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Nielsen Idaho Tool and Engineering Corp v. Scepter Corporation

September 22, 2011

NIELSEN IDAHO TOOL AND ENGINEERING CORP., PLAINTIFF,
v.
SCEPTER CORPORATION, DEFENDANT.



The opinion of the court was delivered by: B. Lynn Winmill Chief Judge United States District Court

MEMORANDUM DECISION AND ORDER

INTRODUCTION

The Court has before it Defendant Scepter Corporation's Motion to Dismiss (Dkt. 12). In the interest of avoiding further delay, and because the Court finds that the decisional process would not be significantly aided by oral argument, these motions shall be decided on the record before this Court without oral argument. Local Rule 7.1(b). Having reviewed the parties submissions and as explained further below, the Court will deny Scepter's Motion to Dismiss.

BACKGROUND

Plaintiff Nielsen Idaho Tool and Engineering Corp. ("Nielsen Corp.") is an Idaho corporation. Roger B. Nielsen, the sole principal and shareholder of Plaintiff Nielsen Corp., is a toolmaker and inventor living and working in Meridian, Idaho. Nielsen invented a closeable self-venting spout for portable liquid-carrying containers designed to avoid spillage. The spout has a number of uses, including compliance with U.S. environmental and safety regulations regarding portable gas cans. Nielsen Corp. sued Scepter Corporation, a Canadian company that manufactures fuel cans and other plastic products. Nielsen Corp. alleges in the Complaint that Scepter breached an "Exclusive License to Exploit Invention" agreement by terminating the agreement and failing to pay semi-annual royalty payments.

The negotiation of the licensing agreement occurred over a year and a half period in 2004 and 2005. In 2004, Nielsen Corp., through its Boise, Idaho patent attorney, began contacting various domestic and foreign manufactures, including Scepter, about their interest in licensing Nielsen's spout technology. Scepter indicated an interest in licensing the technology to develop products for sale in the United States that would comply with stringent environmental standards enacted by the California Air Resources Board ("CARB") and adopted by several U.S. states. To ensure that it would acquire rights to Nielsen Corp.'s technology, Scepter asked to engage in exclusive licensing negotiations with Nielsen Corp. On March 28, 2005, at Nielsen Corp.'s request, Scepter signed, scanned, and emailed a formal letter of intent to negotiate exclusively with Nielsen Corp.

Over the next several months of exclusive negotiations, Scepter made numerous inquiries, requests, and demands of Nielsen, Nielsen Corp. and its Idaho attorneys. The negotiations occurred through telephone calls and emails. Scepter proposed meeting Nielsen in Idaho, but it fell through because of scheduling conflicts.

Before entering into the licensing agreement with Nielsen Corp., Scepter required Nielsen to perform extensive analysis and work in Idaho. Scepter required Nielsen to build a working physical prototype of a spout assembly before it would finalize any agreement with Nielsen Corp. Nielsen spent over 350 hours in Idaho preparing the requested prototype and other supporting materials. Nielsen completed the prototype and presented it to Scepter at a meeting in Canada.

For the next several months, the parties continued to negotiate the terms of the licensing agreement through emails and telephone calls between Idaho and Canada. After the parties volleyed proposed contractual terms and requirements back and forth and agreed on the proposed terms, Nielsen Corp.'s attorneys drafted the final contract. The parties signed the "Exclusive License to Exploit Invention" agreement in October 2005 -- Scepter signed on October 6, 2005, and Nielsen signed, in Idaho, on October 19, 2005.

The agreement required Scepter to pay Nielsen Corp. an advance royalty payment of $250,000, which Scepter paid to Nielsen Corp. in Idaho. In addition, Scepter paid $250,000 for the first 5,000,000 units Scepter made using the spout. The licensing agreement further obligated Scepter to make semi-annual royalty payments of $125,000 from January 1, 2009 through the life of the patent, or October 2023. While Scepter only made two such payments before terminating the agreement, Scepter nonetheless paid Nielsen Corp. hundreds of thousands of dollars over a four-year period.

On January 29, 2010, Scepter terminated the licensing agreement after Scepter chose a new product that complied with CARB regulations and was supposedly cheaper to manufacture. The termination of the agreement precipitated this lawsuit. Scepter now seeks a dismissal of the lawsuit on the ground that this Court lacks personal jurisdiction over the company. In support of its motion, Scepter filed the Declaration of Robert S. Torokvei, who states that all Scepter officers, factories, and places of business are located in Canada, and all Scepter employees work in the Canadian facilities. Torokvei Decl. ¶ 2, Dkt. 12-3. No Scepter representative traveled to Idaho during the negotiation of the licensing agreement with Nielsen Corp.

LEGAL STANDARD

In ruling on this motion, the Court must take Nielsen's Corp.'s uncontroverted allegations in the complaint as true and resolve factual disputes in affidavits in its favor. See Dole Food Co., Inc. v. Watts, 303 F.3d 1104, 1108 (9th Cir. 2002). However, where Scepter offers evidence in support of its motion, Nielsen Corp. may "not simply rest on the bare allegations of its complaint." Amba Mktg. Sys., Inc. v. Jobar Int'l, Inc., 551 F.2d 784, 787 (9th Cir. 1977); see Data Disk, Inc. v. Sys. Tech. Assocs., 557 F.2d 1280, 1284 (9th Cir. 1977) (holding that the Court "may not assume the truth of allegations in a pleading which are contradicted by affidavit"). In that instance, Nielsen Corp. must "come forward with facts, by affidavit or otherwise," in response to [Scepter's] version of the facts. Amba Mktg. Sys., Inc., 551 F.2d at 787.

Nielsen Corp. bears the burden of proving that the Court has personal jurisdiction over Scepter. Rano v. Sipa Press, Inc., 987 F.2d 580 (9th Cir. 1995). If the Court decides the matter on affidavits and depositions -- without an evidentiary hearing -- Nielsen Corp. need only establish a prima facie showing of jurisdictional facts to withstand a motion to dismiss. Ballard v. Savage, 65 F.3d 1495 (9th Cir. 1995).But the issue remains alive for trial ...


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