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Hoenig Developments, Inc. v. Dial Industries, Inc.

United States District Court, E.D. Michigan, Southern Division

March 27, 2015



DENISE PAGE HOOD, District Judge.

Before the Court is Defendant, Dial Industries, Inc.'s, Motion to Dismiss and/or For Change of Venue Improperly Laid, or in the Alternative, for Change of Venue for the Convenience of the Witnesses and Parties and in the Interests of Justice [Docket No. 9, filed January 24, 2014]. Plaintiffs filed a Response in Opposition to this Motion on February 24, 2014, [Docket No. 14] to which Defendant filed a Reply [Docket No. 15, filed March 10, 2014].


Plaintiff Hoenig Developments, Inc. ("Hoenig Inc.") is a corporation that is organized and exists under Canadian law but maintains a place of business in Oakland Township, Michigan. Plaintiff Hoenig Developments, LLC ("Hoenig LLC") is a limited liability company that is organized and exists under Michigan law. Hoenig LLC also maintains a place of business in Oakland Township, Michigan and Plaintiff asserts that there are no members of Hoenig LLC that are residents of California. Defendant Dial Industries, Inc. ("Dial") is a corporation organized and existing under California law that maintains a place of business in Los Angeles, California.

Plaintiffs Hoenig LLC and Hoenig, Inc. (hereinafter "Plaintiffs") claim that in or around 2000, Peter Hoenig, a retired Canadian schoolteacher and inventor, "designed and invented a drawer organizer device that he named the DREAM DRAWER.'" On or about January 24, 2002, Mr. Hoenig filed a provisional patent application with the U.S. Patent and Trademark Office ("USPTO"), and received a patent which designated it as U.S. Patent Application 601351, 541 [Compl. ¶10]. On or about January 17, 2003, Mr. Hoenig filed a regular utility patent application with USPTO entitled "Drawer Organizer, " which designated it as U.S. Patent Application 101347, 049. Plaintiffs contend that the "049 application claims the benefit of the earlier filing date of January 24, 2002 for the '541 provisional application" [Compl. ¶ 11].

On or about January 31, 2006, Plaintiff states that the USPTO issued a U.S. Patent 6, 997, 307 to Mr. Hoenig for the "Drawer Organizer" device. [Docket No. 1, Exhibit A - the '307 Patent] Mr. Hoenig then assigned all his rights, title, and interest in the '307 Patent to Hoenig, Inc. which assigned its rights to Hoenig LLC [Compl. ¶ 13-14]. Plaintiffs claim that they have used the mark "DREAM DRAWER" since at least November 2001 in connection with its patented Drawer Organizer device, acquiring "rights in the word mark" and "gain[ing] great recognition for such use" [Compl. ¶ 15]. Plaintiffs also contend that the word mark "DREAM DRAWER" is "inherently distinctive and/or has become distinctive through its acquisition of secondary meaning" [Compl. ¶ 16].

On December 18, 2002, Plaintiffs and Defendant Dial entered into a license agreement in which Plaintiffs granted Defendant an exclusive license to manufacture, market, and sell the patented Drawer Organizer device and use Plaintiff's "DREAM DRAWER" word mark [Compl. ¶ 20-21]. In exchange, Defendant was to, among other things, pay Plaintiffs "10% of the Net Sale Price (as determined in accordance with generally accepted accounting principles, GAAP) the Licensee or any of its subsidiaries is receiving for the [patented Drawer Organizer device]" [Compl. ¶ 22; Ex. B at ¶ 4]. Plaintiffs assert that they were also to receive a royalty of 17% of the net sales of devices that were sold outside of the United States [Comp. ¶ 23]. The license agreement was written for a term of twenty (2) years unless the agreement was "terminated for reasons of default" [Docket No. 1, Ex. B. at ¶ 9].

In or around November 2003, Plaintiffs allege that Defendant began to sell its patented product [Compl. ¶ 28]. For a period of time, Plaintiffs received their payment under the agreement [Compl. ¶ 30]. However, some time in 2010, Plaintiffs contend that Defendant Dial began to develop and implement a plan to "increase profitability in part by decreasing costs" which included reducing the amount that it paid to business partners including Plaintiffs [Compl. ¶ 31]. Plaintiffs claim that Defendant "resolved to attempt to create a copy drawer organizer device that is substantially and confusingly similar to Hoenig's patented Drawer Organizer device" and began to call its devices "DREAM DRAWER" [Compl. ¶ 32-33]. Plaintiffs further contends that Defendant improperly filed an application with the USPTO to register the "DREAM DRAWER" mark that Defendant was only allowed to use as a part of its licensing agreement while knowing that Plaintiffs continuously used the mark since 2001 [Compl. ¶ 33-35]. Plaintiffs claims that as a result, the amount that they received from Defendant decreased and Defendant's wrongful actions, including its improper trademark, caused Plaintiffs to incur money damages [Compl. ¶ 37-39].

Plaintiffs' Complaint alleges five claims for relief: Count I - Trademark Infringement Under 15 U.S.C. § 1125(a); Count II - Breach of Contract; Count III - Quantum Meruit / Unjust Enrichment; Count IV - Cancellation of Trademark; and Count V - Request for Accounting. Plaintiffs contend that this Court has jurisdiction over the Defendant "consistent with the requirements of due process because, for example, (1) Defendant Dial purposefully availed itself of the privilege of conducting business activities in Michigan by conducting business with at least one Michigan company, Hoenig, LLC, thereby invoking the benefits and protections of Michigan's laws; (2) Plaintiffs' claims arise from the activities of Defendant Dial in Michigan; and (3) this Court's exercise of jurisdiction over Defendant Dial is reasonable because Michigan has a manifest interest in providing effective means of redress to Plaintiffs as Michigan is the place where harms occurred" [Docket No. 1, Pg ID 2]. Plaintiffs claim that Defendant "has systematic and continuous contacts with the State of Michigan" and that venue is proper in this Court pursuant to 28 U.S.C. § 1391(b) [Id.]. Plaintiffs also claim jurisdiction pursuant to the Lanham Act, 15 U.S.C. § 1125(a).

In its Motion to Dismiss or for Change of Venue, Defendant argues the facts in this case are such that a "substantial part" of the alleged actions did not occur within the Eastern District of Michigan [Docket No. 9, Pg ID 81]. Defendant contends that this matter should be transferred to the United States District Court for the Central District of California, pursuant to 28 U.S.C. § 1404(A), for the convenience of the parties and the witnesses as well as in the interest of justice [Id. at 82]. Specifically, Defendant relies on the Affidavit of John Macho [Docket No. 9, Exhibit 2] in which Mr. Macho states that more than just a "substantial part" of the events that gave rise to the purported claims of the Plaintiffs' occurred at Defendant Dial's operations and facilities in the Los Angeles, California. This included Defendant Dial's decision, and execution on its decision, to replace the Hoenig Dream Drawer with its own product, the decision makers, and the execution of their decisions all occurred at Dial's operations and facilities in the Los Angeles, CA area. This also included, according to Mr. Macho, Defendant's decision, and action, to trademark the phrase "DREAM DRAWER, " because the decision makers, and the execution of their decisions all occurred at Defendant Dial's operations and facilities in Los Angeles, California.

The plaintiff bears the burden of establishing jurisdiction. Third National Bank in Nashville v. WEDGE Group, Inc., 882 F.2d 1087, 1089 (6th Cir.1989), cert. denied, 493 U.S. 1058 (1990). The procedure for deciding a motion to dismiss for lack of personal jurisdiction under Fed.R.Civ.P. 12(b)(2) in the Sixth Circuit is set forth in Serras v. First Tennessee Bank National Association, 875 F.2d 1212, 1214 (6th Cir. 1989). The court may determine the motion on the basis of the submitted affidavits alone, it may permit discovery in aid of the motion, or it may conduct an evidentiary hearing, either pretrial or during trial, on the merits of the motion. Id. (quoting Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2nd Cir. 1981)). If the written submissions raise disputed issues of fact or require determinations of credibility, the court may order a hearing. See id. The plaintiff then must prove that jurisdiction exists by the same standard that would apply if the matter were deferred to trial: the preponderance of the evidence. Serras, 875 F.2d at 1214 (citing Welsh v. Gibbs, 631 F.2d 436, 439 (6th Cir. 1980), cert. denied, 450 U.S. (1981) (stating that "the plaintiff must show by a preponderance of the evidence that jurisdiction exists").

"If the court rules on written submissions alone, it must consider the pleadings and affidavits in the light most favorable to the plaintiff.'" Id. (quoting Welsh, 631 F.2d at 436). Plaintiff "may not rest on his or her pleadings to answer affidavits submitted by the movant, but must set forth, by affidavit or otherwise[, ]... specific facts showing that the court has jurisdiction.'" Serras, 875 F.2d at 1214 (citation omitted). However, Plaintiff's burden is merely to make a prima facie showing that personal jurisdiction exists. See Id. If plaintiff meets that burden, the motion to dismiss should be denied, "notwithstanding any controverting presentation by the moving party." Id. (quoting Marine Midland Bank, 664 F.2d at 904).

In a diversity action (here, Plaintiffs a Canadian Corporation and a Michigan LLC and Defendant a California corporation), the issue of whether a federal court has personal jurisdiction over a defendant is determined by applying the law of the state in which the court sits. See Erie Railroad Co. v. Tompkins, 304 U.S. 64, 78 (1938) (noting that "Except in matters governed by the Federal Constitution or by acts of Congress, the law to be applied in any case is the law of the state."). In addition, the court must consider whether constitutional due process permits personal jurisdiction. Theunissen v. Matthews, 935 F.2d 1454, 1459 (6th Cir. 1991). The relevant inquiry is whether the facts of the case demonstrate that the non-resident defendant possesses such minimum contacts with the forum state that the exercise of jurisdiction would comport with "traditional notions of fair play and substantial justice." International Shoe Co. v. State of Washington, 326 U.S. 310, 316 (1945).

The state of Michigan's long-arm statute on personal jurisdiction over corporations provides that limited or "specific" jurisdiction may be exercised where a specified relationship exists between a ...

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