Navajo Air, LLC v. Crye Precision, LLC et al

MEMORANDUM OF LAW in Support re: 61 CROSS MOTION for Summary Judgment ., 55 MOTION for Summary Judgment . and In Opposition to Plaintiff's Motion for Summary Judgment. Document

S.D.N.Y.October 27, 2017

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK NAVAJO AIR, LLC, and SANTEE PRINT WORKS, INC., Plaintiffs, v. CRYE PRECISION LLC and LINEWEIGHT LLC, Defendants. Docket No. 16-cv-9873 (VEC) DEFENDANTS CRYE PRECISION LLC’S AND LINEWEIGHT LLC’S MEMORANDUM OF LAW IN OPPOSITION TO PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT AND IN SUPPORT OF DEFENDANTS’ CROSS-MOTION FOR SUMMARY JUDGMENT Robert A. Horowitz Justin A. MacLean Daniel Friedman GREENBERG TRAURIG, LLP 200 Park Avenue New York, NY 10166 Tel: (212) 801-9200 Attorneys for Plaintiffs Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 1 of 31 i TABLE OF CONTENTS PRELIMINARY STATEMENT ...................................................................................................... 1 STATEMENT OF FACTS .............................................................................................................. 3 Crye and the Development of MultiCam .................................................................. 3 A. Crye’s Licensing Program for MultiCam .................................................................. 3 B. The Army’s Switch to OCP .................................................................................... 4 C. The Santee License ................................................................................................. 6 D. ARGUMENT .................................................................................................................................. 8 I. LEGAL STANDARD FOR SUMMARY JUDGMENT ...................................................... 8 II. SANTEE HAS BREACHED SECTIONS 6.3, 3.1 AND 3.5 OF THE SANTEE LICENSE BY PRINTING OCP WITHOUT PAYING LICENSING FEES TO CRYE. ................................................................................................................................. 9 III. SECTIONS 6.3, 3.1, AND 3.5 OF THE SANTEE LICENSE AGREEMENT ARE ENFORCEABLE. .............................................................................................................. 10 Section 7 of the Santee License, and the Duro and Bennettsville Decisions, A. Are Irrelevant to This Case. .................................................................................... 10 Section 6.3 of the Santee License Is Enforceable Because It Is Narrowly B. Tailored to Protect Crye’s Legitimate Business Interest in Protecting Its Intellectual Property and Preventing Unfair Competition. ................................... 11 1. Legal Standard Regarding the Enforcement of Restrictive Covenants in License Agreements. ........................................................... 11 a. Crye Has a Legitimate Business Interest in Protecting Its Intellectual Property. ...................................................................... 13 b. Santee Expressly Acknowledged that OCP Uses Crye’s Intellectual Property. ...................................................................... 14 c. Crye and Santee Bargained for These Contractual Protections for Crye’s Intellectual Property. ...................................................... 14 d. The Government’s Utility Patents Covering OCP Are Irrelevant to a Determination as to the Enforceability of Section 6.3. .................................................................................... 16 2. Section 6.3 Is Appropriately Limited in Temporal and Geographic Scope. ........................................................................................................ 20 Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 2 of 31 ii 3. Santee Will Not Suffer Undue Hardship and Navajo’s Alleged Hardship Has No Bearing on Enforceability of the Santee License. ........ 22 Sections 3.1 and 3.5 of the Santee License Are Not Restrictive Covenants and C. Therefore Do Not Implicate the Same Enforceability Analysis and Concerns. ........ 24 IV. PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT SEEKING A DECLARATORY JUDGMENT THAT NAVAJO DID NOT TORTIOUSLY INTERFERE WITH THE SANTEE LICENSE MUST BE DENIED AND CRYE’S CROSS-MOTION FOR SUMMARY JUDGMENT SHOULD BE GRANTED................ 24 CONCLUSION ............................................................................................................................. 25 Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 3 of 31 iii TABLE OF AUTHORITIES Page(s) Federal Cases Adickes v. S.H. Kress & Co., 398 U.S. 144 (1970) ...................................................................................................................8 Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) ...................................................................................................................8 Atlas Powder Co. v. E.I. du Pont de Nemours & Co., 750 F.2d 1569 (Fed. Cir. 1984)................................................................................................16 Baker’s Aid v. Hussmann Foodservice Co., 730 F. Supp. 1209 (E.D.N.Y. 1990) ..................................................................................12, 21 Bio-Technology Gen. Corp. v. Genentech, Inc., 80 F.3d 1553 (Fed. Cir. 1996)..................................................................................................16 Castle Rock Entm’t, Inc. v. Carol Pub. Group, Inc., 150 F.3d 132 (2d Cir. 1998).....................................................................................................17 Crye Precision LLC v. Bennettsville Printing, No. 15-CV-00221, 2017 WL 4325817 (E.D.N.Y. Sept. 27, 2017) .....................................2, 11 Crye Precision LLC v. Duro Textiles, LLC, No. 15-CV-1681, 2016 WL 1629343 (S.D.N.Y. Apr. 22, 2016), aff’d, 689 F. App’x 104 (2d Cir. 2017) ..............................................................................................1, 11, 22 DAR & Assoc’s, Inc. v. Uniforce Servs., Inc., 37 F. Supp. 2d 192 (E.D.N.Y. 1999) ...........................................................................12, 13, 23 Estee Lauder Cos. v. Batra, 430 F. Supp. 2d 158 (S.D.N.Y. 2006) ......................................................................................20 Giannullo v. City of New York, 322 F.3d 139 (2d Cir. 2003).......................................................................................................8 Herman v. Youngstown Car Mfg. Co., 191 F. 579 (6th Cir. 1911) .......................................................................................................17 Layne Christensen Co. v. Bro-Tech Corp, 836 F. Supp. 2d 1203 (D. Kan. 2011) ..........................................................................13, 15, 17 Leatherman Tool Group Inc. v. Cooper Indus., Inc., 131 F.3d 1011 (Fed. Cir. 1997)................................................................................................16 Leesona Corp. v. United States, 1978 WL 14862 (Ct. Cl. May 1, 1978) ....................................................................................17 Luv N’ Care, Ltd. v. Groupo Rimar, 844 F.3d 442 (5th Cir. 2016) .............................................................................................15, 17 Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 4 of 31 iv Omni Consulting Grp., Inc. v. Marina Consulting, Inc., 2007 WL 2693813 (W.D.N.Y. Sept. 12, 2007) .......................................................................21 P.C. Films Corp. v. MGM/UA Home Video Inc., 138 F.3d 453 (2d Cir. 1998), cert. denied, 119 S. Ct. 542 (1998) .....................................20, 21 Pac. Coast Marine Windshields Ltd. v. Malibu Boats, LLC, 739 F.3d 694 (Fed. Cir. 2014)..................................................................................................18 Pure Power Boot Camp, Inc. v. Warrior Fitness Boot Camp, LLC, 813 F. Supp. 2d 489 (S.D.N.Y. 2011) ................................................................................18, 19 Rogers v. Koons, 960 F.2d 301 (2d Cir. 1992).....................................................................................................18 Sheldon v. Metro-Goldwyn Pictures Corp., 81 F.2d 49 (2d Cir. 1936) (Hand, J.) ........................................................................................18 Studiengesellschaft Kohle mbH v. N. Petrochem. Co., 784 F.2d 351 (Fed. Cir. 1986)..................................................................................................16 TV Globo Ltda. v. Brazil Up-Date Weekly, Inc., 1999 WL 163378 (S.D.N.Y. Mar. 23, 1999) .....................................................................20, 21 Two Farm, Inc. v. Greenwich Ins. Co., 993 F. Supp. 2d 353 (S.D.N.Y. 2014) ......................................................................................15 Universal Gym Equipment, Inc. v. ERWA Exercise Equipment Ltd., 827 F.2d 1542 (Fed. Cir. 1987)........................................................................12, 13, 14, 15, 17 Warner-Lambert Pharm. Co. v. John J. Reynolds, Inc., 178 F. Supp. 655 (S.D.N.Y. 1959), aff’d, 280 F.2d 197 (2d Cir. 1960) ............................20, 21 Winston Franchise Corp. v. Williams, 1992 WL 7843 (S.D.N.Y. Jan. 10, 1992) ..........................................................................12, 21 State Cases Am. Broad. Cos. v. Wolf, 52 N.Y.2d 394 (1981) ..............................................................................................................17 BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999) ..............................................................................................................13 Greenwich Mills Co. v. Barrie House Coffee Co., 91 A.D.2d 398, 459 N.Y.S.2d 454 (2d Dep’t 1983) ................................................................11 Karpinski v. Intrasci, 28 N.Y.2d 45 (1971) ................................................................................................................21 Statutes 17 U.S.C. § 101 ..............................................................................................................................17 17 U.S.C. § 106(2) .........................................................................................................................17 Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 5 of 31 v 17 U.S.C. § 302(a) .........................................................................................................................20 17 U.S.C. § 302(c) .........................................................................................................................21 17 U.S.C. § 501(a) .........................................................................................................................17 35 U.S.C. § 154 ..............................................................................................................................16 35 U.S.C. § 289 ..............................................................................................................................18 Other Authorities Fed. R. Civ. P. 56(a) ........................................................................................................................8 Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 6 of 31 Defendants Crye Precision LLC and Lineweight LLC (collectively, “Crye”) submit this memorandum of law in opposition to Plaintiffs Navajo Air, LLC (“Navajo”) and Santee Print Works, Inc.’s (“Santee”) (collectively, “Plaintiffs”) motion, and in support of Crye’s cross-motion, for summary judgment on Counts Three and Four of the Amended Complaint (Dkt. 27). PRELIMINARY STATEMENT In 2014, Crye and Santee entered into a license agreement (the “Santee License”) that permitted Santee to use Crye’s intellectual property. In the Santee License, Santee acknowledged that it wished to print and sell certain products that “require the use of [Crye’s] IP,” which the agreement defines as “Products,” as detailed on Schedule B. The Products listed on Schedule B are two specific camouflage patterns, namely MultiCam and OCP. Upon the expiration of the license, Santee elected not to renew it. Yet, Santee has continued to print and sell OCP without paying Crye licensing fees. In the absence of an agreement to the contrary, Santee would be free to sell OCP, subject to Crye’s (and others’) enforcement of their intellectual property rights. However, there is an agreement to the contrary. The parties expressly agreed in Section 6.3 of the Santee License that upon termination, Santee “shall immediately cease all sales of the Products.” Santee clearly is in breach; the only issue is whether Section 6.3 is enforceable under New York law. It is. As Plaintiffs concede, Crye has a legitimate business interest in protecting its intellectual property rights. The Santee License acknowledges that OCP is subject to Crye’s intellectual property rights, and Section 6.3, along with other provisions in the license, is designed to protect those rights and prevent unfair competition. Section 6.3 is narrowly tailored to accomplish these objectives by prohibiting Santee from selling licensed Products after the license has ended. Plaintiffs attempt to confuse the Court with misplaced reliance on the decisions in Crye Precision LLC v. Duro Textiles, LLC, No. 15-CV-1681, 2016 WL 1629343 (S.D.N.Y. Apr. 22, Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 7 of 31 2 2016), aff’d, 689 F. App’x 104 (2d Cir. 2017) (“Duro”) and Crye Precision LLC v. Bennettsville Printing, No. 15-CV-00221, 2017 WL 4325817 (E.D.N.Y. Sept. 27, 2017) (“Bennettsville”), which are wholly inapposite to the issues before this Court. In Duro and Bennettsville, the courts held the restrictive covenants at issue in those cases (neither of which were Section 6.3) were too broad because they prohibited the printing of “similar” or “confusingly similar” patterns, which the courts found too vague and capable of being read to prohibit Crye’s former licensees from printing any camouflage pattern. By contrast, the restriction in Section 6.3 could not be any narrower—it prohibits Santee from selling only the two licensed Products (OCP and MultiCam), both of which Santee acknowledges in the Santee License require the use of Crye’s intellectual property. To the extent Section 6.3 lacks an express durational or geographic limitation, the limitations are implicit based upon the scope of the intellectual property Section 6.3 is designed to protect. Thus, Section 6.3 should be read to prohibit Santee from selling MultiCam and OCP in the United States for the life of the intellectual property listed in Schedule A of the Santee License. If the Court were to find Section 6.3 unenforceable without an express durational or geographic limitation, the Court should give effect to the parties’ intent expressed in Section 14.4 that the agreement “will be modified to the least extent necessary to make it enforceable.” (Emphasis added.) Finally, even if the Court were to find Section 6.3 unenforceable and be unwilling to modify it to the extent necessary to make it enforceable, Santee would still be obligated under Section 3.5 to pay licensing fees in connection with its ongoing sale of OCP: Licensee’s obligation to pay the Licensing Fees shall survive termination or expiration of this Agreement and shall continue for as long as Licensee continues to manufacture Products. For the reasons discussed herein, Plaintiffs’ motion should be denied and Crye’s cross- motion should be granted. Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 8 of 31 3 STATEMENT OF FACTS Crye and the Development of MultiCam A. More than a decade ago, after conducting extensive research, testing and analysis, as well as making artistic judgments as to the variety of shapes, colors, and gradients used in the pattern, Crye invented MultiCam (“MultiCam”). (Thompson Decl. ¶5.) MultiCam was one of the first commercially available camouflage patterns designed for multiple environments. (Id. ¶6.) MultiCam features a color palette and distinctive shapes, and an arrangement of those shapes, that were developed by Crye and in which Crye has certain proprietary rights. (Id.) For instance, MultiCam is the subject of at least one United States design patent, Design Patent No. D592,861 (the “’861 Patent”). (Id. ¶7, Ex. A.) MultiCam is also subject to copyright protection. (Id.) Crye owns other patents, copyrights, and other intellectual property rights, related to the family of related patterns now falling under the MultiCam umbrella. (Id.) In 2006, United States Army Special Operations (“Special Forces”) units independently tested Crye’s MultiCam against multiple patterns and adopted MultiCam as Special Forces’ official camouflage pattern. (Id. ¶7.) In 2010, MultiCam was selected as the standard issue camouflage pattern for United States soldiers deployed to Afghanistan, and was renamed “Operation Enduring Freedom Camouflage Pattern,” (“OEFCP”) or “OCP,” by the United States Army. (Id. ¶9.) Since then, MultiCam has generated enormous goodwill for Crye. (Id. ¶10.) Crye’s Licensing Program for MultiCam B. In 2008, Crye had an exclusive license agreement with one printer, Duro Textiles, LLC (“Duro”), to print and sell MultiCam. (Id. ¶11.) In 2010, the United States Army insisted that Crye license additional printers to print MultiCam, purportedly to ensure an uninterrupted supply of MultiCam products. (Id. ¶12.) In response, Crye developed a network of United States-based Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 9 of 31 4 printers, eventually including Santee, which it appointed as non-exclusive licensees authorized to print and sell MultiCam in connection with sales to the United States Government. (Id.) Notwithstanding what appeared on the surface to be a strong partnership between and among the Army, Crye, and Crye’s licensees to provide novel, state-of-the-art camouflage uniforms and equipment to keep our soldiers safe, in 2013 Crye became aware of several individuals in the Army working behind the scenes to undermine the partnership by seeking to deprive Crye of its licensing fees. (Id. ¶13.) To protect itself, Crye inserted new provisions in its 2014 license agreements:  Crye focused on protecting its intellectual property, adding an acknowledgment that the products listed in the agreement (“Products”) “require the use of [Crye’s intellectual property],” a recitation that Crye agreed to grant “licenses to practice the [intellectual property] such that [the licensees] can sell the Products,” and Licensee’s express agreement in Section 1.1 to accept the license “to practice the IP” in connection with making sales of the “Products.”(Id.)  Crye anticipated the Army might copy MultiCam to create a pattern that Crye believes requires the use of its intellectual property and ask the licensees to print it, so it added a provision (Section 1.4) that allows for the addition of new Products during the term of the agreement. (Id.)  Crye anticipated the Army might pressure the licensees to terminate or not renew their license agreements with Crye, so it added a provision (Section 6.3) expressly that requires the licensees to cease all sales of the Products upon termination or expiration of the license agreement. (Id.)  Crye anticipated that, at the urging of the Army, the licensees might continue printing the Products after expiration or termination of the license agreement, so it added a provision (Section 3.5) that requires the licensees to continue paying License Fees “for as long as Licensee continues to manufacture Products.” (Id.) The Army’s Switch to OCP C. As it turns out, Crye’s fears were realized. In or about May 2014, the Army announced its intention to switch its standard issue camouflage pattern from MultiCam to a camouflage pattern known as Scorpion W2, but which the Army renamed “OCP” (previously, the Army sometimes referred to MultiCam as OCP). (Id. ¶14.) Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 10 of 31 Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 11 of 31 6 The photographs above show just how close OCP is to MultiCam, and how different they both are to other camouflage patterns used by the Army that do not implicate Crye’s intellectual property. (Id. ¶15.) Critically, the photographs also show that, depending upon the portion of the fabric used to make any particular garment; two garments printed in MultiCam may look more different from each other than a garment printed in MultiCam and a garment printed in OCP. (Id.) The Santee License D. Santee first became a Crye licensee in 2012, and received a non-exclusive right for two years to use Crye’s intellectual property to print and sell MultiCam in connection with Government Sales. (Id. ¶16.) In October 2014, after the Army announced it was switching to OCP, Crye and Santee entered into a new license agreement, the Santee License. (Id. ¶17.) Recognizing the strikingly similar appearance of OCP and MultiCam and the high likelihood that printing OCP would implicate Crye’s intellectual property, Crye and Santee agreed to include “OCP Scorpion W2” in the list of licensed “Products” (Id.) The Santee License provides the following recitals: WHEREAS, LineWeight LLC (“LineWeight”) is the owner of valuable intellectual property rights tied to a family of camouflage patterns commonly known as “MultiCam” (as set forth on Schedule A, collectively, the “IP”). Crye [Precision LLC] is the sister company of LineWeight and is the exclusive Licensor of the IP; and WHEREAS, Licensee wishes to develop and manufacture, for commercial and/or governmental sale, certain products which require the use of the IP (as detailed on Schedule B attached hereto and made a part hereof, the “Products”); and WHEREAS, Crye has agreed, subject to the terms of this Agreement, to grant Licensee certain non-exclusive limited licenses to … practice the IP such that Licensee can develop and sell the Products. (Id. ¶18, Ex. B (emphasis added).) The recitals were “incorporated . . . and made a part [of the Santee License].” (Id. § 14.9.) Thus, Santee expressly agreed that OCP (which was included in Schedule B to the Santee License) “require[s] the use of the IP” listed in Schedule A, which includes Crye’s patents and copyrights covering MultiCam. (Id. ¶19.) Even the Government recognized that Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 12 of 31 7 OCP implicates Crye’s intellectual property when, in November 2015, it asked Santee to get Crye’s signature on Schedule E to the Santee License (setting forth the license fees) “in order for [Santee] to proceed” with printing OCP. (Id. ¶21, Ex. C.) Section 1 of the Santee License details the scope of the grant and limited license of Crye’s intellectual property to Santee. Subject to a condition not relevant here, Crye granted to Santee and Santee accepted “a non-exclusive limited license to practice the IP in connection with making certain [sales] of the Products listed on Schedule B.” (Id. ¶22, Ex. B § 1.1.) Santee was prohibited from “manufactur[ing] or sell[ing] variations or modifications of any Products, or any pending or future Products, unless and until those Products have been (i) added to Schedule B … and (ii) assigned a licensing fee as provided for in Section 3 and Schedule E.” (Id. § 1.4.)1 Section 3.1 of the Santee License obligates Santee to pay licensing fees of $.007 per inch finished width per yard for printing OCP. (Id. ¶23, Ex. B § 3.1, Schedule E.) Section 3.5 of the Santee License provides Santee’s “obligations to pay the Licensing Fees shall survive expiration or termination of this Agreement and shall continue for as long as Licensee continues to manufacture Products” (id. ¶24, § 3.5), so to this day, Santee is obligated to pay the prescribed licensing fees. Section 6.3 of the Santee License provides: Upon termination of this Agreement for any reason, any and all rights acquired by Licensee relating to the practice of the IP shall terminate and cease absolutely, and Licensee shall immediately cease all sales of the Products. In addition, within thirty (30) days after the termination of this Agreement, Licensee shall remit to Crye any unpaid and outstanding License Fees and submit a written statement sworn by an officer of Licensee attesting that the obligations set forth in this Section 6.3 have been met. 1 To facilitate the printing of Products according to Crye’s specifications, Crye provided Santee with various “MultiCam Artwork Packages” (“MCAPs”) and print screens. (Ex. B § 1.5.) Santee agreed to return MCAPs and print screens to Crye when the Santee License ended (id. § 1.6), but has failed to return them. (Thompson Decl. ¶16 n. 1.) Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 13 of 31 8 (Id. ¶25, Ex. B§ 6.3(emphasis added).) Section 14.2 provides that these key provisions “survive termination of this Agreement.” (Id. ¶28, Ex. B § 14.2.) The Santee License expired on October 28, 2016. (Id. ¶30.) Thereafter, Crye reached out on multiple occasions, reminding Santee of its obligations to provide the written statement agreed upon in Section 6.3 that Santee had ceased sales of the Products and had remitted any outstanding licensing fees. (Id. ¶31, Exs. D and E.) Santee refused, and Navajo (not Crye’s licensee Santee) filed this lawsuit. In response to Crye’s motion to dismiss (Dkt. 23), Navajo filed an Amended Complaint adding Santee as a Plaintiff. ARGUMENT I. LEGAL STANDARD FOR SUMMARY JUDGMENT Summary judgment is appropriate when the movant shows that there is no genuine dispute of any material fact, and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). “It is the movant’s burden to show that no genuine factual dispute exists,” and “all reasonable inferences must be drawn in the non-movant’s favor.” Giannullo v. City of New York, 322 F.3d 139, 140 (2d Cir. 2003) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970) and Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)). Where the movant fails to introduce “admissible evidence of the material facts entitling it to summary judgment, summary judgment must be denied, even if no opposing evidentiary matter is presented, for the non-movant is not required to rebut an insufficient showing.” Id. at 140-41 (internal quotation marks and citation omitted). In many instances, Plaintiffs have cited only to allegations in their own unverified complaint as alleged “evidence” of the facts set forth in their 56.1 Statement. For this reason alone, Plaintiffs’ motion should be denied. Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 14 of 31 9 II. SANTEE HAS BREACHED SECTIONS 6.3, 3.1 AND 3.5 OF THE SANTEE LICENSE BY PRINTING OCP WITHOUT PAYING LICENSING FEES TO CRYE. Plaintiffs spend most of their memorandum arguing why Santee has not breached Section 7 of the Santee License, but (as discussed below at p.10, infra), Section 7 is not at issue in this case. There is no dispute that Santee has breached and continues to breach Section 6.3 of the Santee License. Specifically, there is no genuine dispute that: (1) as it avers in its own Amended Complaint, “Santee has printed on a commission basis, and intends to continue to print on a commission basis, textile fabric with the OCP print design” (Dkt. 27 ¶ 101); (2) OCP is a “Product” under the Santee License (Santee printed OCP and paid Crye a licensing fee for its sales of OCP during the term of the Santee License) (Thompson Decl. ¶ 20); (3) Section 6.3 of the Santee License provides that “Upon termination of this Agreement for any reason, any and all rights acquired by Licensee relating to the practice of the IP shall terminate and cease absolutely, and Licensee shall immediately cease all sales of the Products” (Ex. B § 6.3 (emphasis added)); and (4) the Santee License terminated on October 28, 2016. (Id. ¶30.) Thus, the facts are undisputed and clear that in continuing to sell OCP fabric; Santee has breached and is continuing to breach Section 6.3. There is also no dispute that Santee has not provided Crye within thirty days after the termination of the Santee License the sworn written statement required by Section 6.3 confirming that it ceased manufacture of OCP and paid all outstanding licensing fees. (Id. ¶31.) This constitutes a separate breach of Section 6.3 of the Santee License. Section 3.1 of the Santee License requires the payment of licensing fees for all Products sold (Ex. B § 3.1, Schedule E), and Section 3.5 provides the obligation to pay such fees “shall survive expiration or termination of this Agreement and shall continue for as long as Licensee continues to manufacture Products.” (Id. § 3.5.) Santee has not paid Crye licensing fees in Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 15 of 31 10 connection with its sales of OCP after expiration of the Santee License, (Thompson Decl. ¶32), which constitutes a breach of Sections 3.1 and 3.5 of the Santee License. For at least these reasons, Crye is entitled to summary judgment that Santee’s ongoing printing and sale of OCP and failure to pay Crye licensing fees in connection with those sales are breaches of the Santee License. III. SECTIONS 6.3, 3.1, AND 3.5 OF THE SANTEE LICENSE AGREEMENT ARE ENFORCEABLE. Section 7 of the Santee License, and the Duro and Bennettsville Decisions, Are A. Irrelevant to This Case. Plaintiffs’ motion is built on the strawman argument that Section 7 of the Santee License is unenforceable, because allegedly similar provisions were held unenforceable in Duro and Bennettsville. But Section 7 of the Santee License is not the provision that will be breached by Santee’s continuing to print OCP fabric and is not similar to Section 6.3. Indeed, the irrelevance of Section 7 of the Santee License could not be more clear: Except for the Products for which Crye shall be entitled to receive Licensing Fees, Licensee agrees that it shall not, at any time during the term of this Agreement or at any time thereafter, make or provide, or assist or encourage others to make, products which are confusingly similar in design or appearance (i.e., color palette, arrangement or placement of elements) to, or which constitute derivative works of, any of the IP. (Ex. B § 7 (emphasis added).) It is undisputed that OCP is a “Product” (id., Schedule B), and that Crye is entitled to receive licensing fees on Products (id. §§ 3.1, 3.5). Thus, by its explicit terms, Section 7 of the Santee License does not prohibit the printing of OCP, and the enforceability or unenforceability of Section 7 has no bearing on Santee’s breach of the Santee License.2 2 In its memorandum of law, Plaintiffs argue that Section 6.3 and 7 should be read together, “as a whole,” to relate to the protection of MultiCam intellectual property rights. (Dkt. 59 at 12.) But even considering their common purpose, they are separate provisions that address different Products. Sections 3.1, 6.3 and 6.5 expressly apply to the Products listed in Schedule B, while Section 7 expressly excludes those Products. Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 16 of 31 11 Similarly, the Duro and Bennettsville decisions are inapplicable. In the agreements at issue in those cases, OCP was not listed as a “Product” (Thompson Decl. ¶12), so the provisions applicable to “Products” (such as Section 6.3 here) were not at issue. Because OCP was not a “Product” in their license agreements, to prevent Duro and Bennettsville from printing OCP, Crye sought to enforce (i) Section 3(h) of the Duro License, prohibiting the making of “products that are similar to MultiCam;” and (ii) Section 7 of the 2014 Bennettsville License, prohibiting “products which are confusingly similar in design or appearance (i.e., color palette, arrangement or placement of elements) to, or which constitute derivative works of, any of the IP” listed in Schedule A.” The courts in Duro and Bennettsville held that each of these restrictions is too vague and overbroad to be enforceable because they could conceivably prevent the printers in those cases from printing any camouflage pattern. Duro, 2016 WL 1629343, at *5; Bennettsville, 2017 WL4325817, at *8. The courts’ concerns about the vagueness and overbreadth of the provisions in Duro and Bennettsville simply do not exist here. Rather than preventing Santee from printing “similar” or “confusingly similar” camouflage patterns, the restriction in Section 6.3 of the Santee License extends explicitly to only two specific camouflage patterns: MultiCam and OCP (Ex. B, Schedule B), the very Products Santee was licensed to print. The requirement to “cease all sales of the Products” is unambiguous, precisely defined, and enforceable. Simply stated, Section 7 of the Santee License and the decisions in Duro and Bennettsville have no bearing on the issues before this Court. Section 6.3 of the Santee License Is Enforceable Because It Is Narrowly B. Tailored to Protect Crye’s Legitimate Business Interest in Protecting Its Intellectual Property and Preventing Unfair Competition. 1. Legal Standard Regarding the Enforcement of Restrictive Covenants in License Agreements. The test to determine the enforceability of any restrictive covenant is whether it is reasonable under the totality of circumstances. Greenwich Mills Co. v. Barrie House Coffee Co., Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 17 of 31 12 91 A.D.2d 398, 400-01, 459 N.Y.S.2d 454, 456 (2d Dep’t 1983). Restrictive covenants in commercial contracts are analyzed “under a simple rule of reason, balancing the competing public policies in favor of robust competition and freedom to contract.” DAR & Assoc’s, Inc. v. Uniforce Servs., Inc., 37 F. Supp. 2d 192, 197 (E.D.N.Y. 1999) (citing Baker’s Aid v. Hussmann Foodservice Co., 730 F. Supp. 1209, 1214 (E.D.N.Y. 1990) and Winston Franchise Corp. v. Williams, 1992 WL 7843, at *6 (S.D.N.Y. Jan. 10, 1992)). In DAR, the court considered three factors to determine the reasonableness of a restrictive covenant in an ordinary commercial contract: (1) “whether [the party] has demonstrated a legitimate business interest that warrants the enforcement of the restrictive covenants;” (2) “the reasonableness of the covenants with respect to geographic scope and temporal duration;” and (3) “the degree of hardship that enforcing those covenants would inflict upon” the party seeking to hold a restrictive covenant unenforceable. Id. In analyzing this last factor, the court “b[ore] in mind the degree to which [the complaining party] consciously agreed to bear the risk of such hardship when it entered into the contracts” at issue. Id. Restrictive covenants aimed at protecting intellectual property are subject to less scrutiny than covenants that prohibit or restrain competition generally. Thus, in Universal Gym Equipment, Inc. v. ERWA Exercise Equipment Ltd., 827 F.2d 1542 (Fed. Cir. 1987), the Court of Appeals for the Federal Circuit (which routinely deals with intellectual property matters) enforced a restrictive covenant pursuant to which the licensee (Global) agreed that after termination of its license it would not “manufacture, use, sell, or distribute any products which include any of the features, designs, technical information, or said know-how of Universal [the licensor].” Id. at 1545. The Court affirmed the district court’s finding that “[the covenant] was not invalid as a non-compete with no temporal or geographic limitations” because Global could compete with Universal with only one limitation, Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 18 of 31 13 namely, it could not use Universal’s features, designs, technical knowledge, and know-how. Id. at 1551 (emphasis added). Similarly, in Layne Christensen Co. v. Bro-Tech Corp,, 836 F. Supp. 2d 1203 (D. Kan. 2011), the court upheld a restrictive covenant that prohibited the licensee during and after the term of the license to “directly or indirectly use any Intellectual Property resulting from its activities under this Agreement to directly or indirectly manufacture, sell, supply or use any products or media substantially similar to, or competitive with” the licensor’s product. Id. at 1223. The Court contrasted the restrictive covenant at issue with a covenant that prohibits or restricts competition generally. It upheld the restriction “even without the type of geographical and temporal limitations required for other types of contractual non-compete provisions” because the licensee may still compete with the licensor “by making and selling products not based on or resulting from the [licensor’s] intellectual property.” Id. at 1234. a. Crye Has a Legitimate Business Interest in Protecting Its Intellectual Property. As discussed above, Crye owns various intellectual property rights (including, inter alia, design patents and copyrights) that cover its family of MultiCam camouflage patterns, set forth in Schedule A of the Santee License. (Ex. B, Schedule A.) Santee concedes that (“Crye … has a legitimate business interest in protecting its intellectual property rights in [the MultiCam] pattern.” (Dkt. 59 at 12). Crye also has a legitimate business interest in the “prevention of unfair competition, a malleable tort that includes any misappropriation for commercial advantage of a benefit or property right belonging to another.” DAR, 37 F. Supp. 2d at 198 (internal quotations omitted); see also BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 392 (1999). These points are undisputed. Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 19 of 31 14 b. Santee Expressly Acknowledged that OCP Uses Crye’s Intellectual Property. The Santee License acknowledged Santee’s and Crye’s agreement that: (1) Crye owns “valuable intellectual property rights tied to a family of camouflage patterns commonly known as ‘MultiCam’” (defined as the “IP” and listed in Schedule A) (Ex. B, first recital); and (2) that the manufacture of the “Products” listed on Schedule B of the Santee License, including OCP, “require the use of the IP” (id., second recital (emphasis added)). Thus, Crye agreed “to grant [Santee] certain non-exclusive limited licenses to practice the IP such that [Santee] can develop and sell the Products” such as OCP (id., third recital (emphasis added); see also id. § 1.1 (granting Santee a limited license and Licensee accepting the license “to practice the IP in connection with [certain sales] of the Products listed on Schedule B[.]”) These provisions are also undisputed.3 Section 6.3 of the Santee License is narrowly tailored to protect Crye’s interests in that intellectual property. c. Crye and Santee Bargained for These Contractual Protections for Crye’s Intellectual Property. Parties can agree to contractual provisions in a license agreement that, as between them, provide some additional protection to the licensor’s intellectual property than patent law provides with regard to the public at large. For example, in Universal Gym, after affirming the district court’s dismissal of plaintiff’s patent infringement claim, the Court of Appeals for the Federal Circuit upheld a restrictive covenant that prohibited the licensee from using the licensor’s product features and designs after expiration of the license agreement even though those product designs and features were in the public domain and could be copied by anyone else. That the “features and designs” were readily available to, and available for use by, Global without the license did not limit the protection offered by the covenant because “[p]arties to a contract may limit their right to take action they 3 These recitals were explicitly incorporated into and made a part of the Santee License. (Id. § 14.9.) Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 20 of 31 15 previously had been free to take.” Id. at 1550. The covenant enforced in Universal Gym was far broader than the covenant in Section 6.3 of the Santee License. Likewise, the Fifth Circuit Court of Appeals in Luv N’ Care, Ltd. v. Groupo Rimar, 844 F.3d 442 (5th Cir. 2016), enforced a restrictive covenant in a distribution agreement that prohibited the distributor from copying or utilizing plaintiff’s product designs, which included those in the public domain. The court reversed the district court’s finding that the covenant could only protect designs that were either confidential or protectable as intellectual property. It noted that such a narrow interpretation would render the covenant meaningless—the plaintiff would not need a contract to enforce its rights: “Interpreting [the restrictive covenant] to apply only to information that is either confidential or already protected as intellectual property would render the provision mere surplusage, violating one of the basic tenets of contract interpretation recognized in Louisiana and elsewhere.” Id. at 447 (citation omitted); see also, e.g., Two Farm, Inc. v. Greenwich Ins. Co., 993 F. Supp. 2d 353, 360 (S.D.N.Y. 2014) (“Courts interpreting contracts pursuant to New York law are required to give each word and phrase in a contract its plain meaning and avoid rendering the terms or provisions of a contract superfluous.”). The court cited Universal Gym for the proposition that “parties in contractual privity with one another may bargain for benefits beyond what the law itself can provide.” Id. at 448. Similarly, in Layne Christensen, the court upheld a restrictive covenant aimed at protecting non-patented intellectual property. It held the restriction, which was far broader than the restriction in Section 6.3 of the Santee License, was not greater than necessary. 836 F. Supp. 2d at 1234. Here, after acknowledging that OCP uses Crye’s intellectual property, Santee agreed to a covenant (Section 6.3) that gives Crye a contractual right to prevent Santee from selling OCP after expiration of the license agreement. While Crye could sue Santee for patent or copyright Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 21 of 31 16 infringement, Section 6.3 provides Crye an alternative: a suit for breach of contract against Santee which is typically more expeditious and less expensive than patent and copyright infringement litigation. Crye’s contract right is particularly appropriate in light of Santee’s acknowledgement that OCP is subject to Crye’s intellectual property rights. d. The Government’s Utility Patents Covering OCP Are Irrelevant to a Determination as to the Enforceability of Section 6.3. Plaintiffs argue that “Crye’s legitimate business interest in protecting its MultiCam intellectual property ends where a camouflage pattern other than MultiCam … begins,” and that, because OCP is purportedly covered by patents owned by the Government, OCP cannot also use Crye’s intellectual property. (Dkt. 59 at 13; see also id. at 4-5, 14-15.) Plaintiffs’ arguments are based on a fundamental misstatement of intellectual property law. That the Government has utility patents with claims that allegedly read on OCP does not insulate OCP from all other intellectual property claims and protections. Indeed, even between utility patents, one patented invention can still be subject to the patents of another. As discussed below, patents merely give the right to exclude others, they do not grant absolution against intellectual property claims from others. It is black letter law that “[t]he existence of one’s own patent does not constitute a defense to infringement of someone else’s patent.” Bio-Technology Gen. Corp. v. Genentech, Inc., 80 F.3d 1553, 1559 (Fed. Cir. 1996) (internal quotation omitted). This is because “the federal patent laws do not create any affirmative right to make, use, or sell anything.” Leatherman Tool Group Inc. v. Cooper Indus., Inc., 131 F.3d 1011, 1015 (Fed. Cir. 1997). Rather, a patent only carries with it “the right to exclude others from practice of the patented subject matter.” Studiengesellschaft Kohle mbH v. N. Petrochem. Co., 784 F.2d 351, 357 (Fed. Cir. 1986) (citing 35 U.S.C. § 154). As the Federal Circuit has held, this is true even if the later patent (here, the Government’s utility patents) was examined and granted over the earlier patent (here, Crye’s design patent). Atlas Powder Co. v. E.I. Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 22 of 31 17 du Pont de Nemours & Co., 750 F.2d 1569, 1581 (Fed. Cir. 1984) (quoting Herman v. Youngstown Car Mfg. Co., 191 F. 579, 584-85 (6th Cir. 1911)); see also Leesona Corp. v. United States, 1978 WL 14862, at *15-16 (Ct. Cl. May 1, 1978).4 And, of course, the grant of a patent is immaterial to whether a copyright has been infringed by a patentee. Thus, the fact that the Government has been issued patents that allegedly cover OCP has no bearing on whether OCP infringes Crye’s design patent or its copyrights as a derivative work of MultiCam. It has even less bearing on whether Section 6.3, which requires Santee to cease selling OCP, is overly broad, or bears a reasonable relationship to Crye’s interest in protecting its intellectual property. Plaintiffs further understate the scope of “protecting [Crye’s] intellectual property.” First, Crye’s legitimate business interest in protecting its intellectual property extends beyond its registered intellectual property. See Universal Gym, 827 F.2d at 1549-50; Luv N’ Care, 844 F.3d at 448; Layne Christensen, 836 F. Supp. 2d at 1234. As the New York Court of Appeals has held, Crye’s legitimate interest extends to “protection from unfair or illegal conduct that causes economic injury.” Am. Broad. Cos. v. Wolf, 52 N.Y.2d 394, 404 (1981) (emphasis added). Such conduct includes activities that would, if conducted without Crye’s authorization, amount to an infringement of Crye’s intellectual property (i.e., unfair or illegal conduct). It is clear that such conduct is not limited to copying every detail of MultiCam without change. Copyrights are infringed when there is unauthorized preparation of “derivative works,” see 17 U.S.C. §§ 106(2), 501(a), which are defined as “work[s] based upon one or more preexisting works,” including any “form in which a work may be recast, transformed, or adapted.” Id. § 101. In any case, the test for copyright infringement is one of “substantial similarity,” not identicality. Castle Rock Entm’t, Inc. v. Carol Pub. Group, Inc., 150 4 “Although defendant has a license to use the claimed invention in the packaging and shipment of the anodes, liability for infringement of the claims of the unlicensed Leesona patents is not avoided…. The fact that a person, by purchasing a device from a licensed source, has an implied license to use that device, does not, ipso facto, give him a license to use that device in combination with other elements or structures if the resulting product infringes the claims of an unlicensed patent.” Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 23 of 31 18 F.3d 132, 137-38 (2d Cir. 1998); see also Rogers v. Koons, 960 F.2d 301, 307 (2d Cir. 1992) (“Substantial similarity does not require literally identical copying of every detail”); Sheldon v. Metro-Goldwyn Pictures Corp., 81 F.2d 49, 56 (2d Cir. 1936) (Hand, J.). (“[N]o plagiarist can excuse the wrong by showing how much of his work he did not pirate.”). With respect to design patents, infringement also “does not require literal identity,” but rather encompasses “(1) appl[ying] the design, or any colorable imitation thereof, to any article of manufacture for the purposes of sale, or (2) sell[ing] or expos[ing] for sale any article of manufacture to which such design or colorable imitation has been applied,” a concept that includes infringement under the doctrine of equivalents. Pac. Coast Marine Windshields Ltd. v. Malibu Boats, LLC, 739 F.3d 694, 701 (Fed. Cir. 2014) (citing 35 U.S.C. § 289) (emphasis in original). Thus, as a matter of law, Crye’s legitimate business interest in protecting its intellectual property does not “end[] where a camouflage pattern other than MultiCam … begins” when that other camouflage pattern uses Crye’s intellectual property. Given the parties’ agreement that OCP would require the use of Crye’s intellectual property, Section 6.3’s prohibition of sales of OCP after the Santee License ended achieves Crye’s legitimate interest in protecting its intellectual property. Plaintiffs’ reliance on Pure Power Boot Camp, Inc. v. Warrior Fitness Boot Camp, LLC, 813 F. Supp. 2d 489, 515 (S.D.N.Y. 2011) is misplaced. In Pure Power Boot Camp, the intellectual property provision in the plaintiffs’ employment contract5 was held unenforceable—not because it 5 The provision at issue read as follows: You acknowledge that [Pure Power’s] obstacle-confidence courses and related environments, and the marketing thereof, embody and/or reflect inventions, discoveries, concepts, ideas, developments, improvements, methods, processes, know-how, trade secrets, designs, trademarks, ... trade dress, textual and graphic material, and a distinctive overall look and feel (collectively, “Intellectual Property”). You agree that all such Intellectual Property, regardless of whether or not it is capable of patent, trademark, trade dress, trade secret or copyright protection, is exclusively owned by [Pure Power]. You shall not, during the course of your employment or any time thereafter, challenge [Pure Power’s] ownership of any Intellectual Property or the validity or enforceability thereof, nor shall you use any Intellectual Property in any competing business, or in any other way without [Pure Power’s] express written permission, during or after your Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 24 of 31 19 dealt with “the use of U.S. Military concepts,” as Plaintiffs put it (see Dkt. 59 at 15)—but rather, because the provision was “impermissibly vague, indefinite, and overbroad.” 813 F. Supp. 2d at 514. The court held that it would be required to “impos[e] its own conception of what exactly is meant by [a] vague and indefinite phrase,” that the terms “obstacle-confidence courses and related environments” were “vague and overbroad, and [were] nowhere made definite or more explicit elsewhere in the contract,” and it was “unclear” whether the term “related environments” related to “the overall decor of Pure Power, or to any camouflage material, or to the use of military colors or artifacts or a military theme, or just the obstacle course environment….” Id. at 515. Accordingly, the provision could not “be said to promote predictable contractual relationships,” and was struck down as impermissibly vague. Id. In the case of the Santee License, however, Section 6.3 is not vague, not indefinite, and not overbroad. It restricts Santee from selling only two Products— MultiCam and OCP, each of which Santee agreed requires the use of Crye’s intellectual property. No contractual relationship could be more predictable: Section 6.3 prohibits Santee from selling OCP after the expiration of the Santee License. In sum, Crye has a legitimate business interest which Section 6.3 is narrowly tailored to protect. Crye and Santee agreed that OCP would “require the use of [Crye’s] IP” and that is the basis for listing OCP as a “Product” in Schedule B of the Santee License. Since Section 6.3 only prohibits continued printing of “Products” (i.e., items that Santee conceded “require the use of the IP”), Section 6.3 is precise, reasonable, and sufficiently tailored to Crye’s legitimate interests of protecting its intellectual property and preventing unfair competition. Because the Duro and Bennettsville decisions did not address the narrow restriction in Section 6.3 (which was not at issue in those cases and was never even mentioned in the decisions), those cases are inapposite. Finally, the fact that employment with [Pure Power]. Pure Power Boot Camp, 813 F. Supp. 2d at 514. Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 25 of 31 20 OCP is not identical to MultiCam in every detail, or that the Government owns patents that allegedly cover OCP, does not affect the reasonableness of Section 6.3 of the Santee License. 2. Section 6.3 Is Appropriately Limited in Temporal and Geographic Scope. That Section 6.3 does not explicitly recite a temporal or geographic scope is not unreasonable under the circumstances. “[T]here are no per se lines demarcating what constitutes an unreasonable durational or geographic scope.” Estee Lauder Cos. v. Batra, 430 F. Supp. 2d 158, 180 (S.D.N.Y. 2006). In an intellectual property license such as the Santee License, where these restrictions are not explicitly stated, it is altogether common for the provision at issue to be interpreted to implicitly extend to the temporal and geographical scope of the intellectual property rights that are the subject of the license. See, e.g., TV Globo Ltda. v. Brazil Up-Date Weekly, Inc., 1999 WL 163378, at *2 (S.D.N.Y. Mar. 23, 1999) (where “an assignment or license does not expressly prescribe the period or term of its duration, it will generally be construed (in the absence of evidence of a contrary intent) to be effective for the duration of the then existing copyright term of the work.”) (internal quotation omitted); P.C. Films Corp. v. MGM/UA Home Video Inc., 138 F.3d 453, 458 (2d Cir. 1998) (“[W]here a contract is silent as to the duration of the grant of copyright rights, the contract is read to convey rights for the initial copyright period….”), cert. denied, 119 S. Ct. 542 (1998); Warner- Lambert Pharm. Co. v. John J. Reynolds, Inc., 178 F. Supp. 655, 664 (S.D.N.Y. 1959) (“[W]hen parties agree upon a license under a patent or copyright the court will assume, in the absence of express language to the contrary, that their actual intention as to the term is measured by the definite term of the underlying grant fixed by statute.”), aff’d, 280 F.2d 197 (2d Cir. 1960). Here, Crye licensed to Santee a suite of U.S. intellectual property rights set forth on Schedule A of the Santee License in the “Territory” of the United States (Ex. B), including design patents and, importantly, copyrights. A copyright lasts for 70 years past the life of the author, 17 U.S.C. § 302(a), Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 26 of 31 21 or, for works made for hire, the earlier of 95 years from first publication or 120 years from the year of its creation, id. § 302(c)—in either case, long after everyone at Crye, Santee, or Navajo (and possibly even the business entities themselves) will have passed away or dissolved. Accordingly, that the Santee License does not explicitly include a temporal limitation is reasonable under the circumstances. For these reasons, the geographic and temporal scope of the restriction in Section 6.3 should be coextensive with the geographic and temporal scope of the intellectual property in Schedule A. See TV Globo, 1999 WL 163378, at *2; P.C. Films, 138 F.3d at 458; Warner-Lambert, 178 F. Supp. 655 at 664. In addition, Crye and Santee agreed that “[i]f any term of this Agreement is found to be unenforceable or contrary to law, it will be modified to the least extent necessary to make it enforceable, and the remaining portions of this Agreement will remain in full force and effect.” (Ex. B § 14.4. (emphasis added).) Even if such a clause did not exist in the Santee License, “[w]here a restrictive covenant contains both reasonable and overbroad provisions this Court may ‘make use of the tool of severance, paring an unreasonable restraint down to appropriate size and enforcing it.’” Baker’s Aid, 730 F. Supp. at 1215 (quoting Karpinski v. Intrasci, 28 N.Y.2d 45, 52 (1971)); see also Omni Consulting Grp., Inc. v. Marina Consulting, Inc., 2007 WL 2693813, at *6-7 (W.D.N.Y. Sept. 12, 2007) (holding that restrictive covenant with lack of any temporal restriction was, as a whole, not overbroad and applying ‘blue pencil’ rule); Winston Franchise Corp. v. Williams, 1992 WL 7843, at *10 (S.D.N.Y. Jan. 10, 1992) (“Where a restrictive covenant contains both reasonable and unreasonable provisions, courts of equity may pare down the restrictions and fashion an appropriate injunction.”). Thus, even if the Court were to interpret Section 6.3 as having an implicit durational or geographic limitation, and conclude that fact would otherwise make the provision unenforceable, the Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 27 of 31 22 Court should exercise its authority to “blue-pencil” the restriction on printing OCP to be limited to the geographic and temporal scope of the intellectual property in Schedule A. Doing so would be not only proper under Baker’s Aid, but is also necessary to give effect to the parties’ explicit intent in Section 14.4 of the Santee License. Again, the situation here is not like that presented in Duro or Bennettsville, where the court refused to blue-pencil Section 3(h) of the agreement in question because the addition of a durational or geographic limitation would not eliminate what the courts held to be the basic infirmity in the restrictions, namely, that the provision against making products “similar to MultiCam” or “confusingly similar” to Crye’s intellectual property was overbroad because it could be read to cover all camouflage patterns. See Duro, 2016 WL 1629343, at *6. Here, as discussed above, Section 6.3 covers only two specific camouflage patterns—MultiCam and OCP. Thus, enforcing the restriction in Section 6.3 to the extent of the geographic and temporal scope of the intellectual property in Schedule A does not raise the same concerns. 3. Santee Will Not Suffer Undue Hardship and Navajo’s Alleged Hardship Has No Bearing on Enforceability of the Santee License. Plaintiffs make the conclusory assertion that “Santee’s viability would be seriously threatened” if Section 6.3 is enforced to require Santee to refrain from printing OCP. (Dkt. 59 at 16; Dkt. 56 ¶ 50.) But Plaintiffs proffer no admissible evidence to support that statement. Rather, Plaintiffs cite to allegations in their unverified Amended Complaint, which is not evidence, and to the Declaration of Ernest Chornyei, the sole owner of Plaintiff Navajo, whose statement concerning Santee’s viability lacks foundation. Mr. Chornyei does not own or control Santee. (See Dkt. 56 ¶ 50; Dkt. 58 ¶¶ 1, 35.) Indeed, a simple Internet search reveals that Santee is a diversified company selling a multitude of fabrics and related services, and is not limited to printing camouflage fabric for the Army. See generally https://santeeprint.com/inspirations. Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 28 of 31 23 In any case, Plaintiffs’ claim of “undue” hardship appears to stem from its allegations that the Government prevents its contractors from paying a royalty to any third party for the use of OCP. (Dkt. 59 at 7-8; Dkt. 56 ¶¶ 30-31.) Again, Plaintiffs cite no evidence to support these allegations. In fact, the Government does not forbid contractors from paying royalties. (Thompson Decl. 34.) Instead, it prohibits those contractors from including Crye’s licensing fee in the price they charge the Government. The distinction is important in light of Plaintiffs’ admission that “goods purchased under Government contracts are all purchased on a firm fixed price basis set at per unit prices”— not on a “cost-plus” basis. (Dkt. 56 ¶ 32 (emphasis added).)6 Thus, Santee can honor its contractual obligation to pay Crye’s licensing fee and any entity in the chain from the prime contractors (the entities selling the garments to the Government) to the subcontractors (in this case Navajo or Santee) can simply absorb the cost. (Thompson Decl. ¶35.) Indeed, Crye’s other licensees have submitted proposals certifying that their price does not include the licensing fees payable to Crye. (Id. ¶36) Santee’s supposed hardship boils down to the fact that its profitability on OCP fabric it prints for Government Sales may be lower than it would be if it had not agreed to pay Crye a licensing fee. That hardship is not “undue.” In assessing any claim of hardship, the Court must “bear[] in mind the degree to which [Santee] consciously agreed to bear the risk of such hardship when it entered into the contract[]” with Crye. DAR, 37 F. Supp. 2d at 197. When it entered into the Santee License, Santee acknowledged that printing OCP would “require[] the use of [Crye’s] IP.” Santee executed the Santee License with its “eyes wide open,” and “received the benefit of that bargain by its use of” Crye’s intellectual property. DAR, 37 F. Supp. 2d at 200. Santee cannot claim that the hardship it faces now that it has chosen to terminate the Santee License is somehow “undue.” 6 If the goods were purchased on a “cost-plus” basis, the contractors would be required to itemize their costs and the price ultimately charged would reflect a certain mark-up over those costs. Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 29 of 31 24 Santee argues enforcing the covenant would “prevent Plaintiffs from printing camouflage fabrics for the U.S. military forever.” (Dkt. 59 at 16.) The covenant does not prevent Navajo from printing OCP and Crye has not prohibited Santee from selling OCP. Crye has prohibited Santee from selling OCP without paying Crye’s licensing fees following expiration of the Santee License which Santee, not Crye, elected not to renew. (Thompson Decl. ¶ 37.) Finally, Navajo’s alleged hardship is irrelevant to Crye’s right to enforce Sections 6.3 and 3.5 against Santee. Navajo is neither a party to, nor a beneficiary named in, the Santee License. Plaintiffs cite no authority for the proposition that the enforceability of a contractual provision should hinge on any hardships faced by a non-party to that contract (much less a party who appears to be tortiously interfering therewith). In any case, Navajo apparently made business decisions to (i) hinge the viability of its entire business on a design that implicates Crye’s intellectual property rights; and (ii) depend solely upon Santee to fulfill its orders. Navajo’s hardship is the result of its own business decisions and the terms of the Government’s solicitation. It cannot hold Crye responsible for its hardship when Crye is simply enforcing its contractual rights against Santee. Sections 3.1 and 3.5 of the Santee License Are Not Restrictive Covenants and C. Therefore Do Not Implicate the Same Enforceability Analysis and Concerns. Sections 3.1 and 3.5 require Santee to pay the agreed-upon licensing fee to Crye for the agreed-upon Products, and to do so after expiration or termination of the Santee License, for so long as Santee continues to print the Products, including OCP. These provisions are not restrictive covenants, non-compete provisions, or restraints of trade. They do not obligate Santee to refrain from doing anything. Therefore, they are enforceable without regard to the factors a court would consider in determining the enforceability of a restrictive covenant. IV. PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT SEEKING A DECLARATORY JUDGMENT THAT NAVAJO DID NOT TORTIOUSLY INTERFERE WITH THE SANTEE LICENSE MUST BE DENIED AND CRYE’S CROSS-MOTION FOR SUMMARY JUDGMENT SHOULD BE GRANTED. Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 30 of 31 25 In moving for summary judgment on its Fourth Claim for Relief, seeking a declaratory judgment of no tortious interference with contract, Plaintiffs argue only that, since the Santee License is invalid, Navajo cannot have tortiously interfered with that license. (See Dkt. 59 at 17 (“However, a plaintiff cannot succeed on a claim for tortious interference when the contractual provision at issue is unenforceable”).) However, as discussed above, Sections 6.3, 3.1, and 3.5 of the Santee License are not unenforceable. For the reasons set forth above with regard to Plaintiffs’ claim that Santee has not breached the Santee License, Plaintiffs’ motion for summary judgment on their tortious interference claim and should be denied and Crye’s cross-motion for summary judgment should be granted. CONCLUSION For the foregoing reasons, Crye respectfully requests that the Court deny Plaintiffs’ motion for summary judgment and grant Crye’s cross-motion for summary judgment. Dated: New York, NY October 27, 2017 GREENBERG TRAURIG, LLP By: /s/ Robert A. Horowitz Robert A. Horowitz Justin A. MacLean Daniel Friedman 200 Park Avenue New York, NY 10166 Tel.: (212) 801-9200 Attorneys for Defendants Crye Precision LLC and Lineweight LLC Case 1:16-cv-09873-VEC Document 64 Filed 10/27/17 Page 31 of 31