Opinion
CASE NO. C 02-04097 SI.
July 31, 2003.
KENNETH B. WILSON, State Bar No. 130009 STEFANI E. SHANBERG, State Bar No. 206717 LUNG-CHI LEE, State Bar No. 215521 PERKINS COLE LLP 180 Townsend Street, 3rd Floor San Francisco, California 94107-1909 Telephone: (415) 344-7000 Facsimile: (415) 344-7050
Attorneys for Plaintiff and Counterdefendant TILIA INTERNATIONAL, INC.
SCOTT R. BROWN, California State Bar No. 151635 JASON E. GORDEN, California State Bar No. 208594 HOVEY WILLIAMS LLP
2405 Grand Blvd., Suite 400 Kansas City, Missouri 64108 Telephone: (816) 474-9050 Facsimile: (816) 474-9057
Attorneys for Defendant and Counterclaimant ARY, INC.
STIPULATED DISMISSAL WITH PREJUDICE
WHEREAS, on August 26, 2002, plaintiff Tilia International, Inc. ("Tilia") filed its Complaint for Patent Infringement against ARY, Inc. ("ARY");
WHEREAS, on October 9, 2002, ARY filed its answer and counterclaims against Tilia.
WHEREAS, on July 25, 2003, the parties executed the final Settlement and Patent License Agreement attached hereto as Exhibit A; and
WHEREAS, the parties desire that the Court enter this Stipulated Dismissal with Prejudice.
In witness wherefore, by signing below the parties, by and through their counsel of record, hereby AGREE AND STIPULATE, AND THE COURT ORDERS ADJUDGES AND DECREES, AS FOLLOWS:
1. This Court has jurisdiction over the subject matter of and the parties to this action is proper in this judicial district;
2. Tilia's claims against Defendant are hereby dismissed with prejudice;
3. ARY's counterclaims against Tilia are hereby dismissed with prejudice; and
4. Each party shall bear its own costs and attorneys' fees.
IT IS SO ORDERED, ADJUDGED AND DECREED:
SETTLEMENT AND PATENT LICENSE AGREEMENT
This Settlement and Patent License Agreement (" Agreement") is made and entered into as of July 25, 2003 (the " Effective Date"), by and between Tilia International, Inc. (" Tilia" and ARY, Inc. (" ARY") (collectively, the " Parties").RECITALS
WHEREAS, ARY manufactures, imports, markets, sells and/or distributes vacuum channel bags containing a cracked ice pattern ("Cracked Ice Bags").
WHEREAS, ARY denies having thus far manufactured, imported, marketed, sold and/or distributed vacuum channel bags containing a crisscross pattern ("Crisscross Bags").
WHEREAS, ARY may manufacture, import, market, sell and/or distribute Crisscross Bags in the future.
WHEREAS, on August 26, 2002, Tilia filed an action in United States District Court for the patent infringement entitled, Tilia International, Inc. v. ARY, Inc., bearing Case No. C 02-4097 SI (the " Tilia Claim") against ARY alleging that the ARY's manufacture, import, marketing, sale and/or distribution of the Cracked Ice Bags and/or the Crisscross Bags infringes Tilia's U.S. Patent No. RE 34,929, entitled "Plastic Bag for Vacuum Sealing", which originally issued on July 12, 1988, to Harms J. Kristen (the " 929 Patent").
WHEREAS, on October 9, 2002, ARY filed a counterclaim in United States District Court seeking a declaration of non-infringement and invalidity and alleging a violation of section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), interference with prospective business advantage, defamation, deceptive trade practices in violation of Nebraska Revised Statute § 87-302 (the " ARY Claim" and, together with the Tilia Claim, the "Claims").
WHEREAS, the Parties desire to finally settle the Claims and, therefore, enter into this Agreement upon the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and obligations herein undertaken, the Parties agree as follows:
1. Admission of Infringement and Validity.
ARY hereby agrees and acknowledges that its manufacture, import, marketing, sale and/or distribution of the Cracked Ice Bags is covered by at least one valid and enforceable claim of the "929 Patent. ARY hereby agrees and acknowledges that the manufacture, import, marketing, sale and/or distribution of the Crisscross Bags would be covered by at least one valid and enforceable claim of the `929 Patent. Furthermore, ARY hereby agrees and acknowledges that the `929 Patent is valid and enforceable under all applicable laws. ARY agrees that it will not, and ARY agrees that it will not cause any person which directly or indirectly controls or is controlled by, or is under common control with ARY (" ARY Affilates") to challenge or assist any third party in challenging the validity or enforceability of the `929 Patent.
2. Limited License Grant.
2.1. Subject to the terms and conditions of this Agreement, Tilia grants to ARY a nonexclusive, nontransferable, royalty-bearing, limited license (without the right to sublicense) under the `929 Patent to make, use, sell, offer for sale and otherwise dispose of the Cracked Ice Bags solely in the commercial market (i.e., ARY shall not knowingly make, have made, use, sell, offer for sale or otherwise dispose of Cracked Ice Bags in the household market).
2.2. Subject to the terms and conditions of this Agreement, Tilia grants to ARY a nonexclusive, nontransferable, royalty-bearing, limited license (without the right to sublicense) under the `929 Patent to make, use, sell, offer for sale and otherwise dispose of the Crisscross Bags solely in the commercial (i.e., non-household) market.
2.3. No additional license, grant, or working right to the `929 Patent is granted or implied by this Agreement.
3. Use of Name and Marks.
Except as expressly stated herein, ARY shall not use any trademark, service mark, brand name, copyright, patent, or any other intellectual property of Tilia without Tilia's prior written consent. Tilia's name is proprietary and nothing herein constitutes a license authorizing the use of Tilia's name or other Tilia trademarks, service marks or brand names, and in no event shall ARY attempt to sell services or products using the name of Tilia other Tilia trademarks, service marks or brand names. In addition, ARY shall not market the Cracked Ice Bags or Crisscross Bags to the non-commercial market or for use with Tilia products.
4. Payments.
4.1. As consideration for the license granted in Section 2.1 above, ARY shall pay to Tilia 7.5 % of the Net Revenues (as such term is defined below) that ARY receives from the sale or distribution of the Cracked Ice Bags for each Cracked Ice Bag that ARY sells or distributes, net of returns. The Parties hereby agree that if ARY pays Tilia Forty-Three Thousand Two Hundred and Six Dollars ($43,206.00) within 10 days of the Effective Date, Tilia shall accept such payment in full satisfaction of all amounts that ARY owes, or might owe, Tilia under Sections 2.1 and 4.1.
4.2. As consideration for the license granted in Section 2.2 above, ARY shall pay to Tilia 15% of the Net Revenues that ARY receives from the sale or distribution of the Crisscross Bags. ARY shall pay Tilia the foregoing amounts on a quarterly basis within fifteen (15) days of the end of each quarter.
4.3. As used in this Agreement, " Net Revenues" shall mean all revenue, less all out-of-pocket costs paid, attributed to, or accumulated in order to manufacture, test, package, ship, warehouse, or otherwise process Cracked Ice Bags or Crisscross Bags, as applicable, up to a maximum of fifteen percent (15%)], less returns.
4.4. All payments made by ARY to Tilia hereunder shall be made in U.S. dollars by remitting to Tilia a check of immediately available funds to the following address or as otherwise directed by Tilia:
Tilia International, Inc. 303 Second Street North Tower, Fifth Floor San Francisco, CA 94107-6302 Attn: Dolores Silva
4.5 ARY agrees to pay, and to indemnify and hold Tilia harmless from, any sales, use, excise, import or export, value added or similar tax, not based on Tilia's net income, as well as the collection or withholding thereof, including penalties and interest, and all government permit or license fees and all customs, duty, tariff and similar fees levied upon the delivery of the Cracked Ice Bags and Crisscross Bags, and any costs associated with the collection of any of the foregoing items.
5. Stipulation of Dismissal.
Within ten (10) days after the Effective Date, each Party agrees to join in and file Stipulations of Dismissal with Prejudice in the forms attached hereto as Exhibit A, or in such other forms as required for approval by the Court, for dismissal of the Claims with prejudice.
6. Representations and Warranties.
6.1. Tilia represents and warrants to ARY as follows.
(a) It has the full power and authority to enter into this Agreement.
(b) It possesses or has acquired all right, title and interest in and to the `929 Patent, and that it has the right, authority and capacity to enter into this Agreement and grant the rights set forth in Section 2.
(c) It has not entered into any agreement in conflict with this Agreement or which would interfere with or diminish the rights granted hereunder.
(d) To Tilia's knowledge, the `929 Patent does not misappropriate or misuse the intellectual property of any third party.
6.2. ARY represents and warrants to Tilia that it the full power and authority to enter into and legally perform its obligations under this License Agreement.
7. Term and Termination.
7.1. Term. The term of this Agreement shall be from the Effective Date until the expiration of the `929 Patent, unless terminated sooner in accordance with the provisions contained herein.
7.2. Termination. This Agreement, and the license granted hereunder may be terminated earlier by Tilia, without penalty or liability, if (a) ARY shall have breached any of its material obligations under this Agreement and such default continues unremedied for 30 days or more days after written notice of such default is delivered from Tilia to ARY; or (b) ARY shall voluntarily or involuntarily commence a bankruptcy proceeding or apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or all or a substantial part of its property, or take any similar action or (c) ARY exceeds the scope of the licenses granted herein.
7.3. Survival. The following provisions shall survive the termination or expiration of this Agreement: Sections 1, 3, 8, 9, 10.
8. Nondisparagement.
The Parties hereby agree and acknowledge that they will not disparage in any way the other Party or the products, services, employees or business reputation of the other Party or otherwise engage in conduct that is intended to disrupt, damage, impair or interfere with the business reputation of the other Party.
9. Audit Rights.
ARY agrees to create, safely maintain, and preserve records of all Cracked Ice Bags and Crisscross Bags made, used, sold, offered for sale and otherwise disposed of by ARY and all other relevant commercial, business, financial, shipping, or accounting documentation related thereto (collectively " Records") in an understandable form, in the English language, and using generally accepted accounting practices and reasonable business methods. Such Records shall be kept throughout the duration of this Agreement and for a period of three (3) years from creation of that record. During this period, Tilia may cause an audit to be made of the Records in order to verify ARY's compliance with this Agreement. Any such audit shall be conducted by an independent certified public accountant selected by Tilia, and shall be conducted during regular business hours and in such a manner as not to unreasonably interfere with ARY's normal business activities. Tilia shall pay for any such audit, unless the audit shows a discrepancy of five percent (5%) or more in the number of Cracked Ice Bags or Crisscross Bags made, used, sold, offered for sale and otherwise disposed of reported by ARY or shows ARY otherwise breached this Agreement in a material manner. In those cases, ARY shall pay Tilia for the costs associated with the audit and remedy any breach if possible. All audit rights under this Agreement relating solely to the Cracked Ice Bags shall be extinguished upon payment of the paid-up licensee fee in accordance with Section 4.1. All audit rights relating solely to the Criss Cross Bags shall commence on either ARY's notice to Tilia that ARY is selling Criss Cross bags or upon Tilia's reasonable belief of ARY's sale of Criss Cross bags, provided however, Tilia's reasonable belief can be rebutted by ARY's written affidavit that it has not sold Criss-Cross bags.
10. Confidentiality.
In the performance of its obligations under this Agreement, each Party may disclose certain of its Confidential Information (the " Disclosing Party") to the other Party (the " Receiving Party"). The Receiving Party shall not disclose any Confidential Information of the Disclosing Party to any third person, except to its employees, agents and consultants who have a reasonable need to know such information in connection with the performance of this Agreement. Before disclosing any Confidential Information of the Disclosing Party to any such employee, agent or consultant, the Receiving Party shall advise such person of the confidentiality provisions hereof and obtain the commitment of such person to abide thereby. In any case, the Receiving Party shall be responsible to the Disclosing Party for any violation of the terms hereof by any of the employees, agents or consultants of the Receiving Party. In addition to the foregoing, the Receiving Party shall safeguard the Confidential Information of the Disclosing Party with the same degree of care that it utilizes to safeguard its own proprietary information of a similar character, and in any case shall use reasonable care to safeguard such Confidential Information. The Receiving Party shall not use Confidential Information of the Disclosing Party except for purposes of this Agreement. If compelled by subpoena or other court order to produce any Confidential Information, the Receiving Party shall immediately contact the Disclosing Party and provide the Disclosing Party with the opportunity to object and/or seek a protective order to prevent its production or the terms of its production. " Confidential Information" means the proprietary and/or confidential information of a Party that relates to such Party's business, operations, services, products, trade secrets or technical knowledge, including information relating to such Party's patent applications, methods of manufacturing, products (current or planned), computer software, product documentation, research, development, processes, procedures and "know-how," as well as the terms and existence of this Agreement, the fact that there has been a settlement and any of the negotiations leading to this settlement or Agreement. Notwithstanding anything foregoing to the contrary, Tilia may disclose to any party the terms and existence of this Agreement without the consent of ARY.
11. Injunctive Relief.
Each Party agrees that its obligations hereunder are necessary and reasonable in order to protect the other Party and the other Party's business, and expressly agrees that monetary damages would be inadequate to compensate the other Party for any breach by either Party of any covenants and agreements set forth herein. Accordingly, each Party agrees and acknowledges that any such violation or threatened violation will cause irreparable injury to the other Party and that, in addition to any other remedies that may be available, in law, in equity or otherwise, the other Party shall be entitled to injunctive relief, specific performance and other equitable remedies without proof of (a) irreparable harm absent an injunction, (b) the balance of hardships favors an injunction or (c) monetary damages or the inadequacy of other remedies.
12. Disclaimer of Warranties Limitation of Liability.
EXCEPT AS EXPRESSLY SET FORTH HEREIN, TILIA SPECIFICALLY DISCLAIMS ALL WARRANTIES IN CONNECTION WITH THE PATENT, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY, VALIDITY, ENFORCEABILITY, INTERFERENCE AND FITNESS FOR A PARTICULAR PURPOSE IN CONNECTION THEREWITH. IN NO EVENT SHALL TILIA BE LIABLE (WHETHER IN CONTRACT, WARRANTY, TORT, NEGLIGENCE OR OTHERWISE) FOR ANY INDIRECT, INCIDENTAL, SPECIAL, LOSS PROFITS OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT. IN NO EVENT SHALL THE AGGREGATE LIABILITY OF TILIA ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT EXCEED THE PAYMENTS RECEIVED BY TILIA UNDER SECTIONS 4.1 AND 4.2 OF THIS AGREEMENT.
13. Acknowledgement.
The Parties acknowledge that they are sophisticated business persons and entities who performed their own investigation regarding the issues in this dispute and have had an opportunity to consult with legal counsel of their choice before entering into this Agreement.
14. Severability.
In the event that any provision of this Agreement, or the application of any provision to any person or in any circumstances, shall be determined to be invalid, unlawful, or unenforceable to any extent, the remainder of this Agreement and its application to other persons or in other circumstances shall not be affected by such a determination, and each remaining provision and application of this Agreement shall continue in full force and effect and may be enforced to the fullest extent permitted by law.
15. Successors and Assigns.
All covenants and agreements herein shall bind and inure to the benefit of the respective successors, assigns, representatives, employees, transferees, directors, officers, attorneys, parent companies, subsidiaries, divisions, partners and joint venturers of the Parties hereto. ARY may not assign or transfer this Agreement, whether by operation of law or otherwise, without the prior written consent of Tilia.
16. Attorneys' Fees.
Except as otherwise provided in this Agreement, each Party shall bear its own costs and attorneys' fees incurred in the disputes hereby resolved except as provided herein. If any Party hereto shall bring an action against any other Party hereto, or otherwise seek to enforce this Agreement, by reason of the breach of any covenant, warranty, representation or condition of this Agreement, or otherwise arising out of this Agreement, whether for declaratory or other relief, the prevailing Party in such suit shall be entitled to its costs of suit and attorneys' fees.
17. Counterparts.
This Agreement may be executed in two or more partially or fully executed counterparts each of which shall be deemed an original and shall bind the signatory, but all of which together shall constitute but one and the same instrument.
18. Amendment.
No modification of or amendment to this Agreement shall be effective unless in writing and signed by all Parties to this Agreement.
19. Governing Law.
This Agreement will be governed by, enforced and construed in accordance with the laws of the State of California, without regard to its choice of law principles.
20. Notices.
If a Party is required or permitted to give notice to the other Party under this Agreement, such notice shall be deemed given either: (i) upon transmission by facsimile service to the number listed below, with the sending Party having received a transmission report affirming that all pages of the notice have been transmitted to the correct facsimile number, with duplicate notification sent via overnight delivery, or (ii) when delivered in person to the recipient named below, or (iii) upon the date of receipt after deposit with an overnight courier service; all addressed by name and address to the Party or persons intended as follows:
To Tilia:
Tilia International, Inc.
303 Second Street North Tower, Fifth Floor San Francisco, CA 94107-6302 Attn: Dolores Silva Telephone: (415) 371-7200 Facsimile: (415) 896-6469With a copy. which shall not constitute notice to:
Perkins Cole LLP Attn: Stefani E. Shanberg 180 Townsend Street San Francisco, CA 94107-1909 Telephone: (415) 344-7000 Facsimile: (415) 344-7050To ARY:
10301 Hickman Mills Drive Suite 200 Kansas City, Missouri 64141 Telephone: (816) 761-2900 Facsimile: (816) 761-0055With a copy, which shall not constitute notice to:
Hovey Williams LLP Attn: Scott R. Brown 2405 Grand Blvd., Suite 400 Kansas City Missouri 64108-2519 Telephone: (816) 474-9050 Facsimile: (816) 474-9057
21. Relationship of the Parties.
The relationship between the Parties to this License Agreement is that of independent contractors. Under no circumstances shall either Party be deemed an agent or representative of the other Party. Neither Party shall have authority to act for or bind the other Party in any way, or represent that it is in any way responsible for acts of the other Party. Nothing in this License Agreement shall be construed or interpreted to create a relationship between the Parties of partner, joint venturer, principal and agent, or employer and employee.
22. Entire Agreement.
This Agreement is the entire agreement and understanding between and among the Parties with respect to the subject matter hereof.
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IN WITNESS WHEREOF, the Parties hereto have signed this Agreement as of the date first written above.