Free Reply Brief - District Court of Delaware - Delaware

Case 1:07-cv-00608-SLR-MPT

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

MAM BABYARTIKEL GMBH, and BAMED AG, Plaintiffs, v. LUV N' CARE, LTD. and, MUNCHKIN, INC. Defendants.

Civil Action No.: 07-608-***

LUV N' CARE'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO TRANSFER OR DISMISS I. BAMED AND MAM LACK LEGITIMATE REASON TO DISTURB THE FIRSTTO-FILE RULE AND MISREPRESENT THE RECORD. Knowing that the first-to-file rule is well established in this district, Bamed and Mam spin false claims regarding alleged bad faith by Luv n' care to dislodge the suit Luv n' care previously filed in Texas. Those claims are rife with misrepresentations. Furthermore, Plaintiffs' response papers show no connection between them and Delaware making this particular district a necessary or indispensable one for their claims. In fact, those foreign corporations only sued here after service of Luv n' care's Texas suit was attempted on them. The filing here maximizes the potential inconvenience to Luv n' care when Plaintiffs could have easily pursued their alleged claims in the first-filed suit.

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A.

LUV N' CARE HAS FULLY ACTED IN GOOD FAITH.

As Luv n' care itself noted in its initial motion, it is correct that LNC filed a Declaratory Judgment proceeding in Texas on December 1, 2006 and did not engage in service of process until a number of months later. However, Bamed's allegation that Luv n' care "feigned" interest in negotiation is a complete misstatement and is knowing distortion of the facts. In fact, Luv n' care specifically informed Bamed of its intent to negotiate a settlement and also have its attorneys pursue the legal avenues available to them. The dispute began when several letters1 were forwarded to Luv n' care ("LNC") in November 2006 accusing LNC of infringement. Luv n' care's CEO, N. Edward Hakim, promptly responded to Bamed by email on November 24, 2006 (see Exhibit B hereto) as follows: "I will advise our attorneys that I have decided to negotiate with you directly, but I have instructed them to proceed forward until I think a settlement between the two of us is realistic." (Underlining added ). It is apparent that Bamed was notified from the very outset that Luv n' care was having its attorneys proceed with legal action while it pursued a concurrent settlement track. This was stated in LNC's first response to Bamed, and is exactly what its CEO did, i.e., he had his attorneys file a Declaratory Judgment proceeding in Texas while attempting to negotiate a settlement. Luv n' care did not want a meritless suit for infringement of an invalid patent indefinitely hanging over its head, so it promptly filed a declaratory judgment action for invalidity and noninfringement.

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Specifically, an overseas law firm (Sonn & Partner) wrote a letter to Bird and Bird (Plaintiff's overseas attorneys), on November 6, 2006 and then Susanna Wagner, Chief Operating Officer of Defendant, wrote N. Edward Hakim, CEO of Plaintiff, a letter dated November 22, 2006. 2

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Subsequently, Mr. Hakim negotiated with Ms. Wagner in good faith as Mr. Hakim said he would, and the parties exchanged repeated correspondence. It is thus noteworthy that Bamed's representations here are the opposite of its representations in a concurrent proceeding in Germany. (See e.g., Exhibit C (excerpts of settlement negotiation letters as submitted by Bamed to the German Patent Office)). In Germany, Bamed requested an extension of Bamed's time to respond on the grounds that the parties were engaged in bona fide settlement discussions, pointing to the very same settlement correspondence it points to in this case. (See Exhibit C hereto). The case in Germany is an invalidity action filed by Luv n' care before the German Patent Office to invalidate a Bamed pacifier patent there, so it served Bamed's interest to take the opposite position. When it wanted an extension in Germany, Bamed took the position that the parties were engaged in bona fide negotiations; when it wants something different here, it represents based on the same correspondence that the negotiations were not. Bamed's counsel's attempt to mischaracterize the sequence of events is deliberately misleading and virtually defamatory. Luv n' care believed that Plaintiff's patents would be invalidated if it proceeded and specifically told Bamed so. (See e.g., Exhibit B). But at the same time, it attempted to negotiate a settlement in good faith for months. Bamed's claim that the negotiations were in "bad faith" does not even make sense ­ if Luv n' care were not interested in settling there would have been no negotiations and Luv n' care would have just proceeded forward with its complaint. Offers to settle matters are done every day after suits are filed, and this is exactly what Mr. Hakim did. Indeed, had Bamed accepted Luv n' care's offer, no further court proceedings would have been necessary.

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Ultimately, when negotiations were not sufficiently fruitful, LNC proceeded to move forward in late July 2007. Counsel was not aware that there is no language such as "Swiss", and as a result of inadvertence or a misunderstanding between Luv n' care's counsel and the translator, the suit was translated into Swedish. That error was obviously unintentional. There is no reason why Luv n' care would spend a great deal of money to have a document translated and served in the wrong language, when it could have just as easily have had the document translated and served in the right one. Plaintiffs's allegations of nefarious conduct are ludicrous, and do not pass the laugh test. Likewise, in connection therewith, Exhibit D is attached hereto which is a copy of a certified letter to Rick Hamilton of PFI Services Company, which is a national company that effectuates service via the Hague Convention on out of country defendants, and which handled the service for Luv n' care. PFI, in fact, conducts service for the U.S. Department of Justice and the U.S. State Department. See https://www.pfiserves.com/AboutUs.html. It is highly experienced, handles thousands of service requests such as this one every month, and did not catch the error either. The Court will readily note that Plaintiff sent the translated version of the Plaintiff's Summons for Service in Switzerland on August 15, 2007 approximately seven weeks before Bamed and Mam filed suit here in Delaware. Exhibit D includes an email from Plaintiff's attorneys' office to Rick Hamilton seeking a status on the aforementioned service on the Defendant as well as a request as to how long it would take to effectuate the service. Even this email request was sent approximately two weeks before the Plaintiffs filed suit in Delaware. To recap, it is respectfully pointed out that Luv n' care gave notice to Bamed of its intention to have its attorneys proceed forward from the very outset, and it did just that, while nonetheless extending a courtesy to Bamed to see if negotiations could work out before it tried to effectuate 4

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service. Defense counsel's allegations are totally improper and in fact illogical. What possible benefit was there to Luv n' care in letting the period of time in question elapse and engaging in multiple settlement proposals if it were not negotiating in good faith to resolve the matter? For defense counsel to make such allegations when it is well aware of the numerous settlement efforts made between the parties over months shows that it makes its statements with the sole intent of misleading this Honorable Court, without concern for what actually happened. After the error in translation which caused return of the service copy from the Swiss authorities, Luv n' care was forced to file a Motion for a Second Extension of Time in Texas. Bamed's claim that Luv n' care attempted to "conceal" the present suit from the Texas Court is yet another attempt to mislead this Court with falsehoods. It is important to note that Luv n' care's request for the second extension was filed on October 4, 2007 (see Exhibit F hereto), whereas Bamed's suit here was also filed on October 4, 2007. Luv n' care had no knowledge of the Delaware suit when it filed its motion for a second extension. Bamed is well aware that it did not serve Luv n' care until after Luv n' care filed its motion ­ the summons was not even issued until October 5, 2007, as shown by the records of this Court. Furthermore, service was made on the Secretary of State, so that Luv n' care had no knowledge of it until much later. Bamed's allegations are scurrilous and false. Bamed's claim that Luv n' care's "bad faith in seeking negotiations" was a pretext to gain an improper advantage is also totally without merit and completely illogical. It should be noted that it was Bamed who sought to negotiate with Luv n' care not vice versa. If Luv n' care wanted to seek "an advantage", it would have gone ahead immediately after filing suit and not wait until months later for service, during which time Luv n' care carried on regular, repeated, good faith negotiations 5

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with Bamed. It was actually to Luv n' care's advantage to go ahead and serve the complaint immediately so that it could proceed before the federal court in the Eastern District of Texas. Delaying such service certainly did work to its advantage, and defense counsel's statements to the contrary are totally meritless. Moreover, the fact that service on Luv n' care was perfected before the Texas complaint was served on Bamed is of little consequence since the suit for Declaratory Judgment was filed over ten months before the action in Delaware. Luv n' care's counsel respectfully points out that Bamed has not shown one request by Luv n' care asking to have Bamed or Mam delay filing of legal proceedings. On the contrary, as pointed out above, the initial response from Luv n'care's CEO to Bamed's Chief Operating Officer put Bamed on notice that Luv n' care intended to have its attorneys move forward even while settlement was attempted. B. BAMED ENGAGES IN CONTRADICTORY REGARDING THE DESIGN PATENT. REPRESENTATIONS

As far as Bamed's claims that Mam is a "necessary and indispensable party" for the issues in the design patent, it is difficult to determine which of Bamed's claims are false and which are true on this point. Counsel previously represented the opposite to Luv n' care; namely, that Bamed is the proprietor of the design patent (US D441,083 S) owning the exclusive rights thereto. (See November 7, 2006 letter from Sonn and Partners to Luv n' care, Exhibit A hereto). Luv n' care's choice to sue Bamed and not Mam is not at all "inexplicable": it was based on Bamed's counsel's own representation. Either way, Mam can be easily added to the suit in Texas. There is easily jurisdiction over it there. (See Exhibit G hereto, Declaration of Nouri E. Hakim). Mam has regularly displayed and

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offered its products for sale in Texas at the Juvenile Products Manufacturers' Association (JPMA) Trade Show in Dallas. It did so for years (until that show was recently moved to Florida). For example, attached hereto are articles referring to Mam's exhibition in 1997 and another article refers to its exhibition in 2004. (See Exhibit E). These are merely two examples; in fact, it is Luv n' care's understanding and recollection that Mam has exhibited every year at that show. Bamed and Mams' submissions on that point are simply misleading. It is likewise submitted that Bamed also has continuous, systematic and on-going contacts with Texas. Specifically, it is Luv n' care's belief that Bamed's merchandise is shipped to warehouses in Texas to be distributed throughout Texas (see Exhibit G, Declaration of N. Edward Hakim), which it intends to bring to the Texas court's attention, and which forms sufficient basis for jurisdiction. Those issues can, of course, be further addressed in the Texas action. C. BAMED AND MAM ARE NOT TRULY CONCERNED ABOUT JUDICIAL ECONOMY.

Bamed and Mam's allegations that they are concerned about judicial economy ring completely hollow. In fact, as their moving papers show, they instituted the present action against Luv n' care and Munchkin in Delaware after they became aware that Luv n' care had filed a suit in Texas. (See Plaintiff's Response at 10). They could have easily pursued a suit and counterclaims against Luv n' care in the Texas action. They could have likewise sued Munchkin there. Texas would have been a very appropriate venue in view of the fact that all of the parties are believed to have been regular exhibitors at the JPMA trade show held in Dallas each year. But Bamed and Mam did not do so. Instead, they chose to sue at a significant distance from Luv n' care's location. Neither of the plaintiffs were forced to sue in Delaware when a sister court

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already had a case pending on these very issues. Rather, Plaintiffs' choice only serves to deliberately inconvenience Luv n' care and its witnesses. They are well aware that LNC's headquarters is less than 150 miles from the Eastern District of Texas, but is across the country from Delaware. Neither Bamed nor Mam ­ both of whom are foreign corporations ­ has alleged in their papers any legitimate need for their suit to be in this particular district. D. PLAINTIFFS' CLAIMS THAT THE TEXAS SUIT WAS ANTICIPATORY DO NOT CHANGE THE LEGAL RESULT.

As shown above, Bamed and Mam distort the record to have this Court overlook the first action in Texas in contravention of the well-established rule favoring the first filed action. Plaintiffs' allegations that the Texas suit was anticipatory do not overcome the first-to-file rule, and their focus on such allegations distracts from the relevant issues. Electronics for Imaging, Inc. v. Coyle, 394 F.3d 1341, 1347 (Fed. Cir. 2005) (focusing on anticipatory nature of suit is an abuse of discretion). The purpose of the Declaratory Judgment Act is to provide the allegedly infringing party relief from uncertainty, and to relieve it from having to abandon its enterprises due to a threat of liability hanging over it. Id. at 1346. This is particularly the case, as here, when that threat is not justified. It also particularly the case when Plaintiffs were aware of the first-filed suit and deliberately chose to sue in this district to create the conditions of which they complain. There was no "race to the courthouse" ­ Bamed didn't file its suit for over ten months after Luv n' care's filing, and it only did so in response to attempted service of the Texas suit. (See Plaintiff's Response at 10). Absent that, the threats Plaintiffs raised would still be hanging over Luv n' care's head. The significantly increased convenience and availability of the witnesses in Texas, the availability of jurisdiction over all the parties in Texas, the nature of Bamed's misrepresentations

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here, and the fact that Plaintiffs have no real connection to Delaware making it necessary for suit to proceed in this district, all confirm that transfer under the first-filed rule is warranted and prudent. II. IN VIEW OF THE FACTS, BAMED AND MAM HAVE SHOWN NO REASONABLE BASIS FOR PERSONAL JURISDICTION IN THIS STATE. As shown above, Plaintiffs' attacks on Luv n' care is a smokescreen of misleading statements to distract from the applicable and pertinent legal issues. Turning to the issues actually applicable, the Plaintiffs do not dispute that Luv n' care has no direct connection with Delaware, with Luv n' care having no office, place of business, employees or so forth here. Instead, Plaintiffs claim that Luv n' care is subject to jurisdiction because LNC's products were ultimately sold in Delaware by a third party who is outside Luv n' care's control. Luv n' care did not ship any products to this district: it shipped its products to Arkansas. The party who sent products here ­ Wal-Mart ­ did so unilaterally. But the unilateral action of a third party to direct a product to its eventual end in the stream of commerce does not meet constitutional requirements for personal jurisdiction. The `purposeful availment' requirement of the Due Process Clause requires that a defendant not be haled into a particular court as a result of the unilateral activity of another party or a third person. See, Helicopteros Nacionales de Columbia S.A. v. Hall, 466 U.S. 408, 417, (1984), Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985). Indeed, while they claim to be offended by the shipment of the accused items to this particular district, Mam and Bamed fail to sue the very party who did actually ship here. Their claim of particular damage in this district, and a particular need for suit due to sales here, is contradicted by the fact that Wal-Mart, the very actor who undisputedly sent the accused products directly into

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this locale, is completely absent from this suit. This again demonstrates the hollow nature of Plaintiffs' claims. Moreover, there are a plethora of locales where Luv n' care was subject to suit based on the applicable facts. As Luv n' care has admitted, it shipped the accused products to Wal-Mart in Arkansas. Thus, Plaintiffs could have sued Luv n' care in Arkansas based on the direct shipments there. Or, Plaintiffs could have sued Luv n' care in Texas based on the fact that a prior suit on these very same issues was already pending, and/or based on LNC's appearances at the JPMA trade show. Or, Plaintiff's could have sued Luv n' care in Louisiana, the location of Luv n' care's corporate headquarters. Luv n' care has a far more direct connection with quite a number of districts, without needing to base suit in this particular one based on a tenuous, or non-existent, connection with it. It is abundantly clear that there was no real need for this suit to proceed in Delaware in view of the very many other districts with a far greater interest in the facts of this suit. Bamed and Mam's protestations to the contrary are transparent and self-serving. Indeed, Bamed and Mam are both foreign corporations and could have sued in any judicial district. Luv n' care's size does not give Plaintiffs the right to sue anywhere without a solid constitutional basis, and in particular to choose a locale to maximize the inconvenience to Luv n' care. To cover the nature of their conduct, Plaintiffs raise a series of red herrings. For example, they raise Luv n' care's prior suit in the Southern District of New York. The fact that Luv n' care once sued a foreign corporation in New York has absolutely no pertinence to the facts of this suit. LNC believed it could obtain jurisdiction in New York over an infringer in a case involving products and parties having nothing whatsoever to do with the products or parties of the present case.

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Likewise, Luv n' care's suit in Louisiana against the Insta-Mix infringer also has no relevance. In that case, suit was fairly and properly brought based on its facts. Luv n' care sued in Louisiana since Insta-Mix had sent dozens of shipments of infringing products to Louisiana. Under the logic of the Insta-Mix case, the present suit should have been brought in Arkansas. Admittedly, the question of whether stream of commerce jurisdiction or stream of commerce plus makes more sense as a matter of law is a long-debated one; arguments can and have been made by commentators and courts for both sides. But the mere fact that Luv n' care's products were sold here is not a sufficient basis for this suit. As the Supreme Court has held, the constitutional test requires fundamental fairness (see, World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980)), and the fairness issue here is plainly in Luv n' care's favor. The plethora of jurisdictions having a direct nexus to Luv n' care's accused activities makes the present district ­ having no such nexus ­ an unfair one violating due process. Plaintiffs don't even have their own connection with this district. They are not headquartered here and have not alleged that they have any crucial connection to this State. This district is not even a remotely necessary one. The balance of equities plainly tilts in Luv n' care's favor. Under Bamed and Mam's position, once a party sells a product anywhere in the U.S., it becomes subject to suit anywhere the product later ends up. Any third party's decision to resell a product somewhere else would automatically create jurisdiction in that new locale. As noted in LNC's opening brief, Plaintiffs' theory creates national jurisdiction from any local act and violates principles of federalism. See Lesnick v. Hollingsworth & Voseco, 35 F.3d 939, 945 (4th Cir. 1994).

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CONCLUSION In summary, transfer of this action or dismissal is respectfully requested for the reasons discussed above, and as set forth in Luv n' care's opening brief. WHEREFORE, for the foregoing reasons, LNC respectfully requests that this Court transfer the suit involving plaintiffs and LNC to the Eastern District of Texas, or in the alternative, dismiss plaintiffs' suit against LNC for lack of proper venue. Alternatively, it is respectfully submitted that this case should be dismissed for lack of personal jurisdiction. Luv n' care's sales of product to Wal-Mart in the State of Arkansas, without any further contacts with Delaware, does not comply with the constitutional requirements of due process. Dated: January 28, 2008

Respectfully submitted, /s/ David L. Finger______________ David L. Finger (DE Bar ID #2556) Finger & Slanina, LLC One Commerce Center 1201 Orange Street, Suite 725 Wilmington, DE 19801-1155 (302) 884-6766 Of Counsel: Joe D. Guerriero, Esq. Luv n' care, Ltd. General Counsel 3030 Aurora Avenue Monroe, Louisiana 71201 Telephone: (318) 338-3603 Facsimile: (318) 388-5892 Email: [email protected] 12

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Morris E. Cohen, Esq. Law Office of Morris E. Cohen, P.C. 1122 Coney Island Avenue Suites 216-217 Brooklyn, New York 11230 Telephone: (718) 859-8009 Facsimile: (718) 859-3044 Email: [email protected] Attorneys for Luv n' care, Ltd.

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