Free Joint Case Management Statement - District Court of California - California

Case 3:07-cv-04015-MMC

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Filed 12/07/2007

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Chrstopher W. Brown, SBN 243472
1 The DuBoff Law Group, LLC

6665 SW Hampton Street, Suite 200
2 Portland, Oregon 97223-8357

Telephone: (503) 968-8111
3 Facsimile: (503) 968-7228 cbrown~duboffaw .com

4

Attorney for Defendants Michael D. Sage
5 and Susan Gilmour Sage, dba Sage Designs

6 Lawrence G. Townsend, Esq., SBN 88184

1townsend~owe.com
7 Linda Joy Kattinkel, Esq. SBN 164283

1jk~owe.com
8 Owen, Wickersham & Erickson, PC

455 Market Street, Ste. 1910
9 San Francisco, CA 94105 phone: (415) 882-3200 10 fax: (415) 882-3232

11 Attorneys for Plaintiff Leaf Lines, LLC
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13

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

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15

LEAF LINES, LLC, a California Company,
16

Case No. CV074015MMC

Plaintiff,
17

v.
18

JOINT CASE MANAGEMENT STATEMENT AND PROPOSED ORDER

MICHAEL D. SAGE and SUSAN GILMOUR
19 SAGE, Washington State residents dba SAGE

DESIGNS, and DOES 1-100
20

Defendants.
21

22
The parties to the above-entitled action

jointly submit this Case Management Statement

23

and Proposed Order and request the Court to adopt it as its Case Management Order in this case.

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1

1.

JURISDICTION AND SERVICE
the federal copyright laws, 17 U.S.C.

2 This is an action to redress alleged violations of

3 § 501, et seq., federal laws of

trade dress infringement and unfair competition, 15 US.C.

4 §1125(a) et seq., as amended, federal law of dilution, 15 U.S.C. § 1125 (c), California state law
5 of

unfair competition, CaL. Bus. & Prof. Code § 17200 et seq., breach of contract under

6 California law, breach of fiduciary duty under Californa law, and misrepresentation under the

7 federal Digital Milennium Copyright Act, 17 U.S.C. § 512(f) ("DMCA"). This Cour has subject
8 matter jurisdiction over Plaintiffs claims under and pursuant to 28 U.S.c. §§ 1331 and 1338. 9 This cour has supplemental jurisdiction over Plaintiffs claims pursuant to 28 U.S.C. § 1367.
10 Venue in the Northern District of

California is proper pursuant to 28 U.S.C.§ 1391(b), § 1392

11 and § 1400(a).

12 No paries remain to be served.
13 Defendants wil raise claims of misrepresentation under the DMCA, for an accounting
14 under the federal copyright laws, 17 U.S.C. § 501, et seq., breach of contract under California
15 law, California state law of

unfair competition, CaL. Bus. & Prof. Code § 17200, et seq.,

16 intentional interference with prospective business advantage under California law, and negligent

17 interference with prospective business advantage under Californa law. This Cour has subject
18 matter jurisdiction over Defendants' claims under and pursuant to 28 U.S.C. §§ 1331 and 1338.
19 This cour has supplemental

jurisdiction over Defendants' claims pursuant to 28 U.S.C. § 1367.

20

2.

DESCRIPTION OF THE CASE

21 Plaintiff Leaf Lines, LLC of Mountain View, Californa, manufactues and sells fine ars
was formed on or about
22 and crafts products at wholesale throughout the United States. Plaintiff

23 November 8, 2005. From 1993 to November 2005, Booker Morey, Plaintiffs principal and

24 founder, acted as a sole proprietorship doing business as Leaf Lines.
25 In 1993, Mr. Morey developed an allegedly proprietary leaf-etching process for creating
26 "skeletonized" or "etched" leaves, which he has allegedly kept confidentiaL. Also in 1993, Mr.

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I Morey developed an allegedly distinctive design for arworks which feature three-dimensional
2 collages of

his etched leaves in small shadowboxes (the "Small Shadowbox Designs"), and

3 since then has promoted and sold products comprising the Small Shadowbox Designs as par of
4 the Leaf Lines product line. Leaf Lines, LLC claims exclusive copyright and trade dress rights in

5 its Small Shadowbox Designs. There are ten U.S. Copyrights for the Small Shadowbox Designs.

6 Defendants Michael D. Sage and Susan Gilmour Sage are husband and wife curently
7 doing business as Sage Designs. They operated a business making and sellng fine ars and crafts
8 out of

their home in Sunyvale, California, until 2003, when they moved to Vancouver,

9 Washington. Mr. Morey met Mr. Sage at a crafts trade show in San Francisco in March 1995,
wood. Thereafter, the paries
10 where Mr. Sage was displaying and sellng primarily vases made of

II entered into a business relationship under which Mr. Sage sold and eventually participated in

12 constructing Leaf Lines products, including Small Shadowbox Designs.
13 The exact nature of

the paries' contractual and working relationships, and Mr. Sage's

14 alleged paricipation in creating the Small Shadowbox Designs, are in dispute. Without fuher

15 detailng the many factual disputes, the paries' history can be sumarized as follows: .

16 On September 14, 1995, the parties signed an agreement under which Sage would sell
17 Leaf Lines products alongside his own. From September 1995 until approximately September
18 2002, Mr. Sage sold Plaintiffs Leaf

Lines products on a consignment basis at festivals and trade

19 shows. In 2002, the arangement was changed from consignment to wholesale purchase of
20 products by Sage.

21 Meanwhile, in approximately March 1999, the parties began discussing the possibility
22 that Mr. Sage might eventually buy the Leaf

Lines business. On October 24,2001, Mr. Morey,

23 Mr. Sage, and Mrs. Sage signed a document under which Plaintiff contends certain limits were
2011 or
24 placed on the Sages (the "2001 Agreement"). These provisions were to be effective until

25 until the Leaf Lines business was sold to Sage Designs.
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1 After the Sages moved to Vancouver in 2003, Mr. Morey's and Mr. Sage's relationship
Leaf 2 became more strained. In February 2005, Mr. Sage made his last purchase of

Lines

3 products. In July 2005 the paries' ongoing discussions regarding the purchase price and
4 financing for the proposed sale became acrimonious. On May 2, 2006, Plaintiff, through letter
5 from counsel, suspended such discussions pending resolution of

Plaintiffs infingement claims

6 (as set forth more fully below).

7 At least as early as June 2005, the Sages were making their own products comprising
8 etched leaf collages in shadowboxes under the "Sage Designs" trade name and mark, and the
9 slogan "The Fine Ar of

Phantom Leaves." They sold these items alongside the remaining Leaf

10 Lines products stil in their possession. Plaintiff alleges the labels were missing from some of

11 the Leaf Lines products sold by Sage Designs during this time. Sage Designs has promoted and
12 sold etched leaf products, including some which Plaintiff alleges duplicate the Small Shadowbox

13 Designs, in various venues, including third par galleries, trade shows, festivals and websites.

14 Plaintiff alleges that the Sages deliberately removed the labels from Leaf Lines products

15 and sold them as Sage Designs products, and that the Sages made various misrepresentations (in
16 person at trade shows, public ar festivals, and in printed and online promotional materials) as

17 follows: statements and implications that Mr. Sage was aware of and paricipated in developing

18 the Leaf Lines proprietar etching process, that it was an old process in the public domain; that
19 Sage Designs products utilized the same etching process and overall product quality as Leaf
20 Lines products; that Mr. Sage was offered a partnership in Leaf Lines; and that Sage Designs has

21 been and is the only source of etched leaf shadowbox products. Plaintiff also alleges that the
22 Sage Designs website displayed quotes of endorsement and praise from some purorted

23 customers of Sage Designs products who were actually talking about Leaf Lines products, and

24 that the Sage Designs website offered preferential credit terms to galleries presently carrying
25 Leaf Lines products. Plaintiff

has received and continues to receive comments and inquiries from

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I Leaf

Lines' wholesale customers and potential retail customers about an association between

2 Sage Designs and Leaf Lines.
3 Defendants contend that Mr. Morey invited Mr. Sage to compete in the marketplace with
4 the Sage Designs products prior to Sage Designs beginning any sales. Defendants contend that,
5 at all times, Mr. Sage properly characterized his and Mr. Morey's working relationship, the
these products, the development of 6 efforts and materials Mr. Sage put into the designs of

Mr.

7 Sage's own skeletonizing process, and that he has properly marketed his goods.
8 In April 2007, Plaintiff sent notices under the DMCA to third paries who displayed or

9 promoted sale of the Sage Designs products that allegedly infringe the Leaf Lines Small
10 Shadowbox Designs. One such notice was sent to Wholesalecrafts.com regarding displays of

11 infringing images on its websites. Wholesalecrafts.com eventually removed the infringing received notice from Wholesalecrafts.com that
12 images from its sites. On July 24,2007, Plaintiff

13 the infringing images would be retured to its site based on a purorted DMCA counter-notice by
14 provided by Mr. Sage. The counter-notice by Mr. Sage (as forwarded to Plaintiff

15 Wholesalecrafts.com) states, under penalty of perjur, that the materials were removed as a result
16 of

mistake or misidentification, and that "Mr. Morey and I (Michael Sage) have been

17 collaborative partners and I was the driving creative force in the relationship and own any

18 enforceable rights therein." Plaintiff then filed this action and informed Wholesalecrafts.com that

19 it had done so, and the allegedly infringing images have not been re-posted.
20
3.

LEGAL ISSUES

21 Plaintiff alleges that some of the Sage Designs products infringe Plaintiff s copyright and
22 trade dress rights in the Leaf Lines Small Shadowbox Designs in violation of federal copyright

23 law and federal and state trademark law; that the misrepresentations described above comprise
24 false advertising and unair competition in violation of federal and state laws; that Defendants
25 have breached the 200 i Agreement; that Defendants have breached their fiduciary duty to
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1 Plaintiff

under California law; and that Defendants' statements to Wholesalecrafts.com in its

2 DMCA counter-notice constitute misrepresentation under the DMCA.
3 Defendants contend that Plaintiff lacks standing to bring these claims.
4 Defendant Michael Sage contends that he is a co-author of the works at issue in this suit.
5 The scope and breadth of any copyright, if

there can be any, to the works is disputed because of

6 the nature of the Small Shadowbox Designs. Therefore, Defendants contend they canot have
7 infringed any copyright claimed in this suit.

8 Defendants contend that there is no trade dress in the "Leaf Lines Small Shadowbox
9 Designs." Defendants deny they have committed unfair competition under state law.

10 Defendants contend that certain terms of the 200 I Agreement constitute an unenforceable
11 restraint on trade pursuant to CaL. Bus. & Prof. Code § 16600, et seq. Furher, the 2001
12 Agreement lacks consideration on the par of

Mr. Morey, and is therefore unenforceable.

13 Defendants contend if

there is consideration, then Mr. Morey breached the 2001 Agreement prior

14 to any breach by Defendants.

15 Defendants deny that they had any fiduciary duty to Plaintiff or Mr. Morey.
the Small Shadowbox
16 As counterclaims, Defendants allege that Mr. Sage, as co-author of 17 Designs, is entitled to an accounting of

Mr. Morey's and Plaintiffs sales and profits ofthe Small

18 Shadowbox Designs. Defendants allege that Plaintiffs DMCA notice constituted
19 misrepresentation under the DMCA. Defendants' state claims stem from this misrepresentation.

20 Finally, Defendants allege that, if enforceable, Mr. Morey breached the 2001 Agreement.
21

4.

MOTIONS

22 No motions have been filed to date, and at this time the paries do not anticipate fiing
23 any motions. The paries reserve the right to fie appropriate motions in the event discovery or

24 other activity in the case warants them, including without limitation dispositive motions.

25 / / / 26 / / /
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I
2 Plaintiff

5.

AMENDMENT OF PLEADINGS
has agreed to file a First Amended Complaint by December 21,2007.
wil respond to

3 Defendants wil fie an Answer and Counterclaims by January 4, 2008. Plaintiff

4 the Counterclaims within the time allowed by the Federal Rules of Civil Procedure. Other than
5 these changes, the paries do not anticipate a need to amend the pleadings. However, recognizing

6 that information obtained during discovery may uncover potential new issues or paries, the

7 paries request that the deadline to amend be set as March 28,2008.

8

6.

EVIDENCE PRESERVATION

9 Plaintiffs and Defendants' counsel have discussed evidence preservation with their

10 respective paries. Neither pary has an ongoing document-destruction program and each pary
II has agreed to preserve all electronically-recorded materiaL.

12
13

7.

DISCLOSURES
The paries have agreed to exchange initial disclosures on December 14, 2007.

14

8.

DISCOVERY

15 No discovery has been taken to date. The paries do not anticipate a need to limit or

16 modify discovery rules. The paries have met and conferred pursuant to Fed. R. Civ. P. 26(f),
17 and have agreed to exchange e-discovery in pdf or tif format, with the option for the receiving

18 party to request other formats on a case-by-case basis. The paries have agreed to refrain from
19 exchanging discovery requests pending court-ordered mediation (see below), other than as
20 necessar to support the mediation. The paries are working on a stipulated protective order to

21 facilitate confidential discovery responses.
22
9.

CLASS ACTIONS

23 Not applicable.
24
10.

RELATED CASES

25 The paries are not aware of any related cases.
26
11.

RELIEF
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A.

Plaintiff seeks the following relief:
Injunctive relief:
1.
Enjoining Defendants from: making and marketing copies of

2
3

Plaintiffs

4 copyrighted designs and trade dress, or makng false or misleading descriptions of facts in their

5 commercial advertising and promotions, regarding Plaintiffs products or Defendant's products
6 or the nature of the business relationship between Plaintiff and Defendants;

7

2.

Notification to venues where the infringing products have been displayed or

8 offered for sale requiring that such display and sales be discontinued and that the materials be

9 destroyed.
10
11

3.

Destruction of all infringing materials in Defendants' possession.

Monetary relief:
4.

12

Profits made by Defendants as a result of the infringements, with interest (amount

13 presently unown), to be calculated as net profits on sales of the infringing products;
14
5.

Plaintiffs damages (amount presently unown), to be calculated as net profits on

15 sales lost by Plaintiff as a result of Defendant's infringements;
16
6.
Disgorgement of

Defendants' profits and/or unjust enrichment (amount presently

17 unkown);
18

7.
8.

Treble damages for wilful trade dress infringement;
Statutory damages in the amount of$150,000 per copyright infringement (the

19

20 maximum allowable as provided under and pursuant to 17 U.S.C. § 504(c), as amended).
21

9.
10.

Punitive damages in an amount to be determined at triaL.
Plaintiffs attorneys' fees and costs

22
23
B.

Defendants seek the following relief:
1.
Denial of any relief

24
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Plaintiff seeks;

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1

2.

If Defendant is liable for copyright infringement, statutory damages and attorney

2 fees should be denied because the infringement alleged to have begun at least as early as June

3 2005 while any registration of the copyrights occurred in late 2005 and early 2006;
4
3.

If Defendants are found to have infringed any rights of Plaintiff, the relief should

5 be limited to Plaintiffs damages, to be calculated as net profits on sales lost by Plaintiff as a
6 result of Defendant's infringements;

7 On Defendants' counterclaims (not yet raised):

8 Injunctive Relief:
9
1.
A declaration that Mr. Sage is a co-author of

the Small Shadowbox Designs with

10 Mr. Morey (who will necessarily be joined as a part by counterclaim) and subsequent
11 modification of

the ten U.S. Copyrights obtained by Mr. Morey;

12 Monetary Relief:
13

2.

An accounting from Mr. Morey and Plaintiff for sales and profits of the Small

14 Shadowbox Design and equitable division ofthose profits (amount presently unown);
15

3.

Defendants' damages (amount presently unown), to be calculated as net profits
Plaintiffs and/or Mr. Morey's misrepresentations under

16 on sales lost by Defendants as a result of

17 the DMCA, interference with Defendants' prospective business advantage, and unfair

18 competition;
19

4.

Defendants' damages (amount presently unown) for loss of goodwil and
Plaintiff

s and/or Mr. Morey's misrepresentations

20 reputation as general damages as a result of

21 under the DMCA, interference with Defendants' prospective business advantage, and unfair

22 competition;
23
5.
Disgorgement of

Defendants' profits and/or unjust enrichment (amount presently

24 unown);
25
6. 7.

Punitive damages in an amount to be determined at trial;
Defendants' attorney fees and costs.

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1

12.

SETTLEMENT AND ALTERNATIVE DISPUTE RESOLUTION

2 The paries resumed negotiations for purchase of the Leaf Lines business by Sage
3 Designs, or alternate resolution, in September 2007. The paries have been attempting to settle
4 this matter and are committed to continuing such efforts. The parties have agreed to court5 ordered mediation. The paries expect that initial disclosures wil provide sufficient information

6 and documentation to support the mediation, and therefore do not anticipate that paricular
7 discovery or motions will be necessary to position the paries to negotiate a resolution.

8

13.

CONSENT TO MAGISTRATE
Not applicable.

9
10
11

14.

OTHER REFERENCES
Not applicable.

12

15.

NARROWING OF ISSUES

13 There are no issues that can be narowed at this time. However, the parties wil endeavor
14 to do so as appropriate following discovery.
15

16.

EXPEDITED SCHEDULE

16 Because of the heavily-disputed factual issues, the paries do not believe that this case
17 can be handled on an expedited basis.
18

17.

SCHEDULING

19 The paries request the following schedule, with the understanding that adjustments may
20 be requested if rendered necessary by timing of the mediation or other matters that may impact
21

scheduling: Fact discovery cut-off:

June 16, 2008

22
23

Expert disclosure:

August 15,2008
October 3, 2008

Rebuttal expert reports due: September 15, 2008

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Expert depositions cut-off:

Dispositive motions hearing: November 28,2008

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Trial:
1

Januar 25, 2009, or two months after the court rules on

dispositive motions, or at a date thereafter as convenient to

2
3

the Court's calendar

18. TRIAL
4
The case will be tried to a

jur. The parties anticipate a two-week triaL.

5

19. DISCLOSURE OF NON-INTERESTED ENTITIES OR PERSONS
6

Pursuant to Civil L.R. 3-16, Plaintiff certifies that as of this date, other than the named
7

paries, there is no such interest to report.
8
Pursuant to Civil L.R. 3-16, Defendants certify that as of

this date, other than the named

9

paries and Mr. Booker Morey, there is no such interest to report.
10

20. OTHER MATTERS
11

Not applicable.
12
13

Dated: December 7. 2007

Dated: December 7. 2007

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15

16 17
18

Christopher W. Brown, SBN 243472 Attorney for Defendants Michael Sage and Susan Gilmour Sage, dba Sage Designs

t1yl~ ~

Isl Linda JOY Kattwinkel Linda Joy Kattwinkel, SBN 164283 Attorney for Plaintiff Leaf Lines, LLC

I II

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1 CASE MANAGEMENT ORDER
2 The Case Management Statement and Proposed Order is hereby adopted by the Cour as

3 the Case Management Order for the case and the paries are ordered to comply with this Order.
4 In addition the Cour Orders:
5

6
7
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Dated:
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13

The Honorable Maxine M. Chesney United States District Judge

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CERTIFICATE OF SERVICE
I hereby certify that on the date set forth below, I served a true copy of

the foregoing JOINT

2

CASE MANAGEMENT STATEMENT AND PROPOSED ORDER on the individuals
3

listed below:
4
5

6
7 8

Linda Joy Kattwinkel Owen, Wickersham & Erickson, P.C. 455 Market Street, Suite 1910 San Francisco, CA 94105 Tel: 415-882-3200 Fax: 415-882-3232 Email: Ijk~owe.com

9 10
11

Attorney for Plaintiff, Leaf Lines, LLC

() by mailng a full, true, and correct copy thereof in a sealed first-class postage-prepaid
12
13
envelope, addressed to the attorney as shown above, the last-known office address of

the attorney, and deposited with the United States Postal Service at Portland, Oregon, on the date set forth below.

14
() by causing a full, true, and correct copy thereof to be hand-delivered to the attorney at
15

the attorney's last-known office address listed above on the date set forth below.
() by sending a full, true, and correct copy thereof via overnight courier in a sealed,

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prepaid envelope, addressed to the attorney as shown above, the last-known office the attorney, on the date set forth below. address of
() by faxing a full, true, and correct copy thereof to the attorney at the fax number shown

19

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21
( x ) by em

above, which is the last-known fax number for the attorney's office, on the date set forth below. The receiving fax machine was operating at the time of service and the transmission was properly completed.
ailng a full, true and correct copy thereof to the attorney at the email address

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shown above, which is the last-known email address for the attorney, on the date set forth below.
DATED this 7th day of

December, 2007.

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