MNM Invs., LLC v. HDM, Inc.
| Decision Date | 07 May 2021 |
| Docket Number | Case No. 18-1267-EFM-KGG |
| Parties | MNM INVESTMENTS, LLC, Plaintiff, v. HDM, INC. and DEREK MCCLOUD, Defendants. HDM, INC., Counterclaim-Plaintiff, v. MNM INVESTMENTS, LLC, KANSAS MOTORCYCLE WORKS, LLC, and MATTHEW MOORE, Counterclaim-Defendants. |
| Court | U.S. District Court — District of Kansas |
Plaintiff MNM Investments, LLC ("MNM"), through its affiliate and wholly owned subsidiary Kansas Motorcycle Works, LLC ("KMW"), is a manufacturer of high-end cruiser-style motorcycles under the "Big Dog Motorcycles" brand. Defendant HDM, Inc. ("HDM") sells Big Dog motorcycle parts and accessories primarily through an eBay storefront. From 2014 to 2017, the parties worked together to sell Big Dog motorcycles, parts, and accessories. After their relationship broke down, MNM filed this lawsuit asserting ownership in the Big Dog federal trademark registrations and common law marks as well as certain design information necessary for manufacturing Big Dog parts and accessories. MNM defines this design information as "parts drawings, engineering drawings, or designs" (the "Designs"). MNM asserts claims for breach of contract, trademark infringement, and trademark counterfeiting against HDM. In response, HDM asserts counterclaims against MNM, KMW, and Matthew Moore, MNM's principal, for tortious interference with prospective business relations, declaratory judgment concerning the manufacture and sale of Big Dog parts, and declaratory judgment concerning noninfringement of trademarks.
This matter comes before the Court on MNM's Second Motion for Partial Summary Judgment (Doc. 160). MNM asks the Court to make three findings: (1) that MNM owns all of the Big Dog trademarks, including the common law marks; (2) that MNM is entitled to judgment on HDM's counterclaim for declaratory judgment as to the right to manufacture parts and accessories; and (3) that MNM is entitled to judgment on HDM's counterclaim for tortious interference with prospective business relations. For the reasons discussed below, the Court grants in part and denies in part MNM's motion.
The "Big Dog Motorcycles" brand was originally owned by Big Dog Motorcycles, LLC ("Old Big Dog") under the ownership of Wichita-businessman Sheldon Coleman. From 1994 to 2011, Old Big Dog sold thousands of Big Dog-branded motorcycles, parts, and accessories. Old Big Dog also obtained federal trademark registrations for its "Big Dog Motorcycles, LLC,""BDM," and "BDM Performance Products" marks (the "Registered Marks") and owned a number of unregistered common law marks (the "Common Law Marks") (collectively, the "Big Dog Marks").2 Matthew Moore, a principal of MNM, served as Old Big Dog's director of marketing.
In 2011, Old Big Dog's business failed, and its lender, Intrust Bank, N.A. ("Intrust"), foreclosed on its loans to Old Big Dog. Intrust possessed a security interest in certain physical and intangible assets of Old Big Dog. On April 5, 2011, Old Big Dog conveyed its property to Intrust, so Intrust could dispose of and liquidate the assets as partial satisfaction of Old Big Dog's indebtedness. The next day, Intrust conveyed certain assets to two entities associated with Old Big Dog—Motorcycle Enterprises, LLC, and Wichita Motorcycles, LLC.3 To Motorcycle Enterprises, Intrust conveyed the tangible assets associated with the business as well as the trademarks and copyrights associated with the "BDM" and "BDM Performance Products" marks. To Wichita Motorcycles, Intrust conveyed the remaining trademarks, including the registered "Big Dog Motorcycles" mark, the patents, copyrights, and other intellectual property used in connection with the Big Dog business, and certain motorcycle prototypes.
On November 18, 2013, in connection with the foreclosure, Intrust and Moore agreed that Moore would act as a liquidator of the foreclosed assets. In exchange for this service, Intrust agreed to provide Moore ten percent of the proceeds of the assets sold and the intellectual property held by Wichita Motorcycles, Motorcycle Enterprises, and Big Dog Motorcycles, LLC.
HDM is a long-time parts supplier of "Big Dog" branded parts and accessories. In 2003, HDM and its principal, Derek McCloud, developed a relationship with Old Big Dog under which HDM liquidated Old Big Dog's excess inventory. Through 2011, HDM purchased parts and accessories from Old Big Dog and resold those items, all with Old Big Dog's approval. After Old Big Dog went out of business in 2011, HDM continued to buy Big Dog parts and accessories from the Old Big Dog entities for resale. It also began ordering and selling newly manufactured parts and accessories, some of which bore the Big Dog Marks, with full knowledge and without objection of the Old Big Dog entities.
During the liquidation of Old Big Dog's assets, HDM was the high bidder. On January 9, 2014, Intrust executed a Bill of Sale transferring "all right, title and interest in and to the equipment and other personal property" set forth in an attachment identified as "Exhibit A" to HDM. HDM has not been able to produce a complete copy of Exhibit A. The copy in existence, however, lists certain tooling necessary to make Big Dog component parts, such as "tooling for 231-000005-00 wolf seat pan" and "sm sub-weldment tooling for K9 250." Exhibit A also lists various software licenses and other property relating to designs, such as "software licenses from BDMOC," "computer licenses in design creative suite 3," as well as computers and servers used specifically for design purposes. HDM paid over $240,000 for the property conveyed in the January 2014 Bill of Sale.
Moore helped HDM clean out Old Big Dog's premises and remove the items described in the January 2014 Bill of Sale. While doing so, he created copies of the Design files located on Old Big Dog's servers and computers with HDM's permission. He later informed another Big Dog supplier that the January 2014 Bill of Sale is "proof-of-ownership for the 'Big Dog tooling.' "
Motorcycle Enterprises and Wichita Motorcycles executed a Quit Claim Bill of Sale on October 2, 2014. The Quit Claim states that Motorcycle Enterprises and Wichita Motorcycles "sell, transfer, and quit claim" to Intrust all of their right, title, and interest in the following property:
All inventory, equipment, accounts (including but not limited to all healthcare insurance receivables), chattel paper, instruments (including but not limited to all promissory notes), letter-of-credit rights, letters of creditor, documents, deposit accounts, investment property, money, other rights to payment and performance, and general intangibles (including but not limited to all software and all payment intangibles); all attachments, accessions, accessories, fittings, increases, tools, parts, repairs, supplies, and commingled goods relating to the foregoing property, and all additions, replacements of and substitutions for all or any part of the foregoing property; all insurance refunds relating to the foregoing property; all good will relating to the foregoing property; all records and data and embedded software relating to the foregoing property, and all equipment, inventory and software to utilize, create, maintain and process any such records and data on electronic media; and all supporting obligations relating to the foregoing property; and all products and proceeds (including but not limited to all insurance payments) of or relating to the foregoing property.
It further states that Motorcycle Enterprises and Wichita Motorcycles agree to deliver to Intrust the documents necessary to complete the conveyance of the property described above, including but not limited to:
(i) trademarks, service marks, trade names, logos, and product names and the goodwill of the business associated therewith, (ii) the copyrights, copyright applications, and copyright registrations associated therewith, (iii) the patents and patent applications associated therewith; (iv) all other intellectual property, used or useful in accordance with or relating to the businesses of Motorcycle Enterprises, LLC and Wichita Motorcycles, LLC; and (v) all contracts, instruments, drawings, engineering, source and access codes and other documentation relating to the foregoing.
On November 13, 2014, Wichita Motorcycles and Intrust executed two identical conveyances titled "Assignment of Mark," except that one conveyance was for the "BDM"trademark and the other was for the "Big Dog Motorcycles" trademark.4 The conveyances state that Wichita Motorcycles "ratifies, confirms, and acknowledges the assignment" of the Marks to Intrust pursuant to the October 2014 Quit Claim. The conveyances then assigned Intrust's right, title, and interest in those marks, together with the goodwill of the business, to MNM.
Less than a week later, on November 17, Intrust and MNM executed a "Quit Claim Assignment and Assumption of Intellectual Property." This conveyance assigned all of Old Big Dog's remaining intellectual and intangible property then held by Intrust to MNM. MNM paid $15,000 for the rights to the intellectual and intangible property.
On November 15, 2015, MNM filed a trademark application seeking registration of the "Big Dog" logo mark, which was later registered on December 19, 2017.
From 2014 to 2018, HDM continued to sell Big Dog parts and accessories that were either purchased in liquidation from Old Big Dog in 2014 or newly manufactured, with MNM's knowledge and approval. MNM alleges that HDM sold these parts and accessories under a license granted by MNM. Moore allegedly sent HDM a copy of a License Agreement, which granted HDM the right to use the Big Dog Marks and "the Design Information," as that term is defined in the Agreement,5 in connection with the sale of...
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