Automated Irrigation Controls, LLC v. The Wattstopper, Inc. et al

Filing 154

MEMORANDUM OPINION AND ORDER re: 92 MOTION for Summary Judgment . filed by The Wattstopper, Inc., 97 MOTION for Summary Judgment . filed by Automated Irrigation Controls, LLC. For the reasons articulated above, Watt Stopper's motion for summary judgment as to the Complaint is GRANTED IN PART and DENIED IN PART, and AIC's motion for summary judgment as to the Counterclaims DENIED. Watt Stopper is granted summary judgment as to AIC's claims to the extent those claims any are reliant on a determination that any given product is a "functionally equivalent successor product." Watt Stopper is also granted summary judgment as to AIC's claims to the extent those claims relate to produ cts bearing the model numbers LMDL-600, LMPC-600, and LMPX-600. In all other respects, the parties' motions for summary judgment are denied. The Court understands that Watt Stopper's counterclaim for declaratory judgment that Pike is obliga ted to return all Watt Stopper property in his possession, custody, or control is no longer germane. The Clerk of Court is directed to terminate the motions pending at Dkt. Nos. 92 and 97. SO ORDERED. (Signed by Judge Gregory H. Woods on 9/9/2019) (kv)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------------------------------X
:
AUTOMATED IRRIGATION CONTROLS, :
LLC,
:
:
Plaintiff, :
:
-against:
:
THE WATT STOPPER, INC and LEGRAND :
NORTH AMERICA, INC.
:
:
Defendants. :
:
------------------------------------------------------------ X
GREGORY H. WOODS, United States District Judge:

USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #:
_________________
DATE FILED: 9/9/2019

1:18-cv-2435-GHW
MEMORANDUM OPINION
AND ORDER

Plaintiff Automated Irrigation Controls (“AIC”) sues for breach of contract, claiming that
Defendant Watt Stopper, Inc. (“Watt Stopper”) has failed to pay royalties to which Plaintiff
contends it is contractually entitled. The governing contract, however, contains a self-executing
clause that, absent waiver or other modification, terminated Watt Stopper’s royalty obligations. The
contractual language at issue is clear and unambiguous, and consistent with the law of New York, is
to be enforced according to its terms. However, as material issues of fact persist as to whether the
contractual framework was modified by waiver, the Court cannot conclude on the record before it
that Watt Stopper’s royalty obligations have terminated. As a result, for the reasons that follow,
Watt Stopper’s motion for summary judgment is GRANTED IN PART and DENIED IN PART
and AIC’s motion for summary judgment is DENIED.
I.

BACKGROUD
A. Undisputed Facts
Watt Stopper markets and sells lighting control products. AIC developed certain wireless

outdoor lighting control products.1 At or around November 12, 2013 Watt Stopper and AIC
entered into the technology licensing agreement (the “TLA”) that is the subject of this dispute.
Counterclaim Statement of Undisputed Facts (“CC 56.1”), Dkt. No. 130 ¶ 1; TLA, Dkt. No. 95-1 at
1 (noting Nov. 11, 2013 as the effective date). Legrand North America, LLC. (“Legrand”) is the
guarantor of Watt Stopper’s obligations under the TLA.2 TLA § 2(K). Bryan Pike, as VicePresident of AIC, executed the TLA on AIC’s behalf. TLA at 11.
The TLA granted Watt Stopper an exclusive license to exploit certain patents, patent
applications, and technologies developed by AIC in exchange for the payment of royalties to AIC on
the sale of “Royalty Bearing Products,” as defined in the TLA. TLA 1-4. “Royalty Bearing
Products” were defined as:
. . . the products set forth in Exhibit A and functional [sic] equivalent successor
products. As used in the preceding sentence “functionally equivalent successor
products” means (i) products on Exhibit A that are re-named or re-branded without
material change to their features or functionality, (ii) products that are reconfigurations of the same technology (same feature/functionality) as products on
Exhibit A but not (iii) battery operated single digital or analog input or “single point”
products.
TLA § 2(D).
Because Watt Stopper “desire[d] to employ certain individuals previously employed by
AIC,” TLA, Recitals at 1, the TLA anticipated that certain persons who were employed by AIC at
the time the TLA was executed would be offered employment at Watt Stopper. That Watt Stopper

The Amended Complaint names “The Watt Stopper, Inc.” as a defendant, and Defendant consistently uses the name
“Watt Stopper” to describe itself. Accordingly, the Court adopts that convention. The Court notes, however, that the
party to the TLA is “The Wattstopper, Inc.” TLA at 1. As no party contends that discrepancy is material, the Court
continues its analysis assuming that it is not.
1

The Amended Complaint, names Legrand North America, Inc. as a defendant, and Legrand North America, Inc. is
listed as Watt Stopper’s guarantor in the TLA. However, the Legrand entity which has appeared is, in actuality, Legrand
North America, LLC. See Corporate Disclosure Statement, Dkt. No. 42; Answer and Counterclaims, Dkt. No. 53. As
discussed below, no claims remain against Legrand in any event.
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anticipated hiring those employees, and the implications of any violations of those employees’
employment agreements with Watt Stopper, were embodied in the text of the TLA.
. . . because the know-how associated with the Licensed Technology is anticipated to
be shared hereunder by certain key persons currently employed by AIC but
anticipated hereunder to be offered employment by [Watt Stopper], it shall be a
condition hereunder that AIC hereby acknowledge and agree, notwithstanding the
Royalty Period (defined below) and any other conflicting or potentially conflicting
provision herein, that if any of Bryan Pike, Joe Dylinski, or Zane Brown resigns from
their employment with Wattstopper without Wattstopper’s consent prior to the third
anniversary of the Effective Date, or breach their employment obligations, including
without limitation their respective “no conflict of interest” and “non-compete”
terms and conditions, then as of that date sales by [Watt Stopper] of Royalty Bearing
Products will be royalty free and all licenses granted by AIC hereunder will be fully
paid.
TLA at 3 (the “Conditions on Royalties Clause”); TLA § 3 (“In connection with [the TLA],
Wattstopper shall extend offers of employment to current AIC employees Bryan Pike, Joe Dylinski,
Zane Brown, and Nathan Wood.”)
Joe Dylinski and Bryan Pike both executed employment agreements with Watt Stopper on
November 12, 2013. Dylinski Agreement, Dkt. No. 95-8 ; Pike Agreement, Dkt. No. 95-7,
(collectively, the “Employment Agreements”). Section 3.3 in both Employment Agreements are
identical, and both state that:
. . . . Employee further agrees to divest any and all ownership interest in Digital
Contracting Solutions (DCS) and provide [Watt Stopper] with satisfactory evidence
of the divestiture within six months of this Agreement’s effective date. Employee
further agrees to cease his participation in the operations of AIC, DCS, or any
company with which [Watt Stopper] or its Affiliates is expected to do business in
performance of obligations under either the technology license agreement or OEM
agreement. If employee fails to fulfill the obligations set forth in this [section], his
employment will be terminated immediately for “Cause,” and Employee shall be
entitled to no further payments and benefits under any provision of this Agreement
(other than for accrued unused vacation).
Employment Agreements § 3.3 (the “Conflict of Interest Clauses”).
Neither Pike nor Dylinski ever divested their interests in DCS; nor, consequentially, did they
3

provide proof of such divestiture. Statement of Undisputed Facts (“56.1”), Dkt. No. 121 ¶¶ 17, 18
(neither man “divest[ed] his ownership interest in DCS because [they] could not.”). Peter Horton
was the primary representative of Watt Stopper in negotiating the TLA. 56.1 ¶ 2. On June 11, 2013,
Pike wrote an email to Horton, copying Dylinski, in which he stated that: “Per the license
agreement, AIC needed to show full divestiture of DCS by now. What do we need to do if anything
to comply?” 56.1 ¶ 19. Horton subsequently forwarded the email to Jim Young, a Watt Stopper
executive. Id. Young informed Horton that he “should ask Pike and Dylinski for an executed copy
of the DCS sale agreement.” Id. Horton “forwarded [that] email to Pike, advising him to ‘see
below’ for Young’s request.” Id. As described above, however, neither Dylinski nor Pike divested
their DCS holdings, nor provided proof of divesture. 56.1 ¶¶ 17, 18.
The TLA is governed by the law of the State of New York, without regard to New York’s
conflict of laws principles. TLA § 15. The Agreement contains an anti-waiver provision which
states that “[n]o waiver by either Party of any default shall be deemed as a waiver of prior or
subsequent default of the same of [sic] other provisions of this Agreement.” TLA § 19. The
Agreement is fully integrated, and its terms prohibit modification or amendment of the TLA except
in writing. The relevant provision states:
This Agreement constitutes the full understanding of the Parties and a complete
statement of the terms of their agreement with respect to the subject matter hereof
and supersedes and cancels all prior agreements, correspondence, undertakings and
communications of the Parties, oral or written, respecting such subject matter. Each
Party acknowledges that it is entering into this Agreement without relying on any
promise by another Party that is not expressly set forth in this Agreement. This
Agreement cannot be modified or amended except in writing signed by both Parties and
specifically referring to this Agreement.
TLA § 23, (the “Written Modifications Only Clause”) (emphasis added).3
For ease of reference, additional facts specifically pertinent to the purported 2018 breach of Pike’s Employment
Agreement in 2018 are provided in § II(B), below.
3

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B. Procedural History
This case was filed on March 19, 2018. Dkt. No. 1. The Amended Complaint was served
on May 31, 2018. Dkt. No. 39 (“AC”). In the Amended Complaint, Plaintiff pleaded three causes
of action. Counts I and II alleged breaches of the TLA by Watt Stopper. In Count I, Plaintiff
alleged that Watt Stopper “failed to use reasonable efforts to exploit [the exclusive] license” granted
in the TLA. AC ¶¶ 47-52. In Count II, Plaintiff alleged that Watt Stopper failed to make royalty
payments on “functionally equivalent successor products to the Royalty Bearing Products.” AC
¶¶ 53-58. In Count III, Plaintiff alleged that Legrand tortiously interfered with the TLA “by taking
action to prevent Watt Stopper from using its reasonable and best efforts to exploit the exclusive
license.” AC ¶¶ 59-65.
On June 28, 2018, Watt Stopper served a motion to dismiss Count I of the Amended
Complaint. Dkt. No. 55. That same day, Legrand served a motion to dismiss Count III of the
Amended Complaint, the only count which directly implicated Legrand.4 On October 26, 2018, the
Court granted Legrand’s motion to dismiss and denied Watt Stopper’s motion to dismiss. Dkt. No.
83. AIC was granted leave to serve a second amended complaint no later than November 9, 2018.
AIC never served a second amended complaint. Accordingly, only Counts I and II of the Amended
Complaint remain at issue in this case.
Watt Stopper’s Answer and Counterclaims were served on June 25, 2019. CCs, Dkt. No. 53.
In Count I of the Counterclaims, Watt Stopper seeks, inter alia, declaratory judgment that as of the
date of the breach of Pike’s and Dylinski’s Employment Agreements, all sales of Royalty Bearing
Products were royalty-free and all licenses granted under the TLA were fully paid. Id. ¶¶ 28-39.

The Court need not reach the import of Legrand’s status as Watt Stopper’s guarantor under the TLA in the present
opinion and takes no position on that issue.
4

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Watt Stopper additionally seeks declaratory judgment that it is entitled to the return of all Watt
Stopper’s property in Pike’s or AIC’s possession, custody, or control. Id. ¶ 39. In Count II of the
Counterclaims, Defendants allege that AIC tortiously interfered with Pike’s and Dylinski’s
Employment Agreements—inducing both men to breach their Employment Agreements and
damaging Watt Stopper. Id. ¶¶ 40-47.
Before the Court are cross-motions for summary judgment. Watt Stopper has moved for
summary judgment on all counts in the Amended Complaint, and for partial summary judgment in
its favor as to Count I of its Counterclaims.5 Dkt. No. 92. AIC has moved summary judgment as to
all counts of the Counterclaims.6 Dkt. No. 97. Both motions are fully briefed and ripe for
adjudication.
II.

STANDARD
Summary judgment is appropriate 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); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (“[S]ummary judgment is proper ‘if the
pleadings, depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law.’” (quoting former Fed. R. Civ. P. 56(c))). A
genuine dispute exists where “the evidence is such that a reasonable jury could return a verdict for
the nonmoving party,” while a fact is material if it “might affect the outcome of the suit under the
governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “Factual disputes that are

5

As no claims remain against Legrand, Legrand did not participate in this round of motion practice.

On February 15, 2019 Watt Stopper served a motion for evidentiary sanctions and associated relief. Dkt. No. 138.
The Court denied that motion on August 19, 2019. Dkt. No. 149.
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irrelevant or unnecessary will not be counted.” Id.
The movant bears the initial burden of demonstrating “the absence of a genuine issue of
material fact,” and, if satisfied, the burden then shifts to the non-movant to present “evidence
sufficient to satisfy every element of the claim.” Holcomb v. Iona Coll., 521 F.3d 130, 137 (2d Cir.
2008) (citing Celotex, 477 U.S. at 323). To defeat a motion for summary judgment, the non-movant
“must come forward with ‘specific facts showing that there is a genuine issue for trial.’” Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting former Fed. R. Civ. P. 56(e)). “The
mere existence of a scintilla of evidence in support of the [non-movant’s] position will be
insufficient; there must be evidence on which the jury could reasonably find for the [non-movant].”
Anderson, 477 U.S. at 252. Moreover, the non-movant “must do more than simply show that there is
some metaphysical doubt as to the material facts,” Matsushita, 475 U.S. at 586 (citations omitted),
and she “may not rely on conclusory allegations or unsubstantiated speculation,” Fujitsu Ltd. v. Fed.
Express Corp., 247 F.3d 423, 428 (2d Cir. 2001) (internal quotation marks and citation omitted).
In determining whether there exists a genuine dispute as to a material fact, the Court is
“required to resolve all ambiguities and draw all permissible factual inferences in favor of the party
against whom summary judgment is sought.” Johnson v. Killian, 680 F.3d 234, 236 (2d Cir. 2012)
(internal quotation marks and citation omitted). The Court’s job is not to “weigh the evidence or
resolve issues of fact.” Lucente v. Int’l Bus. Machs. Corp., 310 F.3d 243, 254 (2d Cir. 2002) (citation
omitted); see also Hayes v. N.Y.C. Dep’t of Corr., 84 F.3d 614, 619 (2d Cir. 1996) (“In applying th[e]
[summary judgment] standard, the court should not weigh evidence or assess the credibility of
witnesses.”). “Assessments of credibility and choices between conflicting versions of the events are
matters for the jury, not for the court on summary judgment.” Jeffreys v. City of New York, 426 F.3d
549, 553-54 (2d Cir. 2005) (citation omitted). However, if “no rational finder of fact ‘could find in
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favor of the nonmoving party because the evidence to support its case is so slight,’ summary
judgment must be granted.” Brown v. Eli Lilly & Co., 654 F.3d 347, 358 (2d Cir. 2011) (quoting
F.D.I.C. v. Great Am. Ins. Co., 607 F.3d 288, 292 (2d Cir. 2010)).
In resolving cross-motions for summary judgment, “each party’s motion must be examined
on its own merits, and in each case all reasonable inferences must be drawn against the party whose
motion is under consideration.” Morales v. Quintel Entm’t, Inc., 249 F.3d 115, 121 (2d Cir. 2001)
(citing Schwabenbauer v. Bd. of Educ., 667 F.2d 305, 314 (2d Cir. 1981)).
III.

DISCUSSION
A. Purported Breaches of the Employment Agreements in 2014
For the reasons that follow, the undisputed evidence comes to the precipice of establishing

that no later than May 13, 2014, “sales by [Watt Stopper] of Royalty Bearing Products [were] royalty
free and all licenses granted by AIC hereunder [were] fully paid.” TLA at 4. Ultimately, however,
questions of material fact remain as to whether Watt Stopper waived its right to benefit from the
Conditions on Royalties Clause, and accordingly the Court cannot, on this record, conclude that
Watt Stopper’s royalty obligations terminated in May 2014.
Under New York law,7 “[i]t is well settled that a contract is to be construed in accordance
The Employment Agreements are governed by the law of Georgia. Employment Agreement § 5.7. No party,
however, has presented an argument that the law of Georgia applies here, or analyzed the contracts applying Georgia
law. Where “[t]he parties’ briefs assume that New York substantive law governs the issues . . . such implied consent is . .
. sufficient to establish the applicable choice of law.” Arch Ins. Co. v. Precision Stone, Inc., 584 F.3d 33, 39 (2d Cir. 2009)
(quoting Golden Pac. Bancorp v. F.D.I.C., 273 F.3d 509, 514 n.4 (2d Cir. 2001)); see also Guardian Life Ins. Co. v. Gilmore, 45 F.
Supp. 3d 310, 323 (S.D.N.Y. 2014) (collecting cases). Furthermore, the law of Georgia, like New York law, looks first to
the four corners of the agreement to discern the intent of the parties. Wolf Creek Landfill, LLC v. Twiggs Cty., 337 Ga.
App. 211, 214-15 (2016) (“The cardinal rule of [contract] construction is to ascertain the intention of the parties. If that
intention is clear and it contravenes no rule of law and sufficient words are used to arrive at the intention, it shall be
enforced irrespective of all technical or arbitrary rules of construction.”) (alteration in original) (quotation omitted); Livoti
v. Aycock, 263 Ga. App. 897, 901-02, (2003) (“The first step is to look to the four corners of the instrument to determine
the intention of the parties from the language employed. . . . [O]nly if [an] ambiguity is not resolved by application of
the rules of construction may parol evidence be introduced to explain the agreement.”). Accordingly, in the absence of
any contention that there is a germane conflict between the law of Georgia and the law of New York, the Court applies
the law of New York, except as otherwise indicated.
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with the parties’ intent, which is generally discerned from the four corners of the document itself.”
MHR Capital Partners LP v. Presstek, Inc., 12 N.Y.3d 640, 645 (2009). “The best evidence of what
parties to a written agreement intend is what they say in their writing.” Greenfield v. Philles Records, 98
N.Y.2d 562, 569 (2002) (quoting Slamow v. Del Col, 79 N.Y.2d 1016, 1018 (1992)). “Consequently, ‘a
written agreement that is complete, clear and unambiguous on its face must be enforced according
to the plain meaning of its terms.’” Presstek, 12 N.Y.3d at 645 (quoting Greenfield, 98 N.Y.2d at 562).
The Conditions on Royalties Clause contains clear and unambiguous language regarding the
impact of a breach of the Conflict of Interest Clauses of the Employment Agreements on the TLA.
In the case of such a breach, “then as of that date sales by [Watt Stopper] of Royalty Bearing Products
will be royalty free and all licenses granted by AIC hereunder will be fully paid.” TLA at 3 (emphasis
added). A review of the Conditions on Royalties Clause’s clear and unambiguous language reveals
three features pertinent to this analysis. First, it is self-executing.8 In the event that either Pike or
Dylinski breached his respective Employment Agreement, this provision would automatically be
triggered, without the need for an affirmative act on the part of Watt Stopper. Second, it is triggered
on the date of the breach of an Employment Agreement. And third, it does not terminate the TLA
in the event it is triggered. In sum, the Conditions on Royalties Clause is clearly and unambiguously
drafted so that it is triggered automatically on the date that either Mr. Pike or Mr. Dylinski breached
their respective Employment Agreement, with the effect of terminating Watt Stopper’s royalty
obligations and rendering the licenses granted fully paid without the need for any affirmative action
on the part of Watt Stopper.

AIC contends that this provision is a condition subsequent, and therefore cannot be self-executing because a party
“must perform some additional act in order to terminate the contract.” In re St. Casimir Dev. Corp., 358 B.R. 24, 39
(S.D.N.Y. 2007). Such authority is inapposite here as the Conditions on Royalties Clause does not even purport to
provide Watt Stopper with the right to terminate the TLA if triggered—much less terminate the TLA itself.
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Pike and Mr. Dylinski executed their Employment Agreements on November 12, 2013.
Pike Agreement at 2; Dylinski Agreement at 2. The Conflict of Interest Clauses of those agreements
require, inter alia, that both men “divest any and all ownership interest in Digital Contracting
Solutions (DCS) and provide [Watt Stopper] with satisfactory evidence of the divestiture within six
months of [the] Agreement’s effective date.” Employment Agreements § 3.3. It is undisputed that
neither man ever divested his interest in DCS. Accordingly, by May 13, 2014, Pike and Dylinski had
both breached the Conflict of Interest provisions of their respective Employment Agreements.
Absent a modification of the contractual framework, those breaches triggered the Conditions on
Royalties Clause—with the consequence that, as of May 13, 2014, “sales by [Watt Stopper] of
Royalty Bearing Products [were] royalty free and all licenses granted by AIC hereunder [were] fully
paid.” TLA at 3.
AIC does not contend that Pike or Dylinski ever divested their DCS holdings or provided
proof of their divestiture. Nor has AIC adduced evidence that it has suffered any damages if Watt
Stopper’s royalty obligations terminated on May 12, 2014. 56.1 ¶ 20. Rather, AIC contends that
principles of waiver and estoppel counteract the contractual mechanisms described above.
For the reasons that follow, the Court cannot, on this record, determine that there is no
question of material fact as to the issue of contractual modification by waiver, which precludes the
Court from determining at this time whether Watt Stopper’s royalty obligations terminated as of
May 13, 2014.
1. Amendment of the TLA
“Under New York law, parties may modify a contract by another agreement, by course of
performance, or by conduct amounting to a waiver or estoppel.” Dallas Aerospace, Inc. v. CIS Air
Corp., 352 F.3d 775, 783 (2d Cir. 2003) (internal quotation marks and citation omitted). However, as
10

discussed above, the TLA contains the Written Modifications Only Clause, which states, in pertinent
part, that the TLA “cannot be modified or amended except in writing signed by both Parties and
specifically referring to this Agreement.” TLA § 23. This provision is enforceable under N.Y. Gen.
Oblig. Law § 15-301(1) (“§ 15-301”) which “places this type of clause on the same footing as any
other term in a contract.” Israel v. Chabra, 12 N.Y.3d 158, 167 (2009); see HGT Capital LLC v. HDS
Int’l Corp., 60 Misc. 3d 1225(A), 1225(A) (N.Y. Sup. Ct. 2018) (“The defense of waiver is also
inapplicable, as the Note contains a no-oral-modification clause.”).
“Despite § 15-301, New York recognizes oral modification or waiver of a contractual
provision, but only under limited circumstances, specifically, (1) ‘when there has been partial
performance of an agreement to modify, so long as the partial performance is unequivocally
referable to the oral modification,’ or (2) ‘when one party has induced the other party to rely on an
oral modification’ such that ‘the first party may be equitably estopped from invoking the
requirement that any modification be in writing.’” DiStefano v. Maclay, 102 F. App’x 188, 189 (2d Cir.
2004) (summary order) (quoting Towers Charter & Marine Corp. v. Cadillac Ins. Co., 894 F.2d 516, 522
(2d Cir. 1990)).
a. Waiver by Partial Performance
For the reasons that follow, there is a question of material fact regarding the application of
the waiver by partial performance exception to § 15-301. As a result, on this record, the Court
cannot determine whether Watt Stopper’s royalty obligations terminated on May 13, 2014.
Under New York law, “[p]artial performance of an oral agreement to modify a written
contract, if unequivocally referable to the modification, avoids the statutory requirement of a
writing.” Gun Hill Rd. Serv. Station, Inc. v. ExxonMobil Oil Corp., 08-cv-7956-PKC, 2013 WL 395096,
at *5 (S.D.N.Y. Feb. 1, 2013) (alteration in original) (quoting Rose v. Spa Realty Assocs., 42 N.Y.2d
11

338, 341 (1977)). “If the conduct that allegedly constituted partial performance of the oral
agreement to modify was in fact compatible with the original agreement, the oral agreement will not
be enforced.” Towers Charter & Marine Corp., 894 F.2d at 522.
It is undisputed that Watt Stopper continued to pay AIC royalty payments, despite Pike’s
and Dylinski’s failure to divest their DCS holdings.9 56.1 ¶ 76; see CC 56.1 ¶ 51. Those continued
payments may constitute partial performance of a modification of the TLA—and accordingly are
consistent with AIC’s contention that the TLA was modified by waiver. The question before the
Court is whether there is a question of material fact as to whether those payments are unequivocally
referable to a potential modification of the TLA.
On this record, the Court cannot conclude that there is no question of material fact
regarding whether Watt Stopper’s continued payment of royalties is unequivocally referable to a
modification of the TLA. Watt Stopper contends that because its obligation to pay royalties was
imposed by the TLA, its continued payment of royalties cannot be unequivocally referable to a
modification of the TLA. Watt Stopper’s Reply, Dkt. No. 134 at 5 (“[T]he partial performance
alleged by MTS was the payment of money, which it was already required to do under the original
agreements.” (alteration in original) (quoting Am. Int’l Tel., Inc. v. Mony Travel Servs., Inc., 99-cv-11581CM-LMS, 2001 WL 209918, at *4 (S.D.N.Y. Feb. 23, 2001))). That argument is flawed, however,
for the basic reason that, absent a modification of the contract, the TLA did not require Watt
Stopper to make payments after May 12, 2014. Royalty payments after that date were not required
under the original agreement—that is, unless it was modified. This is the only argument presented

There is a disputed issue of fact as to whether Horton informed Pike and or Dylinski that no divestiture was required.
Dylinski testified at his September 5, 2018 deposition that he had spoken about the requirement of divesture with
Horton, and that Horton told him that “it would not be an issue” that Mr. Dylinski had not divested his DCS holdings.
Sept. 5, 2018 Dep. of Joe Dylinski, Dkt. No. 99-3 at 77:1-11. Mr. Horton denies having had any such conversation.
Sept. 13, 2018 Dep. of Peter J. Horton, Dkt. No. 112-1, 113:35-114:17.
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by Watt Stopper on this point—the only egg that it placed in this basket—and it is profoundly
flawed because the continued stream of royalty payments was not required by the contract as
written. Given that Watt Stopper has not presented alternative explanations of the continued
payment stream, the Court cannot determine, on this record, that there is no question of material
fact regarding whether the continued payment of royalties is unequivocally referable to a
modification of the TLA.
Watt Stopper has not presented alternative explanations for the continued royalty payments
in briefing this motion to dismiss. Despite that failure, however, the Court notes in dicta that other
explanations for the continued payment of royalties may ultimately call into question whether those
payments were unequivocally referable to a modification of the TLA.10 In Gun Hill, Judge Castel
explained that, in the context of a § 15-301 analysis, actions that are “consistent with an oral
modification” but that are “just as easily explained as an attempt to improve a strained business
relationship” are not unequivocally referable to a putative-contractual modification. Gun Hill, 2013
WL 395096, at *5. The evidence indicates that Watt Stopper anticipated benefiting from the “knowhow” of the AIC employees it hired in parallel with the execution of the TLA, TLA at 3, and
believed that it would “further the purposes of the [TLA]” if certain AIC employees were hired by
Watt Stopper. Employment Agreements, Recitals. Accordingly, the Court notes the possibility that
the payments made by Watt Stopper were, in fact, voluntary payments made not due to an
obligation in the TLA, but to maintain the good will of the AIC employees who, at that time, were

The Court notes in dicta that Watt Stopper’s arguments here, including their counterclaims, may cut against their
position with respect to the question of whether the payments are unequivocally attributable to a modification. In its
counterclaims, Watt Stopper seeks, inter alia, damages under a theory of tortious interference with contract—and
contends that AIC’s alleged tortious interference with the Employment Agreements was the proximate cause of Watt
Stopper’s overpayment of royalties to AIC. See Watt Stopper’s Reply, Dkt. No. 110 at 25. Watt Stopper’s
characterization of the damages it seeks in its counterclaims as overpayment of royalties is difficult to square with any
potential alternative explanation for those payments.
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employed by Watt Stopper. See 56.1 ¶ 120. Other potential alternative rationales for the continued
payment of royalties may exist. However, Watt Stopper failed to present any such alternative
rationales for the continued payments, relying instead on one argument, which suffers from the
flaws described above.
For all these reasons, the Court concludes that there is a question of material facts as to
whether the royalty payments made by Watt Stopper on or after May 13, 2014 are unequivocally
referable to Watt Stopper’s waiver of the Conditions on Royalties Clause. Accordingly, the Court
cannot conclude that Watt Stopper’s obligation to pay royalties terminated on May 12, 2014. Nor,
however, can the Court conclude that Watt Stopper’s Royalty obligation necessarily survived beyond
that date. Consequentially, both pending motions for summary judgment are denied to the extent
that those motions are premised on a determination of that issue.
b. Estoppel
The Court need not reach this issue, as it has already determined that a question of material
fact exists as to whether Watt Stopper’s royalty obligations persisted past May 13, 2014. However,
in dicta, the Court notes that AIC’s estoppel arguments appear to be flawed in that AIC has not
presented any evidence of detrimental reliance on any act taken by Watt Stopper.
In order to benefit from the estoppel exception to §15-301, a party must demonstrate, inter
alia, “acts taken in detrimental reliance” on the conduct at issue, which in turn must be
“unequivocally referable’” to the modification of the agreement. Richardson & Lucas, Inc. v. N.Y.
Athletic Club of City of New York, 758 N.Y.S.2d 321, 322 (1st Dep’t 2003) (quoting Rose, 42 N.Y.2d at
343). AIC, however has not adduced evidence of any specific acts it took in detrimental reliance on
the receipt of payments which, had the TLA been strictly enforced according to its terms, it may not
have been entitled to receive.
14

Despite lacking factual support in the record, AIC made the following arguments in support
of its purported detrimental reliance. First, that “AIC relied on [Watt Stopper’s] actions in
continuing to sell the licensed products and pay AIC royalties owed on those products.” AIC’s
Opp. to S.J., Dkt. No. 98 at 7-8. And second, that “[h]ad [Watt Stopper] timely insisted on its rights,
AIC could have taken steps at the time to remedy any purported breaches.” AIC’s Reply in Support
of S.J., Dkt. No. 129 at 3. Neither argument is supported by record evidence. In addition, AIC’s
first argument is inadequate in that it does not even purport to identity any detrimental acts taken by
AIC in reliance on Watt Stopper’s continued payment of royalties. Absent modification of the
contractual framework, Watt Stopper’s royalty obligation terminated no later than May 13, 2014.
AIC has not explained how the receipt of payments which Watt Stopper may not have been
obligated to make caused AIC to rely on those payments to its detriment, let alone adduced evidence
supporting any such contention.
As for AIC’s second argument, the Court notes that it appears to be in tension with AIC’s
admission that neither Pike nor Dylinski were capable of divesting their DCS holdings—which begs
the question of how AIC could have cured Pike’s and Dylinski’s failure to timely divest.11 56.1 ¶ 17
(“Mr. Pike did not divest his ownership interest in DCS because he could not.”), ¶ 18 (“Mr. Dylinski
did not divest his ownership interest in DCS because he could not.”). Additionally, AIC’s second
argument fails to identify any of Watt Stopper’s actions upon which AIC is purported to have
detrimentally relied. Ultimately, however, the Court need not reach this issue and provides the

The Court notes that this tension is aggravated by AIC’s contention that the disputed conversations between Horton,
Pike and Dylinski as to Pike’s and Dylinski’s obligation to divest their DCS holdings do not constitute oral amendments
of the TLA. See AICAIC’s Reply, Dkt. No. 129 at 1 (“AIC does not argue that there was an oral modification (or oral
wavier) to any agreement.”). Assuming, arguendo, that such testimony could be interpreted as indicative of one or more
oral agreements which amended the contractual framework to obviate the need for Pike or Dylinski to divest their DCS
holdings, then AIC’s failure require a written amendment might be considered an act taken in detrimental reliance on the
statements which led AIC to believe that no written amendment was necessary. See § II(A)(2), below.
11

15

above analysis merely as dicta.
2. Amendment of the Employment Agreements
The Court understands that AIC contends that the TLA, rather than the Employment
Agreements themselves, was modified by the parties. That position seems sensible in light of the
record evidence of the timing of the purported conversations between Dylinski and Horton.
The Employment Agreements, unlike the TLA, are governed by the law of Georgia.
Employment Agreements § 5.7. Accordingly, any amendment of the Employment Agreements
would be considered outside the ambit of § 15-301, which is a creature of New York law.
As dicta, the Court notes that, even construing the facts in the light most favorable to AIC,
the record indicates that any amendment of the Employment Agreements would have occurred in
“the last quarter of 2014.” Dylinski Tr. at 77:9-11. As discussed above, Pike and Dylinski were
obligated to divest their DCS holdings no later than May 12, 2014. Accordingly, on this record, the
Court could not conclude that any amendment of the Employment Agreements based on purported
conversations between Dylinski and Horton occurred prior to the self-execution of the Conditions
on Royalties Clause. Therefore, it appears that any such amendment of the Employment
Agreements would have occurred too late in time to prevent the Conditions on Royalties Clause
from being triggered. However, as the Court need not reach this issue, it ultimately takes no
position on it.
B. Purported Breach of Pike’s Employment Agreement in 2018
AIC has moved for summary judgment on Watt Stopper’s counterclaims, to the extent that
those claims are premised on a purported breach of Pike’s Employment Agreement in 2018.12 AIC’s

Watt Stopper has not moved for summary judgment in its favor as to this aspect of its counterclaims regarding Pike.
Watt Stopper’s Br., Dkt. No. 93 at 20. Accordingly, as AIC is the movant as to this issue, the facts in this section are
presented in the light most favorable to Watt Stopper. Johnson, 680 F.3d at 236.
12

16

motion for summary judgment is denied in that respect, for the reasons that follow.
Pike worked for Watt Stopper until his resignation, which was effective April 13, 2018. CC
56.1 ¶ 19. According to the terms of Pike’s Employment Agreement, Pike became an at-will
employee on January 1, 2017. Id. ¶¶ 19-20. At the time of his resignation, Pike returned a laptop to
Watt Stopper. Id. ¶ 23. Before he did so, however, he copied certain files from that laptop onto a
flash drive, which he subsequently provided to counsel for AIC for use in this litigation. Id. ¶¶ 24,
43 (the extent of the files copied is disputed). Pike additionally disclosed certain Watt Stopper files
saved on digital Dropbox servers to counsel for AIC for use in this litigation. Id. ¶¶ 25-28, 42.
In his Employment Agreement, Pike agreed to “to deliver to [Watt Stopper] at the
termination of his employment or at any other time the Company may request, all Company
property, including, but not limited to, Confidential Information which he then may possess or have
under his control.” Pike Employment Agreement § 3.1. Pike further agreed that he would “not, at
any time, whether during the Term of [the Employment Agreement] or otherwise . . . reveal, divulge
or make known to any person or entity (other than [Watt Stopper]) or use for his own account, any
. . . Confidential Information . . . .” Id. The Watt Stopper files that Pike disclosed to counsel for
AIC contained “Confidential Information” as that term is defined in Pike’s Employment
Agreement. CC 56.1 ¶ 42. By August 20, 2018 counsel for the parties had conferred regarding this
issue, and all files which Watt Stopper considered to be confidential had been deleted or returned.
56.1 ¶¶ 33-34.
Watt Stopper asserts that these facts constitute another breach of Pike’s Employment
Agreement, which again triggered the Conditions on Royalties Clause, and therefore terminated
Watt Stopper’s royalty obligations, to the extent any remained, as of April 13, 2018. See TLA at 3.
In its motion for summary judgment, AIC contends that it cured any breach within the
17

notice period provided by the TLA, preventing the application of the Conditions on Royalties
Clause. AIC’s Br., Dkt. No. 98 at 8-9. However, the TLA does not provide any such applicable
notice period. Accordingly, for the reasons that follow, AIC’s motion is denied in this respect.
AIC points to § 8(C) of the TLA which states: “Either Party may terminate this Agreement
if the other Party materially breaches this Agreement, and fails to cure such material breach within
sixty (60) days after receiving written notice thereof.” On that basis AIC contends that the TLA
provided them with 60 days to cure any breach of the TLA.
AIC’s argument is premised on the incorrect assumption that triggering the Conditions on
Royalties Clause terminates the TLA, or constitutes a breach of the TLA, and therefore that § 8(C) is
applicable. The TLA, however, contains no language to that effect. As described above, the
Conditions on Royalties Clause, when triggered, terminates Watt Stopper’s obligation to pay
royalties and renders all licenses granted by AIC fully paid—it does not terminate the agreement as a
whole, nor grant any party the right to do so. Nor is the TLA breached as a result of the selfexecution of the Conditions on Royalties Clause. Indeed, such a reading is contrary to the language
of the Conditions on Royalties Clause, which uses the phrase “as of that date” to indicate that, if a
covered employee were to breach his employment agreement, then the Conditions on Royalties
Clause would be automatically triggered “as of that date”—not 60 days following notice as AIC
contends.13
Accordingly, as AIC’s motion for summary judgment is premised on the existence of an
applicable notice period for which the TLA does not provide, AIC’s motion for summary judgment

AIC further contends that “practically speaking” the Conditions on Royalties Clause terminates the TLA because it
has such sweeping consequences. Divorced as it is from from the language of the TLA, the Court is not swayed by that
purely functionalist and outcome-determinative argument. Greenfield, 98 N.Y.2d at 569 (“The best evidence of what
parties to a written agreement intend is what they say in their writing.”).
13

18

is denied in this respect.
C. Reasonable Efforts
In the Amended Complaint, AIC alleges that Watt Stopper owes it additional royalties
because Watt Stopper did not use reasonable efforts to promote the Royalty Bearing Products, as
defined in the TLA. Watt Stopper has moved for summary judgment on that issue, contending that
the TLA does not contain an obligation to use reasonable efforts to promote the Royalty Bearing
Products. For the reasons that follow, the Court cannot conclude that such an obligation is not
implied within the TLA. Accordingly, to the extent Watt Stopper has moved for summary judgment
on this basis, its motion is denied.
The TLA does not expressly require that Watt Stopper use reasonable efforts to market or
otherwise promote the Royalty Bearing Products. Nonetheless, as first articulated in Justice
Cardozo’s famed opinion Wood v. Lucy, Lady Duff-Gordon, 222 N.Y. 88 (1917), and confirmed by that
case’s progeny, New York law may imply into an agreement an obligation that a licensee must use
reasonable efforts to exploit the licensed products, especially in circumstances in which the payment
of royalties on the sale of licensed products is the only consideration given for an exclusive license.
Id. at 91. Watt Stopper provides two arguments as to why such an implied covenant should not be
read into the TLA: (1) the parties specifically contemplated including a reasonable efforts provision
in the TLA and chose not to do so; and (2) AIC received consideration other than the payment of
royalties, and thus the Lady Duff-Gordon rule does not apply. For the reasons that follow, the Court
cannot conclude that either argument precludes the Court from implying a duty to use reasonable
promotional efforts into the TLA, pursuant to Lady Duff-Gordon and its progeny.
During the negotiation of the TLA, AIC proposed the inclusion of the following clause:
If Wattstopper/Legrand fails to actively promote, develop and market Royalty Bearing
Products or decides to exit from the business affecting Royalty Bearing Products,
19

such that less than expected royalties are due under this Agreement to AIC, all of
Wattstopper’s right, title and interest in such Royalty Bearing Products shall revert to
AIC.
56.1 ¶ 11 (emphasis added). It is undisputed that AIC proposed that language in an
“attempt[] to protect itself against the possibility that Defendants would not use reasonable
efforts to promote, develop, or market the Royalty Bearing Products and to address the
circumstances of Watt Stopper not making sales equal to the amount that were projected.”
Id. (alteration in original) (internal quotation marks omitted) (emphasis added). Ultimately,
the proposed term was not included in the TLA. The only term in the TLA which relates to
the prospect of complete failure by Watt Stopper to promote the Royalty Bearing Products
is § 8(E), which, as the quotation below indicates, only applies if Watt Stopper leaves the
business entirely.
If Wattstopper decides to exit from the business affecting Royalty Bearing Products
prior to the end of the Royalty Period, AIC may propose to acquire Funded
Improvements at fair market value or as otherwise may be negotiated . . .
TLA § 8(E).
On that factual predicate, Watt Stopper invokes Reiss v. Fin. Performance Corp., 97
N.Y.2d 195 (2001), for the proposition that New York law “will not imply a term [into a
contract] where the circumstances surrounding the formation of the contract indicate that
the parties, when the contract was made, must have foreseen the contingency at issue and
the agreement can be enforced according to its terms.” Id. at 961. According to Watt
Stopper, Reiss precludes implying a duty to use reasonable promotional efforts into the TLA.
However, for the reasons that follow, the Court cannot conclude that Reiss is applicable to
the facts established here.
Even assuming arguendo that Reiss controls, the facts here do not support Watt
20

Stopper’s contention that Reiss precludes implying a duty to use reasonable promotional
efforts into the TLA. The duty to reasonably promote sales of a licensed product, as implied
into certain contracts by Lady Duff-Gordon and its progeny, is an implied contractual duty, not
a remedy. The clause proposed by AIC during negotiations would not only have imposed a
duty to “actively promote,” but would also have created a specific remedy for failing to
“actively promote”—reversion of the intellectual property at issue in the TLA to AIC.
Accordingly, the Court has not been presented with undisputed evidence that the parties
specifically rejected a contractual obligation to use reasonable promotional efforts. Rather,
the parties rejected a clause which would have imposed an obligation to “actively”—as
opposed to “reasonably”—promote the Royalty Bearing Products and that would have
created a specific remedy as a result of any such breach. As a result, it is far from clear on
this record why the parties rejected the proposed clause. For example, it may have been the
case that Watt Stopper rejected the clause due to its imposition of an additional remedy, or
because it imposed a duty to “actively” promote, which could be interpreted as going
beyond the default Lady Duff-Gordon rule’s implied obligation to use “reasonable” efforts.
Accordingly, even if Reiss is presumed to control, there would be a question of material fact
as to the precise rationale for the parties’ rejection of the proposed clause.14

The Court notes that Watt Stopper appears to have overread the extent to which Reiss displaces Lady Duff-Gordon in
the context of contracts granting an exclusive license in exchange for royalties. The issue before the Reiss court was
“whether warrants to purchase shares of stock of defendant corporation must be adjusted in light of a reverse stock split
authorized by defendant corporation after plaintiffs received warrants.” Reiss, 97 N.Y.2d at 197. In the course of
determining that the contract at issue should not be adjusted by implying a term modifying the purchase price, the Reiss
court cited Lady Duff-Gordon approvingly. Id. at 201 (“It may be that Reiss would be entitled to a remedy if Financial
performed a forward stock split, on the theory that he did not intend to acquire nothing. We should not assume that
one party intended to be placed at the mercy of the other (Wood v. Duff-Gordon, 222 N.Y. 88, 91, 118 N.E. 214 [1917]).”
(internal quotation and quotation marks omitted)). Accordingly, as a general matter, Reiss did not displace Lady DuffGordon or its progeny. The Court need not opine further on the interaction between these cases, however, as Reiss does
not apply to the facts here.
14

21

As to Watt Stopper’s second argument, for the reasons that follow, Watt Stopper has
failed to adduce evidence of additional consideration sufficient to preclude the implication of
a reasonable duty to promote the licensed technology into the TLA.
Courts have been reluctant to imply a duty to use reasonable promotional efforts
into contracts granting exclusive licenses when the agreement at issue provides for a
substantial upfront payment or the payment of guaranteed royalties. See, e.g., Emerson Radio
Corp. v. Orion Sales, Inc., 253 F.3d 159, 169 (3d Cir. 2001) (applying New York law) (“[W]e
cannot hold that it is necessary to imply an obligation to use reasonable efforts” when the
agreement at issue guaranteed “a substantial minimum royalty payment totaling $4 million
per year for three years.”). On the other hand, “courts have, on occasion, implied a
covenant requiring a licensee to exploit a license even when the licensor has received a
guaranteed minimum royalty or upfront fee.” Palazzetti Import/Export, Inc. v. Morson, 98-cv722-FM, 2001 WL 1568317, at *6-7 (S.D.N.Y. Dec. 6, 2001), aff’d, 54 F. App’x 698 (2d Cir.
2002) (collecting cases).
The evidence of additional consideration adduced by Watt Stopper falls well short of
constituting, or being analogous to, a substantial guaranteed payment of royalties or an
upfront payment sufficient to prevent an implied duty to use reasonable promotional efforts
from arising. Watt Stopper claims that the TLA provides two additional categories of
consideration to AIC beyond the payment of royalties: (1) the signing of a separate
agreement (the “OEM Agreement”) which required payments to AIC, and (2) the hiring of
AIC employees by Watt Stopper. For the reasons articulated below, the Court cannot
conclude as a matter of law that those categories of consideration preclude the implication of
a duty to use reasonable promotional efforts into the TLA.
22

The TLA provides that Watt Stopper’s “obligation to pay the Royalty hereunder shall
be subject to AIC’s contemporaneous execution of the OEM Agreement with Wattstopper
. . . .” TLA § 2. That language unambiguously establishes that Watt Stopper’s royalty
obligations are conditioned on AIC’s execution of the OEM Agreement. It follows that the
execution of the OEM Agreement is consideration provided, at least in part, for Watt
Stopper’s benefit. Furthermore, while the OEM Agreement requires Watt Stopper to pay
AIC for ancillary services and rental space, the TLA only anticipates the execution of the
OEM Agreement, it does not require that the OEM Agreement have any particular terms.
See TLA at 3; OEM Agreement § 13, Ex. AA. On those facts, the Court cannot conclude as
a matter of law that the execution of the OEM Agreement is sufficiently analogous to a
substantial upfront payment or a guaranteed royalty, which are the types of consideration
courts have held to be sufficient to preclude the implication of a duty to use reasonable
promotional efforts into certain contracts pursuant to Lady Duff-Gordon and its progeny. See,
e.g., Emerson Radio Corp., 253 F.3d at 169.
And as for the hiring of AIC employees, the language of the Conditions on Royalties
Clause unambiguously establishes: (1) that Watt Stopper anticipated hiring those employees
in order to benefit from their “know-how” of the licensed technology, and (2) Watt
Stopper’s right to terminate royalty payments in the event the conduct of those employees
breached their respective Employment Agreements such that Conditions on Royalties
Clause was triggered.
. . . [B]ecause the know-how associated with the Licensed Technology is anticipated
to be shared hereunder by certain key persons currently employed by AIC but
anticipated hereunder to be offered employment by Wattstopper, it shall be a
condition hereunder that AIC hereby acknowledge and agree . . . that if any of Bryan
Pike, Joe Dylinski, or Zane Brown resigns from their employment with Wattstopper
without Wattstopper’s consent prior to the third anniversary of the Effective Date,
23

or breach their employment obligations . . . then as of that date sales by Wattstopper
of Royalty Bearing Products will be royalty free and all licenses granted by AIC
hereunder will be fully paid.
TLA at 3. In that context, the hiring of those employees, which directly benefitted Watt
Stopper and, at most, indirectly benefitted AIC, is not at all similar to a substantial upfront
payment or guaranteed royalty. In sum, the evidence of consideration adduced by Watt
Stopper does not establish as a matter of law that a minimum royalty was owed, or that AIC
was otherwise provided with consideration otherwise sufficient to preclude the implication
of a duty to use reasonable promotional efforts into the TLA.
For all these reasons, on this record the Court cannot conclude that the TLA does
not contain an implied obligation that Watt Stopper use reasonable efforts to promote the
Royalty Bearing Products—with the corollary that to the extent Watt Stopper’s motion for
summary judgment is premised on such a finding, that motion is denied.
D. Expert Testimony Regarding “Functionally Equivalent Successor Products”
At issue in this case is whether certain Watt Stopper products are “functionally equivalent
successor products” as defined in the TLA. TLA at 4. Despite the technological complexity
involved in comparing AIC’s products with the purported “functionally equivalent successor
products,” AIC chose not to procure and notice any expert testimony to support its claims.
Accordingly, for the reasons which follow, to the extent that AIC’s claims are contingent on such
comparisons, AIC is unable to bear its burden of persuasion.
The TLA defines “Royalty Bearing Products” as:
. . . the products set forth in Exhibit A [to the TLA] and functional [sic] equivalent
successor products. As used in the preceding sentence “functionally equivalent
successor products” means (i) products on Exhibit A that are re-named or rebranded without material change to their features of functionality, (ii) products that
are re-configurations of the same technology (same feature/functionality) as
products on Exhibit A but not (iii) battery operated single digital or analog input or
24

“single point” products.
TLA at 4. AIC alleges that Watt Stopper was contractually required to pay AIC royalties on certain
wireless products in Watt Stopper’s digital light management line (“wireless DLM products”)
because those products are “are re-configurations of the same technology (same features
/functionality) as the products on Exhibit A.”15 Id.
The wireless DLM products that AIC contends are functionally equivalent successor
products are identified as follows: LMBR-600, LMBC-600, LMRC-611MCC, LMDL-600-LMDM601; LMPC-600, LMPX-600, and LMSW-605. 56.1 ¶ 27. It is undisputed that the wireless DLM
products at issue are not “products on Exhibit A that are re-named or re-branded without material
change to their features of functionality.” 56.1 ¶ 30. Accordingly, the wireless DLM products are
only Royalty Bearing Products if they are “re-configurations of the same technology (same
feature/functionality) as products on Exhibit A but [are not] battery operated single digital or analog
input or ‘single point’ products.” TLA at 4.
AIC concedes that “LMDL-600, LMPC-600, and LMPX-600 are battery operated single
digital or analog input products.” 56.1 ¶ 32. Accordingly, the clear terms of the TLA indicate that
those products are not Royalty Bearing Products and accordingly summary judgment must be
granted to Watt Stopper with respect to those products.
As to the remaining products, at trial AIC would bear the burden of demonstrating that

15

The meaning of the phrase “re-configurations of the same technology (same feature/functionality) as products on
Exhibit A” is disputed—with both parties claiming that the phrase is ambiguous. The Court disagrees. The contractual
language clearly and unambiguously refers to “reconfigurations of the same technology” and then provides the
parenthetical phrase “(same feature/functionality)” to inform the reader of factors that are relevant to the determination
of whether a product is a “reconfiguration of the same technology.” TLA at 4.
However, as the Court has determined that AIC cannot bear its burden of persuasion as to whether any term is a
“functionally equivalent successor product” absent expert testimony, the Court need not, and does not, take any further
position as to the impact of AIC’s erroneous proposed construction of this term on their claims.

25

those products are “functionally equivalent successor products.” However, they have failed to
procure an expert who can opine on this topic. For the reasons that follow, that failure is fatal to
their claim.
While “there is no categorical rule requiring expert testimony . . . . [g]enerally speaking, it is
needed when the facts and concepts of a case are beyond a layperson’s understanding.” S.E.C. v.
Ginder, 752 F.3d 569, 575 (2d Cir. 2014). The issues which would be presented to the jury, were this
case to proceed to trial, would go well beyond a layperson’s understanding. In order to determine if
a wireless DLM product was a Royalty Bearing Product, the jury would need to resolve at least the
following three categories of evidentiary issues: (1) the nature of the technology involved in the AIC
products, including those products’ features and functions; (2) the nature of the technology involved
in allegedly royalty-bearing Watt Stopper products, including those products’ features and functions;
and (3) a comparison of the technology at issue to determine whether any Watt Stopper product
qualifies as a “functionally equivalent successor product.” TLA at 4. As the issues presented are
technical in nature, and involve comparing various technological features and functionalities, the
Court draws on patent jurisprudence to determine whether expert testimony is necessary to decide
any of the issues presented.16
“[N]o expert opinion [is] required . . . [when] the technology [is] ‘easily understandable.’”
Wyers v. Master Lock Co., 616 F.3d 1231, 1240 (Fed. Cir. 2010) (quoting Centricut, LLC v. Esab Group,

In particular, the Court finds the issue of “obviousness” in the patent context to be closely analogous to the issues at
bar here. A determination of obviousness requires analysis of the invention, the prior art, and a determination of
whether the development of the invention would be obvious to a practitioner of the art. See 35 U.S.C. § 103 (“A patent
for a claimed invention may not be obtained, notwithstanding that the claimed invention is not identically disclosed as
set forth in section 102, if the differences between the claimed invention and the prior art are such that the claimed
invention as a whole would have been obvious before the effective filing date of the claimed invention to a person
having ordinary skill in the art to which the claimed invention pertains.”) Analogously, a determination that a product is
a reconfiguration of the same technology would require analysis of the wireless DLM product at issue’s technology, the
listed Royalty Bearing Product’s technology, a comparison of the technology in the one to the other, and a determination
of whether one product was a “functionally equivalent successor product” of the other.
16

26

Inc., 390 F.3d 1361, 1369 (Fed. Cir. 2004)). “However, as [the Federal Circuit] noted in Centricut,
‘expert testimony regarding matters beyond the comprehension of laypersons is sometimes
essential,’ particularly in cases involving complex technology.” Id. at 1240 n.5 (quoting Centricut, 390
F.3d at 1369-70 (requiring expert testimony to establish infringement)); see Asia Vital Components Co.
v. Asetek Danmark A/S, 377 F. Supp. 3d 990, 1011-12 (N.D. Cal. 2019) (“The Federal Circuit has
explained that ‘cases involving complex technology’ may require expert testimony ‘to establish . . .
the existence (or lack thereof) of a motivation to combine references.’ But it has declined to adopt
‘a per se rule that expert testimony is required to prove infringement when the art is complex.’”)
(alteration in original) (quoting Wyers, 616 F.3d at 1240 n.5, and Centricut, 390 F.3d at 1370).
In the Asia Vital Components Co. case cited above, the Northern District of California, in
determining that the technology at issue in that case was sufficiently complex that it necessitated
expert testimony, compiled an illuminating survey of the Federal Circuit’s treatment of this issue.
[T]he technologies here are more complex than in the cases cited [in opposition to
the need for expert testimony]. See Tokai Corp. v. Easton Enters., Inc., 632 F.3d 1358,
1371 (Fed. Cir. 2011) (manual lighters); Sundance, Inc. v. DeMonte Fabricating Ltd., 550
F.3d 1356, 1365 (Fed. Cir. 2008) (single patent claim involving retractable tarp); Ruiz
v. A.B. Chance Co., 357 F.3d 1270, 1276 (Fed. Cir. 2004) (screw anchors and metal
brackets). The technology embodied in the [patent at issue’s] system of cooling
computer components is instead comparable to other cases that have required expert
testimony regarding motivation. See, e.g., Kinetic Concepts, Inc. v. Smith & Nephew, Inc.,
688 F.3d 1342, 1369 (Fed. Cir. 2012) (devices using “a seal capable of maintaining
negative pressure” and “draining fluids” to treat wounds); Proveris Sci. Corp. v.
Innovasystems, Inc., 536 F.3d 1256, 1259, 1267 (Fed. Cir. 2008) (“device used for
calibrating drug delivery devices” comprised of “a housing,” “a spray pump
actuator,” “an illumination device,” and “an imaging device,” each serving various
mechanical functions). The Court concludes that “this subject matter is sufficiently
complex to fall beyond the grasp of an ordinary layperson.” Proveris Sci. Corp., 536
F.3d at 1267.
Id. at 1012. The Court finds that framework persuasive and adopts it.
The wireless DLM products integrate multiple layers of technology in what can be described
as “stacks.” See 56.1 ¶ 29. Their features include “wirelessly control[ling] lighting loads,” “sens[ing]
27

light level[s],” communicating requested or sensed light levels “wirelessly to another device,” and
determining the “occupancy status of a room.” AIC’s Resp. to Am. Inter. 16, Dkt. No. 95-13 at 3-6.
Applying the Asia Vital Components Co. framework described above, the Court observes that the
technology at issue here is multifunctional, involves digital and programmable features, and is
designed to wirelessly synergize and communicate with other products. Accordingly, the technology
at issue is not analogous to products such as “screw anchors” or “retractable tarp[s]” where a lay
juror could reasonably be expected to make the necessary determinations without the benefit of
expert testimony. Asia Vital Components Co., 377 F. Supp. 3d at 1012. Rather, these products are
more similar to a multi-functional medical device or a “system for cooling computer components,”
id., which are “beyond a layperson’s understanding” without expert testimony. Ginder, 752 F.3d at
575. Comparing the technology at issue in such products is similarly beyond the ken of a lay juror.
Expert discovery closed on November 12, 2018, and despite an extension of the expert
discovery period, AIC has not adduced any expert testimony regarding whether any of the wireless
DLM products in question here is a “functionally equivalent successor product.” TLA at 4. For the
reasons articulated above, without the benefit of expert testimony AIC cannot bear its burden of
persuasion as to the question of whether any product at issue is a “re-configurations of the same
technology (same feature/functionality) as products on Exhibit A” of the TLA. Id.
1. Lay Testimony
AIC’s contention that it can bear its burden of persuasion through lay testimony is
unavailing. According to AIC, the lay testimony of Zane Brown, the developer of the AIC products
at issue, together with the lay testimony of Jonathan Cartrette, who oversaw the development of the
Watt Stopper products at issue, would be, in combination, sufficient to bear its burden. However,
for the reasons that follow, neither man’s lay testimony could be admitted to the extent necessary to
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bear AIC’s burden.
“Lay opinion under Rule 701 must be limited to opinions that ‘result[ ] from a process of
reasoning familiar in everyday life.’” United States v. Cuti, 720 F.3d 453, 459 (2d Cir. 2013) (alteration
in original) (quoting the Fed. R. Evid. 701 advisory committee’s note to the 2000 amendment). Lay
testimony is limited to testimony that is “not based on scientific, technical, or other specialized
knowledge within the scope of Rule 702.” Fed. R. Evid. 701(c). “[T]he purpose of Rule 701(c) is ‘to
eliminate the risk that the reliability requirements set forth in Rule 702 will be evaded through the
simple expedient of proffering an expert in lay witness clothing.’” Bank of China, N.Y. Branch v.
NBM LLC, 359 F.3d 171, 181 (2d Cir. 2004) (quoting the Fed. R. Evid. 701 advisory committee’s
note to the 2000 amendment).
In order for Brown’s and Cartrette’s testimony to carry AIC’s burden of persuasion, they
would need to testify as to the nature of the technology at issue and the similarities and differences
between the technology in the AIC and Watt Stopper products. That testimony would not “result[ ]
from a process of reasoning familiar in everyday life,” Cuti, 720 F.3d at 459 (alteration in original),
but instead would reflect their “scientific, technical, or other specialized knowledge,” Fed. R. Evid.
701(c); see United States v. Natal, 849 F.3d 530, 536-37 (2d Cir. 2017) (holding that testimony as to
“how cell phone towers operate” was, at least in part, improperly introduced through a lay witness).
Accordingly, it would not be properly admitted as lay testimony.
The cases AIC cites in support of its position are inapposite. AIC cites 523 IP LLC v.
CureMD.Com, 48 F. Supp. 3d 600, 635 (S.D.N.Y. 2014), for the proposition that “co-founders of a
technology can, without being designated as an expert, testify as to the features and functionality of
the software system they created based on their personnel knowledge.” Pl.s’ Opp. at 18. In order to
bear its burden of persuasion, however, AIC must adduce evidence as to how the “technology” at
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issue was developed and operates in order to demonstrate that it was a “functionally equivalent
successor product,” TLA at 4, not merely as to the features and functionality of that technology. See
supra n.16. Indeed, in allowing the lay testimony in question, the 523 IP LLC court observed that
the testimony did not involve “any technical or other specialized knowledge, such as software
coding or computer systems functionality.” 523 IP LLC, 48 F. Supp. 3d at 635 (internal quotation
marks omitted). Without that type of detailed technical testimony, however, AIC cannot bear its
burden of persuasion—and accordingly 523 IP LLC does not support AIC’s position.17
For all these reasons, to the extent Watt Stopper seeks summary judgment on the basis of
AIC’s inability to prove at trial that any product is a “functionally equivalent successor product” due
to lack of expert testimony, its motion is granted.
E. Expert Testimony as to Reasonable Efforts to Promote Royalty Bearing
Products
Watt Stopper also contends that it is entitled to summary judgment because AIC has failed
to adduce expert testimony regarding the applicable standard for determining whether Watt
Stopper’s efforts to promote the Royalty Bearing Products were reasonable. For the reasons that
follow, Watt Stopper’s motion for summary judgment is denied in this respect.
“[T]he necessity of expert testimony depends on circumstances, and . . . there is no
categorical rule requiring expert testimony . . . . Generally speaking, it is needed when the facts and
concepts of a case are beyond a layperson’s understanding.” Ginder, 752 F.3d at 575. “It is well

AIC also cites Donlin v. Philips Lighting N. Am. Corp., 581 F.3d 73, 81 (3d Cir. 2009) for the proposition that “[w]hen a
lay witness has particularized knowledge by virtue of her experience, she may testify—even if the subject matter is
specialized or technical—because the testimony is based upon the layperson's personal knowledge rather than on
specialized knowledge within the scope of Rule 702.” In that case, the Third Circuit held that a lay witness’s testimony
about her future pay was improperly admitted under Rule 701. Even assuming, arguendo, the applicability of the case, it
at most stands for the proposition that Brown and Cartrette might be permitted to offer lay testimony as to the features
or functions of a given product—but not the operation of the technology that facilitated those features and functions.
See Fed. R. Evid. 701(c).
17

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settled that expert testimony is unnecessary in cases where jurors ‘are as capable of comprehending
the primary facts and of drawing correct conclusions from them as are witnesses possessed of
special or peculiar training.’” Wills v. Amerada Hess Corp., 379 F.3d 32, 46 (2d Cir. 2004) (quoting
Salem v. U.S. Lines Co., 370 U.S. 31, 35 (1962)).
Watt Stopper contends that what constitutes reasonable promotional efforts in the
“commercial lighting controls industry is beyond a layperson’s understanding.” Watt Stopper’s Br.,
Dkt No. 93 at 13. However, Watt Stopper has failed to adduce evidence that the commercial
lighting control industry is sufficiently complex to mandate the use of expert testimony to determine
whether Watt Stopper’s promotional efforts were reasonable.
As discussed in § II(D) above, the technology at issue in this case is sufficiently complex that
expert guidance is required to assist the jury in determining if one product is a “functionally
equivalent successor product” of another. That is because, inter alia, the products themselves
involve complex technology, and comparison of the features, functionalities, components, and other
aspects of those products at issue to determine if they were “functionally equivalent” is beyond the
ken of a lay juror.
Plaintiff can prove its claim with evidence of an absence of any efforts to promote the
products, which would not require expert testimony. At minimum, a duty to use reasonable efforts
to promote “requires that the promising party undertake at least some activity.” Holland Loader
Company, LLC v. FLSmidth A/S, 313 F. Supp. 3d 447, 473 (S.D.N.Y. 2018). The corollary of this
basic principle is that if AIC adduces evidence at trial that Watt Stopper undertook no promotional
efforts, a jury could reasonably find that Watt Stopper had failed to use reasonable efforts to
promote the products at issue. Such evidence would not require the testimony of an expert.
Because AIC might support its claim with evidence of a lack of any efforts by Watt Stopper, this
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element of Watt Stopper’s motion must be denied.
Watt Stopper argues that because the products at issue are complex to install, may be custom
built, and the sales force tasked with selling them received additional training on how to sell those
products, that promotion of those products is an area “beyond a layperson’s understanding.” Ginder,
752 F.3d at 575. Notably, however, the cases cited in support of that proposition discuss industries
in which a determination of whether promotional efforts were reasonable would be far more
complex than in this case. E.g., Musket Corp. v. Suncor Energy (U.S.A.) Mktg., Inc., H-15-100, 2017 WL
896510, at *6 (S.D. Tex. Mar. 7, 2017) (applying New York law) (expanding a rail terminal sufficient
to accept certain quantities of crude oil); Sekisui Am. Corp. v. Hart, 15 F. Supp. 3d 359, 381 (S.D.N.Y.
2014) (bringing a breast cancer diagnostic assay to market in the FDA-regulatory context).
For all these reasons, the Court has not been presented with an adequate factual or legal
basis to conclude that the question of whether Watt Stopper’s promotional efforts were reasonable
is “beyond a layperson’s understanding.” Ginder, 752 F.3d at 575. Accordingly, on this record, the
Court cannot conclude that expert testimony is necessary for AIC to bear its burden of persuasion
as to that issue. As such, to the extent Watt Stopper’s motion for summary judgment is premised on
the requirement that AIC must adduce expert testimony to demonstrate that Watt Stopper did not
engage in reasonable promotional efforts, Watt Stopper’s motion is denied.
F. Patent Expiration
Watt Stopper has argued that it is entitled to partial summary judgment under Brulotte v. Thys
Co., 379 U.S. 29 (1964), and its progeny due to the expiration of the last remaining patent licensed
to Watt Stopper pursuant to the TLA on March 19, 2017. AIC reinstated that patent at or around
January 17, 2019. As the lapse of that patent was a necessary factual predicate for Watt Stopper’s
Brulotte argument, the reinstatement of that patent effectively moots that aspect of Watt Stopper’s
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motion.18 Accordingly, to the extent Watt Stopper’s motion for summary judgment asserts that no
royalties are owed under a Brulotte theory, its motion is denied.
G. Declaratory Judgment
In its Counterclaims, Watt Stopper seeks declaratory judgment that its royalty obligations
terminated at the time of any breach of Pike’s or Dylinski’s respective Employment Agreements,
that Watt Stopper is owed repayment of any royalties paid after the Conditions on Royalties Clause
went into effect, that all sales of Royalty Bearing Products are royalty-free and all licenses granted to
Watt Stopper by the TLA are fully paid, and that Watt Stopper is entitled to the return of all of its
property in Pike’s or AIC’s possession, custody, or control. CC ¶¶ 35-39.
Watt Stopper has moved for partial summary judgment as to its declaratory judgment
counterclaim, contending that the undisputed evidence establishes that the Conditions on Royalties
Clause was triggered by Pike’s and Dylinski’s respective breaches of their Employment Agreements,
terminating Watt Stopper’s royalty obligation. AIC has also moved for summary judgment as to the
declaratory judgment counterclaim, contending that Watt Stopper’s royalty obligation never
terminated. As the Court has concluded above, however, questions of material fact persist as to
whether Watt Stopper’s royalty obligation was terminated or survived. Accordingly, both motions
for summary judgment are denied to the extent those motions are reliant on a dispositive
determination of whether Watt Stopper’s royalty obligation was terminated.
The Court understands, as discussed in § III(B) above, that Pike has returned or deleted all
Watt Stopper property in his possession, custody, or control. Accordingly, the Court considers the
request for declaratory judgment that Pike must return any such property to no longer be germane.

The Court has separately considered, and denied, Watt Stopper’s motion for sanctions and associated relief due to the
reinstatement of the patent. See Order Denying Motion for Sanctions, Dkt. No. 149.
18

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H. Tortious Interference
Watt Stopper’s theory of its tortious interference claim is that AIC induced the breaches of
the Employment Agreements, which triggered the Conditions on Royalties Clause, and which, in
turn, caused Watt Stopper to overpay royalties to AIC, harming Watt Stopper. AIC has moved for
summary judgment on this claim. However, AIC’s argument is premised on its contention that Watt
Stopper’s royalty obligation never terminated. For the reasons stated above, however, there is a
question of material fact whether Watt Stopper’s royalty obligations terminated due to breaches of
Pike’s and Dylinski’s Employment Agreements. As the Court cannot determine on this record
whether Watt Stopper’s royalty obligation survived or was terminated, there is necessarily a question
of material fact as to whether Watt Stopper overpaid AIC. Accordingly, AIC’s motion for summary
judgment on the tortious interference counterclaim is denied.
While this issue is decided, and the Court need not, and does not, take any further position
on it, in dicta, the Court notes certain concerns regarding Watt Stopper’s tortious interference claim.
First, the Court notes what appears to be a logical flaw in Watt Stopper’s theory. In order to state a
claim for tortious interference with contract under New York law, plaintiffs must demonstrate “the
existence of a valid contract between the plaintiff and a third party, defendant’s knowledge of that
contract, defendant’s intentional procurement of the third-party’s breach of the contract without
justification, actual breach of the contract, and damages resulting therefrom.” Lama Holding Co. v. Smith
Barney Inc., 88 N.Y.2d 413, 424 (1996) (citing Israel v. Wood Dolson Co., 1 N.Y.2d 116, 120 (1956))
(emphasis added). Assuming arguendo that AIC tortiously induced Pike and Dylinski to breach their
Employment Agreements, triggering the Conditions on Royalties Clause, the result of those actions
would be to terminate Watt Stopper’s obligation to pay royalties. That chain of events would seem
to benefit, not harm, Watt Stopper. To the extent Watt Stopper paid royalties, despite being under
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no obligation to do so, it does not necessarily follow that any such payments resulted from AIC’s
alleged tortious actions. Rather, to the extent that Watt Stopper knew of any such breach, it may be
the case that Watt Stopper’s voluntary decision to pay royalties, in the absence of an obligation to do
so, was the cause of any injury suffered by Watt Stopper, not any alleged action by AIC. As this
issue has not been raised, however, the Court ultimately takes no position on it.
Second, the Court notes that Watt Stopper’s claim that it was harmed by its overpayment of
royalties is in tension with its arguments that there was no waiver within the context if § 15-301. See
§ III(A) and n.10, above. The Court questions if Watt Stopper is attempting to have it both ways—
if the payments were voluntary, it may be the case that they were not “unequivocally referable” to a
modification of the TLA. On the other hand, if Watt Stopper continued to make the royalty
payments specified in the TLA, knowing that its obligation to do so had terminated—those actions
may be pertinent to a determination of whether those payments were unequivocally referable to a
modification of the TLA.
IV.

CONCLUSION
For the reasons articulated above, Watt Stopper’s motion for summary judgment as to the

Complaint is GRANTED IN PART and DENIED IN PART, and AIC’s motion for summary
judgment as to the Counterclaims DENIED.
Watt Stopper is granted summary judgment as to AIC’s claims to the extent those claims any
are reliant on a determination that any given product is a “functionally equivalent successor
product.” Watt Stopper is also granted summary judgment as to AIC’s claims to the extent those
claims relate to products bearing the model numbers LMDL-600, LMPC-600, and LMPX-600. In
all other respects, the parties’ motions for summary judgment are denied.
The Court understands that Watt Stopper’s counterclaim for declaratory judgment that Pike
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is obligated to return all Watt Stopper property in his possession, custody, or control is no longer
germane.
The Clerk of Court is directed to terminate the motions pending at Dkt. Nos. 92 and 97.
SO ORDERED.
Dated: September 9, 2019
New York, New York

__________________________________
GREGORY H. WOODS
United States District Judge

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