Silvers v. Google, Inc.

Filing 58

RESPONSE by Stelor Productions in opposition to [51-1] motion to dismiss amended cross-claim (cj, Deputy Clerk)

Silvers v. Google, Inc.

Doc. 58

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UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF FLORIDA CASE NO. 05-80387 CIV RYSKAMP/VITUNIC STEVEN A. SILVERS, an individual, Plaintiff, v. GOOGLE INC., a Delaware corporation, Defendant. _______________________________________/ GOOGLE INC., a Delaware corporation Counterclaimant, v. STEVEN A. SILVERS, an individual; STELOR PRODUCTIONS, INC., a Delaware Corporation; STELOR PRODUCTIONS, LLC, a Delaware limited liability company, Counterdefendants. ________________________________________/ STELOR'S OPPOSITION TO SILVERS' MOTION TO DISMISS AMENDED CROSS-CLAIM Counterdefendant/Crossplaintiff, STELOR PRODUCTIONS, L.L.C., f/k/a STELOR PRODUCTIONS, INC. ("Stelor"), by and through its undersigned attorneys, hereby opposes on the following grounds Steven A. Silvers ("Silvers") Motion to Dismiss Amended Cross-Claim: I. INTRODUCTION Silvers wants to prevent this Court from deciding the critical threshold issue in this action of whether the License and Settlement Agreements ("Agreements") between Silvers and Stelor remain in force and effect. If they do, as Stelor contend, then Stelor is and remains the exclusive, world-wide licensee of the "Googles" intellectual property, including the trademarks on which

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Plaintiff's claims in this action are based. And Stelor ­ not Silvers ­ has the sole right to bring this trademark infringement action against Google Inc. Whether Silvers likes it or not, that issue must necessarily be decided by this Court in this action. It must be decided as part of Silvers' claims, since he lacks standing to pursue his claims if the License Agreement remains in effect. It must be decided as part of Google Inc.'s affirmative defenses and Counterclaim, which raise the issue of Silvers' standing; and it must also be decided as a critical element of Stelor's compulsory Counterclaim against Google Inc., since Stelor's standing to pursue its own trademark infringement claims against Google Inc. depends largely on the continued validity of the Agreements. Thus, the issue relating to the Agreement s between Silvers and Stelor pervade this dispute. Silvers' attempt to prevent this Court from deciding one set of claims raising this issue is pointless. The issue will still necessarily need to be decided as part of the claims that will remain, including the parties' trademark claims over which this Court undeniably has subject matter jurisdiction. Insofar as Stelor's state law claims against Silvers also raise these issues, those claims are so related to the remaining federal claims that they form part of the same case or controversy under Article III of the United States Constitution, and fall within this Court's supplemental jurisdiction pursuant to 28 U.S.C. § 1367. Accordingly, Silvers' Motion should be denied. Finally, Silvers incorrectly relies on his state court action against Stelor as a basis to dismiss the breach of contract Cross-Claims. breach of contract Cross-Claims. BACKGROUND FACTS Stelor is the exclusive, world-wide licensee of the "Googles" intellectual property, including the trademarks on which Plaintiff's claims in this action are based. As Silvers admits, he licensed the property to Stelor pursuant to a License Agreement dated June 2002 (Exhibit "A" to Silvers' Motion). Under that License Agreement, the exclusive right to institute legal action to protect the property ­ such as the present action against Google Inc. for trademark infringement ­ belongs to Stelor, and not Silvers. See Art. I.A; VIII.A & B. 2 Silvers fails to cite controlling case law on abstention by federal courts, and the state court action presents no basis for dismissal of the

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The provisions of the License Agreement are explicit. It grants to Stelor "the exclusive (even as to LICENSOR), worldwide, sub licensable right and license" with respect to all of the "Googles" intellectual property and trademarks. Agreement ¶ 1(A). The Agreement also expressly grants to Stelor "all right, power and interest to seek, obtain and maintain all Intellectual Property Rights associated with the Licensed Intellectual Property and Licensed Trademarks." And, eliminating any conceivable doubt as to the scope of Stelor's rights, Article IX of the Agreement titled "INFRINGEMENTS", gives Stelor "[d]uring the Term of this Agreement" "the sole right, in its discretion and at its expense, to take any and all actions against third persons to protect the Intellectual Property Rights licensed in this Agreement," (Emphasis added). Critically, the Agreement grants Stelor "an irrevocable power of attorney to act for and on LICENSOR's behalf". Agreement ¶ VIII(A). LICENSOR's behalf". Indeed, presumably motivated to pursue this action against Google Inc. by himself, without having to share with Stelor any portion of the likely recovery, Silvers wrongly and without any justification purported to terminate the License Agreement in April of 2005. As set forth in Stelor's Counterclaim and Amend Cross-Claim, that termination is wrongful, and the Agreements remain in full force and effect. Unfortunately, Silvers' improper and unfounded attempt to terminate the Agreements was just the latest in a series of actions designed to disrupt Stelor's rights to the Googles property. Stelor was previously forced to file an initial lawsuit against Silvers in the Fall of 2004, when Silvers interfered with administrative actions Stelor had brought to protect certain of the "Googles" trademarks. That action was subsequently resolved, pursuant to the written Settlement Agreement. Under the Settlement Agreement, Silvers expressly reinstated all provisions of the License Agreement, including the clear requirement that 60 days' notice be provided of any alleged breaches, with an opportunity to cure, as a precondition for termination of the License Agreements. (See Article IX of the License Agreement, Mot. to Dismiss Ex. A.) Nevertheless, with no notice whatsoever, Silvers purported to terminate the Agreement by letter dated April 27, 3 The Agreement, therefore, gives Stelor the rights to purse these claims, not only in its capacity as licensee, but also "for and on

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2005.

The alleged breaches set forth in the Termination Letter, moreover, were entirely

unfounded. Indeed, in the prior action pending before Judge Hurley, Magistrate Hopkins agreed, expressly finding in a Report and Recommendation following an evidentiary hearing on Stelor's motion for preliminary injunction, that Stelor had a substantial likelihood of success on the merits of his claim. 1

II. OVERVIEW OF THE PENDING CLAIMS On May 4, 2005, Silvers filed the present action for trademark infringement against Google Inc. Google Inc. responded by filing its Answer, Affirmative Defenses and Google Inc. claimed in its affirmative Counterclaim ("Counterclaim") in August of 2005.

defenses that Silvers lacked standing (second affirmative defense) and failed to include an indispensable party (ninth affirmative defense). In addition, Google Inc. joined Stelor as a counterclaim defendant along with Silvers, alleging generally that Stelor and Silvers have falsely claimed rights in the Googles property. The Counterclaim seeks declaratory relief, cancellation of Stelor's and Silvers' trademark rights, and alleges trademark infringement under 15 U.S.C. §§ 1114 and 1125(a). Accordingly, Stelor has been involuntarily joined as a counterclaim (or thirdparty) defendant to this action. Stelor, in turn, has filed its Counterclaim and Amended Cross-Claim. Counts Two and Three of the Counterclaim and Amended Cross-Claim are compulsory counterclaims for trademark infringement against Google Inc.; Count Four is a compulsory counterclaim for common law unfair competition against Google Inc. (These Counts against Google Inc. will be referred to collectively as "Google Trademark Infringement Claims"). As compulsory counterclaims, Stelor was required to bring these claims in this action pursuant to Fed. R. Civ. P. 14(a) and 13(a). And, this Court clearly has original, federal question jurisdiction over these Trademark Infringement Claims, pursuant to 15 U.S.C. § 1121 (Lanham Act), 28 U.S.C. § 1331 (federal question), and 28 U.S.C. § 1338 (trademark and unfair competition), as well as Judge Hurley then entered a TRO implementing the injunction recommended by the Magistrate, although Judge Hurley declined to extend the TRO upon its expiration or otherwise to adopt the Magistrate's additional recommendations. 4
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supplemental jurisdiction under 28 U.S.C. § 1367 over the common law unfair competition claim. In addition, Stelor's Counterclaim and Amended Cross-Claim includes compulsory crossclaims against Silvers ­ whom Google Inc. made a counterclaim/defendant along with Stelor. Thus, Count One of Stelor's Counterclaim and Amended Cross-Claim seeks a declaratory judgment that Stelor's continued use of the Googles trademarks does not infringe Silvers' claimed trademark rights, and also that the Agreements between Stelor and Silvers remain in full force and effect. Counts Five and Six allege breaches by Silvers of the Agreements and applicable warranties under State law. collectively as the "Silvers Claims"). In short, Stelor's right to pursue the Googles Trademark Infringement Claims depends on the continued validity of the License and Settlement Agreements. License Agreement grants to Stelor: · "the exclusive (even as to LICENSOR), worldwide, sub licensable right and license" with respect to all of the "Googles" intellectual property and trademarks. Agreement ¶ 1(A). "all right, power and interest to seek, obtain and maintain all Intellectual Property Rights associated with the Licensed Intellectual Property and Licensed Trademarks" as well as "an irrevocable power of attorney to act for and on LICENSOR's behalf". Agreement ¶ VIII(A). And, "the sole right, in its discretion and at its expense, to take any and all actions against third persons to protect the Intellectual Property Rights licensed in this Agreement." (Emphasis added). ¶ IX As set forth above, the (These Counts against Silvers will be referred to

·

· ·

Clearly, if the License Agreement remains in effect ­ as Stelor contends ­ than Stelor has the right to pursue its Googles Trademark Claims. Conversely, if the License Agreement is terminated (and it is not), then Stelor's rights to pursue the Googles Trademark Claims would be limited. (Stelo r could still pursue the claims, but limited to the period prior to the Agreement's termination). Accordingly, the issue raised by Stelor in the Silvers Claims ­ whether the Agreements remain in effect ­ is a critical threshold issue in this case, and is closely related to 5

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the Googles Trademark Claims (over which this Court has original jurisdiction). Those issues, moreover, pervade ALL of the claims in this action, including Silvers' own trademark infringement claim against Googles Inc. Thus, the issues about the Agreements' validity would STILL necessarily be addressed by this Court even if the Silvers Claims were dismissed.

III. THE COURT HAS ORIGINAL JURISDICTION OVER STELOR'S CLAIMS The Court has original jurisdiction over the Googles Trademark Infringement Claims in Counts Two and Three of Stelor's Counterclaim and Amended Cross-Claim. See 15 U.S.C. § 1121 (Lanham Act), 28 U.S.C. § 1331 (federal question), 28 U.S.C. § 1338 (trademark and unfair competition). The Court also has supplemental jurisdiction over the claim against Google Inc. for common law unfair competition, just as supplemental jurisdiction exists over Silvers' parallel claim against Google Inc. for unfair competition. (DE 10, Ex. A, Count III) In addition, Count One of Stelor's Counterclaim and Amended Cross-Claim for declaratory relief also falls within the Court's federal question jurisdiction. That Count seeks a judicial declaration that Stelor's continued use of the Googles trademarks does not constitute infringement under the Lanham Act. As such, it properly establishes this Court's federal question jurisdiction. See Household Bank v. JFS Group, 320 F.3d 1249, 1251 (11th Cir. 2003) ("federal-question jurisdiction exists in a declaratory judgment action if the plaintiff has alleged facts in a well-pleaded complaint which demonstrate that the defendant could file a coercive action arising under federal law"); Cardtoons, L.C. v. Major League Baseball Players, 95 F.3d 959, 965 (10th Cir. 1996). 2 These claims over which the Court has independent bases for jurisdiction necessarily require a decision to be made about the continued validity of the License and Settlement Agreements. Stelor's standing to pursue the Googles Trademark Infringement Claims, as well as Nor could Silvers legitimately contend that the Court should refrain from deciding that claim. See Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 26 (1983) ("the presence of federal- law issues must always be a major consideration weighing against surrender" of federal jurisdiction.); Verizon Communication, Inc. v. Inverizon International, Inc. 295 F.3d 870, 874 (8th Cir. 2002) (district court abused discretion in staying federal action seeking declaration of non- infringement under Lanham Act, where pending state court action raised only state law issues). 6
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the count seeking a declaratory judgment of non- infringement under the trademark laws, both hinge on that issue. IV. SUPPLEMENTAL JURISDICTION EXISTS OVER STELOR'S STATE LAW CLAIMS A. The Court Has Power To Exercise Supplemental Jurisdiction Over Stelor's State Law Claims . Pursuant to 28 U.S.C. § 1367, this Court has supplemental jurisdiction over Stelor's state law claims. Section 1367(a) provides: Except as provided in subsection (b) and (c) . . . , in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties. As set forth above, the state law claims include a count for common law unfair competition against Google Inc., as well as a count for declaratory judgment that the Agreements remain in full force and effect, and counts for breach of the Agreements and certain of its express warranties. These claims are so related to claims in the action within the Court's original jurisdiction that they form part of the same case and controversy and thus fall within the Court's supplemental jurisdiction. As the Eleventh Circuit has explained, this section "delineates the power of the federal courts to hear supplemental claims and claims against supplemental parties." Palmer v. Hospital Auth, 22 F.3d 1559, 1566 (11t h Cir. 1994) (emphasis original). Subsection (c) of the statute, in turn, "describes the occasions on which a federal court may exercise its discretion not to hear a supplemental claim or admit a supplemental party, despite the power of the court to hear such a claim." Id. (emphasis original). As Palmer made clear, "supplemental jurisdiction must be exercised in the absence of any of the four factors of section 1367(c)." Id. (emphasis original). In analyzing the first component of the Statute, the Court's power to exercise supplemental jurisdiction, Palmer explained that the exercise is proper where ­ as here ­ all of the relevant parties are before the Court on an independent ground of original federal 7

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jurisdiction. Id. As long as the state- law claim arises out of the same nucleus of operative facts, the power to exercise supplemental jurisdiction exists, even where "all the elements of the federal and state claims are certainly not identical, and in some cases quite different." Id. In this connection, supplemental jurisdiction has readily been exercised by the courts over counterclaims and cross-claims by third and even fourth party defendants. As the Court held in Allstate Ins Co. v. James, 779 F.2d 1536, 1539 (11t h Cir. 1986), cross-claims satisfying the same "transaction or occurrence" test of Rule 13(g) "must, by necessity, by closely related to the original claim, and would, therefore fall within the court's ancillary jurisdiction. " Similarly, in Viacom Int'l, Inc. v. Kearney, 212 F.3d 721, 727-28 (2d Cir. 2000), the Court overturned an order granting a motion to dismiss, holding that a fourth-party defendant "could file any claims necessary to protect its interests under the court's supplemental jurisdiction". That holding was especially significant, not only because the Court lacked any independent jurisdictional basis over the fourth-party defendant's claims, but also because those claims were inconsistent with the Court's diversity jurisdiction. The Court analyzed the relationship between the fourth-party defendant's claims and the defendant's compulsory counterclaims, finding them sufficiently related to satisfy the requirements of § 1367(a). litigation then pending in state court. Id. at 728 & n.6. Indeed, numerous courts have approved the exercise of supplemental jurisdictio n over claims by third-party defendants "haled into court against his will", even where no independent basis for jurisdiction exists over any aspect of the claims, Cam-Ful Indus., Inc. v. Fidelity & Deposit Co., 922 F.2d 156, 160 (2d Cir. 1991) (applying parallel doctrine of ancillary jurisdiction). E.g., State Nat'l Ins. Co. v. Yates, 391 F.3d 577, 580 (5t h Cir. 2004) (noting that limits of supplemental jurisdiction over claims of plaintiffs NOT applicable to compulsory crossclaims and counterclaims of defendants); HB General Corp. v. Manchester Partners, L.P., 95 F.3d 1185, 1197-98 (3d Cir. 1996) (emphasizing that the rule of supplemental jurisdiction applies "even to claims asserted by or against additional parties). Applying these standards here, Stelor's Cross-Claim clearly falls within the Court's power to exercise supplemental jurisdiction. Quite simply, the Googles Trademark Infringement Claims brought by Stelor and the nonfederal Silvers Claims "are so tightly interwoven that the 8 As the Court reasoned, the exercise of supplemental jurisdiction would promote judicial economy, eliminating the need for duplicate

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federal claims cannot be resolved unless the federal court also addresses the nonfederal claims," Cam-Ful, 922 F.2d at 160 (2d Cir. 1991). Stelor must demonstrate that License Agreement and Settlement Agreements remain in effect in order for Stelor to have standing to pursue its Trademark Infringement Claims against Google Inc. Indeed, that issue is pervasive and will necessarily be litigated as part of Stelor's trademark claims regardless. Not only is this a critical threshold issue for Stelor's claims, however, it is for Silvers' original claims as well. Thus, if the License Agreement remains in effect, then Silvers does not have standing to pursue its infringement claims against Google Inc. That right, instead, belongs exclusively to Stelor. Silvers' argument against supplemental jurisdiction overlooks the requirement that he prove he ­ and not his licensee, Stelor ­ has standing to pursue the trademark claims against Google Inc. See Coach House Restaurant, Inc. v. Coach & Six Restaurants, Inc., 934 F.2d 1551, 1557 (11t h Cir. 1991); Paradise Creations, Inc. v. UV Sales, Inc., 315 F.3d 1304, 1309 (Fed Cir. 2003) (recognizing exclusive licensee's standing to bring claims). Again, the License Agreement authorizes Stelor to bring such claims in its capacity as licensee. But, the Agreement does more; it expressly grants Stelor "an irrevocable power of attorney to act for and on LICENSOR's behalf". Agreement ¶ VIII(A). Thus, Stelor controls both its and Silvers' rights, as owner, to bring the Googles Trademark Infringement Claims. Having irrevocably granted Stelor that power of attorney, Silvers cannot properly pursue a claim, even in his own name. The bottom line is that, if the License Agreement remains in effect (which it does), Silvers is claiming rights he simply does not have. Although Google Inc.'s actions are improper and the trademark claims should proceed against Google Inc., the exclusive right to pursue the claims belongs to Stelor, not Silvers. Nor can Silvers properly avoid litigation of that critical threshold issue, whether raised as a result of Stelor's Counterclaim and Amended Cross-Claim or simply as a component of Silvers' obligation to demonstrate his standing. Like it or not, Google Inc. has already included Stelor as a party and has injected those issues into the case. Accordingly, the issues will necessarily be litigated, with or without the Silvers Claims included in Stelor's Amended Cross-Claim.

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Nor will inclusion of the Cross-Claim in this case "create havoc at trial", as Silvers suggests. 3 If Silvers is concerned that these issues will require evidence and testimony different from what he believes the evidence should be for the "main trademark claim", then Silvers should not have attempted to usurp Stelor's right to pursue this action. But having done so, he cannot suggest piecing off the Cross-Claim from this action, and requiring it to be separately tried before another court. That would create havoc. A separate state court proceeding will result in dueling cases, with two courts forced to hear and decide the same issues, and Stelor required to litigate those issues twice. As discussed in more detail in the last section of this paper, not only would parallel lawsuits create inefficiency and unwarranted expense, but also a pronounced risk of inconsistent or conflicting decisions. The reality here is that Silvers has no choice but try these issues in one judicial proceeding. B. No Basis Exists Under 1367(c) for The Court to Decline to Exercise Supplemental Jurisdiction. As an initial matter, Silvers has expressly waived any rights regarding the discretionary aspects of supplemental jurisdiction. Although the absence of subject matter jurisdiction cannot be waived, the courts have confirmed that the "discretionary aspect to supplemental jurisdiction is waivable." See Kieslich v. USA, 258 F.3d 968, 970-71 (9t h Cir. 2001); Groce v. Eli Lilly & Co., 193 F.3d 496, 501 (7t h Cir. 1999); Fein v, District of Columbia, 93 F.3d 861, 871 (D.C. Cir. 1996). Here, Silvers expressly agreed in the written Settlement Agreement "to submit to the exclusive continuing jurisdiction of the United States District Court, Southern District of Florida." (Settlement Agreement ¶ 17, tab 2.) This provision clearly constitutes a waiver of any right to object to the Court's exercise of that jurisdiction. Accordingly, this Court has supplemental jurisdiction, and under the circumstances should exercise it. Even if Silvers had not waived his right to object to the discretionary aspect of supplemental jurisdiction, no basis exists here for the Court to decline to exercise supplemental jurisdiction. Although Silvers appears to suggest that a court has broad discretion to decline to exercise supplemental jurisdiction over a closely related state-law claim, that is not the case. Courts may decline such jurisdiction only in four narrowly articulated situations, none of which
3

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apply here. See Palmer, 22 F.3d at 1566 ("Supplemental jurisdiction must be exercised in the absence of any of the four factors"). First, supplemental jurisdiction may be declined if the claim raises a novel or complex issue of State law. Silvers concedes the Cross-Claim "does not raise particularly complex issues of state law". Motion at 10. Also unpersuasive is Silvers' suggestion that a novel question is raised by Stelor's claim for declaratory relief that Silvers' termination of the Agreements was improper and that the License and Settlement Agreements remains in full force and effect. remedies under State law that is certainly not complex or novel. Second, supplemental jurisdiction may be declined if the claim "substantially predominates over the claim or claims over which the district court has original jurisdiction." Here, as set forth above, the issues raised by the Cross-Claim themselves implicate elements of the trademark claims raised by Silvers, and the defenses and counterclaims raised by Google Inc. Those issues, moreover, will need to be addressed and decided as part of the main claims in any event. Accordingly, this ground does not apply. Third, supplemental jurisdiction may be declined if the court has dismissed all claims over which it has jurisdiction, a ground that is obviously inapplicable. Fourth, jurisdiction may be declined "in exceptional circumstances", where "there are other compelling reasons for declining jurisdiction." There are no such circumstances here; Silvers does not (and cannot) seek to invoke this provision. Accordingly, no basis exists in this case for the Court to decline to exercise supplemental jurisdiction. Nor does Silvers' argument that including the Cross-Claim will create havoc at trial ­ which it will not ­ provide a basis for the Court to decline to exercise supplemental jurisdiction. V. STELOR STATES A CLAIM FOR INJUNCTIVE RELIEF Silvers also attempts to argue that Stelor cannot state a claim for injunctive relief. The argument is not directed to any specific count in the Cross-Claim, and essentially appears to be nothing more than an unfounded preemptive argument against a motion for preliminary injunction that has not been filed. Apparently, Silvers contends that, even if he unilaterally and 11 As set forth below, Silvers' argume nt is misplaced, and at most involves an issue of allowable

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wrongly terminated that License Agreement, Stelor's only recourse is money damages. According to Silvers, Stelor cannot have the termination declared improper and the License Agreement deemed to be in effect. That argument is preposterous. As the Court succinctly held in Computer Currents Publishing Corp. v. Jaye Communications, Inc., 968 F. Supp. 684, 687 (N.D. Ga. 1997), in rejecting the identical argument by a trademark licensor, "[u]nfortunately, this is a misstatement of the law." That decision was expressly approved by the Eleventh Circuit in McDonald's Corp. v. Robertson, 147 F.3d 1301, 1307-08 (11t h Cir. 1998), which Silvers ignores. In fact, the Burger King decisions frequently cited by Silvers were effectively overruled by the Eleventh Circuit's decision in Robertson. Id. at 1308. Adopting the Third Circuit's analysis in S&R Corp. v. Jiffy Lube Int'l, Inc., 968 F.2d 371 (3d Cir. 1992), Robertson held that, before a franchisor could enjoin an allegedly terminated franchisee from continuing to use the trademarks, the franchisee had to show the termination was proper. Absent such a showing by the franchisor, the franchisee's rights to use the trademarks continue. Silvers' argument also ignores the ruling in Ron Matusalem & Matusa, Inc. v. Ron Matusalem, Inc., 872 F.2d 1547, 1550, 1553 (11t h Cir. 1989), where the Eleventh Circuit expressly approved a trial court's decision (issued by Judge Ryskamp following a lengthy bench trial) that a termination of a sub- franchise agreement including trademarks was unwarranted, and that the franc hise "is still in existence and . . . should be strictly enforced." Indeed, as the Eleventh Circuit emphasized, Judge Ryskamp had properly recognized that "termination of a franchise is a drastic remedy" and that such franchise rights "should not be set aside lightly". Clearly, the Court in this case has the authority to determine that Silvers' termination was wrongful and that the License remains in existence. In fact, none of the decisions cited by Silvers ­ including the Burger King cases ­ supports Silvers' misstatement of the law that the License Agreement ends, even if Silvers' termination was wrongful. Rather, the established rule is as follows: Under basic contract principles, when one party to a contract feels that the other contracting party has breached its agreement, the non-breaching party may either stop performance and assume the contract is avoided, or continue its performance and sue for damages. 12

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Jiffy Lube, 968 F.2d at 376. Of course, if the non-breaching party does choose the first option ­ stopping its performance and assuming the contract is avoided ­ then its remedy would be limited to money damages. On the other hand, if ­ as Stelor has done here ­ the non-breaching party continues to perform under the contract, the party clearly preserves the right to continue to use the trademark should the termination prove to be wrongful. See Matusa, 872 F.2d at 1550, 1553.4 Even the Burger King cases on which Silvers relies confirm this rule. Thus, the Jiffy Lube decision quotes the f llowing language from Burger King v. Austin, Bus. Fran. Guide o (CCH) ¶ 9788 at 22,069 (S.D. Fla. Dec. 26, 1990) (also cited with approval in Silvers' Opposition at 13): In order to have preserved their right to recover for the alleged breaches and to continue to use the [Plaintiff's] trademark, Defendants should have continued to pay royalties, advertising expenses and rent. See also Burger King Corp. v. Hinton, Inc., 203 F. Supp. 2d 1357, 1365 (S.D. Fla. 2002) (quoting same language); Burger King v. Majeed, 805 F. Supp. 994, 1004 (S.D. Fla. 1991) (same); Burger King Corp. v. Hall, 770 F. Supp. 633, 639 (S.D. Fla. 1991) (same); In re Tampa Checkmate Food Servs. Inc. v. Checkers Drive-In Restaurants, 221 B.R. 541, 545-46 (M.D. Fla. Bankr. 1998) (adopting rule and distinguishing Burger King cases). Thus, if pending judicial resolution of such a dispute, the licensee continues to perform its obligations under the agreement at issue ­ such as paying royalties ­ the licensee preserves its rights under the agreement if the termination is ultimately held to be wrongful. 5 By continuing to perform its obligations under the License Agreement ­ notwithstanding Silvers' bogus termination ­ Stelor has fully preserved its rights as licensee,
4

Notwithstanding the improper termination, Stelor has continues to make royalty payments on a monthly basis as required by the Agreements, but Silvers' counsel has rejected all the payments. 5 As one commentator put it, "[n]either a franchisor nor a franchisee can play the role of judge and jury in connection with contract defaults. A franchisor needs to strictly abide by the franchise agreement, and any applicable franchise statute, including providing the franchisee a mandated right to cure, if the franchisor expects to be able to enjoin the terminated franchisee from continuing to use the trademark." H. Bruno, Is Proper Termination Necessary to Obtain a Trademark Injunction?, 21-SPG Franchise L.J. 204, 207 (2002). The franchisor's simply declaring the agreement to be terminated does not make it so. 13

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including the right to continued use of the Googles trademarks upon a judicial determination of wrongful termination by Silvers. Stelor's rights as licensee, moreover, expressly include the right for Stelor ­ and not Silvers ­ to pursue this trademark infringement claim against Google Inc. In essence, Silvers is pre-arguing a motion for preliminary injunction, which is not pending. Thus, all of his cases involve preliminary injunctions, not dismissals of the underlying claims, and are radically distinguishable. For example, altho ugh the Court in Freeplay Music, Inc. v. Verance Corp., 80 Fed Appx. 137 (2d Cir 2003), affirmed a denial of a preliminary injunction because, on the facts, no showing of irreparable harm was made, the Freeplay Court overturned the lower court's dismissal of the claims for declaratory judgment, breach of contract, and other relief, remanding the matter to the lower court "for proper resolution . . . upon a complete record". The decision in A.L.K. Corp. v. Columbia Pictures Indus., Inc., 440 F.2d 761 (3d Cir. 1971), was similarly limited to an appeal of an order on a preliminary injunction motion. As the decision made clear, moreover, it was based solely on the lack evidence of irreparable harm specific to the circumstances in that case. The Florida cases cited by Silvers are also limited to preliminary injunction motions, and are clearly distinguishable. See Shearson Lehman Hutton, Inc. v. Meyer, 561 So. 2d 1331 (Fla. 5th DCA 1990) (terminated employee had adequate remedy at law); Jacksonville Elec. Aut. V.
s Beemik Builders & Con., Inc., 487 So. 2d 372 (Fla. 1t DCA 1986) (inadequate proof of

irreparable harm); Airlines Reporting Corp. v. Incentive Int'l Travel, Inc., 566 So. 2d 1377 (Fla. 5th DCA 1990) (failure to demonstrate clear legal right preventing termination of contract). Finally, the so-called Burger King cases referenced by Silvers also involve preliminary injunction motions, and are otherwise entirely inapplicable. In fact, Burger King Corp. v. Hall, 770 F. Supp. 633, 638-39 (S.D. Fla. 1991), was effectively overruled by the Eleventh Circuit's decision in McDonald's Corp. v. Robertson, 147 F.3d 1301, 1308 (11t h Cir. 1998). The Robertson Court rejected Hall's finding that the "question of alleged wrongful franchise termination [was] irrelevant," and instead directly addressed the propriety of the alleged termination for purposes of injunctive relief. Cf. Burger King Corp. v. Majeed, 805 F. Supp. 994 (S.D. Fla. 1992) (court found that franchisee had failed to comply with license agreement). In addition, unlike the facts in this case, another of the cited cases involved a contract that had 14

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already terminated by its own terms (and not improperly by one of the parties). E.g., Burger King Corp. v. Agard, 911 F. Supp. 1499, 1501 (S.D. Fla. 1995) (license expired by its own terms). Accordingly, Stelor has properly stated a claim for relief. Silvers' Motion is unfounded and should be denied. VI. SILVERS' STATE COURT ACTION DOES NOT JUSTIFY DISMISSAL Silvers argues that his state court action against Stelor supports dismissal. It does not. The parties expressly agreed in their written Settlement Agreement "to submit to the exclusive continuing jurisdiction of the United States District Court, Southern District of Florida." (Settlement Agreement ¶ 17, attached hereto as tab 2.) Thus, by agreement of the parties, this Court, not the state court, has jurisdiction over this matter. See P&S Bus. Machines, Inc. v. Canon USA, Inc., 331 F.3d 804, 807 (11th Cir. 2003) (per curiam) (parties are bound to their agreement regarding forum). Silvers also neglects to cite to Ambrosia Coal and Constr. Co. v. Pages Morales, 368 F.3d 1320 (11t h Cir. 2004). In Ambrosia, the Eleventh Circuit overturned a district court's decision to abstain from hearing a dispute over a leasehold interest, where a competing action had been first filed in Puerto Rico. The court construed the factors set out in Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976) for federal abstention based on state litigation. The Ambrosia court stated: This general principle [to avoid duplicative litigation] does not apply, however, when the duplicative litigation arises between state and federal courts. As the Supreme Court recognized, "[g]enerally, as between state and federal courts, the rule is that the pendency of an action in state court is no bar to proceedings concerning the same matter in the Federal court having jurisdiction . . . . Federal courts have a "virtually unflagging obligation . . . to exercise the jurisdiction given them." A policy permitting federal courts to yield jurisdiction to state courts cavalierly would betray this obligation. Thus, federal courts can abstain to avoid duplicative litigation with state court only in "exceptional" circumstances. Id. at 1328 (quoting Colorado River 424 U.S. at 817 (citations omitted)). The following factors are to be considered: 1) the court first assuming jurisdiction over property may exercise that jurisdiction to the exclusion of other courts, 2) convenience, 3) the desirability of avoiding 15

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piecemeal litigation, 4) the order in which jurisdiction is obtained by concurrent forums, 5) whether state or federal law will be applied, 6) and the adequacy of the state court to protect the parties' rights. Id. at 1328, 1331. Only the " `clearest of justifications will warrant dismissal' of the federal action, " id. at 1328-29 (quoting Colorado River, 424 U.S. at 819), and the Court must employ "a heavy bias in favor of exercising jurisdiction." Id. at 1332. As to the first and fourth factors (jurisdiction over the property and order in which jurisdiction was obtained), this Court, not the state court, is the first to assume jurisdiction over the parties and over the property rights at issue ­ the trademarks. Silvers filed this action, which necessarily raised his standing to bring trademark claims, against Google Inc. in May 4, 2005. (DE 1.) Google Inc.'s Second Affirmative Defense was filed on August 8, 2005, and it claimed Silvers' lack of standing. (DE 5.) For its part, Stelor filed an action for breach of the License Agreement and Settlement Agreement before Judge Hurley (which was dismissed for lack of complete diversity of citizenship ­ a problem not present here, as discussed above) on May 4, 2005 and filed a Notice of Similar Actions and Request for Transfer and Consolidation to this Court on August 23, 2005, (DE 9), raising the point that it has the exclusive right to bring any trademark action against Google Inc. Thus, this action, and the issue of the contractual relations between Silvers and Stelor as they pertain to the right to enforce the trademarks herein at issue, arose long before Silvers September 6, 2005 state court complaint. 6 As the second and third factors (avoidance of piecemeal litigation and convenience), this forum is clearly superior. As the court in Merrill Lynch, Pierce, Fenner & Smith v. Haydu, 675 F.2d 1169, 1173 (11t h Cir. 1982) held, "[p]rinciples of comity suggest that a court having jurisdiction over all matters in dispute sho uld have jurisdiction. Otherwise, the fractioned dispute would have to be resolved in two courts." This Court, not the state court, has before it the trademark claims and defenses and the standing issues that pervade those claims and defenses. Principles of comity do not require this Court to leave the state court to decide only one issue where this Court is seized of all the issues between the parties. Although Silvers

The Court should also consider the progress made in the state court action. Ambrosia, 368 F.3d at 1333. The state court action has not progressed beyond the pleading stage.
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purports to rely on Merrill, that case forbids the fractioned disput e resolution process Silvers advocates here. 7 The remaining Colorado River factors (pertaining to the law that applies and the adequacy of the state forum) weigh in favor of this Court's jurisdiction. Federal law governs the trademark issues that pervade the litigation, and the state court is inadequate to resolve the issues because it has before it only a portion of the dispute between Silvers and Stelor because Silvers expressly excluded from his claim in the state court action the Settlement Agreement between the Silvers, Stelor and Google Inc. have asserted their respective trademark claims in this Court, not in the state court. In contrast to Merrill Lynch, Pierce, Fenner & Smith v. Haydu, 675 F.2d 1169, 1173 (11t h Cir. 1982), where two courts both had jurisdiction over the "same lawsuit," only this court has jurisdiction in this lawsuit by the parties agreement. A court need not yield jurisdiction to another where "one court has exclusive jurisdiction over a portion of the subject matter of the dispute." Id. Furthermore, according to Silvers, the state action and the cross-claim are not the "same lawsuit." While Stelor's breach of contract cross-claim is based on both the License Agreement and the Settlement Agreement, (Answer, Counterclaim and Amended Cross-claim ¶ 62), Silvers represented to the state court that he "is not asking the Court to interpret or enforce anything in the Settlement Agreement." (Silvers' Mem. of Law in Opp. to Def.'s Mot. to Dismiss, Case No. 05-18033 (Fla. 11t h Jud. Cir.) at 2, attached hereto at tab 1.)8 Also, the state court action does not have before it Stelor's trademark claim. By Silvers' own arguments before The other Florida cases cited by Silvers are likewise distinguishable and inapplicable because they did not involve abstention of a federal district court. In Sunshine State Servs. Corp. v. Dove Invs. Of Hillsborough, 468 So. 2d 281, 283 (Fla. 5t h DCA 1985), the federal court did not have concurrent jurisdiction over the claims and counterclaims asserted in the state court action and the federal action would resolve only part of the dispute presented in the state court action. Here, the federal court has jurisdiction, and it, unlike the state court, has the entire dispute presented before it. Cypress Garden Condo. Assoc. v. Mieli, 804 So. 2d 407 (Fla. 4t h DCA 2001) and Wade v. Clower, 114 So. 548, 552 (Fla. 1927).
7

Silvers made that representation in an attempt to avoid application of the forum selection agreement in the Settlement Agreement setting exclusive jurisdiction the Southern District of Florida. The state court apparently relied on his representation as it has indicated it is denying Stelor's motion to dismiss that action for lack of venue and based on this prior pending federal action. Stelor respectfully believes that this ruling is erroneous and will be appealing it.. 17
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the state court, these are not identical claims. Cf. Merrill, 675 F.2d at 1173 ("Principles of comity come into play when separate courts are presented with the same lawsuit") (emphasis added). In sum, this case is properly before the federal court and should not be dismissed. This case is not like Merrill where dismissal was justified because the state court was seized of all the issues, had already entered a judgment on liability issues, and had scheduled a trial on damages issues prior to the federal claim. See Leenan v. Ruttgers Ocean Beach Lodge, Ltd., 662 F. Supp. 240, 241-42 (S.D. Fla. 1987) (distinguishing Merrill and refusing to dismiss federal action based on earlier filed state action under the Colorado River factors.)

VII. CONCLUSION For the foregoing reasons, Silvers' Motion to Dismiss is unfounded and should be denied. RESPECTFULLY SUBMITTED, BURLINGTON, WEIL, SCHWIEP, KAPLAN & BLONSKY, P.A. Attorneys for Stelor Productions, LLC 2699 South Bayshore Drive, Penthouse Miami, Florida 33133 Tel: [phone] Fax: [phone] Email: [e-mail] By: /s/ Kevin C. Kaplan Kevin C. Kaplan Florida Bar No. 933848 David J. Zack Florida Bar No. 641685

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CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true copy of the foregoing was served electronically and via U.S. mail on this 23rd day of December, 2005 upon the following: Adam T. Rabin, Esq. DIMOND, KAPLAN & ROTHSTEIN, P.A. Trump Plaza 525 S. Flagler Drive, Suite 200 West Palm Beach, Florida 33401 [e-mail] Jan Douglas Atlas ADORNO & YOSS LLP 350 East Las Olas Boulevard Suite 1700 Fort Lauderdale, Flroida 33301 [e-mail] Kenneth R. Hartmann, Esq. Gail M. McQuilkin, Esq. KOZYAK TROPIN & THROCKMORTON, P.A. 2525 Ponce de Leon Blvd., 9t h Floor Coral Gables, Florida 33134 [e-mail] Andrew P. Bridges WINSTON & STRAWN LLP 101 California Street, Suite 3900 San Francisco, California 94111 [e-mail]

/s/ Kevin C. Kaplan Kevin C. Kaplan

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