Transcience Corp. v. Big Time Toys, LLC
| Decision Date | 23 September 2014 |
| Docket Number | No. 13–CV–6642 ER.,13–CV–6642 ER. |
| Citation | 50 F.Supp.3d 441 |
| Parties | TRANSCIENCE CORPORATION and Yolanda Von Braunhut, Plaintiffs, v. BIG TIME TOYS, LLC, Defendant. |
| Court | U.S. District Court — Southern District of New York |
William Timmons, William Timmons, Esq., Sayville, NY, for Plaintiffs.
John A. Stone, Decotiis, Fitzpatrick, Cole & Wisler, LLP, Teaneck, NJ, for Defendant.
Plaintiffs Transcience Corporation and Yolanda Von Braunhut (collectively, “Plaintiffs”) bring this action against Big Time Toys, LLC (“Defendant”), alleging, inter alia, breach of contract and trademark and copyright infringement. Plaintiffs are the owners of the “Sea–Monkeys” product: hybrid brine shrimp that hatch from eggs into “live micro-crustaceans.” Am. Compl. ¶ 16. Plaintiffs allege that Big Time Toys, inter alia, breached a contract relating to the licensing of the “Sea–Monkeys” product.
Pending before the Court are Defendant's motion to dismiss the Amended Complaint (Doc. 16), and Plaintiffs' motion for a preliminary injunction (Doc. 19). For the reasons discussed below, Defendant's motion to dismiss is GRANTED in part and DENIED in part, and Plaintiffs' motion for a preliminary injunction is DENIED. Plaintiffs are granted leave to replead the breach of contract claim within thirty (30) days of the date of this Order.
Transcience Corporation and its Chief Executive Officer, Yolanda Von Braunhut, are the sole and exclusive owners of methods, materials, and properties for designing, hatching, growing, and sustaining a hybrid brine shrimp known and sold under the United States registered trademark “Sea–Monkeys.” Am. Compl. ¶ 16. Plaintiffs are also the exclusive manufacturers of the trade secret pouches1 upon which the Sea–Monkeys product is based. Id. ¶ 35. Plaintiffs own various copyrights registered with the United States Copyright Office relating to Sea–Monkeys, including an instruction book entitled “It's Fun to Raise Pet Sea–Monkeys.” Id. ¶¶ 17, 18.
In June 2007, Plaintiffs entered into a license agreement with Big Time Toys (the “2007 Agreement”), that granted Defendant the right to produce, market, and sell Sea–Monkeys. Id. ¶¶ 29, 30. Under the 2007 Agreement, Defendant agreed to pay Transcience a royalty of ten percent (10%) of the gross sales of Sea–Monkeys. Id. ¶ 31.2 In addition to the royalty payments, Big Time Toys was required to pay a “supplemental laboratory fee” of $750 per week for the maintenance of their laboratory and research facility. Id. ¶ 40. The 2007 Agreement further provided that Plaintiffs would continue to manufacture and produce the trade secret pouches, and sell them to Big Time Toys. Id . ¶ 36. However, Defendant would procure and otherwise produce the other parts of the final Sea–Monkeys product from outside sources. Id. ¶ 37.
The 2007 Agreement also gave Defendant the right to purchase the Sea–Monkeys product for an amount not to exceed $10 million. Id. ¶ 41. The Agreement provided that the purchase price would be made in two segments: (i) an initial lump sum payment of $5 million, and (ii) payments of a five percent (5%) annual royalty from merchandising sales and a percentage of entertainment-related revenue, until the remaining $5 million sum was achieved. Id. ¶ 42. Under the 2007 Agreement, upon payment of the first $5 million, Plaintiffs would turn over to Defendant the production and manufacture of the pouches, as well as the related trade secrets. Id. ¶ 43.
In May 2009, the parties modified the 2007 Agreement (the “2009 Agreement”). Id. ¶ 45. The 2009 Agreement, which modified the 2007 Agreement only where expressly indicated, increased the percentage of royalties owed to Plaintiffs. Id. ¶ 46. Specifically, the 2009 Agreement required Big Time Toys pay to Plaintiffs a royalty of twenty percent (20%) of gross sales. Id. ¶ 47. The 2009 Agreement also modified the procedure by which Big Time Toys could purchase the Sea–Monkeys product. First, the 2009 Agreement specified that the total purchase price for the Sea–Monkeys product would be $10 million, as opposed to an amount not to exceed $10 million. Id. ¶ 48. The 2009 Agreement further provided that the initial purchase price of $5 million would be realized through: (i) a $500,000 lump sum payment upon execution of the agreement, and (ii) the payment of $4,500,000 from the royalties discussed above.Id. ¶ 50.3
In December 2012, Defendant informed Plaintiffs of its intention to forgo its monthly royalty payment and breach the parties' agreements. Id. ¶¶ 53, 54. Defendant did not make the scheduled royalty payment on December 10, 2012, and similarly ceased making laboratory fee payments at the end of 2012. Id. ¶¶ 56, 57.
Under the 2009 Agreement, in the event of a failure to make a royalty payment, Big Time Toys would have 15 days from the receipt of notice of its failure to cure the default. Id. ¶ 59. The 2009 Agreement further provided that Plaintiffs could, in the event of Big Time Toys' failure to cure any default relating to royalty payments, (1) declare the agreement terminated; (2) commence an action for equitable relief, including injunctive relief, prohibiting any continued use of licensed trademarks and copyrights; and (3) require that Defendant immediately cease selling, marketing, or producing the licensed products. Id. ¶ 78. Additionally, any rights granted under the contract would be deemed null and void. Id. Accordingly, on December 20, 2012, Transcience sent to Defendant a notice of default. Id. ¶ 60. After Big Time Toys failed to cure the default, Transcience sent a letter to Defendant, dated January 18, 2013, declaring that the parties' agreements were “null and void and of no further force or effect.” Id. ¶ 61.
The Amended Complaint further alleges that, despite the breach of the agreements, Big Time Toys continued to “prominently feature[ ]” the Sea–Monkeys product on the homepage of its website from January 18, 2013 through November 25, 2013. Id. ¶¶ 81, 82.
Plaintiffs allege that Big Time Toys breached its obligations under the agreements and infringed certain of their trademarks and copyrights by continuing to sell Sea–Monkeys without Plaintiffs' authorization. In addition to the breach of contract and intellectual property claims, Plaintiffs bring the following causes of action: breach of the implied covenant of good faith and fair dealing; unjust enrichment; breach of the implied contract; conversion; and tortious interference with business relationships.4
When ruling on a motion to dismiss pursuant to Rule 12(b)(6), the Court must accept all factual allegations in the complaint as true and draw all reasonable inferences in the plaintiff's favor. Koch v. Christie's Int'l PLC, 699 F.3d 141, 145 (2d Cir.2012) ; see also, e.g., Ruotolo v. City of New York, 514 F.3d 184, 188 (2d Cir.2008). However, the Court is not required to credit “mere conclusory statements” or “threadbare recitals of the elements of a cause of action.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ); see also id. at 681, 129 S.Ct. 1937 (citing Twombly, 550 U.S. at 551, 127 S.Ct. 1955 ). “To survive a motion to dismiss, a complaint must contain sufficient factual matter ... to ‘state a claim to relief that is plausible on its face.’ ” Id. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955 ). A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955 ). More specifically, the plaintiff must allege sufficient facts to show “more than a sheer possibility that a defendant has acted unlawfully.” Id. Federal Rule of Civil Procedure 8 “marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.” Id. at 678–79, 129 S.Ct. 1937. If the plaintiff has not “nudged [his] claims across the line from conceivable to plausible, [the] complaint must be dismissed.” Twombly, 550 U.S. at 570, 127 S.Ct. 1955.
Plaintiffs allege that Defendant's continued use of their copyrights for the Sea–Monkeys product constitutes copyright infringement. To state a claim for copyright infringement, a plaintiff must demonstrate ownership of a valid copyright and infringement of that copyright by the defendant. Am. Broad. Cos. v. Flying J, Inc., 06 Civ. 2967(DAB), 2007 WL 583176, at *4 (S.D.N.Y. Feb. 22, 2007). Courts in the Southern District of New York have held that to meet the requirements of Rule 8(a), a complaint must plead with specificity the acts by which a defendant has committed copyright infringement.
Marvullo v. Gruner & Jahr, 105 F.Supp.2d 225, 230 (S.D.N.Y.2000) ; see also McCarthy v. Stollman, 06 Civ. 2613(DAB), 2009 WL 1159197, at *3 (S.D.N.Y. Apr. 29, 2009) ; Carell v. Shubert Org., Inc., 104 F.Supp.2d 236, 250–51 (S.D.N.Y.2000). Specifically, a plaintiff must allege (1) which specific original works are the subject of the copyright claim; (2) that the plaintiff owns the copyrights in those works; (3) that the copyrights have been registered in accordance with the statute; and (4) by what acts during what time the defendant infringed the copyright. Kelly v. L.L. Cool J., 145 F.R.D. 32, 36 (S.D.N.Y.1992), aff'd sub nom. Kelly v. L.L. Cool J, 23 F.3d 398 (2d Cir.1994) (citing Franklin Elec. Publishers v. Unisonic Prod. Corp., 763 F.Supp. 1, 4 (S.D.N.Y.1991) ; Calloway v. Marvel Entm't Grp., 82 Civ. 8697(RWS), 1983 WL 1141, at *3 (S.D.N.Y. June 30, 1983) ; Gee v. CBS, Inc., 471 F.Supp. 600, 643 (E.D.Pa.1979), aff'd, 612 F.2d 572 (3d Cir.1979) ).
Plaintiffs have adequately pleaded each of these elements. Plaintiffs state that they...
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