Au New Haven, LLC v. YKK Corporation

Background

Au New Haven, LLC and Trelleborg Coated Systems US, Inc. sued YKK Corporation and other defendants. The dispute involves an exclusive licensing agreement under which YKK received a limited, worldwide license to manufacture, use, sell, and practice the invention in U.S. Patent No. 6,105,214 and related foreign patents. The agreement excluded zippers placed in finished goods in certain high-end outerwear, marine, military, and luggage markets. Plaintiffs alleged that YKK sold laminated zippers in those excluded markets and made statements misrepresenting the scope of its license.

The opinion addresses the parties’ second round of summary-judgment motions. YKK sought judgment on Plaintiffs’ Lanham Act false-advertising claim, Connecticut Unfair Trade Practices Act claim, and breach-of-contract claims. The parties also disputed whether YKK’s January 8, 2020 offer of $740,572, including prejudgment interest through that date, resolved the contract claim for unpaid royalties.

Lanham Act claim

The court held that the patent-publication privilege applied to Plaintiffs’ challenged statements. That privilege protects good-faith communications by a patent owner or licensee about patent rights. Because the privilege applied, Plaintiffs had to show that YKK’s statements were made in bad faith, including that they were objectively baseless—that is, lacking a reasonable objective basis.

The court considered four categories of YKK statements about its license. It held that the first three were not objectively baseless because the licensing agreement did give YKK an exclusive license to manufacture and sell products covered by the patents throughout the world, even though the license was limited and not unlimited. The fourth category included YKK’s statement that it had the exclusive right to manufacture, use, sell, and import the patented zippers. The court held that a reasonable jury could find that statement objectively baseless because YKK shared that right with Uretek.

The court therefore ruled that Plaintiffs could not base their Lanham Act claim on the first three categories of statements, but the fourth category survived. YKK also sought summary judgment on Plaintiffs’ claim for lost-profit damages. The court denied that part of the motion because evidence, including customer-related emails, could support an inference that customers would have bought from Plaintiffs rather than YKK if they had understood the patent-rights issue. The court noted that the evidence might present admissibility issues at trial but concluded that it was sufficient to survive summary judgment.

Connecticut Unfair Trade Practices Act claim

The court granted summary judgment to YKK on the Connecticut Unfair Trade Practices Act claim. It interpreted the statute as applying only to unfair or deceptive practices occurring in trade or commerce in Connecticut, rather than to conduct occurring elsewhere merely because it affected a Connecticut business or involved other Connecticut connections.

Plaintiffs identified activities connected to Connecticut, including negotiations, royalty payments, shipments, testing, and communications involving Uretek’s Connecticut plant. The court concluded that these facts did not show that YKK engaged in the alleged unfair or deceptive advertising, sales, or distribution in Connecticut. Plaintiffs did not allege that YKK sold zippers to Connecticut customers or advertised to customers in Connecticut. The court therefore held that the statute did not apply to the alleged worldwide sales and advertising.

Breach-of-contract claims

The court granted summary judgment on the breach-of-contract claim based on unpaid royalties. It held that YKK’s offer of judgment was not defective merely because it did not expressly mention accrued costs. The court stated that the parties should confer about how to ensure payment, and that it would enter judgment for Plaintiffs on this claim once the offer was paid.

The court also granted summary judgment on Plaintiffs’ contract claim based on an alleged breach of the agreement’s sublicensing provision. Plaintiffs had expressly stated that they did not oppose this portion of YKK’s motion based on the court’s earlier summary-judgment ruling.

Disposition

The court’s final disposition was that YKK’s motion for summary judgment was granted as to Plaintiffs’ Connecticut Unfair Trade Practices Act and breach-of-contract claims, and granted in part and denied in part as to Plaintiffs’ Lanham Act claim. The Clerk of Court was directed to terminate the pending motion.