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Ziebart International Corp. v. Z Technologies Corp.

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

January 23, 2017

Ziebart International Corp., Plaintiff,
Z Technologies Corp., Defendant,
Pure Asphalt Co., Counter Defendant.

          Anthony P. Patti Mag. Judge


          JUDITH E. LEVY United States District Judge

         Before the Court are defendant Z Technologies Corp.'s motion for summary judgment, plaintiff Ziebart International Corp. and counter defendant Pure Asphalt Co.'s motion for partial summary judgment on defendant's counterclaims, and Pure Asphalt Co.'s motion for judgment on the pleadings on counterclaims III and IV. (Dkts. 55, 57, 58.) For the reasons set forth below, the Court will deny defendant's motion for summary judgment, will grant in part and deny in part plaintiff and counter defendant's motion for partial summary judgment, and grant counter defendant's motion for judgment on the pleadings on counterclaims III and IV.

         I. Background

         Plaintiff and defendant began their commercial relationship in 1996, and their relationship continued for fifteen years, ending in 2003. Their commercial disputes began in 2000, and have been ongoing for more than fifteen years, continuing to this day. This lawsuit represents the latest in a series of trademark and contract disputes between the parties.

         Plaintiff is a Michigan corporation that sells appearance and protection goods and services, including rustproofing products, for auto vehicles. (Dkt. 1 at 3-4.) Defendant is a Delaware corporation that manufactures and sells industrial undercoating and paint products for vehicles, also including rust prevention products. (Dkt. 52 at 2.) Pure Asphalt Co. is an Illinois corporation and began supplying plaintiff with a sealant known as Formula Q in 1999. (Dkt. 58 at 12.)

         In 1996, plaintiff sold its chemical subsidiary, Ziebart Products Group, Inc. to The Sentry Corporation, which then became known as Z Tech. (Dkt. 1 at 6; Dkt. 56-2 at 8.) As part of the sale, the parties entered into the following agreements that addressed, among other things, use of trade names, trademarks, disclosure of information, and other intellectual property: Asset Purchase Agreement; License Agreement; Non-Competition and Non-Disclosure Agreement; and Supply Agreement. (Dkt. 1 at 4-6; Dkt. 52 at 19-23; Dkt. 66-10 at 2.)

         In the 1996 Asset Purchase Agreement, the parties agreed that defendant Z Technologies Corp. could use the name “‘ZP Corporation' and variants thereof, ” and that plaintiff would no longer use this name or similar names. (Dkt. 56-2 at 41.) Pursuant to the License Agreement, defendant was permitted to license and use specified trademarks, service marks, and trade names owned by plaintiff. (Dkt. 56-4 at 3-4.) The list of licensed marks and names was never attached to the Agreement, and the parties have not identified which marks and names were included in the License Agreement. The parties also entered into the Non-Competition and Non-Disclosure Agreement (NDA), which stated that “all confidential information shall be and remain the sole and absolute property” of defendant, and prohibited plaintiff from disclosing defendant's confidential and proprietary information without written consent. (Dkt. 56-5 at 4.)

         Finally, the parties entered into an ongoing commercial relationship through a Supply Agreement. Pursuant to this agreement, plaintiff agreed to purchase at least 650, 000 gallons per year of automotive sealants, cleaners, and coatings-including “Ziebart Formula Q”-from defendant. (Dkt. 56-6 at 3.) If defendant were unable to provide this product for a period of time, Article 12 permitted plaintiff to cover by finding an alternate supplier for that time. (Id. at 7-8.) If plaintiff needed to cover, Article 15 stated that plaintiff could disclose otherwise confidential Ziebart Product Formula information to the alternate supplier to ensure it received the appropriate products. (Id. at 9.) The right to disclose confidential information under this circumstance was the only exception to plaintiff's duty not to disclose contained in Article 15 of the Supply Agreement and in the NonCompetition and Non-Disclosure Agreement. The Supply Agreement was to last for five years, at which point plaintiff could renew the contract for another five years “on the same terms and conditions” by giving written notice to defendant at least 180 days before the Agreement expired. (Id. at 4.)

         Approximately four years after the parties entered into these agreements, the parties “had a falling out.” (Dkt. 56 at 14.) Plaintiff stopped purchasing products from defendant and terminated the Supply Agreement in approximately March 2000 (see Dkt. 56-9 at 2). Plaintiff then sent defendant a letter on June 14, 2000, alleging defendant was infringing plaintiff's trademarks and stating “Z Tech is not authorized to use the Ziebart Trademarks.” (Id.) On June 14, 2000, defendant denied the allegations, and requested plaintiff purchase the remaining inventory defendant had prepared specifically for plaintiff. (Dkt. 56-10 at 2.) On August 31, 2000, plaintiff again wrote to defendant, asking defendant to cease and desist from continuing to ship products to plaintiff's franchises, and offering to discuss the remaining inventory. (Dkt. 56-11 at 2.) Two months later, on October 24, 2000, plaintiff again wrote to defendant, ordering it to cease and desist using plaintiff's trademarks. (Dkt. 56-12.)

         In January 2001, defendant sued plaintiff in state court for breach of contract, arguing plaintiff had failed to pay defendant and wrongfully terminated the Supply Agreement. (See Dkt. 56-13.) Plaintiff counterclaimed for breach of the Asset Purchase Agreement, Supply Agreement, and License Agreement. (Dkt. 56-13 at 12-15.) In September 2001, the parties settled the lawsuit and submitted a stipulated dismissal with prejudice. (Dkt. 56-14.) Additionally, the parties entered into a Settlement and Release Agreement by which they agreed to mutually release each other from current and future claims “in connection with any counterclaim brought against Z Tech” and “in connection with any claim brought against Ziebart” in the 2000 litigation. (Dkt. 56-7 at 3.)

         After this dispute, the parties executed an Amended Supply Agreement on September 18, 2001. (Dkt. 1 at 6.) Pursuant to this agreement, the contract would be valid until September 17, 2007, and plaintiff could renew the contract for five years “upon written notice to Z Tech not later than one hundred eighty (180) days prior to the expiration of the initial terms of this Agreement.” (Dkt. 56-7 at 7.)

         Despite their attempts to continue their business relationship, the parties' disagreements persisted. Their commercial relationship broke down in 2003. (Dkt. 1 at 6; Dkt. 52 at 25.)[1] And following this breakdown, plaintiff continued to accuse defendant of infringing its trademarks. In 2003, plaintiff's chief operating officer was informed by one of its techicians that defendant may be using plaintiff's Formula Q trademark on its products. (Dkt. 56 at 15.) In 2006, plaintiff complained to defendant about several warranty forms that stated defendant was the “Originators of Ziebart Protective Coatings.” (Id.) In 2007, Pure Asphalt notified plaintiff that defendant Z Technologies Corp. was using the Ziebart name on its website. (Id. at 16.)

         In 2011, plaintiff learned defendant was potentially infringing several other trademarks on defendant's website. (Dkt. 56 at 16; Dkt. 56-16 at 7.) Plaintiff's trademark counsel, Patricia Lipsky, contacted defendant, and the parties settled the dispute by entering into the Settlement Agreement of February 2012. (Dkt. 56 at 16-17; Dkt. 1-8.) Pursuant to this agreement, defendant was prohibited from using the Z-Shield, Zeegard, and Z Guard names on its website, and plaintiff agreed to allow defendant to use the Z Shield and Z Guard marks in certain fields. (Dkt. 1-8.)

         Subsequently, in 2015, plaintiff learned defendant was using the name Ziebart in the meta tags[2] in connection with its website despite the 2012 Settlement Agreement. Around this same time, plaintiff registered the Formula Q trademark with the U.S. Patent and Trademark Office. Plaintiff then allegedly learned defendant was infringing the Formula Q trademark and filed this lawsuit. (See Dkt. 1.) Plaintiff's claims are as follows: (I) trademark infringement pursuant to 15 U.S.C. § 1114; (II) common law trademark infringement; (III) false designation of origin or sponsorship, false advertising or trademark infringement pursuant to 15 U.S.C. § 1125(a); and (IV) breach of the 2012 Settlement Agreement. (Id. at 8-13.)

         Defendant has brought five counterclaims against plaintiff and Pure Asphalt Co. First, defendant alleges that plaintiff breached the Asset Purchase Agreement and NDA by registering the Formula Q trademark with the U.S. Patent & Trademark Office, “by disclosing to third parties . . . the formula for Formula Q and other formulas, when it was not permitted to do so, ” “by claiming Z Tech does not have the right to use the name ‘Formula Q and . . . bringing legal action against Z Tech for its alleged infringement of the purported ‘Formula Q' trademark.” (Dkt. 52 at 31-32.) Second, defendant argues that, through this same conduct, plaintiff misappropriated its trade secrets “relating to Formula Q and other formulas.” (Id. at 33.) Third, defendant claims Pure Asphalt Co. misappropriated the same trade secrets by continuing to use these formulas despite knowing it has no legal right to do so. (Id. at 34-35.) Fourth, defendant requests a declaratory judgment “of the rights and legal relations [of the parties] pertaining to Z Tech's formulas and other trade secrets and confidential and proprietary information.” (Id. at 36.) Finally, defendant seeks cancellation of plaintiff's registration of the Formula Q trademark, arguing the registration is invalid as ownership rights were transferred to defendant in the 1996 Asset Purchase Agreement. (Id. at 36-37.)

         II. Legal Standard

         Before the Court are motions for summary judgment and a motion for judgment on the pleadings.

         Summary judgment is proper when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The court may not grant summary judgment if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The court “views the evidence, all facts, and any inferences that may be drawn from the facts in the light most favorable to the nonmoving party.” Pure Tech Sys., Inc. v. Mt. Hawley Ins. Co., 95 F. App'x 132, 135 (6th Cir. 2004) (citing Skousen v. Brighton High Sch., 305 F.3d 520, 526 (6th Cir. 2002)).

         Judgment on the pleadings is appropriate “when no material issue of fact exists and the party making the motion is entitled to judgment as a matter of law.” Coyer v. HSBC Mort. Servs., Inc., 701 F.3d 1104, 1108 (6th Cir. 2012). “The standard of review for a Rule 12(c) motion is the same as for a motion under Rule 12(b)(6) for failure to state a claim upon which relief can be granted.” Fritz v. Charter Twp. of Comstock, 592 F.3d 718, 722 (6th Cir. 2010). Thus, “all well-pleaded material allegations of the pleadings of the opposing party must be taken as true, and the motion may be granted only if the moving party is nevertheless clearly entitled to judgment.” Id. (quoting JPMorgan Chase Bank, N.A. v. Winget, 510 F.3d 577, 581 (6th Cir. 2007)). However, the allegations “need to be sufficient to give notice to the defendant as to what claims are alleged, ” and they must state a plausible claim for relief. Id. (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).

         III. Analysis

         A. Defendant's Motion for Summary Judgment

         Defendant seeks to dismiss all of plaintiff's claims. First, defendant argues plaintiff cannot bring Counts I, II, or III because (1) they are time barred by the statute of limitations and laches, and/or (2) they are barred by the 2001 lawsuit and the doctrine of res judicata. (Dkt. 56 at 11-18.) Second, defendant argues that Counts I, III, and IV are barred under the doctrine of equitable estoppel and the Asset Purchase Agreement. (Id. at 19-21.)

         Defendant is also seeking summary judgment on four issues related to its counterclaims: (1) the NDA is still in effect; (2) plaintiff's right to cover under the Amended Supply Agreement does not extend “forever”; (3) plaintiff is barred from arguing that its disclosure of defendant's formula to Pure Asphalt Co. destroyed defendant's rights; and (4) plaintiff is barred from making new disclosures of defendant's formulas. (Dkt. 56 at 29-33.)

         i. Counts I-III Are Not Time Barred

         Defendant claims Counts I, II, and III-plaintiff's trademark infringement claims under the Lanham Act and common law-are time barred. (Dkt. 56 at 19-22.)

         There is no express statute of limitations for common law trademark infringement claims, but the Sixth Circuit has held that Michigan's three-year statute of limitations for property damage applies to common law trademark infringement claims. See, e.g., Nartron Corp. v. STMicroelectrionics, Inc., 305 F.3d 397, 408 (6th Cir. 2002).

         The Lanham Act also does not include an express statute of limitations. Instead, courts use the doctrine of laches to determine if a claim is barred. Audi AG v. D'Amato, 469 F.3d 534, 545 (6th Cir. 2006). Under this doctrine, a court looks at “(1) whether the owner of the mark knew of the infringing use; (2) whether the owner's delay in challenging the infringement of the mark was inexcusable or unreasonable; and (3) whether the infringing user was unduly prejudiced by the owner's delay.” Id. at 545-46. In the Sixth Circuit, “there is a strong presumption that a plaintiff's delay in asserting its rights is reasonable as long as an analogous state statute of limitations has not elapsed.” Nartron Corp., 305 F.3d at 408. In this case, assuming that Michigan law is the pertinent law, the statute of limitations is three years. “In other words, a delay beyond the three-year statutory period is presumptively prejudicial and unreasonable. The period of delay begins to run when plaintiff had ‘actual or constructive knowledge of the alleged infringing activity.'” Id. To rebut this presumption of ...

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