Orange County Choppers v. Olaes Enterprises
| Decision Date | 27 July 2007 |
| Docket Number | No. 06 Civ. 7211(WCC).,06 Civ. 7211(WCC). |
| Citation | 497 F.Supp.2d 541 |
| Parties | ORANGE COUNTY CHOPPERS, INC., a New York Corporation, Plaintiff-Counterdefendant, v. OLAES ENTERPRISES, INC. d/b/a ODM, a California Corporation, Defendant-Counterplaintiff, v. Vending Supply, Inc., a Nevada Corporation, and Interbrand LLC, a Delaware limited liability corporation, Additional Counterdefendants. |
| Court | U.S. District Court — Southern District of New York |
Tabner, Ryan and Keniry, LLP, William J. Keniry, Esq., Benjamin F. Neidl, Esq., of Counsel, Albany, NY, for Plaintiff-Counterdefendant Orange County Choppers, Inc.
Bleakley Platt & Schmidt, LLP, Thomas G. Bailey, Jr., Esq., of Counsel, White Plains, NY, Law Offices of Darren J. Quinn, Darren J. Quinn, Esq., of Counsel, Del Mar, CA, for Defendant-Counterplaintiff Olaes Enterprises, Inc. d/b/a ODM.
Marsh Menken & Weingarden PLLC, Mitchell I. Weingarden, Esq., David A. Menken, Esq., of Counsel, White Plains, NY, for Additional Counterdefendant Vending Supply, Inc.
Markotsis & Lieberman, Douglas M. Lieberman, Esq., of Counsel, Hicksville, NY, for Additional Counterdefendant Interbrand, LLC.
wILLIAM C. CONNER, Senior District Judge.
Plaintiff Orange County Choppers, Inc. ("OCC")1 brings this action against Olaes Enterprises, Inc. d/b/a ODM ("ODM")2 for breach of contract and unjust enrichment. OCC and ODM entered into a licensing agreement pursuant to which ODM agreed to pay royalties to OCC in return for a license to use OCC's trade name and trademarks in designing T-shirts and other apparel. OCC alleges that ODM breached the license agreement by failing to pay $846,723.99 in royalties due under the contract. ODM, in turn, brings copyright infringement claims against OCC, Vending Supply, Inc. ("VSI")3 and Interbrand LCC,4 pursuant to 17 U.S.C. §§ 101, et seq., alleging that they marketed and sold designs on which ODM owns copyrights. In addition, ODM asserts a litany of counterclaims against OCC for breach of contract, unjust enrichment, unfair competition, breach of the implied covenant of good faith and fair dealing and tortious interference with contractual relations. OCC, VSI and Interbrand now move pursuant to FED. R. Crv. P. 12(b)(6) for dismissal of all but one of ODM's claims. For the following reasons, their motion is granted in part and denied in part.
The following facts are taken from ODM's Counterclaims and the relevant provisions of the licensing agreement between the parties.5 OCC is a well-known custom motorcycle manufacturer and is featured on "American Choppers," a reality television show on the Discovery Channel. It also sells apparel featuring its trade name and logos, including T-shirts, hats, sweatshirts and sun glasses. (See Complt.; http://orangecountychoppers. corn.) ODM is a graphic design company that creates, markets and sells graphic designs and artwork incorporating companies' trade names and trademarks in accordance with various licensing agreements. (See Counterclaims ¶ 6.) It has worked with hundreds of licensors, including companies such as General Motors and Corona Beer. (See id.)
On March 1, 2003, OCC and ODM entered into the "Consumers Product License Agreement" (the "Agreement"). The Agreement granted ODM the exclusive right and license to use OCC's logos, trademarks and controlled designs (hereinafter, the "OCC Property") in connection with the manufacture, distribution, sale and advertising of T-shirts, fleeces, jerseys, caps and beanies (hereinafter, the "Licensed Products").6 (See Neidl Affm, Ex. A (Agreement ¶¶ 1(l), (r), 2(a)(i)).) In return, ODM agreed to pay OCC royalties in the amount of eight or ten percent of the net sales price on all products sold featuring OCC Property.7 (See id. (Agreement ¶ 4).) The Agreement became effective on April 1, 2003 and expired on December 31, 2005. (See id. (Agreement ¶ 3).)
The Agreement provided OCC the right to approve all designs proposed by ODM prior to distribution. (See id. (Agreement, Standard Terms and Conditions, ¶ A(2)(d)).) Specifically, OCC could disapprove a proposed design if, "in its sole and unfettered discretion," it would "impair the value and goodwil" of OCC Property. (See id.) Moreover, OCC had the right to disapprove a proposed design for any "reasonable cause," including if it did not satisfy the general quality standards of OCC, failed to accurately depict OCC Property, was unethical, immoral or offensive to good taste, or failed to carry proper copyright, trademark or other required notices. (See id.) OCC was required "to use reasonable efforts to notify [ODM] in writing of its approval or disapproval of any materials submitted to it ... within fifteen [] days after its receipt of such materials, and ... in the case of its disapproval, to notify [ODM] in writing of its reasons for disapproval." "In the event [OCC] fail[ed] to approve or disapprove of any materials submitted ... within twenty [] days after [its] receipt of such materials ..., the materials [were] automatically deemed disapproved." (See id.)
Pursuant to the Agreement, ODM was obligated to furnish a royalty statement within thirty days after the close of each month along with the royalty payments then due.8 Specifically, the Agreement provided:
[ODM] shall furnish to [OCC] ... a full and complete statement, duly certified by an officer of [ODM] to be true and accurate, showing the number of each type of Licensed Product sold during the calendar [month] in question, the total gross sales revenues for each such Licensed Product, an itemization of all allowable deductions, if any, the Net Sales Price for each Licensed Product sold and the amount of royalties due with respect to such sales together with such other pertinent information as [OCC] may reasonably request from time to time.
. . .
[ODM] will keep accurate books of account and records covering all transactions relating to the rights and licenses granted under this Agreement including sales of Licensed Products[]....
(See id., Ex. A (Agreement, Standard Terms and Conditions, ¶¶ C(5), C(8)).) The Agreement further provided that "[t]he receipt or acceptance by [OCC] ... of any royalty statements furnished pursuant to this Agreement, or the receipt or acceptance of any royalty payments made, shall not preclude [OCC] from questioning their accuracy at any time." (See id. (¶ C(6)).)
The Agreement also contained separate sections entitled "Trademark Protection" and "Copyright Provisions" that governed the intellectual property rights of the respective parties. (See id. (¶¶ D(1), E).) The trademark section, in particular, provided that "[a]ll uses of the [OCC] Property [by ODM] will inure to the exclusive benefit of [OCC], which will own all rights, including trademark rights, created by such uses of the Property, together with the goodwill of the business in connection with which such trademarks are used." (See id. (¶ D(1)).) The copyright section provided:
[OCC] and [ODM] acknowledge and agree that to the extent that [ODM's] graphic designs, including, but not limited to, the creative elements contained therein can be separated from [OCC's] Property, [ODM] shall retain ownership of the graphic designs and/or creative elements; however, if such graphic designs created by [ODM] cannot be separated from [OCC's] Property, [OCC] shall own the graphic designs.
(See id. (¶ E).)
On August 10, 2006, OCC fled an action in New York State Supreme Court and alleged that ODM underpaid royalties due under the Agreement in the amount of $846,723.99. ODM removed the action to federal court and asserted fourteen counterclaims, thirteen of which OCC now moves to eismiss.9
First, ODM alleges that it owns copyrights in the various designs that it created pursuant to the Agreement and that OCC infringed these copyrights by providing ODM's designs to other OCC licensees, including VSI and Interbrand, without its permission. (See Counterclaims ¶ 17.) Specifically, ODM claims that OCC provided ODM's designs to approximately fifty of OCC's licensees, which then advertised or sold merchandise containing designs that were substantially similar to those owned by ODM. (See id. ¶¶ 18-19.) Attached as exhibits to ODM's Counterclaims are advertisements for VSI and Interbrand merchandise featuring the designs created by ODM. (See id., Exs. B, C.)
Second, ODM asserts claims for breach of contract, unjust enrichment and unfair competition against OCC, alleging that it licensed other entities to use the OCC logos, trademarks and other controlled designs in connection with the manufacture, distribution sale and advertisement of the Licensed Products (i.e., T-shirts, fleeces and jerseys) in violation of the Agreement's exclusivity provision. It claims that "[b]y double- and triple-licensing to produce Licensed Products as defined in the [] Agreement, OCC took a property right belonging to ODM and used ODM's property for its own commercial advantage." (See Counterclaims ¶ 62.)
Third, ODM alleges that OCC intentionally delayed its approval of ODM's designs in violation of ¶ A(2)(e) of the Standard Terms and Conditions of the Agreement. (See id. ¶¶ 65-75.) It claims that "OCC breached its contractual obligations under the [] Agreement by failing to use `reasonable efforts' to approve or disapprove ODM's...
To continue reading
Request your trial
-
Ace Arts, LLC v. Sony/ATV Music Publ'g, LLC
...that the defendant “used ‘wrongful means' to induce the third party to breach the contract,’ ” Orange Cnty. Choppers, Inc. v. Olaes Enterprises, Inc., 497 F.Supp.2d 541, 561–62 (S.D.N.Y.2007) (quoting Wolff v. Rare Medium, Inc., 210 F.Supp.2d 490, 499 (S.D.N.Y.2002) ). Defendants first chal......
-
Hit Ent. v. D & L Amusement & Ent. Inc.
...with the statute; and (3) the defendant copied constituent elements of the work that are original.” Orange County Choppers, Inc. v. Olaes Enter., Inc., 497 F.Supp.2d 541, 550 (S.D.N.Y.,2007) (citations and footnotes omitted). Proof of the third element requires a further showing that “(1) t......
-
Wallert v. Atlan
...dismissed." Id. (citing Swan Media Grp., Inc. v. Staub, 841 F.Supp.2d 804, 807–08 (S.D.N.Y.2012) ; Orange Cty. Choppers, Inc. v. Olaes Enter., Inc., 497 F.Supp.2d 541, 554 (S.D.N.Y.2007) ; Highlands Ins. Co. v. PRG Brokerage, Inc., No. 01 Civ. 2272(GBD), 2004 WL 35439, at *8 (S.D.N.Y. Jan. ......
-
Spinelli v. Nat'l Football League
...must be dismissed. Swan Media Grp., Inc. v. Staub, 841 F.Supp.2d 804, 807–08 (S.D.N.Y.2012) ; Orange Cnty. Choppers, Inc. v. Olaes Enter., Inc., 497 F.Supp.2d 541, 554 (S.D.N.Y.2007) ; Highlands Ins. Co. v. PRG Brokerage, Inc., No. 01 Civ. 2272, 2004 WL 35439, at *8 (S.D.N.Y. Jan. 6, 2004).......
-
Top Six Legal Issues In Earnout Lawsuits
...that will deprive the other party of the benefits of their agreement." Orange County Choppers, Inc. v. Olaes Enterprises, Inc., 497 F. Supp. 2d 541, 560 (S.D.N.Y. 2007). In earnout cases, sellers will argue that buyers may not undermine the attainment of a performance threshold and thereby ......
-
Intellectual property crimes.
...visited Oct. 31, 2007). (206.) See 17 U.S.C. [section] 410(c) (2000); see also Orange County Choppers, Inc. v. Olaes Enter., Inc., 497 F. Supp. 2d 541, 550 (S.D.N.Y. 2007) (stating certificate of registration establishes presumption of valid (207.) See, e.g., Entertainment Research Group, I......
-
Amy E. Jensen, When News Doesn't Want to Be Free: Rethinking "hot News" to Help Counter Free Riding on Newspaper Content Online
...unjust enrichment claims over the theft of literary material were preempted). 100 Orange Cnty. Choppers, Inc. v. Olaes Enters., Inc., 497 F. Supp. 2d 541, 555 (S.D.N.Y. 2007) (holding that a claim of unjust enrichment over use of graphic designs was preempted by the Copyright Act). 101 Nash......
-
The Licensing Corner
...without opinion, 883 F.2d 1022 (2d Cir. 1989) (licensor's approval of licensing agents). County Choppers v. Olaes Enterprises, Inc., 497 F. Supp. 2d 541 (S.D.N.Y. 2007) (unreasonable delays in approvals).2. See Adams on Drafting at www.adamsdrafting.com. While writing this column, he posted......