koetzle) petitioned the USPTO, arguing that the agreement was not an assignment and that the patent should not have been issued to Tarksol International, LLC. The USPTO acknowledged it did not have authority to conclusively resolve the dispute, but issued an opinion concluding that the "Exclusive License Agreement" was in fact an assignment.
The parties previously came before the court on an order to show cause on October 2007. In that application, plaintiffs sought a permanent injunction directing specific performance of Sections 2.01, 2.02, and 2.03 of the Agreement. The application was denied and the court determined that plaintiffs, if successful, could be recompensed with a monetary award.
It is well settled that "the proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact." Alvarez v. Prospect Hosp., 68 NY2d 320, 324 (1986) (citations omitted). See also Potter v. Zimber, 309 AD2d 1276 (4th Dept. 2003) (citations omitted). "Once this showing has been made, the burden shifts to the nonmoving party to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact that require a trial for resolution." Giuffrida v. Citibank Corp., 100 NY2d 72, 81 (2003), citing Alvarez, 68 NY2d at 324. "Failure to make such showing requires denial of the motion, regardless of the sufficiency of the responsive papers." Wingrad v. New York Univ. Med. Ctr., 64 NY2d 851, 853 (1985) (citation omitted). See also Hull v. City of North Tonawanda, 6 AD3d 1142, 1142-43 (4th Dept. 2004). When deciding a summary judgment motion, the evidence must be viewed in the light most favorable to the nonmoving party. See Russo v. YMCA of Greater Buffalo, 12 AD3d 1089 (4th Dept. 2004). The court's duty is to determine whether an issue of fact exists, not to resolve it. See Barr v. County of Albany, 50 NY2d 247 (1980); Daliendo v Johnson, 147 AD2d 312, 317 (2nd Dept. 1989) (citations omitted).
Defendants contend that plaintiffs seek to reargue the court's previous decision denying the request for a preliminary injunction. According to defendants, plaintiffs' cross motion seeks to reargue assertions for relief that were previously denied by the court. In particular, defendants take issue with plaintiffs' arguments asserted with respect to Koetzle's alleged failure to account, failure to report sales of Tarksol products, and failure to remit funds to Tarksol International.
In the preliminary injunction decision previously issued, the court stated that "[t]he parties' dispute in this regard hinges upon whether Koetzle and his entities were entitled to continue selling Tarksone and Tarkseal products after signing the Exclusive License." Decision and Order dated November 21, 2007, at 8. The court continued:
While that issue is not directly before the court at this juncture for determination, it does bear on the balance of the equities issue which attends consideration of whether an injunction directing specific performance should issue.
Despite defendants' contentions, there is no motion to reargue before the court, nor need such a motion be made. The court explicitly stated in the previous decision that the issue of Koetzle's sales was not before the court for immediate determination. The court considered the argument on the balancing of the equities issue but stated specifically that the issue "need not be decided" at that time. Id. at 9. Moreover, a decision on a motion for a preliminary injunction does not foreclose ultimate adjudication of the merits by trial or summary judgment, and "lacks preclusive effect." BFP 245 Park Co., LLC v. GMAC Commercial Mort. Corp., 12 AD3d 330, 332 (1st Dept. 2004). See Preston Corp. v. Fabrication Centers, Inc., 68 NY2d 397, 402 (1986)("granting or refusal of a temporary injunction does not constitute the law of the case or an adjudication on the merits, and the issues must be tried to the same extent as through no temporary injunction had been applied for").
The parties vigorously dispute whether the "Exclusive License Agreement" granted a license or an assignment.1
Section 5.08 of the "Exclusive License Agreement" states:
GOVERNING LAW. This License shall be governed by and construed in accordance with the laws of the State of New Nevada (sic).
Whereas federal law governs the issue of a patent's validity, see Loral Fairchild Corp. v. Matsushita Elec. Indus. Co., 840 F.Supp. 211, 217 (E.D.NY 1994), state contract law governs ownership of a patent. Id. 840 F.Supp. at 217 (). Akazawa v. Link New Technology Intern, Inc., 520 F.3d 1354, 1357 (Fed Cir. 2008)("case law is clear that state law, not federal law, typically governs patent ownership"); Jim Arnold Corp. v. Hydrotech Systems, Inc., 109 F.3d 1567, 1572 (Fed Cir. 1997)("the question of whether a patent is valid and infringed ordinarily is one for federal courts, while the question of who owns the patent rights and on what terms typically is a question exclusively for state courts"). On the other hand, because the provisions of Exclusive License Agreement "involve the granting of rights to various patents, [a state court] appropriately look[s] to federal case law on standing in patent infringement cases (see e.g. Bottlers Seal Co. v. Rainey, 225 NY 369, 372, 122 N.E. 200 [1919], citing, inter alia, Waterman v. Mackenzie, 138 U.S. 252, 11 S.Ct. 334, 34 L.Ed. 923 [1891]; see also Sybron Transition Corp. v. Nixon, Hargrave, Devans & Doyle, 770 F.Supp. 803, 809 [W.D.NY 1991])." Biosynexus, Inc. v. Glaxo Group Ltd., 40 AD3d 384 (1st Dept. 2007), affing in...
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