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MINEBEA CO. v. PAPST

June 22, 1998

MINEBEA CO., LTD., et al., Plaintiffs,
v.
GEORG PAPST, et al., Defendants.



The opinion of the court was delivered by: HARRIS

OPINION

 Before the Court are defendants' motion to dismiss, plaintiffs' opposition thereto, defendants' reply, and the parties' citations of supplemental authority and responses thereto. Based on plaintiffs' complaint and the submissions of the parties, the Court grants defendants' motion to dismiss Counts VIII and IX but denies defendants' motion with respect to all other counts. An appropriate Order accompanies this Opinion.

 BACKGROUND

 This dispute arises out of a series of business transactions between plaintiff Minebea Co., Ltd. ("Minebea"), its subsidiaries, plaintiffs Precision Motors Deutsch Minebea, GmbH ("PMDM"), and Nippon Miniature Bearing Corporation ("NMB"), and defendants Georg Papst and Papst Licensing GmbH ("Papst Licensing"). *fn1" In 1990, Minebea and Papst-Motoren GmbH & Co. KG ("Papst-Motoren KG"), a German corporation owned and controlled by Papst and his immediate family, entered into a "General Business Agreement" which established a joint venture for the research, development, engineering, manufacture, and sale of hard disk drive motors ("HDD spindle motors"). One of the joint venture entities created was PMDM, and all the joint venture entities were controlled by Papst. As part of the joint venture agreement, Papst-Motoren KG granted Minebea the right to use all its patents, and it was agreed that purchasers of HDD spindle motors from the joint venture or Minebea and its subsidiaries would be free to utilize such motors for their sole intended use -- in hard disk drives -- without any danger of infringing any patents owned or controlled by Papst-Motoren KG or Georg Papst.

 Plaintiffs allege that, beginning in 1991, Papst made misrepresentations to Minebea regarding the scope of the joint venture. In particular, Minebea alleges that Papst misrepresented that certain patents had not been previously licensed to Minebea under the General Business Agreement. Minebea relied upon these representations in all of its subsequent discussions and dealings with Papst due to the fiduciary relationship established during the joint venture. Moreover, Minebea alleges that Papst formed Papst Licensing for the purpose of, inter alia, converting valuable joint venture assets to his benefit.

 Eventually, in 1993, the parties decided to end the joint venture. They entered into a series of agreements which provided that (1) Papst Licensing would be substituted for Papst-Motoren KG, (2) Minebea would purchase Papst Licensing's interest in PMDM and the other joint venture entity, and (3) Minebea would pay Papst Licensing in return for being granted licenses under various of Papst's patents. The agreements specifically carved out from Minebea's license certain "Drive Patents" owned by Papst and Papst Licensing. Minebea claims that it agreed to this provision based on misleading representations by Papst that the Drive Patents were never included in the General Business Agreement.

 Finally, in 1995, Minebea and Papst Licensing entered into a "Settlement Agreement," purportedly to create a "lasting peace" between the parties by granting Minebea and PMDM the patents necessary for them to continue the business of selling HDD spindle motors. Plaintiffs allege that during the process of negotiating the Settlement Agreement, Papst and Papst Licensing continued to misrepresent the number and scope of previous patents licensed to Minebea and PMDM during and after the joint venture. The result of these misrepresentations was that the Settlement Agreement contained a clause reserving certain rights for Papst and Papst Licensing against purchasers of Minebea's HDD spindle motors.

 Starting about the spring of 1995, Papst and Papst Licensing began to make claims that plaintiffs' customers were violating certain Papst patents. They alleged that the customers' incorporation of the HDD spindle motors into hard disk drives infringed other Papst patents. Minebea and its subsidiaries learned of the allegations after they received demands for indemnification from their customers. Plaintiffs then filed the instant complaint, alleging that through fraud and deceit, Georg Papst and Papst Licensing had carved out patent rights which had previously been licensed to Minebea and were necessary for the ongoing HDD spindle motor business of Minebea and its subsidiaries.

 DISCUSSION

 A. Subject Matter Jurisdiction

 Defendants first contend that plaintiffs' complaint should be dismissed under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction because it does not raise a federal question. Defendants further contend that even if some counts of the complaint raise a federal question, the Court should not exercise pendent jurisdiction over the remaining state law counts. Plaintiffs argue that there is an independent federal question in each count of the complaint, or alternatively that there is at least one federal question presented and the Court should exercise supplemental jurisdiction over the remaining claims. *fn2"

 1. Count VII -- Violation of § 43(a)

 In Count VII, plaintiffs allege that defendants have violated § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), by falsely claiming that the use of plaintiffs' motors in a hard disk drive infringes upon defendants' patents and that plaintiffs are not licensed under such patents. It appears clear to the Court that false patent infringement and licensing claims may violate the Lanham Act, and therefore this Court has subject matter jurisdiction over Count VII pursuant to 28 U.S.C. § 1331. See, e.g., Laser Diode Array, Inc. v. Paradigm Lasers, Inc., 964 F. Supp. 90, 95 (W.D.N.Y. 1997) ("There is case authority that allegations that a party falsely represented to a business's customers that the business was infringing on the party's patent rights will support such [a Lanham Act claim]." (citations omitted)); Wicker Grp. v. Standard Register Co., 1994 U.S. Dist. LEXIS 20236, 33 U.S.P.Q.2D (BNA) 1678, 1680 (E.D. Va. 1994) (plaintiffs' allegations that defendant made false statements about the scope of its patent and its relationship to plaintiffs' technology adequately pled a Lanham Act violation); Brandt Consol., Inc. v. Agrimar Corp., 801 F. Supp. 164, 170 (C.D. Ill. 1992) (denying motion to dismiss Lanham Act count based on false patent infringement claims).

 2. Counts I, X, and XI -- Requests for Declaratory Relief

 In Counts I, X, and XI, plaintiffs request a declaration pursuant to the Federal Declaratory Judgments Act, 28 U.S.C. §§ 2201 & 2202 (1994), that: (1) plaintiffs' authorized sales of HDD spindle motors exhaust defendants' patent rights; (2) certain patents allegedly infringed by plaintiffs' customers are encompassed in the licensing ...


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