TOWN & COUNTRY LINEN CORP. and TOWN & COUNTRY HOLDINGS v. INGENIOUS DESIGNS LLC

Background

The plaintiffs alleged that they developed products and product ideas for the defendants, including the CloseDrier portable garment dryer and TuffTech luggage. They asserted claims for patent infringement, copyright infringement, federal and New York trade-secret misappropriation, misappropriation of ideas, quantum meruit, unjust enrichment, unfair competition, breach of contract, and tortious interference with contract. The defendants moved under Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6), which address certain jurisdictional defects and whether a complaint states a legally sufficient claim.

Patent standing

The court declined to dismiss the patent-infringement claim against the defendants generally for lack of prudential standing. The plaintiffs had granted third parties security interests in the CloseDrier patent, including rights connected to infringement claims. Applying the agreements’ language and New York law, the court held that those third parties received rights that would arise only if the plaintiffs defaulted on their loans. They did not receive present patent rights or present authority to sue. The plaintiffs therefore had standing to bring the patent claim without joining those third parties.

The patent claim was dismissed as to Joy Mangano individually. The court held that personal liability for a corporate officer’s direct patent infringement required allegations supporting disregard of the corporate entity. The complaint alleged that Mangano advertised a product sold by HSN, Inc. through her personal social-media accounts, but did not allege that she personally sold or offered to sell the product. The patent claim remained against Ingenious Designs LLC and HSN, Inc.

Copyright claim

The court dismissed the copyright-infringement claim against all defendants. The plaintiffs’ registered work was a CloseDrier control panel with operating buttons, mode lights, and timer controls. Although the panel could be identified separately from the dryer, the court held that it could not exist independently from the dryer’s functional operation. It was therefore a useful article or functional part of one, rather than a copyrightable pictorial, graphic, or sculptural work.

Misappropriation-of-ideas claim

The court dismissed the misappropriation-of-ideas claim against all defendants for two reasons applying to different allegations. The CloseDrier allegations were preempted by federal patent law because they duplicated the patent-infringement allegations: both claims were based on developing, making, promoting, and selling the JOY CloseDrier with Forever Fragrant.

The allegations concerning the Aramid Fiber Luggage Project were not preempted because federal patent law does not protect ideas themselves. However, the court held that those ideas were not novel. The complaint described ideas involving aramid fibers, Oxford-weave fabric, fiber percentages, fiber spacing, and keeping the fibers from showing outside the luggage. Earlier patents showed that using aramid fibers in durable fabrics, including Oxford weaves, and using those fabrics in luggage were already known. The court characterized the plaintiffs’ variations as adaptations of existing knowledge rather than genuinely novel ideas.

Quantum meruit and unjust enrichment

The court allowed the quantum-meruit and unjust-enrichment claims to proceed. Those claims alleged that the plaintiffs provided services and developed products for which the defendants did not reasonably compensate them. Although such claims generally cannot duplicate a valid contract claim covering the same subject, the complaint alleged the MNDA as well as other express or implied agreements, and the parties disputed whether valid contracts covered all of the relevant work and compensation. The court held that this factual dispute prevented dismissal at the pleading stage.

Unfair competition against Joy Mangano

The court allowed the unfair-competition claim against Mangano to proceed. Under New York law, unfair competition requires misappropriation of another’s work or expenditures together with some element of bad faith. The complaint alleged that Mangano participated in receiving the plaintiffs’ prototypes and product information, expressed preferences about the products, advertised the resulting products, and participated in the alleged use of confidential business information. The court held that these allegations were sufficient at this stage to allege her personal participation in bad-faith misappropriation.

Disposition

The motion to dismiss was granted as to Count II, copyright infringement, against all defendants. It was granted as to Count V, misappropriation of ideas, against all defendants. It was granted as to Count I, patent infringement, only against Mangano. The motion was otherwise denied.

The surviving claims were: Count I, patent infringement, against Ingenious Designs LLC and HSN, Inc.; Counts III and IV, federal and New York trade-secret misappropriation, against Ingenious Designs LLC and HSN, Inc.; Counts VI and VII, quantum meruit and unjust enrichment, against Ingenious Designs LLC and HSN, Inc.; Count IX, breach of contract, against Ingenious Designs LLC and HSN, Inc.; Count X, tortious interference with contract, against HSN, Inc.; and Count VIII, unfair competition, against all defendants. Judge Lorna G. Schofield issued the Opinion and Order dated January 29, 2020.