Winston v. Redman - MSJ Brief

7/27/2019 Winston v. Redman - MSJ Brief

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF OKLAHOMA

WINSTON COMPANY, INC., )

)

Plaintiff, ))

v. ) Case No. 12-CV-0646-JED-TLW

)

REDMAN & ASSOCIATES, LLC, et al., )

)

Defendants. )

DEFENDANT REDMAN & ASSOCIATES, LLC’S

BRIEF IN SUPPORT OF

MOTION FOR SUMMARY JUDGMENT

Case 4:12-cv-00646-JED-TLW Document 56 Filed in USDC ND/OK on 10/16/13 Page 1 of 28



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TABLE OF CONTENTS

I. INTRODUCTION..................................................................................................................... 1

II. STATEMENT OF MATERIAL UNDISPUTED FACTS ...................................................... 2

III. SUMMARY JUDGMENT STANDARD .............................................................................. 3

IV. ARGUMENT .......................................................................................................................... 4

A. THE COURT SHOULD ENTER SUMMARY JUDGMENT INVALIDATING THE DESIGN

PATENT, THEREBY DENYING COUNTS 1, 2, 3, 4 AND 7. .......................................................... 4

1. All features of the ‘903 Design Patent claim are purely functional, and the patent is therefore invalid. ........................................................................................... 4

2. Even were the ‘903 Design Patent valid, Plaintiff would be unable to prove

infringement under the ordinary observer test. .......................................................... 12

3. Plaintiff cannot prove unfair competition as pled under Count 4. ............................. 14

B. THE COURT SHOULD ENTER SUMMARY JUDGMENT DENYING THE ANCILLARY STATE

CLAIMS PLED UNDER COUNTS 5 AND 6. .............................................................................. 15

1. Plaintiff cannot prove breach of contract as pled under Count 5. ............................. 15

2. Plaintiff cannot prove interference with business relationship as pled under Count 6. ...................................................................................................................... 22

V. CONCLUSION ...................................................................................................................... 25




ii

TABLE OF AUTHORITIES

CASES

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986) ........... 3

Berry Sterling Corp. v. Prescor Plastics, Inc., 122 F.3d 1452 (Fed. Cir. 1997) ....................... 5, 12 Blisscraft of Hollywood v. United Plastics Co., 189 F. Supp. 333 (S.D.N.Y. 1960) .................. 5, 6

Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 109 S. Ct. 971, 103 L. Ed.2d 118 (1989) .............................................................................................................................. 4

Celotex Corp. v. Catrett , 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986) ........................ 3

Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665 (Fed. Cir. 2008) ......................................... 12

Elmer v. ICC Fabricating, Inc., 67 F.3d 1571 (Fed. Cir. 1995) ..................................................... 4

Gorham Co. v. White, 81 U.S. 511, 20 L. Ed. 731 (1871) ........................................................ 1, 12

In re Mann, 861 F.2d 1581 (Fed. Cir. 1988) ................................................................................. 12 Keystone Retaining Wall Sys., Inc. v. Westrock, Inc., 997 F.2d 1444 (Fed. Cir. 1993) .................. 5

L.A. Gear, Inc. v. Thom McAn Shoe Co., 988 F.2d 1117 (Fed. Cir. 1993) ................................. 4, 5

Lee v. Dayton-Hudson, Corp., 838 F.2d 1186 (Fed. Cir. 1988) .......................................... 4, 11, 13

OddzOn Prods., Inc. v. Just Toys, Inc., 122 F.3d 1396 (Fed. Cir. 1997) ...................................... 13

PHG Techs., LLC v. St. John Cos., 469 F.3d 1361 (Fed. Cir. 2006) ...................................... 4, 5, 7

Power Controls Corp. v. Hybrinetics, Inc., 806 F.2d 234 (Fed. Cir. 1986) .................................. 14

Sun Hill Indus., Inc. v. Easter Unlimited, Inc., 48 F.3d 1193 (Fed. Cir. 1995) ............................ 12

Tuffy’s, Inc. v. City of Okla. City, 2009 OK 4, 212 P.3d 1158 (2009) .......................................... 22

Vornado Air Circulation Sys., Inc. v. Duracraft Corp., 58 F.3d 1498 (10th Cir. 1995) ............... 14

STATUTES

35 U.S.C. § 171 ......................................................................................................................... 4, 12

OTHER AUTHORITIES

Manual of Patent Examination Procedures .................................................................................... 5

R ULES

Fed. R. Civ. P. 56 ...................................................................................................................... 3, 25

TREATISES

J.T. McCarthy, Trademarks and Unfair Competition (2d ed. 1984) ............................................ 14




1

I. INTRODUCTION

Winston sued Redman & Associates LLC (“R&A”) asserting two core federal claims:

One, that R&A infringed a utility patent application; and two, that R&A infringed issued design

patent number USD666903 S1 (attached as Exhibit 1) (the “‘903 Design Patent”). Because no

lawsuit may proceed on a mere patent application, Winston voluntarily dismissed its utility

patent application claims. The lone federal question for this lawsuit is whether the defendants

infringed the ‘903 Design Patent. Quite literally, this lawsuit is asking for ornamental protection

for a nondescript rectangular cardboard box.

The lawsuit is absurd because the purpose of the design patent laws is to promote the

decorative arts, not the utility of an item. Gorham Co. v. White, 81 U.S. 511, 524, 20 L. Ed. 731,

736 (1871). Winston’s box is devoid of decoration and ornamentation. It has no color,

markings, or adornment. Each and every feature is altogether functional; it is not decorative by

any stretch of the imagination – and the inventors confirm this undisputed fact. One need only

look to Winston’s companion application for the utility patent or the sworn deposition testimony

of two of the named inventors to reveal these facts. Simply put, because functional features are

not protectable using a design patent, Winston’s ‘903 Design Patent is invalid and its

infringement claims fail.

The remaining ancillary state law claims Winston salaciously narrated are likewise

appropriate for summary judgment, giving the Court opportunity to dispose of all of Winston’s

claims. Plaintiff’s corporate witness, Neal Zahn, testified of having no evidence whatsoever to

support any of the state law claims against any of the Defendants. The Court should grant

judgment as a matter of law denying all Plaintiff Winston’s claims, thereby streamlining this

lawsuit to R&A’s counterclaims.




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II. STATEMENT OF MATERIAL UNDISPUTED FACTS

R&A submits the following material facts as undisputed:

Undisputed Fact (for the Patent Claims) Support

1 Plaintiff applied for two forms of patent protection—utility anddesign—for the same subject matter. Exh. 2, Neal Zahn depo, p.96, 123-124; Exh. 3, JohnMcIntosh depo, p. 45.

2 The design of the box was dictated by the toy product it was meant to

contain.

Exh. 2, Neal Zahn depo, p.

109.

3 One primary design objective for the box was to maximize the visual

exposure of the toy product packaged thereby.

Exh. 2, Neal Zahn depo,

pp. 39, 47; Exh. 3, JohnMcIntosh depo, p. 68.

4 A second primary design objective for the box was to permit a child

seated access to the toy product while the toy remained inside the box.


54-55, 102.

5 A third primary design objective for the box was to ensure the box wasstackable.

Exh. 2, Neal Zahn depo, p.46; Exh. 3, John McIntosh

depo, p. 68.6 The back panel of the box was designed to correspond exactly with theheight of the toy product’s handlebars to permit stacking.

Exh. 2, Neal Zahn depo, pp. 35-37; Exh. 3, John

McIntosh depo, pp. 35, 44.

7 The front panel of the box was designed to accomplish two functional

purposes: (i) provide advertising space to showcase the toy productinside; and (ii) contain the toy product and accessories inside.


pp. 36-39, 105; Exh. 3,John McIntosh depo, pp.40-41, 44.

8 The width of the box was designed to accomplish two functionalobjectives: (i) allow enough space for the toy product to fit inside the box; and (ii) allow enough space for a child to actually sit on the toy

product while it was inside the box at the store.

Exh. 2, Neal Zahn depo, pp. 54-55.

9 The length of the box was dictated by the overall length of the toy product. Exh. 2, Neal Zahn depo, p.103; Exh. 3, John

McIntosh depo, p. 44.

10 The front facing display surface of the box was designed to provide

additional space for advertising artwork placement.


pp. 57-58.

11 The actual visually pleasing artwork was designed and applied later bya third party graphic designer in cooperation with the licensor of the

toy product, such as Disney. Such artwork is not claimed as part of

the ornamental design of the box.

Exh. 2, Neal Zahn depo, p.85.

12 The licensor, such as Disney, has the final authority on the ultimate

appearance of the exterior surface of the box, thus the inventors did

not even know what ornamentation would be later applied in the

commercial process.


86.

13 The upper right tab of the box served the function of allowing the box

to be assembled with folding and locking, which also added strength tothe box design.


pp. 100-101, 107-108.

14 The obtuse angle formed between points 148, 162, and 32 (as

described by the Utility Patent Application) was designed to serve four functional purposes: (i) increase exposure of the toy product to theconsumer; (ii) hold the toy product steady at the box’s point of contact

with the toy’s seat; (iii) increase the rigidity and sturdiness of the box;


pp. 101-102; Exh. 3, JohnMcIntosh depo, pp. 37, 42-43, 58-59.




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and (iv) make it easier for a child to step over the box sides to sit on

the toy product.

15 No aspect of the design was driven by aesthetic or ornamentalconsiderations.

Exh. 2, Neal Zahn depo, pp. 125-126; Exh. 3, John

McIntosh depo, pp. 68-69.

Undisputed Fact (for the State Contract Claims) Support

16 Plaintiff’s singular basis for asserting a breach by Defendant R&A of the Teaming Agreement is R&A’s act in giving notice of default to

Plaintiff.

Exh. 2, Neal Zahn depo, pp. 186-188.

17 Under the Teaming Agreement, Plaintiff was solely responsible for securing adequate financing for the venture’s operations and for

establishing sufficient cash reserves to protect the venture from

unexpected contingencies and losses.

Exh. 4, TeamingAgreement; Exh. 2, Neal

Zahn depo, pp. 154, 188.

18 Plaintiff could not secure adequate financing and had insufficient cashreserves, leading to complete disruption in the supply chain and

placing the venture at risk of breaching contracts with both its vendors

and its customer, Wal-Mart.

Exh. 2, Neal Zahn depo, pp. 159, 176-179, 190,

197-198, 201-202, 207;

Exh. 3, John McIntoshdepo, pp. 25-27.

19 Arvest bank refused to issue a letter of credit in January 2012 for

reasons unrelated to R&A and thus Winston could not obtain adequatefinancing to honor its commitment to Wal-Mart.


pp. 198, 201-202, 206-207.

20 Plaintiff’s failure to obtain adequate financing constituted a material

breach of the Teaming Agreement.

Exh. 4, Teaming

Agreement.

22 Plaintiff has no evidence that R&A did anything to interfere with

Plaintiff’s relationship with Wal-Mart, but rather Plaintiff only believes R&A “didn’t help us succeed.”


242.

III. SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate when the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving party is entitled to judgment as a matter

of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett , 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106

S. Ct. 2548 (1986). A material fact is one that may affect the decision, whereby the finding of

that fact is relevant and necessary to the proceedings. Anderson v. Liberty Lobby, Inc., 477 U.S.

242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). A genuine issue is shown to exist only if

sufficient evidence is presented such that a reasonable fact finder could decide the question in

favor of the nonmoving party. Id.




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IV. ARGUMENT

The Amended Complaint alleges seven (7) counts. Counts 1, 2, and 3 are infringement

claims for the ‘903 Design Patent, and Count 4 presents an unfair competition claim derivative of

the ‘903 Design Patent. Count 7 seeks injunctive relief against future infringement. Counts 5 and

6 are ancillary state law claims. All counts are ripe for summary judgment in the Defendants’

favor.

A. THE COURT SHOULD ENTER SUMMARY JUDGMENT INVALIDATING THE

DESIGN PATENT, THEREBY DENYING COUNTS 1, 2, 3, 4 AND 7.

A design patent protects only the nonfunctional aspects of an ornamental design as shown

in the patent. Elmer v. ICC Fabricating, Inc., 67 F.3d 1571, 1577 (Fed. Cir. 1995). To invalidate

a design patent, a party must present clear and convincing evidence of its functionality. L.A.

Gear, Inc. v. Thom McAn Shoe Co., 988 F.2d 1117, 1123 (Fed. Cir. 1993).

1. ALL FEATURES OF THE ‘903 DESIGN PATENT CLAIM ARE PURELY FUNCTIONAL, AND

THE PATENT IS THEREFORE INVALID.

The statute governing design patents is 35 U.S.C. § 171. To be eligible for a design

patent, the design must be “new, original and ornamental.” Id. “As the statute indicates, a design

patent is directed to the appearance of an article of manufacture.” PHG Techs., LLC v. St. John

Cos., 469 F.3d 1361, 1366 (Fed. Cir. 2006). A design must present an “aesthetically pleasing

appearance that is not dictated by function alone.” Bonito Boats, Inc. v. Thunder Craft Boats,

Inc., 489 U.S. 141, 148, 109 S. Ct. 971, 103 L. Ed. 2d 118 (1989). “Design patents do not and

cannot include claims to the structural or functional aspects of the article[.]” Lee v. Dayton-

Hudson, Corp., 838 F.2d 1186, 1188 (Fed. Cir. 1988) (citing 37 C.F.R. § 1.153(a)). “If the

patented design is primarily functional rather than ornamental, the patent is invalid.” PHG

Techs., 469 F.3d at 1366. Stated conversely, “To be patentable, a design must be primarily




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ornamental.” Manual of Patent Examination Procedures (“ MPEP ”), § 1504.01(c) (citing L.A.

Gear, Inc. v. Thom McAn Shoe Co., 988 F.2d 1117, 1123 (Fed. Cir. 1993)).

The design of a useful article is deemed to be functional when “the appearance of the

claimed design is dictated by the use or purpose of the article.” L.A. Gear, Inc. v. Thom McAn

Shoe Co., 988 F.2d 1117, 1123 (Fed. Cir. 1993). Determination of whether the patented design is

dictated by the function of the article of manufacture must ultimately rest on an analysis of its

overall appearance. Id. A determination of ornamentality is not a quantitative analysis based on

the size of the ornamental features but rather a determination based on their ornamental

contribution to the design as a whole. MPEP , § 1504.01(c). Considerations for assessing

whether the patented design is dictated by functional considerations include:

whether the protected design represents the best design; whether alternativedesigns would adversely affect the utility of the specified article; whether thereare any concomitant utility patents; whether the advertising touts particular

features of the design as having specific utility; and whether there are any

elements in the design or an overall appearance clearly not dictated by function.

Berry Sterling Corp. v. Prescor Plastics, Inc., 122 F.3d 1452, 1456 (Fed. Cir. 1997). If a feature

is essential to the product’s use or purpose, or if it affects the cost or quality of the product, then

it is functional. Keystone Retaining Wall Sys., Inc. v. Westrock, Inc., 997 F.2d 1444, 1449 (Fed.

Cir. 1993). The Federal Circuit “invariably also considers whether the elements of the design are

themselves dictated by the purpose or use of the article of manufacture.” PHG Techs., 469 F.3d

at 1369 n.2 (internal citations omitted). In Blisscraft of Hollywood v. United Plastics Co., 189 F.

Supp. 333 (S.D.N.Y. 1960), aff’d , 294 F.2d 694 (2d. Cir. 1961), the plaintiff owned a design

patent on a beverage pitcher and sued a competitor for patent infringement. The defendant

asserted patent invalidity. Id. at 337. After considering the particular elements of the patented

design, the District Court for the Southern District of New York concluded that the presumption




6

of patent validity was rebutted and invalidated the patent. Id. The court walked through the

proper analysis:

The patent is also invalid on the ground that the novelty, if any, is functional

rather than ornamental. The spout serves to close the spout opening; the handleand the tapered body make for ease in molding. The finger indentations on the

‘pistol grip’ prevent the pitcher from slipping out of one’s hand. The horizontal

lines around the body permit measuring and also strengthen the body. Thescalloped lower edge of the lid serves to keep the lid on more tightly and to prevent leakage; and the flange or base prevents tipping. Each of these features is

basically functional.

The new and pleasing aesthetic impression required to sustain a design patentcannot be merely the natural result of a combination of functional arrangements.

Here, the design is clearly dictated by functional or mechanical requirements, and

the so-called pleasing effect is merely a by-product. It is therefore invalid.

Id. Plaintiff’s Rule 30(b)(6) representative, Mr. Neal Zahn, was also listed in the ‘903 Design

Patent as the inventor of the design along with co-inventor Mr. John McIntosh (and Separate

Defendant Melvin Redman). Zahn and McIntosh unequivocally testified how the overall box

design, as well as every single constituent element of the layout, was based on purely functional

considerations. There were three primary objectives that dictated all aspects of creating the

cardboard box layout:

(1) Maximize the visual exposure of the actual toy product inside the box;1

(2) Allow a child to sit on the toy product while it remained inside the box;2 and

(3) Ensure the box was stackable.3

These functional objectives were dictated by the product the cardboard box was meant to

contain.4 Aesthetic appeal of the cardboard box was never a consideration in the design.

Accordingly, the appearance of the box was but a natural result of a combination of functional

1 Exhibit 2, 30(b)(6) Deposition of Neal Zahn, pp. 39, 47.

2 Exhibit 2, 30(b)(6) Deposition of Neal Zahn, pp. 54-55, 102.

3Exhibit 2, 30(b)(6) Deposition of Neal Zahn, p. 46.

4 Exhibit 2, 30(b)(6) Deposition of Neal Zahn, p. 109.




7

arrangements. In analyzing the ‘903 Design Patent, it is important to review the other disclosures

Plaintiff made to the United States Patent Office in connection with a companion utility patent

application for the same cardboard box.5 It is important because a plaintiff-patentee’s statements

presented in the prosecution of a utility patent are relevant to whether the elements of the

claimed design are primarily ornamental and also relevant to whether the design’s overall

appearance was dictated by its use and purpose. PHG Techs., LLC v. St. John Cos., 469 F.3d

1361, 1369 n.2 (Fed. Cir. 2006).6

Plaintiff’s utility patent application illustrates the functional nature of every single aspect

of the cardboard box and serves as an excellent comparative between the utility application and

the ‘903 Design Patent.7 Below is Figure 1 of the utility patent application for the box design:

5Exhibit 2, 30(b)(6) Deposition of Neal Zahn, pp. 96, 123-124; Exhibit 3, Deposition of John McIntosh,

p. 45.

6Notably, Plaintiff did not advise the Patent Examiner reviewing the design patent application of the

existence of Plaintiff’s co-pending utility patent application covering the same subject matter.

7 See Exhibit 5, utility patent application.




8

Below is virtually identical Figure 5 of the ‘903 Design Patent for the same cardboard

box:

Using Figure 1 of the utility patent application as an agreed-upon reference point during

the deposition, both Mssrs. Zahn and McIntosh testified in great detail as to the functional

purpose of each and every decision they made in the design of the box for which the design

patent issued. Each of their deposition transcripts are attached in their entirety as Exhibits 2 and

3. Both explained how the height of the backside of the box (136, “Rear Box Panel”) was driven

by the height of the handlebars.8 “You take the handlebars and you take the back the box, and

those two dimensions will be equal.”9 The purpose was to establish a uniform dimension such

that the boxes could be stacked.10 Stacking was important to minimize freight costs.11

The design of the front panel of the box (30, “Front Box Exterior Panel”) accomplished

two functional purposes. First, it provided advertising space to showcase the quad inside.12

Second, the Front Box Exterior Panel’s height was designed to be just tall enough to contain

8 Exhibit 2, 30(b)(6) Deposition of Neal Zahn, pp. 35-37, 54, 103; Exhibit 3, Deposition of JohnMcIntosh, pp. 35, 44.


10 Exhibit 2, 30(b)(6) Deposition of Neal Zahn, p. 36; Exhibit 3, Deposition of John McIntosh, pp. 36, 44.

11Exhibit 3, Deposition of John McIntosh, p. 36.

12 Exhibit 2, 30(b)(6) Deposition of Neal Zahn, pp. 36-37.




9

product accessories sitting in the floor of the box, while not excessively tall as to unnecessarily

obscure the quad toy inside.13 The Front Box Exterior Panel’s height was also designed to

provide a certain amount of containment for the actual toy vehicle by providing a barrier to

prevent the toy’s front wheels from rolling forward.14

The width of the box was designed to accomplish two functional objectives: (i) to allow

enough space for the toy product to fit inside the box; and (ii) to allow enough space for a child

to actually sit on the toy product while it was still inside the box at the store. 15

The length of the box (12, “Bottom Box Panel”) was dictated by the “overall length of

the vehicle.”

16

The length of the toy product was first measured, and then the Bottom Box Panel

was designed just long enough to accommodate placement of the vehicle inside the box.17

The forward facing display surface (152, “Forward Facing Display Surface”) was

designed to provide additional space for advertising artwork placement.18 Importantly, artwork

is not a part of the patented design. The artwork would be designed and applied later by a third

party graphic designer (Liza Wenzel) in cooperation with the brand licensor of the toy product,

such as Disney.19 The brand licensor, such as Disney, has the final authority on the ultimate

appearance of the box exterior.20

13 Exhibit 2, 30(b)(6) Deposition of Neal Zahn, pp. 37-39; Exhibit 3, Deposition of John McIntosh, pp.40-41, 44.


15 Exhibit 2, 30(b)(6) Deposition of Neal Zahn, pp. 54-55.16 Exhibit 2, 30(b)(6) Deposition of Neal Zahn, p. 103; Exhibit 3, Deposition of John McIntosh, p. 44.








10

The upper right tab (156, “Upper Right Tab”) of the box served the function of allowing

the box to be assembled with folding and locking without the use of tape.21 The fold-and-lock

assembly also added strength to the box design.22

The obtuse angle formed between points 148, 162, and 32 (visible from the side-view of

the box in Figure 1) was designed to serve five functional purposes. The first purpose was to

increase the exposure of the toy product to the consumer.23 The second purpose in selecting the

placement of the angle vertex was to have the Forward Facing Display Surface (152) drop below

the top point of the toy’s seat to help hold the product steady.24 The third purpose for the angled

design was to make it easier for a child to step over the box sides to sit on the toy product.

25

A

fourth purpose disclosed by Mr. Zahn was to increase the rigidity and sturdiness of the box.26

Mr. McIntosh added a fifth functional purpose with respect to this specific design element: The

obtuse angled box facilitated more compact stacking than the embodiment having a 90-degree

angle at Point 162.27

21Exhibit 2, 30(b)(6) Deposition of Neal Zahn, pp. 100-101, 107-108.


23Exhibit 2, 30(b)(6) Deposition of Neal Zahn, pp. 101-102; Exhibit 3, Deposition of John McIntosh, p.

37.

24Exhibit 2, 30(b)(6) Deposition of Neal Zahn, p. 102; Exhibit 3, Deposition of John McIntosh, pp. 42-

43.

25Exhibit 2, 30(b)(6) Deposition of Neal Zahn, p. 102; Exhibit 3, Deposition of John McIntosh, pp. 37,

58-59.


27 Exhibit 3, Deposition of John McIntosh, pp. 58-59.




11

When asked about any aspect of the design that was not driven by functional

considerations, neither inventor identified a single aesthetic consideration.28 Mr. McIntosh

summarized the considerations that dictated the box design:

Q Are there any other considerations as to why the box is designed the way it

is other than what we’ve talked about today?

A It had to present the product on the shelf in a very open and positive

manner, has to be stackable. We needed the unit to be as complete as possible in the package, and you had to – the unit had to arrive safely.Those were basically the criteria.

Q And then the angle was modified specifically for the purposes of allowingthe child to sit?

A And to enhance the ability to stack it and to reduce the cubage.

Q And it was [third party graphic designer] Liza’s [Wenzel] then job to make

the package look nice for the consumer?

A That’s correct.29

The Federal Circuit, the appellate court reserving appellate jurisdiction of all patent cases,

provides the rule of law under such facts:

Many well-constructed articles of manufacture whose configurations are dictated

solely by function are pleasing to look upon, for example a hexnut, a ball bearing, a golf club, or a fishing rod, the pleasure depending largely on one’s

interests. But it has long been settled that when a configuration is the result of functional considerations only, the resulting design is not patentable as an

ornamental design for the simple reason that it is not “ornamental” – was not

created for the purpose of ornamenting.

Lee v. Dayton-Hudson, Corp., 838 F.2d 1186, 1188 (Fed. Cir. 1988).

The foregoing quote directly applies to Plaintiff’s blank cardboard box. The cardboard

box was the result of purely functional goals, as Plaintiff thoroughly explained both in its utility

patent application and in its sworn deposition testimony. To the extent that some person might

28Exhibit 2, 30(b)(6) Deposition of Neal Zahn, pp. 125-126; Exhibit 3, Deposition of John McIntosh, pp.

68-69.





12

view Plaintiff’s blank cardboard box as aesthetically pleasing, it would be the equivalent of

viewing “a hexnut, a ball bearing, a golf club, or a fishing rod” with pleasure. The ‘903 Design

Patent is, by clear and convincing evidence, invalid pursuant to 35 U.S.C. § 171 for lack of

ornamentality.

2. EVEN WERE THE ‘903 DESIGN PATENT VALID, PLAINTIFF WOULD BE UNABLE TO

PROVE INFRINGEMENT UNDER THE ORDINARY OBSERVER TEST.

If the single claim of the ‘903 Design Patent were to survive the rigorous analysis

described above, then the Court would proceed to the next step, i.e., a simple comparison of the

allegedly infringing product against the ‘903 Design Patent. The legal framework is very narrow

because “design patents have almost no scope.” In re Mann, 861 F.2d 1581, 1582 (Fed. Cir.

1988). The claim is “limited to what is shown in the application drawings.” Id . For example, if

the drawings in the patent application are devoid of color and size, then during the comparison

process the patented design must be viewed as devoid of color and size, regardless of whether

the plaintiff-patentee might have applied color and size to commercialized products embodying

the patented design. See, e.g., Sun Hill Indus., Inc. v. Easter Unlimited, Inc. , 48 F.3d 1193, 1196

(Fed. Cir. 1995) (“The trial court committed legal error by relying on unclaimed features of Sun

Hill’s commercial embodiment,” such as size, color and material.); see also Berry Sterling Corp.

v. Prescor Plastics, Inc., 122 F.3d 1452, 1455 (Fed. Cir. 1997). The proper standard for

determining design patent infringement is the “ordinary observer” test. Egyptian Goddess, Inc. v.

Swisa, Inc., 543 F.3d 665, 670 (Fed. Cir. 2008) (citing Gorham Co. v. White, 81 U.S. 511, 20 L.

Ed. 731 (1871)). “If, in the eye of an ordinary observer, giving such attention as a purchaser

usually gives, two designs are substantially the same, if the resemblance is such as to deceive

such an observer, inducing him to purchase one supposing it to be the other, the first one

patented is infringed by the other.” Id. (quoting Ghoram, at 528)).




13

The legal test focuses on only the aspects of the design that survive the functionality test,

if any. If a design contains both functional and ornamental features, the patentee must show that

the perceived similarity is based on the ornamental features of the design. OddzOn Prods., Inc. v.

Just Toys, Inc., 122 F.3d 1396, 1405 (Fed. Cir. 1997). The plaintiff-patentee bears the burden of

proving by a preponderance of the evidence that an ordinary person would be deceived by reason

of the common features in the claimed and accused designs which are ornamental. Id. “A device

that copies the utilitarian or functional features of a patented design is not an infringement unless

the ornamental aspects are also copied, such that the overall resemblance is such as to deceive.”

Lee v. Dayton-Hudson, Corp., 838 F.2d 1186, 1189 (Fed. Cir. 1988).

When the facts of this situation are applied to the foregoing law, it is undisputed the

Plaintiff’s blank box lacks any surface ornamentation. The ‘903 Design Patent is for a white,

blank box. Compare Fig. 1 of the ‘903 Design Patent, which is a white box on the left, against

the colorful, stylized, graphical, visual display box produced by R&A, on the right:

There are many obvious differences as between the ‘903 Design Patent Fig. 1 and the

highly stylized visual labels applied to the outside of the box. Defendants could not have copied




14

any ornamental aspects of the white, blank cardboard box. The Defendants therefore cannot be

found liable for infringement of the ‘903 Design Patent. Furthermore, even if some aspect of the

design were found to be ornamental, it would be impossible for an ordinary observer to confuse

Plaintiff’s white, blank cardboard box design with Defendants’ toy products, whose appearance

is unquestionably driven by the brand licensor’s artwork.30 Defendants’ allegedly infringing box

is adorned with all of the artwork of the brand licensor, in this example Spiderman® as licensed

through Marvel. Plaintiff’s corporate witness confirmed it is Disney’s or Marvel’s brand that

attracts consumers, not the shape of the box.31 No reasonable consumer would claim confusion

of origin based on the shape of Defendants’ box because it is the branding, the artwork and, most

importantly, the product inside the box, which drives a consumer’s choice. Plaintiff has not and

cannot produce any evidence that consumers could confuse its plain white box shape with

Defendants’ product. The Court should deny as a matter of law Plaintiff’s claims of patent

infringement and injunctive relief under Counts 1, 2, 3, and 7.

3. PLAINTIFF CANNOT PROVE UNFAIR COMPETITION AS PLED UNDER COUNT 4.

Unfair competition law is intended to protect consumers from confusion or deception as

to whose product they are buying. See Vornado Air Circulation Sys., Inc. v. Duracraft Corp. , 58

F.3d 1498 (10th Cir. 1995). As explained in the preceding section of this brief, the design patent

is invalid because it is functional. The unfair competition claim fails because “unfair competition

cannot be based upon a functional design.” Power Controls Corp. v. Hybrinetics, Inc., 806 F.2d

234, 240 (Fed. Cir. 1986) (citing J.T. McCarthy, Trademarks and Unfair Competition § 7:26 (2d

ed. 1984)). Further, Plaintiff has not and cannot produce any evidence that consumers could

30 See Exhibit 2, 30(b)(6) Deposition of Neal Zahn, p. 129 (“The fact that it’s Disney is the biggest

indicator of the aesthetic.”).

31 Id.




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confuse its plain white cardboard box with Defendants’ highly stylized presentation. Given the

complete absence of testimony and evidence supporting Plaintiff’s unfair competition claim,

summary judgment should be granted in Defendants’ favor.

B. THE COURT SHOULD ENTER SUMMARY JUDGMENT DENYING THE

ANCILLARY STATE CLAIMS PLED UNDER COUNTS 5 AND 6.

Having disposed of the federal question claims, each ancillary state law claim may

likewise be disposed of summarily under the analysis that follows.

1. PLAINTIFF CANNOT PROVE BREACH OF CONTRACT AS PLED UNDER COUNT 5.

Plaintiff asserts at Count 5 of its Amended Complaint that Defendant R&A breached the

Teaming Agreement attached both as Exhibit 1 to its lawsuit and as Exhibit 4 to this motion.

When given full opportunity to identify any facts supporting its breach of contract claim,

Plaintiff could identify not a single fact. Plaintiff’s 30(b)(6) witness Neal Zahn testified directly

about the breach of contract claim at pages 179-190 of his deposition transcript.32 Mr. Zahn

explained that Plaintiff’s singular basis for asserting a breach by Defendant R&A was R&A’s act

of giving notice of intent to terminate the agreement for cause on February 6, 2012. It is

undisputed, however, the Teaming Agreement provided that a party could either (i) terminate for

cause by giving 30 days notice; or (ii) terminate without cause by giving 90 days notice.33

Mr.

Zahn agreed in his deposition that if R&A “would have given us 90 days, he [Redman] could

have done it without cause and without breach.”34 Mr. Zahn then admitted how Plaintiff’s only

issue was in the timing given for the notice of default:

I think that the only issue that I have with the teaming agreement is the 30 daysinstead of the 90 days, given the fact that the bank wasn’t allowing us to move the

32 Exhibit 2, 30(b)(6) Deposition of Neal Zahn.

33Exhibit 4, Teaming Agreement, ¶ 6.





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money per the contract and agreement of 2011, which was entered into by all parties.”35

The testimony belies Plaintiff’s legal position. Plaintiff’s argument is that R&A’s act of

breach occurred when R&A elected to give Winston 30 days to cure its default (with cause)

rather than 90 days (without cause).36 To refute Plaintiff’s legal theory, R&A need only show

Plaintiff was in default at the time R&A served its notice of default for cause on February 6,

2012. A copy of R&A’s notice of default letter is attached hereto as Exhibit 7. In the notice,

R&A cites several acts of breach to support the notice for cause, including:

Winston has failed to obtain financing at levels currently required to fund

operations of the Winston-Redman venture, as required by the Teaming

Agreement, resulting in delinquent accounts with trade creditors, which has putthe venture’s business operations in jeopardy. Winston has also failed to establishsufficient reserves necessary to protect the venture from unexpected

contingencies, losses and for support of planned growth.37

The specific provisions of the Teaming Agreement referenced in the excerpted portion of

the notice of default letter are found on page 2 of the Teaming Agreement, attached as Exhibit 4:

b. Winston’s initial responsibilities include:

* * *

(v) obtaining bank accounts and financing for the Venture’s operations in

amounts deemed appropriate in Winston’s sole discretion,

* * *

(vi) coordinating the sourcing and purchase of Products either directly from

manufacturers thereof or through Winston China,

* * *


36 This is the identical claim Winston presented in a counterclaim filed August 31, 2012, in the state case

Redman & Associates, LLC v. Winston Company, Inc., Circuit Court of Benton County, Arkansas, No.CV-2012488. See Exhibit 6, Winston’s counterclaim, at p. 3. R&A is litigating its own breach of contract

claims against Plaintiff exclusively in the Benton County, Arkansas case.

37Exhibit 7, notice of default letter. R&A cited other events of default in the notice letter, including

Winston’s failure to pay R&A money it was owed under the Teaming Agreement. Those allegations are being litigated in the Arkansas state court case.




17

(x) determining the reserves necessary to reasonably protect WinstonINTL from unexpected contingencies, or losses, or to provide supportfor planned growth or capital acquisitions needs of Winston INTL.38

In essence, the Teaming Agreement required Winston, and not R&A, to be fully

responsible for ensuring adequate cash flow for the venture’s operations. Winston and its

owners, the Zahn family, were responsible for “the financial purse strings.”39

Prior to R&A serving Plaintiff with the notice of default, Plaintiff indisputably breached

one or more of the above-referenced provisions by failing its financial obligations to the venture.

Mr. Zahn testified how, due to a series of supply chain breakdowns and financial failures

beginning in 2011, the business was in collapse by January 2012. The major problems arose

because Mr. Zahn mismanaged the Winston Company and did not respect Winston’s contractual

obligations under the Teaming Agreement to responsibly manage the cash flow, ensure adequate

cash reserves, and properly source and pay for the products manufactured in China. Mr. John

McIntosh was Winston’s Operations Manager and had responsibility for the company’s

production, inventory control, quality, industrial engineering, manufacturing engineering, and

purchasing.40 Mr. McIntosh testified that “there were some issues in cash flow that were not

associated with the business itself… To say that there could have been issues because of the way

cash flow was handled is probably more accurate way of putting it.”41 He acknowledged the

company’s demise boiled down to the Zahns’ loose management of cash reserves:

Q Right. So what I’m understanding you are saying is that the product was

good, the support was good. The company could have been viable hadmoney not been pulled out from the business as fast and rapidly as it was

being pulled out.

38Exhibit 4, Teaming Agreement, ¶ 3. Plaintiff Winston Company, Inc. is also known as Winston

International or Winston INTL. Exhibit 2, 30(b)(6) Deposition of Neal Zahn, p. 5.

39 Exhibit 2, 30(b)(6) Deposition of Neal Zahn, pp. 154, 188.

40Exhibit 3, Deposition of John McIntosh, p. 6.

41 Exhibit 3, Deposition of John McIntosh, p. 25.




18

Mr. Cartledge: Object to the form. You can answer.

A Yes, I would agree to that.42

Mr. McIntosh offered an analogy to another defunct company in Tulsa known as Arrow

Trucking, which “was a very viable company here in Tulsa not long ago.”43 He analogized Neal

Zahn, who inherited the Winston Company from his father Henry Zahn, to the son of the Arrow

Trucking founder:

The owner of the company, patriarch of the company passed away, and the son

started – I’m not sure the mother – I’m going by what I read in the newspaper.But it has a very similar trail. The son had no restraints on how he spent thecompany money and Arrow Trucking found themselves bankrupt. Greed will

destroy a company, and we saw a lot of greed.44

Mr. Zahn’s failure to responsibly manage the company’s cash flow led to its bank

freezing its line of credit and important vendors not being paid. This in turn led to a breakdown

in the supply chain and an inability to honor commitments to the customer, Wal-Mart. One

important vendor was a logistics company known as Yusen, who was responsible for

transporting the toy products from China into the United States.45 When Plaintiff failed to pay

Yusen’s bills, Yusen exercised its warehouseman’s lien rights on the quad toy products Plaintiff

was importing from China:

Q Do you feel as though – did Winston provide timely payment to Yusen in

advance of when Yusen asserted the warehouseman’s lien or was there an –

A No.

Q – unpaid balance?

A There was an unpaid balance.

Q What is the amount of the unpaid balance to Yusen –


43 Exhibit 3, Deposition of John McIntosh, p. 26.

44Exhibit 3, Deposition of John McIntosh, pp. 26-27.





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A 700,000, 800,000.

Q -- to Yusen. Okay.

So prior to the assertion of the lien, Yusen required or demanded payment

or was owed payment between 700 and 800,000? Yes?

A Yes.

Q Were – was Winston able to make that payment to Yusen prior to theassertion of the warehouseman’s lien?

A No.

Q Was Winston financially able to make that payment at any time in the sixweeks surrounding March 2012?

A No. Returns started coming in January 7th or so. Three million was

returned, and those were taken off invoice by Walmart. So we had paid for the goods, but we didn’t get the money in for the sale of them.

Q Walmart took the – exercised its right of return.

A Took deductions, yes.

Q And so the check you expected from Walmart was 300 – no, three millionless than you thought it would be?

A Yes.

Q And, therefore, it created – the returns created tremendous cash flowimpairment to Winston such they could not honor the obligation to Yusen of

about $800,000?

A Yes, and other vendors.

Q And then – and did Golden Wheel America or Jai Jai also claim that theywere owed money from Winston at this time?

A I don’t know when their lawsuit hit. It may have been March or April of

2012.

Q Okay.

A And that’s when they – there was a settlement agreement initially with themfor 300 and some thousand. And then in the lawsuit they claimedownership of the goods, and it took them to almost two million or whatever

the number is.




20

Q So in light of the amount owed to Yusen and in light of the claim by JaiJai/Golden Wheel America, was Winston in any position to fulfill the salesorder at Walmart over the 12-volt goods that were eventually seized?

A When Ellen Liu [owner of another Chinese vendor named Sales Chief]opted out of her agreement and Walmart took the three million dollars in

deductions, that five million dollars that disappeared, we weren’t in anyfinancial position to do anything. That’s when the bank pulled away from

us and said no more. How can we extend credit to a Chinese factory thatcan’t possibly – you can’t collect from? How can you do that?

Q Okay. So adding another layer to this scenario, you’re saying that Arvest

[Bank] had refused to provide an LC [letter of credit]?

A To extend our line of credit that would expire in February, late February of 2012.

Q A lot of things were crashing down in February of 2012?

A Hey, two million dollars gone from Ellen Liu and three million cash from

Walmart, that’s five million dollars for a company that’s doing 40 is toughto swallow at the time.

Q So given the returns and the demands and the cash flow tension and the

refusal of Arvest to continue forward with an LC, it was impossible for Winston to fulfill the sales order from Walmart?

A Impossible.46

Thus, Winston’s mismanagement caused insurmountable problems with many third

parties including Wal-Mart, Sales Chief (Ellen Liu), Yusen, Jai Jai, Golden Wheel America, and

Arvest Bank. There were other internal problems as well, including: suspected embezzlement

by one of Winston’s longtime trusted employees who was described as a Zahn family “pet”47;

Winston’s failure to have a competent accountant on staff, who was finally terminated in

February 2012 amidst the cascade of other problems raining down on Winston 48; the Zahn

family’s insistence on maintaining a veil of secrecy over the company’s finances

49

; and IRS



48Exhibit 2, 30(b)(6) Deposition of Neal Zahn, pp. 247, 252.

49 Exhibit 3, Deposition of John McIntosh, pp. 8-9, 35




21

payroll tax liens against Winston’s assets, which only further exacerbated Winston’s credit

problems.50

Everything came to a halt when Plaintiff Winston was no longer able to secure financing

for operations from Arvest Bank.51

Zahn agreed Defendants in no way contributed to the

Plaintiff’s financing problem.52 Mr. Zahn acknowledged that Plaintiff was no longer able to

meet its financial obligations by January 2012:

Q But not since January of 2012 has your company been in a financial position

to import any more toys?

A Correct.53

R&A gave proper notice to Plaintiff of its material breach of their Teaming Agreement

and exercised its right to terminate the relationship for good cause on February 6, 2012. 54 On

March 7, 2012, after the requisite notice period expired, R&A formally terminated the venture

for cause.55 Mr. Zahn admitted Plaintiff was the party in fact who was in breach of the Teaming

Agreement in March 2012 when R&A formally terminated the relationship:

Q So do you agree that between March 1st – or March 2012 you could no

longer comply with the requirements of the teaming agreement?

A We couldn’t comply with the financing – securing the financing of that

teaming agreement.56

50Exhibit 2, 30(b)(6) Deposition of Neal Zahn, pp. 214-215; Exhibit 8, email string with Arvest Bank

dated _____.

51 Exhibit 2, 30(b)(6) Deposition of Neal Zahn, p. 222.52 Exhibit 2, 30(b)(6) Deposition of Neal Zahn, p. 208.


54 Exhibit 7, notice of default.

55Exhibit 9, notice of termination.





22

Accordingly, it is undisputed that Plaintiff breached the Teaming Agreement, and R&A’s

termination of the agreement was legally justified. The Court should deny Plaintiff’s claim of

breach of contract as a matter of law.

2. PLAINTIFF CANNOT PROVE INTERFERENCE WITH BUSINESS RELATIONSHIP AS PLED

UNDER COUNT 6.

Plaintiff alleges that Defendant R&A tortiously interfered with Plaintiff’s relationship

with Wal-Mart. However, Mr. Zahn’s testimony establishes just the opposite—that R&A

voluntarily went to heroic efforts to try to preserve Winston’s relationship with Wal-Mart.

Under Oklahoma law, the elements of tortious interference with a business relationship

are: (1) interference with a business or contractual right; (2) malicious and wrongful interference

that is neither justified, privileged, nor excusable; and (3) damage proximately sustained as a

result of the interference. Tuffy’s, Inc. v. City of Okla. City, 2009 OK 4, ¶ 14, 212 P.3d 1158,

1165 (2009).

Winston has no evidence of damages. At his deposition, Mr. Zahn could not speak to

damages and instead deferred to his accountant, David Grisham.57 However, Mr. Grisham was

never identified as a testifying witness, and discovery has now closed. Plaintiff lacks any

evidence to support any aspect of its damages claim, which is a critical element to the tort of

tortious interference of a business relationship. The Court should deny Plaintiff’s claim of

tortious interference under Count 6 as a matter of law.

Winston has no witness to testify as to any malicious or wrongful interference not

otherwise justified, privileged, nor excusable. As discussed in the prior section, due to a series of

poor management and financial decisions of Plaintiff and the Zahn family, by January 2012

Plaintiff was no longer in a position to fulfill its obligations to Wal-Mart. Winston, through the





23

venture, had pledged to deliver to Wal-Mart a large shipment of toys referred to as the “Easter

tab goods.”58 In early January 2012, Arvest Bank refused to issue a letter of credit for Winston

to pay for the Easter tab goods, meaning Winston did not have the financial ability to import the

goods.59

To help Winston avoid a devastating breach of faith with Wal-Mart, R&A stepped in to

personally fund the purchase, importation and delivery of the Easter tab goods to Wal-Mart.60

R&A performed this act without any legal obligation to do so, and Mr. Zahn does not dispute the

importance of R&A fulfilling the order:

Q So Redman then – when it was discovered you could not have an LC,

Redman stepped forward to pay for a product that Winston had ordered?

A Purportedly, yes.

Q Well, evidently. Yes?

A Maybe not.

Q Well, okay. And had Med Redman or Redman & Associates not stepped

forward to make these financial arrangements, what would Winston’s

logical liability be to [vendor] VKS, [vendor] Sales Chief or Walmart as aresult of not providing merchandise surrounding the Easter tab goods?

A Not providing the financing?

Q Or the goods.

A Well, you don’t not fill Walmart orders. That’s for certain.61

Plaintiff welcomed R&A’s assistance and fully acknowledges that it was to benefit

Plaintiff’s relationship with Wal-Mart, not damage it:

Q And so it seems reasonable that Redman & Associates was helping Winston

because you’re using Redman’s help as proof of your intention to preserve a

good relationship with Walmart?








24

A For the Easter tab, that is correct.

Q And you were using the Easter tab scenario as further proof of your continued desire to work with Walmart.

A Yes, and Mel Redman.62

Around this same time period in early 2012, R&A again rescued Winston from a breach

of contract with Wal-Mart, this time in connection with the Yusen warehouseman’s lien debacle.

R&A personally funded, outside of the venture, the satisfaction of Yusen’s warehouseman’s lien

that was tying up the goods Winston owed to Wal-Mart, and R&A fulfilled Winston’s obligation

to deliver goods to Wal-Mart, thereby helping Winston avoid a breach of contract claim from

Wal-Mart.63

Thereafter, Winston sought to repair its damaged relationship with Wal-Mart, but

Winston’s financial mess only complicated the relationship further. In mid-March 2012, after

R&A terminated the Teaming Agreement, Winston sought concessions from Wal-Mart to help

Winston try to climb out of its financial hole.64 It is clear Winston was counting on

extraordinary relief from Wal-Mart to try to salvage its business relationship.65 Winston has

absolutely no evidence that R&A did anything to interfere with its relationship, and Winston’s

true gripe is it believes R&A “didn’t help us succeed.”66

In fact, quite the contrary is true

because R&A stepped in to minimize the damage for Winston’s failure to fulfill the Wal-Mart

contracts.

62 Exhibit 2, 30(b)(6) Deposition of Neal Zahn, p. 206; see also Exhibit 10, email string dated March 12,2012 involving Neal Zahn and Henry Zahn regarding financing of the Easter tab goods.



65Exhibit 2, 30(b)(6) Deposition of Neal Zahn, p. 148-150.





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V. CONCLUSION

Plaintiff Winston Company wrongly sued to enforce a design patent over a functional

rectangular box having no decorative element, and the Court should declare the design patent

invalid. All Plaintiff’s other salacious claims fail now that the corporate leader, Neal Zahn, was

deposed. Zahn admitted his company could not fulfill its obligations under the Teaming

Agreement prior to when Redman & Associates, LLC gave lawful notice of intention to

terminate the agreement. Zahn had no information of any claimed damages and discovery has

closed. The Court should dispose of Plaintiff’s frivolous claims as a matter of law and enter

summary judgment in favor of Defendants pursuant to Fed. R. Civ. P. 56.

Respectfully submitted,

REDMAN & ASSOCIATES LLC

/s/ Mark Murphey Henry

Mark Murphey Henry, OBA #20927Adam L. Hopkins, AR #2006282Henry Law FirmP.O. Box 8850Fayetteville, AR 72703(479) 695-1330 telephone(479) 695-1332 [email protected]@henrylawfirm.net Admitted Pro Hac Vice

CERTIFICATE OF SERVICE

I hereby certify that on the 16th day of October, 2013, the foregoing document wasdelivered via the Court’s ECF system upon all counsel who has entered his or her appearancetherein on the date noted thereby.

/s/ Mark Murphey HenryMark Murphey Henry


Documents

Winston v. Redman - MSJ Brief