Fin Brand Positioning, et al. v. Take 2 Dough Productions, et al. CV-09-405-JL 10/29/10 P

UNITED STATES DISTRICT COURT DISTRICT OF NEW HAMPSHIRE

Fin Brand Positioning, LLC Martin Eldon Lapham, and Julie Lapham

v. Civil N o . 09-cv-405-JL Opinion N o .

Take 2 Dough Productions, Inc. David Tully, and Dawn Tully

MEMORANDUM ORDER

This case arises from a dispute between two married couples

over a business plan to produce, market, and sell pizza dough.

Plaintiffs Martin and Julie Lapham, together with Martin’s

marketing company, Fin Brand Positioning, LLC, brought suit

against defendants David and Dawn Tully and their company, Take 2

Dough Productions, Inc., alleging that the Tullys reneged on the

business plan and misappropriated intellectual property that the

Laphams had developed, including a new logo, a special box for

the dough, and other marketing materials, without providing any

compensation. This court has jurisdiction under

(a)(1) (diversity), because the plaintiffs are New

Hampshire citizens, the defendants are Maine citizens, and the

amount in controversy exceeds $75,000.

The defendants have moved to dismiss most of the claims

against them, see Fed. R. Civ. P. 12(b)(6), arguing that those

claims cannot be litigated until the United States Patent and

Trademark Office (“USPTO”) has decided whether to approve Martin Lapham’s pending application to patent the special dough box.

After hearing oral argument, this court grants the motion in part

and denies it in part. The plaintiffs cannot litigate their

claim for a declaration of sole inventorship and ownership of the

dough box while Martin’s patent application is pending with the

USPTO. But they may litigate their other claims:

misappropriation of intellectual property and services, unjust

enrichment, and unfair and deceptive trade practices (as well as

their contract claim, which the defendants did not move to

dismiss).

I. Applicable legal standard

To survive a motion to dismiss under Rule 12(b)(6), the

plaintiff’s complaint must make factual allegations sufficient to

“state a claim to relief that is plausible on its face.”

Ashcroft v . Iqbal, 129 S . C t . 1937, 1949 (2009) (quoting Bell

Atl. Corp. v . Twombly,

4 4 , 570 (2007)). In ruling on

such a motion, the court must accept as true all well-pleaded

facts set forth in the complaint and must draw all reasonable

inferences in the plaintiff’s favor. See, e.g., Martino v .

Forward Air, Inc.,

, 2 (1st Cir. 2010). The following

background summary is consistent with that approach. With the

facts so construed, “questions of law [are] ripe for resolution

2 at the pleadings stage.” Simmons v . Galvin,

4 , 30 (1st

Cir. 2009).

II. Background

In April 2009, the Tullys and Laphams developed a business

plan to start a new company that would produce, market, and sell

pizza and bread dough under the brand name PaneBelle. The Tullys

already owned a successful dough company called Take 2 Dough

Productions, which was to be responsible for producing the

PaneBelle dough. The Laphams, in turn, were to be responsible

for marketing and selling the product. The business plan called

for the Laphams, who are both marketing professionals, to expand

what had been primarily a wholesale dough business into retail

operations.

In furtherance of that business plan, Martin Lapham (through

his company Fin Brand) designed a logo for PaneBelle dough, along

with various other branding and marketing materials, which he

provided to the Tullys. The Tullys proceeded to file an

application with the USPTO for trademark registration of the

PaneBelle logo, which is still pending. See U.S. Trademark

Application Serial N o . 77/706964 (filed Apr. 4 , 2009). Martin

also designed a special box in which PaneBelle dough could be

sold. The box had certain interlocking and telescoping features

3 that allowed it to expand with the rising (or “proofing”) dough

once removed from the consumer’s refrigerator, and to indicate

when the proofing was complete.

In June 2009, the Laphams and Tullys agreed to form

PaneBelle as a limited liability company or other legal entity.

Under their agreement, each of the four individuals was to take

an equal ownership share in the company, and its profits were to

be shared equally among them (after an initial period where any

profits would be reinvested in the company). They also agreed

that the entity would own the PaneBelle intellectual property,

including its “name, logo, packaging . . . and all printed

marketing material.” Through early marketing efforts, Julie

Lapham managed to secure at least one major contract for the

retail distribution of PaneBelle dough.

Instead of forming PaneBelle as a legal entity, however, the

Tullys reneged on the agreement in August 2009. They took the

intellectual property that Martin Lapham had developed (including

the logo, the special box, and other marketing materials) and

began marketing and selling PaneBelle dough through their own

company, Take 2 Dough. They continue to market and sell the

product on their own to this day. The Laphams have never

received any compensation, royalties, or other payments for the

4 intellectual property they created or the marketing services they

performed for PaneBelle.

The Laphams and their company filed separate suits against

the Tullys and their company in New Hampshire state court in

October 2009, asserting a wide array of state-law claims. The

defendants removed the cases to this court, see

(a), where they were consolidated into a single proceeding.

In their answer, the defendants asserted a similar array of

state-law counterclaims against the plaintiffs. They later moved

for a preliminary injunction barring the plaintiffs from using

confidential and proprietary information relating to PaneBelle.

This court denied the motion as moot after the parties indicated

that they could resolve the issue by stipulation.

In February 2010, with the case still in its early stages,

Martin Lapham filed an application with the USPTO seeking a

patent for PaneBelle’s expandable box. See U.S. Patent

Application N o . 12/704,954 (filed Feb. 1 2 , 2010). He listed

himself as the box’s sole inventor on the application. The USPTO

has not yet decided whether to issue a patent. To date, no one

has filed a competing patent application with the USPTO--

otherwise known as an “interference,” see

--

challenging Martin’s claim of sole inventorship. But the

application has not yet been published by the USPTO for public

5 review. See

(b) (requiring publication 18 months

after a patent application is filed, unless the applicant

requests earlier publication).

After filing the patent application, the plaintiffs amended

their complaint in a number of significant respects. As amended,

the complaint asserts claims for (1) a declaration that Martin

Lapham is the sole inventor and owner of the expandable box and

any related patents; (2) misappropriation of intellectual

property and services, unjust enrichment, and unfair and

deceptive trade practices; and (3) breach of contract. Before

filing an amended answer, the defendants moved to dismiss the

plaintiff’s first and second claims, see Fed. R. Civ. P.

12(b)(6), arguing that they cannot be litigated while Martin’s

patent application is still pending before the USPTO. This court

will address each claim in turn.

III. Analysis

A. Declaration of sole inventorship and ownership of the expandable box (count 1)

The first claim that the defendants have moved to dismiss is

the plaintiffs’ request for a declaration that Martin Lapham is

the sole inventor and owner of the expandable box and any related

patents. It is well established that “inventorship is a unique

question of [federal] patent law.” HIF Bio, Inc. v . Yung Shin

6 Pharms. Indus. Co.,

(Fed. Cir. 2010).

Congress, as reflected in

and 135(a), has given

the USPTO exclusive authority for making initial determinations

of inventorship in response to patent applications. HIF Bio,

. Thus, while a patent application is pending,

parties may not litigate inventorship claims in court; such

claims may be brought only after the USPTO has rendered its final

decision on the patent application. Id.; see also E.I. Du Pont

de Nemours & C o . v . Okuley,

7 8 , 583-84 (6th Cir. 2003);

Sagoma Plastics, Inc. v . Gelardi,

(D.

M e . 2005).

The plaintiffs accept those general principles, but argue

that this court should carve out an exception for cases where

inventorship is uncontested before the USPTO. In such cases,

they argue, the patent applicant should be allowed to litigate

inventorship claims without having to wait for the USPTO’s

decision. But the plaintiffs have not identified, nor has this

court been able to find, any authority for that proposition.

According to the leading cases on this issue, “Congress intended

to draw a distinction between patent applications and issued

patents”--not between contested and uncontested applications--so

as to “avoid[] premature litigation and litigation that could

become futile if the [USPTO] declined to grant a patent.”

7 Okuley,

. Those risks of premature and futile

litigation exist even in cases where inventorship has not (yet)

been contested.

Indeed, this case is a perfect example of that point. The

defendants have made clear (in their answer, motions briefing,

and again at oral argument) that they believe David Tully is the

sole inventor of the expandable box o r , at the very least, its

co-inventor with Martin Lapham, and that Martin has an

affirmative duty to correct his patent application in that

regard. See

(patent applicant “has a duty of

candor and good faith in dealing with the [USPTO]”) and

1.63(a)(2) (applicant must “[i]dentify each inventor” on the

application). If Martin refuses to do s o , the defendants have

reserved their right to initiate an interference proceeding

before the USPTO, which they still have plenty of time to d o . So

there is a significant risk that litigation of the inventorship

claim in this case would be premature.

Moreover, one of the reasons the defendants have not (yet)

challenged Martin’s patent application is that their patent

counsel believes the expandable box concept may be an “obvious”

invention, which would make it unpatentable under

. See, e.g., KSR Int’l C o . v . Teleflex, Inc.,

(2007). While this court expresses no opinion on that issue,

8 which must be “determined, in the first instance, by examination

of the patent application in the [US]PTO,” In re Dillon,

(Fed. Cir. 1990), the defendants’ doubts about the

patentability of their own alleged invention suggests that there

is at least some risk that litigation of the plaintiffs’

inventorship claim “could become futile if the [USPTO] declined

to grant a patent” for the expandable box on obviousness grounds.

Okuley,

.

Given those risks and the lack of authority for the

plaintiffs’ position, this court declines to carve out an

exception here to the established rule that inventorship claims

may not be litigated while a patent application is pending before

the USPTO. To the extent that the plaintiffs’ first claim

requests a declaration that Martin Lapham is the sole inventor of

the expandable box, it is dismissed without prejudice to being

reinstated once the USPTO reaches a final decision on Martin’s

patent application (if this case is still open at that time, and

reinstatement is otherwise permissible under the Federal Rules of

Civil Procedure) or brought in a separate lawsuit following the

USPTO’s decision. See, e.g., HIF Bio,

(dismissing a similar claim for a declaration of sole

inventorship due to a pending patent application); Sagoma

Plastics,

(same).

9 Even if they cannot seek a declaration of sole inventorship,

the plaintiffs argue, they should still be permitted to seek a

declaration that Martin Lapham is the sole owner of the

expandable box concept. It is true “that inventorship and

ownership are separate issues.” Beech Aircraft Corp. v . EDO

Corp.,

(Fed. Cir. 1993). Inventorship is the

“question of who actually invented the subject matter claimed in

a patent,” whereas ownership is the “question of who owns legal

title to the subject matter.”

The two questions are closely

related, however, “because the patent right initially vests in

the inventor, who may then . . . transfer that right to another,”

just as one could transfer other forms of personal property.

Id.; see also

(“patents shall have the attributes

of personal property”).

In this case, the plaintiffs have advanced two distinct

theories of ownership. One is based on Martin Lapham’s alleged

inventorship of the expandable box, which cannot be litigated now

(for reasons just discussed). But the other theory is based on

an alleged contract in which the Tullys and Laphams agreed that

their new company, PaneBelle, would own the rights to the box

concept and that they would each take an equal ownership share in

the company. Since that contract “could dictate which party owns

the invention,” regardless of which party invented i t , the

10 plaintiffs argue that “the ownership dispute could be resolved

without a determination of who invented” the expandable box and

therefore is not barred by Martin’s pending patent application.

HIF Bio,

(allowing ownership claim to go

forward on that basis).

That argument fails here for two reasons. First, the

contractual theory of ownership is incompatible with the relief

that the plaintiffs are expressly requesting on this claim: a

declaration that Martin is the sole owner of the expandable box

concept and any related patents. At most, the parties’ agreement

would make Martin an equal co-owner of that intellectual property

with his wife and each of the Tullys, through their new company

PaneBelle. Thus, the plaintiffs’ request for a declaration of

sole--as opposed to joint--ownership is really based on the

inventorship theory, not the contractual theory.

Second, the contractual theory of ownership presumes that

the expandable box concept is something that can be owned, i.e.,

that it is a patentable invention. As just discussed in

connection with the plaintiffs’ inventorship claim, the

defendants have raised doubts about the obviousness, and hence

the patentability, of the expandable box. See

;

KSR Int’l,

. Like inventorship, that issue must

be “determined, in the first instance, by examination of the

11 patent application in the [US]PTO,” not by litigation. Dillon,

.

For both of those reasons, this court concludes that the

plaintiffs’ request for a declaration that Martin Lapham is the

sole owner of the expandable box concept also must be dismissed

without prejudice, in light of Martin’s pending patent

application. Id. at 1354 (pending patent application bars

ownership claim “if the inventorship issue is essential to the

resolution of the claim”).

B. Misappropriation, unjust enrichment, and unfair and deceptive trade practices (count 2)

The other claim that the defendants have moved to dismiss is

the plaintiffs’ multifaceted claim for misappropriation of

intellectual property and services, unjust enrichment, and unfair

and deceptive trade practices. The defendants argue that this

claim, too, should be barred by Martin Lapham’s pending patent

application, because it depends on the inventorship and

patentability of the expandable box. This court agrees that,

insofar as it relates to the box concept, the plaintiffs’ claim

cannot succeed unless they prove either that Martin invented the

box, or that they otherwise acquired ownership of the box

concept, such that the defendants could be said to have

misappropriated their property. To that extent, then, the claim

12 cannot be litigated while Martin’s patent application is pending.

See Part III.A, supra.

The plaintiffs’ claim, however, goes well beyond the

expandable box. The claim also alleges that the defendants

misappropriated services that the plaintiffs performed for

PaneBelle.1 And it alleges that the defendants misappropriated

other intellectual property that is not covered by patent law,

including a new logo and various marketing materials that the

plaintiffs allegedly developed for PaneBelle. So far as this

court can tell, neither the pending patent application in

particular, nor patent law in general, has any bearing on those

allegations. The defendants (who seem to have focused only on

the allegations relating to the expandable box) have not argued

otherwise.

It is well established that where, as here, a claim for

misappropriation, unjust enrichment, or unfair and deceptive

1 At oral argument, the defendants noted that the plaintiffs’ claim mentions “services” only in its heading, not in any of its specific allegations. But one of the allegations refers to “the making . . . of” intellectual property (¶ 3 8 ) , which is another way of saying “services.” And the claim incorporates by reference the complaint’s earlier allegations of “defendants’ wrongful conduct,” which include that the defendants “stole . . . the services provided” and failed to provide “reasonable compensation” for those services (¶ 2 9 ) . This court accordingly construes the claim to encompass services, as its heading suggests. See, e.g., Aversa v . United States,

(1st Cir. 1996) (“the district court must construe the complaint liberally” in evaluating a motion to dismiss).

13 business practices is supported by both a patent theory and an

“alternative, non-patent theory,” it may proceed on the non-

patent theory, notwithstanding that a pending patent application

bars litigation of the patent theory. HIF Bio,

-

57 (allowing litigation of such claims, despite a pending patent

application, where the plaintiffs alleged misappropriation not

only of their invention, but also of their experiments,

experimental data, and draft papers). This court accordingly

concludes that, insofar as the plaintiffs’ claim relates to

services or non-patent intellectual property, it may be litigated

now, without waiting for the USPTO’s decision.

IV. Conclusion

For the reasons set forth above, the defendants’ motion to

dismiss2 is GRANTED without prejudice as to count 1 , but DENIED

as to count 2 .

SO ORDERED.

0C Joseph N . Laplante ited States District Judge

Dated: October 2 9 , 2010

2 Document n o . 2 1 .

14 cc: Philip L . Pettis, Esq. K. Joshua Scott, Esq. Scott A . Daniels, Esq. James F. Laboe, Esq.

15