BAM Bags, LLC v. ZIP-IT Ltd.
| Decision Date | 26 June 2019 |
| Docket Number | 15 Civ. 2172 (ER) |
| Parties | BAM BAGS, LLC, Plaintiff, v. ZIP-IT LTD., Defendant. |
| Court | U.S. District Court — Southern District of New York |
Ramos, D.J.
BAM BAGS, LLC ("BAM BAGS" or "Plaintiff") brings this action against ZIP-IT LTD. ("ZIP-IT" or "Defendant"), for the alleged infringement of a novelty handbag patent. BAM BAGS develops fashion accessories, especially handbags, for a high-end boutique market. Id. ¶ 9. ZIP-IT is in the business of distributing and selling purses, handbags, pencil cases and related products for a mass market. Id. ¶ 18. The dispute arises out of a licensing agreement whereby ZIP-IT agreed to pay royalties for selling BAM BAGS' patented products. BAM BAGS claims that ZIP-It infringed the patent when it stopped paying royalties, but ZIP-IT counters that it does not owe royalties because the patent is invalid. Presently before the Court is ZIP-IT's motion for partial summary judgment ("MPSJ"). Doc. 98. For the reasons set forth below, the motion is DENIED.
In 2004, Beth Metsch ("Metsch"), an architect and designer who lived in Colorado, entered a friendly competition with her mother, Barbara Metsch, to design an accessory out of a single zipper. Ex. B at 250, Doc. 100. Metsch created a handbag made from a continuous zipper. Id. at 19. She called it a ZIPPURSE. BAM BAGS' Opposition ¶ 2, Doc. 112. Metsch showed the bag to her mother and gave her a sample one as a gift. Ex. B at 272, Doc. 100. Metsch also showed the ZIPPURSE to other relatives and a few friends, including Yvette del Torre, the owner of The Pink Purse, a fashion-accessories store which sold high-end handbags, id. at 276-78. Her mother and friends thought the ZIPPURSE was so entertaining they ordered bags and so did "a bunch of stores." Ex. C, "ZIPIT 002182," Doc. 100.
Believing she had a good idea, Metsch took steps to protect and commercialize her invention. On June 16, 2004, she purchased a domain name for ZIPPURSE. Ex. B at 101, Doc. 100. Metsch also displayed the ZIPPURSE on her website www.bambags.com, id., but claims she did not sell any bags through the website until December 2004, id. at 140. ZIP-IT submitted an internet archive printout as evidence that Metsch displayed the ZIPPURSE on the BAM BAGS website as early as July 28, 2004. Ex. C, "ZIPIT 002055," Doc. 100.
From August 1-3, 2004, Metsch showcased the ZIPPURSE at a trade show in New York City. Id. at 2. She was careful to not put the bags out before the show started because she did not want anyone to steal her idea. Id. at 3. Metsch received offers from interested buyers at the trade show and arranged to manufacture those orders after she returned home to Colorado. Id. After the trade show, Metsch worked with a patent lawyer to obtain a patent and a trademark for the ZIPPURSE. Compl. ¶ 10, Doc. 1. On August 1, 2005, Metsch filed a patent application for the ZIPPURSE, exactly one year after she displayed it and took orders at the trade show. Id. On August 8, 2005, Metsch filed an application to register the ZIPPURSE trademark ("ZIPPURSE Mark") and the BAM BAGS trademark ("BAM BAGS Mark"). Id. Both marks were registered in connection with handbags, change purses, and cosmetic cases. Id.
On March 31, 2009, more than years after Metsch filed the patent application, the United States Patent and Trademark Office ("USPTO") issued her a utility and design patent, Serial No. 7,509,985 B2 (the "'985 Patent"), entitled "Handbag-with novel features," for the ZIPPURSE, "a unique handbag constructed from one continuous length of zipper." Compl. at Ex.1. The '985 Patent discloses how the ZIPPURSE differs from similar prior inventions, i.e. no protective liner formed from the dual-purpose slide fastener tapes, and the objects of the invention, including providing a novel construction for a fashionable handbag formed from a single compound, lightweight tape with slide fastener attachments along the periphery. Ex. D, Doc. 100.
Metsch licensed the ZIPPURSE trademark and patent to various companies. In 2006, Metsch filed a trademark infringement case in Florida against two companies it had entered into licensing agreements with, Overbreak, LLC and JUST ZIP-IT, LLC. Ex. A (the "Overbreak Complaint"), Doc. 100. Despite the similar name, the defendant Israeli company in this action, ZIP-IT, LTD, does not claim a connection to the defendant Florida company, ZIP-IT, LLC, in the Overbreak Complaint. According to the complaint, Overbreak was in the business of marketing and distributing novelty, "knock-off" products. Id. at 6. Around July 2005, Metsch received suspicious phone calls from a man seeking to acquire ZIPPURSEs and discovered that the calls came from Overbreak. Id. She went on Overbreak's and discovered a link to a site operated by JUST ZIP-IT, LLC, which advertised the sale of a handbag constructed from a continuous length of zipper called the "ZIP-IT," which was "confusingly similar" to the ZIPPURSE. Id. at 7. The claims against Overbreak were dismissed with prejudice on September 20, 2006 and the claims against JUST ZIP-IT, LLC were dismissed without prejudice on October 13, 2006. ZIP-IT's MPSJ n.1, Doc. 100.
On October 1, 2009, after obtaining the '985 Patent, Metsch, doing business as BAM BAGS, entered into an exclusive license agreement ("License") with ZIP-IT. Compl. Ex. 4, Doc. 1. Metsch granted ZIP-IT an exclusive license to make, use, sell, offer to sell, and import any products covered by the '985 Patent ("Licensed Products"). Compl. ¶ 14. Metsch also granted ZIP-IT an exclusive license to use the BAM BAGS Mark in connection with the sale of the Licensed Products. Id. ZIP-IT agreed to pay a royalty based on gross sales of the Licensed Products. Id. ¶ 15.
Initially, ZIP-IT sold the Licensed Products, paid royalties and submitted quarterly reports to Metsch, pursuant to the License. Id. ¶ 19. But by November 6, 2014, ZIP-IT had failed to make royalty payments or provide reports for three consecutive quarters. Compl. ¶ 21, Doc. 1. Metsch sent ZIP-IT a notice of breach and gave 30 days to cure. Id. at Ex. 6. Initially, ZIP-IT promised to send Metsch the royalty report, but they did not do so. Id. ¶ 22. On November 26, 2014, ZIP-IT told Metsch it was "impractical" for them to continue paying the agreed-upon royalty rate and asked for a lower rate. Compl. ¶ 23, Doc. 1. But Metsch refused to lower the rate and on December 10, 2014, Metsch's counsel sent ZIP-IT a notice of breach of contract. Id. at Ex. 8. In the letter, ZIP-IT was given an additional seven days to cure or else it would be considered in breach. Id.
By letter dated December 15, 2014, ZIP-IT's counsel denied that they breached the License. Compl. ¶ 25, Doc. 1. ZIP-IT compared the '985 Patent with the Zipper Bags sold by ZIP-IT and concluded the '985 Patent was invalid, and they did not owe royalties under the License. Id. During 2015, ZIP-IT continued to sell the Licensed Products without paying royalties. Id. ¶ 26. On March 3, 2015, Metsch assigned her rights, title, and goodwill (including the right to sue for past infringement) in the '985 Patent, the BAM BAGS Mark, and the ZIPPURSE Mark, to BAM BAGS. Id. ¶ 27. Later that month, BAM BAGS sued ZIP-IT for breaching the License and infringing on the '985 Patent.
BAM BAGS filed the instant complaint on March 23, 2015 asserting two causes of action: patent infringement and trademark infringement. Doc 1. ZIP-IT answered on June 8, 2015 denying the allegations and counterclaiming that (1) the '985 Patent is invalid, (2) the ZIPPURSE trademark was improvidently allowed and should be cancelled, (3) and, in the alternative, the ZIPPURSE Mark infringes on the Zip It Mark because the Zip It Mark predates it. Doc. 10. On March 3, 2016, the Court held a Markman hearing to resolve disputes about the '985 Patent's claim construction, the technical terms that define the scope of the patent. On March 30, 2018, the Court issued an Order detailing its findings on the patent claims. Doc. 90. On October 5, 2018, ZIP-IT filed the instant motion alleging that: (1) the '985 Patent is invalid under 35 U.S.C. § 102(b)'s public-use and on-sale statutory bars, (2) if valid, ZIP-IT's products do not infringe the '985 Patent, and (3) in the alternative, that the '985 Patent is invalid because of anticipation and obviousness. Doc. 100. BAM BAGS filed its opposition on November 13, 2018, Doc. 112, and ZIP-IT replied on November 27, 2018, Doc. 116.
The standard of review for a motion for summary judgment in a patent infringement case is the same as in any other type of action. See Union Carbide Corp. v. Am. Can Co., 724 F.2d 1567, 1571 (Fed.Cir.1984). Summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to summary judgment as a matter of law." Fed. R. Civ. P. 56(a). "An issue of fact is 'genuine' if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Senno v. Elmsford Union Free Sch. Dist., 812 F. Supp. 2d 454, 467 (S.D.N.Y. 2011) (citing SCR Joint Venture L.P. v. Warshawsky, 559 F.3d 133, 137 (2d Cir. 2009)). A fact is "material" if it might affect the outcome of the litigation under the governing law. Id. The party moving for summary judgment is initially responsible for demonstrating the absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party meets its burden, "the nonmoving party must come forward with admissible evidence sufficient to raise a genuine issue of fact for trial in order to avoid summary judgment." Saenger v. Montefiore Med. Ctr., 706 F. Supp. 2d 494, 504 (S.D.N.Y. 2010) (internal quotation marks omitted) (citing Jaramillo v. Weyerhaeuser Co., 536 F.3d 140, 145 (2d Cir. 2008)).
In deciding a motion for summary judgment, the Court must "construe the facts in the light most favorable to the...
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