CHATTERY Int'l Inc. -Counter v. JOLIDA Inc. -Counter
| Decision Date | 28 March 2011 |
| Docket Number | CIVIL NO.: WDQ-10-2236 |
| Parties | CHATTERY INTERNATIONAL, INC., et al., Plaintiffs -Counter-Defendants, v. JOLIDA, INC., et al., Defendant -Counter-Plaintiffs. |
| Court | United States District Courts. 4th Circuit. United States District Court (Maryland) |
OPINION TEXT STARTS HERE
Chattery International, Inc. ("Chattery") and Shanghai Shenda Sound Electronic Co., Ltd. ("Shenda") sued JoLida, Inc. ("JoLida") for unauthorized use and registration of a trademark, breach of contract, false designation of origin, and related claims. JoLida counterclaimed against Chattery, Shenda, Jing Guo Chen (collectively, the "Shenda Parties"), and Marc Prylli for trademark infringement, cybersquatting, tortious interference with economic relations, civil conspiracy, and related claims. For the following reasons, the Shenda Parties' motion to remand and JoLida's motion for preliminary injunction will be denied, and Prylli's motion to dismiss for lack of personal jurisdiction will be granted.
I. Background1
In December 1983, cousins Michael Allen and Huang Hong-Sheng and others incorporated JoLida in Maryland. Countercl. ¶ 9.2 Allen is its president and chief executive officer. Allen Decl. ¶ 2. JoLida primarily sold China-manufactured vacuum tubes used in electronics. Countercl. ¶ 11. In December 1986, JoLida began selling products using an "X Marks the Spot" design trademark in conjunction with a "JOLIDA" word trademark:
JOLIDA
In 1993, JoLida began designing amplifiers that use vacuum tubes ("tube amplifiers"). Id. ¶¶ 12-13.3 In 1994, JoLida began purchasing vacuum tubes manufactured by Shuguang Tube. Allen Decl. ¶ 6. In connection with that relationship, JoLida applied to the United States Patent and Trademark Office ("USPTO") in1994 to register the trademark "S.G. JOLIDA." Id.; Kamarei Decl., Ex. 1. However, JoLida decided not to use that trademark and abandoned its application. Id.; Allen Decl. ¶ 6.
In January 1995, Chattery was incorporated in Maryland. Compl. ¶ 1; ECF No. 14 at 4. Jing Guo Chen is its chairman and chief executive officer. Id.
Sometime in 1995, JoLida began manufacturing and distributing tube amplifiers and other audio equipment to United States customers. Countercl. ¶ 13. Trade journals first described JoLida's products as unreliable and poorly constructed. See, e.g., id. , Ex. 1 at 2.
Sometime before or in 1996, JoLida began to outsource the manufacture of its tube amplifiers and other products to makers in China. Countercl. ¶ 29. In June 1996, JoLida received defective amplifiers from a manufacturer. Id. ¶ 31. Sometime in or after September 2006, JoLida's Hong-Sheng entered into a contract with Chattery's Chen, his old classmate, under which Chattery agreed to fix the amplifiers. Id. ¶ 33.
In November 1996, Shenda was formed in China as JoLida's subsidiary. ECF No. 14 at 4. Chen managed Shenda. Countercl. ¶ 34. In 1996 or 1997, JoLida began using Shenda as the supplier and manufacturer of parts for JoLida's tube amplifiers. Id.
The Shenda Parties assert that sometime before May 1997, Chattery and JoLida entered into a joint venture agreement thatrequired them to invest $1 million in Shenda (the "Joint Venture Agreement"), but JoLida did not contribute its capital share. Chen Decl. ¶ 3. JoLida asserts that there is no evidence of the Joint Venture Agreement, but does not deny its existence. See ECF No. 23 at 10 n.20.
The Shenda Parties assert that because JoLida did not contribute its share under the Joint Venture Agreement, Chattery and JoLida entered into a new agreement on May 26, 1997 (the "1997 Agreement"). Chen Decl. ¶ 4; ECF No. 48, Ex. A.4 The alleged 1997 Agreement is typed in Chinese on JoLida's letterhead and includes JoLida's telex number. Id. A translation of the alleged 1997 Agreement provides, inter alia, that:
[JoLida] agrees to transfer all shares of [Shenda] to [Chattery] for the transfer amount of 0,000 USD which is to be directly wired by [Chattery] to the company account of Shenda . . . in order to complete the investment as soon as possible.
[Chattery] authorizes [JoLida] to be the sole distributor for the U[nited] S[tates] and Europe for the audio product series manufactured by Shenda. Shenda shall distribute its products by itself in China and Asia.
In order to improve the image of [JoLida] in the U[nited] S[tates], [Chattery] agrees to use the logo X originally used by [JoLida], and to use "JOLIDA" as the trademark as [sic] the audio products produced by Shenda.
The trademarks used by the audio products manufactured by Shenda belong to Shenda, and shall be registered in China by Shenda. Should [JoLida] wish to register the [subject]trademark for the audio products in the U[nited] S[tates] and other countries and areas, [JoLida] must obtain authorization from Shenda.
The intellectual property rights of the audio products manufactured by Shenda belong to Shenda. [JoLida] should not produce or ask others to produce identical products.
Compl., Ex. A at 2 ¶¶ 1-2, 4-6 (emphasis added).
In June 1997, JoLida's Hong-Sheng died unexpectedly. ECF No. 20 at 8. The Shenda Parties assert that Hong-Sheng had signed and mailed the 1997 Agreement to Chen, who countersigned on behalf of Chattery and returned a copy of the agreement to Hong-Sheng. Chen Decl. ¶¶ 5-6. Shenda has the original alleged 1997 Agreement. Id. ¶ 5. JoLida asserts that the 1997 Agreement is a fake. ECF No. 14 at 12.5
Sometime in 1997, Shenda became Chattery's wholly-owned subsidiary and ceased to be JoLida's subsidiary. Chen Decl. ¶ 8.
On March 28, 1998, Shenda registered the "JOLIDA" word trademark and the "X Marks the Spot" design trademark in China. See Compl., Ex. A; ECF No. 2 3 at 8.
From 1997 to 2008, Shenda manufactured audio products for JoLida. ECF No. 14 at 5. From 1997 to 2000, Shenda operated at a loss, and Chen continued to provide capital for the company. Chen Decl. ¶ 10. Shenda hired engineers and technical staff to improve the quality of its products, and sales increased. Id.
Shenda's factory manager was Qin Zhong ("Loyal Qin").6 Id. ¶ 12. The Shenda Parties assert that Loyal Qin was "secretly conspir[ing] with JoLida to build a competing factory," and that he stole Shenda's intellectual property, including its manufacturing designs and configurations. Id.
In 2003, Shenda made its first profit, and sales continued to increase. Id. ¶ 11. Its audio products for JoLida received positive reviews and won engineering awards. See, e.g. , Countercl., Ex. 1 at 4, 12.
On June 29, 2005, Loyal Qin--Shenda's factory manager-signed a "Resolution [by Shenda's] Board of Directors" that JoLida's trademarks belonged to JoLida in America and to Shenda in China. See Countercl. , Ex. 10 at 2 [hereinafter Shenda Resolution]. On July 18, 2005, Loyal Qin signed a "Declaration of Responsibility" that "noted that the name of JoLida is an exclusive trademark name owned by JoLida, Inc." See Countercl., Ex. 11.
On September 19 and 20, 2005, JoLida applied to register the "X Marks the Spot" design trademark and the "JOLIDA" word trademark (collectively, the "JoLida Trademark") with the USPTO. Countercl. ¶¶ 18, 20; id. , Exs. 3, 5. In 2006 and 2007, the USPTO granted JoLida's applications. Id. Thus, JoLida is the registrant of the JoLida Trademark.
On March 16, 2006, Loyal Qin signed a document stating that JoLida owned certain legal records allowing it to sell audio equipment in Europe, and Shenda could not use or transfer those records. See Countercl. , Ex. 12 [hereinafter Certificate Confirmation].
On January 10, 2007, JoLida opened a factory in China, JoLida Shanghai Co. Ltd. ("JoLida Shanghai"), and began to transfer the manufacturing process there from Shenda. ECF No. 14 at 5. Loyal Qin left Shenda to work for JoLida Shanghai. Chen Decl. ¶ 12. JoLida asserts that it created JoLida Shanghai to take control of its products because "the quality of Shenda's manufacturing began to deteriorate." ECF No. 14 at 5; Countercl. ¶ 36. The Shenda Parties assert that Shenda was cut out because profits were increasing, and Loyal Qin stole Shenda's designs and configurations to use at JoLida Shanghai. ECF No. 20 at 11; Chen Decl. ¶ 12.
On April 3, 2007, JoLida obtained international registration for the JoLida word trademark. Id. , Ex. 4.
In February 2008, JoLida stopped ordering from Shenda. See Countercl. ¶¶ 54-55.
On September 5, 2008, the Shenda Parties sued JoLida Shanghai in China, seeking to shut down the factory and/or enjoin JoLida from using the JoLida Trademark in violation of the 1997 Agreement. Countercl. ¶ 63; Answer to Countercl. ¶ 63.JoLida asserts that the Chinese court "found in favor of JoLida Shanghai"; the Shenda Parties assert that the court found that JoLida "was not allowed to mark [its] goods with Shenda's JOLIDA mark." Id. ; Countercl. ¶ 63.
JoLida's official website is "www.jolida.com." The website markets JoLida's audio products--which bear the JoLida Trademark--and provides information about its company. JoLida sells its products to distributors and retailers; it does not accept customer orders. See Countercl. ¶ 15.
In late 2009, the "www.jolida.fr" website began operating. Jolida.fr is owned by Marc Prylli, Shenda's marketing and overseas manager, who is a citizen and resident of France.7 The website is in French and tells customers where to buy Shenda's audio products--all bearing the JoLida Trademark--from retailers in France. Jolida.fr also describes Shenda's history and dispute with JoLida.
On January 15, 2010, Prylli e-mailed JoLida's Allen in Maryland and stated that the "www.jolida.net" website would begin operating in less than a week unless JoLida sold its French trademark registration to the Shenda Parties "very quickly." ECF No. 37, Ex. 4 at 1. Sometime after that e-mail, thejolida.net website, which is also owned by Prylli, began operating. Countercl., Ex. 17.
Customers can buy Shenda's audio products--all bearing the JoLida Trademark--directly from jolida.net.8 Before making a purchase, customers...
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