Cosa Instrument Corp. v. Hobre Instruments BV, 2010 WL 1141385 (E.D.N.Y. 2010)
The declaratory judgment co-plaintiff Cosa Instrument Corp manufactured calorimeters. Cosa purchased components for its calorimeters from Hobré, which it modified before incorporating into one of its products. After a dispute between the two companies, Cosa began to purchase the component parts from another party, Xenataur, the other declaratory judgment co-plaintiff, in order to develop and market a new calorimeter.
Hobré sent a cease and desist to Cosa in 2008 alleging that Cosa was exploiting its confidential proprietary information and was infringing Hobré’s various intellectual property rights. The company stated that “[u]nless Cosa acknowledges within a reasonable period of ten business days … that it will cease the production of the [the relevant product] … Hobré will seek legal remedies for infringement of its (intellectual) property rights.” A back and forth ensued that ended with Hobré alleging that Cosa had engaged in unfair competition, trademark and trade dress infringement, and copyright infringement. Hobré also demanded, inter alia, that Cosa and Xenataur impose a litigation hold on any documents or materials relevant to the parties’ dispute.
After settlement discussion broke down, Cosa and Xenataur filed suit seeking a declaration of noninfringement/lack of liability on the tort-based claims, an order enjoining Hobré from challenging their right to sell the relevant product, and attorneys’ fees under the Lanham Act, 15 U.S.C. § 1117(a)(3), and the Copyright Act, 17 U.S.C. § 505.
Hobré never answered the Complaint. After default judgment was awarded Hobré filed a “Memorandum of Law in Opposition to Plaintiffs’ Motion for a Default Judgment,” including a declaration explaining its failure to answer:
[d]ue to the expense of pursuing a lawsuit in the United States, and due to the fact that Hobré had developed its next generation of calorimeters, we decided to let our products battle in the competitive marketplace. After negotiations broke off in spring 2009, Hobré took no affirmative legal steps against Cosa.
The Judge Magistrate denied the motion for declaratory relief finding that the “sole basis for plaintiffs’ request for relief are two cease-and-desist letters sent by Hobré and its counsel in October and December 2008 …”; and that, given the assurances from the letter sent to the Court, the declaration served no “useful purpose.”
The Judge Magistrate also denied the motion for an injunction (the breadth of the parties’ proposed injunction suggested that it sought to use the “proceeding to gain a competitive advantage over future products not at issue”) and the motion for attorneys’ fees (the parties failed to present any evidence of bad faith, unreasonableness, or frivolousness on the part of Hobré that would justify an award of attorneys’ fees.)
The E.D.N.Y. rejected the Judge Magistrate’s recommendation in regard to the declaratory judgment and the injunction. The Court found that the recommendation did not address the parties’ ”legitimate concern that at some point in the not too distant future, Hobré may reconsider its legal options with respect to Cosa’s continued sale of the [relevant product].” Stated the Court, “a declaratory judgment will definitively establish Cosa’s rights to market and sell the [relevant product] and resolve any uncertainty about which party holds the intellectual property rights to this product.” The Court further found that a revised, narrowly tailored, injunction that only enjoined Hobré from challenging the parties’ right to manufacture, supply, service, sell, and distribute the [relevant product and components] in the United States, or interfering in any manner with Plaintiffs’ marketing and sale of [the relevant product] in the United States” would make it “crystal clear” that the injunction was not overbroad.