Welding Eng'rs Ltd. v. NFM/Welding Eng'rs, Inc., CIVIL ACTION NO. 16-4850

• Citation: 352 F.Supp.3d 416
• Decision Date: 26 November 2018
• Docket Number: CIVIL ACTION NO. 16-4850
• Parties: WELDING ENGINEERS LTD., Plaintiff v. NFM/WELDING ENGINEERS, INC., Defendant
• Court: U.S. District Court — Eastern District of Pennsylvania

352 F.Supp.3d 416

WELDING ENGINEERS LTD., Plaintiff

v.NFM/WELDING ENGINEERS, INC., Defendant

CIVIL ACTION NO. 16-4850

United States District Court, E.D. Pennsylvania.

Signed NOVEMBER 26, 2018

Daniel S. Bernheim, III, Wilentz, Goldman & Spitzer, Philadelphia, PA, Jacob Max Kaplan, Joshua Scott Wolkoff, Baker & McKenzie LLP, New York, NY, Richard V. Wells, Baker & McKenzie LLP, Washington, DC, for Plaintiff.

Owen J. Rarric, Terry A. Moore, Krugliak Wilkins Griffiths Dougherty Co., LPA, Canton, OH, Kyle M. Heisner, Marshall Dennehey, Philadelphia, PA, for Defendant.

MEMORANDUM OPINION

NITZA I. QUIÑONES ALEJANDRO, U.S.D.C.J.

INTRODUCTION

On October 5, 2015, Welding Engineers Ltd. ("WEL"), as the Buyer, and NFM/Welding Engineers, Inc. ("NFM"), as the Seller, executed an agreement entitled Technology Transfer Agreement ("TTA"), in which NFM, inter alia , "irrevocably assign[ed] to Buyer the entire right, title and interest in the Purchased Technology,¹ free and clear of any Encumbrances." In exchange for the assignment and "in settlement of any remaining dispute involving the 1998 License Agreement and/or the Cross-License Agreement, the total Consideration due from Buyer to Seller ... [wa]s USD 10,150,000, which amount [was to] be tendered by Buyer on the Closing Date." Section 2.4 of the TTA stipulated that "Seller agree[d] to provide copies of all drawings (i) for spare parts for the Purchased Technology and (ii) as the case may be, for machines covered by the Cross-License Agreement[.]"

On September 7, 2016, WEL filed this breach-of-contract action against NFM, essentially averring that NFM failed to comply with Section 2.4's requirement that NFM provide to WEL copies of all drawings for certain machines and spare parts. WEL seeks specific performance of the agreement, compensatory damages, and "a declaratory judgment that NFM is in material breach of the TTA, and the limited license agreements contained in the TTA are therefore terminated." [ECF 1]. In the answer, NFM denies the averments in the complaint and asserts counterclaims against WEL premised on, inter alia , trademark infringement; and counterclaims under the Declaratory Judgment Act, 28 U.S.C. § 2201. [ECF 17 at 14-29].

Before this Court are the parties' cross-motions for summary judgment filed pursuant to Federal Rule of Civil Procedure ("Rule") 56. Specifically, WEL seeks summary judgment on its breach-of-contract claim against NFM and on all of NFM's counterclaims. [ECF 57]. In turn, NFM seeks summary judgment on both of WEL's claims and on Counts One, Two, and Three of its counterclaims.² [ECF 58]. The issues presented in the cross-motions for summary judgment have been fully briefed by the parties,³ and are ripe for disposition. For the reasons set forth, each motion is granted, in part , and denied, in part.⁴

BACKGROUND

As noted, WEL claims that NFM breached the TTA and, as a result of the breach, seeks specific performance requiring the delivery of all relevant drawings as well as compensatory damages for lost sales revenue caused by not having the drawings (Count I), and a declaration that NFM is in material breach of the TTA and, therefore, that the "limited license agreements" referenced in the TTA are terminated (Count II). [ECF 1]. In its answer, NFM denies the allegations and, in turn, asserts counterclaims against WEL for misappropriation and infringement of NFM's trademarks, specifically, the infringement of the "Welding Engineers" name and the "W-E" logo in violation of Section 43(a) of the Lanham Act, 115 U.S.C. § 1125(a) (Count II) and common law (Counts III, VII), and seeks damages for these violations. NFM also seeks declaratory judgments declaring to wit : that WEL has no right to use any of the relevant trademarks (Count I); that certain disputed devices do not fall within the scope of the TTA's definition of "Turbulator Technology," and, thus, WEL is not entitled to royalties with respect to NFM's use of those devices (Count IV); that WEL is not entitled to drawings of a device called a "vertical feeder" (Count V); and that WEL is not permitted to offer barrels manufactured with hot isostatic pressing ("HIP") technology to customers and that NFM is entitled to sell HIP barrels to any customer in any "field of use" (Count VI). [ECF 17].

Procedurally, discovery ensued and closed. Thereafter, the parties filed cross-motions for summary judgment based on the following uncontested relevant facts:⁵

WEL is a company which was incorporated in Switzerland in 1958 and has its principal place of business in Switzerland. As of 1998, WEL and its parent company, W Bar E Inc. ("W-Bar-E"), were engaged in the business of designing, manufacturing, marketing, and selling extrusion machinery utilized to remove water from synthetic rubber, and had developed substantial expertise, patents and trade secrets relating to equipment designed and manufactured for the purpose of dewatering and finishing of polymers based on single screw slurry feeders, single screw dewaterers, single screw dryers and turbulators, collectively known as "Single Screw Extruder Technology." An affiliate of WEL, Welding Engineers, Inc. ("WEI") designed, manufactured, and sold similar machinery using "twin screw extruder technology."⁶

NFM is an Ohio corporation in the business of designing, manufacturing, and supplying extrusion equipment and other products for the plastic and rubber industries.

The Asset Purchase Agreement

In April 1998, pursuant to an Asset Purchase Agreement (the "APA"), NFM acquired the rights to WEI's twin screw extruder technology.⁷ (ECF 22-4 (APA) at Recitals A & B, and Section 1.01). The APA provided NFM with all of WEI's rights to use the " ‘W-E’ logo" and corporate name "Welding Engineers, Inc." (Id. at Sections 1.01(d), 1.01(h) ). The APA also required the consummation of "a duly executed agreement by and between [NFM] and [WEL], regarding [WEL]'s use of [WEL's] corporate name [i.e. , Welding Engineers Ltd.] and [NFM]'s use of the name ‘Welding Engineers, Inc.’ " (Id. at Section 5.02(f) ).

The License Agreement and Cross-License Agreement

Consistent with the requirement of the APA, WEL and NFM executed a License Agreement and a Cross-License Agreement on the same day they executed the APA, and agreed therein to the following:

• WEL would license the single screw extruder technology to NFM in exchange for royalties;

• NFM would license the twin screw extruder technology to WEL in exchange for royalties;

• WEL could sell products using either the single or twin screw technology outside of North America; and

• NFM could sell products using either technology in North America. (ECF 22-5 (License Agreement) at Sections 1.5, 3.1; ECF 22-6 (Cross-License Agreement) at Sections 1.5, 3.1).

In the Cross-License Agreement, WEL granted NFM the right to use "Licensed Technology" to make, use, market, and sell defined "Products," listed in Exhibit A to said agreement. (Cross-License Agreement at Sections 1.1, 1.3, 3.1, Exhibit A). Notably, vertical feeders were not among the products listed in Exhibit A.Section 13 of the License Agreement, entitled "Use of Name and Logo," outlined the parties' agreements with respect to the use of their respective corporate names. Section 13 provided that pursuant to the APA, NFM had acquired from WEI "all of [WEI]'s right, title and interest in and to [WEI]'s corporate name [i.e. , Welding Engineers, Inc.] and the ‘W-E’ logo[.]" (See License Agreement at Section 13.1). The License Agreement further provided that NFM and WEL "desire[d] to set forth ... their relative rights to the use of the Logo, the use of the name ‘Welding Engineers’, the use by [WEL] of its corporate name ["Welding Engineers Ltd."], and the use by NFM of the name ‘Welding Engineers, Inc.’ " (Id. ) The parties further agreed that WEL "ha[d] the right to utilize its full corporate name, the name ‘Welding Engineers’, and the Logo for its existing business as conducted on the date hereof." (Id. at Section 13.2(a) ). WEL agreed not to use the name "Welding Engineers" without WEL's "corporate designator (i.e., ‘Ltd.’)." (Id. at Section 13.2(b) ). NFM, in turn "ha[d] the right to use the name ‘Welding Engineers’, the name ‘Welding Engineers, Inc.’ and the Logo, without the corporate designator (‘Inc.’) in connection with the business acquired from WEI [in the APA]." (Id. at Section 13.3(a) ). NFM also agreed to seek trademark registrations for the names "Welding Engineers" and "Welding Engineers, Inc.," and for the Logo. (Id. ). Finally, Section 13 concluded by providing that: "The provisions of this Section 13 shall survive termination of the license under this Agreement and termination of any other provision herein." (Id. at Section 13.5).

The Technology Transfer Agreement

In April 2015, NFM⁸ filed a lawsuit against WEL in the United States District Court for the Northern District of Ohio, averring that WEL had failed to report certain royalties owed under the License Agreement. SeeNFM/Welding Engineers, Inc. v. Welding Engineers Ltd. , 5:15-cv-000652 (N.D. Ohio), ECF 1. In October 2015, the parties settled that lawsuit by executing the Technology Transfer Agreement ("TTA"). (ECF 22-7 (TTA) ). Pursuant to the TTA, WEL agreed to pay NFM $10,150,000 to settle the royalty dispute and to purchase NFM's rights to certain twin screw extruder technology (the "Purchased Technology"). NFM also agreed to provide WEL with all "drawings" for certain machines and spare parts. (Id. at Sections 1.1.7, 2.4, 3.1). Specifically, as to the drawings, the TTA section entitled "Perfection of Rights" provides:

As soon as reasonably practicable after the Closing Date, Seller agrees to provide copies of all drawings (i) for spare parts for the Purchased Technology and (ii) as the case may be, for machines covered by the Cross-License Agreement, for the following companies: Lanxess, Inc., in Sarnia, Canada; Dyneon, LLC, in Decatur, Alabama; Solvay Specialty Polymers USA, LLC, in Thorofare, New Jersey; and

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