Ziebart International Corporation v. Z Technologies Corporation
MEMORANDUM OPINION and ORDER Denying 55 Motion for Summary Judgment, Granting in Part and Denying in Part 57 Motion for Partial Summary Judgment on the Counterclaims, and Granting 58 Motion for Judgment on the Pleadings - Signed by District Judge Judith E. Levy. (FMos)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
Ziebart International Corp.,
Case No. 15-cv-11745
Judith E. Levy
United States District Judge
Z Technologies Corp.,
Mag. Judge Anthony P. Patti
Pure Asphalt Co.,
OPINION AND ORDER DENYING MOTION FOR SUMMARY
JUDGMENT , GRANTING IN PART AND DENYING IN PART
MOTION FOR PARTIAL SUMMARY JUDGMENT ON
COUNTERCLAIMS , AND GRANTING MOTION FOR
JUDGMENT ON THE PLEADINGS 
Before the Court are defendant Z Technologies Corp.’s motion for
summary judgment, plaintiff Ziebart International Corp. and counter
defendant Pure Asphalt Co.’s motion for partial summary judgment on
defendant’s counterclaims, and Pure Asphalt Co.’s motion for judgment
on the pleadings on counterclaims III and IV. (Dkts. 55, 57, 58.) For
the reasons set forth below, the Court will deny defendant’s motion for
summary judgment, will grant in part and deny in part plaintiff and
counter defendant’s motion for partial summary judgment, and grant
counter defendant’s motion for judgment on the pleadings on
counterclaims III and IV.
Plaintiff and defendant began their commercial relationship in
1996, and their relationship continued for fifteen years, ending in 2003.
Their commercial disputes began in 2000, and have been ongoing for
more than fifteen years, continuing to this day. This lawsuit represents
the latest in a series of trademark and contract disputes between the
Plaintiff is a Michigan corporation that sells appearance and
protection goods and services, including rustproofing products, for auto
vehicles. (Dkt. 1 at 3–4.) Defendant is a Delaware corporation that
manufactures and sells industrial undercoating and paint products for
vehicles, also including rust prevention products. (Dkt. 52 at 2.) Pure
Asphalt Co. is an Illinois corporation and began supplying plaintiff with
a sealant known as Formula Q in 1999. (Dkt. 58 at 12.)
In 1996, plaintiff sold its chemical subsidiary, Ziebart Products
Group, Inc. to The Sentry Corporation, which then became known as Z
Tech. (Dkt. 1 at 6; Dkt. 56-2 at 8.) As part of the sale, the parties
entered into the following agreements that addressed, among other
things, use of trade names, trademarks, disclosure of information, and
other intellectual property: Asset Purchase Agreement; License
Agreement; Non-Competition and Non-Disclosure Agreement; and
Supply Agreement. (Dkt. 1 at 4–6; Dkt. 52 at 19–23; Dkt. 66-10 at 2.)
In the 1996 Asset Purchase Agreement, the parties agreed that
defendant Z Technologies Corp. could use the name “‘ZP Corporation’
and variants thereof,” and that plaintiff would no longer use this name
or similar names.
(Dkt. 56-2 at 41.)
Pursuant to the License
Agreement, defendant was permitted to license and use specified
trademarks, service marks, and trade names owned by plaintiff. (Dkt.
56-4 at 3–4.) The list of licensed marks and names was never attached
to the Agreement, and the parties have not identified which marks and
names were included in the License Agreement.
The parties also
entered into the Non-Competition and Non-Disclosure Agreement
(NDA), which stated that “all confidential information shall be and
remain the sole and absolute property” of defendant, and prohibited
plaintiff from disclosing defendant’s confidential and proprietary
information without written consent. (Dkt. 56-5 at 4.)
relationship through a Supply Agreement. Pursuant to this agreement,
plaintiff agreed to purchase at least 650,000 gallons per year of
Formula Q”—from defendant.
(Dkt. 56-6 at 3.)
If defendant were
unable to provide this product for a period of time, Article 12 permitted
plaintiff to cover by finding an alternate supplier for that time. (Id. at
7–8.) If plaintiff needed to cover, Article 15 stated that plaintiff could
disclose otherwise confidential Ziebart Product Formula information to
the alternate supplier to ensure it received the appropriate products.
(Id. at 9.)
The right to disclose confidential information under this
circumstance was the only exception to plaintiff’s duty not to disclose
contained in Article 15 of the Supply Agreement and in the NonCompetition and Non-Disclosure Agreement. The Supply Agreement
was to last for five years, at which point plaintiff could renew the
contract for another five years “on the same terms and conditions” by
giving written notice to defendant at least 180 days before the
Agreement expired. (Id. at 4.)
Approximately four years after the parties entered into these
agreements, the parties “had a falling out.” (Dkt. 56 at 14.) Plaintiff
stopped purchasing products from defendant and terminated the Supply
Agreement in approximately March 2000 (see Dkt. 56-9 at 2). Plaintiff
then sent defendant a letter on June 14, 2000, alleging defendant was
infringing plaintiff’s trademarks and stating “Z Tech is not authorized
to use the Ziebart Trademarks.” (Id.) On June 14, 2000, defendant
denied the allegations, and requested plaintiff purchase the remaining
inventory defendant had prepared specifically for plaintiff. (Dkt. 56-10
at 2.) On August 31, 2000, plaintiff again wrote to defendant, asking
defendant to cease and desist from continuing to ship products to
plaintiff’s franchises, and offering to discuss the remaining inventory.
(Dkt. 56-11 at 2.)
Two months later, on October 24, 2000, plaintiff
again wrote to defendant, ordering it to cease and desist using
plaintiff’s trademarks. (Dkt. 56-12.)
In January 2001, defendant sued plaintiff in state court for breach
of contract, arguing plaintiff had failed to pay defendant and wrongfully
terminated the Supply Agreement.
(See Dkt. 56-13.)
counterclaimed for breach of the Asset Purchase Agreement, Supply
Agreement, and License Agreement.
(Dkt. 56-13 at 12–15.)
September 2001, the parties settled the lawsuit and submitted a
stipulated dismissal with prejudice.
parties entered into a Settlement and Release Agreement by which they
agreed to mutually release each other from current and future claims
“in connection with any counterclaim brought against Z Tech” and “in
connection with any claim brought against Ziebart” in the 2000
litigation. (Dkt. 56-7 at 3.)
After this dispute, the parties executed an Amended Supply
Agreement on September 18, 2001. (Dkt. 1 at 6.) Pursuant to this
agreement, the contract would be valid until September 17, 2007, and
plaintiff could renew the contract for five years “upon written notice to
Z Tech not later than one hundred eighty (180) days prior to the
expiration of the initial terms of this Agreement.” (Dkt. 56-7 at 7.)
Despite their attempts to continue their business relationship, the
parties’ disagreements persisted. Their commercial relationship broke
down in 2003.
(Dkt. 1 at 6; Dkt. 52 at 25.)1
And following this
breakdown, plaintiff continued to accuse defendant of infringing its
trademarks. In 2003, plaintiff’s chief operating officer was informed by
one of its techicians that defendant may be using plaintiff’s Formula Q
trademark on its products.
(Dkt. 56 at 15.)
In 2006, plaintiff
complained to defendant about several warranty forms that stated
defendant was the “Originators of Ziebart Protective Coatings.” (Id.) In
2007, Pure Asphalt notified plaintiff that defendant Z Technologies
Corp. was using the Ziebart name on its website. (Id. at 16.)
In 2011, plaintiff learned defendant was potentially infringing
several other trademarks on defendant’s website. (Dkt. 56 at 16; Dkt.
56-16 at 7.) Plaintiff’s trademark counsel, Patricia Lipsky, contacted
defendant, and the parties settled the dispute by entering into the
Settlement Agreement of February 2012. (Dkt. 56 at 16–17; Dkt. 1-8.)
Pursuant to this agreement, defendant was prohibited from using the ZShield, Zeegard, and Z Guard names on its website, and plaintiff agreed
Defendant amended its initial answer (Dkt. 9) in a later filing. (Dkt. 52.) The
counterclaims were not amended in the later filing, and defendant did not resubmit
the exhibits attached to Dkt. 9. The Court will reference exhibits from defendant’s
answer as numbered in Dkt. 9.
to allow defendant to use the Z Shield and Z Guard marks in certain
fields. (Dkt. 1-8.)
Subsequently, in 2015, plaintiff learned defendant was using the
name Ziebart in the meta tags2 in connection with its website despite
the 2012 Settlement Agreement.
Around this same time, plaintiff
registered the Formula Q trademark with the U.S. Patent and
Plaintiff then allegedly learned defendant was
infringing the Formula Q trademark and filed this lawsuit. (See Dkt.
Plaintiff’s claims are as follows: (I) trademark infringement
pursuant to 15 U.S.C. § 1114; (II) common law trademark infringement;
(III) false designation of origin or sponsorship, false advertising or
trademark infringement pursuant to 15 U.S.C. § 1125(a); and (IV)
breach of the 2012 Settlement Agreement. (Id. at 8–13.)
Defendant has brought five counterclaims against plaintiff and
Pure Asphalt Co. First, defendant alleges that plaintiff breached the
Asset Purchase Agreement and NDA by registering the Formula Q
trademark with the U.S. Patent & Trademark Office, “by disclosing to
third parties . . . the formula for Formula Q and other formulas, when it
Meta tags are words or phrases describing a web page’s content and appear in the
page’s code, but do not appear on the page itself. The tags can be read by search
engines so the web page will appear in search results.
was not permitted to do so,” “by claiming Z Tech does not have the right
to use the name ‘Formula Q and . . . bringing legal action against Z
Tech for its alleged infringement of the purported ‘Formula Q’
(Dkt. 52 at 31–32.)
Second, defendant argues that,
through this same conduct, plaintiff misappropriated its trade secrets
“relating to Formula Q and other formulas.”
(Id. at 33.)
defendant claims Pure Asphalt Co. misappropriated the same trade
secrets by continuing to use these formulas despite knowing it has no
legal right to do so.
(Id. at 34–35.)
Fourth, defendant requests a
declaratory judgment “of the rights and legal relations [of the parties]
pertaining to Z Tech’s formulas and other trade secrets and confidential
and proprietary information.”
(Id. at 36.)
Finally, defendant seeks
cancellation of plaintiff’s registration of the Formula Q trademark,
arguing the registration is invalid as ownership rights were transferred
to defendant in the 1996 Asset Purchase Agreement. (Id. at 36–37.)
Before the Court are motions for summary judgment and a motion
for judgment on the pleadings.
Summary judgment is proper when “the movant shows that there
is no genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The court may
not grant summary judgment if “the evidence is such that a reasonable
jury could return a verdict for the nonmoving party.”
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The court “views the
evidence, all facts, and any inferences that may be drawn from the facts
in the light most favorable to the nonmoving party.” Pure Tech Sys.,
Inc. v. Mt. Hawley Ins. Co., 95 F. App’x 132, 135 (6th Cir. 2004) (citing
Skousen v. Brighton High Sch., 305 F.3d 520, 526 (6th Cir. 2002)).
Judgment on the pleadings is appropriate “when no material issue
of fact exists and the party making the motion is entitled to judgment
as a matter of law.” Coyer v. HSBC Mort. Servs., Inc., 701 F.3d 1104,
1108 (6th Cir. 2012). “The standard of review for a Rule 12(c) motion is
the same as for a motion under Rule 12(b)(6) for failure to state a claim
upon which relief can be granted.” Fritz v. Charter Twp. of Comstock,
592 F.3d 718, 722 (6th Cir. 2010).
Thus, “all well-pleaded material
allegations of the pleadings of the opposing party must be taken as true,
and the motion may be granted only if the moving party is nevertheless
clearly entitled to judgment.” Id. (quoting JPMorgan Chase Bank, N.A.
v. Winget, 510 F.3d 577, 581 (6th Cir. 2007)). However, the allegations
“need to be sufficient to give notice to the defendant as to what claims
are alleged,” and they must state a plausible claim for relief. Id. (citing
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
Defendant’s Motion for Summary Judgment
Defendant seeks to dismiss all of plaintiff’s claims.
defendant argues plaintiff cannot bring Counts I, II, or III because (1)
they are time barred by the statute of limitations and laches, and/or (2)
they are barred by the 2001 lawsuit and the doctrine of res judicata.
(Dkt. 56 at 11–18.) Second, defendant argues that Counts I, III, and IV
are barred under the doctrine of equitable estoppel and the Asset
Purchase Agreement. (Id. at 19–21.)
Defendant is also seeking summary judgment on four issues
related to its counterclaims: (1) the NDA is still in effect; (2) plaintiff’s
right to cover under the Amended Supply Agreement does not extend
“forever”; (3) plaintiff is barred from arguing that its disclosure of
defendant’s formula to Pure Asphalt Co. destroyed defendant’s rights;
and (4) plaintiff is barred from making new disclosures of defendant’s
formulas. (Dkt. 56 at 29–33.)
Counts I-III Are Not Time Barred
Defendant claims Counts I, II, and III—plaintiff’s trademark
infringement claims under the Lanham Act and common law—are time
barred. (Dkt. 56 at 19–22.)
There is no express statute of limitations for common law
trademark infringement claims, but the Sixth Circuit has held that
Michigan’s three-year statute of limitations for property damage applies
to common law trademark infringement claims. See, e.g., Nartron Corp.
v. STMicroelectrionics, Inc., 305 F.3d 397, 408 (6th Cir. 2002).
The Lanham Act also does not include an express statute of
limitations. Instead, courts use the doctrine of laches to determine if a
claim is barred. Audi AG v. D’Amato, 469 F.3d 534, 545 (6th Cir. 2006).
Under this doctrine, a court looks at “(1) whether the owner of the mark
knew of the infringing use; (2) whether the owner’s delay in challenging
the infringement of the mark was inexcusable or unreasonable; and (3)
whether the infringing user was unduly prejudiced by the owner’s
Id. at 545–46.
In the Sixth Circuit, “there is a strong
presumption that a plaintiff’s delay in asserting its rights is reasonable
as long as an analogous state statute of limitations has not elapsed.”
Nartron Corp., 305 F.3d at 408. In this case, assuming that Michigan
law is the pertinent law, the statute of limitations is three years. “In
other words, a delay beyond the three-year statutory period is
presumptively prejudicial and unreasonable. The period of delay begins
to run when plaintiff had ‘actual or constructive knowledge of the
alleged infringing activity.’” Id. To rebut this presumption of laches, a
plaintiff must “(1) rebut the presumption of prejudice; (2) establish that
there was a good excuse for its delay; or (3) show that the defendant
engaged in ‘particularly egregious conduct which would change the
equities significantly in plaintiff’s favor.’” Id. at 409.
In this case, plaintiff’s claims are not time barred. First, although
the parties agree that plaintiff knew defendant was allegedly infringing
the Ziebart and Formula Q trademarks in 2000 (see Dkt. 56-9 (letter
from plaintiff to defendant)), plaintiff believed defendant stopped using
the trademarks in 2000, prior to the 2001 lawsuit being filed. (Dkt. 66
at 10.) Plaintiff learned of one other potential instance of infringement
in 2003 regarding the unauthorized use of Formula Q and defendant
again allegedly agreed not to infringe. (Id. at 14–15.) Plaintiff asserts
that it had no reason to know that defendant would infringe again, and
that it timely raised this issue when it first learned of additional
infringements in 2015. (Id. at 10–11.)
Defendant has not demonstrated plaintiff should have suspected
other infringements of the Ziebart and Formula Q trademarks prior to
Between 2005 and 2012, plaintiff contacted defendant about
various trademark issues, but not the Ziebart or Formula Q
Defendant therefore cannot rely on these instances to
demonstrate that plaintiff should have filed suit regarding Formula Q
at an earlier date.
Moreover, plaintiff has alleged violations of seven specific
trademarks (including Formula Q). (Dkts. 1-1–1-8.) The documentation
provided by defendant does not indicate the trademarks listed in the
complaint are the same as those that plaintiff previously disputed with
defendant either prior to the 2001 lawsuit or in the parties’ subsequent
letters of communication. The 2012 Settlement Agreement lists specific
trademarks that may and may not be used, and the registration
numbers do not match those listed in the complaint. The only reference
to “Ziebart” is in a provision requiring defendant to remove references
to the name from its website (see Dkt. 1-9 at 3), but no specific
trademark is identified by name or number. Thus, defendant cannot
rely on this agreement to argue plaintiff is time barred from raising its
Construing the evidence in the light most favorable to plaintiff,
plaintiff is not barred by the three-year statute of limitations and
plaintiff did not unreasonably delay in bringing its Lanham Act and
common law infringement claims.
Accordingly, defendant is not
entitled to summary judgment on Counts I-III on the ground that they
are time barred.
Counts I-III Are Not Barred by Res Judicata
Defendant claims Counts I, II, and III of the complaint are barred
by res judicata and the 2001 settlement agreement between the parties.
(Dkt. 56 at 22–26.) The 2001 settlement agreement between the parties
contains a mutual release clause, which prohibits both parties from
suing for any claims “whether now known or unknown, suspected or
unsuspected” and that each party “now has, owns, or holds . . . or at any
time heretofore ever had, owned or held . . . in connection with any
[claim or counterclaim]” brought by the parties in that litigation. (Dkt.
56-7 at 3.)
This Court is required to apply the Michigan doctrine of res
judicata in this case.
“Michigan takes a broad approach to the
doctrine,” and “bars a second, subsequent action when (1) the prior
action was decided on the merits, (2) both actions involve the same
parties or their privies, and (3) the matter in the second case was, or
could have been, resolved in the first.” Smith v. City of Inkster, 644 F.
App’x 602, 607 (6th Cir. 2016). Thus, the doctrine “bars not only claims
already litigated, but also every claim arising from the same
transaction that the parties, exercising reasonable diligence, could have
raised.” Id. However, this does not necessarily bar “all claims that
accrue before entry of a final award.” Id. (citing McCoy v. Michigan,
369 F. App’x 646, 651 (6th Cir. 2010); Banks v. LAB Lansing Body
Assembly, 271 Mich. App. 227, 231–32 (2006)).
With respect to defendant’s res judicata argument, the parties
dispute only whether the trademark claims could or should have been
brought as part of the 2001 litigation. Here, the third prong is not
satisfied and the 2001 settlement agreement does not bar plaintiff’s
As set forth above, although plaintiff knew defendant was
allegedly infringing the Ziebart and Formula Q trademarks in 2000,
plaintiff believed defendant stopped using the trademarks that same
year, prior to the lawsuit being filed. Thus, there was no reason for
plaintiff to bring its trademark infringement claims in the 2001
The counterclaims made in 2001 are not sufficiently related to
trademark infringement such that the mutual release bars plaintiff’s
claims. In 2001, plaintiff sued defendant for breach of the non-compete
and non-solicitation provisions of the Asset Purchase Agreement after
defendant allegedly solicited sales from plaintiff’s franchisees. (Dkt. 5613 at 12.) Although trademark infringement relates to competition, it
does not sufficiently relate to soliciting sales from plaintiff’s franchisees
so as to qualify as “in connection” with the counterclaims brought in
2001. Accordingly, defendant’s motion for summary judgment on the
ground of res judicata is denied.
Count IV Is Not Barred by Equitable Estoppel or
the Asset Purchase Agreement
Defendant argues Count IV of the complaint is barred by
equitable estoppel or the Asset Purchase Agreement. (Dkt. 56 at 19–
21.) Defendant argues it was misled by plaintiff because plaintiff failed
to request defendant remove the meta tags with “Ziebart” from its
website in its correspondence with defendant and in the 2012
Settlement Agreement. (Id. at 20.) Plaintiff contends its claims are not
barred because (1) it is unreasonable for defendant to believe plaintiff
wanted removed only the improper uses that plaintiff found; (2) the
2012 Settlement Agreement expressly requires defendant to remove
references to Ziebart from its website within thirty days; and (3)
plaintiff was not negligent and did not make misrepresentations, as its
trademark counsel could not have known about the meta tags. (Dkt. 66
In a trademark infringement suit, a defendant asserting equitable
estoppel must prove “(1) misleading conduct that leads the defendant to
believe that the plaintiff will not bring an infringement suit; (2) reliance
on the misleading conduct by the defendant; and, (3) material prejudice
suffered by the defendant as a result of the defendant’s reliance.”
Volkswagen AG v. Dorling Kindersley Pub., Inc., 614 F. Supp. 2d 793,
813 (E.D. Mich. 2009).
Here, defendant has not demonstrated plaintiff misled it.
2012 Settlement Agreement requires defendant “remove references to
Ziebart, Zeegard and Z-Shield from its website within thirty days of
execution of” the agreement. (Dkt. 56-18 at 3.) The agreement does not
expressly mention meta tags, but the language of the agreement—
defendant must “remove references to Ziebart . . . from its website”—
may be construed as reaching both visible and non-visible references,
including meta tags in the website’s code, to Ziebart.
remains a question of material fact with respect to the scope of the
Further, defendant has not demonstrated how plaintiff
could have discovered or known about the tags before the 2012
Settlement Agreement since the tags appear only in the website’s code.
And the 2011 correspondence between the parties that led to the
settlement cannot be relied on as the “misrepresentation” given that it
predates the settlement. Defendant also does not dispute that it never
disclosed the meta tags to plaintiff during their 2011 settlement
discussions. Thus, defendant has not demonstrated plaintiff should be
equitably estopped from raising its meta tag claim.
Additionally, the Asset Purchase Agreement does not establish
defendant may use “Ziebart” or “ZBart” in meta tags.
provision addressing names states defendant may use “ZP Corporation
and variants thereof.”
(Dkt. 56-2 at 41 (Art. 11.5).)
And the 2012
Settlement Agreement requires defendant to remove all references to
Ziebart from its website, which indicates there remain questions of
material fact with respect to whether and how defendant may use the
Accordingly, defendant is not entitled to summary
judgment on Count IV.
Defendant Is Not Entitled to Judgment On the
Issues Relating to Its Counterclaims
Defendant has asked for judgment on four issues related to the
parties’ Amended Supply Agreement: (1) the NDA is still in effect; (2)
plaintiff’s right to cover under the Amended Supply Agreement does not
continue “forever”; (3) plaintiff is barred from arguing that its disclosure
of defendant’s formula to Pure Asphalt Co. destroyed defendant’s rights;
and (4) that plaintiff is barred from making new disclosures of
defendant’s formulas. (Dkt. 56 at 29–33.)
Plaintiff argues that defendant is not entitled to judgment on
these issues because (1) plaintiff did not disclose the formula for
Formula Q to Pure Asphalt Co., and even if plaintiff did, defendant
knew of the disclosure by 2001 and took no steps to ensure the secrecy
of its trade secret; and (2) defendant is improperly seeking advisory
opinions because it has failed to identify how plaintiff has allegedly
acted in a way so as to generate an actual case or controversy. (Dkt. 66
District courts have “discretion to entertain declaratory judgment
actions,” but may decline to address claims within their jurisdiction,
taking into account “considerations of practicality and wise judicial
Wilton v. Seven Falls Co., 515 U.S. 277, 288–89
(1995). And the “party seeking a declaratory judgment has the burden
of establishing the existence of an actual case or controversy.”
MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 144 (2007) (quoting
Cardinal Chem. Co. v. Morton Int’l, Inc., 508 U.S. 83, 95 (1993)). The
Sixth Circuit has articulated five factors a trial court should consider
when determining whether to exercise its declaratory judgment
(1) whether the declaratory action would settle the
controversy; (2) whether the declaratory action would serve a
useful purpose in clarifying the legal relations in issue; (3)
whether the declaratory remedy is being used merely for the
purpose of “procedural fencing” or “to provide an arena for
res judicata”; (4) whether the use of a declaratory action
would increase friction between our federal and state courts
and improperly encroach upon state jurisdiction; and (5)
whether there is an alternative remedy which is better or
Assurance Co. of Amer., 392 F. App’x at 475 (quoting Scottsdale Ins. Co.
v. Flowers, 513 F.3d 546, 554 (6th Cir. 2008)).
Here, defendant has pleaded plaintiff gave defendant’s formula for
Formula Q and other confidential and proprietary information to Pure
Asphalt Co., and that Pure Asphalt Co. has continued to use this
(Dkt. 52 at 15; Dkt. 56 at 29.)
allegations do not suggest that plaintiff will or has made any
disclosures since either the late 1990s or early 2000s. (See Dkt. 56-24
at 17.) Thus, exercise of declaratory judgment jurisdiction would be
premature as such a declaration would not settle the controversy
By extension, it would be premature for the Court to
exercise declaratory judgment jurisdiction over defendant’s request that
plaintiff be barred from making new disclosures of defendant’s trade
Defendant has also requested a judgment stating that plaintiff’s
right to cover under the Amended Supply Agreement does not extend
Defendant has phrased its claim very broadly, and a
judgment reciting this axiomatic statement would do little to resolve
the legal rights and relations of the parties. Further, both parties agree
that the provisions imposing obligations on the parties related to the
purchase and sale of goods are no longer in effect, and defendant has
not demonstrated that plaintiff is attempting to cover by purchasing
from Pure Asphalt Co. Therefore, there is no case or controversy that a
declaratory judgment alone would resolve. Accordingly, defendant is
not entitled to a declaratory judgment or summary judgment on this
Finally, defendant asks that plaintiff be barred from arguing any
past disclosure of defendant’s trade secret relating to Formula Q
destroyed defendant’s rights to that trade secret.
that plaintiff disclosed the formula in 1999, but subsequently agreed
As set forth below, plaintiff’s right to cover ended on September 17, 2007. This
fact alone does not resolve the rights of the parties, but addresses defendant’s
counterclaims. Thus, the issue standing alone is not appropriate for declaratory
relief. But, the issue is relevant to resolving the statute of limitations claims in
plaintiff’s motion for partial summary judgment and is addressed there.
not to disclose any product formulas in the 2001 Amended Supply
Agreement, and that this agreement forecloses plaintiff’s right to rely
on this defense. (Dkt. 66 at 32.) Plaintiff agrees both that the relevant
disclosure occurred before the Amended Supply Agreement was
finalized, and that the prior disclosure itself did not destroy defendant’s
trade secret. (Dkt. 66 at 22, 24.)
That plaintiff does not claim the prior disclosure destroyed
defendant’s trade secret indicates defendant’s request for judgment is
likely being made “for the purpose of ‘procedural fencing’” rather than
“to provide an arena for res judicata.” Assurance Co. of Amer., 392 F.
App’x at 475.
Additionally, defendant’s request would not resolve any questions
here. First, as set forth below, plaintiff does not claim ownership of any
trade secrets, only trademarks. Rather, plaintiff argues that if a trade
secret were disclosed, defendant lost its right to bring this because it
never took steps to protect its trade secret. A declaratory judgment
relating to the disclosure would not preclude plaintiff from making this
argument. Trade secrets are no longer protectable if the holder fails to
take reasonable steps to ensure the secrecy of the information. Giasson
Aerospace Science, Inc. v. RCO Eng’r, Inc., 680 F. Supp. 2d 830, 840
(E.D. Mich. 2010) (under Michigan law, the trade secret owner must
take actions “reasonable under the circumstances to maintain [the]
secrecy or confidentiality”).
Questions as to whether an owner has
taken reasonable steps to maintain confidentiality “ordinarily is a
question of fact for the jury,” and “only in an extreme case can what is a
‘reasonable’ precaution be determined [as a matter of law].” Id. at 840
(quoting Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d
714, 725 (7th Cir. 2003), cited in Niemi v. NHK Spring Co., Ltd., 543
F.3d 294 (6th Cir. 2008)). Thus, defendant is not entitled to declaratory
or summary judgment barring plaintiff from arguing that its disclosure
of the trade secret destroyed defendant’s rights in that trade secret.
Plaintiff and Counter Defendant’s Motion for Partial
Plaintiff and counter defendant Pure Asphalt Co. seek summary
judgment on Counts I-IV of defendant’s five counterclaims. As set forth
below, Pure Asphalt Co. is entitled to judgment on the pleadings with
respect to Counts III and IV. Because Count III is against only Pure
Asphalt Co., this count will not be addressed here. Count IV will be
discussed with reference to plaintiff only.
Count I: Breach of Contract
Agreement and NDA by registering the Formula Q trademark and
wrongfully disclosing and using the trade secrets relating to Formula Q
and “other formulas.” (Dkt. 52 at 30–32.) Plaintiff claims Count I is
barred by the statute of limitations. (Dkt. 57 at 12–13.)
Under Michigan law, a breach of contract claim must be brought
within six years of the time the claim accrues. MICH. COMP. LAWS
§ 600.5807(8). A breach accrues “at the time the wrong upon which the
claim is based was done regardless of the time when damage results.”
Scherer v. Hellstrom, 270 Mich. App. 458, 463 (2006) (breach accrued
when deadline in contract passed).
Thus, the statute of limitations
typically begins to run when the breach occurs, or when the “promisor
fails to perform.”
Blazer Foods, Inc. v. Restaurant Props., Inc., 259
Mich. App. 241, 245–46 (2003).
Agreement and NDA by wrongfully disclosing its trade secrets to
alternate suppliers after plaintiff lost its right to cover in 2012, and that
defendant did not learn of these wrongful disclosures until 2015.
Plaintiff argues defendant’s breach of contract claim accrued at least
ten years ago when the amended supply agreement expired, or even
earlier, in 2003, when plaintiff stopped purchasing products from
defendant. (Dkt. 57 at 19.)
Defendant has offered no evidence to support the allegation that
plaintiff has recently disclosed or continues to disclose defendant’s trade
secrets or that defendant learned of such alleged conduct only in 2015.
At best, defendant offers the declaration of Ellis Breskman, the
majority owner of defendant. Mr. Breskman claims he learned from
Tom Walker, who worked for plaintiff, that plaintiff disclosed the
formula for Formula Q to Pure Asphalt Co.
(Dkt. 64-2 at 4–5.)
Problematically, Mr. Breskman has not provided the date on which he
allegedly heard from Mr. Walker that plaintiff had disclosed
defendant’s formula to Pure Asphalt Co. Defendant does not contest
knowing that plaintiff potentially disclosed the formula to Pure Asphalt
Co. by 2001. No evidence, including the allegations in the Breskman
Declaration, suggests plaintiff disclosed new information or formulas to
Pure Asphalt Co. after 2001.
At most, the evidence shows plaintiff has been using the name
“Formula Q.” This does not, as defendant appears to argue, indicate
plaintiff is asserting ownership over the formula for Formula Q.
Neither party appears to dispute the formula for the product sold as
Formula Q is Formula 1021. But defendant has offered no evidence to
show Formula 1021 is being used by plaintiff in the product currently
being sold as Formula Q. Thus, even if plaintiff is using the Formula Q
trademark, use of the name is insufficient to imply the continued use or
disclosure of Formula 1021, and there is no evidence to show any
improper disclosures or use of defendant’s trade secrets relating to the
product sold as Formula Q past 2001.
Consequently, there is no
genuine issue of fact indicating a breach of contract occurred at any
time. But assuming there was a breach, defendant’s claim accrued on
September 18, 2007, the day after the Amended Supply Agreement
Defendant’s breach of contract claim for improper disclosure is
therefore ten years old and is barred by the six-year statute of
Defendant relies on Kendall Holdings Limited v. Eden
Cryogenics LLC, 521 F. App’x 453 (6th Cir. 2013), to show its claim is
not barred, but this reliance is misplaced. That case involved a plaintiff
alleging defendant misappropriated its trade secrets under the Ohio
Uniform Trade Secrets Act. Defendant Eden Cryogenics argued there
was no misappropriation and the claim was barred because plaintiff
permitted defendant to retain the drawings allegedly misappropriated.
Id. at 457.
The Sixth Circuit concluded the district court erred in
granting summary judgment to defendant because defendant itself
introduced evidence of its continued use past when permitted to do so.
Id. at 458.
These are not the facts here.
In this case, plaintiff has not
admitted to retaining the formula past 2007, and it has not introduced
evidence of continued use of the formula for Formula Q. Thus, that
plaintiff disclosed the information in or prior to 2001 does not create a
question of fact as there is no evidence of continued use or disclosure
after this date. Defendant’s conclusory statements do not change this.
Defendant’s reliance on plaintiff’s response to interrogatory 8 is
Nothing in plaintiff’s response indicates it is
asserting a right to use defendant’s trade secrets; in fact, plaintiff
Interrogatory 8, dated March 14, 2016, is plaintiff’s supplemental responses to
defendant’s first set of requests for admission, interrogatories, and requests for
production of documents. (See Dkt. 64-3.)
denies using the trade secrets.
Although plaintiff, in interpreting
section 17(b) of the Amended Supply Agreement, states the section does
not limit plaintiff’s use, nowhere does plaintiff assert a right to use
defendant’s trade secrets.
Accordingly, the claim with respect to defendant’s disclosure and
use allegations is time barred and plaintiff’s motion for summary
judgment as to this claim is granted. However, plaintiff has failed to
address the portion of Count I alleging a breach of contract for
plaintiff’s 2015 registration of the Formula Q trademark. Insofar as
plaintiff intended to request summary judgment on this issue, the
motion is denied.
Count II: Misappropriation of Trade Secrets
Defendant claims plaintiff misappropriated defendant’s trade
secrets “relating to Formula Q and other formulas” by “disclosing them
to third parties and/or using them” despite being aware of its duty not
to disclose the information. (Dkt. 52 at 33–34.) Plaintiff argues this
counterclaim is time barred.
445.1902(b)(ii)(B) of the Michigan Uniform Trade Secret Act (MUTSA),
MICH. COMP. LAWS § 445.1902(b)(ii)(B). (Dkt. 64 at 15.) This section
defines misappropriation as follows:
Disclosure or use of a trade secret of another without express
or implied consent by a person who . . .
(B) At the time of disclosure or use, knew or had reason to
know that his or her knowledge of the trade secret was
derived from or through a person who had utilized improper
means to acquire it, acquired under circumstances giving
rise to a duty to maintain its secrecy or limit its use, or
derived from or through a person who owed a duty to the
person to maintain its secrecy or limit its use.
Under this statute, a claim for misappropriation of trade secrets
must be brought within three years “after the misappropriation is
discovered or by the exercise of reasonable diligence should have been
discovered.” MICH. COMP. LAWS § 445.1907.
For the same reasons set forth above with respect to defendant’s
breach of contract claim, defendant’s misappropriation claim is also
Moreover, defendant has failed to identify what the “other
formulas” and trade secrets are, and sufficiently demonstrated only that
plaintiff may have legally disclosed information relating to the formula
for Formula Q in or before 2001. Defendant has therefore failed to raise
questions of material fact that plaintiff misappropriated any trade
secrets, and plaintiff’s motion for summary judgment on Count II is
Count IV: Declaratory Judgment
Plaintiff seeks summary judgment on the ground that defendant’s
request for a declaratory judgment is time barred.
(Dkt. 57 at 15.)
Count IV requests the court declare “the rights and legal relations of Z
Tech, Ziebart and Pure Asphalt pertaining to Z Tech’s formulas and
other trade secrets and confidential and proprietary information.” (Dkt.
52 at 36.)
As set forth above, plaintiff is not asserting any ownership rights
to defendant’s trade secrets or formulas. And as set forth below, Pure
Asphalt Co. is also not asserting any ownership rights to these trade
secrets or formulas. Defendant has failed to raise questions of material
fact suggesting otherwise. Rather, the dispute is between plaintiff and
defendant regarding ownership of various trademarks.
this issue is not ripe for declaratory relief and plaintiff is entitled to
summary judgment on Count IV.
Counter Defendant’s Motion for Judgment on the
Pure Asphalt Co. argues it is entitled to judgment on the
pleadings with respect to defendant’s counterclaims III and IV because
defendant has failed to state a plausible claim.
Count III: Trade Secret Misappropriation
Defendant claims Pure Asphalt Co. misappropriated its trade
secrets, including Formula Q and “other formulas,” pursuant to MICH.
COMP. LAWS § 445.1902(b)(ii)(B). (Dkts. 52 at 34, 64 at 15.)
To plead misappropriation of a trade secret, a party must first
demonstrate “the information at issue actually constitutes a trade
secret.” Mike’s Train House, Inc. v. Lionel, L.L.C., 472 F.3d 398, 410
(6th Cir. 2006). A trade secret is information that derives economic
value because it is unknown to others, and is subject to efforts that are
reasonable under the circumstances to keep it secret. Id. The party
claiming a trade secret “must particularize and identify the purportedly
misappropriated trade secret with specificity.” Int’l Tech. Consultants,
Inc. v. Stewart, Case No. 07-13391, 2010 WL 3789831, at *11 (E.D.
Mich. Sept. 22, 2010).
Here, defendant has not identified by name or description the
Defendant claims these formulas were purchased through the Asset
Purchase Agreement, but the agreement does not identify the formulas
and defendant provides no other details. Thus, taking all of defendant’s
allegations as true, defendant has failed to state a plausible claim or
raise questions of material fact with respect to the “other formulas.”
Defendant also claims Pure Asphalt Co. misappropriated trade
secrets relating to Formula Q by disclosing or using it.
defendant has not provided any information that indicates or even
suggests Pure Asphalt Co. has disclosed, is using, or is threatening to
use any trade secret relating to Formula Q. At best, defendant alleges
that during this dispute it “learned that . . . Pure Asphalt was using the
formula” (Dkt. 52 at 26), and “[o]n information and belief, Pure Asphalt
is continuing to use Z Tech’s trade secrets.”
(Id. at 30.)
allegations are conclusory statements, and defendant provides none of
the “information” that led it to learn or believe Pure Asphalt Co. was
disclosing or using its trade secrets.
Without more, defendant has
failed to state a plausible claim with respect to any trade secrets
relating to Formula Q.
Accordingly, Pure Asphalt Co.’s motion for judgment on the
pleadings as to Count III is granted.
Count IV: Declaratory Judgment
Defendant claims it is entitled to a declaratory judgment
establishing “the ownership of and rights to Z Tech’s formulas and other
trade secrets and confidential and proprietary information.” (Dkt. 52 at
36.) Pure Asphalt Co. argues it is entitled to judgment on this claim
because it has never owned and is not using defendant’s trade secrets.
(Dkt. 58 at 21.)
Nowhere in defendant’s briefs does it argue Pure Asphalt Co.
asserted ownership rights to any of its trade secrets or other
confidential or proprietary information.
Further, as with Count III,
defendant has failed to identify the trade secrets and other information
in dispute. Although defendant has identified Formula Q, as set forth
above, defendant has failed to raise questions of material fact as to
whether Pure Asphalt Co. is currently using or recently used any of the
trade secrets related to Formula Q.
Thus, there is no case or
controversy with respect to ownership of the formula previously used
for Formula Q, and Pure Asphalt Co. is entitled to judgment on the
pleadings as to Count IV.
For the reasons set forth above, defendant’s motion for summary
judgment is DENIED. (Dkt. 55.) Plaintiff’s motion for partial summary
judgment is GRANTED IN PART to Counts I (partial—disclosure and
use of formula for Formula Q), II, and IV, and DENIED IN PART as to
Count I (registration of Formula Q trademark). (Dkt. 57.) Counter
defendant Pure Asphalt Co.’s motion for judgment on the pleadings as
to Counts III and IV of defendant’s counterclaims is GRANTED. (Dkt.
58.) Because Pure Asphalt Co.’s motion for judgment on the pleadings
is granted, its motion for partial summary judgment on Count III is
DENIED AS MOOT. (Dkt. 57.)
IT IS SO ORDERED.
Dated: January 23, 2017
Ann Arbor, Michigan
s/Judith E. Levy
JUDITH E. LEVY
United States District Judge
CERTIFICATE OF SERVICE
The undersigned certifies that the foregoing document was served
upon counsel of record and any unrepresented parties via the Court’s
ECF System to their respective email or First Class U.S. mail addresses
disclosed on the Notice of Electronic Filing on January 23, 2017.
s/Felicia M. Moses
FELICIA M. MOSES
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