Schutte Bagclosures Inc. v. Kwik Lok Corp.

• Decision Date: 29 September 2014
• Docket Number: No. 12 Civ. 5541JGK.,12 Civ. 5541JGK.
• Citation: 48 F.Supp.3d 675
• Parties: SCHUTTE BAGCLOSURES INC., Plaintiff, v. KWIK LOK CORPORATION, Defendant. Kwik Lok Corporation, Counterclaim Plaintiff v. Schutte Bagclosures B.V., Counterclaim Defendant.
• Court: U.S. District Court — Southern District of New York

48 F.Supp.3d 675

SCHUTTE BAGCLOSURES INC., Plaintiff

v.KWIK LOK CORPORATION, Defendant.

Kwik Lok Corporation, Counterclaim Plaintiff

v.Schutte Bagclosures B.V., Counterclaim Defendant.

No. 12 Civ. 5541JGK.

United States District Court, S.D. New York.

Signed Sept. 29, 2014.

Carl Maria Reinier Van Der Zandt, Hand Baldachin & Amburgey LLP, Sherli Yeroushalmi, Nixon Peabody LLP, New York, NY, for Plaintiff/Counterclaim Defendant.

Brian McQuillen, Robert Terry Parker, Vanessa C. Hew, Duane Morris, LLP, New York, NY, for Defendant/Counterclaim Plaintiff.

OPINION AND ORDER

JOHN G. KOELTL, District Judge:

This case concerns the well-known, small plastic clips commonly used to close bags of items such as bread and fruit. The defendant, Kwik Lok Corporation (“Kwik Lok”), has been manufacturing and distributing these bag closures within the United States for many years, competing with other popular forms of bag closures such as twist ties. Counterclaim defendant Schutte Bagclosures B.V. (“Schutte BV”) has sold similar plastic clip bag closures in Europe, and has incorporated plaintiff Schutte Bagclosures Inc. (“Schutte Inc.”) in New York with the intention of entering the United States bag closure market.¹

Schutte Inc. seeks a judgment against Kwik Lok declaring that Schutte Inc.'s use of its plastic bag closure products does not infringe on Kwik Lok's registered trademarks for its own bag closure products. Kwik Lok has filed counterclaims against Schutte Inc. for, among other claims, federal trade dress infringement and dilution.

Kwik Lok has brought third party claims against Schutte BV for substantially the same claims of federal trade dress infringement and dilution.

Presently before the Court are a motion by the Schutte parties to dismiss the counterclaims and third party claims and cross-motions for summary judgment by Kwik Lok and Schutte Inc. Schutte BV has moved to dismiss the claims against it pursuant to Federal Rule of Civil Procedure 12(b)(2) on the grounds that, as a Netherlands corporation, it has insufficient contacts with New York to be subject to jurisdiction under New York law or the United States Constitution. Schutte BV and Schutte Inc. have also moved to dismiss the counterclaims and third party claims pursuant to Federal Rule of Civil Procedure 12(b)(6) on the grounds that Kwik Lok's allegations of infringement do not plausibly state a claim upon which relief may be granted, or alternatively, for summary judgment on these claims.

Kwik Lok moves for partial summary judgment, urging that for the products added by Schutte Inc. in its Second Amended Complaint, there is no case or controversy under the Declaratory Judgment Act because Schutte Inc. has taken no steps to market any of those products in the United States. Kwik Lok offers to withdraw its counterclaims as to each product for which this Court finds there is no real controversy. Following argument of the current motion, Schutte Inc. withdrew numerous claims and limited its claims to those affecting one line of its bag closure products.

I

There is no dispute as to the following facts, except where noted.

A.

The defendant and counterclaim plaintiff in this action, Kwik Lok, is incorporated and based in the State of Washington, and has been manufacturing and distributing plastic bag closures in the United States for more than fifty years. (See Sec. Am. Countercl. ¶¶ 2, 15.) Counterclaim defendant Schutte BV is a Netherlands corporation that manufactures and distributes plastic bag closures in Europe. (See Sec. Am. Compl. ¶ 96.) Plaintiff and counterclaim defendant Schutte Inc. was incorporated in New York as the wholly owned subsidiary of Schutte BV, and is presently based in New York as the U.S. marketing arm for Schutte BV. (See Sec. Am. Compl. ¶¶ 1, 123; Abbenhuis Dep. at 158, Jan. 29, 2014.)

The first dispute between these parties took place in the Netherlands. In March of 2010, the Court of Appeal of the Hague issued a final appeal decision in Kwik Lok Corporation v. Schutte Bagclosures, BV, in which Kwik Lok had asserted infringement claims under its European patent, trademark, and trade dress rights against Schutte BV. (See May 23, 2014 Decl. of Brian McQuillen (“May 23 McQuillen Decl.”) ¶ 2, Ex. A.) The Court determined that Kwik Lok's European Community Trade Dress Registration No. 55848429 was functional and thus invalid, and that Schutte BV's G–Series bag closures did not infringe on any of Kwik Lok's European patent, trademark, or trade dress rights. (See May 23 McQuillen Decl. ¶ 2, Ex. A.)

Kwik Lok has two registered trademarks for its product configurations in the United States, both registered in 1996: United States Trademark Registration No. 1,975,545 (the “'545 Registration”), for a thin, rectangular plastic bag closure with two arched edges along the top and bottom, parallel edges on the sides, and a beveled triangular slot opening at the center of one of the arches; and United States Trademark Registration No. 1,972,043 (the “'043 Registration”), for a thin, square plastic bag closure with beveled portions on each corner, and a beveled triangular slot opening at the center of one side. (See Am. Countercl. ¶¶ 13–25; June 20, 2014 Decl. of Hal Miller (“June 20 Miller Decl.”) ¶¶ 5–8, Exs. Y, Z.) Kwik Lok has been selling products under these trademarks continuously each year since 1996, as well as similarly configured products for which it claims unregistered trade dress rights. (See Sec. Am. Compl. ¶¶ 118–20; June 20 Miller Decl. ¶¶ 7, 9, 12–19, Exs. S, T, W.)

In 2011 and 2012, Schutte BV began to evaluate entry into the United States market, from which it had been previously absent. (See Sec. Am. Compl. ¶¶ 118–20; June 20, 2014 Decl. of Brian McQuillen (“June 20 McQuillen Decl.”) ¶ 2, Ex. A.) On April 19, 2012, Schutte BV incorporated Schutte Inc. under New York law in order to serve as its United States operating entity. (See Sec. Am. Compl. ¶ 123.) Schutte BV had previously met in the Netherlands with a United States business services company, TABS Inc., which accepted Schutte Inc. as a client after it was incorporated. (See Willemsen Dep. at 15–17.)

B.

In this action, Schutte Inc. requests a declaratory judgment of non-infringement and non-dilution of Kwik Lok's U.S. trade dress rights by five of Schutte Inc's products in the “Clipps” product line, including Types G, GL, BL, T, and K. (See Sec. Am. Compl. ¶ 101, Ex. D).² Schutte Inc.'s products are generally square or rectangular, with four rounded corners with four small jagged protrusions near each rounded corner, a “v” shaped opening along one side, and a concave side opposite the side with the opening. (See Sec. Am. Compl. ¶ 104, Ex. D.) Schutte Inc. also seeks to cancel Kwik Lok's '043 Registration and claims damages under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and New York General Business Law §§ 349, 350, and 350–a for Kwik Lok's alleged false advertising.³

Schutte BV designs and manufactures all of the Schutte products in the Netherlands. (See Abbenhuis Aff. ¶ 8.) In June of 2012, Schutte BV shipped samples of over 100,000 Clipps G–Series bag closure products to the TABS Inc. office for Schutte Inc. to use in promotion in New York. (See Sec. Am. Compl. ¶ 126; Jan. 29 Abbenhuis Dep. at 106–08, Ex. 15.) As of December 2013, Schutte Inc. had not designed, manufactured, or offered any products for sale in the United States. (See Abbenhuis Aff. ¶ 7.) Furthermore, the Clipps G–Series was the only product being promoted on the Schutte website, www.clippsamerica.com. (See Jan. 29 Abbenhuis Dep. at 175). Besides the G–Series, no other Schutte products had been shipped into the United States, and nothing had been done to promote Schutte products in the United States as of April, 2014. (See Abbenhuis Dep. at 281, 315, Apr. 14, 2014.)

C.

This lawsuit was filed by Schutte Inc. on July 18, 2012. In its original complaint, Schutte Inc. sought a narrower declaration, requesting declaratory relief only for a single “Schutte Device.” (Compl. ¶ 18.) Schutte Inc. claimed that Schutte BV developed a version of the device Schutte BV used in the European market specifically for the United States market. (Compl. ¶ 18.) What Schutte Inc. then referred to as the “Schutte Device” appeared to consist of two of its products, the Clipps G–Series, which it had shipped into the United States, and the Clipps GL–Series. (See Compl. Ex. E; Am. Compl. Ex. D.) Schutte Inc. filed an amended complaint on December 10, 2012, expanding its requested relief by adding nine additional Schutte products on which it sought a declaratory judgment. (Am. Compl. ¶ 74, Ex. D.) On December 28, 2012, Kwik Lok filed a motion to dismiss the amended complaint on the grounds that this Court lacked subject matter jurisdiction over the declaratory judgment claims, and a motion to dismiss the state and federal false advertising claims, the false patent marking claim, and the monopolization claim for failure to state a claim.

On July 23, 2013, this Court issued an order granting Kwik Lok's motion in part and denying it in part. This Court found that, at the motion to dismiss stage prior to fact discovery, Schutte Inc.'s allegations presented a sufficient case or controversy under the Declaratory Judgment Act for subject matter jurisdiction over at least some of its claims. This Court found that Schutte Inc. had standing at that stage as well, but granted Kwik Lok's motion to dismiss without prejudice Schutte Inc.'s trademark cancellation claims. This Court granted Kwik Lok's motion to dismiss Schutte Inc.'s false patent marking claim, but denied the motion to dismiss with respect to Schutte Inc.'s false advertising and monopolization claims. This Court also denied Kwik Lok's motion to transfer this action to the Western District of Washington.

Schutte Inc. filed its second amended complaint on August 6, 2013, and Kwik Lok filed counterclaims in an amended answer on September 5, 2013, naming Schutte BV as a counterclaim defendant. On ...